For PART 2 of the article CLICK HERE
Internet Banking in India-Part I
- Dr A. K. Mishra
[Dr Mishra is Professor at IIM Lucknow. In his Two part feature, Dr
Mishra covers emerging challenges, main concerns in
Internet banking and strategies that need to be adopted
by Indian banks.]
The Internet banking is changing the banking industry and is having the major effects on banking relationships. Even the Morgan Stanley Dean Witter Internet research emphasised that Web is more important for retail financial services than for many other industries. Internet banking involves use of Internet for delivery of banking products & services. It falls into four main categories, from Level 1 - minimum functionality sites that offer only access to deposit account data - to Level 4 sites - highly sophisticated offerings enabling integrated sales of additional products and access to other financial services- such as investment and insurance. In other words a successful Internet banking solution offers
· Exceptional rates on
Savings, CDs, and IRAs
DRIVERS OF CHANGE
Advantages previously held by large financial institutions have shrunk considerably. The Internet has leveled the playing field and afforded open access to customers in the global marketplace. Internet banking is a cost-effective delivery channel for financial institutions. Consumers are embracing the many benefits of Internet banking. Access to one's accounts at anytime and from any location via the World Wide Web is a convenience unknown a short time ago. Thus, a bank's Internet presence transforms from 'brouchreware' status to 'Internet banking' status once the bank goes through a technology integration effort to enable the customer to access information about his or her specific account relationship. The six primary drivers of Internet banking includes, in order of primacy are:
· Improve customer access
INDIAN BANKS ON WEB
The banking industry in India is facing unprecedented competition from non-traditional banking institutions, which now offer banking and financial services over the Internet. The deregulation of the banking industry coupled with the emergence of new technologies, are enabling new competitors to enter the financial services market quickly and efficiently.
Indian banks are going for the retail banking in a big way. However, much is still to be achieved. This study which was conducted by students of IIML shows some interesting facts:
· Throughout the country,
the Internet Banking is in the nascent stage of
development (only 50 banks are offering varied kind of
Internet banking services).
Information technology analyst firm, the Meta Group, recently reported that "financial institutions who don't offer home banking by the year 2000 will become marginalized." By the year of 2002, a large sophisticated and highly competitive Internet Banking Market will develop which will be driven by
· Demand side pressure due
to increasing access to low cost electronic services.
Certainly some existing brick and mortar banks will go out of business. But that's because they fail to respond to the challenge of the Internet. The Internet and it's underlying technologies will change and transform not just banking, but all aspects of finance and commerce. It represents much more than a new distribution opportunity. It will enable nimble players to leverage their brick and mortar presence to improve customer satisfaction and gain share. It will force lethargic players who are struck with legacy cost basis, out of business-since they are unable to bring to play in the new context.
MAIN CONCERNS IN INTERNET BANKING
In a survey conducted by the Online Banking Association, member institutions rated security as the most important issue of online banking. There is a dual requirement to protect customers' privacy and protect against fraud. Banking Securely: Online Banking via the World Wide Web provides an overview of Internet commerce and how one company handles secure banking for its financial institution clients and their customers. Some basic information on the transmission of confidential data is presented in Security and Encryption on the Web. PC Magazine Online also offers a primer: How Encryption Works. A multi-layered security architecture comprising firewalls, filtering routers, encryption and digital certification ensures that your account information is protected from unauthorised access:
· Firewalls and filtering
routers ensure that only the legitimate Internet users
are allowed to access the system.
In the Second part of this feature, read some compelling research findings of Claus Nehmzow, a Principal in the Information Technology Group in London at Booz Allen & Hamilton and also the STRATEGIES TO BE ADOPTED BY INDIAN BANKS.
© Banknet India |
All rights reserved worldwide.