B ANKING I NFORMATION S YSTEMS

BANKING INFORMATION SYSTEMS LECTURE 4

E-Banking Services 1. Account Access 2. Balance Transfer 3. Bill Payment 4. Bill Presentment 5. Mortgage /Credit card / Misc. Lending 6. Business Banking Services & Administration 7. Cross‐Selling 8. Personalized Content and Tools 9. Account Aggregation 10. Electronic Fund Transfer

1. Account Access •  Access online to all of one’s account information (usually checking, savings, andmoney market), which is either updated inreal time or on a daily bath basis.

2. Balance Transfer •  Transfer funds between accounts: -  Between accounts in the same bank -  Between accounts in different banks in the samecountry -  Between accounts in different banksinternationally

3. Bill Payment •  Pay any designated bill based on instructionsone proves including whether to payautomatically or manually each month.

4. Bill Presentment •  View billing statements as presented electronically, which allows inter‐ active capabilities such as sorting, drill‐down details, or advertising, in addition to on‐clickpayments.

5. Mortgage /Credit card / Misc. Lending •  Search, apply, and receive approval online forvarious types of loans and then review yourstatements using online bill presentment.

6. Business Banking Services •  In addition to all of the basic payment andaccount access services, merchant canmanage their electronic lock box for receivedpayment, accounts receivable posing, as wellas initiative payment via networks.

7. Customer Service andAdministration •  While the Web will eventually enable livecommunication, it is most optimally designed tofacilitate interaction with information so thatcustomers can more easily service themselves. In theprocess, customers receive as good, if not better,service while the bank saves money with eachadditional transaction as it realizes the scaleeconomies of its largely fixed online investment.Advanced e‐Mail systems with automated replies andintelligent routing are also helping to improve theonline customer service experience.

8. Cross‐selling •  Just as visitors to a branch are being offered newproducts by tellers and simple signage. In most cases today, banks performthis function online with standard, broadly targetedtext offers or by just making their product literatureavailable online. In the future, banks will be able toharness the true power of the Internet by providingtargeted offers to Web customers based on acombination of their indicated interests and financialsituation. Not only will banks be able to sell banksproducts, but non‐financial products as well.

9. Personalized Content and Tools •  As one visits the Web branch, one is instantlyrecognized and content displayed is orientedtoward one’s interests including weather,investment, and hobbies. More importantly,by using the Web, bank customers could useonline financial planning tools to bettermanage their finances.

10. Account Aggregation •  Accounts aggregation enables a consumer to be presented with all his or her account details (current account, saving account, mortgage account etc.) on a single page. •  For access to external financialdata consumers to provide their account passwords to theaggregator (usually a bank). The aggregator uses thepasswords to access automatically the consumer’s accounts. The information is then provided to the consumer on a consolidated basis on a single page so the customer has a full view of his/her financial poreolio.

11. Electronic Funds Transfer •  Electronic Funds Transfer (EFT) is a system oftransferring money from one bank accountdirectly to another without any paper moneychanging hands. •  One of the most widely‐used EFT programs isDirect Deposit, in which payroll is depositedstraight into an employee’s bank account. Thissystem may also be used for debit transfers,such as mortgage payments.

E‐banking Technologies • E-banking relies heavily on information and communication technologies (ICT) to achieve itspromise of 24 hours availability, low error rates,and quicker delivery of financial services. •  When considering e‐banking, bank websitesusually come to mind first, but e‐bankingrequires much more than just a good website.

Services and Structure

E‐banking and E‐commerce • E‐banking may be viewed as one branch of e‐commerce. •  The Internet may be the most common and wellknown medium for e‐commerce, but it is not theonly one. •  In a banking context, ATMs and credit cards arealso classified as e‐commerce.

The Internet •  The emergence of the Internet has posed a host of new organizational opportunities and challenges. •  Other e‐channels such as Interactive Television (iTV) and Wireless Application Protocol (WAP) technologies are available for services delivery, their use is still limited in the provision of financial services. •  The Internet is a massive global network of interconnected packet‐switched computer networks. Hoffman (2002) offers three(mutually consistent) definitions of the Internet: a network ofnetworks based on the TCP/IP protocols; a community of peoplewho use and develop those networks; and a collection ofresources that can be reached from those networks.

The Internet •  A more recent development is web 2.0 whichmay be described as a newer version of web-based applications(such as wikis, social- networking sites, and blogs) which aim toenhance creativity, collaboration, andinteraction between Internet users. Thesedevelopments on the Internet are expandingbeyond the utilization of the Internet as acommunication medium to an important view ofthe Internet as a new market place.

The Internet •  The Internet influences the future services/products distribution channel structure. •  Increased competition between suppliers isalso likely to result in lower prices forconsumers.

The Internet •  Internet technology can make a significant contribution to a company’s value chain. •  It can improve a company’s relationship with vendors and suppliers, its internal operations and its customer relations, and offers the prospect of reaching an expanding customer base. •  The Internet also promises to dramatically lower communications costs by eliminating obstacles created bygeography, time zones, and locations (Tan & Teo, 2000).

The Internet •  The Internet provides a powerful platform for corporations with home pages to market and advertisetheir products and services. •  It has proved an efficient and cost-effective way of distributing information almost instantaneously to millions of potential clients in global markets. •  Many companies use the Internet to conduct market and scientific research, as well as to source business-related information to improve their products and services.

The Internet •  The rise of the Internet has resulted in the formation of virtual organizations, which have virtually no physical presence in terms of retailoutlets but enjoy access to national and international markets. •  There is a scope for physical organizations to become virtual, as they can leverage their core competencies in primary activities. Physical companies often have a great deal more experience/knowledge of theirproducts and how to sell them than new Internet traders and theyusually also have established brands and a large customer base. •  Owens and Robertson (2000) contend that it takes longer for physical organizations to develop an integrated e-‐commerce structure than it does for virtual traders to commence trading. This is due to the reduced,simple physical structure of the virtual organizations. They argue that astructure of similar efficiency must be adopted by physical organizationsfor the provision of Internet services.

Mobile Banking Technologies •  Mobile banking is the newest channel in electronic banking to provide a convenient way of performing banking transaction usingmobile phones or other mobile devices. •  Some banks are making significant investments in mobile systems to deliver a range of types of business value, from increased efficiency and cost reduction,to improved operational effectiveness and customer service to provide a competitive advantage. •  A factor that has contributed to this development has been the extended availability and capacity of mobile communications infrastructure around the world.

Mobile Banking Technology •  The number of types of mobile devices has beenincreasing rapidly and the functionality availablehas also improved. •  The shrinking costs of data transmission and,due to the intense competition from suppliers,the reduced costs of devices have catalyzed thedistribution of mobile technologies andamplified the growth of the worldwide mobilemarket.

Mobile Banking Technology •  Wireless Application Protocol (WAP): is an applicationenvironment and set of communication protocols forwireless devices designed to enable manufacturer,vendor, and platform independent access to theInternet and advanced telephony services. •  Wireless Internet Gateway (WIG): is a Short MessageService (SMS)‐based service, in which a menu ofavailable banking options is initially downloaded fromthe bank to the phone device (Brown et al. 2003). Thisenables users to browse bank accounts and conductother banking related tasks.

Mobile Banking Disadvantages 1. Internet connectivity costs: Although connection costs from mobile phones is steadily declining it is still high enough in many countries to deter customers from using their mobiles for applications such as e‐banking. 2. Difficult user interface: Human Computer Interface (HCI) issues are a key factor in mobile technology acceptance. A general rule is that the easier and more adoptable the interface, the greater is the user acceptance.

Mobile Banking Disadvantages 3. Lack of awareness amongst customers: Many banking customers are not even aware of availability of mobile bankingor associated benefits. Awareness increases with time and needsconsiderable promotional efforts. 4. Limitations in functionality of mobile devices: Mobile technologies are still dogged by limitations such as limitedbattery life, unreliable network connections, volatile accesspoints, risk of data loss, portability, and location discovery.

Mobile Banking Disadvantages 5. Security concerns: Mobile technology still suffers from questionable security. So it may not be suitable for transfer of highly confidential financial information. Mobile devices are increasingly becoming a target for virus writers, hackers, and short message service (SMS) spammers. 6. Organizational changes: To offer mobile banking many organizations will need to change their business processes, ways in which information is provided and accessed, working practices and work relationships, working styles and changes in roles, responsibilities and management structures.

Mobile Banking Disadvantages 7. Small number of choices: Not all banks offer mobile banking. 8. Technology overload: Fragmented information channels often result in inefficient workingpatterns as users switch from device to device and between different media (Evans, 2004) which may result in mobile ignorant customers unable to use their devices for day to day tasks such as e-banking.

B ANKING I NFORMATION S YSTEMS