Banking On Technology

Remember the days when you had to run to your bank, stand in long queues, fill up tedious forms just to make a simple request for a cheque book? Remember the time you needed to update your passbook urgently, but you would simply be asked to come the next day? Remember the long time it used to take to withdraw cash from a bank? It still happens in some banks, but it will soon become history. Welcome to new-age banking, where machines are becoming the bulwark of a drive to improvise on processes.

Over the past five years or so, technology has swiftly and comprehensively changed the face of banking in the country. For instance, unlike in the past when you had to rush to the bank with a written application to make a stop payment, now it can be done through a mere phone call or an online instruction. You can now also order a cheque book, demand draft or transfer funds or even ask for cash to be delivered at your doorstep. Thanks to technology, the average Indian now spends less time at the bank. Or not at all, if he goes to the nearest Automated Teller Machine (ATM). And this is just one aspect of new-age banking. There's online banking, there's phone banking, there's mobile banking and the list can only grow.

Today, courtesy the technological changes, there's the convenience of withdrawing cash from anywhere in the country, 24 hours a day. Due to the advent of internet and mobile telephony, many banking activities can be done without moving out from home. There's the convenience of checking account balances or cheque status, downloading/requesting account statements, issuing stop payment instructions, ordering personalised cheque books, transferring funds and also issuing (electronic) cheques to third parties.

Technology is also helping banks move closer to the customer rather than the customer going to the branch while simultaneously enhancing comfort and convenience to the customer. Adds a banker, "Today, with the help of card-swiping machines installed by banks, customers can even buy vegetables using their credit card." And that's apart from a host of merchandise they can purchase by using the card and that too, anywhere across the globe or even through the internet. For those credit-averse individuals, banks now even have international debit cards to offer, in which case, as and when you transact, the money simultaneously gets debited from your account.

Further, technology is enabling banks to move into non-banking areas like securities trading and demat services. Besides, technology has also allowed them to act as intermediaries viz, online distribution of mutual fund schemes, insurance advisory services, etc. While their bank account access is just a phone-call or a click away, customers need not wait in queue to pay their utility (phone or electricity) bills either; online bill payments are becoming the norm.

Adding to the customer's convenience, some banks have even deployed mobile-ATMs. And in a departure from the past when getting a loan would take days and weeks, banks are moving towards sanctioning loans within a day's time. In fact, the banking sector has seen a host of new loan products and services with a myriad features being launched to woo customers. In sum, banks are moving closer to becoming one-stop shops for patrons.

If you're wondering why banks are spending crores of rupees to create such an exhaustive and mammoth infrastructure to service their customers and that too, with most of these services being offered for free, read on. Banks have it to their advantage to invest in technology. Says Deepak Chandnani, MD, NCR Corporation India Pvt Ltd, "As per estimates, an ATM transaction costs around Rs 70-80 whereas it costs Rs 100 when carried out through a teller." That's why, despite the high capital cost of Rs 7-12 lakh per ATM (and operational cost of Rs 50,000-Rs 1,00,000 annually), banks are rushing to expand their ATM network (10,000-odd as on June 2003) in the country.

Not only ATMs but most other alternative channels too are more economical for the bank with the cheapest of all being online banking. As all of these enable banks to save on costs like real estate, equipment, leased lines and salaries, among others associated with the setting up of a branch.

Notably, while the private and foreign banks have a lead, older generation banks are now moving to the second phase of computerisation. They are now networking their major branches after which they would move on to management information systems to mine data of existing customers and offer them more value-added services, customised to an individual's requirements. For instance, a person with a clean credit history could get a special discount offer on interest charges or a waiver on processing fees. Loyal customers could also get discounts on new products and services.

Some banks have already begun using consolidated client information, which is perhaps the most crucial stage. Explains a banker, "At one point, everybody will be having the same kind of technology infrastructure. The differentiating factor would be how the bank uses the technology to service the client in terms of providing customised solutions. And of course, the human (employee) interface will count a lot. It will be something similar to the F1 race, where all the participating cars are of a similar kind. But, due to the human element, that is how you drive the car, you have mostly seen Michael Schumacher win the race."

While life's certainly becoming much easier for customers, there is a lot on hand for banks, in terms of educating (awareness) and enabling acceptance by the customer, especially the older generation's hesitancy towards adapting to newer technologies.

We could in the future see the advent of smart cards. Very popular in Europe and catching up in the US, smart cards could allow banks to combine the debit and credit cards by transferring personal information of an individual on a chip embedded in it. Apart from financial information, other kinds of customer information could also be stored onto the chip and depending on the service sought, the same could be used at different places.

Technology will continue to evolve. And you could find a lot more surprises depending on how this happens, and how regulations take shape, and finally how tech-security is handled. But new technology doesn't come only with all the advantages; it comes with a few drawbacks as well. You will have to keep abreast of the rapidly changing systems as and when banks keep upgrading theirs. And more disheartening, you may long for the personal touch. But, then again, the advantages could far outweigh the drawbacks.