UNIVERSITY OF MUMBAI
PROJECT REPORT ON ONLINE BANKING CHALLENGES AND OPPORTUNITIES BY Ms. DRASHTI CHANDRAKANT CHAUHAN T.Y.B.COM. (BANKING AND INSURANCE) ACADEMIC YEAR 2012-2013
PROJECT GUIDE PROF. ARCHIS SAHSRABUDDHE
PARLE TILAK VIDYALAYA ASSOCIATION‘S M.L.DAHANUKAR COLLEGE OF COMMERCE DIXIT ROAD, VILE-PARLE (E) MUMBAI-400 057.
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CERTIFICATE
I, hereby certify that Ms. DRASHTI CHANDRAKENT CHAUHAN of Third Year Bachelor of Commerce (Banking and Insurance), Parle Tilak Vidyalaya Association‘s, M.L.Dahanukar College of Commerce has completed the project on ONLINE BANKING
CHALLENGES AND OPPORTUNITIE in Semester V of the academic year 2012-2013. The information and facts as submitted in the project are true and original to the best of our knowledge and information. Internal Examiner/ Project Guide:
Co-ordinator:
External Examiner Principal
Date : _______ Place: _______
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DECLARATION
I, DRASHTI CHANDRAKANT CHAUHAN of PARLE TILAK VIDYALAYA ASSOCIATION‘S,
M.L.DAHANUKAR COLLEGE OF COMMERCE of T.Y.B.Com. (Banking and Insurance) (Semester V) hereby declare that I have completed this project on ONLINE BANKING CHALLENGES AND OPPORTUNITIE in the Academic year 2012-2013. The information submitted is true and original to the best of my knowledge.
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ACKNOWLEDGEMENT
To list who all have helped me is difficult because they are so numerous and the depth is so enormous. I would like to acknowledge the following as being idealistic channels and fresh dimensions in the completion of this project. I take this opportunity to thank the University of Mumbai for giving me chance to do this project. I would like to thank my Principal, Dr.Madhavi S. Pethe for providing the necessary facilities required for completion of this project. I take this opportunity to thank our Coordinator Prof.Mrs.Mitali Shelankar, for her moral support and guidance. I would also like to express my sincere gratitude towards my project guide Prof. Archis Sahsrabuddhe whose guidance and care made the project successful. I would like to thank my College Library, for having provided various reference books and magazines related to my project. Lastly, I would like to thank each and every person who directly or indirectly helped me in the completion of the project especially my Parents and Peers who supported me throughout my project.
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EXECUTIVE SUMMARY
Technology is a very dynamic force. It is changing the competitive landscape of the financial services and banking industry and is influencing the way their products and services are sold and delivered. There is an impact of IT on variety on sectors in the economy as a whole; these includes business, industry, education, medicine and health care, government, defence services, securities, management organizations, individuals and economy and individuals. With the advent of online transaction, speedy and secure settlement of payments has lead to the globalization of financial services. Better customer services is provided using IT aided development such as introduction of ATM, Magnetic Ink Character Recognition (MICR) cheques, credit cards, debit cards, smart cards, digital e-cash and electronic fund transfer. The day-to-day transaction in the banks and insurance companies are automated which provide better services in processing transactions. Throughout the world, the financial service provider are looking towards the new concept of ?anytime, anywhere, anyhow‘ banking. To facilitate usage by customer in different countries, provide multicurrency accounts and cards, denominated in the major currencies. Back this up with electronic, real time, multi currency account to account transfer capability. For every system about to be developed, consider whether all or part of it could be delivered using Intranet, and how much commonality there is with other Web based deliverables.
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CONTENTS
ONLINE BANKING CHALLENGES AND OPPORTUNITIES
NO.
CHAPTER
PAGE NO.
1.
INTRODUCTION TO ONLINE BANKING
1-9
2.
WHAT IS ONLINE BANKING
10 - 24
3.
OPPORTUNITIES IN ONLINE BANKING
25 - 32
4.
CHALLENGES IN ONLINE BANKING
33 - 39
5.
ARCHITECTURE FOR E-BANKING
40 - 47
6.
PAYMENT AND SETTEMENT SYSTEMS
48 - 62
7.
SECURITY CONSIDERATION IN E-BANKING
63 - 75
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8.
RECENT TREND OF IT IN BANKING
79 - 84
CASE STUDY (ICICI Bank – Investment in Technology Yielding Rich Dividends Today)
85 - 89
CONCLUSION AND RECOMMENDATION
90 -91
GLOSSARY
92 - 94
BIBLIOGRAPHY
95
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LIST OF DIAGRAMS
SR. NO. DESCRIPTION OF DIAGRAM
1. 2.1 Preferred Method Of Bill Payment
PAGE NO.
15
2.
7.1 Safe World Of Online Banking
70
3. 4.
8.1 Migration To An Online Banking 8.2 Internet Banking And Customer Relationship
80 82
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LIST OF TABLES
SR NO.
DESCRIPTION OF TABLE
PAGE NO.
1.
1.1 Position Of I-Banking Among Various E-Channels
4
2.
1.2 Number Of Population And Internet Users
7
3.
2.1 Bank’s Online Banking Price Matrix
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4.
2.2 Advantage & Disadvantage Of Online Banking
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5.
3.1 SBI – Growth In Distribution Network
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6.
4.1 Bank Service And Their Website
36
7.
4.2 Total Internet Banking User In India
39
8.
6.1 Online Banking & Their Bill Payment Service
49
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LIST OF GRAPHS
SR. NO.
1.
DISCRIPTION OF GRAPH
1.1 Online Service Users
PAGE NO.
3
2.
2.1 Percentage Of Internet Users Visiting Bank Sites
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3.
2.2 Online Banking Deposit Trends Graph
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4.
3.1 Online Bank Transfer
31
5.
7.1 Graph On Internet In Safe Hand
65
6.
8.1 Graph on Online Payment By Age Group
84
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Chapter-1 INTRODUCTION TO ONLINE BANKING
1.1 E-BANKING – AN INTRODUCTION 1.2 E-BANKING IN INDIA 1.3 INTERNET BANKING STRATEGY
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1.1
E-BANKING AN INTODUCTION
Definition: The provision of banking services through electronic channels and customer can access the data without time and geographical limitation. Introduction: Before the advent of the Internet, Electronic banking has existed for around two decades, but it was limited to direct-dial services. The increase in ecommerce has speeded up this process in recent years due to a rise in the use of internet. Most of the banks are now offering electronic banking services with increasing competition from Internet-enabled, or online, banks and other financial organization. Both computer and telephone banking cover the term electronic banking or e-banking. Using computer banking, a customer‘s computer either dials directly into his bank‘s computer or gains access to the bank‘s computer over the internet. Using telephone banking, the customer can control his bank accounts by giving the bank instruction over the telephone. Both computer and telephone banking involve the use of passwords, which give access to the customer‘s account. Banking transaction can be carried out 24 hours a day using these methods. For instance. A customer can view recent transactions, get print out of statement of account and transfer funds between accounts and make payment or transfer funds using computer banking. Many banks have provided the facility to set-up, amend or cancel standing orders.
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Online banking (or Internet banking or E-banking) allows customers of a financial institution to conduct financial transactions on a secure website operated by the institution, which can be a retail or virtual bank, credit union or building society.
Graph 1.1 Online service users To access a financial institution's online banking facility, a customer having personal Internet access must register with the institution for the service, and set up some password (under various names) for customer verification. The password for online banking is normally not the same as for telephone banking. Financial institutions now routinely allocate customer numbers (also under various names), whether or not customers intend to access their online banking facility. Customer numbers are normally not the same as account numbers, because a number of accounts can be linked to the one customer number. The customer will link to the customer number any of
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those accounts which the customer controls, which may be cheque, savings, loan, credit card and other accounts. To access online banking, the customer would go to the financial institution's website, and enter the online banking facility using the customer number and password. Some financial institutions have set up additional security steps for access, but there is no consistency to the approach adopted.
E-Delivery channel Computerized Branches ATM I-Banking M-Banking T-Banking Average 200001 93.29 23.01 11.80 7.37 3.69 27.38 200102 93.80 30.89 16.25 8.82 4.41 30.83 200203 94.34 34.87 23.08 10.64 6.68 33.92 200304 94.31 36.55 32.27 12.42 9.50 37.01 200405 93.98 37.76 35.08 91.53 12.30 39.73 200506 99.13 39.09 40.37 17.53 13.62 41.94 200607 100 45.90 51.44 25.89 19.38 48.52 200708 95.55 35.43 30.04 14.6 9.94 35.11
Table 1.1 Position of I-Banking among various e-channels Banks have traditionally been in the forefront of harnessing technology to improve their products, services and efficiency. They have, over a long time, been using electronic and telecommunication networks for delivering a wide range of value added products and services. The delivery channels include direct dial – up connections, private networks, public networks etc and the devices include telephone, Personal Computers including the Automated Teller Machines, etc. With the popularity of PCs, easy access to Internet and World Wide Web (WWW), Internet is increasingly used by banks as a channel for receiving instructions and delivering their products and services
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to their customers. This form of banking is generally referred to as Internet Banking, although the range of products and services offered by different banks vary widely both in their content and sophistication. Different services provided under E-Banking, ? Online Bill Payment ? Shopping ? Ticket booking ? Pre paid mobile recharge ? Market watch ? Personal home page ? Investment services ? Online applications ? Personal updates
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1.2
E-BANKING IN INDIA
The backbone of every country is the financial sector, comprising banks, stocks exchanges and insurance organizations. It is instrumental in implementing and bringing about economic reform. Any changes in this sector will have a sweeping impact on the country.The cost per transaction to the investors and other intermediaries in the market has come down significantly, besides bringing total transparency in the market operation as a result of the introduction of automation in stock markets.
The reforms introduced in 1990s have initiated a healthy competition among the banks. As a result, they have started improving customer service and find technology to be an ideal tool to achieve this objectives. In a manner, the banking and financial service sector-being the early adopters of any new technology defined the roadmap for future adoption. Banks are now focusing on three core issues: ? How to meet customer service expectation? ? How to cut costs? ? How to manage competition?
At present, the total Internet users in the country are estimated at 9 lakhs. However, this is expected to grow exponentially to 90 lakhs by 2003. Only about 1% of Internet users did banking online in 1998. This increased to 16.7% in March 2000. The growth potential is, therefore, immense. Further incentives provided by banks would dissuade customers from visiting physical branches, and thus get ?hooked‘ to the convenience of arm-chair banking.
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YEAR 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2009 2010
Users 1,400,000 2,800,000 5,500,000 7,000,000 16,500,000 22,500,000 39,200,000 50,600,000 40,000,000 42,000,000 81,000,000 100,000,000
Population 1,094,870,677 1,094,870,677 1,094,870,677 1,094,870,677 1,094,870,677 1,094,870,677 1,094,870,677 1,112,225,812 1,112,225,812 1,129,667,528 1,156,897,766 1,173,108,018
% Penetration 0.1 % 0.3 % 0.5 % 0.7 % 1.6 % 2.1 % 3.6 % 4.5 % 3.6 % 3.7 % 7.0 % 8.5 %
Table 1.2 Number of population and internet user
Banks like ICICI Bank Ltd., HDFC Bank Ltd. etc. are thus looking to position themselves as one stop financial shops. These banks have tied up with computer training companies, computer manufacturers, Internet Services Providers and portals for expanding their Net banking services, and widening their customer base. The customer base of kiosks and permeation through the cable television route to widen customer base are other priority areas in the agendas of the more aggressive players. Centurion Bank Ltd. has taken up equity stake in the teauction.com portal, which aims to bring together buyers, sellers, registered brokers, suppliers and associations in the tea market and substitute their physical presence at the auctions announce.
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1.3 INTERNET BANKING STATEGY
Internet will radically alter the banking and finance industry. This will have a much larger business impact than ATMs and telephone banking. It will have a fundamental way of doing business as the capacity exists for anyone, anywhere in the world at a reasonable cost, with reasonable performance, and in a standard manner. So far many banks are treating the Internet, specifically in terms of their web presence, as just another element in the evolution of the delivery channel in the order of Branch- ATM-Telephone Banking-Home Banking-Internet. Though it is a logical assumption and to a certain implications by assuming that the internet delivery channel is an adjunct to existing banking relationship and traditional delivery methods. Having understood the importance of it some banks are setting up websites, and some are implementing internet delivered transactions, though they still consider it as just another delivery channel. According to a survey conducted by Ernst and Young, 84% of banks are planning to offer PC based services, and 61% are piloting or planning internet services. In this context the banks are slowly realizing that it is not just another delivery channel, it has more to it when we consider the following aspects: a. Internet is growing exponentially b. Most of the usage growth is in the most profitable customer segments. The strategy: Firstly, the bank have to develop internet presence and start building internal skills and infrastructure to support subsequently stages. This is a relatively
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low-cost exercise. The cost of one traditional branch will be more than that of the cost of setting up a fully functional internet banking site. E-mail and web server capability is enough to start with. They should focus on critical factors such as bandwidth available and firewall/security issues. They have to decide on the structure of the organization that will support internet banking activity. They should decide on the issues such as whether the new sew setup will be integral with the existing institution, a different branch or a different bank. Then they need to publicize e-mail contacts to customers so that the existing customers, who have e-mail capability and know-how, will be able to contact the bank using this medium. It is important to publicize the web presence through the major and minor search engine. It must be made sure that any internet user who uses search engine and enters keywords such as ?Bank? or the institution‘s name should be able to find the bank‘s website. It is extremely important not to underestimate the important of dedicating resource to establishing the ?web publicity‘. New mechanisms for this are appearing literally daily, and it takes a considerable amount of effort to keep up with the development The bank can also consider a corporate payment terminal. Delivered across the internet, using a specific application at the customer end, supplied by the bank, to handle EDI payment and account management in a secure environment, i.e., using the internet as a neutral transport mechanism only. They can also consider developing in conjunction with credit card companies, ?Internet only‘ payment tokens, such as credit cards without physical plastic enabled for internet payment capability only.
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Chapter-2 WHAT IS ONLINE BANKING
2.1 INTRODUCTION 2.2 FEATURES OF ONLINE BANKING 2.3 ADVANTAGES OF ONLINE BANKING 2.4 DISADVANTAGES OF ONLINE BANKING
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2.1 INTRODUCTION : WHAT IS ONLINE BANKING?
If you're like most people, you've heard a lot about online banking but probably haven't tried it yourself. You still pay your bills by mail and deposit checks at your bank branch, much the way your parents did. You might shop online for a loan, life insurance or a home mortgage, but when it comes time to commit, you feel more comfortable working with your banker or an agent you know and trust. Online banking isn't out to change your money habits. Instead, it uses today's computer technology to give you the option of bypassing the time-consuming, paper-based aspects of traditional banking in order to manage your finances more quickly and efficiently. Online banking is a great convenience for many people. Whether people use it to manage traditional accounts or switch all of their banking to an onlineonly firm, it is a wonderful improvement over the days when everything had to be done face-to-face. No matter what kind of banking is done online, it starts with a secure web site. Usually, the bank will have certain requirements to ensure password strength as well. This and other security measures ensure that online accounts are safe from tampering. From there, all of the necessary services can be accessed. Online banking is quite simple once the basics are understood. Depositing money is simple, and can be done in a number of ways. The most popular method is likely direct deposit. Many employers offer direct deposit of paychecks, and by providing them with your online bank account number, your checks will go right into that account. Other ways of depositing money include bank and wire transfers. Some accounts even allow customers to mail their checks in.
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Online bill payment allows users to pay their bills without mailing checks, and those who use web-based accounts typically prefer this and other electronic payment methods. Most types of bills can be paid via a debit card or electronic checks, as well. This makes it easy to eliminate the need for paper checks entirely. Still, many find it useful to have a few checks on hand for those few companies that haven‘t quite reached the modern age. The management of traditional accounts is another common use for online banking. Most banks offer online access to accounts, and all customers need to do to make use of the service is sign up through their bank‘s site. Once this is done, checking your balance, seeing which payments have cleared, and other common banking operations can be done from the computer. This eliminates the need to call or visit the bank for simple account maintenance needs.
Graph 2.1 Percentage of Internet users visiting banking sites
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Every online banking interface is slightly different, but all banks try to make things easy and intuitive for users. It won‘t take long for a new user to figure out exactly how everything works. Sign up for an online bank account or online access to your current one, and soon you‘ll wonder how you could have lived without it.
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2.2 FEATURES OF ONLINE BANKING
We need to be able to manage our finances from anywhere in the world. Rich online banking services are much more important than a physical location. Since I have been doing all of my banking online with quite a few different online banks as I looked for the best solution, I‘ve had a chance to really experiment with what works and what doesn‘t work for us. Here is a checklist of things to look for in an online bank. Some items you may be familiar with. Others might be new to you if it isn‘t something your current bank offer
1. Bill Pay Service - One of the biggest reasons for going with an online bank is to get really good bill payment services. Different banks handle bill payment different ways. Here are some things to think about (a) How many bills are you allowed to pay per month? (b) What are the fees for going over the limit? (c) Can the bill payment send physical checks to merchants who aren‘t set up to take electronic payments? (d) Do checks come from your account or from a third party service? For privacy reasons, it might be better to be able to pay someone without giving them your bank account number on the check. On the other hand, if the checks actually come from your account, the money doesn‘t get taken out until the check is cashed. (e) Can you set up reoccurring payments?
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2. Electronic Bill Notification - With electronic bills, your merchant (credit card company, gas company, electric company, etc.) sends an electronic bill to your bank. You can set it up to pay automatically or notify you for approval. This can be particularly good for people who are on the road because it reduces the amount of physical mail you have to somehow get read or forwarded to you.
Diagram 2.1 Preferred method of bill payment
3. Online Check Images- Most banks will show you an image of the check, which makes it really easy to balance your account if you can‘t remember
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what a particular payment was for. (Ideally, you should minimize the number of physical checks you write to reduce fraud)
4. Online Deposit Slip Images - Most banks just record the total with no image. It will let you see an image of each deposit slip. Having the images available can be very helpful if you ever have to prove something for tax purposes or need to remember where that $2581 deposit came from.
Graph 2.2 Online banking deposit trends graph
5. Reporting Tools - Most banks offer basic reporting tools that will let you see how much you have spent in each category you‘ve created. This may not be an issue if you use desktop money management software, but it still can be handy if you are traveling and want to see how much you‘ve paid on your mortgage over the past 12 months.
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6. Linked Accounts - Can you link your bank account with a brokerage account? Can you add your minor children as custodial accounts and manage them all centrally? If you and your spouse both set them up IRAs, is it easy to view them both along side the rest of your finances, or do you have to have a separate login for each IRA to keep them on separate SSNs? These are small things that many banks don‘t support, but it starts getting really complicated when you have to manage a bunch of accounts instead of having a single place to manage all of your money.
7. Convenient Deposit Methods - Since you may not be anywhere near the physical location of your bank, make sure you understand how to deposit money. Payroll can be set up on direct deposit, but there will be times when you need to deposit checks. Does the bank provide postage paid envelopes and deposit slips? Some banks work with FedEx or UPS stores to allow you to send in a deposit overnight for free.
8. Low ATM Fees and Convenient Locations - If you need to get cash, will the bank refund the ATM fees? Are there only certain ATMs that are free, and if so, are they located near places you normally go? Are the ATMs available nation wide so you can use them on vacation? What are the fees for using the ATM internationally and how is the exchange rate handled?
9. Integration with Desktop Software - If you use Microsoft Money, Quicken or something similar, you‘ll want to make sure your bank supports it. Make sure you understand if downloading transactions require you to login and manually download a file, or if your money management software can directly connect and download new transactions. If you are using
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Quicken on a Mac, make sure the bank is paying Quickens extortion fee so the files will work with Mac users.
10. Many Account Types - Some banks only offer basic checking and savings accounts. Ideally you want a bank that makes it easy to open money market accounts, IRAs, health savings accounts, etc. If you have to go to another institution to open a different type of account, it is more difficult to manage–especially if you are on the road. You want to be able to easily open a CD to take advantage of a higher interest rate, easily open an IRA to help reduce your tax liability, etc.
11. Free Money Transfers - Be sure to consider how easy it is to move money in and out of the account. You should be able to set up links with your accounts from other institutions to transfer money back and forth as necessary. Make sure you understand what type of fees are associated with these transfers. Good banks should allow a certain number of transfers per month with no fee. 12. Security Balanced with Convenience - Some banks spend so much effort trying to keep things secure that you‘ll find yourself automatically logged out of their website while you try to balance your account. You want security but you don‘t want it to get in the way of you doing your banking. Also check into what type of additional security features are available. For example, some banks will offer you an RSA keychain with a number that changes every 60 seconds. In addition to your password, you will need the number from that key in order to get access to your account.
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13. Ease of Use - This is something that most banks seem to struggle with. Right now I have my personal account with one online bank and my business accounts with another. I dread using the business accounts and I absolutely love using my personal account. At first I thought I was just more familiar with the bank where my personal accounts are, but I finally realize that it comes down to the ease of use. One is ok and the other is superb, but it makes a big difference.
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2.3 ADVANTAGES OF ONLINE BANKING
In olden days you need to go to the bank for every banking transaction. Sometimes you may find that the banks are closed or the banking hours are not suitable to you or location of the bank is not convenient to you. There are many difficulties you face when you go to your bank personally. To avoid these difficulties there is one solution, online banking. Consumer Online Banking No charge No charge No charge 1 N/A N/A N/A Business online Banking No charge No charge No charge 2 $ 2.00 N/A N/A Cash Management Online Banking No charge $ 40.00 No charge 10 $ 2.00 $ 15.00 No charge
Setup Monthly maintenance Bills Payment (unlimited) Number of login ID’s Additional login ID’s per month Wire transfers Electronic federal tax payment service (EFTPS) ACH Orginated files
N/A
N/A
No charge
Table 2.1 Bank‘s online banking price matrix
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You can check your bank balance and transactions, pay your bills online by typing the instructions on the internet. Over the last few years online banks have started to become more and more popular. Clearly there are benefits to having an online bank account so it is definitely a good idea to look into opening one. These days many traditional banks have started to offer online accounts so it may be a good idea to find out if the bank that you already deal with offers this service. If not you have lots of other options available to you. The other advantages of online banking are as follow: 1.Convenience: Unlike your corner bank, online banking sites never close; they're available 24 a day,7 day a week, there‘s only a mouse click away. 2. Ubiquity: If you're out of state or even out of the country when a money problem arises, you can log on instantly to your online bank and take care of business, 24/7. 3. Transaction speed: Online bank sites generally execute and confirm transactions at or quicker than ATM processing speeds.
4. Efficiency: You can access and manage all of your bank accounts, including IRAs, CDs, even securities, from one secure site. 5. Effectiveness: Many online banking sites now offer sophisticated tools, including account aggregation, stock quotes, rate alerts and portfolio managing programs to help you manage all of your assets more effectively. Most are also compatible with money managing programs such as Quicken and Microsoft Money.
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2.4 DISADVANTAGES OF ONLINE BANKING
Yes, online banking is generally secure, but it certainly isn't always secure. Identity theft is running rampant, and banks are by no means immune. And once your information is compromised, it can take months or even years to correct the damage, not to mention possibly costing you thousands of dollars, as well. Some online banks are more stable than others. Not all online setups are an extension of a brick-and-mortar bank. Some operate completely in cyberspace, without the benefit of an branch that you can actually visit if need be. With no way to physically check out the operation, you must be sure to thoroughly do your homework about the bank's background before giving them any of your money. Not all online transactions are immediate. Online banking is subject to the same business-day parameters as traditional banking. Therefore, printing out and keeping receipts is still very important, even when banking online. 1. Setting up an account may take time: In order to register for your bank's online program, you will probably have to provide ID and sign a form at a bank branch. Some banks even ask for photos 2. Legal issues: If you and your spouse wish to view and manage your assets together online, one of you may have to sign a durable power of attorney before the bank will display all of your holdings together. 3. Learning difficulties: Banking sites can be difficult to navigate at first. Getting acquitted with the banking sites software may require some time to read the tutorials in order to become comfortable in your virtual lobby.
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4. Site changes and upgrades: Even the largest banks periodically upgrade their online programs, adding new features in unfamiliar places. In some cases, you may have to re-enter account information. 5. Customer service: There is no personal contact with any of the staff, and if talk to any staff through the telephone, you have guarantee you are talking to the best person available 6. Internet account: You need to get an account with an Internet Service Provider (ISP) which may be another hectic experience 7. Security concern: Even though online banking sites are heavily encrypted, with the developing technology, it‘s hard to rule out the "hackers" who may access your bank accounts 8. Switching banks: This can be more cumbersome online than in person 9. Money usage: You can‘t spend your money from the online bank account as you wish, in the end; you will need to go to an ATM to withdraw money for usage. 10. Technical breakdowns: As with all technologies, online banking websites sometimes go down. If this happen when you closed your local bank or credit card accounts, you will definitely go penniless. However, even though online banking has some disadvantages, the advantages with no doubt outweigh. It is there for important for everyone to prepare for the unknown with an online bank account.
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Table 2.2 Advantages and disadvantages of online banking
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CHAPTER-3 OPPORTUNITIES IN ONLINE BANKING
3.1 OPPORTUNITIES IN ONLINE BANKING: ARE WE READY? 3.2 IS THERE A FUTURE IN ONLINE BANKING..? 3.3 WHY BANK ENCOURAGE ONLINE BANKING
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3.1 OPPORTUNITIES IN ONLINE BANKING: ARE WE READY?
It has always been a chicken-and-egg dilemma in business. Either firms wait for the market to mature until customers are ready for the products and services. Or, firms can go ahead and offer the products and services, hoping that their customers will catch on soon. The same is true for new products and services that have emerged and continue to emerge in the world of electronic banking (e-banking). Banking executives interviewed by Business World Online have different ways of resolving the issue. Some would go ahead with new ideas, wanting to take the first-mover advantage. Others would wait in the sidelines, but armed nevertheless just in the case the market take up suddenly increases.
Table 3.1 SBI-Growth in distribution network
Whether first-movers or latecomers, there is one partner in the e-banking game that is not waiting for the chicken to lay the egg, or wait for the egg to
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hatch into a chick. Technology providers are always up on their toes, like chicken ready to catch the early worm. Even smaller banks are beefing up their online banking offerings to include more payment options. Travis Sears, a vice president and electronic banking manager at Union Bank and Trust, a $2.5 billion-asset bank based in Lincoln, Neb., says his bank‘s deeper penetration into electronic payments is part of an overarching trend to automate all the bank‘s payments. (At present more than 70% of the bank‘s payments are sent through the automated clearing house and require no paper.). There‘s still a huge opportunity [to] migrate customers to chat and alerts from using the phone,? he says, adding that the chat function will become more appealing to customers as the bank integrates more budgeting and tracking within the online banking interface.
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3.2 IS THERE A FUTURE IN ONLINE BANKING..?
By this point, no one can dismiss online banking as a fad. However, it is worth considering whether the trend towards online financial transactions is going to slow or reverse in the years to come. There will continue to be people who resist online banking in favor of offline transactions just as there are people who prefer to keep their money in mattresses instead of putting it in banks. Whether these people will exert serious influence on the movement towards online banking can be examined by looking at the needs of modern consumers, and the interests of the banks themselves. 1. The Move to Online Business The global connectivity provided by the internet, combined with the fallout from the global financial crisis has encouraged a growing number of entrepreneurs to start their own businesses online. As an increasing number of people look to save themselves from unemployment or augment otherwise insufficient salaries by finding new ways to make money online, they will require new ways to send, receive, and invest their online funds.
2.The Rise of Mobile Banking As handheld mobile devices become more sophisticated, users are experimenting with more sophisticated transactions. Moving beyond ringtone downloads; consumers can now shop online and purchase software upgrades and augmentations through app stores. In addition to this buying and selling, anyone with a web browser on their phone can access their bank‘s online banking site to move and manage their money in more locations than ever before.
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3. Staffing Solutions As banks consolidate and grow larger, they are looking for more ways to cut costs, and reducing the number of full-time employees on their payroll is an attractive option. Encouraging customers to do their banking online allows banks to close smaller branches in outlying locations and use economies of scale to develop customer assistance centers in locations where the labor market is more favorable.
4. Physical Footprints Online banking is also more attractive to banks because a reduced physical footprint means reduced costs in other areas. In addition to saving the money that would normally be associated with operating and maintaining physical branches, no longer having to print and mail paper statements to customers would be a huge savings for banks. As an added bonus, banks have been able to take advantage of current pro-environment sentiment by marketing online banking as a ?green? alternative. By appealing to more mobile customers and more cost-conscious financial service providers alike, online banking continues to be an attractive option for everyone involved. However, when discussing the internet it is dangerous to assume that everything is going to be moved online; there will always be individuals, industries, and transactions that are grounded in the real world with no desire to change the way they do business.
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3.3 WHY BANK ENCOURAGE ONLINE BANKING
Online banking has enjoyed increased popularity, and some banks actually require it. From standard, brick-and-mortar institutions to cloud managed institutions, online banking offers flexibility and convenience for all involved.
1. Bank Advantages Each visit to a bank costs the institution money, whether in bank teller wages and benefits to security costs to maintenance costs. Online banking reduces those costs and increases the bank‘s profit margin. Online banking reduces the need for the number of physical locations and services offered within each. Because Customer Service Departments are united into fewer locations, asset sharing within those locations further reduce bank costs.
2. Customer Advantages Online security of financial data has evolved tremendously since the early days of online banking, and often transactions can be even more secure than those conducted in a drive through lane.
Online banking transactions require not only a secure login but also require secured password entry. In-person transactions are based on account information and a photo ID, both of which can be obtained ?under the radar.?Online banking transactions also track the Internet Protocol (IP) address of the computer used in the transaction. The IP can be traced to the method or mode of Internet access, often through an Internet Service
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Provider who always notes activity, computer, and actions performed under that IP address assigned to the ISP account holder. Whether a dynamic or changing IP address or a static or unchanging IP address is used, the ISP always records what IP address is assigned to what ISP account at any time.
Graph 3.1 Online bank transfer
Online Bill Pay processes reduce stolen or counterfeit checks which cost banks billions of dollars every month. Each online bill pay transaction allows for a grace period from the payment order date to the actual check delivery date, which also allows the account holder additional time to preview activity and account status.
3. Development Increasingly, more and more people are switching to electronic platforms for executing financial transactions. The wider usage of cell phone and internet
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certainly seems to be playing a role in blurring physical boundaries, and unlocking a whole new world of opportunities for banks in tapping newer customer segments and in recording greater volume of transactions. If latest RBI data on retail electronic payment systems is anything to go by, electronic banking is set to become the catalyst for change in the way money moves. Provisional data show that in FY09 to January, a total of 5,587.85 lakh transactions were executed through the electronic channel, a rise of 234.76 lakh transactions over the previous fiscal. This growth was facilitated by the introduction of real-time gross transfer (RTGS) and national electronic funds transfer (NEFT), which enabled fund transfers among account holders of the same bank as well as inter-bank transfers. The growth has also been aided by banks' efforts to offer innovative services and tighten security measures, and the increase in awareness of services available. RBI outlining guidelines on mobile banking, setting up of the National Payments Corporation of India and passage of the Payments and Settlement Act too have given a positive thrust to the growth in electronic payments. "FY10 will certainly herald an important phase for electronic banking in India and an upsurge in internet and ATM transactions," says Ashvin Parekh, partner and national industry leader, financial services, Ernst & Young. "At the same time, traditional fund transfer will continue to hold its own."Now, decisions can be taken remotely and the activities too can be undertaken in a centralised location.
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CHAPTER-4 Challenges in online banking
4.1 RURAL MARKET 4.2 GROWTH OF BANKING 4.3 GLOBAL BANKING 4.4 FINANCIAL INCLUSION 4.5 EMPLOYEES RETENTION 4.6 CUSTOMER RETENSION 4.7 ENVIRONMENTAL CONCERNS
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Developing countries like India, still has a huge number of people who do not have access to banking services due to scattered and fragmented locations. But if we talk about those people who are availing banking services, their expectations are raising as the level of services are increasing due to the emergence of Information Technology and competition. Since, foreign banks are playing in Indian market, the number of services offered has increased and banks have laid emphasis on meeting the customer expectations. Now, the existing situation has created various challenges and opportunity for Indian Commercial Banks. In order to encounter the general scenario of banking industry we need to understand the challenges and opportunities lying with banking industry of India.
4.1 Rural Market
Banking in India is generally fairly mature in terms of supply, product range and reach, even though in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. Consequently, we have seen some examples of inorganic growth strategy adopted by some nationalized and private sector banks to face upcoming challenges in banking industry of India. For example recently, ICICI Bank Ltd. merged the Bank of Rajasthan Ltd. in order to increase its reach in rural market and market share significantly. State Bank of India (SBI), the largest public sector bank in India has also adopted the same strategy to retain its position. It is in the process of acquiring its associates. Recently, SBI has merged State Bank of Indore in 2010.
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4.2 Growth of Banking
Foreign banks appear to have acted as technological innovators when competition increased, which added to the competitive pressure in the banking market. Finally, our results also indicate an increase in risk-taking behaviour, along with the whole deregulation process. It was found in the study of Goyal and Joshi (2011a) that small and local banks face difficulty in bearing the impact of global economy therefore, they need support and it is one of the reasons for merger. Some private banks used mergers as a strategic tool for expanding their horizons. There is huge potential in rural markets of India, which is not yet explored by the major banks. Therefore ICICI Bank Ltd. has used mergers as their expansion strategy in rural market. They are successful in making their presence in rural India. It strengthens their network across geographical boundary, improves customer base and market share.
4.3 Global Banking
It is practically and fundamentally impossible for any nation to exclude itself from world economy. Therefore, for sustainable development, one has to adopt integration process in the form of liberalization and globalization as India spread the red carpet for foreign firms in 1991. The impact of globalization becomes challenges for the domestic enterprises as they are bound to compete with global players. If we look at the Indian Banking Industry, then we find that there are 36 foreign banks operating in India, which becomes a major challenge for Nationalized and private sector banks. These foreign banks are large in size, technically advanced and having
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presence in global market, which gives more and better options and services to Indian traders.
Table 4.1 Banks service and their web site
4.4 Financial Inclusion
Financial inclusion has become a necessity in today‘s business environment. Whatever is produced by business houses, that has to be under the check
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from
various
perspectives
like
environmental
concerns,
corporate
governance, social and ethical issues. Apart from it to bridge the gap between rich and poor, the poor people of the country should be given proper attention to improve their economic condition. Dev (2006) stated that financial inclusion is significant from the point of view of living conditions of poor people, farmers, rural non-farm enterprises and other vulnerable groups. Financial inclusion, in terms of access to credit from formal institutions to various social groups. Apart from formal banking institutions, which should look at inclusion both as a business opportunity and social responsibility, the author conclude that role of the self-help group movement and microfinance institutions is important to improve financial inclusion. The study suggested that this requires new regulatory procedures and depoliticiation of the financial system.
4.5 Employees’ Retention
The banking industry has transformed rapidly in the last ten years, shifting from transactional and Customer service-oriented to an increasingly aggressive environment, where competition for revenue is on top priority. Long-time banking employees are becoming disenchanted with the industry and are often resistant to perform up to new expectations. Results indicated that personal, job, and organizational climate factors influenced the ego investment or job involvement of people in their jobs, which in turn influenced the intra-psychic reward of sense of competence that they experienced, which then directly influenced employees' job satisfaction. Saxena and Monika (2010) studied a case of 5 companies out of 1000 organizations and 8752 respondents surveyed across 800 cities in India by
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Business Today. The survey was on nine basic parameters like career and personal growth, company prestige, training, financial compensation and benefits and merit based performance evaluation. It was concluded that the biggest challenge for organizations is that when new employees appointed, it is difficult to merge them in organizational culture. Each organization has its own unique culture and most often, when brought together, these cultures clash. When there is no retention, employees point to issues such as identity, communication problems, human resources problems, ego clashes, and intergroup conflicts, which all fall under the category of ?cultural differences?.
4.6 Customer Retention
Levesque and McDougall (1996) investigated the major determinants of customer satisfaction and future intentions in the retail bank sector. They identified the determinants which include service quality dimensions (e.g. getting it right the first time), service features (e.g. competitive interest rates), service problems, service recovery and products used. It was found, in particular, that service problems and the bank‘s service recovery ability have a major impact on customer satisfaction and intentions to switch. These were: service, feeling, chemistry, relationship and confidence, dialogue, complaints and retention. All except the first two of these categories of experience were found to enhance retention, implying that the informants have found that strategies for enhancing both satisfaction and retention are similar. The strongest connection between retention and satisfaction strategies turned out to be in terms of relationship and confidence.
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Table 4.2 Total internet banking user in India
4.7 Environmental Concerns
It is quite clear from the recently formed Copenhagen Climate Council (CCC) that there is a severe need for environmental awareness among all the countries of the world. CCC published Thought Leadership Series on Climate Change which is a collection of inspirational, concise and clearly argued pieces from some of the world's most renowned thinkers and business leaders on climate change. The objective of the pieces is to assist in enhancing the public and political awareness of the actions that could have a significant impact on global emissions growth and to disseminate the message that it is time to act. The Thought Leadership Series was aimed at explaining and spreading awareness of the key elements in the business and policy response to the climate problem. The rationale for the Thought Leadership Series was to change the focus of people.
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CHAPTER - 5 ARCHITECTURE FOR E-BANKING
5.1 HISTORY AND PLANNING OF ONLINE BANKING 5.2 INTERNET AND ITS IMPACT ON BANKING 5.3 BANKING SOFTWARE
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5.1 HISTORY AND PLANNING OF ONLINE BANKING
History of Online Banking From its humble start in the late 80s, online banking has morphed into a sophisticated and convenient way of accessing finances that many of us now simply couldn't live without.
In the late 80s and early 90s ?home banking‘ was rolled out, allowing us to check our account balances from our home computer. It seems unbelievable now but banks would actually mail us a floppy disk with software that we could install onto our PC like the one pictured at right. Then, using a dial-up modem, we could talk to the bank's systems. We could check balances and make transfers but we usually paid for the privilege. Needless to say, the world of online banking had commenced its evolution.
Then in the mid 90s a big leap occurred with banks setting up websites for consumers to access both product and contact information. Then within a few years the banks launched internet banking functionality. This made the process of doing your banking online easy and accessible to everyone. We could pay bills, order statements and view up to 90 days of transaction history, all with a few clicks of the mouse.
After this great leap forward, however, we saw very little change in our online banking facilities. Many facilities still today only have 100 days of transaction history available. If we have a query on a transaction we have to ring up. We are still asked for our name and address when we apply online for a new product, despite banking with that same institution all our adult
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lives. So there continue to be small sources of annoyance that should have been smoothed out by now.
We have noted online banking moving towards newer levels of functionality and ease of use over the past few years. Many of these changes are based on an overall shift to the ?secure side? of the website. Originally, the main reason to login to your banking website was to transact. Now we are seeing websites that allow far more to be done when logged in, creating a personalized online experience.
The best banking websites allow people to manage a full range of their banking needs from their own secure online portal. They do this by providing a streamlined, intuitive platform with access to a wide range of information and functionality.
Gaining access to your financial records is becoming easier – there is more information instantly available and accessing it is becoming more intuitive. Communication between bank and customer is the key and online banking is bringing new and simple ways of sharing information. Secure messaging to and from customers through the internet banking portal is doing away with the excessive lag times of snail mail. Turnaround times for all types of requests are now benefiting, a positive and impressive development for all involved.
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5.2 INTERNET AND ITS IMPACT ON BANKING
Since the Great Depression, consumers have largely chosen their banks based on how convenient a bank's branches were to their homes or offices. Well aware of this, banks spent billions of dollars building up their branch networks to secure the most convenient locations in the most attractive communities. Today, branches serve as the cornerstone of competitive advantage in the retail banking industry. It is no wonder then that the Internet has inspired a crisis of confidence in that industry. With its 24- hour access, national footprint, low barriers to entry and attractive demographics, the Internet has confronted retail banks with a series of difficult strategic questions: How soon will the Internet have an impact on retail banking? How will it change the competitive dynamics of the industry? What needs to be done to prepare for these changes? To help answer these questions, Booz-Allen & Hamilton's financial services group recently conducted a study that included the first-ever survey of banks that operate sites on the Internet. Current and Future Prospects For now, banks don't have much to worry about, the survey revealed. For example, even though 285 North American banks have opened Internet sites, only 1 percent of those sites are actually offering banking services. The majority of sites, more than 70 percent, are little more than glorified brochures, providing only general information. But this underdeveloped state won't last for long. In fact, 90 percent of the survey respondents have aggressive plans for improving the size and
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functionality of their Internet banking offerings. So much so that within three years, 69 percent of the banks plan to offer such advanced services as bill payments over the Internet. Based on these plans, as well as estimates of the overall growth of the Internet, the study projects that the number of bank Internet sites will explode to almost 1,500 within three years. Now that's something to worry about. The Internet banking has opened a new avenue to exploit to make a distinction between banks and deliver a superior service compared to competitors. It involves the use of the Internet by consumers to get in touch with their banks and check their accounts and carry out banking transactions. The migration to Internet banking has greatly influenced the distribution policies of banks and the mode of interaction with the banking and service experience for consumers. Thus, retention and attraction of consumers are largely determined by the quality of services delivered. The aim of this research is to study the impact of the quality of online banking services on customers intention to revisit the banking site and to maintain a lasting relationship with it. It will also verify the mediating role of satisfaction in that relationship. It is twofold. From a theoretical viewpoint, this research enriched the few studies that have explored the concept of perceived quality of online services. From a managerial point of view, it points to the bankers the importance of promoting satisfaction factors which could produce favorable behavioral intentions among customers.
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5.3 BANKING SOFTWARE
The software packages for banking application in India made their beginning in the middle of 80s, when the banks spurred on by the RBI and the Rangarajan committee Report, started computerizing the branches in limited manner. The approach was to empanel a few hardware vendors who would also develop the software as per the bank‘s specification and also help to install at the branches. The early 90s saw the plummeting of hardware prices and advent of cheap and inexpensive but high-powered PCs and servers and bank went in for what was called Total Branch Automation (TBA) packages. Architecturally, some were centralized solutions with a powerful central server maintaining the database with multiple terminal; others went in for distribution processing with multiple PCs as nodes linked on a LAN. The platforms used ranged from simple UNIX-C to powerful RDBMS like Oracle, etc. The middle and late 90s witnessed the tornado of financial reforms, deregulation, globalization, etc, coupled with rapid revolution in communication technologies and evolution of novel concept of ?convergence‘ of computer and communication technologies, like internet, mobile/cell phones, etc. The arrival of foreign and private banks with their superior state-of-the-art technology based services pushed Indian banks also to follow suit by going in for the latest technologies so as to meet the threat of competition and retain customer base. This also brought in revolutionary products and services. Categories Of Packages
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The IT packages and services available in India can be broadly classified into the following six types: 1. Standalone branch-level packages 2. Multi-branch solution 3. Foreign packages 4. Packages for specialized niche areas 5. Service branch/high-volume transaction processing packages 6. IT Services. Thus, we have a wide spectrum of banking software available in the market to cater to the various needs of the banking industry. 1. Standalone branch-level Packages These are usually written in FoxPro, C or DBASE and handle specific function at the branches; these are sometimes networked on a LAN to simulate a TBA environment. But there are also high-end packages with a central server terminals. Some of them use sophisticated RDBMS like ORACLE as back-end and provide user friendly front end with Windows GUI. 2. Multi-Branch Solution These are used to network a cluster of branches in a city or can be distributed, networking being achieved through Wide Area Network (WAN) on terrestrial lines/high speed lines/satellite network and now even wireless. 3. Foreign Packages
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Examples are bank master, Kappiti, Sanchez etc. These need to be extensively customized to suit Indian requirement- but their strength lie in their proven capabilities in developing and offering modern/globel banking products/services that Indi is just ushering in. 4. Packages For Specialized Niche Areas These packages include Asset-Liability Management (ALM), Treasury Management, Trading/Dealing Room activities, Custodial
Services/Depository Participant, etc. These are high-end packages with sophisticated analytical and decision tools. 5. Service Branch/High-Volume Transaction Processing Packages These packages include, clearing, drafts issue/payments/reconciliation (Remittances), Bills (payments/collection/purchases), Dividend Warrant Processing, inter-branch reconciliation etc. These are often developed and implemented by service providers to whom the work is outsourced. 6. IT Services These are not packages in the sense, these are developed to handle specific problems like disaster recovery, virus protection, security handling, linking/networking multiple legacy systems between themselves or to new delivery channels like ATMs, etc.
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CHAPTER - 6 PAYMENT AND SETTLEMENT SYSTEMS
6.1 Payment Methods 6.2 Electronic Fund Transfers 6.3 Automatic Teller Machines 6.4 Electronic Clearing Service 6.5 Electronic Data Interchange 6.6 Financial Networks In India 6.7 Real-Time Gross Settlement Systems 6.8 Digital Certificates
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6.1 PAYMENT METHODS
Traditional payment methods include cash, cheques, electronic fund transfers, and credit cards. Payment by cash means an immediate physical transfer of funds, unlike other methods of payment, which involves changing notations in the ledgers of financial institutions. Each method of payment differs in terms of the regulations covering it and the degree of privacy, anonymity, and protection it conveys to consumers.
Table 6.1 online banking and their bill payment service Cash Cash is defined as coin and currency (paper money). If cash is lost or stolen, the unlucky party suffers the loss. From the perspective of consumers and merchants, an instantaneous transfer of value occurs in cash transactions; thus payment and payment finality are simultaneous. National Money Most money exists not as notations in the ledgers of depository institutions (bank and other financial institutions). Debiting one party‘s account and crediting another party‘s account execute notational money transactions.
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Depository institutions must be ready to convert notational checking deposits into cash on demand. The Indian government operates a system of deposit insurance that protects depositors against loss if the depository institution fails. Thus depositors are protected against the risk of losing all of their money on deposit. National money transaction are generally not anonymous and consequently may not be completely private either. Banking laws protect the confidentiality of an individual‘s financial records when other parties seek access to them. Payment Of Cheques The most common form of notational money is an account with cheque facility. A cheque is an order authorizing the transfer of money from one account to another; it is not a token that represents value, as cash does. When a cheque is accepted as payment, the recipient‘s bank collect the value of cheque after presenting it to the bank on which it is drawn. Because a cheque can be returned for insufficient funds, the bank may not make the fund available to the recipient until the day a returned cheque would have been received – a log of three days for local cheque and over five days for non –local cheques. Consequently, merchants who are paid with a cheque may have to wait several days before they receive their money. Traveller’s cheques are also included in a bank‘s net transaction accounts and thus are subject to reserve requirements. Traveler‘s cheques issued by a bank are covered by deposit insurance, but traveller‘s cheque issued by a non-depository institution (such as American Express) are not
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6.2 ELETRONIC FUND TRANSFERS (ETFs)
Electronic funds transfer (EFT) is the electronic exchange or transfer of money from one account to another, either within a single financial institution or across multiple institutions, through computer-based systems. The term covers a number of different concepts: Cardholder-initiated transactions, where a cardholder makes use of a payment card
?
Direct deposit payroll payments for a business to its employees, possibly via a payroll service bureau
?
Direct debit payments, sometimes called electronic checks, for which a business debits the consumer's bank accounts for payment for goods or services
?
Electronic bill payment in online banking, which may be delivered by EFT or paper check
?
Transactions involving stored value of electronic money, possibly in a private currency
?
Wire transfer via an international banking network (carries a higher fee in North America and in Poland)
?
Electronic Benefit Transfer
In 1978 the U.S. Congress passed the Electronic Funds Transfer Act to establish the rights and liabilities of consumers as well as the responsibilities of all participants in EFT activities in the United States.
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Electronic funds transfers are basically electronic checks that automatically debit the payer's account and credit the payee's account. EFTs do not require clearinghouses because the routing information is contained in the electronic message. EFTs require a secure network and operating standards. There are various EFT networks, but the most common type of EFT is the automated clearinghouse transaction (ACH), which many businesses and people use to pay recurring bills. The ACH Network is operated by the Federal Reserve and the Electronic Payments Networks, and most banks use this network in the same way that they used clearinghouses—to exchange payment information. An ACH transaction consists of the account numbers of the payer, the payer's bank, the payee's bank, the account number of the payee, and the amount of the payment. An ACH transaction has the same basic type of information on the payer as a paper check with its bank routing number and the payer's account number. It differs from the paper check in that it also has the payee's bank routing number and the payee's account number so it can be completed as a single transaction. Some retailers, such as Wal-Mart, can convert a paper check directly into an ACH transaction by scanning the check for the bank's routing number and customer's account number. The customer then signs and gets a receipt. This saves the retailer the cost and risk of transporting paper checks. According to the Federal Reserve, 8% of checks written in 2006 were converted electronically into ACH payments, while only 1% were converted in 2003.
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6.3 AUTOMATIC TALLER MACHINE (ATMs)
An automated teller machine or automatic teller machine (ATM), also known as an automated banking machine (ABM) in Canada, and a Cash point (which is a trademark of Lloyds TSB), cash machine or sometimes a hole in the wall in British English, is a computerized telecommunications device that provides the clients of a financial institution with access to financial transactions in a public space without the need for a cashier, human clerk or bank teller. Using an ATM, customers can access their bank accounts in order to make cash withdrawals, debit card cash advances, and check their account balances as well as purchase prepaid cellphone credit. If the currency being withdrawn from the ATM is different from that which the bank account is denominated in (e.g.: Withdrawing Japanese Yen from a bank account containing US Dollars), the money will be converted at an official wholesale exchange rate. There are no hard international or government-compiled numbers totaling the complete number of ATMs in use worldwide. Estimates developed by ATMIA place the number of ATMs in use currently at over 2.2 million, or 1 ATM per around over 3000 people in the world. For the purpose of analyzing ATM usage around the world, financial institutions generally divide the world into seven regions, due to the penetration rates, usage statistics, and features deployed. Four regions (USA, Canada, Europe, and Japan) have high numbers of ATMs per million people. Despite the large number of ATMs, there is additional demand for machines in the Asia/Pacific area as well as in Latin America. ATMs have yet to reach high numbers in the Near East and Africa.
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6.4 ELECTRONIC CLEARING SERVICE (ECS)
It is a mode of electronic funds transfer from one bank account to another bank account using the services of a Clearing House. This is normally for bulk transfers from one account to many accounts or vice-versa. This can be used both for making payments like distribution of dividend, interest, salary, pension, etc. by institutions or for collection of amounts for purposes such as payments to utility companies like telephone, electricity, or charges such as house tax, water tax, etc or for loan installments of financial institutions/banks or regular investments of persons. Types of ECS There are two types of ECS ECS (Credit) : ECS (Credit) is used for affording credit to a large number of beneficiaries by raising a single debit to an account, such as dividend, interest or salary payment. ECS (Debit) : ECS (Debit) is used for raising debits to a number of accounts of consumers/ account holders for crediting a particular institution. Working of ECS ECS payments can be initiated by any institution (called ECS user) who have to make bulk or repetitive payments to a number of beneficiaries. They can initiate the transactions after registering themselves with an approved clearing house. ECS users have also to obtain the consent as also the account particulars of the beneficiary for participating the ECS clearings.
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The ECS user's bank is called as the sponsor bank under the scheme and the ECS beneficiary account holder is called the destination account holder. The destination account holder's bank or the beneficiary's bank is called the destination bank. The beneficiaries of the regular or repetitive payments can also request the paying institution to make use of the ECS (Credit) mechanism for effecting payment. The ECS users intending to effect payments have to submit the data in a specified format to one of the approved clearing houses. The list of the approved clearing houses or the list of centres where the ECS facility has been provided is available at. The clearing house would debit the account of the ECS user through the account of the sponsor bank on the appointed day and credit the accounts of the recipient banks, for affording onward credit to the accounts of the ultimate beneficiaries. The beneficiary has to furnish a mandate giving his consent to avail of the ECS facility. The advantages to the banks (a) Banks handling ECS get freed of paper handling. (b) Paper handling also creates lot of pressure on banks as they have to encode the instruments, present them in clearing, monitor their return and follow up with the concerned bank and customers. (c) In ECS banks simply get the payment particulars relating to their
customers. All they need to do is to match the account particulars like name, a/c number and credit the proceeds
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6.5 ELECTRONIC DATA INTERCHANGE
For several hundred years, commerce has been based upon the movement of written documents. These documents contained the information that one company needed to convey to another company in order to do business. Over a period of time the documents started to take on standard names such as Invoice, Credit Note and Order. However, the documents were certainly not of any standard layout. They did not need to be because the recipient was always a human being and humans have the ability to read, interpret and rationalise. About all that could be said of an invoice document, for example, was that it would contain header information about the parties involved, detail lines about the products, quantities and prices, and finally some totalling information. In the early 1950s, computers started to be used by large companies for their accounting and payroll needs. Throughout the following decades, computers rapidly took over task after task until they were involved not only in accounting, but in production, administration and all other areas of commerce. But one thing did not change. The computers still produced printed documents in various non-standard formats. This situation was not too bad for those sending a document but was much worse for the receiver. Many documents must be sent from one company‘s computer to their trading partner‘s computer. Computers cannot easily read written documents, and getting them to understand what they have just read is an almost impossible task, so the receiving company would have to employ personnel to re-key the information from the received documents into the company‘s computer system.
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The EDI Model There are three logical levels or ?layers? of standards required to achieve EDI information transfer, each layer having its own controlling standards organisations (although some organisations may define more than one layer). This structured approach to EDI allows for the maximum flexibility and also enables future developments in technology and standards to be easily incorporated. From the lowest layer upward, these three layers are: The Communications Standards - Defining just how the data is to be transferred from the sender to the receiver. The Syntax Standards - Defining what overall standards format the EDI file will be in. The Message Standards - Defining exactly what the message is and what information is to be placed where within this message. These standards are going to be further described in the following sections but it is important to remember that whatever standards are used within each layer, the layering process is required to allow flexibility. For example not all users will wish to use a specific communication protocol; some may even wish to copy the data onto a floppy disk and send it in the post! So the communications level is now a floppy disk but the higher levels still remain.
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6.6 FINANCIAL NETWORK IN INDIA
It had been widely felt earlier that one of the biggest bottlenecks in the banking system in the country was the lack of a system that ensures fast, safe and secure intra-bank and inter-bank communication. In fact, this deficiency had been hampering to a large extent the development of a modern, integrated payment system in the Nineties. Most of the cases of complaint against banks, in those days related to the time taken for transfer of funds across banks and between cities and to the delays in the collection of outstation cheques. Clearly, the non-availability of a reliable communication backbone had been one of the main contributors to this state of affairs. The functioning of the terrestrial line networks was hardly optimal in terms of efficiency, although of late, there has been some change in this area for the better. Indian Financial Network (INFINET) Financial Network is the communication backbone for the Indian Banking and Financial Sector. All Banks, Public Sector, Private Sector, Cooperative, etc., and the premier Financial Institutions in the country are eligible to become members of the INFINET. The INFINET is a Closed User Group (CUG) Network for the exclusive use of Member Banks and Financial Institutions. It uses a blend of communication technologies such as VSATs and Terrestrial Leased Lines. Presently, the network consists of over 950 VSATs located in 127 cities of the country and utilises one full transponder on INSAT 3B. INFINET, an acronym for the Indian Financial Network, uses a blend of communication technologies such as VSATs and Terrestrial Leased Lines.
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The HUB of the VSAT network is situated at IDRBT, and consists of an 11metre antenna and other satellite earth station equipments. Presently, the network consists of over 950 VSATs located in more than 180 cities of the country and utilises one full transponder on INSAT 3B. SWADHAN, The Shared Payment Network Service Foreseeing the escalating demand and need for ubiquitous ATMs in the country, The Indian Bank Association has promoted SWADHAN in the year 1997 for its member banks to share their ATMs with other participating banks. ATM (Automated Teller Machine) is the foremost among the electronic payment gateways available in the banking segment. It made its presence in India in the year 1988. It is a computerized device that enables bank customers to withdraw cash outside banking hours. ATMs also accept cash and cheques, provide statements, effect transfers. Operated by cash cards and a personal identification number (PIN), they are placed on outside walls of banks. Off late, the deployment locations of ATMs include hospitals, showrooms, shopping malls, and airport. The member bank's customer can withdraw money anytime from any of the ATM irrespective of the bank with which the customer has an account. It offers services beyond cash withdrawals, like utility bill payment, fund transfer and deposits. SWADHAN widens the scope of ATM usage in the country in a cost effective manner. A member bank of SWADHAN can increase its geographical presence without deploying ATMs in all the locations; instead it can share and use ATMs of other banks, thereby saving a substantial amount.
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6.7 REAL TIME GROSS SETTLEMENT SYSTEM (RTGS)
The RTGS system implemented by the Reserve Bank has been in operation for more than four years. The system has also stabilized over the years and has been witnessing increased coverage in terms of bank branches and transaction volume. The volume of RTGS (Real Time Gross Settlement System ) transactions is increasing rapidly. RTGS settled 1.94 million transactions in the month of March 2009 as against 0.72 million transactions in March 2008. Customer transactions settling in RTGS presently constitute 89 percent of total RTGS transactions and are growing. 1. It is treiterated that in a Straight Through Processing (STP) environment, standardization is very much necessary and uniformity in message format is a pre requisite for the success of STP. 2. RTGS Customers have been complaining that there is no uniformity on information provided to the customer in the pass books / account statements by different banks. Some banks merely indicate `RTGS credit‘ without details while other banks are giving sender's bank account number or UTR number of the transactions etc. RBI has therefore, advised that a) A bank customer receiving RTGS credit shall be provided with the name of the remitter in his account statements / pass book. b) A bank customer sending a RTGS remittance shall be provided with the name of the beneficiary in his account statements / pass book. The banks are free to provide any additional information as they deem necessary / useful.
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6.8 DIGITAL CERTIFICATES
Definition A digital certificate provides secure authentication to users of computerbased systems such as email, software and Web applications. Digital certificates can be used in lieu of the traditional username-password system to access restricted contents. Digital certificates are based on a public-private key system, which acts like a lock and key pair. When you have a digital certificate, your public key is freely accessible, while the private key is kept secret and is given only to trusted recipients.
Universities generally issue institutional ID cards only after ensuring or validating that you are a bona fide student, faculty, or staff member. In PKI terms, this is called the registration process—verifying that you are eligible to receive a certificate and verifying the information in it. Similar to an important ID card, once a digital certificate is issued, it should be managed with care. How is a digital certificate created? In creating digital certificates a unique cryptographic key pair is generated. One of these keys is referred to as a public key and the other as a private key. Then the certification authority—generally on your campus—creates a digital certificate by combining information about you and the issuing organization with the public key and digitally signing the whole thing. This is very much like an organization‘s ID office filling out an ID card for you and then signing it to make it official. In PKI terms, the public key for an individual is put into a digital document, along with information about that individual, and then the digital document
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is signed by the organization‘s certification authority. This signed document can be transmitted to anyone and used to identify the subject of the certificate. However, the private key of the original key pair must be securely managed and never given to anyone else. As the private key is a very large prime number, it is not something an individual memorizes; rather, the private key must be stored on some device, such as a laptop computer, PDA, or USB key ring. If you send a copy of your certificate to another computer to authenticate yourself, what keeps someone with access to that computer from reusing it later to pretend to be you? Unlike an ID card which is valuable by itself, the digital certificate is useless without the associated private key. That is why protecting the private key is so important. The private key must never be given to anyone else nor left somewhere outside of control by the owner.
Types of Certificates There are different types of certificates, each with different functions and this can be confusing. It helps to differentiate between at least four types of certificates. You can see samples of some of these different types of certificates in your browser. • Root or authority certificates. These are certificates that create the base (or root) of a certification authority hierarchy, such as Thawte or CREN. These certificates are not signed by another CA—they are self signed by the CA that created them. When a certificate is self-signed, it means that the name in the Issuer field is the same as the name in the Subject Field. • Institutional authority certificates. These certificates are also called campus certificates. These certificates are signed by a third party verifying
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CHAPTER – 7 SECURITY CONSIDERATION IN E-BANKING
7.1 THE NEED FOR SECURITY 7.2 RISK MANAGEMENT FOR INTERNET BANKING 7.3 CONTROL MEASUES AT SYSTEM LEVEL AND NETWORL LEVEL 7.4 LEGAL ASPECTS AND FRAMEWORK 7.5 SECURITY POLICY
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7.1 THE NEED FOR SECURITY
As Internet-lurking identity thieves hone their dark skills, banks and financial institutions need to employ more advanced technology to protect the identity and information of online banking customers, according to a recently release study conducted by the Federal Deposit Insurance Corporation (FDIC). "User names" and passwords should be supported in Internet banking transactions with new and better ways of identifying real customers from fraud artists trying to "highjack" bank accounts, recommended FDIC security analysts. Identity theft, particularly account hijacking, continues to grow as a problem for the financial services industry and for consumers," said FDIC Chairman Don Powell in a press release. "Our review illustrates that ID theft is evolving in more complicated ways and that more can and should be done to make online banking more secure." The new findings are in a supplement to an FDIC study issued in December about ways to fight "phishing" scams, in which criminals send fraudulent emails to trick consumers into providing confidential financial information that can lead to illegal access to bank accounts. The supplement reviews and responds to public comments that the FDIC received about the original study, identifies the most recent trends in identity theft, and discusses a variety of new technologies that could be used to make Internet banking more secure.
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In the latest findings, the FDIC concluded that the risk assessment financial institutions are required to perform regarding information security also should address customer authentication. The supplement also said that if an institution offers Internet banking, it has an obligation to properly secure that service. This extra level of security for online accounts, often referred to as "multifactor authentication," would be used in addition to the traditional passwords. These new security features may include "tokens" issued to customers that generate new passwords every 60 seconds, software that can identify the computer that a customer uses to access online accounts, or actually contacting a customer by phone to make sure that he or she is the one attempting to access the account.
Graph 7.1 Graph on internet in safe hand
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The FDIC, along with other federal banking oversight agencies are expected to issue regulatory guidelines later this year to financial institutions about improving the security of customer authentication methods. The latest FDIC findings are expected to be considered in the development of that guidelines. "The FDIC does not intend to propose one solution for all, but the evidence…indicates that more can and should be done to protect the security and confidentiality of sensitive customer information in order to prevent account hijacking," the supplement said. It added that consumers are concerned about online security and may be receptive to using a new form of authentication "if they perceive it as offering improved safety and convenience."
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7.2 RISK MANAGEMENT FOR INTERNET BANKING
The past few years have been characterized by rapid changes in technology and the introduction of corporate and retail banking services through the Internet. The unprecedented speed with which new technologies are being adopted, the ubiquitous and global nature of electronic networks, the integration of e-banking platforms with legacy systems and the increasing dependence of banks on third party information service providers, all dramatically amplify the magnitude of risks to which banks are exposed. Types of Internet Banking Financial institution Internet offerings can be broadly classified into three groups with distinct risk profiles:
?
Informational—Offers information about the bank's products and services ("brochureware") and is low risk
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Communicative—Offers account-related information and possibly offers updates to static data (such as addresses). Since access is permitted to the bank's main systems, the risk is material.
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Transactional—Allows customers to execute financial transactions and carries the highest risk.
Risk Management Principles Managing the risks and implementing controls for Internet banking initiatives follows the same principles as other risk management processes. The most dangerous thing is to treat this as a technical problem and leave it to IT management to manage. As the previous enumeration of the risks has
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shown, this is a general management issue which needs attention from senior management. A general framework of risk management is set forth below. Legal and Reputational Risk Management Legal and reputational risk management can be broken down into the following:
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Privacy—Banks should articulate a privacy policy and should communicate this to customers. Customers must be allowed opt-out options, and great care must be exercised before sharing customer information with outside entities. If customers are from a different jurisdiction, then the strongest privacy law may apply.
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Availability—Banks should have business continuity and contingency planning processes to help ensure continuous availability of Internet banking services. This is challenging because of the potential for high transaction volume and the demand for 24-hour, seven-day-a-week availability.
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Incident response—Banks should formulate appropriate incident response plans to detect, manage, contain and minimize problems arising from internal and external attacks.
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The risks arising from Internet banking are not restricted to information security areas, but span across all the traditional banking areas. Risk management for Internet banking should be directed by senior management and incorporated within existing risk management disciplines in the organization. Control procedures need to keep pace with rapid changes in technology.
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7.3 CONTROL MEASURES AT SYSTEM LEVEL AND NETWORK LEVEL
Information system hardware, software, networks and data need to be protected by built-in controls to ensure their security. Effective controls ensure accuracy, integrity and safety of information system resources and activities associated with it. They can minimize errors, fraud and destruction in the Internet worked information systems. Different types of controls are available in administrative and software security they are: ? Input controls, ? Output controls, ? Procedural controls,
?
Facility controls
System Level Control System level security is concerned with the level of standalone system/terminal. The normally used control measures at a system level are Password, Antiviruses, and Firewall Password : The front line of defense against intruders is the password system. The password serves to authenticated the ID of the individual and logging on to the system. In turn the ID provide the security. The ID is used what is referred to as discretionary access control. For Example, by listing the IDs of the user may grant permission to them to read files owned by that user. Antiviruses : The ideal solution to the threat of viruses is prevention – do not allow a virus to get into the system in the first place. This goal is in
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general impossible to achieve, although prevention can reduce number of successful viral attacks. The next best approach is to do a following, ? Detection ? Identification ? Removal
Diagram 7.1 Safe world of online banking Network Level Control
The other types of classification of security measures, apart from the system level are the network level security measures. They provide security to network and the elements of a network as a whole. For this purpose either firewall or cryptographic techniques are used.
Firewalls : A firewalls is the point at which your private company network and a public network, such as the Internet connect. A firewall system is the
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hardware/software configuration, which sits at this perimeter, controlling access into and out of your company‘s network. New ways are constantly being developed to compromise these systems while in theory, firewall allows only authorized users and stopping unwanted activities on the internet network. Firewall can also be deployed within an enterprise network to compartmentalize different servers and networks in effect controlling access within the network. For Example, an enterprise may want to separate the accounting and payroll server from the rest of the network and only allow certain individuals to access the information. The 3 common types of firewall are as follows: a) Packet-filters b) Application-level gateways and c) Circuit-level gateways.
Cryptography : The process of systematic encoding of data before transmission so that an unauthorized person cannot decipher it is called as data encryption. There are different types of encryption techniques but each is suitable depending upon the situation.
In the process of sending a message, the sender sends the encrypted data that is governed by an algorithm and has a key, which is changed periodically. At the receiving end that data is decrypted using the key. Because the key is the only means that can decrypt. And there is no compulsion that the sender and the receiver should be at standard spots.
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7.4 Legal Aspects and Framework
During the research It could found that the literature on regulatory aspect on online baking is very less. Shedding the conventional brick and mortar banking style, the Indian banking has entered the new forte of online/internet banking, though of late. This being the transition period, the banking community is facing immense challenge and issues of feasibility also popup. I. Feasibility of Online banking in India The redtapism in public sector banking and lesser consumer base is being attributed to as the reasons for the Indian banks to enter into the online banking this late. With the rapid development in the technological infrastructure (security, confidentiality is being mainly referred to) and the legal framework being better equipped, the online bank has become a feasible mode of banking in India. II. Challenges In the Internet banking system, information is considered as an asset and so worthy of protection. However, the present system of authentication does not address the security aspect in full. This calls for an urgent need to acclimatize the whole system. According to Online Banking Association, member institutions rated security as the most important issue of online banking. There is a dual requirement to protect customers' privacy and protection against fraud.
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Another major issue is that of Data Protection and the need for a legal and regulatory framework. On the technological front the Indian Internet banking system is facing many hurdles. The problems include operational risks, security risks, system architecture risks, reputational risks and legal risks. Phishing is another issue that needs attention. Experts suggest that simple rules such as not sharing login IDs and passwords with anyone, would keep customers safe. III. Future It would obviously take much time before the online banking could be called a fully alternative banking mode to the conventional one. Legal and crossborder risks can be avoided through proper customer identification devices, information screening techniques, periodic reviews on compliance with various laws, and gaining knowledge of various national laws (applicable) and guide the customers through their cross-border dealings. The security issues can be tackled by having the bank's systems technologically equipped to evade operational and security risks. Reputational risks can be prevented by testing of the system before implementation, developing contingency plans and creating back-up facilities. Customer education and awareness also need to addressed, as unless the customers are taken into confidence and made comfortable with the working of online banking all the technological development will go in vain.
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7.5 SECURITY POLICY
While First National Bank works to protect your banking privacy, you will also play an important role in protecting your accounts. There are a number steps you can take to ensure that your Online Banking account information is protected: 1. Don't reveal your NetTeller ID or Password to anyone else. Your NetTeller ID and Password are designed to protect your banking information, but they will only work if you keep them to yourself. 2. Change your Online Banking Password frequently. 3. Don't walk away from your computer if you are in the middle of an Online Banking session. 4. After entering your NetTeller ID, verify your personal identification image that you selected before entering your Password. If you see your personal identification image this confirms that you are accessing First National Bank‘s website. 5. Once you have finished your Online Banking session, sign off before visiting other Internet sites. Online Banking is private & secure First National Bank is committed to making your Online Banking experience safe and secure. We have taken many measures to ensure your privacy, including:
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1. Information Encoding We use the latest encoding technology to ensure that your private information cannot be intercepted. Encryption is a way to rewrite something in code, which can be decoded later with the right "key". When you request information about your accounts, the request is sent encrypted to First National Bank. 2. Personally Selected Account Names First National Bank does not display your account numbers over the Internet. Instead, we ask you to choose a "pseudo" name for each of your accounts. 3. Individual ID & Password Information In order to access First National Bank's Online Banking, you must enter a unique NetTeller ID and Password. 4. Password Security System To keep unauthorized individuals from accessing your account by guessing your Password, we have instituted a Password security system. If your Password is entered incorrectly three consecutive times, the user is "locked out" of the system for 24 hours. Your account is not accessible via Online Banking throughout this 24-hour lockout period 5. Automatic Log-Off If you are logged on to Online Banking but do not perform any activity for 10 minutes, you will not be able to proceed until you "re-log" on to the system.
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CHAPTER- 8 RECENT TRED OF IT IN BANKING
8.1 The Branch Renaissance 8.2 The migration to an Online Environment 8.3 Customer Relationship Through Portals 8.4 The Digital Age of Banking
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8.1 THE BRANCH RENAISSANCE In presence of e-banking banks also are recognizing that the branch is still the cornerstone of retail banking. Banks are focusing their efforts on improving revenues through sales of complex higher-margin services and products, and they are finding that branch is most effective delivery channel for this purpose. Their ability to leverage the branch, however has been impeded by legacy systems and outdated applications as they no longer can support innovative delivery strategies. Improvement in Internet Banking Banks are increasingly convinced that ROI from Internet can extend beyond simple cost-to-serve equations and direct revenue models. Due to the enhancement in Internet banking and user-friendliness, internet banking‘s ROI now is poised to generate revenue indirectly by improving customer satisfaction with internet banking. Expanding Automation Of Loan Process As internet rates look up, banks are scrambling to develop marketing and IT strategies geared towards maintaining strong growth in organizations. Next generation solution will provide users with greater work process automation capabilities and better integration with third party applications, thereby eliminating many of the manual processes still in place today. Better service to a Smaller Business So far small business have been chronically undeserved by banks. The classic example is the application of a retail internet banking solution to serve these businesses, which has been the leading cause of low adoption to
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date. Banks however are increasingly recognizing they could garner a larger share of small, In an effort to better serve them and attract their business, banks will deploy internet banking solution built specifically for small businesses. Check Imaging With the help of latest technology, the full potential of check imaging technology can realized. Check imaging which had an ignominious start in 1990s, is about to make a comeback drive by economic and technological factors. It began generating ripple in the late1990s, with re-pass image capture and is currently propelling a tidal wave, which will sweep in check truncation and image exchange. Cash Management While most bank have large bank corporate banking solution in place, a large number of bank transaction are still being completed on window-based solutions. However many banks are to all of their customer over to browser based solutions, because full functionality is available through this channel. Convergence in Banking By the turn of this twenty first century, the biggest banks in the industrial world have become complex financial organizations that offer a wide variety of services to the international market and control billion of dollars in cash and assets. Supported by the latest technology, banks are trying to identify new business niches, develop customized services, implement innovative strategies and exploit new market opportunities.
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8.2 THE MIGRATION TO AN ONLINE ENVIRONMENT
With the rapid shift of business into the online environment, the pressure to enhance market value, latest expansions and consolidations there can be not doubt that the current trends in retail banking are going to confront financial services providers. The important trend of customer increasingly preferring securities as investment vehicles, has been visible for last ten years, but is now significantly accentuated. Individually each of these trends has already had or will have considerable effect on retail business: combined together, they will ensure that banking landscape will experience greater change over the next five to ten years than experienced over the previous twenty years. New Distribution Channels As more household will have broadband internet connections, new approaches will evolve to provide advisory services. Data voice and image will integrated and put the bank‘s branch on screen in the customer‘s living room. Online-banking consumers can do well by doing good, improving financial control while eliminating the paper bills, statements and checks that harm the environment – saving 17 million trees and avoiding 4 billion tons of greenhouse gases a year – Marketing Charts reports. According to a recent report from Javelin Strategy & Research, ?2007 Online Banking and Bill Payment: Trends, Forecasts, and Strategies for Reinvigorating Growth and Adoption,? finds that those who have yet to use online banking have become more entrenched in their objections over time, saying they ?prefer to deal with people? or because of fears of fraud.
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Diagram 8.1 Migration to an online banking In assessing other trends illustrated by the report, author Mary Monahan said, ?People manage their assets and bills online to gain control of time, finances and safety. Bankers can meet consumer needs while providing vital environmental benefits.? ?In addition, emerging features such as two-way mobile or email alerts and preset user-defined limits and prohibitions (UDLAPs) can transform today‘s overwhelming flood of online information into an experience that is green, safe and practical for everyone.?
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8.3 CUSTOMER RELATIONSHIP THROUGH PORTAL The 80s and 90s were marked by an unprecedented development in information and communication technologies. This movement was motivated, in particular, by the need for companies to remain competitive in markets characterized by an increase in customer numbers and in the supply of services (Venkatraman, 1994). The introduction of technology-based solutions therefore came about as a way of differentiating companies from their customers‘ point of view. This evolution contributed towards a change in many companies‘ strategies and, in particular, the relations they establish with customers (Ricard et al, 2001). It is therefore essential to research the impact that the introduction of these technologies has on existing company customer relations. The relationship approach concept was first introduced by Berry (1983) and refers to all marketing activities carried out by a company in order to establish, develop and, above all, maintain customer relationships (Berry, 1983; Morgan and Hunt, 1994). Although there is no consensus as to the definition of relationship marketing (Shirvastava and Kale, 2003; Proença and Fernandes, 2005), the underlying principle of RM involves maximizing the long-term benefits for both parties involved. Discussion has recently arisen on the strategic benefits of adopting the relationship approach in the banking sector (Bennett and Durkin, 2002). It is essential for the banks to know its customers well, building a strong, trusting relationship with them – which is particularly important in the financial services sector due to the complexity of many of its products (Diacon and Ennew, 1996; Bejou et al, 1998) –, commitment, honesty, cooperation between the institution and
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its customers (Tyler and Stanley, 1999; Rexha et al, 2003), as well as customer satisfaction. Research Methodology Discussion of Result
This study seeks to examine the impact of the use of Internet Banking on the relationship approach used in retail banking: ?In what way is the impact of the use of Internet Banking shown in the relationship between the bank and its customer?? The dimensions of the concepts under study are presented in Figure 1. The study explores the way in which the various dimensions of the use of Internet Banking and the relationship approach affect each other, seeking to understand, ultimately, the relationship between the two basic concepts.
INTERNET BANKING ? Frequency of use ? Intensity and degree of use ? Diversity of use (place of access or type of product) ? Duration of use
BANKING RELATIONSHIP ? Duration/ Continuity ? Adaptability ? Equity ? Importance of the quality/commissions ? Commitment
Diagram 8.2 Internet banking and customer relationship
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8.4 DIGITAL AGE OF BANKING
The banking industry believes financial institutions will embrace digital checks quickly because image exchange -- the exchange of images rather than original paper -- is expected to cut the volume of paper in circulation dramatically, eventually reducing transportation and other check-processing costs. For example, some paper checks have to be flown across the country before clearing, costing banks billions of dollars annually. More than 40 billion checks are written annually in the United States, and up to 20 people may physically handle a single check throughout its lifecycle. On average, banks store three copies of each check written, for an annual total of more than 150 billion copies. Additionally, banks historically have been required by law to keep detailed paper records of bank statements, including copies of original checks, but now the laws are changing so that banks can use digital documentation. How Does It All Work? The truth is, banks are looking forward to the day when a scanned image of a check can be zapped to another bank, into the depository and then back to the customer's bank. As a first step, many banks already are allowing employees and customers to view digital images of checks online. As the number of online banking customers increases, so will the rate of replacement of original paper checks in monthly statements. The next step will be the proliferation of scanned imaging -- which works by scanning a check's front and back, then making it available at Web-based ATMs or bank-teller stations. From there, a copy can be printed for customers upon request.
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Graph 8.1 Graph on online payment by age group Two technologies behind digital archiving, imaging and exchange are content management and Web services. Content management is actually a set of technologies for creating, managing, integrating, Web-enabling and delivering digital content to employees, customers and, in our case, check writers. The technology allows users to access, retrieve and move all kinds of digital images. Together, technologies like content management and Web services are making the digital evolution of banking real and immediate. Digital archiving and digital technologies will reduce labor and mailing costs and will help improve service to banking customers. Look for it at a bank near you.
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CASE STUDY ICICI BANK - Investment In Technology Yielding Rich Dividends Today
Bank Profile Established in 1994, ICICI Bank is today the second largest bank in India and among the top 150 in the world. In less than a decade, the bank has become a universal bank offering a well diversified portfolio of financial services. It currently has assets of over US$ 79 billion and a market capitalization of US$ 9 billion and services over 14 million customers through a network of about 950 branches, 3300 ATM's and a 3200 seat call center (as of 2007). The hallmark of this exponential growth is ICICI Bank‘s unwavering focus on technology. Key Business Drivers ICICI Bank was set up when the process of deregulation and liberalization had just begun in India and the Reserve Bank of India (India‘s central bank) had paved the way for private players in the banking sector, which at that time was dominated by state-owned and foreign banks. Serving the majority of the country‘s populace, state owned banks had a large branch network, with minimal or no automation and little focus on service. Foreign banks, on the other hand, deployed high-end technology, had innovative product offerings, but had a very small branch network that serviced only corporate's and individuals with high net-worth. Sensing an untapped opportunity, ICICI Bank decided to target India‘s burgeoning middle class and corporate's by offering a high level of customer service and efficiency that
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rivaled the foreign banks, on a much larger scale, at a lower cost. A crucial aspect of this strategy was the emphasis on technology. ICICI Bank positioned itself as technology-savvy customer friendly bank. To support its technology focused strategy, ICICI Bank needed a robust technology platform that would help it achieve its business goals. After an intense evaluation of several global vendors, ICICI Bank identified Infosys as its technology partner and selected Finacle, the universal banking solution from Infosys, as its core banking platform. An open systems approach and low TCO (Total Cost of Ownership) were some of the key benefits Finacle offered the bank. Unlike most banks of that era, ICICI Bank was automated from day one, when its first branch opened in the city of Chennai. Some of the reasons cited by the bank for their decisions to select Finacle include Finales‘ future-proof technology, best-of-breed retail and corporate banking features, scalable architecture and proven implementation track record. Solution Overview One of the biggest challenges for Finacle was ensuring straight through processing (STP) of most of the financial transactions. With the ICICI group having several companies under its umbrella, Finacle needed to seamlessly integrate with multiple applications such as credit cards, mutual funds, brokerage, call center and data warehousing systems. Another key challenge was managing transaction volumes. ICICI Bank underwent a phase of organic and inorganic growth, first by acquiring Bank of Madura followed by a reverse merger of the bank with its parent organization, ICICI Limited. The scalable and open systems based architecture, enabled Finacle to successfully manage the resultant increase in transaction levels from 400,000 transactions a day in 2000 to nearly 2.1 million by 2005 with an
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associated growth in peak volumes by 5.5 times. With Finacle, the bank currently has the ability to process 0.27 million cheques per day and manage 7000 concurrent users.
Over the years, the strategic partnership between ICICI Bank and Infosys that started in 1994 has grown stronger and the close collaboration has resulted in many innovations. For instance, in 1997, it was the first bank in India to offer Internet banking with Finacle‘s e-banking solution and established itself as a leader in the Internet and eCommerce space. The bank followed it up with offering several e-Commerce services like Bill Payments, Funds Transfers and Corporate Banking over the net. The internet is a critical element of ICICI Bank‘s award winning multi-channel strategy that is one of the main engines of growth for the bank. Between 2000 and 2004, the bank has been able to successfully move over 70 percent of routine banking transactions from the branch to the other delivery channels, thus
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increasing overall efficiency. Currently, only 25 percent of all transactions take place through branches and 75 percent through other delivery channels. This reduction in routine transactions through the branch has enabled ICICI Bank to aggressively use its branch network as customer acquisition units. On an average, ICICI Bank adds 300,000 customers a month, which is among the highest in the world.
Share of Transactions Channels March 2000
Share of Transactions March 2004 25 % 43 %
Branches ATM's Internet & Mobile Call Centers
94 % 3%
2%
21 %
1%
11 %
Reaping The Benefits A powerful, scalable and flexible technology platform is essential for banks to manage growth and compete successfully. And Finacle provides just the right platform to ICICI Bank thus fueling its growth.
The bank has successfully leveraged the power of Finacle and has deployed the solution in the areas of core banking, consumer e-banking, corporate e99
banking and CRM. With Finacle, ICICI Bank has also gained the flexibility to easily develop new products targeted at specific segments such as ICICI Bank Young Stars- a product targeting children, Women's Account addressing working women and Bank@campus targeting students.
ICICI Bank is today recognized as a clear leader in the region and has won numerous accolades worldwide for its technology-driven initiatives. In 2003, the bank received the best multi-channel strategy award from The Banker magazine and this year it was rated as the 2nd best retail bank in Asia by The Asian Banker Journal. The bank has effectively used technology as a strategic differentiator, thus not only redefining the rules of banking in India, but also showcasing how technology can help in transforming a bank‘s business.
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CONCLUSIONS & RECOMMENDATIONS
CONCLUSION: ? People are not confident enough to whether to rely completely on online banking. There is hesitancy in their minds with regards to preference. So they use both the techniques of banking i.e. Online and Traditional. ? Because of the complexity and the unawareness in the people regarding the online banking, there is less utilization of the online banking services provided by the banks. ? People are not sure whether their account is completely secured in online banking. Security concern is the main and the core reason why people do not tend to use online banking. ? People in India are not aware of the full utility of online banking and the services that can be availed of in online banking. ? Most of the Indian population are salaries employees who do not have that volume of transaction that can be used for online transaction.
RECOMMENDATION: After analyzing the entire study on online banking with respect to both the primary and the secondary data, the following recommendations can be put forth:? The infrastructure for the development is not being implemented in way that could be beneficial.
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? There are various obstacles in the banking scenario with regards to guidelines and issues for functioning. This has led to decline in the usage of the online banking service of the banks. ? The people having accounts can be urged to take up an internet banking facility. They should be motivated rather than just being told that there exists a service of online banking. ? There are more people who are not actually aware of all the benefits that they reap out of the transaction of online banking. They should be proper awareness. ? Most of the people o not count online banking due the problems of security concerns. Proper security software should be developed and people should be convinced that their accounts are secured in online transactions.
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Glossary
Bankne :A communication software to provide message and file transfer between branches of banks and across banks.
Cryptography : It is the science of using mathematics to encrypt and decrypt information. Digital certificate : A digital certificate is an electronic ?certificate? that contains information about a user and is used (among other things) to verify who the user is. Digital certificate make use of Public Key Cryptography. The public key is stored as part of the digital certificate. The private key on the user‘s computer, or in some hardware such as smart cards, i-keys etc
Digital Signature
: A digital signature is a way to ensure that a electronic
document (e-mail, document, text file, etc.).
Electronic Banking telephone and computer.
: Banking by means of electronic devices like
Extranet : Ti is a private business network of several cooperating organizations located outside the corporate firewall.
Firewall : Protection systems that monitor all internet or external communication
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activity at a site. It closes all connection attempts from unauthorized users. May provide activity logs to identify intruders, examine programs and files as they are downloaded for virus to ensure that users downloading files and programs have the authority to do so.
Indian Financial Network (INFINET) : The INFINET is primarily a TCP/IP based network. It is a Closed User. Group (CUG) Network and uses a blend of communication technologies such as VSATs and Terrestrial Leased Lines.
Intranet : An intranet is an internal corporate network built using Internet and World Wide Web standards and products. It is used by the employees Of the organization to gain access to corporate information.
Data Base Management System (DBMS) : A set of computer programs that controls the creation, maintenance, and utilization of the databases of an organization.
Information System : A system which accepts the data resources as input to process them and provide output in the form of information products.
Local Area Network (LAN) : An interconnected group of intelligent microcomputers or terminal within a small geographic location.
Mainframe : A large size of computer system, typically with a separate central processing unit, as distinguished from microcomputer and minicomputer
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Protocol : A set of rules and procedures for the control of communications in a communication network.
Public Key Infrastructure (PKI) : This provides an electronic identity to a person through the issuance of a digital certificate and a private cryptographic key, usually stored in a secure media such as a smart card or an i-key or even a floppy disk. The person could make use of the identity to digitally sign documents or transactions.
Real Time Gross Settlement System (RTGS) : It is a settlement process, minimizes settlement risks by settling individual payments in real time in the books of account, held at the Central Bank. Under RTGS, practically, instant settlement ensures fast, secure, final and irrevocable settlement of payment transactions.
TCP/IP : Transmission Control Protocol/Internet Protocol. A de facto network architecture standard for many companies.
Topology : Geometric arrangement of computer.
Transaction Processing System (TPS) : An information system that processes data arising from the occurrence of business transaction.
Wide Area Network (WAN) : A communication network that is spread out over a wide geographical area.
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BIBLIOGRAPHY
Reference Book
Reference website
www.ehow.com/list_6603416_challenges-electronic-banking.html www.isrj.net/August/2011/Commerce_Emerging_Trends_in_Banking_Chall enges_and_Opportunities.html www.scribd.com/doc/38577189/E-banking-Challenges-and-Opportunities www.pulakchowdhury.com/the-3-biggest-benefits-of-online-banking.php www.corporate- clients.commerzbank.com/en/metanavigation/files/ 2007_11_ online-security.pdf www.fool.com/Money/Banking/Banking12.htm banking.about.com/od/securityandsafety/Scams_Security_Safety.htm
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doc_557696595.docx
PROJECT REPORT ON ONLINE BANKING CHALLENGES AND OPPORTUNITIES BY Ms. DRASHTI CHANDRAKANT CHAUHAN T.Y.B.COM. (BANKING AND INSURANCE) ACADEMIC YEAR 2012-2013
PROJECT GUIDE PROF. ARCHIS SAHSRABUDDHE
PARLE TILAK VIDYALAYA ASSOCIATION‘S M.L.DAHANUKAR COLLEGE OF COMMERCE DIXIT ROAD, VILE-PARLE (E) MUMBAI-400 057.
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CERTIFICATE
I, hereby certify that Ms. DRASHTI CHANDRAKENT CHAUHAN of Third Year Bachelor of Commerce (Banking and Insurance), Parle Tilak Vidyalaya Association‘s, M.L.Dahanukar College of Commerce has completed the project on ONLINE BANKING
CHALLENGES AND OPPORTUNITIE in Semester V of the academic year 2012-2013. The information and facts as submitted in the project are true and original to the best of our knowledge and information. Internal Examiner/ Project Guide:
Co-ordinator:
External Examiner Principal
Date : _______ Place: _______
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3
DECLARATION
I, DRASHTI CHANDRAKANT CHAUHAN of PARLE TILAK VIDYALAYA ASSOCIATION‘S,
M.L.DAHANUKAR COLLEGE OF COMMERCE of T.Y.B.Com. (Banking and Insurance) (Semester V) hereby declare that I have completed this project on ONLINE BANKING CHALLENGES AND OPPORTUNITIE in the Academic year 2012-2013. The information submitted is true and original to the best of my knowledge.
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ACKNOWLEDGEMENT
To list who all have helped me is difficult because they are so numerous and the depth is so enormous. I would like to acknowledge the following as being idealistic channels and fresh dimensions in the completion of this project. I take this opportunity to thank the University of Mumbai for giving me chance to do this project. I would like to thank my Principal, Dr.Madhavi S. Pethe for providing the necessary facilities required for completion of this project. I take this opportunity to thank our Coordinator Prof.Mrs.Mitali Shelankar, for her moral support and guidance. I would also like to express my sincere gratitude towards my project guide Prof. Archis Sahsrabuddhe whose guidance and care made the project successful. I would like to thank my College Library, for having provided various reference books and magazines related to my project. Lastly, I would like to thank each and every person who directly or indirectly helped me in the completion of the project especially my Parents and Peers who supported me throughout my project.
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EXECUTIVE SUMMARY
Technology is a very dynamic force. It is changing the competitive landscape of the financial services and banking industry and is influencing the way their products and services are sold and delivered. There is an impact of IT on variety on sectors in the economy as a whole; these includes business, industry, education, medicine and health care, government, defence services, securities, management organizations, individuals and economy and individuals. With the advent of online transaction, speedy and secure settlement of payments has lead to the globalization of financial services. Better customer services is provided using IT aided development such as introduction of ATM, Magnetic Ink Character Recognition (MICR) cheques, credit cards, debit cards, smart cards, digital e-cash and electronic fund transfer. The day-to-day transaction in the banks and insurance companies are automated which provide better services in processing transactions. Throughout the world, the financial service provider are looking towards the new concept of ?anytime, anywhere, anyhow‘ banking. To facilitate usage by customer in different countries, provide multicurrency accounts and cards, denominated in the major currencies. Back this up with electronic, real time, multi currency account to account transfer capability. For every system about to be developed, consider whether all or part of it could be delivered using Intranet, and how much commonality there is with other Web based deliverables.
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CONTENTS
ONLINE BANKING CHALLENGES AND OPPORTUNITIES
NO.
CHAPTER
PAGE NO.
1.
INTRODUCTION TO ONLINE BANKING
1-9
2.
WHAT IS ONLINE BANKING
10 - 24
3.
OPPORTUNITIES IN ONLINE BANKING
25 - 32
4.
CHALLENGES IN ONLINE BANKING
33 - 39
5.
ARCHITECTURE FOR E-BANKING
40 - 47
6.
PAYMENT AND SETTEMENT SYSTEMS
48 - 62
7.
SECURITY CONSIDERATION IN E-BANKING
63 - 75
7
8.
RECENT TREND OF IT IN BANKING
79 - 84
CASE STUDY (ICICI Bank – Investment in Technology Yielding Rich Dividends Today)
85 - 89
CONCLUSION AND RECOMMENDATION
90 -91
GLOSSARY
92 - 94
BIBLIOGRAPHY
95
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LIST OF DIAGRAMS
SR. NO. DESCRIPTION OF DIAGRAM
1. 2.1 Preferred Method Of Bill Payment
PAGE NO.
15
2.
7.1 Safe World Of Online Banking
70
3. 4.
8.1 Migration To An Online Banking 8.2 Internet Banking And Customer Relationship
80 82
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LIST OF TABLES
SR NO.
DESCRIPTION OF TABLE
PAGE NO.
1.
1.1 Position Of I-Banking Among Various E-Channels
4
2.
1.2 Number Of Population And Internet Users
7
3.
2.1 Bank’s Online Banking Price Matrix
20
4.
2.2 Advantage & Disadvantage Of Online Banking
24
5.
3.1 SBI – Growth In Distribution Network
26
6.
4.1 Bank Service And Their Website
36
7.
4.2 Total Internet Banking User In India
39
8.
6.1 Online Banking & Their Bill Payment Service
49
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LIST OF GRAPHS
SR. NO.
1.
DISCRIPTION OF GRAPH
1.1 Online Service Users
PAGE NO.
3
2.
2.1 Percentage Of Internet Users Visiting Bank Sites
12
3.
2.2 Online Banking Deposit Trends Graph
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4.
3.1 Online Bank Transfer
31
5.
7.1 Graph On Internet In Safe Hand
65
6.
8.1 Graph on Online Payment By Age Group
84
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Chapter-1 INTRODUCTION TO ONLINE BANKING
1.1 E-BANKING – AN INTRODUCTION 1.2 E-BANKING IN INDIA 1.3 INTERNET BANKING STRATEGY
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1.1
E-BANKING AN INTODUCTION
Definition: The provision of banking services through electronic channels and customer can access the data without time and geographical limitation. Introduction: Before the advent of the Internet, Electronic banking has existed for around two decades, but it was limited to direct-dial services. The increase in ecommerce has speeded up this process in recent years due to a rise in the use of internet. Most of the banks are now offering electronic banking services with increasing competition from Internet-enabled, or online, banks and other financial organization. Both computer and telephone banking cover the term electronic banking or e-banking. Using computer banking, a customer‘s computer either dials directly into his bank‘s computer or gains access to the bank‘s computer over the internet. Using telephone banking, the customer can control his bank accounts by giving the bank instruction over the telephone. Both computer and telephone banking involve the use of passwords, which give access to the customer‘s account. Banking transaction can be carried out 24 hours a day using these methods. For instance. A customer can view recent transactions, get print out of statement of account and transfer funds between accounts and make payment or transfer funds using computer banking. Many banks have provided the facility to set-up, amend or cancel standing orders.
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Online banking (or Internet banking or E-banking) allows customers of a financial institution to conduct financial transactions on a secure website operated by the institution, which can be a retail or virtual bank, credit union or building society.
Graph 1.1 Online service users To access a financial institution's online banking facility, a customer having personal Internet access must register with the institution for the service, and set up some password (under various names) for customer verification. The password for online banking is normally not the same as for telephone banking. Financial institutions now routinely allocate customer numbers (also under various names), whether or not customers intend to access their online banking facility. Customer numbers are normally not the same as account numbers, because a number of accounts can be linked to the one customer number. The customer will link to the customer number any of
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those accounts which the customer controls, which may be cheque, savings, loan, credit card and other accounts. To access online banking, the customer would go to the financial institution's website, and enter the online banking facility using the customer number and password. Some financial institutions have set up additional security steps for access, but there is no consistency to the approach adopted.
E-Delivery channel Computerized Branches ATM I-Banking M-Banking T-Banking Average 200001 93.29 23.01 11.80 7.37 3.69 27.38 200102 93.80 30.89 16.25 8.82 4.41 30.83 200203 94.34 34.87 23.08 10.64 6.68 33.92 200304 94.31 36.55 32.27 12.42 9.50 37.01 200405 93.98 37.76 35.08 91.53 12.30 39.73 200506 99.13 39.09 40.37 17.53 13.62 41.94 200607 100 45.90 51.44 25.89 19.38 48.52 200708 95.55 35.43 30.04 14.6 9.94 35.11
Table 1.1 Position of I-Banking among various e-channels Banks have traditionally been in the forefront of harnessing technology to improve their products, services and efficiency. They have, over a long time, been using electronic and telecommunication networks for delivering a wide range of value added products and services. The delivery channels include direct dial – up connections, private networks, public networks etc and the devices include telephone, Personal Computers including the Automated Teller Machines, etc. With the popularity of PCs, easy access to Internet and World Wide Web (WWW), Internet is increasingly used by banks as a channel for receiving instructions and delivering their products and services
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to their customers. This form of banking is generally referred to as Internet Banking, although the range of products and services offered by different banks vary widely both in their content and sophistication. Different services provided under E-Banking, ? Online Bill Payment ? Shopping ? Ticket booking ? Pre paid mobile recharge ? Market watch ? Personal home page ? Investment services ? Online applications ? Personal updates
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1.2
E-BANKING IN INDIA
The backbone of every country is the financial sector, comprising banks, stocks exchanges and insurance organizations. It is instrumental in implementing and bringing about economic reform. Any changes in this sector will have a sweeping impact on the country.The cost per transaction to the investors and other intermediaries in the market has come down significantly, besides bringing total transparency in the market operation as a result of the introduction of automation in stock markets.
The reforms introduced in 1990s have initiated a healthy competition among the banks. As a result, they have started improving customer service and find technology to be an ideal tool to achieve this objectives. In a manner, the banking and financial service sector-being the early adopters of any new technology defined the roadmap for future adoption. Banks are now focusing on three core issues: ? How to meet customer service expectation? ? How to cut costs? ? How to manage competition?
At present, the total Internet users in the country are estimated at 9 lakhs. However, this is expected to grow exponentially to 90 lakhs by 2003. Only about 1% of Internet users did banking online in 1998. This increased to 16.7% in March 2000. The growth potential is, therefore, immense. Further incentives provided by banks would dissuade customers from visiting physical branches, and thus get ?hooked‘ to the convenience of arm-chair banking.
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YEAR 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2009 2010
Users 1,400,000 2,800,000 5,500,000 7,000,000 16,500,000 22,500,000 39,200,000 50,600,000 40,000,000 42,000,000 81,000,000 100,000,000
Population 1,094,870,677 1,094,870,677 1,094,870,677 1,094,870,677 1,094,870,677 1,094,870,677 1,094,870,677 1,112,225,812 1,112,225,812 1,129,667,528 1,156,897,766 1,173,108,018
% Penetration 0.1 % 0.3 % 0.5 % 0.7 % 1.6 % 2.1 % 3.6 % 4.5 % 3.6 % 3.7 % 7.0 % 8.5 %
Table 1.2 Number of population and internet user
Banks like ICICI Bank Ltd., HDFC Bank Ltd. etc. are thus looking to position themselves as one stop financial shops. These banks have tied up with computer training companies, computer manufacturers, Internet Services Providers and portals for expanding their Net banking services, and widening their customer base. The customer base of kiosks and permeation through the cable television route to widen customer base are other priority areas in the agendas of the more aggressive players. Centurion Bank Ltd. has taken up equity stake in the teauction.com portal, which aims to bring together buyers, sellers, registered brokers, suppliers and associations in the tea market and substitute their physical presence at the auctions announce.
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1.3 INTERNET BANKING STATEGY
Internet will radically alter the banking and finance industry. This will have a much larger business impact than ATMs and telephone banking. It will have a fundamental way of doing business as the capacity exists for anyone, anywhere in the world at a reasonable cost, with reasonable performance, and in a standard manner. So far many banks are treating the Internet, specifically in terms of their web presence, as just another element in the evolution of the delivery channel in the order of Branch- ATM-Telephone Banking-Home Banking-Internet. Though it is a logical assumption and to a certain implications by assuming that the internet delivery channel is an adjunct to existing banking relationship and traditional delivery methods. Having understood the importance of it some banks are setting up websites, and some are implementing internet delivered transactions, though they still consider it as just another delivery channel. According to a survey conducted by Ernst and Young, 84% of banks are planning to offer PC based services, and 61% are piloting or planning internet services. In this context the banks are slowly realizing that it is not just another delivery channel, it has more to it when we consider the following aspects: a. Internet is growing exponentially b. Most of the usage growth is in the most profitable customer segments. The strategy: Firstly, the bank have to develop internet presence and start building internal skills and infrastructure to support subsequently stages. This is a relatively
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low-cost exercise. The cost of one traditional branch will be more than that of the cost of setting up a fully functional internet banking site. E-mail and web server capability is enough to start with. They should focus on critical factors such as bandwidth available and firewall/security issues. They have to decide on the structure of the organization that will support internet banking activity. They should decide on the issues such as whether the new sew setup will be integral with the existing institution, a different branch or a different bank. Then they need to publicize e-mail contacts to customers so that the existing customers, who have e-mail capability and know-how, will be able to contact the bank using this medium. It is important to publicize the web presence through the major and minor search engine. It must be made sure that any internet user who uses search engine and enters keywords such as ?Bank? or the institution‘s name should be able to find the bank‘s website. It is extremely important not to underestimate the important of dedicating resource to establishing the ?web publicity‘. New mechanisms for this are appearing literally daily, and it takes a considerable amount of effort to keep up with the development The bank can also consider a corporate payment terminal. Delivered across the internet, using a specific application at the customer end, supplied by the bank, to handle EDI payment and account management in a secure environment, i.e., using the internet as a neutral transport mechanism only. They can also consider developing in conjunction with credit card companies, ?Internet only‘ payment tokens, such as credit cards without physical plastic enabled for internet payment capability only.
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Chapter-2 WHAT IS ONLINE BANKING
2.1 INTRODUCTION 2.2 FEATURES OF ONLINE BANKING 2.3 ADVANTAGES OF ONLINE BANKING 2.4 DISADVANTAGES OF ONLINE BANKING
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2.1 INTRODUCTION : WHAT IS ONLINE BANKING?
If you're like most people, you've heard a lot about online banking but probably haven't tried it yourself. You still pay your bills by mail and deposit checks at your bank branch, much the way your parents did. You might shop online for a loan, life insurance or a home mortgage, but when it comes time to commit, you feel more comfortable working with your banker or an agent you know and trust. Online banking isn't out to change your money habits. Instead, it uses today's computer technology to give you the option of bypassing the time-consuming, paper-based aspects of traditional banking in order to manage your finances more quickly and efficiently. Online banking is a great convenience for many people. Whether people use it to manage traditional accounts or switch all of their banking to an onlineonly firm, it is a wonderful improvement over the days when everything had to be done face-to-face. No matter what kind of banking is done online, it starts with a secure web site. Usually, the bank will have certain requirements to ensure password strength as well. This and other security measures ensure that online accounts are safe from tampering. From there, all of the necessary services can be accessed. Online banking is quite simple once the basics are understood. Depositing money is simple, and can be done in a number of ways. The most popular method is likely direct deposit. Many employers offer direct deposit of paychecks, and by providing them with your online bank account number, your checks will go right into that account. Other ways of depositing money include bank and wire transfers. Some accounts even allow customers to mail their checks in.
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Online bill payment allows users to pay their bills without mailing checks, and those who use web-based accounts typically prefer this and other electronic payment methods. Most types of bills can be paid via a debit card or electronic checks, as well. This makes it easy to eliminate the need for paper checks entirely. Still, many find it useful to have a few checks on hand for those few companies that haven‘t quite reached the modern age. The management of traditional accounts is another common use for online banking. Most banks offer online access to accounts, and all customers need to do to make use of the service is sign up through their bank‘s site. Once this is done, checking your balance, seeing which payments have cleared, and other common banking operations can be done from the computer. This eliminates the need to call or visit the bank for simple account maintenance needs.
Graph 2.1 Percentage of Internet users visiting banking sites
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Every online banking interface is slightly different, but all banks try to make things easy and intuitive for users. It won‘t take long for a new user to figure out exactly how everything works. Sign up for an online bank account or online access to your current one, and soon you‘ll wonder how you could have lived without it.
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2.2 FEATURES OF ONLINE BANKING
We need to be able to manage our finances from anywhere in the world. Rich online banking services are much more important than a physical location. Since I have been doing all of my banking online with quite a few different online banks as I looked for the best solution, I‘ve had a chance to really experiment with what works and what doesn‘t work for us. Here is a checklist of things to look for in an online bank. Some items you may be familiar with. Others might be new to you if it isn‘t something your current bank offer
1. Bill Pay Service - One of the biggest reasons for going with an online bank is to get really good bill payment services. Different banks handle bill payment different ways. Here are some things to think about (a) How many bills are you allowed to pay per month? (b) What are the fees for going over the limit? (c) Can the bill payment send physical checks to merchants who aren‘t set up to take electronic payments? (d) Do checks come from your account or from a third party service? For privacy reasons, it might be better to be able to pay someone without giving them your bank account number on the check. On the other hand, if the checks actually come from your account, the money doesn‘t get taken out until the check is cashed. (e) Can you set up reoccurring payments?
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2. Electronic Bill Notification - With electronic bills, your merchant (credit card company, gas company, electric company, etc.) sends an electronic bill to your bank. You can set it up to pay automatically or notify you for approval. This can be particularly good for people who are on the road because it reduces the amount of physical mail you have to somehow get read or forwarded to you.
Diagram 2.1 Preferred method of bill payment
3. Online Check Images- Most banks will show you an image of the check, which makes it really easy to balance your account if you can‘t remember
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what a particular payment was for. (Ideally, you should minimize the number of physical checks you write to reduce fraud)
4. Online Deposit Slip Images - Most banks just record the total with no image. It will let you see an image of each deposit slip. Having the images available can be very helpful if you ever have to prove something for tax purposes or need to remember where that $2581 deposit came from.
Graph 2.2 Online banking deposit trends graph
5. Reporting Tools - Most banks offer basic reporting tools that will let you see how much you have spent in each category you‘ve created. This may not be an issue if you use desktop money management software, but it still can be handy if you are traveling and want to see how much you‘ve paid on your mortgage over the past 12 months.
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6. Linked Accounts - Can you link your bank account with a brokerage account? Can you add your minor children as custodial accounts and manage them all centrally? If you and your spouse both set them up IRAs, is it easy to view them both along side the rest of your finances, or do you have to have a separate login for each IRA to keep them on separate SSNs? These are small things that many banks don‘t support, but it starts getting really complicated when you have to manage a bunch of accounts instead of having a single place to manage all of your money.
7. Convenient Deposit Methods - Since you may not be anywhere near the physical location of your bank, make sure you understand how to deposit money. Payroll can be set up on direct deposit, but there will be times when you need to deposit checks. Does the bank provide postage paid envelopes and deposit slips? Some banks work with FedEx or UPS stores to allow you to send in a deposit overnight for free.
8. Low ATM Fees and Convenient Locations - If you need to get cash, will the bank refund the ATM fees? Are there only certain ATMs that are free, and if so, are they located near places you normally go? Are the ATMs available nation wide so you can use them on vacation? What are the fees for using the ATM internationally and how is the exchange rate handled?
9. Integration with Desktop Software - If you use Microsoft Money, Quicken or something similar, you‘ll want to make sure your bank supports it. Make sure you understand if downloading transactions require you to login and manually download a file, or if your money management software can directly connect and download new transactions. If you are using
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Quicken on a Mac, make sure the bank is paying Quickens extortion fee so the files will work with Mac users.
10. Many Account Types - Some banks only offer basic checking and savings accounts. Ideally you want a bank that makes it easy to open money market accounts, IRAs, health savings accounts, etc. If you have to go to another institution to open a different type of account, it is more difficult to manage–especially if you are on the road. You want to be able to easily open a CD to take advantage of a higher interest rate, easily open an IRA to help reduce your tax liability, etc.
11. Free Money Transfers - Be sure to consider how easy it is to move money in and out of the account. You should be able to set up links with your accounts from other institutions to transfer money back and forth as necessary. Make sure you understand what type of fees are associated with these transfers. Good banks should allow a certain number of transfers per month with no fee. 12. Security Balanced with Convenience - Some banks spend so much effort trying to keep things secure that you‘ll find yourself automatically logged out of their website while you try to balance your account. You want security but you don‘t want it to get in the way of you doing your banking. Also check into what type of additional security features are available. For example, some banks will offer you an RSA keychain with a number that changes every 60 seconds. In addition to your password, you will need the number from that key in order to get access to your account.
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13. Ease of Use - This is something that most banks seem to struggle with. Right now I have my personal account with one online bank and my business accounts with another. I dread using the business accounts and I absolutely love using my personal account. At first I thought I was just more familiar with the bank where my personal accounts are, but I finally realize that it comes down to the ease of use. One is ok and the other is superb, but it makes a big difference.
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2.3 ADVANTAGES OF ONLINE BANKING
In olden days you need to go to the bank for every banking transaction. Sometimes you may find that the banks are closed or the banking hours are not suitable to you or location of the bank is not convenient to you. There are many difficulties you face when you go to your bank personally. To avoid these difficulties there is one solution, online banking. Consumer Online Banking No charge No charge No charge 1 N/A N/A N/A Business online Banking No charge No charge No charge 2 $ 2.00 N/A N/A Cash Management Online Banking No charge $ 40.00 No charge 10 $ 2.00 $ 15.00 No charge
Setup Monthly maintenance Bills Payment (unlimited) Number of login ID’s Additional login ID’s per month Wire transfers Electronic federal tax payment service (EFTPS) ACH Orginated files
N/A
N/A
No charge
Table 2.1 Bank‘s online banking price matrix
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You can check your bank balance and transactions, pay your bills online by typing the instructions on the internet. Over the last few years online banks have started to become more and more popular. Clearly there are benefits to having an online bank account so it is definitely a good idea to look into opening one. These days many traditional banks have started to offer online accounts so it may be a good idea to find out if the bank that you already deal with offers this service. If not you have lots of other options available to you. The other advantages of online banking are as follow: 1.Convenience: Unlike your corner bank, online banking sites never close; they're available 24 a day,7 day a week, there‘s only a mouse click away. 2. Ubiquity: If you're out of state or even out of the country when a money problem arises, you can log on instantly to your online bank and take care of business, 24/7. 3. Transaction speed: Online bank sites generally execute and confirm transactions at or quicker than ATM processing speeds.
4. Efficiency: You can access and manage all of your bank accounts, including IRAs, CDs, even securities, from one secure site. 5. Effectiveness: Many online banking sites now offer sophisticated tools, including account aggregation, stock quotes, rate alerts and portfolio managing programs to help you manage all of your assets more effectively. Most are also compatible with money managing programs such as Quicken and Microsoft Money.
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2.4 DISADVANTAGES OF ONLINE BANKING
Yes, online banking is generally secure, but it certainly isn't always secure. Identity theft is running rampant, and banks are by no means immune. And once your information is compromised, it can take months or even years to correct the damage, not to mention possibly costing you thousands of dollars, as well. Some online banks are more stable than others. Not all online setups are an extension of a brick-and-mortar bank. Some operate completely in cyberspace, without the benefit of an branch that you can actually visit if need be. With no way to physically check out the operation, you must be sure to thoroughly do your homework about the bank's background before giving them any of your money. Not all online transactions are immediate. Online banking is subject to the same business-day parameters as traditional banking. Therefore, printing out and keeping receipts is still very important, even when banking online. 1. Setting up an account may take time: In order to register for your bank's online program, you will probably have to provide ID and sign a form at a bank branch. Some banks even ask for photos 2. Legal issues: If you and your spouse wish to view and manage your assets together online, one of you may have to sign a durable power of attorney before the bank will display all of your holdings together. 3. Learning difficulties: Banking sites can be difficult to navigate at first. Getting acquitted with the banking sites software may require some time to read the tutorials in order to become comfortable in your virtual lobby.
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4. Site changes and upgrades: Even the largest banks periodically upgrade their online programs, adding new features in unfamiliar places. In some cases, you may have to re-enter account information. 5. Customer service: There is no personal contact with any of the staff, and if talk to any staff through the telephone, you have guarantee you are talking to the best person available 6. Internet account: You need to get an account with an Internet Service Provider (ISP) which may be another hectic experience 7. Security concern: Even though online banking sites are heavily encrypted, with the developing technology, it‘s hard to rule out the "hackers" who may access your bank accounts 8. Switching banks: This can be more cumbersome online than in person 9. Money usage: You can‘t spend your money from the online bank account as you wish, in the end; you will need to go to an ATM to withdraw money for usage. 10. Technical breakdowns: As with all technologies, online banking websites sometimes go down. If this happen when you closed your local bank or credit card accounts, you will definitely go penniless. However, even though online banking has some disadvantages, the advantages with no doubt outweigh. It is there for important for everyone to prepare for the unknown with an online bank account.
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Table 2.2 Advantages and disadvantages of online banking
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CHAPTER-3 OPPORTUNITIES IN ONLINE BANKING
3.1 OPPORTUNITIES IN ONLINE BANKING: ARE WE READY? 3.2 IS THERE A FUTURE IN ONLINE BANKING..? 3.3 WHY BANK ENCOURAGE ONLINE BANKING
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3.1 OPPORTUNITIES IN ONLINE BANKING: ARE WE READY?
It has always been a chicken-and-egg dilemma in business. Either firms wait for the market to mature until customers are ready for the products and services. Or, firms can go ahead and offer the products and services, hoping that their customers will catch on soon. The same is true for new products and services that have emerged and continue to emerge in the world of electronic banking (e-banking). Banking executives interviewed by Business World Online have different ways of resolving the issue. Some would go ahead with new ideas, wanting to take the first-mover advantage. Others would wait in the sidelines, but armed nevertheless just in the case the market take up suddenly increases.
Table 3.1 SBI-Growth in distribution network
Whether first-movers or latecomers, there is one partner in the e-banking game that is not waiting for the chicken to lay the egg, or wait for the egg to
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hatch into a chick. Technology providers are always up on their toes, like chicken ready to catch the early worm. Even smaller banks are beefing up their online banking offerings to include more payment options. Travis Sears, a vice president and electronic banking manager at Union Bank and Trust, a $2.5 billion-asset bank based in Lincoln, Neb., says his bank‘s deeper penetration into electronic payments is part of an overarching trend to automate all the bank‘s payments. (At present more than 70% of the bank‘s payments are sent through the automated clearing house and require no paper.). There‘s still a huge opportunity [to] migrate customers to chat and alerts from using the phone,? he says, adding that the chat function will become more appealing to customers as the bank integrates more budgeting and tracking within the online banking interface.
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3.2 IS THERE A FUTURE IN ONLINE BANKING..?
By this point, no one can dismiss online banking as a fad. However, it is worth considering whether the trend towards online financial transactions is going to slow or reverse in the years to come. There will continue to be people who resist online banking in favor of offline transactions just as there are people who prefer to keep their money in mattresses instead of putting it in banks. Whether these people will exert serious influence on the movement towards online banking can be examined by looking at the needs of modern consumers, and the interests of the banks themselves. 1. The Move to Online Business The global connectivity provided by the internet, combined with the fallout from the global financial crisis has encouraged a growing number of entrepreneurs to start their own businesses online. As an increasing number of people look to save themselves from unemployment or augment otherwise insufficient salaries by finding new ways to make money online, they will require new ways to send, receive, and invest their online funds.
2.The Rise of Mobile Banking As handheld mobile devices become more sophisticated, users are experimenting with more sophisticated transactions. Moving beyond ringtone downloads; consumers can now shop online and purchase software upgrades and augmentations through app stores. In addition to this buying and selling, anyone with a web browser on their phone can access their bank‘s online banking site to move and manage their money in more locations than ever before.
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3. Staffing Solutions As banks consolidate and grow larger, they are looking for more ways to cut costs, and reducing the number of full-time employees on their payroll is an attractive option. Encouraging customers to do their banking online allows banks to close smaller branches in outlying locations and use economies of scale to develop customer assistance centers in locations where the labor market is more favorable.
4. Physical Footprints Online banking is also more attractive to banks because a reduced physical footprint means reduced costs in other areas. In addition to saving the money that would normally be associated with operating and maintaining physical branches, no longer having to print and mail paper statements to customers would be a huge savings for banks. As an added bonus, banks have been able to take advantage of current pro-environment sentiment by marketing online banking as a ?green? alternative. By appealing to more mobile customers and more cost-conscious financial service providers alike, online banking continues to be an attractive option for everyone involved. However, when discussing the internet it is dangerous to assume that everything is going to be moved online; there will always be individuals, industries, and transactions that are grounded in the real world with no desire to change the way they do business.
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3.3 WHY BANK ENCOURAGE ONLINE BANKING
Online banking has enjoyed increased popularity, and some banks actually require it. From standard, brick-and-mortar institutions to cloud managed institutions, online banking offers flexibility and convenience for all involved.
1. Bank Advantages Each visit to a bank costs the institution money, whether in bank teller wages and benefits to security costs to maintenance costs. Online banking reduces those costs and increases the bank‘s profit margin. Online banking reduces the need for the number of physical locations and services offered within each. Because Customer Service Departments are united into fewer locations, asset sharing within those locations further reduce bank costs.
2. Customer Advantages Online security of financial data has evolved tremendously since the early days of online banking, and often transactions can be even more secure than those conducted in a drive through lane.
Online banking transactions require not only a secure login but also require secured password entry. In-person transactions are based on account information and a photo ID, both of which can be obtained ?under the radar.?Online banking transactions also track the Internet Protocol (IP) address of the computer used in the transaction. The IP can be traced to the method or mode of Internet access, often through an Internet Service
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Provider who always notes activity, computer, and actions performed under that IP address assigned to the ISP account holder. Whether a dynamic or changing IP address or a static or unchanging IP address is used, the ISP always records what IP address is assigned to what ISP account at any time.
Graph 3.1 Online bank transfer
Online Bill Pay processes reduce stolen or counterfeit checks which cost banks billions of dollars every month. Each online bill pay transaction allows for a grace period from the payment order date to the actual check delivery date, which also allows the account holder additional time to preview activity and account status.
3. Development Increasingly, more and more people are switching to electronic platforms for executing financial transactions. The wider usage of cell phone and internet
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certainly seems to be playing a role in blurring physical boundaries, and unlocking a whole new world of opportunities for banks in tapping newer customer segments and in recording greater volume of transactions. If latest RBI data on retail electronic payment systems is anything to go by, electronic banking is set to become the catalyst for change in the way money moves. Provisional data show that in FY09 to January, a total of 5,587.85 lakh transactions were executed through the electronic channel, a rise of 234.76 lakh transactions over the previous fiscal. This growth was facilitated by the introduction of real-time gross transfer (RTGS) and national electronic funds transfer (NEFT), which enabled fund transfers among account holders of the same bank as well as inter-bank transfers. The growth has also been aided by banks' efforts to offer innovative services and tighten security measures, and the increase in awareness of services available. RBI outlining guidelines on mobile banking, setting up of the National Payments Corporation of India and passage of the Payments and Settlement Act too have given a positive thrust to the growth in electronic payments. "FY10 will certainly herald an important phase for electronic banking in India and an upsurge in internet and ATM transactions," says Ashvin Parekh, partner and national industry leader, financial services, Ernst & Young. "At the same time, traditional fund transfer will continue to hold its own."Now, decisions can be taken remotely and the activities too can be undertaken in a centralised location.
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CHAPTER-4 Challenges in online banking
4.1 RURAL MARKET 4.2 GROWTH OF BANKING 4.3 GLOBAL BANKING 4.4 FINANCIAL INCLUSION 4.5 EMPLOYEES RETENTION 4.6 CUSTOMER RETENSION 4.7 ENVIRONMENTAL CONCERNS
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Developing countries like India, still has a huge number of people who do not have access to banking services due to scattered and fragmented locations. But if we talk about those people who are availing banking services, their expectations are raising as the level of services are increasing due to the emergence of Information Technology and competition. Since, foreign banks are playing in Indian market, the number of services offered has increased and banks have laid emphasis on meeting the customer expectations. Now, the existing situation has created various challenges and opportunity for Indian Commercial Banks. In order to encounter the general scenario of banking industry we need to understand the challenges and opportunities lying with banking industry of India.
4.1 Rural Market
Banking in India is generally fairly mature in terms of supply, product range and reach, even though in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. Consequently, we have seen some examples of inorganic growth strategy adopted by some nationalized and private sector banks to face upcoming challenges in banking industry of India. For example recently, ICICI Bank Ltd. merged the Bank of Rajasthan Ltd. in order to increase its reach in rural market and market share significantly. State Bank of India (SBI), the largest public sector bank in India has also adopted the same strategy to retain its position. It is in the process of acquiring its associates. Recently, SBI has merged State Bank of Indore in 2010.
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4.2 Growth of Banking
Foreign banks appear to have acted as technological innovators when competition increased, which added to the competitive pressure in the banking market. Finally, our results also indicate an increase in risk-taking behaviour, along with the whole deregulation process. It was found in the study of Goyal and Joshi (2011a) that small and local banks face difficulty in bearing the impact of global economy therefore, they need support and it is one of the reasons for merger. Some private banks used mergers as a strategic tool for expanding their horizons. There is huge potential in rural markets of India, which is not yet explored by the major banks. Therefore ICICI Bank Ltd. has used mergers as their expansion strategy in rural market. They are successful in making their presence in rural India. It strengthens their network across geographical boundary, improves customer base and market share.
4.3 Global Banking
It is practically and fundamentally impossible for any nation to exclude itself from world economy. Therefore, for sustainable development, one has to adopt integration process in the form of liberalization and globalization as India spread the red carpet for foreign firms in 1991. The impact of globalization becomes challenges for the domestic enterprises as they are bound to compete with global players. If we look at the Indian Banking Industry, then we find that there are 36 foreign banks operating in India, which becomes a major challenge for Nationalized and private sector banks. These foreign banks are large in size, technically advanced and having
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presence in global market, which gives more and better options and services to Indian traders.
Table 4.1 Banks service and their web site
4.4 Financial Inclusion
Financial inclusion has become a necessity in today‘s business environment. Whatever is produced by business houses, that has to be under the check
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from
various
perspectives
like
environmental
concerns,
corporate
governance, social and ethical issues. Apart from it to bridge the gap between rich and poor, the poor people of the country should be given proper attention to improve their economic condition. Dev (2006) stated that financial inclusion is significant from the point of view of living conditions of poor people, farmers, rural non-farm enterprises and other vulnerable groups. Financial inclusion, in terms of access to credit from formal institutions to various social groups. Apart from formal banking institutions, which should look at inclusion both as a business opportunity and social responsibility, the author conclude that role of the self-help group movement and microfinance institutions is important to improve financial inclusion. The study suggested that this requires new regulatory procedures and depoliticiation of the financial system.
4.5 Employees’ Retention
The banking industry has transformed rapidly in the last ten years, shifting from transactional and Customer service-oriented to an increasingly aggressive environment, where competition for revenue is on top priority. Long-time banking employees are becoming disenchanted with the industry and are often resistant to perform up to new expectations. Results indicated that personal, job, and organizational climate factors influenced the ego investment or job involvement of people in their jobs, which in turn influenced the intra-psychic reward of sense of competence that they experienced, which then directly influenced employees' job satisfaction. Saxena and Monika (2010) studied a case of 5 companies out of 1000 organizations and 8752 respondents surveyed across 800 cities in India by
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Business Today. The survey was on nine basic parameters like career and personal growth, company prestige, training, financial compensation and benefits and merit based performance evaluation. It was concluded that the biggest challenge for organizations is that when new employees appointed, it is difficult to merge them in organizational culture. Each organization has its own unique culture and most often, when brought together, these cultures clash. When there is no retention, employees point to issues such as identity, communication problems, human resources problems, ego clashes, and intergroup conflicts, which all fall under the category of ?cultural differences?.
4.6 Customer Retention
Levesque and McDougall (1996) investigated the major determinants of customer satisfaction and future intentions in the retail bank sector. They identified the determinants which include service quality dimensions (e.g. getting it right the first time), service features (e.g. competitive interest rates), service problems, service recovery and products used. It was found, in particular, that service problems and the bank‘s service recovery ability have a major impact on customer satisfaction and intentions to switch. These were: service, feeling, chemistry, relationship and confidence, dialogue, complaints and retention. All except the first two of these categories of experience were found to enhance retention, implying that the informants have found that strategies for enhancing both satisfaction and retention are similar. The strongest connection between retention and satisfaction strategies turned out to be in terms of relationship and confidence.
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Table 4.2 Total internet banking user in India
4.7 Environmental Concerns
It is quite clear from the recently formed Copenhagen Climate Council (CCC) that there is a severe need for environmental awareness among all the countries of the world. CCC published Thought Leadership Series on Climate Change which is a collection of inspirational, concise and clearly argued pieces from some of the world's most renowned thinkers and business leaders on climate change. The objective of the pieces is to assist in enhancing the public and political awareness of the actions that could have a significant impact on global emissions growth and to disseminate the message that it is time to act. The Thought Leadership Series was aimed at explaining and spreading awareness of the key elements in the business and policy response to the climate problem. The rationale for the Thought Leadership Series was to change the focus of people.
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CHAPTER - 5 ARCHITECTURE FOR E-BANKING
5.1 HISTORY AND PLANNING OF ONLINE BANKING 5.2 INTERNET AND ITS IMPACT ON BANKING 5.3 BANKING SOFTWARE
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5.1 HISTORY AND PLANNING OF ONLINE BANKING
History of Online Banking From its humble start in the late 80s, online banking has morphed into a sophisticated and convenient way of accessing finances that many of us now simply couldn't live without.
In the late 80s and early 90s ?home banking‘ was rolled out, allowing us to check our account balances from our home computer. It seems unbelievable now but banks would actually mail us a floppy disk with software that we could install onto our PC like the one pictured at right. Then, using a dial-up modem, we could talk to the bank's systems. We could check balances and make transfers but we usually paid for the privilege. Needless to say, the world of online banking had commenced its evolution.
Then in the mid 90s a big leap occurred with banks setting up websites for consumers to access both product and contact information. Then within a few years the banks launched internet banking functionality. This made the process of doing your banking online easy and accessible to everyone. We could pay bills, order statements and view up to 90 days of transaction history, all with a few clicks of the mouse.
After this great leap forward, however, we saw very little change in our online banking facilities. Many facilities still today only have 100 days of transaction history available. If we have a query on a transaction we have to ring up. We are still asked for our name and address when we apply online for a new product, despite banking with that same institution all our adult
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lives. So there continue to be small sources of annoyance that should have been smoothed out by now.
We have noted online banking moving towards newer levels of functionality and ease of use over the past few years. Many of these changes are based on an overall shift to the ?secure side? of the website. Originally, the main reason to login to your banking website was to transact. Now we are seeing websites that allow far more to be done when logged in, creating a personalized online experience.
The best banking websites allow people to manage a full range of their banking needs from their own secure online portal. They do this by providing a streamlined, intuitive platform with access to a wide range of information and functionality.
Gaining access to your financial records is becoming easier – there is more information instantly available and accessing it is becoming more intuitive. Communication between bank and customer is the key and online banking is bringing new and simple ways of sharing information. Secure messaging to and from customers through the internet banking portal is doing away with the excessive lag times of snail mail. Turnaround times for all types of requests are now benefiting, a positive and impressive development for all involved.
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5.2 INTERNET AND ITS IMPACT ON BANKING
Since the Great Depression, consumers have largely chosen their banks based on how convenient a bank's branches were to their homes or offices. Well aware of this, banks spent billions of dollars building up their branch networks to secure the most convenient locations in the most attractive communities. Today, branches serve as the cornerstone of competitive advantage in the retail banking industry. It is no wonder then that the Internet has inspired a crisis of confidence in that industry. With its 24- hour access, national footprint, low barriers to entry and attractive demographics, the Internet has confronted retail banks with a series of difficult strategic questions: How soon will the Internet have an impact on retail banking? How will it change the competitive dynamics of the industry? What needs to be done to prepare for these changes? To help answer these questions, Booz-Allen & Hamilton's financial services group recently conducted a study that included the first-ever survey of banks that operate sites on the Internet. Current and Future Prospects For now, banks don't have much to worry about, the survey revealed. For example, even though 285 North American banks have opened Internet sites, only 1 percent of those sites are actually offering banking services. The majority of sites, more than 70 percent, are little more than glorified brochures, providing only general information. But this underdeveloped state won't last for long. In fact, 90 percent of the survey respondents have aggressive plans for improving the size and
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functionality of their Internet banking offerings. So much so that within three years, 69 percent of the banks plan to offer such advanced services as bill payments over the Internet. Based on these plans, as well as estimates of the overall growth of the Internet, the study projects that the number of bank Internet sites will explode to almost 1,500 within three years. Now that's something to worry about. The Internet banking has opened a new avenue to exploit to make a distinction between banks and deliver a superior service compared to competitors. It involves the use of the Internet by consumers to get in touch with their banks and check their accounts and carry out banking transactions. The migration to Internet banking has greatly influenced the distribution policies of banks and the mode of interaction with the banking and service experience for consumers. Thus, retention and attraction of consumers are largely determined by the quality of services delivered. The aim of this research is to study the impact of the quality of online banking services on customers intention to revisit the banking site and to maintain a lasting relationship with it. It will also verify the mediating role of satisfaction in that relationship. It is twofold. From a theoretical viewpoint, this research enriched the few studies that have explored the concept of perceived quality of online services. From a managerial point of view, it points to the bankers the importance of promoting satisfaction factors which could produce favorable behavioral intentions among customers.
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5.3 BANKING SOFTWARE
The software packages for banking application in India made their beginning in the middle of 80s, when the banks spurred on by the RBI and the Rangarajan committee Report, started computerizing the branches in limited manner. The approach was to empanel a few hardware vendors who would also develop the software as per the bank‘s specification and also help to install at the branches. The early 90s saw the plummeting of hardware prices and advent of cheap and inexpensive but high-powered PCs and servers and bank went in for what was called Total Branch Automation (TBA) packages. Architecturally, some were centralized solutions with a powerful central server maintaining the database with multiple terminal; others went in for distribution processing with multiple PCs as nodes linked on a LAN. The platforms used ranged from simple UNIX-C to powerful RDBMS like Oracle, etc. The middle and late 90s witnessed the tornado of financial reforms, deregulation, globalization, etc, coupled with rapid revolution in communication technologies and evolution of novel concept of ?convergence‘ of computer and communication technologies, like internet, mobile/cell phones, etc. The arrival of foreign and private banks with their superior state-of-the-art technology based services pushed Indian banks also to follow suit by going in for the latest technologies so as to meet the threat of competition and retain customer base. This also brought in revolutionary products and services. Categories Of Packages
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The IT packages and services available in India can be broadly classified into the following six types: 1. Standalone branch-level packages 2. Multi-branch solution 3. Foreign packages 4. Packages for specialized niche areas 5. Service branch/high-volume transaction processing packages 6. IT Services. Thus, we have a wide spectrum of banking software available in the market to cater to the various needs of the banking industry. 1. Standalone branch-level Packages These are usually written in FoxPro, C or DBASE and handle specific function at the branches; these are sometimes networked on a LAN to simulate a TBA environment. But there are also high-end packages with a central server terminals. Some of them use sophisticated RDBMS like ORACLE as back-end and provide user friendly front end with Windows GUI. 2. Multi-Branch Solution These are used to network a cluster of branches in a city or can be distributed, networking being achieved through Wide Area Network (WAN) on terrestrial lines/high speed lines/satellite network and now even wireless. 3. Foreign Packages
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Examples are bank master, Kappiti, Sanchez etc. These need to be extensively customized to suit Indian requirement- but their strength lie in their proven capabilities in developing and offering modern/globel banking products/services that Indi is just ushering in. 4. Packages For Specialized Niche Areas These packages include Asset-Liability Management (ALM), Treasury Management, Trading/Dealing Room activities, Custodial
Services/Depository Participant, etc. These are high-end packages with sophisticated analytical and decision tools. 5. Service Branch/High-Volume Transaction Processing Packages These packages include, clearing, drafts issue/payments/reconciliation (Remittances), Bills (payments/collection/purchases), Dividend Warrant Processing, inter-branch reconciliation etc. These are often developed and implemented by service providers to whom the work is outsourced. 6. IT Services These are not packages in the sense, these are developed to handle specific problems like disaster recovery, virus protection, security handling, linking/networking multiple legacy systems between themselves or to new delivery channels like ATMs, etc.
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CHAPTER - 6 PAYMENT AND SETTLEMENT SYSTEMS
6.1 Payment Methods 6.2 Electronic Fund Transfers 6.3 Automatic Teller Machines 6.4 Electronic Clearing Service 6.5 Electronic Data Interchange 6.6 Financial Networks In India 6.7 Real-Time Gross Settlement Systems 6.8 Digital Certificates
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6.1 PAYMENT METHODS
Traditional payment methods include cash, cheques, electronic fund transfers, and credit cards. Payment by cash means an immediate physical transfer of funds, unlike other methods of payment, which involves changing notations in the ledgers of financial institutions. Each method of payment differs in terms of the regulations covering it and the degree of privacy, anonymity, and protection it conveys to consumers.
Table 6.1 online banking and their bill payment service Cash Cash is defined as coin and currency (paper money). If cash is lost or stolen, the unlucky party suffers the loss. From the perspective of consumers and merchants, an instantaneous transfer of value occurs in cash transactions; thus payment and payment finality are simultaneous. National Money Most money exists not as notations in the ledgers of depository institutions (bank and other financial institutions). Debiting one party‘s account and crediting another party‘s account execute notational money transactions.
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Depository institutions must be ready to convert notational checking deposits into cash on demand. The Indian government operates a system of deposit insurance that protects depositors against loss if the depository institution fails. Thus depositors are protected against the risk of losing all of their money on deposit. National money transaction are generally not anonymous and consequently may not be completely private either. Banking laws protect the confidentiality of an individual‘s financial records when other parties seek access to them. Payment Of Cheques The most common form of notational money is an account with cheque facility. A cheque is an order authorizing the transfer of money from one account to another; it is not a token that represents value, as cash does. When a cheque is accepted as payment, the recipient‘s bank collect the value of cheque after presenting it to the bank on which it is drawn. Because a cheque can be returned for insufficient funds, the bank may not make the fund available to the recipient until the day a returned cheque would have been received – a log of three days for local cheque and over five days for non –local cheques. Consequently, merchants who are paid with a cheque may have to wait several days before they receive their money. Traveller’s cheques are also included in a bank‘s net transaction accounts and thus are subject to reserve requirements. Traveler‘s cheques issued by a bank are covered by deposit insurance, but traveller‘s cheque issued by a non-depository institution (such as American Express) are not
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6.2 ELETRONIC FUND TRANSFERS (ETFs)
Electronic funds transfer (EFT) is the electronic exchange or transfer of money from one account to another, either within a single financial institution or across multiple institutions, through computer-based systems. The term covers a number of different concepts: Cardholder-initiated transactions, where a cardholder makes use of a payment card
?
Direct deposit payroll payments for a business to its employees, possibly via a payroll service bureau
?
Direct debit payments, sometimes called electronic checks, for which a business debits the consumer's bank accounts for payment for goods or services
?
Electronic bill payment in online banking, which may be delivered by EFT or paper check
?
Transactions involving stored value of electronic money, possibly in a private currency
?
Wire transfer via an international banking network (carries a higher fee in North America and in Poland)
?
Electronic Benefit Transfer
In 1978 the U.S. Congress passed the Electronic Funds Transfer Act to establish the rights and liabilities of consumers as well as the responsibilities of all participants in EFT activities in the United States.
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Electronic funds transfers are basically electronic checks that automatically debit the payer's account and credit the payee's account. EFTs do not require clearinghouses because the routing information is contained in the electronic message. EFTs require a secure network and operating standards. There are various EFT networks, but the most common type of EFT is the automated clearinghouse transaction (ACH), which many businesses and people use to pay recurring bills. The ACH Network is operated by the Federal Reserve and the Electronic Payments Networks, and most banks use this network in the same way that they used clearinghouses—to exchange payment information. An ACH transaction consists of the account numbers of the payer, the payer's bank, the payee's bank, the account number of the payee, and the amount of the payment. An ACH transaction has the same basic type of information on the payer as a paper check with its bank routing number and the payer's account number. It differs from the paper check in that it also has the payee's bank routing number and the payee's account number so it can be completed as a single transaction. Some retailers, such as Wal-Mart, can convert a paper check directly into an ACH transaction by scanning the check for the bank's routing number and customer's account number. The customer then signs and gets a receipt. This saves the retailer the cost and risk of transporting paper checks. According to the Federal Reserve, 8% of checks written in 2006 were converted electronically into ACH payments, while only 1% were converted in 2003.
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6.3 AUTOMATIC TALLER MACHINE (ATMs)
An automated teller machine or automatic teller machine (ATM), also known as an automated banking machine (ABM) in Canada, and a Cash point (which is a trademark of Lloyds TSB), cash machine or sometimes a hole in the wall in British English, is a computerized telecommunications device that provides the clients of a financial institution with access to financial transactions in a public space without the need for a cashier, human clerk or bank teller. Using an ATM, customers can access their bank accounts in order to make cash withdrawals, debit card cash advances, and check their account balances as well as purchase prepaid cellphone credit. If the currency being withdrawn from the ATM is different from that which the bank account is denominated in (e.g.: Withdrawing Japanese Yen from a bank account containing US Dollars), the money will be converted at an official wholesale exchange rate. There are no hard international or government-compiled numbers totaling the complete number of ATMs in use worldwide. Estimates developed by ATMIA place the number of ATMs in use currently at over 2.2 million, or 1 ATM per around over 3000 people in the world. For the purpose of analyzing ATM usage around the world, financial institutions generally divide the world into seven regions, due to the penetration rates, usage statistics, and features deployed. Four regions (USA, Canada, Europe, and Japan) have high numbers of ATMs per million people. Despite the large number of ATMs, there is additional demand for machines in the Asia/Pacific area as well as in Latin America. ATMs have yet to reach high numbers in the Near East and Africa.
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6.4 ELECTRONIC CLEARING SERVICE (ECS)
It is a mode of electronic funds transfer from one bank account to another bank account using the services of a Clearing House. This is normally for bulk transfers from one account to many accounts or vice-versa. This can be used both for making payments like distribution of dividend, interest, salary, pension, etc. by institutions or for collection of amounts for purposes such as payments to utility companies like telephone, electricity, or charges such as house tax, water tax, etc or for loan installments of financial institutions/banks or regular investments of persons. Types of ECS There are two types of ECS ECS (Credit) : ECS (Credit) is used for affording credit to a large number of beneficiaries by raising a single debit to an account, such as dividend, interest or salary payment. ECS (Debit) : ECS (Debit) is used for raising debits to a number of accounts of consumers/ account holders for crediting a particular institution. Working of ECS ECS payments can be initiated by any institution (called ECS user) who have to make bulk or repetitive payments to a number of beneficiaries. They can initiate the transactions after registering themselves with an approved clearing house. ECS users have also to obtain the consent as also the account particulars of the beneficiary for participating the ECS clearings.
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The ECS user's bank is called as the sponsor bank under the scheme and the ECS beneficiary account holder is called the destination account holder. The destination account holder's bank or the beneficiary's bank is called the destination bank. The beneficiaries of the regular or repetitive payments can also request the paying institution to make use of the ECS (Credit) mechanism for effecting payment. The ECS users intending to effect payments have to submit the data in a specified format to one of the approved clearing houses. The list of the approved clearing houses or the list of centres where the ECS facility has been provided is available at. The clearing house would debit the account of the ECS user through the account of the sponsor bank on the appointed day and credit the accounts of the recipient banks, for affording onward credit to the accounts of the ultimate beneficiaries. The beneficiary has to furnish a mandate giving his consent to avail of the ECS facility. The advantages to the banks (a) Banks handling ECS get freed of paper handling. (b) Paper handling also creates lot of pressure on banks as they have to encode the instruments, present them in clearing, monitor their return and follow up with the concerned bank and customers. (c) In ECS banks simply get the payment particulars relating to their
customers. All they need to do is to match the account particulars like name, a/c number and credit the proceeds
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6.5 ELECTRONIC DATA INTERCHANGE
For several hundred years, commerce has been based upon the movement of written documents. These documents contained the information that one company needed to convey to another company in order to do business. Over a period of time the documents started to take on standard names such as Invoice, Credit Note and Order. However, the documents were certainly not of any standard layout. They did not need to be because the recipient was always a human being and humans have the ability to read, interpret and rationalise. About all that could be said of an invoice document, for example, was that it would contain header information about the parties involved, detail lines about the products, quantities and prices, and finally some totalling information. In the early 1950s, computers started to be used by large companies for their accounting and payroll needs. Throughout the following decades, computers rapidly took over task after task until they were involved not only in accounting, but in production, administration and all other areas of commerce. But one thing did not change. The computers still produced printed documents in various non-standard formats. This situation was not too bad for those sending a document but was much worse for the receiver. Many documents must be sent from one company‘s computer to their trading partner‘s computer. Computers cannot easily read written documents, and getting them to understand what they have just read is an almost impossible task, so the receiving company would have to employ personnel to re-key the information from the received documents into the company‘s computer system.
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The EDI Model There are three logical levels or ?layers? of standards required to achieve EDI information transfer, each layer having its own controlling standards organisations (although some organisations may define more than one layer). This structured approach to EDI allows for the maximum flexibility and also enables future developments in technology and standards to be easily incorporated. From the lowest layer upward, these three layers are: The Communications Standards - Defining just how the data is to be transferred from the sender to the receiver. The Syntax Standards - Defining what overall standards format the EDI file will be in. The Message Standards - Defining exactly what the message is and what information is to be placed where within this message. These standards are going to be further described in the following sections but it is important to remember that whatever standards are used within each layer, the layering process is required to allow flexibility. For example not all users will wish to use a specific communication protocol; some may even wish to copy the data onto a floppy disk and send it in the post! So the communications level is now a floppy disk but the higher levels still remain.
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6.6 FINANCIAL NETWORK IN INDIA
It had been widely felt earlier that one of the biggest bottlenecks in the banking system in the country was the lack of a system that ensures fast, safe and secure intra-bank and inter-bank communication. In fact, this deficiency had been hampering to a large extent the development of a modern, integrated payment system in the Nineties. Most of the cases of complaint against banks, in those days related to the time taken for transfer of funds across banks and between cities and to the delays in the collection of outstation cheques. Clearly, the non-availability of a reliable communication backbone had been one of the main contributors to this state of affairs. The functioning of the terrestrial line networks was hardly optimal in terms of efficiency, although of late, there has been some change in this area for the better. Indian Financial Network (INFINET) Financial Network is the communication backbone for the Indian Banking and Financial Sector. All Banks, Public Sector, Private Sector, Cooperative, etc., and the premier Financial Institutions in the country are eligible to become members of the INFINET. The INFINET is a Closed User Group (CUG) Network for the exclusive use of Member Banks and Financial Institutions. It uses a blend of communication technologies such as VSATs and Terrestrial Leased Lines. Presently, the network consists of over 950 VSATs located in 127 cities of the country and utilises one full transponder on INSAT 3B. INFINET, an acronym for the Indian Financial Network, uses a blend of communication technologies such as VSATs and Terrestrial Leased Lines.
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The HUB of the VSAT network is situated at IDRBT, and consists of an 11metre antenna and other satellite earth station equipments. Presently, the network consists of over 950 VSATs located in more than 180 cities of the country and utilises one full transponder on INSAT 3B. SWADHAN, The Shared Payment Network Service Foreseeing the escalating demand and need for ubiquitous ATMs in the country, The Indian Bank Association has promoted SWADHAN in the year 1997 for its member banks to share their ATMs with other participating banks. ATM (Automated Teller Machine) is the foremost among the electronic payment gateways available in the banking segment. It made its presence in India in the year 1988. It is a computerized device that enables bank customers to withdraw cash outside banking hours. ATMs also accept cash and cheques, provide statements, effect transfers. Operated by cash cards and a personal identification number (PIN), they are placed on outside walls of banks. Off late, the deployment locations of ATMs include hospitals, showrooms, shopping malls, and airport. The member bank's customer can withdraw money anytime from any of the ATM irrespective of the bank with which the customer has an account. It offers services beyond cash withdrawals, like utility bill payment, fund transfer and deposits. SWADHAN widens the scope of ATM usage in the country in a cost effective manner. A member bank of SWADHAN can increase its geographical presence without deploying ATMs in all the locations; instead it can share and use ATMs of other banks, thereby saving a substantial amount.
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6.7 REAL TIME GROSS SETTLEMENT SYSTEM (RTGS)
The RTGS system implemented by the Reserve Bank has been in operation for more than four years. The system has also stabilized over the years and has been witnessing increased coverage in terms of bank branches and transaction volume. The volume of RTGS (Real Time Gross Settlement System ) transactions is increasing rapidly. RTGS settled 1.94 million transactions in the month of March 2009 as against 0.72 million transactions in March 2008. Customer transactions settling in RTGS presently constitute 89 percent of total RTGS transactions and are growing. 1. It is treiterated that in a Straight Through Processing (STP) environment, standardization is very much necessary and uniformity in message format is a pre requisite for the success of STP. 2. RTGS Customers have been complaining that there is no uniformity on information provided to the customer in the pass books / account statements by different banks. Some banks merely indicate `RTGS credit‘ without details while other banks are giving sender's bank account number or UTR number of the transactions etc. RBI has therefore, advised that a) A bank customer receiving RTGS credit shall be provided with the name of the remitter in his account statements / pass book. b) A bank customer sending a RTGS remittance shall be provided with the name of the beneficiary in his account statements / pass book. The banks are free to provide any additional information as they deem necessary / useful.
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6.8 DIGITAL CERTIFICATES
Definition A digital certificate provides secure authentication to users of computerbased systems such as email, software and Web applications. Digital certificates can be used in lieu of the traditional username-password system to access restricted contents. Digital certificates are based on a public-private key system, which acts like a lock and key pair. When you have a digital certificate, your public key is freely accessible, while the private key is kept secret and is given only to trusted recipients.
Universities generally issue institutional ID cards only after ensuring or validating that you are a bona fide student, faculty, or staff member. In PKI terms, this is called the registration process—verifying that you are eligible to receive a certificate and verifying the information in it. Similar to an important ID card, once a digital certificate is issued, it should be managed with care. How is a digital certificate created? In creating digital certificates a unique cryptographic key pair is generated. One of these keys is referred to as a public key and the other as a private key. Then the certification authority—generally on your campus—creates a digital certificate by combining information about you and the issuing organization with the public key and digitally signing the whole thing. This is very much like an organization‘s ID office filling out an ID card for you and then signing it to make it official. In PKI terms, the public key for an individual is put into a digital document, along with information about that individual, and then the digital document
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is signed by the organization‘s certification authority. This signed document can be transmitted to anyone and used to identify the subject of the certificate. However, the private key of the original key pair must be securely managed and never given to anyone else. As the private key is a very large prime number, it is not something an individual memorizes; rather, the private key must be stored on some device, such as a laptop computer, PDA, or USB key ring. If you send a copy of your certificate to another computer to authenticate yourself, what keeps someone with access to that computer from reusing it later to pretend to be you? Unlike an ID card which is valuable by itself, the digital certificate is useless without the associated private key. That is why protecting the private key is so important. The private key must never be given to anyone else nor left somewhere outside of control by the owner.
Types of Certificates There are different types of certificates, each with different functions and this can be confusing. It helps to differentiate between at least four types of certificates. You can see samples of some of these different types of certificates in your browser. • Root or authority certificates. These are certificates that create the base (or root) of a certification authority hierarchy, such as Thawte or CREN. These certificates are not signed by another CA—they are self signed by the CA that created them. When a certificate is self-signed, it means that the name in the Issuer field is the same as the name in the Subject Field. • Institutional authority certificates. These certificates are also called campus certificates. These certificates are signed by a third party verifying
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CHAPTER – 7 SECURITY CONSIDERATION IN E-BANKING
7.1 THE NEED FOR SECURITY 7.2 RISK MANAGEMENT FOR INTERNET BANKING 7.3 CONTROL MEASUES AT SYSTEM LEVEL AND NETWORL LEVEL 7.4 LEGAL ASPECTS AND FRAMEWORK 7.5 SECURITY POLICY
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7.1 THE NEED FOR SECURITY
As Internet-lurking identity thieves hone their dark skills, banks and financial institutions need to employ more advanced technology to protect the identity and information of online banking customers, according to a recently release study conducted by the Federal Deposit Insurance Corporation (FDIC). "User names" and passwords should be supported in Internet banking transactions with new and better ways of identifying real customers from fraud artists trying to "highjack" bank accounts, recommended FDIC security analysts. Identity theft, particularly account hijacking, continues to grow as a problem for the financial services industry and for consumers," said FDIC Chairman Don Powell in a press release. "Our review illustrates that ID theft is evolving in more complicated ways and that more can and should be done to make online banking more secure." The new findings are in a supplement to an FDIC study issued in December about ways to fight "phishing" scams, in which criminals send fraudulent emails to trick consumers into providing confidential financial information that can lead to illegal access to bank accounts. The supplement reviews and responds to public comments that the FDIC received about the original study, identifies the most recent trends in identity theft, and discusses a variety of new technologies that could be used to make Internet banking more secure.
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In the latest findings, the FDIC concluded that the risk assessment financial institutions are required to perform regarding information security also should address customer authentication. The supplement also said that if an institution offers Internet banking, it has an obligation to properly secure that service. This extra level of security for online accounts, often referred to as "multifactor authentication," would be used in addition to the traditional passwords. These new security features may include "tokens" issued to customers that generate new passwords every 60 seconds, software that can identify the computer that a customer uses to access online accounts, or actually contacting a customer by phone to make sure that he or she is the one attempting to access the account.
Graph 7.1 Graph on internet in safe hand
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The FDIC, along with other federal banking oversight agencies are expected to issue regulatory guidelines later this year to financial institutions about improving the security of customer authentication methods. The latest FDIC findings are expected to be considered in the development of that guidelines. "The FDIC does not intend to propose one solution for all, but the evidence…indicates that more can and should be done to protect the security and confidentiality of sensitive customer information in order to prevent account hijacking," the supplement said. It added that consumers are concerned about online security and may be receptive to using a new form of authentication "if they perceive it as offering improved safety and convenience."
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7.2 RISK MANAGEMENT FOR INTERNET BANKING
The past few years have been characterized by rapid changes in technology and the introduction of corporate and retail banking services through the Internet. The unprecedented speed with which new technologies are being adopted, the ubiquitous and global nature of electronic networks, the integration of e-banking platforms with legacy systems and the increasing dependence of banks on third party information service providers, all dramatically amplify the magnitude of risks to which banks are exposed. Types of Internet Banking Financial institution Internet offerings can be broadly classified into three groups with distinct risk profiles:
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Informational—Offers information about the bank's products and services ("brochureware") and is low risk
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Communicative—Offers account-related information and possibly offers updates to static data (such as addresses). Since access is permitted to the bank's main systems, the risk is material.
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Transactional—Allows customers to execute financial transactions and carries the highest risk.
Risk Management Principles Managing the risks and implementing controls for Internet banking initiatives follows the same principles as other risk management processes. The most dangerous thing is to treat this as a technical problem and leave it to IT management to manage. As the previous enumeration of the risks has
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shown, this is a general management issue which needs attention from senior management. A general framework of risk management is set forth below. Legal and Reputational Risk Management Legal and reputational risk management can be broken down into the following:
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Privacy—Banks should articulate a privacy policy and should communicate this to customers. Customers must be allowed opt-out options, and great care must be exercised before sharing customer information with outside entities. If customers are from a different jurisdiction, then the strongest privacy law may apply.
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Availability—Banks should have business continuity and contingency planning processes to help ensure continuous availability of Internet banking services. This is challenging because of the potential for high transaction volume and the demand for 24-hour, seven-day-a-week availability.
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Incident response—Banks should formulate appropriate incident response plans to detect, manage, contain and minimize problems arising from internal and external attacks.
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The risks arising from Internet banking are not restricted to information security areas, but span across all the traditional banking areas. Risk management for Internet banking should be directed by senior management and incorporated within existing risk management disciplines in the organization. Control procedures need to keep pace with rapid changes in technology.
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7.3 CONTROL MEASURES AT SYSTEM LEVEL AND NETWORK LEVEL
Information system hardware, software, networks and data need to be protected by built-in controls to ensure their security. Effective controls ensure accuracy, integrity and safety of information system resources and activities associated with it. They can minimize errors, fraud and destruction in the Internet worked information systems. Different types of controls are available in administrative and software security they are: ? Input controls, ? Output controls, ? Procedural controls,
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Facility controls
System Level Control System level security is concerned with the level of standalone system/terminal. The normally used control measures at a system level are Password, Antiviruses, and Firewall Password : The front line of defense against intruders is the password system. The password serves to authenticated the ID of the individual and logging on to the system. In turn the ID provide the security. The ID is used what is referred to as discretionary access control. For Example, by listing the IDs of the user may grant permission to them to read files owned by that user. Antiviruses : The ideal solution to the threat of viruses is prevention – do not allow a virus to get into the system in the first place. This goal is in
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general impossible to achieve, although prevention can reduce number of successful viral attacks. The next best approach is to do a following, ? Detection ? Identification ? Removal
Diagram 7.1 Safe world of online banking Network Level Control
The other types of classification of security measures, apart from the system level are the network level security measures. They provide security to network and the elements of a network as a whole. For this purpose either firewall or cryptographic techniques are used.
Firewalls : A firewalls is the point at which your private company network and a public network, such as the Internet connect. A firewall system is the
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hardware/software configuration, which sits at this perimeter, controlling access into and out of your company‘s network. New ways are constantly being developed to compromise these systems while in theory, firewall allows only authorized users and stopping unwanted activities on the internet network. Firewall can also be deployed within an enterprise network to compartmentalize different servers and networks in effect controlling access within the network. For Example, an enterprise may want to separate the accounting and payroll server from the rest of the network and only allow certain individuals to access the information. The 3 common types of firewall are as follows: a) Packet-filters b) Application-level gateways and c) Circuit-level gateways.
Cryptography : The process of systematic encoding of data before transmission so that an unauthorized person cannot decipher it is called as data encryption. There are different types of encryption techniques but each is suitable depending upon the situation.
In the process of sending a message, the sender sends the encrypted data that is governed by an algorithm and has a key, which is changed periodically. At the receiving end that data is decrypted using the key. Because the key is the only means that can decrypt. And there is no compulsion that the sender and the receiver should be at standard spots.
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7.4 Legal Aspects and Framework
During the research It could found that the literature on regulatory aspect on online baking is very less. Shedding the conventional brick and mortar banking style, the Indian banking has entered the new forte of online/internet banking, though of late. This being the transition period, the banking community is facing immense challenge and issues of feasibility also popup. I. Feasibility of Online banking in India The redtapism in public sector banking and lesser consumer base is being attributed to as the reasons for the Indian banks to enter into the online banking this late. With the rapid development in the technological infrastructure (security, confidentiality is being mainly referred to) and the legal framework being better equipped, the online bank has become a feasible mode of banking in India. II. Challenges In the Internet banking system, information is considered as an asset and so worthy of protection. However, the present system of authentication does not address the security aspect in full. This calls for an urgent need to acclimatize the whole system. According to Online Banking Association, member institutions rated security as the most important issue of online banking. There is a dual requirement to protect customers' privacy and protection against fraud.
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Another major issue is that of Data Protection and the need for a legal and regulatory framework. On the technological front the Indian Internet banking system is facing many hurdles. The problems include operational risks, security risks, system architecture risks, reputational risks and legal risks. Phishing is another issue that needs attention. Experts suggest that simple rules such as not sharing login IDs and passwords with anyone, would keep customers safe. III. Future It would obviously take much time before the online banking could be called a fully alternative banking mode to the conventional one. Legal and crossborder risks can be avoided through proper customer identification devices, information screening techniques, periodic reviews on compliance with various laws, and gaining knowledge of various national laws (applicable) and guide the customers through their cross-border dealings. The security issues can be tackled by having the bank's systems technologically equipped to evade operational and security risks. Reputational risks can be prevented by testing of the system before implementation, developing contingency plans and creating back-up facilities. Customer education and awareness also need to addressed, as unless the customers are taken into confidence and made comfortable with the working of online banking all the technological development will go in vain.
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7.5 SECURITY POLICY
While First National Bank works to protect your banking privacy, you will also play an important role in protecting your accounts. There are a number steps you can take to ensure that your Online Banking account information is protected: 1. Don't reveal your NetTeller ID or Password to anyone else. Your NetTeller ID and Password are designed to protect your banking information, but they will only work if you keep them to yourself. 2. Change your Online Banking Password frequently. 3. Don't walk away from your computer if you are in the middle of an Online Banking session. 4. After entering your NetTeller ID, verify your personal identification image that you selected before entering your Password. If you see your personal identification image this confirms that you are accessing First National Bank‘s website. 5. Once you have finished your Online Banking session, sign off before visiting other Internet sites. Online Banking is private & secure First National Bank is committed to making your Online Banking experience safe and secure. We have taken many measures to ensure your privacy, including:
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1. Information Encoding We use the latest encoding technology to ensure that your private information cannot be intercepted. Encryption is a way to rewrite something in code, which can be decoded later with the right "key". When you request information about your accounts, the request is sent encrypted to First National Bank. 2. Personally Selected Account Names First National Bank does not display your account numbers over the Internet. Instead, we ask you to choose a "pseudo" name for each of your accounts. 3. Individual ID & Password Information In order to access First National Bank's Online Banking, you must enter a unique NetTeller ID and Password. 4. Password Security System To keep unauthorized individuals from accessing your account by guessing your Password, we have instituted a Password security system. If your Password is entered incorrectly three consecutive times, the user is "locked out" of the system for 24 hours. Your account is not accessible via Online Banking throughout this 24-hour lockout period 5. Automatic Log-Off If you are logged on to Online Banking but do not perform any activity for 10 minutes, you will not be able to proceed until you "re-log" on to the system.
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CHAPTER- 8 RECENT TRED OF IT IN BANKING
8.1 The Branch Renaissance 8.2 The migration to an Online Environment 8.3 Customer Relationship Through Portals 8.4 The Digital Age of Banking
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8.1 THE BRANCH RENAISSANCE In presence of e-banking banks also are recognizing that the branch is still the cornerstone of retail banking. Banks are focusing their efforts on improving revenues through sales of complex higher-margin services and products, and they are finding that branch is most effective delivery channel for this purpose. Their ability to leverage the branch, however has been impeded by legacy systems and outdated applications as they no longer can support innovative delivery strategies. Improvement in Internet Banking Banks are increasingly convinced that ROI from Internet can extend beyond simple cost-to-serve equations and direct revenue models. Due to the enhancement in Internet banking and user-friendliness, internet banking‘s ROI now is poised to generate revenue indirectly by improving customer satisfaction with internet banking. Expanding Automation Of Loan Process As internet rates look up, banks are scrambling to develop marketing and IT strategies geared towards maintaining strong growth in organizations. Next generation solution will provide users with greater work process automation capabilities and better integration with third party applications, thereby eliminating many of the manual processes still in place today. Better service to a Smaller Business So far small business have been chronically undeserved by banks. The classic example is the application of a retail internet banking solution to serve these businesses, which has been the leading cause of low adoption to
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date. Banks however are increasingly recognizing they could garner a larger share of small, In an effort to better serve them and attract their business, banks will deploy internet banking solution built specifically for small businesses. Check Imaging With the help of latest technology, the full potential of check imaging technology can realized. Check imaging which had an ignominious start in 1990s, is about to make a comeback drive by economic and technological factors. It began generating ripple in the late1990s, with re-pass image capture and is currently propelling a tidal wave, which will sweep in check truncation and image exchange. Cash Management While most bank have large bank corporate banking solution in place, a large number of bank transaction are still being completed on window-based solutions. However many banks are to all of their customer over to browser based solutions, because full functionality is available through this channel. Convergence in Banking By the turn of this twenty first century, the biggest banks in the industrial world have become complex financial organizations that offer a wide variety of services to the international market and control billion of dollars in cash and assets. Supported by the latest technology, banks are trying to identify new business niches, develop customized services, implement innovative strategies and exploit new market opportunities.
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8.2 THE MIGRATION TO AN ONLINE ENVIRONMENT
With the rapid shift of business into the online environment, the pressure to enhance market value, latest expansions and consolidations there can be not doubt that the current trends in retail banking are going to confront financial services providers. The important trend of customer increasingly preferring securities as investment vehicles, has been visible for last ten years, but is now significantly accentuated. Individually each of these trends has already had or will have considerable effect on retail business: combined together, they will ensure that banking landscape will experience greater change over the next five to ten years than experienced over the previous twenty years. New Distribution Channels As more household will have broadband internet connections, new approaches will evolve to provide advisory services. Data voice and image will integrated and put the bank‘s branch on screen in the customer‘s living room. Online-banking consumers can do well by doing good, improving financial control while eliminating the paper bills, statements and checks that harm the environment – saving 17 million trees and avoiding 4 billion tons of greenhouse gases a year – Marketing Charts reports. According to a recent report from Javelin Strategy & Research, ?2007 Online Banking and Bill Payment: Trends, Forecasts, and Strategies for Reinvigorating Growth and Adoption,? finds that those who have yet to use online banking have become more entrenched in their objections over time, saying they ?prefer to deal with people? or because of fears of fraud.
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Diagram 8.1 Migration to an online banking In assessing other trends illustrated by the report, author Mary Monahan said, ?People manage their assets and bills online to gain control of time, finances and safety. Bankers can meet consumer needs while providing vital environmental benefits.? ?In addition, emerging features such as two-way mobile or email alerts and preset user-defined limits and prohibitions (UDLAPs) can transform today‘s overwhelming flood of online information into an experience that is green, safe and practical for everyone.?
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8.3 CUSTOMER RELATIONSHIP THROUGH PORTAL The 80s and 90s were marked by an unprecedented development in information and communication technologies. This movement was motivated, in particular, by the need for companies to remain competitive in markets characterized by an increase in customer numbers and in the supply of services (Venkatraman, 1994). The introduction of technology-based solutions therefore came about as a way of differentiating companies from their customers‘ point of view. This evolution contributed towards a change in many companies‘ strategies and, in particular, the relations they establish with customers (Ricard et al, 2001). It is therefore essential to research the impact that the introduction of these technologies has on existing company customer relations. The relationship approach concept was first introduced by Berry (1983) and refers to all marketing activities carried out by a company in order to establish, develop and, above all, maintain customer relationships (Berry, 1983; Morgan and Hunt, 1994). Although there is no consensus as to the definition of relationship marketing (Shirvastava and Kale, 2003; Proença and Fernandes, 2005), the underlying principle of RM involves maximizing the long-term benefits for both parties involved. Discussion has recently arisen on the strategic benefits of adopting the relationship approach in the banking sector (Bennett and Durkin, 2002). It is essential for the banks to know its customers well, building a strong, trusting relationship with them – which is particularly important in the financial services sector due to the complexity of many of its products (Diacon and Ennew, 1996; Bejou et al, 1998) –, commitment, honesty, cooperation between the institution and
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its customers (Tyler and Stanley, 1999; Rexha et al, 2003), as well as customer satisfaction. Research Methodology Discussion of Result
This study seeks to examine the impact of the use of Internet Banking on the relationship approach used in retail banking: ?In what way is the impact of the use of Internet Banking shown in the relationship between the bank and its customer?? The dimensions of the concepts under study are presented in Figure 1. The study explores the way in which the various dimensions of the use of Internet Banking and the relationship approach affect each other, seeking to understand, ultimately, the relationship between the two basic concepts.
INTERNET BANKING ? Frequency of use ? Intensity and degree of use ? Diversity of use (place of access or type of product) ? Duration of use
BANKING RELATIONSHIP ? Duration/ Continuity ? Adaptability ? Equity ? Importance of the quality/commissions ? Commitment
Diagram 8.2 Internet banking and customer relationship
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8.4 DIGITAL AGE OF BANKING
The banking industry believes financial institutions will embrace digital checks quickly because image exchange -- the exchange of images rather than original paper -- is expected to cut the volume of paper in circulation dramatically, eventually reducing transportation and other check-processing costs. For example, some paper checks have to be flown across the country before clearing, costing banks billions of dollars annually. More than 40 billion checks are written annually in the United States, and up to 20 people may physically handle a single check throughout its lifecycle. On average, banks store three copies of each check written, for an annual total of more than 150 billion copies. Additionally, banks historically have been required by law to keep detailed paper records of bank statements, including copies of original checks, but now the laws are changing so that banks can use digital documentation. How Does It All Work? The truth is, banks are looking forward to the day when a scanned image of a check can be zapped to another bank, into the depository and then back to the customer's bank. As a first step, many banks already are allowing employees and customers to view digital images of checks online. As the number of online banking customers increases, so will the rate of replacement of original paper checks in monthly statements. The next step will be the proliferation of scanned imaging -- which works by scanning a check's front and back, then making it available at Web-based ATMs or bank-teller stations. From there, a copy can be printed for customers upon request.
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Graph 8.1 Graph on online payment by age group Two technologies behind digital archiving, imaging and exchange are content management and Web services. Content management is actually a set of technologies for creating, managing, integrating, Web-enabling and delivering digital content to employees, customers and, in our case, check writers. The technology allows users to access, retrieve and move all kinds of digital images. Together, technologies like content management and Web services are making the digital evolution of banking real and immediate. Digital archiving and digital technologies will reduce labor and mailing costs and will help improve service to banking customers. Look for it at a bank near you.
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CASE STUDY ICICI BANK - Investment In Technology Yielding Rich Dividends Today
Bank Profile Established in 1994, ICICI Bank is today the second largest bank in India and among the top 150 in the world. In less than a decade, the bank has become a universal bank offering a well diversified portfolio of financial services. It currently has assets of over US$ 79 billion and a market capitalization of US$ 9 billion and services over 14 million customers through a network of about 950 branches, 3300 ATM's and a 3200 seat call center (as of 2007). The hallmark of this exponential growth is ICICI Bank‘s unwavering focus on technology. Key Business Drivers ICICI Bank was set up when the process of deregulation and liberalization had just begun in India and the Reserve Bank of India (India‘s central bank) had paved the way for private players in the banking sector, which at that time was dominated by state-owned and foreign banks. Serving the majority of the country‘s populace, state owned banks had a large branch network, with minimal or no automation and little focus on service. Foreign banks, on the other hand, deployed high-end technology, had innovative product offerings, but had a very small branch network that serviced only corporate's and individuals with high net-worth. Sensing an untapped opportunity, ICICI Bank decided to target India‘s burgeoning middle class and corporate's by offering a high level of customer service and efficiency that
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rivaled the foreign banks, on a much larger scale, at a lower cost. A crucial aspect of this strategy was the emphasis on technology. ICICI Bank positioned itself as technology-savvy customer friendly bank. To support its technology focused strategy, ICICI Bank needed a robust technology platform that would help it achieve its business goals. After an intense evaluation of several global vendors, ICICI Bank identified Infosys as its technology partner and selected Finacle, the universal banking solution from Infosys, as its core banking platform. An open systems approach and low TCO (Total Cost of Ownership) were some of the key benefits Finacle offered the bank. Unlike most banks of that era, ICICI Bank was automated from day one, when its first branch opened in the city of Chennai. Some of the reasons cited by the bank for their decisions to select Finacle include Finales‘ future-proof technology, best-of-breed retail and corporate banking features, scalable architecture and proven implementation track record. Solution Overview One of the biggest challenges for Finacle was ensuring straight through processing (STP) of most of the financial transactions. With the ICICI group having several companies under its umbrella, Finacle needed to seamlessly integrate with multiple applications such as credit cards, mutual funds, brokerage, call center and data warehousing systems. Another key challenge was managing transaction volumes. ICICI Bank underwent a phase of organic and inorganic growth, first by acquiring Bank of Madura followed by a reverse merger of the bank with its parent organization, ICICI Limited. The scalable and open systems based architecture, enabled Finacle to successfully manage the resultant increase in transaction levels from 400,000 transactions a day in 2000 to nearly 2.1 million by 2005 with an
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associated growth in peak volumes by 5.5 times. With Finacle, the bank currently has the ability to process 0.27 million cheques per day and manage 7000 concurrent users.
Over the years, the strategic partnership between ICICI Bank and Infosys that started in 1994 has grown stronger and the close collaboration has resulted in many innovations. For instance, in 1997, it was the first bank in India to offer Internet banking with Finacle‘s e-banking solution and established itself as a leader in the Internet and eCommerce space. The bank followed it up with offering several e-Commerce services like Bill Payments, Funds Transfers and Corporate Banking over the net. The internet is a critical element of ICICI Bank‘s award winning multi-channel strategy that is one of the main engines of growth for the bank. Between 2000 and 2004, the bank has been able to successfully move over 70 percent of routine banking transactions from the branch to the other delivery channels, thus
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increasing overall efficiency. Currently, only 25 percent of all transactions take place through branches and 75 percent through other delivery channels. This reduction in routine transactions through the branch has enabled ICICI Bank to aggressively use its branch network as customer acquisition units. On an average, ICICI Bank adds 300,000 customers a month, which is among the highest in the world.
Share of Transactions Channels March 2000
Share of Transactions March 2004 25 % 43 %
Branches ATM's Internet & Mobile Call Centers
94 % 3%
2%
21 %
1%
11 %
Reaping The Benefits A powerful, scalable and flexible technology platform is essential for banks to manage growth and compete successfully. And Finacle provides just the right platform to ICICI Bank thus fueling its growth.
The bank has successfully leveraged the power of Finacle and has deployed the solution in the areas of core banking, consumer e-banking, corporate e99
banking and CRM. With Finacle, ICICI Bank has also gained the flexibility to easily develop new products targeted at specific segments such as ICICI Bank Young Stars- a product targeting children, Women's Account addressing working women and Bank@campus targeting students.
ICICI Bank is today recognized as a clear leader in the region and has won numerous accolades worldwide for its technology-driven initiatives. In 2003, the bank received the best multi-channel strategy award from The Banker magazine and this year it was rated as the 2nd best retail bank in Asia by The Asian Banker Journal. The bank has effectively used technology as a strategic differentiator, thus not only redefining the rules of banking in India, but also showcasing how technology can help in transforming a bank‘s business.
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CONCLUSIONS & RECOMMENDATIONS
CONCLUSION: ? People are not confident enough to whether to rely completely on online banking. There is hesitancy in their minds with regards to preference. So they use both the techniques of banking i.e. Online and Traditional. ? Because of the complexity and the unawareness in the people regarding the online banking, there is less utilization of the online banking services provided by the banks. ? People are not sure whether their account is completely secured in online banking. Security concern is the main and the core reason why people do not tend to use online banking. ? People in India are not aware of the full utility of online banking and the services that can be availed of in online banking. ? Most of the Indian population are salaries employees who do not have that volume of transaction that can be used for online transaction.
RECOMMENDATION: After analyzing the entire study on online banking with respect to both the primary and the secondary data, the following recommendations can be put forth:? The infrastructure for the development is not being implemented in way that could be beneficial.
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? There are various obstacles in the banking scenario with regards to guidelines and issues for functioning. This has led to decline in the usage of the online banking service of the banks. ? The people having accounts can be urged to take up an internet banking facility. They should be motivated rather than just being told that there exists a service of online banking. ? There are more people who are not actually aware of all the benefits that they reap out of the transaction of online banking. They should be proper awareness. ? Most of the people o not count online banking due the problems of security concerns. Proper security software should be developed and people should be convinced that their accounts are secured in online transactions.
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Glossary
Bankne :A communication software to provide message and file transfer between branches of banks and across banks.
Cryptography : It is the science of using mathematics to encrypt and decrypt information. Digital certificate : A digital certificate is an electronic ?certificate? that contains information about a user and is used (among other things) to verify who the user is. Digital certificate make use of Public Key Cryptography. The public key is stored as part of the digital certificate. The private key on the user‘s computer, or in some hardware such as smart cards, i-keys etc
Digital Signature
: A digital signature is a way to ensure that a electronic
document (e-mail, document, text file, etc.).
Electronic Banking telephone and computer.
: Banking by means of electronic devices like
Extranet : Ti is a private business network of several cooperating organizations located outside the corporate firewall.
Firewall : Protection systems that monitor all internet or external communication
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activity at a site. It closes all connection attempts from unauthorized users. May provide activity logs to identify intruders, examine programs and files as they are downloaded for virus to ensure that users downloading files and programs have the authority to do so.
Indian Financial Network (INFINET) : The INFINET is primarily a TCP/IP based network. It is a Closed User. Group (CUG) Network and uses a blend of communication technologies such as VSATs and Terrestrial Leased Lines.
Intranet : An intranet is an internal corporate network built using Internet and World Wide Web standards and products. It is used by the employees Of the organization to gain access to corporate information.
Data Base Management System (DBMS) : A set of computer programs that controls the creation, maintenance, and utilization of the databases of an organization.
Information System : A system which accepts the data resources as input to process them and provide output in the form of information products.
Local Area Network (LAN) : An interconnected group of intelligent microcomputers or terminal within a small geographic location.
Mainframe : A large size of computer system, typically with a separate central processing unit, as distinguished from microcomputer and minicomputer
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Protocol : A set of rules and procedures for the control of communications in a communication network.
Public Key Infrastructure (PKI) : This provides an electronic identity to a person through the issuance of a digital certificate and a private cryptographic key, usually stored in a secure media such as a smart card or an i-key or even a floppy disk. The person could make use of the identity to digitally sign documents or transactions.
Real Time Gross Settlement System (RTGS) : It is a settlement process, minimizes settlement risks by settling individual payments in real time in the books of account, held at the Central Bank. Under RTGS, practically, instant settlement ensures fast, secure, final and irrevocable settlement of payment transactions.
TCP/IP : Transmission Control Protocol/Internet Protocol. A de facto network architecture standard for many companies.
Topology : Geometric arrangement of computer.
Transaction Processing System (TPS) : An information system that processes data arising from the occurrence of business transaction.
Wide Area Network (WAN) : A communication network that is spread out over a wide geographical area.
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BIBLIOGRAPHY
Reference Book
Reference website
www.ehow.com/list_6603416_challenges-electronic-banking.html www.isrj.net/August/2011/Commerce_Emerging_Trends_in_Banking_Chall enges_and_Opportunities.html www.scribd.com/doc/38577189/E-banking-Challenges-and-Opportunities www.pulakchowdhury.com/the-3-biggest-benefits-of-online-banking.php www.corporate- clients.commerzbank.com/en/metanavigation/files/ 2007_11_ online-security.pdf www.fool.com/Money/Banking/Banking12.htm banking.about.com/od/securityandsafety/Scams_Security_Safety.htm
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