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Whither Internet Banking

[ R P Singh, the author is a specialist in Banking IT systems & will be contributing a special series of features on Banking Technology]

In India, a number of banks have either gone for Internet Banking or are on the verge of going for it. The system I am talking about is different from what was possible up to now - off line information or few limited services. I am talking about the type that enables the customer to transact business on line in real time.

The decision to implement an Internet banking solution for your bank should not be based on the "we-too-have-it" factor (an economist will call it Mr. Jones' effect). Before you decide for Internet based delivery channel you should consider a variety of factors. The first and the foremost being the business justification for it. In any case the RBI is going to need it (duly passed by your board of directors) before you get permission for it.

A channel management software has a wide range of possible configurations. It may range from the simple Internet Banking channel to a full range of channels - ATMs, POSs, Kiosks, mobile banking (SMS and IVR), TVs and so on. Many new channels may be coming in. At the simplest, it will cost you about two crores of rupees. Apparently, you should have a careful assessment of whether you should go in for an Internet based banking system or not.

I am not suggesting that you should consider it from the narrow viewpoint of your spread on additional business generated Vs the rate of return on your capital investment. You will have to take into account the following factors:

1. Possibility of new business generated.

2. Additional floating funds expected from new as well as the existing customers.

3. Expansion in the geographical reach of your business (Please note, the markets are opening and expanding).

4. Your plans to integrate with other banks or the total banking system (RBI has started the implementation of RTGS. An internal real-time transaction system combined with the Real Time Gross Settlement System of the RBI will be a miraculous achievement for the Indian banking customer).

5. The image value. The image of a tech-savvy bank, especially if you are targeting Generation X.

6. The chances of your customers shifting loyalty if you do not modernise.

You may have two objections to my above statements:

a. It is just not possible to quantify the above factors.

b. If you take into account these factors, especially points 2 through 6, almost every bank will have a strong case for delivery channel management system for banking.

I may not agree with you on point 'a' but on point 'b' I have to agree. But, if that is the case, why should you spend time and money on analysing these. Time and money do not come for free.

There are reasons for it. For one, if you have built a detailed business case for it with projected figures, your Internet banking team knows where to push and for what objective. This is the first requirement for any successful investment. For another, when you analyse your business relevance to the Internet Banking, with points 2 to 6 in mind, you will realise that your investment in the Internet Banking is not complete with buying and installing the SW and the HW. You must have a plan for generating new customers, new deposits, new borrowers, a plan to utilise the floats efficiently as soon as they are available. You will need an entirely new set of procedures (which responds with e-speed), a new set of mentality, a new behaviour pattern, and a new service image. And all this will need investment - investment in Process Redesign, in Process Change Management, in training the personnel, in new recruitment, in marketing the concept not only to the external clients but, before this, to the internal clients - the employees-, and so on.

This all may sound so obvious and so simple. My experience with the banks suggests that the bankers who may readily spend 4- 5 crores of rupees on buying and implementing a channel management system of the most modern type, will not invest 20 -30 lakhs of rupees on these activities. The problem of the proverbial last mile! For them the project ends with the successful UAT. My strong recommendation is that let your project begin with the completion of UAT. As a banker you are not interested in the technology. Your objective is business - the business of banking. And your project will start with the end of the technological side of the project.

So, if you want to go for a channel management system or simply Internet banking system, go for it. But plan your investment not only in the hardware and software and the firewall. Have a complete business plan including all the aspects as stated above, with required investments. Then only will your business be able to reap the benefits of this investment.

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