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Rukmani Vishwanath

Banks in both the public and private sectors watch with interest as their latest born, Net banking, takes its first baby steps.

Vijay Basrur, a senior executive with an entertainment company in Mumbai, has hardly set foot in a bank in the past four years. He is an example of the growing number of urban Indians who are increasingly transacting their banking requirements online. After the initial few years of being eyed with suspicion and circumspection, Internet banking is finally gaining acceptance, at least, in urban centres across the country. Today about 10 per cent of bank customers use online banking and this segment is poised to grow further, say bankers.

This is a far cry from the time when Net banking was introduced in the country in the late-1990s, when less than one per cent of customers dared to transact online. Industry analysts ascribe the increasing interest in online banking to the increase in the use of the Internet. The growth of e-commerce has also contributed to this trend.

"I find Internet banking extremely convenient as I can conduct my transactions from anywhere and don't have to queue up at branches. I have never gone to a bank branch since I started banking online. Initially I would transact small amounts and continue to do so. I haven't really exposed myself to large-value transactions over the Net," says Basrur.

While Net banking services had been popular with the high-net worth corporate clients of most foreign banks even earlier, it is significant that even middle-class retail customers have started warming up to online banking. "Online banking is gathering momentum not only in the metros, but also in cities such as Chandigarh, Hyderabad, Lucknow and Pune. This is due to greater awareness of the Internet, the growing number of cyber cafés and kiosks and the tremendous convenience they offer," says Rahul Bhagat, Vice-President and Head, Internet Banking, HDFC Bank.

According to him banks have been successful to some extent in presenting Net banking as a realistic alternative to conventional banking. "It is a great convenience for the customer and, at the same time, it helps ease branch traffic, so that the staff can focus on providing value-added services, cross-selling products and so on," he says. As on March 2004, 73 per cent of all banking transactions in HDFC Bank were conducted through alternative channels such as ATMs, phone and Net banking. Of the total transactions, Net banking accounted for eight per cent. In fact, in the first six months of the current fiscal, Net banking has grown 30 per cent over the March numbers, adds Bhagat.

ICICI Bank is also witnessing a significant spurt in its online banking transactions and expects the trend to continue. "Around 11 per cent of all transactions in the bank happen through the Internet. We started Net banking in 1997, as we wanted to open up all channels for our customers. Net banking is a convenient option, as branches are not open 24/7," says Anup Baghchi, General Manager, ICICI Bank.

"Net banking is a mainline business channel for us and not just for support. We sell Net banking along with our other channels right at the time of opening the account," he adds. In this age of cut-throat competition between banks, the public sector banks are not far behind in offering online banking services. Most of them are investing heavily in upgrading technology infrastructure and networking branches through core banking solutions.

State Bank of India (SBI), the country's biggest bank, launched its Internet banking services in July 2001. According to a spokesman, SBI has registered 4.5 lakh users, and of these 1.3 lakh use the services actively.

The bank has bifurcated its services into corporate and retail sectors. Retail customers can perform all financial and non-financial transactions from their computers; these include bill payments, DD requests, third party transfers, opening new account, chequebook requests and so on.

It has enabled Internet banking services at 2,000 branches. Currently, the bank does not offer non-commercial customers online fund transfers from one account at one branch to another account at another branch. "These facilities are in great demand and SBI plans to launch them soon. We feel this will treble — or even quadruple — our transaction traffic," says an SBI official.

The bank plans to aggressively roll out Internet banking services at more branches and offer value-added features like brokerage services. According to analysts, banks want to migrate customers to alternate delivery channels, as this would result in lower transaction and service costs.

But one main reason why Net banking has not gathered adequate momentum is due to concerns about Net security and privacy.

"Net banking makes a lot of sense once security levels are followed — not only in terms of fire-walls but also secure processes. There are always security challenges when it comes to online transactions. In most cases break-ins occur from within the organisation. Not only the bank, but customers also have to take measures to secure their personal computers, which have their digital signatures. The end-user must also take necessary precautions," says Sharad Sanghi, Managing Director and CEO of NetMagic Solutions.

Picture by K.K. Mustafah

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