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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


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ELECTRONIC BANKING

delivery of banks services to a customer at

his office or home by using electronictechnology.


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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 inthe 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.


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Different Delivery Channels in E-Banking
http://www.paypal.com/cgi-bin/webscr?cmd=_home


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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).


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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

t t


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utomate e er ac nes(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


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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 BanksNew*

Old**Public Sector Banks

Foreign Banks

All Banks

309

21

27

36

93

289

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.
http://www.banknetindia.com/banklinks.htmhttp://www.banknetindia.com/banklinks.htm


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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 anywhereelectronic banking services to the customers in the

city of Mumbai, Vashi and Thane.


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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.


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Factors Affecting the Adoption of E-

Banking in India

Ease of use

Level of Security

The cost of adopting the technologyPreference for personalized services

Reluctance to adopt new technology

Opposition from Staff UnionsDevelopments in Law

Haste of banks to adopt new technology


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Concerns about Electronic BankingGovernment

Businesses

Banks

- Legal Risk

- Operational Risk

- Outsourcing Risk

- Reputational Risk

Individuals

Technology- Secur ity

- Anonymity (Pri vacy)

- Authentication


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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.

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