Bank branches, the interface between banks and customers, have also changed drastically from being operations-centric to servicing clients. The shift during this period has been from branch to alternative delivery channels such as ATM, Internet and mobile," says T.M. Bhasin, Chairman and Managing Director, Indian Bank, and author of E-commerce in Indian Banks.
Customers can now perform several banking operations such as fund transfers, opening deposit accounts, ordering cheque books and demand drafts, paying utility bills, applying for loans, and getting account statements without visiting a branch. Indeed, they have multiple alternate channels to use - Internet, mobile apps or ATMs.
"We are seeing more and more people shifting to alternative delivery channels which account for nearly 30 to 40 per cent of customers at present. Over the next few years this is likely to go up to 70 to 80 per cent," says Bhasin
ICICI Bank, the country's second largest bank, has seen a big jump in transactions outside the branches. Chanda Kochhar, MD and CEO of the bank, says only 15 per cent of transactions on average take place through the branches. "The rest are happening outside," she says.
ATM is the oldest of the alternative banking channels and enjoys the highest level of acceptance among customers. The number of ATMs in India has doubled in the past three years. Currently, there are more than 100,000 ATMs, around 70 per cent of them in urban locations. Global research firm Celent expects the number of ATMs to double by 2016, with more than 50 per cent of the new machines going to small towns.
"Today, ATM provides more than cash withdrawal. Apart from fixed deposits, cheque book requests and balance enquiries, there are also enhanced banking services," says Shivaji Chatterjee, Vice President, Hughes Communications India, which helps banks create their ATM networks.
Banking is also changing due to the efforts of the Reserve Bank of India (RBI) to inculcate the habit of paperless payments through credit and debit cards, electronic fund transfers and mobile banking. While cheque is still the dominant mode of payment, the value of such transactions has been on a gradual decline between 2007/08 and 2011/12. Paper-based payments accounted for 52.4 per cent of non-cash transactions in terms of volume, but only 8.4 per cent in terms of value.
Mobile phones are seen as a big enabler of electronic payments as the costs are low. Mobile transactions have increased in the past few years, but the use of mobile banking services is quite low. Most of the transactions carried out using mobile phones are non-financial in nature. "The potential of mobile banking technology is yet to be fully exploited," says G. Padmanabhan, Executive Director, RBI.