Internet banking impacting retail

PERSPECTIVE

The Next Wave in Internet Banking

Internet, in the form we know it today, is about 20 years old. It has, in fact, seen a rebirth in what experts call Web 2.0. Banking on the Internet, has thrived for more than half of those years. Among the business models that rode the crest of dot coms, Internet banking was undoubtedly one of the few models that satisfied a genuine need thatkept growing despite the slump of 2001. In those 10 years, Internet banking followed the traditional market cycle of morphing from fad to trend, becoming an indispensably integral part of life for many. This is true of not only the global upwardly mobile population, but also those who seek more control over their lives and time; and those encountering the limitations of traditional brickand-mortarbanking. Analysts say, on an average, banks save about 45 cents every time they send an account statement electronically instead of by paper mail. A bank that sends monthly account statements by paper mail to 5 million customers would spend $27 million more than if it sent electronic statements. Besides, the understated, yet biggest, benefit of Internet banking, as appreciated today, is annualsavings of more than 10 million trees, touching our lives in yet one more amazing manner. Another factor serving to drive the growth of Internet banking even harder is the retail boom - a path-breaking trend the industry is witnessing in recent years. By virtue of the availability of a robust financial ecosystem and modern technological advances in the industry, retail banking has gone past thebottleneck of primary hurdles such as quicker payments and settlements through financial supply chains that form the backbone of the retail industry. This accrues to the fact that the retail focus of the industry, including that of BFSI, coupled with the uptake of Internet by retail consumers, can hypothetically be looked upon to together deliver the key for next generation Internet banking. This willin essence entail capitalizing on Web 2.0 in the banking sphere to garner the business potential presented by existing large consumer banking networks. Internet Banking: Journey so Far The Internet banking model was originally built around ‘need for convenience’ – replacing identified brick-&-mortar services and providing an online means of reaching out to the bank. Basic offerings includedinquiry facilities and in-house

fund transfers. Eventually, facilities like bill payments were extended to the Internet, further expanding the ‘convenience’ paradigm. Since there were no billing aggregators then and the model was not mature for the market, Internet banking solutions served as mere aggregating mechanisms. This paved the way for the next category of features to be introduced to theretail world – inter-bank local payments, international remittances, communication through secure e-mail with dedicated relationship managers from the bank, interactive marketing and exposure of account relationships through online channels. Thus was born the ‘differentiation’ paradigm, which further led to introduction of conveniences like notification mechanisms through customerpreferred modes(e-mail, facsimile and voice), along with investment and personal financial management services. A good example is Singapore which has one of the highest Internet penetration rates worldwide. All major Singaporean banks provide Internet banking platforms and many also provide host-tohost capabilities to link up to companies' backoffice operations for file transfers. The authorities in Singapore havebeen proactive in recognizing the role of the Internet as a delivery channel and have strongly promoted Internet banking. MAS, the central bank of Singapore has welcomed Internet banking operations in Singapore. Now, with the deep penetration of Internet banking, the focus has moved to enhancing the length and breadth of the scope of services offered via electronic channels. Regular reviews and...