ABSTRACT:
This paper discusses the required key success criteria for maximizing the introduction of GIS inside the core banking. Core banking is all about knowing customers' needs; provide them with the right service at the right time through the right channels 24 hours a day, 7 days a week. There are three separate channels of core banking first are retail customers second are small business and last is larger business.
This is a GIS system which finds its application in helping the customers as well as employees of the bank who are using core banking services. This is a GIS model which is capable to solve the problems regarding core banking such as client record mapping, debtor record analysis, ATM network solutions, safe monetary transaction route analysis, client asset mapping, market analysis, bank merger evaluations, analyzing business continuities etc. Adding a spatial dimension to statistical, operational, and monetary data can give a more valuable and insightful viewpoint. Already GIS has proved a very important tool in analyzing regional data and variations in traditional system. So it could give better solution for banking business also.
Introduction Core Banking
In recent years, the banking industry has been undergoing drastic changes, reflecting a number of underlying developments. Significant advancements in communication and information technology accelerated and broadened the dissemination of financial information and financial services and also increased the complexity. Another key impetus for change has been the increasing competition among a broad range of domestic and foreign institutions in providing banking and related financial services. Regulations are forcing the banks to adopt better operational strategies and upgrade their skills. All these factors throwing more challenges to banking sector.
Core Banking is normally defined as the business conducted by a banking institution with its retail and small business customers. Many banks treat the retail customers as their core banking customers, and have a separate line of business to manage small businesses. Larger businesses are managed via the Corporate Banking division of the institution. Core banking basically is depositing and lending of money. Normal core banking functions will include deposit accounts, loans, mortgages and payments. Banks make these services available across multiple channels like ATMs, Internet banking, and branches distributed geographically.
Core Banking Solutions
Core Banking Solutions is new jargon frequently used in banking circles of India. The advancement in technology especially internet and information technology has led to new way of doing business in banking. The technologies have cut down time, working simultaneously on different issues and increased efficiency. The platform where communication technology and information technology are merged to suit core needs of banking is known as Core Banking Solutions. Here computer software is developed to perform core operations of banking like recording of transactions, passbook maintenance, and interest calculations on loans and deposits, customer records, balance of payments and withdrawal are done. This software is installed at different branches of bank and then interconnected by means of communication lines like telephones, satellite, internet etc. It allows the user (customers) to operate accounts from any branch if it has installed core banking solutions. This new platform has changed the way banks are working. Now many advanced features like regulatory requirements and other specialized services like share (stock) trading are being provided. Core banking solutions is very help full to small industries
A customer-centric business model can help address these challenges. A bank’s primary function is to deliver financial services and products to the customers. Banks, today, need to be market driven and market responsive. The success of such an institution depends on its approach to data management, customer relation management. Banks manage a world of information about customers, customer profiles and so much more. By adding a component called “Location” to their database, banks can gain enormous advantage in many ways. Long range planning mixed with geographic modeling will yield tangible benefits to the Banking /Financial institutions community.
How GIS can benefit banks
GIS is a critical tool in today's banking environment, where there is increased competition both from existing and new banks, as well as from new companies such as Internet and phone banks, and from retail based incursions into traditional financial markets. GIS plays an important role in various functional areas of banking in achieving the various business objectives of banks such as
- Expansion of Customer base
- Improvement in Quality of the Services
- Increased Customer Satisfaction
- Consistent Business Growth
- Increase in Profitability
GIS helps in banks various functional Areas by providing support in decision-making and strategic planning. Some of the major areas are discussed below.
Market Analysis
In today's highly competitive Business environment, Marketing is a customer-orientated operation that is essential for success of any bank. There is a need of understanding the Market & the customers as what are their financial needs. Marketing departments of the banks face real problems in fully understanding their markets and the potential customers for their finance products and services. GIS based Marketing analysis proves relevant and useful in this context.
In general, marketing is a question of demand (of the customers) and supply (Financial products, Financial services, Customer services through branches and ATMs of the bank). Both demand and supply are easy to pinpoint to a geographical location. Therefore, these factors if analyzed with the help of GIS will certainly provide interesting results.
The development of GIS technology has made a new approach to the marketing analysis imperative. It also reveals the importance of geo-demographic research to marketing. All kinds of market segmentation techniques are being developed to define more precisely the target group of customers.
Home loans
Geographic information is central to the real estate business. The geographical location of housing units is one of the most important determinants of market value. For most families, buying a residential site or apartment is among the most important decisions to make. Identifying a suitable property is tedious and time-consuming. An important reason is the lack of information on what is available for sale. The housing market in Indian cities and towns being fragmented, there is no single source of information. Comparisons between properties, on price and features, are difficult to make. Here is where GIS comes in. GIS applications can help prospective buyers find homes by specifying their requirements on spatial characteristics such as proximity to school/city centre, etc, and property characteristics such as built-up area, number of bedrooms, flooring, etc. Banks have to manage credit risks associated with making real estate loans. The higher the loan to value ratio for a property, the greater the risk to the bank. A significant decline in property value could result in negative equity for the borrower — where the value of his asset falls below that of his liability. Borrowers with negative home equity will likely have a higher propensity to default. The assessment of property value is, therefore, critical in housing finance.
The location of housing relative to offices, schools, hospitals, shopping and entertainment centers influences its market value. Attributes of the neighborhood — quality of roads, water and power supply, public transport, degree of congestion and other socio-economic factors such as crime rates — also influence its value. Banks must develop databases of property transaction prices. Appraisers can then use transaction prices of nearby properties and make adjustments for the location and neighborhood attributes to estimate a fair value.
Customer Analysis
This analysis answers the queries, where are our customers located? What are their characteristics (market segmentation, classification of residential areas)? Catchments area for the branches can be drawn and areas, which are not served, can be easily identified. GIS can also provide information about the potential customers, their power for high end core banking facilities. GIS applications have a tool known as a geo-coder that can convert a location reference such as a postal address to its corresponding position on a map. GIS can display where customers are located in relation to a branch. It can provide answers to questions such as — "How many customers live or work within one km of Branch X?”
New Branch or New ATM Location
Business expansion planning needs modeling location-relevant data and providing fast and cost- effective site analysis to confidently and reliably select a new bank branch/ATM location and shorten the cycle for time to market. It is also necessary to assess the likely performance of new branches/ATMs based on the presence of key decision variables, such as Concentration of commercial areas, traffic patterns, workplaces or homes of customers whose demographics and purchase behavior match a bank's target customer profile. GIS based solution helps to understand how a potential new branch would perform based on the performance of a bank's best matching existing branches as well as relative performance of one of its branches to other branches.
Banks seeking sites for location for expansion, also need information from localities, land costs, building availability and suitability, construction costs, local and state taxes, local and state development incentives, availability and cost of energy, transportation costs to customers and from suppliers, as well as such factors as the availability and quality of medical care in the area, the location and market areas of competitors, the availability of other infrastructure such as telecommunications, sewer, and water, as well as factors related to quality of life. Using GIS, these diverse information elements can more readily be identified and integrated. Additionally, the ability to display this information in map formats enables economic developers to demonstrate pictorially and comprehensively that a site or sites meet specified criteria.
Using GIS based solutions banks can determine the maximum number of branches a market, region is capable of supporting. This leads to more focused growth strategies, more efficient Banks can use GIS based solutions to rank service areas within a market according to viability for the concept. Based on the bank's criteria, the analysis can consider competition, cannibalization, demographics and other concept factors to help prioritize options.
Competitor Analysis
This analysis answers the queries, where are our competitors located. This analysis identifies the competitors and their customers on the Map, analyze the reason for existing performance.
Focused Marketing
GIS based solution can provide specific information on products and the areas they are well received. Therefore allowing specific advertising thereby reducing large advertising bills. Banks can now advertise in region media specific products, rather than major national media campaigns. Scheme’s introduction and advertising those schemes can be targeted to the more appropriate group (Specific income group, Some specific category like NRI account, Current Account…etc). GIS can help in identifying those target groups spatial distribution thereby saving the advertising cost & providing way for strategic advertising.
Business Expansion Planning
Finding the best new bank location for business expansion is really a challenging task as it requires substantial capital investment and with so much money on the line, management wants to feel sure that they have selected the right expansion site. The solution should allow the management the ability to understand the big picture for their concept, providing insight for strategic planning.
Branch Performance Monitoring
Using GIS Banks can analyze the performance of the banks. Monitoring the Branches performance using spatial component will have a greater advantage. Potential customer zones can be drawn in based on the spatial distribution of the customers. The GIS component of a branch review involves defining a trade area around the branch, measuring the market potential within that trade area, and identifying the nearby competitors. The banks can determine the products that are being purchased by particular socio demographic groups. From that information, banks can determine other areas with similar influences to target specific advertising.
Decision support for Strategic Planning
Banks need decision support while carrying out strategic planning. GIS based solutions help banking industry with What - if” scenarios. GIS based tools examine the interrelationships between land-use factors, infrastructure capacities and proximities (such as railroads, water and wastewater facilities, major highways), and economic growth. This has the potential of increasing the profit margins by allowing the effects of major decisions to be estimated prior to their execution. Former methods were more of a vague nature than accurate predictions. What if scenarios provide the means to determine the effects of branch closures, or relocations, Furthermore, they allow banks to check the effect different changes would impose upon their markets. For example a bank could determine the extent of loss of clients if the minimum balance of their basic savings account was increased. This is only feasible when the banks have input data regarding their client’s accounts.
Bank Mergers
The banking sector is seeing a lot of merger and acquisition (M&A) activity. Sometimes, the deals involve public sector banks with large branch networks. Mergers will require many branches to be closed if the economic benefits of the transaction are to be realized. GIS can help identify which branches can be closed while minimizing inconvenience to customers being shifted to other nearby branches. GIS can help the government and merging parties a void months of tedious effort trying to identify such markets manually. Electronic street address and postal data, combined with GIS software tools, permit us to first assign geographic locations to lists of bank branches involved which the GIS software can further manage. Following this, the task of determining pairs of branches within close proximity and selecting municipalities which surround these pairs can also be automated via GIS.
Bank Asset Management
Modern banks have now various physical assets such as ATMs and other electronic equipment in door as well as outdoors to manage and monitor. Bank management needs to monitor vast amounts of information over an ever-changing inventory of physical assets. From installation to replacement, the condition of an asset throughout its lifecycle needs to be considered in a comprehensive management model in order to maximize the benefits of its services to its customers and users.
Today's environment of limited resources and growing demand means that decision-makers need the ability to weigh multiple scenarios balancing varying levels of investment against asset lifespan. GIS technology includes the analytical tools to perform "what if" analysis and dynamic segmentation to locate multiple classes of assets. The right tools make it possible to operate, maintain, and upgrade physical assets cost-effectively.
This entails that a bank document whether its assets are being maintained at or above a condition level pre-established by the agency. It requires regular inspection for condition assessment and disclosure of infrastructure asset condition no less than every three years. In addition, anticipated and actual maintenance outlays required to maintain minimum asset condition need to be determined and disclosed.
Retail banking services
Banking priorities are being challenged like never before and bank management is looking for innovative and smarter ways to meet the demands of retail banking service delivery. Banks should be positioned to provide solutions that improve the lives of both bank executives and their customers
The future of retail banking is, quite literally, in the customers' hands. Metaphorically, too, they are exercising the power to choose the way they want to carry out their financial affairs. This issue such as managing the technology obsolescence, new customer care initiatives, and higher levels of regulation, is a monster challenge for today's bank executive in an environment increasingly shaped by globalization
Hence banks should adopt innovative methods of automations to deliver the most efficient retail banking services to hold the customers. GIS based solutions help the bank management in achieving these objectives.
Online tracking of Cash status in ATM’s
Distribution and replenishment of the Cash to the ATM according to demand and in-time is a major challenge in the area of ATM management as the dead-cash results into substantial interest loss.
GIS based Real Time solution for the replenishment and management of ATMs provides highly effective approach to the cash management cycle. “Auto detect” component provides real time data in order to optimize the servicing of ATMs, “just in time”, based on actual customer demand. This solution should be a flexible, dynamic model, which operates in real time and is based on actual customer needs to improve the servicing of ATMs, resulting in improved efficiency and reduced costs.
GIS based solution displays the ATMs on the map along with the cash status to help in better visualization and better optimization in Cash distribution. Cash requirement for each day for a Bank/ATM can be predicted with the help of the history of cash transactions over a certain period during previous years and also with the help of Demographic data such as population density, Socio economic information etc.
Cash Van Fleet management for Cash distribution
Banks employ cash vans for the money disbursement across ATMS. Managing these Vehicle movements for money disbursement is a challenging task. Some banks outsource these services to third party service provider. The fleet management of the cash vans involves scheduling and planning of routes for cash vans and at the same time ensuring that the Cash vans run as per the schedule and disburses the cash at ATMs in time. This becomes exceptionally difficult in bigger cities for example metros where the number of Cash vans involved is very high and all these vans perform repetitive trips.
The failure of management in ensuring timely operations of cash vans results Into cash run offs at ATMS thus affecting customer services with the chance of banks becoming unpopular
However GPS and GIS based Fleet management Systems provide the possibility of monitoring the movement of cash vans at an affordable cost.
Conclusion
GIS based solutions can be developed in an integrated environment to help banks in decision making, Strategic planning, Effective resource management and Operations management to achieve their business objectives such as Customer Satisfaction, Business Growth and Customer base expansion etc.
Acknowledgements
The authors would like to thank Dr. T P Singh, Dept. of GIS, Symbiosis Institute of Geoinformatics for his help & guidance.
References
- Geographic Information System and Economic Development : Conceptual Applications/edited by Bidhanesh Misra. 1997
- Application of Geospatial Technology by A. Ganesh 2006