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Nitte Education International Post Graduate Diploma (Banking & Finance) Digital Banking & Alternate Channels Module 1
P a g e | 1 Post Graduate Diploma (Banking & Finance) Introduction This module on Digital Banking & Alternate Channels carries three credits and has eight units. It is very important for the present-day banker to be aware of technological advancements in the banking industry and be comfortable with the use of digital banking. This module deals extensively with Digital banking and Alternate Channels. The module has been designed keeping in mind learner requirements and from the learners’ perspective. This reading material is part of the courseware provided by Nitte Education International Private Limited (hereinafter referred to as “NEIPL”) to students of the PGD(B&F) course. The proprietary rights to the material rest with “NEIPL”. No part of the reading material may be reproduced, photocopied or transmitted in any form without prior written permission of “NEIPL”. All efforts have been made to ensure the correctness of information in the reading material and to provide the latest information. However, there are bound to be changes in the industry, and NEIPL reserves the right to change and update information from time to time. NEIPL is not liable for any loss or damage arising from the use of the information provided. Reference: NEI/PGD(B&F)/2024/DBAC/INSB2.1V1
P a g e | 2 Post Graduate Diploma (Banking & Finance) Module 1 This module deals with: Introduction to Digital Banking • Need for and concept of Digital Banking. • Replacement of traditional face-to-face (F2F) services. • Future of banking services channels, cost-benefit analysis. • Need for Customer Education and awareness of Digital Products (Cards, POS Terminals, UPI, and Payment Systems). • Use of biometrics. • Power of Digitization. • Cyber Security, Cyber Crimes/threats and proactive preventive measures. Introduction The Narasimham Committee of 1993 advocated competition in the banking industry. It recommended licenses for private and foreign banks into the industry. Based on these recommendations the RBI laid down guidelines for the establishment of the private sector banks in January 1993. This was a turning point in the history of banking in India, not because of the entry of private banks but because all new generation private banks started on a 100% CBS platform. Therefore, they could offer the best of the services to their customers. Today they have become a dominant force in the financial service industry in India by putting technology to best use. A stable and sound financial system is essential for growth of the economy. But for a more equitable growth, the financial system requires depth. A wider distribution and access of financial services helps raise welfare and productivity of all sectors of the economy. World over banks have moved towards a more paperless, non-face-to-face banking and have to a great extent moved away from the traditional brick and mortar structure of banking. This has enabled them to progress faster through use of improved technology and better customer service. Customers have been using digital platforms for most of their banking transactions. Internationally banks have leveraged digital technology for improved quality of service and enhancement in business. On one hand with globalisation there is a need to transact on huge amounts of funds without actually involving physical cash and the need of the market and the populace for added services from banks and the need for banks to become one point contact for all financial needs of customers, the shift has taken place in the banking industry towards technology enabled banking and towards the birth and boom of alternate channels of delivery.
P a g e | 3 Post Graduate Diploma (Banking & Finance) Need and Concept - Digital Banking Digital Banking is the use of digital technologies to provide enhanced service experience to customers. Digital technologies may mean use of electronic tools in an innovative way. Digital technologies are used in digital banking to facilitate banking transactions in a cost effective and efficient way. Around 40% of the population in India is within the age group of 25-54 years. Average age being around 29 years. This generation has grown-up surrounded by gadgets, be it with desktop computers, laptops, tablets, iPads or smart phones. The financial service industry too is catching up with the trend. Replacement of traditional face-to-face(F2F) services A study by Price Water Coopers reveals that traditional banking might be on the wane since the new generation has shifted preference towards more fast and convenient methods of banking using the latest technologies like internet and mobiles. There is a reduced interest in the traditional “brick and mortar” banking. Recent developments which have added thrust on digital banking includes- ⚫ Interactive interfaces. ⚫ Ability to access internet from multiple devices using different platforms. ⚫ Advances in data analytics which gives real time analysis of customer tastes and preferences. ⚫ Artificial intelligence and voice recognition. ⚫ Government regulations and state interventions to promote digital banking. Customers desire to better his banking experience by having all or many of the features as given below- 1. Speed of transaction/ service: Digital age is the age of high-speed transmission. Time lag in service is immediately felt by the customer. Customers are used to this speed elsewhere while surfing the net, hooking up on social media, movies, entertainment etc. Customers would want their experience with banking transactions to match their other experiences. 2. Convenience and ease: Customer access points should be user-friendly and simple to use. Most often customers are put-off by tedious and complicated banking procedures. 3. Appeal: Customers must find the product or service attractive and appealing. 4. Reduced cash handling: Cash handling is burdensome and risky. Banking transactions should help reduce handling of cash at branches. 5. Security: This is one main deterrents in the use of digital channels especially among the illiterates and aged. Customers expect paperless transactions through banking channels to be safe and secure. 6. Better planning: Customers rightly expect digital banking channels to help them plan their banking needs in advance e.g. Schedule bill payment.