Electronic Banking Floorer Essay Online For Free - Free Essay Example

One of the most challenges of e-banking is to create value for business. Successful e-banking investment creates value for present and potential customers and business as well. A base of potential customers is a key to the generation of e-banking transactions. Transactions, in turn, generate business value in a number of ways by increasing revenue, decreasing costs and improving market share. In most e-banking startups that fail to create business value, the typical problems are: e-banking plan is not aligned with business strategy, poorly defined requirements inadequate business cases and ineffective management of return on investment In the struggle with economic turmoil and large cost burden, financial institutions such as bankers are focusing on improving the profitability of their customer relationships, reducing distribution costs and enabling more self-service e-banking. Therefore, an important problem confronting e-banking managers is how to control the cost of e-banking. E-bank products and services are a lot more complex than the products of a manufacturing company. The start-up costs of e-banking are expensive, especially in ICT infrastructure. Launching a trusted e-bank is very costly because it requires advertising expen se. Moreover, expenditure on e-banking technology is increasing and considered to be out of control despite of the lower costs of hardware. Typically, the reasons for higher expenditures are: Most organization does not understand the costs associated with ICT asset such as RD expenses, human resources investment. Annual operational budgets increase as a result of complex licensing, maintenance and outsourcing contracts. Failed project result in large financial losses. Using e-banking as a fully integrated part of their business strategy enables banks to increase the attractiveness of their products and services. Strategic alignment is an important driving force to achieve business value through investments in e-banking. Therefore, understanding the strategic risks associated with e-banking adoption is very important. Poor e-banking planning and investment decisions can increase a bankers strategic risk. Indeed, e-banking investment has sufficient potential to allow banks to become even more profitable in an increasingly hostile and competitive environment. Technical issues appear to be the major challenge in the successful adoption of e-banking initiatives such as scope, scale and complexity of equipment, systems, products and services. E-banking systems are complex large-scale system with requirement for high performance, reliability and availability. And even the most technologically sophisticated organization is struggling to manage them. E-banking raises bankers dependence on IT hence raises the technical complexity. Typical problems arising due to these complexities are: Managing diverse technical competence. Managing diverse technical infrastructures. Adapting to a rapid changes and new development. Managing external relationship and service providers. The Basle Committee on Banking Supervision has recognized the important role of bank supervisors and regulators in ensuring that the risks associated with the use of technological developments in e-banking are well managed. Regulations on e-banking transactions that banks must follow, place an increased management burden on banks and higher costs arising from violation or nonconformance with laws, rules and regulations. Non compliance exposes the bank to be fined, civil money penalties and payment of damages. In addition, non compliance can lead to a decreased reputation, reduced image value and limited business opportunities. Banks as well as consumers has serious concerns about the security of Internet access to client accounts, which was the biggest challenge. The growth of e-banking have also carries a new set of security risks. The challenge is to address these risks without impairing further development of e-banking. These risks have increased as a result of several factor s: The use of internet which exposes the internal systems to the world. Phishing, viruses and hacker. Increasing misuse of information. Poor awareness of security. According Symantec as plotted in Exhibit 2-2, financial sector are most likely to yield data that could be used in financially motivated attacks. This leads to understand that offering e-banking services will be exposure the banks to security risks. E-banking contributes value to bankers such as enhanced image, revenue generation, cross-selling, customer retention and cost saving. The main driving forces behind e-banking contributions are customer retention and enhanced image as ranked in Exhibit 2-3. Enhanced Image: e-banking is considered as a new marketplace to attract potential customers. E-banking can help to enhance their image of the organization as a customer focused innovative organization. Innovation builds up a reputation for the banks that customers learn to trust and comment positively to other people. An attractive banking website with a large portfolio of innovative products will enhance a banks image (Shah Mahmood and Clarke Steve, 2009). Revenue Generation : e-banking allows bankers to offer mass market and exploit extra sources of revenue from transactional commissions servicing charge, advertising and financial information subscriptions. Cross-Selling: E-banking can take advantages of cross-selling effects to offer personalized services and an additional channel to existing customers and reach new customers. Customer Satisfaction Retention: in the e-banking environment, banks can use collaborative and interactive way to offer recommendations based on past transaction profile and customize the services to meet all their needs. Thus, customer can have full access to relevant financial information; do more self-service for themselves and no need to rely on the staff at the branch office. Consequently, e-banking increases customers loyalty and satisfaction. Cost saving: An online transaction costs the bank much less than a face-to-face interaction with a banks teller (World Almanac Book of Facts, 2001). According to study by MCOM â€Å"Mobile Banking Research Paper, Nov 2009† as shown in Exhibit 2-3, the cost per bank transaction for the customer varies from $4 for full service branch transactions, to $3.75 for call center transactions, $0.17 for transaction via the Internet and $0.08 for transaction via mobile. The cost can go down further with the increased use of these facilities. E-banking is the cheapest transaction channel so banks can get cost savings, reduce their branch networks and downsize workforce. Convenience: Consumers can execute various banking transactions such as bill paying, check ordering, account managing, money transferring and shopping in any location with an internet connection, at any time, without leaving home. Accessibility: E-banking has the potential to provide customers with accessible financial services 24 hours a day, 7 days a week and 365 days a year because it does not requires a bricks and mortar infrastructure that is operated by the staff. Consumers can access various banking services electronically. Time savings: People are becoming busier and hence are seeking to carry out transactions within seconds at a time of their convenience. Reduced waiting rime, customers prefer Internet banking instead of traditional banking. Successfully leveraging e-banking to transform the banks and create value-added products and services has become a universal business competency. Leveraging e-banking drives value, reduces transaction costs and increases revenue. Increased revenue as a result of offering e-channels are often reported, because of possible increases in the number of customers, retention of existing customers and cross selling opportunities (Shah Mahmood and Clarke Steve, 2009). E-banking will enable the bank to leverage e-channels towards: Accelerating the growth of banking business; facilitating the offering of more services; increasing customer loyalty; and attracting new customers. Although the benefits of e-banking are i rreplaceable, there are some drawbacks and concerns should be aware: Restricted Customers: Some customers do not want to use e-banking services as they find it difficult to know how to use a computer. A wrong click causing monetary losses makes them afraid of using e-banking rather than traditional banking. Getting familiar with the banks website requires much time to read the instruction. Impersonal: Doing transactions on the internet can be very impersonal. In other words, you can only do business with the use of a computer. No teller receives and checks your money or corrects wrong information that you might have if you deal with real people. Trust: Reasons that many customers have not used e-banking services are that they do not trust the e-banking services through the internet. Some customers prefer trusting real staff to a machine, especially in the matters of money. IT Challenges, 2007 IT Governance Institute, www.itgi.org. IT Challenges, 2007 IT Governance Ins titute, www.itgi.org IT Challenges, 2007 IT Governance Institute, www.itgi.org