BANKING IN TECHNOLOGICAL PARADIGM

8/7/2019 BANKING IN TECHNOLOGICAL PARADIGM

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18701870 Bank of HindustanBank of Hindustan First BankFirst Bank

Presidency BanksPresidency Banks -- Bank of Calcutta, Bank of Bombay and Bank ofBank of Calcutta, Bank of Bombay and Bank ofMadrasMadras

19211921 -- All 3 banks amalgamated and became Imperial Bank of IndiaAll 3 banks amalgamated and became Imperial Bank of India

19341934 RBI was ConstitutedRBI was Constituted

19491949 RBI came under government controlRBI came under government control

19551955 Imperial Bank became State bank of IndiaImperial Bank became State bank of India


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Accepting, for the purpose of lending or investment ofAccepting, for the purpose of lending or investment ofdeposits of money from the public, repayable on demand ordeposits of money from the public, repayable on demand orotherwise and withdrawable by cheques, draft, order orotherwise and withdrawable by cheques, draft, order orotherwise.otherwise.

A bank is an institution that deals with money and Credit.A bank is an institution that deals with money and Credit.

However, in reality Banks are service organisations sellingHowever, in reality Banks are service organisations sellingbanking services.banking services.

Economic importance:Economic importance:

Contribution to GDPContribution to GDP 4.7%4.7%

Employing approx. 1.5million employeesEmploying approx. 1.5million employees


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Post IndependencePost Independence

The Banking Regulation Act provided that no new bank or branch of an existing bankThe Banking Regulation Act provided that no new bank or branch of an existing bank

may be opened without a licence from the RBI, and no two banks could have commonmay be opened without a licence from the RBI, and no two banks could have common

directors.directors.

NationalizationNationalization

Nationalisation of the 14 largest commercial banksNationalisation of the 14 largest commercial banks

LiberalisationLiberalisation

Liberalisation Policy was implied which gave licences to a small number of private banks.Liberalisation Policy was implied which gave licences to a small number of private banks.

Relaxation in the norms for Foreign Direct InvestmentRelaxation in the norms for Foreign Direct Investment


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Banking:Banking:

A Bank is a financial institution licensed by a government.A Bank is a financial institution licensed by a government.

Its primary activities include borrowing and lending money.Its primary activities include borrowing and lending money.

It provides Services like Credit card, debit card , interest on deposits,It provides Services like Credit card, debit card , interest on deposits,

Finance:Finance:

A financial institution provides financial services for its clients orA financial institution provides financial services for its clients ormembers.members.

Probably the most important financial service provided by financialProbably the most important financial service provided by financialinstitutions is acting as financial intermediaries.institutions is acting as financial intermediaries.

Most financial institutions are highly regulated by government bodiesMost financial institutions are highly regulated by government bodies


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The banking activities can be classified as :The banking activities can be classified as :

Accepting Deposits from public/others (Deposits)Accepting Deposits from public/others (Deposits)

Lending money to public (Loans)Lending money to public (Loans)

Transferring money from one place to another (Remittances)Transferring money from one place to another (Remittances)

Acting as trusteesActing as trustees

Acting as intermediariesActing as intermediaries

Keeping valuables in safe custodyKeeping valuables in safe custody

Collection BusinessCollection BusinessGovernment businessGovernment business


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Keeping money safe while also allowing withdrawals when neededKeeping money safe while also allowing withdrawals when needed

Issuance of check books so that bills can be paid and other kinds of payments can be delivered byIssuance of check books so that bills can be paid and other kinds of payments can be delivered by

postpost

Provide personal loans, commercial loans, and mortgage loans (typically loans to purchase a home,Provide personal loans, commercial loans, and mortgage loans (typically loans to purchase a home,

property or business)property or business)

Issuance of credit cards and processing of credit card transactions and billingIssuance of credit cards and processing of credit card transactions and billing

Issuance of debit cards for use as a substitute for checksIssuance of debit cards for use as a substitute for checks

Allow financial transactions at branches or by using Automatic Teller Machines (ATMs)Allow financial transactions at branches or by using Automatic Teller Machines (ATMs)

Provide wire transfers of funds and Electronic fund transfers between banksProvide wire transfers of funds and Electronic fund transfers between banks

Facilitation of standing orders and direct debits, so payments for bills can be made automaticallyFacilitation of standing orders and direct debits, so payments for bills can be made automatically

Provide overdraft agreements for the temporary advancement of the Bank's own money to meetProvide overdraft agreements for the temporary advancement of the Bank's own money to meet

monthly spending commitments of a customer in their current account.monthly spending commitments of a customer in their current account.

Provide Charge card advances of the Bank's own money for customers wishing to settle creditProvide Charge card advances of the Bank's own money for customers wishing to settle credit

advances monthly.advances monthly.

Provide a check guaranteed by the Bank itself and prepaid by the customer, such as a cashier'sProvide a check guaranteed by the Bank itself and prepaid by the customer, such as a cashier's

check or certified check.check or certified check.

Notary service for financial and other documentsNotary service for financial and other documents


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IT-BASED BANKING SERVICES

UNLOCKING THE BUSINESS

POTENTIAL


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Banks have lots of data about their customers, butstill dont fully leverage it.

Some banks have started using Analytics to

develop a better understanding about customers. With much better data mining and analytics,

banks need to graduate to understand and

anticipate the needs of the customers better so as

to ensure congruence in terms of customer

experience as well as better rates of sales

conversions.

Reduce the cost of banks.


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Contd.

Banks have also to implement far better

customer relationship tools with Customer

One View campaign management and sales

funnel management features.

Telecom Industries and Hospitality Industries

have used these technologies far better.

Next decade will see a significant progress on

this front.


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Contd

Will entail creating products which will get

instant interest and fulfillment.

Banks will need to make this huge leap if theyhave to remain relevant for the next

generation customers.


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Obituary of branches as a channel was written

at the peak of the internet boom, but rose like a

phoenix and came back in reckoning.

Need to look at the retailing industry to adopt

practices and formats which will redefine the

customer experiences in terms of look, feel,

point of purchase marketing, merchandising,

display, modes of interaction with the customer. They need to go a step further and personalize

the experience of the customer.


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Contd

The new age branches will have

Open formats with flexibility of customer self service or assisted

self-service or banker assisted service using equipments and

devices. Customer will be recognized and will see specific offers on screens.

Will be able to interact with experts over two-way video conference

All this will require a whole range of technologies relating to banking

devices, VoIP, telephony, and digital devices. Without this transformation the branches may indeed lose their

relevance


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While Net banking usage has seen a reasonable growth,mobile banking is still in its early days/infancy.

Mobile as a medium will outgrow the other channels.

Suffers from many problems relating to standardization of

operating systems, protocols, security issues, evolvingregulatory framework, and so on.

Banks have a great advantage if they can create platformswhich are agnostic to specific operators, operating systems,etc. and take the entire Net banking proposition to themobile phones.

Another league of experience when it integrates voicetechnology and web technology and when Net and mobileplatforms merge.


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Contd.

Redefine how banks deliver service to their

customers.

It is imperative that banks have cutting-edgepresence and capability in this space.


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Banks have been able to convert interbank

transactions into electronic message formats.

Will be at the forefront of elimination ofdocuments and paperwork.

Need to upgrade significantly on document

imaging, electronic messaging formats,

integration capabilities to enable paperless

transactions across multiple entities.


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Most banks have looked at this segment aslargely unprofitable.

Use of biometric technology and mobile hasmade limited impact.

In the years to come cost of transactions anddelivery to this segment profitable and may bethe focus area of many banks.

Lord Meghnad Desai has advocated thateverything should be given to the poor in cashand put directly into their bank so that it will bemore beneficial to the poor.


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Challenge on the technology front is dynamic

Depends on the state of the technology absorptionin the specific bank and ever changing and evolvingworld of technology.

But what is clear is that banking withouttechnology is inconceivable now and in the future .

Hence banks must make it their business to be attheir cutting edge of the developments intechnology that can have a transformational andmay be even disruptive impact on their business


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BANKING IN TECHNOLOGICAL PARADIGM

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