Transformation in the banking sector

24 Jun, 2022 - 00:06 0 Views
Transformation in the banking sector Internet banking is now a common mode of secure and convenient banking services

eBusiness Weekly

Dr Keen Mhlanga

Banking in old times was not the tightly monitored and tightly regulated business that it is today.
Instead, earlier banking was completely a free market operation. Any entrepreneur could enter and exit the banking business without any restriction or licenses.

The banking profession, in the strictest sense of the word, was first carried on by goldsmiths in medieval Europe. Since, it was the business of the goldsmith to deal with valuable commodities, the goldsmith would build strong vaults to protect their inventory from theft.

The residents of the town wanted to rent the goldsmiths secure vault in order to keep their money safe. The goldsmith therefore started taking deposits and this was in a way the birth of modern banking.

Over a period of time, the goldsmiths realised that the deposits are usually far in excess of the withdrawals. This meant that if 100 gold coins were deposited with the goldsmith, statistically only 10 of them would be withdrawn at any given time.

Therefore, the goldsmiths started lending out the money that they had held on deposit even though it did not belong to them!

This was the birth of the second major function of modern banking ie lending money.

Taking deposits and making loans together changed the nature of the goldsmith’s business to money lending. Over a period of time, this would further evolve and become banking.

This evolution thus affiliated the definition of a bank which is a financial institution licensed to receive deposits and make loans. Banks may also provide financial services such as wealth management, currency exchange, and safe deposit boxes.

There are several different kinds of banks including retail banks, commercial or corporate banks, and investment banks. In most countries, banks are regulated by the national government or central bank.
Over the years banking sector has continued to evolve and has been highly influenced by technology since there is now internet banking.

Banks are a very important part of the economy because they provide vital services for both consumers and businesses. As financial services providers, they give you a safe place to store your cash.

Through a variety of account types such as checking and savings accounts and certificates of deposit (CDs), you can conduct routine banking transactions like deposits, withdrawals, check writing, and bill payments.

You can also save your money and earn interest on your investment. Banks also provide credit opportunities for people and corporations. The bank lends the money you deposit at the bank short-term cash to others for long-term debt such as car loans, credit cards, mortgages, and other debt vehicles.

This process helps create liquidity in the market which creates money and keeps the supply going. Just like any other business, the goal of a bank is to earn a profit for its owners. For most banks, the owners are their shareholders.

Banks do this by charging more interest on the loans and other debt they issue to borrowers than what they pay to people who use their savings vehicles. Due to vast rise in technology, digital banking has grown at a faster pace.

Most of the countries’ banks have launched their internet banking and mobile banking websites to facilitate the customers with online availability of almost all banking products. Internet banking is now a common mode of secure and convenient banking services.
Internet banking, also known as net-banking or online banking, is an electronic payment system that enables the customer of a bank or a financial institution to make financial or non-financial transactions online via the internet.
This service gives online access to almost every banking service, traditionally available through a local branch including fund transfers, deposits, and online bill payments to the customers.

Internet banking can be accessed by any individual who has registered for online banking at the bank, having an active bank account or any financial institution.

After registering for online banking facilities, a customer need not visit the bank every time he/she wants to avail a banking service. It is not just convenient but also a secure method of banking. Net banking portals are secured by unique User/Customer IDs and passwords.

PwC’s 2017 Digital Banking Consumer Survey enlightens us about the rapidly changing behavior of the digital banking customer. The report specifically refers to the rise of a new breed of customers labeled “omni-digital” or those who only use mobile, PCs, and tablets to conduct their banking, avoiding physical channels of banking altogether.

To keep up with the changing requirements of their customers, many banks have already adopted a mobile-first approach, and others are working towards it.

However, at a time when Fintech organisations have turned the financial industry on its head by introducing digital at every level, banks must recapture the attention of their prospects in a mere span of 8 seconds if they wish to beat the competition and improve their customer satisfaction rates, as well as their bottom line.

According to research, interactive marketing strategies can help the banking sector grow its market share, while also increasing customer satisfaction levels significantly. Therefore, the first marketing strategy is to improve customer experience.

When a user uses online banking, the idea is for their experience to be as satisfactory as possible. Therefore, it’s important to focus on the disadvantages that may exist in the customer journey and how we can improve these segments.

It’s important that to make certain changes we consider there are several types of clients.
Creating an effective mobile app is also another market strategy banks can implement to support their internet banking.

Online banking invites innovation and progress. So much so, that today, it’s on almost every financial institution. Because of this, we must exceed customer expectations when using this service.

So, if the objective of a banking entity is to improve both communication and its commitment to consumers, it’s mobile app must be of quality. When it comes to banking marketing strategies, digital transformation must continue to be part of financial institutions.

Therefore, online banking must rely on innovation and new technologies to optimise the financial services offered to customers. The digital push is important for digital banking to provide better interactions in real time, and to improve the business process through the adoption of cloud solutions. In this case, the use of robotic processes, BPM, blockchain and artificial intelligence will be essential for online banking.

Internet banking, unlike usual banking hours, is not time-bound. It is available 24/7 throughout the year. Most of the services available online are not time-restricted.

Users can check their bank balance, account statements and make fund transfers anytime instantly. Internet banking is largely preferred because of the convenience that it provides while fund transfer and bill payments.

Registered users can use almost all the banking services without having to visit the bank and standing in queues.

Financial transactions such as paying bills and transferring funds between accounts can easily be performed anytime as per the convenience of the user. Acknowledgement slips are provided by the bank after transactions which have a high possibility of getting misplaced.

However, with internet banking, it becomes very easy to track the history of all the transactions initiated by the user. Transactions and fund transfers made online are organised in the “Transaction History” section along with other details such as payee’s name, bank account number, the amount paid, the date and time of payment, and remarks.

Net banking users can transfer funds between accounts instantly, especially if the two accounts are held at the same bank. Funds can be transferred via NEFT, RTGS or IMPS as per the user’s convenience. One can also make bill payments, EMI payments, loan and tax payments easily.

Moreover, the transactions, as well as the account, are secured with a password and unique User-ID. Besides fund transfer, internet banking allows the users to avail non-financial services such as balance check, account statement check, application for issuance of cheque book.

Online financial transactions must develop in tandem with the growth of electronic commerce. Offering services that match user needs is essential to maintain high customer satisfaction.

Satisfied users perceive good service quality. Therefore, banks must measure banking service quality in a way that represents customer perceptions of good service.

Dr Keen Mhlanga is the executive chairman of Finking Financial Advisory. He can be contacted on [email protected] Com or +263719516766

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