National Seminar on

"CREATING AND DELIVERING VALUE FOR CUSTOMERS"

CUSTOMERS
Organized by School of Management Studies
Cochin University of Science and Technology
Kochi – 682022, INDIA
March 27 - 28, 2009

CONSUMER AS CO-CREATOR OF VALUE:

CROSSING THE TECHNOLOGY HURDLE

Prof. Chowdari Prasad

Professor of Finance & Registrar, Alliance Business School
Bangalore – 560 068, Email: Chowdari.p@absindia.org
and
Vamshi Krishna Arumbaka
PGP (Marketing), Alliance Business School
Bangalore – 560 068, Email: Vamshiavk@yahoo.com
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Consumer as co-creator of value:
Crossing the technology hurdle
TECHNOLOGY IN INDIAN BANKING
 ALPMs and Back Office Computerisation
 Need to improve Customer Service
 Reconciliation / Union Problems
 Advent of PC in 1980s
 Competition and Reforms
 Introduction of computerization
 Clearing Houses, ATMs, Electronic Fund Transfers,
BANKNET, SWIFT, e-Mail, Credit Cards, Online Banking,
Tele- Banking…

2
Consumer as co-creator of value:
Crossing the technology hurdle
 COMMITTEES ON COMPUTERISATION OF BANKS
IN INDIA - 1982-1995
 Working Group to consider feasibility of introducing MICR /
OCR Technology for Cheque processing (1982), Convenor : Dr
Y B Damle, Advisor, Management Services Department, RBI
 Committee on Mechanisation in the Banking Industry (1984),
Chairman : Dr C Rangarajan, Deputy Governor, Reserve Bank
of India
 Committees on Communication Network for Banks and SWIFT
implementation (1987), Chairman : Shri TNA Iyer, Executive
Director, RBI

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Consumer as co-creator of value:
Crossing the technology hurdle
 COMMITTEES ON COMPUTERISATION OF BANKS
IN INDIA - 1982-1995 continued…

 Committee on Computerisation in Banks (1988), Chairman :

Dr C Rangarajan, Deputy Governor, RBI
 Committee on Technology Issues relating to Payments
System, Cheque Clearing and Securities System in the
Banking Industry, (1994), Chairman: Shri W S Saraf,
Executive Director, Reserve Bank of India
 Committee on proposing Electronics Funds Transfer and
Electronics Payments (1995), Chairperson: Smt K S Shere,
Principal Legal Adviser, Reserve Bank of India

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Consumer as co-creator of value:
Crossing the technology hurdle
LITERATURE REVIEW
 Ostlund (1974)extended Rogers’(1971) seminal work on diffusion in
identifying risk as influential to the adoption process. Diffusion studies found
that adopters are more innovative, less risk averse, perceive an innovation
 Parasuraman (2000) - optimism and innovativeness are drivers of
technology readiness, while discomfort and insecurity are inhibitors. If
consumers are not “ready” to be an internet banking user, they are likely to
express discomfort and insecurity
 Mary Modahl(2001), Forrester Research, impact of the Internet on business,
developed a concept called "Technographics," Ranked computer users by their
comfort level with technology and how likely they are to use the Internet:
Early Adopters, Mainstream Users and Laggards
 Financial services' researchers, such as Black et al(2002). and Gerrard and
Cunningham(2003), Theory of diffusion and internet banking, Internet
banking is perceived: More convenient and more compatible with the
adopter's lifestyle or more complex and requiring a higher level of PC skills

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Consumer as co-creator of value:
Crossing the technology hurdle
ADVANTAGES OF INTERNET BANKING
 Improve customer access, convenience
 Facilitate the offering of more services
 Increase customer satisfaction and loyalty
 Attract new customers easily
 Provide services offered by competitors
 Reduce customer attrition
 Reduces the time, cost and effort in the interaction

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Consumer as co-creator of value:
Crossing the technology hurdle
ADVANTAGES OF INTERNET BANKING
Conti…

Cost Per Transaction (US $)

Type Branch Cheque Phone ATM PC Internet

Cost Per 1.07 0.95 0.45 0.27 0/015 0.01

Transaction

Furst, Lang & Nolle Report

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Consumer as co-creator of value:
Crossing the technology hurdle
INDIAN SCENARIO – Banks & IT
Price Water Coopers report on Indian Banks: use of IT

 Far behind the global scenario

 Only 46% being spent on IT for business continuity
 Huge investments needed 55% - 27% - 18%
 Managing & retaining good clients, optimize costs, beat competition
 Banks should take up automation: centralized networks, 24*7
services, reduce manpower, CBS, CRM

The Financial Express - – 24th March, 2009

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Consumer as co-creator of value:
Crossing the technology hurdle
INDIAN SCENARIO – IDRBT, Hyderabad-1996
 V-SAT based Financial Network for banks
 Data warehousing & Datamining
 Publishes a Journal on IT in Banking
 Web based training for executives
 INdian FInancial NETwork(INFINET)
 Financial Networks and Applications
 Electronic Payments and Settlement Systems
 Security Technologies for the Financial Sector
 Technology Based Education, Training and Development
 Financial Information Systems and Business Intelligence

Institute for Development and Research in Banking Technology

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Consumer as co-creator of value:
Crossing the technology hurdle
INDIAN SCENARIO: STATISTICS - 2009

http://www.bulletin.rbi.org.in

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Consumer as co-creator of value:
Crossing the technology hurdle
INDIAN SCENARIO: STATISTICS - 2009

http://www.bulletin.rbi.org.in

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Consumer as co-creator of value:
Crossing the technology hurdle
INDIAN SCENARIO – IT Penetration
Year Population Users % penetration

1998 1,094,870,677 1,400,000 0.10%

1999 1,094,870,677 2,800,000 0.30%
2000 1,094,870,677 5,500,000 0.50%
2001 1,094,870,677 7,000,000 0.70%
2002 1,094,870,677 16,500,000 1.60%
2003 1,094,870,677 22,500,000 2.10%
2004 1,094,870,677 39,200,000 3.60%
2005 1,112,225,812 50,600,000 4.50%
2006 1,112,225,812 40,000,000 3.60%
2007 1,129,667,528 42,000,000 3.70%
2008 1,147,995,898 81,000,000 7.10%
http://www.internetworldstats.com

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Consumer as co-creator of value:
Crossing the technology hurdle
HURDLES FOR ADOPTION
The Technology Readiness Index (TRI) of Parasuraman:
 Optimism: the degree to which people with a positive view of
technology believe it offers increased control, flexibility and
efficiency in their lives
 Innovativeness: the degree to which people are technological
pioneers and thought leaders
 Discomfort: the degree to which people perceive a lack of
control over technology and feel overwhelmed by it, and
 Insecurity: the degree to which people distrust technology and
are skeptical of its ability to work properly

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Consumer as co-creator of value:
Crossing the technology hurdle
HURDLES FOR ADOPTION
Key components of security concerns:
 Authentication: The assurance of identity of the person in
a deal
 Authorization: A party doing a transaction is authorized
to do so
 Privacy: The confidentiality of data and information
relating to any deal
 Data integrity: Assurance that the data has not been
altered
 Non-repudiation: A party to the deal cannot deny that it
originated the communication or data

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Consumer as co-creator of value:
Crossing the technology hurdle
CROSSING HURDLES FOR ADOPTION
SUGGESTIONS:
 Remove lack of human interaction
 Address pricing concerns – Hole-in-the-wall(Sugata Mitra)
 Need to shift or perish
 Cost reduction: almost 100 times cheaper
 Increased customer participation
 Self service 24*7, Anytime Anywhere Banking
 Divide and Rule

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Consumer as co-creator of value:
Crossing the technology hurdle
“Much will depend on the capability to leap frog to the
state-of-the-art payment and settlement systems.
Given the high rate of technology absorption witnessed
in the recent past in our region, there is reason to be
optimistic that the challenges will be met successful”

YV Reddy, Governor RBI

Speaking at Institute for Development and Research in
Banking Technology

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Consumer as co-creator of value:
Crossing the technology hurdle
CONCLUSION
 Choice is made
 Huge effort & cost
 New business model Cost reduction +
Better service +
 Take this to public Co-creation of
 Need for push value =
 Change willingly or forcible Increased
 Many hurdles but not difficult Loyalty
 Include customer for progress

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Consumer as co-creator of value:
Crossing the technology hurdle
 Thank You

“Reduced costs for bank, better user experience and

freedom for consumer make it feasible”
Modhal in Now or Never

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Consumer as co-creator of value:
Crossing the technology hurdle