Higher Echelon of Banking in the E-Economy


Mr. Avik Ranjan Roy
DMC Kolkata
An Eminent Research Scholar, Ex. Student of Burdwan University, M.COM, Mphil, UGC:SLET Qualified, M.B.A

Abstract Relating To The Article:

As a bank becomes more and more proficient in identifying which customer want product and services and when she or he will want it, then next logical and strategic step is to figure out why. This is where a bank can truly provide mass customization through one-to-one marketing and provide that ultimate personalized financial service.


Banks, by their very nature, were in the transaction business-taking deposits, cashing cheques, making loans, along with keeping customers' money safe and earning decent interest. This was mostly the extend of what banks did for a living, and what banking customers expected. Banking entered the 1990s, doing for the most part, what it had always done. Then, the Internet came, a phenomenon suddenly propelled by the confluence of forces that has redefined the world economy. Customers' expectations took a quantum leap and consequently, banking had to take a quantum leap of its own.

With this quantum leap, the entire banking industry is now changing rapidly. New technologies are erasing the old lines between banking delivery channels, between industries, and indeed between nations.

Firstly, we are competing in a customer's market, secondly, the market is global, third and finally, the competition for these customers and their money is no longer confined to the banking industry.

In the new world of banking without boundaries, this confluence of forces represents severe and potentially fatal loss of competitive advantage. In the new Net Economy and the culture it brings, a bank is defined almost solely by its ability to add value to the customer relationship, which breaks down into the acquiring, analyzing, integrating, and leveraging of information about, from, and for the benefit of each individual customer.

Indeed, the banking industry is changing. What used to happen in bank branches can now happen over the Internet anywhere and anytime. The purchasing power has completely switched from banks to customers. A acquisition is very much lower that the old economy. Furthermore, the traditional term referred to as "banking hours" no longer applies to Internet banking. As banking moves online, the service is open 24 hours a day and everyday.

The reality today is that the foreign banks generally offer better customer service than Asian banks' or at least this is the perception. New technologies can certainly assist in many ways. By adopting new technologies, a bank can replace rude customer interface with friendly and learning interface.

The traditional bank may find itself reduced to a supplier status on the Internet. We are already seeing the rise of a new breed of "intelligent agent" software that will shop thousand of Web sites to pick off the best banking deals for what have effectively become their customers. Such agents already exist on the Internet; for example, fulfill your request for the lowest 5-year mortgage rate available or the highest interest earning fixed deposit account. These Interest services are available today and are already actively seeking customers. We are also seeing the rise of "integrators" who take over management of customers' finances and help them consolidate their financial relationships. What happens here is that the integration ends up replacing the bank as the customer's primary financial institution and again the bank is reduced to a mere supplier. If we put agents and integrators together we see a serious competitor who knows a customer's complete financial picture and is in charge of where that customer's money is spent. In this scenario, banks would almost inevitably end up paying commissions to these info-mediaries.

The role of banking in the digital economy is changing. It is now about information and not money. It is about collecting, analyzing, packaging, and distributing information about customers and for customers. By gathering accurate and pertinent data to understand customer better, their financial goals, plans, philosophies, tolerance for risk and other interests in their lives. As a bank becomes more and more proficient in identifying which customer want product and services and when she or he will want it, then next logical and strategic step is to figure out why. This is where a bank can truly provide mass customization through one-to-one marketing and provide that ultimate personalized financial service. Going forward, it is ultimately about the bank's ability to managing customers' unique information and add unparalleled value to them in order to stay competitive and owning that winning edge.

Banks in Asia are going through a transformation period. A transformation caused by social, political, and economical environments. The technology plays a crucial role in keeping the banks competitive in the global economy. The global economy extends to the digital economy and it means everything. As Asian countries open up their boundaries and uplift customer is no longer bounded by geographic area on where to bank his or her money. The Net Economy has introduced additional business forces such as digitalization, globalization, and deregulation that will fundamentally change every industry. With new technologies, banking products and services can be easily digitalized. After all, the banking products and services are primarily information based, which can be made completely available to anyone with the proper authority. In the digital world, information is the easiest element to change and can be broadcast in real-time basis. Internet is a borderless medium to conduct commerce. When a bank in any country in the world can digitize their products and services and reach out to any customers through the Internet, what is going to stop this Internet-based bank from competing with any Malaysian banks? The only constraint is government license and local protective regulations.

The world is becoming smaller. Major industries in Asia are removing local protection so the market is wide open for global competition. Today, Hong Kong is one of the most free and open markets for financial services and telecommunication industries. By year 2002, Malaysia's banking industry faced the same challenges.

With deregulation trend hitting the local financial services industry, nothing is going to stop a large American or European bank to enter the local market with advanced technologies, professional and reliable brand and superior customer services. The competition in the traditional banking industry will only get tougher and harder. Furthermore, banks will no longer compete just with banks. In the very near future, traditional banks will compete head-on with Internet.

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Source: E-mail January 6, 2011


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