Just five years ago, it was common to see bank tellers in Shanghai and Beijing copying every transaction in quadruplicate for filing in a vault somewhere. Today, everything is automated in banks across all major cities and automated teller machines (ATMs) are ubiquitous. In banking - as in many other sectors - the mainland has been able to leapfrog technologies because it is basically starting from scratch. 'What took Europe and America 100 years to produce, China can do in 10 because there is a will and the technology already exists,' said Lim Bak Wee, the executive chairman of Integro Technologies, a Singaporean banking software company. But the country has a long way to go to even come close to global banking technology standards. As anyone who has tried to withdraw cash in Guangxi from an account opened with the same bank in Beijing will tell you, many branches still operate largely independently of each other. In recent years, there has been rapid expansion of the hardware to automate and centralise data, and companies such as IBM and ATM manufacturer NCR have been doing a roaring trade. But investment in software, particularly in advanced computer programs for risk and credit management, has lagged far behind. 'There may be ATMs now in remote parts of the country, but when a branch manager has to provide lending information, he will still ask for five days so he can courier an Excel spreadsheet,' said John Kwong, a senior risk consultant at Misys, Britain's largest software company. The market for technology companies trying to sell complete systems and banking software is still very much in its infancy and it will be some time before the global leaders will begin to make a profit. 'It is definitely the market we are all looking to, but it is a very tough market and whether this is the optimal time to be here is debatable,' IBM senior financial services executive Kent Ting said. 'The banks here have good models on paper but how they execute is very different.' The next couple of years are expected to lift the software and hardware markets into the stratosphere as regulatory authorities force banks to comply with risk management and credit control standards and foreign players already familiar with global standards take larger stakes in mainland banks. 'No Chinese banks have bought any major projects in the field of risk management software but we foresee the market being 10 times the size of Taiwan within the next three years,' said Eric Takigawa, the managing director for Asia-Pacific at Algorithmics, a software company recently acquired by Fitch Group. He pointed out that the China Banking Regulatory Commission came out late last month with a detailed directive on how banks must comply with the global Basel I and Basel II banking standards. These capital adequacy guidelines are being adopted all over the world at varying rates, with the deadline for compliance for Basel II set for December next year, the same date by which the mainland has promised to fully open its banking sector under its World Trade Organisation accession agreement. Singapore, Hong Kong and Japan are preparing to meet that deadline while countries such as Malaysia, Thailand, the Philippines and Indonesia are expected to be in compliance a year later. Beijing, however, has said it will have to wait until the end of 2008 at the earliest if its banks are to have a hope of meeting the new standard's more risk-sensitive capital adequacy requirements. Lending practices over the past two decades have led to massive stocks of bad loans, with many banks failing to meet even basic standards under the 1996 Basel I accord. Separately, MasterCard and Visa have announced the EMV security standard for credit and bank cards, which banks must implement for point-of-sale transactions by early next year to avoid liability on fraudulent transactions. At present, credit-card companies bear the cost for fraud but banks will soon be liable if they do not upgrade to the standard. 'It isn't just the regulators pushing for banks to upgrade their technology. The banks themselves are racing to be the first to meet all the new regulations,' Mr Takigawa said. Hardware will always be a big business in such a massive market, but Mr Lim expects software to be the main focus for Chinese banks over the next few years. 'Hopefully, it will be hot next year as banks are pushed to meet the Basel II standards,' he said. 'That could create the sort of profitable scenario we saw with Y2K, where everyone was forced to comply.'