Banking environment has become highly competitive today. To be able to survive and grow in the changing market environment, banks are going for the latest technologies, which is being perceived as an ‘enabling resource’ that can help in developing learner and more flexible structure that can respond quickly to the dynamics of a fast changing market scenario. It is also viewed as an instrument of cost reduction and effective communication with people and institutions associated with the banking business.
The Software Packages for Banking Applications in India had their beginnings in the middle of 80s, when the Banks started computerizing the branches in a limited manner. The early 90s saw the plummeting hardware prices and advent of cheap and inexpensive but high powered PC’s and Services and banks went in for what was called Total Branch Automation (TBA) packages. The middle and late 90s witnessed the tornado of financial reforms, deregulation globalization etc. coupled with rapid revolution in communication technologies and evolution of novel concept of convergence of communication technologies, like internet, mobile/cell phones etc. Technology has continuously played on important role in the working of banking institutions and the services provided by them.
Information Technology enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets. Internet has significantly influenced delivery channels of the banks. Internet has emerged as an important medium for delivery of banking products and services.
The customers can view the accounts; get account statements, transfer funds and purchase drafts by just punching on few keys. The smart card’s i.e., cards with microprocessor chip have added new dimension to the scenario. An introduction of ‘Cyber Cash’ the exchange of cash takes place entirely through ‘Cyber-books’. Collection of Electricity bills and telephone bills has become easy. No doubt banking services have undergone drastic changes and so also the expectation of customers from the banks has increased greater.
IT is increasingly moving from a back office function to a prime assistant in increasing the value of a bank over time. IT does so by maximizing banks of pro-active measures such as strengthening and standardizing banks infrastructure in respect of security, communication and networking, achieving inter branch connectivity, moving towards Real Time gross settlement (RTGS) environment the forecasting of liquidity by building real time databases, use of Magnetic Ink Character Recognition and Imaging technology for cheque clearing to name a few. Indian banks are going for the retail banking in a big way.
The key driver to charge has largely been the increasing sophistication in technology and the growing popularity of the Internet. The shift from traditional banking to e-banking is changing customer’s expectations.
Milestone
In India, banks as well as other financial entities entered the world of information technology and with Indian Financial Net (INFINET). INFINET, a wide area satellite based network (WAN) using VSAT (Very Small Aperture Terminals) technology, was jointly set up by the Reserve Bank and Institute for Development and Research in Banking Technology (IDRBT) in June 1999.
The Indian Financial Network (INFINET) which initially comprised only the public sector banks was opened up for participation by other categories of members. The first set of applications that could benefit greatly from the use of technological advances in the computer and communications area relate to the Payment systems which form the lifeline of any banking activity. The process of reforms in payment and settlement systems has gained momentum with the implementation of projects such as NDS ((Negotiated Dealing System), CFMS (Centralized Funds Management System) for better funds management by banks and SFMS (Structured Financial Messaging Solution) for secure message transfer. This would result in funds transfers and funds-related message transfer to be routed electronically across banks using the medium of the INFINET. Negotiated dealing system (NDS), which has become operational since February 2002 and RTGS (Real Time Gross Settlement system) scheduled towards the end of 2003 are other major developments in the area. Internet has significantly influenced delivery channels of the banks. Internet has emerged as an important medium for delivery of banking products &services. Detailed guidelines of RBI for Internet Banking has prepared the necessary ground for growth of Internet Banking in India. The Information Technology Act, 2000 has given legal recognition to creation, trans-mission and retention of an electronic (or magnetic) data to be treated as valid proof in a court of law, except in those areas, which continue to be governed by the provisions of the Negotiable Instruments Act, 1881.
E-Banking
E-banking made its debut in UK and USA 1920s. It becomes prominently popular during 1960, through electronic funds transfer and credit cards. The concept of web-based baking came into existence in Europe and USA in the beginning of 1980.
In India e-banking is of recent origin. The traditional model for growth has been through branch banking. Only in the early 1990s has there been a start in the non-branch banking services. The new private sector banks and the foreign banks are handicapped by the lack of a strong branch network in comparison with the public sector banks. In the absence of such networks, the market place has been the emergence of a lot of innovative services by these players through direct distribution strategies of non-branch delivery. All these banks are using home banking as a key “pull’ factor to remove customers away from the well entered public sector banks.
Many banks have modernized their services with the facilities of computer and electronic equipment’s. The electronics revolution has made it possible to provide ease and flexibility in banking operations to the benefit of the customer. The e-banking has made the customer say good-bye to huge account registers and large paper bank accounts. The e-banks, which may call as easy bank offers the following services to its customers:
· Credit Cards/Debit Cards
· ATM
· E- Cheque
· EFT (Electronic Funds Transfer)
· DEMAT Accounts
· Mobile Banking
· Telephone Banking
· Internet Banking
· EDI (Electronic Data Interchange)
Benefits of E-banking:
1. to the Customer:
· Anywhere Banking no matter wherever the customer is in the world. Balance enquiry, request for services, issuing instructions etc., from anywhere in the world is possible.
· Anytime Banking – Managing funds in real time and most importantly, 24 hours a day, 7days a week.
· Convenience acts as a tremendous psychological benefit all the time.
· Brings down “Cost of Banking” to the customer over a period a period of time.
· Cash withdrawal from any branch / ATM
· On-line purchase of goods and services including online payment for the same.
To the Bank:
· Innovative, scheme, addresses competition and present the bank as technology driven in the banking sector market
· Reduces customer visits to the branch and thereby human intervention
· Inter-branch reconciliation is immediate thereby reducing chances of fraud and misappropriation
· On-line banking is an effective medium of promotion of various schemes of the bank, a marketing tool indeed.
· Integrated customer data paves way for individualized and customized services.
2. Impact of IT on the Service Quality
The most visible impact of technology is reflected in the way the banks respond strategically for making its effective use for efficient service delivery. This impact on service quality can be summed up as below:
· With automation, service no longer remains a marketing edge with the large banks only. Small and relatively new banks with limited network of branches become better placed to compete with the established banks, by integrating IT in their operations.
· The technology has commoditizing some of the financial services. Therefore the banks cannot take a lifetime relationship with the customers as granted and they have to work continuously to foster this relationship and retain customer loyalty.
· The technology on one hand serves as a powerful tool for customer servicing, on the other hand, it itself results in depersonalizing of the banking services. This has an adverse effect on relationship banking. A decade of computerization can probably never substitute a simple or a warm handshake.
· In order to reduce service delivery cost, banks need to automate routine customer inquiries through self-service channels. To do this they need to invest in call centers, kiosks, ATM’s and Internet Banking today require IT infrastructure integrated with their business strategy to be customer centric.
3. Impact of IT on Banking System
The banking system is slowly shifting from the Traditional Banking towards relationship banking. Traditionally the relationship between the bank and its customers has been on a one-to-one level via the branch network. This was put into operation with clearing and decision making responsibilities concentrated at the individual branch level. The head office had responsibility for the overall clearing network, the size of the branch network and the training of staff in the branch network. The bank monitored the organization’s performance and set the decision making parameters, but the information available to both branch staff and their customers was limited to one geographical location.
4. Impact of IT on Privacy and Confidentiality of Data
Data being stored in the computers is now being displayed when required on through internet banking mobile banking, ATM’s etc. all this has given rise to the issues of privacy and confidentially of data are:
· The data processing capabilities of the computer, particularly the rapid throughput, integration, and retrieval capabilities, give rise to doubts in the minds of individuals as to whether the privacy of the individuals is being eroded.
· So long as the individual data items are available only to those directly concerned, everything seems to be in proper place, but the incidence of data being cross referenced to create detailed individual dossiers gives rise to privacy problems.
· Customers feel threatened about the inadequacy of privacy being maintained by the banks with regard to their transactions and link at computerized systems with suspicion.
Aside from any constitutional aspect, many nations deem privacy to be a subject of human right and consider it to be the responsibility of those who concerned with computer data processing for ensuring that the computer use does not revolve to the stage where different data about people can be collected, integrated and retrieved quickly. Another important responsibility is to ensure the data is used only for the purpose intended.