EBANKING-PART3

Finland PioneeringFinland and its other Nordic countries are pioneering developments in Internet banking services. They are well ahead of their continental rivals in terms of customer penetration and the services offered.
Finns can do their banking irrespective of time or place with an ordinary phone, personal computer, or a wireless terminal such as a laptop computer, GSM or WAP phone. This means that the banks are open 24 hours a day and customer can chose from a variety of services. This is very different from the banking services available in other European countries as Internet banking has only just taken off and most customers adjusting to the benefits of the telephone service.
Finland’s three biggest banking groups, Merita, Leonia and Okobank, are global pioneers in the development of electronic banking services. Finland was the first country in the world to offer telephone banking in 1982, on-line share trading in 1988, banking via a mobile phone in 1992, Internet banking in 1996 and banking using a WAP phone in 1999. As a result only 10 to 15 per cent of all banking transactions in Finland are now done over-the-counter. All of these services are integrated, for instance users of the Okobank can access WAP services using the same codes that they currently use for GSM services, the Internet, telephone banking and the automatic telephone service. This means that their customers have the opportunity to use those services that suit them best at any given moment.
Improved Customer Choice
Merita, Finland’s largest bank is owned by the Swedish company Nordic Baltic Holding. It’s pioneering e-banking ‘Solo’ service currently has 1.4 million users and offers customers a wide range of banking services, it can be used with a wired phone, a GSM, or WAP phone, a computer or even a television if it is connected to the Internet using an add-on device. Most importantly, their e-banking service enables customers at any time to check their accounts, pay bills (even foreign exchange invoices), apply for a loan, e-shop in cash by paying for a purchase using the bank’s ‘pay’ button on the website of the company concerned, subscribe for units in mutual trusts and bonds, or submit an order to buy or sell shares which is transmitted directly to the Helsinki Stock Exchange system once the exchange opens. The possibilities are endless and among features currently being expanded are electronic billing for cases in which the customer does not want to use the cash-payment facility, making contracts using the bank’s identification routines, and the totally electronic processing of consumer loans. Nordic Baltic Holding was recently awarded a prize by the UK-based journal ‘The Banker’ for having the best electronic strategy in the world. The panel of judges gave particular praise to the bank’s multi-channel e-Banking services and its progressive steps forward in wireless technology.
Benefit to the Bank
There are many ways in which Finnish banks can benefit by providing these services. It enables them to provide more value-added banking services, improve their customer service relations and offer a more efficient, direct and personalized approach. They are not restricted by geographical restrictions or limited by branch locations, so they can widen their customer base. Most significantly, these automated services have meant substantial cost savings in overhead and operating costs. For instance, the number of self-serve machines is declining in Finland. Although, it is not envisaged that branches will closed altogether, some closures are expected. Since the Swedish bank SEB introduced its online services, it has closed 20 per cent of its branches and is seeing its staff numbers fall by 5 per cent a year. The result of this is that branch staff are less tied up with day-to-day transactions and are freed up for other services such as providing and selling products liked pensions and life assurance that cannot be sold online. These changes and their implications are clearly revolutionising the Finnish banking industry.
Technology
The technology for such innovations should have developed in the region is not surprising. It has been the rapid adoption of the new technologies by financial institutions here that has made them world leaders in several sectors. The introduction of these services has proved so successful in Finland as they have such a high-technology environment. They are commonly reputed to be the world’s leading information society with an advanced communications infrastructure and with the highest penetration of mobile phones and Internet connections in the world. The Finns are also considered ‘tech-savvy’ and responded well to technological innovations welcoming the benefits that they can bring to their working and domestic lives. It seems hardly surprised then, that Finns have adapted to these ’e-services’ so quickly. It is clearly a unique situation in Finland and banks in other countries will not find it so easily to introduce similar services with a successful take up. However, they can learn from Finland’s experience as it serves as an effective example of how to do it successfully. Finnish banks have actively encouraged people to utilise new technology by making it cheaper to pay bills online and introducing a surcharge for cheques and other traditional banking services. The success of this strategy is shown by the success of Nordic Baltic Holdings who manage Finland’s Merita Bank, as 32 per cent of all Finnish bill payments are now made online. In this case a reliable and cost-effective payment system is central to take-up.
Expansion
Industry experts believe that e-banking has huge potential. Customers will take more control of their finances, they will want more information, product choice and access to international markets. Across Europe, Asia-Pacific, Japan and Latin America, it is estimated that the number of households who are connected to the net and are active investors will grow more than four-fold in the next decade to 50 million. Analysts also believe that only by expanding outside of the Nordic region will Finland’s banks really be able to capitalise on the technical skills and experience gained in the Nordic region. Finnish banks have got a head start on the rest of Europe, so it would be a natural step to take in their development. It would greatly enable them to expand their penetration and customer base. eQ-online is Finland’s market leading online brokerage service and is demonstrating this trend, it is already up and running in Germany. It has ambitions to become the leading European provider of fast, reliable, highly secure, easily accessible and fully automated online brokerages to active retail investors.
Competition
In Finland the three biggest players, Merita, Leonia and Okobank dominate the Internet banking market and this has meant that new entrants have stayed clear. This situation is different in Denmark, which has been seen as an opportunity to outsiders, partly because Danish banks were slower to launch their own online services. In the other Nordic regions; Sweden’s ForeningsSparbanken and SEB have launched Internet banking operations there. A new internet bank, Basisbank, partially backed by Iceland’s Islandsbank iFBA, will also start operations there soon. Basisbank also has ambitions to enter Norway. Finnish banks clearly have the upper hand here.
However, competition within the Nordic market could intensify, a company called Silicon Capital is planning to start a pan-Nordic Internet banking operation called Bankia next year. Although, the Nordic countries have made a head start may soon be about to face some though competition for the global investment banks. For instance, Merrill Lynch and HSBC are recently joined forces to create the first global online banking and investment services company focused on a European market. Given the short business cycles in today’s Internet environment, it means that competition can intensify further as it becomes easier for new entrants can enter the market. This competition will undoubtedly serve to benefit the customers as it will open up the marketplace, encouraging further innovation, improved value added services, increase the amount of services available, offer price reduction and further investment in technology.
The Future of Banking
The newest industry buzzword is ‘m-banking’. This latest abbreviation stands for ‘mobile banking’ which is the current focus of many European bank’s strategy and they are investing a great deal of money in its development. M-banking would provide customers with an additional channel form services and increased mobility. Although, ‘wireless’ banking services are already in place in Finland using GSM and WAP technology, m-Banking will make use of the new GPRS networks, 3rd Generation mobile phone technology and more sophisticated handsets. It offers much more potential and now the race is on to see who will provide the first services.
Finland’s Okobank are a definite contender, they developed the world’s first GSM and WAP wireless banking services which enabled it customers to access their account over their mobile telephone, check account and credit card balances, authorise credit transfers, make bill payments and trade shares. Okobank suggest that, “wireless banking is a perfect compliment to Internet banking”, and now m-banking will provide greater mobility which is the prefect enhancement to this situation. Indeed, this has not just been limited to the traditional banks, online brokerage eQ-Online is currently developing mobile solutions for financial services, and they are far from alone.
As with the wired Internet, early successful movers in the mobile Internet stand to garner the largest customer share. Partnering with other companies to quickly fill the gaps in areas outside their expertise will be necessary for companies to strengthen their mobile Internet platforms and achieve market share. Although, we are yet to see any Finnish banks entering into strategic partnerships with telecommunication companies, Norway’s Den Norske Bank has entered into an alliance with Telenor (the state owned telecom) to create a new portal called ‘Doorstep’ and mobile services.
Finnish Optimism
Many industry experts are extremely optimistic about the success of m-banking. Bo Harald, a Finn himself and chairman of the industry group, the Mobey Forum says; “in times to come, every Finn will have the Internet in his or her pocket in the shape of a WAP phone. This means that everyone will have a handy personal bank, as easy to use as a computerised connection”. Simiilarly, Birgitta Johanasson-Hedberg, the CEO and President of Sweden’s Foreningssparkbanken firmly believes that; “those who refuse to move with the times will, perforce, have to comprise on their quality of life”.However, some analysts do not share this enthusiasm, they believe that adoption of the mobile Internet may be slower than expected due to high prices, slow access and transmission speeds, limited functionality, lack of available content, entrenched pricing/distribution models and disparate global standards. To overcome these problems, Finland has had an instrumental role in developing global standards and compatibility with banking services and mobile communications. The Mobey Forum, whose members include many international banks and telecommunications companies such as Nokia, Ericsson and Motorola, advocate open standards, encourage the use of wireless services and promote an operating environment for these. Also, Nokia and VISA International is running a project called the Electronic Mobile Payment Service, the target of which is to create a global standard for payments and other related services.
There is also concern about the ability to provide content on a small, mobile screen, Matti Korkeela, the Okobank Group’s Director of Development, believes that; “the main restriction is the size of the screen. Some people find it too hard small for dealing conveniently with their daily business”. Despite this concern, the leading Finnish company Nokia, is currently developing its ‘Nokia Mobile Display Appliances’ (NMDA), which will have: a high end display, IP technology and mobility, offer end-users new communication solutions, it will be cheap and light weight, with a wide touch screen display and is a centric consumer device. It seems that the phones are getting more sophisticated, the range of services is expanding, and the dial-up speeds will improve when GPRS and the third generation systems are installed, so the banks remain confident that many of their customers will soon be checking their bank balances, paying their bills, and buying and selling shares while on the move. But there are other problems that m-banking has to overcome.
Further Problems
Another factor that threatens to limit the take up of mobile banking is the issue of security, but Finland has again made pioneering achievements in this area too. As a platform for WAP services, Okobank uses its own Nokia WAP Server 1.0 WAP-Gateway, it also uses its own servers for the GSM services as well. By relying on in-house servers, the bank can guarantee the security and confidentiality of its customers' information and it also allows for flexibility in product development. Finland is a leading country in enabling the use of electronic identification in electronic commerce. Okobank was the first bank to integrate electronic identification and digital signatures into banking services. A digital certificate, that's kept on a smart card's chip, enables electronic transactions. They are now working on bringing the use of electronic identification and digital signatures into their GSM and WAP services as well.
In addition to this, another Finnish company F-Secure, which is a leading developer of centrally managed security solutions has just announced the release of the world’s first anti-virus product for the Symbian EPOC platform. The new product incorporates F-Secure’s Mobile Scanner Technology and highlights advanced wireless features. Risto Siilasmaa, F-Secure’s President and CEO, says; “The next generation of mobile phones and PDA’s (Personal Digital Appliances) bring the Internet to your pocket. The openness of wireless information devices poses new security issues, which must be addressed. Information must be protected where it is created, stored and processed, since these new platforms will take information everywhere the user goes, security protection must follow. F-Secure Anti-Virus is the first native solution protect these systems against malicious code”.
They Don't Stop There...!
Finland’s major banks are not limiting their innovation to m-banking, they are also currently discussing the potential of Digital TV as a future channel for banking services. Birgitta Johanasson-Hedberg, for Foreningssparkbanken has also recogised this opportunity, she believes; “televisions will surpass computers as the prime means of connecting people to the Internet, so in future we may easily pay our bills while at the same time watching the evening movie”. Finland is clearly planning to stay ahead and continue leading the way for the future of banking; other countries it seems will simply be left following and trying to catch up.

E-BANKING-PART2

User Friendly e-Banking
This article discusses the importance of usability within the e-Banking sector and identifies common usability problems and ways to resolve them.
Imagine if you discovered that half of potential customers to your bank’s branches give up when applying for products because it is too difficult or confusing. Alarm bells would be ringing in the customer services department and a team would be dispatched to investigate and rectify the situation ASAP, wouldn’t there?
Yet this scale of lost business happens daily at many online banks due to poor usability of their websites. Research shows that 50% of prospective customers registering for online banking bail out before signing up, mostly due to problems navigating the site, completing online forms, security fears, and understanding content and feedback.
Web usability is the extent to which users can perform their tasks effectively, efficiently and with satisfaction. Based on the principles of Human Computer Interaction (HCI), web usability has become a recognised success factor for all e-business, including online banking. Users most enjoy those sites that provide clear information, easy navigation and an engaging customer experience. After the initial flush of design-led sites, businesses realised that the best way to profit online is to create sites that users can understand, and use effectively.
Typical online banking usability problems
In its widest sense, online banking consists of three main parts: the ‘brochureware’ marketing pages, the online application, and the transactional banking area. All can provide poor customer experiences:
inconsistent navigation and page layouts
on-site search engines that don’t find, even when it is available
bank-oriented jargon that is not explained
poor feedback using interactive tools and forms
inability to save an application and complete it later
too many steps in transactions and no visibility of progress
unhelpful error messages
pages that are inaccessible to customers who are blind or disabled
These usability and accessibility barriers are not only frustrating for online customers, they are very expensive for banks.
Error messages are critical for online applicants. The example shown below occurs when a user has entered amounts using commas. The user is reprimanded by an error message telling them there are problems because they used decimal places, which is not the case. Such usability problems cause users to lose confidence in the process and the bank, and many abandon the process.
In addition to the high drop out rate in online applications, Forrester Research found that one in nine people who have tried online banking in the UK gave up because of poor usability or security concerns. As more people consider banking online in this highly competitive marketplace, the online customer experience has become a crucial differentiator.
What can be done to improve usability and stem the flow of these losses?
The most important change is the need to apply user-centred design methods such as task analysis and iterative rounds of usability testing.
Put it to the test
One of the best ways to improve your site’s usability is to watch your customer use it. Usability testing involves asking some representative users to perform tasks following a scenario such as applying online, learning about product features, or performing banking transactions. As the user describes what they are doing and their impressions of the site, the usability expert observes, and only intervenes when necessary to clarify what the subject is doing. In addition to showing whether users could perform the tasks, usability testing provides rich insights on what parts of the site the user finds difficult or confusing.
Profiting from usability improvements
Properly applied, these methods will dramatically increase the probability that online solutions will meet the overall business objectives. User Vision has helped many financial organisations design sites to better suit their users, and they quickly see how such improvements can increase revenues. As Intelligent Finance founder Jim Spowart said soon after the launch of the site after considerable usability input “This investment in testing the usability of our site has been extremely worthwhile. We are currently experiencing around 54 per cent of our business through the internet which is a far greater usage rate that we had originally anticipated. Pre-launch predictions were that two thirds of the bank’s business would come via the telephone channel.” Things have continued well for IF, with the web channel playing a significant role in reducing costs and attaining new customers.
When Royal Bank of Scotland (RBS) decided to redesign their web site they worked with consultancy User Vision and site designers HeathWallace to research what users were looking for and how to best present it. New designs were then evaluated by User Vision consultants and subjects in usability tests. The result is a dramatic increase in customers doing business on the new RBS site. Following its launch in January 2003, online applications to open a Direct Saver account rose by 47 per cent. Similarly, applications for the Bank’s internet only personal loan rose by 26 per cent. There has also been a 100 per cent increase in brochure requests and a significant increase in visitors to the small business and mortgage sections. The site was recently commended by the British Interactive Media Association (BIMA) for ‘Most usable & accessible site’.
Access for all
Closely aligned with the issue of usability is making a site accessible for those with disabilities. Thanks to innovative browsers and software, blind people and those with motor impairment can access sites through assistive technologies such as ‘screen readers’ which read the site aloud. However, the site needs to be designed to allow these assistive technologies can work. Some main reasons that leading online banks are building accessibility into their sites are:
1. Legal Compliance Under the UK Disability Discrimination Act, online services such as banking must be made accessible to disabled users. Legal action based on disability discrimination has significant legal and PR costs.
2. Wider market According to the Office Of National Statistics, there are 8.5 million disabled customers in the UK. An inaccessible site shuts out many of these people as potential customers.
3. Social responsibility It’s simply the right thing to do. With a little effort in the site design, web site designers can improve the lives of those who with physical disabilities.
Although most early online banking sites were not designed with accessibility in mind, more banks are realising the commercial benefits of making their sites accessible, and are redesigning their sites accordingly. One of the myths concerning accessibility is that sites that are accessible will have no visual appeal. Recent efforts by some leading banks are showing that there need be no trade-off between making a site accessible and the aesthetic design.
Conclusion: usability for profitability
It is widely recognised that online banking provides more revenue per customer and costs less per transaction than any other channel, including phone banking. Encouraging news from Forrester Research states that by 2007 the number of Europeans banking online will double to 130 million. Yet people will naturally gravitate to the ones which are easiest to use and offer the best service. Banks aiming to profit the most from the increase in online banking volumes should consider the usability and accessibility of all aspects of their site to welcome them.

E-BANKING-PART1

Banking in a cloud of electrons
E-Banking in the region has been in an up beat mode. The financial marketplace has been actively promoting their online publications and functionalities while growth in Internet penetration in the Middle East continues to increase (compared with similar global economies and regions).

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Regional E-Banking Scene The pro-technology sentiment of the local governments (especially in the UAE) is helping feed e-banking growth that is evident by the mushrooming of numerous electronic service providers. This ongoing Internet development growth phase augers well for e-banking to mature into a way of life. Internet Channel and E-Adoption Online banking and the web channel are here to stay. Financial services rely on multiple distribution channels and e-banking represents the channel of the future. Success stories around e-banking have taken shape through a mix of innovation and experience. The financial services sector needs to apply both these factors to their advantage to produce the desired results. Win-win implementation of e-banking not only requires high Internet penetration rates and stable infrastructures, but more importantly, for companies to realize the powerful revenue opportunity of this business arm vis-à-vis the traditional brick and mortar system of operation. Therefore, it is imperative that all e-banking implementations are seamlessly integrated with the core 'traditional' services thereby making the online experience truly holistic for the customer. Best Practices Web channels need to market the bank's products and services, present corporate information about their global businesses and provide customers with personal financial management tools and banking platforms. In a nutshell, core online offerings should provide customers to:
• Access their financial information anytime.
• Transact real-time
• Make empowered online financial decisions

Additionally, value-add extensions of e-banking services should be offered to compliment the bank's core online services. For example, functionalities like Alerts offer customers to schedule notifications (like account balances) or self-select specific account related events (like credit card due date). Based on the preferences, customers are notified as and when the alerts are triggered. Such services help ensure higher levels of customer satisfaction and open other relationship building opportunities. E-Banking Is No Rocket Science The ideal bank should position the online channel as an acquisition, cross sell and retention business and with a clear strategy to proactively deliver the 'best-in-class' products and services through all business channels

BANKING

Banks safeguard money and valuables and provide loans, credit, and payment services, such as checking accounts, money orders, and cashier’s checks. Banks also may offer investment and insurance products, which they were once prohibited from selling. As a variety of models for cooperation and integration among finance industries have emerged, some of the traditional distinctions between banks, insurance companies, and securities firms have diminished. In spite of these changes, banks continue to maintain and perform their primary role—accepting deposits and lending funds from these deposits.

Goods and services. Banking is comprised of two parts: Monetary Authorities—Central Bank, and Credit Intermediation and Related Activities. The former includes the bank establishments of the U.S. Federal Reserve System that manage the Nation’s money supply and international reserves, hold reserve deposits of other domestic banks and the central banks of other countries, and issue the currency we use. The establishments in the credit intermediation and related services industry provide banking services to the general public. They securely save the money of depositors, provide checking services, and lend the funds raised from depositors to consumers and businesses for mortgages, investment loans, and lines of credit.

Industry organization. There are several types of banks, which differ in the number of services they provide and the clientele they serve. Although some of the differences between these types of banks have lessened as they have begun to expand the range of products and services they offer, there are still key distinguishing traits. Commercial banks, which dominate this industry, offer a full range of services for individuals, businesses, and governments. These banks come in a wide range of sizes, from large global banks to regional and community banks. Global banks are involved in international lending and foreign currency trading, in addition to the more typical banking services. Regional banks have numerous branches and automated teller machine (ATM) locations throughout a multi-state area that provide banking services to individuals. Banks have become more oriented toward marketing and sales. As a result, employees need to know about all types of products and services offered by banks. Community banks are based locally and offer more personal attention, which many individuals and small businesses prefer. In recent years, online banks—which provide all services entirely over the Internet—have entered the market, with some success. However, many traditional banks have also expanded to offer online banking, and some formerly Internet-only banks are opting to open branches.

Savings banks and savings and loan associations, sometimes called thrift institutions, are the second largest group of depository institutions. They were first established as community-based institutions to finance mortgages for people to buy homes and still cater mostly to the savings and lending needs of individuals.

Credit unions are another kind of depository institution. Most credit unions are formed by people with a common bond, such as those who work for the same company or belong to the same labor union or church. Members pool their savings and, when they need money, they may borrow from the credit union, often at a lower interest rate than that demanded by other financial institutions.

Federal Reserve banks are Government agencies that perform many financial services for the Government. Their chief responsibilities are to regulate the banking industry and to help implement our Nation’s monetary policy so our economy can run more efficiently by controlling the Nation’s money supply—the total quantity of money in the country, including cash and bank deposits. For example, during slower periods of economic activity, the Federal Reserve may purchase government securities from commercial banks, giving them more money to lend, thus expanding the economy. Federal Reserve banks also perform a variety of services for other banks. For example, they may make emergency loans to banks that are short of cash, and clear checks that are drawn and paid out by different banks.

Interest on loans is the principal source of revenue for most banks, making their various lending departments critical to their success. The commercial lending department loans money to companies to start or expand their business or to purchase inventory and capital equipment. The consumer lending department handles student loans, credit cards, and loans for home improvements, debt consolidation, and automobile purchases. Finally, the mortgage lending department loans money to individuals and businesses to purchase real estate.

The money banks lend comes primarily from deposits in checking and savings accounts, certificates of deposit, money market accounts, and other deposit accounts that consumers and businesses set up with the bank. These deposits often earn interest for their owners, and accounts that offer checking provide owners with an easy method for making payments safely without using cash. Deposits in many banks are insured by the Federal Deposit Insurance Corporation, which guarantees that depositors will get their money back, up to a stated limit, if a bank should fail.

Recent developments. Technology is having a major impact on the banking industry. Direct deposit allows companies and governments to electronically transfer payments into various accounts. Debit cards, which may also be used as ATM cards, instantaneously deduct money from an account when the card is swiped across a machine at a store’s cash register. Electronic banking by phone or computer allows customers to access information such as account balances and statement history, pay bills, and transfer money from one account to another. Some banks also have begun offering online account aggregation, which makes available in one place detailed and up-to date information on a customer’s accounts held at various institutions.

Advancements in technology have also led to improvements in the ways in which banks process information. The use of check imaging allows banks to store photographed checks on the computer instead of paper files. Also, the availability and growing use of credit scoring software allows lending departments to approve loans in minutes, rather than days.

Other fundamental changes are occurring in the industry as banks diversify their services to become more competitive. Many banks now offer their customers financial planning and asset management services, as well as brokerage and insurance services, often through a subsidiary or third party. Others are beginning to provide investment banking services—usually through a subsidiary—that help companies and governments raise money through the issuance of stocks and bonds. As banks respond to deregulation and as competition in this sector grows, the nature of the banking industry will continue to undergo significant change.