Seven Year Itch

I wanted to do something different with this piece.  I was going through some old folders on my PC the other day and came across an old university assignment I did on banking in 2005.   It was for an eCommerce subject I was studying at the time and hence it was written with digital tinted glasses.  Something’s never change.  I have copied and pasted selected extracts from the report below, poor grammar and all.  I thought it would be fun to share these with you.  Keeping in mind it is nearly seven years old it really hit home how little has changed in the banking industry.

On Culture

Some things never change...

Smaller banks are taking an increasing share of the market due to the risks they are willing to take. The majors have to break out of this comfort culture they currently possess.  “Unless it is on the CEO’s agenda to make sure that the company is fully on board, it will be a slow transition.  To win in the online global economy, you will need an e-enterprise culture, not just some disparate Internet initiative”. (Kirchoff and Mendonca, 2000 – Pg 108)

About the need to continue innovating...

Once customers become more accustomed to the capabilities of Internet banking they will be expecting more and more.  New tools and products should be updated constantly to create a “virtual bank”.  Whilst, “No one is predicting the complete demise of the traditional bank…bankers who run these old fashioned institutions have to wake up and the smell the new e-economy if they are going to survive”. (Brian and Mary Dixon, 2000 – Pg 194)

On Customers

How banks could support older users...

Banks should also increase education for older customers who should be the main beneficiaries of online banking.  It is easier, quicker and enables those who may suffer a physical condition to conduct their banking activities without leaving the home.  Older customers can’t be expected to understand what a “Phishing Scam” is without being taught.  Younger users take for granted the knowledge they have received from growing up with the Internet,  this knowledge can be taught however and perhaps free seminars or home tutorials can be promoted for those who need a little bit of help.

Attracting younger users...

Another initiative that could increase a banks customer base is a children’s awareness program.  In the early 1990’s the Commonwealth bank introduced a progress saver account designed and marketed for kids.  It was known as “Dollarmites” and was promoted around most primary schools.  Banks should reintroduce a similar scheme aimed at increasing awareness amongst future generations.  Statistics show that younger users are the main exponents of Internet banking.  They have grown up with Internet and therefore feel more comfortable with its capabilities.

On Security

When two-factor authentication was rare....

Two-factor authentication is considered the biggest improvement in internet banking security for years.  Two-factor authentication is a process which adds an additional step to the traditional means of logging on to your account.  Its introduction is aimed at preventing the increasing amount of identity fraud in the market.  It works after a customer enters there PIN originally.  When this is satisfied the customer is then notified of a randomly generated number or code.

Could biometric authentication work?

Some banks have also experimented with various forms of biometric testing in regards to increasing customer security.  Whilst this essentially offers the most potent weapon against online fraud its costs are high and its consistency is low. A recent study commissioned by the British government highlights its potential short falls.  In 30 per cent of cases the system failed to recognise or accept a face scan of a valid user.  1 per cent of the time it accepted a false user.  These numbers are enough to make banks squirm.   Imagine trying to legitimately access your account and being denied.  Detection times have also been slow.

On Benefits

Why Internet Banking was proving popular...

The success of Internet banking lies in its immediate benefits to both bank and customers.  Whilst customers have been keen to embrace its services such as 24 hour access, bill payment, and international availability, banks are just as keen to embrace its cost effectiveness and efficiency.   Internet banking is also useful in providing a platform for cross-selling into other areas such as loans and advice.

Who said something about ‘benefits’?

Whilst many banks jumped online because it was the newest trend, its benefits haven’t come in the areas that many predicted.  Most banks envisaged a long line of new customers but this simply hasn’t been the case.  “After the initial influx of new customers, overall growth of online banking has slowed in recent quarters as the sector has matured, but that trend has now reversed with the offering of new products enticing people to log on for the first time”. (Weekes, 2005)

On Opportunities

Before it was called PFM...

Research indicates consumers and small business owners will go online in greater numbers driven by a desire to be informed. Due to this there should be an increased focus on tools that will enable this financial analysis to become more sophisticated and accessible.

Importance of data...

By attracting all these potential customers banks will also increase their databases. This data can then be used to mail pamphlets for a credit card once a customer reaches eighteen.  This presents the, “final function provided by an electronic commerce system…data acquisition.  Important data can be acquired…and used for various purposes, especially market research.  (Nickerson, 2001 – Pg 379)

Online Statements...

Banks should produce an online statement “mailed” to your account once a month and posted in a statement section.  Viewers could be notified of its arrival and could view or print the form if they wanted.  It would save costs for the bank and would once again persuade users to go online.  This simple method of getting customers to use Internet banking more is an efficient and simple way of improving performance.

Mobile Banking...

Australia has long been a keen proponent of mobile phone technology.  Most Australians feel a mobile phone is a necessity especially in today’s corporate jungle.  To compliment the success of mobile phones banks have began to use WAP technology as a feature of online banking.  Some Australian banks such as Bendigo have recently introduced two-factor authentication through SMS.  The next step for banks should be increased usage of mobile enabled services and transactions.

References

Dixon, Brian and Mary (2000).  “e-Banking – Managing your money and transactions online”.  Sams Publishing – Printed in America.

Kirchoff, S. and Mendonca, S. (2000) “Instant Advantage.com”. Published by Prentice Hall, America.

Nickerson, R. (2001) “Business and Information Systems – International Edition”.  Published by Prentice-Hall, Washington.

Weekes, Peter.  “Online banking: The only way is up”.  http://www.theage.com.au/news/Breaking/Online-banking-the-only-way-is-up/2005/04/20/1113854261162.html. Accessed 29 April at 11.15 pm