Description
This is a documentation to show the extent and quality of services and products offered on and off the internet by various banks in India.
CONTENTS Page No.
?
EXECUTIVE SUMMARY (4-5)
(3)
INTRODUCTION TO INTERNET BANKING
2.
OBJECTIVES OF THE STUDY (6)
3.
RESEARCH METHODOLOGY (7-10)
3.1 Method of data collection. 3.2 Sampling. 3.3 Limitation.
4.
A STUDY ON INTERNET BANKING (11-17)
4.1 Features of internet banking. 4.2 Service through internet banking. 4.3 Advantage of internet banking. 4.4 Disadvantage of internet banking. 4.5 Types of internet banking. HISTORY OF INTERNET BANKING
6.
(18)
INDIAN SCENARIO. (19-22)
6.1 Future Scenario.
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7.
GLOBAL INTERNET BANKING SCENARIO. (23-25)
7.1 Internet Banking products and services at global
8. 9.
GROWTH ININTERNET BANKING TYPES OF RISKS ASSOCIATED WITH INTERNET BANKING.
(26-27) (28-31) (32) (33-41)
10. REGULATORY TOOLS TO OVERCOME CHALLENGES. 11. ANALYSIS & INTERPRETATION OF THE DATA. 11.1 Account in the respective bank
11.2 Prefer using internet banking instead of visiting bank every now and then. 11.3 Educate about the internet banking services being offered 11.4 Safe in disclosing details on internet 11.5 Satisfaction with bank services 11.6 Main transactions prefer to do by internet 11.7 Benefits seen by customer in internet banking 11.8 Awareness of internet banking benefits 11.9 Awareness of methods for secure transaction 12. 13. 14. A CASE ON INTERNET BANKING IN SBI. FINDING CONCLUSION. (42-47) (48-49) (50)
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15.
ANNEXURE 15.1 15.2 QUESTIONNARIE . BIBLIOGRAPHY.
(51-54)
Executive Summary
This study is an attempt to show the extent and quality of services and products offered on and off the internet by various banks in India. Particularly, it seeks to examine the area of internet banking (popularly known as online banking) and its influence on the population of a developing country like India. The main purpose of this study to get an overview of the internet-banking sector in the Indian economy and study as to how it has helped change the banking habits of various individuals This Project gave me a great learning experience and at the same time it gave me enough scope to implement my analytical ability. The data for this study are collected systematically and analyzed in a proper manner. Closed Ended questionnaire were used for Analysis & Interpretation of the Data. Data for internet banking is collected from the banks’ respective websites. The First part of the Project consists of data and its analysis collected from 30 customers who acquire internet-banking facilities from the bank. The second part of the Project consists about SBI internet banking collected from SBI manager Sanjay sir by face-to-face interview. Findings: The results show that internet banking is very popular in India and is in the development stage.Every day more and more people are turning to the internet banking for their personal banking. It is a safe, convenient way to shop for
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financial services, maintain bank accounts and conduct business 24 hours a day Thus; internet banking has a promising future ahead.
1. INTRODUCTION
Banks play a positive role in economic development of a country. Banking environment has become highly competitive today. The Indian banking industry is passing through a phase of customers market. The customers have more choices in choosing their banks. A competition has been established within the banks operating in India. Now, banks are also adding services to their customers. During the last 39 years since 1969, tremendous changes have taken place in the banking industry. The banks have shed their traditional functions and have been innovating, improving and coming out with new types of the services to cater to the emerging needs of their customers. The banking scenario has changed drastically. The changes, which have taken place in the last ten years, are more than the changes took place in last fifty years because of the institutionalization, liberalization, globalization and automation in the banking industry. With stiff competition and advancement of technology, the services
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provided by banks have become more easy and convenient. Gone are those days when long lines had to be formed to apply for a new cheque book or to transfer money to another account or to get a bank pass book updated.
There are various banking product available to customer they are as follow:? CREDIT CARD ? DEBIT CARD ? AUTOMATIC TELLER MACHINE (ATM) ? E-BANKING ? TELEBANKING ? INTERNET BANKING Welcome to the era of internet banking or online banking or internet banking. Whatever the name, it serves the same purpose. Internet banking is one of the famous banking products available to customer. In internet, banking system the bank has a centralized database that is web-enabled. All the services that the bank has permitted on the internet are displayed in menu. Any service can be selected and further interaction is dictated by the nature of service. Internet Banking is conducting ones banking or bank account online through a computer and an internet connection. Through Internet-banking one can check the status of his/her account, place queries and also can be facilitated with a wide range of transaction services simultaneously. These days, a range of services is provided by banks making it a very wide spectrum, from the very basic services such as fixed deposit enquiries, cheque book application, account statements, etc., to the high end services such as bill payments, fund transfers, payment of credit card dues and much
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more. Internet has emerged as an important medium for delivery of banking products and services.
2. PURPOSE OF THE STUDY
The main purpose of this study to get an overview of the internet-banking sector in the Indian economy and study as to how it has helped change the banking habits of various individuals
OBJECTIVES OF THE STUDY
Objectives of a project tell us why project has been taken under study. It helps us to know more about the topic that is being undertaken and helps us to explore future prospects of the topic. The various research objectives of the study are: ? To study the internet banking facilities offered by the banks to its customers ? To study as to how much internet banking has penetrated in the minds of the customers ? ? To gain insights about functioning of internet banking. To explore the future prospects of internet banking.
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?
To study the benefits that are provided to the individual under
internet banking
3. Research Methodology
This report is based on primary as well secondary data, however primary data collection was given more importance since it is overhearing factor in attitude studies. Research is a process through which we attempt to achieve systematically and with the support of data. . The researcher has collected data from two sources they are as follow; 1. Primary Data : The sources of Primary data were
questionnaires and personal interviews. 2. Secondary data : - The sources of secondary data were internet, books and newspaper articles. This process, which is frequently called research methodology the data is analyzed in proper manner according to the result of customer satisfactions. The researcher analysis the data given by the respondent customer and also calculated in systematic manner. Descriptive research is used in this project report in order to know about online services to clients and determining their level of satisfaction. This is the most popular type of research technique, generally used in survey research design and
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most useful in describing the characteristics of consumer behavior. The method used was following: ?
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Questionnaire method Direct Interaction with the clients .
3.1 METHOD OF DATA COLLECTION A. Instruments for data collection: The research instruments used for this survey were structured questionnaires. The questionnaires were designed to find the satisfaction levels of internet banking users. B. Questionnaire: A questionnaire consists of a set of questions prepared to respondents for their answers. A set of question paper which consist of 10 question based on internet banking were prepared. It is multiple-choice question, which have three different alternatives. The researcher is asked to tick the most suitable option according to choice of them. C. Drafting of a Questionnaire: Closed Ended questionnaire were used in research Questionnaire was prepared over a period of 5 days by intensive brainstorming. Valuable advice regarding changes was given by my project guide, Mr. Sachin sir, has resulted in the formulation of the questionnaire through which responses were collected and analyzed. A copy of the questionnaire has been attached as an annexure to the project.
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Since my objective was to derive out the maximum information out of the passengers without making the whole exercise boring and troublesome, I decided to keep questionnaire close-ended. In order to generate and sustain the interest of the respondents, the initial questions pertained to the gathering of simple information like the knowledge of internet banking, the choice of their bank and the main areas of their transactions.
D. ANALYSIS OF DATA There are 10 questions were given related to internet banking. These questions were asked to 30 different people. The researcher has analyzed the reports in a systematic manner with the help of following formula: i.e.
NO. of respondent's Total respondent's
× 100
3.2 Sampling:
? Sampling procedure:
The sample was selected randomly from the customers who acquire internet-banking facilities from the bank, irrespective of them. It was also collected through personal visits to persons, by formal and informal talks and through filling up the questionnaire prepared. ? Sample size:
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The sample size of my project is limited to 30 people only, who acquire internet-banking facilities from the bank. ? Sample design:
Data has been presented with the help of pie charts only.
3.3 LIMITATIONS
The following are the limitations with this report:? ?
Some of the persons were not willing to answer the question. Possibility of error in data collection because many customer may
have not given actual answers of my questionnaire.
?
Sample size is limited to 30 customers who acquire internet-
banking facilities from the bank. The sample size may not adequately represent the whole market.
?
There is a chance of error in data collection because many
customers have chosen two option in Question No. 2 in questionnaire.
?
The research is confined to a certain part of area.
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? People were mostly unwilling to talk because of their heavy schedule or they get annoyed with the phone calls or even if they are asked about this face to face. ? Some of the persons were not so responsive.
4. A STUDY ON INTERNET BANKING
Internet banking can be defined as a facility provided by banking and financial institutions that enable the user to execute bank related transactions through Internet. The biggest advantage of Internet banking is that people can expend the services sitting at home, to transact business. Due to which, the account holder does not have to personally visit the bank. With the help of Internet, the account holder can execute banking many transactions. When small transactions like balance inquiry, record of recent transaction, etc. are to be processed, the Internet banking facility proves to be very handy. The concept of Internet banking has thus become a revolution in the field of banking and finance. Internet banking system and method in which a network connects a personal computer service provider directly to a host computer system of a bank such that customer service representatives can process customer service requests automatically without need for intervention. The system is capable of distinguishing between those customer service requests, which are capable of automated fulfillment, and those requests, which require handling by a customer service representative. The system is integrated with the host computer system of the bank so that the remote banking
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customer can access other automated services of the bank. The method of the invention includes the steps of inputting a customer banking request from among a menu of banking requests at a remote personnel computer, transmitting the banking requests to a host computer over a network; receiving the request at the host computer; identifying the type of customer banking request received; automatic logging of the service request, comparing the received request to a stored table of request types, each of the request types having an attribute to indicate whether the request type is capable of being fulfilled by a customer service representative or by an automated system.
4.1 Features of internet banking
Internet banking offers a diverse assortment of features. The number one feature used by internet bankers is bill pay service. Some banks offer and unlimited amount of bill pays per month at no cost to you. Additionally some offer the option to send an actual paper check to those unable to receive an electronic payment. Even better is some banks don’t even charge you for the postage to mail the paper check. In addition, something to look for is the option to setup reoccurring payments. Electronic bill notification is another handy feature. The way it works is that the merchant that needs payment, says your gas company, will send an electronic bill to your bank. You can then set it up to have that bill automatically paid or send you an approval request. It is nice; you do not have to worry about getting paper bills forwarded to you if you are traveling. Online check and deposit slip images is another feature. Banks simply scan the front, back of the actual check, deposit slip, and then upload the image to your account. That way you still have a record, but you do not have to store all of that paper in those under the bed boxes.
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4.2
SERVICES THROUGH INTERNET BANKING.
Bill payment service :You can facilitate payment of electricity and telephone bills, mobile phone, credit card and insurance premium bills as each bank has tie-ups with various utility companies, service providers and insurance companies, across the country. To pay your bills, all you need to do is complete a simple one-time registration for each biller. You can also set up standing instructions online to pay your recurring bills, automatically. Generally, the bank does not charge customers for onlinebillpayment.
Fund transfer You can transfer any amount from one account to another of the same or any another bank. Customers can send money anywhere in India. Once you login to your account, you need to mention the payee’s account number, his bank and the branch. The transfer will take place in a day or so, whereas in a traditional method, it takes about three working days. ICICI Bank says that online bill payment service and fund transfer facility have been their most popular online services. Credit card customers With Internet banking, customers can not only pay their credit card bills online but also get a loan on their cards. If you lose your credit card, you can report lost card online. Railway pass This is something that would interest all the aam janta. Indian Railways has tied up with ICICI bank and you can now make your railway pass for local trains online. The pass will be delivered to you at your doorstep. However, the facility is limited to Mumbai, Thane, Nashik, Surat and Pune. Investing through Internet banking
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You can now open an FD online through funds transfer.Now investors with interlinked demat account and bank account can easily trade in the stock market and the amount will be automatically debited from their respective bank accounts and the shares will be credited in their demat account. Moreover, some banks even give you the facility to purchase mutual funds directly from the online banking system. Nowadays, most leading banks offer both online banking and demat account. However if you have your demat account with independent share brokers, then you need to sign a special form, which will link your two accounts.
Recharging your prepaid phone Now just top-up your prepaid mobile cards by logging in to Internet banking. By just selecting your operator's name, entering your mobile number and the amount for recharge, your phone is again back in action within few minutes. Shopping With a range of all kind of products, you can shop online and the payment is made conveniently through your account. You can also buy railway and air tickets through internet banking. 4.3
Advantages of internet banking
1. The greatest advantage of Internet banking perhaps lies in the fact that customers are no longer required waiting in those long and wearisome queues of the banks to request a financial transaction or statement.
2.
Another important advantage of Internet banking is that it has made the opening of an account quite simple and easy and without much paperwork. The same flexibility can be observed even while closing an account. You can also apply for bank loans without personally visiting any local branch of yours bank
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3.
Conventional banking has always been slow and time consuming, so much so that sometimes you need to wait several hours to process a simple transaction like clearing a check.
4.
Internet banking has tremendously reduced the time required to process banking transactions, thereby making banking faster and convenient. For the bankers this system is cost-effective, as it has considerably reduced the administrative costs and paperwork related to the transactions. Besides, banks can also cater to the needs of thousands of customers at the same time. All these factors have significantly increased the profit margins of commercial banks by lowering their operating costs. This has enabled them acceptable interest rates on savings account and credit cards. to offer
5. With the help of Internet banking, you can access any information regarding your account and transactions, any time of the day. This means that you no longer have to depend on the office hours of your bank to obtain information. Therefore, you can regularly monitor your account as well as keep track of financial transactions, which can be of immense help in detecting any fraudulent transaction.
6.
In addition to this, fund transfers, both national and international, have also become faster and convenient with Internet banking. Nowadays, you can transfer funds from one account to another within a few minutes. You can easily carry out stock trading, exchanging bonds and other investments with the help of Internet banking. All these features have made Internet banking ideal for people who make a number of financial transactions each day.
7. In addition to availing banking facilities for 24 hours a day, you can also receive other important information regarding banking policies, rates of interest offered on different types of bank accounts and formalities required in
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executing various transactions. With such information, you can compare the services of different banks and opt for the one that satisfies your individual needs and requirements.
4.4 DISADVANTAGE OF INTERNET BANKING
However, there are some serious disadvantages of internet banking, out of which the security of your bank account is the most important one. So while availing the facilities of Internet banking, you have to be very careful to ensure the security of your computer and personal information like the password, user name and pin number of your bank account. Otherwise, you may become a victim of computer hacking, which can lead to unauthorized use of your account by computer hackers. Though banks have come up with several security measures, the customers are also required to be a bit careful to ensure security and safety of internet banking.
4.5
Types of Internet banking
The Reserve Bank of India constituted a working group on Internet Banking. The group divided the internet banking products in India into 3 types based on the levels of access granted. They are:
1.
Information Only System General Purpose information like interest rates, branch location, bank products and their features, loan and deposit calculations are provided in the
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banks website. There exist facilities for downloading various types of application forms. The communication is normally done through e-mail. There is no interaction between the customer and bank’s application system. No identification of the customer is done. In this system, there is no possibility of any unauthorized person getting into production systems of the bank through internet.
2. Electronic Information Transfer System
The system provides customer- specific information in the form of account balances, transaction details, and statement of accounts. The information is still largely of the ‘read only’ format. Identification and authentication of the customer is through password. The information is fetched from the bank’s application system either in batch mode or off-line. The application systems cannot directly access through the internet.
3. Fully Electronic Transactional System
This system allows bi-directional capabilities. The customer for online update can submit transactions. This system requires high degree of security and control. In this environment, web server and application systems are linked over secure infrastructure. It comprises technology covering computerization, networking and security, inter-bank payment gateway and legal infrastructure.
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5. HISTORY OF INTERNET BANKING
The concept of Internet banking has been simultaneously evolving with the development of the World Wide Web. Programmers working on banking databases came up with ideas for online banking transactions, some time during the 1980's. The creative processes of development of these services were probably sparked off after many companies started the concept of online shopping. The online shopping promoted the use of credit cards through Internet. Many banking organizations had already started creating data ware housing facilities to ease their working staffs. The developments of these databases were widely used during the development of ATM's. Sometime in 1980's, banking and finance organizations in Europe and United States started suggestive researches and programming experiments on the concept of 'home banking'. Initially in the 80's when computers and Internet were not so well developed, 'home banking’ made use of fax machines and telephones to facilitate their customers. The wide spread of Internet and programming facilities created further opportunities for development of home banking. In 1983, the Nottingham Building Society, commonly abbreviated and refereed to as the NBS, launched the first Internet banking service in United Kingdom. This service formed the basis for most of the Internet banking facilities
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that followed. This facility was not very well developed and restricted the number of transactions and functions that account holders could execute. The facility introduced by Nottingham Building Society is said to have been derived from a system known as Prestel that is deployed by the postal service department of United Kingdom. The first online banking service in United States was introduced, in October 1994. The service was developed by Stanford Federal Credit Union, which is a financial institution. The online banking services are becoming more and more prevalent due to the well-developed systems.
6. The Indian Scenario
“The entry of Indian banks into Internet Banking” Tremendous growth of Internet during the mid-nineties prompted banks to utilize Internet as a medium for offering banking services. Using Internet Banking, banks allow their customers to perform banking transactions through their web site in a secure way. However, not many studies have been conduced to evaluate if the customers in India utilize “Internet Banking” channel properly. Internet banking, both as a medium of delivery of banking services and as a strategic tool for business development, has gained wide acceptance internationally and is fast catching up in India with more and more banks entering the fray. India can be said to be on the threshold of a major banking revolution with net banking having already been unveiled. A recent questionnaire, to which 46 banks responded, has revealed that at present, 11 banks in India are providing Internet banking services at different levels, 22 banks propose to offer Internet banking in near future while the remaining 13 banks have no immediate plans to offer such facility. In India, approximately one percent of high and middle-income group banking customers conducted banking on the Internet in 2000 compared to 5 to 6 percent in Singapore and South Korea. In 2001, a Reserve Bank of India survey
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revealed that more than 20 major banks either were offering internet-banking services at various levels or planned to do so in the near future. Some of the private banks included ICICI Bank, HDFC Bank, IDBI Bank, Citibank, Global Trust Bank, Bank of Punjab and UTI Bank. In the same year, out of an estimated 0.9 million Internet user base, approximately 17 percent were reported to be banking on the Internet. At present, the total Internet users in the country are estimated at 9lakh. However, this is expected to grow exponentially to 90lakh by 2003. Only about 1% of Internet users did banking online in 1998. This increased to 16.7% in March 2000.* the growth potential is, therefore, immense. Further incentives provided by banks would dissuade customers from visiting physical branches, and thus get ‘hooked’ to the convenience of armchair banking. The facility of accessing their accounts from anywhere in the world by using a home computer with Internet connection, is particularly fascinating to Non-Resident Indians and High Net worth Individuals having multiple bank accounts. Costs of banking service through the Internet form a fraction of costs through conventional methods. Rough estimates assume teller cost at Re.1 per transaction, ATM transaction cost at 45paise, phone banking at 35paise, debit cards at 20paise and Internet banking at 10paise per transaction. The cost-conscious banks in the country have therefore actively considered use of the Internet as a channel for providing services. Fully computerized banks, with better management of their customer base are in a stronger position to cross-sell their products through this channel. The online population has increased from just 500,000 in 1998 to 5 million in 2000. By 2015, the online population is expected to reach 70 million. IT services is a $1.5 billion industry in India growing at a rate of 55% per annum. Banks providing Internet banking services have been entering into agreements with their customers setting out the terms and conditions of the services. The terms and conditions include information on the access through user-id and secret password,
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minimum balance and charges, authority to the bank for carrying out transactions performed through the service, liability of the user and the bank, disclosure of personal information for statistical analysis and credit scoring also, nontransferability of the facility, notices and termination, etc. These services are being initiated by banks like ICICI Bank Ltd., Citibank, Global Trust Bank Ltd., UTI Bank Ltd., Bank of Citibank Bank of Madura Ltd., Federal Bank Ltd., etc. Indian Government has introduced the Information Technology Bill, which has already been notified in October 2000. Section 72 of the Information Technology Act, 2000 casts an obligation of confidentiality against disclosure of any electronic record, register, correspondence and information, except for certain purposes and violation of this provision is a criminal offence. Notification for appointment of Authorities to certify digital signatures, ensuring confidentiality of data, is likely to be issued in the coming months. Comprehensive enactments like the Electronic Funds Transfer Act in U.K. and data protection rules and regulations in the developed countries are in place abroad to prevent unauthorized access to data, malafide or otherwise, and to protect the individual’s rights of privacy. The legal issues are, however, being debated in our country and it is expected that some headway will be made in this respect in the near future.
6.1 The Future Scenario
•
Compared to banks abroad, India banks offering online services still have a long way to go. For online banking to reach a critical mass, there has to be sufficient number of users and the sufficient infrastructure in place.
•
Various security options like line encryption, branch connection encryption, firewalls, digital certificates, automatic sign-offs, random pop-ups and disaster
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recovery sites are is in place or are being looked at, there is as yet no Certification Authority in India offering Public Key Infrastructure, which is absolutely necessary for online banking.
•
The communication bandwidth available today in India is also not enough to meet the needs of high priority services like online banking and trading. Banks offering online facilities also need to calculate their downtime losses, because even a few minutes of downtime in a week could mean substantial losses.
•
•
Users of Internet Banking Services are required to fill up the application forms online and send a copy of the same by mail or fax to the bank. The customer with the bank for using the Internet banking services enters into a contractual agreement. Domestic customers, for whom other access points such as ATMs, telebanking, personal contact, etc. are available, are often hesitant to use the Internet banking services offered by Indian banks. Internet Banking, as an additional delivery channel, may, therefore, be attractive/ appealing as a value added service to domestic customers. Non-resident Indians, for whom, it is expensive and time consuming to access their bank accounts maintained in India find net banking very convenient and useful.
•
•
• Cyber crimes are, therefore, difficult to be identified and controlled.
•
In order to promote Internet banking services, it is necessary that the proper legal infrastructure is in place. The Department of Telecommunications (DoT) is moving fast to make available additional bandwidth, with the result that internet access will become much faster in the future.
•
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•
Reserve Bank of India has constituted a group to examine different issues relating to internet banking and recommend technology, security legal standards and operational standards keeping in view the international best practices. In the following paragraphs a generic set of risks discussed as the basis for formulating general risk control guidelines.
Scenario
7. Global internet Banking
Internet Banking
Internet Banking is one of the few web applications where benefits to customers and banks are already widely proven. It is now no longer a “nice to have” but an “impossible to survive without” for all banks. “Internet Banking” refers to systems that enable bank customers to access accounts and general information on bank products and services through a personal computer (PC) or other intelligent devices. Internet banking means a kind of self-help financial services provided by the bank for its clients by the medium of Internet, including account information inquiry, account transfer & payment, online payment, agency services, etc.
7.1 Internet Banking products and services at global
Internet Banking products and services can include wholesale products for corporate customers as well as retail and fiduciary products for individual customers. Ultimately, the products and services obtained through internet banking may mirror
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products and services offered through other bank delivery channels. Some examples of wholesale products and services include: • Cash management • Wire transfer • Automated clearinghouse transactions • Bill presentment and payment Examples of retail and fiduciary products and services include: • Balance inquiry • Funds transfer • Downloading transaction information • Bill presentment and payment • Loan applications • Investment activity. • Other value-added services. Other internet banking services may include providing internet access as an Internet Service provider (ISP). Historically, banks have used information systems technology to process checks (item processing), drive ATM machines (transaction processing), and produce reports (management information systems). In the past, customers rarely noticed the computer systems that made the information systems operate. Today, web sites, electronic bill presentment and payment systems are an important way for banks to reach their customers. The banking industry is expected to be a leading player in internet-business. While the banks in developed countries are working primarily via Internet as nonbranch banks, banks in the developing countries use the Internet as an information delivery tool to improve relationship with customers. In early 2001, approximately 60 percent of internet -business in the UK was concentrated in the financial services
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sector, and with the expected 10-fold increase of the British internet -business market by 2004, the share of the financial services will further increase. Around one fifth of Finish and Swedish bank customers are banking online, while in the US, online banking is growing at an annual rate of 60 percent and the numbers of online accounts are expected to reach 15 million by 2003. Banks have established an Internet presence with various objectives. Most of them are using the Internet as a new distribution channel. Financial services, with the use of Internet, may be offered in an equivalent quantity with lower costs to the potential customers. There may be contacts from each corner of the world at any time
of day or night. This means that banks may enlarge their market without opening new branches. The banks in the US are using the Web to reach opportunities in three different categories: to market information, to deliver banking products and services, and to improve customer relationship. In 2001, over 50 percent of the banks in the US were offering internet -banking services. However, large banks appeared to have a clear advantage over small banks in the range of services they offered. Some banks in the US were targeting their Internet strategies towards business customers. Apart from affecting the way customers received banking services; internet -banking was expected to influence the banking industry structure. The economics of internet -banking was expected to favor large banks because of economies of scale and scope, and the ability to advertise heavily. Moreover, internet -banking offered entry and expansion opportunities that small banks traditionally lacked. The major factor restricting growth of internet -banking is security, in spite of several countries being well connected via Internet. Access to high-quality
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internet -banking products is an issue as well. Majority of banks in Asia are just offering basic services compared with those of developed countries. Still, internet -banking seems to have a future in Asia. According to McKinsey survey, internet -banking will succeed if the basic features, especially bill payment, are handled well. Bill payment was the most popular feature, cited by 40 percent of respondents of the survey.
8. Growth in Internet Banking
Numerous factors including competitive cost, customer service, and demographic considerations – are motivating banks to evaluate their technology and assess their electronic commerce and Internet banking strategies. The challenge is to make sure the savings from internet banking technology more than offset the costs and risks associated following: • Competition The competitive pressure is the chief driving force behind increasing use of internet banking technology, ranking ahead of cost reduction and revenue enhancement. Banks see internet banking as a way to keep existing with conducting business in cyberspace. Some of the market factors that may drive a bank’s strategy towards internet banking include the
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customers and attract new ones to the bank. • Cost efficiencies Banks can deliver banking services on the internet at transaction costs far lower than traditional ways. The actual costs to execute a transaction will vary depending on the delivery channel used. These costs are expected to continue to decline. • Geographical Reach Internet Banking allows expanded customer contact through increased geographical reach and lower cost of delivery channels. In fact, some banks are doing business exclusively via the internet – they do not have traditional banking offices and only reach their customers online. • Branding Relationship building is a strategic priority for most banks. Internet banking technology and products can provide a means for banks to develop and maintain an ongoing relationship with their customers by offering easy access to a broad array of products and services. By capitalizing on brand identification and by providing a broad array of financial services, banks hope to build customer loyalty, and enhance repeat businesses.
• Customer Demographics Internet banking allows banks to offer a wide array of options to their banking customers. Some customers will rely on traditionalbranches to conduct their banking business. Other customers are early adopters of new technologies that arrive in the marketplace. The challenge to banks is to understand their customer
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base and find the right mix of delivery channels to deliver products and services profitably to their various market segments. As use of the internet continues to expand, more banks are using the web to offer products and services or otherwise enhance communications with consumers. The internet offers the potential for safe, fast, and convenient new ways to shop for financial services and conduct banking business, any day, any time.
9. TYPES OF RISKS ASSOCIATED WITH INTERNET BANKING Operational Risk: ?
Operational risk, also referred to as transactional risk is the most common form of risk associated with internet banking. It takes them from of inaccurate processing of transactions, non-enforceability of contracts, compromises in data integrity, data privacy and Confidentiality, unauthorized access / intrusion to bank’s systems and transaction, etc. Such risks can arise out of weaknesses in design, implementation and monitoring of banks information system. Besides inadequacies in technology, human factors like negligence by customers and employees, fraudulent activity of employees and crackers/hackers, etc. can become potential source of operational risk.
?
?
?
Security Risk: ?
Security risk arises because of unauthorized access to a bank’s critical information stores like accounting system, risk management system, portfolio management system, etc.
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?
Other related risks are loss of reputation, infringing customers’ privacy and its legal implications, etc. Attackers could be hackers, unscrupulous vendors, disgruntled employee or even pure thrill seekers. In addition to external attacks banks are exposed to security risk from internal sources e.g. employee fraud. Employee being familiar with different systems and their weaknesses become potential security threats in a loosely controlled environment. They can manage to acquire the authentication data in order to access the customer accounts causing losses to the bank. Unless specifically protected, all data/ information transfer over the internet can be monitored or read by unauthorized persons.
?
?
?
System architecture and design: ?
Banks face the risk of wrong choice of technology, improper system design and inadequate control processes. Numerous protocols are used for communication across internet. Each protocol is designed for specific types of data transfer. A system allowing communications with all protocols, say HTTP (Hyper Text Transfer Protocol), FTP (File Transfer Protocol), telnet, etc. is more prone to attack than one designed to permit say, only HTTP. Many banks rely on outside service providers to implement, operate and maintain their e-banking system. Security related operational risk include access control, use of firewalls, cryptographic techniques, public key encryption, digital signature, etc.
?
?
?
?
Reputation Risk: ?
Reputation risk is the risks of getting significant negative public opinion, which may result in a critical loss of funding or customers. Such risks arise from actions, which cause major loss of the public confidence in the banks’
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ability to perform critical functions or impair bank-customer relationship. It may be due to banks’ own action or due to third parties action.
?
The main reasons for this risk may be system or product not working to the expectations of the customers, significant security breach (both due to internal and external attack), inadequate information to customers about product use and problem resolution procedures, significant problems with communication networks that impair customers’ access to their funds or account information especially if, there are, no alternative means of account access.
Legal Risk: ?
Legal risk arises from violation of, or non-conformance with laws, rules, regulations, or prescribed practices, or when the legal rights and obligations of parties to a transaction are not well established. A customer inadequately informed about his rights and obligations, may not take proper precautions in using Internet banking products or services, leading to disputed transactions, unwanted suits against the bank or other regulatory sanctions.
?
Money Laundering Risk: ?
As internet-banking transactions are conducted remotely, banks may find it difficult to apply traditional method for detecting and preventing undesirable criminal activities. Application of money laundering rules may also be inappropriate for some forms of electronic payments. To avoid this, banks need to design proper customer identification and screening techniques, develop audit trails, conduct periodic compliance reviews, and frame policies in internet transactions.
?
Cross-Border Risks: 30
?
Internet banking is based on technology that, by its very nature, is designed to extend the geographic reach of banks and customers. Such market expansion can extend beyond national borders. This causes various risks. Such considerations may expose banks to legal risks associated with noncompliance of different national laws and regulations, including consumer protection laws, record keeping and reporting requirements, privacy rules and money laundering laws. The foreign-based service provider or foreign participants in internet banking are sources of country risk to the extent that foreign parties become unable to fulfill their obligations due to economic, social or political factors.
?
?
Strategic Risk: ?
For reducing such risk, banks need to conduct proper survey, consult experts from various fields, establish achievable goals and monitor performance. In addition, they need to analyze the availability and cost of additional resources, provision of adequate supporting staff, proper training of staff and adequate insurance coverage.
?
Other Risk: Traditional banking risks such as credit risk, liquidity risk, interest rate risk and market risk are also present in internet banking. These risks are intensified due to the very nature of internet banking on account of use of electronic channels as well as absence of geographical limits. Credit risk: Is the risk that a counterparty will not settle an obligation for full value, either when due or at any time thereafter. Banks may not be able to properly evaluate
31
the creditworthiness of the customer while extending credit through remote banking procedures, which could enhance the credit risk. Another facility of internet banking is electronic money. It brings various types of risks associated with it. If a bank purchases e-money from an issuer in order to resell it to a customer, it exposes itself to credit risk in the event of the issuer defaulting on its obligation to redeem electronic money. Liquidity risk: It is important for a bank engaged in electronic money transfer activities that it ensures that funds are adequate to cover redemption and settlement demands at any particular time. Failure to do so, besides exposing the bank to liquidity risk, may even give rise to legal action and reputation risk. 10. REGULATORY TOOLS TO OVERCOME CHALLENGES There are four key tools that regulators need to focus on to address the new challenges posed by the arrival of internet -banking. Adaptation: In light of how rapidly technology is changing and what the changes mean for banking activities, keeping regulations up to date has been, and continues to be, a far-reaching, time-consuming, and complex task. In May 2001, the Bank for International Settlements issued its "Risk Management Principles for internet banking," which discusses how to extend, adapt, and tailor the existing riskmanagement framework to the electronic banking setting. Legalization: New methods for conducting transactions, new instruments, and new service providers will require legal definition, recognition, and permission. For example, it will be essential to define an electronic signature and give it the same legal status as the handwritten signature.
32
Harmonization: International harmonization of electronic banking regulation must be a top priority. This means intensifying cross-border cooperation between supervisors and coordinating laws and regulatory practices internationally and domestically across different regulatory agencies. The problem of jurisdiction that arises from "borderless" transactions is, as of this writing, in limbo. Integration: This is the process of including information technology issues and their accompanying operational risks in bank supervisors' safety and soundness evaluations. In addition to the issues of privacy and security, for example, bank examiners will want to know how well the bank's management has elaborated its business plan for electronic banking.
11.
ANALYSIS & INTERPRETATION OF THE DATA
11.1 ACCOUNTS IN THE RESPECTIVE BANK
Bank
State bank of India HDFC Canara bank Others Total
No. of Respondents
10 9 6 5 30
33
Account in the respectice bank
0% SBI 33% canara bank 20% HDFC 30%
other 17%
canara bank other HDFC SBI
Analysis of the above diagram
0%
Out of 30 samples, 10 customers are from State bank of India, 6 people from canara bank, 9 people from HDFC, and 5 people in other bank It was witnessed that today public sector bank State bank of India has the largest customer base but the private banks are also catching up and after State bank of India HDFC has the highest customer.
34
11.2 PREFER USING INTERNET BANKING INSTEAD OF VISITING BANK EVERY NOW AND THEN. Response No. of Respondents Yes 27 No 3 TOTAL 30
Prefer using net banking
No 10%
Yes 90% Yes No
Analysis of the above diagram
Out of 30 customers, 27 customers prefer using internet banking; only 3% of customers do not prefer using internet banking. It was witnessed that most of the respondents preferred using internet banking to there conventional banking system. Thus, internet banking has a bright future ahead
35
11.3 EDUCATE ABOUT THE INTERNET BANKING SERVICES BEING OFFERED. Response No. of Respondents YES
18
NO
12
TOTAL
30
Educating about internet banking
No 40%
Yes 60%
Yes
No
Analysis of the above diagram
From the above chart, it can be inferred that out of 30 customers, 18 customers felt that they are properly educated of internet banking. It means most of the respondents felt that they are not properly educated of internet banking and its benefits to them.
36
11.4 SAFE IN DISCLOSING DETAILS ON INTERNET.
Response YES NO Total No. of Respondents 18 12 30
safety in disclosing details
70 60 50 40 30 20 10 0 Yes No Yes No 0 0 No, 40 Yes, 60
Analysis of the above diagram From the above graph out of 30 peoples, 12 customers felt that disclosing their details is not safe. It means, few of the respondents felt safe in disclosing their details but still there were a lot people who felt unsafe in disclosing and feared their personal information may used by some other person.
37
11.5 SATISFACTION WITH BANK SERVICES.
Response No. of Respondents
Yes 24
No 6
TOTAL 30
Satisfaction with banking services
No 20%
Yes
Yes 80%
No
Analysis of the above diagram
From the above graph out of 30 peoples, 24 customers are happy from the services their respective bank is providing ,the rest of the respondents felt there is a scope of improvement still they were also happy.
38
11.6 MAIN TRANSACTIONS PREFER TO DO BY INTERNET MAIN TRANSACTIONS
Money transfers Checking of your current balance Create Fixed Deposits Online Request a Demand Draft Pay Bills Order a Cheque Book TOTAL
No. of Respondent 5.5 4 4 4.5 3 4.5 30
Main transactions
Stop payment cheque book Pay bill DD FD Current bal Money transfer 0.00% 5.00% Stop payment, 15%
Order cheque book 14%
Stop payment cheque book Pay bill
Pay bill, 10% DD, 15% FD, 13.33% Current bal, 13.33% Money transfer, 18.33% 10.00% 15.00% 20.00%
DD FD Current bal Money transfer
Analysis of the above diagram
From the above graph, it can be inferred that out of 30 people it is interesting to see that a respondent would like to do all the transactions which one does personally on a visit to the bank. Thus, internet banking has a promising future ahead.
11.7 BENEFITS SEEN BY CUSTOMER IN INTERNET BANKING BENEFITS
Convenience Speed Transparency Time TOTAL
No. of Respondents
5 6 16 10 30
benefits seen by customers
Time 10% Conv enience 17%
Speed 20%
Transparency 53%
Conv enience Speed Transparency Time
Analysis of the above diagram Out of 30 people, only five customers felt that Convenience is seen in internet banking. Most of the respondents felt that the transparency provided by internet banking is the highest motivating factor for an individual to use internet banking; rest speed convenience and time are also the other motivating factors
40
11.8. AWARENESS OF INTERNET BANKING BENEFITS
Response YES NO Total No. of Respondents 3 26 30
Benefits of Internet banking
No 10%
Yes Yes 90%
No
Analysis of the above diagram
From the above pie diagram, it can be inferred that out of 30 people, only three customers are not aware of the benefit of internet banking. It means most of the respondents are aware of the benefits of internet banking
41
11.9.
AWARENESS
OF
METHODS
FOR
SECURE
TRANSACTION.
Response No. of Respondents
Yes 9
No 21
TOTAL 30
Awareness of methods for secure transaction
Yes 30%
No 70%
Yes
No
Analysis of the above diagram Out of 30 customers, only nine people are aware of the technique for secure transaction. However, most of the respondents are unaware of the techniques, which can be taken up for secure transaction in internet.
42
12. A CASE ON INTERNET BANKING IN SBI
STATE BANK OF INDIA
State Bank of India is India’s largest bank with a branch network of over 11000 branches and six associate banks located even in the remotest parts of India. State Bank of India (SBI) offers a wide range of banking products and services to corporate and retail customers. State Bank of India with its 200 years of service created relationship with customers. Internet banking is one more effort to add value to the relationship. Internet banking facility offers convenience of 24X7 banking to its customers Online SBI is the Internet banking portal for State Bank of India. The portal provides anywhere, anytime, online access to accounts for State Bank’s Retail and Corporate customers. The application is developed using the latest innovative technology and tools. The infrastructure supports unified, secure access to banking services for accounts in over 11,000 branches across India. Security Aspects of state bank of India SBI's Internet banking channel is protected by advanced security features, both physical and logical. SBI has considered various risks inherent in transacting over a public network such as the Internet, and has deployed appropriate security measures to protect customers. Firewalls allow only valid web traffic to reach our server. Proven 128-bit Secure Socket Layer (SSL) encryption technology is deployed to ensure that the information exchanged between your computer and https://www.onlinesbi.com over the Internet is secure and cannot
43
be intruded upon. 'VeriSign' certifies that information exchanged during a valid session is protected during its transmission over the Internet. Additionally, the bank has installed mechanisms such as Intrusion detection Systems.The following operational and control measures undertaken by SBI for Online customers:
• •
Access to Internet banking is provided only on registration. The UserID and password generation is conducted in a secure environment and its distribution is automated. UserID and password are printed on tamper-proof stationery and mailed separately to the customers. This reduces risks. Change of User D and password on the first log on is mandatory. All correspondence on the service is sent to the address registered at the branch. Customer logins and activities are tracked and archived for future reference. Customer can fix the limits on the monetary value of transactions, which they desire to carry out over this service. The customer alone can modify this. Registration format of State bank of India in internet banking
•
• •
• •
1. The www.onlinesbi.com registration form(s) should be addressed and sent directly to the Branches where the applicant(s) maintain his/her/their account(s). 2. Separate registration is required in case the accounts are maintained at different branches. Separate registration is allowed for single and joint accounts at the option of the user. 3. Normally the account holders can access his accounts through the www.onlinesbi.com only after he/she acknowledges to the respective Branch the receipt of the User-Id and Password sent to him/her.
44
4. Each account holder in a joint account with “Either or Survivor” type mode of operation may register himself/ herself as a USER of the www.onlinesbi.com facility. 5. All other accounts not listed in the registration form will be available on the www.onlinesbi.com for the purpose of enquiry only. The customers may approach Branch for enabling transaction rights on such accounts any time. 6. The www.onlinesbi.com service cannot be claimed as a right. The Bank may also convert the Service into a discretionary service anytime, if so warranted, after it has been made available to the USER.
TERM AND CONDITION IN STATE BANK OF INDIA
1. All requests received from the USERS are logged and transmitted to the User’s Branch for their fulfillment. The requests become effective from the time these are recorded/ registered at the respective branch. While registering the request, the USER is informed about the time normally taken by the Bank for fulfillment such requests.
2.
The rules and regulations applicable to the banking transactions done in the traditional way in India will be applicable mutatis mutandis for the transactions done through the www.onlinesbi.com service.
3.
Disputes between the registered USER of this service and the Bank with regard to the transactions done through www.onlinesbi.com will be subject to the jurisdiction of the competent Courts where the branch maintaining the relative account of the user is located and will be governed by Indian Laws in force from time to time.
45
4.
The Bank will take reasonable care to make use of the available technology for ensuring security and preventing unauthorized access to any of the services offered through the www.onlinesbi.com
5.
The www.onlinesbi.com service is a ‘VeriSign’ certified secure site. It assures that during the session user is dealing with web site of SBI. The two-way communication is secured with 128-bit SSL encryption technology, which ensures the confidentiality of the data during transmission. The access-control methods designed on the site afford a high level of security to the transactions conducted on www.onlinesbi.com
6. It is proposed to implement, in due course, the PKI (Public Key Infrastructure)/Digital Signature technology for the www.onlinesbi.com Service. 7. The Bank reserves the right to modify, change, add or cancel any of the services offered through www.onlinesbi.com or the Terms of Service listed in this Document without prior notice to the Users. The changes will be notified to the users / customers through a notification on the site.
46
STATE BANK OF INDIA INTERNET BANKING " OnlineSBI " Registration Form for Corporations / firms) To The Branch Manager State Bank of India ________________ We wish to register our firm / company / corporation for availing of the Bank's Internet Banking Service ~ "OnlineSBI". * Our firm / company / corporation has already been registered for availing of the Bank's Internet Banking Service ~ "OnlineSBI". * (*Strike off whichever is inapplicable) We request you to register the below named official / employee as an authorised USER on behalf of the firm / company / corporation* for accessing its account(s). We confirm having read and understood the document containing the "Terms of Service" governing the SBI's Internet Banking Service and we accept them. Name of firm / company / corporation : FOR OFFICE USE Application Serial number:
Name of the Official / employee being authorised :
(Any official / employee of the firm / company / corporation may be nominated to use the OnlineSBI Service for Enquiry purposes only) Designation & Official Address of the Official : ____________________ ____________________________________ e-mail Address _________________
47
____________________________________ Pin : _____________
Tel. No._________________
Account Numbers : (Please mention 11 / 13 digit A/c No. as mentioned in your Statement of Account) Note : -For the present only
enquiry rights are available in respect of accounts of firms /
companies / corporations.
For Firm / Company / Corporation, Date : _________________________ ________________________ (Authorised Signatory / Signatories)
(Signature of Official being Authorised)
For office use SIGNATURE(S) OF AUTHORISED SIGNATORY(IES) OF FIRM/COMPANY/CORPORATION VERIFIED
OFFICER
Authorised Official/user means any official/employee of the corporate/ firm who are authorized to use Online’s services by the Authorized Signatories.
Recommended for rejecting Internet Access
providing/ Internet Access permitted/rejected DATE BRANCH MANAGER/ MANAGER OF DIVISION
DATE :
OFFICER
Reason(s) for rejecting the INB Service (if any) DATE Reason(s) advised to the Applicant SIGNATURE OFFICIAL OF
48
INB Service approved and INB Customer Flag set to "Y" in the Bank master * User Details Uploaded
* This is necessary only at the time of registration of the First Authorised User and not for the subsequent authorised users of the firm/Company/Corporation.
13. FINDINGS
? Every day more and more people are turning to the Technology
for their personal banking. It is a safe, convenient way to shop for financial services, maintain bank accounts and conduct business 24 hours a day
?
Bank customers can save time by internet banking. There is no
need to stand in one more line to perform the most basic transactions when they can be done quickly from the desktop PC anytime, day or night. ? Ease of use is one of the most important factors. Navigation
through online banking should be simple and intuitive.
?
Moreover complicated transactions or investment decisions,
people like having direct control over their finances themselves. They
49
find it convenient to access all of their financial information in one place.
?
Most Banks now offers a comprehensive range of financial
products and services, including a FREE checking account and internet bill paying services.
?
Customers also choose banks whose online services are reliable. Internet banking is the ones who consider time as money and
?
are the one with loads of money.
?
Many people choosing their personal computers as the new way
to view and manage their money through internet banking, because it is a valuable option to have.
?
Internet banking has become a necessary survival weapon and is
fundamentally changing the banking industry worldwide.
50
?
The transparency provided by internet banking is the highest
motivating factor for an individual to use internet banking; rest speed convenience and time are also the other motivating factors ? Internet banking provides enormous benefits to consumers in terms
of the ease and cost of transactions.
?
It was witnessed that most of the respondents preferred using
internet banking to there conventional banking system. Thus, internet banking has a bright future ahead.
14.
CONCLUSION
From this report, it is found that internet banking has empowered customers and businesses with information needed to make better financial service, and it has helped change the banking habits of various individuals. Every day more and more people are turning to the internet banking for their personal banking. Internet banking is a safe, convenient way to shop for financial services, maintain bank accounts and conduct business 24 hours a day Thus; internet banking has a promising future ahead.
51
Internet banking has become a necessary survival weapon and is fundamentally changing the banking industry worldwide. Today, the click of the mouse offers customers banking services at a much lower cost and empowers them with unprecedented freedom in choosing vendors for their financial service needs Internet has created plenty of opportunities for players in the banking sector. Today bank depending on delivering some or all of their banking services on the Internet while continuing to support their traditional infrastructure. It is observed that most of the customer preferred using internet banking to there conventional banking system and it is also witnessed that most of people would like to do all the transactions which one does personally on a visit to the bank Thus; internet banking has a bright future ahead.
15. ANNEXURE QUESTIONNAIRE
Dear Respondent, I am student of V.PM COLLEGE; I am doing this research to compare different services provided by bank to its clients.
1.
In which bank do you have your account?
52
(a) (b) (c) (d)
HDFC Bank State Bank of India Canara Bank Other bank
2. Would you prefer using internet banking instead of visiting your bank every now and then? (a) (b) Yes No
3. Does your bank educate you about the internet banking services being offered? (a) (b) Yes No
4. Do you feel safe in disclosing your details on internet? (a) (b) 5. (a) (b) Yes No Are you satisfied with your bank services? Yes No
53
6. (a) (b) (c) (d) (e) (f) (g)
What are your main transactions you would prefer to do by internet? Money transfers Checking of your current balance Create Fixed Deposits Online Request a Demand Draft Pay Bills Order a Cheque Book Request Stop Payment on a Cheque
7. What benefits do you see in internet banking? (a) Convenience (b) Speed
(c) Transparency
(d) Time
8. Does your bank educate you about the internet banking services being offered? (a) (b) Yes No
54
9. Are you aware of all the methods, which can be taken up to secure your transaction? (a) (b) Yes No
10 .Personal Information Name: Sex: ( ) Male ( ) Female Age:
Phone No: Occupation:
Signature of Respondent
BIBLIOGRAPHY
1.
2.
BANKING SERVICE BOOK SBI INTERNET BANKING GUIDELINE BOOK. INTERNET BANKING BOOK
3.
55
4. NEWS PAPERS STATE BANK OF INDIA- WWW.ONLINESBI.COM
5.
HDFC BANK- www.hdfcbank.com WEBSITES VISITED:www.google.com www.scribd.com
56
doc_989447038.doc
This is a documentation to show the extent and quality of services and products offered on and off the internet by various banks in India.
CONTENTS Page No.
?
EXECUTIVE SUMMARY (4-5)
(3)
INTRODUCTION TO INTERNET BANKING
2.
OBJECTIVES OF THE STUDY (6)
3.
RESEARCH METHODOLOGY (7-10)
3.1 Method of data collection. 3.2 Sampling. 3.3 Limitation.
4.
A STUDY ON INTERNET BANKING (11-17)
4.1 Features of internet banking. 4.2 Service through internet banking. 4.3 Advantage of internet banking. 4.4 Disadvantage of internet banking. 4.5 Types of internet banking. HISTORY OF INTERNET BANKING
6.
(18)
INDIAN SCENARIO. (19-22)
6.1 Future Scenario.
1
7.
GLOBAL INTERNET BANKING SCENARIO. (23-25)
7.1 Internet Banking products and services at global
8. 9.
GROWTH ININTERNET BANKING TYPES OF RISKS ASSOCIATED WITH INTERNET BANKING.
(26-27) (28-31) (32) (33-41)
10. REGULATORY TOOLS TO OVERCOME CHALLENGES. 11. ANALYSIS & INTERPRETATION OF THE DATA. 11.1 Account in the respective bank
11.2 Prefer using internet banking instead of visiting bank every now and then. 11.3 Educate about the internet banking services being offered 11.4 Safe in disclosing details on internet 11.5 Satisfaction with bank services 11.6 Main transactions prefer to do by internet 11.7 Benefits seen by customer in internet banking 11.8 Awareness of internet banking benefits 11.9 Awareness of methods for secure transaction 12. 13. 14. A CASE ON INTERNET BANKING IN SBI. FINDING CONCLUSION. (42-47) (48-49) (50)
2
15.
ANNEXURE 15.1 15.2 QUESTIONNARIE . BIBLIOGRAPHY.
(51-54)
Executive Summary
This study is an attempt to show the extent and quality of services and products offered on and off the internet by various banks in India. Particularly, it seeks to examine the area of internet banking (popularly known as online banking) and its influence on the population of a developing country like India. The main purpose of this study to get an overview of the internet-banking sector in the Indian economy and study as to how it has helped change the banking habits of various individuals This Project gave me a great learning experience and at the same time it gave me enough scope to implement my analytical ability. The data for this study are collected systematically and analyzed in a proper manner. Closed Ended questionnaire were used for Analysis & Interpretation of the Data. Data for internet banking is collected from the banks’ respective websites. The First part of the Project consists of data and its analysis collected from 30 customers who acquire internet-banking facilities from the bank. The second part of the Project consists about SBI internet banking collected from SBI manager Sanjay sir by face-to-face interview. Findings: The results show that internet banking is very popular in India and is in the development stage.Every day more and more people are turning to the internet banking for their personal banking. It is a safe, convenient way to shop for
3
financial services, maintain bank accounts and conduct business 24 hours a day Thus; internet banking has a promising future ahead.
1. INTRODUCTION
Banks play a positive role in economic development of a country. Banking environment has become highly competitive today. The Indian banking industry is passing through a phase of customers market. The customers have more choices in choosing their banks. A competition has been established within the banks operating in India. Now, banks are also adding services to their customers. During the last 39 years since 1969, tremendous changes have taken place in the banking industry. The banks have shed their traditional functions and have been innovating, improving and coming out with new types of the services to cater to the emerging needs of their customers. The banking scenario has changed drastically. The changes, which have taken place in the last ten years, are more than the changes took place in last fifty years because of the institutionalization, liberalization, globalization and automation in the banking industry. With stiff competition and advancement of technology, the services
4
provided by banks have become more easy and convenient. Gone are those days when long lines had to be formed to apply for a new cheque book or to transfer money to another account or to get a bank pass book updated.
There are various banking product available to customer they are as follow:? CREDIT CARD ? DEBIT CARD ? AUTOMATIC TELLER MACHINE (ATM) ? E-BANKING ? TELEBANKING ? INTERNET BANKING Welcome to the era of internet banking or online banking or internet banking. Whatever the name, it serves the same purpose. Internet banking is one of the famous banking products available to customer. In internet, banking system the bank has a centralized database that is web-enabled. All the services that the bank has permitted on the internet are displayed in menu. Any service can be selected and further interaction is dictated by the nature of service. Internet Banking is conducting ones banking or bank account online through a computer and an internet connection. Through Internet-banking one can check the status of his/her account, place queries and also can be facilitated with a wide range of transaction services simultaneously. These days, a range of services is provided by banks making it a very wide spectrum, from the very basic services such as fixed deposit enquiries, cheque book application, account statements, etc., to the high end services such as bill payments, fund transfers, payment of credit card dues and much
5
more. Internet has emerged as an important medium for delivery of banking products and services.
2. PURPOSE OF THE STUDY
The main purpose of this study to get an overview of the internet-banking sector in the Indian economy and study as to how it has helped change the banking habits of various individuals
OBJECTIVES OF THE STUDY
Objectives of a project tell us why project has been taken under study. It helps us to know more about the topic that is being undertaken and helps us to explore future prospects of the topic. The various research objectives of the study are: ? To study the internet banking facilities offered by the banks to its customers ? To study as to how much internet banking has penetrated in the minds of the customers ? ? To gain insights about functioning of internet banking. To explore the future prospects of internet banking.
6
?
To study the benefits that are provided to the individual under
internet banking
3. Research Methodology
This report is based on primary as well secondary data, however primary data collection was given more importance since it is overhearing factor in attitude studies. Research is a process through which we attempt to achieve systematically and with the support of data. . The researcher has collected data from two sources they are as follow; 1. Primary Data : The sources of Primary data were
questionnaires and personal interviews. 2. Secondary data : - The sources of secondary data were internet, books and newspaper articles. This process, which is frequently called research methodology the data is analyzed in proper manner according to the result of customer satisfactions. The researcher analysis the data given by the respondent customer and also calculated in systematic manner. Descriptive research is used in this project report in order to know about online services to clients and determining their level of satisfaction. This is the most popular type of research technique, generally used in survey research design and
7
most useful in describing the characteristics of consumer behavior. The method used was following: ?
?
Questionnaire method Direct Interaction with the clients .
3.1 METHOD OF DATA COLLECTION A. Instruments for data collection: The research instruments used for this survey were structured questionnaires. The questionnaires were designed to find the satisfaction levels of internet banking users. B. Questionnaire: A questionnaire consists of a set of questions prepared to respondents for their answers. A set of question paper which consist of 10 question based on internet banking were prepared. It is multiple-choice question, which have three different alternatives. The researcher is asked to tick the most suitable option according to choice of them. C. Drafting of a Questionnaire: Closed Ended questionnaire were used in research Questionnaire was prepared over a period of 5 days by intensive brainstorming. Valuable advice regarding changes was given by my project guide, Mr. Sachin sir, has resulted in the formulation of the questionnaire through which responses were collected and analyzed. A copy of the questionnaire has been attached as an annexure to the project.
8
Since my objective was to derive out the maximum information out of the passengers without making the whole exercise boring and troublesome, I decided to keep questionnaire close-ended. In order to generate and sustain the interest of the respondents, the initial questions pertained to the gathering of simple information like the knowledge of internet banking, the choice of their bank and the main areas of their transactions.
D. ANALYSIS OF DATA There are 10 questions were given related to internet banking. These questions were asked to 30 different people. The researcher has analyzed the reports in a systematic manner with the help of following formula: i.e.
NO. of respondent's Total respondent's
× 100
3.2 Sampling:
? Sampling procedure:
The sample was selected randomly from the customers who acquire internet-banking facilities from the bank, irrespective of them. It was also collected through personal visits to persons, by formal and informal talks and through filling up the questionnaire prepared. ? Sample size:
9
The sample size of my project is limited to 30 people only, who acquire internet-banking facilities from the bank. ? Sample design:
Data has been presented with the help of pie charts only.
3.3 LIMITATIONS
The following are the limitations with this report:? ?
Some of the persons were not willing to answer the question. Possibility of error in data collection because many customer may
have not given actual answers of my questionnaire.
?
Sample size is limited to 30 customers who acquire internet-
banking facilities from the bank. The sample size may not adequately represent the whole market.
?
There is a chance of error in data collection because many
customers have chosen two option in Question No. 2 in questionnaire.
?
The research is confined to a certain part of area.
10
? People were mostly unwilling to talk because of their heavy schedule or they get annoyed with the phone calls or even if they are asked about this face to face. ? Some of the persons were not so responsive.
4. A STUDY ON INTERNET BANKING
Internet banking can be defined as a facility provided by banking and financial institutions that enable the user to execute bank related transactions through Internet. The biggest advantage of Internet banking is that people can expend the services sitting at home, to transact business. Due to which, the account holder does not have to personally visit the bank. With the help of Internet, the account holder can execute banking many transactions. When small transactions like balance inquiry, record of recent transaction, etc. are to be processed, the Internet banking facility proves to be very handy. The concept of Internet banking has thus become a revolution in the field of banking and finance. Internet banking system and method in which a network connects a personal computer service provider directly to a host computer system of a bank such that customer service representatives can process customer service requests automatically without need for intervention. The system is capable of distinguishing between those customer service requests, which are capable of automated fulfillment, and those requests, which require handling by a customer service representative. The system is integrated with the host computer system of the bank so that the remote banking
11
customer can access other automated services of the bank. The method of the invention includes the steps of inputting a customer banking request from among a menu of banking requests at a remote personnel computer, transmitting the banking requests to a host computer over a network; receiving the request at the host computer; identifying the type of customer banking request received; automatic logging of the service request, comparing the received request to a stored table of request types, each of the request types having an attribute to indicate whether the request type is capable of being fulfilled by a customer service representative or by an automated system.
4.1 Features of internet banking
Internet banking offers a diverse assortment of features. The number one feature used by internet bankers is bill pay service. Some banks offer and unlimited amount of bill pays per month at no cost to you. Additionally some offer the option to send an actual paper check to those unable to receive an electronic payment. Even better is some banks don’t even charge you for the postage to mail the paper check. In addition, something to look for is the option to setup reoccurring payments. Electronic bill notification is another handy feature. The way it works is that the merchant that needs payment, says your gas company, will send an electronic bill to your bank. You can then set it up to have that bill automatically paid or send you an approval request. It is nice; you do not have to worry about getting paper bills forwarded to you if you are traveling. Online check and deposit slip images is another feature. Banks simply scan the front, back of the actual check, deposit slip, and then upload the image to your account. That way you still have a record, but you do not have to store all of that paper in those under the bed boxes.
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4.2
SERVICES THROUGH INTERNET BANKING.
Bill payment service :You can facilitate payment of electricity and telephone bills, mobile phone, credit card and insurance premium bills as each bank has tie-ups with various utility companies, service providers and insurance companies, across the country. To pay your bills, all you need to do is complete a simple one-time registration for each biller. You can also set up standing instructions online to pay your recurring bills, automatically. Generally, the bank does not charge customers for onlinebillpayment.
Fund transfer You can transfer any amount from one account to another of the same or any another bank. Customers can send money anywhere in India. Once you login to your account, you need to mention the payee’s account number, his bank and the branch. The transfer will take place in a day or so, whereas in a traditional method, it takes about three working days. ICICI Bank says that online bill payment service and fund transfer facility have been their most popular online services. Credit card customers With Internet banking, customers can not only pay their credit card bills online but also get a loan on their cards. If you lose your credit card, you can report lost card online. Railway pass This is something that would interest all the aam janta. Indian Railways has tied up with ICICI bank and you can now make your railway pass for local trains online. The pass will be delivered to you at your doorstep. However, the facility is limited to Mumbai, Thane, Nashik, Surat and Pune. Investing through Internet banking
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You can now open an FD online through funds transfer.Now investors with interlinked demat account and bank account can easily trade in the stock market and the amount will be automatically debited from their respective bank accounts and the shares will be credited in their demat account. Moreover, some banks even give you the facility to purchase mutual funds directly from the online banking system. Nowadays, most leading banks offer both online banking and demat account. However if you have your demat account with independent share brokers, then you need to sign a special form, which will link your two accounts.
Recharging your prepaid phone Now just top-up your prepaid mobile cards by logging in to Internet banking. By just selecting your operator's name, entering your mobile number and the amount for recharge, your phone is again back in action within few minutes. Shopping With a range of all kind of products, you can shop online and the payment is made conveniently through your account. You can also buy railway and air tickets through internet banking. 4.3
Advantages of internet banking
1. The greatest advantage of Internet banking perhaps lies in the fact that customers are no longer required waiting in those long and wearisome queues of the banks to request a financial transaction or statement.
2.
Another important advantage of Internet banking is that it has made the opening of an account quite simple and easy and without much paperwork. The same flexibility can be observed even while closing an account. You can also apply for bank loans without personally visiting any local branch of yours bank
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3.
Conventional banking has always been slow and time consuming, so much so that sometimes you need to wait several hours to process a simple transaction like clearing a check.
4.
Internet banking has tremendously reduced the time required to process banking transactions, thereby making banking faster and convenient. For the bankers this system is cost-effective, as it has considerably reduced the administrative costs and paperwork related to the transactions. Besides, banks can also cater to the needs of thousands of customers at the same time. All these factors have significantly increased the profit margins of commercial banks by lowering their operating costs. This has enabled them acceptable interest rates on savings account and credit cards. to offer
5. With the help of Internet banking, you can access any information regarding your account and transactions, any time of the day. This means that you no longer have to depend on the office hours of your bank to obtain information. Therefore, you can regularly monitor your account as well as keep track of financial transactions, which can be of immense help in detecting any fraudulent transaction.
6.
In addition to this, fund transfers, both national and international, have also become faster and convenient with Internet banking. Nowadays, you can transfer funds from one account to another within a few minutes. You can easily carry out stock trading, exchanging bonds and other investments with the help of Internet banking. All these features have made Internet banking ideal for people who make a number of financial transactions each day.
7. In addition to availing banking facilities for 24 hours a day, you can also receive other important information regarding banking policies, rates of interest offered on different types of bank accounts and formalities required in
15
executing various transactions. With such information, you can compare the services of different banks and opt for the one that satisfies your individual needs and requirements.
4.4 DISADVANTAGE OF INTERNET BANKING
However, there are some serious disadvantages of internet banking, out of which the security of your bank account is the most important one. So while availing the facilities of Internet banking, you have to be very careful to ensure the security of your computer and personal information like the password, user name and pin number of your bank account. Otherwise, you may become a victim of computer hacking, which can lead to unauthorized use of your account by computer hackers. Though banks have come up with several security measures, the customers are also required to be a bit careful to ensure security and safety of internet banking.
4.5
Types of Internet banking
The Reserve Bank of India constituted a working group on Internet Banking. The group divided the internet banking products in India into 3 types based on the levels of access granted. They are:
1.
Information Only System General Purpose information like interest rates, branch location, bank products and their features, loan and deposit calculations are provided in the
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banks website. There exist facilities for downloading various types of application forms. The communication is normally done through e-mail. There is no interaction between the customer and bank’s application system. No identification of the customer is done. In this system, there is no possibility of any unauthorized person getting into production systems of the bank through internet.
2. Electronic Information Transfer System
The system provides customer- specific information in the form of account balances, transaction details, and statement of accounts. The information is still largely of the ‘read only’ format. Identification and authentication of the customer is through password. The information is fetched from the bank’s application system either in batch mode or off-line. The application systems cannot directly access through the internet.
3. Fully Electronic Transactional System
This system allows bi-directional capabilities. The customer for online update can submit transactions. This system requires high degree of security and control. In this environment, web server and application systems are linked over secure infrastructure. It comprises technology covering computerization, networking and security, inter-bank payment gateway and legal infrastructure.
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5. HISTORY OF INTERNET BANKING
The concept of Internet banking has been simultaneously evolving with the development of the World Wide Web. Programmers working on banking databases came up with ideas for online banking transactions, some time during the 1980's. The creative processes of development of these services were probably sparked off after many companies started the concept of online shopping. The online shopping promoted the use of credit cards through Internet. Many banking organizations had already started creating data ware housing facilities to ease their working staffs. The developments of these databases were widely used during the development of ATM's. Sometime in 1980's, banking and finance organizations in Europe and United States started suggestive researches and programming experiments on the concept of 'home banking'. Initially in the 80's when computers and Internet were not so well developed, 'home banking’ made use of fax machines and telephones to facilitate their customers. The wide spread of Internet and programming facilities created further opportunities for development of home banking. In 1983, the Nottingham Building Society, commonly abbreviated and refereed to as the NBS, launched the first Internet banking service in United Kingdom. This service formed the basis for most of the Internet banking facilities
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that followed. This facility was not very well developed and restricted the number of transactions and functions that account holders could execute. The facility introduced by Nottingham Building Society is said to have been derived from a system known as Prestel that is deployed by the postal service department of United Kingdom. The first online banking service in United States was introduced, in October 1994. The service was developed by Stanford Federal Credit Union, which is a financial institution. The online banking services are becoming more and more prevalent due to the well-developed systems.
6. The Indian Scenario
“The entry of Indian banks into Internet Banking” Tremendous growth of Internet during the mid-nineties prompted banks to utilize Internet as a medium for offering banking services. Using Internet Banking, banks allow their customers to perform banking transactions through their web site in a secure way. However, not many studies have been conduced to evaluate if the customers in India utilize “Internet Banking” channel properly. Internet banking, both as a medium of delivery of banking services and as a strategic tool for business development, has gained wide acceptance internationally and is fast catching up in India with more and more banks entering the fray. India can be said to be on the threshold of a major banking revolution with net banking having already been unveiled. A recent questionnaire, to which 46 banks responded, has revealed that at present, 11 banks in India are providing Internet banking services at different levels, 22 banks propose to offer Internet banking in near future while the remaining 13 banks have no immediate plans to offer such facility. In India, approximately one percent of high and middle-income group banking customers conducted banking on the Internet in 2000 compared to 5 to 6 percent in Singapore and South Korea. In 2001, a Reserve Bank of India survey
19
revealed that more than 20 major banks either were offering internet-banking services at various levels or planned to do so in the near future. Some of the private banks included ICICI Bank, HDFC Bank, IDBI Bank, Citibank, Global Trust Bank, Bank of Punjab and UTI Bank. In the same year, out of an estimated 0.9 million Internet user base, approximately 17 percent were reported to be banking on the Internet. At present, the total Internet users in the country are estimated at 9lakh. However, this is expected to grow exponentially to 90lakh by 2003. Only about 1% of Internet users did banking online in 1998. This increased to 16.7% in March 2000.* the growth potential is, therefore, immense. Further incentives provided by banks would dissuade customers from visiting physical branches, and thus get ‘hooked’ to the convenience of armchair banking. The facility of accessing their accounts from anywhere in the world by using a home computer with Internet connection, is particularly fascinating to Non-Resident Indians and High Net worth Individuals having multiple bank accounts. Costs of banking service through the Internet form a fraction of costs through conventional methods. Rough estimates assume teller cost at Re.1 per transaction, ATM transaction cost at 45paise, phone banking at 35paise, debit cards at 20paise and Internet banking at 10paise per transaction. The cost-conscious banks in the country have therefore actively considered use of the Internet as a channel for providing services. Fully computerized banks, with better management of their customer base are in a stronger position to cross-sell their products through this channel. The online population has increased from just 500,000 in 1998 to 5 million in 2000. By 2015, the online population is expected to reach 70 million. IT services is a $1.5 billion industry in India growing at a rate of 55% per annum. Banks providing Internet banking services have been entering into agreements with their customers setting out the terms and conditions of the services. The terms and conditions include information on the access through user-id and secret password,
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minimum balance and charges, authority to the bank for carrying out transactions performed through the service, liability of the user and the bank, disclosure of personal information for statistical analysis and credit scoring also, nontransferability of the facility, notices and termination, etc. These services are being initiated by banks like ICICI Bank Ltd., Citibank, Global Trust Bank Ltd., UTI Bank Ltd., Bank of Citibank Bank of Madura Ltd., Federal Bank Ltd., etc. Indian Government has introduced the Information Technology Bill, which has already been notified in October 2000. Section 72 of the Information Technology Act, 2000 casts an obligation of confidentiality against disclosure of any electronic record, register, correspondence and information, except for certain purposes and violation of this provision is a criminal offence. Notification for appointment of Authorities to certify digital signatures, ensuring confidentiality of data, is likely to be issued in the coming months. Comprehensive enactments like the Electronic Funds Transfer Act in U.K. and data protection rules and regulations in the developed countries are in place abroad to prevent unauthorized access to data, malafide or otherwise, and to protect the individual’s rights of privacy. The legal issues are, however, being debated in our country and it is expected that some headway will be made in this respect in the near future.
6.1 The Future Scenario
•
Compared to banks abroad, India banks offering online services still have a long way to go. For online banking to reach a critical mass, there has to be sufficient number of users and the sufficient infrastructure in place.
•
Various security options like line encryption, branch connection encryption, firewalls, digital certificates, automatic sign-offs, random pop-ups and disaster
21
recovery sites are is in place or are being looked at, there is as yet no Certification Authority in India offering Public Key Infrastructure, which is absolutely necessary for online banking.
•
The communication bandwidth available today in India is also not enough to meet the needs of high priority services like online banking and trading. Banks offering online facilities also need to calculate their downtime losses, because even a few minutes of downtime in a week could mean substantial losses.
•
•
Users of Internet Banking Services are required to fill up the application forms online and send a copy of the same by mail or fax to the bank. The customer with the bank for using the Internet banking services enters into a contractual agreement. Domestic customers, for whom other access points such as ATMs, telebanking, personal contact, etc. are available, are often hesitant to use the Internet banking services offered by Indian banks. Internet Banking, as an additional delivery channel, may, therefore, be attractive/ appealing as a value added service to domestic customers. Non-resident Indians, for whom, it is expensive and time consuming to access their bank accounts maintained in India find net banking very convenient and useful.
•
•
• Cyber crimes are, therefore, difficult to be identified and controlled.
•
In order to promote Internet banking services, it is necessary that the proper legal infrastructure is in place. The Department of Telecommunications (DoT) is moving fast to make available additional bandwidth, with the result that internet access will become much faster in the future.
•
22
•
Reserve Bank of India has constituted a group to examine different issues relating to internet banking and recommend technology, security legal standards and operational standards keeping in view the international best practices. In the following paragraphs a generic set of risks discussed as the basis for formulating general risk control guidelines.
Scenario
7. Global internet Banking
Internet Banking
Internet Banking is one of the few web applications where benefits to customers and banks are already widely proven. It is now no longer a “nice to have” but an “impossible to survive without” for all banks. “Internet Banking” refers to systems that enable bank customers to access accounts and general information on bank products and services through a personal computer (PC) or other intelligent devices. Internet banking means a kind of self-help financial services provided by the bank for its clients by the medium of Internet, including account information inquiry, account transfer & payment, online payment, agency services, etc.
7.1 Internet Banking products and services at global
Internet Banking products and services can include wholesale products for corporate customers as well as retail and fiduciary products for individual customers. Ultimately, the products and services obtained through internet banking may mirror
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products and services offered through other bank delivery channels. Some examples of wholesale products and services include: • Cash management • Wire transfer • Automated clearinghouse transactions • Bill presentment and payment Examples of retail and fiduciary products and services include: • Balance inquiry • Funds transfer • Downloading transaction information • Bill presentment and payment • Loan applications • Investment activity. • Other value-added services. Other internet banking services may include providing internet access as an Internet Service provider (ISP). Historically, banks have used information systems technology to process checks (item processing), drive ATM machines (transaction processing), and produce reports (management information systems). In the past, customers rarely noticed the computer systems that made the information systems operate. Today, web sites, electronic bill presentment and payment systems are an important way for banks to reach their customers. The banking industry is expected to be a leading player in internet-business. While the banks in developed countries are working primarily via Internet as nonbranch banks, banks in the developing countries use the Internet as an information delivery tool to improve relationship with customers. In early 2001, approximately 60 percent of internet -business in the UK was concentrated in the financial services
24
sector, and with the expected 10-fold increase of the British internet -business market by 2004, the share of the financial services will further increase. Around one fifth of Finish and Swedish bank customers are banking online, while in the US, online banking is growing at an annual rate of 60 percent and the numbers of online accounts are expected to reach 15 million by 2003. Banks have established an Internet presence with various objectives. Most of them are using the Internet as a new distribution channel. Financial services, with the use of Internet, may be offered in an equivalent quantity with lower costs to the potential customers. There may be contacts from each corner of the world at any time
of day or night. This means that banks may enlarge their market without opening new branches. The banks in the US are using the Web to reach opportunities in three different categories: to market information, to deliver banking products and services, and to improve customer relationship. In 2001, over 50 percent of the banks in the US were offering internet -banking services. However, large banks appeared to have a clear advantage over small banks in the range of services they offered. Some banks in the US were targeting their Internet strategies towards business customers. Apart from affecting the way customers received banking services; internet -banking was expected to influence the banking industry structure. The economics of internet -banking was expected to favor large banks because of economies of scale and scope, and the ability to advertise heavily. Moreover, internet -banking offered entry and expansion opportunities that small banks traditionally lacked. The major factor restricting growth of internet -banking is security, in spite of several countries being well connected via Internet. Access to high-quality
25
internet -banking products is an issue as well. Majority of banks in Asia are just offering basic services compared with those of developed countries. Still, internet -banking seems to have a future in Asia. According to McKinsey survey, internet -banking will succeed if the basic features, especially bill payment, are handled well. Bill payment was the most popular feature, cited by 40 percent of respondents of the survey.
8. Growth in Internet Banking
Numerous factors including competitive cost, customer service, and demographic considerations – are motivating banks to evaluate their technology and assess their electronic commerce and Internet banking strategies. The challenge is to make sure the savings from internet banking technology more than offset the costs and risks associated following: • Competition The competitive pressure is the chief driving force behind increasing use of internet banking technology, ranking ahead of cost reduction and revenue enhancement. Banks see internet banking as a way to keep existing with conducting business in cyberspace. Some of the market factors that may drive a bank’s strategy towards internet banking include the
26
customers and attract new ones to the bank. • Cost efficiencies Banks can deliver banking services on the internet at transaction costs far lower than traditional ways. The actual costs to execute a transaction will vary depending on the delivery channel used. These costs are expected to continue to decline. • Geographical Reach Internet Banking allows expanded customer contact through increased geographical reach and lower cost of delivery channels. In fact, some banks are doing business exclusively via the internet – they do not have traditional banking offices and only reach their customers online. • Branding Relationship building is a strategic priority for most banks. Internet banking technology and products can provide a means for banks to develop and maintain an ongoing relationship with their customers by offering easy access to a broad array of products and services. By capitalizing on brand identification and by providing a broad array of financial services, banks hope to build customer loyalty, and enhance repeat businesses.
• Customer Demographics Internet banking allows banks to offer a wide array of options to their banking customers. Some customers will rely on traditionalbranches to conduct their banking business. Other customers are early adopters of new technologies that arrive in the marketplace. The challenge to banks is to understand their customer
27
base and find the right mix of delivery channels to deliver products and services profitably to their various market segments. As use of the internet continues to expand, more banks are using the web to offer products and services or otherwise enhance communications with consumers. The internet offers the potential for safe, fast, and convenient new ways to shop for financial services and conduct banking business, any day, any time.
9. TYPES OF RISKS ASSOCIATED WITH INTERNET BANKING Operational Risk: ?
Operational risk, also referred to as transactional risk is the most common form of risk associated with internet banking. It takes them from of inaccurate processing of transactions, non-enforceability of contracts, compromises in data integrity, data privacy and Confidentiality, unauthorized access / intrusion to bank’s systems and transaction, etc. Such risks can arise out of weaknesses in design, implementation and monitoring of banks information system. Besides inadequacies in technology, human factors like negligence by customers and employees, fraudulent activity of employees and crackers/hackers, etc. can become potential source of operational risk.
?
?
?
Security Risk: ?
Security risk arises because of unauthorized access to a bank’s critical information stores like accounting system, risk management system, portfolio management system, etc.
28
?
Other related risks are loss of reputation, infringing customers’ privacy and its legal implications, etc. Attackers could be hackers, unscrupulous vendors, disgruntled employee or even pure thrill seekers. In addition to external attacks banks are exposed to security risk from internal sources e.g. employee fraud. Employee being familiar with different systems and their weaknesses become potential security threats in a loosely controlled environment. They can manage to acquire the authentication data in order to access the customer accounts causing losses to the bank. Unless specifically protected, all data/ information transfer over the internet can be monitored or read by unauthorized persons.
?
?
?
System architecture and design: ?
Banks face the risk of wrong choice of technology, improper system design and inadequate control processes. Numerous protocols are used for communication across internet. Each protocol is designed for specific types of data transfer. A system allowing communications with all protocols, say HTTP (Hyper Text Transfer Protocol), FTP (File Transfer Protocol), telnet, etc. is more prone to attack than one designed to permit say, only HTTP. Many banks rely on outside service providers to implement, operate and maintain their e-banking system. Security related operational risk include access control, use of firewalls, cryptographic techniques, public key encryption, digital signature, etc.
?
?
?
?
Reputation Risk: ?
Reputation risk is the risks of getting significant negative public opinion, which may result in a critical loss of funding or customers. Such risks arise from actions, which cause major loss of the public confidence in the banks’
29
ability to perform critical functions or impair bank-customer relationship. It may be due to banks’ own action or due to third parties action.
?
The main reasons for this risk may be system or product not working to the expectations of the customers, significant security breach (both due to internal and external attack), inadequate information to customers about product use and problem resolution procedures, significant problems with communication networks that impair customers’ access to their funds or account information especially if, there are, no alternative means of account access.
Legal Risk: ?
Legal risk arises from violation of, or non-conformance with laws, rules, regulations, or prescribed practices, or when the legal rights and obligations of parties to a transaction are not well established. A customer inadequately informed about his rights and obligations, may not take proper precautions in using Internet banking products or services, leading to disputed transactions, unwanted suits against the bank or other regulatory sanctions.
?
Money Laundering Risk: ?
As internet-banking transactions are conducted remotely, banks may find it difficult to apply traditional method for detecting and preventing undesirable criminal activities. Application of money laundering rules may also be inappropriate for some forms of electronic payments. To avoid this, banks need to design proper customer identification and screening techniques, develop audit trails, conduct periodic compliance reviews, and frame policies in internet transactions.
?
Cross-Border Risks: 30
?
Internet banking is based on technology that, by its very nature, is designed to extend the geographic reach of banks and customers. Such market expansion can extend beyond national borders. This causes various risks. Such considerations may expose banks to legal risks associated with noncompliance of different national laws and regulations, including consumer protection laws, record keeping and reporting requirements, privacy rules and money laundering laws. The foreign-based service provider or foreign participants in internet banking are sources of country risk to the extent that foreign parties become unable to fulfill their obligations due to economic, social or political factors.
?
?
Strategic Risk: ?
For reducing such risk, banks need to conduct proper survey, consult experts from various fields, establish achievable goals and monitor performance. In addition, they need to analyze the availability and cost of additional resources, provision of adequate supporting staff, proper training of staff and adequate insurance coverage.
?
Other Risk: Traditional banking risks such as credit risk, liquidity risk, interest rate risk and market risk are also present in internet banking. These risks are intensified due to the very nature of internet banking on account of use of electronic channels as well as absence of geographical limits. Credit risk: Is the risk that a counterparty will not settle an obligation for full value, either when due or at any time thereafter. Banks may not be able to properly evaluate
31
the creditworthiness of the customer while extending credit through remote banking procedures, which could enhance the credit risk. Another facility of internet banking is electronic money. It brings various types of risks associated with it. If a bank purchases e-money from an issuer in order to resell it to a customer, it exposes itself to credit risk in the event of the issuer defaulting on its obligation to redeem electronic money. Liquidity risk: It is important for a bank engaged in electronic money transfer activities that it ensures that funds are adequate to cover redemption and settlement demands at any particular time. Failure to do so, besides exposing the bank to liquidity risk, may even give rise to legal action and reputation risk. 10. REGULATORY TOOLS TO OVERCOME CHALLENGES There are four key tools that regulators need to focus on to address the new challenges posed by the arrival of internet -banking. Adaptation: In light of how rapidly technology is changing and what the changes mean for banking activities, keeping regulations up to date has been, and continues to be, a far-reaching, time-consuming, and complex task. In May 2001, the Bank for International Settlements issued its "Risk Management Principles for internet banking," which discusses how to extend, adapt, and tailor the existing riskmanagement framework to the electronic banking setting. Legalization: New methods for conducting transactions, new instruments, and new service providers will require legal definition, recognition, and permission. For example, it will be essential to define an electronic signature and give it the same legal status as the handwritten signature.
32
Harmonization: International harmonization of electronic banking regulation must be a top priority. This means intensifying cross-border cooperation between supervisors and coordinating laws and regulatory practices internationally and domestically across different regulatory agencies. The problem of jurisdiction that arises from "borderless" transactions is, as of this writing, in limbo. Integration: This is the process of including information technology issues and their accompanying operational risks in bank supervisors' safety and soundness evaluations. In addition to the issues of privacy and security, for example, bank examiners will want to know how well the bank's management has elaborated its business plan for electronic banking.
11.
ANALYSIS & INTERPRETATION OF THE DATA
11.1 ACCOUNTS IN THE RESPECTIVE BANK
Bank
State bank of India HDFC Canara bank Others Total
No. of Respondents
10 9 6 5 30
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Account in the respectice bank
0% SBI 33% canara bank 20% HDFC 30%
other 17%
canara bank other HDFC SBI
Analysis of the above diagram
0%
Out of 30 samples, 10 customers are from State bank of India, 6 people from canara bank, 9 people from HDFC, and 5 people in other bank It was witnessed that today public sector bank State bank of India has the largest customer base but the private banks are also catching up and after State bank of India HDFC has the highest customer.
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11.2 PREFER USING INTERNET BANKING INSTEAD OF VISITING BANK EVERY NOW AND THEN. Response No. of Respondents Yes 27 No 3 TOTAL 30
Prefer using net banking
No 10%
Yes 90% Yes No
Analysis of the above diagram
Out of 30 customers, 27 customers prefer using internet banking; only 3% of customers do not prefer using internet banking. It was witnessed that most of the respondents preferred using internet banking to there conventional banking system. Thus, internet banking has a bright future ahead
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11.3 EDUCATE ABOUT THE INTERNET BANKING SERVICES BEING OFFERED. Response No. of Respondents YES
18
NO
12
TOTAL
30
Educating about internet banking
No 40%
Yes 60%
Yes
No
Analysis of the above diagram
From the above chart, it can be inferred that out of 30 customers, 18 customers felt that they are properly educated of internet banking. It means most of the respondents felt that they are not properly educated of internet banking and its benefits to them.
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11.4 SAFE IN DISCLOSING DETAILS ON INTERNET.
Response YES NO Total No. of Respondents 18 12 30
safety in disclosing details
70 60 50 40 30 20 10 0 Yes No Yes No 0 0 No, 40 Yes, 60
Analysis of the above diagram From the above graph out of 30 peoples, 12 customers felt that disclosing their details is not safe. It means, few of the respondents felt safe in disclosing their details but still there were a lot people who felt unsafe in disclosing and feared their personal information may used by some other person.
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11.5 SATISFACTION WITH BANK SERVICES.
Response No. of Respondents
Yes 24
No 6
TOTAL 30
Satisfaction with banking services
No 20%
Yes
Yes 80%
No
Analysis of the above diagram
From the above graph out of 30 peoples, 24 customers are happy from the services their respective bank is providing ,the rest of the respondents felt there is a scope of improvement still they were also happy.
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11.6 MAIN TRANSACTIONS PREFER TO DO BY INTERNET MAIN TRANSACTIONS
Money transfers Checking of your current balance Create Fixed Deposits Online Request a Demand Draft Pay Bills Order a Cheque Book TOTAL
No. of Respondent 5.5 4 4 4.5 3 4.5 30
Main transactions
Stop payment cheque book Pay bill DD FD Current bal Money transfer 0.00% 5.00% Stop payment, 15%
Order cheque book 14%
Stop payment cheque book Pay bill
Pay bill, 10% DD, 15% FD, 13.33% Current bal, 13.33% Money transfer, 18.33% 10.00% 15.00% 20.00%
DD FD Current bal Money transfer
Analysis of the above diagram
From the above graph, it can be inferred that out of 30 people it is interesting to see that a respondent would like to do all the transactions which one does personally on a visit to the bank. Thus, internet banking has a promising future ahead.
11.7 BENEFITS SEEN BY CUSTOMER IN INTERNET BANKING BENEFITS
Convenience Speed Transparency Time TOTAL
No. of Respondents
5 6 16 10 30
benefits seen by customers
Time 10% Conv enience 17%
Speed 20%
Transparency 53%
Conv enience Speed Transparency Time
Analysis of the above diagram Out of 30 people, only five customers felt that Convenience is seen in internet banking. Most of the respondents felt that the transparency provided by internet banking is the highest motivating factor for an individual to use internet banking; rest speed convenience and time are also the other motivating factors
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11.8. AWARENESS OF INTERNET BANKING BENEFITS
Response YES NO Total No. of Respondents 3 26 30
Benefits of Internet banking
No 10%
Yes Yes 90%
No
Analysis of the above diagram
From the above pie diagram, it can be inferred that out of 30 people, only three customers are not aware of the benefit of internet banking. It means most of the respondents are aware of the benefits of internet banking
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11.9.
AWARENESS
OF
METHODS
FOR
SECURE
TRANSACTION.
Response No. of Respondents
Yes 9
No 21
TOTAL 30
Awareness of methods for secure transaction
Yes 30%
No 70%
Yes
No
Analysis of the above diagram Out of 30 customers, only nine people are aware of the technique for secure transaction. However, most of the respondents are unaware of the techniques, which can be taken up for secure transaction in internet.
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12. A CASE ON INTERNET BANKING IN SBI
STATE BANK OF INDIA
State Bank of India is India’s largest bank with a branch network of over 11000 branches and six associate banks located even in the remotest parts of India. State Bank of India (SBI) offers a wide range of banking products and services to corporate and retail customers. State Bank of India with its 200 years of service created relationship with customers. Internet banking is one more effort to add value to the relationship. Internet banking facility offers convenience of 24X7 banking to its customers Online SBI is the Internet banking portal for State Bank of India. The portal provides anywhere, anytime, online access to accounts for State Bank’s Retail and Corporate customers. The application is developed using the latest innovative technology and tools. The infrastructure supports unified, secure access to banking services for accounts in over 11,000 branches across India. Security Aspects of state bank of India SBI's Internet banking channel is protected by advanced security features, both physical and logical. SBI has considered various risks inherent in transacting over a public network such as the Internet, and has deployed appropriate security measures to protect customers. Firewalls allow only valid web traffic to reach our server. Proven 128-bit Secure Socket Layer (SSL) encryption technology is deployed to ensure that the information exchanged between your computer and https://www.onlinesbi.com over the Internet is secure and cannot
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be intruded upon. 'VeriSign' certifies that information exchanged during a valid session is protected during its transmission over the Internet. Additionally, the bank has installed mechanisms such as Intrusion detection Systems.The following operational and control measures undertaken by SBI for Online customers:
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Access to Internet banking is provided only on registration. The UserID and password generation is conducted in a secure environment and its distribution is automated. UserID and password are printed on tamper-proof stationery and mailed separately to the customers. This reduces risks. Change of User D and password on the first log on is mandatory. All correspondence on the service is sent to the address registered at the branch. Customer logins and activities are tracked and archived for future reference. Customer can fix the limits on the monetary value of transactions, which they desire to carry out over this service. The customer alone can modify this. Registration format of State bank of India in internet banking
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1. The www.onlinesbi.com registration form(s) should be addressed and sent directly to the Branches where the applicant(s) maintain his/her/their account(s). 2. Separate registration is required in case the accounts are maintained at different branches. Separate registration is allowed for single and joint accounts at the option of the user. 3. Normally the account holders can access his accounts through the www.onlinesbi.com only after he/she acknowledges to the respective Branch the receipt of the User-Id and Password sent to him/her.
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4. Each account holder in a joint account with “Either or Survivor” type mode of operation may register himself/ herself as a USER of the www.onlinesbi.com facility. 5. All other accounts not listed in the registration form will be available on the www.onlinesbi.com for the purpose of enquiry only. The customers may approach Branch for enabling transaction rights on such accounts any time. 6. The www.onlinesbi.com service cannot be claimed as a right. The Bank may also convert the Service into a discretionary service anytime, if so warranted, after it has been made available to the USER.
TERM AND CONDITION IN STATE BANK OF INDIA
1. All requests received from the USERS are logged and transmitted to the User’s Branch for their fulfillment. The requests become effective from the time these are recorded/ registered at the respective branch. While registering the request, the USER is informed about the time normally taken by the Bank for fulfillment such requests.
2.
The rules and regulations applicable to the banking transactions done in the traditional way in India will be applicable mutatis mutandis for the transactions done through the www.onlinesbi.com service.
3.
Disputes between the registered USER of this service and the Bank with regard to the transactions done through www.onlinesbi.com will be subject to the jurisdiction of the competent Courts where the branch maintaining the relative account of the user is located and will be governed by Indian Laws in force from time to time.
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4.
The Bank will take reasonable care to make use of the available technology for ensuring security and preventing unauthorized access to any of the services offered through the www.onlinesbi.com
5.
The www.onlinesbi.com service is a ‘VeriSign’ certified secure site. It assures that during the session user is dealing with web site of SBI. The two-way communication is secured with 128-bit SSL encryption technology, which ensures the confidentiality of the data during transmission. The access-control methods designed on the site afford a high level of security to the transactions conducted on www.onlinesbi.com
6. It is proposed to implement, in due course, the PKI (Public Key Infrastructure)/Digital Signature technology for the www.onlinesbi.com Service. 7. The Bank reserves the right to modify, change, add or cancel any of the services offered through www.onlinesbi.com or the Terms of Service listed in this Document without prior notice to the Users. The changes will be notified to the users / customers through a notification on the site.
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STATE BANK OF INDIA INTERNET BANKING " OnlineSBI " Registration Form for Corporations / firms) To The Branch Manager State Bank of India ________________ We wish to register our firm / company / corporation for availing of the Bank's Internet Banking Service ~ "OnlineSBI". * Our firm / company / corporation has already been registered for availing of the Bank's Internet Banking Service ~ "OnlineSBI". * (*Strike off whichever is inapplicable) We request you to register the below named official / employee as an authorised USER on behalf of the firm / company / corporation* for accessing its account(s). We confirm having read and understood the document containing the "Terms of Service" governing the SBI's Internet Banking Service and we accept them. Name of firm / company / corporation : FOR OFFICE USE Application Serial number:
Name of the Official / employee being authorised :
(Any official / employee of the firm / company / corporation may be nominated to use the OnlineSBI Service for Enquiry purposes only) Designation & Official Address of the Official : ____________________ ____________________________________ e-mail Address _________________
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____________________________________ Pin : _____________
Tel. No._________________
Account Numbers : (Please mention 11 / 13 digit A/c No. as mentioned in your Statement of Account) Note : -For the present only
enquiry rights are available in respect of accounts of firms /
companies / corporations.
For Firm / Company / Corporation, Date : _________________________ ________________________ (Authorised Signatory / Signatories)
(Signature of Official being Authorised)
For office use SIGNATURE(S) OF AUTHORISED SIGNATORY(IES) OF FIRM/COMPANY/CORPORATION VERIFIED
OFFICER
Authorised Official/user means any official/employee of the corporate/ firm who are authorized to use Online’s services by the Authorized Signatories.
Recommended for rejecting Internet Access
providing/ Internet Access permitted/rejected DATE BRANCH MANAGER/ MANAGER OF DIVISION
DATE :
OFFICER
Reason(s) for rejecting the INB Service (if any) DATE Reason(s) advised to the Applicant SIGNATURE OFFICIAL OF
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INB Service approved and INB Customer Flag set to "Y" in the Bank master * User Details Uploaded
* This is necessary only at the time of registration of the First Authorised User and not for the subsequent authorised users of the firm/Company/Corporation.
13. FINDINGS
? Every day more and more people are turning to the Technology
for their personal banking. It is a safe, convenient way to shop for financial services, maintain bank accounts and conduct business 24 hours a day
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Bank customers can save time by internet banking. There is no
need to stand in one more line to perform the most basic transactions when they can be done quickly from the desktop PC anytime, day or night. ? Ease of use is one of the most important factors. Navigation
through online banking should be simple and intuitive.
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Moreover complicated transactions or investment decisions,
people like having direct control over their finances themselves. They
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find it convenient to access all of their financial information in one place.
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Most Banks now offers a comprehensive range of financial
products and services, including a FREE checking account and internet bill paying services.
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Customers also choose banks whose online services are reliable. Internet banking is the ones who consider time as money and
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are the one with loads of money.
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Many people choosing their personal computers as the new way
to view and manage their money through internet banking, because it is a valuable option to have.
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Internet banking has become a necessary survival weapon and is
fundamentally changing the banking industry worldwide.
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?
The transparency provided by internet banking is the highest
motivating factor for an individual to use internet banking; rest speed convenience and time are also the other motivating factors ? Internet banking provides enormous benefits to consumers in terms
of the ease and cost of transactions.
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It was witnessed that most of the respondents preferred using
internet banking to there conventional banking system. Thus, internet banking has a bright future ahead.
14.
CONCLUSION
From this report, it is found that internet banking has empowered customers and businesses with information needed to make better financial service, and it has helped change the banking habits of various individuals. Every day more and more people are turning to the internet banking for their personal banking. Internet banking is a safe, convenient way to shop for financial services, maintain bank accounts and conduct business 24 hours a day Thus; internet banking has a promising future ahead.
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Internet banking has become a necessary survival weapon and is fundamentally changing the banking industry worldwide. Today, the click of the mouse offers customers banking services at a much lower cost and empowers them with unprecedented freedom in choosing vendors for their financial service needs Internet has created plenty of opportunities for players in the banking sector. Today bank depending on delivering some or all of their banking services on the Internet while continuing to support their traditional infrastructure. It is observed that most of the customer preferred using internet banking to there conventional banking system and it is also witnessed that most of people would like to do all the transactions which one does personally on a visit to the bank Thus; internet banking has a bright future ahead.
15. ANNEXURE QUESTIONNAIRE
Dear Respondent, I am student of V.PM COLLEGE; I am doing this research to compare different services provided by bank to its clients.
1.
In which bank do you have your account?
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(a) (b) (c) (d)
HDFC Bank State Bank of India Canara Bank Other bank
2. Would you prefer using internet banking instead of visiting your bank every now and then? (a) (b) Yes No
3. Does your bank educate you about the internet banking services being offered? (a) (b) Yes No
4. Do you feel safe in disclosing your details on internet? (a) (b) 5. (a) (b) Yes No Are you satisfied with your bank services? Yes No
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6. (a) (b) (c) (d) (e) (f) (g)
What are your main transactions you would prefer to do by internet? Money transfers Checking of your current balance Create Fixed Deposits Online Request a Demand Draft Pay Bills Order a Cheque Book Request Stop Payment on a Cheque
7. What benefits do you see in internet banking? (a) Convenience (b) Speed
(c) Transparency
(d) Time
8. Does your bank educate you about the internet banking services being offered? (a) (b) Yes No
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9. Are you aware of all the methods, which can be taken up to secure your transaction? (a) (b) Yes No
10 .Personal Information Name: Sex: ( ) Male ( ) Female Age:
Phone No: Occupation:
Signature of Respondent
BIBLIOGRAPHY
1.
2.
BANKING SERVICE BOOK SBI INTERNET BANKING GUIDELINE BOOK. INTERNET BANKING BOOK
3.
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4. NEWS PAPERS STATE BANK OF INDIA- WWW.ONLINESBI.COM
5.
HDFC BANK- www.hdfcbank.com WEBSITES VISITED:www.google.com www.scribd.com
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