Prospects of using innovative technologies in banks

Isayeva P.G.

Russia, Dagestan State University

Integration of credit institutions in the new information economy is reflected in the emergence of new business models and strategies of development that are used by banks to achieve their economic goals. Some banks are starting to organize their own platforms for trading various goods via Internet, on which they act as coordinators of communications, guarantors of payment transactions, creditor and intermediary in transactions. Other banks aimed at maximum efficient use of network structure of organization and business, typical for large virtual and traditional companies.

With this organization the bank becomes the center of numerous interconnections and interdependencies; in the range of their actions get providers of banking equipment and software as well as corporate customers and private consumers. Peculiarities of business organization in the Internet required credit institutions to establish partnerships with companies providing access and or services in the global network.

Internet is the ideal environment for attracting new customers to banks. It is much easier for a potential customer to come across the website of a bank, than go to its office. Internet offers new large scale opportunities on the financial services market. Therefore online banks have been able to find their niche in the market and even began to press traditional banks. The use of the system of Internet banking a gives a number of advantages to customers:

• First, one can save much time by eliminating the need to visit the bank personally;

• Second, the customer is able 24 hours a day control his own account and in accordance with the changed situation in the financial markets immediately react to these changes (E.g., closing bank deposits, buying or selling currency, etc.);

• Third, internet banking system is indispensable for tracking operations with plastic cards (any charge off the card is promptly reflected in account statements);

• Fourth, enhances client’s control for his operations;

• Fifth, allows using the services of online stores;

• Sixth, online banks offer higher deposit rates than traditional banks.

For the bank itself the transition to a "virtual" space means improvement of internal business model. Costs for renting and keeping the room decrease to zero, because there is no need for them remote servicing. By automating the management of customers' own bank accounts the number of personnel required significantly reduce, and hence reduce the cost of salaries. As a result, transaction costs are significantly reduced and the business becomes profitable even when serving private clients who are holders of small amounts in bank accounts.

At the very beginning of online banking it seemed that it had no drawbacks, but the practice has identified a number of shortcomings and problems.

There has been an outflow of customers from these banks recently. Their main advantage – virtuality, turned out to be a major drawback. The main cause forcing clients to part with such bank is the impossibility of human communication. Admittedly western experts "Achilles' heel" of the virtual banks is that because of their "virtuality" they cannot fully meet the customer's requirement of contact with bank employees and the natural "right" of a client for an individual approach. As a rule, only few people are satisfied with automatic responses of online banking to e-mails, and concerning the responses from the customer service you have to wait for quite a long time.

For example, despite the rapid development of remote banking (online, by phone or by mobile phone) Americans still prefer the old-fashioned way of working with banks, i.e. they simply go to the nearest branch of a bank. According to F. Wiseman, the vice-president of Maritz Research Marketing, even though banks are vying with each other in offering the technologies to improve the usability and efficiency of interaction between the bank and the client, a local bank office is still more preferable when it comes to financial administration. The whole-American survey found out that 47% of respondents perform banking transactions in a traditional way and only 4% are regularly working with their bank via Internet. Almost 40% of respondents indicated that when choosing a bank they were exclusively guided by the closeness of a bank to their own home. That is, in spite of the facilities that online banking can provide the customers, the society is not ready to abandon the live contact in solving their financial problems.

Experts believe that banks should take into account a number of facts: "Modern marketing strategies in the retail field are increasingly involving the possibility of virtual or electronic transactions. The biggest danger associated with the electronic spread of banking services is in weakening of contact with the client that can cause weakening of the client’s attachment to the bank. Virtual banks will not in any case completely replace traditional bank branches in the next ten years, although the technological progress will bring them to do certain steps to improve the system of branches ... The palette of banking services consists of standard products as well as the decisions for the use of which we require additional clarification. In cases when we require additional clarification the personal computer is not considered as a means of offering services. However, things can change when the computer will be used in combination with videophone, the ability to classify a document and identify a magnetic card.

Thus, the existing drawbacks in transactions security complicates the fact that Internet was not originally designed to be a secure network. Therefore, the data transferred through online banking can be easily intercepted by sufficiently fast and affordable means. Even phone calls are much more difficult to intercept. Besides, during the transactions over Internet there appears an additional operational risk for a company providing client the access to the network (of the provider). For example, this risk may occur when the provider will have electricity disconnection or faults with computer equipment.

References

1 See: www.intuit.com.

2 See: www.microsoft.com / money.