e-Finance: Quo Vadis
Two distinct trends can be discerned in the realm of Internet Banking. On one hand, Banks and Financial Institutions are trying to enter into new areas and consolidate their hold on the entire financial sector. On the other hand, new Dot Coms are entering the financing business and challenging the banks. It could be said that two opposite things are happening at the same time. The banks, via their consolidation moves are trying to preserve their strongholds, while the Dot Coms are trying to fragment the market by providing superior services. Banks and Financial Institutions are trying to leverage their Brands and their position in the industry. While, the Dot Coms are using their competency in superior service design and experience of competing in this highly unstable environment. All the players share the same objectives: acquiring customers, providing them with new financial information, services, and products, and doing so in a way that enhances the value proposition of their products and services.
Internet Banking allows the Banks (and other Financial Service providers) to overcome the tradeoff between content and reach. With the use of Internet, banks can provide their services to a much wider audience then they could do without it. Even before the coming of Internet, competition had shifted from products to services. This was due, in large part, to the advent of Private Sector Banks.
Before the entry of these banks, the retail banking was more of a commodity with hardly any differentiation on the basis of products or services. Banks offered similar products and similar service. But the new private sector banks changed the scenario by differentiating on the basis of service. They started providing Telephone based banking and introduced the concept of home banking. The superior service being provided by these banks was the main reason for their rapid growth. But their reach was limited due to logistics of setting up branches and increasing the reach of their service. Any attempt to increase the branch network would have increased their overheads and any attempt to widen the areas being served by a branch was likely to lead to deterioration in the service levels. In other words, these banks were caught in a dilemma as they faced the Reach and content tradeoff. With the advent of Internet these banks have been able to overcome this tradeoff.
By using the Internet, these banks can expand their reach as well as maintain the standards of their services.
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