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A new world, new opportunities

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CIOL Bureau
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The era of Internet & growing net-banking

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As the Internet spins a web of connectivity around the globe, its popularity has revolutionized the banking sector, enabling customers to conduct financial transactions over the Internet.

Banks are witnessing a sharp rise in online transactions as an increasing number of customers log on to the Internet to pay their bills. Telephone bills, predominately mobile bills, are primarily driving the transactions, followed by insurance premiums and electricity bills.

Online payments and transfer of funds from one bank to another also contributed to a 100 per cent year-on-year growth in online transactions. Online transactions are going up by 10-12 per cent every month. Banks believe that customers are turning to online transactions as these are convenient and save time.

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In a survey by Assocham in 2008, an average Indian household in cities pays about 50 bills annually. An individual saves about 80 hours in a year by e-billing, with the business growing 200 per cent and its size expected to touch 6.5 million by 2008-09 from the then level of 1.9 million.

Online trading

Indians eager to invest their extra income are signing up in droves at Internet trading sites. According to the records at the National Stock Exchange (NSE), the nation's largest stock exchange, the number of investors registered for online trading has grown by at least 150 per cent over 2006-07 figures, with 2.9 million in the cash segment and 5.5 million for both cash and F&O.

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Traditionally, equities trading in India has been done through brokers, in person or over the phone, but with the convergence of mobile and Internet, shopping for shares has become as easy as making a few clicks from one's PC.

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Online portals giving important information

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We are all leaving money on the table in our personal accounting, and having a tool to point us to easy ways to save some money is a great idea. And even if you don't respond to come-ons, you'll probably find its personal spending trend tracking and budget features illuminating.

Online bill payment, and income tax help. These are two great benefits of using electronic accounting: not having to write checks by hand or fill out tax forms from scratch.

Misconceptions on security

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The security space can be one of the most confusing territories to traverse as an IT decision-maker. These days there are just so many misconceptions about security's hot topics that it can sometimes be difficult to know what is true or false about security strategies and technologies anymore. There are several ways to help ensure safe transactions on the Internet, and more are becoming possible all the time.

* Mightier banks are too small to be worth attacking

* Two-factor authentication will keep you totally safe: Two-factor authentication — needing not only a password, but also a one-time code either generated electronically or sent via SMS — is an increasingly common element of bank security. It’s a useful additional step, but you shouldn’t assume it provides total security. Users can do everything right and still lose their bank account.

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What if we had this on our mobiles as well?

As technology zooms along, businesses and popular culture ultimately follow.

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The wave of technological and cultural change extends to banking and finance as well, where customers have adjusted from bank tellers to ATMs to online banking.

The next evolution for financial institutions is the continued transition of their customers to mobile banking, the ability of consumers to manage their accounts via applications on their mobile devices.

India had over 617.53 million mobile connections as of May 2010, and is adding 12-15 million every month. Also, by 2013 the projected global consumer spending via mobile broadband could hit $70 billion, according to Juniper Research.

Many financial institutions ask: Why mobile banking now? The answer revolves around economy, technology and consumers.

Consumers — even if they’re not mobile banking now — expect to change their habits in the future. For instance, nearly two of every five (38 per cent) adults said in a June 2009 StrategyOne survey they’d likely consider mobile banking in the next six months if it’s offered by their bank or wireless carrier.

The economic downturn prompts consumers to manage their finances more closely. Consumers want real-time access to their financial information as well as control of the aggregated financial data. They don’t necessarily want to track every penny but they do want to see the big picture. Did their paycheck get deposited? Did their bill get paid? Do they have enough money to go out on Friday night?

Recent studies, including one by industry analyst firm TowerGroup, indicate that the proliferation of mobile devices and smart phones — coupled with the current financial downturn — creates an urgent opportunity for mobile banking.

Some Internet trading sites have also launched low-bandwidth platforms to facilitate trading through mobile phones and low-bandwidth connections.

One way to track money on the go is with smartphone software. Low-cost applications let you use your Windows Mobile, BlackBerry or iPhone to enter new expenditures, view current account balances, generate spending reports and more.

Trail off into the possibilities of tomorrow…

By this year’s end, there will be 10 million mobile banking users. By 2013, that number would spike to 53 million users, a compound annual rate of 53 per cent, according to research firm TowerGroup. Customers will make the crucial decision: stay with their current bank or move to a competitor.

Because financial institutions can capture the initial sweep of changing habits now before they crest and establish a mobile revenue channel that will exceed the initial investment, they can set the trend. And encouraging consumer use early is critical to adoption and success.

Businesses need to take the long view. The essential choice is whether to save money now or invest for the future.

Consumers are out there and they’re ready to transact. They often represent a financial institution’s or a merchant’s top customers, including multiple segments with household income in excess of Rs. 2,00,000. These include newer, younger customers — digital trend-setters, many of whom don’t read a newspaper but will never leave home without their mobile handset to search for content.

Because of the economy, changes in technology and the unstoppable momentum of consumer expectation — now is the time to implement mobile banking. Wait too long and the optimum return will have passed and many consumers may leave one institution in favor of a competitor.

(The author is the managing director of Intuit India. The views expressed in this article are the views of the author and do not necessarily reflect the views or policies of CIOL)