The Financial Services Environment

Published Date: 02 Nov 2017

The Financial Services Environment

You need to clearly illustrate why the organisation needs to embrace technological innovation. Being an early adopter of new technologies always is a more costs but pays higher dividend returns.

Made by : Elysia Ann Gauci – class 2G

Table of Contents

Title Sheet ___________________________________________________________ Page 1

Table of Contents ______________________________________________________ Page 2

Report:

Brief ___________________________________________________________ Page 3

Situational Analysis _______________________________________________ Pages 4-6

SWOT Analysis __________________________________________________ Page 6-7

Action Plan ______________________________________________________ Page 7-9

Recommendations ________________________________________________ Page 10

References_____________________________________________________________Page 11

Report on reducing cash and cheques and increasing other methods of payment

To : Chief Executive

From : Elysia Ann Gauci

Date : 22nd April 2013

Subject : Reducing cash and cheques and increasing electronic means of payment

Brief

I have been assigned to produce a report on how cash and cheques can be reduced in order to increase electronic services such as internet banking and mobile banking. Some recommendations for this to happen are that the bank can lengthen the credit cards’ repayment period, remove the annual fee on the use of internet banking and add more ipos machines in shops.

Situational Analysis

Our task is to push people away from cash and cheques and use other services such as internet banking, credit cards, debit cards, ATMs, mobile banking, standing orders, direct debits, debit transfers, credit transfers and cheque invoices.

The number of cash transactions that pass through all the banks of Malta is 250 million. 20% (50 million) of those transactions passed from our bank. Every cash transaction is €0.42 and therefore the cash handling is €21 million (50million x €0.42). The number of cheque transactions that passed through all banks of Malta is 10 million. 30% (3 million) of these cheque transactions passed from our bank and every cheque transaction costs €3.55. Therefore the cheque handling is €10650000 (3000000 x €3.55). If we put the cash handling and the cheque handling together, the result is €31650000.

These costs are too high and our solution is to reduce the €31650000 of costs by 30% in 3 years (that is €31650000 - €12660000 = €18990000). To do this, we are proposing the following solution in order to save a total of €9495000 after 3 years:

Expenses

Year 1

Year 2

Year 3

Total

Cash - €21 million

15% = €3150000

10% = €2100000

5% = €1050000

€6300000

Cheques - €10650000

15% = €1597500

10% = €1065000

5% = €532500

€3195000

This proposition will have other costs such as:

Branch upgrades

€1 500 000

Upgrades to systems

€1 000 000

Marketing campaign

€300 000

Intensive schemes

€3 000 000

Vault keeping

€ 150 000

Salaries

€ 300 000

Total

€6 250 000

Therefore the net savings (how much we will be actually saving) is €3245000 (€9495000-6250000)

Other banks also tried to decrease the use of cash and cheques and to increase the use of electronic payments. Some of the propositions of other banks to reduce cash and cheques and move to an electronic payments approach were:

To set a deadline to implement electronic payments and eliminate cash and cheques.

To consider the complaints of the bank’s users

To have a wider range of facilities from electronic payments

To keep a minimum number of free cheque book every year

New loans should be paid through electronic means of payment only and existing loans must be turned to be paid through electronic means of payment too

Higher charges on issuance of cheques

To remove cheque collection boxes from public areas and provide the cheque collection boxes in bank branches only

Provide no free cheque books to business users and sell the cheque books for a higher price

To remove the fee on electronic payments

To make customers pay the credit card fees electronically

Dividends on shares, debentures, bonds etc. should be paid directly into the customer’s account by electronic means and not sent through a cheque

Governments must consider to give tax rebates to business that accept electronic means of payments

Swot Analysis

When someone is behaving in a certain way and you need him/her to behave in another way, you should consider the SWOT analysis that is to see the strengths, weaknesses, opportunities and threats.

The bank’s strengths are that it has well trained employees which help deliver an excellent service to customers, it has a large client base which help in gaining a good marketshare, it offers a broad range of services and channels to customers, the bank highly invests in the system, it has experience in handling change and also experience in processing SEPA and International payments, the bank also has updated Customer Information Databases which help the employees in their work and the bank also has a large branch network.

The bank’s weaknesses are that marketing budgets and the funds that it invests in the new system are limited, it contains a computer system that is very complicated, the cost of cash and cheques processing is being subsidized by other products and payment channels and another weakness is that the bank has Less human interaction to collect market and customer information on their needs.

The bank’s opportunities are that the bank can improve its liquidity position, new customers in the area of payment can be attracted, the bank’s cost base can be decreased if the operating cost per transaction is lowered, the branch network has more resources to look after client’s needs and sell more products, the bank can improve its profitability if it lowers he cash management and cheque handling costs and there will be economies of scale in using electronic means of payments.

The bank’s threats that the bank could have a reputational risk such as from failing systems, the bank could lose control in terms of compliance and money laundering regulations because of electronic processing, there could be an increase in competition from payments operators or from other financial services companies, and the opportunities to sell financial products are reduced because of the decreased contact with customers.

Action plan

The following are some ways on how the use of debit cards and credit cards can be increased:

the bank can reduce the Annual fee of the credit cards so that more people will be tempted to use the credit card facility

the bank can reduce the interest on Credit Cards so that people will use them more often.

the bank can also lengthen the repayment period of Credit Cards so that people will not feel reluctant to use them

the bank can make more benefits related to the use of Credit and Debit Cards such as a ‘points system’ which means that the more the credit and debit cards are used by customers, the more points they will be given that could be exchanged for a gift. Another example could be that the bank offers a discount or free Travel Insurance when the cards are used.

The bank can add more ipos machines in shops so that people will not have an excuse that they cannot use the credit or debit card because the shop did not have an ipos machine.

The bank can reduce the charge (of about 2%) that the shopkeeper has to pay for every transaction when people use the credit and debit cards so that shopkeepers will be more willing to use the ipos machines.

The bank can also liaise with shopkeepers so that when there is the sales period, the bank reduces the charge on the use of ipos machines a lot so that the shopkeeper will not have an excuse to not use the ipos machine.

The following are some ways on how the use of internet banking can be increased:

The bank can remove the annual fee on the use of internet banking so that payments and transfers of money will be made through internet banking more often instead of through cash.

The bank can enter into an agreement with the largest corporations such as enemalta, water services, Go mobile, Vodafone, Melita and Insurance agencies so that payments will be made directly online.

The bank can offer very good interest rates to customers who open their accounts online so that there will be no use of cash and cheques.

The bank can offer better rates to people who use internet banking to transfer money from one bank to another or from a bank to another country.

The following are some ways on how the use of mobile banking can be increased.

Mobile banking can be used to make transfers of money in different accounts and to third parties (other people) and even to accounts payable of people without the use of cash at any time

The bank can reduce the charges related to the use of mobile banking or even offer the mobile banking service for free to its clients.

The bank should send a positive message to people to assure them that mobile banking is safe to use and that it can be used on every smartphone.

The following are some ways on how the use of direct transfers can be increased.

The bank can enter into an agreement with companies so that payments of wages to employees and also other payments such as payments to buy the shop’s stock, will be done through direct payment and therefore the bank should offer a lower interest rate on overdraft.

The bank offers the facility to people that use direct debit to pay loans or make transfers of money to be able to arrange the terms of transfer from home whenever they want.

Recommendations

Since it is impossible to put all of the mentioned suggestions into action, I recommend the following:

add more ipos machines in shops

reduce the charge (of about 2%) that the shopkeeper has to pay for every transaction when people use the credit and debit cards

remove the annual fee on the use of internet banking

offer very good interest rates to customers who open their accounts online

reduce the charges related to the use of mobile banking

Offer a lower interest rate on overdraft.