Having already talked about various technologies available for the e-banking in my previous post. Let me touch on the factors which make e-banking an attractive proposition for the customers

e-Banking: The value proposition
An electronic banking solution must provide sufficient value to persuade the customer to move away from cash. However, cash is an incredibly versatile medium of exchange – it is universally recognized as a store of value, it is accessible, portable and divisible.

So what are the factors that are valued by the customer? These are my top ones:
1. Features (for example, the improved personal safety from having less cash to carry)
2. Acceptability
3. Accessibility of the service
4. Affordability and
5. Ease of use

Features: Many early electronic banking initiatives were designed to reduce the cost of transactions for the financial institution as much as to deliver value to the customer. However, an electronic banking solution can be designed as a low-cost bank account on a card or telephone, with a number of features valuable to customers, such as cash withdrawals and cash-back transactions, deposits, payments and transfers. Added-value services can be provided such as
• loyalty programmes,
• person-to-person transfers,
• airtime top up for mobile phones
• government payments.
Acceptability: Although there may be an age bias in the acceptability of e-banking solutions, practical experience has demonstrated that the bias towards paper-based record keeping in developing markets is far lower than might be expected.

Accessibility: Walking many kilometers to be able to access the service of a bank/ FI is inconvenient and costly for customers, so saturation of an area with the service is preferable to a wider, thinner distribution. E-banking has the potential to provide accessible, convenient financial services because it no longer requires a ‘bricks and mortar’ infrastructure, operated by the permanent staff of a financial institution. E-banking uses an electronic infrastructure and in many cases relies upon third parties to originate transactions. However, partners in an e-banking initiative differ in nature, in location, in accessibility for the poor and in the functionality they are able to provide.

Affordability: Customers on low incomes should find the transactions affordable. Charges need to be designed around a greater volume of low value transactions, probably charging customers a fee per transaction rather than a percentage per transaction, as is the case with Visa and MasterCard.

Ease of use: Systems should be simple to use, fast and user friendly. Service should be standardized so that wherever the solution is used the customer is familiar with the procedure followed.
All of these factors combined collectively swing the customers to either be a part or staying away from any e-banking initiative

Evolution of the financial and retail market

Electronic banking initiatives are more likely to succeed in evolved financial and retail markets. There are a number of reasons for this. Since scale is required to cover costs, the business case for electronic banking in developing countries becomes stronger with the significant fall in the price of ATMs and POS devices and improving communications infrastructure. With scale come a number of advantages:

• When there are a large number of card (or other solution) users in a population the problem of financial illiteracy is significantly reduced since, for example, children teach their parents how to use the card.
• Initial concerns relating to trust are likely to be overcome.
• The case for merchants to hold POS devices improves as the volume of cards in circulation grows.
• Scale increases the case for interoperability and as financial and retailer infrastructure develops, markets become more attractive.

Keep watching this space for more posts by me. Signing off for now. Happy Reading !!