What steps can banks take to retain their major urban customers?
Banks can provide Internet banking facilities by sharing data centres with other banks and get into consortium arrangements with other banks.1 Net banking is the process of conducting banking transactions over the internet by viewing bank statements and the status of the bank account online. Computer systems perform this process by connecting them to the banking site. Through Internet banking, a customer can track his transaction history and monitor his or her account at any time meaning that one can get to know about any fraudulent activity or threat before it exposes account into very severe damage.2
Net banking has several benefits that include providing an opportunity for automatic payment of bills, saving money on envelopes, checks, and postage.3 It is also convenient to the customer because it is available all the time 24 hours, seven days and therefore a bank user can perform all tasks from anywhere at any time even late at night when banking institutions are not in operation or during holidays provided the user has an internet connection. Banks have also been able to manage several customer accounts through the Net banking system since it is fast and efficient, and funds can be transferred from one account to another within a very short time.4 Business considerations are divided into three broad areas in Internet banking by reducing the number of mortar branches and brick numbers.
Credit institutions have been able to expand their markets through Net banking by cooperating with service providers like Telecom, and IPS thereby achieving the benefit of cross-selling effects. The concept of financial supermarkets rose when banks offered personalized services to their new and existing customers. Internet banks have integrated with other financial institutions horizontally to include non-financial services like online shopping such as electronic commerce and increased customer retention due to relocation needs.
Though internet banking is beneficial to both the bank and the customers, there are several risks associated with information technology that poses a very big challenge to its use. These risks have great challenges for the bank and financial operations.5 As a result, jurisdiction varies from one country to another.
Reputational risk is related to changes in customer confidence and takes a very important trust from the side of the customer in his or her internet bank to perform any banking transactions. This trust is lost if the Internet bank does not provide a secure banking facility.6 Other risks include systemic risk and strategic risks that occur as a result of the management taking decisions and cannot keep up the internet technology and therefore end up taking the wrong steps in planning and implementing the banking strategy, for example, market cannibalization. The main challenge with the internet banking is on the security of transactions whereby the account information might be hacked by unauthorized people over the internet, a customer cannot use internet banking in case the bank server is down.
Why you do think that the overall cost of servicing the customer has gone up despite the increase in ATM transaction volume?
Ever since the introduction of ATM’s in 1971, they have been used as the best alternative for reducing cost as opposed to the traditional branch banking office.7 While ATM scale economies appear to be substantial, they may not increase bank profits or reduce costs because in the past the bank customers were using the ATM’s mainly to do non-cash transactions like printing of bank statements and checking balances. Tellers handled most of the bank operations like cash withdrawal and deposits because banks considered offering both ATM services and ATM cards as a bundle to their depositors.8 Though banks imposed peruse surcharge for each transaction, customers were able to access their ATM’s.
The financial institutions should have considered providing educational programs on their customers in an effort to convince them that operating ATMs were safe and more convenient as branch managers.9 The main challenge with the ATM markets is that banks may impose surcharges in order to maximize profits in their ATM business. Banks operations are done on a shared network, and customers can use their ATM cards at other banks ATMs through foreign transactions. Each foreign transaction charges two fees: The interchange fee paid by the cardholder’s bank to the ATM owner and a switch fee paid by the cardholder’s bank to the network.
Although the transaction cost of an ATM costs half as much as tellers transaction cost at the branch office, ATM’s are being used more than the teller and, therefore, the saving cost per ATM transaction expected by banks has been reduced by the unexpected increase in use. Banks have now been obtaining income from ATM investment through fees charged when one bank’s ATM is used by a customer of another bank.10 Though a foreign ATM is charged a lower fee, it generates most of the income associated with the use of an ATM.
Though many customers have adopted the Net banking technology, there are many problems that have come along with this technology. First, is the ATM fraud which occurs when one obtains an ATM card and pin number of another person; he or she can easily access cash balance from the account. The ATM card can also be swallowed by the ATM machine or give the incorrect amount.11 The error of discrepancies might occur between the banking information and the ATM cards when money might be posted to the wrong account, and the transaction does not go through. Net banking technology has transformed many sectors by helping bring banking transactions closer to the people. Before banking reforms were implemented in developing countries, it was frustrating to do transactions with the banking sector.12 Holders of account face many challenges, even during simple banking transactions business. Many things have, therefore, changed with the introduction of the ATM machine at most service points across the country.
Can the rural focus be a viable strategy in reducing the cost of deposits?
Central cash and the compensation paid to depositors entail the deposit cost and any reserve liquidity requirement that is paid out to the sales team that booked the branch or the deposit. It also includes any additional non-tangible and tangible incentives that are paid or offered to the depositor or the marketing team. By focusing on rural areas bank may not reduce deposit cost because most of the financial institutions don’t charge any cost with cash depositing. Rural finance is about the provision of financial services such as credit money transfer, insurance, and secure saving.
In rural areas, financial services play a significant role of rural development through money transfer services that meant it possible for people to work in cities and leave in rural areas and they could send their money safely at reasonable costs.13 With the emergence of more financial institutions, banks have been facing very significant competition from the private banking sector in servicing most of its customers located in the urban areas. These Customers have been demanding multicity cheques, cash management, and internet banking. Multicity cheque facility is issued by the bank to the reputable customer whose account has a good track record and can access his account at any bank premises in the country. So most industrial customers demanded these cheques because if issued, they acted as security instruments in times of borrowing from the bank.
For faster clearance of cheques, the bank entered into an arrangement with major banks in the four metros that were drawn from those major cities.14 This was a huge cost to the bank branches located in the urban areas, and they preferred receiving most of the deposits from the rural areas because customers in the rural areas did not demand such facilities. Though banks are focusing on rural areas for most of its deposits, many barriers still impose challenges on rural entrepreneurs and households to access financial services.15 Consequently, banks and customers offering services in rural areas face a wide number of challenges that include high transaction cost in providing financial services in rural areas which are associated with a cost per unit to clients and the institution since communication and transport infrastructure is less developed in rural areas and the place is very remote. Therefore, bank customers have to travel for long distances to deposit cash since they travel on foot which can cost them a full working day.
In developing countries, illiteracy levels are very high, and it’s challenging for them to analyze cash deposits and understand the conditions for the contract.16 Some banks fail to communicate interest rates to their clients in a transparent manner. Financial institutions that want to establish in rural areas face challenges in hiring and keeping competitive staff due to lack of experienced staff which in turn leads poor institutional capacity among rural financial institutions.
How cloud computing model can be developed to decrease the customer response time and decrease the customer servicing cost
Cloud computing used in business application means that bank customers are connected to applications that run on a set of pooled servers rather than using one dedicated server. It is very delicate and at the same time, a very important change in the banking industry. For example, the client-server computing that has dominated information technology for the last 15 years and each application was assigned to a particular piece of hardware in the datacenter. In early days these resources were shared among different users and were physically located away from the bank’s premises. Through cloud computing, businesses and financial institutions are able to scale the consumption that suite their desired needs. This means that information technology (IT) equipment can be expanded without any variations to capital investment.
By maximizing on cloud computing resources, businesses can overcome the challenges of related to information technology and most important for users who have insufficient IT personnel.Other benefits include: Collaboration and customization. banks can also access high computing and storing devices through cloud computing and this services help in facilitating timework initiative and bolster an agency continuity of operation. Due to its functional flexibility, a business enterprise can perform multiple services, adapt and respond quickly to any changes in the business environment which leads to benefit of cost reduction, faster growth in revenues, and efficient management of risks and reputational threats. The banking institutions are accessible world wide by customers who are connected to the internet and, therefore, reducing the time and cost involved in marketing. Banking internal operations can easily improve to be become very efficient and incorporate marketing channels externally.
Users would, therefore, access their connection over the public Internet in order to run business management applications or email. Therefore, cloud computing was the Internet that is mostly represented with the physical cloud on networking maps and software design. Through cloud computing, a business venture is able to save money without having to sacrifice quality by developing applications such as customer service that allows the user to house cumbersome and expensive equipment that are used for management of data in customer service. If well developed the user performs less task and satisfies the customer because they just log into any computer and do their work at any location.
Through cloud computing banks and other business have been able to offer large management application and remote hosting such as customer relationship management, sales force automation, and knowledge management. In the entire life of business, some changes to business standardization practices and protocols, employee turnover, and shift in management occur. Company’s most important information is misplaced or lost during transition and it is sometimes hard to retrieve but with cloud computing platforms, workflows and information it is very secure in the cloud and easily accessible whenever required without having employ information technology (IT) experts to dig around with the machines to get back the data.
Many businesses, therefore, are embracing cloud computing technology because it’s efficient due to its low IT and hardware costs and outsource their hardware requirements to providers who are already running large data centers and know how to employ them for maximum performance. Example of such data centers, Amazon, Microsoft, and Rack space.17 Instead of filling their own datacenters with servers that must be managed, cooled, and powered. With private clouds, virtual applications run on several resources that make them much more effective because they require fewer servers to purchase and maintain.18
Cloud computing is flexible in sense that businesses pay for what they need because services are billed per use while infrastructure and platform services are billed based on the capacity being used.19 In early days companies had to estimate the number of software licenses they required over the coming periods so if they purchased more they stuck with those licenses. Therefore, through duplication of data, cloud computing can allow companies to have several copies of information on various servers meaning the flow of work cannot be affected by technical hitches. It also provides an opportunity for business to deploy special tools and software that would have been costly in the traditional setting.20
Cloud computing can also be developed through innovation whereby businesses like banks and other training institutions get a path through which can build new products and services that can be accessed very easily by the consumer. Other ways in which cloud computing can be developed include: increase in technical capability and teleworking. Information technology is among the biggest expenses for business that base reliance on data storage and information management. It is important to outsource these expenses and let the company run efficiently in the cloud.
Gatev, Evan, Til, Schuermann, and Philip, Strahan. Managing Bank Liquidity Risk: How Deposit-Loan Synergies Vary with Market Conditions. Review of Financial Studies 22.3 (2009): 995-1020.
Yang, Haijing. Research on the Legal Liability for Bankcard Deposit Loss. Asian Social Science 8.2 (2012): 276-282.
Keenan, Charles. Putting the Cinch on ATM Costs. Community Banker 15.3 (2006): 125-150.
Maura, Keller. Making Your ATM Work for You. National Petroleum News 101.7 (2009): 115-120.
Nasri, Wadie. Factors Influencing the Adoption of Internet Banking in Tunisia. International Journal of Business & Management 68 (2011): 143-160.
Noor, Hassan et al. Acceptance towards the Use of Internet Banking Services of Cooperative Bank. International Journal of Academic Research in Business & Social Sciences 2.3 (2012): 135-147.
Aljabre, Abdul-Aziz. Cloud Computing for Increased Business Value. International Journal of Business & Social Science 3.1 (2012): 234-239.
Parker, Joshua. Lost In The Cloud: Protecting End-User Privacy In Federal Cloud Computing Contracts. Public Contract Law Journal 41.2 (2012): 385-409.
- Noor, Hassan et al. Acceptance towards the Use of Internet Banking Services of Cooperative Bank. International Journal of Academic Research in Business & Social Sciences 2.3 (2012): p.137.
- Wadie, Nasri. Factors Influencing the Adoption of Internet Banking in Tunisia. International Journal of Business & Management 68 (2011): p.146.
- Ibid. p.137.
- Wadie, Nasri. Factors Influencing the Adoption of Internet Banking in Tunisia. International Journal of Business & Management 68 (2011): p.143.
- Ibid. p. 147.
- Noor, Hassan et al. Acceptance towards the Use of Internet Banking Services of Cooperative Bank. International Journal of Academic Research in Business & Social Sciences 2.3 (2012): p. 138.
- Maura, Keller. Making Your ATM Work for You. National Petroleum News 101.7 (2009): p. 119.
- Ibid. p. 120.
- Charles, Keenan. Putting the Cinch on ATM Costs. Community Banker 15.3 (2006): p. 132.
- Maura, Keller. Making Your ATM Work for You. National Petroleum News 101.7 (2009): p. 118.
- Keenan, Charles. Putting the Cinch on ATM Costs. Community Banker 15.3 (2006): p. 135.
- Ibid. p. 145.
- Gatev, Evan, Til, Schuermann, and Philip, Strahan. Managing Bank Liquidity Risk: How Deposit-Loan Synergies Vary with Market Conditions. Review of Financial Studies 22.3 (2009): p.998.
- Gatev, Evan, Til, Schuermann, and Philip, Strahan. Managing Bank Liquidity Risk: How Deposit-Loan Synergies Vary with Market Conditions. Review of Financial Studies 22.3 (2009): p. 1002.
- Yang, Haijing. Research on Legal Liability for Bankcard Deposit Loss. Asian Social Science 8.2 (2012): p.278.
- Ibid. p. 378.
- Abdul-Aziz, Aljabre. Cloud Computing for Increased Business Value. International Journal of Business & Social Science 3.1 (2012): p. 235
- Joshua, Parker,. Lost In The Cloud: Protecting End-User Privacy In Federal Cloud Computing Contracts. Public Contract Law Journal 41.2 (2012): p. 389.
- Ibid. p. 236.
- Joshua, Parker. Lost In The Cloud: Protecting End-User Privacy In Federal Cloud Computing Contracts. Public Contract Law Journal 41.2 (2012): p. 395.