New Face of Banking Sector 1 http://embaitm.blogspot.com
An industry that's tightly protected by regulations has finally opened up. But this has introduced many new challenges. Technology can help overcome these challenges and address the new set of issues associated with modern day banking.
The Banking sector in India has experienced a
rapid transformation. Just about a decade back this sector was limited to the sarkari (read nationalized) and co-operative banks.
In past, every branch of the same bank acted as an independent information silo, and multi-channel banking (ATMs, Net banking, tele-banking, etc) was almost non-existent.
With the entry of private players into retail banking and with multi-nationals focusing on the individual consumer in a big way, the banking system underwent a phenomenal change.
For the first time consumers got the choice of conducting transactions either the traditional way (through the bank branch), through ATMs, the telephone or through the internet. Technology played a key role in providing this multi-service platform.
The entry of private players combined with new RBI guidelines forced nationalized banks to redefine their core banking strategy. And technology was central to this change.
Traditional Branch Banking
With the emergence of various channels for banking, all over have been predicting the end of traditional branch banking, at least in the metros and other upwardly urban areas.
But despite the benefits offered by other technologies in terms of lower costs or better reach, it looks like branch banking is very much here to stay.
Traditional banking is great because you can develop relationships with your bank representatives. This is helpful when you’re borrowing money, looking for sound advice or just like to know the people who are managing your money.
Traditional banking also offers the convenience of easy deposits and withdrawals. You know that your deposit will be in your account the same day or the next day. And you can withdraw money during regular banking hours.
The downside to traditional banks is that you have to stick to their business hours, which aren’t always convenient. You cannot access your bank account when you’re out of town, and every time you need to process a transaction you have to go to the bank.
The first Automated Teller Machines (ATM) were used in the 1960s in New York City. Since then, advancements in technology have created a complete electronic banking system available to consumers 24/7.
In the 1990s, the banking sector in India saw greater emphasis being placed on technology and innovation. Banks began to use technology to provide better quality of services at greater speed.
Electronic banking systems consist of a service that allows you to conduct transactions without physically being in a bank branch. This includes ATMs, Internet banking, pay-by-phone banking and direct deposit accounts.
Internet banking and mobile banking made it convenient for customers to do their banking from geographically diverse places.
In May 2004, the curtain was finally lifted on the much discussed Real Time Gross Settlement (RTGS) system, which many analysts considered, would revolutionize funds transfer in the Indian banking sector.
RTGS is an electronic funds transfer system designed to allow the real time settlement of inter bank payments in a fully secure environment.
Some of the systems implemented earlier included the electronic clearing service (1995), electronic funds transfer (EFT) facility (1997) and special electronic funds transfer system (2003).
POSTerminalandCashDispenser POS Terminal Connected to Cash dispenser 8 http://embaitm.blogspot.com
Banking channels Banks offer many different channels to access their banking and other services:
ATM is a machine that dispenses cash and sometimes takes deposits without the
need for a human bank teller. Some ATMs provide additional services.
A branch is a retail location
Mail: most banks accept check deposits via mail and use mail to communicate to
their customers, e.g. by sending out statements
Mobile banking is a method of using one's mobile phone to conduct banking
Online banking is a term used for performing transactions, payments etc. over the
Relationship Managers mostly for private banking or business banking, often
visiting customers at their homes or businesses
Telephone banking is a service which allows its customers to perform transactions
over the telephone without speaking to a human 9 http://embaitm.blogspot.com
NEFT Process Meaning : National Electronic Funds Transfer (NEFT) system is a nation wide funds transfer system to facilitate transfer of funds from any bank branch to any other bank branch. The National Electronic Funds Transfer (NEFT) system has been successfully handling significant volumes, ever since its launch in November 2005. More than 6 million transactions were processed by the system during the month of January 2010 alone. The coverage has also increased substantially with the participation of over 63,000 bank branches spread across the length and breadth of the country. 11 http://embaitm.blogspot.com
NEFT Process Step-1: The remitter fills in the NEFT Application form giving the following particulars of the beneficiary and authorises the branch to remit the specified amount to the beneficiary by raising a debit to the remitter’s account. (This can also be done by using net banking services offered by some of the banks.) Beneficiary's name Beneficiary's bank name Beneficiary's branch name Beneficiary's account type Beneficiary's account No. Beneficiary's Branch IFSC Step-2: The remitting branch prepares a Structured Financial Messaging Solution (SFMS) message and sends it to its Service Centre for NEFT. 12 http://embaitm.blogspot.com
NEFT Process Step-3: The Service Centre forwards the same to the local RBI (National Clearing Cell, Mumbai) to be included for the next available settlement. Presently, NEFT is settled in six batches at 0930, 1030, 1200, 1300, 1500 and 1600 hours on weekdays and 0930, 1030 and 1200 hours on Saturdays Step-4: The RBI at the clearing centre sorts the transactions bank-wise and prepares accounting entries of net debit or credit for passing on to the banks participating in the system. Thereafter, bank-wise remittance messages are transmitted to banks. Step-5: The receiving banks process the remittance messages received from RBI and effect the credit to the beneficiaries’ accounts. 13 http://embaitm.blogspot.com
ICICI Bank brought to us the 2nd generation iMobile that has newer features, smarter interface, quicker navigation and enhanced functionality.
ICICI Bank's iMobile is answer to banking on the move.
The next generation iMobile is key to a faster, easier and simplified banking service. Now do Banking and more, all from your mobile phone 14 http://embaitm.blogspot.com
iMobile offers a range of services in a simple consolidated menu. Now we can make banking transactions like funds transfer, bill payment, balance enquiry, locate a branch, view your last 5 transactions and much more.
Using GPRS enabled mobile handset or through SMS, iMobile helps us to connect directly to our bank account. This rich client based application needs to be installed on your mobile thereby enabling a single click access to your account
Benefits of using iMobile:
Secure access to bank accounts anytime, anywhere
Convenient menu based features designed for easy access
Enjoy financial transactions worth Rs 50,000 per day for funds transfer to any account, bill payment and prepaid mobile recharge
Services available with iMobile:
Payment of utility bills and credit card bills
Transfer of funds to any bank account
Payment of insurance premium
Placement of service request such us ordering of cheque books, bank account statements, cheque status and balance enquiry
Book movie tickets and recharge your pre-paid mobile
Future Banking Banking is one of the Indian Sectors which is truly consumer oriented and technically advanced. Reserve Bank of India (RBI) is behind the scenes in getting Indian Banking domain to the word class and highly competitive with many new systems and continues to play an important role in introducing customer service initiatives. The recent steps taken in various payment system segments include;
ATM payments (increasing accessibility to the public, Bringing transparency and reasonableness in charges),
Rationalisingcharges for electronic payments (NEFT / RTGS) and Collection of outstation cheques, Mobile payments, Pre-paid payment instruments, etc.
Future Banking RBI in its report “Payment Systems in India: Vision 2009-12″ has unveiled its new projects RBI plans New Payment System:
Mobile Payment Infra
India Card – Rival to Visa & Master Card
Future Banking Implementing a new and feature rich RTGS system : For scaling the existing the RTS facility with latest technologies for more flexibility in operations and better liquidity saving features. 2. India MoneyLine – A 24×7 system for one-to-one funds transfers: The existing NEFT system operates during weekdays from 9 am to 5 pm and on Saturdays from 9 am to 12 noon. With “India MoneyLine”, RBI is considering to extend NEFT to function on a 24×7 basis or to develop a new system akin to the Faster Payments Service in the UK which operates on a 24×7 basis. 3. India Card – A domestic card initiative: RBI is actively looking at introducing a domestic payment card (India Card) and a POS (Point of Sales)switch network for issuance and acceptance of payment cards. The need for such a system arises from two major considerations 18 http://embaitm.blogspot.com
Future Banking (a) The high cost borne by the Indian Banks for affiliation with international card associations in the absence of a domestic price setter (b) The connection with international card associations resulting in the need for routing even domestic transactions, which account for more than 90% of the total, through a switch located outside the country The value of credit card transactions were Rs.65,356/- crores in 2008-09, a 100 per cent jump in the last three years. This means almost Rs 60,000 crore was settled outside India through Visa and Mastercard which act as the payment link on behalf of the bank, merchant and card holder. Debit card transactions amounted to Rs 18,547 crore in 2008-09. So, this new initiative by RBI makes high sense and its very timely. The Indian Banks Association is also in favour of setting up a payment card. If everything has to go as planned, then we might see this new RBI card as a major rivalry to the existing Visa and MasterCards. 19 http://embaitm.blogspot.com
Future Banking 4. Redesigning ECS (Electronic Clearing Service) to function as a true Automated Clearing House (ACH) for bulk transactions: Currently, Local ECS (to facilitate bulk electronic transactions with one-to-many and many-to-one variants) is operational at 76 centres. Centralisationof this process is already underway. RBI is building a technology and feature-rich ACH network by totally redesigning the existing ECS to provide end-to-end processing in a straight-through manner. 5. Mobile Payments Settlement Network Mobile phones are expected to emerge as an important channel for transmission of payment instructions. Efficient mobile payments would require real time transfer of funds with adequate security. Currently all inter-bank mobile transfers are payment instructions for settling funds through existing payment systems. So, RBI is building a new national infrastructure for facilitating real time mobile payments. 20 http://embaitm.blogspot.com
Developing country’s own payment system seems to be a developing trend.
Europe has the Monnet debit scheme which is scheduled for 2010 launch.
The Russian Finance Ministry announced plans to investigate the potential benefits involved with creating their own payment system.
The main reason being to eliminate foreign systems (like visa, mastercard, american express) to cash in the country’s local transactions.
We be prepared for major new systems drive in the Indian Banking System and we consumers are going to be benefited the most.
The future will not be more of the same…
Thank you…… … we need to be ready.. 22 http://embaitm.blogspot.com