A PROJECT REPORT ON “e-BANKING”
SUBMITTED BY BHAVSAR MANTHAN RAJENDRA THIRD YEAR (BANKING AND INSURANCE) (SEMESTER V) 2011-2012
MODEL COLLEGE DOMBIVLI
UNIVERSITY OF MUMBAI OCTOBER 2011
e-B@NKING
A PROJECT REPORT ON “e-BANKING”
SUBMITTED TO THE UNIVERSITY OF MUMBAI IN PARTIAL FULFILLMENT FOR THE AWARD OF THE DEGREE OF BACHELOR OF COMMERCE (BANKING AND INSURANCE)/ BACHELOR OF MANAGEMENT STUDIES V SEMESTER
BY BHAVSAR MANTHAN RAJENDRA MODEL COLLEGE DOMBIVLI OCTOBER 2011
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e-B@NKING
TABLE OF CONTENTS
SR.NO. 1. 2. 3. 4. 5. 6. 7. 8. 9.
DESCRIPTION. DECLARATION ACKNOWLEDGEMENT CHAPTER 1: INTRODUCTION CHAPTER 2: BANK PROFILE CHAPTER 3:THEORETICAL VIEW CHAPTER 4:COMPARATIVE STUDY CHAPTER 5:CONCLUSION BIBLOGRAPHY ANNEXURE
PAGE.NO. 4 5 6-10 11-15 16-53 54-58 59-62 63 64-65
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e-B@NKING DECLARATION
I, BHAVSAR MANTHAN RAJENDRA, STUDENT OF BANKING AND INSURANCE V SEMESTER OF MODEL COLLEGE DOMBIVLI (E), HERE BY DECLARE THAT, I HAVE COMPLETED THIS PROJECT ON “e-BANKING” FOR THE ACADEMIC YEAR 2011-2012 THE INFORMATION SUMBITTED IS TRUE AND
ORIGINAL TO THE BEST OF MY KNOWLEDGE.
BHAVSAR MANTHAN RAJENDRA THIRD YEAR (BANKING AND INSURANCE)
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e-B@NKING ACKNOWLEDGEMENT
I WOULD LIKE TO EXTEND MY SINCERE GRATITUDE TO ALL THOSE PEOPLE WHO HAVE HELPED ME IN THE SUCCESSFUL COMPLETION OF MY PROJECT ENTITLED “e-BANKING” FIRST AND FOREMOST I WOULD LIKE TO THANK MY PROJECT GUIDE MRS.REENA MADAM FOR BEING KIND ENOUGH IN SPARING HER TIME AND ENERGY FROM HER BUSY SCHEDULE AND HELPING ME IN COLLECTING THE NECESSARY DATES. ALSO I OWE MY SINCERE GRATITUDE TO LIC MEMBER, WHO DYNAMISM AND POSITIVE APPROACH GAVE AN EFFECTIVE MOMENTUM TO MY PROJECT. I WOULD ALSO LIKE TO EXPRESS MY SINCERE THANKS TO OUR PRINCIPLE, DR. M.R.NAIR FOR HIS CONSTANT MORAL SUPPORT AND VISION THIS PROJECT COULD NOT HAVE BEEN POSSIBLE WITHOUT HELP OF ENTIRE LIBRARY DEPARTMENT OF OUR COLLEGE.THEY MAKE AS MUCH DATA, BOOKS, MAGAZINES, ETC. AVAILABLE AS THEY CAN TO FACILITATE THE EASY COLLECTION OF INFORMATION.
BHAVSAR MANTHAN RAJENDRA
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CHAPTER 1: INTRODUCTION TO e-BANKING
“People have discovered that this industry is one of the most successful elements of e-commerce. It's time for this industry to act like a real bona fide segment of business”. -Richard Jones.
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e-B@NKING INTRODUCTION TO e-BANKING A non-resident Indian (NRI) in Paris has an easy way to access money in this fashion capital of the world. His Citibank account in India can be accessed through an ATM in Paris, which in turn transmits information to Citibank’s central hub in the US. The Indian rupees are converted to US dollars, which are in turn converted into French Francs at the current exchange rate, the Indian account is debited and the Francs made available to the NRI. Welcome to the era of technology banking! Traditionally, banks have used branch networks and distributed PC software as their delivery channels to reach business customers. However, in the recent past, a combination of distinctive factors requires that banks rethink their strategy. These factors include demands on time as a limited resource, rising real estate expense, changing human resource and information technology infrastructure and, most of all, fierce competition. All of these factors are forcing banks to provide services to their business customers anytime, anywhere, anyhow in what is termed as “boundary-less banking." There is no denying the fact that in the past two decades information technology has been the most rapidly changing industry in the world. But more than the rate of change, what is remarkable is the way IT has changed the paradigms of business in other industries. One industry that has really felt the impact of IT has been the banking sector. What is e-banking: Electronic Banking in simple terms means, it does not involve any physical exchange of money, but it’s all done electronically, from one account to another, using the Internet. Internet banking is just like normal banking, with one big exception. You don't have to go to the bank for transactions. Instead, you can access your account any time
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e-B@NKING and from any part of the world, and do so when you have the time, and not when the bank is open. For busy executives, students, and homemakers, e-banking is a virtual blessing. No more taking precious time off from work to get a demand draft made or a Chequebook issued. Banks offer Internet banking in two main ways. An existing bank with physical offices can establish a Web site and offer Internet banking to its customers in addition to its traditional delivery channels. A second alternative is to establish a ‘‘virtual,’’ ‘‘branchless,’’ or ‘‘Internetonly’’ bank. The computer server that lies at the heart of a virtual bank may be housed in an office that serves as the legal address of such a bank, or at some other location. Virtual banks may offer their customers the ability to make deposits and withdraw funds via automated teller machines (ATMs) or other remote delivery channels owned by other institutions. Online systems allow customers to plug into a host of banking services from a personal computer by connecting with the bank's computers over telephone wires. The convenience can be compelling. Not only is travel time reduced, but ATM machines, telephone banking or banking by mail are often unnecessary. And, technology continues to make online banking, once attempted only by computer enthusiasts, easier for the average consumer. Banks use a variety of names for online banking services, such as PC banking, home banking, electronic banking or Internet banking. Can one imagine life without paper cash? Money has always been part of human emotions. And although it is difficult to imagine that all those years of savings at the bank is now just a whole bunch of bits and bytes, it is becoming a reality and the sooner people adjust to it, the better it is.
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e-B@NKING ABOUT THE REPORT TITLE OF THE STUDY The present study is titled as “e-BANKING” with special reference to SBI bank and IDBI BANK OBJECTIVES OF THE STUDY • To identify what services are offered by banks. • To understand the advantages and disadvantages of e-banking. • To understand the need and importance of e-banking. • To study how RBI initiates towards promoting e-banking in banks. • To study the challenges faced by banks in e-banking
SCOPE OF THE STUDY • It provides a complete knowledge of various services and additional benefits provided to its customer. • It provides the complete knowledge of how it is beneficial to customers and banks.
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e-B@NKING DATA AND METHODOLOGY:The data has been collected in two ways: PRIMARY DATA As far as primary data is concerned, a detailed study is done and manager of SBI-IDBI and also employees answered to it; the carefully analysis of the data is done to arrive at conclusion. Hence, for this study, primary data has been collected directly from the manager and a few employees through an interview and questionnaire.
SECONDARY DATA The secondary source of information has been collected from internet, banks.
CHAPTER LAYOUT CHAPTER 1 – Introduction of the title “e-B@NKING”. CHAPTER 2 – Profile of the banks i.e. SBI & IDBI. CHAPTER 3 – Theoretical view of e-BANKING. CHAPTER 4 – Comparative study CHAPTER 5 – Summarizes the results of the study
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e-B@NKING
CHAPTER 2: PROFILE OF BANKS (SBI-IDBI)
“We are very pleased with our first-quarter results. As important, our strong balance sheet puts us in an excellent position to build our ecommerce capability on every front”.
-Mr.H.R.Henry.
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e-B@NKING ONLINE SBI PROFILE State Bank of India is India's largest bank with a network of over 13000 branches and 5 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. OnlineSBI 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 cutting edge technology and tools. The infrastructure supports unified, secure access to banking services for accounts in over 13,000 branches across India. The Retail banking application is an integration of several functional areas, and enables customers to:
• • • • • • • • • • •
Issue Demand Drafts online Transfer funds to own and third party accounts Credit beneficiary accounts using RTGS/NEFT feature Generate account statements Setup Standing Instructions Configure profile settings Use e-tax for online tax payment Use e-Pay for automatic bill payments Interface with merchants for railway and airline reservations Avail DEMAT and IPO services Pay bill of Visa Credit Card issued by any Bank. The OnlineSBI corporate banking application provides features to administer and manage corporate accounts online. The corporate
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e-B@NKING module provides roles such as Regulator, Admin, Up loader, Transaction Maker, Authorizer, and Auditor. These roles have access to the following functions:
• • •
Manage users, define rights and transaction rules on corporate accounts Access accounts in several branches with a single sign-on mechanism Upload files to make bulk transactions to third parties, supplier, vendor and tax collection authorities. Use online transactional features such as fund transfer to own accounts, third party payments (both Inter and Intra bank), and draft issues Make bill payments over the Internet. Authorize, modify, reschedule and cancel transactions, based on rights assigned to the user Generate account statement Enquire on transaction details or current balance In addition to the above the Internet banking application also provides the following value added services:
•
• •
• •
•
Tax payments to central and state governments through site to site integration. Supply Chain Finance( e-VFS- Electronic Vendor Finance Scheme) Direct Debit Facility E Collection Facilities for: Core Banking Transactions Inter Bank Transactions for incoming RTGS/NEFT Transactions Internet Banking Transactions for SBI & Associate Banks Direct Debit facility where suppliers can directly debit their customer’s account through Internet Banking
• • •
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e-B@NKING ONLINE IDBI PROFILE IDBI Bank Ltd. is today one of India's largest commercial Banks. For over 40 years, IDBI Bank has essayed a key nation-building role, first as the apex Development Financial Institution (DFI) (July 1, 1964 to September 30, 2004) in the realm of industry and thereafter as a full-service commercial Bank (October 1, 2004 onwards). As a DFI, the erstwhile IDBI stretched its canvas beyond mere project financing to cover an array of services that contributed towards balanced geographical spread of industries, development of identified backward areas, emergence of a new spirit of enterprise and evolution of a deep and vibrant capital market. On October 1, 2004, the erstwhile IDBI converted into a Banking company (as Industrial Development Bank of India Limited) to undertake the entire gamut of Banking activities while continuing to play its secular DFI role. Post the mergers of the erstwhile IDBI Bank with its parent company (IDBI Ltd.) on April 2, 2005 (appointed date: October 1, 2004) and the subsequent merger of the erstwhile United Western Bank Ltd. with IDBI Bank on October 3, 2006, the tech-savvy, new generation Bank with majority Government shareholding today touches the lives of millions of Indians through an array of corporate, retail, SME and Agricultural products and services. Headquartered in Mumbai, IDBI Bank today rides on the back of a robust business strategy, a highly competent and dedicated workforce and a state-of-the-art information technology platform, to structure and deliver personalised and innovative Banking services and customised financial solutions to its clients across various delivery channels. As on March 31, 2010, IDBI Bank has a balance sheet of Rs.2.34 lakh crore and business size (deposits plus advances) of Rs.3.06 lakh crore.
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e-B@NKING As an Universal Bank, IDBI Bank, besides its core Banking and project finance domain, has an established presence in associated financial sector businesses like Capital Market and Investment Banking, Home Finance, Primary Dealership area and more recently, the Life Insurance Business. As a step towards taking the organization on a accelerated growth path, the Bank has reorganized its businesses around nine verticals out of which six customer verticals, each focusing on distinct customer segments and three business verticals. Going forward, IDBI Bank is strongly committed to work towards emerging as the 'Bank of choice' and 'the most valued financial conglomerate', besides generating wealth and value to all its stakeholders. In today's digital world, Internet banking assumes a special significance. Realising that the default access to your banking information in the near future would be only through the Internet, we at IDBI Bank have made available to you a globally benchmarked Internet Banking facility. With IDBI's Internet Banking, your Bank travels with you around the world and you have on-line, real-time access to your accounts. Admittedly, such a service requires security of the highest nature and complete privacy protection. We provide a completely secure environment, using 128-bit encryption SSL (Secure Sockets Layer), digitally certified by VeriSign. 128-bit SSL guarantees world-class security for Internet and e-commerce applications. Click on the image to verify the certificate.
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e-B@NKING
CHAPTER 3: THEORETICAL VIEW
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e-B@NKING PRE E-BANKING SCEN ENARIO IN INDIA Traditional Banking Traditionally the relation ionship between the bank and its cu customers has been on a one-to-one l level via the branch network. This was put into is operation with clearing and decision-making responsibilities concentrated a s at the individual branch level. The head office had respons h nsibility for the overall clearing network the size of the branch network an the training rk, nd of staff in the branch n network. The bank monitored the o organization’s performance and set et the decision-making paramete ters, but the information available to both branch staff and their customer was limited ob ers to one geographical loca cation. Tra raditional Banking Structure
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e-B@NKING THE INTERNET – A DISTRIBUTION CHANNEL Distribution channels are physical capacities to build up customer contacts in a systematic way in order to inform, counsel and sell products and services. The Internet is a so-called electronic distribution channel. Combined with self-service terminals and telecommunication equipment electronic distribution channels are technical channels within the class of media distribution channels. Another example for a media distribution channel is direct mail. Today, media distribution channels are an important way of distributing information and managing standard transactions. Counselling is mostly done in branch offices or by field workers. Together, personal and media distribution channels are called internal distribution channels. On the other side there are external distribution channels like salesman or franchising partners. The following figure visualizes this classification. Distribution Channels of Financial Institutions
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e-B@NKING Areas of Use of the Internet in Financial Institutions Generally we may distinguish four classes of Internet use in financial institutions: • • • • Information presentation Information presentation together with two way (asynchronous)
communication (e.g. email to request further information) Interaction with user (e.g. execution of programs with individual
customer data) Transaction banking (e.g. electronic payments)
Information may be provided in connection with one or two way communication. One-way communication means that the institution uses the Internet only as a presentation medium for its products and services. The simplest way to use two-way communication is to allow users to send electronic mails to the server in order to ask for further information or make suggestions with respect to the Internet site. Interaction with customers requires quick information exchange. Information provided by the user controls the information offered by the server. If the customer is identified and authenticated connecting to operative systems of the financial institution may be possible. Then, often very little information has to be provided by the customer since data stored in the databases of the financial institution may be used. Presentation of product information may be used to initiate new contacts. Implemented product models permit the construction of optimal insurance or financing contracts by using simpler components. Using mathematical models the customer may analyze his portfolios. To do so, he may use simulation techniques, what-if-analysis and other similar techniques.
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e-B@NKING SERVICES OF E-BANKS
Internet banks offer a variety of features and perks, rushing to lure online customers. The race is on to increase market share and creates customer loyalty with features that make online banking friendlier, more useful, and less expensive. E-Banking lures customers with ‘convenience’.
The three broad facilities that e-banking offers are: Convenience - Complete your banking at your convenience, in the comfort of your home or at any place you can access the Net. No more Qs - There are no queues at an online bank. 24/7 service - Bank online 24 hours a day, 7 days a week and 52 weeks a year. Below is a detailed review of features found in Internet banking around the world.
Online applications Consumers can begin their banking relationship with an online application. No need to waste time driving to a local branch to begin a banking relationship. Consumers can fill out and submit electronically all necessary information needed to open a checking, savings account or even a fixed deposit. When the application is submitted, the bank will mail you a signature card for its records and request you to mail or wire your initial funds. Some firms like American Express and CompuBank
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e-B@NKING enable customers applying for an account to fund their new account electronically via a credit card or cheque from another banking institution. There are some firms such as Wingspan and USA BancShares.com that enable customers to digitally sign their applications. Account Access Internet banking customers now have the ability to view their accounts online, including checking, savings, loans and credit cards. No need to wait for your monthly statements or wait in queue for the next available customer service representative. Account access enables customers to view most recent activity on accounts, including cleared checks, deposits, ATM transactions and balances as of previous days activities. Customers no longer have to hold on to the cleared checks, since their bank will store them for them online. Account transfers Internet banking customers have the ability to transfer funds to and from their accounts online. With a simple online form, customers can move money from a checking account to a savings account and vice versa within the safety and convenience of their home –- without having to visit the ATM. Funds transferred online are updated in less than three hours. In addition, customers can set up recurring transfers to accounts. A recurring transfer will take place on the customer specified date, with a specified amount. Bill Payment Online bill payment enables customers to pay anyone, friends or family, as well as a pay their bills electronically. As an add on feature to Internet banking, bill payment enables customers to send paper checks to
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e-B@NKING anyone or an electronic check to any institution that accepts electronic bill payments. To use bill payment, customers are required to set up their payees online. Customers then have the ability to set up recurring, automatic payments to a specific biller on a specified day or just a onetime payment. Arrange payments three to five days, before the due date, to ensure timely delivery. It is important to note that not all banks provide bill payment as a free feature. Benefits at participating online merchants The banks partner with online merchants to offer discounts when a purchase is made with the card.
24/7 customer service Although it is easy to yield to the temptation of allowing the Internet to replace expensive branch personnel and overhead, many banks have found that an customer service staff ready at any hour is well worth the expense. This can be especially true as customers transition to online banking and need help learning the features. Offering telephone and email contacts is a basic level of service. Offering live chat assistance is the exceptional level. Access to old transactions Choices made in designing the Internet interface may include how much history will be available online. Some banks have chosen to show only 30-45 days, while others offer a history of six months or a year.
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Categorize transactions and produce reports Functionality is king as online banking customers using these features enjoy a Web interface that delivers the utility of a money management software application. Export your banking data Most banks offering the management interface also allow easy downloading of financial information into files that can be imported into Microsoft Money and Intuit's Quicken.
Interactive guides & tools to help selection of proper product Although online, interactive guides through a bank's products, adds complexity to the programming it also serves the bank by assisting potential customers in choosing new products or services. Interactive Tools to design a savings plan, choose a mortgage, obtain online insurance quotes all tied to applications These tools help remove some of the mystery involved in so many account options and costs.
Loan status and credit card account information Bank customers are familiar with reviewing their checking account information, but many banks are adding the ability to look at one's loan status and credit card information as well. Access to as many accounts held at the bank seems to be the goal.
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e-B@NKING View digital copies of checks This, again, is removing a down side to online banking. It makes images of checks available as replacement for sending out cancelled checks or sheets of printed check images.
Online forms for ordering checks, stop payment, etc. Convenience is popular and if a customer visits his or her online account frequently it only makes sense to allow the ability to reorder checks or perform certain other commands through the same interface.
These features and many others help customers save time, simplify their lives and provide greater value than conventional banking.
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e-B@NKING ONLINE PAYMENT SYSTEMS
What is a Payment System? Payment means the transfer of money. In its simplest form, a payment system is an agreed upon way to transfer value between a buyer and a seller in a transaction. When coupled with rules and procedures, the payment system provides an infrastructure for transferring money from one entity in the economy to another. Payment systems can be distinguished by the mechanisms used to transfer value in an exchange of goods or services.
Electronic Payment Systems Electronic payment systems exist in a variety of forms, which can be divided into two groups: wholesale payment systems and retail payment systems. Wholesale payment systems among exist and for non-consumer banks, transactions--transactions initiated between
corporations, governments, and other financial service firms.
Retail electronic payment systems encompass those transactions involving consumers. These transactions involve the use of such payment mechanisms as credit cards, automated teller machines (ATMs), debit cards, point-of-sale (POS) terminals, home banking, and telephone bill-paying services.
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e-B@NKING Wholesale Payment Systems Wholesale payment systems are also called Large Value Payment Systems. Large value funds transfer systems are usually distinguished from retail funds transfer systems that handle a large volume of payments of relatively low value. The average size of transfers through large value funds transfer systems is substantial and the transfers are typically more time critical. There are two types of wholesale payment systems – net settlement systems and gross settlement systems. Large Value funds transfer systems can also be classified according to the timing (and frequency) of settlement. Systems can in principle be grouped into two types designated time (or deferred) settlement systems and real-time (or continuous) settlement systems, depending on whether they settle at pre specified points in time or on a continuous basis. Net Settlement Systems In a net settlement system, the settlement of funds transfers occurs on a net basis according to the rules and procedures of the system. A participating bank's net position is calculated, on either a bilateral or a multilateral basis, as the sum of the value of all the transfers it has received up to a particular point in time minus the sum of the value of all the transfers it has sent. The net position at the settlement time, which can be a net credit or debit position, is called the net settlement position.
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e-B@NKING Gross Settlement System In a gross settlement system, on the other hand, the settlement of funds occurs on a transaction by transaction basis, that is, without netting debits against credits.
Designated Time Settlements Designated time (or deferred) settlement system is one in which final settlement occurs at one or more discrete, pre specified settlement times during the processing day. Designated time settlement systems in which final settlement takes place only once, at the end of the processing day, are called end of day settlement systems. Currently, net settlement systems for large value transfers are typically end of day net settlement systems that settle the net settlement positions by means of transfers of central bank money from net debtors to net creditors.
In some countries, there are systems in which the final settlement of transfers occurs at the end of the processing day without netting the credit and debit positions - on a transaction by transaction basis or on the basis of the aggregate credit and aggregate debit position of each bank. Such systems are often called end of day gross settlement systems.
Real time Settlement Systems A real time (or continuous) settlement system is defined as a system that can effect final settlement on a continuous basis during the processing
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e-B@NKING day. RTGS i.e. Real Time Gross Settlement systems, as defined below, fall into this category.
Types of large value funds transfer system (Diag. 3) Settlement characteristic s Gross Net
Designated time (deferred)
Designate d gross settlement time
Designated time (DNS) net settlement
Real time Continuous (real time) gross settlement (RTGS)
(Not applicable) *
* By definition, netting involves the accumulation of a number of transactions so that credits can be netted against debits and this is incompatible with genuinely continuous settlement.
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e-B@NKING Retail Payment Systems Retail payment systems are also called small value payment systems.
An important emerging mechanism for enabling small-value payment systems is electronic money. Electronic money is a payment mechanism that is a direct substitute for traditional cash; value is transferred electronically to pay for goods and services at vending machines, retail establishments, over networks, or through direct person-to-person exchanges.
Electronic money offers some features that make it an attractive alternative over other payment mechanisms. Electronic money does not have to be designed to faithfully emulate all the properties of paper cash. It can be implemented to preclude some features of paper cash, such as complete anonymity, while including other desirable attributes of paper cash, such as full divisibility, assignment of limits and constraints, and links to the current owner. The following are some types of electronic money available over the net worldwide. First Virtual The account is set up by phone using a traditional credit card number and a First Virtual account number is issued. Clients provide their credit card numbers to First Virtual over the phone or other non-Internet method, and are issued a personal account number to make purchases over the Internet. This payment mechanism allows the user to order goods online and then charges the user's credit card company on behalf
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e-B@NKING of the online merchant. The merchant reports the transaction amount with the First Virtual account number. First Virtual then confirms the purchase with the customer via email. No special software is required for either purchaser or merchant.
DigiCash David Chaum, a mathematician and privacy expert, founded DigiCash. This provider creates e-cash, proprietary electronic cash tokens, which are marketed as being the equivalent of cash. An account is established at a DigiCash-licensed bank with real money. Once established, the customer can withdraw e-cash that is stored on the user computer's hard drive. Using proprietary software, e-cash can be spent with an Internet merchant or with anyone else whose computer is set up to deal in ecash. Using public-key cryptography, the digital tokens are said to be secure and can be registered and verified by the issuer without revealing to whom it was originally issued. In effect, these digital cash transactions are capable of being as anonymous as cash. No transaction confirmations are necessary, meaning the merchant can immediately ship the product.
CyberCash This payment mechanism consists of a downloadable software package using public-key encryption that is designed to assure the security of credit card transactions over the Internet. The system protects the customer's authentication data. An account is set up and acts as an Internet front end to any existing credit card that is designated. When a purchase is made, proprietary software is used that sends the purchase
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e-B@NKING and account information in encrypted form to the account provider. The provider in turn sends the information to the appropriate financial organization for processing.
NetCash This concept is similar to e-cash, except that it does not require any special software to use. NetCash is transmitted across the Internet using an encryption scheme known as PGP (pretty good privacy). To get NetCash, a party must send a check or money order to the company's headquarters. The company returns electronic coupons via e-mail.
Millicent The Millicent method is developed by Digital Equipment Corporation (DEC) to manage small and smallest payments (e.g. payment for getting information from the Internet about news and stock quotations or payment for small programs like Java-applets)
Electronic Checking Accounts Several organizations and coalitions of organizations have been trying to create ways of using existing checking accounts over the Internet. In most of those efforts, the consumer uses his or her checking account with a bank or service and then draws down those funds using special electronic checks and digital signatures. Generally, those programs are not as close to a major commercial introduction as are those based on credit cards or electronic scrip. Many observers feel that electronic
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e-B@NKING checks, despite a slow start, could become a widely used method for making payments.
Credit Cards The credit card is usually a four-party card which involves two banks in each transaction, the cardholder's bank (the issuer of the card) and the retailer's bank. The retailer hands over the credit card slips to its own bank for payment, less a discount, typically about 2-3%. The retailer's bank then passes the slips on to a clearing system. The clearing system presents each slip for payment to the bank that issued the card on which it was written. The issuing bank collects from the cardholder. All of these exchanges are now done by wire.
Stored Value Card Scheme or Smart Cards Smart card technology represents a real change in how and where information is processed. The smart card is a credit card-sized payment mechanism with an integrated circuit chip embedded within the card. The embedded chip enables the card to contain significant amounts of data including prepaid stored value. The embedded chip can also hold programs that interact with data either contained on the chip or external to the chip. These programs can be permanent and unchangeable or can be modified when the card is connected to a network. Data can be stored, updated, and retrieved both when the card is issued and throughout its life. However, because of the embedded chip, the smart card operates as a stand alone payment mechanism--in effect, a direct substitute for cash--without requiring online network connections. This
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e-B@NKING stored value can be accessed and altered by terminals at a merchant's establishment or at remote locations. A consumer with a smart card can go to a bank or ATM and have the card loaded with a certain amount of value. The consumer can then proceed to make purchases, up to the amount of stored value, in the same manner as if currency were being used. At each terminal, the device reads the smart card to determine that there is sufficient value available and deducts the amount of the transaction. When the card's value has been exhausted, the consumer can return to the bank or ATM to replenish the value.
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e-B@NKING ONLINE SECURITY SYSTEMS
The concern of security remains the largest barrier to the growth of online banking. Most people seem to believe that it is a hacker jungle out there, and stay very wary of trying to simplify their lives by using cyberspace. Most institutions providing online banking services are very security conscious. After all, they wouldn’t want to open their computers to a stampeding public, would they? The security measures that organizations take over the Web are simply invincible, unlike the surveillance cameras and lobby guards posted in many banks. If the general public is not aware of, or does not understand, the many features put into place to guard their finances, then people remain sceptical. Depending on how online accounts are accessed, security can be guaranteed in a variety of ways. Moreover, when a bank offers online service, it is not opening its mainframe computers to the world. Usually, the bank installs a group of separate computers that stand between the mainframe computer and the network that will deliver data to your PC. At several points along the way, protection is built in. Some of the most common security features are firewalls, data encryption, and passwords/personal identification numbers.
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e-B@NKING Firewalls A firewall is a computer or software that protects the bank’s computers and data from being accessed by any outsider. This firewall is located at the point where the bank’s world connects with the rest of the world. This firewall is basically a gatekeeper, checking each attempt at delivery of data with a list of strict specifications; any criteria not met; does not make it past the firewall.
Public Key Infrastructure Public key infrastructure can be defined as a solution to ensure secure electronic business communication incorporating signatures and encryption technology.
Every user in a PKI transaction owns a pair of keys: A public key known to everybody and a private key known only to the owner. The keys have 2 main characteristics. One, they are complimentary sets of passwords. This means that a document encrypted by a public key can only be decrypted by a private key and vice-versa. Two, the keys are a unique pair.
Encryption Encryption is the process of converting information into a more secure format for transmission. In other words the plain text is converted to scrambled code while being transmitted, and then decrypted back to plain text at the receiving end of the transmission. It is comparable to
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e-B@NKING writing a letter, converting it to code, putting it in an envelope and mailing it with the recipient descrambling the code.
Currently, there are 2 levels of encryption generally available in web browsers: 40-bit encryption, and 128-bit encryption. Most commonly available browsers use 40-bit encryption. However, the 128-bit browser offers the highest level of encryption and provides the best protection when transmitting confidential data over the Internet. The difference between these two types of encryption is one of capability. 128-bit encryption is exponentially more powerful than 40-bit encryption.
By using digital signatures, consumers are reassured that any sensitive information they send across the Web, such as postal addresses and credit card details, is protected from interception along the way. Meanwhile, online merchants can be more confident that the customer placing the purchasing order is indeed entitled to use the payment card in question. Security experts believe that digital signatures will encourage more consumers to purchase goods online.
Access Codes The access codes used to identify you to the online banking system are called passwords, and are further protected by using PINs (Personal Identification Numbers).
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e-B@NKING BENEFITS OF E-BANKING
Consumers are embracing the many benefits of Internet banking. The following are a few advantages that e-banking gives to customers: • Consumers can use their computers and a telephone modem to dial
in from home or any site where they have access to a computer.
•
The services are available seven days a week, 24 hours a day.
•
Transactions are executed and confirmed quickly, although not
instantaneously. Processing time is comparable to that of an ATM transaction.
•
In general, the customer will find lower fees and higher interest rates
for deposits due to the reduced cost of operating online and not needing numerous physical bank branches.
•
And the range of transactions available is fairly broad. Customers
can do everything from simply checking on an account balance to applying for a mortgage.
•
The interface is very user-friendly and often intuitive. Additionally,
business customers will most likely use the Internet for more than cash management, and they will be accustomed to a similar "look and feel" among all applications that they use.
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DISADVANTAGES OF E-BANKING The most obvious disadvantage is: Technophobes need not apply i.e. if you are still not comfortable using a computer, e-banking is not for you.
The other disadvantages are: • Investment of time upfront can be formidable. The data entry is
necessary before the numbers can be massaged and money managed successfully. Online bill payment is an example of an effort that requires setting up which leads to ultimate convenience.
•
Switching software or banks can mean re-entry of data, although
Internet-based systems are less impacted by this. But competition seems to be minimizing this problem. The personal finance management software Microsoft Money enables users of competing software to import data easily.
•
Like anything that deals with the transfer of large amounts of
money, security is a major factor of Online Banking. It is taken very seriously during Online Banking procedures.
•
With a system as complex as Online Banking, some errors are
inevitable. i.e.: An interrupted online session; late arrival of payments etc. A mistake made by either the user or the bank in question, can affect both, causing problems. For Example: An 'Infinity' (ICICI’s Online
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e-B@NKING Banking Brand name) customer from Bangalore (who did not want to be named) paid his cell phone bill through the bank, only to receive another bill the following month, with late fees. The amount had been debited from his account but not passed on to the cellular operator.
•
When dealing with computers, there is always the concern of the
system crashing, viruses entering the system or a power cut. These are larger problems and are not as easily solved. In all three cases, many people would be affected, information may be lost and a back-up plan would have to be initiated.
•
Need an account with an Internet Service Provider (ISP)
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e-B@NKING PAYING SAFE When you bank online, make sure your transactions are secure, your personal information is protected, and your fraud sensors are sharpened. Although you can't control fraud or deception on the Internet, you can take steps to recognize it, avoid it, and report it. Here's how: • Use a secure browser - software that encrypts or scrambles the
purchase information you send over the Internet - to guard the security of your online transactions. Most computers come with a secure browser already installed. You also can download some browsers for free over the Internet.
•
Keep records of your online transactions. Read your e-mail -
merchants may send you important information about your purchases.
•
Be prompt about reviewing your monthly bank and credit card
statements for any billing errors or unauthorized purchases. Notify your credit card issuer or bank immediately if your credit card or checkbook is lost or stolen.
•
Read the policies of Web sites you visit - especially the disclosures
about a Web site's security, its refund and return policies, and its privacy policy on collecting and using your personal information. Some Web sites' disclosures are easier to find than others are - look at the bottom of the home page, on order forms, or in the "About" or "FAQs" section of a site. If you can't find a privacy policy, consider shopping elsewhere.
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e-B@NKING • Keep your personal information private. Don't disclose your personal
information - your address, telephone number, Social Security number, or e-mail address - unless you know who's collecting the information, why they're collecting it, and how they'll use it.
•
Give payment information only to businesses you know and trust,
and only in appropriate places like order forms.
•
Evaluate The Site - Make sure the online banking site you are
considering has depth (many pages), and is well designed. Unless you know a bank is legitimate, don't accept a poorly designed site with broken images. If you are unsure as to whether a online bank is legitimate look for a different bank.
•
Go to the bank, don't let the bank come to you - Don't accept
unsolicited email recommendations for online banks. You should search for the bank; don't let a bank search for you. In this way you won't be the victim of a web site masquerading as a bank when they are not. In the past few years hackers have gotten email addresses of customers of some financial service companies and sent email to them inviting them to fraudulent sites in order to try to get personal information from them. PayPal experienced this problem, when con-artists sent a email asking consumer to go to the web site to review a large payment in their account. They gave the url of PayPa1.com instead of the correct url PayPal.com (They substituted a 1 for the L). Know your banks online address and go directly to it.
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e-B@NKING RBI INITIATIVES INFINET Information technology and the communication networking systems have a crucial bearing on the efficiency of money, capital and foreign exchange markets and have manifold implications for the conduct of monetary policy. In India, banks as well as other financial entities have entered the world of information technology and computer networking with INFINET.
The Indian Financial Network (INFINET), a wide area satellite based network using VSAT technology, was jointly set up by the Reserve Bank and Institute for Development and Research in Banking Technology (IDRBT) at Hyderabad to facilitate connectivity within the financial sector. The network was inaugurated in June 1999.
The INFINET was planned to cover, in a phased manner, 100 commercially important centres and serve as the communication backbone of the proposed Integrated Payment and Settlement System (IPSS).
Committees Rangarajan Committee ( I ) In the early 80s, a high level committee was formed under the chairmanship of Dr. C Rangarajan, then Governor of the Reserve Bank of India, to draw up a phased plan for computerisation and mechanisation in the Banking Industry over a five year time frame of
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e-B@NKING 1985-89. The focus by this time (justifiably) was on customer service and two models of branch automation were developed and implemented • • front office mechanisation where front desk operations were
computerised while back office work was done manually and back office automation covering mechanisation of General Ledger
and back office operations while the front office work was done manually; Rangarajan Committee ( II ) Having gained experience in the earlier mode of computerisation, the second Rangarajan Committee constituted in 1988 drew up a detailed perspective plan for computerisation of in Banks and for extension of automation to other areas like funds transfer, electronic mail, BANKNET, SWIFT, ATMs etc. • • • • Around 2000 to 2500 large branches located at high activity (urban
and metropolitan) centres to be fully computerised Regional Offices / Zonal Offices/Head Offices Inter- and intra bank transactions using the BANKNET set up by the
RBI; and Installation of a network of cash dispensers / ATMs at strategic
locations such as airports/railway stations etc., on a shared basis by banks. The Committee also made studied recommendations on the 'Single Window Concept; 'all bank credit cards', credit clearing/GIRO system, office automation, etc. In fact this report was the most comprehensive road map for Bank Automation considering the state of the technology at that time.
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e-B@NKING Vasudevan Committee To further upgrade the existing technology in the banking sector and also to suggest measures for implementation, the Reserve Bank appointed a "Committee on Technology Upgradation in the Banking Sector". The Committee in its Report, submitted in July 1999, recommended a new legislation on Electronic-funds-transfer system to facilitate multiple payment systems to be set up by banks and financial institutions. Law The Information Technology Act, 2000 has given legal recognition to creation, transmission and retention of an electronic (or magnetic) data to be treated as valid proof in a court of law, except in those areas, which continue to be governed by the provisions of the Negotiable Instruments Act, 1881.
Payment System Legislation in the form of amendments to various Acts as also the need for framing new legislation for the regulation of multiple electronic payments is under consideration of RBI. Several measures to ensure the authenticity of the message across the Internet have been suggested by the Working Group on Internet Banking. RBI has also laid down guidelines for electronic banking.
Electronic Payment Mechanisms With the advancement of technology, new delivery mechanisms have been introduced in the financial markets, giving rise to potential risks. These risks have to be tackled. This calls for modernisation of Payment Systems to increase efficiency and reduce risk.
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In order to improve payment flows, the RBI has been taking measures with the employment of appropriate technology from time to time. The bank has put in the following solutions (managed by RBI, SBI and the nationalised banks) in this regard: • Mechanised clearing of cheques using MICR technology first at
Metros managed by RBI and subsequently at other centres managed by some public sector banks. • Inter-city clearing among MICR centres at the 4 Metros (two-way)
and other offices of RBI with these four Metros under one-way inter-city clearing. • Regional Grid Clearing connecting important commercial
centres/district headquarters in a region to the nearest MICR centre under one way clearing. • etc. • • Floppy input-based clearing. High-value clearing (floppy based) Electronic Clearing Services (Debit, Credit, RAPID) for clearing of
bulk payments like dividend warrants, utility payments like electricity bills,
Lack of a reliable communication infrastructure in our country hampered modernisation of payment systems and consequently clearing and payment instructions, which are of non-local nature takes unduly long time. With INFINET, the RBI VSAT network for banks this bottleneck maybe removed and steps are being initiated to use INFINET to improve the payment flows. It has been decided to consolidate on the steps already taken and leapfrog in areas like Real Time Gross Settlement (RTGS) System and graduate to an integrated national payments system
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e-B@NKING in the long run. As a step towards achieving this, pilots have been started for implementing Electronic Data Interchange in major sectors. RTGS RBI has initiated measures to set up a Large Value Funds Transfer and Settlement System on a Real Time Basis (or Real Time Gross Settlement System). Such a system will be extremely critical in the development of a stable and efficient financial infrastructure.
The RTGS architecture would consist for an Apex Level Server that would have a persistent queuing system to receive the messages and execute instructions subject to specified fulfillment conditions. This would connect through a network to various Bank Level Servers for the member banks. These bank level servers would be connected to their branches through the VSAT network.
The RTGS will provide the infrastructure for a real time nationwide dynamic funds management by the user institutions. Such a system has the potential for integrating the money markets and security markets across the country. The potential volume, nature and type of transactions that are likely to flow through the above network may relate to forex, money market securities, inter bank claims, large corporate flows etc.
Electronic Fund Transfer This is a system that IBA offers that is better-applied and waiting for appreciation. EFT is probably the safest and fastest way to transfer
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e-B@NKING money from your account to another individual in another city regardless of which bank she uses.
All the transferor needs is her account number. A maximum of Rs0.1mn can be transferred for a flat fee of Rs25. The bank has discretionary powers to raise the limit for select customers. Or a customer can break up the transactions in to multiples of upto Rs0.1mn. The money sent is credited overnight and can be withdrawn by the receiver the day after transfer.
The hitch, it is not well known and secondly, the facility is only available in the four metros! Plus, money sent from abroad cannot be transferred through EFT.
Disclosing other advantages of the EFT, an official of the IBA's department of information technology, says, "The facility can be availed of even if the branch from where you are sending the amount is not fully computerized. The details of the transfer have to be sent to the RBI which in turn notifies the receiving bank to credit the individual with the mentioned amount."
Electronic Clearing Systems Never mind the vagaries of the stock market. For those who are and will always make equity investments a way of life the ECS has made that life a lot easier as far as dividend payments go. All a person has to do is
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e-B@NKING provide the company with details about the bank where the deposits should be made. The firm can then directly deposit the dividends into the shareholder's account. The maximum that a company can deposit is Rs0.1mn, though here too, the bank has the discretion to raise that ceiling.
Dividends, Interest on Bonds/Debentures, Salary, Pension, etc can now be credited directly to the beneficiaries’ bank accounts through ECS (CREDIT) services. Similarly, you can make payments of Telephone Bills, Electricity Charges, School Fees, Credit Card Dues, Tax Payments etc. using ECS(DEBIT) services.
Apart from being a free service, from four metros the facility can now be availed of in 15 cities (those that have regional RBI offices) including Ahmedabad, Pune, Thiruvananthapuram and Nashik.
SWADHAN - Shared Payment Network System (SPNS) To provide anytime, anywhere banking, in consonanace with the views of the Managing Committee , IBA (Indian Banks Association) set up a network of ATMs in Mumbai.
SPNS as envisaged by the IBA is a large network of ATMs, Cash Dispensers spread originally over the city of Mumbai, Vashi and Thane connected to a central host. Today, the network has expanded to
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e-B@NKING connect ATMs all over India. The banks which participate in this network would issue cards to the customers for transacting on this network.
The objective behind forming the Shared Payment Network System is to provide 24 hours, 365 days/year electronic banking service to the customer anywhere in the country through state of the art electronic fund transfer system to be shared by different participating banks. The SWADHAN-SPNS project is the first of its kind in India. The SWADHANSPNS went on live on 1st February, 1997 with 4 ATMs of 4 Banks. Currently there are 350 ATMs of 36 banks connected to the network. (i.e. as on December 15th, 2000)
Shared Payment Network System would be capable to offer the following services: Cash Transactions, Extended hours service, Across the bank payments, Utility payments, Balance enquiry, Printing of statement of accounts, Cheque Deposit, Request for Cheque book Standing Instructions and Statement of account, Point of Sale (EFT/POS) facilities
Advantages of SPNS: • • • • Cash holding at home can be reduced. Direct improvement in customer services. Benefits of standardization. Cost of service is minimized.
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e-B@NKING • • Improved centralized control ensures ongoing compatibility with
national and international standards and systems. Easier technology absorption and building the base for indigenous
development capability. Under SWADHAN, a member bank enjoys the benefit of maximum ATMs with minimum investment. Also each member bank earns revenue in the form of acquiring transaction of other banks card holders. Anytime banking and anywhere banking became a reality under the SWADHANSPNS. What is SWADHAN : SWADHAN is a registered trademark for electronic banking services, owned by Indian Banks' Association, on behalf of its members and only institutions which are members of the SWADHANShared Payment Network System are permitted to use it. Benefits to Customers : • • • • • • • • Easy access to cash, Day & Night, on Weekends/Holidays. Fast Service. No need to wait in queues. Convenience of Location : ATMs can be placed in any convenient
location in the city. Privacy in transaction. Free from errors. Flexibility in withdrawals. Less crowding at Bank Counters. 24 hours, 365 days service.
Benefits to Banks : • • Increases market penetration. Provides an alternative to extended hours.
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Debit/Smart Cards RBI has issued guidelines to the banks for issuing debit cards and smart cards as alternative payment instruments to ease pressure on physical cash.
Debit cards are plastic cards issued by banks to customers who could use them for paying for their purchases at specified Point of Sales terminals. The cards facilitate on their own accounts remotely. the customers to effect the transactions
Smart card has an integrated circuit with a microchip embedded in it so that it could perform calculations, maintain records, act as electronic purse. The cards can either be exhaustible or rechargeable.
The RBI guidelines issued include criteria on the eligibility of customers to whom the cards can be issued, payment of interest on the balances transferred to the smart/debit cards, treatment of liability in respect of outstanding/unspent balances on the smart/debit cards, security aspects and other terms and conditions for issue of these cards by the banks.
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e-B@NKING BENEFITS TO THE BANK Why should a bank ‘bank online’? Advantages previously held by large financial institutions have shrunk considerably. The Internet has leveled the playing field and afforded open access to customers in the global marketplace. Internet banking is a cost-effective delivery channel for financial institutions. The bank has an opportunity to generate revenue, decrease operational and transactional costs, increase productivity, and attract new customers. Ability to increase Revenue Financially, the bank can benefit a great deal from providing their customers with an online banking service. The bank has the ability to increase revenue by generating user and transaction fees for the use of a bill payment product and has the option of charging an account access fee for the use of the online system. Online banking provides an excellent promotional opportunity to generate revenue by helping the bank to cross-sell products such as credit cards, loans, certificate of deposits, and other financial services. Save Money In addition to making money, the bank can save money with an Internet banking system. Online banking can actually decrease operating costs by reducing the daily reproduction and distribution of paper-drawn transactions and delivering and processing statements for accounts, credit cards, and bills. Performing transactions via the Internet also provides cost savings, as indicated by a study done by Booz, Allen & Hamilton that shows a transaction over the phone costs $.54, at an ATM
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e-B@NKING it costs $.27 and via the Internet the cost is $.01. Using the Internet to perform transactions greatly reduces the cost to the bank.
Improves Productivity Internet banking improves productivity as well. Bank representatives are able to process data more quickly and efficiently; track account activity with automated reports, help customers achieve daily tasks via the Internet, and reduce time spent handling service problems. There can be a dramatic reduction in the number of customer service calls, as some banks that are providing this service has proven.
Marketing & Competitive Tool Internet banking also offers the bank an exceptional marketing and competitive tool. Large banks such as Nations Bank and Wells Fargo, in the United States, have already capitalized on the Internet as a mechanism to attract new customers. The majority of people using the Internet are middle to high income and polls indicate that 50% of the people online are either in professional or managerial positions. These people are also the ones who want to have the convenience of online banking for home or business use. This is an excellent opportunity for the community bank to keep their hometown customers from looking to national institutions for an online product.
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CHAPTER 4: COMPARATIVE STUDY
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e-B@NKING YEAR IN WHICH e-BANKING STARTED • IN SBI, e-BANKING STARTED AFTER 2000. • IN IDBI, e-BANKING STARTED IN 2005.
PROCESS TO AVAIL BENEFITS OF e-BANKING • IN SBI, CUSTOMER HAVING SAVING A/C OR CURRENT A/C CAN HAVE THE BENEFITS OF e-BANKING. • IN IDBI, CUSTOMERS WILL BE PROVIDED USERNAME AND PASSWORD TO AVAIL THE BENEFITS OF e-BANKING.
SECURITY BY BANKS TO USERS • IN SBI, VIRTUAL KEYBOARD IS PROVIDED ONLINE AND UNDER URL BAR LOCK OPTION IS TOO AVAILABLE. • IN IDBI, IF THE USER ENTERS A WRONG PASSWORD FOR 3 TIMES THEN THE LOGIN GETS BLOCKED.
ANY KPO OR BPO FOR SOLVING THE QUERIES OF USERS • IN SBI, CONTACT CENTRES ARE PRESENT TO SOLVE THE QUERIES OF USERS. • IN IDBI, BPO IS THERE IN BELAPUR.
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e-B@NKING REVIEW FOR ERRORS • IN SBI, MINITES TO MINITES AMONG BRANCHES. • IN IDBI, ON A DAILY BASIS.
MEASURES PROVIDED BY BANKS TO OMIT THE PROBLEMS OF USERS • IN SBI, THE USERS ARE ASKED TO CONTACT THE CONTACT CENTRES i.e. (BPO.) • IN IDBI, THE USERS HAVE TO VISIT THE BRANCHES TO OMIT THEIR PROBLEMS.
VALUE ADDED SERVICE OTHER THAN e-BANKING SERVICE • IN SBI, e-TAX, PAY UTILITY BILLS, e-RAIL RESERVATION. • IN IDBI, CARD TO CARD TRANSFER, UTILITY BILLS.
NEW INNOVATION IN NEAR FUTURE • IN SBI, e-R.D, e-F.D, e-TDR. • IN IDBI, e-PREMIUM.
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e-B@NKING VIRUS PROTECTION SOFTWARE UPDATION ON SERVERS • IN SBI, MINITES TO MINITES. • IN IDBI, ON A DAILY BASIS.
PRIME OBJECTIVES TOWARDS e-BANKING • IN SBI, SOCIAL BENEFITS WITH BUSINESS BENEFITS. • IN IDBI, COST CUTTING.
DIFFERENT FROM OTHERS BANKS IN e-BANKING • IN SBI, BRAND NAME, TRUSTWORTHINESS, AND TRANSPARENCY. • IN IDBI, UNIQUE, SAFE, USERFRIENDLY.
TIME TO TAKE A SINGLE ONLINE TRANSACTION
• IN SBI, BANK TO BANK – IN SECONDS INTERNATIONAL – 5 TO 7 HOURS. • IN IDBI, BANK TO BANK – 2 TO 3 HOURS INTERNATIONAL – 10 TO 12 HOURS.
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e-B@NKING IF WEBSITE IS HACKED, IS IT GOVERNMENT OR BANK TO PAY DEBTS • IN SBI, BANK. • IN IDBI, BANK.
ONE DRAWBACK • IN SBI, NO DRAWBACK. • IN IDBI, NETWORK ERROR.
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CHAPTER 5: CONCLUSION, FINDINGS AND SUGGESTIONS
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Findings of the study made on ICICI BANK and IDBI BANK. • In the users ratio of internet banking 65% of customers are using this service. • More banks are connecting to the any software company. to running the e-banking service. In these services the SBI banks is top in service of ebanking. • The services that are mostly used by maximum customers are transactions, online trading, bill payment, shopping etc. • The mode of the cash deposit in bank is for use to online truncation cash, cheque & e-banking.
Suggestions • Awareness should be created among non-users towards e-banking. • After repairing the basic deficiency, banks must ensure that their services are competitive by making more innovations in their services. • Banks charges should economical.
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CONCLUSION Technology innovation and fierce competition among existing banks have enable a wide array of banking products and services, being made available to retail and wholesale customer through an electronic distribution channel, collectively referred to as e-banking. The integration of e-banking application with legacy system implies an integrated risk management approach for all banking activities of a banking institution. Latest recommendations of Basel Committee recognize that each bank’s risk profile is different and requires a tailored risk mitigation approach appropriate for the scale of e-banking operations, the materiality of the risks present and the willingness and ability of the institution to manage their risks. This implies that a “one size fits all” approach to e-banking risk management issues may not be appropriate. Banks have traditionally been in the forefront of harnessing technology to improve product and efficiency. Technology is altering the relationships between banks and its internal and external customers. Technology has also eroded the entry barriers faced by many industries. With one time investment, technology has brought about superior products and channel management with a special focus on customer relationship. The incremental costs incurred for expansion and diversification are also more beneficial. The major driving force behind the rapid spread of e-banking is its acceptance as an extremely cost effective delivery channel. But on the Flipside, it is associated with risks such as reputation risk, security risk, cross-border risk and strategic risk, which are unique to e-banking. Banks need to have an effective disaster recovery plan along with
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e-B@NKING comprehensive risk management tool is significant not only to the bank but also to the banking system as a whole. All these issues underscore the importance of sound supervisory policies and high level of international co-operation among the bank regulators. The Basel Committee on banking Supervision has taken the lead in this area through the creation of its Electronic Banking Group – a group comprising 17 central banks and bank supervisory agencies in the late 1999. The main focus of this group has been to develop sound risk management practices. Internet has created plenty of opportunities for players in the banking sector. While the new entrants have the advantage of latest technology, the good-will of the established banks gives them a special opportunity to lead the online world. By merely putting existing service online won’t help the banks in holding their customer close. Instead, banks must learn to capitalize their customer’s different online financial-services relationships.
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BIBLOGRAPHY
WEBLIOGRAPHY http://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/21595.pdf http://en.wikipedia.org/wiki/Online_banking https://www.onlinesbi.com/aboutonlinesbi.html http://www.idbi.com/internetbanking.asp
BOOKS 1111111111111111111111111Modern Banking Technology by Dr. Firdos T. Shroff e-banking in India: challenges and opportunities by R.K.uppal
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ANNEXURE
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e-B@NKING QUESTIONARE ON e-BANKING v IN WHICH YEAR DID SBI START PROVIDING e-BANKING SERVICE IN INDIA? v WHAT IS A PROCESS TO AVAIL THE BENEFITS OF e-BANKING SERVICE? v WHAT SECURITY IS PROVIDED BY BANK TO PROTECT THE INTEREST OF USERS? v DOES YOUR BANK HAVE ANY KPO OR BPO FOR SOLVING THE QUERIES OF USERS? v HOW OFTEN WEBSITE IS REVIEWED FOR ERRORS? v WHAT MEASURES ARE PROVIDED TO USERS IF THEY FACE ANY PROBLEMS? v WHICH VALUE ADDED SERVICE YOU PRODIVE OTHER THAN eBANKING SERVICE? v WHAT NEW INNOVATION YOU ARE GOING TO BRING IN NEAR FUTURE? v HOW OFTEN IS VIRUS PROTECTION SOFTWARE UPDATED ON SERVERS AND WORKSTATIONS? v WHAT IS THE PRIME OBJECTIVE OF BANK TOWARDS e-BANKING? v HOW YOUR BANK IS DIFFERENT FROM OTHER BANKS IN eBANKING SERVICE? v WHAT IF ANY USER LOST HIS USERNAME AND PASSWORD? v HOW MUCH TIME IT TAKES TO COMPLETE A SINGLE ONLINE TRANSACTION? v WHO IS THE HEAD OF e-BANKING DEPARTMENT? v IF YOUR BANKS WEBSITE IS HACKED, THEN WHO IS LIABLE TO PAY OFF DEBTS OF THE USER GOVERNMENT OR BANK? v ONE DRAWBACK OF e-BANKING SERVICE PROVIDED BY YOU
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doc_441418431.pdf
SUBMITTED BY BHAVSAR MANTHAN RAJENDRA THIRD YEAR (BANKING AND INSURANCE) (SEMESTER V) 2011-2012
MODEL COLLEGE DOMBIVLI
UNIVERSITY OF MUMBAI OCTOBER 2011
e-B@NKING
A PROJECT REPORT ON “e-BANKING”
SUBMITTED TO THE UNIVERSITY OF MUMBAI IN PARTIAL FULFILLMENT FOR THE AWARD OF THE DEGREE OF BACHELOR OF COMMERCE (BANKING AND INSURANCE)/ BACHELOR OF MANAGEMENT STUDIES V SEMESTER
BY BHAVSAR MANTHAN RAJENDRA MODEL COLLEGE DOMBIVLI OCTOBER 2011
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TABLE OF CONTENTS
SR.NO. 1. 2. 3. 4. 5. 6. 7. 8. 9.
DESCRIPTION. DECLARATION ACKNOWLEDGEMENT CHAPTER 1: INTRODUCTION CHAPTER 2: BANK PROFILE CHAPTER 3:THEORETICAL VIEW CHAPTER 4:COMPARATIVE STUDY CHAPTER 5:CONCLUSION BIBLOGRAPHY ANNEXURE
PAGE.NO. 4 5 6-10 11-15 16-53 54-58 59-62 63 64-65
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e-B@NKING DECLARATION
I, BHAVSAR MANTHAN RAJENDRA, STUDENT OF BANKING AND INSURANCE V SEMESTER OF MODEL COLLEGE DOMBIVLI (E), HERE BY DECLARE THAT, I HAVE COMPLETED THIS PROJECT ON “e-BANKING” FOR THE ACADEMIC YEAR 2011-2012 THE INFORMATION SUMBITTED IS TRUE AND
ORIGINAL TO THE BEST OF MY KNOWLEDGE.
BHAVSAR MANTHAN RAJENDRA THIRD YEAR (BANKING AND INSURANCE)
4
e-B@NKING ACKNOWLEDGEMENT
I WOULD LIKE TO EXTEND MY SINCERE GRATITUDE TO ALL THOSE PEOPLE WHO HAVE HELPED ME IN THE SUCCESSFUL COMPLETION OF MY PROJECT ENTITLED “e-BANKING” FIRST AND FOREMOST I WOULD LIKE TO THANK MY PROJECT GUIDE MRS.REENA MADAM FOR BEING KIND ENOUGH IN SPARING HER TIME AND ENERGY FROM HER BUSY SCHEDULE AND HELPING ME IN COLLECTING THE NECESSARY DATES. ALSO I OWE MY SINCERE GRATITUDE TO LIC MEMBER, WHO DYNAMISM AND POSITIVE APPROACH GAVE AN EFFECTIVE MOMENTUM TO MY PROJECT. I WOULD ALSO LIKE TO EXPRESS MY SINCERE THANKS TO OUR PRINCIPLE, DR. M.R.NAIR FOR HIS CONSTANT MORAL SUPPORT AND VISION THIS PROJECT COULD NOT HAVE BEEN POSSIBLE WITHOUT HELP OF ENTIRE LIBRARY DEPARTMENT OF OUR COLLEGE.THEY MAKE AS MUCH DATA, BOOKS, MAGAZINES, ETC. AVAILABLE AS THEY CAN TO FACILITATE THE EASY COLLECTION OF INFORMATION.
BHAVSAR MANTHAN RAJENDRA
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CHAPTER 1: INTRODUCTION TO e-BANKING
“People have discovered that this industry is one of the most successful elements of e-commerce. It's time for this industry to act like a real bona fide segment of business”. -Richard Jones.
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e-B@NKING INTRODUCTION TO e-BANKING A non-resident Indian (NRI) in Paris has an easy way to access money in this fashion capital of the world. His Citibank account in India can be accessed through an ATM in Paris, which in turn transmits information to Citibank’s central hub in the US. The Indian rupees are converted to US dollars, which are in turn converted into French Francs at the current exchange rate, the Indian account is debited and the Francs made available to the NRI. Welcome to the era of technology banking! Traditionally, banks have used branch networks and distributed PC software as their delivery channels to reach business customers. However, in the recent past, a combination of distinctive factors requires that banks rethink their strategy. These factors include demands on time as a limited resource, rising real estate expense, changing human resource and information technology infrastructure and, most of all, fierce competition. All of these factors are forcing banks to provide services to their business customers anytime, anywhere, anyhow in what is termed as “boundary-less banking." There is no denying the fact that in the past two decades information technology has been the most rapidly changing industry in the world. But more than the rate of change, what is remarkable is the way IT has changed the paradigms of business in other industries. One industry that has really felt the impact of IT has been the banking sector. What is e-banking: Electronic Banking in simple terms means, it does not involve any physical exchange of money, but it’s all done electronically, from one account to another, using the Internet. Internet banking is just like normal banking, with one big exception. You don't have to go to the bank for transactions. Instead, you can access your account any time
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e-B@NKING and from any part of the world, and do so when you have the time, and not when the bank is open. For busy executives, students, and homemakers, e-banking is a virtual blessing. No more taking precious time off from work to get a demand draft made or a Chequebook issued. Banks offer Internet banking in two main ways. An existing bank with physical offices can establish a Web site and offer Internet banking to its customers in addition to its traditional delivery channels. A second alternative is to establish a ‘‘virtual,’’ ‘‘branchless,’’ or ‘‘Internetonly’’ bank. The computer server that lies at the heart of a virtual bank may be housed in an office that serves as the legal address of such a bank, or at some other location. Virtual banks may offer their customers the ability to make deposits and withdraw funds via automated teller machines (ATMs) or other remote delivery channels owned by other institutions. Online systems allow customers to plug into a host of banking services from a personal computer by connecting with the bank's computers over telephone wires. The convenience can be compelling. Not only is travel time reduced, but ATM machines, telephone banking or banking by mail are often unnecessary. And, technology continues to make online banking, once attempted only by computer enthusiasts, easier for the average consumer. Banks use a variety of names for online banking services, such as PC banking, home banking, electronic banking or Internet banking. Can one imagine life without paper cash? Money has always been part of human emotions. And although it is difficult to imagine that all those years of savings at the bank is now just a whole bunch of bits and bytes, it is becoming a reality and the sooner people adjust to it, the better it is.
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e-B@NKING ABOUT THE REPORT TITLE OF THE STUDY The present study is titled as “e-BANKING” with special reference to SBI bank and IDBI BANK OBJECTIVES OF THE STUDY • To identify what services are offered by banks. • To understand the advantages and disadvantages of e-banking. • To understand the need and importance of e-banking. • To study how RBI initiates towards promoting e-banking in banks. • To study the challenges faced by banks in e-banking
SCOPE OF THE STUDY • It provides a complete knowledge of various services and additional benefits provided to its customer. • It provides the complete knowledge of how it is beneficial to customers and banks.
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e-B@NKING DATA AND METHODOLOGY:The data has been collected in two ways: PRIMARY DATA As far as primary data is concerned, a detailed study is done and manager of SBI-IDBI and also employees answered to it; the carefully analysis of the data is done to arrive at conclusion. Hence, for this study, primary data has been collected directly from the manager and a few employees through an interview and questionnaire.
SECONDARY DATA The secondary source of information has been collected from internet, banks.
CHAPTER LAYOUT CHAPTER 1 – Introduction of the title “e-B@NKING”. CHAPTER 2 – Profile of the banks i.e. SBI & IDBI. CHAPTER 3 – Theoretical view of e-BANKING. CHAPTER 4 – Comparative study CHAPTER 5 – Summarizes the results of the study
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e-B@NKING
CHAPTER 2: PROFILE OF BANKS (SBI-IDBI)
“We are very pleased with our first-quarter results. As important, our strong balance sheet puts us in an excellent position to build our ecommerce capability on every front”.
-Mr.H.R.Henry.
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e-B@NKING ONLINE SBI PROFILE State Bank of India is India's largest bank with a network of over 13000 branches and 5 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. OnlineSBI 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 cutting edge technology and tools. The infrastructure supports unified, secure access to banking services for accounts in over 13,000 branches across India. The Retail banking application is an integration of several functional areas, and enables customers to:
• • • • • • • • • • •
Issue Demand Drafts online Transfer funds to own and third party accounts Credit beneficiary accounts using RTGS/NEFT feature Generate account statements Setup Standing Instructions Configure profile settings Use e-tax for online tax payment Use e-Pay for automatic bill payments Interface with merchants for railway and airline reservations Avail DEMAT and IPO services Pay bill of Visa Credit Card issued by any Bank. The OnlineSBI corporate banking application provides features to administer and manage corporate accounts online. The corporate
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e-B@NKING module provides roles such as Regulator, Admin, Up loader, Transaction Maker, Authorizer, and Auditor. These roles have access to the following functions:
• • •
Manage users, define rights and transaction rules on corporate accounts Access accounts in several branches with a single sign-on mechanism Upload files to make bulk transactions to third parties, supplier, vendor and tax collection authorities. Use online transactional features such as fund transfer to own accounts, third party payments (both Inter and Intra bank), and draft issues Make bill payments over the Internet. Authorize, modify, reschedule and cancel transactions, based on rights assigned to the user Generate account statement Enquire on transaction details or current balance In addition to the above the Internet banking application also provides the following value added services:
•
• •
• •
•
Tax payments to central and state governments through site to site integration. Supply Chain Finance( e-VFS- Electronic Vendor Finance Scheme) Direct Debit Facility E Collection Facilities for: Core Banking Transactions Inter Bank Transactions for incoming RTGS/NEFT Transactions Internet Banking Transactions for SBI & Associate Banks Direct Debit facility where suppliers can directly debit their customer’s account through Internet Banking
• • •
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e-B@NKING ONLINE IDBI PROFILE IDBI Bank Ltd. is today one of India's largest commercial Banks. For over 40 years, IDBI Bank has essayed a key nation-building role, first as the apex Development Financial Institution (DFI) (July 1, 1964 to September 30, 2004) in the realm of industry and thereafter as a full-service commercial Bank (October 1, 2004 onwards). As a DFI, the erstwhile IDBI stretched its canvas beyond mere project financing to cover an array of services that contributed towards balanced geographical spread of industries, development of identified backward areas, emergence of a new spirit of enterprise and evolution of a deep and vibrant capital market. On October 1, 2004, the erstwhile IDBI converted into a Banking company (as Industrial Development Bank of India Limited) to undertake the entire gamut of Banking activities while continuing to play its secular DFI role. Post the mergers of the erstwhile IDBI Bank with its parent company (IDBI Ltd.) on April 2, 2005 (appointed date: October 1, 2004) and the subsequent merger of the erstwhile United Western Bank Ltd. with IDBI Bank on October 3, 2006, the tech-savvy, new generation Bank with majority Government shareholding today touches the lives of millions of Indians through an array of corporate, retail, SME and Agricultural products and services. Headquartered in Mumbai, IDBI Bank today rides on the back of a robust business strategy, a highly competent and dedicated workforce and a state-of-the-art information technology platform, to structure and deliver personalised and innovative Banking services and customised financial solutions to its clients across various delivery channels. As on March 31, 2010, IDBI Bank has a balance sheet of Rs.2.34 lakh crore and business size (deposits plus advances) of Rs.3.06 lakh crore.
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e-B@NKING As an Universal Bank, IDBI Bank, besides its core Banking and project finance domain, has an established presence in associated financial sector businesses like Capital Market and Investment Banking, Home Finance, Primary Dealership area and more recently, the Life Insurance Business. As a step towards taking the organization on a accelerated growth path, the Bank has reorganized its businesses around nine verticals out of which six customer verticals, each focusing on distinct customer segments and three business verticals. Going forward, IDBI Bank is strongly committed to work towards emerging as the 'Bank of choice' and 'the most valued financial conglomerate', besides generating wealth and value to all its stakeholders. In today's digital world, Internet banking assumes a special significance. Realising that the default access to your banking information in the near future would be only through the Internet, we at IDBI Bank have made available to you a globally benchmarked Internet Banking facility. With IDBI's Internet Banking, your Bank travels with you around the world and you have on-line, real-time access to your accounts. Admittedly, such a service requires security of the highest nature and complete privacy protection. We provide a completely secure environment, using 128-bit encryption SSL (Secure Sockets Layer), digitally certified by VeriSign. 128-bit SSL guarantees world-class security for Internet and e-commerce applications. Click on the image to verify the certificate.
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e-B@NKING
CHAPTER 3: THEORETICAL VIEW
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e-B@NKING PRE E-BANKING SCEN ENARIO IN INDIA Traditional Banking Traditionally the relation ionship between the bank and its cu customers has been on a one-to-one l level via the branch network. This was put into is operation with clearing and decision-making responsibilities concentrated a s at the individual branch level. The head office had respons h nsibility for the overall clearing network the size of the branch network an the training rk, nd of staff in the branch n network. The bank monitored the o organization’s performance and set et the decision-making paramete ters, but the information available to both branch staff and their customer was limited ob ers to one geographical loca cation. Tra raditional Banking Structure
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e-B@NKING THE INTERNET – A DISTRIBUTION CHANNEL Distribution channels are physical capacities to build up customer contacts in a systematic way in order to inform, counsel and sell products and services. The Internet is a so-called electronic distribution channel. Combined with self-service terminals and telecommunication equipment electronic distribution channels are technical channels within the class of media distribution channels. Another example for a media distribution channel is direct mail. Today, media distribution channels are an important way of distributing information and managing standard transactions. Counselling is mostly done in branch offices or by field workers. Together, personal and media distribution channels are called internal distribution channels. On the other side there are external distribution channels like salesman or franchising partners. The following figure visualizes this classification. Distribution Channels of Financial Institutions
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e-B@NKING Areas of Use of the Internet in Financial Institutions Generally we may distinguish four classes of Internet use in financial institutions: • • • • Information presentation Information presentation together with two way (asynchronous)
communication (e.g. email to request further information) Interaction with user (e.g. execution of programs with individual
customer data) Transaction banking (e.g. electronic payments)
Information may be provided in connection with one or two way communication. One-way communication means that the institution uses the Internet only as a presentation medium for its products and services. The simplest way to use two-way communication is to allow users to send electronic mails to the server in order to ask for further information or make suggestions with respect to the Internet site. Interaction with customers requires quick information exchange. Information provided by the user controls the information offered by the server. If the customer is identified and authenticated connecting to operative systems of the financial institution may be possible. Then, often very little information has to be provided by the customer since data stored in the databases of the financial institution may be used. Presentation of product information may be used to initiate new contacts. Implemented product models permit the construction of optimal insurance or financing contracts by using simpler components. Using mathematical models the customer may analyze his portfolios. To do so, he may use simulation techniques, what-if-analysis and other similar techniques.
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e-B@NKING SERVICES OF E-BANKS
Internet banks offer a variety of features and perks, rushing to lure online customers. The race is on to increase market share and creates customer loyalty with features that make online banking friendlier, more useful, and less expensive. E-Banking lures customers with ‘convenience’.
The three broad facilities that e-banking offers are: Convenience - Complete your banking at your convenience, in the comfort of your home or at any place you can access the Net. No more Qs - There are no queues at an online bank. 24/7 service - Bank online 24 hours a day, 7 days a week and 52 weeks a year. Below is a detailed review of features found in Internet banking around the world.
Online applications Consumers can begin their banking relationship with an online application. No need to waste time driving to a local branch to begin a banking relationship. Consumers can fill out and submit electronically all necessary information needed to open a checking, savings account or even a fixed deposit. When the application is submitted, the bank will mail you a signature card for its records and request you to mail or wire your initial funds. Some firms like American Express and CompuBank
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e-B@NKING enable customers applying for an account to fund their new account electronically via a credit card or cheque from another banking institution. There are some firms such as Wingspan and USA BancShares.com that enable customers to digitally sign their applications. Account Access Internet banking customers now have the ability to view their accounts online, including checking, savings, loans and credit cards. No need to wait for your monthly statements or wait in queue for the next available customer service representative. Account access enables customers to view most recent activity on accounts, including cleared checks, deposits, ATM transactions and balances as of previous days activities. Customers no longer have to hold on to the cleared checks, since their bank will store them for them online. Account transfers Internet banking customers have the ability to transfer funds to and from their accounts online. With a simple online form, customers can move money from a checking account to a savings account and vice versa within the safety and convenience of their home –- without having to visit the ATM. Funds transferred online are updated in less than three hours. In addition, customers can set up recurring transfers to accounts. A recurring transfer will take place on the customer specified date, with a specified amount. Bill Payment Online bill payment enables customers to pay anyone, friends or family, as well as a pay their bills electronically. As an add on feature to Internet banking, bill payment enables customers to send paper checks to
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e-B@NKING anyone or an electronic check to any institution that accepts electronic bill payments. To use bill payment, customers are required to set up their payees online. Customers then have the ability to set up recurring, automatic payments to a specific biller on a specified day or just a onetime payment. Arrange payments three to five days, before the due date, to ensure timely delivery. It is important to note that not all banks provide bill payment as a free feature. Benefits at participating online merchants The banks partner with online merchants to offer discounts when a purchase is made with the card.
24/7 customer service Although it is easy to yield to the temptation of allowing the Internet to replace expensive branch personnel and overhead, many banks have found that an customer service staff ready at any hour is well worth the expense. This can be especially true as customers transition to online banking and need help learning the features. Offering telephone and email contacts is a basic level of service. Offering live chat assistance is the exceptional level. Access to old transactions Choices made in designing the Internet interface may include how much history will be available online. Some banks have chosen to show only 30-45 days, while others offer a history of six months or a year.
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e-B@NKING
Categorize transactions and produce reports Functionality is king as online banking customers using these features enjoy a Web interface that delivers the utility of a money management software application. Export your banking data Most banks offering the management interface also allow easy downloading of financial information into files that can be imported into Microsoft Money and Intuit's Quicken.
Interactive guides & tools to help selection of proper product Although online, interactive guides through a bank's products, adds complexity to the programming it also serves the bank by assisting potential customers in choosing new products or services. Interactive Tools to design a savings plan, choose a mortgage, obtain online insurance quotes all tied to applications These tools help remove some of the mystery involved in so many account options and costs.
Loan status and credit card account information Bank customers are familiar with reviewing their checking account information, but many banks are adding the ability to look at one's loan status and credit card information as well. Access to as many accounts held at the bank seems to be the goal.
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e-B@NKING View digital copies of checks This, again, is removing a down side to online banking. It makes images of checks available as replacement for sending out cancelled checks or sheets of printed check images.
Online forms for ordering checks, stop payment, etc. Convenience is popular and if a customer visits his or her online account frequently it only makes sense to allow the ability to reorder checks or perform certain other commands through the same interface.
These features and many others help customers save time, simplify their lives and provide greater value than conventional banking.
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e-B@NKING ONLINE PAYMENT SYSTEMS
What is a Payment System? Payment means the transfer of money. In its simplest form, a payment system is an agreed upon way to transfer value between a buyer and a seller in a transaction. When coupled with rules and procedures, the payment system provides an infrastructure for transferring money from one entity in the economy to another. Payment systems can be distinguished by the mechanisms used to transfer value in an exchange of goods or services.
Electronic Payment Systems Electronic payment systems exist in a variety of forms, which can be divided into two groups: wholesale payment systems and retail payment systems. Wholesale payment systems among exist and for non-consumer banks, transactions--transactions initiated between
corporations, governments, and other financial service firms.
Retail electronic payment systems encompass those transactions involving consumers. These transactions involve the use of such payment mechanisms as credit cards, automated teller machines (ATMs), debit cards, point-of-sale (POS) terminals, home banking, and telephone bill-paying services.
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e-B@NKING Wholesale Payment Systems Wholesale payment systems are also called Large Value Payment Systems. Large value funds transfer systems are usually distinguished from retail funds transfer systems that handle a large volume of payments of relatively low value. The average size of transfers through large value funds transfer systems is substantial and the transfers are typically more time critical. There are two types of wholesale payment systems – net settlement systems and gross settlement systems. Large Value funds transfer systems can also be classified according to the timing (and frequency) of settlement. Systems can in principle be grouped into two types designated time (or deferred) settlement systems and real-time (or continuous) settlement systems, depending on whether they settle at pre specified points in time or on a continuous basis. Net Settlement Systems In a net settlement system, the settlement of funds transfers occurs on a net basis according to the rules and procedures of the system. A participating bank's net position is calculated, on either a bilateral or a multilateral basis, as the sum of the value of all the transfers it has received up to a particular point in time minus the sum of the value of all the transfers it has sent. The net position at the settlement time, which can be a net credit or debit position, is called the net settlement position.
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e-B@NKING Gross Settlement System In a gross settlement system, on the other hand, the settlement of funds occurs on a transaction by transaction basis, that is, without netting debits against credits.
Designated Time Settlements Designated time (or deferred) settlement system is one in which final settlement occurs at one or more discrete, pre specified settlement times during the processing day. Designated time settlement systems in which final settlement takes place only once, at the end of the processing day, are called end of day settlement systems. Currently, net settlement systems for large value transfers are typically end of day net settlement systems that settle the net settlement positions by means of transfers of central bank money from net debtors to net creditors.
In some countries, there are systems in which the final settlement of transfers occurs at the end of the processing day without netting the credit and debit positions - on a transaction by transaction basis or on the basis of the aggregate credit and aggregate debit position of each bank. Such systems are often called end of day gross settlement systems.
Real time Settlement Systems A real time (or continuous) settlement system is defined as a system that can effect final settlement on a continuous basis during the processing
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e-B@NKING day. RTGS i.e. Real Time Gross Settlement systems, as defined below, fall into this category.
Types of large value funds transfer system (Diag. 3) Settlement characteristic s Gross Net
Designated time (deferred)
Designate d gross settlement time
Designated time (DNS) net settlement
Real time Continuous (real time) gross settlement (RTGS)
(Not applicable) *
* By definition, netting involves the accumulation of a number of transactions so that credits can be netted against debits and this is incompatible with genuinely continuous settlement.
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e-B@NKING Retail Payment Systems Retail payment systems are also called small value payment systems.
An important emerging mechanism for enabling small-value payment systems is electronic money. Electronic money is a payment mechanism that is a direct substitute for traditional cash; value is transferred electronically to pay for goods and services at vending machines, retail establishments, over networks, or through direct person-to-person exchanges.
Electronic money offers some features that make it an attractive alternative over other payment mechanisms. Electronic money does not have to be designed to faithfully emulate all the properties of paper cash. It can be implemented to preclude some features of paper cash, such as complete anonymity, while including other desirable attributes of paper cash, such as full divisibility, assignment of limits and constraints, and links to the current owner. The following are some types of electronic money available over the net worldwide. First Virtual The account is set up by phone using a traditional credit card number and a First Virtual account number is issued. Clients provide their credit card numbers to First Virtual over the phone or other non-Internet method, and are issued a personal account number to make purchases over the Internet. This payment mechanism allows the user to order goods online and then charges the user's credit card company on behalf
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e-B@NKING of the online merchant. The merchant reports the transaction amount with the First Virtual account number. First Virtual then confirms the purchase with the customer via email. No special software is required for either purchaser or merchant.
DigiCash David Chaum, a mathematician and privacy expert, founded DigiCash. This provider creates e-cash, proprietary electronic cash tokens, which are marketed as being the equivalent of cash. An account is established at a DigiCash-licensed bank with real money. Once established, the customer can withdraw e-cash that is stored on the user computer's hard drive. Using proprietary software, e-cash can be spent with an Internet merchant or with anyone else whose computer is set up to deal in ecash. Using public-key cryptography, the digital tokens are said to be secure and can be registered and verified by the issuer without revealing to whom it was originally issued. In effect, these digital cash transactions are capable of being as anonymous as cash. No transaction confirmations are necessary, meaning the merchant can immediately ship the product.
CyberCash This payment mechanism consists of a downloadable software package using public-key encryption that is designed to assure the security of credit card transactions over the Internet. The system protects the customer's authentication data. An account is set up and acts as an Internet front end to any existing credit card that is designated. When a purchase is made, proprietary software is used that sends the purchase
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e-B@NKING and account information in encrypted form to the account provider. The provider in turn sends the information to the appropriate financial organization for processing.
NetCash This concept is similar to e-cash, except that it does not require any special software to use. NetCash is transmitted across the Internet using an encryption scheme known as PGP (pretty good privacy). To get NetCash, a party must send a check or money order to the company's headquarters. The company returns electronic coupons via e-mail.
Millicent The Millicent method is developed by Digital Equipment Corporation (DEC) to manage small and smallest payments (e.g. payment for getting information from the Internet about news and stock quotations or payment for small programs like Java-applets)
Electronic Checking Accounts Several organizations and coalitions of organizations have been trying to create ways of using existing checking accounts over the Internet. In most of those efforts, the consumer uses his or her checking account with a bank or service and then draws down those funds using special electronic checks and digital signatures. Generally, those programs are not as close to a major commercial introduction as are those based on credit cards or electronic scrip. Many observers feel that electronic
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e-B@NKING checks, despite a slow start, could become a widely used method for making payments.
Credit Cards The credit card is usually a four-party card which involves two banks in each transaction, the cardholder's bank (the issuer of the card) and the retailer's bank. The retailer hands over the credit card slips to its own bank for payment, less a discount, typically about 2-3%. The retailer's bank then passes the slips on to a clearing system. The clearing system presents each slip for payment to the bank that issued the card on which it was written. The issuing bank collects from the cardholder. All of these exchanges are now done by wire.
Stored Value Card Scheme or Smart Cards Smart card technology represents a real change in how and where information is processed. The smart card is a credit card-sized payment mechanism with an integrated circuit chip embedded within the card. The embedded chip enables the card to contain significant amounts of data including prepaid stored value. The embedded chip can also hold programs that interact with data either contained on the chip or external to the chip. These programs can be permanent and unchangeable or can be modified when the card is connected to a network. Data can be stored, updated, and retrieved both when the card is issued and throughout its life. However, because of the embedded chip, the smart card operates as a stand alone payment mechanism--in effect, a direct substitute for cash--without requiring online network connections. This
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e-B@NKING stored value can be accessed and altered by terminals at a merchant's establishment or at remote locations. A consumer with a smart card can go to a bank or ATM and have the card loaded with a certain amount of value. The consumer can then proceed to make purchases, up to the amount of stored value, in the same manner as if currency were being used. At each terminal, the device reads the smart card to determine that there is sufficient value available and deducts the amount of the transaction. When the card's value has been exhausted, the consumer can return to the bank or ATM to replenish the value.
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e-B@NKING ONLINE SECURITY SYSTEMS
The concern of security remains the largest barrier to the growth of online banking. Most people seem to believe that it is a hacker jungle out there, and stay very wary of trying to simplify their lives by using cyberspace. Most institutions providing online banking services are very security conscious. After all, they wouldn’t want to open their computers to a stampeding public, would they? The security measures that organizations take over the Web are simply invincible, unlike the surveillance cameras and lobby guards posted in many banks. If the general public is not aware of, or does not understand, the many features put into place to guard their finances, then people remain sceptical. Depending on how online accounts are accessed, security can be guaranteed in a variety of ways. Moreover, when a bank offers online service, it is not opening its mainframe computers to the world. Usually, the bank installs a group of separate computers that stand between the mainframe computer and the network that will deliver data to your PC. At several points along the way, protection is built in. Some of the most common security features are firewalls, data encryption, and passwords/personal identification numbers.
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e-B@NKING Firewalls A firewall is a computer or software that protects the bank’s computers and data from being accessed by any outsider. This firewall is located at the point where the bank’s world connects with the rest of the world. This firewall is basically a gatekeeper, checking each attempt at delivery of data with a list of strict specifications; any criteria not met; does not make it past the firewall.
Public Key Infrastructure Public key infrastructure can be defined as a solution to ensure secure electronic business communication incorporating signatures and encryption technology.
Every user in a PKI transaction owns a pair of keys: A public key known to everybody and a private key known only to the owner. The keys have 2 main characteristics. One, they are complimentary sets of passwords. This means that a document encrypted by a public key can only be decrypted by a private key and vice-versa. Two, the keys are a unique pair.
Encryption Encryption is the process of converting information into a more secure format for transmission. In other words the plain text is converted to scrambled code while being transmitted, and then decrypted back to plain text at the receiving end of the transmission. It is comparable to
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e-B@NKING writing a letter, converting it to code, putting it in an envelope and mailing it with the recipient descrambling the code.
Currently, there are 2 levels of encryption generally available in web browsers: 40-bit encryption, and 128-bit encryption. Most commonly available browsers use 40-bit encryption. However, the 128-bit browser offers the highest level of encryption and provides the best protection when transmitting confidential data over the Internet. The difference between these two types of encryption is one of capability. 128-bit encryption is exponentially more powerful than 40-bit encryption.
By using digital signatures, consumers are reassured that any sensitive information they send across the Web, such as postal addresses and credit card details, is protected from interception along the way. Meanwhile, online merchants can be more confident that the customer placing the purchasing order is indeed entitled to use the payment card in question. Security experts believe that digital signatures will encourage more consumers to purchase goods online.
Access Codes The access codes used to identify you to the online banking system are called passwords, and are further protected by using PINs (Personal Identification Numbers).
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e-B@NKING BENEFITS OF E-BANKING
Consumers are embracing the many benefits of Internet banking. The following are a few advantages that e-banking gives to customers: • Consumers can use their computers and a telephone modem to dial
in from home or any site where they have access to a computer.
•
The services are available seven days a week, 24 hours a day.
•
Transactions are executed and confirmed quickly, although not
instantaneously. Processing time is comparable to that of an ATM transaction.
•
In general, the customer will find lower fees and higher interest rates
for deposits due to the reduced cost of operating online and not needing numerous physical bank branches.
•
And the range of transactions available is fairly broad. Customers
can do everything from simply checking on an account balance to applying for a mortgage.
•
The interface is very user-friendly and often intuitive. Additionally,
business customers will most likely use the Internet for more than cash management, and they will be accustomed to a similar "look and feel" among all applications that they use.
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e-B@NKING
DISADVANTAGES OF E-BANKING The most obvious disadvantage is: Technophobes need not apply i.e. if you are still not comfortable using a computer, e-banking is not for you.
The other disadvantages are: • Investment of time upfront can be formidable. The data entry is
necessary before the numbers can be massaged and money managed successfully. Online bill payment is an example of an effort that requires setting up which leads to ultimate convenience.
•
Switching software or banks can mean re-entry of data, although
Internet-based systems are less impacted by this. But competition seems to be minimizing this problem. The personal finance management software Microsoft Money enables users of competing software to import data easily.
•
Like anything that deals with the transfer of large amounts of
money, security is a major factor of Online Banking. It is taken very seriously during Online Banking procedures.
•
With a system as complex as Online Banking, some errors are
inevitable. i.e.: An interrupted online session; late arrival of payments etc. A mistake made by either the user or the bank in question, can affect both, causing problems. For Example: An 'Infinity' (ICICI’s Online
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e-B@NKING Banking Brand name) customer from Bangalore (who did not want to be named) paid his cell phone bill through the bank, only to receive another bill the following month, with late fees. The amount had been debited from his account but not passed on to the cellular operator.
•
When dealing with computers, there is always the concern of the
system crashing, viruses entering the system or a power cut. These are larger problems and are not as easily solved. In all three cases, many people would be affected, information may be lost and a back-up plan would have to be initiated.
•
Need an account with an Internet Service Provider (ISP)
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e-B@NKING PAYING SAFE When you bank online, make sure your transactions are secure, your personal information is protected, and your fraud sensors are sharpened. Although you can't control fraud or deception on the Internet, you can take steps to recognize it, avoid it, and report it. Here's how: • Use a secure browser - software that encrypts or scrambles the
purchase information you send over the Internet - to guard the security of your online transactions. Most computers come with a secure browser already installed. You also can download some browsers for free over the Internet.
•
Keep records of your online transactions. Read your e-mail -
merchants may send you important information about your purchases.
•
Be prompt about reviewing your monthly bank and credit card
statements for any billing errors or unauthorized purchases. Notify your credit card issuer or bank immediately if your credit card or checkbook is lost or stolen.
•
Read the policies of Web sites you visit - especially the disclosures
about a Web site's security, its refund and return policies, and its privacy policy on collecting and using your personal information. Some Web sites' disclosures are easier to find than others are - look at the bottom of the home page, on order forms, or in the "About" or "FAQs" section of a site. If you can't find a privacy policy, consider shopping elsewhere.
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e-B@NKING • Keep your personal information private. Don't disclose your personal
information - your address, telephone number, Social Security number, or e-mail address - unless you know who's collecting the information, why they're collecting it, and how they'll use it.
•
Give payment information only to businesses you know and trust,
and only in appropriate places like order forms.
•
Evaluate The Site - Make sure the online banking site you are
considering has depth (many pages), and is well designed. Unless you know a bank is legitimate, don't accept a poorly designed site with broken images. If you are unsure as to whether a online bank is legitimate look for a different bank.
•
Go to the bank, don't let the bank come to you - Don't accept
unsolicited email recommendations for online banks. You should search for the bank; don't let a bank search for you. In this way you won't be the victim of a web site masquerading as a bank when they are not. In the past few years hackers have gotten email addresses of customers of some financial service companies and sent email to them inviting them to fraudulent sites in order to try to get personal information from them. PayPal experienced this problem, when con-artists sent a email asking consumer to go to the web site to review a large payment in their account. They gave the url of PayPa1.com instead of the correct url PayPal.com (They substituted a 1 for the L). Know your banks online address and go directly to it.
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e-B@NKING RBI INITIATIVES INFINET Information technology and the communication networking systems have a crucial bearing on the efficiency of money, capital and foreign exchange markets and have manifold implications for the conduct of monetary policy. In India, banks as well as other financial entities have entered the world of information technology and computer networking with INFINET.
The Indian Financial Network (INFINET), a wide area satellite based network using VSAT technology, was jointly set up by the Reserve Bank and Institute for Development and Research in Banking Technology (IDRBT) at Hyderabad to facilitate connectivity within the financial sector. The network was inaugurated in June 1999.
The INFINET was planned to cover, in a phased manner, 100 commercially important centres and serve as the communication backbone of the proposed Integrated Payment and Settlement System (IPSS).
Committees Rangarajan Committee ( I ) In the early 80s, a high level committee was formed under the chairmanship of Dr. C Rangarajan, then Governor of the Reserve Bank of India, to draw up a phased plan for computerisation and mechanisation in the Banking Industry over a five year time frame of
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e-B@NKING 1985-89. The focus by this time (justifiably) was on customer service and two models of branch automation were developed and implemented • • front office mechanisation where front desk operations were
computerised while back office work was done manually and back office automation covering mechanisation of General Ledger
and back office operations while the front office work was done manually; Rangarajan Committee ( II ) Having gained experience in the earlier mode of computerisation, the second Rangarajan Committee constituted in 1988 drew up a detailed perspective plan for computerisation of in Banks and for extension of automation to other areas like funds transfer, electronic mail, BANKNET, SWIFT, ATMs etc. • • • • Around 2000 to 2500 large branches located at high activity (urban
and metropolitan) centres to be fully computerised Regional Offices / Zonal Offices/Head Offices Inter- and intra bank transactions using the BANKNET set up by the
RBI; and Installation of a network of cash dispensers / ATMs at strategic
locations such as airports/railway stations etc., on a shared basis by banks. The Committee also made studied recommendations on the 'Single Window Concept; 'all bank credit cards', credit clearing/GIRO system, office automation, etc. In fact this report was the most comprehensive road map for Bank Automation considering the state of the technology at that time.
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e-B@NKING Vasudevan Committee To further upgrade the existing technology in the banking sector and also to suggest measures for implementation, the Reserve Bank appointed a "Committee on Technology Upgradation in the Banking Sector". The Committee in its Report, submitted in July 1999, recommended a new legislation on Electronic-funds-transfer system to facilitate multiple payment systems to be set up by banks and financial institutions. Law The Information Technology Act, 2000 has given legal recognition to creation, transmission and retention of an electronic (or magnetic) data to be treated as valid proof in a court of law, except in those areas, which continue to be governed by the provisions of the Negotiable Instruments Act, 1881.
Payment System Legislation in the form of amendments to various Acts as also the need for framing new legislation for the regulation of multiple electronic payments is under consideration of RBI. Several measures to ensure the authenticity of the message across the Internet have been suggested by the Working Group on Internet Banking. RBI has also laid down guidelines for electronic banking.
Electronic Payment Mechanisms With the advancement of technology, new delivery mechanisms have been introduced in the financial markets, giving rise to potential risks. These risks have to be tackled. This calls for modernisation of Payment Systems to increase efficiency and reduce risk.
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In order to improve payment flows, the RBI has been taking measures with the employment of appropriate technology from time to time. The bank has put in the following solutions (managed by RBI, SBI and the nationalised banks) in this regard: • Mechanised clearing of cheques using MICR technology first at
Metros managed by RBI and subsequently at other centres managed by some public sector banks. • Inter-city clearing among MICR centres at the 4 Metros (two-way)
and other offices of RBI with these four Metros under one-way inter-city clearing. • Regional Grid Clearing connecting important commercial
centres/district headquarters in a region to the nearest MICR centre under one way clearing. • etc. • • Floppy input-based clearing. High-value clearing (floppy based) Electronic Clearing Services (Debit, Credit, RAPID) for clearing of
bulk payments like dividend warrants, utility payments like electricity bills,
Lack of a reliable communication infrastructure in our country hampered modernisation of payment systems and consequently clearing and payment instructions, which are of non-local nature takes unduly long time. With INFINET, the RBI VSAT network for banks this bottleneck maybe removed and steps are being initiated to use INFINET to improve the payment flows. It has been decided to consolidate on the steps already taken and leapfrog in areas like Real Time Gross Settlement (RTGS) System and graduate to an integrated national payments system
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e-B@NKING in the long run. As a step towards achieving this, pilots have been started for implementing Electronic Data Interchange in major sectors. RTGS RBI has initiated measures to set up a Large Value Funds Transfer and Settlement System on a Real Time Basis (or Real Time Gross Settlement System). Such a system will be extremely critical in the development of a stable and efficient financial infrastructure.
The RTGS architecture would consist for an Apex Level Server that would have a persistent queuing system to receive the messages and execute instructions subject to specified fulfillment conditions. This would connect through a network to various Bank Level Servers for the member banks. These bank level servers would be connected to their branches through the VSAT network.
The RTGS will provide the infrastructure for a real time nationwide dynamic funds management by the user institutions. Such a system has the potential for integrating the money markets and security markets across the country. The potential volume, nature and type of transactions that are likely to flow through the above network may relate to forex, money market securities, inter bank claims, large corporate flows etc.
Electronic Fund Transfer This is a system that IBA offers that is better-applied and waiting for appreciation. EFT is probably the safest and fastest way to transfer
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e-B@NKING money from your account to another individual in another city regardless of which bank she uses.
All the transferor needs is her account number. A maximum of Rs0.1mn can be transferred for a flat fee of Rs25. The bank has discretionary powers to raise the limit for select customers. Or a customer can break up the transactions in to multiples of upto Rs0.1mn. The money sent is credited overnight and can be withdrawn by the receiver the day after transfer.
The hitch, it is not well known and secondly, the facility is only available in the four metros! Plus, money sent from abroad cannot be transferred through EFT.
Disclosing other advantages of the EFT, an official of the IBA's department of information technology, says, "The facility can be availed of even if the branch from where you are sending the amount is not fully computerized. The details of the transfer have to be sent to the RBI which in turn notifies the receiving bank to credit the individual with the mentioned amount."
Electronic Clearing Systems Never mind the vagaries of the stock market. For those who are and will always make equity investments a way of life the ECS has made that life a lot easier as far as dividend payments go. All a person has to do is
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e-B@NKING provide the company with details about the bank where the deposits should be made. The firm can then directly deposit the dividends into the shareholder's account. The maximum that a company can deposit is Rs0.1mn, though here too, the bank has the discretion to raise that ceiling.
Dividends, Interest on Bonds/Debentures, Salary, Pension, etc can now be credited directly to the beneficiaries’ bank accounts through ECS (CREDIT) services. Similarly, you can make payments of Telephone Bills, Electricity Charges, School Fees, Credit Card Dues, Tax Payments etc. using ECS(DEBIT) services.
Apart from being a free service, from four metros the facility can now be availed of in 15 cities (those that have regional RBI offices) including Ahmedabad, Pune, Thiruvananthapuram and Nashik.
SWADHAN - Shared Payment Network System (SPNS) To provide anytime, anywhere banking, in consonanace with the views of the Managing Committee , IBA (Indian Banks Association) set up a network of ATMs in Mumbai.
SPNS as envisaged by the IBA is a large network of ATMs, Cash Dispensers spread originally over the city of Mumbai, Vashi and Thane connected to a central host. Today, the network has expanded to
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e-B@NKING connect ATMs all over India. The banks which participate in this network would issue cards to the customers for transacting on this network.
The objective behind forming the Shared Payment Network System is to provide 24 hours, 365 days/year electronic banking service to the customer anywhere in the country through state of the art electronic fund transfer system to be shared by different participating banks. The SWADHAN-SPNS project is the first of its kind in India. The SWADHANSPNS went on live on 1st February, 1997 with 4 ATMs of 4 Banks. Currently there are 350 ATMs of 36 banks connected to the network. (i.e. as on December 15th, 2000)
Shared Payment Network System would be capable to offer the following services: Cash Transactions, Extended hours service, Across the bank payments, Utility payments, Balance enquiry, Printing of statement of accounts, Cheque Deposit, Request for Cheque book Standing Instructions and Statement of account, Point of Sale (EFT/POS) facilities
Advantages of SPNS: • • • • Cash holding at home can be reduced. Direct improvement in customer services. Benefits of standardization. Cost of service is minimized.
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e-B@NKING • • Improved centralized control ensures ongoing compatibility with
national and international standards and systems. Easier technology absorption and building the base for indigenous
development capability. Under SWADHAN, a member bank enjoys the benefit of maximum ATMs with minimum investment. Also each member bank earns revenue in the form of acquiring transaction of other banks card holders. Anytime banking and anywhere banking became a reality under the SWADHANSPNS. What is SWADHAN : SWADHAN is a registered trademark for electronic banking services, owned by Indian Banks' Association, on behalf of its members and only institutions which are members of the SWADHANShared Payment Network System are permitted to use it. Benefits to Customers : • • • • • • • • Easy access to cash, Day & Night, on Weekends/Holidays. Fast Service. No need to wait in queues. Convenience of Location : ATMs can be placed in any convenient
location in the city. Privacy in transaction. Free from errors. Flexibility in withdrawals. Less crowding at Bank Counters. 24 hours, 365 days service.
Benefits to Banks : • • Increases market penetration. Provides an alternative to extended hours.
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Debit/Smart Cards RBI has issued guidelines to the banks for issuing debit cards and smart cards as alternative payment instruments to ease pressure on physical cash.
Debit cards are plastic cards issued by banks to customers who could use them for paying for their purchases at specified Point of Sales terminals. The cards facilitate on their own accounts remotely. the customers to effect the transactions
Smart card has an integrated circuit with a microchip embedded in it so that it could perform calculations, maintain records, act as electronic purse. The cards can either be exhaustible or rechargeable.
The RBI guidelines issued include criteria on the eligibility of customers to whom the cards can be issued, payment of interest on the balances transferred to the smart/debit cards, treatment of liability in respect of outstanding/unspent balances on the smart/debit cards, security aspects and other terms and conditions for issue of these cards by the banks.
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e-B@NKING BENEFITS TO THE BANK Why should a bank ‘bank online’? Advantages previously held by large financial institutions have shrunk considerably. The Internet has leveled the playing field and afforded open access to customers in the global marketplace. Internet banking is a cost-effective delivery channel for financial institutions. The bank has an opportunity to generate revenue, decrease operational and transactional costs, increase productivity, and attract new customers. Ability to increase Revenue Financially, the bank can benefit a great deal from providing their customers with an online banking service. The bank has the ability to increase revenue by generating user and transaction fees for the use of a bill payment product and has the option of charging an account access fee for the use of the online system. Online banking provides an excellent promotional opportunity to generate revenue by helping the bank to cross-sell products such as credit cards, loans, certificate of deposits, and other financial services. Save Money In addition to making money, the bank can save money with an Internet banking system. Online banking can actually decrease operating costs by reducing the daily reproduction and distribution of paper-drawn transactions and delivering and processing statements for accounts, credit cards, and bills. Performing transactions via the Internet also provides cost savings, as indicated by a study done by Booz, Allen & Hamilton that shows a transaction over the phone costs $.54, at an ATM
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e-B@NKING it costs $.27 and via the Internet the cost is $.01. Using the Internet to perform transactions greatly reduces the cost to the bank.
Improves Productivity Internet banking improves productivity as well. Bank representatives are able to process data more quickly and efficiently; track account activity with automated reports, help customers achieve daily tasks via the Internet, and reduce time spent handling service problems. There can be a dramatic reduction in the number of customer service calls, as some banks that are providing this service has proven.
Marketing & Competitive Tool Internet banking also offers the bank an exceptional marketing and competitive tool. Large banks such as Nations Bank and Wells Fargo, in the United States, have already capitalized on the Internet as a mechanism to attract new customers. The majority of people using the Internet are middle to high income and polls indicate that 50% of the people online are either in professional or managerial positions. These people are also the ones who want to have the convenience of online banking for home or business use. This is an excellent opportunity for the community bank to keep their hometown customers from looking to national institutions for an online product.
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CHAPTER 4: COMPARATIVE STUDY
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e-B@NKING YEAR IN WHICH e-BANKING STARTED • IN SBI, e-BANKING STARTED AFTER 2000. • IN IDBI, e-BANKING STARTED IN 2005.
PROCESS TO AVAIL BENEFITS OF e-BANKING • IN SBI, CUSTOMER HAVING SAVING A/C OR CURRENT A/C CAN HAVE THE BENEFITS OF e-BANKING. • IN IDBI, CUSTOMERS WILL BE PROVIDED USERNAME AND PASSWORD TO AVAIL THE BENEFITS OF e-BANKING.
SECURITY BY BANKS TO USERS • IN SBI, VIRTUAL KEYBOARD IS PROVIDED ONLINE AND UNDER URL BAR LOCK OPTION IS TOO AVAILABLE. • IN IDBI, IF THE USER ENTERS A WRONG PASSWORD FOR 3 TIMES THEN THE LOGIN GETS BLOCKED.
ANY KPO OR BPO FOR SOLVING THE QUERIES OF USERS • IN SBI, CONTACT CENTRES ARE PRESENT TO SOLVE THE QUERIES OF USERS. • IN IDBI, BPO IS THERE IN BELAPUR.
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e-B@NKING REVIEW FOR ERRORS • IN SBI, MINITES TO MINITES AMONG BRANCHES. • IN IDBI, ON A DAILY BASIS.
MEASURES PROVIDED BY BANKS TO OMIT THE PROBLEMS OF USERS • IN SBI, THE USERS ARE ASKED TO CONTACT THE CONTACT CENTRES i.e. (BPO.) • IN IDBI, THE USERS HAVE TO VISIT THE BRANCHES TO OMIT THEIR PROBLEMS.
VALUE ADDED SERVICE OTHER THAN e-BANKING SERVICE • IN SBI, e-TAX, PAY UTILITY BILLS, e-RAIL RESERVATION. • IN IDBI, CARD TO CARD TRANSFER, UTILITY BILLS.
NEW INNOVATION IN NEAR FUTURE • IN SBI, e-R.D, e-F.D, e-TDR. • IN IDBI, e-PREMIUM.
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e-B@NKING VIRUS PROTECTION SOFTWARE UPDATION ON SERVERS • IN SBI, MINITES TO MINITES. • IN IDBI, ON A DAILY BASIS.
PRIME OBJECTIVES TOWARDS e-BANKING • IN SBI, SOCIAL BENEFITS WITH BUSINESS BENEFITS. • IN IDBI, COST CUTTING.
DIFFERENT FROM OTHERS BANKS IN e-BANKING • IN SBI, BRAND NAME, TRUSTWORTHINESS, AND TRANSPARENCY. • IN IDBI, UNIQUE, SAFE, USERFRIENDLY.
TIME TO TAKE A SINGLE ONLINE TRANSACTION
• IN SBI, BANK TO BANK – IN SECONDS INTERNATIONAL – 5 TO 7 HOURS. • IN IDBI, BANK TO BANK – 2 TO 3 HOURS INTERNATIONAL – 10 TO 12 HOURS.
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e-B@NKING IF WEBSITE IS HACKED, IS IT GOVERNMENT OR BANK TO PAY DEBTS • IN SBI, BANK. • IN IDBI, BANK.
ONE DRAWBACK • IN SBI, NO DRAWBACK. • IN IDBI, NETWORK ERROR.
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CHAPTER 5: CONCLUSION, FINDINGS AND SUGGESTIONS
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Findings of the study made on ICICI BANK and IDBI BANK. • In the users ratio of internet banking 65% of customers are using this service. • More banks are connecting to the any software company. to running the e-banking service. In these services the SBI banks is top in service of ebanking. • The services that are mostly used by maximum customers are transactions, online trading, bill payment, shopping etc. • The mode of the cash deposit in bank is for use to online truncation cash, cheque & e-banking.
Suggestions • Awareness should be created among non-users towards e-banking. • After repairing the basic deficiency, banks must ensure that their services are competitive by making more innovations in their services. • Banks charges should economical.
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CONCLUSION Technology innovation and fierce competition among existing banks have enable a wide array of banking products and services, being made available to retail and wholesale customer through an electronic distribution channel, collectively referred to as e-banking. The integration of e-banking application with legacy system implies an integrated risk management approach for all banking activities of a banking institution. Latest recommendations of Basel Committee recognize that each bank’s risk profile is different and requires a tailored risk mitigation approach appropriate for the scale of e-banking operations, the materiality of the risks present and the willingness and ability of the institution to manage their risks. This implies that a “one size fits all” approach to e-banking risk management issues may not be appropriate. Banks have traditionally been in the forefront of harnessing technology to improve product and efficiency. Technology is altering the relationships between banks and its internal and external customers. Technology has also eroded the entry barriers faced by many industries. With one time investment, technology has brought about superior products and channel management with a special focus on customer relationship. The incremental costs incurred for expansion and diversification are also more beneficial. The major driving force behind the rapid spread of e-banking is its acceptance as an extremely cost effective delivery channel. But on the Flipside, it is associated with risks such as reputation risk, security risk, cross-border risk and strategic risk, which are unique to e-banking. Banks need to have an effective disaster recovery plan along with
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e-B@NKING comprehensive risk management tool is significant not only to the bank but also to the banking system as a whole. All these issues underscore the importance of sound supervisory policies and high level of international co-operation among the bank regulators. The Basel Committee on banking Supervision has taken the lead in this area through the creation of its Electronic Banking Group – a group comprising 17 central banks and bank supervisory agencies in the late 1999. The main focus of this group has been to develop sound risk management practices. Internet has created plenty of opportunities for players in the banking sector. While the new entrants have the advantage of latest technology, the good-will of the established banks gives them a special opportunity to lead the online world. By merely putting existing service online won’t help the banks in holding their customer close. Instead, banks must learn to capitalize their customer’s different online financial-services relationships.
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BIBLOGRAPHY
WEBLIOGRAPHY http://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/21595.pdf http://en.wikipedia.org/wiki/Online_banking https://www.onlinesbi.com/aboutonlinesbi.html http://www.idbi.com/internetbanking.asp
BOOKS 1111111111111111111111111Modern Banking Technology by Dr. Firdos T. Shroff e-banking in India: challenges and opportunities by R.K.uppal
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ANNEXURE
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e-B@NKING QUESTIONARE ON e-BANKING v IN WHICH YEAR DID SBI START PROVIDING e-BANKING SERVICE IN INDIA? v WHAT IS A PROCESS TO AVAIL THE BENEFITS OF e-BANKING SERVICE? v WHAT SECURITY IS PROVIDED BY BANK TO PROTECT THE INTEREST OF USERS? v DOES YOUR BANK HAVE ANY KPO OR BPO FOR SOLVING THE QUERIES OF USERS? v HOW OFTEN WEBSITE IS REVIEWED FOR ERRORS? v WHAT MEASURES ARE PROVIDED TO USERS IF THEY FACE ANY PROBLEMS? v WHICH VALUE ADDED SERVICE YOU PRODIVE OTHER THAN eBANKING SERVICE? v WHAT NEW INNOVATION YOU ARE GOING TO BRING IN NEAR FUTURE? v HOW OFTEN IS VIRUS PROTECTION SOFTWARE UPDATED ON SERVERS AND WORKSTATIONS? v WHAT IS THE PRIME OBJECTIVE OF BANK TOWARDS e-BANKING? v HOW YOUR BANK IS DIFFERENT FROM OTHER BANKS IN eBANKING SERVICE? v WHAT IF ANY USER LOST HIS USERNAME AND PASSWORD? v HOW MUCH TIME IT TAKES TO COMPLETE A SINGLE ONLINE TRANSACTION? v WHO IS THE HEAD OF e-BANKING DEPARTMENT? v IF YOUR BANKS WEBSITE IS HACKED, THEN WHO IS LIABLE TO PAY OFF DEBTS OF THE USER GOVERNMENT OR BANK? v ONE DRAWBACK OF e-BANKING SERVICE PROVIDED BY YOU
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