Post-liberalisation, among the many changes witnessed in the banking sector, one that touched all of us has been the ease and convenience of access to banking services. No longer do we have to live by the 10 am to 2 pm timing of the neighbourhood bank to operate our accounts. No longer do we even have to go to the bank.

A key driver of this shift has been the rapid deployment of technology and e-banking channels by banks. Innovations in e-banking have in fact become a tool for banks to differentiate their services to woo customers.

Technology has also enabled banks to provide the convenience of anytime-anywhere banking to their customers. The earlier brick-and-mortar model is no longer sufficient; technology is now taking banks to the customers’ homes and offices 24X7 through delivery mechanisms like ATMs, phone banking, Net banking, mobile banking and doorstep banking services. The financial supply chain is undergoing a fundamental strategic change.

This trend of non-branch service delivery in banking started with the growing popularity of electronic payment services. Then came credit cards, ATMs and smart cards in the evolution chronology.

Gradually, with the advancement of computing technology, e-banking became a powerful medium of delivering banking services. Though this is being well received by new age customers, banks are still facing a challenge in terms of client retention.

Banks have taken up the challenge and are educating and incentivising customers to use these facilities. For instance, ABN Amro is rewarding its clients by giving royalty reward points for making transactions through the direct channels. ABN Amro has gone a step further and is now working on a card-less cash withdrawal service that would help clients withdraw cash in an emergency from an ATM even if the person is not carrying his/her ATM card.

Internet penetration has seen a huge surge in recent years; services like online flight and railway bookings are making a sea change in the common man’s attitude towards this medium. Though the new technology is sweeping forward, some challenges remain. Customers tend to forget or misplace their Net banking passwords, which is one of the biggest hurdles in the growth of this channel.

However, some banks have revamped their online banking module through which a customer can create his own Net banking user ID and password, as many times as he wants, whenever he wants. ABN Amro saw a big surge in online banking users, witnessing a 45% growth within the first five months of the launch of the new Net banking module.

Internet banking today is not just limited to regular banking transactions but is playing an important role in capturing the daily household transactions—while sitting at home you can pay your bills and shop for just about anything. The market has seen newer business models of aggregators coming in this space.

With limited bandwidth of the banks, these aggregators tie-up with both merchants and banks to facilitate online or mobile payments for shopping on merchant portals.

With the surge in Internet penetration, security concerns have also increased. Banks today use high-encryption security systems and have continuous monitoring and auditing by internal as well as external security teams.

The direct banking channel reduces the transaction cost for a bank when compared to the cost on traditional channels; in fact in some cases the potential of saving could be 90% of the usual channel cost. The migration of clients’ transactions on direct banking channels is not only cost effective for a bank but also increases the clients’ engagement with the bank. Thus, the nonbranch delivery model is here to stay and in the coming years it will consolidate its position further in the minds of the consumer.