IMPACT OF EMERGING TECHNOLOGY IN INDIAN BANKING SECTOR

Introduction

Information Technology played significant role in business success and survival,

because, it is an important resource, valuable input and powerful tool in the hand of the

business organization to develop business. In recent past every business enterprise and

financial institutions is thriving for collecting, organizing and disseminating information

to the business for an overall development and getting competitive advantages over

competitors.

Moreover technology plays key role in different types of business among the

banking sector is one of the important sectors that require adequate information

technology for meeting the day to day requirements of the banks and it facilitates speed

work, lower transaction cost and generates a high rate of innovation in improved and new

financial products. Hence technology can be the key to differentiation, competitive edge

and institutional survival.

Technology is revolutionizing every filed of human endeavor and activity. One of

them is introduction of information technology into capital market. The internet banking

is changing the banking industry and is having the major effects on banking relationship.

Web is more important for retail financial services than for many other industries.

The banking industry is currently under-going dramatic global change at a rapid

pace. Competition and change in technology and lifestyle have changed the face of

banking. Nowadays banks are seeking alternative ways to provide and differentiate their

services. Customers both corporate and retail are no longer willing the queue in banks or

wait on phones, for the most basic of services. They demand and expect to transact their

financial dealings where and when they wish. With the number of computers increasing

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every year, the electronic delivery of banking services is becoming the ideal way for

banks to meet their client’s expectation.

The banks are struggling day and night to increase shareholder value. Joint

ventures; New channels to market; Cost reduction of Costs through outsourcing and use

of technology; offering more services to customers, customer management and a constant

drive to reduce cost income ratio through any possible mean are the essential features

needed by the banks to stay in Competition.

Need and Scope of Technology in Banking:

The consumers banking needs are getting more complex and demands are for more

innovative products. As a result, the technology architecture of banks needs to be more

flexible and achieve faster go to market product strategy. It is widely felt that they had

been in complete transformation, as far as banking approach towards technology is

concerned. Traditionally, a progressive bank would come with a vision, formulate a

strategy to design the process and look at the technology to implement the desired

process, which could help to convert that strategy into action. In the modern approach,

the technology is factored at the vision stage itself, followed by formulation of

technology-enabled strategies and ultimately co-development of processes and

technology. The main areas in which the technology is expected to enhance the

operational case of the banks are identified as:

• Providing secured network so as to position bankers as a trusted provider of

electronic payments

• Enabling business-to-business integration between commercial clients in banks.

• Consistency across multiple delivery channels.

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• Aggregation of customer information.

The technology is pivotal and is central to banking. This is one of the major

reasons why new private and multinational banks have been able to survive, thrive, and

adapt in an increasingly competitive space. These banks were able to leverage on low

cost channels such as ATM and Net Banking to the optimum levels contributing to

reduced operating cost and to the benefit of the customers. Banks have realized that

shifting customer access to lower cost channels can help in bringing down the operating

cost. These channels are used not only to improve customer service but also to divert

traffic from branches. It is a fact that the cost of the transactions over the delivery

channels is lower than doing the transactions through branches. The ATM and net

banking services enable nonstop banking – convenience banking – 24 hours access to

cash – 365 days of the year without any additional cost burden to the customer. The

ATMs enable the customers withdraw the cash to a fixed ceiling limit, balance enquiry, a

mini statement, cheque deposit, funds transfer etc. The net banking facilitates the

customer making use at his/her convenience for different types of transactions.

E-BANKING (Tech Driven Banking)

Technology, obviously, has driven retail growth and brought in more efficiency in

the working of the back office. In the recent years, technology has become increasingly

important to the evolution of bank retail delivery systems and the development of new

electronic retail products. The ability to deliver new advanced technology products

reliably has become a central theme in the marketing strategies of a growing number of

banks.

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Most institutions see introducing new products and services such as Personal

Computer banking as a necessary step for retaining highly valued customers, and for

positioning themselves strategically for the future. As this trend continues, the nature and

magnitude of risks posed by technology will continue to change, and these changes will

pose significant challenges for banks and banking supervisors.

Electronic banking or e-banking is a web-based service, which enables bank’s

customer’s access their accounts. It allows the customers to log on to the bank’s website

with the help of a bank- issued identification and a personal identification number. The

banking system verifies the user and provides access to the required services. The

concepts of e-banking and internet banking are used synonymously in the banking

industry, though in reality banking activities carried out through the internet just

constitute a part of the whole gamut of e-banking.

E-banking has made the world a global village and removed the time and

geographical barriers. With the use of electronic network, billions of dollars can move

across countries by click of a mouse and this creates tremendous impact on the economy.

Functions of e-banking:

 Inquiry about the information of account: It helps the client to inquire about the

details of his own account information such as the cards/ account’s balance and the

detailed historical records of the account and download the reports list.

 Card Account’s Transfer: It helps the client to achieve the fund transfer between his

own cards and transfer the fund to another person’s Credit Card in the same city

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 Bank- Securities Accounts Transfer: It helps the client to achieve the fund transfer

between his own bank savings accounts or his own Credit Card account and his own

capital account in the securities company. Moreover, it helps to enquire about the

present balance to real time.

 The Transaction of Foreign Exchange: It helps the client to trade the foreign

exchange, cancel order and inquire about the information of the transaction of foreign

exchange according to the exchange rate given by bank on set.

 The B2C Disbursement on Net: It helps the client to do the real-time transfer and

get the feedback information about payment from bank when the client does shopping

in the appointed website.

 Client services: It helps the client to modify the login password, information of the

Credit Card and his information in e-bank on net.

 Account Management: It helps the client to modify his own limits of right and state

of the registered account in the personal e-bank, such as modifying how own login

password, freezing or deleting some cards and so on.

 Reporting the loss of the Account: It helps the client to report the loss in the local

area (not nationwide) when the client’s Credit Card or passbook is missing or stolen.

The most common e-banking services are:

 Internet banking

 Mobile banking

 Tele banking

 ATM services

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 Electronic Bill payment.

 Online brokerage

 Online delivery of financial products

 Downloading transaction information

 Loan applications

 Electronic Fund Transfer (ETF)

Internet banking

Internet banking allows customers to conduct financial transactions on a secure

website operated by their retail or virtual bank, credit union or building society.

Features

Online banking solutions have many features and capabilities in common, but

traditionally also have some that are application specific.

The common features fall broadly into several categories

• Transactional (e.g., performing a financial transaction such as an account to

account transfer, paying a bill, wire transfer… and applications ….. apply for

loan, new account etc. )

o Electronic bill presentment and payment – EBPP

o Funds transfer between a customer’s own checking and saving accounts or

to another customer’s account.

o Investment purchase or sale

o Loan applications and transactions, such as repayments

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• Non-transactional (e.g., online statements, check links, cobrowsing, chat)

o Bank statements

• Financial institution administration

• Support of multiple users having varying levels of authority

• Transaction approval process

• Wire transfer

Mobile banking

Mobile banking is a term used for performing balance checks, account

transactions, payments etc. via a mobile device such as a mobile phone. Mobile banking

today is mot often performed via SMS or the Mobile internet but can also use special

programs called clients downloaded to the mobile device.

Mobile banking services : Mobile banking can offer services such as the following

Account information

1. Mini-statements and checking of account history

2. Alerts on accounts activity or passing of set thresholds

3. Monitoring of term deposits

4. Access to loan statements

5. Access to card statements

6. Mutual Funds/ equity statements

7. Insurance policy management

8. Pension plan management

Tele banking :

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It is a service provided by a financial institution which allows its customers to

perform transactions over the telephone.

Most telephone banking use an automated phone answering system with phone

keypad response or voice recognition capability. To guarantee security, the customer

must first authenticate through a numeric or verbal password of through security

questions asked by a live representative. With the obvious exception of cash withdrawals

and deposits, it offers virtually all the features of an automated teller machine; account

balance information and list of latest transactions, electronic bill payments, funds transfer

between a customer’s accounts, etc.

Usually, customers can also speak to a live representative located in a call centre

or a branch, although this feature is not guaranteed to be offered 24/7. in addition to the

self – service transactions listed earlier, telephone banking representatives are usually

trained to do what was traditionally available only at the branch: loan applications,

investment purchases and redemptions, chequebook orders, debit card replacements,

change of address, etc.

Banks which operate mostly or exclusively by telephone are known as phone

banks.

Benefits of technology

The branch mechanization has gained considerable place in the banking industry

passing on innumerable benefits to the customers. They are:

• Getting queries promptly responded due to screen displays.

• Neatly typed generation of statement of accounts in time.

• Execution of standing and stop payment instructions in time, regularly.

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• Automatic calculation of interest and its posting in customers’ account.

• Generation of various operational miscellaneous reports/statements like ledge

sheets, drawing power maintenance details of overwithdrawals etc.

• Better information system and transfer of funds.

The technology enables the customers banking through telephone from home, workplace

or office. Just dial the given number, get information related to the account from the

bank.

• At the service 24 hours a day and 7 days a week

• The customers can give instruction to the bank

• The facilities and the benefits that can be offered are balance enquiry request for

statement of account, latest transaction query/stop payment to request / cheque

book request / status query of cheques/ instruments/ enquiry on collection of bills/

cheques/ deposit rates query / forex rate query etc.

The leveraging of technology for customer benefit can be enabled through personal

computer. The devise requires a computer, a modern and a telephone connection. The

customer can get benefited by the services offered such as:

• Balance enquiry

• Latest transaction enquiry

• Stop payment request

• Cheque book request

• Outward clearing cheque status enquiry

• Deposit rate query

• Forex rate query

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• Download account statement

• Request for other services.

The Electronic Bill Presentment and Payment Service which enables the bank customers

to get their various bill paid without their involvement. The features are

• Customers can give standing instructions to the bank to pay the bills with an

individual upper limit for each of the bill, and as the customers bill is within the

limit, it would be paid without customers intervention.

Impact of Technology

Information technology has resulted in a major attitudinal change by

revolutionizing the treatment of customers of the banks. With the depth of the

geographical distances, the customer can be treated as a customer can of the bank and not

as a customer of the branch. This is now possible due to usage of IT on a large scale

where database are possible in a bank with decentralized access. Another option is to

have clustered solution in a bank with data of customers available in systems. Banks need

to constantly look for innovation for innovative services which offer the convenience of

transacting from anywhere and at anytime by using suitable delivery channels for them.

These are the frontiers which would add value to the services to the customers and at the

same time act as a means for increasing the profits of the bank.

One of the most significant areas where technology has had a positive impact is

on the traditional funds movement services. With the advent of electronic banking.

Electronic transfer and other similar products, funds transfers across different

constituencies are easily possible within time frames which would have appeared

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impossible in the past. With networking and interconnection, new challenges are arising

related to security and confidentiality of transaction. Many new players are entering into

the area of transfer services and the pride of place enjoyed by the bankers is under severe

competition.

Customer relationship management (CRM) solutions, if implemented and

integrated correctly can help significantly in improving customer satisfaction levels with

accrued benefits. Data warehousing can help in providing better transaction experience

for customers over different transaction channels.

The CRM is about finding, getting and retaining customers. The basic aim of

these systems is to assist in building a lasting customer relationship in order to turn

customer satisfaction into customer’s loyalty. The banks are the prime users of CRM.

Any bank would have such a huge customer base that it would not be able to monitor it

manually in order to find out various customers behavior trends and patterns. It is

essential to attract, retain and grow customer base with effective management of the

information about the customers and enhance the relationship with them. Unless the bank

understands the needs of the customer, best technology products benefiting the customer

cannot be designed. Hence, the CRM and technology go hand in hand supplementing

each other’s needs and conveniences. Once the customer needs are understood the

technology product orientation becomes easy for value creation process.

Negative impact on technology in banking sector

• Though e-banking is an effective tool but many of the customers are not using it

due to non awareness of the facility. Now the responsibility lies with banks to make

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them aware about e-banking through publicity, advertisement and some-times with

personal contacts.

• Customers have doubts about the safety and security of e-banking services. It is the

basic step to be taken up by banks to build trust and confidence among the

customers, so that they can use it frequently without any trepidation.

• Customers who know about e-banking are not using this facility due to

misconception and lack of trust in the system. These customers should be targeted

by banks and must be convinced to use the same.

• Customers now –a-days prefer net banking to branch banking. The bank that are

slow in introducing technology – based products, are finding it difficult to retain the

customers who wish to opt for net banking.

• Though banks are investing heavily in technology, they are not able to exploit the

same to the full extent.

• A major disadvantage is monitoring and follows up of huge volume of loan

accounts inducing banks to spend heavily in human resources department.

Conclusion

Managing customers is one of the main issues faced by banks. The demands and

expectations of the customers grow at a much faster rate than the banks can equip

themselves to be with them. If the service levels or the product levels are not up to the

customer satisfaction, there is always a danger that the customer might shift his

transactions elsewhere. In banking, as the products can be copied very fast, it is the

customer service levels that really matter. The latest techno-savvy products coupled with

excellent customer relationship will lead to customer satisfaction and delight. The CRM

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has to updated and upgraded. Techno savvy products will only benefit and respond to the

ever changing demands of the customers. The major challenges stirring the banker in

India relate to the need to introduce innovative, customer – friendly products and services

for which newer technologies are needed to be brought in multiple areas to reduce the

overall transaction cost for the benefits of the customers.

Technology has been one of the most important factors for the development of

mankind. Information and communication technology is the major advent in the field of

technology which is used for access, process, storage and dissemination of information

electronically. Banking industry is fast growing with the use of technology in the form of

ATMs. On-line banking, Telephone banking, Mobile banking etc., Plastic card is one of

the banking products that cater to the needs of retail segment has seen its number grow in

geometric progression in recent years. This growth has been strongly supported by the

development of in the field of technology, without which this could not have been

possible of course it will change our lifestyle in coming years.

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