E-commerce and banking importance in business.pptx

Ecommerce banking

1. E- COMMERCE AND BANKING C HAPTER 7 Bipin B. Naik Assistant Professor, Information Technology Department , Goa College of Engineering 1

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3. 7.1 C HANGING DYNAMICS IN BANKING INDUSTRY 3 Bank was concerned about quality and capitalization. Today, banks need to focus on increasing revenues in mature market.

4. W HY D EVELOP N EW E-C OMMERCE P RODUCTS ? 4 Strengthen Relationships Create Opportunities to Sell Products P reve n t T e chnology C om pani e s a n d Non b a nk Financial Companies from taking their Customers

5. RISK BANKS FACES 5 Strategic risk Competitive (Internet-only banks, technology companies acting as banks) Adjustment (Optimum size of branch networks)

6. Operational Risk Computer or network failures could damage bank reputations. Hackers could create fraudulent transactions. 6

7. 5 FACTORS CONTRIBUTING TO NEW 7 COMPETITIVE ENVIRONMENT Changing consumer needs. Optimization of branch networks in order to reduce cost. C h a n g i n g d e mo g raph i c t r e n d s a n d pote n t i al n e w consumer markets. Gross industry competition caused by deregulation. New online financial products .

8. C HANGING CONSUMER NEEDS 8 Consumer wants to access account transfer of funds & pay bills. rel a t e d in f o, Now a da y s , cons u mer e x pect g u a rantee o n priv a cy and confidentiality of information. Long term relationship. 24*7 service E-banking

9. C OST REDUCTION 9 Reduce operating cost. Adopt online technology for providing service. Reduce cost, grow in size.

10. D EMOGRAPHIC TRENDS 10 Consumers are careful about their personal finance. Pays high premium. Plan for future, retirement plans, savings and tax. Invest in mutual funds, trust and other services. Companies should target such customers.

11. R EGULATORY REFORM 11 Banks acts as intermediaries in redistributing capital. Govt. controls and stabilizes the redistribution. their Accepting deposit in any branch from customer. R e f o r m all o w s in v e s t m ent b a n k t o bro a d e n product lines.

12. T ECHNOLOGY BASED FINANCIAL SERVICE & PRODUCTS 12 Importance of computer technology is important factor for future structure of banking. Additional development can improve future banking. Startup cost can be high ie. Investment in computer s/w or h/w and other resources. D e v elo p me n t of e - b a nking inc r ea s e c o m p et i tio n in banking market and lower OC.

13. O PEN VERSUS CLOSED MODELS 13 2 technology models of online banking. Banks need to be familiar with this models. With high level of customer interest in banking and internet many bank have announced plans to offer internet banking services. Banks have setup homepages on internet to provide existing and new customers with info. about upcoming services.

14. O PEN MODEL 14 I n o p en mod e l, co n t e nt cha n g es can occur e a s ily because of use of standard technology and component. Eg. A banking interface developed around the web is a open system that is easy to customize to bank’s changing needs.

15. C LOSED SYSTEM 15 Is one in which the changes are difficult since everything is proprietary. Eg. A banking interface developed around a package such as Intuit’s Quicken cannot be modified unless the vendor distributes a new version of it’s software.

16. K EY POINTS ON OPEN AND CLOSED 16 MODELS O pe n m o de l co n t r ol th e u s e r i n te rf a c e a n d intermediation. It also offers bank to expand array of financial service to choose their business partners when offering additional services. In Closed models, software firm acts as a intermediary between bank and customer. Software provider controls the interface design. Software provider also controls the selection of financial products and determines the choice and availability of services

17. M ANAGEMENT ISSUES IN ONLINE BANKING 17 Whether management has creativity and vision to harness the technology and provide customers with new financial products. Needs to deliver high quality products at customer’s convenience with high technology and affordable service.

18. 5 KEY VALUES THAT INCREASE DRIVE 18 CUSTOMERS BANKING DECISIONS SIMPLICITY CUSTOMIZED SERVICE CONVENIENCE QUALITY PRICE

19. FALLING KEY ELEMENT SHOULD FALL INTO PLACE 19 Development of interesting portfolio of products and services that attract customers. Creation of online financial supply chain to manage the shift from banks as gatekeeper model to banks as gateway. Identification of new market segment. Establishment of good customer service -maintaining customer loyalty. Development of effective back office support.

20. D IFFERENTIATING PRODUCTS AND SERVICES B eing w il l ing to t a k e r i s k in t e r m s o f be i ng f ir s t mover. Making strategic decisions about whether to partner with software provider Ma k ing s t rateg i c de c i s ions a b out th e p r odu c t s a n d services offered online. Strategic decision making needs to take into account the changing market structure. Strategy must includes methods to prevent customers from migrating to bank with competing online offerings. Market leader - those who enhances their image. 20

21. M ANAGING FINANCIAL SUPPLY CHAINS 21 Banks are no longer gatekeepers, but gateways to financial products. In old gatekeeper model, bank is to restrict customer only set of product choice. In new model, banks functions as flexible intermediary that provide access to entire system of products and delivery channels. Some of the products- insurance, entertainment , travel , investment management. Bank provides customer with access to value added services anywhere in the world.

22. T O GAIN ADVANTAGE BANK FOLLOWS THE STRATEGIES . 22 Investing amount of capital in building information architecture, technology infrastructure and online banking products/services. Seeking partners in online financial supply chain that links customers, intermediaries, banks, third party service providers. Moving from a product dominated (mass production) mode to customer centered (mass customization) model.

23. P RICING ISSUES IN ONLINE BANKING c) Support cost Pricing affects online banking at 3 levels: 1) Initial software pricing - In order to gain market share and achieve critical mass of customers, banks will bundle their personal finance products with new PC’s. 2) Financial Product pricing - pricing for financial products has to balance three major cost: Developmental cost Marketing cost 23

24. Developmental cost 24 - W h i ch i n clud e s c o s t associated with the design, implementation, testing and commercialization of financial products. Marketing cost - W h i ch i n clud e s co s t o f la u nc h i n g new pr od uct a n d maintaining it throughout its initial stage. Support Cost - Which includes the cost of providing and delivering the product and maintaining it via back office support.

25. 3) Usage pricing 25 is based on bank’s volume of transaction. companies offering these services must provide incentive such as low fees to attract customers to the service.

26. M ARKETING ISSUES : ATTRACTING 26 CUSTOMERS Bank must look beyond home customers for online banking. Rapid growing use of PC by small business provides good opportunity for banks to build profitable base of small business. Many firms have PC’s and Modems. new services like interactive cash management services could generate good revenues for banks.

27. M ARKETING ISSUES : KEEPING 27 CUSTOMERS Keeping customer requires following: 1) banks must switch the cost of moving from one software platform to another to keep customer from moving. - customers are familiar with using technology to access bank accounts and to handle financial affairs which increases additional services and increases switching cost. 2) Bank provides integrated service. - heavy workload, family obligations, h o useho l d man ag ement p u s h e s cu s t o m er t o w a r d int e g rated services that speed up financial procedures.

28. 3 ) B a n k can rea l i z e t he p o s i tiv e c o s t i mp l i c atio n s f o r long term value of building customer loyalty. BACK OFFICE SUPPORT FOR ONLINE BANKING Accounting – general ledger, account payable. Financial reporting - balance sheet T ransa c tio n man ag e m ent – b i ll pa y m ent, ac c ou n t management Controlling – interest transaction, operating cost Risk management – currencies, interest rate changes, assets and liabilities. Other functions – Loans, securities, insurance 28