E-business - E- banking

by alex57207 (student)

University Degree Business and Administrative studies

FINAL ASSIGNMENT

E-Business

SUMMARY

Introduction

Presentation of the E-Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . p.4

The definition of the E-Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.4
The launch of the E-Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.5
Bank online and traditional Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.5

The advantages of the E-Banking. . . . . . . . . . . . . . . . . . . . . . . . p.7

Opportunities and future prospects. . . . . . . . . . . . . . . . . . . . . p.11

Bank and social network. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .p.11
Bank and mailing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.12
The arrival of the video banking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.12

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.15

Bibliography. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.16

INTRODUCTION

For this final assignment I have chosen to take the topic of the E-Banking because it represents what is the E-business for the bank in general.

Thanks to the advent of the news technologies these last years, our lives are became very different and it has drastically changed. Internet has made that the concept of time and distance have, today, lost their significances. Banks have benefited of these new technologies and one of the sectors the most affected by internet today is that of the bank. Indeed, more and more banks offer their services online and we're seeing the emergence of banks that operate exclusively online.

In a first part, we are going to make a general presentation of the E-Banking and show the difference between the traditional bank and the bank online. Then, we will see the advantages of the E-Banking for the bank. In a third part, we will focus on the opportunities of the E-Banking for the bank and the future prospects.

Presentation of the E-Banking

The definition of the E-Banking

Before elaborating further, it is important to define what the e-banking is. Through my research, I found several definitions of "E-Banking" which is a contraction of “Electronic Bank”. First, we can see that "E-Banking" is not the only "contraction". Indeed, we may as well say "Internet Banking" or its variant "Net Banking", "Online Banking", "Home Banking", "PC banking", ... to refer to the Electronic Bank.
The definition that we could give to the E-Banking is all the services proposed by the bank that we can carry out by internet such as access to accounts, purchases of financial products, bank transfers ...
First of all, the E-banking was born thanks to the invention of the “Minitel”. French banks have explored the E-banking before the Americans who wanted to wait the launch of the Internet. Today, Americans have overwhelmingly adopted the E-Banking. Indeed, in 2001, more than 25 million Americans were using banking services via the Internet.

The launch of the E-Banking

The first service of E-Banking is appeared in the United Kingdom and has been launched by the Nottingham Building Society in 1983. The bank had developed a system based on Prestel terminals of U.K. which was a terminal (screen and keyboard) connected to the telephone system. With this system, the English people could view their bank account online, pay certain bills and also make transfers. However, to pay the bills, a confirmation had to be sent to the NBS. Thanks to this system, the English people began to pay their gas, telephone and electricity bills online. The customer had to introduce into this NBS system the payment details. The information was then sent to the NBS who sent a check to the beneficiary and an acknowledgment was sent to the owner of the account.

In the United States, the first financial institution which proposed the services of the E-Banking is appeared in 1994.
However, the beginnings of the E-Banking have not been easy. After the burst of the Internet bubble, some retail banks which had launched the E-Banking preferred to go back by withdrawing of this new market. During this period, which was at the beginning of the twentieth one century when there was the internet bubble burst, some banks become bankrupts and others wanted to reinvest in their traditional agencies. We can explain this trend by the fact that banks did not trust on Internet and that they “feared" to grow via the web.

Bank online and traditional Bank

When we talk about e-business, it is easy to distinguish between companies 100% online, and those where the Internet is a support. It is the same for the banking sector. In this area, we can distinguish 2 major types of businesses:

Brick and mortar:

This is a preview of the whole essay

Bank online and traditional Bank

Brick and mortar:

"Brick and mortar" is a term used for companies that sell their services or products only through agencies (physical distribution structures which are, for example, agencies in the banking sector).
In 2005, a survey lead in the United States showed that in 3 478 consumers, only 31% of referee, customers of a retail bank, say they want a relationship with their bankers. This means that the rest of the respondents are indifferent (40% according to the survey), or skeptical (29%) vis-à-vis this relationship.
In addition, this study also shows that the keys of dissatisfaction would be if the personnel trained by agencies do not show friendly and especially they seem incompetent.

Thanks to this study, we can note that the relationship between the customers and bankers is no longer considered essential. Then, we can think that the traditional banks will disappear in the coming years and Internet will replace the agencies.

Click and mortar

The term "click and mortar" is used to describe the companies which sell their services or goods through physical structures, such as agencies, but also via Internet.
The client may extend its operation, via internet for example, after establishing a relationship with a person. In the banking sector, this means that the customer can open an account in a bank agency with a person and after consult the account and make some bank transactions via the Internet. Or conversely, customers may have opened a bank account on internet and manage their account through an agency.

We can take the example of stock exchange operation. The customer has all the information of the market, as the evolution of the stock exchange prices often presented on the site of the bank, and therefore can directly send a stock market order behind his computer. The execution of this order will be then completely automated. This is what we call an approach multi channel because in this case, the Internet is considered as a tool available to the client among other possible solutions such as moving to his agency, call ...
This development is due to the increase of the customer demand to be able to have an offer equivalent to that available in the agencies. Some people begin to think that agencies are slowly dying because they are rejected by the new generations and the oldest starting to accustom to Internet. For the majority of people today, go to an agency is considered as a "chore" because customers consider losing a lot of time in these agencies while they can do their banking transactions directly from home.

Today, we see to appear the Bank which sells their service and financial products exclusively on Internet without some “physical” agencies.

Today in the bank

Today, the majority of the banks are in the second category "click and mortar". Quasi all the banks offer online services.
This can be explained by the life that we lead and the lack of time associated. The use of the E Banking is the best way for us, active people we are, to carry out our banking transactions directly from our office or our home.

The advantages of the E-Banking

To define the advantages of e-banking, it is essential to define the two different points of view which are those of the clients and those of the banks. So we will define the benefits of the E-Banking through these two points of view.

According to the customers’ point of view

From the clients’ point of view, we first hypothesized that the advantages of E-Banking is largely similar to the E-business because the E-banking allows them to benefit of the advantages such as:

- Availability 24/24:

Any time or any day, the customers may realize their transactions at any moment. That is the big advantage of the E-Banking. Customers do not wonder if their agencies are open or not.

- Ability to carry out banking transactions anywhere in the world.

The main characteristic of the Internet is that we can use it anywhere in the world. Thus, one of the major benefits of E-Banking is that no matter where the client is, he can do banking transaction. Geographical distance is no longer a problem with the E-Banking. The customer can do banking transactions quickly and easily from home and everywhere in the world. One of the advantages of the E-Banking is also that the customer does not need to make queue to access at a bank counter or an ATM.

- More and more services offered

Over the years, features, options, possibilities and applications have been enriched and the customer can now find a whole range of information that allows it a management of its bank account more and more complete.

2) From the point of view of the bank

New perspectives…

At the beginnings, banks used the Web as a "shop window" with the goal to present the company. Over the years, banking sites have evolved into true transactional tools. Thanks to the web, customers could then obtain information about the various banking products offered by the bank, check their accounts ... It even became possible to contract a loan or do investment transactions.

Initially, and like most companies that were present on the web, using e-banking was paying. Indeed, the first companies that have developed assumed that they invented something totally new and that people would pay to use it. Today, the services of E-Banking are free.

It is at the end of the 90’s that the majority of banks developed websites. At this time, the websites of the banks were only marketing tools.

In 2006, banks began to develop their sites by offering to do some banking transactions directly online. The customer could then control their balances, pay online or make the reporting of a change of address online.

However, there are a number of services which cannot be carry out totally online because it requires a physical identification.

Now, banks are forced to build their websites with the "Web 2.0". With the “web 2.0”, these are the sites which have to ensure the security and have not to counted on the firewall or the antivirus of the customers. Also, it allows use E-Banking with any device (including mobile phone).

To summarize, we can say that the functionality provided by a web site can be divided into three opportunities for the banks such as:

A tool for the transmission of the information
To sell products and services bank
To improve the relationship between bankers and customers

A real time saver

Customers making their banking transactions via the Internet constitute a significant time savings for employees of the bank. The banks are always arranged themselves for that the customers meet the least possible the employees. The fitting out of the bank may let to us think that the banks want to avoid that the customers come to the counter. Indeed, when a customer enters in a bank, it has to pass at the front of lots of ATMs. It is possible for a client to approach the counter only after passing these ATMs. This arrangement is made for that the counters are used as little as possible and to reduce the number of transaction made manually. Since the creation of the ATM and more recently the advent of the web, banks have succeeded to reduce the number of customers which come to make their banking transactions in the agencies.
The e-banking is a huge time saver for banks but also for the customer. This automation makes it possible to employees of the bank to reduce the time of transactions processing and then thanks to the E-Banking, there is a better productivity.

The reduction of the costs

One of the most important assets of the E-Banking for a bank is the reduction of the costs. Indeed, transactions cost are very important for a bank because they directly affect the net profit. Like any business, the profitability of a company depends in part on its costs. If they are reduced, then the profitability will be higher. Thanks to the new Internet technologies, the costs of transaction, treatment and others have largely decreased.

The following table shows the different costs of a transaction according to the channel:

As we could easily imagine, the transactions costs by internet are considerably less expensive than other distribution channels. Indeed, the cost of an Internet transaction is only one cents, while for a transaction made at the counter, it is about $ 1, or 100 times more expensive than by Internet. That is why we often see advertisements in the agencies boasting the use of Internet banking.

It is also interesting to note that the cost of an ATM transaction is about 72 cents cheaper than if the client do it at the counter. That is why the banks want to push their customers in other channels than the agencies to improve their profitability in reducing their costs.

Opportunities and future prospects

Bank and social network

Banks are also beginning to use social networks to promote their products, as lots of companies in any sector. Firstly, quasi all the banks have at least one Facebook page accessible to all.

However, other banks such as Fortis, for example, sees in the social networks a clever way to gather information and statistics about its customers and more particularly on the contractors. The idea of Fortis was to create a social network for European entrepreneurs and thanks to that establish a profile of each member and thus be able to offer the product which will correspond at their waits, their needs.

Fortis wants to imitate Facebook because according to how the contractor describes itself, the products the most susceptible to interest it, will be it offered. On Facebook, when we "like" a page as Macdonald for example, several advertising of hamburgers or "Fast Food" arrive on our homepage in order to we "entice". It is thanks to the information that we give without realizing it that the advertising which are the most susceptible to interest us appear. The main challenge, however, for Fortis is to win the confidence of its members by building credibility but also to position itself as a financial partner for European entrepreneurs. Therefore, Fortis will then use the information collected on each member in order to improve its communication and target its marketing campaigns or even to launch new financial products. The advantage for entrepreneurs, users of this concept, is to quickly create an European social network through Fortis where they can exchange knowledge, ideas and also create some business relationships.

Bank and mailing

Thanks to client portfolios, the mailing is widely used by the banks to introduce new products or promotional offers, but also to highlight the news investments fund. The fact that it is free, this mode of communication is widely used by the banks and the others companies.

However, the problem with this kind of communication is that, according to one study, more than the half of E-mail sent is not opened and then read by the recipient. Indeed, today the E-mail boxes are more and more “spammed”.

The arrival of the video banking

One thing that will greatly affect the banks and in particular the E-Banking will be the using of the video channel as the "video over IP." With this new technology which will soon be used by banks, the customers and the banker could meet themselves via the web visually and verbally. We know that one of the disadvantages of the E-Banking for the clients is that the relationship between customers and bankers are not present anymore. That is why customers are still quite skeptical about the use of the E-Banking because the bank-customer relationship was no longer present. Thanks to the "video over IP," this relationship will be able to once again be present. Indeed, with this new method of "Internet video", the customer could, before making any financial transactions, have a discussion face-to-face with his banker. The only differences will be the fact that this discussion will be done via Internet and distance (the client will is at home or office and the banker at his place of work). Human contact, which is one of the fundamental pillars of the banks-customers relationship, will be always present. To sell a financial product, the customers need to have a dialogue with his bankers. Banks need more focus on human elements to be different from the others. Therefore the arrival of the "video banking" may be a revolution for the E-Banking and also for the e-business in general.

However, before the arrival of the video banking, it remains at the banks several questions such as, for example, if the clients will have the material necessary and the skills required to use this kind of material, how the bank could protect the private life of its employees in the case where a customer use the images of the conversations for any reasons …

The bank needs to let, to the first customers, a good image of this new kind of communication. Indeed, it will be very bad for the image of the bank if, for example, an operator of the call center does not arrive to make work the system.

Thanks to the video banking, the banker and the customer will share one screen of data. All the information concerning the latest customer transactions, as well as its latest banking activities of any kind will be present on the screen of the banker and the client. However, the banker will have some additional data which will be reserved it as the marketing program for example, the "credit store", some information reserved to the employees of the bank ... These information are designed in order to offered at the customers the banking services or products that would be most in line with the banking situation of the customer. In other words, they serve to assist the banker to sell their services and products.

The use of this new kind of communication which is the "video banking" is, today, only available to customers with high value but in the future, it is sure that this new mode of communication will be used in mass, that is to say for all types of clients. We can imagine that tomorrow, the use of "video banking" will dominate the next generation of retail banks and the e-business in general because it could be used for any companies which sell their services or product on Internet.

CONCLUSION

To conclude, we have seen that the main advantages of the E-banking are the same than the E-business in general. Indeed, as any companies which offered their services and products on Internet, for the clients, there are availability 24 / 24, we could make some banking transactions everywhere in the world, … and for the bank, the costs have largely decreased when the transactions are made on internet and there are lots of opportunities of growth for the bank with the E-Banking. We see appear today some bank which operates only on Internet and that did not exist there is only 4 years. Then we can think that in the future, the traditional bank will be replaced by the E-banking and the agencies will disappear.