The Indian banking industry is already witnessing a radical change as
technology is changing the way customers do banking. However the best, or the
worst to some, is yet to come–the Internet.
As Internet provides a never before opportunity, banking and insurance
companies need not only to have Web sites for marketing and promotion purposes
but also move quickly into higher levels of Internet operations like
full-fledged online transactions. Some of the foreseeable benefits are:
Reduced overall costs
Internet banking reduces a bank’s costs in two fundamental
ways–it minimizes the cost of processing transactions and reduces the number
of branches required to service an equivalent number of customers. According to
the American Banking Association, the average cost for a full-service branch
transaction is roughly $1.1. Since an Internet banking transaction links
directly to the back-end processing system, an Internet transaction costs
roughly $0.01. According to industry analyst the Indian comparison would be
about Rs 35—38 through an account to about Rs 14—16 through an ATM and just
about Rs 1—3 transaction cost via the Internet.
Increased customer satisfaction
With 24×7 availability, it gives the customer the highest
degree of convenience and Indian users are more likely to jump on to the
Internet as they start demanding quality service. Like ATMs, Internet banking
empowers customers to choose when and where they conduct their banking. From the
financial institution perspective it gives a new and very cost effective
delivery channel to them.
Wider product offerings
Though not happening in India at the moment–as banking
companies cannot offer other financial services from their banking operations–the
Internet can offer a lot of services like brokerage, mutual funds, insurance,
mortgages, car loans and credit cards–either directly or indirectly from their
Web sites.
Better customer retention
Banks often lose customers as they relocate. As the Internet
shrinks time and space, it has become a very useful tool to retain customers.
Greater geographic reach
Again with the Internet destroying geographic barriers, it
can increase the customer base even in areas where it does not have
brick-and-mortar branches. The private banks are banking on the same and intend
to move in the other areas with huge dependence on Internet and ATMs.
Cross-selling services
The Internet gives the possibility of collecting useful data
in ways that are virtually impossible to collect through any other medium.
Tracking software allows a bank to monitor which Web pages customers (and
prospective customers) view–and how long they spend viewing them. This
information, when combined with customer databases, allows financial
institutions to target banking products and services more effectively to
customers. An extension to the same is by using personalization software. The
Web site can display a unique advertisement or promotion to capture the customer’s
attention. This advertisement might cross-sell a product, suggest a change in
account status or provide some other form of valuable information. The Internet
allows banks to develop sophisticated, personalized marketing campaigns and
increase cross-selling success rates.