E-Banking: Indian Banks Moving Towards Innovation

E-BANKING:
INDIAN BANKS MOVING

TOWARDS INNOVATION
Dr. Balwinder Singh Pooja Malhotra
Reader Research Scholar

Department of Commerce and Business Management
Guru Nanak Dev University
Amritsar-143005
Punjab
ELECTRONIC BANKING
delivery of banks services to a customer at
his office or home by using electronic
technology.
Delivery Platforms for Electronic Banking

Type of Service

Description

PC banking

Internet banking
Managed network

TV based banking

Telephone banking

ATM

EFTPOS

Smart cards

Electronic Funds Transfer (EFT)

Electronic Data Interchange
(EDI)
Electronic Clearing System
(ECS)
Shared Payment Network System
(SPNS)

Uses special software distributed by the bank, which is installed in
the users PC. Customers access banks via modem linked directly to
the bank.
Customers access their bank account via Internet
The bank makes use of an online service provided by another party
such as AOL
Use of satellite or cable to deliver account information to TV screens
of customers
Customers can access their bank via regular phones or mobile
phones using SMS or WAP services
ATMs provide cash accessibility and account information and in
some cases enable to transfer funds
Electronic funds transfer at point of sale (EFTPOS) is essentially a
payment system for purchases through debit cards within the store
itself.
Microchip based cards can be used between individuals to exchange
electronic cash or can interface with ATMs, telephones and retailers.
Uses computer and electronic technology as a substitute for checks
and other paper transactions.
Transmit financial information and payments in electronic form.

Paperless mode of effecting payment for handling bulk and
repetitive payment transactions.
A large network of ATMs, Cash Dispensers belonging to different
banks to provide anytime and anywhere banking service.

Different Delivery Channels in E-Banking

Banking Transaction Cost Comparison

Type of E-Banking

Average Cost

Normal Branch Banking

$ 1.07

Telephone Banking

$ 0.54

ATMs

$ 0.27

PC Banking

$ 0.02

Internet Banking

$ 0.01

Source: Booz, Allen and Hamilton, Banking Survey, July 1996 as quoted in Aggarwal, (2000).

Customer Benefits

Supplier Benefits

Convenience

Lower cost per transaction

Tailored products and services

Increased customer knowledge

Ease of access to product
information

Ability to tailor products and
services

Ease of shopping around for best
price

Ability to access a large market

Ease of changing supplier

Increased customer relationships

Low cost.

Reduced errors, time, and
overhead costs

Financial planning capability

The Benefits of Electronic banking
Automated Teller Machines
(in India)
Banks with large networks

Bank

April 2001

March 2002

March 2003

ICICI Bank

510

1000

1675

UTI Bank

303

480

1150

HDFC Bank

207

410

900

IDBI Bank

77

225

225

GTB

101

200

200

Total

1198

2315

4150

Source: Annual reports and websites of respective banks

Internet Banking
(in India)
Adoption Rates of Internet Banks
(As on March 31, 2004)

Number of Banks

Number of Banks With
Websites

Number of Banks With
Transactional Sites

Private Sector Banks
New*
Old**
Public Sector Banks
Foreign Banks
All Banks

30
9
21
27
36
93

28
9
19
27
35
90

15 (50.0)
9 (100.0)
6 (28.6)
13(48.1)
20(55.6)
48 (51.6)

Source: Websites of the individual banks available at www.banknetindia.com/banklinks.htm (accessed during December, 2003 to March 2004)
Figures in bracket denote percentage.
* includes banks established after the liberalization reforms as recommended by Narsimham Committee in 1991.
** includes banks established before the liberalization reforms as recommended by Narsimham Committee in 1991.

Shared Payment Network System (SPNS)
or SWADHAN
Under the initiative of Indian Bank Association
(IBA) in Mumbai, a pilot project to link up 165
ATMs of 31 member banks has come up in the form
of SWADHAN a shared payment network system
which has a card base of 1, 00,000 with 30,000
transactions per month.
The objective is to provide anytime and anywhere
electronic banking services to the customers in the
city of Mumbai, Vashi and Thane.
Source: IBA Bulletin 2004, January
Year

Credit Cards
(in Millions)

Credit Card Amount
(Rs. in Crores)

1999

4.2

6500

2000

4.9

8500

2001

5.3

10500

2002

6.4

14175

2003

8.3

19136

2004E

10.3

25833

2005E

13.0

34874

Volume of Credit Cards in India
Source: IBA Bulletin 2004, January.

Factors Affecting the Adoption of E-
Banking in India
Ease of use
Level of Security
The cost of adopting the technology
Preference for personalized services
Reluctance to adopt new technology
Opposition from Staff Unions
Developments in Law
Haste of banks to adopt new technology
Concerns about Electronic Banking
Government
Businesses
Banks
- Legal Risk
- Operational Risk
- Outsourcing Risk
- Reputational Risk
I ndividuals
Technology
- Security
- Anonymity (Privacy)
- Authentication

Conclusion
E-Banking Enable Better Business Anywhere, Anytime.
E-Banking represent a tremendous opportunity in India.
However, Factors such as illiteracy in India, availability of
cheaper labor force, reluctance to change by the existing
staff of banks and slow growth of technology in India are
responsible for slow growth of e-banking in India.
Development and acceptance of standards by financial
institutions will clearly have a positive impact on the level
of security achieved by banks and bank customers.
Since opportunities foregone are opportunities lost, the
banks have to rise ahead of time so as not to lag behind in
the e-banking era.

E-Banking: Indian Banks Moving Towards Innovation

Uploaded by

Copyright:

Available Formats

E-Banking: Indian Banks Moving Towards Innovation

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

E-Banking: Indian Banks Moving Towards Innovation

Uploaded by

Copyright:

Available Formats

E-BANKING:

INDIAN BANKS MOVING

You might also like