Role of Modern Technology in Banking Industry

7/30/2019 Role of Modern Technology in Banking Industry

1/24


2/24

Role of TechnologyInModern banking


3/24

Introduction

The term banking technology refers to the useof sophisticated information and communication

technologies together with computer science toenable banks to offer better services to its customers

in a secure, reliable, and affordable manner,

and sustain competitive advantage over otherbanks


4/24

Current Banking Industry

Credit Institution (31)

Public Sector Banks (26)

Regional Rural banks (82)

Foreign Banks (40)Private Sector Banks (20)

Urban Cooperative Banks (51)

Scheduled Commercial Banks (SCBs)(168)

Cooperative Banks(82)Rural cooperative credit institution (31)

Note: The figures in brackets represent number of respective banks as on 31st

March 2012


5/24

The industry in recent times has recognized theimportance of private and foreign players in acompetitive scenario and has moved towards greaterliberalization

Indian banks have mobilized around 80%In today's scenario, Current and saving accounts(CASA)

are the bank's lifeline for profitable growth,Credit growth of the Scheduled Commercial Banks (SCBs)

slowed down to 18.10%1 on FY2012, which was22.90%1 in FY2011

Growth of Banking Industry


6/24

Banking

Technology

Information

Technology

Finance & Risk

Management

Communication Technology

Computer services

Marketing

Science


7/24

Information TechnologyNet banking

Mobile banking

Online payment of excise and service taxBill payment

Shopping

Ticket booking

Anywhere banking

Bill payment


8/24

Finance & Risk and management

Risk management is a business activity that helps anorganization limit (or prevent) risks of loss that may originatein its operations.

Risk management processes include policies, guidelines,mechanisms and staff that a financial institution's topmanagement puts into place to avoid losses

A financial institution manages operational risk, the risk of

losses due to human error or technology malfunction,through internal controls and guidelines such as humanresources policies.


9/24

Communication TechnologyTodays business environment is very dynamic and

undergoes rapid changes as a result of technologicalinnovation, increased awareness and demands from

customers.Electronic Home and Office Banking

Telephone Banking

Electronic Funds TransferAutomated Delivery Channels: These include interactive

television and the Internet.

Railways ticket booking through SMS


10/24

Computer Services

It is globally belief that the computers are able to provideuseful information

It helps enhance and improve its services and systemse-Trading

Software Development

Web based solution

Improvement in efficiency

In 2007-85.6%

In 2010-97.8%


11/24

Marketing ScienceA long-standing challenge in middle-market commercial

banking is making the best use of relationship managers(RMs).

Directly interacting with customers, these fieldrepresentatives play the most visible role in generatingbalances and revenues.

effective marketing can have a large impact onconsumers who are choosing new services.


12/24

Levels of use of technology in an Banking

Institutions.Transactional Non-transactional

Bill payments and wire transfers to thirdparties

Analyzing recent transactions

Fund transfer between customer'stransactional and savings account

Downloading bank statements

Sale and purchase of investments Viewing paid cheques

Applications and transactions for loans andenrollment repayments

Financial Institution Administration

Portfolio Management of multiple users atdifferent authority levels

Transaction approval process


13/24

Online BankingOnline Banking-It empowers customers to conduct financial

banking transactions on a secure websitewhich can be operated by a retail, virtualbank, credit union or building society.

The most unique feature of online bankingis:Personal financial management support

-Importing data to personal accountssoftware. Supporting account aggregation

which allows the customers to manage all oftheir accounts in one place irrespective oftheir location.


14/24

Mobile Banking

It is used for performing through mobile device suchas a mobile phone or a Personal Digital Assistant(PDA), banking activities such as:Balance checks,Account details,Portfolio managementAccount transactions,Payments and investments,Credit applications and other transactions.Mobile banking became popular with the

introduction of first primitive smart

phones supported with WirelessApplication

Protocol (WAP).

d k


15/24

Video Banking

It is used for conducting banking transactions or consultations

through a remote video connection. It can be performed overpurpose built banking transaction machines similar to AutomatedTeller Machines (ATM) or through bank branches enabled withvideo conferencing.

A. Benefits of video banking are:

In-branchLocation Convenience i. Video banking improves following banking

activities:Customer authentication,

Cash and check deposits,Cash and coin withdrawals,Account transfers and bill payments,Processing new accounts and loans,

Bank consultations and inquiries.


16/24

Telephone Banking

It is a bank service provided by financial institutions allowing

its customers to conduct banking transactions over thetelephone.

A. Telephone banking make use of: Automated phone answering system,

Phone keypad response resources, Voice recognition capability. Telephone banking offers many self-services as well as traditional bank features such as: Account balance information List of latest transactions, Electronic bill payments,

Funds transfer between customer accounts, Loan and account applications, Purchase and redemption of investments, Chequebook orders, Debit or credit card replacements., Requests such as change of address.


17/24

TM An automated or automatic teller machine (ATM) is a computerizedtelecommunications device that enables the clients of a financial institution toperform financial transactions without the need for a cashier, human clerk or bankteller.

Alternative uses:- Printing bank statements Updating passbooks total number of ATMs was 1,04,500. Public sector banks and the State Bank group

with about 61,500 ATMs accounted for 59 per cent of the ATMs. The private sectorand foreign banks put together have about 41,800 ATMs accounting for 40 per cent ofthe ATMs and the balance 1 per cent represents about 1,150 ATMs that have beendeployed by co-operative banks/RRBs.

Nearly 200 million transactions are processed every month in NFS, of which 75 per

cent are cash withdrawal transactions with an average ticket size of Rs 3,300. Thebalance 25 per cent transactions are nonfinancial transactions.
http://en.wikipedia.org/wiki/Financial_transactionhttp://en.wikipedia.org/wiki/Customerhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Bank_tellerhttp://en.wikipedia.org/wiki/Bank_tellerhttp://en.wikipedia.org/wiki/Financial_transactionhttp://en.wikipedia.org/wiki/Bank_tellerhttp://en.wikipedia.org/wiki/Bank_tellerhttp://en.wikipedia.org/wiki/Bank_statementhttp://en.wikipedia.org/wiki/Passbookhttp://en.wikipedia.org/wiki/Passbookhttp://en.wikipedia.org/wiki/Bank_statementhttp://en.wikipedia.org/wiki/Bank_tellerhttp://en.wikipedia.org/wiki/Bank_tellerhttp://en.wikipedia.org/wiki/Financial_transactionhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Customer


18/24

ECS The Electronic Clearance Service (ECS) scheme provides an alternative

method of effecting bulk payment transactions like periodic payments ofinterest/ salary/ pension/ commission/ dividend/ refund byBanks/Companies /Corporations /Government Departments.

The transactions under this scheme move from a single User source (i.e.Banks/Companies /Corporations /Government Departments) to a largenumber of Destination Account Holders (Customers/Investors).

The Scheme is in operation at 15 centers where Reserve Bank of Indiamanages Clearing Houses, 21 centers where SBI is managing ECS on behalfof RBI and 29 other centers where PNB and other banks are managing ECSon behalf of RBI.


19/24

Inter Bank Transfer Inter Bank Transfer enables electronic transfer offunds from the account of the

remitter in one Bank to the account of the

beneficiary maintained with any other Bank branch. There are two systems of Inter Bank Transfer - RTGS

and NEFT.

Both these systems are maintained by Reserve Bank

of India.


20/24

RTGS(Real Time Gross

Settlement) This is a system where the processing of funds transfer

instructions takes place at the time they are received

(real time). Also the settlement of funds transfer instructions occurs

individually on an instruction by instruction basis (grosssettlement).

RTGS is the fastest possible interbank money transfer

facility available through secure banking channels inIndia.


21/24

NEFT(National Electronic Funds

Transfer) This system of fund transfer operates on a Deferred

Net Settlement basis.

Fund transfer transactions are settled in batches. Presently, NEFT operates in hourly batches from 8

am to 7 pm on week days and 8 am to 1 pm onSaturdays.


22/24

Innovation in the Banking Industry

These ATMs use the finger printof the card holder or eye retinascan as a PIN for verification

purpose

Banks are more focused to putthese ATMs in rural areas becausebiometrics makes it possible for the

low literacy population to us banks

Bioetric ATMsM-pesa is a mobile-phone based

money transfer and microfinancing service, which allowsusers with a national ID to use

their money easily with a mobile

Vodafone is expected to launchM-pesa in India, in associationwith ICICI & HDFC bank

M- pesa


23/24

Plastic money, cash cards,

credit/debit cards and polymernotes will boom as thee-commerce space boom inIndia and people get used tothe idea of carrying less cash.

Many cards have a micro chipembedded in them whichmakes it a transit card also

Plastic Money This technology will have a

deep impact on the lives ofprofessionals who believe inthe life-on-the-goapproach

A user can have access tohis/her bank accounts at anominal cost and at a fastspeed from anywhere in theworld

Virtual banking


24/24

CONCLUSIONIndian Banking sector holds 6th rank in the GDP.

Though, it faced many challenges and have some

drawbacks. To overcome from this challenges this sector is

constantly upgrading itself with well maintainedand updated technology.

Required to adopt smoothly the advancedtechnology and other benchmarked systems inthe Global Banking sector.

Role of Modern Technology in Banking Industry

Documents

Transcript of Role of Modern Technology in Banking Industry