Electronic banking: Lower cost, more convenience for small to medium businesses

The Internet has caused business dynamics to evolve at a pace never seen before. Owing to the nature of the business of banking, it has had an enormous impact on the way individuals and companies transact, bringing the benefits of remote access banking and account management to the screens of all types of consumers - both the private individuals as well as those employed to manage the financial affairs of companies.

The benefits of electronic transacting have an increasingly important role to play in assisting the small to medium businesses (SMB) sector to run its operations more effectively as well as at a lower cost than traditional financial management mechanisms - many of which still revolve around the company chequebook. Addressing this requirement, most banks have introduced systems that are specifically tailored to the needs of the SMB.

Perhaps oddly, electronic banking systems have enjoyed particularly good acceptance at what can be considered to be opposite ends of the market - large corporations and private individuals. Large corporations are familiar with the use of electronic payment systems such as magtape and electronic data interchange (EDI), while most individuals are familiar with the Internet and satisfied that the security protecting online banking systems is sufficient to protect their funds.

But the SMB environment tends to lag somewhat in the adoption of Internet banking solutions.

Most large corporations have invested in software applications such as enterprise resource planning, supply chain management, customer relationship management and more to achieve the benefits associated with process automation. They are also familiar with the benefits of vendor collaboration to identify solutions that help contain costs, enhance process efficiencies and improve productivity. This was done by granting mutual access to business systems, through interfacing with supplier - such as the ERP system `talking to` the bank`s electronic banking system - to automation aspects of cash management and treasury.

However, many SMBs are under the impression that such software applications are too complex and costly for their business requirements, or are not sufficiently confident in the security of online systems.

The history of electronic banking systems provided by banks saw these traditionally focused at the money management needs of large corporates. As such, many SMB owners perceive that Internet banking facilities are directed predominantly at larger companies. However, most banking institutions have introduced systems that are specifically directed at the requirements of the SMB, both in terms of functionality and pricing.

SMBs that are used to performing simple banking activities, for example viewing account balances and transferring funds between accounts via ATM or phone-banking, can use a multi-user Internet banking platform to perform these banking activities and more via the Internet.

At the click of a mouse, SMBs can have easy access to their most updated and detailed financial information anywhere in the world, at anytime. Using such systems also allows the SMB to improve the costs of managing finances - having immediate real-time access to exact available cash positions in their bank accounts supports planning and decision-making, resulting in better control over their cashflow.

Additionally, human resources is another significant cost centre for most SMBs. With the use of Internet banking, SMBs can cut down on manual processes and deploy staff to do more value-added work. Internet banking allows the SMB to make local or overseas payments to third parties, apply for letters of credit, contract foreign exchange rates and more, improving productivity and saving time by obviating the need to make a trip to the bank branch, stand in a queue and wait for transactions to be processed. It also introduces automation to the payment process - once a beneficiary is created on the system, it is a matter of `point and click` to effect payment.

Contrast these benefits to a cheque-based system, which requires writing the cheque, then delivery or deposit by a driver, or collection by the supplier - an expensive, cumbersome, time-consuming process.

The benefits of using Internet banking systems become even more apparent when it comes to processing urgent and time-critical transactions - employees no longer need to rush documents to the bank only to find out that they have missed the cut-off time.

The evolution of the services offered by most banks means SMBs should see the bank as far more than just a provider of finance and money-handling services. Most leading banks have become a centre from which businesses can source a variety of service offerings and options that can help improve business management.

And banks are usually forerunners in technology adoption, such as the implementation of e-business strategies and solutions that help customers improve their financial position. They are also keen to assist their customers to move into Internet-based financial activities. SMBs should therefore make their bankers their financial and business partners in accessing appropriate online banking solutions that can provide better financial management while also offering a lower cost of banking.