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Analysis of development trends of modern bank services offered by the banks of the world to their customers

The global market of Internet and telephone banking is going through times of great change. Just a few years ago it was enough to launch online banking in order to have a huge competitive advantage over other lenders. Now, when payments become available for consumers and processing of loans without leaving the house, the banks should think about how to make their electronic office more comfortable with the user's perspective and to expand the palette of options available online. Stiff virtual competition requires not only creativity, but also the speed - the Internet has taught consumers to measure time, not even minutes but seconds. Apparently, the Russian banks are also preparing to take part in this exciting race. The authors of the global market research online and telephone banking (Internet & Telephone Banking Market Report 2011) estimated the number of users of online banks in the past year, 45.1 million worldwide, compared with 28.2 million in 2010. This growth demonstrates the rapid development of the market of Internet banking and forecast of customers for 2015 is about 60 million. In U.S., according to a report by the American Bankers Association (American Bankers Association), over the past two years customers steady prefer online banking to any other method of managing their own finances.

A new survey by the American Bankers Association shows that for the first time, older Americans prefer to do their banking online compared to any other method. The survey of more than 2,000 U.S. adults, conducted August 12-14, 2011 by Ipsos Public Affairs, an independent market research firm, revealed that the popularity of online banking among customers 55 and up has surged since last year. Fifty-seven percent of bank customers 55 and up say they prefer banking online compared to 20 percent in 2010.
Overall, bank customers now prefer online banking more than all other methods combined. This year, 62 percent of U.S. adults polled named online
banking as their preferred banking method compared to just 36 percent last year. This is the first year the ABA survey was conducted online. All previous surveys were conducted by telephone. ABA has conducted the survey annually since 1998. The margin of error is +/- 2.2 percent.
The preferences for all other banking methods experienced declines. Customers named the following banking methods as preferred as follows (see trend chart below) (Picture 11.):

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  Internet Banking (laptop or PC) – 62% (36% in 2010);
  
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  Branches – 20% (25% in 2010);
  
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  ATMs – 8% (15% in 2010);
  
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  Mail – 6% (8% in 2010);
  
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  Telephone - 3% (6% in 2010);
  
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  Mobile (cell phone, Blackberry, PDA, I-Pad, etc.) – 1% (3% in 2010);
  

Picture 11. Preferred Banking Method 2011¹

These survey results hammer home the point that retail banking has changed for good. They tell us for the first time that customers of all age groups prefer the speed and convenience of conducting their banking transactions on the Internet to visiting their local branch or ATM. They also tell us that customers trust the accuracy and security of online banking.
Online banking first became the most preferred banking method in 2009 with 25 percent of customers naming it as their favorite. This marks the first time, however, that adults 55 and up also named it their preferred banking method. Previously, visiting a branch was the most popular method, followed by ATMs.
Online banking may be the most preferred method of banking but banks are still committed to providing multiple choices to serve the needs of all customers. Bank customers will continue to have the choice to use branches, ATMS, telephone, mobile devices or the Internet to conduct their transactions – whichever they find most convenient for them (Picture 12.).

Picture 12. Preferred banking method¹

The UK National Statistics Office (Office of National Statistics, 2011) states that in 2011, 55% of UK adults prefer online banking versus visiting bank

branches. Moreover, in the age group from 24 to 35 years, the percentage of users of online systems increased up to 72%. In Russia, according to a study MForum Analytics, only every tenth customer uses online banking system, but according to analysts, this number will grow, including through increasing of sales of tablet PCs and developing of applications for mobile phones. Despite the fact that the Russian market of Internet and mobile banking shows low growth relative to the U.S. and Europe, a survey of Muscovites Russian company Profi Online Research, conducted back in 2010, showed that a convenient system of online banking is a competitive advantage when choosing a bank for the majority of respondents. 53% of men and 42% of women pay attention to the presence of suitable functional internet banking system. In the first hundred Russian banks didn`t stay at least one that does not offer customers a system of online banking in addition to opening the account and issue international credit card.
Almost all the major Russian banks offer to their customers the opportunity to enjoy with the benefits of e-banking service (DBS). DBS today - is the ability to ensure the competitiveness of the credit institution. In the remote service channels displayed a maximum range of banking services. But still the main question in the functioning of DBS is to ensure the security of financial transactions.
Perhaps there is no doubt that the bank of the future - is a bank with a unique set of technologies that enable customers to perform financial transactions from anywhere, anytime and any day of the week, quickly, efficiently and safely. Not surprisingly, now the Russian market for remote banking is growing rapidly. Experts say that over the past few years in this area there will be a qualitative shift: the most forward-thinking banks have started using internet banking, mobile banking and other types of DBS in all aspects of their business. Also development and maintenance of IT DBS is going parallel.
Experts predict that in the coming years the growth rate of the Russian market DBS will be not less than 100% per year. Sure the market growth will be
fueled by a proliferation of banking products among the population, and development of remote maintenance services.
Over the past few years, the relation of Russian banks to electronic channels of service has changed considerably: credit institutions have been actively working in the field to extend the functionality of DBS, expand into new market segments, although, according to experts, an effective promotion of sales of these services are engaged in earnest only a few players. As shown by a study Analytic Research Group, only a few banks have been actively promoting DBS services. Among them stand out VTB24, Alfa-Bank, Savings Bank and others, that is, as a rule, it is a major lending institutions.
It is clear that DBS is developed to a greater extent in large cities, where the level of automation suppliers of goods and services can receive remote payments. In the regions, according to experts Analytic Research Group even crisis has not pushed residents of small towns to the use remote banking services.
In this area, popular services are mobile phone deposits, payments for online services and utilities. The increasingly popular, according to market participants, are external transfers, replenishment of electronic purses, told representatives of Analytic Research Group. According to market experts, the Russian banks in this area have lacks of consolidator, who concluded a contract of payments acceptance with a large number of recipients, and then offered to banks to use the entire current contract when the consolidators appear banks would spend significantly less time to sign contracts.
According to analysts, penetration of e-banking services in developed countries exceeded 90%. Today the most popular and common kind of DBS in the world is online banking. In the U.S., almost all the major lending institutions are providing Internet banking services, and the number of users is about 80 million people.
In Europe, the number of users of Internet banking services at present, about 100 million people, and it is expected that by 2014 this figure will exceed 110 million.
We can compare the level of penetration of Internet banking in Russia, which is only 1.5-2%, and in some other countries: Canada, 65% in the U.S. - 45% in Sweden - 54%.
Researchers from the company comScore Data Mine showed the top ten countries in the world where people are most often uses remote banking services via the Internet¹.
As can be seen from the picture, the leader of top 10, according to comScore Data Mine, became Canada. The share of Internet users in this country who use the services of a monthly online banking is approaching 65%. In second place - the Netherlands, where the comparable figure was almost 61%.
Next in the ranking are other countries in Western Europe and the United States and Australia, where citizens are traditionally the owners of bank accounts and regularly go to the World Wide Web.

Picture 11. Top 10 Countries by Online Banking Penetration²

¹http://moneynews.ru/News/14441/
² http://www.aba.com/Press+Room/090811ConsumerPreferencesSurvey.htm
The possibilities of modern Internet banking for individuals increased significantly in Russia. In just 2-3 years, such systems from a simple information service for a small group of customers turned into a real working tool to commit a variety of operations «online». Number of users of DBS is growing (Picture 13.). Since 2009, the proportion of individuals` accounts that are available over the Internet increased from 12% to 25%, while the proportion with a score of «mobile» access, and even more - three times. According to its functional best Internet banking programs today satisfy the average user. Payment for cellular communications, utilities payments, repayment of loans - are standard features of most online banking systems.

Picture 13. Availability of RBS for individuals¹
However, banks do not rest and continue to expand the functionality of systems in response to customer needs (Picture 14.). By the beginning of 2012 half of the surveyed lending institutions began to provide service according to scheduleof automatic payments (at the beginning of 2011 there were only one- third). Similar progress is observed in the design of applications for credit (31% today vs. 18% a year earlier) and to provide additional services (online booking, air travel, the completion of accounts in the system of electronic money), and the list goes on.




¹Source: Assessment of "Expert RA" according to the information of Central Bank of Russian Federation
Large banks with their development teams far exceeded the requirements of the average customer; the same thing was achieved by medium and small banks that join the club systems. They are developing: for example, the number of customers of Handy Bank for the year increased by almost half - from 36 to 85 banks.

Picture 14.Banks are actively expanding the base of payees¹

At the same time, the creators of the systems continue to add new features. JSC "CREDIT BANK OF MOSCOW" after making the final rating functionality hooked SMS and e-mail informing about transactions in the system. JSC "Russian Standard Bank," is constantly upgrading its Internet bank, in accordance with the wishes of users, as reflected in such remote services, such as the provision of invoices, statements on the cards to CSV². At the moment, it is also expected to launch a new information security from the TCR³ of the Bank with a significantly updated functionality.

¹ Source: Assessment of "Expert RA" according to the information of banks
²Comma Separated Values
³ T-cell receptor
Together with the marketing efforts of the functionality development allowed to banks to increase significantly, from 8% to 26% (Picture 15.), to increase the share of transactions conducted with the use of internet banking (the total number of transactions). Here, Sberbank of Russia playes an important role, which actively connect individuals to the system. Thus, banks have moved to the internet a lot of small payments, unloaded their operating offices. But this is just one of the tasks that can solve a good system of internet banking. The second problem - the growth of fee income by increasing the volume of transactions - has not yet been solved, as evidenced by a weak increase in the proportion of Internet banking in the amount of payments. As a result of 2011, only 8% of bank payments from individuals has been committed through the Internet, while the last four years this figure has not changed.

Picture 15. The volume of transactions over the Internet¹

The main causes of poor growth, according to "Expert RA" - distrust of the general population of Internet services, unavailability of active users to carry out large transactions and the relative complexity of the interfaces of most Internet banking programs for ordinary customers.
At a time when, from a user perspective, the majority of internets banking programs are similar in functionality, other factors start to work. Among them: the


¹Source: Assessment of "Expert RA" according to the information of Central Bank of Russian Federation
clarity of the interface, clock work, the security system. Another important factor is the awareness of customers that the bank is ready to go to meet them in resolving disputes.
The most popular services are online transactions with deposit accounts and loan repayments to the bank. It should be noted that some banks offer better terms on deposit products, opened with DBS.
The share of Internet banking systems that support the discovery of a virtual map or completion of brokerage accounts maintained at a low level, indicating weak demand for these services.

Picture 16.Main activities of banks are gradually transferred to the web

space¹
Information that internet and mobile banking are developing also can be proved with browsers. Year by year more and more browsers are supported by internet-banking (Appendix 1).
The company MForum Analytics presents the results of research of mobile and internet banking in the Russian Federation. Considered the dynamics and


¹Source: Assessment of "Expert RA" according to the information of banks
volume of the market by end of 2010, banks' profit margins on these services, as well as the main types of payments made through a digital banking.
According MForum Analytics, the volume of Russian market of mobile and Internet banking in 2010 amounted to 20.4 billion rubles without electronic money WebMoney. Compared to the year 2009, an increase of 54% compared to 2007, market volume grew at exactly 4 times. In 2011, the growth of the market amounted to 27.7 billion

Picture 17.The market of mobile and internet banking in Russia (from 2007 to 2011)¹

At the same time Internet banking provides the main growth, while the mobile banking during the year increased by 31% and amounted to 1.6 billion rubles (about 7.8% of the total market of digital banking in 2010). In 2011, its growth amounted to 2.3 billion rubles.

Picture 18.Marginal gains in the market of mobile and internet banking in Russia (2007-2011yy)¹

According MForum Analytics sais that the combined profit margin of banks, payment systems operators and mobile operators from providing services to mobile and Internet banking in 2010 amounted to 0.43 billion rubles, with respect to performance in 2009 is 48% more. In 2011, its growth amounted to 0.58 billion rubles.

The increase in profit margin of mobile banking in 2010 was 62%, and Internet banking - 46%. In 2011 the growth rate increased to 25% and 37% respectively.
As shown by surveys conducted by analytical companies, 75% of Russians do not know anything and have not heard about the banking system through the Internet. Another 16% are aware of such services, but for one reason or another do not use them. Only 9% of respondents said they had used internet banking (Picture 19).



Picture 19. Level of using Internet banking by population of Russia¹

The most popular service of mobile and Internet banking in Russia is the payment service to the provider - 48% of payments. Another 12% is payment for Internet access.

Picture 20. Types and proportion of payments made through a digital banking in Russia²

¹MForum Analytics
Utility services are also included among the leaders on the number of mobile transactions and online banking on the basis of 11% in 2011. Off-line payments for standard bank details and shopping in online stores make up 9% and 8% of the transaction, respectively.
Given that over 95% of the bank card users in Russia have mobile phones and over 60% - Internet access, the availability of and prospects for development of digital banking in Russia is obvious.
Assuming that the technological platform for consumer banking services to individuals in Russia is ready, they begin to copy the structure of the developed financial markets in the long term: proportion of cash flow of individuals begin to decline, the share of payments made through the Internet and mobile banking to grow.
Thus, in the coming years the growth rate of the Russian market DBS amount not less than 100% per year. Sure the market growth will be fueled by a proliferation of banking products among the population, and development of remote maintenance services.
In conclusion we can say that the development of information technologies affects the lifestyle of modern man. People are provided more opportunities to make transactions via the Internet and mobile phone from year to year. And to have remote access to information and services in real-time plays an important role in the development of modern business.