DIGITAL banking has become a trending topic in the financial services sector.
Digital Banking refers to the use of the internet, mobile phones and any other electronic media as a delivery channel for banking services.
These services include traditional services such as balance enquiries, printing of statements, funds transfers, bill payments and electronic bill payments.
These are done without necessarily visiting a bank.Online banking, also referred to as virtual banking, digital banking or electronic banking, uses telecommunication networks and the internet to provide an extensive array of financial services and products to clients through a website or a system operated by financial institutions.
E-banking can be defined as the deployment of banking services and products over electronic and communication networks directly to customers.
A healthy banking industry is crucial in any country and it may have a substantial impact on economic development through providing efficient financial services.
Commercial banks play a more important role in developing economies than in established countries, hence analysing the advancement of commercial bank performance has drawn most academics’ attention from an emerging market viewpoint.
Although digital banking yields many benefits, several financial experts found that its global appreciation still remains at infancy stage. The diffusion of electronic banking is felt more by customer acceptance than what the seller offers.
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Digital banking hastransformed the manner in which banks offer services, allowing individual and corporate customers to view transactions, download statements and transact online without visiting banks.
Improvements in technology have contributed to the distribution channels of banks and these electronic delivery channels are collectively referred to as electronic banking.
Financial institutions have also revisited their distribution strategies by closing branches in remote and loss-making regions, resorting only to deployment of electronic banking services.
In Zimbabwe, commercial banks are reorganising and restructuring their distribution networks by closing branches in less profitable or loss-making areas, leaving agents to offer banking services.
Nonetheless, in the context of developing nations such Zimbabwe, there is lack of well-developed telecommunication systems resulting in non-realisation of cost-effectiveness and financial performance related to electronic banking.
This implies that banks ought to have a significant initial capital expenditure in infrastructure prior to benefiting in terms of performance and cost effectiveness. The purpose of digital banking is to directly affect the profitability or return on assets and enhance the quality of assets.
Banks have made large investments in technology over the past few decades to cut costs and enhance customer service. With the hope of boosting profitability and lowering operating costs, banks are providing clients with the highest quality services through digital channels.
Their costs are projected to decrease as consumers switch to modern banking channels, but because banks are still having trouble converting customers into using digital banking channels, the anticipated decrease in operating costs has not yet been attained at favourable levels.
E-banking provides more avenues for income generation, because it generates income from additional non-interest sources.
Introduction of e-banking services and products, which are accessible and convenient has made it possible for banks to attract prospective customers thus allowing them to boost their market share.
Value is added by providing better quality services and products to the client. This leads to high levels of satisfaction and client retention rate.
The other major benefit from e-banking innovation is fee-based income. If a bank joins an ATM network, it can generate income from other banks’ customers that use its ATM machines or from third parties that cooperate with it.
The more transactions with a third party, the more fee-based income is acquired.
E-banking systems provide attributes for banks to deploy and design products for market segments that are varying. The product-bundling capabilities of this solution offer a wide assortment of possibilities for banks to make products with advanced features.
This empowers banks to innovate and expand their suite of products. E-banking systems’ capability to provide comprehensive information about customers' financial profiles and buying behaviour, which also offer detailed comprehension of customers, enables customising of advertising products and gives an opportunity for cross-selling.
The end result is improved bank performance as it is able to meet each customer’s needs.
Electronic banking is changing the banking sector and it has the primary impact on banking relationship. It is now possible anytime and anywhere in the world to do banking.
Providing e-banking is often becoming a “need to have” than a “nice to have”.
Banks are moving away from “handling branches” to “managing distribution” throughout the whole bank’s channels.
Bank management should enhance digital banking to improve financial performance in commercial banks.
Government, through the financial sector regulatory authorities, more so RBZ, should encourage banks to improve digital banking.
Digital banking is the engine of increasing ROA in banks. Faster financial service delivery spurs development of businesses and economic growth in all other sectors.
Makoni is an analyst @ Nurture Invest. — [email protected]
