An Overview of E-Banking
This chapter provides a theoretical overview of the e-banking process and suggests how it may evolve in the near future.
MODELS FOR ELECTRONIC SERVICES DELIVERY
Banks followed retailers to the online medium, and there are many lessons e-banking can learn from e-commerce. However, the two are not analogous, as the capabilities of e-banking have evolved beyond the basic transaction processing necessary to support e-commerce.
E-commerce is, at heart, merely the extension of commerce (buying and selling) to the electronic medium. Product information is provided via computer, the order is submitted online, and the progress of fulfillment is tracked online (in some cases, the product itself may be delivered digitally, such as an e-book or digital audio./video). This activity necessitates changes in business processes to accommodate or take advantage of the medium and has a significant impact on how businesses interact with customers, suppliers, and partners.
For business, e-commerce offers different (and lower) barriers to entry, opportunities for cost reduction, the ease of re-engineering business processes, and increased opportunity to expand markets (even across borders).
For the customer, e-commerce has meant more choices (of products and suppliers), more information, better value, better tools to manage purchasing, faster service, and convenience.
For retailers and suppliers, e-commerce provides an easy method for gathering information about customers, enabling the seller to develop a profile of behavior that can be useful in customizing products and managing customer relations.
Some of the industries that have undergone sweeping changes as a result of networked communications are:
- Travel and Tourism - Has entirely cut out the middleman (travel agent) to enable service providers and customers to interact directly
- Insurance and Investments - As with travel, the need for a middleman (broker) has been minimized, though not yet eliminated.
- Real Estate - Same change, though the author also emphasizes the way in which customers are empowered to access information directly.
- Labor Market - In virtually every industry, the way in which employers and candidates interact has been completely transformed by technology.
FROM E-COMMERCE TO E-BANKING
The term e-banking can cover a wide array of activities - but for the present, it is defined as the use of IT to provision financial services to customers. The author provides a list of the kinds of services available via e-banking, but it's a random hodgepodge (check balance, transfer funds, view statements, apply for accounts, etc.)
In one sense, e-banking the extension of services beyond a physical location, which began with ATMs and telephone banking (EN: he forgot the telegraph, which was even earlier). The author mentions modem-based banking for businesses in the 1980's, but these were not standard solutions (and were often quite awkward).
Things were far from standard, and largely did not catch on until the Internet. Even then, most banks were reluctant to become entangled in the new medium (fear of fraud and security) and preferred a "wait and see" approach and were not motivated until they perceived that they were at a competitive disadvantage to banks that were more proactive.
While e-banking is presently widespread, it's noted that most of the major players are traditional brick-and-mortar banks, and it's asserted that customers still have a psychological need for a physical branch office, even when they do not conduct any business there.
It is predicted (but has not yet panned out) that "pure" e-banks will eventually win out because the cost savings of having no brick-and-mortar presence will enable them to offer more attractive rates on both ends (higher interest savings, lower interest loans)
There's a note about e-banking in emerging economies: it's not catching on. In part, it's because of low technology, but it's also because of a "cash" culture: few people use banks at all, even in person. Changing this will require infrastructure and cultural adjustments as well as increased personal wealth.
FUTURE OF E-BANKING
After some hedging, the author makes a few statements about the future developments in e-banking:
- New products and services will evolve by virtue of the medium (use of RFID tags or cell phones in place of card artifacts)
- Security will continue to remain a concern - each innovation will be an opportunity for criminals
- Tools will emerge to enable individuals to manage their accounts with multiple institutions
- Fewer barriers to switching will cause customers to move their funds more rapidly to banks offering better offers
- International banking (having accounts beyond national borders) may become a reality for "ordinary" customers.
- Banks will need to expand their services, or partner with other companies, to provide a broader range of options and capabilities to their customers.
- Ease of money movement will empower individuals and small businesses to seek revenue from nontraditional sources
- Banks will become innovative and highly competitive to retain customers, and will need to be proactive rather than reactive in their approach to providing new products and services.
- There's always a danger that regulators may intervene and interfere.
CHAPTER SUMMARY
This is a rehash, except to state that e-banking currently seems like a complementary channel, rather than a substitute for other channels such as physical branches, and that evolution toward purely digital banking could be inevitable, but progress will be slow.