Entering the era of digital banking

Mahendra Gautama, Contributor, Jakarta

For many bank customers, digital banking is no longer a strange or unfamiliar term. Digital banking involves transactions using the latest communications technology, like the internet or mobile phones. Like any other technological development, digital banking is meant to offer customers numerous advantages, while at the same time being cost effective, convenient and less time consuming for both sides -- the banks and the customers.

With all these advantages it is only natural that bank owners and managers expect their customers to welcome digital banking with open arms.

In reality, however, it has come as a disappointment to them to find that in fact only a small number of customers are happy with it. There are many factors that influence the adoption of digital technology. Just like in conventional banking, one of the most important of these is the security factor. After all, it is the customers' money that is at stake.

A consumer survey report on e-banking was issued by a leading research company, eMarketer, in December 2003. On reasons why many customers are still reluctant to use digital banking the report was an eye opener for bankers. Close to 26 percent of respondents said they were worried about hackers or some other form of digital crime.

A remarkable 22 percent found advanced technology inconvenient. Fear of privacy invasion and losing confidential personal data worried six percent of respondents. About 21 percent emphasized the need for one-on-one or personal communication, even in today's sophisticated world, for their banking transactions. That left only a quarter of the respondents who were prepared to fully embrace hi-tech banking.

Meanwhile, another research company, Harris Interactive, issued a surprising report on customer trust regarding banking security. Its 2003 report clearly revealed a downspiraling of customer trust over the last few years. The 2003 level was the lowest: only 42 percent of customers believed that their banks were taking good care of the security aspect. In 2000, the number was higher, 54 percent of them trusted their banks on this matter, while in 1999 close to two-thirds of customers felt their financial transactions were in safe hands with their chosen banks.

For banks, obviously, in order to provide trustworthy service security is the top priority and has always been since the earliest days of the banking industry.

From the sturdiest locks and iron deposit boxes behind locked bars with security guards in the era of traditional banking -- most of which still exist today -- to surveillance cameras and secure cards using PINs (Personal Identification Numbers), banks always need to ensure their customers have a sense of real security.

Digital banking includes features like SSL, encryption and firewalls as some of the safeguard measures designed to make transactions really safe. In mobile banking a wide range of security features are also utilized, like WTLS, Visa 3-D Secure Specification, MasterCard SPA, and Address Verification Systems (AVS) to ensure customers that their transactions are untouchable.

All these technological innovations do not come cheap. However, realizing the need to provide customers with every competitive edge, including convenience and less hassle, major banks have gladly spent huge sums of money investing in security technology. This is not a once-off investment, and periodic upgrading of hardware and software is necessary from time to time. This means more expenditure all the way.

However, with banks spending huge amounts of money in their efforts to give customers the best in banking security on one hand, and the reluctance of a major cross-section of customers to use advanced banking methods on the other, indicates that there is a missing link somewhere.

Johanes Saragih, one of Indonesia's most noted bankers, said the missing link was most probably a lack of clear communication from the banks to customers on the brand-new, strange-sounding terminology and features associated with digital security.

While keeping a good balance between the huge investment in technology and providing the best service to customers, bankers should not belittle the role of communications, he said. "Most customers are not familiar with all these new names, phrases and abbreviations. They are simply lay people and we ram technical words down their throats and expect them to appreciate what we are trying to do. Two-way communication in simple language is what is needed. What we are doing, technologically, that is, is of course for their benefit. But we must familiarize them with all this and make it simple for them to understand. Only then will they feel comfortable with it, see the benefits, and ultimately both sides will gain," he said.

Johanes added that bankers should also give information on how customers can be active participants in further securing banking transactions, like upgrading computers with the latest security shields and changing their passwords periodically. Essentially, he said, enhancing customer awareness and understanding about digital banking security is not only for the benefit of customers, but also of the banks themselves.

Once the communications hurdle is overcome, the advantages of digital banking, including all its security aspects, will be better understood. It is human nature to distrust something new that is difficult to fathom. In this case, it is digital banking. It should be made less complicated with all channels of communications being availed of, including conventional means and one-on-one communication. With all the advantages offered by digital banking, it should not too difficult to gradually convince customers to turn to solution-providing technologies, which are only a click or a phone call away.