The Hindu Business Line : Bank automation: Towards paperless transactions

This electronic representation of money has made it easier to progressively increase the use of information technology for banking operations. It is also possible to make banking more global due to electronic automation of work processes.

Technological innovation has also speeded up bank transactions, in the process, reducing human drudgery and possibilities of human error. Banking operations have become more customer-friendly and flexible.

Approach to the bank branch concerned has become multi-channelled and more and more customers are finding little need to visit the bank.

As a matter of fact, the very concept of a bank branch is becoming irrelevant as far as catering to a customer’s needs is concerned.

On the flip side, however, these improvements have been associated with increased threat of misuse, forgery and fraud.

Introduction of automation has also liberated the banks from a lot of paper-work. While banks in India have not become fully paperless, there is a steady movement in that direction. Banks have realised that persuading customers to carry out transactions using electronically available channels without physically visiting the bank is less expensive for them. Hence, exploiting new technologies should also improve the profitability of the banks.

Automation

Automation came to banks, beginning with ALPMs (Automatic Ledger Posting Machines). The repetitive and cumbersome task of ledger maintenance had been simplified. A server at every branch contained the entire database. It was soon realised that it would be more fruitful to have the total database at a central location and create a wide area network, WAN. Such a system required a lot of redundancy to ensure 24x7 availability to the customers.

Core banking

Introduction of these innovations created the idea of core banking. This happened around 1992 and changed the very concept of branch banking. The first ATM had been had been installed in 1980 and progressively provided an electronic channel with flexi-timing for customers’ banking needs. Limited services like cash withdrawal, balance enquiries, printing of mini statements, etc., was available. Addition of Internet banking multiplied the delivery channels. This required that the accounts be up-dated in real time.

Mobile banking

SMS banking provides another channel for banking. It indicates to the customer all the entries like credit, debit or any other transaction that has taken place in his account. Mobile banking has an edge over Internet banking, since it does not require any connectivity. Visits to the bank may be made only for seeking advice.

The customer is really dealing with the bank and not that specific branch since the database is centrally located. All this provides excellent flexibility in bank operations and timing.

Customer does everything

It is interesting to note that with more and more facilities becoming available, the customer is doing almost all the tasks himself that were earlier done by the banking staff. Thus, technical obsolescence is taking place fairly quickly in the banking system. Banks usually depreciate all the system-related costs to zero in three years.

Real time settlement

The Reserve Bank of India has taken initiative to improve the functioning of financial institutions by using the facilities offered by information technology. Major thrust has been to achieving quick payments and settlement across the country. A network called Infinet was set up linking all banking industry units and financial institutions. This network, based on V-Sats and leased lines ensures settlement of funds all over the country on real-time basis. This has also introduced transparency in these transactions.

The message that uses Structured Financial Message Solutions is encrypted for security reasons through Public Key Interface. The system, called Real Time Gross Settlement, and developed in May 2004 by the Institute of Development and Research for Banking & Technology, enables inter-bank transfer of funds in two hours. This has , to some extent, reduced the need for telegraphic transfer and demand drafts .

Similarly, cheque collection time will be significantly reduced (especially for outstation cheques) by the process, which transmits truncated cheque data through electronic imaging to the drawee bank. The cheque need not be moved physically. A National Electronic Fund Transfer scheme will thus empower the customers further. ECS has made banking operations cheque-less.

Thanks to electronic systems, a quantum jump has been achieved by banks in Customer Relationship Management (CRM). This not only includes information about transactions in his account, but also his preferences and his interest in a particular scheme or product of the bank.

Thus, even before the customer interacts with the bank representative over the phone or in person, the bank representative has total and comprehensive information about the customer. This helps improve the quality of response the caller gets from the bank.

With the banking industry likely to be opened to foreign banks by 2009, this will complete the process of globalisation for this segment. Banks in India have been taking steps to face 2009 with courage and the above measures are aimed at meeting the challenges of new entrants head-on.

Let us hope that our institutions will not be found wanting in comparison when the time comes.

(The author, a former IAF Group Captain, is a Pune-based writer.)

More Stories on : Banking | Information Technology

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
FTA concerns

Spectre of sovereign wealth funds

Bank automation: Towards paperless transactions

Finance and the real economy

Capital market plays a catalytic role

Incompatible approaches

Using reserves