New Trends In Banks EXECUTIVE SUMMARY There has been a tremendous change in the banking sector and these changes include phone banking, online banking, ATM, bancassurance, mutual funds etc. There was a time when banks used to perform only the basic functions but today the scenario is not the same. There is an increasing competition in this field and banks are aiming to offer more and more products and services to their customers. This change has led to convenience and customers are at ease. This change is possible because of the trust which the people have in banks. Indeed technological and regulatory changes have had such an impact on the banking industry that a good case can be made for saying that they are the most important changes to have occurred in the industry, apart from ones that are directly due to the changing nature of society itself. The precise nature of the impact technology has had on the banking industry since the early 1980’s is difficult to assess, because the intimacy of the relationship between the industry and its technology means that it is impossible to separate the two. Technology is a much part of the banking industry today as the ship’s engine is the part of the ship. And, like the ship’s engine, technology drives the whole thing forward.
Transcript
1. New Trends In Banks EXECUTIVE SUMMARY There has been a
tremendous change in the banking sector and these changes include
phone banking, online banking, ATM, bancassurance, mutual funds
etc. There was a time when banks used to perform only the basic
functions but today the scenario is not the same. There is an
increasing competition in this field and banks are aiming to offer
more and more products and services to their customers. This change
has led to convenience and customers are at ease. This change is
possible because of the trust which the people have in banks.
Indeed technological and regulatory changes have had such an impact
on the banking industry that a good case can be made for saying
that they are the most important changes to have occurred in the
industry, apart from ones that are directly due to the changing
nature of society itself. The precise nature of the impact
technology has had on the banking industry since the early 1980s is
difficult to assess, because the intimacy of the relationship
between the industry and its technology means that it is impossible
to separate the two. Technology is a much part of the banking
industry today as the ships engine is the part of the ship. And,
like the ships engine, technology drives the whole thing
forward.
2. New Trends In Banks BANKS INTRODUCTION A bank is an
institution that provides financial service, particularly taking
deposits and extending credit. Currently the term bank is generally
understood as an institution that holds a banking license. Banking
licenses are granted by bank regulatory authorities and provide
rights to conduct the most fundamental banking services such as
accepting deposits and making loans. There are also financial
institutions that provide certain banking services without meeting
the legal definition of a bank, a so called non-banking financial
company. The start of banks the only banks which appeared earlier:
- June 2, 1806: The Bank of Calcutta established. January 2, 1809:
redesignated as Bank of Bengal. April 15, 1840: Bank of Bombay
established. July 1, 1843: Bank of Madras established. 1861: Paper
Currency Act passed. January 27, 1921: all three banks amalgamated
to form Imperial Bank of India. July 1, 1955: State Bank of India
formed; becomes the first Indian bank to be nationalised. 1959:
State Bank of India (Subsidiary Banks) Act passed, enabling the
State Bank of India to take over eight former State-associated
banks as its subsidiaries.
3. New Trends In Banks Banks have a long history, and have
influenced economies and politics for centuries. The word bank is
derived from the Italian banca, which is derived from German
language and means bench. The terms bankrupt and "broke" are
similarly derived from banca rotta, which refers to an
out-of-business bank, having its bench physically broken. Money
lenders in Northern Italy originally did business in open areas, or
big open rooms, with each lender working from his own bench or
table. Traditionally, a bank generates profits from transaction
fees on financial services and from the interest it charges for
lending. In recent history, with historically low interest rates
limiting banks' ability to earn money by lending deposited funds,
much of a bank's income is provided by overdraft fees and riskier
investments. Services typically offered by banks earlier Although
the type of services offered by a bank depends upon the type of
bank and the country, services provided usually include: Taking
deposits from their customers and issuing checking and savings
accounts to individuals and businesses Extending loans to
individuals and businesses Cashing cheques Facilitating money
transactions such as wire transfers and cashiers checks Issuing
credit cards, ATM, and debit cards Storing valuables, particularly
in a safe deposit box
4. New Trends In Banks Trends in banking India adopted a
socialistic model of development with centralized plans for
implementing the objectives of balanced growth. For this purpose,
banks were nationalised to ensure that the flow of credit followed
the pattern required for economic growth. Nationalisation of banks
led to the expansion of the banking network in the country with the
banks recording a multifold growth in the mobilization and
deployment of finance. However, with the growth of the network,
there also arose concerns over the efficacy of such directed credit
and the cost of operations in conducting banking in the public
sector. In line with the liberalization of the Indian economy in
the 1990s, the financial sector was also liberalized in order to
allow greater competition leading to efficiency in the banking
system. This has led to developments such as: - the entry of new
private sector banks. - greater leeway to foreign banks in
operating in the country and - gradual sale of government equity in
PSU Banks (without ceding government control) Apart from the
increasing competition, the banking sector in the country is
currently in the throes of change being impacted by events such as
economic recession leading to rising NPAs and problems of achieving
capital adequacy. This has made banks extremely cautious about
lending to industry (especially to the small and medium
enterprises) restricting the growth of a number of these
enterprises.
5. New Trends In Banks Latest trends in banking Banks today
have moved towards universal banking. Banks today include
investment services in addition to services related to savings and
loans. 1.Universal Banking The concept of universal banking refers
to the provision of most or all financial services under a single,
largely unified banking structure. Financial activities may
include: Intermediation Trading of financial instruments, foreign
exchange, and their derivatives Underwriting new debt and equity
issues Brokerage Corporate advisory services, including mergers and
acquisitions advice Investment management Insurance Holding equity
of non-financial firms in the banks portfolio. Universal banking
can be divided in four parts: 1) The fully integrated universal
bank: supplies the complete range of financial services from one
institutional entity. 2) The partially integrated financial
conglomerate: able to supply the services listed above, but several
of these (for example, mortgage banking, leasing, and insurance)
are provided through wholly owned or partially owned subsidiaries.
3) The bank subsidiary structure: the bank focuses essentially on
commercial banking and other functions, including investment
banking and insurance, which are carried out through legally
separate subsidiaries of the bank.
6. New Trends In Banks 4) The bank holding company structure: a
financial holding company owns both banking (and in some countries,
non banking) subsidiaries that are legally separate and
individually capitalized, in so far as financial activities other
than banking are permitted by law. The holding company often owns
non-financial firms, or the holding company itself may be an
industrial concern. Universal Banking includes not only services
related to savings and loans but also investments. However in
practice the term 'universal banks' refers to those banks that
offer a wide range of financial services, beyond commercial banking
and investment banking, insurance etc. Universal banking is a
combination of commercial banking, investment banking and various
other activities including insurance. If specialized banking is the
one end universal banking is the other. This is most common in
European countries. Universal banking has some advantages as well
as disadvantages. The main advantage of universal banking is that
it results in greater economic efficiency in the form of lower
cost, higher output and better products. However larger the banks,
the greater the effects of their failure on the system. Also there
is the fear that such institutions, by virtue of their sheer size,
would gain monopoly power in the market, which can have significant
undesirable consequences for economic efficiency. Universal banking
in India In India Development financial institutions (DFIs) and
refinancing institutions (RFIs) were meeting specific sectoral
needs and also providing long-term resources at concessional terms,
while the commercial banks in general, by and large, confined
themselves to the core banking functions of accepting deposits and
providing working capital finance to industry, trade and
agriculture. Consequent to the liberalisation and deregulation of
financial sector, there has been blurring of distinction between
the commercial banking and investment banking. Reserve Bank of
India constituted on December 8, 1997, a Working Group under the
Chairmanship of Shri S.H. Khan to bring about greater clarity in
the respective roles of banks and financial institutions for
greater harmonization of facilities and obligations. Also report of
the Committee on Banking Sector Reforms or Narasimham Committee
(NC) has major bearing on the issues
7. New Trends In Banks considered by the Khan Working Group.
The issue of universal banking resurfaced in Year 2000, when ICICI
gave a presentation to RBI to discuss the time frame and possible
options for transforming itself into an universal bank. Reserve
Bank of India also spelt out to Parliamentary Standing Committee on
Finance, its proposed policy for universal banking, including a
case-by-case approach towards allowing domestic financial
institutions to become universal banks. Now RBI has asked FIs,
which are interested to convert itself into a universal bank, to
submit their plans for transition to a universal bank for
consideration and further discussions. FIs need to formulate a road
map for the transition path and strategy for smooth conversion into
an universal bank over a specified time frame. The plan should
specifically provide for full compliance with prudential norms as
applicable to banks over the proposed period. 2.Electronic banking
In the wake of recent developments in information and communication
technologies, majority of banking operations have been computerized
by most of the commercial banks, both in the private and the public
sectors especially in the last ten years and the process s still on
for extension and upgradation of computerization of banks in India.
The computerization is done for front-office operations involving
interface with customers as well as back office operations
involving internal house keeping (accounting and books balancing),
external accounting and settlement with other branches and
banks/institutions. Electronic banking provides a bouquet of new
channels like internet banking, telephone banking, ATM banking
which are different from the traditional brick and mortar branch
banking and which have made possible anywhere and anytime banking
and contributed to speed, accuracy and confidentiality of customers
transactions while enhancing customers convenience. Funds transfer;
cheques clearing and collection of bills of exchange are also done
electronically with accuracy, speed and safety. Internal house
keeping is done accurately and much faster through programmed
packages/software at the branch and also at centralized platforms
involving several branches of a region or zone. 3.Globalization of
banking
8. New Trends In Banks In addition to universal banking and
electronic banking, globalization has emerged as a prime mover in
the Indian banking system. This has come about as a result of the
policy of liberalization and opening up of banking and other
sectors pursued after 1991 in India. Foreign banks that wish to set
up their offices/branches in India have been granted licenses by
RBI on liberal and on reciprocal basis. Their business in India has
increased manifold, due to scores of Multinational Corporations
setting up their manufacturing/trading bases in India and also due
to Indias increased foreign trade. Similarly, Indian banks are also
opening their offices/branches abroad, particularly in countries
whose banks have opened offices in India. Banks have now changed
their approach towards technology, products and the services
offered by them. Technology development Banks have started using
the latest technology to keep up with the competition. The
advancement in the technology has helped the banks to reduce the
workload. There are so many activities, which are taken over by
machines. Employees are no more loaded with paper work. With the
advancement of technology and the birth of competition, banks are
in the race of becoming the best in the country. With an eye upon
customer satisfaction policy they are providing best of the best
services with the minimum hazards.
9. New Trends In Banks Banks like ABN AMRO introduced banking
with a coffee. It made a tie-up with one of the best coffee bar in
the country, Barista and remained open till late evening for
customers with a setup of a coffee bar in the premises. Few banks
have introduced world ATM card to make travelers across the globe
more safe and secure. What else. Internet and Phone Banking is the
call of the day for banks. Products and services 1.PHONE BANKING
Banking now a days is a phone call away. Pick up the phone to
access a host of Bank services, day or night. You can pay bills and
transfer funds and buy and sell open-end mutual funds. 2.ONLINE
BANKING Online banking (or Internet banking) is a term used for
performing transactions, payments etc. over the Internet through a
bank, credit union or building society's secure website. This
allows customers to do their banking outside of bank hours and from
anywhere where Internet access is available. In most cases a web
browser such as Internet Explorer or Mozilla Firefox is utilized
and any normal Internet connection is suitable. No special software
or hardware is usually needed. Features Online banking usually
offers such features as: Bank statements, with the possibility to
import data in a personal finance program such as Quicken or
Microsoft Money Electronic bill payment Funds transfer between a
customer's own checking and savings accounts, or to another
customer's account Investment purchase or sale Loan applications
and transactions, such as repayments
10. New Trends In Banks Account aggregation to allow the
customers to monitor all of their accounts in one place whether
they are with their main bank or with other institutions. There are
a growing number of banks that operate exclusively online. Because
these online banks have low costs compared to traditional banks
they can offer high interest rates. Security Protection through
single password authentication, as is the case in most secure
Internet shopping sites, is not considered secure enough for
personal online banking applications in some countries. Online
banking user interfaces are secure sites (generally employing the
https protocol) and traffic of all information - including the
password - is encrypted, making it next to impossible for a third
party to obtain or modify information after it is sent. However,
encryption alone does not rule out the possibility of hackers
gaining access to vulnerable home PCs and intercepting the password
as it is typed in (key logging). There is also the danger of
password cracking and physical theft of passwords written down by
careless users. Many online banking services therefore impose a
second layer of security. Strategies vary, but a common method is
the use of transaction numbers, or TANs, which are essentially
single use passwords. Another strategy is the use of two passwords,
only random parts of which are entered at the start of every online
banking session. This is however slightly less secure than the TAN
alternative and more inconvenient for the user. A third option,
used in many European countries and currently being trailed in the
UK is providing customers with security token devices capable of
generating single use passwords unique to the customer's token
(this is called two-factor authentication or 2FA). Another option
is using digital certificates, which digitally sign or authenticate
the transactions, by linking them to the physical device (e.g.
computer, mobile phone, etc). While most online banking in the
United States still uses single password protection, the FDIC has
issued regulations requiring that banks implement more secure
authentication mechanisms by the end of the year 2006. Banks in
many European countries (including the Scandinavian countries, The
Netherlands, Austria and Belgium) are offering online banking for
e-commerce payments directly from customer to merchants.
11. New Trends In Banks Fraud Some customers avoid online
banking, as they perceive it as being too vulnerable to fraud. The
security measures employed by most banks are never 100% safe, but
in practice the number of fraud victims due to online banking is
very small. Indeed, conventional banking practices may be more
prone to abuse by fraudsters than online banking. Credit card
fraud, signature forgery and identity theft are far more widespread
"offline" crimes than malicious hacking. Bank transactions are
generally traceable and criminal penalties for bank fraud are high.
Online banking can be more insecure if users are careless, gullible
or computer illiterate. 3.ATM
12. New Trends In Banks An automated teller machine or
automatic teller machine (ATM) (also called cash machine,
cashpoint, ATM Scrip to Cash machine, "hole in the wall", "bank
machine" or "ABM", "autoteller" or guichet) is an electronic
computerized telecommunications device that allows a bank's
customers to directly use a secure method of communication to
access their bank accounts, order or make cash withdrawals and
check their account balances without the need for a human bank
teller (or cashier in the UK). Some ATMs allow withdrawals funded
by clerical staff in retail merchant locations. The clerical staff
are not considered bank tellers. Many ATMs also allow people to
deposit cash or cheques, transfer money between their bank
accounts, top up their mobile phones' pre-paid accounts or even buy
postage stamps. The ATM industry is an evolving one which has seen
radical and business-changing events occur frequently in its first
three decades. Here's our attempt to look into the crystal ball of
ATMs of the future, with the help of some of the most
forward-thinking minds involved in ATMs. 4.Credit cards A credit
card system is a type of retail transaction settlement and credit
system, named after the small plastic card issued to users of the
system. A credit card is different from a debit card in which,
during every transaction, the money from the users's account is
removed. But in case of credit card, issuer lends money to the
consumer (or the user). It is also different from a charge card
(though this name is sometimes used by the public to describe
credit cards), that require the balance to be paid in full each
month. In contrast, a credit card allows the consumer to 'revolve'
their balance, at the cost of having interest charged. 5.Debit
cards A debit card is a card which physically resembles a credit
card, and, like a credit card, is used as an alternative to cash
when making purchases. However, when purchases are made with a
debit card, the funds are withdrawn directly from the purchaser's
current/checking or savings account at a bank or credit union.
6.Cheque Cards
13. New Trends In Banks It is a card given to the customer by
the bank that he must show when writes a cheque which promises that
a bank will pay out the money written on the cheque. Under cheque
cards system, the card holder is given a card and a cheque book. He
has to use the cheques, while purchases are made and the trader
gets guaranteed payment. The customer does not get free credit, he
has to keep sufficient balance in his account or the bank will
provide overdraft upto a specified limit, of course on interest
payment basis. 7.Charge Cards A small usually plastic provided by
an organization with which one may buy goods from various shops,
etc. The full amount owed must then be paid on demand. in credit
cards , the card holders get credit or loan for payment of
periodical bills when sufficient balance is not available in their
accounts . In a charge card such credit facility is not available
.the periodical bill amount is paid off by charging it to customers
account. A fee is also payable by the card holder to the card
issuing institution. 8.Smart Cards With the use of credit cards, we
may avail of credit facility on our purchase of goods or services
from approved sales outlets. A smart card enables the cardholder to
perform various other banking functions apart from credit
purchases. For an example, with, smart cards, we can draw cash from
ATMs; we can verify entries in our accounts, etc. This is possible
because the card has an integrated circuit with microprocessor chip
embedded in the card for identification purposes. The card can also
perform calculations and maintain records. The credit card
customers are typically extended an unsecured credit for at least
30 days. Beyond this period, the bank charges interest on
outstanding bills. However, some cardholders may prefer to pay off
their dues before the free credit period. Such cardholders are
called convenience users. 9.BILL PAYMENTS Save time and money with
payment services offered by banks
14. New Trends In Banks It's easy to pay your bills with their
help. Some banks have agreements with over 600 companies for
payment services. Payments can be made easily and conveniently over
the internet, on the phone, at any branch or by using an ATM. What
can you pay through a Bank? 1.Bills - access nearly 600 companies
with their services. 2.Utilities - an easy way to manage household
expenses. 3.Income Tax - pay income tax through a Bank's ATM
network. How do you pay? Invoices from more than 100 companies can
be paid by internet banking. Payments can also be scheduled for
future dates. At the branch - bills can be paid at the branch
counter service or you can take advantage of the convenient Express
Deposit Box service kept by some banks. Over the phone - just call
the Phone Banking Center. ATM bill payment - all you need to do is
select "other services" on the machines and have your bills handy.
10.INVESTMENTS Mutual funds If you want attractive returns and are
prepared to take a higher risk - one alternative is to invest in
mutual funds. The banks give you access to the funds 24 hours a day
with ATMs and Phone service and when you choose to sell - you'll
get your money the next day.
15. New Trends In Banks Mutual funds can invest in many
different kinds of securities. The most common are cash, stock, and
bonds, but there are hundreds of sub-categories. Stock funds, for
instance, can invest primarily in the shares of a particular
industry, such as technology or utilities. These are known as
sector funds. Bond funds can vary according to risk (high yield or
junk bonds, investment-grade corporate bonds), type of issuers
(government agencies, corporations, or municipalities), or maturity
of the bonds (short or long term). Both stock and bond funds can
invest in primarily US securities (domestic funds), both US and
foreign securities (global funds), or primarily foreign securities
(international funds). Most mutual funds' investment portfolios are
continually adjusted under the supervision of a professional
manager, who forecasts the future performance of investments
appropriate for the fund and chooses the ones which he or she
believes will most closely match the fund's stated investment
objective. A mutual fund is administered through a parent
management company, which may hire or fire fund managers. Mutual
funds are subject to a special set of regulatory, accounting, and
tax rules. Unlike most other types of business entities, they are
not taxed on their income as long as they distribute substantially
all of it to their shareholders. Also, the type of income they earn
is often unchanged as it passes through to the shareholders. Mutual
fund distributions of tax-free municipal bond income are also
tax-free to the shareholder. Taxable distributions can either be
ordinary income or capital gains, depending on how the fund earned
it. Investing in Bonds Government bonds and Corporate debentures
provide a regular and reliable source of income and it's easy to
invest through Banks. You can buy and sell government bonds or
corporate debentures through branches. A government bond is a bond
issued by a national government denominated in the country's own
currency. Bonds issued by national governments in foreign
currencies are normally referred to as sovereign bonds. Government
bonds are usually referred to as risk-free bonds, because the
government can raise taxes or simply print more money to redeem the
bond at maturity. A corporate debenture is a long-term debt
instrument used by governments to obtain funds.
16. New Trends In Banks 11.UNDERWRITER Underwriting refers to
the process that a large financial service provider (bank, insurer,
investment house) uses to assess the process of providing access to
their product like providing equity capital, insurance or credit to
a customer. In banking, underwriting is the detailed credit
analysis preceding the granting of a loan, based on credit
information furnished by the borrower, such as employment history,
salary, and financial statements; publicly available information,
such as the borrower's credit history, which is detailed in a
credit report; and the lender's evaluation of the borrower's credit
needs and ability to pay. Underwriting can also refer to the
purchase of corporate bonds, commercial paper, Government
securities, municipal general obligation bonds by a commercial bank
or dealer bank for its own account, or for resale to investors.
Bank underwriting of corporate securities is carried out through
separate holding company affiliates, called securities affiliates,
or Section 20 affiliates. Guarantee the sale of stock and bond
issues, trade for their own accounts, make markets, and advise
corporations on capital markets activities such as mergers and
acquisitions. 12.PROVIDING CAPITAL TO FIRMS Merchant banks were
traditionally banks which engaged in trade financing. The modern
definition, however, refers to banks which provide capital to firms
in the form of shares rather than loans. Unlike Venture capital
firms, they tend not to invest in new companies.
13.BANCASSURANCE
17. New Trends In Banks Bancassurance is the term used to
describe the sale of insurance products in a bank. The word is a
combination of "banque or bank" and "assurance" signifying that
both banking and insurance is provided by the same corporate
entity. The usage of the word picked up as banks and insurance
companies merged and banks sought to provide insurance, especially
in markets that have been liberalised recently. It is a
controversial idea, and many feel it gives banks too great a
control over the financial industry. Bancassurance your Trusted
Service- insurance provided by banks through their tie ups with
insurance companies. Bancassurance is the term used to describe the
sale of insurance products in a bank. The word is a combination of
"banque or bank" and "assurance" signifying that both banking and
insurance is provided by the same corporate entity. The usage of
the word picked up as banks and insurance companies merged and
banks sought to provide insurance, especially in markets that have
been liberalised recently. It is a controversial idea, and many
feel it gives banks too great a control over the financial
industry. Banks gives you peace of mind with Bancassurance. Receive
coverage and save money at the same time. You can choose the right
option which benefits you the most.
18. New Trends In Banks Life Insurance Policies They are life
insurance policies which give your family a financial stability.
They provide both protection from insurance policies and great
savings plan at the same time. Life insurance policies play a major
role for investments. 14.Currency Exchange Services Great rates,
great services A customer can now buy or sell notes, travelers
cheques and drafts in all major currencies at selected branches.
Changing currency is fast and easy using the currency booths and
currency exchange machines. The banks today have competitive rates
with efficient service. 15.Online Government Tax Payment An online
government tax payment and filing service is available seven days a
week, 24 hours a day, using a financial institution's Internet
site. It enables participating financial institution customers to
electronically submit RST return cards and payments via the
Internet. This service is currently offered by many financial
institutions to customers who have an account with them. Benefits
of Online Tax Payments Convenience and Reliability - available 24
hours/day and 7 days/week. Avoid late payment of taxes by
post-dating your payments.
19. New Trends In Banks Less paperwork - no cheques or
remittance forms required. 16.Trust Services A legal entity that
can hold and manage assets for one or more beneficiaries over time.
A bank can act as an agent for the trustee to invest funds
according to the directions of the trustee. A bank can handle
employee benefit programs, personal trusts and estates, and
corporate trusts. Employee benefit programs include profit sharing
plans, defined benefit plans, and defined contribution plans.
17.INTERNATIONAL BANKING Indian banks have extended their
activities beyond the national boundaries. The extension may take
place in the form of borrowings as well as lending and it may take
place through official or private or commercial channel. In the
process of internationalization, the domestic financial
institutions participate in foreign financial markets and the
foreign institutions participate in domestic market to a
significant extent. In other words, the domestic and foreign
financial markets get integrated and interlinked and the supply and
demand curves of funds assume a different character. In India
,foreign exchange dealings of banks are 6 to 7 times, sometimes, 50
times, their merchant base. Day to day foreign exchange transaction
in India are handled by scheduled commercial banks who are
authorized and licensed dealers in foreign exchange.
20. New Trends In Banks International lending Syndicated loans
Large loans that enable borrowers to obtain large amounts of funds
and lenders can diversify their credit risk. Lead bank can earn fee
income for management services. Letters of credit Import letters of
credit are issued by a bank in favor of a firm in most cases. An
export letter of credit is issued by a foreign bank to a firm in
the U.S. Letters of credit The letter of credit is a document from
a bank that says it will pay the exporter when the conditions in
the letter are met. In effect, the banks credit is substituted for
the importer. The issuing bank pays the seller through the advising
(paying) bank. The importer pays the issuing bank a fee for its
services. Foreign exchange markets Interbank market of money center
banks and major foreign banks. Foreign exchange brokers facilitate
currency trading. Credit risk associated with the counterparty
(bank or broker) failing to meet its obligations. Changes in normal
sevices
21. New Trends In Banks 1.OPENING ACCOUNTS A savings, current
or fixed account now opens up a world of new products and services
- giving the customers access to your funds 24 hours a day, 7 days
a week. With a savings or current account in place you can choose a
ATM or Debit Card for everyday access to your funds. 2.LOANS No
matter what you need, there is a loan or a line of credit to give
you the borrowing power you want. Home Loans? You do not need to
worry about the huge investments needed to purchase a new home.
Personal Loans? Today banks also give personal loans and you can
use this to renew your furniture, finance an education or buy a new
car. Mortgage Work?
22. New Trends In Banks You can be an informed borrower and
find out how your mortgage works. What are the benefits and what
are the interest rates. 3.BRANCHES You dont have to travel far to
enjoy a Banks fast and efficient service. With the most extensive
branch networks, officers are always close by to offer you banking
products and services that match your needs. The branches of a bank
are connected to their computer mainframe via our state-of-the-art
electronic network. This means a customer gets consistent service
with fast and efficient transactions at any branch. Certainly, it
is true that, in general, customers use bank branches less and
less. Many customers visit their bank only once a month or, even
much less, while some hardly bother going into the branch at all.
Yet, while the demand for branches is certainly reducing all the
time, this does not mean that branch banking is necessarily fated
to disappear entirely, any more than the increasing proliferation
of mobile telephones mean that landline telephone will disappear
completely. It is possible though not certain that, just as there
will always be people who need to use telephone (apart from
anything else, people may have lost or mislaid their mobile
telephones or may have left them at home), there will always be
people who need to visit their branch. Furthermore, branches remain
comparatively popular to organizations with corporate accounts
(including small businesses), mainly because businesses like to be
able to discuss things in person with a banker in a branch.
Also,
23. New Trends In Banks some older people (including some
older, wealthier people) like to be able to pop in to their branch.
There is a need for some good research about why this is: if it is
simply that older people are less adept with new style technology
than younger ones, then, of course, in time, by a natural process,
the need for branches will start to erode. However, if, as may well
be the case, older people inherently feel more comfortable with
being able to do their banking at a physical branch, this may limit
the extent to which banks can afford to get rid of branches
entirely, especially branches that cater to wealthy customers. A
NEW SECURITY DEVICE Some banks have started with a new security
device. This device brings in confidence in a customers mind while
using internet banking. How does the Security Device work? To log
on to your account on Internet Banking, you need to enter your
existing username and password as usual, followed by the unique
security code generated by the Security Device. The Security Device
provides you an enhanced level of security as access to your
Internet Banking account is now based on a 2-step authentication
process:
24. New Trends In Banks Since the Security Device is in your
possession and the username and password is known only to you, only
you can access your account online. Simple to use and easy to
carry, the Security Device ensures you can access your financial
information online, in a completely secure environment. The Modern
Banking System (Where does money come from?) "If the debt which the
banking companies owe be a blessing to anybody, it is to themselves
alone, who are realizing a solid interest of eight or ten per cent
on it. As to the public, these companies have banished all our gold
and silver medium, which, before their institution, we had without
interest, which never could have perished in our hands, and would
have been our salvation now in the hour of war; instead of which
they have given us two hundred million of froth and bubble, on
which we are to pay them heavy interest, until it shall vanish into
air... We are warranted, then, in affirming that this parody on the
principle of 'a public debt being a public blessing,' and its
mutation into the blessing of private instead of public debts, is
as ridiculous as the original principle itself. In both cases, the
truth is, that capital may be produced by industry, and accumulated
by economy; but jugglers only will propose to create it by
legerdemain tricks with paper."
25. New Trends In Banks Bank Systems & Technology September
20, 2004- an article The nine-year history of Web-based online
banking in the U.S. has witnessed a number of innovations, from
Web-based check imaging to inter-FI transfers and beyond. But a
number of these innovations first arrived in Web banking earlier
than most realize. A gap persists between the introduction of Web
banking features at one bank and the widespread awareness and
adoption among all banks. This gap points to the broader market and
consumer trends. Inter-FI transfers -- the ability for a customer
to transfer money to an account that the customer holds at another
institution -- have been a hot topic at large banks for over a
year. But inter-FI transfers have been a staple of many community
banking offerings for more than eight years. The underlying
technology is used routinely in offline transactions, so it is not
surprising that inter-FI transfers appeared so early in the
development of Web banking. But most community and regional banks
still don-t offer the feature. Moreover, there is a gap of at least
seven years between its first appearance and the August 2003 launch
of inter-FI transfers at Citibank Online -- its first appearance in
a top 10 retail bank-s consumer offering. What explains this slow
rollout? One hindrance was the argument offered by a number of
traditional banks that by launching inter-FI transfers, the bank
would lose funds, as customers
26. New Trends In Banks will move money to other institutions
that pay higher interest. This argument, dubious at first, has over
time become essentially moot. Over the last several years, online
brokers and Internet-centric banks such as E*Trade Bank launched
inter-FI transfers. These are institutions whose customers faced
the greatest challenges in depositing money and institutions that
are offering seductive returns on deposits and investments. The
customer who wants to transfer money to an account at one of these
institutions has, by construction, access to inter-FI transfers at
these institutions. The bank isnt stopping the flow of funds by not
offering the service itself. Another gap persisted between the
launch of Web-based check imaging for consumers at some
Internet-centric and community banks and the wider adoption of this
service, especially among large banks. Web-based check imaging for
retail customers first arrived in 1995. But, when the legacy
Wachovia bank, once the 15th largest retail bank, launched check
imaging in 2000, it was the largest retail bank at that point to
launch check imaging. Now, check imaging is the rule rather than
the exception. All medium-size and large banks that are currently
the exception now are launching check imaging themselves. A number
of forces combined to take check imaging from a feature confined
for years to Internet-centric banks and select community banks to a
necessity for large banks. First, digital check image capture is
required for Web-based check imaging to be feasible, but many banks
did not capture digital images when Web banking first rolled out.
Second, the proportion of customers using Web banking was small
enough at a number of banks that the benefits were not worth the
cost of systems re-engineering needed to bring images to the Web.
With the natural progression of systems and the growth in the
number of online bankers, check imaging became a popular
initiative. The advent of Check 21 legislation encouraged these
developments, but before the law was
27. New Trends In Banks even enacted, let alone in effect, more
than half of the top 10 banks offered consumers online check
imaging. The rise in 2000 of account aggregation and its fall in
later years, and the failure of wireless banking to catch on,
confirmed a truth of Web banking: There is little to no first mover
advantage in online banking, even for the largest banks. Instead,
it is often useful to wait for another bank to prove out a
speculative idea, such as the notion that customers will adopt
wireless banking when they have yet to adopt other wireless
services. But the debunking of the first-mover myth would be the
wrong lesson to learn from the slow rollout of inter-FI transfers
and check imaging. Banks that offered check imaging early on
received uniformly strong, positive feedback from customers on the
feature. With inter-FI transfers, the benefits to Internet- centric
banks such as E*Trade Bank is clear, but even community banks that
rolled out inter-FI transfers tended to stick with it in the early
years, unlike wireless, aggregation, news tickers and third-party
brokerage partnerships. Yet, other banks were very slow to adopt
either service. Rather, the lesson is that the different
technologies, customer bases and business goals of two banks can
result in an innovation that makes sense for one bank long before
it makes sense for another bank. As your banks systems, customers
and goals change, old ideas make new sense. The next enhancement
you should consider for your Web banking offering may not be the
one that all the other banks are considering right now, but an
earlier innovation that you should now reconsider. Top ten banking
groups in the world ranked by assets Figures in U.S. dollars, and
as at end-2004 1. UBS 1,533 billion 2. Citigroup 1,484 billion
28. New Trends In Banks 3. Mizuho Financial Group 1,296 billion
4. HSBC Holdings 1,277 billion 5. Credit Agricole 1,243 billion 6.
BNP Paribas 1,234 billion 7. JPMorgan Chase & Co. 1,157 billion
8. Deutsche Bank 1,144 billion 9. Royal Bank of Scotland 1,119
billion 10. Bank of America 1,110 billion Top ten bank holding
companies in the world ranked by profit Figures in U.S. dollars,
and as 2003 1. Citigroup 21 billion 2. Bank of America 15 billion
3. HSBC 10 billion 4. Royal Bank of Scotland 8 billion 5. Wells
Fargo 7 billion 6. JP Morgan Chase 7 billion 7. UBS AG 6 billion 8.
Wachovia 5 billion 9. Morgan Stanley 5 billion 10. Merrill Lynch 4
billion Top ten banks in the world ranked by market capitalisation
Figures in U.S. dollars, and as at 26 July 2006 1. Citigroup 235
billion 2. Bank of America 230 billion
29. New Trends In Banks 3. HSBC 200 billion 4. JPMorgan Chase
150 billion 5. Mitsubishi UFJ 145 billion 6. Wells Fargo 120
billion 7. UBS 110 billion 8. Royal Bank of Scotland 100 billion 9.
China Construction Bank 100 billion 10. Mizuho 95 billion Future of
banks Banks will have to change dramatically from today's
traditional institutions if they want to survive in the networked
world. They are currently introducing Internet banking to try to
keep customers, but the move to digital electronic cash, held
perhaps by the customer or an independent third party, will mean
that the cash can be quite separate from the transaction agent.
Cash does not need to be stored in a bank if records in secured
databases anywhere can be digitally signed and authenticated. The
customer may hold it on his own computer, or in a cyberspace vault
elsewhere. With digital signatures and high network security,
advanced software will put the customer firmly in control with
access to any facility or service anywhere. In fact, no one need
hold cash at all, or even move it around. Cash is just bits today,
already electronic records. In the future, it will be an
increasingly blurred entity, mixing credit, reputation,
information, and simply promises into exchangeable tokens. Any
corporation or reputable individual may easily capture the bank's
role of keeping track of the credit. It is just one service among
many that may leave the bank. As the world becomes increasingly
networked, the customer could thus retain complete control of the
cash and its use, and could buy banking services on a
transaction-by-transaction basis.
30. New Trends In Banks The key is flexibility; none of these
services need be fixed any more. Banks will not compete on overall
package, but on every aspect of service. Worse still (for the
banks), some of their competitors will be just freeware agents. The
whole of the finance industry will fragment. The banks that survive
will almost by definition be very adaptable. Services will continue
and be added to, but not by the rigid structures of today.
Surviving banks should be able to compete for a share of the future
market as well as anyone. They certainly have a head start in many
of the required skills, and have the advantage of customer lethargy
when it comes to changing to potentially better suppliers. Many of
their customers will still value tradition and will not wish to use
the better and cheaper facilities available on the network. So as
always, it looks like there will be a balance. Firstly, with large
numbers of customers moving to the network for their banking
services, banks must either cater for this market or become a niche
operator, perhaps specializing in tradition, human service and even
nostalgia. Most banks however will adapt well to network existence
and will either be entirely network based, or maintain a high
street presence to complement their network presence. Any serious
discussion of the future of the retail banking industry eventually
raises a basic question: will future customers still need banks?
The answer, it turns out, depends on banks themselves. With
technology and non-bank businesses providing new options for
safeguarding and managing their finances, customers will continue
to depend on banks only as long as banks can provide service and
value that cannot be found anywhere else.
31. New Trends In Banks There are already signs that customers
are questioning the ability of banks to look out for their
financial well-being. As a result, banks have begun to rethink
what, where and how they serve an increasingly informed and
demanding customer base. At the same time, a confluence of industry
developments, including consolidation, regulation, industry
specialization, changing workforce needs and new technologies are
putting additional pressure on banks operating models and raising
questions about traditional strategies for growth and value
creation. So, what will the future look like? How will banks
continue to grow revenues and remain profitable? What will it take
to create and maintain advantage in this highly competitive
industry? The future will require superior efficiency and
operational excellence from all banks, while industry leadership
will be attained by those institutions most adept at harnessing
product, service and process innovation to anticipate and meet
customer needs. Ultimately, banks will have to focus on their core
strengthsthose activities in which they excel and partner with
best-in-class specialists for everything else: achieving more by
doing less. Through market research and interviews with industry
executives, the IBM Institute for Business Value identified five
major industry trends that will impact the retail banking industry:
Customers redefine the rules of the game Universal banks and
ultra-focused niche players thrive Changing workforce composition
dictates new approaches Regulatory burdens intensify
32. New Trends In Banks Technology improves inexorably. In this
emerging environment, innovation will take many forms, including
advances in products and services, markets, operational processes,
customer intimacy, and new channel and diversification strategies.
But innovation will not be possible, nor will it have the desired
impact, unless banks create the requisite conditions for innovation
development. There are four strategic imperatives banks must follow
to cultivate innovation and position themselves for sustainable
growth: Focus on core strengths and partner for everything else
Optimize the potential of each customer relationship Harness the
potential of the workforce through effective performance management
Recognize that technology will be a critical element of success. By
2015, the results of two prominent competitive forces will be
clearly visible: a "middle squeeze" of traditional banks, and the
emergence of far greater numbers of industry specialists and
non-bank bankseach with distinct competitive growth strategies.
Winning through specialization As competitive forces intensify, it
is clear that banks will have to become far more responsive to
changing market conditions and emerging competitive threats, not to
mention a more empowered customer base. They will need to take
dramatic steps to redefine their business models to assemble the
best
33. New Trends In Banks capabilities in the market becoming
specialized enterprises that focus on critical, differentiating
business components within the firm. Non-core tasks should be
distributed to external specialists that can provide functionality
in open, flexible ways. As the open networked economy allows banks
to strike alliances quickly with nimble service providers, capital
will be freed up for ongoing reinvestment in strategic
capabilities. Ultimately, banks can benefit tremendously from the
industry paradox: achieving more by doing less ANNEXURE 1) What
makes your Bank different from the other banks in the market? 2)
What are the New trends followed by your Bank? 3) How does your
Bank keep up to the latest technology? Does the bank have any tie
ups with software companies? 4) What are the new products and
services offered by your Bank? 5) How does the bank maintain
customer relationship? 6) Explain your Mutual funds and the
improvements made. 7) How does the trading website of your Bank
operate? 8) How is the branch managed? 9) Can you give me some
general information about this branch?
34. New Trends In Banks REPORT ON BANKS VISITED THE COSMOS
CO-OPERATIVE BANK LTD MALAD (EAST) BRANCH There are three types of
banks: Co-operative Bank Nationalized Bank Privatised Bank Cosmos
Bank is Co-operative Bank. It is 100 year old Pune based branch.It
is a Multi-state Scheduled Bank. Other banks are having centralized
solution that they have taken up. This bank have taken up new
trends such as SMS facility, Internet Banking, Phone Banking, etc.
This bank is having a tie-ups with FINACLE COMPANY (INFOSYS) as an
software company. There is no difficulty to any customer. There is
customer friendly relationship with every customer.There is no
Mutual Fund. The branch is managed in two shifts. Staff is managed
on Saturday and Sunday also. Total 9 staff are working. Due to
modern technology there are no extra staff required.The Branches
are situated at Maharashtra, Andhra Pradesh, Baroda,
Gujarat(Ahemadabad), Karnataka, Madhya Pradesh and Mumbai.The
trading websites of this bank is www.cosmosbank.com Interviewed by
person Mr. Mayuresh (Manager)
35. New Trends In Banks ABHYUDAYA CO-OPERATIVE BANK LTD MALAD
(EAST) BRANCH Abhyudaya Bank is dealing with small traders. All
their branches are in rural areas and interior areas. This bank is
dealing with mass-banking. The new trends followed by this bank are
ATM, RTGS (Real Time Gross Settlement), Franking Machine (since 1
year), NFT (National Fund Transfer). The RTGS is above 1,00,00 and
NFD is below 1,00,000. This bank has started core banking from
Mumbai to Pune. This bank has tie up with ING Vyasa for Insurance.
They had started a new product called Abhyudaya Gold Growth Scheme
for fixed deposit on 15th July, 2007 and which was opened till 1
month in which rate of interest was 10.5%. They achieved a good
feedback from the customers and there was a tremendous response
from the customers and they had achieved lots of deposits. This
bank has personalized customer relation. They are giving Phone
banking service to any customer for any clearing cheques. They
inform the customer at the same day for clearance. They attend
immediately to customers call. Two managers Mr. Jayant Shetty and
Mr.S.S Rane manage the Branch. There are 40 staff members. The
branches are at Dadar Branch (W), Hill Road Branch (Bandra), Kher
Nagar Branch (Bandra) and many more. The trading website of bank to
operate is www.abhyudayabank.com Interviewed by person
Mr.JayantShetty (Senior Manager)
36. New Trends In Banks PUNJAB NATIONAL BANK MALAD (EAST)
BRANCH This Branch is empowered to render value added services:
Multicity cheques. Connected with 2600 net worked branches. Debit
card which can be used over 25,000 ATM. Banking from your home/
office through Internet Banking. Facility of Inter bank Transfer
through RTGS online. Earning interest on your current account.
Online trading in stock market with Depository services. Deposit of
your taxes online. Obtaining life / non-life insurance cover. This
Bank is having tie up with INFOSYS. There are 20 staff members
working. The trading website to operate on this bank is
www.pnb.co.in Intervie
37. New Trends In Banks BIBLIOGRAPHY BOOKS 1) Banking theory
and practice Srivastava.P.K Himalaya publishing house 2) Banking
products and services Indian trust of banking and finance Taxmann
publication Pvt. Ltd. 3) Modern Trends in Global Banking
Development - Viatcheslav V.C. 4) Banking and financial services in
India Sobti, Renu 5) Recent Trends In Indian Banking C. M. Choudary
WEBSITES 1) www.google.com 2) www.wikipedia.org
38. New Trends In Banks DECLARATION I, Miss ANKITA .R. GALA of
Shri Chinai College of Commerce and Economics T.Y.B.B.I. (Semester
V), hereby declare that I have completed this project on NEW TRENDS
IN BANKS in the academic year 2007 2008. The information submitted
is true and original to the best of knowledge. (Signature of
student) ____________________
39. New Trends In Banks CERTIFICATE I, Miss VINITA PIMPLE
hereby certify that Miss ANKITA .R. GALA of T. Y. B. B. I.
(Semester V) has completed the project on NEW TRENDS IN BANKS in
the academic year 2006 2007. The information submitted is true and
original to the best of my knowledge. (Signature of (Signature of
Project Guide) Principal of college) __________________________
______________________
40. New Trends In Banks ACKNOWLEDGEMENT I sincerely thank the
University for introducing a degree course in B.Com for Banking
& Insurance. This has given us an opening to gain knowledge on
the insights of the Banking & Insurance industry. A special
thanks to our esteemed coordinator Professor VINITA PIMPLE for
being a guide in the right sense of the word and motivating me
during the project. I would also like to thank the librarian of
Shri Chinai College of Commerce and Economics who helped me out in
finding out various books on the topic. It would be my pleasure to
thank Mr.Jayant Shetty, who is the senior manager of Abhyudaya
Co-op bank, Malad Branch, Mr. Mayuresh, who is manager of Cosmos
Bank, Malad Branch and Miss.Nayna Shah, who is Customer Care
Officer of Punjab National Bank, Malad Branch for giving me all the
support. This project was highly educational and a great learning
experience.