Structure & History of Retail Banking

Community Bank Online | History of retail banking Basic banking services such as deposits for safe keeping, saving, or borrowing for personal or business use is as old as human civilisation. Organised banking services started in 15th and 16 century Europe, when banks began opening branches in commercial areas of large cities. By the last quarter of the 19th century, banks were consolidating their branch networks so that they could operate in a more integrated manner (Consoli, 2003).

Mergers and acquisitions allowed banks to grow quickly but, in the absence initially of information and communication technologies, their services remained largely local. The policy of opening new branches continued throughout the twentieth century as a means of business expansion, but services were limited to the provision of routine operations such as deposits, withdrawals and basic loan services. To cope with the increasing volume of work, and to achieve consistency across branch networks, banks started to standardise their record keeping and accounting practices.

This also helped them to effectively connect branches. Standard record keeping also resulted in the appearance of new professions such as bank clerks. The arrival of the typewriter in the late nineteenth century helped to standardise internal/external communications, and other tools such as the telegraph made communications between branches and headquarters a daily routine.

After the end of the Second World War, early forms of computers began to find their way into the banking industry, initially to automate routine data processing operations. This later gave way to more organized data processing to make data more accurate and easier to access. More advance database tools enabled the automation of clearing systems and retail money transfer which cleared the way for banks to widen their reach and improve and increase the delivery of financial services.

At this stage, these technological developments were often confined to the banks headquarters, while branches continued to operate paper based systems. In the mid 1960s IBM developed a magnetic strip on which data could be stored to be used through plastic cards for electronic reading (Consoli, 2003). Banks were again one of the first users of this technology, beginning with the development of cash machines. Later these became known as Automated Teller Machines (ATMs).

ATMs not only provided cash but also showed balances, mini statements and requests for banking stationary such as cheque books. During the 1980s the automation of data processing spread rapidly to branches, and most internal operations were fully automated, making considerable savings for banks. Their benefits to customers however remained very limited. In the late 80s and early 90s the use of computers started spreading to all areas of banking, and intra-bank networks further enhanced and enabled standardization of products and service delivery.

This meant that technology itself was ceasing to be a source of competitive advantage, and banks had to differentiate their products and services in order to grow. The standardization of products, processes and technologies, as well as liberalization of banking regulations, allowed the entry of new financial agents who operated in a diversified manner by offering, at lower prices, services traditionally available exclusively from banks.

The use of IT, which drastically reduced entry costs (Consoli, 2003), further accelerated this trend. ATM use grew significantly as functionality improved, and this growth continues to the present day. The arrival of early forms of online banking further revolutionized the banking sector. This aspect of banking is covered in the next chapter.

Structure of Retail Banking 

As mentioned in the previous section, the traditional banking business model is based on physical decentralization, with branches scattered around populated areas, providing a range of services. The rationale behind such branch investment is the need to distribute banking services, encourage usage, and maintain contact with customers. Such a structure allows these institutions to provide a large range of products and services, but all at the high costs associated with premises and staff. 

In the past, a large branch network was source of competitive advantage, as it gave customers easier geographic access and the reassurance that the bank has substantial resources and hence offers security for their savings (Jayawardhena & Foley, 2000) Banks needed large investments to develop and maintain such network, so it worked as an entry barrier for new entrants and retail banking remained mostly the preserve of a few large banks, especially in Europe. One notable exception is the US, where there are more than 8000 community banks and nearly 9000 memberowned banking institutions regulated by the National Credit Union Administration (Fraering & Minor, 2006). 

During the last decade or so, new players such Internet only banks as well as other organizations such as supermarkets have also started to offer retail financial services. While large banks still hold the major market share, these other organizations are making significant inroads. The importance of services distribution channels is also changing at a rapid pace. In the past the main source of retail banking services distribution was ‘brick and mortar’ branches. 

With the arrival of other channels such as telephone banking and e-banking, the number of branches is steadily declining, a trend also fuelled by mergers and takeovers. Now, most banks choose to deliver their products and services through multiple channels, including the internet and telephone. The density of a bank’s ATM network, and hence the average proximity of an ATM for the customer, is important for the convenience of cash management. In the U.K., for example, during the last decade almost all banks have maintained or significantly increased the number of ATMs in their network. 

Recently this trend has started to change as the number of fee charging ATMs (mainly operated by small business) has grown, together with signs that the number of free ATMs may be starting to decline (Donze & Dubec, 2008). Whilst the number of financial products available in the market is growing, current accounts still play an important role in the relationship between a bank and its customers. Current accounts offer access to deposit-holding services, payment services through payment books/cards, and direct debit facilities, and potentially act as a vehicle for instant credit through overdrafts. 

As such, they are key vehicles for building relationships between a bank and its customers and often serve as a gateway through which suppliers can cross-sell other banking products (Fraering & Minor, 2006). However, the traditional structure of banking industry may be changing as the Internet-only banking model offers a potential alternative. The main idea of this model is the reduction in operational costs of traditional branch networks and telephone call centers. 

There is a potential competitive advantage to Internet only banks, as lower operational costs could mean they are able to offer higher value to customers. So far, however, this has not been the case, and the main beneficiaries of e-banking so far have been traditional banks, offering e-banking as just another service delivery channel.

e-Marketing In The Financial Services

E-marketing in the financial services sector (which is covered later) was made possible by the arrival of e-banking. E-marketing builds on the e-channel’s ability to provide detailed data about customers’ financial profiles and purchasing behaviour.

Detailed understanding of customers enables customised advertising, customised products and enrichment of the relationship with customers through such activities as cross selling. Other potential benefits of e-banking to organizations may include:

improved use of IT resources and business processes; better relationships with suppliers/ customers; quick delivery of products and services; and a reduction in data entry and customer services related errors. It is important to note that e-channels do not automatically bring these benefits, as other organizational issues also have been dealt with.

There are only a few examples reported in the literature where e-banking is realising its promised potential. One such example is the Royal Bank of Canada, where its number of online relationships was 340,000 and was growing at a rate of almost 700 new enrolments a day during year 2002-2003. Another example of realisation of the above benefits is the Woolwich Building Society in the UK, which is described in Chapter VIII.

The number of its online customer was growing so fast that it was cited as one of the main reason for its takeover by a much bigger bank, Barclays. Not only did the number of its online customer grow very quickly, but the new customer base was also very profitable. According to Woolwich’s own figures, its online customers bought four financial products each - much higher than its ‘branch banking only’ customers.

Why Is e-Banking Important?

Why Is e-Banking Important? Understanding e-banking is important for several stakeholders, not least of which is management of banking related organizations, since it helps them to derive benefits from it. The Internet as a channel for services delivery is fundamentally different from other channels such as branch networks, telephone banking or Automated Teller Machines (ATMs).

Therefore, it brings up unique types of challenges and requires innovative solutions. Many banks and other organizations have already implemented or are planning to implement e-banking because of the numerous potential benefits associated with it. Some of these major benefits are briefly described below. 

Why Is e-Banking Important? # Choice and Convenience for Customers 

In the fierce battle over customers, providing a unique experience is the compelling element that will retain customers. A ‘customer first’ approach is critical for success in e-banking. Customers hold the key to success and companies must find out what different customers want and provide it using the best available technology, ensuring that they are acting on the latest, most up-to-date information. In modern business environments, customers want greater choice.

They want the traditional range of banking services, augmented by the convenience of online capabilities and a stronger focus by banks on developing personal relationships with customers. Avkiran (1999) stressed the importance of the human touch in the customer services. Politeness and neatness, recognition in terms of greeting, willingness to provide prompt service, ability to apologise and express concern for a mistake are all important for bank customer. 

Most of these aspects of customer service cannot be automated. The adequacy of staff members serving customers can be expected to directly influence the customers’ satisfaction. However, e-banking backed up by data mining technologies can help in better understanding customers’ needs and customizing products/services according to those needs. Offering extra service delivery channels means wider choice and convenience for customers, which itself is an improvement in customer service. 

E-banking can be made available 24 hours a day throughout the year, and a widespread availability of the Internet, even on mobile phones, means that customers can conduct many of their financial tasks virtually anywhere and anytime. This is especially true of developed countries, but increasingly in developing countries, the spread of wireless communications means that services such as e-banking are becoming accessible. 

Why Is e-Banking Important? # Attracting High Value Customers 

E-banking often attracts high profit customers with higher than average income and education levels, which helps to increase the size of revenue streams. For a retail bank, e-banking customers are therefore of particular interest, and such customers are likely to have a higher demand for banking products. 

Most of them are using online channels regularly for a variety of purposes, and for some there is no need for regular personal contacts with the bank’s branch network, which is an expensive channel for banks to run (Berger & Gensler, 2007). Some research suggests that adding the Internet delivery channel to an existing portfolio of service delivery channels results in nontrivial increases in bank profitability (Young, 2007). 

These extra revenues mainly come from increases in noninterest income from service charges on deposit/current accounts. These customers also tend to be of high income earners with greater profit potential. 

Why Is e-Banking Important? # Enhanced Image 

E-banking helps to enhance the image of the organization as a customer focused innovative organization. This was especially true in early days when only the most innovative organizations were implementing this channel. Despite its common availability today, an attractive banking website with a large portfolio of innovative products still enhances a bank’s image. This image also helps in becoming effective at e-marketing and attracting young/professional customer base. 

Why Is e-Banking Important? # Increased Revenues 

Increased revenues as a result of offering e-channels are often reported, because of possible increases in the number of customers, retention of existing customers, and cross selling opportunities. Whether these revenues are enough for reasonable return on investment (ROI) from these channels is an ongoing debate. 

It has also allowed banks to diversify their value creation activities. E-banking has changed the traditional retail banking business model in many ways, for example by making it possible for banks to allow the production and delivery of financial services to be separated into different businesses. This means that banks can sell and manage services offered by other banks (often foreign banks) to increase their revenues.

This is an especially attractive possibility for smaller banks with a limited product range. E-banking has also resulted in increased credit card lending as it is a sort of transactional loan that is most easily deliverable over the Internet. Electronic bill payment is also on rapid rise (Young, 2007) which suggests that electronic bill payment and other related capabilities of e-banking have a real impact on retail banking practices and rapidly expanded revenue streams. 

Why Is e-Banking Important? # Easier Expansion 

Traditionally, when a bank wanted to expand geographically it had to open new branches, thereby incurring high start up and maintenance costs. E-channels, such as the Internet, have made this unnecessary in many circumstances. Now banks with a traditional customer base in one part of the country or world can attract customers from other parts, as most of the financial transaction do not require a physical presence near customers living/working place.

In one case study presented in Chapter VIII, a bank based in the southern part of the UK was attracting customers from northern England, where it had no branches. In many countries banks share their resources such as ATMs or use post offices as their main interaction points, with customers for services such as cash and cheques deposits. 

Why Is e-Banking Important? # Load Reduction on Other Channels 

E-Channels are largely automatic, and most of the routine activity such as account checking or bill payment may be carried out using these channels. This usually results in load reduction on other delivery channels, such as branches or call centres. This trend is likely to continue as more sophisticated services such as mortgages or asset finance are offered using e-Banking channels. In some countries, routine branch transactions such as cash/cheque deposit related activities are also being automated, further reducing the workload of branch staff, and enabling the time to be used for providing better quality customer services. 

Why Is e-Banking Important? # Cost Reduction 

The main economic argument of e-banking so far has been reduction of overhead costs of other channels such as branches, which require expensive buildings and a staff presence. It also seems that the cost per transaction of e-banking often falls more rapidly than that of traditional banks once a critical mass of customers is achieved. 

The research in this area is still inconclusive, and often contradicting reports appear in different parts the world. The general consensus is that fixed costs of e-banking are much greater than variable costs, so the larger the customer base of a bank, the lower the cost per transaction would be. Whilst this implies that cost per transaction for smaller banks would in most cases be greater than those of larger banks, even in small banks it is seen as likely that the cost per transaction will be below that of other banking channels. 

Having said that some sources of research in this area suggest that banks so far have made little savings from introducing e-banking (Young, 2007). It implies that, any efficiency related savings are offset by above average wages and benefits per worker due to the need for a more skilled labor force to run the more sophisticated delivery system. Other costs such as systems integration and extra security measures also take their toll. 

Why Is e-Banking Important? # Organizational Efficiency 

To implement e-banking, organizations often have to re-engineer their business processes, integrate systems and promote agile working practices. These steps, which are often pushed to the top of the agenda by the desire to achieve e-banking, often result in greater efficiency and agility in organizations. However, radical organizational changes are also often linked to risks such as low employee morale, or the collapse of traditional services or the customer base.

What is E-Banking and Evolution

Community Bank Online ~ What is E-Banking and Evolution | What is E-Banking? In its very basic form, e-banking can mean the provision of information about a bank and its services via a home page on the World Wide Web (WWW). More sophisticated e-banking services provide customer access to accounts, the ability to move their money between different accounts, and making payments or applying for loans via e-Channels. 

The term e-banking will be used in this book to describe the latter type of provision of services by an organization to its customers. Such customers may be either an individual or another business. To understand the electronic distribution of goods and services, the work of Rayport and Sviokla (1994; 1995) is a good starting point. They highlight the differences between the physical market place and the virtual market place, which they describe as an information-defined arena. 

In the context of e-banking, electronic delivery of services means a customer conducting transactions using online electronic channels such as the Internet. Many banks and other organizations are eager to use this channel to deliver their services because of its relatively lower delivery cost, higher sales and potential for offering greater convenience for customers. But this medium offers many more benefits, which will be discussed in the next section. A large number of organizations from within and outside the financial sector are currently offering e-banking which include delivering services using Wireless Application Protocol (WAP) phones and Interactive Television (iTV). 

Many people see the development of e-Banking as a revolutionary development, but, broadly speaking, e-banking could be seen as another step in banking evolution. Just like ATMs, it gives consumers another medium for conducting their banking. The fears that this channel will completely replace existing channels may not be realistic, and experience so far shows that the future is a mixture of “clicks (e-banking) and mortar (branches)”. Although start up costs for an internet banking channel can be high, it can quickly become profitable once a critical mass is achieved. 

Evolution of E-banking 

There have been significant developments in the e-financial services sector in the past 30 years. According to Devlin (1995), until the early 1970s functional demarcation was predominant with many regulatory restrictions imposed. One main consequence of this was limited competition both domestically and internationally. As a result there was heavy reliance on traditional branch based delivery of financial services and little pressure for change. 

This changed gradually with deregulation of the in dustry during 1980s and 1990s, whilst during this time, the increasingly important role of information and communication technologies brought stiffer competition and pressure for a faster pace of change. The Internet is a relatively new channel for delivering banking services. Its early form ‘online banking services’, requiring a PC, modem and software provided by the financial services vendors, were first introduced in the early 1980s. However, it failed to get widespread acceptance and most initiatives of this kind were discontinued. 

With the rapid growth of other types of electronic services since mid 1990s, banks renewed their interest in electronic modes of delivery using the Internet. The bursting of the Internet bubble in early 2001 caused speculation that the opportunities for Internet services firms had vanished. The “dot.com” companies and Internet players struggled for survival during that time but e-commerce recovered from that shock quickly and most of its branches including e-banking have been steadily, and in some cases dramatically, growing in most parts of the world. 

One survey conducted by the TechWeb News in 2005 (TechWeb News, 2005) found e-banking to be the fastest growing commercial activity on the Internet. In its survey of Internet users, it found that 13 million Americans carry out some banking activity online on a typical day, a 58 percent jump from late 2002. The spread of online banking has coincided with the spread of high-speed broadband connections and the increasing maturation of the Internet user population. Another factor in e-banking growth is that banks have discovered the benefits of e-banking and have become keener to offer it as an option to customers.

3 Simple Steps to Fix A Negative Credit Report

Community Bank Online - 3 Simple Steps to Fix A Negative Credit Report | Really it's not difficult to acquire these corrections taken care of on your credit track record. You could take care of it pretty fast and it won't run you a dime apart from a firstclass stamp. In general that you can do a more satisfactory job than any credit repair clinic because you're in the position to actually then add positive credit marks on your report if you know how to get it done and I'll explain below.

Okay these are the basic 3 basic steps to fix your credit history.

3 Simple Steps to Fix A Negative Credit Report # 1. First get yourself a copy of your respective free credit score in the event you don't have a CURRENT copy. Everybody is entitled to a free credit report each year according to govt laws. You can get a totally free annual credit profile online instantly in the approved Site annualcreditreport.com. You'll have the ability to print out when you provide identification.

You can also call 1-877-322-8228. Once you call you'll receive an automated service. Know what contact number you're going as that is the requirement in the process. However it should take about 15 days to have the report. It's also possible to write but instant online or calling is easiest. This free services sponsored with the three credit scoring agencies - Equifax, Experian and TransUnion.

Now you must know that you won't get your credit rating or score when you're getting the report. There's an additional charge to secure a score. If however you recently applied for credit and were refused, call the lender and ask what your score is. You'll be able to usually find out this way for free.

3 Simple Steps to Fix A Negative Credit Report # 2.  Write a dispute letter. It's an easy task to write a dispute letter. If you're not sure how to accomplish this, take a seat and pretend you're writing directions into a friend. No should be fancy also it can be absolutely need handwriting if legible or typed out. Don't help it become too difficult. Make a list from the low credit score marks or wrong information that you want to dispute. Ensure that you maintain it as short as possible and don't add any fluff. Obtain the facts everbody knows them. When you have any documentation to incorporate to 'back you up' you can add this or include copies together with your dispute letter.

When the credit agency gets your letter they'll do an analysis and will either verify the item showcased and take off or remedy it - or they'll be can not verify the negative credit information to remove it.

When they notify you actually not able to verify any negative credit mark thus not removing it, then you can definitely still dispute it by sending another letter asking the way they arrived at their decision. This is what's called a 'method of verification' or sometimes 'procedural request'. In the event the dispute is regarding a creditor the loan reporting bureau and the creditor must both present you with adequate evidence of their decision. Otherwise they are essential to law to remove the negative credit mark from your credit score.

3 Simple Steps to Fix A Negative Credit Report # 3.  The way to get positive credit marks on your credit score. This can be simple to do in a period of a few months to start constructing a positive credit history. Get mall and/or gas cards and rehearse them. Pay them down by the due date. Make note these usually feature higher rates of interest so compare rates first. Pay a tad bit more than your debt is and pay just a little early. Paying online means that your payment arrives and isn't lost within the mail.

Have a very bill calendar and write on it when payments are due and another notation around the calendar several days before so that you will make the payment online early. If you wait till the very last minute, the site could be down for maintenance or their may be other network issues. But in either case make sure you make the payment before it's due. Try to get an installment type of loan or automobile loan using your bank or bank.

Know that if you attempt to get an automobile or any other vehicle how the dealership will contact several lenders for the greatest monthly interest and These will contribute a mark to your credit track record. This could affect to your credit rating, otherwise known as FICO. So try to get a pre-approved loan prior to you heading for an auto dealer. If this can be achieved in a couple of months you will establish a current and a good credit score history fast. No credit score improvement service should be able to develop this positive history for you.