Only banks, no bricks

(Continued from last week)

However, the most important of it all is the significant improvement in

customer relationship. Customers, both corporate and retail, are no longer

willing to queue in banks, or wait on phones, for the most basic of services.

They demand and expect to be able to transact their financial dealings where and

when they wish. The emergence of Internet banking is prompting banks to rethink

their customer interface. The Internet enables banks to offer low- cost, high

value-added financial services. In addition, it provides customers with better

opportunities to compare services.

To remain competitive, banks will need to develop their Web-based business

models centered on customers by developing and personalizing innovative,

easy-to-use offering that focus on customer's lifestyle goals and develop

tailored customer solutions in real-time.

E-business marketplaces

Various studies clearly suggest that banks in future will become e-business

marketplaces. In North America and Europe, banks have already started investing

in Internet commerce market, by discovering areas in which they have a role to

play and can reap the benefits first. Banks have discovered that they can play a

primary role as financial inter-mediators and facilitators of complete

commercial transaction via electronic networks and especially the Internet. Both

ICICI and HDFC have made significant investments in their payment gateways with

this objective in mind. The challenge for banks is to offer a payment backbone

system that will be open enough to support multiple payment instruments (credit

cards, debit cards, direct debit to accounts, e-checks, digital money, etc.) and

scalable enough to allow for a stable service regardless of the `workload'.

The impediments

One of the major hurdles in the way of Internet banking in India is the lack

of a critical mass of Internet subscribers. PC penetration is dismal and

Internet growth is still slow. Add to this the state of poor IT infrastructure

in the country. Hence, banks are not in a position to achieve the full potential

of their electronic capabilities. However, the major hurdle in the way of

e-banking in India is that of security-a hitherto uncharted territory both for

banks and their customers. The ubiquitous nature of Internet means there is a

theoretical possibility of attack by anyone, anywhere. These attacks can

manifest themselves as traditional break-ins, fake website or by `denial of

service' attacks.

The website of ICICI bank and HDFC bank furnish elaborate information on the

security aspects of their banks. ICICI has multi-layered security architecture

comprising firewalls, filtering routers, 128-bit encryption and digital

certificates. HDFC bank uses a technology called Secured Socket Layer (SSL),

which involves scrambling of the information between the customer and the bank.

However, despite cryptography, authenticated website and firewalls, there

remain serious legal challenges to be resolved. Business on the Internet is

without precedent and lacks a legal framework in most countries. Banks and

customers, therefore, need to define appropriate legal measures covering, among

other things: service levels, indemnities, limitations of liability and

acceptability of digital signature. In India, all of these are conspicuous by

absence and lack of a Public Key Infrastructure (PKI) could hamper the growth of

Internet banking.

Trends

Six years ago, Bill Gates said, "Banking is necessary, but banks are

not." Virtual banks with no branches and attached costs are gaining

popularity in the West. But it doesn't necessarily spell doom for traditional

banks. And it would seem almost inconceivable that the position of big banks

which process crore of rupees a day could be challenged by these Internet

entities, and especially in the Indian context, it is a far-fetched idea. As has

happened in the past, some of the biggest dotcom website of the world have

fallen prey to hacking that has stalled their systems for hours in a day.

Legacy systems on the other hand have been known to work. What the Internet

does offer established systems of the old types are opportunities for cutting

costs and marketing products more efficiently. With IT enabling a paradigm shift

in the banking sector, there is no way banks can turn a blind eye to new

technology and the willingness to adopt technology products.

MT Jeevan


Source: www.voicendata.com


Concluded.