Digital banking is also known as online or internet banking. When the bank provides online services to its customers where they can carry out various bank related activities, it is known as digital banking. Many banks offer digital banking through websites that can be accessed by computer as well as smartphone apps.
The services offered by online banking are transfer of funds from one account to the other, checking balance, obtain credit card statements, loan details, pay bills and so on. The first bank to offer digital banking services in India is the ICICI bank in the year 1996.
With time, other banks also started this service and now a majority of the Indian banks offer online banking services to customers.
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SEE ALSO: What is Digital Banking
In India the need for digitization of banking services was felt in the late 1980’s, in order to improve the customer care service, book keeping and MIS reporting. Initially, banks began to use PCs with the help of LAN connectivity. They trained their staff to use the system for maintaining bank records.
With further advancement, banks adopted the core banking platform. The CBS enabled banks to enhance the comfort features of customers.
A major change came in the banking system with the rise in competition among private and foreign banks. E-banking has resulted in reducing costs drastically and has helped generate revenue through various channels.
Digitization has helped banks increase customer base through ease of access of banking services. Digitization has reduced human error. It is possible to access and analyze the data anytime, enabling a strong reporting system.
Commercial Banks in India have moved to newer technologies by way of Bank Mechanization and Automation with the introduction of MICR based cheque processing, Electronic Funds transfer, Inter-connectivity among bank Branches and implementation of ATM which has increased efficiency of anytime, anywhere banking facilities.
National Electronic Funds Transfer (NEFT) is the most commonly used electronic payment system for transferring money across bank branches. It operates in half hourly batches. At present there are 23 settlements.
Real Time Gross Settlement (RTGS) is primarily used for high-value transactions which are based on 'real time'. The minimum amount to be remitted through RTGS is Rupees Two Lakhs. There is no upper limit.
Immediate Payment Service (IMPS) is an instant electronic funds transfer facility, offered by National Payments Corporation of India (NPCI) which is available 24 x 7.
The usage of prepaid payment instruments (PPIs) for purchase of goods and services and fund transfers has increased considerably in recent years. The value of transactions through PPI Cards (which include mobile prepaid instruments, gift cards, foreign travel cards and corporate cards) and mobile wallets have drastically increased.
Commercial Banks in India have moved towards technology by way of Bank Mechanization and Automation with the introduction to MICR based cheque processing, Electronic Funds transfer, Inter-connectivity among bank Branches and implementation of ATMs.
SEE ALSO: History of Online and Digital Banking
Listed below are a few benefits of digital banking in India:
At present the government of India is aggressively promoting digital banking. The launch of United Payment Interface (UPI) and Bharat interface for money (BHIM) by national payments corporation of India, is a significant step in the payment system domain.
This not only proves that we are adopting newer technologies, we are constantly innovating as well. The UPI interface allows the user transfer instant funds across accounts on the basis of virtual address without mentioning the bank account. The BHIM app is used to facilitate e-payments directly via banks and simplify cashless transactions. The main advantage of BHIM app is that you don’t have to remember banking details. All you need is a virtual payment address of the payee to make digital transactions.
We can gauge the future of digital banking in Indian banking sector, to be bright. We as customers can expect further innovation and better services in the banking sector.
Digital banking should not be viewed as advancement in technology or better customer care. It is a revolution in the functioning of banks and the way it offers services to customers.
With digitization, the market is flooded with smart phones. Internet is easily accessible with higher speeds. This has enabled customer’s access banking services with smart phones.
Most of the commercial banks have developed mobile applications to enable customers make transactions and get banking facilities on their phones. With advancement in technology, we can expect advanced features on these apps, which would streamline the process.
Part of the improvement in mobile banking, also includes creating a cohesive experience across various platforms. Customers cannot see the different channels; they view all the channels to be the same be it mobile banking or net banking. To enhance the customer experience during digital transformation in banking, each channel must have a cohesive feel and experience, so that the customers can seamlessly operate across channels without hindrance to the service experience.
Artificial intelligence is about to change the face of digital banking. Business Analytics and Artificial Intelligence (AI) has the potential to bring a major change. Robotics, enabled by AI, is expected to be a future game changer for banks.
Many private banks are planning to deploy Robots for customer service, investment advisory and credit-approval process to improve the services and be cost effective in the long run. However, lack of understanding of artificial intelligence can be a security concern in digital banking. However, Digital Banking will be the most preferred form of banking in the coming years.
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