This paper studies endogenous diffusion and impact of a cost-saving technological innovation — Internet Banking. The bank understudy i. e. ICBC has efficiently embarked on its internet based private banking service. The vice director of e-banking felt that the entire project was an accomplishment in terms of its schema and satisfactory quality. Here is this case he needs to expound the understandings and the lessons internalized along the entire course of the project.
Moreover, there were various issues which were raised during this intellectual itinerary, which included the challenges regarding computer system implementation, Information system design and most importantly the feasibility analysis. This case deals with the fact that how he confronted the challenges and developed a plan which immensely benefited bank. ISSUES There are various issues discussed in the case. These issues will be highlighted below: -The foremost challenge was the seamless promotion of the existing banking system and channels for the installation of new state-of-art IT infrastructure.
In this regard, the changes made to the structure and functioning of the financial institution challenged the regulatory structure of the bank. -Furthermore, the subsequent development of innovative banking products on the skeletal framework of information technology. -Another tactical goal on the banks strategic map was to fortify associations and interactions with private customers by offering better product delivery and in doing so harvesting the use of internet as a medium.
-Initially the bank’s core banking system was product oriented, but the need of the hour was to develop a customer oriented system, because the challenge is to build customer loyalty, cross sell, and enhance repeat business. -The industry is composed by a continuum of banks which produce a homogenous product — banking service. Domestic as well as foreign competition is violent. Not to forget the fact that ICBC has not been the first bank to embrace internet banking. So, it is all the more reason which places the bank in the most precarious position to continuously shield it self from the volleying competition.
-Another pivotal issue was that of the multichannel integration—call center, branch, ATM, and Internet—which is immensely important for large financial institution like ICBC to attract and retain customers with the promise of “anytime, anywhere” account access. Customers are eager to have the kind of flexibility to use whichever channel is most appropriate at a particular time. Continuing with the same point the, ICBC was also concerned about the relative penetration of the existing as well as new customer base to gain access to the banks new technological proposition.
-Moving further consumer protection, with issues such as transparency, security, accountability, and legal recourse also remain to be considered. Currently with the first release the security issues are being answered but with second and third release a well-reputed professional vendor would be needed. -There was another concern about the internal marketing i. e. coordination and communication between the departments. Unless or until the there would be a flawless assimilation between the internal customers and internal suppliers, external marketing would keep on lagging.
-As they were making use of a phased approach, in which they would be piloting the first release only for some time, there was this concern that it would constrain the upshots of the nation wide impact of a consolidated Internet Banking system. -Another issue was that manager was apprehensive about the use of IBM WSBCC platform, because they had never used it before, and so it was extremely important to “test” the usability and compatibility of the proposal by developing small portion of the services.
-The organization is facing a big challenge in terms of developing a consolidated data repository, should allow for smooth data access and retrieval, without building up repetitive and redundant data. -The advent of Internet banking in ICBC would effect a variety of stakeholders, whether inside or outside the bank. So such a strategy should be adopted which should leave no space for any communication gaps to arise, and should allow for a harmonious integrations all across the organization.
By analyzing the aforementioned issues, the following set of recommendations is deemed feasible. -To achieve the daunting task of implementing the Internet banking service, ICBC, most importantly the bank needs to strengthen its internal marketing channels. Otherwise it would lead to tribal warfare within the organization. -It is recommended that ICBC should understand their customer base and find the right mix of delivery channels to make available products and services profitably to their various market segments.
-Instead of geographically segmenting their business they should segment it according to its business lines. -Security issue can be dealt by maintaining a high level of public confidence in an open network environment, should include security, authentication, certification, non-repudiation and privacy. -As it is outsourcing a professional security vendor the Bank should therefore evaluate the ability of the service provider to maintain the same level of security (including encryption/fire wall/authentication techniques) as though the activities were conducted in-house.
Similarly the forthcoming releases should be handled efficiently. This can be done by reviewing the service providers’ policies and procedures aimed at protecting sensitive data. -The arrangements for risk management systems and internal controls should be reviewed and evaluated on a regular basis (e. g. by external or internal auditors). -There should be a contingency plan for major breaches in the security of the system which should cater to recovery procedures and damage control procedures. -It is also recommended to use a modular approach for the construction of this project.
The idea is to encapsulate tasks like communication with legacy systems and business logic into separate modules. This would hide the implementation details from the main application and each other. This way, if changes were made to some part of the system in the future (say, any system application is updated or a new machine is added), only the pertinent module would need to be altered. This would immensely help in dealing with the problems pertaining to the hardware as well software portion of the system.
The main challenge for the bank is to ensure that the savings from Internet banking more than offset the costs and risks associated with conducting business in cyberspace. This could stifle some of the more imaginative new approaches to payment methods and financial services; approaches which could bring important benefits to consumers. It needs to find a way of adapting their regulatory environment to new technology, and not adapting new technology to old regulatory rules.