customer as co-creator of value : technology in banking
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National Seminar on"CREATING AND DELIVERING VALUE FOR CUSTOMERSCREATING AND DELIVERING VALUE FOR CUSTOMERS"
Organized bySchool of Management StudiesCochin University of Science and Technology
Kochi 682022, INDIAMarch 27 - 28, 2009
CONSUMER AS CO-CREATOR OF VALUE:CONSUMER AS CO-CREATOR OF VALUE:
CROSSING THE TECHNOLOGY HURDLECROSSING THE TECHNOLOGY HURDLE
Prof. Chowdari PrasadProfessor of Finance & Registrar, Alliance Business School
Bangalore 560 068, Email: [email protected]
andVamshi Krishna Arumbaka
PGP (Marketing), Alliance Business SchoolBangalore 560 068, Email: [email protected]
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TECHNOLOGY IN INDIAN BANKING
Consumer as co-creator of value:Crossing the technology hurdle
ALPMs and Back Office Computerisation
Need to improve Customer Service
Reconciliation / Union Problems
Advent of PC in 1980s Competition and Reforms
Introduction of computerization
Clearing Houses, ATMs, Electronic Fund Transfers,
BANKNET, SWIFT, e-Mail, Credit Cards, Online Banking,Tele- Banking
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COMMITTEES ON COMPUTERISATION OF BANKSIN INDIA - 1982-1995
Working Group to consider feasibility of introducing MICR /
OCR Technology for Cheque processing (1982), Convenor : Dr
Y B Damle, Advisor, Management Services Department, RBI
Committee on Mechanisation in the Banking Industry (1984),
Chairman : Dr C Rangarajan, Deputy Governor, Reserve Bank
of India
Committees on Communication Network for Banks and SWIFT
implementation (1987), Chairman : Shri TNA Iyer, Executive
Director, RBI
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COMMITTEES ON COMPUTERISATION OF BANKSIN INDIA - 1982-1995 continued
Committee on Computerisation in Banks (1988), Chairman :
Dr C Rangarajan, Deputy Governor, RBI
Committee on Technology Issues relating to Payments
System, Cheque Clearing and Securities System in theBanking Industry, (1994), Chairman: Shri W S Saraf,
Executive Director, Reserve Bank of India
Committee on proposing Electronics Funds Transfer and
Electronics Payments (1995), Chairperson: Smt K S Shere,
Principal Legal Adviser, Reserve Bank of India
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LITERATURE REVIEW
Ostlund (1974)extended Rogers(1971) seminal work on diffusion inidentifying risk as influential to the adoption process. Diffusion studies foundthat adopters are more innovative, less risk averse, perceive an innovation
Parasuraman (2000) - optimism and innovativeness are drivers oftechnology readiness, while discomfort and insecurity are inhibitors. If
consumers are not ready to be an internet banking user, they are likely toexpress discomfort and insecurity
Mary Modahl(2001), Forrester Research, impact of the Internet on business,developed a concept called "Technographics," Ranked computer users by theircomfort level with technology and how likely they are to use the Internet:Early Adopters, Mainstream Users and Laggards
Financial services' researchers, such as Black et al(2002). and Gerrard andCunningham(2003), Theory of diffusion and internet banking, Internetbanking is perceived: More convenient and more compatible with theadopter's lifestyle or more complex and requiring a higher level of PC skills
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ADVANTAGES OF INTERNET BANKINGADVANTAGES OF INTERNET BANKING
Improve customer access, convenience
Facilitate the offering of more services
Increase customer satisfaction and loyalty
Attract new customers easily
Provide services offered by competitors
Reduce customer attrition Reduces the time, cost and effort in the interaction
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ADVANTAGES OF INTERNET BANKINGADVANTAGES OF INTERNET BANKINGContiConti
Cost Per Transaction (US $)
Type Branch Cheque Phone ATM PC Internet
Cost Per
Transaction
1.07 0.95 0.45 0.27 0/015 0.01
Furst, Lang & Nolle Report
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Price Water Coopers reporton Indian Banks: use of IT
Far behind the global scenario
Only 46% being spent on IT for business continuity
Huge investments needed 55% - 27% - 18%
Managing & retaining good clients, optimize costs, beat competition
Banks should take up automation: centralized networks, 24*7services, reduce manpower, CBS, CRM
The Financial Express - 24th
March, 2009
INDIAN SCENARIO INDIAN SCENARIO Banks & ITBanks & IT
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V-SAT based Financial Network for banks
Data warehousing & Datamining
Publishes a Journal on IT in Banking
Web based training for executives
INdian FInancial NETwork(INFINET)
Financial Networks and Applications
Electronic Payments and Settlement Systems
Security Technologies for the Financial Sector
Technology Based Education, Training and Development
Financial Information Systems and Business Intelligence
INDIAN SCENARIOINDIAN SCENARIO IDRBT, IDRBT, Hyderabad-1996Hyderabad-1996
Institute for Development and Research in Banking TechnologyInstitute for Development and Research in Banking Technology
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INDIAN SCENARIO:INDIAN SCENARIO:STATISTICS - 2009STATISTICS - 2009
http://www.bulletin.rbi.org.in
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INDIAN SCENARIO:INDIAN SCENARIO:STATISTICS - 2009STATISTICS - 2009
http://www.bulletin.rbi.org.in
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INDIAN SCENARIO INDIAN SCENARIO IT PenetrationIT Penetration
Year Population Users % penetration
1998 1,094,870,677 1,400,000 0.10%
1999 1,094,870,677 2,800,000 0.30%
2000 1,094,870,677 5,500,000 0.50%
2001 1,094,870,677 7,000,000 0.70%
2002 1,094,870,677 16,500,000 1.60%
2003 1,094,870,677 22,500,000 2.10%
2004 1,094,870,677 39,200,000 3.60%
2005 1,112,225,812 50,600,000 4.50%
2006 1,112,225,812 40,000,000 3.60%
2007 1,129,667,528 42,000,000 3.70%
2008 1,147,995,898 81,000,000 7.10%http://www.internetworldstats.com
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The Technology Readiness Index (TRI) of Parasuraman:
Optimism: the degree to which people with a positive view oftechnology believe it offers increased control, flexibility andefficiency in their lives
Innovativeness: the degree to which people are technologicalpioneers and thought leaders
Discomfort: the degree to which people perceive a lack ofcontrol over technology and feel overwhelmed by it, and
Insecurity: the degree to which people distrust technology andare skeptical of its ability to work properly
HURDLES FOR ADOPTIONHURDLES FOR ADOPTION
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Key components of security concerns:
Authentication: The assurance of identity of the person ina deal
Authorization: A party doing a transaction is authorizedto do so
Privacy: The confidentiality of data and informationrelating to any deal
Data integrity: Assurance that the data has not been
altered Non-repudiation: A party to the deal cannot deny that it
originated the communication or data
HURDLES FOR ADOPTIONHURDLES FOR ADOPTION
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SUGGESTIONS:
Remove lack of human interaction
Address pricing concerns Hole-in-the-wall(Sugata Mitra)
Need to shift or perish Cost reduction: almost 100 times cheaper
Increased customer participation
Self service 24*7, Anytime Anywhere Banking
Divide and Rule
CROSSINGCROSSING HURDLES FOR ADOPTIONHURDLES FOR ADOPTION
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Much will depend on the capability to leap frog to thestate-of-the-art payment and settlement systems.
Given the high rate of technology absorption witnessedin the recent past in our region, there is reason to be
optimistic that the challenges will be met successful
YV Reddy, Governor RBI
Speaking atInstitute for Development and Research inInstitute for Development and Research in
Banking TechnologyBanking Technology
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CONCLUSIONCONCLUSION
Choice is made
Huge effort & cost
New business model
Take this to public Need for push
Change willingly or forcible
Many hurdles but not difficult
Include customer for progress
Cost reduction +
Better service +Co-creation ofvalue =
IncreasedLoyalty
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Thank YouThank You
Reduced costs for bank, better user experience and
freedom for consumer make it feasible
Modhal in Now or Never
Consumer as co-creator of value:Crossing the technology hurdle