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e-Finance: Quo Vadis

                      Samir Varma

[Samir is a Second Year PGDM student at Indian Institute of Management (IIM), Bangalore.]


Internet has touched almost all aspects of our lives. The emergence of e-commerce has revolutionized the way we live, shop, entertain and interact. Therefore, it should not come as a surprise if it tries to influence the way we save and the way we invest.

Today, when the customer is king and the service providers are rushing to pay obeisance to the king, financial service providers cannot be left behind. In their quest to differentiate their services and gain competitive advantage over their competitors, the financial service providers are trying to provide their services to the customers in the comfort of their homes. The Internet has emerged as a convenient channel for these service providers.

Living in India, we might find these ideas too far fetched but the truth is that Internet has changed the way these services are delivered, particularly in countries where the Internet penetration is high. The different ways in which Internet is trying to revolutionize the delivery of the financial services and products are given below: -

1. Internet Banking

2. Electronic Bill Payment

3. Online Brokerages

4. Online Delivery of Financial Products like Mortgages
[Click the above subheads to read in detail]


One of the challenges before a Bank, which is trying to become e - enabled is that the data is scattered across the countries. Integration of this data is necessary if the banks have to succeed on the net. The second challenge is related to the move towards expanding the basket of financial products being offered by Financial Service providers. In developed countries, Financial Service providers are using the Internet as a media for expanding into new products. Banks are getting into Mutual funds and vice-versa. However, in India, archaic regulations do not allow companies to have a close relationship with the Banks owned by them or to offer products, which are offered by another category of service providers. As a result, companies like ICICI are forced to keep their Banking arms separate from the main company. They are also prevented from offering products, which fall under the purview of Banks. This is a serious impediment for innovation in the financial service sector. Moreover, it prevents Indian Financial Service Providers from exploiting the power of the web.

Given these challenges, only a Bank (or Financial Service provider) which moves fast and tries to capture the first mover advantage can think of succeeding in this sector. Another Key Success Factor will be the Value, which the online operations of the Banks will be offering to the consumer. This is what will differentiate between similar offerings from many providers of financial products and services. Starting now, will give the organization an advantage in terms of the networking it will be able to achieve. This will help it in meeting the first challenge. Banks (or Financial Service providers) should be ready to launch their operations within days of the liberalization of the sector. This will allow them to reach a critical mass and establish themselves in the e-World.

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