E-Banking: Trend, Status, Challenges and Policy Issues
E-banking: Status, Trends, Challenges and Plan Implications 1. Precountenance In individualization to precountenance (minority I) and blank (minority VI), the Nursing Dissertation comprises indelicate minoritys.
Minority II addresses the unfairation and popular residence of e-banking. Then, minority III addresses the contact of e-banking on banking duty. After that, minority IV addresses the superior collision of e-banking. That is too the reasonwork verse whether e-banking can be viable in a dominion. Minority V addresses the new challenges e-banking has brought and plan implications from the perspectives of company, banks, and regulatory antecedent as courteous-mannered-behaved-behaved as council. . Status 2.
1. Specification • The Internet comprises all connected web-enabling technologies and exoteric telecommunication networks ranging from trodden dial- up, the exoteric Cosmos-people Wide Web, cable, and leading peculiar networks. (BIS-EBG, 2003) • Internet banking (e-banking) is fixd to comprise the produce of retail and feeble treasure banking products and benefits through electronic mediums as courteous-mannered-behaved-behaved as ample treasure electronic acquittals and other negotiateable banking benefits delivered electronically. (BIS-EBG, 2003) 1 2. 2. Fundamental characteristicsComparison unformed the popular smooth financial newfangledness (e-banking) and gone-by financial newfanglednesss The popular newfangledness (ebanking) Content Bestowal medium newfangledness-deliver banking duty via internet. Contact Wider Gone-by financial newfanglednesss Products and benefits, i.
e. , bestowal, swap Narrow 2. 3. Levels/Scope of e-banking duty • • Basic notification e-banking/web sites that right promulgate notification on banking products and benefits presented to bank customers and the unconcealed exoteric; Simple affairal e-banking /web sites that apportion bank customers o propose collisions for irrelative benefits, perform queries on their representation balances, and propose instructions to the bank, but do no encourage any representation removes; • Tardy affairal e-banking/web sites that apportion bank customers to electronically remove funds to/from their representations pay bills, and persuade other banking affair online. • Usually, e-banking refers to images II and III. 2. 4.
Popular fruit residences (in industrial calculateries) • E-banking products and benefits are getting balance and balance tardy and increasing in medley.From providing notification at the present mark to providing affairal activities. 2 • • Twain distance and divide in the aggregate banking duty are getting bigger and bigger very firm (Graph, Europe) E-banking customer dishonorable is getting bigger instantly. 2. 5. Status in developing calculateries Developing calculateries are in pestilential up in e-banking: • • • • • • The medium e-banking sagacity for developing calculateries by the end of 1999 was suspend to 5% (World Bank Survey, 2001). In Brazil, the enumerate of e-banking users stretched 8 favorite in 2000.
In Mexico, the enumerate of e-banking users stretched 1. 5 favorite in 2000. In India, balance 50 banks are subsidy onverse banking benefits. ICICI Bank’s e-banking is very impressing. E-banking in Korea, Thailand, Malaysia, and Singapore, Hong Kong and Taiwan (China) is thriving. In Ghana and some other African calculateries, ready cards dishonorabled on Visa Horizon proximately technologies are getting instituted. 3.
Prospects--Impact of E-banking on oral banking 3. 1. The present ordinary attainment: • • Internet banking would subvert the oral banking duty design and raise the minute of newcomers from the beyond of the banking activity.Developing calculateries could own the “opportunities to leapfrog” in the graftion of efinance on a ample flake. 3. 2. In substance, e-banking develops firm, but not deleterious as ordinary attainment contemplated.
• The belief of leapfrog has not worked in frequent developing calculateries due to multiform impediments. This can be authorized by UNCTAD ment. “Some real signs are 3 already manifest, including a violent plane of calculateersegregate of technology by customers and financial institutions…. H(h)owever, most projects own not yet been deployed on a ample flake. ” (UNCTAD 2002. It contributes a all observe at the status of efinance in developing calculateries.It cloaks dispose of areas connected to e- finance including e-banking, e-payments, e-trades, and e-belief notification).
• • Even in industrial calculateries, e-banking is stagnant a supplyary tools to oral banking. Lots of unmixed e-banking dutyes own been solid out of negotiate. Internet-solely banks own been in-effect short beneficial. They beget inferior duty distances and any savings begetd by inferior natural balanceheads answer to be offset by other images of non-concern expenditures, notably negotiateing to invite new customers. (De Young 2001). 3. 3.
Prevailing longing • The ruling intention today is that Internet banking can solely excel if it is fully integrated amid the massive banking infrastructure, which should integrate “click” (e-banking) after a opportunity “mortar” (natural branches) due to the weight of exoteric commission in banks, the treasure of an recurrent disgrace indicate, and the yearn of customers to do something naturally. • According to this intention, Internet is present solely as another arrangement medium as a supply to natural braches, phone banking and ATM networks. The superiority of the so-called “click and mortar” design can be explained by its amiable-fortune on the reason.Two amiable outgrowths are Wells Fargo in the US and Nordea in Scandinavia. 3. 4. Case-study--experience from the two most amiable-fortuneful conditions Two most amiable-fortuneful outgrowths: • • Wells Fargo (US), has really the violentest arbitrary enumerate of onverse customers, balance than 3 favorite out of its aggregate 24 favorite customers in 2001.
Nordea (Scandinavia), has 2. 3 favorite onverse customers, representing balance 20% of its aggregate customer dishonorable. It has the violentest divide of onverse customers. 4 They divide the subjoined low elements: • • • • • Twain are conveyers in their oral negotiates and thus can excellentize on a sizable customer dishonorable.Furthermore, their customer dishonorable is technologically undulating. California and Scandinavia own greatly violent rates of Internet use. Twain are technologically tardy and instituted present in Internet deployment.
Wells Fargo instituted e-banking duty as present as in 1989. Twain own tightly integrated Internet in their operations and their massive infrastructure. Twain own ample enumerate of SME customer dishonorable. 3. 5. Prospects Groundwork verse: the ability to mainstream SME and men-folks into E-banking. 4.
Trend: The superior collision of e-banking—SME finance E-banking is used balance and balance for graceful bearing to finance.Financial constraints for SMEs own never been powerfully unfoldd and own been victuals irresistible. This minority gain cbalance the advantages of e-banking on this air. 4. 1. Obstacles to SME’s bearing to finance 4. 1.
1. from banks’ perspective • • • Violent demands and low profitability of SME advances owing of the feeble advance distance. Violent facilitates of SME advances due to failure of duty vestige annals, belief narrative, and limpid notification. Evaluating SME facilitate is “too labor- intensive” to be beneficial. 5 • Frequent banks failure strategies and skills to harness impediments associated after a opportunity SME finance.In frequent developing calculateries, the staff of banks failure wantful skills to unexceptionably assess belief facilitates of SMEs 4. 1.
2. from SME’s perspective • Inmisspend products and benefits, which are rigidly supply-driven instead of demand-driven. Commercial bank products are usually intentional to unite the wants of ample corporations; few products and benefit are unfairally tailored to the wants of SMEs. SME sector is usually beneathserved. • • • Violent concern rates. SMEs usually insist-upon weighable feebleer advances than ample enterprises. banks, consequently, usually direct violent margins to cbalance the demands.
Cumbersome procedures.Over insistence on indirects and guarantees. SMEs usually own low- plane of unroving amiables and relatively violent- plane of working excellent. Therefore, when lending to an SME, a bank wants to assess the SME’s economic viability and coming capital issues instead of indirects. However, in frequent developing calculateries, banks are stagnant in the very present mark of mastering gauge lending policies and amiable belief practices. Their lending answers to solely depend on indirect rather than capital- issue projections. banks’ failure of cleverness of non-indirect belief tribute has caused them feeble to contribute lending benefits to SMEs.
Inflexible belief criteria—one distance fits all. 4. 2. New Technology, New Hope for SME Finance 4. 2. 1. From bank’s interest, new technology (e-banking) performs SME finance economically practicable (i) inferior operational demands of banks • • • Automated way Accelerated belief conclusions Lowered insufficiency advance distance to be beneficial (ii) hypothetically inferior margins 6 • • • • • • Inferior demand of minute Expanded financing stretch Increased notoriousness (iii) develop stretch through self-benefit Inferior affair demand Perform some municipal benefits economically practicable for SMEs Perform anyopportunity bearing to representations and advance notification practicable .
2. 2. From SMEs’ perspective E-banking duty performs bearing to finance from banks inviteive. SMEs own benefited from the fruit of E- finance and gradually stepped out of the ambagious sector. In point, E- finance presents the subjoined inviteive benefits for SMEs: • • • • • Ease of use Inferior demands of financing Convenience Opportunity savings Operational competency 4. 2. 3.
From the council’s perspective New technologies own contributed the inducements/benefits for the council to correct SME finance by • • • • Increasing circumventing. Contributing to indigence abbreviateion. Contributing to economic fruit.Reducing the ambagious sector and capital rule1 . 1 Failure of SME’s bearing to FIs is one of the superior reasons why there are usually big ambagious economic sector (capital rule) in frequent developing calculateries. Improved SME bearing to stately financial institutions is expected to narrow the ambagious economic sector. 7 5.
Challenges and plan implications 5. 1. Cross-border e-banking activities and its plan implications 5. 1. 1. unfairation • Definition: Cross-border e-banking is fixd as the produce of affairal on- verse banking products or benefit by a bank in one dominion to residents of another dominion. BIS, 2003) • • A still n ess on the unfairation: A bank delivering its e-banking activities via its natural branches/ subsidiaries in a multitude dominion does calcudeceased into cross-border e-banking.
A raise still n ess: banks can use the new bestowal medium (e-banking) stretch customers in another dominion after a opportunityout as weighable assurance on natural influence and the speaking bombardment that it entails (example). 5. 1. 2. Two scenarios • • The in-out scenario—In-dominion institutions providing banking benefits to customers beyond the residence dominion.The out- in scenario—institutions dishonorabled beyond the residence dominion providing banking benefits to segregateies amid the residence dominion. 5.
1. 3. Raised frequent challenges and investigations for banking regulatory authorities (twain residence and multitude) • Who should charm the superlonging commission? Bordershort affection of e-banking extension the immanent for poweral ambiguities after a opportunity honor to the superintendry responsibilities of irrelative exoteric authorities. Such residences could convey to scant superlonging of cross-border e-banking activities. • • Does it want to be licensed?Banks that buy in cross-border e-banking may countenance extensiond lawful facilitate. Specifically, unshort banks persuade deferred due application they run the facilitate of immanent non-compliance after a opportunity irrelative exoteric laws and regulations, including 8 ry consumer refuge laws, annals-keeping and menting insist-uponments, solitude rules, AML rules. • Non-banks may present after a opportunity superior dexterity bank- enjoy benefits after a opportunityout any image of superintendry praise or balancesight due to unfairational ambiguities that may endure wit revere to what constitutes a bank (or banking benefits).
• • • Which dominion’s law applies to cross-border e-banking activities.Role and responsibilities of the residence dominion banking superintendr and general superintendr. Supervisors want to acknowledge that the Internet apportions for the produce of e-banking benefits that can p geographic borders and hypothetically circumvent into investigation massive poweral authorization insist-uponments and the regulatory wayes; • Supervisors want to acknowledge the implications of taking a stringent way toward popularly regulated banks after a opportunityout an upright tenor of exotic constructions that may persuade corresponding or npresent corresponding activities via the Internet in the general power. Supervisors should secure that banks unexceptionably direct the lawful doubt during the duration opportunity the lawful infrastructure for cross-border e-banking offscourings beneath reading. 5. 1. 4.
Its plan implications • Plan goal: The external of twain the multitude and residence superintendrs should be to shirk or minimize lawful facilitates stemming from poweral ambiguities, and to secure that e-banking activities are deferredly supervised after a opportunity clpresent fixd superintendry responsibilities. •Basic origin: Centre care on the want for powerful residence dominion superlonging of cross-border e-banking activities on a dim reason as courteous-mannered-behaved-behaved as continued interexoteric society unformed residence and general banking superintendrs revereing such activities consecrated the practicable stagnation of a natural banking influence in general power. Such as centre is leading to raise secured and gauge cross-border e- 9 banking after a opportunityout creating undue regulatory bundle or impediments to banks’ use of the internet bestowal medium to unite customer wants. Complementary origin : Residence superintendrs should contribute multitude superintendrs after a opportunity notorious notification on how they balancesee a bank’s e-banking activities on a dim plane. Multitude superintendr would unconcealedly depend on the residence superintendr to powerfully convey out its superintendry program. Where there are concerns about the powerfulness of a residence superintendr’s balancesight program, the multitude would way the residence superintendr on a bilateral reason. The multitude superintendr gain want to weigh what actions may be misspend to save general residents and their banking plan.
Society unformed exoteric superintendrs . Rapid gait of fruit of e-banking and the associated facilitates gain insist-upon superintendry agility, instrument and, in the crossborder texture, society unformed residence and multitude superintendrs. 5. 2. From the company’s perspective 5. 2. 1.
Challenges 1. Theft of identical oneness 2. Solitude issues 3. Who charm the commission in condition of injury 5. 2. 2. Plan implications 1.
Leading are efforts to fix the solitude framework and to use technology to unfold abbreviate enforcement problems. . 3. From bank’s perspectives 5. 3. 1. Facilitate directment challenges • Adaptation to Technology issues: The expedite of fluctuate relative-to to technological and customer benefit newfangledness in e-banking is rare.
This intensifies challenges to the directment to secure that deferred strategic tribute, facilitate 10 decomposition and securities reviews are persuadeed precedent to instrumenting new e-banking collisions. • Outsourcing issue: E-banking extension banks’ ependence on notification technology, thereby increasing the technical confusion of frequent operational and deposit issues and raiseing a incline towards balance societys, alliances and outsourcing disposements after a opportunity third segregateies, frequent of whom are irregular. • • Increased lawful and reputational facilitates E-deposit issue: The internet is ubiquitous and global by affection. It is an exoteric network bearingible from anywhere in the cosmos-people by mysterious segregateies, after a opportunity routing of messages through mysterious locations and via firm evolving wireshort devices.Therefore, it raises speaking challenges on deposit governs, customer evidence techniques, basis refuge, audit copy procedures, and customer solitude standards. § Opportunity companies own been serenesighted to contain the immanent presented by these technologies, few beneathstand the innate inshelter and facilitates associated after a opportunity e- finance. Since 1999, Brazil has seen a 418% extension in electronic deposit incidents; Korea has seen a 932% extension and Japan has seen balance 1000% extension in choleric electronic deposit incidents (Tom Glaessner et al, 2003).
§ Balance 57% of all hack attacks in 2002 were indoctrinated athwart the financial sector (Tom Glaessner et al, 2003). Oneness Theft has rejected and incidents are expected to stretch approximately 2 favorite per year by 2005 wit a demand of approximately US$10 billion. • Outsourcing issue: E-banking extension banks’ belief on notification technology, thereby increasing the technical confusion of frequent operational and deposit issues and raiseing a incline towards balance societys, alliances and outsourcing disposements after a opportunity third segregateies, frequent of whom are irregular. • Increased lawful and reputational facilitates 11 5. 3. 2. Plan implications/recommendations .
Establish a all deposit govern way. • • • • Evidence of e-banking customers Misspend measures to secure animosity of duties Establishment of notorious audit copys for e-banking affairs Non-repudiation and representationability for e-banking affairs 2. Centralized-back employment to unreserved staff opportunity in sales and benefits areas and to thicken way conformably across the construction. 3. Develop automated belief authorization plan by developing misspend belief scoring plan and capital- issue scoring plan to narrow loose demands, correct asset tendency, and extension client profitability.One of the superior benefits of belief scoring plan is that claimants can perform belief conclusions after a opportunityout necessarily obtaining financial assertion, belief ments, or other opportunity-consuming and hard-to-get notification. In point, the financial assertions of SMEs are repeatedly not accomplished and up-hill to get.
Banks can balance suspendly align their unfair belief policies and negotiateing strategies after a opportunity the analytics, making the conclusion way balance demandefficient. (I. e. , Fair, Isaac has patent clear a belief scoring plan specialized in SME finance—SBSS 5. (feeble duty scoring benefits), which has been increasingly used by frequent banks as their SME belief conclusion making design. ) 4. All due application and directment balancesight way for outsourcing relationships and other third-party dependencies.
5. Integrate cross-border e-banking facilitates into the bank’s balanceall facilitate directment framework. 6. Lawful and reputational facilitate directment • • • • • Misspend disclosures for e-banking benefits Solitude of customer notification Capacity, duty uninterruptedness and superfluity planning to secure availability of e-banking plans and benefits Incident response planning.Segregation of duties 12 • Due application on facilitate tribute 5. 4. From the authorities’ perspective (banking superintendr, mediate bank, connected council depts.
) 5. 4. 1. Challenges from e-banking 1. Error of outsourcing and society disposements, and the balancesight of deposit and basis truthfulness and governs and securedguards, specially when the sustaining operations are located in another power . 2.The ability to graft global technology to the general insist-uponments: A deferred plane of infrastructure and civilized cleverness erection are insist-upond anteriorly developing calculateries can graft the global technology for their general insist-uponments.
3. The ability to fashion the wantful plane of regulatory and institutional frameworks: The failure of regulatory frameworks, commission, deposit and solitude standards, violent commerce barriers, customer and investor refuges clog proceeding in frequent developing calculateries to instrument e- finance projects. 4. E-deposit challenges 5. 4. 2.Policy implications/recommendations 1.
• • • • Correct plan infrastructure environment for e-banking duty Strengthen acquittal plan (including RTGS, bulk/low treasure acquittal plan). Correct the dregs plan (e. g. , for belief cards and other forms of electronic affairs). Build-up affair menting/reconciliation benefits. Establish belief notification registry and disseminating plan. Belief notification registries, commsolely notorious as belief caucuss in frequent calculateries, can narrow the distance of asymmetric notification by making a borrower’s belief narrative serviceable to 3 immanent claimants.
Lenders defended after a opportunity this basis can shirk making advances to violent facilitate customers, after a opportunity meagre reacquittal histories, defaults, or bankruptcies. Once a claimant performs a advance, the borrower knows that their operation gain be mented to the belief caucus. The notification contained in a belief registry becomes segregate of the borrower’s “reputation indirect”; deceased acquittals or defaults narrow the treasure of this “collateral” providing an individualizational inducement for opportunityly reprisals. At the corresponding opportunity, by reducing the notification impropriation that banks own balance their massive borrowers,