Speaking at BancIT, a two-day seminar on "Banking in the next millennium -- from strategy to implementation" in Bangalore on Friday, Kamath said to sustain profitability and stand global pressures, the banking sector should use technology as a competitive tool.

"In three years, the Internet will be the determining factor for the banking industry and only solution available to redefine the traditional banking system. Internet should be considered and exploited as a powerful instrument," he said.

According to him, banks should concentrate more on technology upgradation and evaluation of customer-centric products moving from vertical integration to verbal integration.

"To face challenges in the next millennium, Indian banking requires a convergence of Internet and bankingservices," he felt.

He said in countries like US, Internet was viewed as the mainstream distribution channel. Online banking improved shareholder value and would also help cut down service charges making banks cost effective and viable.

"Traditional banking is no more a viable strategy for us in the future and India is in the growth phase of a technology life cycle. We have to quicken the process to convert the global threat into an opportunity," Kamath said.

He said in the next information age, banking sector would have a different picture. It would have features like virtual banking, paperless branch banking, Internet-based corporate banking and smart card delivery systems. The new millennium banking industry would also bring in new concepts like e-cash systems, fun banks (Disney, Coca Cola) and banking super markets.

Speaking on the impact of the web on retail financial services, a US-based banking software provider MphasiS Corporation chairman Jerry Rao said the Internet has spawned a series ofnew technologies like networking, security, multi-media and personalisation in the banking sector. He said over 70 million Americans use the Internet and e-commerce. By 2003, e-commerce would be a $1.3-trillion business. Indian banking also would see a revolution with the help of Internet.

Listing the advantages of Internet in the banking sector, Rao said the Web provided an opportunity to recreate customer relationship and to establish an intimate, personalised association based entirely on customers' choice. The Net is one of the most exciting, positive things that has happened to enhance customer intimacy in banking sector.

Infosys Technologies Ltd (ITL) senior vice president-banking business unit Girish G Vaidya felt traditional banking architecture needed to be replaced with technology architecture. To improve Indian banking, personalised banking services should be made available at the doorstep. He also suggested creation of regional centres and hubs for faster turnaround and the need forscalability to handle large and growing volumes.

The seminar organised by ITL in association with Cisco Systems, IBM, Oracle Corporation, Sun Microsystems and Financial Software & Systems is being attended by 37 IT companies and 34 banks and non-banking financial institutions from across the country.