home page 





year book



what's new


click here

    internet banking    what is internet banking | variants | advantages |indian scenerio |                                     internet banking in india | internet banking software | success models | issues| strategies| features|

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
Checking with no monthly fee, free bill payment and rebates on ATM surcharges
Credit cards with low rates
Easy online applications for all accounts, including personal loans and mortgages
24 hour account access
Quality customer service with personal attention


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
Facilitate the offering of more services
Increase customer loyalty
Attract new customers
Provide services offered by competitors
Reduce customer attrition


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).
In general, these Internet sites offer only the most basic services. 55% are so called 'entry level' sites, offering little more than company information and basic marketing materials. Only 8% offer 'advanced transactions' such as online funds transfer, transactions & cash management services.
Foreign & Private banks are much advanced in terms of the number of sites & their level of development.


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.
Emergence of open standards for banking functionality.
Growing customer awareness and need of transparency.
Global players in the fray
Close integration of bank services with web based E-commerce or even disintermediation of services through direct electronic payments (E- Cash).
More convenient international transactions due to the fact that the Internet along with general deregulation trends, eliminate geographic boundaries.
Move from one stop shopping to 'Banking Portfolio' i.e. unbundled product purchases.

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.


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.
Encryption techniques used by the bank (including the sophisticated public key encryption) would ensure that privacy of data flowing between the browser and the Infinity system is protected.
Digital certification procedures provide the assurance that the data you receive is from the Infinity 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.

Advertise | Book Store | About us | Contact us | Terms of use | Disclaimer

Banknet India | All rights reserved worldwide.
Best viewed with IE 4.00 & above at a screen resolution of 800 x 600 or higher