Banking 2.0

With banks offering most services on the Internet and Internet penetration in India growing rapidly (a 2009 World Bank report puts the number of Internet users in India at 61.3 million, up from 51.75 million the previous year), it’s of little wonder that a McKinsey report has found that 7% of all banking consumers use Internet banking, up from only 1% in 2007. Coupled with Internet, other modes of banking, like mobile banking, are growing rapidly. The report found that 6% of the banking population used mobile banking services. The sheer savings incurred by the banks through the use of these alternate modes of transactions, as opposed to branch transactions (down 15% since 2007), coupled with the increasing range of services like balance enquiry, stop payment instruction of cheques, transactions enquiry and location of the nearest ATM/branch offered on the phone, suggests that this number is sure to grow in the future. Consider this: officials at the Union Bank of India estimate that transactions through alternative channels account for 53% of total transactions (up from 35% in 2010 and targeted to reach 60% by March 2012), and are at only around 10% of the cost of branch transactions. No wonder, then, that even RBI is urging more banks to launch mobile banking. Presumably, lower costs for the banks result in lower fees for the customers, and the limited availability of bank branches in India (only 79,735 branches across India in 2009, according to RBI) makes using mobile phones and the Internet a much more attractive option. With 812 million mobile subscribers and banks now allowing customers to make transactions using their phones (as semi-closed wallets, allowing customers to exchange physical cash for virtual money stored on the phone, thus enabling electronic payments, like a debit card), mobile banking in India is fast becoming the banking tool of choice. Keeping all these developments in mind, the McKinsey report astutely surveyed the participants on why they wouldn’t use Internet banking, and the results should be illuminating for the banks. Overall, 55% thought that Internet banking was not secure enough, up from 47% in 2007. More relevant for the banks is that 76% of those in the ‘affluent’ group considered Internet banking not secure enough, a whopping 18% rise over 2007. This suggests that even though there haven’t been cases of Internet banking fraud, the various other cases of hacking and phishing have shaken people’s confidence in the security of the Internet. An image change might be a good idea in this regard.

FE