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E-Banking and ABC costing - Assignment Example

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E-Banking and ABC costing

This article explores the implementation techniques of Activity-Based Costing (ABC) in the banking sector on the example of bank in order to analyze the cost structure for traditional and electronic channel transactions. The article shows how it is possible to implement ABC in banking and proves empirically that electronic channels help reduce the costs of both banks and their clients.
The setup and infrastructure to implement e-banking services requires a huge amount of initial outlay. Therefore, European banks have spent billions of euros into building direct channels like the Web, upgrading branches and call centres, and trying to integrate all these channels. Major financial futurists predicted bright prospects to electronic banking. But after some years of excitement it appeared that the banks' long-awaited sky-rocketing profits from this area would not be yielded. Around the world, Internet banks are faltering. This situation requires a profound analysis to be able to understand the real cost of e-banking, and e-bank transactions in particular.
All major banks have declared e-business as one of their core strategies for future developments. Until recently, most of the pricing decisions about e-bank services were made instinctively as the current financial management information systems did not support such analysis.
This research expThis research explores the implementation techniques of Activity-Based Costing in the banking sector on the example of bank in order to analyze the cost structure for traditional and electronic channel transactions. Also conclusions are drawn about the profitability of e-banking transactions.
The research addresses the following questions:
1. How can ABC techniques be implemented in a bank How it is possible to allocate IT expenses to products
2. What are the cost elements of e-channel transactions What are the major cost groups
3. Are e-channel transactions cheaper than those made via the traditional channels
Chapter 2: Role of E-banking

In the past, banks have used a set of integrated distribution channels has provided the basis for them to build strong relationships with their customers. Those banks leading to shape the way in which products are distributed can often gain long lasting competitive advantages. Like ATMs and 'phone banking, the Internet is seen by many banks today as a new, low cost distribution channel (Feng 2001).
Unlike traditional corporate networks (which usually have private computer networks in place), the Internet has become a mass infrastructure available to an ever-growing segment of the population. It is based on an open, standard protocol for communications, and it is relatively inexpensive and non-proprietary with global accessibility. Most of all, the Internet is not only cheaper than other distribution channels but also allows banks to reach new customers in new areas more easily (Feng 2001).
The advantages both for banks and their customers are obvious, especially in terms of cost and convenience. If we assume that the end users have the basic understanding of internet usage then substantial cost savings can be achieved if banks can persuade their ...Show more

Summary

Over the last few years European banks have spent billions of euros on new electronic channels. However, after some years of excitement it was clear that the banks' long-awaited skyrocketing profits from this area would not be netted. Banks have also invested in expanding and improving the IT systems and a number of new e-banking services have been developed.
Author : wizaterrill
E-Banking and ABC costing essay example
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