E-Banking: Perspective for Survival in Current Market

Transcription

1 E-Banking: Perspective for Survival in Current Market Pooja Vashishta 1 and Sumiti Kapoor 2 1 Research Scholar, Pacific University, Udaipur (Rajasthan), India vashishtapooja@gmail.com 2 Research Scholar, Pacific University, Udaipur (Rajasthan), India anukapoor08@gmail.com Abstract: E-Banking is a major invention that has transformed the banking industry. The World over banks are reorienting their strategies; towards new opportunities offered by the e-banking. Technology has become the fuel for rapid change. It gives birth to integration of Information System with Communication Technology. The development of technology brought a revolution in the banking industry too. The banks appear to be on fast track with the emerge in IT based products and services. Deregulation and Liberalization in the financial sector have simulated financial innovations. Breath taking developments in the technology of Telecommunication and Electronic Data Processing have further accelerated these changes. This paper tries to seek that what all changes are taken place with the introduction of new and upcoming technology, and how customers have benefitted. The study has been done by taking all the banks together. The study focuses on growth of technology in banking sector and segments of society it has covered, and how technology has being upgraded. Keywords: E-banking, financial Sector. and Electronic Business. Below figure illustrates the expansion in the internet usage all over the world. Figure 1: World-Wide Percentage of Internet Users 1. INTRODUCTION In early days there was nothing called electronic computing and we were left with no choice except to work manually. But today, its wings are expanding almost in every sphere of life. Now days, it is unthinkable to imagine life without technology like computers, internet, cell phones, T.V. etc. The impact of technology on the financial sector has been profound. Banks have been inducting technology in their operations from very beginning. But this was in fragmented way and depended on the type of technology available at that spot of time. The technology revolution started in a small way in Indian banks in the second half of the twentieth century but the technology transformation journey has taken us through Automated Ledger Posting Machines, Back office Automation, Full branch Computerization, now to Core banking and Digital signature. The Electronic banking define as the technology which allows customers to access the banking services electronically like to pay bills, transfer funds, view the accounts details and advices. The Electronic banking concern about the electronic services those are available to the customers through phone, computer, television, the internet and by many other electronic means. After the introduction of electronic banking, the banks are moving their focus of the payments from the physical presence of money to the use of the electronic money. Customers can perform banking transactions for Electronic Commerce 2. TECHNOLOGY AND INDIAN BANKS With the development of Information Technology, the world has become a global village and it has brought a revolution in the banking industry. Deregulation and Liberalization in the financial sector have simulated financial innovations. Breath taking developments in the technology of Telecommunication and Electronic Data Processing have further accelerated these changes. Figure 2: Internet users in India (year ) IT is backing its use in five key areas:

2 Convenience in product delivery access Managing productivity access Product design Adapting to market and customers needs Access to customers market 3. RATIONALE AND OBJECTIVE OF THE STUDY The current study tries to seek how much changes have taken place due to the introduction of new and upcoming technology, how customers have benefitted, what all segments and areas it has covered, and what is the significance of services provided by various private and foreign banks. It also seeks to identify what more changes can be brought about, how work load can be reduced and what more measures can be taken to give best services to the customers. This paper tends to investigate technology upgradation in the banking sector and its impact on various fields. Accordingly the study seeks to achieve following objectives: To identify what are the latest technology available in banks, To identify what are the uses and impact of the technology, To identify the areas which it has covered, To find out how it is more beneficial as compared to the previous technology. The study is based on secondary data compiled from various bank journals. The study has been done by taking all the banks in totality, the study focuses on the growth of technology in banking sector and what segments of society it has covered, how techno logy is being upgraded and what more is about to come. 4. CURRENT IT TOOLS APPLICABLE IN BANKING 4.1 Electronic Clearing and Settlement System The cheque is one of the more accepted forms of payment for setting transactions. The inter-bank cheques are cleared through the system of clearing house, clearing house is common service provided by RBI for the benefit of a bank to clear the cheques drawn on other banks. Conducting clear house involves huge expenditure in the the form of rental for the premises equipment, cost staff etc. The MICR/OCR technology aims at automating the clearing process MICR/OCR Clearing System The two types of technology being adopted in clearing are the Magnetic Ink Character Recognition (MICR) and optical Character Recognition (OCR) technology. This is also known as Automated Clearing System (ACS). In India, MICR technology is used in clearing of cheques. Under this system, specific type of paper is processed in a high speed machine; the cheques have two white bands, one at the top and another at the bottom. In these bands the details of the cheques are encoded with special magnetic ink. These bands should be free from any marketing or impressions as such, otherwise things are likely to interfere with the processing of cheques, the cheques should not be folded in between and either end should be free from any tabs Debit Clearing System It is a process in which a user of any utility service like telephone bills, electricity bills and E-shopping etc., has to make regular and periodic payments to the service provider. With the view to make these payments easy, the service provider obtains an authorization from the customer to debit his bank account Credit Clearing System Credit clearing system is applicable where a company is required to make periodical payments to a large number of clients such as shareholders/ investors. In this case, the company prepares a list of customers city-wise, bank-wise and branch-wise. The amount that needs to be transferred to customers is made available to the relevant bankers along with the lists. The bankers credit the specified amounts to the accounts of the customers Real Time Gross Settlement System (RTGS) The RTGS system is explain as a gross settlement system in which both the processing and the final settlement of the funds transfer instructions can take place continuously i.e., in real time mode. RTGS systems are typically electronic systems, using telecommunication network, which transmit and process in real time. It is a gross settlement system, that transfers are settled individually, without netting debits against credits, it is a real time settlement system, and the system effects the final settlement continuously rather than the periodically at pre-specified times provided that the sending bank has sufficient covering balances or credits Structured Financial Messaging System (SFMS) SFMS like SWIFT is an electronic data interchange system for banks. It allows exchange of structured messages prepared in conformity with published standards. The SFMS consists of four main entities: Hub, Gateway, Branch Servers and thin or thick clients. 5. PLASTIC MONEY 5.1 Credit Cards Credit card is the modern system of payment, which has to a large extent replaced the traditional forms of payment by cash, cheques, etc. Visa and master cards are association of banks, which deal in credit cards. Bank credit cards are a type of consumer loans, revolving in nature, i.e., automatically renewing itself, within specific limits. The utility of credit card is derived from its ability to buy goods and services without actually paying for them immediately. Credit cards were introduced much earlier than debit cards. This segment is growing at the rate of 45%. This study is based upon a sample of 200 respondents spread

3 over various ages, income levels and occupations, which have their accounts with public banks like SBI or private banks like ICICI, HDFC, HSBC and UTI. In this study, there is significant representation of female segment that is growing at a rapid rate. Out of 200 respondents, 82 were females and remaining 118 were males. The income level is scattered across different income brackets. The preferences of the respondents as to their choice of bank for availing credit card facility area given below. ICICI bank is the most preferred bank and SBI is the second preferred bank as demonstrated in figure below Figure 4: Debit card usage 5.3 Smart Cards These are plastic cards just the size of a visiting card. A smart card looks like any other credit card and only difference is that it carries a chip embedded in it on the reverse below the magnetic strip. The aim of the smart card technology is to replace multiple cards with one smart card with facility to store information. Types of smart cards are: Stored value cards Magnetic stripe cards Re-loadable disposable cards Closed open stored cards Figure 3: Preference of bank for credit card The quality of various services provided by banks as per the respondents is summarized below in table 1. It must be noted that the quality of service in general is found to be very good, good or medium rather than poor or very poor. Table 1: The responses of the respondents as to the quality of banking services Very poor Poor Medium Good Very good Security Time Convenience Flexibility Extended card period Debit Cards These cards look like credit cards, and are processed as well as accepted by the merchants in the same way as the credit cards. A debit card is a plastic card used at the point of sales to make payment generally for smaller amounts and also for obtaining cash, the use of debit card is like use of cheque. This illustrates that debit cards are used widely for the withdrawal of money from ATM s. 6. E-COMMERCE E-commerce is defined as A transaction of services or goods between parties thorough electronic tools and techniques. It provides more option to the customer by better integrating the design and production processes along with the delivery of products and services. It decreases the cost and time of finding products and services. It expands the market place from regional markets to national and international markets with minimal capital outlay, equipment, space and staff. 6.1 Remote Banking Services This facility allows for balance enquiry, statement ordering, funds transfer to third party, funds transfer between customer s different accounts, and ordering traveler s cheques and other financial instruments. 6.2 Automatic teller machine(atms) ATM is a device that allows customers who have an ATM card to perform routine banking transactions without interacting with a human teller ATMs are currently becoming popular in India that enables the customers to withdraw their money 24 hours a day, and 7 days in a week. It allows the customer to withdraw cash up to specified amount by operating the machine via a magnetic card to a host computer

4 6.3 Electronic cheques It is a mechanism for through internet. This facility is the internet version of FEDI systems which have allowed these functions to be performed over VAN S. The electronics cheques provide internet websites with the ability to perform the following functions: Present the bill to the payer Allow the payer to initiate payments of the invoice. Provide remittance information. Allow the payer to initiate automatic payment authorizations for a pre-specified amount or range of amounts. 7. LATEST UPCOMING TECHNOLOGIES IN BANKS 7.1 Rural ATM s Rural ATMs have the ability to handle used and soiled currency notes, detect and correct false dispensation, deposit acceptor with secure ant phishing mechanism, secure chest with e-lock actuated only by remote-bank server. It has got smart-card based identification, biometric authentication, encrypted secure communication over the internet, and real time online communication for anywhere banking. 7.2 Biometric ATM s for Rural India ATM s with biometric devices are the latest contribution in the ongoing effort to offer the banking services to the rural masses. The banks are deploying biometric ATM s for to reach in rural masses and boost up micro financing. Establishing the identity of a rural depositor through biometric parameters makes it convenient for the illiterate to become part of the banking user community. Biometric ATM s establish identification via face, voice, retina or iris. 7.3 Transactional kiosks The emerging transactional kiosks industry is re-shaping how consumers in all demographic groups meet their banking needs. Located outside of traditional banking environments, the kiosks provide convenience of extending basic financial services to the unbanked areas. 7.4 Cheque Truncation Kiosks These are meant for all non-cash transactions. Kiosks installed inside the ATM room will serve customers all 24 hours. Cheque truncation kiosks are capable of satisfying all the requirements put down by the RBI, namely: scanning the front and rear of the cheque, capturing storing the MICR code and endorsing a cheque. 7.5 Biometric smart cards Issuing biometric smart cards to the rural masses for their credit needs is a good alternative. The majority of these customers are illiterate and it would be unfair to give them password to use. Instead customer s fingerprints can be scanned and stored and can be conveniently used by them whenever required. 7.6 SBI Tiny the no Frills account for Rural Indians SBI s no frill banks account for rural people is a major step towards financial inclusion in the country targeting villagers. In this scheme, the bank officials will help villagers to open accounts at their doorstep. Each operator trained by SBI has been given a mobile phone that recognize the customers passbook that looks like any ATM card, biometric finger print recognizer, and a small printer. The scheme will enable villagers to start a bank account with deposit amount as low as 50 termed SBI Tiny. The account can be maintained at zero balance. The deposit scheme will be available to all daily wage earners and to those with monthly income below Bank on Wheels As per the new government directive every PSU is expected to adopt a particular district for the financial inclusion, in other word the respective bank will have to ensure that all the residents of that area have bank account. The most efficient and cost effective way to do so is by setting up ATMs in the mobile banking units (Bank on wheels). The Bank-on-Wheels would carry a rural TM from village to village. It will be deployed in communities to eliminate the need for customers to travel long distances from their home to conduct their day to day banking. 7.8 Mobile Banking The Governor of RBI strongly favored the idea of using mobile phones as instruments for bank account transactions. The integration of existing technologies like smart cards with mobile phones holds exciting premises for future, with drastic fall in the cell phone tariff and the emergence of seamless connectivity between fixed and mobile lines, the mobile banking is set to emerge as one of the cost-effective delivery channel in near future. 8. GLOBAL TRENDS IN BANKING SYSTEM Globally the banks are recognizing the need to embrace technology in the area of products and services to compete successfully in the coming years. The bank perceive the future of the financial services industry depends heavily on electronic delivery mechanism and are working towards bringing banking right into the customer s home. There is a noticeable tilt towards technology driven products and services, and the following trends are visible in the bank systems: Most of the banks are installing more and more ATMs for transactions. To give customers more choices for collecting their cash, the banks are resorting to have nontraditional branches such as super markets and wider-kiosks

5 The telephonic banking and debit cards are finding increased acceptance of the customers. The smart cards are currently offered by only few banks, but others are also planning to offer that in near future. Personal Computer banking is another service that is finding wider acceptance. Banks are tapping new sources of revenue and finding the ways to differentiate themselves from the other banks and non-banks, are increasingly venturing into fee based services like marketing of insurance and annuity, mutual funds, financial planning and trust services. 9. CONCLUSION Evolution of technology is taking place at an enormous pace and the approach to automation in banking has been an element of healthy opportunism. Internet banking has already become very popular in the industrially and technologically advanced countries due to its numerous advantages to customers and banks. Most of the bank business in these countries is carried on with the help of electronic gadgets including computers. His has improved the productivity and efficiency of the industry on the one hand and the improvement in the quality of services to consumers on the other. The Indian banking industry although initiated the introduction of modern technology in the early 1980s, it still requires some time and effort to introduce internet banking in their operations. But it is expected that in near future, all the banks in India will offer an increased range of online services. However, there will be lots of problems associated with Internet banking and that require urgent solutions. Deep&Deep Publ) [9] Johari and Jauhari (1994) Role of Computers in Banking Operation Systems. (New Delhi: Himalaya Publ. House [10] Joshi,N.C. (1978)"Indian Banking" (New Delhi Ashish Publ House) [11] Kalakota,R. (2000) E-Business (Pearson Education Asia) [12] Kshirsagar, S,S. (1979) Decentralization in Bank's, Prajnan, NIBM(April-June)Chapter two (PP 11-18): Journal of IPM Meerut [13] Murthy, C.S. (1999) "Fundamentals of Information Technology (New Delhi: Himalaya Publ House) [14] Niranjan.(2000) Internet Banking Is Here, Business World(3 rd April) [15] Pathrose,P.P.(2001) Hi Tech Banking Prospects and Problems, IBA Bulletin, Vol.xxiii, No.7 (July). [16] Rangarajan, C.(2000) Banking InThe HiTech Environment, The Journal of the Indian Institute of Banker.(Jan-March) [17] Rao, S.U.(2005)"General Bank Management" (New Delhi:Mc Millan Delhi) [18] Shurethy, S.(1999), E-Business with Net- Commerce(Singapore: Addison Wesley Longman) [19] Swaran,S.(2000) E-Banking, IBA Bulletin (March) pp25 [20] Tandon, B.B,P.L Choudhary.(1984) Commercial Bank's and Backward Areas,Lok Udyog(Dec) pp l8 [21] Uppal,R. IC(2006)"Indian Banking Industry and Information Technology (New Delhi, New Century Publ) [22] Websites Referred: rbi.co.in iibf. org. in References [1] Adhivarahan, V.(2001) Information Technology Act,2000-The Legal ' View Point. IBA Bulletin, Vol. xxiii,no.12(dec) [2] Bhasin,T.M. (2001) E-commerce in Indian Banking,lBA Bulletin, Vol. xxii. No.4&5 (April- May) [3] Chawla,A.C. (1998)"Indian Banking Towards 21" Century"(New Delhi: Deep&Deep Publ) [4] Daruwalla,H.A.(2007) Tradition Meets Technology,The Indian Banker Journal of Indian Bank's Association Vol I.No.3(March) [5] E-Payments (2007) The Indian Banker, Monthly Journal of Indian Bank s Association Vol ii, No.6 (June) [6] Ganesh,S.(2001)Frauds In Computerized Environment,IBA Bulletin, Volxxiii, No12 (Dec)pp19-25 [7] Gupta,R.P. (2001) Banking In The New Millennium: Strategic Management Issues IBA Bulletin, Vol.xxiii, No.3 (March) pp38-45 [8] Hussain,E (1988) "Computerization and Mechanization in Indian Banks" (New Delhi: