Module: 6 - Advent of Internet Banking in India (Page: 1 of 1)

The Internet has already had a seismic effect on the way the financial services industry conducts business in the west. It has permanently altered the way customers perceive value, how value is delivered, and the profitability it can produce. However, coping with internal and external environmental disturbances, Indian banks earlier before the Nineties have fell far behind to prepare themselves for this challenge that requires them to urgently and radically restructure their business model. However considering the immense potential, Internet Banking will bound to have a profound impact in the coming years. As per the view of Deepak Gupta of PricewaterhouseCoopers-

"Banking lives on the inadequacies of the system. The floats generated through delays caused by unforeseen circumstances and unavoidable infrastructure problems have seen even the least of the efficient banks sail through the worst of the times. But what if all these inadequacies were to die and that too in a wave. It doesn't take much to recognize that the Internet has already had a profound effect on the delivery of financial services and is likely to bring more radical changes. Some years ago, Mary Meeker (Morgan Stanley Dean Witter's Internet analyst) forecast that financial services would be among the industries most profoundly affected by the Internet, since the distribution of financial products doesn't require any physical exchange of goods. The impact is bound to be higher and tougher for those in India as a slew of disturbances in the internal and external environment kept them so much preoccupied that they hardly got a chance to prepare themselves for the challenges of Internet that requires them to urgently and radically restructure their business model"
(Source: Deepak Gupta, Consultant, PricewaterhouseCoopers - URL: "http://www.oocities.org/deepakg2000/netbank.html".)

Internet banking enables a customer to do banking transactions through the bank's website in the Internet. This is also called virtual banking, or net banking, or anywhere banking. It is more or less like bringing the bank to your computer, at the place and time of your choice.

"The advantages of Internet Banking are many. First, there is round-the-clock access. And second, one can access the bank from anywhere in the world at one's own convenience. For banks, the operational cost is very low, compared to any other form of banking distribution channel. Against $1.07 for branch banking, it costs only $0.13 in Internet banking. It is still cheaper than ATM where the cost is around 0.30 cents. The additional advantage is that the bank need not invest in infrastructure and staff management." (Mr. V. Narayanan, - faculty member of the Indian Overseas Bank Staff Training Centre, in his article "Nuts and bolts of Internet Banking" published in "Business Line" online edition dated Sunday, July 16, 2000)

Internet access can be done via either the ``Dial-up'' connection or DSL or Cable TV- modem. The customer desiring to avail this service must have an account with the bank and have executed the bank's agreement for availing Internet Banking Service as per the terms and conditions of the bank. The Bank thereafter provides the customer with a Unique personal password or Personal Identification Number (PIN) and also Financial software such as MS-Money.

The customer visits the bank's web site (say www.icici.com) on the Internet. Then he enters the Internet banking section, Infinity on-line, in this case. The personal password supplied by the bank enables one to access the bank and do any required operation or transaction. The bank can also be accessed from a cyber Cafe or Internet Cafe and one need not have to own a P.C with Internet connection.

• Account information.

• Funds transfer.

• Online real-time payment for shopping done on Internet.

• Requests and intimations.

• Contacting/communicating with the accounts or relationship manager.

• Electronic bill payment towards utility bills.

However right now funds- transfer from one bank to another on-line is not possible in India. Currently, one can transfer funds among the various branches of the same bank. Optional software like MS-Money helps the customer to download information (historic and current) of one's account(s) from the bank, and enables one to do some "what if"' analysis. For instance, if one has a foreign currency term deposit, one may want to know what could be the savings. All such transactions are encrypted, using sophisticated multi-layered security architecture, including firewalls and filters. One can be rest assured that one's transactions are secure and confidential.