Expat Offshore Banking

Despite the general public becoming increasingly wary of the internet, Victoria Hartley finds that the banks still believe it is their future.

The internet is old news according to the popular press. People are logging off in their thousands and the hysteria over technology and new media in all its forms has subsided and been replaced by wary cynicism.

That may be so. But the fact remains that where web-surfing enthusiasm might be waning in the face of advertising saturation, technology glitches and poor-quality websites, the offshore banking fraternity sees a beginning, not an end.

Expat Offshore Banking - Going Abroad

According to the Office for National Statistics, approximately 130,000 British citizens leave to work abroad every year. Couple that with the results of an ECA International conducted survey that shows 90 per cent of businesses are expanding internationally, increasing the numbers of executives being asked to move abroad.

Those surveyed also suggested companies are more aware of their employees’ need for a financial briefing and tax advice specific to the location in question prior to departure.

Expat Offshore Banking Branches

The offshore banking branches are exploiting the possibilities of the internet to address many of the frustrations experienced when trying to exert control over your finances from abroad.

Your feelings of displacement as a foreign national are further exaggerated by time-zone differences: dealing with the bank at its convenience not yours, not to mention the vagaries of currency conversions and high charges for transfers.

Expat Offshore Banking Online

All of these are cited as reasons for the explosion of interest in offshore banking over the internet. Another reason is the flexibility that the web offers offshore banking customers. A few clicks allow customers to check balances, open deposit accounts and even trade shares.

Expat Offshore Internet Banking

Growth in internet banking has become so strong that some customers are now using their bank’s website as their sole channel of banking communication for varying periods of time.

Prior research by the banks confirmed that there was huge market potential in internet banking, with accessibility as its key selling point.

The first offshore internet-based bank, Fsharp, was launched by the Bank of Ireland in September 1999.

Expat Offshore Banking - Selling Offshore Funds

At Fsharp, services include facilities to open multiple-currency accounts with transfer facilities, the option to pay bills in one country from another, the sale of offshore investment funds on the internet and a single online statement offering an overview of all offshore account transactions every 24 hours.

The site offers ‘core’ Bank of Ireland products, alongside debit and credit-card accounts, although the fixed-term deposit account proves to be one of its most popular accounts, according to Fsharp marketing manager, Chiara Maher.

Expat Offshore Banking - Tax Advice

Fsharp retains a link to the tax advisory service, KPMG, and its telephone contact centre is open twelve hours a day, from 7am to 7pm.

Merrill Lynch is Fsharp’s investment managers, presiding over ten funds from the Mercury Selected trust range, with a variety of asset classes and investment regions. The most recent, the Euro Markets fund launched in January 1999, is regionally focused and invests primarily in mainstream large-cap organisations.

Fsharp, for example, claims it has the highest level of encryption available to organisations outside the military to keep out hackers. Six digit pin numbers are also dealt out to all customers, which is the case with most of the banking sites.

But the site’s big attraction, says Maher, is the launch this month of a ‘real-time’ foreign-exchange function enabling customers to switch money between accounts in up to 24 different currencies, with no commission charge.

Since the launch of Fsharp, the rest of the offshore banks have followed, all with a keen eye on each other’s rapidly developing product lines.

HSBC International’s website, www.offshore.hsbc.com, went live last month, and its launch offer is also commission-free payments between international accounts until March this year.

Expat Offshore Banking - Barclays

Barclays offshore banking site, Global Solutions, launched in July last year, takes a slightly different approach, which the bank terms “life-style-related assistance”, although its variation on the money transfer theme is a payment discount scheme. It offers a £10 saving on up to 36 electronic payments over the course of a year to three nominated individuals or companies.

Inevitably, though, all customers will need to use other support services at some point and most websites offer a telephone service for straightforward account or technology-based queries.

HSBC International receives 25,000 calls a month on its 24-hour telephone banking line, including Christmas day and is intended to partner the internet, as all the start-up advertising mailings were sent solely to its telephone customers.

HSBCI has links with KPMG to offer its clients advice on personal taxation issues, a service that almost all web-based banks outsource to tax consultants.

Barclays International investment uses Price Waterhouse Cooper, and its investment product adviser, James Pearson, says specialist advisory services are likely to remain the norm in offshore banking until the unlikely event of a global tax directive.

Pearson says: “Where a few years ago banks used to have individual tax departments, now we have offshore customers in over 200 countries and they couldn’t compete with the specialist knowledge of the local accountants. You need local advice with offshore accounts. Just think about the differences between European and African taxation.”

Expat Offshore Banking - Financial Products

Unfortunately, the hype and spin that surrounds the web has yet to be translated into exciting new products. Mainstream product trends are replicated in website offerings.

Web customers are moving away from deposit accounts and towards guaranteed linked products, with the popularity of bonds also continuing for as long as interest rates hold steady.

Peter Shirreffs, director of the Royal Bank of Scotland’s offshore arm, RBSI, says these products appeal to the innate conservatism of consumers.
“People want guaranteed products, but saw they were losing out to equity investors, which is why RBS International is still offering lines of index-linked growth bonds like the Nasdaq option.

“If you go to a building society the rates on deposits are high, but there’s no choice, and that is the advantage banks will retain over building societies.”
But where many of the banks offer similar services and products, the sites’ differing levels of maturity and mission statements lead to an eclectic mix for offshore clients to sift through.

Expat Offshore Banking - HSBC International Bank Account

HSBC International spokesman, Roland Cross, states that its recently-launched website was never intended to break new ground in the market, which is why the company chose not to give the site a brand name.

“HSBC online was a move to enhance our current product lines, and offer another dimension to customers who may want to mix and match their ways of communicating with us. The internet offers increased efficiency and functionality, although we recognise the importance of the personal touch and maintain trained operators on our 24-hour phone lines who are prepared to give fund investment advice.”

Cross also emphasises the availability of personal banking representatives who will travel to see clients, which further clarifies HSBC International’s perception of the internet as a single component in a broader banking machine.

Alongside the standard internet offerings of telephone banking and a range of 14 currency options for the cheque deposit, instant access and fixed deposit accounts, there is an ‘Out and Back’ service intended to ease the move abroad. It includes tax guidance through Merrill Lynch and financial planning advice prior to, during and after the return from overseas.

Barclays’ site, Global Solutions, was launched in May 1999, selling itself as a ‘life-style’ service and giving a display of branding ambition on a worldwide scale. With links to Thomas Cook and Forte, Global Solutions offers its expatriate clients country guides, emergency assistance, property management and discount hotel deals.

Expat Offshore Banking - Global Solutions

Kerrie Ellis, manager of Global Solutions, said the website is heading towards the ‘one stop shop’ ideal and she predicts the internet will become the ‘primary’ channel for most of the bank’s off-shore clients.

“We are looking to widen access to the website, and over 72 per cent of our offshore clients are currently using it. But essentially, we are extending the cultural and educational aspects both on the website and through paper guides, which we hope will be valuable to our international customers.”

The website, www.internationalbanking.barclays.com, has links to Price Waterhouse Cooper for its tax consultation service, and gives access to investments like the high interest guaranteed income bond. Closing on January 12, the bond is a two-way split, with up to 50 per cent in a one year bond with a 10 per cent interest return, and the other 50 per cent in the S&P 500 or FTSE 100 for dollar or sterling investors respectively.

The internet has already spawned a wave of new execution-only stockbroker sites and sites for old school names like Charles Schwab, encouraging virgin investors with cut-price charges and little or no commission.

But James Pearson, Barclays International investment product manager, says that where funds or bonds are currently offered by all the offshore sites, he can’t see the internet will effect staggering changes to banking offerings for investors.

Expat Offshore Banking - Investment Portfolio

“Currently, our investment business tends to fall into two divisions, with execution-only and advisory as the smaller fraction at around 20 per cent. Fully managed portfolios are about 80 per cent of our business. Filtering information is the biggest issue with the internet and I expect little change in our offshore clients’ investment preferences. Often, to make the right decisions, you need to see someone,” says Pearson.

He suggests that the beauty of the website is its capacity for information, which is the real key in terms of offshore banking. “At the moment, it’s the after-sales service where the internet makes the difference. But the real benefit will be when we produce products that attempt to link up all other aspects of our lives. So if, for example, you have a spare £5,000, you have a multitude of choices available from a single provider.”

Merrill Lynch and HSBC International recently launched an execution-only share-dealing site in Canada. Although it is certainly a bold move, it will take time to roll-out globally and is not intended to be an internet-only service. It will remain a component part of a wider service.

Expat Offshore Banking - RBOS Ban Accounts

Royal Bank of Scotland International’s Peter Shirreffs says clients, particularly wealthy individuals, will always value a personal, fully-integrated face to face relationship with their banks.

He says: “Some clients use a single communication channel, like a personal banker or the internet, and are content to remain that way.

“But importantly, people buy people, not banks and that one-to-one relationship is valuable. If a bank service brings together trusts, taxation, investment and everyday banking with quality advice under one roof, 24-hour access becomes a secondary issue.”