TECHNOLOGICAL ADVANCEMENT AND BANKING SECTOR

The banking industry plays an important role in the economic development of a country. It supplies the life blood –money that supports and fosters growth in all the industries. Banking all over the world is undergoing significant changes. In India too, steps are being taken to improve the banking system to suit the changing requirement of the customers.

Technology has given birth to a new era in banking. Technology can be the key differentiator between two banks and a major factor to attain competitive edge. Technology systems of Indian banks have been rated more advanced than china and Russia at par with Japan, but less advanced than Singapore, U.K. and USA.

Some of the major strengths of the Indian banking industry, which helps mark its place on the global banking scene as highlighted by Annual survey on Indian Banking system by FICCI are Regulatory systems (84.21%), Economic growth rate (63.15%), Technological advancement (52.63%), Risk assessment systems (47%) and Credit Quality (42.1%).
Technological up gradation has been identified as one of the most important strategies successful in customer acquisition and retention by public, private and foreign banks in a survey conducted by FICCI.

During the past few years the banks have undertaken a swing of IT initiatives including branch computerization besides computerization of all controlling offices. With the introduction of the internet and the opportunities it has provided, new products and services are emerging that are set to change the way we look at money and monetary system.
Core Banking

Core banking technology is a term used generally to define mature back office production systems used by banks to manage the core of their business. This core business is all the processing of all products services and information. Core Banking is an integrated core solution that will provide functionality such as:

1. Automatic Teller Machine(ATM) : It is a machine permitting a bank’s
Customers to make cash withdrawals and check their account balances at any time, anywhere and without the need for a human teller.
2. Bankers Automated Clearing System (BACS): Using BACS a large number of payments can be transferred directly into appropriate account across a number of banks and in one payment, covering the amount, which is paid out of the client’s own account.
3. Tele Banking Services: It is a service for customers doing banking transactions via the telephone.
4. Cash Management Services: Banks offer a number of sophisticated services to larger clients to help them manage their funds world wide.
5. Electronic Funds Transfer (EFT): EFT is defined as “any transfer of funds initiated through an electronic terminal, telephonic instrument or computer magnetic tape so as to order, instruct or authorize a bank to credit or debit an account”.
6. Electronic Data Interchange (EDI): EDI is the exchange of documents in standardized electronic form, between organizations in an automated manner, directly from a computer application in one organization to an application of another.
7. Electronic Cheque System: In this electronic cheque system, a consumer processes an electronic cheque book on a personal computer memory card international association card (PCMCIA). Cheques are written electronically from the e-cheque book on the card.
8. Cyber Cash: Cyber Cash offers a secure medium to deliver payments between customers, merchants and banks in e-commerce transactions..
9. Credit Cards: A credit card is a payment card issued to a person for purchasing goods and services and obtaining cash against a line of credit established by the issuer, for which a card holder is subsequently billed by an issuer for repayment of the credit extended at once or on an installment basis.
10. Debit Card: This plastic card looks like a credit card, but it is used to withdraw money from savings or other accounts.
11. Smart Card: Smart cards have a built in micro computer chip which can be used for storing and processing information. When inserted into a reader, it transfers data to and from a central computer. It can be used to store personal identifications, medical history, and insurance information and to store thousand more bits of information than a magnetic stripe card, although it requires a special card reading device. The smart card being developed will combine all the features of electronic purses, credit cards and ATM Cards.

By 2015, market will become intensely customer-centric and dominated by global mega banks and densely populated by financial service providers. Innovations in products, processes, relationships and business model will be the primary path to sustainable growth. Customer today is open to ideas, demands flexibility and is looking for innovations and new products.
Technology has moved from being just a business enabler to being a business driver. Be it customer service, reducing costs, achieving profitability, developing risk management systems we turn to technology for providing necessary solution.