Web Mindset Begins To Seep Into Indian Banks (cont.)
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Oracle's financial services industry solutions are used by 70 banks around the world, such as Asahi Bank, Bangkok Bank, Commonwealth Bank of Australia, Wells Fargo Bank, and the Royal Bank of Canada. Oracle's suite of products includes General Ledger , Profit Analyser, Marketing Manager, and other modules for human resources, payroll and data warehousing.
"Within a year, all of Oracle's financial services solutions will be Web-enabled," says Nazif Mohammed, practice manager for the financial services industry at Oracle South Asia.
Other companies like ACI offer electronics funds transfer solutions for ATMs, point of sales installations, and Internet banking. ACI's Base24 offers SSL (Secure Socket Layer) capabilities for e-commerce. Base24 is deployed in India by organizations like HDFC Bank and UTI bank.
U.S.-based Cincom offers document management systems for financial service industries. Cisco's Web Connect products are used by Goldman Sachs, Charles Schwab, Deutsche Bank, and the Industrial Bank of Japan. Bangalore-based InfoSys has developed banking IT solutions like Bancs2000 and BankAway.
In Bangalore, for instance, CitiBank has rolled out a PC banking test with about 50-60 transactions per day. Customers in cities like Bangalore, Pune and Hyderabad have a high awareness of Internet shopping and online banking, according to Ashoke Dutt, CEO of CitiBank India.
Another promising channel--especially in a country with relatively poor telecommunications infrastructure--is smart cards based on open standards and Java.
In addition to exploring new channels, Indian banks will have to explore new alliances--with one another, especially in the area of payment systems and devices. Partnerships need to be formed to handle ATMs, POS terminals, and national payment processing systems, according to Samir Govil, director of business development for Visa South Asia.
Indian banks like ICICI Bank, IndusInd Bank and Global Trust Bank have already plunged into harnessing Web technologies for improving their suite of offerings.
"The Internet is the only cost effective medium to reach a globally dispersed clientele and also enable remote financial transactions," says A.G. Prabhu, senior executive vice-president of IT at ICICI Banking Corporation. The bank's Web site www.icicibank.com was launched in February 1996; it drew 25 e-mail messages a day, and also received a favorable citation from the Financial Times newspaper in London in November 1997.
"The Internet allows even a small player like us to become globally competitive," said Prabhu. Thanks to their Web site, the bank was able to increase the percentage of NRI deposits from 4% to 10% of total deposits.
In the next phase of Internet banking, ICICI Bank deployed the BankAway solution of InfoSys. Basic account inquiry services were formally launched via the Web in January 1998. "We expected only about 10 percent of the traffic to come from India, and the rest from NRIs," said Prabhu. "To our surprise, we found 60 percent of the traffic to be domestic. Therefore this service seems to be desirable to local audiences as well."
The other surprise was the number of countries from where new customers came. "We not only received inquiries from the usual countries like the U.S. and Britain, but also Mozambique, Brunei, New Guinea, Vietnam and Kazakhstan. That is the miracle of the Internet," said Prabhu.
Though there was some controversy in the U.S. over exporting strong 128-bit technology, the U.S. approved its use by financial services organizations in September 1997. ICICI Bank applied for and received the license to use this technology, as well as a VeriSign digital certificate after approval from RBI and Dun&Bradstreet.
In the next phase of Internet banking, ICICI Bank hopes to introduce utility bill payments, fund transfer between a customer's own accounts, and balance queries in real time (instead of from the previous day).
ICICI Bank has found that customers still need some technical support because of different browsers and proxy servers, especially due to the relative complexity of using strong 128-bit encryption. "The other challenge, of course, is customer retention. After all, on the Internet, 'goodbye' is just one click away," says Prabhu.
IT solutions providers for banks themselves use Web technologies heavily. For instance, InfoSys has a dedicated network which connects its programmers and project managers with 120 customers. The network links 5 cities in India via leased 64 Kbps links and ISDN backup. International links also connect InfoSys with 5 cities in the U.S. and Canada. All applications on this network are Web-enabled, and handle training (in areas like Unix and offshore project management), library resource tracking, and recruitment.
The top management of Indian banks needs not only to view IT as an integral part of strategy, but to back up their enlightenment with commitment in the form of IT investments and Web strategies.
In comparison, the annual investment by U.S. financial institutions in Web technologies is estimated at $1.7 billion today, and will top $3.7 billion in year 2000. "IP (Internet Protocol) is winning in the LAN and the WAN," according to Todd Abbott, managing director of Cisco for South Asia.
"In the U.S., a branch transaction typically costs over a dollar--but via the Net, the transaction cost drops to one cent," said Abbott. "No wonder established traditional players like Merrill Lynch are terrified of the online power of new financial services entrants like E*Trade which did not exist a few years ago."
And all this is just the beginning. Indian banks are now starting to seriously address the challenges of building datacom infrastructure, retraining personnel in IT skills, and developing a cyber mindset. More and more Indian banks are likely to wake up to the winds of competitive pressures and develop comprehensive Web strategies to reduce overheads, cycle time, and customer dissatisfaction.
As Michael Porter remarked in a recent issue of Banking Strategies: "The banking industry is overwhelmed by imitation. One bank goes onto the Internet, and all banks go into Internet banking."