Banking in 21st Century
The banking industry
is undergoing a rapid transformation worldwide propelled by two major factors:, global convergence and information technology. The power of information technology is driving the banking industry as never before, leading to faster,
better and cheaper banking services. The banking sector considers no boundary in the present economic scenario. Universal banking has become a common phenomenon in the present economic development.
In the wake of the
liberalization policies, the traditional and conservative face of Indian banking has undergone a significant change. The Indian banking industry is undergoing a paradigm shift in scope, context, structure, functions and governance.
The information and communication technology revolution is radically changing the operational environment of the banks. "Technology driven" products have now become very common in the present banking area.
Modern Age Banking Services
Automatic Teller Machines –
It is an electronic machine which allows the user to withdraw and lodge cash, pay bills, request statement and other banking transactions. The customer
requires ATM Card and ID no. to gain access to the machine. Some ATM cards are also debit cards which can be used in shops and other markets. The banking transactions such as with drawl of cash up to the daily limits, cash deposit,
transfer of funds between accounts, check balances and request for statements etc.
Tele banking facility is made available with the help of a voice response system (VRS). It is one of the
most popular products. Tele Banking i.e. the round the clock, "Bank on phone" service allows the customer to enter phase via telephone. Customers can perform a number of transactions from their office or home. Facilities offered by
tele banking are information on balance, Cheque book requisition. Money transfer, queries on new schemes etc.
Electronic Fund Transfer
The EFT automatically transfers money from one account to another.
In this system, the sender and the receiver of funds, may be located in different cities and may even bank with different banks. This system also makes possible payments for credit cards, private level cards, change cards, etc.
Payment of insurance premium, mortgage installments are also electronically transferred from the bank to respective accounts periodically.
It is issued to the customer by the bank in order to
make cash withdrawals at cash machines. It provides exchange services. This service helps the customer to withdraw money even when the banks are closed.
The credit card is a small card
containing a means of identification, such as signature and a small photo. These cards enable the holder to buy goods and services on credit from different outlets. The bank receives the bills from the merchants and pay on behalf
of the customer. The bank charges from the cardholders for the services. The cardholder had not to carry money with him when he travels or goes for purchasing.
A debit card is a plastic card
which provides an alternative payment method to cash when making purchases. Every time a person uses the debit card, the merchant, can get the money transferred to his account from the bank of the buyer, by debiting an exact amount
of purchase from the card. To get a debit card, an individual has to open an account with the issuing bank.
Point Of Sale (POS) Terminal
The point of sale is initiated by using a payment card at a retail
location. The POS system identifies the cardholders and checks whether his account has sufficient funds to cover the purchase. This is done through the debit card. To get these cards, the customer has to deposit money in the bank.
But there is a risk in this debit card system. If the customer losses the card, there is the danger of emptying the account with no resources of him.
Demat accounts have been introduced by
the Securities and Exchange Board of India to regulate and to improve stock investing. The investor opens an account called "demat account" with depository participants. These DP transact business through electronic media. They get
the shares in an electronic form. Thus, they send the actual shares to the investor. The investor has to pay charges for opening of account maintaining and for collection. One of the major benefits is that, it requires less paper
work, no loss of share certificate, no bad deliveries, and lower transactions cost etc.
Online banking is doing banking business through home PC. The customer demands necessary application form
through the net and the bank sends a UPP (Unique Personal Password) for accession. The complete database that the bank has about the customer's account is available to the customer at his terminal. It also provides current balances
in the customer's account on real time basis, day's transaction in the account, details of cash credit limit, drawing power, amount utilized etc.
Clearing House Automated Payment System (CHAPS)
an electronic messaging system in which all transactions are transmitted in code to help reduce the risk of fraud. Under this system, customers could be assured that local transfers of funds would be cleared on the same day and
this allows customers to treat amounts so transferred to them as cash available.
Electronic Data Interchange
Electronic Data Interchange is an automated system of business to business data exchange. Two
primary areas of EDI are data interchange and electronic funds transfer used among banks. The transfer of information related to commercial trade through the banking system, sometimes called financial EDI, includes payment orders,
remittance information, statements of account and message linked to documentary payments. It will be beneficial in areas such as inventory management, transport and distribution and cash management.
Digital Payment System
Digital Payment System focus on getting a payment forms a customer to a merchant. It requires higher level of activity and commitment from consumers and merchants. The reward for providing such
systems is very attractive. DPS services provider can earn profit each sell. Main components of DPS are cyber cash, virtual payments and digicash.
Cyber cash offers a secure conduit to deliver
payments between customers, merchants, and banks. Since it offers safe, efficient and inexpensive delivery of payments, across the internet practically instantaneously, it has been described as the Federal Express of the internet
payment business. The main goal of cyber cash is to work with financial institutions and merchants to provide an accessible and acceptable payment system on the internet.
Shared Payment Network System (SPNS)
SPNS has been established at the behest of the Indian Banks Association by Indian Switch Company Pvt. Ltd. The participation banks issue universal cards to the customers for transacting on this network. SPNS is offering the
services like cash transactions, across the bank payments, extended hour's services, utility payments, balance inquiry, Cheque deposit, point of sale facilities etc.
The e-Cheque system uses
the network services to issue and process payments that emulate real world queuing. The payer issues a digital Cheque to the payee and all the transactions are, done through the internet. It consists of five primary facts; i.e.
customers, the merchant, consumers bank, the merchants bank and the clearing process. The consumer accesses the merchant server and the merchant server presents its good to the customer. The consumer selects the goods and purchases
them by sending an e-Cheque to the merchant. The merchant electronically forwards the Cheque to its bank. The merchant bank forwards the e-cheque to the clearing house for e-cash. The merchant's bank updates his account. The
consumer's bank updates the consumer's account with the withdrawal information.
Real Time Gross Settlement
RTGS is a centralized system in which inter -bank payment instructions are settled. "Real Time"
what this means is that banks can settle their payments to one another immediately. In this method, an electronic image of the Cheque is transmitted and based on this digitally encrypted image, the payment advice is made and the
settlement done. In addition to quicker realization of cheques for the banks customers; it is also beneficial for banks since it lessens intra-settlement risks and volatility. It also cuts down handling costs of cheques.
Indian banking sector has witnessed several structural changes from time to time. India now has a well-developed banking infrastructure, conducive regulatory environment and sound supervisory
system. Banks have become efficient and sound which make them comparable to the best in the world. Technology driven banks are rendering top class services to the customers. It is equally essential to educate the customers to go at
par with the introduction of innovative products. To compete and succeed in the banking market, new initiatives and innovations, new strategies, new delivery mechanisms and ability to cross sell products are imperative. At the same
time, banks should align themselves with customers and become more customer-centric with proper emphasis on relationship management. Banking in India is poised for exciting times ahead.