beyond pt 0 23/1

2.3 Cost savings
Banks are keen to make greater use of Internet banking for many reasons,
but a key factor is the substantial cost advantage this activity enjoys. The
range of channels that the banking sector can use at present and their
differing cost is illustrated in the following graph.
Figure 2.1
Costs favour electronic banking
1.2
1
Cost per Transaction US$
Cost US$
0.8
0.6
0.4
0.2
0
Internet PC Banking ATM Telephone Branch
Source: The Emerging Digital Economy, US Department of Commerce 1998.
Similar cost differentials in Australia are driving the banks to rely more on
electronic banking channels. The Commonwealth Bank states in its 1998
Annual Report that 72 per cent of all banking transactions are conducted
through electronic channels, such as telephone, the Internet, ATMs, and
EFTPOS terminals. Similarly, Westpac states that around 80 per cent of
their transactions are done electronically. The National Australia Bank
have recently reduced the percentage of transactions through branches
from 19 per cent to 14 per cent. Every customer that is to switch from a
branch transaction to a lower cost channel results in a substantial saving.
Competition will force the banks to pass these savings on to customers as
lower fees and prices.
Using the Internet for bill payment can provide savings to all parties
involved including the merchant, customer and the bank. Electronic
billing is likely to be a significant growth area in the economy in 2000.
Table 2.2
Online banking equals lower service costs and fees
US$ Traditional Online
(cheque by mail) (Internet and credit card)
Cost to merchant 1.65–2.70 0.60–1.00
Cost to customer 0.42 0.00
Cost to bank 0.15–0.20 0.05–0.10
Cost to all parties 2.22–3.32 0.65–1.10
A flow on impact of greater use of the electronic channels and
consolidation in general has been the reduction in staff required. The
following graph indicates the change in employee numbers of the four
Australian major banks. It is important to note that these employee
numbers include those added through domestic and international
acquisitions by these banks.
94