The Internet banking is changing the banking industry and is also having the major effects on banking relationships. Even the Morgan Stanley Dean Witter Internet research emphasised that Web is more important for retail financial services than for many other establishments. Internet banking consists of use of Internet for delivery of bank products & services. It comes into four main categories, from Level 1 - least functionality sites that offer only usage of deposit bill data - to Level 4 sites - highly superior offerings enabling included sales of additional products and access to other financial services- such as investment and insurance. Quite simply a successful Internet bank solution offers
· Exceptional rates on Personal savings, CDs, and IRAs
· Checking without monthly charge, free bill repayment and rebates on ATM surcharges
· Credit cards with low rates
· Easy online applications for many accounts, including personal loans and mortgages
· 24 hour account access
· Quality customer service with personal attention
Advantages previously kept by large financial institutions have shrunk noticeably. THE WEB has leveled the taking part in field and afforded open up usage of customers in the global current market. Internet bank is a cost-effective delivery channel for finance institutions. Individuals are embracing the many great things about Internet banking. Usage of one's accounts whenever and from any location via the World Wide Web is a convenience unknown a short time ago. Thus, a bank's Internet occurrence transforms from 'brouchreware' status to 'Internet banking' status after the bank undergoes a technology integration effort to enable the client to access information about his or her specific account marriage. The six most important motorists of Internet bank includes, in order of primacy are:
· Improve customer access
· Help in the offering of more services
· Increase customer loyalty
· Attract new customers
· Provide services offered by competitors
· Reduce customer attrition
The bank 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 bank industry coupled with the introduction of new technology, are allowing new rivals to type in the financial services market quickly and effectively.
Indian banks are going for the retail banking in a large way. However, much is still to be performed. This study that was conducted by students of IIML shows some interesting facts:
· Throughout the country, the web Banking is in the nascent stage of development (only 50 banking companies are offering varied kind of Internet banking services).
· Generally, these Web sites offer only the most basic services. 55% are so called 'entry level' sites, offering bit more than company information and basic marketing materials. Only 8% offer 'advanced ventures' such as online funds transfer, trades & cash management services.
· Foreign & Private bankers are much advanced in conditions of the number of sites & their level of development.
Information technology analyst firm, the Meta Group, just lately reported that "finance institutions who don't offer home bank by the year 2000 can be marginalized. " By the year of 2002, a big complex and highly competitive Internet Banking Market will develop which will be driven by
· Demand area pressure scheduled to increasing access to low cost electronic services.
· Emergence of open criteria for banking features.
· Growing customer awareness and need of transparency.
· Global players in the fray
· Close integration of bank or investment company services with web based E-commerce or even disintermediation of services through direct electronic repayments (E- Cash).
· Far more convenient international transactions due to the fact that the Internet along with basic deregulation trends, eliminate geographic restrictions.
· Move from one stop shopping to 'Bank Collection' i. e. unbundled product buys.
Certainly some existing offline banks will go out of business. But that's because they neglect to respond to the task of the Internet. The Internet and it's really underlying technologies will change and transform not merely banking, but all areas of finance and commerce. It represents a lot more when compared to a new circulation opportunity. It'll allow nimble players to leverage their offline presence to improve client satisfaction and gain share. It will induce lethargic players who are struck with legacy cost basis, out of business-since they cannot bring to play in the new framework.
In a survey conducted by the Online Banking Relationship, member institutions graded security as the most crucial problem of online banking. There is a dual requirement to protect customers' privateness and drive back fraud. Bank Securely: Online Bank via the internet provides an overview of Internet commerce and exactly how one company grips secure banking for its lender clients and their customers. Some basic information on the transmitting of private data is presented in Security and Encryption on the Web. PC Newspaper Online also offers a primer: How Encryption Works. A multi-layered security architecture comprising firewalls, filtering routers, encryption and digital recognition ensures that your account information is protected from unauthorised access:
· Firewalls and filtering routers ensure that only the genuine Internet users are allowed to access the system.
· Encryption techniques utilized by the bank (like the sophisticated open public key encryption) would ensure that privacy of data flowing between the browser and the Infinity system is shielded.
· Digital qualification procedures supply the assurance that the info you receive is from the Infinity system.
Claus Nehmzow, a Main in the Information Technology Group in London at Booz Allen & Hamilton, writes of some compelling research findings and will be offering his projections for Western european banks in THE WEB Will Shake Backing's Medieval Foundations. He is convinced the low deal cost will make banking on the Net amazing, but also that this will require institutions to carefully consider and plan customer relationships programs.
· It really is believed that everything will be dependant on content and framework, and where execution will be key. From a customer and company perspective, that's where the entire world is moving-it is likely to be real-time, on-line, personalisation for both marketing and the service experience. If existing banking institutions don't want to fade away, it is this task of Integration that they need to embrace to be able to earn and survive. A lot more things change, the less they change. In the weeks and years-ahead are going to be how PROVIDERS integrate and market their offerings across different programs. The strategic and executional fights of the future are going to be fought for Channel Integration. Exactly what does Channel Integration means? It means that an establishment presents the same face to the customer-be it in the branch, on the net, at an ATM or for example, via a sales rep or an agent. The same face, an identical message. Or on top of that, messages that strengthen each other. When a sales representative tries to market you a property loan, you get e-mail a day later reminding you about the loan. That's called Integrated Sales, which results in incremental monetary activity and increased efficiencies of marketing communications. Channel Integration over the cellphone web can plainly lead to a gain of several percentage points of GDP. The beauty of this approach is that one channel does not displace another. They prey on each other to generate incremental value for the customer, as well as the organization. The incremental value originates from two distinct sources. First of all, you reduce inefficiencies. You do not send people spam because you understand that they are not likely to buy a specific product or service today. That results in online cutting down for the current economic climate. Subsequently, you persuade people at the right time (the right time from the customer's perspective, not from the service provider's perspective) to decide on a tailor made offering. This too increases value. Actually, this has to do with the Internet itself, and much more to with the actual technologies of the Internet which allow incremental efficiency, and empowers the client to make more enlightened and well-timed choices.
· Lastly the product range is another issue which becomes important. It will take a technological trend to offer advanced bank products online and given the rate at which the technology is expanding we can expect this to occur in forseeable future.
Internet banking would drive us into an era of creative devastation due to non-physical exchange, complete transparency providing rise to perfectly electronic market and customer supremacy. The question to be asked right now is "The actual Indian Banks must do" Whatever is the strategy chosen and options followed, certain key variables would determine the bank's success on web:
1. For long-term success, a loan provider may follow:
· Adopting a webs mindset
· Finding and catching on the first mover's advantage
· Recognising the core competencies
· Capability to package multiplicity with simplicity
· Mature Management effort to convert the organisation from inward to outward looking
· Aligning roles and value propositions with the customer sections · Redesigning maximum channel portfolio
· Acquiring new capabilities through proper alliances.
2. These can be executed in four steps:
· Familiarising the customer to new environment by demo version of software on bank's internet site. This will contain head to through the features which are to be included. It'll enable users to provide suggestions for advancements, which may be integrated in later variations wherever possible.
· Second period provides services such as account information and balances, assertion of account, exchange tracking, mail field, check book issue, stop payment, financial and customised information.
· The 3rd phase may include additional services such as fund transfers, DD concern, standing instructions, beginning fixed debris, intimation of loss of ATM cards.
· The final step should include advanced corporate banking services like alternative party payments, domestic bill repayments, establishment of L/Cs, Cash Management Services etc. Increased plan for the clients in future range from demands for demand drafts and pay purchases and many more to generate the ultimate in banking convenience.
All these strategies will help lenders in translating their traditional business model into an Internet one, falling into three main categories
· One stop shop
· Virtual one-stop-shop
· Best of breed dealer.