TOPIC: Internet Banking

SUB: FM
SUBMITTED TO: PROF. MEHTA
E banking
• E banking is the automated delivery of new
and traditional banking products and
services directly to customers through
electronic, interactive communication
channels.
• E- Banking can be defined as “delivery of
bank’s services to a customer at his office
or home using Electronic Technology.”
Internet Banking
• Internet banking (also referred as e banking) is the
latest in this series of technological wonders in the
recent past involving use of Internet for delivery
of banking products & services.
• In Internet banking, any inquiry or transaction is
processed online without any reference to the
branch (anywhere banking) at any time.
• Due to exposure to global trends after information
explosion led by internet, customers- both individuals
and corporates are now demanding better services
with more products from their banks.
• And due to customers demand companies are coming
with new and better improved banking services.
• E-banking services such as Internet Banking,
Telebanking, credit cards, Debit cards and Demat
Services.
• Market is now focusing from mass banking to
class banking through introduction of value
added and customized products. . Providing
Internet banking is increasingly becoming a
"need to have" than a "nice to have" service.
Advantages.
• Convenience.
• Speed of concluding transactions.
• Safety-banking from own home.
• Economy- banking without visiting your bank.
• Cheaper service fees.
• Seamless Integration with existing environment (IDM-
Intelligent Data Module).
• Highly Scaleable.
• Easy Customization.
• Lower Costs of both Installation and Maintenance.
• Platform Independence.
• Round-the-Clock and Cross-Border Availability.
• Remote Authorization.
 Internet Banking Process

• In internet banking system the bank has a

centralized database that is web-enabled.
• Any user with a personal computer and a browser
can get connected to his bank -s website to
perform any of the virtual banking functions.
• All the services that the bank has permitted on the
internet are displayed in menu of banks website.
• Any service can be selected and further
interaction is dictated by the nature of service.
Eg: Menu of banking requests at a remote
personnel computer
• Transmitting the banking requests to a host
computer over a network
• Receiving the request at the host computer
• Identifying the type of customer banking
request received
• Automatic logging of the service request
• Comparing the received request to a stored
table of request types.
• The branch offices of bank are interconnected
through terrestrial or satellite links.
• The network which connects the various locations
and gives connectivity to the central office within the
organization is called intranet. These networks are
limited to organizations for which they are set up.
SWIFT is a live example of intranet application.
• There is no physical identity for any branch. It’s a
borderless entity permitting anytime, anywhere and
anyhow banking.  
 Internet banking in India
• The Reserve Bank of India constituted a working group on
Internet Banking. The group divided the internet banking
products in India into 3 types based on the levels of access
granted. They are: 

• i) Information Only System:  General purpose information

like interest rates, branch location, bank products and their
features, loan and deposit calculations are provided in the
banks website. There exist facilities for downloading various
types of application forms. The communication is normally
done through e-mail. There is no interaction between the
customer and bank's application system. No identification of
the customer is done. In this system, there is no possibility
of any unauthorized person getting into production systems
of the bank through internet. 
• ii) Electronic Information Transfer System:  
The system provides customer- specific
information in the form of account balances,
transaction details, and statement of accounts.
The information is still largely of the 'read
only'  format. Identification and authentication
of the customer is through password. The
information is fetched from the bank's
application system either in batch mode or off-
line. The application systems cannot directly
access through the internet. 
iii) Fully Electronic Transactional System: 
This system allows bi-directional
capabilities. Transactions can be submitted
by the customer for online update. This
system requires high degree of security and
control. In this environment, web server and
application systems are linked over secure
infrastructure. It comprises  technology
covering computerization, networking and
security, inter-bank payment gateway and
legal infrastructure. 
• The process flow of transaction emanating from
a customer in a full transactional internet bank
website in general form is as follows.
 Services by Internet Banking
ELECTRONIC
CLEARING SYSTEM MOBILE BANKING
[ECS]

INTERNET BANKING/
ATMs CORE BANKING SOLUTIONS Plastic
Money

HOME BANKING/
TELE BANKING IN-TOUCH
FINANCIAL SERVICES
 Automated teller machines (ATM)

• Electronic machines operated by

customers themselves to deposit
or withdraw money.
• Uses WAN technology.
• ATM card is a plastic card,
magnetically coded & can be
read by machine.
• For transaction customer has to
insert card in the machine, then
give in the PIN
Advantages
• 1]This machine works 24/7,reduces the pressures
on the bank’s staff.
• 2]Avoid congestion in bank.
• 3]Better customer service.
• 4]Low cost.
• Ex: HWAK, the intelligent Auto teller systems are
special kind of ATM that are capable of thinking
for themselves & can provide better services.
• The Indian market today has approximately more
than 30,000 ATM’s.
 TELE BANKING
• By dialing the Telebanking number
through a landline or a mobile from
anywhere, the customer can access his
account and by following the user-friendly
menu, entire banking can be done through
Interactive Voice Response (IVR) system.
With sufficient numbers of hunting lines
made available, customer call will hardly
fail.
• Facilities offered includes: balance inquiry,
inquiries about collections, or specific
credits/ debits, transfer of funds , requests
for statement of a/c, a/c opening forms etc.
Mobile banking
• Consists of 2 modules
1. Push: customer is informed through SMS alerts.
Eg: launch of new product & services or status
of post dated cheques.
2. Pull: info is sent to customer on his request by
SMS. Eg: A/c bal, installment dues.
Facilities post paid mobile bill payments, creditcard
pt, railway ticketing etc.
Home banking.
• The Seattle the 1st national bank has
promoted an in-touch home service that
provides customers access to a talking
computer from touch tone phones at home
by calling up the bank computer , the
computer can instruct it to perform financial
services like paying bills, inter account
transaction, loan generation etc.
 SMART CARD:
• A smart card usually contains an embedded 8-bit
microprocessor (a kind of computer chip). The
microprocessor is under a contact pad on one side of
the card.
• The microprocessor on the smart card is there for
security. The host computer and card reader actually
"talk" to the microprocessor. The microprocessor
enforces access to the data on the card.
• The chips in these cards are capable of many kinds of
transactions.
 DEBIT/CREDIT
CARD
• Debit cards are also known as check cards. Debit cards look like
credit cards or ATM (automated teller machine) cards, but
operate like cash or a personal check.
• Debit cards are different from credit cards. While a credit card is
a way to "pay later," a debit card is a way to "pay now." When
you use a debit card, your money is quickly deducted from your
current or savings account.
• Debit cards are accepted at many locations, including grocery
stores, retail stores, gasoline stations, and restaurants. You can
use your card anywhere merchants display your card's brand
name or logo.
• They offer an alternative to carrying a checkbook or cash.
 E-CHEQUE
• An e-Cheque is the electronic version or representation
of paper cheque.
• The Information and Legal Framework on the E-
Cheque is the same as that of the paper cheque.
• An E-cheque work the same way a cheque does, the
cheque writer "writes" the e-Cheque using one of many
types of electronic devices and "gives" the e-Cheque to
the payee electronically.
• The payee "deposits" the Electronic Cheque receives
credit, and the payee's bank "clears" the e-Cheque to the
paying bank.
• The paying bank validates the e-Cheque and then
"charges" the check writer's account for the check.
Some important techniques used in
IB
ECS

Internet
CTS EFT
Banking

RTGS
ELECTRONIC CLEARING
SERVICES [ECS]
• ECS is a mode of money transfer from one a/c to
another.
• Introduction of ECS was the 1st version of
“Electronic Payments” in India.
• Its mostly used for bulk transfers.
• Amt restriction: 500,000 & below.
• Very useful to collect payments.
• Companies use this to distribute dividends.
• Extremely cost effective & simple process.
ELECTRONIC FUNDS
TRANSFER [EFT]
• For one-to-one transfers.
• Uses Deferred Net Settlement System.
• This method is used to disburse payments instead
of writing drafts & mailing to the customers.
• Hence cheaper than paper based instruments.
• Also reaches recipient faster. The collection time
is reduced by 2-5 days.
Real Time Gross Settlement[RTGS]
• Electronic credits, inter-bank or customer transactions.
• Near real time value (max:2-4 hrs).
• Transaction amt to be above 100,000 w.e.f. 01-jan-2007.
• Helps quicker collection & disbursal of cheques & dds.
• Cost effective for remote location distribution compared to
traditional methods of cheque/ dds.
• Very effective for collecting high value items-almost
instaneous.
• Provides great liquidity.
Cheque Truncation system [CTS]
• Electronic imaging of physical cheque & use of
that images to clear.
• No amt restrictions.
• Implementation in Delhi in 2007.
• Helps in faster collection of outstation cheque, as
only images need to travel.
• Improves “the Days Of Collection”.
• Used for low value & high volume of cheques.
Security aspects of E-banking
• One of the major issues concerning customers and organizations is the
security aspect of E-banking.
• It is only natural that business customers show concern about sending
their personal details and account numbers over the Internet.
• The security measures are implemented partly by the bank and partly
by the customers themselves through their own vigilance.
• It's evident from the document and from a general study of the
business case of E-banking, that security is perhaps the biggest
concern
• Connectivity issues to remote locations are also very important, but
the need to be secure is far more pressing.
Three types of securities
• TRANSACTION SECURITY

• ACCESS SECURITY

• ACCOUNT HOLDER’S
VIGILANCE
 Key Elements of Security Program
• Seek necessary expertise and training, as
needed, to protect physical locations and
networks from unauthorized access
• Maintain knowledge of current threats
facing the bank and the vulnerabilities to
systems
• Assess firewalls and intrusion detection
programs at both primary and back-up
sites to make sure they are maintained at
current industry best practice levels
• Verify the identity of new employees,
contractors, or third parties accessing your
systems or facilities. If warranted, perform
background checks.
• Evaluate whether physical access to all
facilities is adequate.
• Work with service provider(s) and other
relevant customers to ensure effective logical
and physical security controls
SECURITY CONTROLS
• If user forgets to logoff after logging in
IBS,provider activates an automatic”time-out”
after a period of inactivity to prevent
unauthorized access.
• The pages which the user has viewed during
banking sessions expire to prevent the pages
from being stored in his browser, ensuring that
no one can access these pages & customer’s
financial information.
• Bank also tracks the no. of logon attempts
when bank finds 5 consecutive incorrect
logins user-id/ passwords have been
attempted, it will immediately disable.
• Uniquely identified by user id & password
every time of login.
• Data integrity of e-banking transactions,
records and information.
 SECURITY
PRECAUTIONS

• Customers should never share personal

information like PIN numbers, passwords etc
with anyone, including employees of the bank.

• PIN or password mailers should not be stored,

the PIN and/or passwords should be changed
immediately and memorized before destroying
the mailers.
• Customers are advised not to provide
sensitive account-related information over
unsecured e-mails or over the phone. Take
simple precautions like changing the ATM
PIN and online login and transaction
passwords on a regular basis. Also ensure
that the logged in session is properly signed
out.    
STRENGHT
• Advanced Infrastructure
• Providing innovative products & Services
• Brings transparency.
• Improves customer care and customer-
service tremendously and
• Reduces substantially scope for corruption
or extending undue favour to particular
constituents and uneven service to others.
WEAKNESS. OPPORTUNITIES
• Safety situations • Online banking is growing at an
around ATMs. annual rate of 60 percent and the
• Abuse of bank number of online accounts has
cards by fraudsters approximately reached 40 million
by 2012.
at ATMs.
• By using internet equivalent
• Danger of giving
quantity with lower costs services
your card number
when buying on- can be offered & contacts from
line. each corner of the world at any
time of day or night can be made.
Thus banks may enlarge their
market without opening new
branches.
•
THREATS.
Competition: ICICI Bank is facing tight competition locally as well
as internationally.
• Net Services: ICICI Bank provides all kind of services on-line.
There can be easy access to the e-mail ids of the customers through
wrong people. The confidential information of the customers can be
leaked easily through the e-mail ids.
• Decentralized Management: Each branch manager is given the
authority of taking decisions in their respective branches. The
decisions made by different managers are diverse and any one
wrong decision can laid to heavy losses to the bank.
• No Proper Facilities To Uneducated customers: ICICI Bank
provides all services through electronic computerized machines.
This creates problems to the less educated people. But this threat
falls in the 4th quadrant so its negligible. The company can avoid
this threat.