Description
report on Sales and Distribution through internet adopted by banks
Sales And Distribution Assignment Sales and Distribution by Internet for Banks
Contents
INTRODUCTION ....................................................................................................................................... 3 DRIVERS OF CHANGE .............................................................................................................................. 3 OVERVIEW OF BANKING PRODUCTS AND TRADITIONAL SALES PROCEDURE (PAST TREND) ................ 4 SERVICES OFFERED BY BANK AND PROCESS ....................................................................................... 4 TYPES OF DEPOSITS OFFERED BY BANKS ............................................................................................ 4 TYPES OF CONSUMER LOANS ............................................................................................................. 7 LOAN PROCESS .................................................................................................................................... 9 OVERVIEW OF INTERNET SALES OF BANKS AND THE PRODUCTS (PRESENT TREND) ........................... 10 ONLINE DELIVERY OF FINANCIAL PRODUCTS ................................................................................... 11 ONLINE BROKERAGE ......................................................................................................................... 12 ELECTRONIC BILL PAYMENT .............................................................................................................. 12 INDIAN BANKS ON WEB .................................................................................................................... 13 POINT OF SALES FOR INTERNET BANKING ........................................................................................ 14 COMPARATIVE DATA OF INTERNET BANKING WITH TRADITIONAL BANKING ................................. 15 PROS AND CONS OF MODERN OVER TRADITIONAL METHOD OF BANKING ........................................ 16 STUDY OF DEMOGRAPHICS................................................................................................................... 18 STUDY OF TRADITIONAL BANKING CUSTOMERS .............................................................................. 18 RETAIL BANKING ENVIRONMENT ................................................................................................. 19 STUDY AND ANALYSIS OF DEMOGRAPHICS OF INTERNET USERS .................................................... 20 STUDY AND ANALYSIS OF DEMOGRAPHICS OF INTERNET BANKING USERS .................................... 23 DEMOGRAPHICS OF INTERNET BANKING USERS VS. ALL WEB USERS ............................................. 26 REASONS FOR NOT USING AND INTENTIONS TO USE INTERNET BANKING ..................................... 26 SALES AND DISTRIBUTION OF E-SELLING OF CREDIT CARDS ................................................................ 27 REQUEST PHASE ................................................................................................................................ 27 SALES ................................................................................................................................................. 30 VERIFICATION.................................................................................................................................... 30 DELIVERY ........................................................................................................................................... 31 POST DELIVERY.................................................................................................................................. 31 FUTURE TREND ..................................................................................................................................... 32 APNALOAN.COM ............................................................................................................................... 32 PEER-TO-PEER LENDING.................................................................................................................... 34 REFERENCES .......................................................................................................................................... 36
INTRODUCTION
Internet has touched almost all aspects of our lives. The emergence of e-commerce has revolutionized the way we live, shop, entertain and interact. Therefore, it should not come as a surprise if it tries to influence the way we save and the way we invest. Today, when the customer is king and the service providers are rushing to pay obeisance to the king, financial service providers cannot be left behind. In their quest to differentiate their services and gain competitive advantage over their competitors, the financial service providers are trying to provide their services to the customers in the comfort of their homes. The Internet has emerged as a convenient channel for these service providers. Living in India, we might find these ideas too farfetched but the truth is that Internet has changed the way these services are delivered, particularly in countries where the Internet penetration is high. The different ways in which Internet is trying to revolutionize the delivery of the financial services and products are given below: 1. Internet Banking 2. Electronic Bill Payment 3. Online Brokerages 4. Online Delivery of Financial Products like Mortgages
DRIVERS OF CHANGE
Advantages previously held by large financial institutions have shrunk considerably. The Internet has levelled 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
OVERVIEW OF BANKING PRODUCTS AND TRADITIONAL SALES PROCEDURE (PAST TREND)
SERVICES OFFERED BY BANK AND PROCESS
Some of the services that are traditionally offered by bank are 1. Deposits 2. Loans 3. Insurance 4. Credit Cards
TYPES OF DEPOSITS OFFERED BY BANKS
Deposits are accepted in different ways. Differentiation in deposit types may arise from the ? Type of customer who holds the deposit ? Tenure of the deposit ? Nature and ? Interest factor. Based on these parameters, the deposits can be broadly classified into ? Transaction ? Non-transaction deposits.
Transaction (Payments) Deposits A deposit which facilitates the account holder to transact through a negotiable or transferable instrument, Cheque, Written order of withdrawal, Telephone order to transfer funds, Transferring money to third parties is known as a transaction account. These are one of the oldest deposit services offered by banks where banks make payments on behalf of its customers. This transaction or demand deposit service requires the bank to honor cheques and withdrawals. Transaction deposits include regular non-interest bearing demand deposits, which do not earn an explicit interest payment but provide the customer with payment services, safe keeping of funds and record keeping for any transactions carried out through cheques. They also include interest bearing demand deposits that provide all of the foregoing services and pay interest to the depositor. Current account and Savings account are the most widely used transaction accounts.
Non-Transaction (Savings, or Thrift) Accounts When the deposit account does not facilitate routine payments or transfer of funds for other transaction purposes, it is a non-transaction account. These deposits are designed to attract funds from customers who wish to set aside certain amount in anticipation of future expenditures or financial emergencies. These deposits pay higher interest rates compared to transaction deposits. While their interest cost is higher, thrift deposits are generally less costly for a bank to process and to manage. Most familiar examples of such accounts are the term deposit accounts.
Based on this differentiation of a transaction and a non-transaction account, the deposits mobilized by the Indian banks are generally classified into ? Current Account The depositor can withdraw the money at any time (as long as the money is available in the account) and also can order the bank to use the money to pay third parties, generally through a cheque. Banks may or may not pay interest on these accounts. If they pay interest, the account is called a “NOW” (negotiable order of withdrawal) account. It is possible that banks may charge fees for demand deposit accounts, but in many cases these fees can be reduced or avoided by maintaining a minimum balance or by satisfying other criteria established by the bank. Banks do require the account holder to maintain a certain amount of minimum balance continuously. In some cases, depending on the credibility of the customer, the bank may also allow the deposit holder to overdraw (OD) from the current account. ? Savings Bank Deposits The depositor usually plans to maintain the funds in the account for an extended period of time. Banks pay interest on these accounts. Banks may also charge fees for savings accounts, but in many cases these fees can be reduced or avoided by maintaining minimum balances. Other than for business purpose, operating accounts are also necessary for individuals, trusts, non-profit organizations, etc. However, these types of deposit holders have fewer transactions. Term Deposits. A deposit held at a financial institution that has a fixed term. These are generally short-term with maturities ranging anywhere from a month to a few years. When a term deposit is purchased, the lender (the customer) understands that the money can only be withdrawn after the term has ended or by giving a predetermined number of days notice.
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Figure 1 Categorization of Retail Bank Services Core Services Facilitating Services Supporting Services Payment services ? Cash ? Making payments at door step ? Foreign currency ? Internet banking requirements ? Telephone banking ? Traveler cheques ? DD/Bankers cheque ? TT ? EFT Current account ? ATM card ? Credit cards and savings ? Standing ? Debit cards account instructions ? Services to senior from citizens customers for ? Telephone banking making ? Internet banking payments ? Conversion of excess ? Inter branch/ balance to Time deposit interbank transfer of funds ? Safety vault Loan products: ? Current ? Delivery of loan at Consumer loans, account promised time period Personal loans, ? Savings ? Interest rate option: Housing loans, account Fixed/ floating Educational loans ? Time deposit ? Flexibility in preaccount payment of loan ? Counseling on Realestate markets ? Legal services for documentation ? ECS for payment of loan installments Insurance ? Current account ? Additional insurance products: Life facility for family ? Savings account insurance, members ? Time deposit Pension schemes ? Safety vaults ? Counseling on post retirement savings.
TYPES OF CONSUMER LOANS
Each type of loan requires a different credit analysis approach and provides different answers to the fundamental credit issues. Consumer loans can be classified into three basic types? Installment loans Installment loans require the periodic payment of principal and interest. In most of the cases, the customers’ borrow money to buy durable goods or cover extraordinary expenses and the loan is to be repaid in installments. The typical maturity ranges from two to five years. Excepting for revolving credit, most consumer loans are secured. Installment loans can be either direct or indirect loans. A direct loan is negotiated between the ultimate user of funds and the bank. The user must formally make the loan request and support with personal financial information to borrow from the bank. An indirect loan is funded by a bank through a separate retailer such as an automobile dealer who sells merchandise to the customer. The retailer takes the credit application, negotiates terms with the individual and presents the agreement to the bank. If the bank accepts the proposal it buys the loan from the retailer under prearranged terms. Other types of installment credit are the home loans or housing finance or the home equity loans, consumption loans, auto loans, etc. ? Credit card loans or revolving credit lines Credit cards and overlines tied to checking accounts are the two most important forms of revolving credit agreements. An overline is a prearranged loan to cover overdrafts of checking accounts. Usually, customers pay only a fraction of their monthly and incur finance charges on the remainder. Credit lines against demand deposit accounts at bank are less common but function identically to credit cards. Credit cards are attractive as they provide higher risk adjusted returns than other types of loans. Card issuers earn income from three sources: ? Charging cardholders fees, ? Charging interest on outstanding loan balances and ? Discounting the charges that merchants accept on purchases. ? Non-installment loans A limited number of consumer loans require a single principal and interest payment. Typically, the individual’s borrowing needs are temporary. Credit is extended temporarily in anticipation of a well-defined future cash inflow like selling a house, a large tax refund, etc. Bridge loans in new home buying would be a typical example. The quality of the loan depends on the certainty of the timing and the amount of the anticipated net cash flow for the sale.
Evaluating consumer loans
When evaluating the measurable aspects of consumer loan requests, an analyst addresses the following issues: ? Character of the borrower ? Use of loan proceeds ? Amount needed ? Primary and secondary sources of repayment. Therefore, the bank has to base its decisions more on qualitative parameters rather than quantitative aspects. Credit analysis is distinct for each type of loans.
While evaluating loans the banker cites the six Cs of credit: ? Character ? Capital ? Capacity ? Conditions ? Collateral ? Compliance. Among these, the most important thing to be assessed is character, which depicts the consumer’s desire to repay the loan. If the loan officer determines that a potential customer is dishonest he can reject the loan.
LOAN PROCESS
Consumer comes to know about the loan only after going to the bank and the process that happens are listed below. The process followed in the traditional process is as follows:
OVERVIEW OF INTERNET SALES OF BANKS AND THE PRODUCTS (PRESENT TREND)
With cybercafes and kiosks springing up in different cities access to the Net is going to be easy. Internet banking (also referred as e banking) is the latest in this series of technological wonders in the recent past involving use of Internet for delivery of banking products & services. Internet banking is changing the banking industry and is having the major effects on banking relationships. Banking is now no longer confined to the branches were one has to approach the branch in person, to withdraw cash or deposit a cheque or request a statement of accounts. In true Internet banking, any inquiry or transaction is processed online without any reference to the branch (anywhere banking) at any time. Providing Internet banking is increasingly becoming a "need to have" than a "nice to have" service. The net banking, thus, now is more of a norm rather than an exception in many developed countries due to the fact that it is the cheapest way of providing banking services 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 The bank of the future has to be essentially a marketing organisation that also sells banking products. New distribution channels are being used; more & more banks are outsourcing services like disbursement and servicing of consumer loans, Credit card business. Direct Selling Agents (DSAs) of various Banks go out and sell their products. They make house calls to get the application form filled in properly and also take your passport-sized photo. Home banking has already become common, where you can order a draft or cash over phone/internet and have it delivered home. ICICI bank was the first among the new private banks to launch its net banking service, called Infinity. It allows the user to access account information over a secure line, request cheque books and stop payment, and even transfer funds between ICICI Bank accounts. Citibank has been offering net banking to its Suvidha program to customers. Online banking solutions have many features and capabilities. They fall into the following broad categories: ? Transactional (e.g., performing a financial transaction such as an account to account transfer, paying a bill, wire transfer... and applications... apply for a loan, new account, etc.) ? Electronic bill presentment and payment - EBPP ? Funds transfer between a customer's own checking and savings accounts, or to another customer's account ? Investment purchase or sale ? Loan applications and transactions, such as repayments ? Non-transactional (e.g., online statements, check links, co browsing, chat) ? Bank statements
ONLINE DELIVERY OF FINANCIAL PRODUCTS
The Banks have started offering banking services like checking your account status fund transfer, ordering demand drafts and writing out cheques, via the net. Soon these will form only a small part of the total array of services being offered by them. These Banks have embarked on a number of new initiatives to protect their stronghold and to leverage the net. They are offering value-added services to their customers and at the same time are trying to get into B2C and B2B e-commerce. They are even trying to get their finger into various transactions between the Government on one side and the business and the customer on the other. Banks are trying to become a part of the online value chain. For example, they are trying to tie up with corporates so as to become a part of their supply chain and enable electronic transfer of funds between the different components of the Supply Chain. They are doing this by acting as an intermediary between the corporations and their vendors by enabling online transactions at one place. Some Banks are trying to setup portals for routing payments like Excise Duty and Sales Tax. Not content with that Banks are setting up secure payment gateways to tap the B2C online market. Banks have also taken the application process for personal loans, car loans, and mortgage, online. They plan to offer other financial products like Bonds and Mutual Funds through their financial service portal. This strategy is aimed by pre-empting the entry of new start-ups into this business. Another bit of the Net strategy, involves providing infrastructure for B2C as well as B2B e-commerce. Banks are setting up secure payment gateways that will allow online retail shops to obtain instant credit card verifications. Once the buyer hits the pay button at a B2C portal, the buyer's credit card details will get encrypted and travel securely to the Visa or MasterCard approval system through the bank's payment gateway. The banks are also setting up their own shopping portals. HDFC has a stake in a portal called easy2buy.com where HDFC bank customers can buy using their bank account number. Federal Bank has similar arrangements with Rediff.com and Fabmart.com. ICICI has setup Magiccart.com, an etailing site. At the B2B end, Banks are offering Net Banking service that allows electronic fund transfers among a company, its vendors and dealers. Another service being targeted at this segment is cash management. This will reduce the float, which is present in physical processing of the payments. The Banks are also trying to integrate their systems with the ERP/Supply Chain system of their clients. This will enable the bank to benefit from the movement towards e-procurement. EProcurement involves making transactions online and processing the payment electronically.
ONLINE BROKERAGE
Online Broking is emerging as another field where traditional service providers are likely to face tough competition from the Dot Coms. In order to pre-empt the moves into these areas by new players, many Banks have already tied up with Online Brokerages. The Banks have entered the e-trading business. Since many banks are also Depositary participants, they have tied up with e-traders so that a customer is able to buy or sell shares online and make and receive payments through the Net. In India, HDFC Bank has tied up with Investsmart.com and is offering its services to all the clients of the brokerage. ICICI Bank has gone a step ahead and launched ICICIDirect.com. These banks have become exclusive providers of banking and depositary/custodial services to the clients of these online brokerages.
ELECTRONIC BILL PAYMENT
From the point of view of Banks, Electronic Bill Payment (EBP) represents something of a threat, in that it could lead to customer attrition and reduce revenue. Among other revenue streams, the following sources of funds for the banks could be affected:
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Float associated with processing in the physical form Cash Management Services
The Banks can protect itself by providing this service to their customers. But EBP also has an important strategic dimension, as it can become an integral part of a bank's portfolio of services. EBP can attract customers to the bank by making transactions more efficient and enabling customers to access their financial information more easily. Moreover, online interactions allow use of such tools as e-CRM to create a more intimate relationship with the customer and promote and deliver other online products and services. If the Banks do not establish control on EBP, they are likely to loose customers to the new providers of financial services, thus affecting other sources of revenue. In India, HDFC Bank, ICICI Bank and Citibank are trying setup an EBP portal. ICICI has already started a portal called BillJunction.com. Banks are planning to use the Net for payment of utility bills. They are entering into tie-ups with utilities like MTNL, Airtel, Orange, and BPL Mobile etc. Right now, a customer who's received a bill in the physical form logs into the network in order to make an online payment. In the future, these bills will be sent to customers through the Net. Consumers and Businesses can derive economic benefit on account of reduction in transaction costs and a reduction in the float resulting from physical processing of the Bills. In addition, many are likely to adopt it mainly for the convenience. They can pay bills electronically in the same way they do today, but by consolidating their bills, they can reduce the effort involved in the whole process. They can also access their account at the same time. They can conveniently access all billers from a single portal that also provides them banking facilities. This would enable them to view their account balance while paying bills. For portals or the intermediaries that consolidate bills from multiple billers at a single online location EBP is a tool to acquire customers and provide them other financial services also. Dominance of the EBP market can lead to an entry into other financial services markets such as credit or debit card payments, or indeed into a much broader range of e-commerce markets, such as payments gateways.
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). 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.
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POINT OF SALES FOR INTERNET BANKING
COMPARATIVE DATA OF INTERNET BANKING WITH TRADITIONAL BANKING
Cost of Internet Banking over other mode of Banking (Source: IBM global services consulting group)
PROS AND CONS OF MODERN OVER TRADITIONAL METHOD OF BANKING
Benefits:
1. Accessibility (Anytime, Anywhere banking): In the past Selling without internet used to limit banks to operate only from a fixed location and limited geographic area. But these days using the internet to sell their products/services banks have provided improved accessibility to the user. A user can access his/her account from any location, at any time and from any computer in the world. 2. Additional services : With the advent of Internet technology banks sell and provide people with numerous services like Free bill payment, rebates on ATM surcharges, credit cards with low rates, free online checking and easy online applications for personal loans and mortgages to name a few. 3. Greater Reach to Customers: Selling by internet for banks has removed the traditional geographical barriers the banks use to face in the past. Now the bank could reach out to customers of different countries/legal jurisdiction easily. 4. Convenience: Online selling has increased the sales of banks products/services as a customer finds it more convenient to access his/her account from anywhere and avail the services rather than having to go to the bank lobby or drive-thru during business hours waiting in long queues for even the minute work . Online banking is thus believed to appeal to customers because it is more convenient than visiting bank branches. 5. Availability: Online banks never close and is available 24*7 for use and is only a click away. Thus banks these days have tremendous benefit of putting their product /services on sale 24/7. This translates into more sales and greater cash flow for banks. 6. Efficiency: Online method of selling is more efficient than traditional method since a person can access all his/her accounts from one secure site. Can enquire balance, status of
cheques, perform funds transfers, order drafts, request issue of cheque books etc. Online instead of going to various counters in bank to avail various services. Also a
user a can do various transactions online without any need to buy stamps, lick envelopes, or wait for bills to be received through the mail. 7. Effective: Online banks offer various tools which help you to manage your assets more effectively. Instead of keeping a track of your various assets, investments and services/products availed manually a customer is now can check all the details at one place without hassle. It is easier to keep track of fees charged to accounts, especially those accumulated from using foreign ATMs. This constant visibility allows people to keep closer track of account balances, which saves them from overdrawing their account and incurring overdraft charges. 8. Inexpensive: Internet marketing is relatively inexpensive for banks when compared to the ratio of cost against the reach of the target audience. Banks can reach a wide audience for a small fraction of traditional advertising budgets. The internet thus allows banks to have an unlimited customer base. Their customer base has grown indefinitely from the millions of customers who use the internet on a daily basis. Managing such large customer base is less
expensive which means very low overhead to maintain their inventory of products. The use of mass mailing software means very low mailing costs as email costs nothing to send. The banks also are using auto responders or mail managing packages so that they are required to pay a small monthly fee. This is insignificant compared to traditional mailing costs. Also when banks transfer members to online status, they save money that would otherwise be spent paying tellers and printing paper records. 9. Measurability of statistics: Internet marketers like bankers also have the advantage of measuring statistics easily and inexpensively. Nearly all aspects of an Internet marketing campaign can be traced, measured, and tested. Such marketing measure can determine which messages or offerings are more appealing to the customer and thus accordingly can focus towards a particular product/service. Such measurement cannot be achieved through billboard advertising (traditional method), where an individual will be best interested, and then decide to obtain more information at a later time. 10. Informative: Customers are given faster and easier access to information about various products/services existing with the bank and new offerings of the banks easily across any location. 11. Faster Selling: Internet banking has reduced the time to market the product. It has increased the ability of the banks to introduce new products and services quickly and successfully.
Concerns:
1. Security-the key concern: The main concern of Internet banking is security, protection of customer's privacy and protection against fraud. . Many consumers are hesitant to purchase items over the Internet because they do not trust that their personal information will remain private. Thus for most people the biggest hurdle to online banking is learning to trust it and to be sure whether it is secure. 1. Intangible Feel: From the buyer's perspective, Internet banking gives an intangible feel. The inability of the customers to touch, feel or "try on" tangible goods before making an online purchase is one of the limiting factors. 2. Newer Technologies: Internet selling requires customers to use newer technologies rather than traditional media. Low-speed Internet connections is another barrier. If banks build large or overly-complicated websites, individuals connected to the Internet via dialup connections or mobile devices may experience significant delays in content delivery. Very large networks of bank branches nationwide are growing fast. Lack of connectivity in remote locations is a major concern. Another occasional problem with online banking occurs when the website is down, either for scheduled maintenance or because of technical problems. 3. Effect on Industry: Adoption of internet selling of products/services by banks has posed a strategic risk of loss of business to those banks who have not adopted this method of selling or those who are inefficient in performing. So that the situation is like this: 75-80 percent automation in main branches with less automation in remote cities and smaller branches.
4. Inefficiency: Inefficient and outdated applications in some of the banking departments are there which are not flexible and don't integrate well with other applications. 5. Restraint from people: Even these days when the technology has made its mark all over the world. There is still a majority existing in the country that are Slow-to-change and prefer dealing with a human teller rather than internet or automated teller. 6. Computer literacy in India is still very low and thus acting as a barrier in fast acceptance of Internet banking. 7. Selling of account opening services by banks is still in a nascent phase because the Application for account opening can be accepted over Internet but an account is opened only after proper introduction and physical verification of the customer due to the security concerns face by bank.
STUDY OF DEMOGRAPHICS
STUDY OF TRADITIONAL BANKING CUSTOMERS
Macroeconomic indicators (2006) GDP at current prices Inhabitants GDP per head Economic growth rate Consumer confidence indicator Unemployment rate Consumer Price Index Banking staff Number of branches Number of ATMs Households savings ratio Inflation rate Interest rate, consumer credit Interest rate, residential Interest rate on long term bonds
Rs 39771 billion 1095.4 million Rs. 36307 8.7% 135 7.6% 5.3% 895,131 58,725 25,000 32.4% 6.1% 15.50% 9.25% 8.0%
RETAIL BANKING ENVIRONMENT Macroeconomic Factors • Fear of Overheating: India faced remarkably high inflation during 2006, so RBI is in favour of
tight monetary policy • Interest rate environment that supports exports and demand of investment to continue growth momentum while reinforcing price stability and anchoring inflationary expectations • Adequate liquidity to meet credit needs of economy with emphasis on credit quality
Supervisory Institutions • Reserve Bank of India (RBI): The Central bank which is the monetary authority & regulator of
financial system, issuer of currency and manager of foreign currency. • Securities and Exchange board of India (SEBI): Regulatory body that monitors the stock market transactions and compliance thereof. • Insurance Regulatory & Development Authority (IRDA): An insurance regulatory body to protect the interests of the policyholders.
Type and size of players
Net Banking income
The major Indian Banks fall into three categories: Public sector (State Bank of India, Bank of Baroda, Bank of India, Punjab National Bank, Canara Bank), Private sector (ICICI Bank, HDFC Bank) and Foreign Banks (Citibank, Standard Chartered Bank)
STUDY AND ANALYSIS OF DEMOGRAPHICS OF INTERNET USERS
Demographics of Internet Users Below is the % of each group who use the internet, according to our February–April 2006 survey. As an example, 71% of adult women use the internet. Use the internet Total Adults Women Men Age 18-29 30-49 50-64 65+ Community type Urban Suburban Rural Household income Less than Rs. 1,00,000/yr Rs 1,00,000-Rs 5,00,000/yr Rs.5,00,000-Rs 10,00,000/yr Rs. 10,00,000 +/yr Educational attainment Less than High School High School Graduate Post Graduate 40% 64 84 91 53% 80 86 91 75% 75 63 88% 84 71 32 73% 71 74
Here is the % of home internet users who have dial-up vs. high-speed connections at home. As an example, 34% of home internet users have dial-up connections. Dial-up Home internet users 34% High-speed 62%
ANALYSIS
A higher percentage of men than women are internet users with the majority lying in the age group of 18-29 yrs. Also the urban and sub-urban percentage of population using internet is same and varies according to the educational background and per annum household income. The majority of internet users are college graduates with an annual household income of Rs.10, 00,000 and above.
There are 11.66 million Internet subscribers at the end of June 2008 as compared to 11.09 million at the end of March 2008 registering a growth of 5.09%. This growth rate is less than the growth rate of 7.08% at the end of March 2008.
INTERNET SUBSCRIBER BASE IN INDIA i) Broadband Subscriber Growth - The number of Broadband subscribers (with a download speed of 256 Kbps or more) was 4.38 million at the end of June 2008 as compared to 3.87 million at the end of March 2008. The growth rate of broadband subscribers in this quarter is 13.18%. ii) Broadband Subscribers Share (Technology wise) – Out of total 4.38 million broadband subscribers, 3.72 million are DSL based; 0.42 million Cable Modem; 0.11 million Ethernet LAN; 0.045 million Fiber; 0.057 million Radio, Leased Line 0.018 million and 0.005 million use other technologies.
TECHNOLOGY TRENDS FOR BROADBAND Regulations on ‘Quality of Service of Broadband Service Regulations 2006’ came into force with effect from 1st Jan 2007.
GROWTH OF INTERNET AND BROADBAND SERVICES (TRAI REPORTS)
* Accessing Internet through wireless (GSM & CDMA) networks
Internet Subscriber Base as on 30.06.2008
STUDY AND ANALYSIS OF DEMOGRAPHICS OF INTERNET BANKING USERS
GROWTH IN ONLINE BANKING 2002-2004
The following gives the percentage of those in each group with Internet connections who have tried online banking. In other words, 31% of online men had done online banking in October 2002 and 29% of online women had done it.
October 2002 N=1027 internet users All Internet Users SEX Men Women Age Generation Y(18-27 yrs) Generation X(28-39 yrs) 40-49 yrs 50-58 yrs 29% 34% 33% 26% 31% 29% 30%
November 2004 N=537 internet users 44% 49% 39% 38% 60% 42% 49%
Household Income Live in households earning less than Rest. 1,00,000/yr 21% Rs. 1,00,000/yr- Rs. 5,00,000/yr 31% Rs. 5,00,000/yr- Rs. 10,00,000/yr 33% Rs. 10,00,000/yr + 35% Educational background High School 27% Graduate 27% Post Graduate and above 37% Internet Connection at home Dial up 24% Broadband 35%
32% 44% 51% 55% 42% 41% 52% 35% 63%
ANALYSIS
The survey's other key findings are: ? Broadband and online experience: The spread of online banking has coincided with the spread of high-speed broadband connections and the increasing maturation of the internet population. Fully 63% of those with broadband at home have tried online banking, compared with 32% of those with dial-up connections. And 51% of those who have more
than six years of internet experience have tried banking online, compared to 27% of those with three years or less of online experience. ? The rise of GenX: Those with internet connections between the ages of 28 and 39 to have tried online banking. Some 60% have done so, compared to 38% of wired GenY members (those 18-27) and 25% of those with internet connections over the age of 60. Men: In the past two years, online men are notably more likely to perform online banking activities than online women. Half of men with internet connections (49%) have tried online banking, compared to 39% of online women. This is a change from the situation two years ago when internet-connected men and women were equally as likely to be banking online. Higher socio-economic status: Online banking, like many other internet activities, is most likely to be performed by those living in well-off households with more than Rs.10, 00, 000 p.a. in income, those who have graduate and post graduate degrees.
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This rise in online banking likely flows from two major trends: ? ? As internet users gain more experience online, they are more likely to perform activities that involve money, such as making online purchases and travel reservations, and participating in online auctions. As banks themselves have discovered the virtues of online banking and have become more aggressive in offering it as an option to customers. Various studies have found that online banking customers are more profitable than offline customers – they make fewer customer service calls and are less likely to switch banks. That means many banks are improving their online services and offering them free of charge to customers.
Of course, phishing (the practice of trying fraudulently to get consumer banking and credit card information) is one potential new problem for online banking. Increasing numbers of fake emails are showing up in people email inboxes, “warning” them that their account information needs to be checked or that some problem has arisen in their account. These emails then point people to Web sites where they are asked to enter their financial information. This fraud not only costs banks real money, but it degrades customers’ trust in the bank and in online banking in general.
SURVERY 2
As part of Georgia Tech’s seventh survey of Web users conducted in April and May 1997, nearly 20,000, Web users completed an online profile of their Web habits/preferences, etc. Approximately 7% of the total group completed an Internet banking questionnaire yielding 1,172 usable surveys. Of the 1,172, only 64 (5.5%) currently had an Internet bank account. The sample size of users isn’t large enough to make projections from, but it’s interesting.
DEMOGRAPHICS OF INTERNET BANKING USERS VS. ALL WEB USERS
The demographics of the small sample of Internet banking users were very similar to the demographics of the survey as a whole.
REASONS FOR NOT USING AND INTENTIONS TO USE INTERNET BANKING
Almost half the non-users said it wasn’t available at their bank. Security was also a concern to 39% of non-users.
SALES AND DISTRIBUTION OF E-SELLING OF CREDIT CARDS
REQUEST PHASE
1. The request for CREDIT CARD comes through online portal or sites of Banks.
2. Credit Cards come under Personal Banking products so the internet user has to click the relevant link to apply for Credit Cards.
3. Once this link is clicked the window that appears displays all information to the customer about all the available Credit Card types, their key features and benefits.
4. The customer can browse through various options and if interested can know about eligibility, fees and other details about the product. The various details are as displayed in the following snapshot
5. Once customer has zeroed on any particular card he can click on link to apply for it.
6. A simple form is given out for contact details and mandatory details.
7. On submission the request procedure ends for customer and Bank starts the processing activity.
SALES
1. A third party customer care centre contacts the customer within 48 hours or so through mobile or email service to send in a sales representative as well to clarify doubts. 2. A meeting is setup according to customer’s convenience at specified time, venue and date. The customer is asked to get all required documents. 3. The sales representative /agents form nearest branch makes one on one contact with customer convinces him/her about the product. 4. The physical paperwork is then done and application finalized.
VERIFICATION
1. An On-phone verification is carried out by Bank representatives on paperwork submitted by sales representative within 3-4 days. 2. On verification success the customer is informed of dispatch of credit card to his choice of venue (home/office) in person.
DELIVERY
1. The Delivery agent visits the venue and delivers the credit card to the customer. 2. The customer has to authenticate receipt of credit card. 3. All the instruction manuals help services details and credit card details are given to customer as a kit on delivery.
POST DELIVERY
1. Customer Care 24X7 is provided to resolve queries and help. 2. In case of specific problem Bank representatives contact the customer in person. 3. Online details, bill payment, statements, help for Credit Cards are provided by Bank sites.
FUTURE TREND
APNALOAN.COM
Apnaloan.com is one of the newest form of e-selling of banking products.Apnaloan.com is India’s first and largest personal finance supermarket. It is India's leading online market place for credit cards, auto loans, home loans, personal loans, education loans. You can compare and check the offerings of various banks and apply online and get response from multiple banks within minutes. Features 1. It is an integrated platform where customers can search, apply and avail for loans. 2. The various services provided are : ? Home Loan ? Personal Loan ? Car Loan ? Business Loan ? Education Loan ? Loan against property ? Credit Cards 3. Participant Banks: Around 56 Banks are using this site to sell their loan products including some major banks like AXIS, ICICI, HDFC, SBI, BANK OF BARODA etc. 4. Cities Covered: It covers all the metros, capital cities and many other tier-2 cities in India. 5. It provides Assisted Loan Search Service-A loan application tool that allows customer to quick apply for a loan and avail a faster loan processing. 6. Product Comparators: Allows customers to compare various loan products under different categories offered by different financial institutions. Customers can compare the features, eligibility criterion, documents requirements etc .of various loan products of financial institutions 7. Chat with Experts: Customers can chat with personal finance expert Mr. Harsh Roongta, CEO of Apnaloan.com. 8. Tools & Calculators: There are various tools and calculators provided to aid Customer in comparing and decide on product suitable for them. E.g. EMI Calculator, Interest rate Calculator, Impact of changed Rate calculator etc. 9. Interest Rates: The site gives out updated information regarding interest rates and best interest rates in each product category for all the products across all the banks. 10. Tax tips: Apart from the above mentioned services the customers can also get tips on Tax related queries under the section ‘Tax Tips’ which will provide insights on tax aspect of loan and manage tax liabilities as well. 11. Blogs: Customers discuss and review their experiences regarding products and banks. A great way for word-of-mouth publicity and trust building feature for banks.
The Selling Process
The consumer today has a crying need for help in understanding the entire process of taking a loan, identifying and making a choice from those that best match the individual needs. In another sense, you have an unusual situation where the consumer perceives himself as the taker of a loan rather than a giver of business—due to the treatment meted out to him along the entire loan-taking process. Apnaloan assists and guides the consumer at every step through the entire process of taking the loan. Based on his requirements, the customer can narrow down his options and apply for the deal that suits him the best. The company offers a wide variety of personal and financial products such as auto loans, personal loans, credit cards and home loans using the Internet as a primary consumer contact channel, for both residents of India as well as NRIs. The loan-seeker is required to provide certain basic details like his income, the amount required and the reason for the loan. Every lending organization has a set of minimum requirements that must be met to be eligible for a loan. Based on these factors, Apnaloan selects and displays the options available and then the customer can choose according to his preferences of interest amount, loan duration or other criteria. "This is a much better deal for the consumer as he has access to all the information in one place," says Manish Bhardwaj, assistant manager, HDFC Bank. In addition, Apnaloan also assists the consumer in the process of filling up the application and provides counselling by sending its representative to meet him personally. Sometimes on meeting the customer they find that the customer doesn’t have all the documents required for a particular loan. Here instead of rejecting his application like most individual banks would do, they try and find him the next best organization where he can be eligible for the loan.
The Business model
In order to provide the consumers with loan options from various sources, apnaloan.com has entered into tie-ups with leading banks and financial institutions to act as a non-exclusive distributor of their products and services. The list covers most of the multinational and nationalized Indian banks such as Citibank, American Express, ICICI or HDFC. In addition, it has entered into arrangements with manufacturers, dealers and associate sites to better the deals to the consumer. The site is modelled around a consumer-to-business (C2B) model that is designed to generate revenues through its transactions. Unlike most Eyeball-based sites working on banner-advertising revenue models, the main source of revenue for apnaloan.com will be through charges from the lending institutions on each transaction executed. The amount of commission being the same for every institution, the information given to the consumer will be without a vendor bias. Additional sources of revenue will be generated through participation fees, various alliances with complimentary sites and banner advertising The technology used by apnaloan.com—the three-tier back-end architecture built on Mphasis-BFL software revolves around these components: • The delivery channels: The Web, mobile access devices, call centre and e-mail. • The applications integrator: Components like the customer information profile manager, business rules, decision engine, transaction manager, security sub-system and the workflow manager.
• The back-office systems: The loan origination and tracking system, the information database, compensation system, contract management system, e-mail response management system and an accounting subsystem.
Advantage to Lender
While the site provides a higher bargaining power to customers, it also promises a useful business option to the lender. The participating banks or financial institutions have access to a much larger database that can be tapped. In a scenario where a majority of dot-coms are still struggling to define their business models and most organizations have become sceptical investing in new e-ventures, this e-marketplace seems to suggest a rescue route. By bringing together a group of organizations together on a common platform in this way, apnaloan helps cut down on intermediaries and create a more cost-effective solution. While most multinational banks and lending institutions also have their individual sites; the concept of such an emarket is emerging as a useful common contact point for loans and credit cards.
The Future Trend
? ? ? With Internet becoming the medium of communication all over the world e-selling will be the channel to be used by Banks for almost all products and services. We will see more and more Banks and products using platform like this for sales and distribution. An Integrated marketplace like Apnaloan.com has to be availed to the fullest to reach out to more and more customers for selling financial products. The selling process will become more transparent, better, faster and convenient to match to the expectations of the Internet generation.
PEER-TO-PEER LENDING
Peer-to-Peer lending is cash transacting model where individual customers lend and borrow money with each other. One of the most popular portals of P2P are Zopa.com, Egg and ING. The model is explained through Zopa.com. Zopa.com is a totally different futuristic business model used for cash lending and borrowing. Launched in early 2005, Zopa is a peer-to-peer online brokerage that couples British residents who want to lend with those who want to borrow. The company represents a new business model in the retail financial services industry, and since Zopa is not technically a bank and does not lend money itself, the capital requirements to run the business are relatively small. Compared to a traditional full service bank Zopa concentrates on only a few steps of the value chain.
How it works?
People join Zopa online as either borrowers or lenders. Once registered, lenders could loan money to a pool of people grouped together because of similar credit worthiness and desired loan term. Zopa assesses the credit scores of borrowers using similar credit reference agency-based credit ratings as used by U.K. retail banks and other lenders, and only offers services to borrowers who achieved an A*-, A-, B- or C- rating. The company also engages an identity checking agency to verify the identity of all lenders and borrowers. The company’s own team of underwriters individually assess each borrower’s ability to repay and then enters then into Zopa’s own market system which includes A*, A, B, and C lending categories by loan term (12 to 60 months). Zopa applied for business process patents in the U.S., Japan, and Australia for elements of its proprietary marketplace matching platform, but recognized that the broader concept of ‘P2P
lending’ could not in itself be protected from imitation. By mid-2006, two other peer-to- peer lending sites (donjoy.net and prosper.com) had already been established in Korea and the U.S. By late 2006 the average borrower took a loan of £5,000 and the average lender deposited £3,000 per transaction. Repeat lenders tended to increase their deposit amounts steadily after joining, with many increasing their lending. Only less than 0.05 percent of Zopa’s loans had turned into uncollectible debts. Zopa U.K. CEO James Alexander believes that Zopa had partly achieved such low default rates by injecting a social aspect into lending. Zopa members are able to see the usernames of other members on the site whenever they lend or borrow. While this did not typically include the member’s full name (unless they had chosen a username that matched their real name) or their address, other members could see generic details such as age, marital status, location, and loan purpose. Lenders can see how much had been borrowed, at what rate and term, and track repayments. Here the greater the amount of information available on the actual bad debt rates, the greater is the perceived degree of trust and security for the members. Zopa’s has large installed membership base of about 120,000.potential customers. The other big players are Egg with more than 3.7 million customers and ING Direct (a relative newcomer) with 1 million.
The Future Trend
1. More and more sites covering more geographical areas and internet communities will come up based on this concept. 2. Peer-to-Peer lending is a potential threat for lending services of Banking. If the model is replicated and gains popularity to the best level in the Internet community Banks will have no role play in this marketplace. However this business model is still in the early stages and may undergo a lot of changes before proving its viability on a large scale. 3. The market place involves only cash transactions and hence Banks can use the platform for their other products to reach out to this new segment of customers.
REFERENCEShttp://www.en.articlesgratuits.com/online-banking-the-pros-and-cons-id843.phphttp://en.wikipedia.org/wiki/Online_marketinghttp://ezinearticles.com/?The-Advantage-of-Selling-via-Internet&id=503987http://www.indianmba.com/Faculty_Column/FC908/fc908.htmlhttp://www.networkmagazineindia.com/200302/feature.shtmlhttp://www.allbusiness.com/distribu...tio analysis&gclid=CMKH39GchpkCFQLMbgodBBSTnAhttp://www.slideshare.net/marketingfacts/technology-internet-trends-2008-presentationhttp://www.slideshare.net/chrisgill89/global-perspectives-in-retail-banking-blog-presentationhttp://www.indianmba.com/Faculty_Column/FC908/fc908.htmlhttp://ezinearticles.com/?A-Brief-History-of-Internet-Banking&id=353450http://resources.bnet.com/index.php?q=internet+sales+and+distribution+for+bankshttp://www.banknetindia.com/banking/efin.htmhttp://www.icicibank.comhttp://www.efma.com/index.php/efma_observatory/defaut/index/EN/3/221http://www.netbanker.com/1998/01/1997_market_data_for_internet_banking_users.htmlhttp://www.pewinternet.org/trends/User_Demo_4.26.06.htmhttp://apnaloan.comhttp://www.zorpa.com
doc_165089972.docx
report on Sales and Distribution through internet adopted by banks
Sales And Distribution Assignment Sales and Distribution by Internet for Banks
Contents
INTRODUCTION ....................................................................................................................................... 3 DRIVERS OF CHANGE .............................................................................................................................. 3 OVERVIEW OF BANKING PRODUCTS AND TRADITIONAL SALES PROCEDURE (PAST TREND) ................ 4 SERVICES OFFERED BY BANK AND PROCESS ....................................................................................... 4 TYPES OF DEPOSITS OFFERED BY BANKS ............................................................................................ 4 TYPES OF CONSUMER LOANS ............................................................................................................. 7 LOAN PROCESS .................................................................................................................................... 9 OVERVIEW OF INTERNET SALES OF BANKS AND THE PRODUCTS (PRESENT TREND) ........................... 10 ONLINE DELIVERY OF FINANCIAL PRODUCTS ................................................................................... 11 ONLINE BROKERAGE ......................................................................................................................... 12 ELECTRONIC BILL PAYMENT .............................................................................................................. 12 INDIAN BANKS ON WEB .................................................................................................................... 13 POINT OF SALES FOR INTERNET BANKING ........................................................................................ 14 COMPARATIVE DATA OF INTERNET BANKING WITH TRADITIONAL BANKING ................................. 15 PROS AND CONS OF MODERN OVER TRADITIONAL METHOD OF BANKING ........................................ 16 STUDY OF DEMOGRAPHICS................................................................................................................... 18 STUDY OF TRADITIONAL BANKING CUSTOMERS .............................................................................. 18 RETAIL BANKING ENVIRONMENT ................................................................................................. 19 STUDY AND ANALYSIS OF DEMOGRAPHICS OF INTERNET USERS .................................................... 20 STUDY AND ANALYSIS OF DEMOGRAPHICS OF INTERNET BANKING USERS .................................... 23 DEMOGRAPHICS OF INTERNET BANKING USERS VS. ALL WEB USERS ............................................. 26 REASONS FOR NOT USING AND INTENTIONS TO USE INTERNET BANKING ..................................... 26 SALES AND DISTRIBUTION OF E-SELLING OF CREDIT CARDS ................................................................ 27 REQUEST PHASE ................................................................................................................................ 27 SALES ................................................................................................................................................. 30 VERIFICATION.................................................................................................................................... 30 DELIVERY ........................................................................................................................................... 31 POST DELIVERY.................................................................................................................................. 31 FUTURE TREND ..................................................................................................................................... 32 APNALOAN.COM ............................................................................................................................... 32 PEER-TO-PEER LENDING.................................................................................................................... 34 REFERENCES .......................................................................................................................................... 36
INTRODUCTION
Internet has touched almost all aspects of our lives. The emergence of e-commerce has revolutionized the way we live, shop, entertain and interact. Therefore, it should not come as a surprise if it tries to influence the way we save and the way we invest. Today, when the customer is king and the service providers are rushing to pay obeisance to the king, financial service providers cannot be left behind. In their quest to differentiate their services and gain competitive advantage over their competitors, the financial service providers are trying to provide their services to the customers in the comfort of their homes. The Internet has emerged as a convenient channel for these service providers. Living in India, we might find these ideas too farfetched but the truth is that Internet has changed the way these services are delivered, particularly in countries where the Internet penetration is high. The different ways in which Internet is trying to revolutionize the delivery of the financial services and products are given below: 1. Internet Banking 2. Electronic Bill Payment 3. Online Brokerages 4. Online Delivery of Financial Products like Mortgages
DRIVERS OF CHANGE
Advantages previously held by large financial institutions have shrunk considerably. The Internet has levelled 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
OVERVIEW OF BANKING PRODUCTS AND TRADITIONAL SALES PROCEDURE (PAST TREND)
SERVICES OFFERED BY BANK AND PROCESS
Some of the services that are traditionally offered by bank are 1. Deposits 2. Loans 3. Insurance 4. Credit Cards
TYPES OF DEPOSITS OFFERED BY BANKS
Deposits are accepted in different ways. Differentiation in deposit types may arise from the ? Type of customer who holds the deposit ? Tenure of the deposit ? Nature and ? Interest factor. Based on these parameters, the deposits can be broadly classified into ? Transaction ? Non-transaction deposits.
Transaction (Payments) Deposits A deposit which facilitates the account holder to transact through a negotiable or transferable instrument, Cheque, Written order of withdrawal, Telephone order to transfer funds, Transferring money to third parties is known as a transaction account. These are one of the oldest deposit services offered by banks where banks make payments on behalf of its customers. This transaction or demand deposit service requires the bank to honor cheques and withdrawals. Transaction deposits include regular non-interest bearing demand deposits, which do not earn an explicit interest payment but provide the customer with payment services, safe keeping of funds and record keeping for any transactions carried out through cheques. They also include interest bearing demand deposits that provide all of the foregoing services and pay interest to the depositor. Current account and Savings account are the most widely used transaction accounts.
Non-Transaction (Savings, or Thrift) Accounts When the deposit account does not facilitate routine payments or transfer of funds for other transaction purposes, it is a non-transaction account. These deposits are designed to attract funds from customers who wish to set aside certain amount in anticipation of future expenditures or financial emergencies. These deposits pay higher interest rates compared to transaction deposits. While their interest cost is higher, thrift deposits are generally less costly for a bank to process and to manage. Most familiar examples of such accounts are the term deposit accounts.
Based on this differentiation of a transaction and a non-transaction account, the deposits mobilized by the Indian banks are generally classified into ? Current Account The depositor can withdraw the money at any time (as long as the money is available in the account) and also can order the bank to use the money to pay third parties, generally through a cheque. Banks may or may not pay interest on these accounts. If they pay interest, the account is called a “NOW” (negotiable order of withdrawal) account. It is possible that banks may charge fees for demand deposit accounts, but in many cases these fees can be reduced or avoided by maintaining a minimum balance or by satisfying other criteria established by the bank. Banks do require the account holder to maintain a certain amount of minimum balance continuously. In some cases, depending on the credibility of the customer, the bank may also allow the deposit holder to overdraw (OD) from the current account. ? Savings Bank Deposits The depositor usually plans to maintain the funds in the account for an extended period of time. Banks pay interest on these accounts. Banks may also charge fees for savings accounts, but in many cases these fees can be reduced or avoided by maintaining minimum balances. Other than for business purpose, operating accounts are also necessary for individuals, trusts, non-profit organizations, etc. However, these types of deposit holders have fewer transactions. Term Deposits. A deposit held at a financial institution that has a fixed term. These are generally short-term with maturities ranging anywhere from a month to a few years. When a term deposit is purchased, the lender (the customer) understands that the money can only be withdrawn after the term has ended or by giving a predetermined number of days notice.
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Figure 1 Categorization of Retail Bank Services Core Services Facilitating Services Supporting Services Payment services ? Cash ? Making payments at door step ? Foreign currency ? Internet banking requirements ? Telephone banking ? Traveler cheques ? DD/Bankers cheque ? TT ? EFT Current account ? ATM card ? Credit cards and savings ? Standing ? Debit cards account instructions ? Services to senior from citizens customers for ? Telephone banking making ? Internet banking payments ? Conversion of excess ? Inter branch/ balance to Time deposit interbank transfer of funds ? Safety vault Loan products: ? Current ? Delivery of loan at Consumer loans, account promised time period Personal loans, ? Savings ? Interest rate option: Housing loans, account Fixed/ floating Educational loans ? Time deposit ? Flexibility in preaccount payment of loan ? Counseling on Realestate markets ? Legal services for documentation ? ECS for payment of loan installments Insurance ? Current account ? Additional insurance products: Life facility for family ? Savings account insurance, members ? Time deposit Pension schemes ? Safety vaults ? Counseling on post retirement savings.
TYPES OF CONSUMER LOANS
Each type of loan requires a different credit analysis approach and provides different answers to the fundamental credit issues. Consumer loans can be classified into three basic types? Installment loans Installment loans require the periodic payment of principal and interest. In most of the cases, the customers’ borrow money to buy durable goods or cover extraordinary expenses and the loan is to be repaid in installments. The typical maturity ranges from two to five years. Excepting for revolving credit, most consumer loans are secured. Installment loans can be either direct or indirect loans. A direct loan is negotiated between the ultimate user of funds and the bank. The user must formally make the loan request and support with personal financial information to borrow from the bank. An indirect loan is funded by a bank through a separate retailer such as an automobile dealer who sells merchandise to the customer. The retailer takes the credit application, negotiates terms with the individual and presents the agreement to the bank. If the bank accepts the proposal it buys the loan from the retailer under prearranged terms. Other types of installment credit are the home loans or housing finance or the home equity loans, consumption loans, auto loans, etc. ? Credit card loans or revolving credit lines Credit cards and overlines tied to checking accounts are the two most important forms of revolving credit agreements. An overline is a prearranged loan to cover overdrafts of checking accounts. Usually, customers pay only a fraction of their monthly and incur finance charges on the remainder. Credit lines against demand deposit accounts at bank are less common but function identically to credit cards. Credit cards are attractive as they provide higher risk adjusted returns than other types of loans. Card issuers earn income from three sources: ? Charging cardholders fees, ? Charging interest on outstanding loan balances and ? Discounting the charges that merchants accept on purchases. ? Non-installment loans A limited number of consumer loans require a single principal and interest payment. Typically, the individual’s borrowing needs are temporary. Credit is extended temporarily in anticipation of a well-defined future cash inflow like selling a house, a large tax refund, etc. Bridge loans in new home buying would be a typical example. The quality of the loan depends on the certainty of the timing and the amount of the anticipated net cash flow for the sale.
Evaluating consumer loans
When evaluating the measurable aspects of consumer loan requests, an analyst addresses the following issues: ? Character of the borrower ? Use of loan proceeds ? Amount needed ? Primary and secondary sources of repayment. Therefore, the bank has to base its decisions more on qualitative parameters rather than quantitative aspects. Credit analysis is distinct for each type of loans.
While evaluating loans the banker cites the six Cs of credit: ? Character ? Capital ? Capacity ? Conditions ? Collateral ? Compliance. Among these, the most important thing to be assessed is character, which depicts the consumer’s desire to repay the loan. If the loan officer determines that a potential customer is dishonest he can reject the loan.
LOAN PROCESS
Consumer comes to know about the loan only after going to the bank and the process that happens are listed below. The process followed in the traditional process is as follows:
OVERVIEW OF INTERNET SALES OF BANKS AND THE PRODUCTS (PRESENT TREND)
With cybercafes and kiosks springing up in different cities access to the Net is going to be easy. Internet banking (also referred as e banking) is the latest in this series of technological wonders in the recent past involving use of Internet for delivery of banking products & services. Internet banking is changing the banking industry and is having the major effects on banking relationships. Banking is now no longer confined to the branches were one has to approach the branch in person, to withdraw cash or deposit a cheque or request a statement of accounts. In true Internet banking, any inquiry or transaction is processed online without any reference to the branch (anywhere banking) at any time. Providing Internet banking is increasingly becoming a "need to have" than a "nice to have" service. The net banking, thus, now is more of a norm rather than an exception in many developed countries due to the fact that it is the cheapest way of providing banking services 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 The bank of the future has to be essentially a marketing organisation that also sells banking products. New distribution channels are being used; more & more banks are outsourcing services like disbursement and servicing of consumer loans, Credit card business. Direct Selling Agents (DSAs) of various Banks go out and sell their products. They make house calls to get the application form filled in properly and also take your passport-sized photo. Home banking has already become common, where you can order a draft or cash over phone/internet and have it delivered home. ICICI bank was the first among the new private banks to launch its net banking service, called Infinity. It allows the user to access account information over a secure line, request cheque books and stop payment, and even transfer funds between ICICI Bank accounts. Citibank has been offering net banking to its Suvidha program to customers. Online banking solutions have many features and capabilities. They fall into the following broad categories: ? Transactional (e.g., performing a financial transaction such as an account to account transfer, paying a bill, wire transfer... and applications... apply for a loan, new account, etc.) ? Electronic bill presentment and payment - EBPP ? Funds transfer between a customer's own checking and savings accounts, or to another customer's account ? Investment purchase or sale ? Loan applications and transactions, such as repayments ? Non-transactional (e.g., online statements, check links, co browsing, chat) ? Bank statements
ONLINE DELIVERY OF FINANCIAL PRODUCTS
The Banks have started offering banking services like checking your account status fund transfer, ordering demand drafts and writing out cheques, via the net. Soon these will form only a small part of the total array of services being offered by them. These Banks have embarked on a number of new initiatives to protect their stronghold and to leverage the net. They are offering value-added services to their customers and at the same time are trying to get into B2C and B2B e-commerce. They are even trying to get their finger into various transactions between the Government on one side and the business and the customer on the other. Banks are trying to become a part of the online value chain. For example, they are trying to tie up with corporates so as to become a part of their supply chain and enable electronic transfer of funds between the different components of the Supply Chain. They are doing this by acting as an intermediary between the corporations and their vendors by enabling online transactions at one place. Some Banks are trying to setup portals for routing payments like Excise Duty and Sales Tax. Not content with that Banks are setting up secure payment gateways to tap the B2C online market. Banks have also taken the application process for personal loans, car loans, and mortgage, online. They plan to offer other financial products like Bonds and Mutual Funds through their financial service portal. This strategy is aimed by pre-empting the entry of new start-ups into this business. Another bit of the Net strategy, involves providing infrastructure for B2C as well as B2B e-commerce. Banks are setting up secure payment gateways that will allow online retail shops to obtain instant credit card verifications. Once the buyer hits the pay button at a B2C portal, the buyer's credit card details will get encrypted and travel securely to the Visa or MasterCard approval system through the bank's payment gateway. The banks are also setting up their own shopping portals. HDFC has a stake in a portal called easy2buy.com where HDFC bank customers can buy using their bank account number. Federal Bank has similar arrangements with Rediff.com and Fabmart.com. ICICI has setup Magiccart.com, an etailing site. At the B2B end, Banks are offering Net Banking service that allows electronic fund transfers among a company, its vendors and dealers. Another service being targeted at this segment is cash management. This will reduce the float, which is present in physical processing of the payments. The Banks are also trying to integrate their systems with the ERP/Supply Chain system of their clients. This will enable the bank to benefit from the movement towards e-procurement. EProcurement involves making transactions online and processing the payment electronically.
ONLINE BROKERAGE
Online Broking is emerging as another field where traditional service providers are likely to face tough competition from the Dot Coms. In order to pre-empt the moves into these areas by new players, many Banks have already tied up with Online Brokerages. The Banks have entered the e-trading business. Since many banks are also Depositary participants, they have tied up with e-traders so that a customer is able to buy or sell shares online and make and receive payments through the Net. In India, HDFC Bank has tied up with Investsmart.com and is offering its services to all the clients of the brokerage. ICICI Bank has gone a step ahead and launched ICICIDirect.com. These banks have become exclusive providers of banking and depositary/custodial services to the clients of these online brokerages.
ELECTRONIC BILL PAYMENT
From the point of view of Banks, Electronic Bill Payment (EBP) represents something of a threat, in that it could lead to customer attrition and reduce revenue. Among other revenue streams, the following sources of funds for the banks could be affected:
? ?
Float associated with processing in the physical form Cash Management Services
The Banks can protect itself by providing this service to their customers. But EBP also has an important strategic dimension, as it can become an integral part of a bank's portfolio of services. EBP can attract customers to the bank by making transactions more efficient and enabling customers to access their financial information more easily. Moreover, online interactions allow use of such tools as e-CRM to create a more intimate relationship with the customer and promote and deliver other online products and services. If the Banks do not establish control on EBP, they are likely to loose customers to the new providers of financial services, thus affecting other sources of revenue. In India, HDFC Bank, ICICI Bank and Citibank are trying setup an EBP portal. ICICI has already started a portal called BillJunction.com. Banks are planning to use the Net for payment of utility bills. They are entering into tie-ups with utilities like MTNL, Airtel, Orange, and BPL Mobile etc. Right now, a customer who's received a bill in the physical form logs into the network in order to make an online payment. In the future, these bills will be sent to customers through the Net. Consumers and Businesses can derive economic benefit on account of reduction in transaction costs and a reduction in the float resulting from physical processing of the Bills. In addition, many are likely to adopt it mainly for the convenience. They can pay bills electronically in the same way they do today, but by consolidating their bills, they can reduce the effort involved in the whole process. They can also access their account at the same time. They can conveniently access all billers from a single portal that also provides them banking facilities. This would enable them to view their account balance while paying bills. For portals or the intermediaries that consolidate bills from multiple billers at a single online location EBP is a tool to acquire customers and provide them other financial services also. Dominance of the EBP market can lead to an entry into other financial services markets such as credit or debit card payments, or indeed into a much broader range of e-commerce markets, such as payments gateways.
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). 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.
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POINT OF SALES FOR INTERNET BANKING
COMPARATIVE DATA OF INTERNET BANKING WITH TRADITIONAL BANKING
Cost of Internet Banking over other mode of Banking (Source: IBM global services consulting group)
PROS AND CONS OF MODERN OVER TRADITIONAL METHOD OF BANKING
Benefits:
1. Accessibility (Anytime, Anywhere banking): In the past Selling without internet used to limit banks to operate only from a fixed location and limited geographic area. But these days using the internet to sell their products/services banks have provided improved accessibility to the user. A user can access his/her account from any location, at any time and from any computer in the world. 2. Additional services : With the advent of Internet technology banks sell and provide people with numerous services like Free bill payment, rebates on ATM surcharges, credit cards with low rates, free online checking and easy online applications for personal loans and mortgages to name a few. 3. Greater Reach to Customers: Selling by internet for banks has removed the traditional geographical barriers the banks use to face in the past. Now the bank could reach out to customers of different countries/legal jurisdiction easily. 4. Convenience: Online selling has increased the sales of banks products/services as a customer finds it more convenient to access his/her account from anywhere and avail the services rather than having to go to the bank lobby or drive-thru during business hours waiting in long queues for even the minute work . Online banking is thus believed to appeal to customers because it is more convenient than visiting bank branches. 5. Availability: Online banks never close and is available 24*7 for use and is only a click away. Thus banks these days have tremendous benefit of putting their product /services on sale 24/7. This translates into more sales and greater cash flow for banks. 6. Efficiency: Online method of selling is more efficient than traditional method since a person can access all his/her accounts from one secure site. Can enquire balance, status of
cheques, perform funds transfers, order drafts, request issue of cheque books etc. Online instead of going to various counters in bank to avail various services. Also a
user a can do various transactions online without any need to buy stamps, lick envelopes, or wait for bills to be received through the mail. 7. Effective: Online banks offer various tools which help you to manage your assets more effectively. Instead of keeping a track of your various assets, investments and services/products availed manually a customer is now can check all the details at one place without hassle. It is easier to keep track of fees charged to accounts, especially those accumulated from using foreign ATMs. This constant visibility allows people to keep closer track of account balances, which saves them from overdrawing their account and incurring overdraft charges. 8. Inexpensive: Internet marketing is relatively inexpensive for banks when compared to the ratio of cost against the reach of the target audience. Banks can reach a wide audience for a small fraction of traditional advertising budgets. The internet thus allows banks to have an unlimited customer base. Their customer base has grown indefinitely from the millions of customers who use the internet on a daily basis. Managing such large customer base is less
expensive which means very low overhead to maintain their inventory of products. The use of mass mailing software means very low mailing costs as email costs nothing to send. The banks also are using auto responders or mail managing packages so that they are required to pay a small monthly fee. This is insignificant compared to traditional mailing costs. Also when banks transfer members to online status, they save money that would otherwise be spent paying tellers and printing paper records. 9. Measurability of statistics: Internet marketers like bankers also have the advantage of measuring statistics easily and inexpensively. Nearly all aspects of an Internet marketing campaign can be traced, measured, and tested. Such marketing measure can determine which messages or offerings are more appealing to the customer and thus accordingly can focus towards a particular product/service. Such measurement cannot be achieved through billboard advertising (traditional method), where an individual will be best interested, and then decide to obtain more information at a later time. 10. Informative: Customers are given faster and easier access to information about various products/services existing with the bank and new offerings of the banks easily across any location. 11. Faster Selling: Internet banking has reduced the time to market the product. It has increased the ability of the banks to introduce new products and services quickly and successfully.
Concerns:
1. Security-the key concern: The main concern of Internet banking is security, protection of customer's privacy and protection against fraud. . Many consumers are hesitant to purchase items over the Internet because they do not trust that their personal information will remain private. Thus for most people the biggest hurdle to online banking is learning to trust it and to be sure whether it is secure. 1. Intangible Feel: From the buyer's perspective, Internet banking gives an intangible feel. The inability of the customers to touch, feel or "try on" tangible goods before making an online purchase is one of the limiting factors. 2. Newer Technologies: Internet selling requires customers to use newer technologies rather than traditional media. Low-speed Internet connections is another barrier. If banks build large or overly-complicated websites, individuals connected to the Internet via dialup connections or mobile devices may experience significant delays in content delivery. Very large networks of bank branches nationwide are growing fast. Lack of connectivity in remote locations is a major concern. Another occasional problem with online banking occurs when the website is down, either for scheduled maintenance or because of technical problems. 3. Effect on Industry: Adoption of internet selling of products/services by banks has posed a strategic risk of loss of business to those banks who have not adopted this method of selling or those who are inefficient in performing. So that the situation is like this: 75-80 percent automation in main branches with less automation in remote cities and smaller branches.
4. Inefficiency: Inefficient and outdated applications in some of the banking departments are there which are not flexible and don't integrate well with other applications. 5. Restraint from people: Even these days when the technology has made its mark all over the world. There is still a majority existing in the country that are Slow-to-change and prefer dealing with a human teller rather than internet or automated teller. 6. Computer literacy in India is still very low and thus acting as a barrier in fast acceptance of Internet banking. 7. Selling of account opening services by banks is still in a nascent phase because the Application for account opening can be accepted over Internet but an account is opened only after proper introduction and physical verification of the customer due to the security concerns face by bank.
STUDY OF DEMOGRAPHICS
STUDY OF TRADITIONAL BANKING CUSTOMERS
Macroeconomic indicators (2006) GDP at current prices Inhabitants GDP per head Economic growth rate Consumer confidence indicator Unemployment rate Consumer Price Index Banking staff Number of branches Number of ATMs Households savings ratio Inflation rate Interest rate, consumer credit Interest rate, residential Interest rate on long term bonds
Rs 39771 billion 1095.4 million Rs. 36307 8.7% 135 7.6% 5.3% 895,131 58,725 25,000 32.4% 6.1% 15.50% 9.25% 8.0%
RETAIL BANKING ENVIRONMENT Macroeconomic Factors • Fear of Overheating: India faced remarkably high inflation during 2006, so RBI is in favour of
tight monetary policy • Interest rate environment that supports exports and demand of investment to continue growth momentum while reinforcing price stability and anchoring inflationary expectations • Adequate liquidity to meet credit needs of economy with emphasis on credit quality
Supervisory Institutions • Reserve Bank of India (RBI): The Central bank which is the monetary authority & regulator of
financial system, issuer of currency and manager of foreign currency. • Securities and Exchange board of India (SEBI): Regulatory body that monitors the stock market transactions and compliance thereof. • Insurance Regulatory & Development Authority (IRDA): An insurance regulatory body to protect the interests of the policyholders.
Type and size of players
Net Banking income
The major Indian Banks fall into three categories: Public sector (State Bank of India, Bank of Baroda, Bank of India, Punjab National Bank, Canara Bank), Private sector (ICICI Bank, HDFC Bank) and Foreign Banks (Citibank, Standard Chartered Bank)
STUDY AND ANALYSIS OF DEMOGRAPHICS OF INTERNET USERS
Demographics of Internet Users Below is the % of each group who use the internet, according to our February–April 2006 survey. As an example, 71% of adult women use the internet. Use the internet Total Adults Women Men Age 18-29 30-49 50-64 65+ Community type Urban Suburban Rural Household income Less than Rs. 1,00,000/yr Rs 1,00,000-Rs 5,00,000/yr Rs.5,00,000-Rs 10,00,000/yr Rs. 10,00,000 +/yr Educational attainment Less than High School High School Graduate Post Graduate 40% 64 84 91 53% 80 86 91 75% 75 63 88% 84 71 32 73% 71 74
Here is the % of home internet users who have dial-up vs. high-speed connections at home. As an example, 34% of home internet users have dial-up connections. Dial-up Home internet users 34% High-speed 62%
ANALYSIS
A higher percentage of men than women are internet users with the majority lying in the age group of 18-29 yrs. Also the urban and sub-urban percentage of population using internet is same and varies according to the educational background and per annum household income. The majority of internet users are college graduates with an annual household income of Rs.10, 00,000 and above.
There are 11.66 million Internet subscribers at the end of June 2008 as compared to 11.09 million at the end of March 2008 registering a growth of 5.09%. This growth rate is less than the growth rate of 7.08% at the end of March 2008.
INTERNET SUBSCRIBER BASE IN INDIA i) Broadband Subscriber Growth - The number of Broadband subscribers (with a download speed of 256 Kbps or more) was 4.38 million at the end of June 2008 as compared to 3.87 million at the end of March 2008. The growth rate of broadband subscribers in this quarter is 13.18%. ii) Broadband Subscribers Share (Technology wise) – Out of total 4.38 million broadband subscribers, 3.72 million are DSL based; 0.42 million Cable Modem; 0.11 million Ethernet LAN; 0.045 million Fiber; 0.057 million Radio, Leased Line 0.018 million and 0.005 million use other technologies.
TECHNOLOGY TRENDS FOR BROADBAND Regulations on ‘Quality of Service of Broadband Service Regulations 2006’ came into force with effect from 1st Jan 2007.
GROWTH OF INTERNET AND BROADBAND SERVICES (TRAI REPORTS)
* Accessing Internet through wireless (GSM & CDMA) networks
Internet Subscriber Base as on 30.06.2008
STUDY AND ANALYSIS OF DEMOGRAPHICS OF INTERNET BANKING USERS
GROWTH IN ONLINE BANKING 2002-2004
The following gives the percentage of those in each group with Internet connections who have tried online banking. In other words, 31% of online men had done online banking in October 2002 and 29% of online women had done it.
October 2002 N=1027 internet users All Internet Users SEX Men Women Age Generation Y(18-27 yrs) Generation X(28-39 yrs) 40-49 yrs 50-58 yrs 29% 34% 33% 26% 31% 29% 30%
November 2004 N=537 internet users 44% 49% 39% 38% 60% 42% 49%
Household Income Live in households earning less than Rest. 1,00,000/yr 21% Rs. 1,00,000/yr- Rs. 5,00,000/yr 31% Rs. 5,00,000/yr- Rs. 10,00,000/yr 33% Rs. 10,00,000/yr + 35% Educational background High School 27% Graduate 27% Post Graduate and above 37% Internet Connection at home Dial up 24% Broadband 35%
32% 44% 51% 55% 42% 41% 52% 35% 63%
ANALYSIS
The survey's other key findings are: ? Broadband and online experience: The spread of online banking has coincided with the spread of high-speed broadband connections and the increasing maturation of the internet population. Fully 63% of those with broadband at home have tried online banking, compared with 32% of those with dial-up connections. And 51% of those who have more
than six years of internet experience have tried banking online, compared to 27% of those with three years or less of online experience. ? The rise of GenX: Those with internet connections between the ages of 28 and 39 to have tried online banking. Some 60% have done so, compared to 38% of wired GenY members (those 18-27) and 25% of those with internet connections over the age of 60. Men: In the past two years, online men are notably more likely to perform online banking activities than online women. Half of men with internet connections (49%) have tried online banking, compared to 39% of online women. This is a change from the situation two years ago when internet-connected men and women were equally as likely to be banking online. Higher socio-economic status: Online banking, like many other internet activities, is most likely to be performed by those living in well-off households with more than Rs.10, 00, 000 p.a. in income, those who have graduate and post graduate degrees.
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This rise in online banking likely flows from two major trends: ? ? As internet users gain more experience online, they are more likely to perform activities that involve money, such as making online purchases and travel reservations, and participating in online auctions. As banks themselves have discovered the virtues of online banking and have become more aggressive in offering it as an option to customers. Various studies have found that online banking customers are more profitable than offline customers – they make fewer customer service calls and are less likely to switch banks. That means many banks are improving their online services and offering them free of charge to customers.
Of course, phishing (the practice of trying fraudulently to get consumer banking and credit card information) is one potential new problem for online banking. Increasing numbers of fake emails are showing up in people email inboxes, “warning” them that their account information needs to be checked or that some problem has arisen in their account. These emails then point people to Web sites where they are asked to enter their financial information. This fraud not only costs banks real money, but it degrades customers’ trust in the bank and in online banking in general.
SURVERY 2
As part of Georgia Tech’s seventh survey of Web users conducted in April and May 1997, nearly 20,000, Web users completed an online profile of their Web habits/preferences, etc. Approximately 7% of the total group completed an Internet banking questionnaire yielding 1,172 usable surveys. Of the 1,172, only 64 (5.5%) currently had an Internet bank account. The sample size of users isn’t large enough to make projections from, but it’s interesting.
DEMOGRAPHICS OF INTERNET BANKING USERS VS. ALL WEB USERS
The demographics of the small sample of Internet banking users were very similar to the demographics of the survey as a whole.
REASONS FOR NOT USING AND INTENTIONS TO USE INTERNET BANKING
Almost half the non-users said it wasn’t available at their bank. Security was also a concern to 39% of non-users.
SALES AND DISTRIBUTION OF E-SELLING OF CREDIT CARDS
REQUEST PHASE
1. The request for CREDIT CARD comes through online portal or sites of Banks.
2. Credit Cards come under Personal Banking products so the internet user has to click the relevant link to apply for Credit Cards.
3. Once this link is clicked the window that appears displays all information to the customer about all the available Credit Card types, their key features and benefits.
4. The customer can browse through various options and if interested can know about eligibility, fees and other details about the product. The various details are as displayed in the following snapshot
5. Once customer has zeroed on any particular card he can click on link to apply for it.
6. A simple form is given out for contact details and mandatory details.
7. On submission the request procedure ends for customer and Bank starts the processing activity.
SALES
1. A third party customer care centre contacts the customer within 48 hours or so through mobile or email service to send in a sales representative as well to clarify doubts. 2. A meeting is setup according to customer’s convenience at specified time, venue and date. The customer is asked to get all required documents. 3. The sales representative /agents form nearest branch makes one on one contact with customer convinces him/her about the product. 4. The physical paperwork is then done and application finalized.
VERIFICATION
1. An On-phone verification is carried out by Bank representatives on paperwork submitted by sales representative within 3-4 days. 2. On verification success the customer is informed of dispatch of credit card to his choice of venue (home/office) in person.
DELIVERY
1. The Delivery agent visits the venue and delivers the credit card to the customer. 2. The customer has to authenticate receipt of credit card. 3. All the instruction manuals help services details and credit card details are given to customer as a kit on delivery.
POST DELIVERY
1. Customer Care 24X7 is provided to resolve queries and help. 2. In case of specific problem Bank representatives contact the customer in person. 3. Online details, bill payment, statements, help for Credit Cards are provided by Bank sites.
FUTURE TREND
APNALOAN.COM
Apnaloan.com is one of the newest form of e-selling of banking products.Apnaloan.com is India’s first and largest personal finance supermarket. It is India's leading online market place for credit cards, auto loans, home loans, personal loans, education loans. You can compare and check the offerings of various banks and apply online and get response from multiple banks within minutes. Features 1. It is an integrated platform where customers can search, apply and avail for loans. 2. The various services provided are : ? Home Loan ? Personal Loan ? Car Loan ? Business Loan ? Education Loan ? Loan against property ? Credit Cards 3. Participant Banks: Around 56 Banks are using this site to sell their loan products including some major banks like AXIS, ICICI, HDFC, SBI, BANK OF BARODA etc. 4. Cities Covered: It covers all the metros, capital cities and many other tier-2 cities in India. 5. It provides Assisted Loan Search Service-A loan application tool that allows customer to quick apply for a loan and avail a faster loan processing. 6. Product Comparators: Allows customers to compare various loan products under different categories offered by different financial institutions. Customers can compare the features, eligibility criterion, documents requirements etc .of various loan products of financial institutions 7. Chat with Experts: Customers can chat with personal finance expert Mr. Harsh Roongta, CEO of Apnaloan.com. 8. Tools & Calculators: There are various tools and calculators provided to aid Customer in comparing and decide on product suitable for them. E.g. EMI Calculator, Interest rate Calculator, Impact of changed Rate calculator etc. 9. Interest Rates: The site gives out updated information regarding interest rates and best interest rates in each product category for all the products across all the banks. 10. Tax tips: Apart from the above mentioned services the customers can also get tips on Tax related queries under the section ‘Tax Tips’ which will provide insights on tax aspect of loan and manage tax liabilities as well. 11. Blogs: Customers discuss and review their experiences regarding products and banks. A great way for word-of-mouth publicity and trust building feature for banks.
The Selling Process
The consumer today has a crying need for help in understanding the entire process of taking a loan, identifying and making a choice from those that best match the individual needs. In another sense, you have an unusual situation where the consumer perceives himself as the taker of a loan rather than a giver of business—due to the treatment meted out to him along the entire loan-taking process. Apnaloan assists and guides the consumer at every step through the entire process of taking the loan. Based on his requirements, the customer can narrow down his options and apply for the deal that suits him the best. The company offers a wide variety of personal and financial products such as auto loans, personal loans, credit cards and home loans using the Internet as a primary consumer contact channel, for both residents of India as well as NRIs. The loan-seeker is required to provide certain basic details like his income, the amount required and the reason for the loan. Every lending organization has a set of minimum requirements that must be met to be eligible for a loan. Based on these factors, Apnaloan selects and displays the options available and then the customer can choose according to his preferences of interest amount, loan duration or other criteria. "This is a much better deal for the consumer as he has access to all the information in one place," says Manish Bhardwaj, assistant manager, HDFC Bank. In addition, Apnaloan also assists the consumer in the process of filling up the application and provides counselling by sending its representative to meet him personally. Sometimes on meeting the customer they find that the customer doesn’t have all the documents required for a particular loan. Here instead of rejecting his application like most individual banks would do, they try and find him the next best organization where he can be eligible for the loan.
The Business model
In order to provide the consumers with loan options from various sources, apnaloan.com has entered into tie-ups with leading banks and financial institutions to act as a non-exclusive distributor of their products and services. The list covers most of the multinational and nationalized Indian banks such as Citibank, American Express, ICICI or HDFC. In addition, it has entered into arrangements with manufacturers, dealers and associate sites to better the deals to the consumer. The site is modelled around a consumer-to-business (C2B) model that is designed to generate revenues through its transactions. Unlike most Eyeball-based sites working on banner-advertising revenue models, the main source of revenue for apnaloan.com will be through charges from the lending institutions on each transaction executed. The amount of commission being the same for every institution, the information given to the consumer will be without a vendor bias. Additional sources of revenue will be generated through participation fees, various alliances with complimentary sites and banner advertising The technology used by apnaloan.com—the three-tier back-end architecture built on Mphasis-BFL software revolves around these components: • The delivery channels: The Web, mobile access devices, call centre and e-mail. • The applications integrator: Components like the customer information profile manager, business rules, decision engine, transaction manager, security sub-system and the workflow manager.
• The back-office systems: The loan origination and tracking system, the information database, compensation system, contract management system, e-mail response management system and an accounting subsystem.
Advantage to Lender
While the site provides a higher bargaining power to customers, it also promises a useful business option to the lender. The participating banks or financial institutions have access to a much larger database that can be tapped. In a scenario where a majority of dot-coms are still struggling to define their business models and most organizations have become sceptical investing in new e-ventures, this e-marketplace seems to suggest a rescue route. By bringing together a group of organizations together on a common platform in this way, apnaloan helps cut down on intermediaries and create a more cost-effective solution. While most multinational banks and lending institutions also have their individual sites; the concept of such an emarket is emerging as a useful common contact point for loans and credit cards.
The Future Trend
? ? ? With Internet becoming the medium of communication all over the world e-selling will be the channel to be used by Banks for almost all products and services. We will see more and more Banks and products using platform like this for sales and distribution. An Integrated marketplace like Apnaloan.com has to be availed to the fullest to reach out to more and more customers for selling financial products. The selling process will become more transparent, better, faster and convenient to match to the expectations of the Internet generation.
PEER-TO-PEER LENDING
Peer-to-Peer lending is cash transacting model where individual customers lend and borrow money with each other. One of the most popular portals of P2P are Zopa.com, Egg and ING. The model is explained through Zopa.com. Zopa.com is a totally different futuristic business model used for cash lending and borrowing. Launched in early 2005, Zopa is a peer-to-peer online brokerage that couples British residents who want to lend with those who want to borrow. The company represents a new business model in the retail financial services industry, and since Zopa is not technically a bank and does not lend money itself, the capital requirements to run the business are relatively small. Compared to a traditional full service bank Zopa concentrates on only a few steps of the value chain.
How it works?
People join Zopa online as either borrowers or lenders. Once registered, lenders could loan money to a pool of people grouped together because of similar credit worthiness and desired loan term. Zopa assesses the credit scores of borrowers using similar credit reference agency-based credit ratings as used by U.K. retail banks and other lenders, and only offers services to borrowers who achieved an A*-, A-, B- or C- rating. The company also engages an identity checking agency to verify the identity of all lenders and borrowers. The company’s own team of underwriters individually assess each borrower’s ability to repay and then enters then into Zopa’s own market system which includes A*, A, B, and C lending categories by loan term (12 to 60 months). Zopa applied for business process patents in the U.S., Japan, and Australia for elements of its proprietary marketplace matching platform, but recognized that the broader concept of ‘P2P
lending’ could not in itself be protected from imitation. By mid-2006, two other peer-to- peer lending sites (donjoy.net and prosper.com) had already been established in Korea and the U.S. By late 2006 the average borrower took a loan of £5,000 and the average lender deposited £3,000 per transaction. Repeat lenders tended to increase their deposit amounts steadily after joining, with many increasing their lending. Only less than 0.05 percent of Zopa’s loans had turned into uncollectible debts. Zopa U.K. CEO James Alexander believes that Zopa had partly achieved such low default rates by injecting a social aspect into lending. Zopa members are able to see the usernames of other members on the site whenever they lend or borrow. While this did not typically include the member’s full name (unless they had chosen a username that matched their real name) or their address, other members could see generic details such as age, marital status, location, and loan purpose. Lenders can see how much had been borrowed, at what rate and term, and track repayments. Here the greater the amount of information available on the actual bad debt rates, the greater is the perceived degree of trust and security for the members. Zopa’s has large installed membership base of about 120,000.potential customers. The other big players are Egg with more than 3.7 million customers and ING Direct (a relative newcomer) with 1 million.
The Future Trend
1. More and more sites covering more geographical areas and internet communities will come up based on this concept. 2. Peer-to-Peer lending is a potential threat for lending services of Banking. If the model is replicated and gains popularity to the best level in the Internet community Banks will have no role play in this marketplace. However this business model is still in the early stages and may undergo a lot of changes before proving its viability on a large scale. 3. The market place involves only cash transactions and hence Banks can use the platform for their other products to reach out to this new segment of customers.
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