Electronic banking systems and services

E-Banking

Modernization on the technological front by the business sector during the nineties has transformed the manner in which Indian businesses are required to be performed. I.T. has launched novel business models and is more and more contributing a major part in enhancing the e-banking services in India. (E-Banking: An Emerging Perspective of the Regulatory and Taxation Issues) The description of e-banking differs among the research fraternity since electronic banking pertains to various categories of services. Burr for instance, explains it as an electronic linkage between the bank and its customer so as to organize, deal with and regulate monetary transactions. Electronic banking can even be described as a diversity of the proposals: (a) Internet Banking or online banking (b) Phone Banking (c) T.V-linked banking (d) Mobile Banking and (e) PC Banking or offline banking. (E-Banking: An Emerging Perspective of the Regulatory and Taxation Issues) The concepts 'Anywhere Banking', 'Tele-Banking', 'Internet Banking', 'Web Banking', e-banking, e-commerce, e-business etc. In the sphere of financial service providers have become the catchphrase in the present era and the financial institutions in India are striving to go along the competition exerted by extending innovative and alluring packaged technology-based services to their clients. (Present level of Computerization)

The present day financial structure demonstrates the customer to be a king and the service providers are hurrying to show regards to the authority. In this queue the financial service providers cannot be the exception. In their search to discriminate their services and gain competitive benefits over their competitors, the financial service providers in India are attempting to provide their services to the customers in the convenience of their homes. In India the Internet is growing to appear as a suitable channel for such service providers. (E-Finance: Quo Vadis) The paper shall endeavor to look at the successes and challenges faced in implementing e-banking services in India and employ recommendations by way of which financial institutions in India could attain a beneficial competitive edge by assuming a policy of presenting its customers e-banking products and services.

Causes and Benefits for Implementing E-Banking in India:

The Financial Reforms which were started in the early 90s and the globalization and liberalization measures infused in a comprehensively new operating environment to the financial industry in India which was till then operating in a highly safeguarded milieu. The emergence of the foreign banks, the institution of several private banks and the measures of deregulation that enhanced competition resulted in circumstances in the country whereby it was clear that if the financial institutions do not join the race it will become problematic for them and would be ousted from the competition. In the absence of the application of the art and technique of the IT as early as possible adopting new business and even continuance of the old one will become increasingly problematic for the financial institutions in India. (Present level of Computerization)

The major impeller in case of any financial institution in India to present services online is to give round-the-clock accessibility and benefits to its customers. (Interesting ... Log on to Bank) Implementing e-banking would be an enhanced brand proposition and improved customer responsiveness. The banks presenting these services in India would be considered as frontrunners in accomplishment of technology. Thus they will benefit from an enhanced brand image. (E-Banking in Estonia: Reasons and Benefits of the Rapid Growth) E-banking leverages technology to let the customer of financial institution and other stakeholders in India to communicate, carry out business with the bank flawlessly by an array of avenues like the Internet, wireless gadgets, ATMs and brick and mortar branches. Net Banking is one part of an exhaustive E-banking facility. The Internet Banking is regarded as the principal method of e-banking in India with the Internet emerging to extend the facility of new delivery mechanism for the financial institutions in accessing the customer. (XIII Payment and Settlement Systems) E-banking has taken on the Internet by storm and the Net is a potent and viable medium for businesses to communicate with and offer facilities to their customers. The figures of online banking facilities in favor of customers keep on multiplying and the Internet presents a great deal of financial services to basically restructure their businesses in India. (E-Banking: An Emerging Perspective of the Regulatory and Taxation Issues)

In a survey based on the end user undertaken by the IDC among the privileged Net banking users, it has been revealed that the people classified as Socio-Economic Class A1 in topmost five Indian cities log on to access their account through the Internet once every week. (Interesting ... Log on to Bank) As per the Internet Survey conducted by Nasscom in 2001 on the use of Internet trends, the number of functional Internet subscribers in India is anticipated to enhance to over 18 million and the user base to over 30 million by 2004-05. It is also discovered that Internet connectivity is available in more than 200 cities and towns in India. The McKinsey study of Nasscom in 2002 presented that irrespective of the worldwide economic challenges confronting the IT software and service sector, the outlook for the Indian industry continues to be optimistic. (Present level of Computerization) In the wake of this, the attention is changing from generic banking service to customized banking service services in India. (E-Banking: An Emerging Perspective of the Regulatory and Taxation Issues)

The e-banking services in India extend innumerable prominent advantages, incorporating increased productivity and quick access to an extensive range of practical information. Additionally, such users can presently interactively modify their applications, reach to the services, and information collection processes to cater to their specific, individual requirements. (Impact of the Information Technology Act 2000: In Banking Sector) The significance of e-banking is not possibly ignored by the financial institutions in absence of entailing the cost of withdrawal from the competition. This is so since the application of information technology generates certain benefits which are not available when the traditional and conventional methods of doing business are used. The application of information technology generates the following advantages to the financial institutions in India. "The convenient management of day-to-day affairs of an organization, quick disposal of routine and daily works, promise of authenticity, integrity and confidentiality in the functioning of the organization, cost economy, integration and communication with the institutions worldwide and organizations, better communication and presentation facilities, assurance of safety and sound security of the sensitive and valuable information, like trade secrets, instant transfer of data and information where the situation demands so, it provides access to public documents which are digitalized by several departments of the Government, for making online payments of several bills and dues, to file statutory documents online and so on." (The Compulsive Mandates of Electronic era)

Financial institutions in India can engender income by means of increased account, access fees and take advantage from promotional scope to cross-sell credit cards and loan products. IT plays a crucial part directly in improving work competence and productivity of transaction, resulting in lowering of costs and enhanced customer satisfaction. (E-Business: www.gailonline.com) Jeevan has marked in the year 2000, that the Internet facilitates the financial institutions in India to give high value-added financial services which is cheap. (E-Banking: An Emerging Perspective of the Regulatory and Taxation Issues) The cost to the Bank for each business dealings carried out through the Internet has been calculated to be roughly one eighth of that performed through banking through the physical branch. (Interesting ... Log on to Bank) Through assuming e-banking, more reassurance and less time consuming- business in India can be carried out round the clock and without needing real communication with the financial institution. Rapid and simultaneous access to information will be possible. Financial institutions in India will have speedier and ready access to information since; they can keep a tab on various accounts with a single click of a button. (XIII Payment and Settlement Systems)

With simple transactions like enquiry facilities, today messages transmitted through the net to banks in India entail tasks like funds transfer and account opening. Internet banking however, necessitates that the financial institutions entail a secure web server and a pivotal data base of their customers to facilitate flow of information from customers to the financial institutions and also vice versa. Some of the financial institutions in India have systems to satisfy such requirements and others are at several stages of implementation. (XIII Payment and Settlement Systems) The several forms of electronic-based payments like credit cards, Automated Teller Machines -- ATMs, Stored Value cards, Shared Payment Network Services -- SPNS etc., are approaching at an incredible speed in the country. (Internet Banking and its challenges in India) All such are available in India and the large scale application of such are relying on the levels of technology at financial institutions and their prepared reception by the components of the financial institutions. Still more facilitating factor in the application of technology is Electronic Data Interchange -- EDI. EDI facilitates transmission of information / data along different communities in the Indian economy. EDI is considered fundamental to the activities like Just-in-time processing by manufacturing companies and also has deep pedigree in electronic commerce and electronic trade. (XIII Payment and Settlement Systems)

Besides E-Banking services raises the tempo of cash cycle and enhances the productivity of business processes in India. The entire gamut of banking deals can be completed right from the convenience of home or from a location a customer so desires. The medium sends its responses very swiftly, and thus customers can really wait up to the final minute before finishing a money transfer. Customers in India have the facility of downloading the record of various accounts and perform a "what-if" analysis on their own PC prior to carrying out or impacting any transaction on the Internet. Due to this, there will be an enhanced management of funds. (E-Banking in Estonia: Reasons and Benefits of the Rapid Growth) Each of these will result in profits for financial institutions. As per a survey by Boo, Allen and Hamilton, an anticipated expenses of offering the daily business of a branch giving all the services in USA is $1.07 per dealing, as against 54 cents in case of telephone banking, 27 cents for banking through the ATM -- Automatic Teller Machine and 1.5 cents in case of Net banking. In Nordea Bank, Finland, a single Transaction through the Net costs the Bank an average of merely 11 cents, as against $1 in case of a transaction performed in the physical branch. (E-Banking in Estonia: Reasons and Benefits of the Rapid Growth)

HDFC in India has 1 million customers catered by 350 ATMs. Profits jumped Rs. 200 million to Rs. 1.2 billion in 1996. HDFC made aggressive proliferation to 123 branches covering 43 cities/towns. Every branch is manned by 4-8 personnel with computers that are networked with each other and ATMs. ICICI Bank increased its profits from Rs. 170 million to Rs. 1.07 billion during the same period i.e. 1996. Its 86 branches cover 50 cities / towns. (Security and Trust in Internet Banking: The South Asian Banking scene) Therefore the scope for financial institutions in India in the Internet sphere are varied as they have the potential to be technology providers by creaming out technology resources and to launch new business routes, assume content providers for information relating to products, indices etc. And facilitators by providing core support systems to back several payment system options. (E-Banking: An Emerging Perspective of the Regulatory and Taxation Issues) Besides, the Indian financial institutions exploring the cost and upkeep of traditional physical services witness tremendous profitability in a global Internet presence whose cost of globalization appear to a very little relatively. Therefore, E-Banking will present an evident setting to contrast the cost and quality of services presented by a host of financial institutions in India. (E-Banking: An Emerging Perspective of the Regulatory and Taxation Issues)

Case study of a Financial Institution (ICICI) successfully implementing E-banking services:

The ICICI is considered to be one of the prominent private sector banks in India, that integrates the financial strength with a status for innovation and a general culture that incorporates variation. On March 31, 2002 ICICI officially integrated with the ICICI bank and appeared as the first Universal Bank of India. The retail distribution network of ICICI banks persists to extend and it presently is having 409 branches and extension counters and 1,066 ATMs all over in 240 places. The approach of the ICICI Bank after the integration with the ICICI Ltd. is that of creating a varied portfolio. The integrated concept will persist to be into project finance and the concentration will be to exploit the potential in retail financing. The ICICI bank extends a wide range of domestic and international banking services to make easier the trade, investment, international commerce, treasury and foreign exchange services. (E-Banking: An Emerging Perspective of the Regulatory and Taxation Issues)

ICICI Bank has been fast to acknowledge that E-banking has varied from a somewhat experimental delivery vehicle into an enhanced mainstream one for delivery of broad spectrum of banking products and services. The fundamental E-banking services are quickly varying from competitive distinction to competitive necessity. The association has geared up a number of alliances to emerge as its various offering. In respect of its Internet banking offerings the ICICI bank applies Infinity from Infosys, for its credit card business its uses Vision Plus from Pay Sys, USA, for WAP services the alliance with cellular service providers. Orange and Airtel assists in accessing out to such users, while the WAP technology is being applied by the in-house ICICI Infotech service. To gear up the Net for its marketing initiatives ICICI bank and Satyam Info way have collaboratively set up a 'COM' company to extend banking products on the net. (E-Banking: An Emerging Perspective of the Regulatory and Taxation Issues)

The bank has also entered into agreements with the leading corporate like BPL, Rediff.Com, Usha Martin and Tata Communications for B. To C. solutions in an effort to reinforce further its Internet banking products presentation and services. Even ICICI has integrated with a consortium under the leadership of Compaq to retain the lead in offering a solution to the Indian e-commerce community. This consortium facilitates a B2B and B2C e-commerce payment gateway within India. The Bank has been extending phone banking free of cost and was pioneer in introducing an Internet Banking Service in the country designated as Infinity. Infinity presently provides a plethora of online banking solutions to retail as well as corporate customers.

The persistent effort of ICICI in entailing more worth to the clients has a consequence in Infinity being the pioneer amongst online banking offerings in the country. Further taking into consideration the customers necessity for enhanced security, Corporate Infinity presently generates multiple levels of authentication in addition to user ID / Password and incorporates security tokens, ICICI also strives to be a center for leading research on financial architect in India, more specifically in the area of valuation of securities, risk management and derivatives. By gearing up the resources of the association the ICICI entails custom modified solutions that is compatible even the most complex business strategy. ICICI is presently moving all its operations into the era of 'virtual integration'. By e-Banking, ICICI has enhanced its services to customers that enabled it to severely decline the costs and enhance profits as well. (E-Banking: An Emerging Perspective of the Regulatory and Taxation Issues)

Challenges facing financial institutions for implementing E-banking in India and Solutions provided:

Irrespective of the profits made there are several challenges which are prevalent for the financial institutions in India. One of the significant confrontations for a financial institution in Inida is associated with the transitions towards expansion of the basket of financial products being offered by Financial Service Providers. In advanced countries, Financial Service Providers are applying the Internet as a media for expansions of the new products. However, in India, archaic regulations do not entail the companies to extend products which are offered by another category of service providers. In this manner the companies like ICICI are compelled to maintain their Banking arms isolated from the primary company. They are also deterred from presenting products which come under the jurisdiction of Banks. This is regarded as the severe breakthrough for innovation in the financial service sector. Besides, it avoids the Indian Financial Service Providers from taking advantage of the strength of Internet. Thus taking into consideration such confrontations, only Financial Service providers that transits quickly and attempts to exploit the initial mover benefits can think of efficacy in this sector. (E-Finance: Quo Vadis)

Solutions:

In spite of the challenges associated with implementing e-banking the financial institutions in India are discovering that a wide-ranging online banking policy is indispensable for the achievement in the more and more cutthroat financial services market. Competition and modifications in technology and lifestyles have transformed the characteristics of financial institutions in India in the existing setting are looking for other means to offer and create a point of differentiation in their service offering. (E-Banking: An Emerging Perspective of the Regulatory and Taxation Issues) The manner in which the financial institutions perform in designing, bettering, marketing and offer services will tremendously influence the espousal patterns in India. (Interesting ... Log on to Bank) In order to facilitate either access of information or business transaction, it is exigent on the part of Indian financial institutions to hoist a web site of their own. (E-Banking: An Emerging Perspective of the Regulatory and Taxation Issues)

Further the crucial success factor will be the value that the online operations of the Banks will be offering to the customer. This is what distinguishes between similar offerings from many providers of financial products and services. Initialization presently will entail the organization an advantage in terms of the networking it will be able to attain. This assists it in confronting the challenge. The Financial Service providers in India are required to be prepared to introduce their applications that permit them to access the crucial mass and position themselves in the e-World. (E-Finance: Quo Vadis) The legislation of Information Technology Act made the E-banking more convenient. The Act deals with the admissibility of electronic records along with the paper-based document within the preview of the Indian Evidence Act, Indian Penal Code, and Banker's Book of evidence and to the Reserve Bank of India Act 1934. The Act makes legal the transactions made out by way of Electronic Data Interchange and other means of Electronic communication. (Impact of the Information Technology Act 2000: In Banking Sector)