Page 31 - Banking Finance October 2019

ARTICLE

The major advantage of Virtual Banking is the lower cost of
handling a transaction via the virtual resource compared to
the cost of handling the transaction via the branch. The
increased speed of response to customer requirements
under virtual banking vis-a-vis branch banking can enhance
customer satisfaction and ceteris paribus, can lead to higher
profits via handling a larger number of customer accounts.
It also implies the possibility of access to a greater number
of potential customers for the bank without the concomitant
costs of physically opening branches.

The lower cost of operating branch network along with
reduced staff costs leads to cost efficiency under virtual
banking. It allows banks to expand in new markets, reduce
operational issues and take banking services to the doorsteps
of its existing & potential customers. With the process of prefer talking face-to-face with a banker who is familiar with
dematerialization of shares having gained considerable
his customer's personal circumstances and understands his
ground in recent years, banks have assumed the role of
unique needs.
depository participants. In addition to customers' deposit
accounts, they also maintain D-mat accounts of their clients. A traditional bank often has services and staff available to
Online trading in equities is being allowed by SEBI, this is help us with specialized needs, like drawing up trusts,
another area which banks are keen to get into. In addition, exchanging currencies, obtaining a safe deposit box and
virtual banking allows the possibility of improved quality and other services that virtual banks typically do not offer.
an enlarged range of services being available to the Moreover, virtual banks won't interest those consumers who
customer more rapidly, accurately and at his convenience.
don't like or don't trust online banking or who are reassured
by the presence of a physical bank when depositing their
WAP (Wireless Application Protocol) telephony is the merger
savings. Next issue is, India has one of the lowest broadband
of mobile telephony with the Internet. It offers two-way
connectivity penetration rates in Asia as compared to Japan,
connectivity, unlike Mobile Banking where the customer Taiwan, Korea and Singapore.
communicates to a mailbox-answering machine. Users may
surf their accounts, download items and transact a wider While the bigger cities such as Mumbai, Delhi, Chennai, and
range of options through the cell phone-screen. WAP may
Bangalore have relatively better broadband penetration
provide the infrastructure for P2P (person to person) or P2M
rates, PC users in smaller cities and towns still use dial-up
(person to merchant) payments. It would be ideal for options to connect to the Internet. Slow connectivity speeds
transactions that do not need any cash backup, such as often dampen the online banking experience for many
online 55 investments. Use of this cutting edge technology customers eager to use such services. Banks' ambivalent
could wel- determine which bank obtains the largest market commitment levels and their reluctance to allocate huge
share in electronic banking
budgets for net banking branding initiatives have resulted
in poor acceptance levels of Internet banking by customers.
If we look at the other side of coin, in a developing economy
like India, where even after the passage of 71 yrs. of Fear of online threats about hacking, identity theft, stolen
independence, the state of financial inclusion, general
passwords, viruses, worms and spyware tend to make
literacy and financial literacy is in a bad shape, large number customers wary as well as fearful of losing their hard-earned
of customers like to have face-time with a banker. The savings in online scams. Further, navigating through the
customer can go to local branch when he needs answers to website of a bank may be difficult for a first time user.
a complex problem or when he has a complicated request. Opening an account could also take time as some sites ask
To be sure, virtual banks can have outstanding customer
for numerous personal details including a photo
support over the phone or via an online chat, but one might

BANKING FINANCE | OCTOBER | 2019 | 31