Banking and Operation
Assignment
10/18/2018
SUBMITTED BY:
PRASHANT GHIMIRE
17021141125
Batch: 2017-19
17021141125 Prashant Ghimire
Banking Operations
Assignment - MBA-Sem III (2017-19)
Name:- Prashant Ghimire Enrolment Number:-17021141125
1. How has digital banking improved the banking services in India?
The developments taking place in information and communication technology are
increasing competition in financial institutions worldwide. Thus, the deployment of
advanced technologies is essential to achieve a competitive edge. Recently, the
banking industry was highly affected by the technological revolution that transformed
the way banks deliver their services, using technologies such as automated teller
machines, phones, the Internet, credit cards, and electronic cash. This project covers
the introduction and diffusion of retail banking and the development in electronic
delivery channels and payment systems in its marketplace which is termed as E-
BANKING. Digital banking is an umbrella term for the process by which a customer
may perform banking transactions electronically without visiting any institution. The
following terms all refer to one form or another of electronic banking: personal
computer (PC) banking, Internet banking, virtual banking, online banking, home
banking, remote electronic banking, and Phone Banking. PC banking and Internet or
online banking is the most frequently used designations. It should be noted, however,
that the terms used to describe the various types of electronic banking are often used
interchangeably.
Digital banking nowadays is the one of the fastest developing trends in Indian
banking and is poised to take the banking sector a notch higher. No more falling in
line in banks, no more waiting tons of hours in the bank, no more days and weeks of
waiting. All can be done with one card, one gadget. It’s easy, it works, and most
importantly, people like it.
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Digital Banking has Improved the traditional Banking system in different ways. With
Digital Banking, It means any user with a personal computer and a browser can get
connected to his bank’s website to perform any of the virtual banking functions. In
Internet banking system the bank has a centralized database that is web-enabled. All
the services that the bank has permitted on the internet are displayed in menu. Any
service can be selected and further interaction is dictated by the nature of service.
The traditional branch model of bank is now giving place to an alternative delivery
channels with ATM network. Once the branch offices of bank are interconnected
through terrestrial or satellite links, there would be no physical identity for any
branch. It would a borderless entity permitting anytime, anywhere and anyhow
banking.
Some of the reason how Digital Banking has improved the banking system are:
Real time banking:
Unlike traditional banking which suffers from time consuming procedures, E-
Banking provides real time banking to the customers. You get all the relevant
information about your account instantly. You can access all the details about your
account sitting at home or at any distant location.
24/7 banking:
E-banking has removed the time constraint from banking. Now you can withdraw
cash or get any banking facility anytime.
Banking from anywhere:
Don’t worry if you are sitting in Middle East country and want to check your
account in New York. E-Banking certainly leaves no room for blaming the distances.
Smart banking is ready to serve you anywhere, anytime.
Safe and secure Banking:
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Electronic- banking is more immune to security and safety related problems.
Password Based Encryption (PBE), Secure Socket Layer (SSL), electronic signatures
and electronic tokens gives a high level of security. Any malfunctioning or any
inconsistency in your account can be traced easily. This makes E-Banking more
reliable.
Cashless Transactions:
Use of smart cards, debit cards, credit cards has eased you from hatred, time
consuming loaning procedures. Your banks provide you instant loans. No need to
keep cash with you at all, a small chip card has replaced piles of cash. Certain web
sites provide facility of online loaning .You can get instant loan there, just by filling a
small form.
High Performance and flexibility:
E-Banking is a high performance system satisfying its customers for their every
banking related queries and desires. What makes it more interesting is its flexibility.
Banking is using everyday advancements in technology, which makes it smart and
banking system of today and tomorrow.
Bill payment service:
Customers can facilitate payment of electricity and telephone bills, mobile phone,
credit card and insurance premium bills as each bank has tie-ups with various utility
companies, service providers and insurance companies, across the country. To pay
the bills, all one need to do is complete a simple one-time registration for each biller.
Customers can also set up standing instructions online to pay their recurring bills,
automatically. Generally, the bank does not charge customers for online bill payment.
Fund transfer:
Customers can transfer any amount from one account to another of the same or any
another bank. Customers can send money anywhere in India. After login to the
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account, customers need to mention the payees’ account number, his bank and the
branch. The transfer will take place in a day or so, whereas in a traditional method, it
takes about three working days. ICICI Bank says that online bill payment service and
fund transfer facility have been their most popular online services.
Investing through Internet banking:
You can now open an FD online through funds transfer. Now investors with
interlinked demat account and bank account can easily trade in the stock market and
the amount will be automatically debited from their respective bank accounts and the
shares will be credited in their demat account. Moreover, some banks even give you
the facility to purchase mutual funds directly from the online banking
system. Nowadays, most leading banks offer both online banking and demat account.
However if you have your demat account with independent share brokers, then you
need to sign a special form, this will link your two accounts.
Recharging your prepaid phone:
Now customers can just top-up the prepaid mobile cards by logging in to Internet
banking. By just selecting the operator's name, entering the mobile number and the
amount for recharge, the phone is again back in action within few minutes.
Shopping;
With a range of all kind of products, customer can shop online and the payment is
also made conveniently through the account. Customer can also buy railway and air
tickets through Internet banking.
Railway pass:
This is something that would interest all the aam janta. Indian Railways has tied up
with ICICI bank and they can now make railway passes for local trains online. The
pass will be delivered to the customer’s doorstep. But the facility is limited to
Mumbai, Thane, Nashik, Surat and Pune and other limited cities.
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Credit card customers:
With Internet banking, customers can not only pay their credit card bills online but
also get a loan on their cards. If the customer lose credit card, they can also report lost
card online.
2. How fintech companies are competitors to banks today?
In recent years the business landscape in banking has changed dramatically. After the
financial crisis of 2007-2008 the financial market authorities have intensified
regulation of the banking sector, introducing new or strengthening existing standards.
Besides, innovations and development of information and financial technologies
(FinTech) have increased the necessity to look for more innovative solutions also in
banking. FinTech have become an integral part of banking, and nowadays banks have
started to compete beyond financial services facing increasing competition from
nonbank financial institutions. Besides, start-up service providers, search engines,
and social networks have expanded their services “interfering” in the fields
traditionally covered by banks, for example, providing payment services (as mobile
payments, virtual currencies), alternative financing opportunities (as peer-to-peer
lending, crowdfunding), wealth management, etc. According to Accenture Report and
UK Business Insider, global FinTech investment has rocketed in recent years
reaching ca. 15 billion USD in 2015 (comparing to 4.05 billion USD in 2013).
Further development and integration of FinTech will reshape finance, and experts
already call it the FinTech revolution. It is stimulated by quick development of
hardware (including mobile devices), software (virtual “cloud,” personalization of
services online) and growing convergence of information technologies (ITs) and
communication technologies .The perception of the FinTech revolution is rather
contradictory. Some members of the financial services industry see the boom in
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FinTech as a threat to traditional banking industry. Others believe that FinTech has
become a challenge that can be turned into an opportunity as it provides more
flexibility, better functionality in some areas of banking business as well as
aggregation of services. Thus, the development of FinTech and its impact on the
future of banking are extremely topical nowadays.
Some of the factors because of which Fintech has been able to compete with Banking
and pose a threat are:
Innovation: Fintech is based on innovative technology. Due to a plethora of data,
fintech startups have gained significant traction. By introducing innovative ways,
they are successfully offering products and distinctive solutions for consumer
demand. Their growing popularity is a big reason why banks need to enter sooner for
a timely adoption of technology.
Awareness in customers: Collaborations will provide the perfect opportunity to
leverage the full potential of the technology and will allow them to meet the demand
of digitally savvy users. The maximum usage of fintech is happening along the lines
of payments and money transfers, with 50% of consumers choosing such services in
2017, in comparison to just 18% in 2015. Such growth in numbers could soon blur
the boundaries between different financial services, laying down new standards for
the industry during the process. financial firms would definitely feel the heat from
this growth.
Better service: A traditional bank largely ties a customer in by offering them a range
of services that make them sticky, through increased switching costs. Without this
luxury, specialized fintech companies follow a mantra of earning trust through better
customer service and referral-based client acquisition. While fintech companies look
to provide enhanced customer services. This enhanced customer service is the key to
their competitive advantage.
Better branding: With employees from non-traditional banking backgrounds
adding an unbiased perspective, the fintech industry is refreshing the branding of
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the legacy services that it is trying to upend. Modern marketing tools
like gamification are making mundane tasks like budgeting appear exciting and
more palatable to consumers.
Cheaper prices: Having a leaner virtual operation, more flexibility through not
being regulated as a deposit-gathering institution, and cash from venture capital
allows fintech startups to attract customers with competitive pricing.
3. Suggest some areas where banking services can be further
improved in India.
India is one of the top 10 economies in the world, where the banking sector has
tremendous potential to grow. The last decade saw customers embracing ATM,
internet and mobile banking. India‘s banking sector is currently valued at Rs. 81
trillion (US$ 1.31 trillion). It has the potential to become the fifth largest banking
industry in the world by 2020 and the third largest by 2025, according to an industry
report. The face of Indian banking has changed over the years. Banks are now
reaching out to the masses with technology to facilitate greater ease of
communication, and transactions are carried out through the Internet and mobile
devices. A bank is a financial institution that provides banking and other financial
services to their customers. A bank is generally understood as an institution which
provides fundamental banking services such as accepting deposits and providing
loans. There are also nonbanking institutions that provide certain banking services
without meeting the legal definition of a bank. Banks are a subset of the financial
services industry. A banking system also referred as a system provided by the bank
which offers cash management services for customers, reporting the transactions of
their accounts and portfolios, throughout the day. The banking system in India should
not only be hassle free but it should be able to meet the new challenges posed by the
technology and any other external and internal factors. For the past three decades,
India‘s banking system has several outstanding achievements to its credit. The Banks
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are the main participants of the financial system in India. The Banking sector offers
several facilities and opportunities to their customers. All the banks safeguards the
money and valuables and provide loans, credit, and payment services, such as
checking accounts, money orders, and cashier‘s cheques. The banks also offer
investment and insurance products. As a variety of models for cooperation and
integration among finance industries have emerged, some of the traditional
distinctions between banks, insurance companies, and securities firms have
diminished. In spite of these changes, banks continue to maintain and perform their
primary role—accepting deposits and lending funds from these deposits.
As banks develop their strategies for giving customers access to their accounts
through various advanced services like e banking, mobile banking and net banking,
they should also regard this emerging platform as a potential catalyst for generating
operational efficiencies and as a vehicle for new revenue sources. Banking industry‘s
opportunities includes
1. A growing economy
2. Banking deregulation
3. Increased client borrowing
4. An increase in the number of banks
5. An increase in the money supply
6. Low government-set credit rates
7. Larger customer checking account balances.
Looking at the list we can say that India has a lot of opportunities in front of it. All
these opportunities give many scope for Indian Banking system to grow. And with
these opportunities, there are always scopes to grow. Some of the areasin which the
banking system can further improve in India are:
Rural Banking:
Most of the population in India live in Rural parts of the country. While the urban
population are enjoying the technological improvement in the banking system, the
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rural population still has very less banks in their locality. Banking sytem should work
to make these technological improvement reach the Rural part of India with the help
of which the rural population can be benefited. This way the market will grow as well
as the ease of banking, pushing the number of bank user to a new height.
Transparency:
We witness one of the biggest scam of 2018 from Punjab National Bank. This shows
how there is lack of transparency in the Banking Sector in India, and this can grow to
become a big problem. A better transparency leads to better trust from the customer
and trust relationship develops loyalty within the customers and it may also Improve
flow of Customers.
Continuous R&D:
The research and development process needs to undergo radical change. To remain
relevant in the digital age, banks large and small should be creating innovation labs,
conducting quick beta tests of products early in the development stage and partnering
with fintech startups.
Cyber Security
With the increase use of digital banking platform, a new problem has arised. Cyber
crimes are in the rise and this is preventing the customers to be assured by the online
process with increasing rate of cyber crimes. Banks, to increase the level of assurance
should plan something to get rid of the problem of cyber crime and cyber theft by
working on the Cyber Security and the firewall system.
