E-banking can be defined as “A process that allows a customer to perform banking transactions online without visiting the institution physically. ” It is sometimes used interchangeably with virtual banking, online banking and Internet banking. It is a result of demand of sophisticated customer who has formed an entirely new customer base. It is a means of preserving such customers and capturing a greater share of depositor asset. The type of transactions offered by an e-bank varies from site to site, depending on the policy of the bank and security level of the website.
IMPACT OF E-BANKING ON CONVENTIONAL SERVICES Every technology has it own merits and demerits. Sometimes, innovation is good sometimes its not but it needs firm argument to say what it is. Same is with e-banking it both blessing and curse (especially if you have been a victim of phishing and frauds). However, it needs analysis. 1. E-bank is easy to setup. It don’t need big place with heavy furniture. It just needs a website with considerable investment in risk management.
But since it’s not such a brain eating activity to open an account and precede it afterwards, there is a high chance that a customer may move whenever and wherever he finds better dealings and services. So customer loyalty is not guaranteed. 2. Most of the UK banks are happy with their bequest currently, there is possibility that e-banking may shift deposits elsewhere. This will give rise to regain (customer) fight and heavy investments to retain the current customers.
Probably banks many agree to take risks to refund losses. 3. Transactions through e-banking are much cheaper than branch transactions. It is very good to cut-off additional physical branch plan, have a portal instead. 4. The products will be provided by experts in their field. Traditional banks may simply be left with payment and settlement business – even this could be cast into doubt. 5. E-banking will give real tough time in near future because it is difficult for a physical bank to evolve.
Because physical branches need heavy investment in advertisement. While for you portal to get famous you need to give metadata and Google – the internet god will do the rest. 6. E-banking is a revolution as it has changed the market same way as ATM did. It has shaped the Supply chain management of the banks. There are many security issues of e-banking that should be analyzed and understood in order to provide safe can transparent processing of transaction, especially when cyber crimes are manifested.
With the evolution of dangerous viruses every day, it has become very difficult to have permanent solution of the risks. The major risks and some suggestions to avoid them are: STARTEGIC RISKS E-banking is a technology which is still in its development phase. Many new experiments are being done. Strategic risk arises due to lack of insight amongst upper management about the repercussion of e-banking. E-initiatives can be adapted gradually but care should be taken that these may not be expensive enough to recoup their cost.
Furthermore, they are often positioned as loss leaders (to capture market share), but may not attract the types of customers that banks want or expect and may have unexpected implications on existing business lines. Banks should respond to these risks by having a clear strategy driven from the top and should ensure that this strategy takes account of the effects of e-banking, wherever relevant. Such a strategy should be clearly disseminated across the business, and supported by a clear business plan with an effective means of monitoring performance against it.
E-banking strategy considers factors such as customer demand, competition, expertise, implementation expense, maintenance costs, and capital support. HSBC has also taken initiatives to see that there may not be any strategic risks involved. The upper management in HSBC is highly professional and even the new comers in banks are required to have strict professional backgrounds in order to be a part of bank. Job descriptions at HSBC describe the thorough knowledge of its management in the field (HSBC, 2007).
HSBC also share its strategic risk management with highly responsible firms. Recently HSBC has extended their strategic relationships with Bottomline technologies. HSBC has decided to integrate Bottomline’s invoice automation services into a new HSBC-branded solution to streamline the accounts payable functions of its corporate customers (Bottomline Technologies, 2006). BUSINESS RISKS Business risks are very considerable when you have tough competition in the market. With the initiation of e-banking, customers has gained a new access in their choice lists.
Customer loyalty is at the stake of bank performances. Typical customer characteristic today is “I want it all and I want it now” and has resulted in high rejection rates and high price competition. Furthermore as it is difficult to predict customer volumes and the stickiness of e-deposits (things which could lead either to rapid flows in or out of the bank) it could be very difficult to manage liquidity. Though these are old risks with which banks and upper management have considerable experience but they need to be observant of old risks in new guises.
In particular risk models and even processes designed for traditional banking may not be appropriate. HSBC has paid due attention to the risk which is practiced to avoid from a long time. For this, HSBC has arranged many seminar and training programme for their employees. Recently HSBC has provided its employees with the PIC training programme for Credit risk training, in order to have a better understanding of demands of competitive market on International level today (Contact Centre World, 2006)