E-Banking Technologies
This chapter is meant as an overview of the most common technologies used to support e-banking operations.
THE INTERNET
Of importance: the internet is not just the Web - it's a network over which information is transferred by a number of different protocols. He belabors this point, but it's something a lot of people don't seem to realize. He also goes into some history, evolution, and explanations that are very fundamental.
Some of the key points:
- Networked communication overcomes the need for physical location, which benefits both consumer and supplier
- Computerized communication increases speed and efficiency, and decreases costs.
- Automation of basic tasks overcomes the restriction of time (business can be done outside of banking hours)
- Being increasingly "networked" makes it easier for business to communicate with vendors and work with partners.
- The consumer is exposed to a wider range of vendors, and there is increasing competition for market share.
- The consumer has access to more information and is more aware and informed
- The internet has fewer barriers to entry to new competitors.
MOBILE BANKING TECHNOLOGIES
"Mobile banking" extends the scope further. Internet banking frees the customer from the branch office to let them bank from their home or office; mobile devices enable them to bank from anywhere (that has a signal), using a device that is portable.
Some obstacles to mobile banking are listed:
- Connectivity cost - the cost to have data service on a mobile device remains high enough to deter customers from utilizing it
- Poor Device Capabilities - the smallness of the device makes it difficult to view much information and awkward to enter data, which prevent its use for information-intensive transactions
- Security Concerns - Users remain concerned about the security of mobile banking, chiefly signal intercept and device security (a cell phone is easily lost or stolen)
- Awareness - Many consumers do not know what capabilities exist
- Accessibility - While network breadth is improving, there are still many locations where service is unavailable
- Supply - Many businesses still regard mobile as a fad and are reluctant to make significant investment in provisioning services or developing mobile capabilities.
- Compatibility - There are no widely-accepted standards for mobile communication devices, so a mobile application cannot be developed once and used by everyone.
The author remarks that the medium is improving in each of these regards, but there is no clear path toward a lasting solution at this time.
Mobile banking has caught on in developing markets, especially Asia, where it is more feasible and convenient than Internet banking. It is cheaper for governments to establish mobile infrastructure than Internet, and mobile devices are cheaper for consumers than computers, so their expansion into these markets has been more successful than in established economies. Some examples are provided (Kenya, Japan, Norway)
BACKEND SYSTEMS
An explanation of what this means (thanks bunches).
Product Applications
The word "application" denotes the software that enables business to interact with data (modify or communicate information).
Of particular importance is that banks typically have a large number of incompatible legacy systems to perform various tasks, which don't work with one another easily. Systems integration is a major obstacle to being nimble in providing service and solutions, and overcoming it can be expensive.
Reliance on legacy technology, and reluctance to part with it, is a distinct disadvantage to established companies in the new economy. (Though the author does not concede that even the "new" technology will be legacy in a short while - the need to stay current is ongoing).
The author mentions "outsourcing" as a solution to which some banks are turning - buying data processing services from a vendor rather than establishing in-house capabilities because it is cost-effective. (He does not address the problem with commoditization and loss fo competitive advantage).
Some of the sources of reluctance are the desire to preserve business continuity (no interruption in service, no abandoning "old" data), fears for security (newer systems are shakier for lack of experience), trust issues (giving "outsiders" access to customer data), cost issues (expense of upgrading), and regulatory issues.
Data Warehousing
Information about the way in which customers use their financial accounts has always been available to banks, though they traditionally focused only on the impact to the account balances. Since banking has gone digital, all of this information is captured and stored, and service providers would do well to analyze the information to learn about customer behavior and apply that knowledge to their products and business practices. The author provides additional detail and some examples to explain the concept.
Customer Relationship Management Systems (CRM)
CRM is similar to data warehousing, in that it analyzes customer behavior, though in this case with an eye toward identifying the needs of the individual and customizing products to suit them. The author concedes that the results of CRM have been mixed in practice - some companies claim it's been beneficial, others have claimed it has harmed customer satisfaction, and the proponents generally blame the company, rather than the technology, when things go poorly However, the basic theory merits consideration.
MIDDLEWARE
"Middleware" describes a category of software whose purpose is to facilitate communication between "new" systems and "old" ones. While this is less ideal than having systems that are compatible, companies often turn to middleware for a quick-and-dirty solution that will enable them to keep their legacy systems.
Traditional middleware generally replicated the entire functionality of a system - in effect, replacing the applications in the system with other applications that were more compatible with newer systems.
Another approach, which the author clearly favors, is service-oriented architecture (SOA), which is a method of developing many small applications that perform specific functions (e.g., deduct amount from account) in a way that they can be leveraged by other applications.
The main difference is that the SOA pieces are smaller, cheaper, and easier than a middleware "package" that replicates the full functionality.
WEBSITE DEVELOPMENT ISSUES
The author differentiates between informational resources (all users download the same data and cannot change it) and transactional resources (each user accesses unique data and is able to alter it). While some informational resources are provided for reference and marketing, the bulk of e-banking operations are transactional.
Functionally, the greatest challenge to providing e-banking services is the information systems themselves, which were not intended for use by individual customers, and whose design makes it difficult for them to be adapted to use. An example is given of batch versus real-time transaction processing - the latter is ill-suited to the Web, where changes are expected to take effect immediately.
Security is also a concern. The Internet is an open environment, and it may be difficult to open up secure systems to the right users without also leaving the door open to unauthorized users, whose motives may be sinister. Beyond the financial damage, any breach of security may become a PR disaster, and a detriment to customer retention and acquisition.
One of the main issues is making an e-business experience "engaging." One of the main reasons that banking by computer (using modems) failed was that the systems were complex, clumsy, and difficult to use. Getting a user to transact on your Web site, and to prefer it to others, is a matter of serving their needs in a manner that is simple and engaging. The quality of a site will, in future, become a competitive advantage. (EN: he's skirting the topic of user experience, quite badly).
CHAPTER SUMMARY
Beyond the systems within an individual bank, there is a need for integration and interoperability across all firms in the banking industry. In most instances, a financial transaction involves the movement of funds from an account at one bank to an account at a different one, so cooperation is necessary even among competitors. And beyond the banking industry, there is a need for the systems of each bank to be interoperable with the systems of customers. In effect, e-banking is of concern to more than just banks, but to any individual or organization that participates in financial transactions.