By Neeraj Jha

What is Internet banking? Different banks seem to have different perspectives. Here is how a frontrunner like ICICI Bank looks at it. Says H N Sinor, managing director and CEO of ICICI Bank: "Internet banking is one more channel, one more access point like an automated teller machine or a call centre from where a customer can transact business for which earlier he used to go to a bank branch. Internet banking is the cheapest of all banking channels and helps banks gain substantially in terms of transaction costs."

One-stop shop
ICICI Bank's competitor HDFC Bank is going a step further in its Net banking concept. It seems that HDFC Bank wants to become an one-stop shop and leverage the Internet to help the bank become better. Though the choice of using the Internet banking channel lies ultimately with the customer, it is definitely another versatile channel at his disposal.

For, Internet banking has two sides to it, a passive and an interactive side. Says K Ramachandran, banking analyst and head of research with the Mumbai-based Birla Sunlife Securities: "The real step forward in online banking is represented by the interactive area of e-trade, where banks are an important component of the so-called payment gateways."

Both ICICI Bank and HDFC Bank have already taken that step forward. They have sweated it out and have invested a lot of money in getting to where they are now as far as online banking is concerned. Preparing themselves well in advance for handling the burgeoning banking business opportunities on the Net, these providers of financial services have invested massively in putting up the required systems and processes. That is just one aspect of the preparedness. They have also been exploring and creating new markets for them in their own ways.

A comparison
Consider the similarities that these two banks have: both have a strong parentage, which gives them the muscle and confidence to think and do big. Both banks represent the new-generation of financial institutions to the core. And whatever be the area, be it technology or marketing, they embody the new thinking in the banking industry.

Both the banks have positioned themselves as one-stop financial shops and nurture the ambition of becoming the nation's numero uno financial service provider. That is the driver which is motivating these banks to explore new business horizons and take fresh initiatives.

A contrast
However, there are glaring differences too, in their personalities and in their business models. Their personalities first. HDFC Bank comes across as a brilliant bank which knows what it is doing. The bank has invested as much as Rs 50 crore in technology upfront, even when others of its ilk are not even awake to the emerging realities. Yes, HDFC Bank is in a great hurry and its wisdom seems to be instinctive. It is aggressive and comes across as supremely confident.

On the other hand, ICICI Bank comes across as a sedate, patient and watchful player. A player who would not rush into things. Banking industry observers feel that ICICI Bank would prefer to look around, measure its steps and assess the situation before taking the next step.

Their business models reflect all these contrasting features. Sure, HDFC Bank knew clearly what it wants right from day one. That explains the massive investments the Bank has made upfront in a system which is centralised, open and scalable. Says Aditya Puri, managing director of HDFC Bank: "Originally, when we had set up the bank, we had understood clearly there will be multiple channels to take advantage of convergence and cost reduction."

Puri goes on to justify HDFC Bank's investments in technology. Says Puri: "When you are set up on all these bases and channels, you do not have a legacy, you have no problem in adapting either to an increase in scale or getting a new channel into your open system." Sure, there might have been quite a few banking players who might have frowned upon HDFC's technology initiative. But, today it is a different story.

Reviews necessary
Consider ICICI Bank's brick-by-brick approach and its investments in systems and processes. Says Sinor of ICICI Bank: "We would not have invested more than Rs five crore, including the software and other costs." According to Sinor, ICICI Bank has got "Bankaway" from Infosys at a very reasonable cost. For, possibly ICICI Bank acquired the software as early as 1997, just when it had been launched.

Why is the ICICI Bank so conservative? Says Sinor: "We have to be very alert when it comes to competition, which can emerge from anywhere. Forecasting the scenario five years down the line is difficult. We have to keep shifting our positions. All those banks, which have been talking of a technology platform for the next five years, are going to face a lot of problems."

Perhaps Sinor has a point there. For, Internet banking solutions are still emerging and evolving. That is why Sinor is averse to taking a view on online banking technologies over a timeframe of five years. Says Sinor: "You can have a business model, but you are not sure whether it will work or not at the end of the day. For internal purposes, you can certainly have a business model for either cost-cutting or revenue generation. You need to review your business model every three to six months. You cannot afford to take a five-year perspective."

Sceptics might brand this as being conservative. But, there are quite a few in the banking industry who see his point of view. Says Bandi Ram Prasad, chief economist with the Mumbai-based Indian Banks' Association (IBA): "Your business model should be related to the external environment. It has to respond to the changing external scenario, especially in the wake of globalisation. This means rapid fluctuations."

Customer profiles
There are differences in the profiles of customers these two banks address to. Aditya Puri sees anybody from a young fellow to a good-looking girl like Aishwarya Rai as his target customer. His bank is now taking the cable television route in Internet banking and is trying to reach out to all categories of customers including kids, housewives and old people, among others.

ICICI Bank's approach here is a bit different. The bank seems to believe in catching customers young. Not surprising that ICICI Bank has launched its banking product "Bank@campus" in many campuses, including the Indian Institutes of Technology across the country.

What is the idea here? Says Sinor: "It is to catch them young and be with them through various stages of their career, including their parenthood." What is more, ICICI Bank has another product called "kid-e-bank" for kids. So, what is ICICI Bank's customer-sourcing strategy? Says Sinor: "The high net worth clients apart, we are also looking at the middle class segment. We are also looking at those in the 30 to 40 age bracket who are working in the corporate sector and are quite proficient in using technology."

That is a significant shift in ICICI Bank's strategy. For, earlier Sinor used to say that it was a generation game and ICICI Bank was looking only at customers in the 30 to 40 bracket. His shift certainly has a rationale: even those in their 40s and 50s are fast becoming Net-savvy.

The road ahead
Where are these two banks heading as far as online banking is concerned? HDFC Bank is pinning its hope on cable television network. It is already talking to network owners, Internet service providers and set-top manufacturers to find a way to increase the reach of Internet banking.

On the other hand, ICICI Bank is hoping that the package whereby it joins hands with computer manufacturers such as Compaq will work. Compaq will provide computers at concessional prices. The bank has also tied up with computer training companies such as NIIT for providing basic training and has forged alliances with Internet service providers such as Satyam Online for providing Net access. The hopes are that these alliances will do the trick. ICICI Bank itself will provide consumer loans here.