Innovative Practices in Banking Sectors

D. Sivasubramanian M.Phil Scholar St.Xaviers College (Autonomous) Palayamkottai Introduction Creativity is the ability to think a new idea. Innovation is the process by which the new idea is put into practice. The word itself gets used all the time in the news, in press releases made by governments and universities and in company boardrooms around the world innovation, innovation, innovation! Not surprisingly, it can bring to mind a variety of meanings depending on the context. Innovation in Banking Innovation derives organization to grow, prosper & transform in sync with the changes in the environment, both internal & external. Banking is no exception to this. In fact, this sector has witnessed radical transformation of late, based on many innovations in products, processes, services, systems, business models, technology, governance & regulation. A liberalized & globalized financial infrastructure has provided had provided an additional impetus to this gigantic effort. The pervasive influence of information technology has revolutionaries banking. Transaction costs have crumbled & handling of astronomical brick & mortar structure has been rapidly yielding ground to click & order electronic banking with a plethora of new products. Banking has become boundary less & virtual with a 24*7 model. Banks who strongly rely on the merits of relationship was banking as a time tested way of targeting & servicing clients have readily embraced Customer Relationship Management (CRM), with sharp focus on customer centricity, facilitated by the availability of superior technology. CRM has, therefore, has become a new mantra in service management, which in both relationship based & information intensive. Innovations in Banking in India Over the years, the banking sector in India has seen a number of changes. Most of the banks have begun to take an innovative approach towards banking with the objective of creating more value for customers, and consequently, the banks. Some of the significant changes in the Indian banking sector are discussed below: Technology for Value Creation The use of information technology in the Indian banking sector was a corollary of the liberalization process initiated in the country in the early 1990s...

Rural India Catching Up With a majority of the Indian population living in rural areas, rural banking forms a vital component of the Indian banking system. Besides, rural banking operations in India are rather different from urban operations, due to the strong disparity that exists between urban and rural life, and the needs of these two sections of people... Banking Beyond Banking While traditionally, banking meant 'borrowing and lending', in the latter part of the 20th century, the word took on a different meaning altogether. Banks no longer restricted themselves to traditional banking activities, but explored newer avenues to increase business and capture new markets... The Changing Face of Banking Many analysts predict still more revolutionary changes in the banking sector in India. The chief of these are likely to be the concept of Universal Banks and the introduction of Smart Card technology... The Other Side Although the Indian banking sector has made rapid progress particularly in the number of innovations introduced, some analysts are skeptical about the efficacy and practical use of many of these services... Where is Indian banking heading? Banking in India has already undergone a huge transformation in the years since Independence. The rate of transformation was particularly high in the 1990s and 2000s, when a number of innovations changed the way banking was perceived... Exhibits Exhibit I: Nationalized Banks in India Exhibit II: Internet Banking Exhibit III: HDFC's Promotion of Mobile Banking Exhibit IV: Smart Card Innovations in Customer Services in Indian Banking Sector Satisfied customers are the best guarantee for the stability and growth. Customers will be satisfied only when the banks provide the customized and innovative products and services at
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responsible cost. This paper focuses on the kind of services provided by developed countries and level of innovative services provided by Indian banks. Many innovative services are currently available from Indian banks like E-Banking, ATMs, Anywhere Banking etc., but there is a waste scope of improvement. Globalization, the buzzword, which engulfed all the nations of the world since the beginning of the last decade of the past millennium, did not leave the banking industry untouched. The opening of the world trade has brought out several changes in the global banking map. In a country like America, Debit cards accounted for nearly one-third (31%) of in-store purchases in 2003, up from 21% only four years ago. Reliance on credit cards held steady during that time, at about 21%. Cash and cheques, which accounted for 57% of in-store purchases in 1999, dropped to about 47% last year. In India, if we see then, people still prefer to pay by cash. The reason behind this mindset is safety for money. Still we are far behind in terms of Internet security and E-money security. Coming across through the performance of Banking Institutions of the west and seeing their performance in the use of innovative methods to make themselves more customer-friendly we would have no doubts about their strong banking mail-order company L.L. Bean, know for its superb order-taking and service delivery systems, as its model for change. A major result of this functional benchmarking was the establishment of a 24-hour customer service center that can not only respond to queries and complaints but also promote and sell the banks products and services. Back offices of banks are knows for snail-pace bureaucracy that hampers front line operations and ultimate customer service. By applying the concept of mass production, streamlining, and standardization of tasks, Citicorp aims to remove this critical bottleneck. The bank also benchmarked with Chrysler in getting its functional departments work effectively as teams. Other banks in the west have, sledded their conversation finance and control images, have likewise adopted innovative service strategies and practices. Many Banks have established an information center or encyclopedia in the waiting lounge. Here customers can browse through various bits and pieces of important service information like the average time to finish a transaction and the companys products and services. Modern day banks have extended the concept of Mobile Banking. Some banks in the European and American continents have launched floating branches on boats that provide full branch bank services, to the convenience and delight of customers living in longhouses along the river banks. To further enhance service, banks have also reconfigured their Automated Teller Machines to dispense not only cash, but also commodity prices and information about its products and services. The Korean Technology Banking Corporation (KTB) is setting up a Technology Financing Information Center to serve the various needs of its clients, most of which
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are setting up joint-venture overseas. The centers will contain a huge database of information analyzed from various data from internal and external sources. By accessing this database, clients will get information about specific technologies, local information, and other data relevant to the ventures they are setting up. To facilitate processing, development financial institutions like the Industrial Development Bank on India requires borrowers to submit loan application forms in electronic floppy disks. Even clearinghouses have adopted the new service paradigms to support the banks initiatives. For instance, the Singapore clearing House Association has cut the clearing of US $ checks deposited in Singapore from two weeks to 3 days. The new system requires participating banks to open US dollar accounts with Citibank to service their respective clients. Recent Trends in Indian Banking Sector Today, we are having a fairly well developed banking system with different classes of banks public sector banks, foreign banks, private sector banks both old and new generation, regional rural banks and co-operative banks with the Reserve Bank of India as the fountain Head of the system. In the banking field, there has been an unprecedented growth and diversification of banking industry has been so stupendous that it has no parallel in the annals of banking anywhere in the world. During the last 41 years since 1969, tremendous changes have taken place in the banking industry. The banks have shed their traditional functions and have been innovating, improving and coming out with new types of the services to cater to the emerging needs of their customers. Massive branch expansion in the rural and underdeveloped areas, mobilisation of savings and diversification of credit facilities to the either to neglected areas like small scale industrial sector, agricultural and other preferred areas like export sector etc. have resulted in the widening and deepening of the financial infrastructure and transferred the fundamental character of class banking into mass banking. There has been considerable innovation and diversification in the business of major commercial banks. Some of them have engaged in the areas of consumer credit, credit cards, merchant banking, leasing, mutual funds etc. A few banks have already set up subsidiaries for merchant banking, leasing and mutual funds and many more are in the process of doing so. Some banks have commenced factoring business. The Indian banks are subject to tremendous pressures to perform as otherwise their very survival would be at stake. Information technology (IT) plays an important role in the banking sector as it would not only ensure smooth passage of interrelated transactions over the electric medium but will also facilitate complex financial product innovation and product development.
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The application of IT and e-banking is becoming the order of the day with the banking system heading towards virtual banking. As an extreme case of e-banking World Wide Banking (WWB) on the pattern of World Wide Web (WWW) can be visualised. That means all banks would be interlinked and individual bank identity, as far as the customer is concerned, does not exist. There is no need to have large number of physical bank branches, extension counters. There is no need of person-to-person physical interaction or dealings. Customers would be able to do all their banking operations sitting in their offices or homes and operating through internet. This would be the case of banking reaching the customers. In the days to come, banks are expected to play a very useful role in the economic development and the emerging market will provide ample business opportunities to harness. Human Resources Management is assuming to be of greater importance. As banking in India will become more and more knowledge supported, human capital will emerge as the finest assets of the banking system. Ultimately banking is people and not just figures. Role of Information Technology (IT) in the Banking Sector Banking environment has become highly competitive today. To be able to survive and grow in the changing market environment banks are going for the latest technologies, which is being perceived as an enabling resource that can help in developing learner and more flexible structure that can respond quickly to the dynamics of a fast changing market scenario. It is also viewed as an instrument of cost reduction and effective communication with people and institutions associated with the banking business. Information Technology enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets. Internet has significantly influenced delivery channels of the banks. Internet has emerged as an important medium for delivery of banking products and services. The customers can view the accounts; get account statements, transfer funds and purchase drafts by just punching on few keys. The smart cards i.e., cards with micro processor chip have added new dimension to the scenario. An introduction of Cyber Cash the exchange of cash takes place entirely through Cyber-books. Collection of Electricity bills and telephone bills has become easy. The upgradeability and flexibility of internet technology after unprecedented opportunities for the banks to reach out to its customers. No doubt banking services have undergone drastic changes and so also the expectation of customers from the banks has increased greater.

Conclusion The scope of innovation can be small or large. At one end of the scale lies a single tiny refinement to a simple product;at the other lie whole new business strategies, paradigms and philosophies. Innovation also acts along the entire spectrum from "soft" to "hard", where soft envisages communication, vision, and people's behaviour and hard stands for structure, organisational forms and procedures. But innovation is particularly important for banking & finance companies. Innovation, which transcends invention, represents the point of convergence of invention & insight. References: "Enhancing Competitiveness and Customer Service Through Innovative Banking Technology: Bank Pertanian Malaysia's Experience," Journal of Development Finance.
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banking-sector/
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