As is being seen throughout the western world, the internet banking revolution is also having a major impact on the way banks, businesses, and modern Indian consumers handle their day-to-day financial activities. In fact, Morgan Stanley Dean Witter recently announced that the World Wide Web is fast becoming more important for retail financial services than it is for any other sector of business or industry.

Electronic or e-banking is an umbrella term referring to the ability of customers to perform basic to advanced banking transactions electronically (i.e., remotely) without having to visit a brick-and-mortar structure. E-banking is also referred to as personal computer (PC) banking, internet banking, or online banking. (Phone banking services also fall under this category). To date, the majority of the world’s major and minor banks have established, at a minimum, informational websites to support customer inquiries. However, it is websites with transactional capabilities that are being increasingly demanded by consumers. The primary benefits of e-banking are convenience for the customer and vast cost savings for the banks themselves.

One of the primary drivers of the ebanking revolution in India has been the degree to which internet-savvy financial experts have been able to offer customers access to an entire global marketplace. In most major world economies, including India, consumers have readily embraced ebanking and are increasingly seeking out the highest and most convenient levels of services. According to one India-based financial expert, the six primary drivers of increased ebanking activities in India include (in order of primacy):

• improved customer access,
• the facilitation of access to a greater number of core services,
• a desire to increase customer loyalty,
• a desire to attract new customers,
• attempts to provide services offered by competitors, and
• attempts to reduce customer attrition.

Today, the banking industry in India is busily responding to the unprecedented amount of competition from nontraditional banking institutions, most of which offer or even encourage the conducting of financial business via the internet. Changes in banking regulations have eased this transition toward ebanking, as has the emergence of technologies that enable new competitors to enter the financial services market quickly and efficiently. While impressive advances have occurred, however, ebanking activities in India remain hindered by the fact that—looking at the country as a whole—only 50% of banks currently offer internet banking services of any kind—with 55% of the banks that do offer ebanking having those services limited to the most basic or “entry level” websites, providing information and marketing material only, as opposed to even low-level transactional capabilities. In fact, it is estimated than only 8% of India’s banks currently offer advanced transactional capabilities, such as cash management services and online fund transfers. Compared to India’s nationalized banks, private and foreign banks in India are far more advanced in terms of the number of ebanking sites and services available, as well as the level of technological advancement available on these sites. This being said, the information technology analyst firm Meta Group recently predicted that Indian financial institutions that do not offer PC banking services by the year 2010 will become highly marginalized.

In sum, the pressure on Indian financial institutions to provide or expand ebanking access is being driven by demand-side pressure; the emergence of open standards for banking functionality; increased customer sophistication; the close integration of banking services with web-based E-commerce; and the world’s overriding shift toward “one stop shopping” in banking services.