Electronic and wireless banking
The introduction of 24-hour
telephone banking in the early 1990s quickly caught on
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Many people can still recall the days when banks
opened to the public at 10:00 am and closed for business at 4:00 pm. The
introduction of 24-hour telephone banking in the early 1990s quickly caught on
in some countries. In Sweden, for example, Nordbanken experienced a surge in
customers calling day and night to check balances and transfer money. This early
development soon paved the way for PC and then Internet banking. With these
services, customers can now pay bills, make purchases, and even buy and sell
stock without ever entering a bank building.
Today, the international Citibank has 1.1 million online customers worldwide,
and Bank of America has 2 million. However, more than half of these customers
are infrequent users, highlighting the fact that there is still immense
opportunity for growth in the area of online banking.
Benefits of online banking
E-banking offers considerable savings not only for customers, but also for
the bank itself. It is efficient and cost effective, and can save everyone
involved time and money. Banks can benefit from offering online services in a
number of ways.
- Online banking saves the bank money. A US bank calculated
that a transaction with a teller costs the bank $6 and the cost of an ATM
transaction is $1. An online transaction costs just 10 cents.
- The Internet allows banks to promote their products,
channels, and advice – in other words, their "core capabilities."
- Online banking builds on the existing brand and the
relationship that the bank has already developed with the customer.
Consequently, e-banking should be treated as part of a multichannel strategy,
not as a separate entity. It should offer customers the same services that
they would receive in person in the branch.
- The immediate nature of the Internet has been capitalized
on in the area of trading stocks online. One successful starter in this area
has been www.egg.co.uk.
Banks should see their online
presence as part of overall customer service
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Customers currently tend to use online banks in a
limited way. Even though many customers do not use the Internet for banking,
they may browse a bank's web site for information on services offered, such as
loans and interest rates. Banks should see this as part of overall customer
service and attempt to capitalize on the beneficial relationship. Offering
online service cuts out much of the face-to-face customer contact time and
reduces bank overheads in terms of counter and call center staff.
To fully encourage customers to use online banking, banks should offer bill
paying facilities and other services that are already available at a customer's
local branch. Nordea, Europe's largest e-bank with a customer base of 2.2
million spread over the entire Scandinavian region, has developed a system that
lets the customer enter a PIN number on their cell phone to get instantly
connected to the bank, where they can retrieve information on its various
services. It also offers customers a secure direct debit service allowing them
to shop at almost one thousand outlets on the bank's link to the Solo online
mall.
Implications for the future
So what does the future hold for e-banking? Will we see the demise of the
paper check and a move toward an electronic purse? In Finland, paper checks are
a thing of the past and some of Nordea's branches don't have any cash at all.
Trust and security will be the key issues for future developments in the
sector. Traditional banks have built up a record of trust through their history
of being perceived as safe houses for peoples' finances.
This gives traditional banks an advantage over Internet-only operations,
because customers prefer the security of bricks and clicks to clicks alone.
Therefore banks have an opportunity to develop and build on their current
trusted status.
Barclays has introduced the
Endorse smart card, a digital signature service
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Certification authorities, such as VeriSign and Visa,
help to maintain this trusted status by managing the circulation of digital
certificates providing authentication and security services. Barclays has
introduced the Endorse smart card, a digital signature service. The smart card
creates the customer's digital signature, which the system remembers, thus
ensuring the confidentiality and security of the customer. This service enables
customers to feel secure while doing business on the Internet.
Mobile commerce is another key area being eagerly watched as a future
niche-market service liable to grow.
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