Advertisment

The Lure of the Internet

author-image
DQI Bureau
New Update

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.

Advertisment

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.

Advertisment

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

Advertisment

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.

Advertisment

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.

Advertisment