Recent Trends in Internet Banking


By
Prof. Vishwanathan Bharathan
Assistant Professor
Doddappa Appa Institute of MBA
S.B.College Complex, Gulbarga-585103
E-mail:
v_bharathan@hotmail.com
 


What is Internet Banking?

Internet banking involves consumers using the Internet to access their bank account and to undertake banking transactions. At the basic level, Internet banking can mean the setting up of a Web page by a bank to give information about its product and services. At an advance level, it involves provision of facilities such as accessing accounts, funds transfer, and buying financial products or services online. This is called ``transactional'' online banking.

There are two ways to offer Internet banking. First, an existing bank with physical offices can establish a web site and offer Internet banking in addition to its traditional delivery channels. Second, a bank may be established as a "branch less, Internet only, or virtual bank" without any physical branch.

Banking services through Internet

(A). Levels of Banking services

Broadly, the levels of banking services offered through INTERNET can be categorized in three types:

    (i) The Basic Level Services use the banks' websites which disseminate information on different products and services offered to customers and members of public in general. It may receive and reply to customers' queries through e-mail,

    (ii) In the next level are Simple Transactional Websites which allow customers to submit their instructions, applications for different services, queries on their account balances, etc, but do not permit any fund-based transactions on their accounts,

    (iii) The third level of Internet banking services are offered by Fully Transactional Websites which allow the customers to operate on their accounts for transfer of funds, payment of different bills, subscribing to other products of the bank and to transact purchase and sale of securities, etc.

Most of the banks providing Internet banking products and services offer, to a large extent, an identical and standard package of banking services and transactional capabilities.

(B). Structure of Banking services

In general, Internet banking products are offered in a two-tiered structure.

* A basic tier of Internet banking products includes customer account inquiry, funds transfer and electronic bill payment.

* A second or premium tier includes basic services plus one or more additional services such as

1) Brokerage. 2) Cash management. 3) Credit applications. 4) Credit and debit cards. 5) Customer correspondence. 6) Demat holdings. 7) Financial advice 8) Foreign exchange trading. 9) Insurance. 10) Online trading. 11) Opening accounts 12) Requests and intimations. 13) Tax services. 14) E-shopping. 15) Standing instructions. 16) Investments. 17) Asset management services etc.

Traditional Banking Vs. Internet Banking

In traditional banking, the customer has to visit the branch of the bank in person to perform the basic banking operations viz., account enquiry, funds transfer, cash withdrawing etc.,

On the other hand, E-banking enables the customers to perform the basic banking transactions by sitting at their homes or at offices through a desktop or laptop round the clock globally through electronic media. This is called any time, any where banking. The customers can access the banks' website for viewing their account details and perform the transactions as per their requirements. Customers can make use of these services with no restricted banking hours, no queues, no tellers and no waiting.

E-banking Transactions

The following are some of the basic functions in Internet Banking:

    • Account Enquiry
    • Fund Transfer
    • Payment of Electricity, Water and Telephone bills
    • Online payment for transactions actually performed through Internet
    • Request for issuance of cheque books, demand drafts etc.,
    • Statement of  accounts
    • Access to latest schemes
    • Access to rates of  interest and other service charges

Models for E-Banking

To implement effectively E-banking and augment the level of technology the following  models have been suggested:

(i) Complete Centralized Solution (CCS)
(ii) Cluster Approach
(iii) High Tech Bank within Bank

Complete Centralized Solution

Of the above three models, the Complete Centralized Solution (CCS) is the ideal branch network model on which E-banking activities can be implemented uniformly and efficiently. Under this model, the bank has to provide web-server and the requisite software which is connected  to the main server. The customers can access the web server for their basic banking operations using any standard browser at any location.

Features of CCS

The following are the features of Complete Centralized Solution:

(i) The entire system software, data for the entire bank etc., are stored in a centralized server with its hot standby server being placed at a different location and connected through high speed and efficient network.

(ii) Branches are provided with online nodes to receive requests from customers and to provide services across the counter.

(iii) The nodes provided at remote branches are connected through effective satellite links with enough redundancy to provide reliability as well as adequate bandwidth.

(iv) Skilled manpower is required only at the centralised location


Advantages of Internet Banking

(i) Round the clock banking

E-banking facilitates performing basic banking transactions by customers round the clock globally. In fact there is no restricted office hours for E-banking.

(ii) Convenient Banking

Customers can perform basic banking transactions by simply sitting at their office or at home through PC or LAPTOP. No personal visit to the branch is required for routine basic transactions.

(iii) Low Cost Banking

The operational costs have come down due to technology adoption. The cost of transactions through internet banking is much less than any other traditional mode. There is also much saving on the cost of infrastructure as the banks can have access to a greater number of  potential customers without the commitment costs of physically opening branches. Moreover, requirements of staff at the banks get reduced to a greater extent.

(iv) Profitable Banking

The increased speed of response to customer requirements, can enhance customer satisfaction and consequently can lead to higher profits as a result of  handling more number of customer accounts.

(v) Quality Banking

Internet banking allows the possibility of improved quality and an enlarged range of services being made available to customers.

(vi) Speed Banking

The increased speed of response to customer requirements will lead to greater customer satisfaction and handling a large number of transactions at a lesser time. Thus, it increases the customers' convenience to a greater extent and facilitates better customer retention.

(vii) Service Banking

Banks can also offer many cash management products. Instant credit, one day credit, immediate payment of utility bills, instant transfer of funds etc., is possible under E-banking.
 

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Prof. Vishwanathan Bharathan
Assistant Professor
Doddappa Appa Institute of MBA
S.B.College Complex, Gulbarga-585103
E-mail :
v_bharathan@hotmail.com
 

Source : E-mail February 1, 2005

 

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