New Economy and Network Banking

Author: Shang Hua Juan
Compiler/Origin:
Publisher:
Publish Date: 2003-03-01
Features: In the new economy era, it is an undeniable fact that the internet is widely used. Toffler pointed out that the internet inspires people's imagination, and imagination drives people to talk about the future of the internet, a wonderful future that inspires people's desire for action—creativity. The speed of internet adoption is unprecedented. Radio took 38 years to reach 50 million users, television took 13 years, and the internet took only 5 years. People firmly believe that the internet will change people's ways of thinking and behavior. The internet will reshape the global economy and business management models. As computer networks enter the global economic system, they will replace the traditional, bulky, slow, and costly information transmission systems, thereby completely transforming various aspects of the global economic system. The internet will change corporate management models. As the internet enters the internal operations of businesses, decision-making management can directly communicate with production laborers to implement management. The internet will promote technological innovation and progress. The significant contribution of computer networks to the world lies in their role in promoting the exchange, development, and advancement of scientific and technological ideas. Today, the rapid pace of technological progress and the faster and more efficient channels of information exchange are key to the internet's pivotal role. Gail Fosler, chief economist of the World Association of Great Enterprises, pointed out that the explosive growth of computer technology, telecommunications, and the internet in the new economy has greatly reduced business costs and dramatically changed the competitive landscape of the global market. Facing the vast global market, it is essential to possess a new level of competitiveness. (4) The essential feature of the "new economy" is increasing returns. From an economic theory perspective, the production functions of resource- and labor-intensive industries generally exhibit strong diminishing returns, while the production functions of knowledge- and technology-intensive industries show increasing returns. Particularly, research and development departments engaged in new technology production, due to the exclusive and monopolistic nature of their products, exhibit even more pronounced increasing returns in their production functions. In the 1990s, the United States, leveraging its high level of human capital and technological expertise, along with its institutional environment that stimulates innovation, was able to maintain a leading position in high-tech fields such as network technology. The entire U.S. economy and its production functions demonstrated increasing returns. High investment returns attracted more capital to flow into countries with increasing returns, especially into high-tech industries. Large-scale capital investments not only directly drove economic growth but also promoted new technological innovations, creating a virtuous cycle of capital accumulation, economic growth, and new technological innovation. Information asymmetry is a significant reason for the existence of financial institutions. In traditional financial markets, one party may lack sufficient information about the other, affecting correct financing decisions and leading to adverse selection. In the late 1970s, influenced by the wave of financial liberalization, traditional commercial banks faced unprecedented competition. The rapid rise and development of non-bank financial institutions led to the "disintermediation" that began to erode the market share of commercial banks. With the development of the internet and e-commerce, commercial banks not only faced traditional "disintermediation" but also technical "disintermediation" driven by technological advancements, intensifying market competition. This is because e-commerce has freed online transactions from the constraints of time and space, significantly reducing the cost of obtaining information compared to traditional business operations. As a result, market participants can more easily access market information through the internet, and an increasing amount of financial services are provided directly without intermediaries, reducing the role of financial institutions as intermediaries and undermining the traditional financial behavior in the value chain, causing traditional financial institutions to lose their information advantage in market competition. Meanwhile, some IT companies have begun to enter the financial services sector, bringing greater disruption to traditional commercial banks with their innovative business models. For example, long-established manufacturers like General Electric in the U.S. and Sony in Japan have already expanded into the banking payment sector. Microsoft has also attempted to enter the personal financial payment system by acquiring financial software companies. Banks must adapt to this changing environment, develop online banking, leverage the cost advantages of online banking to expand financial services, and maintain broader connections with customers to survive and thrive in the future digital society. B2C online payment refers to a service where banks provide online fund settlement services for transactions between businesses (sellers) and individuals (buyers) conducted through e-commerce websites on the internet. When customers shop on a designated website of Industrial and Commercial Bank of China (ICBC), they can make real-time online payments and receive payment-related information from the bank. When applying to enable B2C online payment functionality, customers designate acredit card or a debit card with online payment privileges, which is used for online shopping payments and is referred to as the "payment card." Currently, the payment card must be acredit card or a debit card. When customers select goods on an ICBC-designated website, they proceed to the virtual checkout counter as prompted by the website. Clicking the ICBC online payment icon will take customers to the online payment page, where order information is encrypted and transmitted to the ICBC website, where it cannot be altered. Customers only need to enter their login card number and payment password to verify their identity, without entering the payment card number. After confirming, they click "Submit" to complete the payment. Upon successful submission, the system will automatically deduct the amount from the payment card; if it fails, the reason for the failure will be displayed. "Online Personal Transfer" provides customers with a "convenient, fast, secure, and cost-effective" online transfer service. Using "Online Personal Transfer" to remit funds, customers can transfer funds from their own accounts to other individuals or entities at ICBC branches in the same city or different cities, achieving rapid settlement while avoiding the hassle of queuing at bank counters and saving valuable time. All ICBC personal online banking registered customers can use "Online Personal Transfer" without additional procedures. The recipient can withdraw the funds at a local ICBC branch using the deposit slip specified by the sender after the transfer is initiated online. If the sender does not fill in the recipient's account number, the recipient can visit the designated ICBC branch with the sender's specified identification documents to complete the withdrawal procedure. "Online Personal Transfer" incurs no fee for domestic transfers. Cross-city transfers are subject to the following fees and transfer charges: a flat fee of 0.5 yuan per transaction; a fee of 5 yuan per transaction for amounts under 100,000 yuan; a fee of 10 yuan per transaction for amounts between 100,000 yuan and 1 million yuan; a fee of 20 yuan per transaction for amounts between 1 million yuan and 10 million yuan; and a fee of 0.002% of the transfer amount for amounts above 10 million yuan, with a maximum fee of 200 yuan. (For risk control, the single-transaction transfer limit is currently set at 100,000 yuan). In 2001, ICBC pioneered the launch of "Online Personal Transfer" services in 11 provinces and cities: Beijing, Shanghai, Shenzhen, Zhejiang, Guangdong, Fujian, Shandong, Shanxi, Jilin, Chongqing, and Hunan. The service is available only during normal business hours from 8:00 to 16:00. The "Personal Transfer" section includes three functions: tuition payment, domestic/local and cross-city transfers, and fee record inquiries. (1) Tuition Payment Customers can pay tuition, accommodation fees, and other expenses online to schools across the country that have agreements with ICBC. First, click "Tuition Payment," which will open the "Tuition Payment—Enter School Information" page. Enter the school address and name, then click "Next." This will open the "Tuition Payment—Enter Personal Information" page, where you enter the student's name, major, admission number, and payment amount, then click "Next." This will open the "Tuition Payment—Enter Account Information" page, where you select the payment card number, then click "Next." This will open the "Tuition Payment—Confirm" page, where you confirm the above information, enter the payment password, and finally click "Next" to complete the transaction. (2) Domestic/Cross-City Transfers Customers can pay online to individuals or entities at ICBC branches in their local area or anywhere else in China. Click "Domestic/Cross-City Transfers," which will open the "Domestic/Cross-City Transfers" page. Enter the payment card number and transfer amount, then click "Next." This will display a page with recipient information. After filling in the recipient's information, click "Next" to display the customer's full transfer details. Confirm the transfer details, click "Next," and submit to complete the domestic or cross-city transfer. (3) Fee Record Inquiries This section includes: tuition payment inquiries and domestic/cross-city transfer inquiries. "Tuition Payment Inquiries" allows customers to check the tuition payment information they have submitted. Enter the inquiry date, click "Confirm," and the tuition payment inquiry results will be displayed. "Domestic/Cross-City Transfer Inquiries" allows customers to check the domestic or cross-city transfer information they have submitted. Enter the inquiry date, click "Confirm," and the domestic/cross-city transfer inquiry results will be displayed. Management Content of Network Systems The management of network systems is the material foundation for ensuring the safe operation of online banking and enhancing public trust. The content of network system management includes issues such as security, identity verification, reliability, non-repudiation, privacy protection, and continuous availability. 1. Security The management of online banking's network system must first ensure the security of the network system. Online banking allows customers to dial in directly to their systems or provide network access on the internet, and both connection methods carry the risk of passwords, account numbers, and credit card numbers being intercepted or tampered with. Therefore, online banking must have a robust internal control system that prevents various forms of unauthorized electronic access in violation of security regulations, helping to ensure the integrity of the network and the information it processes. Common security measures used by online banks to protect their internal systems are firewalls. A firewall is a combination of hardware and software installed between two networks, providing a gateway through which all information must pass, preventing unauthorized access to the bank's network. The setup of firewalls must address the following issues: (1) Regular inspection and maintenance should be conducted to ensure their effectiveness; (2) The installation, configuration, inspection, and maintenance of firewalls must be handled by specialized technical personnel.