Current status of
e-banking

 

Current practices

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E-banking or internet banking is one of the profound outcomings of
technology in recent past. It has helped to save the time and effort of mankind
by a great extent. Who would have thought in the 90’s that someday common man
could find a way to evade waiting for hours in the long queues in the banks for
even a simple task of getting one’s passbook updated. Well, here we are with e-
banking at our breakfast table. Nowadays, one can easily access his/her bank account
and keep a track of all the transactions and activities undergoing in their respective
bank accounts. With days passing by, e- banking is being made more and more
advanced in terms of facilities and services being provided. We will discuss
about the current status of e-banking in our country in the following content. Indian banking
industry, today, is in the midst of an IT revolution. The technology changes
have put forth the competition among the banks. This has led to increasing
total banking automation in the Indian banking industry. New private sector
banks and foreign banks have an edge over public sector banks as far as
implementation of technological solutions is concerned. However, the later are
in the process of making huge investment in technology.The financial reforms
that were initiated in the early 90s and the globalization and liberalization
measures brought in a completely new operating environment to the banks.
Services and products like “Anywhere Banking,” “Tele-Banking,” “Internet Banking,”
“Web Banking,” “E-Banking” etc. have become the buzzwords of the day and the
banks are trying to cope with the competition by offering innovative and
attractively packaged technology based services to their customers.

Some of the practices that are frequently being used nowadays
are as follows: –

 

 

 

UPI

Unified Payments Interface or UPI is one of the recent
developments in the field of internet banking or e banking which powers
multiple bank accounts into a single mobile application, merging several bank
features. It works on the peer to peer collect request as per the requirement
and convenience. Each bank provides its own mobile application for various
mobile platforms. The various requirements for getting a UPI enabled service
are as follows:

·        
Bank
Account

·        
Mobile
number linked with the bank account

·        
Smart
phone with a reliable internet facility.

·        
Debit
card details for resetting the pin codes.

The benefits the customer enjoys by using a UPI application
are as follows:

·        
Customer
is not being charged a single penny during the transaction unlike internet
banking or cheque transfer or even demand drafts.

·        
Customer
only has to pay for the internet data charges.

Nowadays
a large no. of privately owned organizations like Paytm, bhim, phonepe etc. are
providing the benefits of a UPI. A typical UPI supported by paytm:

 

Mobile banking 

It is a service provided by
a bank and
other financial institutions that allows customers to conduct financial transactions using a mobile device such
as a smartphone remotely.
 Unlike the internet banking it
uses software, usually known as an application, provided by the
financial institution . Mobile banking is usually available on a 24-hour basis
and some financial institutions have restrictions on which accounts may be
accessed through mobile banking, as well as a limit on the amount that can be
transacted.

Transactions through mobile banking
may include obtaining account balances and lists of latest transactions, electronic bill payments, and funds transfers between a customer’s
or another’s accounts. Some apps also enable copies of statements to be
downloaded and sometimes printed at the customer’s premises; and some banks
charge a fee for mailing hardcopies of bank statements.

The services provided by mobile banking reduces the cost
incurred by handling transactions by reducing the need of the customers to
visit a bank branch for non-cash withdrawals and deposit transactions. Mobile
banking does not handle transactions involving cash, and a customer needs to
visit an ATM or bank branch for cash withdrawals or
deposits. Many apps now have a remote deposit option;
using the device’s camera to
digitally transmit cheques to their financial institution. A typical ICICI
mobile banking application:

Cloud technology

Cloud computing is the one technology that
supports many other disruptive technologies such as Big Data, artificial
intelligence (AI), blockchain, IoT. The more progressive banks around the world
have already made significant headway with the adoption of cloud computing, and
Indian banks are fast warming up to its many benefits. They have begun to realize
the degree of agility it brings into their business, a fact that has already
been evident through the success of fintech companies. As a result, business models
for banks and fintech companies in the future are expected to give much greater
emphasis to cloud computing. Demonetization has propelled India’s move towards
being a cashless society, or at least a less cash-dependent society; cloud
technology will provide banks the much-needed bandwidth to deal with the rising
demand for and scale of digital transactions.

Blockchain

Blockchain has been a substantial force
enabling banks through the process of reinvention and satisfying increasing
customer demands. Banks are planning to take specific projects from pilot to
production stage and power inter-organizational processes through blockchain. A
partnership between Emirates NBD and ICICI Bank announced in October
2016 will see the launch of a blockchain pilot network to process
international remittances and trade finance and is expected to herald the
transition of blockchain into mainstream banking in the country.

Demographic Status:
Rural and Urban users

Rural Users

In India there
are 6, 40,867 villages and 68.84% of population resides in rural areas that
offer a huge potential to the economy (Census 2011). Banking sector being the
forefront of the economy has ventured into many innovative services to cater
the need of these non-urban residents and e-banking is one of the most splendid
offers in this context. E-banking has alchemized the conventional way of
banking through providing countless benefits to its users. But the adaptability
of e-banking in rural areas is not in consensus with the proliferate growth of
e-banking observed in other areas.

The number of internet users in urban India is 137 million,
while in rural it is increasing by 58% year on year growth. However, most of
the use is limited to communication purposes (90%), whereas, online
transactions are limited to only 10% of total population. This presents a great
opportunity for internet banking in the country. According to previous
statistics, the number of internet banking users in India was expected to rise
to 213 million by 2014, making India jump onto the second place replacing U.S.
Referring to the current scenario, out of 205 million users in India, 112
million prefer mobile banking. This is clearly, due to rapid IT development in
the banking system in the major cities, but the statistics in suburban &
rural India is different and low, comparably. E-banking services other than
ATM’s still does not account for a significant portion of total transactions in
suburban and rural India due to the lack of awareness about all e-banking
services provided by banks. Still the maximum users across the rural regions of
India are largely dependent on the bank branches across various rural or semi
urban areas for their day to day transactions. In fact, many of them do not
even opt for the ATM services on the account of unreliability and insecurity
linked with the usage of ATM’s that mainly arises due to unawareness. Till date
a large number of villagers are restrained to the age old methodologies of
standing in a long queue at the banks and waiting half a day for a simple
transaction like a cash withdrawal.

With only 40,000-odd ATMs available in rural
areas, access to money in the remotest parts of the country posed a greater
challenge. While public sector banks operate only about 20 per cent of their
ATMs in rural areas, the reach of private banks in the hinterland is far poorer
with just 8 per cent of their ATMs in these areas. All the banks have nearly 3/4th
of their ATMs in urban or semi urban areas. With only a couple of banks (mainly
public sector) having around 34-35 % of their branches in the rural areas. Now,
given the distribution of population in the rural and urban out of which the
rural population is definitely the more, the lesser number of ATMs add up to
the pangs. SBI has the largest number of ATMs in the rural areas which is less
than 8000 ATMs followed up by Punjab National Bank which is far lower in number
at 2700, however there are close to 2.3 lakh ATMs across the country. These
numbers show how weakly the ATMs are distributed across the country. These are
one of the main reasons again why there are less number of rural population
opting for the e- banking services of which using ATMs is one of the parts.
When there are so less number of people opting to use ATMs in the rural areas
imagine the number of people using the internet services for banking, which
could possibly be feeble. Given below is a data on the distribution of ATMs
across the country.

One of the initiatives taken up by RBI couple of years back, was to grant license to non-bank
entities to set up white-label ATMs (WLAs) in the country. The main objective
of this was to expand reach of ATMs in semi-urban and rural areas, where banks
were not able to put up ATMs. Under the RBI’s guidelines, a minimum number of
WLAs have to be installed in Tier-III to -VI centers, depending on the scheme
opted by each player.

Hence almost 41 per cent of WLAs operate in
rural areas. However since the total number of WLAs itself is significantly
smaller than bank-operated ATMs, access to money still remains a challenge. As
of October 2016, there were just 14,427 white label ATMs. Of the 8 players in
this market, two players — Tata Communications Payment Solutions (8, 941) and
BTI Payments (4, 087) — alone constitute 90 per cent of total white label ATMs.
The number of ATMs set up by rest of the players, are far lower in the tally.

With the number of transactions failing to
scale up in these remote areas, WLA operators have found it difficult to
generate revenues and hence expand further.

Some limitations that hold back Rural India
from advanced technologies and the solutions for the same are as follows:-

·        
Hesitation
from using those services from the fear of unknown mistakes and consequences.

·        
Shortage of
cash in the account , this can be overcome by introduction of credit system
provided that there is a safeguard against non-payment.

·        
Inability to
understand or read the instructions. for ex. In case of an ATM, they would be
incapable to follow the instructions that is mentioned in English or in any
other language.

·        
Adaptation
of e-banking to all govt. services available in villages can be initiated , for
example payment of farmers for their goods sold at govt. collectors such as
milk unions etc.

Urban Users

After a recent survey conducted by a group of researchers, it
was found out that the users of internet banking did 22% of their transactions
through internet banking. However, they relied most on ATMs (51% to conduct
their transactions, which is quite a lot understandable  as mostly the transaction involving cash or
cheques couldn’t be practiced over internet banking.

Result shows the % of urban population using e banking
services in India.

With the onset of digital banking in India, the total number
of users opting for digital banking in India is supposed to double up to reach
150 million mark by 2020, from the current 45 million active urban online
banking users in India according to a report drafted by facebook The Boston
Consulting Group. India is in the midst of a digital revolution where the
internet users are going beyond just browsing 
and social networking and moving over to more mature activities like
online banking and making online transactions worth of lakhs of rupees on a
daily basis. As more and more Indians access the internet on their mobile phones,
there is a big opportunity for financial companies to create a powerful digital
experience that is intuitive and secure for their customers. The report
confirms that consumers are leaning in towards digital adoption of financial
services faster than previous estimates, and the time is now for the financial
services industry to invest so we can help more people contribute to a digital
future. However, there is another side of the story where more than 50 percent
of consumers are dissatisfied with their online banking and mobile
app experience largely because of fear of hidden charges, lack of trust,
complicated information provided among others. This is also indicated by the
very low downloads of mobile apps of financial institutions when compared with
e-commerce apps.

As many as 7% of account holders in the country are using the Internet
for banking transactions, while branch banking has fallen by a full 15
percentage points, according to a report by global management consultancy
McKinsey & Company. Use of the Internet for banking has seen a massive rise
in the 2010-11 survey, taking the overall number of bank consumers who use the
Net to close 7% of the total bank account
holders — a seven-fold jump since 2007 — even as for the first time in the
past 13 years, branch banking has come down by a full 15 percentage points
during the same period according to a  McKinsey & Company India employee . The
percentage of online users of banking
transactions was just about 1% in the agency’s 2007 survey.

The survey is the result of one-on-ones with nearly 20,000 Asians
covering the mass, mass-affluent and the affluent consumers across 13 markets,
of which the largest survey pool was from India at 5,000 because of the sheer
diversity of this market, Thomas said.

The survey is based on the number of times in a week respondent visited
bank branches or used Internet for carrying out transactions. In 2007, the
number of times Indian respondents visited bank branch for doing transactions
was 0.58 while the same in 2011 was 0.49, showing a fall of 15 percentage
points. Branch usage has dropped by 27% on an average across Asia between 2007
and 2011, while usage of the Internet and mobile banking have increased by 28%
and 83%, respectively, says the survey, which was also conducted across the
Asia-Pacific region. When it comes to digital banking, the survey said,
“India leads growth in Asia in mobile and Internet usage for banking.
While there was a 15% decline in branch usage here, the growth in usage of the
Internet and mobile banking has almost tripled.” For the first time since
we started this survey in 1998, we see a marked shift away from using branches
as a main channel for interaction in many markets. This is a fundamental shift
in consumer behavior , and has significant implications for banks. The scale of
branch network is a less decisive factor for capturing customers now.The survey
also highlights a number of changes in consumer mindset when it comes to
accessing financial services after the global financial crisis.The worst
casualty is loyalty as there is a full 40 percentage point drop in loyalty
since 2007, though 95% are seemingly satisfied with their main banks, says
associate partner Jatin Pant.

The average number of banking relationships across the country rose 19%
from 1.4 in 2007 to 1.7 in 2011, while the average percentage of people willing
to shop around rose 15, marking a greater willingness of consumers to vote with
their feet and engage with a broader variety of financial institutions, the
McKinsey survey said. “While the consumers say they want to consolidate
their banking relationships, they continue to shop around because banks are not
delivering the products and services, such as frontline services, that can lock
them in,” it said.

Some latest findings on the usage of e banking in India are as follows:

Indians prefer a
digital-first approach to banking, and will not hesitate to protest poor
service, finds a survey by Avaya as on August 2017.
51% of Indians use online banking channels 
26% of Indian customers prefer to access services
via their bank’s website, and the same number would prefer to use a mobile app
rather than talk to a human agent. 

Getting
the customer experience right is important 
37% of Indian respondents will change banks if they
had a bad experience 
One in
four would share their bad
experience on social media .

44% would let friends and family know about their issues 

Satisfaction
levels are high 
93% of respondents are satisfied by the level of
banking service they receive 
22% say they have never faced any customer
satisfaction related issues 

Customers
are keen to be contacted by their bank 
58% wanted to be alerted about a problematic
49% want to be alerted if their credit card is up
for renewal 
47% want to receive information on a new launch or
service 
44% want to receive personal offers