Data Bases • Custom Term Papers • Free Term Papers • Free Research Papers • Free Essays • Free Book Reports • Plagiarism? Links • Top 100 Term Paper Sites • Top 25 Essay Sites • Top 50 Essay Sites • Search 97,000 Papers @ DirectEssays.com • Search 101,000 Papers @ ExampleEssays.com • Search 90,000 Papers @ MegaEssays.com Free Essays • Term Paper Sites • Chuck III's Free Essays • Free College Essays • TermPaperSites.com • Free Essays • My Term Papers • Essay World • Planet Papers	Search Lots of Essays Back to Subjects - Technology OnLine Banking OnLine Banking Picture what our bank looks like today: the brick building, the drive thru window, large vaults, and the counter full of tellers waiting to service their customers. This is the traditional bank that we have all grown up with, the classic brick-and-mortar business model, a fundamentally sound business model that has been successful for hundreds of years. So what has changed with our banks today? Well, the brick-and-mortar model still exists but there is a new trend that all banks are moving towards, the click-and-brick e-business model. On-line banking and electronic bill payment systems are rapidly moving trends that have been adopted by the banking industry within the last two years. It has been the banks number one priority for not only servicing their current customers, but to also attract new customers to their high tech e-business model. It does have a high price tag for implementation, but the market advantage and the cost savings to the bank can potentially be much greater. The traditional banking model that has been in place for hundreds of years has served well not only to banking customers, but also to banks. It's quite simple: open an account, the bank will provide you with checks, write checks to cover payments, the bill payee cashes the check, and your account is debited. Each month, the bank sends you a bank statement detailing all your deposits, withdrawals, and checks cashed. The world of paper has fulfilled our needs to buy goods and services for many years. But this was the past. Today, the banking industry, like many industries, is looking for ways to cut costs, increase profits, and attract new customers while keeping the existing customers. Banks are merging and purchasing other banks in an effort to get new customers and streamline costs. The major parts of a bank's operating overhead costs are the people it employs to service its customers. After all, somebody has to be there to accept your deposit, process your checks, manage your account, and process your loan application. So what can banks do to reduce this overhead and better manage their business? The answer: on-line banking and electronic bill payment systems, a new e-business model that allows banks to take advantage of the Internet craze while maintaining the traditional brick-and-mortar infrastructure that has successfully serviced their customers for the past one hundred plus years. On-line banking is actually a very simple concept. Create some type of web interface that a customer can access his or her account twenty-four hours a day, seven days a week. The customer can have full access to account balances, fund transfers, loans, interest rates, and any other type of information that is available from the bank. All this can happen without having to enter the banking facility. Electronic bill payment systems can be accessed from that same web interface so that the bank customer can actually make payments to creditors without having to write a check. The bank's computers can process the transaction without a bank employee present. The cost savings of these two trends are substantial since the majority of your banking transactions can be processed without a bank employee. The hard part is selling this service to the customers and having them use it for the majority of their transactions. The bank's customers have been used to the same process their entire lives. Selling change is often a very difficult thing to do. In fact, there are still customers today that will not withdraw money from an ATM, they still prefer to do all their banking transactions inside the bank. In addition to this hard sell, it is also very costly for a bank to implement these new products, money that many smaller banks can not afford to invest in a weakening economy. Currently, approximately 5% of all bank customers have used the Internet to access their bank account. Of this 5%, less than 1% have used the Internet bank account to make an electronic bill payment (McPherson, 2001). It's easy to see that there is a huge potential for savings if the banking industry can get at least half of its customers to utilize these on-line tools. So how are banks trying to sell and market the service? The banking industry is trying to promote these new services to a younger generation that is already used to buying and selling on-line. The Internet era is very new and the older, traditional banking customers have very little experience surfing the web. Banks are offering free on-line account statements and offering three month's free electronic bill pay for customers who would like to try out the service. In addition, the banking industry is aggressively marketing the new services in each month's paper statement by inserting informational flyers. These flyers promote their service by showing pictures of a family sitting around the computer, viewing their on-line statement for their Christmas savings balance. The banking industry is aggressively trying to promote the service with the long-term goal of cutting huge overhead costs. Also, the banking industry is starting to implement fees if you perform a certain number of transactions per month inside the bank. Finally, they are promoting e-business accounts that charge zero dollars a month if you never perform a transaction inside the bank and use their electronic bill payment service on a monthly basis. Many businesses today are performing B2B transactions with their banks. The problem is approximately 70% of all the B2B transactions result in creating a paper check (McPherson, 2001). There are some savings, but there are still a lot of costs that the bank must absorb to complete the transaction. This is a demonstration of how banks are working with the business community but are running into roadblocks because of the lack of systems support. Many of the businesses that the banking industry is trying to work with have antiquated Legacy systems that make it difficult and costly to perform a true, end-to-end, B2B transaction. This also holds true in the consumer industry. Many customers write monthly checks to older, not so high tech companies such as cable, utilities, and smaller lending companies. These companies do not have electronic bill acceptance in place. Therefore, when you set up electronic bill payment with your bank, the bank is essentially writing a check for you and mailing it out at their expense. As you can see, the banking industry is making an attempt to go electronic but not all companies are set up to accept an electronic bill payment. There are several attributes that the Internet banking and electronic bill payment systems must have in order to be successful. First, they must be efficient and reliable. Since making payments to creditors on time is essential, the site must be up and working efficiently. The bank and the customer can not afford to have the site down for several hours and have payments delayed. The payments and account balances must be instantaneous for the on-line banking site to be efficient. Second, authentication is a requirement. Your bank account is private and can be viewed only by you and your bank. Your Internet banking account must also be private. Moreover, safeguards and Internet security protocols must be in place to deter fraud. Since anybody can access the Internet at home and visit a bank website, user id's and passwords must be encrypted to ensure that the only person able to access an account is the owner of that account. Third, the information has to be traceable. Both the customer and creditor must be able to tell when the payment was made, to whom, from whom, and the exact amount of the transaction. The information also has to be reversible. Since overpayments and mistakes do occur, proper crediting of an account must be an optional transaction that can be executed by either the customer or the creditor. The click-and-brick e-business model is certainly the business model that most companies are striving for in today's marketplace. In the banking industry, on-line banking and electronic bill payment systems along with the traditional brick-and-mortar bank buildings is the trend for which most banks have put in place or will put in place shortly. Most of the larger banks (First Union, Bank of America, etc.) are already there and are struggling to get the word out to their customers. They are offering fee free banking and free electronic bill pay for three months or longer to promote their product. Many of the smaller banks are lagging behind because of the high cost of putting these systems in place. There is certainly a very big cost savings to a bank if their customers use these tools. There is also a very big benefit to customers who like to use these services. Banking from home is a very simple transaction, it's getting the customer to actually try the service that's difficult. The future of banking is most certainly B2B and B2C. The million-dollar question is when will it be fully implemented? Bibliography: McPherson, Aaron (May 18, 2001). On-Line Payments Shackling E-Marketplaces. CIO Magazine [On-Line]. Available: http://www.cio.com/analyst/051801_idc.html Word Count: 1498
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