IMPACT OF EMERGING TECHNOLOGY

IN INDIAN BANKING SECTOR

Introduction

Information Technology played significant role in business

success and survival, because, it is an important resource,

valuable input and powerful tool in the hand of the business

organization to develop business. In recent past every business

enterprise and financial institutions is thriving for collecting,

organizing and disseminating information to the business for an

overall development and getting competitive advantages over

competitors.

Moreover technology plays key role in different types of

business among the banking sector is one of the important

sectors that require adequate information technology for meeting

the day to day requirements of the banks and it facilitates speed

work, lower transaction cost and generates a high rate of

innovation in improved and new financial products. Hence

technology can be the key to differentiation, competitive edge and

institutional survival.
 Technology is revolutionizing every field of human endeavor

and activity. One of them is introduction of information

technology into capital market. The internet banking is changing

the banking industry and is having the major effects on banking

relationship. Web is more important for retail financial services

than for many other industries.

The banking industry is currently under-going dramatic global

change at a rapid pace. Competition and change in technology

and lifestyle have changed the face of banking. Nowadays banks

are seeking alternative ways to provide and differentiate their

services. Customers both corporate and retail are no longer

willing the queue in banks or wait on phones, for the most basic

of services. They demand and expect to transact their financial

dealings where and when they wish. With the number of

computers increasing every year, the electronic delivery of

banking services is becoming the ideal way for banks to meet

their client’s expectation.

The banks are struggling day and night to increase

shareholder value. Joint ventures; New channels to market; Cost

reduction of Costs through outsourcing and use of technology;

offering more services to customers, customer management and a

constant drive to reduce cost income ratio through any possible

mean are the essential features needed by the banks to stay in

Competition.

Need and Scope of Technology in Banking:

The consumers banking needs are getting more complex and

demands are for more innovative products. As a result, the

technology architecture of banks needs to be more flexible and

achieve faster go to market product strategy. It is widely felt that

they had been in complete transformation, as far as banking

approach towards technology is concerned. Traditionally, a

progressive bank would come with a vision, formulate a strategy

to design the process and look at the technology to implement the

desired process, which could help to convert that strategy into

action. In the modern approach, the technology is factored at the

vision stage itself, followed by formulation of technology-enabled

strategies and ultimately co-development of processes and

technology. The main areas in which the technology is expected

to enhance the operational case of the banks are identified as:

• Providing secured network so as to position bankers as a

trusted provider of electronic payments

• Enabling business-to-business integration between commercial

clients in banks.

• Consistency across multiple delivery channels.

• Aggregation of customer information.

The technology is pivotal and is central to banking. This is

one of the major reasons why new private and multinational

banks have been able to survive, thrive, and adapt in an

increasingly competitive space. These banks were able to leverage

on low cost channels such as ATM and Net Banking to the

optimum levels contributing to reduced operating cost and to the

benefit of the customers. Banks have realized that shifting

customer access to lower cost channels can help in bringing

down the operating cost. These channels are used not only to

improve customer service but also to divert traffic from branches.

It is a fact that the cost of the transactions over the delivery

channels is lower than doing the transactions through branches.

The ATM and net banking services enable nonstop banking –

convenience banking – 24 hours access to cash – 365 days of the

year without any additional cost burden to the customer. The

ATMs enable the customers withdraw the cash to a fixed ceiling

limit, balance enquiry, a mini statement, cheque deposit, funds

transfer etc. The net banking facilitates the customer making use

at his/her convenience for different types of transactions.

E-BANKING (Tech Driven Banking)

Technology, obviously, has driven retail growth and brought

in more efficiency in the working of the back office. In the recent

years, technology has become increasingly important to the

evolution of bank retail delivery systems and the development of

new electronic retail products. The ability to deliver new

advanced technology products reliably has become a central

theme in the marketing strategies of a growing number of banks.

Most institutions see introducing new products and

services such as Personal Computer banking as a necessary step

for retaining highly valued customers, and for positioning

themselves strategically for the future. As this trend continues,

the nature and magnitude of risks posed by technology will

continue to change, and these changes will pose significant

challenges for banks and banking supervisors.

Electronic banking or e-banking is a web-based service,

which enables bank’s customer’s access their accounts. It allows

the customers to log on to the bank’s website with the help of a

bank- issued identification and a personal identification number.

The banking system verifies the user and provides access to the

required services. The concepts of e-banking and internet

banking are used synonymously in the banking industry, though

in reality banking activities carried out through the internet just

constitute a part of the whole gamut of e-banking.

E-banking has made the world a global village and removed

the time and geographical barriers. With the use of electronic

network, billions of dollars can move across countries by click of

a mouse and this creates tremendous impact on the economy.

Functions of e-banking:

 Inquiry about the information of account: It helps the

client to inquire about the details of his own account information

such as the cards/ account’s balance and the detailed historical

records of the account and download the reports list.

 Card Account’s Transfer: It helps the client to achieve the

fund transfer between his own cards and transfer the fund to

another person’s Credit Card in the same city

 Bank- Securities Accounts Transfer: It helps the client to

achieve the fund transfer between his own bank savings accounts
or his own Credit Card account and his own capital account in

the securities company. Moreover, it helps to enquire about the

present balance to real time.

 The Transaction of Foreign Exchange: It helps the client to

trade the foreign exchange, cancel order and inquire about the

information of the transaction of foreign exchange according to

the exchange rate given by bank on set.

 The B2C Disbursement on Net: It helps the client to do the

real-time transfer and get the feedback information about

payment from bank when the client does shopping

in the appointed website.

 Client services: It helps the client to modify the login

password, information of the Credit Card and his information in

e-bank on net.

 Account Management: It helps the client to modify his own

limits of right and state of the registered account in the personal

e-bank, such as modifying how own login password, freezing or

deleting some cards and so on.

 Reporting the loss of the Account: It helps the client to

report the loss in the local area (not nationwide) when the client’s

Credit Card or passbook is missing or stolen.

The most common e-banking services are:

Internet banking

Mobile banking

Tele banking

ATM services

Electronic Bill payment.

Online brokerage

Online delivery of financial products

Downloading transaction information

Loan applications

Electronic Fund Transfer (ETF)

Internet banking

Internet banking allows customers to conduct financial

transactions on a secure website operated by their retail or

virtual bank, credit union or building society.

Features

Online banking solutions have many features and capabilities in

common, but traditionally also have some that are application

specific.

The common features fall broadly into several categories

• Transactional (e.g., performing a financial transaction such as

an account to account transfer, paying a bill, wire transfer… and

applications ….. apply for loan, new account etc. )

o Electronic bill presentment and payment – EBPP

o Funds transfer between a customer’s own checking and saving

accounts or to another customer’s account.

o Investment purchase or sale

• Non-transactional (e.g., online statements, check links,

cobrowsing, chat) o Bank statements • Financial institution

administration • Support of multiple users having varying levels

of authority • Transaction approval process • Wire transfer

Mobile banking Mobile banking is a term used for performing

balance checks, account transactions, payments etc. via a mobile

device such as a mobile phone. Mobile banking today is mot often

performed via SMS or the Mobile internet but can also use

special programs called clients downloaded to the mobile device.

Mobile banking services : Mobile banking can offer services such

as the following Account information

1. Mini-statements and checking of account history

2. Alerts on accounts activity or passing of set thresholds

3. Monitoring of term deposits

4. Access to loan statements

5. Access to card statements

6. Mutual Funds/ equity statements

7. Insurance policy management

8. Pension plan management

Tele banking :

It is a service provided by a financial institution which allows its

customers to perform transactions over the telephone.

Most telephone banking use an automated phone

answering system with phone keypad response or voice

recognition capability. To guarantee security, the customer must

first authenticate through a numeric or verbal password of

through security questions asked by a live representative. With

the obvious exception of cash withdrawals and deposits, it offers

virtually all the features of an automated teller machine; account

balance information and list of latest transactions, electronic bill

payments, funds transfer between a customer’s accounts, etc.

Usually, customers can also speak to a live representative

located in a call centre or a branch, although this feature is not

guaranteed to be offered 24/7. in addition to the self – service

transactions listed earlier, telephone banking representatives are

usually trained to do what was traditionally available only at the

branch: loan applications, investment purchases and

redemptions, chequebook orders, debit card replacements,

change of address, etc.

Banks which operate mostly or exclusively by telephone are

known as phone banks.

Benefits of technology

The branch mechanization has gained considerable place in the

banking industry passing on innumerable benefits to the

customers. They are:

• Getting queries promptly responded due to screen displays.

• Neatly typed generation of statement of accounts in time.

• Execution of standing and stop payment instructions in time,

regularly.

• Automatic calculation of interest and its posting in customers’

account.

•Generation of various operational miscellaneous

reports/statements like ledge sheets, drawing power

maintenance details of overwithdrawals etc.

• Better information system and transfer of funds.

The technology enables the customers banking through

telephone from home, workplace or office. Just dial the given

number, get information related to the account from the bank.

• At the service 24 hours a day and 7 days a week

• The customers can give instruction to the bank

• The facilities and the benefits that can be offered are balance

enquiry request for statement of account, latest transaction

query/stop payment to request / cheque book request / status

query of cheques/ instruments/ enquiry on collection of bills/

cheques/ deposit rates query / forex rate query etc.

The leveraging of technology for customer benefit can be enabled

through personal computer. The devise requires a computer, a

modern and a telephone connection. The customer can get

benefited by the services offered such as:

• Balance enquiry

• Latest transaction enquiry

• Stop payment request

• Cheque book request

• Outward clearing cheque status enquiry

• Deposit rate query

• Forex rate query

• Download account statement

• Request for other services.

The Electronic Bill Presentment and Payment Service which

enables the bank customers to get their various bill paid without

their involvement. The features are

• Customers can give standing instructions to the bank to pay

the bills with an individual upper limit for each of the bill, and as
the customers bill is within the limit, it would be paid without

customers intervention.

Impact of Technology

Information technology has resulted in a major attitudinal

change by revolutionizing the treatment of customers of the

banks. With the depth of the geographical distances, the

customer can be treated as a customer can of the bank and not

as a customer of the branch. This is now possible due to usage of

IT on a large scale where database are possible in a bank with

decentralized access. Another option is to have clustered solution

in a bank with data of customers available in systems. Banks

need to constantly look for innovation for innovative services

which offer the convenience of transacting from anywhere and at

anytime by using suitable delivery channels for them. These are

the frontiers which would add value to the services to the

customers and at the same time act as a means for increasing

the profits of the bank.

One of the most significant areas where technology has had a

positive impact is on the traditional funds movement services.

With the advent of electronic banking. Electronic transfer and

other similar products, funds transfers across different

constituencies are easily possible within time frames which

would have appeared impossible in the past. With networking

and interconnection, new challenges are arising related to

security and confidentiality of transaction. Many new players are

entering into the area of transfer services and the pride of place

enjoyed by the bankers is under severe competition.

Customer relationship management (CRM) solutions, if

implemented and integrated correctly can help significantly in

improving customer satisfaction levels with accrued benefits.

Data warehousing can help in providing better transaction

experience for customers over different transaction channels.

The CRM is about finding, getting and retaining customers.

The basic aim of these systems is to assist in building a lasting

customer relationship in order to turn customer satisfaction into

customer’s loyalty. The banks are the prime users of CRM. Any

bank would have such a huge customer base that it would not be

able to monitor it manually in order to find out various

customers behavior trends and patterns. It is essential to attract,

retain and grow customer base with effective management of the

information about the customers and enhance the relationship

with them. Unless the bank understands the needs of the

customer, best technology products benefiting the customer

cannot be designed. Hence, the CRM and technology go hand in

hand supplementing each other’s needs and conveniences. Once

the customer needs are understood the technology product

orientation becomes easy for value creation process.

Negative impact on technology in banking sector

• Though e-banking is an effective tool but many of the

customers are not using it due to non awareness of the facility.

Now the responsibility lies with banks to make them aware about

e-banking through publicity, advertisement and some-times with

personal contacts.

• Customers have doubts about the safety and security of e-

banking services. It is the basic step to be taken up by banks to

build trust and confidence among the customers, so that they

can use it frequently without any trepidation.

• Customers who know about e-banking are not using this

facility due to misconception and lack of trust in the system.

These customers should be targeted by banks and must be

convinced to use the same.

• Customers now –a-days prefer net banking to branch banking.

The bank that are slow in introducing technology – based

products, are finding it difficult to retain the customers who wish

to opt for net banking.

• Though banks are investing heavily in technology, they are not

able to exploit the same to the full extent.

• A major disadvantage is monitoring and follows up of huge

volume of loan accounts inducing banks to spend heavily in

human resources department.

Conclusion

Managing customers is one of the main issues faced by banks.

The demands and expectations of the customers grow at a much

faster rate than the banks can equip themselves to be with them.

If the service levels or the product levels are not up to the

customer satisfaction, there is always a danger that the customer

might shift his transactions elsewhere. In banking, as the

products can be copied very fast, it is the customer service levels

that really matter. The latest techno-savvy products coupled with

excellent customer relationship will lead to customer satisfaction

and delight. The CRM has to updated and upgraded. Techno

savvy products will only benefit and respond to the ever changing

demands of the customers. The major challenges stirring the

banker in India relate to the need to introduce innovative,

customer – friendly products and services for which newer

technologies are needed to be brought in multiple areas to reduce

the overall transaction cost for the benefits of the customers.

Technology has been one of the most important factors for

the development of mankind. Information and communication

technology is the major advent in the field of technology which is

used for access, process, storage and dissemination of

information electronically. Banking industry is fast growing with

the use of technology in the form of ATMs. On-line banking,

Telephone banking, Mobile banking etc., Plastic card is one of the

banking products that cater to the needs of retail segment has

seen its number grow in geometric progression in recent years.

This growth has been strongly supported by the development of

in the field of technology, without which this could not have been

possible of course it will change our lifestyle in coming years.