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THE INDIAN INTERNET BANKING JOURNEY
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THE FUTURE
Despite the rosy predictions and
increased corporate activity, the Indian Internet banking system is facing many
hurdles. The problems include operational risks, security risks, system
architecture risks, reputational risks and legal risks (See Exhibit I for
Problems in Internet Banking).
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Apart from the
security issues, there are a host of other problems like:
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" PC user base in India is extremely
low compared to global standards.
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The Internet user base is limited.
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Lack of infrastructure to advanced
technology based banking services.
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The absence of a regulatory
framework for Internet banking transactions in India.
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The mindset of the Indian consumer,
who prefers personal interactions and is not very comfortable, doing
transactions through the Internet.
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Limited awareness about the
potential of Internet banking on the part of banks.
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The issue of banks not being ready to
realize the full benefits of Internet banking was aptly summed up by a critic,
"Much of what is now on display at bank websites is an embarrassment, to put it
politely. The average site has information about certain products, e-mail
contacts of bank department, perhaps the Chairman's annual general meeting
speech as well. A mere information booth. This is definitely not Internet
banking."
However, banks are working towards addressing these problems. The security
issues can be tackled by having the bank's systems technologically equipped to
evade operational and security risks. Reputational risks can be prevented by
testing of the system before implementation, developing contingency plans (to
handle system disruptions, system hackers, security lapses and virus attacks)
and creating back-up facilities. Legal and cross-border risks can be avoided
through proper customer identification devices, information screening
techniques, periodic reviews on compliance with various laws, and gaining
knowledge of various national laws (applicable) and guide the customers through
their cross-border dealings.
Apart from ensuring the security of the Internet-based
transactions, ICICI is taking steps to overcome the other hurdles. The bank is
tying up with computer manufacturers to make PCs available to customers at low
prices. The bank also plans to tie-up with Sify to place its ATMs in Sify
cybercafes. In 2000, ICICI opened Internet kiosks (cabins) at its ATMs to enable
easy Internet access to its customers for banking.
Many other banks are also adopting such practices. Analysts claim that Internet
banking holds lots of potential with the emergence of growing Internet awareness
among customers, integration of banking services with e-commerce service, the
increasing reach of the Internet and the entry of global players in the banking
sector. Even the Reserve Bank of India has come out with Internet banking
related guidelines (Refer Exhibit II). With ICICI already having decided to make
the Internet an integral part of its future business plans and other banks
reportedly following suit, Internet banking seems poised to become an important
part of the Indian banking sector in the years to come.
QUESTIONS FOR DISCUSSION:
1. Analyze the major changes that took
place in the Indian banking sector with the advent of Internet banking and
discuss its advantages and disadvantages.
2. Explain how a typical Internet banking transaction is conducted and discuss
the need for secure system architecture, in the light of various risks
associated with Internet banking?
3. "Technology advancement in banking helps high net worth customers and big
corporates, but not the average middle-class customers." Do you agree with the
above statement? Give reasons to support your answer.
4. Discuss the future of Internet banking in India, keeping in view its moderate
growth since its inception.
ADDITIONAL READINGS & REFERENCES:
1. Bannerjee Gunjan, Harnessing
the IT Advantage, Computers Today, November 1997.
2. Mookerjee Nivedita, Internet Banking Still In The Evolution Stage,
Financial Express, July 1998.
3. Strategies For Success, Financial Express, October 1999.
4. Thampi Praveen S. and Basu Indrajit, Snakes And Ladders, Computers
Today, November 1999.
5. Jodhi Anurag, ICICI Sets Target For Infinity, Eyes 1-lakh Users,
November 1999.
6. Rajadhyaksha Niranjan, Internet Banking Is Here, Effective Executive,
April 2000.
7. Joshi Anurag, Payment Gateways - Opening New Vistas, Financial
Express, May 2000.
8. Jha Neeraj, B2B Opportunities Are Huge, Financial Express, July 2000.
9. Jha Neeraj, New Initiatives In Net Banking, Financial Express July
2000.
10. Ghani AH., Unraveling The Intricacies Of Online Banking Initiatives,
Financial Express July 2000.
11. Jha Neeraj, Departmental Stores And Portals Might Become Banks,
Financial Express, July 2000.
12. Singh Rahul, Pvt. Banks Take Net Banking Act To Higher Gear, February
2001.
13. Farias Sandeep and Parikh Vaibhav, A Click In Time Saves Nine, The
Economic Times, June 2001.
14. Internet Banking: Risks and Rewards, Professional Banker, August
2001.
15. Kamesam Vepa, Changing Faces Of Banking: Banking And Technology,
Professional Banker, December 2001.
16. www.icici.com
17. www.banknetindia.com
2010, ICMR (IBS Center for Management Research).All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means - electronic or mechanical, without permission.
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