INTRODUCTION

Banks have traditionally been in the forefront of harnessing technology to improve their
operations 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 to 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. This form of banking is
generally referred to as Internet Banking.
The provision of banking services on a secure website operated by their retail or virtual
bank, credit union or building society is referred to as internet banking Here the customers can
access the data without time and geographical limitations.
Broadly, the levels of banking services offered through INTERNET can be categorized
in to three types:
The Basic Level Service is the banks’ websites which disseminate1 information on different
products and services offered to customers and members of public in general. It may receive and
reply to customers’ queries through e-mail,
In the next level are Simple Transactional Websites which allow customers to submit their
instructions, applications for different services, queries on their account balances, etc, but do not
permit any fund-based transactions on their accounts,
The third level of Internet banking services are offered by Fully Transactional Websites which
allow the customers to operate on their accounts for transfer of funds, payment of different bills,
subscribing to other products of the bank and to transact purchase and sale of securities, etc. The
above forms of Internet banking services are offered by traditional banks, as an additional method
of serving the customer or by new banks, who deliver banking services primarily through Internet
or other electronic delivery channels as the value added services. Some of these banks are known
as ‘virtual’ banks or ‘Internet only’ banks and may not have any physical presence in a country
despite the offering

IMPORTANCE OF INTERNET BANKING

 Our civilization operates on a busy, busy, busy mentality. We are regularly multitasking,
and there does not seem like there is ever enough time.
Banks naturally have very tough hours for working adults to fit into their schedule. With
internet banking, you can do your banking several day of the week at several hour of the day.
The enormous thing is that you can relocate funds from account to account, check in on your
balances, and perhaps the greatest benefit is that you know how to pay your charges online!
You can have your charges sent electronically so that you are not just saving paper, but you
are also saving on postage. As an alternative of buying a stamp to send in your check, you be able
to just transfer money directly into your account.
Internet banking also offers you slightly more protection . You be able to keep an
extremely watchful eye on the debits and credits that hit your account instantly. By maintaining an
eye on it, you can see if there are any suspicious charges almost directly so you can defend your
finances and personal information.
The evolution of electronic banking started from the use of automatic teller machines
(ATM) and has passed through telephone banking, direct bill payment, electronic fund transfer and
the revolutionary online banking . The future of electronic banking according to some is the
acceptance of WAP enabled banking and interactive-TV banking . But it has been forecasted that
among all the categories, online banking is the future of electronic financial transactions. The rise
in the e-commerce and the use of internet in its facilitation along with the enhanced online security
of transactions and sensitive information has been the core reasons for the penetration of online
banking in everyday life .
The fundamental shift towards the involvement of the customer in the financial service
provision with the help of technology especially internet has helped in reduce costs of financial
institutions as well as helped client to use the service at anytime and from virtually anywhere with
access to an internet connection. According to theorists customer evaluation of the electronic
services is influenced by attributions of success and failure in inter personal service situations. The
use of electronic banking has removed the banking personnel that facilitate the transactions and
has placed additional responsibilities on the customers to transact with the service. Although the
use of E-banking is provided for the benefit of the customers but these changes require increased
work or involvement on the part of customers.
CONTEXT

History of internet banking

Internet banking can be defined as a facility provided by banking and financial
institutions, that enable the user to execute bank related transactions through Internet.

The world is changing at a staggering rate and technology is considered to be the key driver for
these changes around us. An analysis of technology and its uses show that it has permeated in
almost every aspect of our life. There are many activities are handled electronically due the
acceptance of information technology at home as well as at workplace. Internet can be seen as a
truly global phenomenon that has made time and distance irrelevant to many transactions. The
transformation from the traditional banking towards internet banking has been a ‘leap' change.

During 1980’s there were certain developments such as:-

 Rapid development of internet
 TCP/IP system
 E-commerce
In May 1995 Wells Fargo-the first bank in the world to offer customer access to their accounts
over the internet.
ICICI bank was the first to initiate the internet banking revolution in india during 1997 under the
brand name ”Infinity”.
FEATURES OF INTERNET BANKING
Transactional (e.g., performing a financial transaction such as an account to account transfer,
paying a bill, wire transfer, apply for a loan, new account, etc.)
Payments to third parties, including bill payments and telegraphic/wire transfers
Funds transfers between a customer's own transactional account and savings accounts
Investment purchase or sale
Loan applications and transactions, such as repayments of enrollments
Non-transactional (e.g., online statements, cheque links, cobrowsing, chat)
Viewing recent transactions
Downloading bank statements, for example in PDF format
Viewing images of paid cheques
Financial Institution Administration
Management of multiple users having varying levels of authority
Transaction approval process

UNIQUE FEATURE
personal financial management support, such as importing data into personal accounting
software. Some online banking platforms support account aggregation to allow the customers to
monitor all of their accounts in one place whether they are with their main bank or with other
institutions.

Different services provided under internet banking are:-

Online bill payment
Shopping
Ticket booking
Prepaid mobile recharge
Market watch
Personal home page
Investment services
Online applications
Personal update
Types of Internet Banking
The advent of the World Wide Web in the mid-1990s brought information to our fingertips.
Using the Internet, we can shop, pay bills, hear weather reports, play interactive games and keep
abreast of breaking news. In recent years, both Internet-based and traditional brick-and-mortar
banks have set up shop online, allowing their patrons to send, receive and monitor money in their
accounts.
There are types of internet banking such as:-

Informational Internet Banking- This fundamental level of banking does not allow patrons to view
or maintain accounts, nor does it allow for communication between the financial institution and
customers. Informational Internet banking simply means the bank provides basic information
about its products and services, much like a brochure. This is meant for marketing purposes only,
and there is no connection to the bank's main computer systems.

Communicative Online Banking- Communicative online banking allows for some communication
between the patron and bank. However, this is typically limited to fundamental interactions such as
account inquiries, new account updates, loan or mortgage applications, contact information
updates and balances. Communicative online banking may connect with the bank's main computer
systems.

Transactional Internet Banking-The most popular online banking type, transactional Internet
banking offers all of the benefits of a traditional brick-and-mortar institution. This includes full
control over your accounts---deposits, withdrawals, transfers, updates and online payments.
Increased security measures now make Internet banking safe, secure and convenient, especially in
the case of mobile online banking.
 Process of internet banking
Opening the bank’s website
Selecting the option which provides Internet Banking
 Enter the user-Id and Password/PIN
 Perform the requisite transactions
 Logout
TECHNOLOGIES RELATED TO INTERNET BANKING

The technologies are:-

 Telephone banking
 Mobile banking
 IVR
 ATM
 EFT
 AFT

TELEPHONE BANKING

 When banking and financial services are delivered to the customer of a bank through the
medium of telephone is called as telephone.
 It uses AVR(automated voice response)
 In this technology a customer uses the tone-phone to send digitized data messages to the
system in order to activate a particular service. the system contains software to recognize the
tone/word.
MOBILE BANKING

 It refers to the banking activity that are carried out on mobile phone.
 Current Mobile Banking Applications:
o SMS Banking
o WAP Banking
o STK (Sim Toolkit) Banking

IVR

 Interactive Voice Response (IVR) is a software application that accepts a

combination of voice telephone input and touch-tone keypad selection and provides
appropriate responses in the form of voice
 IVR has come into our life at the beginnings of 90’s.
  First step in Telephone Banking
 Peak transaction volume in salary payment days for balance inquiry
 Integrated with ATM system
ATM(AUTOMATED TELLER MACHINE)

 On most modern ATMs, the customer is identified by inserting a plastic ATM card with
a magnetic stripe or a plastic smart card with a chip, that contains a unique card number and
some security information such as an expiration date or CVVC (CVV). Authentication is
provided by the customer entering a personal identification number (PIN).
 Using an ATM, customers can access their bank accounts in order to
make cash withdrawals, credit card cash advances, and check their account balances as well as
purchase prepaid cellphone credit.
ELECTRONIC FUND TRANSFER

 Electronic Funds Transfer (EFT) is a system of transferring money from one bank account
directly to another without any paper money changing hands. One of the most widely-used
EFT programs is Direct Deposit, in which payroll is deposited straight into an employee's
bank account.
 EFT is safe, secure, efficient, and less expensive than paper check payments and
collections.
AUTOMATED FUND TRANSFER

 The automatic funds transfer is a financial transaction that ensures funds are sent and
received on schedule without the need for human intervention.
SECURITY MEASURES

There exist two different security methods for online banking.

1. The PIN/TAN system where the PIN represents a password, used for the login and TANs
representing one-time passwords to authenticate transactions. TANs can be distributed in different
ways,
a. the most popular one is to send a list of TANs to the online banking user by postal letter.
The most secure way of using TANs is to generate them by need using a security token. These
token generated TANs depend on the time and a unique secret, stored in the security token (this is
called two-factor authentication or 2FA). Usually online banking with PIN/TAN is done via a web
browser using SSL secured connections, so that there is no additional encryption needed.
b. Another way to provide TANs to an online banking user, is to send the TAN of the
current bank transaction to the user's (GSM) mobile phone via SMS. The SMS text usually quotes
the transaction amount and details, the TAN is only valid for a short period of time. Especially in
Germany and Austria, many banks have adapted this "SMS TAN" service as it is considered as
very secure.

2. Signature based online banking where all transactions are signed and encrypted digitally. The
Keys for the signature generation and encryption can be stored on smartcards or any memory
medium, depending on the concrete implementation.

COUNTER MEASURES
There exist several countermeasures which try to avoid attacks.
Digital certificates are used against phishing and pharming, the use of class-3 card readers is a
measure to avoid manipulation of transactions by the software in signature based online banking
variants.
To protect their systems against Trojan horses, users should use virus scanners and be careful
with downloaded software or e-mail attachments
 ARCHITECTURE

In the internet architecture there is a WEB SERVER. To the web server the
BANK SERVER is connected. Banks access the customer database and then get connected
to the web server for the transactions. The web server is connected to the internet. Firewalls
are used for the protection.
 MAIN CONCERNS IN INTERNET BANKING

In a survey conducted by the 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 protect against fraud. Banking Securely: Online Banking via the World
Wide Web provides an overview of Internet commerce and how one company handles secure
banking for its financial institution clients and their customers. Some basic information on the
transmission of confidential data is presented in Security and Encryption on the Web. PC
Magazine Online also offers a primer: How Encryption Works. A multi-layered security
architecture comprising firewalls, filtering routers, encryption and digital certification ensures
that your account information is protected from unauthorised access:

 Firewalls and filtering routers ensure that only the legitimate Internet users are allowed to
access the system.
 Encryption techniques used by the bank (including the sophisticated public key
encryption) would ensure that privacy of data flowing between the browser and the Infinity system
is protected.
 Digital certification procedures provide the assurance that the data you receive is from the
Infinity system.
ADVANTAGES OF INTERNET BANKING

1.BENEFITS FOR BANKS

Large customer coverage

Lower cast of operation

International promotion of products and services

Increasing customer satisfaction and providing personalized relationship with

customers.

2. BENEFITS FOR SMALL TO MEDIUM BUSINESS

to run its operations more effectively

lower cost than traditional financial management mechanisms.

3. BENEFITS FOR CUSTOMERS

Convenience-24 hrs a day and 7 days a week

Cost- reducing transfer fees

Speed- faster circulation of assets

Competitiveness-fostering competition in financial market.

Communication- communicate easily

Environmental-abolishing the uses of paper

DISADVANTAGES OF INTERNET BANKING
Internet banking services provide a number of benefits to consumers. Despite the
growing popularity of internet banking, it cannot be denied that some people still remain
hesitant doing transactions online especially where money is concerned. Some of the
disadvantages are :-
1. Impersonal.- Doing transactions on the internet can be very impersonal. In other words,
you only do business with the use of a computer. No individual to receive and check your
money or correct some wrong information that you might have written on a certain form.
And so for people comfortable dealing with real people who provide personalized services
and using paper and money, internet banking is not ideal.
2. Lack of trust- Many people still don't trust the internet. For the new users who have
performed financial transactions for only a few times, they may still have this doubt whether
or not they did the right thing such as clicked the right button and so on. They can only be
comfortable once they print the transaction receipt and the transaction appeared on the
bank statement.
3. Difficult for first timers- For a first time user, navigating through a website of an internet
bank may be hard and may take some time. Opening an account could also take time as some
sites ask for numerous personal details including a photo identification which can
inconvenience the potential customer. Because of this complexity, they may be discouraged to
use this internet banking service. Tutorials and live customer support may be provided,
though, to help the client in his or her needed tasks so it's best to take the time to know the
virtual environment.
4. Security fraud.- Many people shy away from internet banking because of the security
threat. They can't help but worry about this aspect what with news on fraudulent bank
transactions that pop up every now and then. However, this should not be a problem as
banks that provide internet banking services prioritize security above anything else. Since
they value their customers, they always use the most advanced security technology in
protecting their websites.
5. Bank site changes- Most banks upgrade their online programs on a periodic basis
sometimes adding new features and products. When this happens, the bank may ask
customers to re-enter account information which can be a cause of worry.
6. Accessibility- If the Internet goes down in your area or the area of the banking office, you will
be unable to access your accounts. This includes being unable to withdraw money from ATMs or
to use your debit card.
TIPS TO AVOID INTERNET BANKING FRAUDS

The various ways to avoid interbanking frauds are:-

1. Phishing
A person's personal details are obtained by fraudsters posing as bankers, who float a site similar to
that of the person's bank. They are asked to provide all personal information about themselves and
their account to the bank on the pretext of database upgradation. The number and password are
then used to carry out transactions on their behalf without their knowledge.
2. Hacking
Here, personal data is stolen through hacking. The fraudster needs to be an adept cyber criminal
who can steal information stored or transacted in any computer. Sometimes, a spyware is installed
in computer to gain access to all files.
3. Securing your account
Here are some simple tips to prevent you from falling into the trap of cyber criminals. Remember,
a simple ignorance or oversight can make a huge dent in your hard-earned savings. Avoid online
banking on unsecured wifi systems and operate only from PCs at home. Never reveal password to
anyone. Do not even write it on a piece of paper on diary. Just memorise it. It should be
alphanemeric and change it frequently. Never reply to queries from bank online about account or
personal details. The personal information should not be kept in a public computer or in emails.
4. Check sites Url
Always check the URL of your bank's web site. Fraudsters can lure you to enter your user ID and
password at a fake website that resembles your bank. If you see anything other than the bank's
genuine URL, it has to be fake. Never enter your user ID or password or such sensitive information
without ascertaining that you are on the right website. Always type the Web address of your bank
into the browser address space. Never click on the link in the email.
5. Full-proof password
Change your online banking password at regular intervals. Also, avoid easy-to-guess passwords,
like first names, birthdays, kid's or spouse's name and telephone numbers. Try to have an alpha-
numeric password, one that combines alphabets and numbers. If you have several bank accounts,
never use the same online banking password for all. Never select the option on browser that stores
or retains user name and password. As it can easily be cracked by cyber criminals. Also, never
paste your password, always type it in. This little amount of `finger exercise' will go a long way in
safety.
6. Always check 'last logged'
Most banks have a 'last logged in' panel on their websites. If your bank has it, check the panel
whenever you log in. If you notice irregularities (like you are logging in after two days, but the
panel says you logged in that morning!), report the matter immediately to your bank and change
your password right away. Always log out when you exit the online banking portal. Close the
browser to ensure that your secure session is terminated. Never exit simply by closing the browser.
7. Keep your system up to date
Regularly check for security updates for your computer operating system. Most security updates
are aimed at reducing risks to your computer, these may be data-related or otherwise. Make sure
that your operating system and browser have the latest security patches installed. And, always
install these only from trusted websites. Install a personal firewall to prevent hackers from gaining
unauthorised access to your computer, especially if you connect to the Internet through a cable or a
DSL modem.
8. Public access can be injurious
Don't leave the PC unattended after keying in information while transacting on the website. Avoid
accessing your bank online at cyber cafes or on a share or public computer. Also, avoid locations
that offer online connections through wireless networks (Wi-Fi), where privacy and security are
minimal.
9. Public PCs
Also, using Net banking services at cyber cafes leaves one vulnerable to data thieves. Another
modus operandi adopted by cheats these days is stealing data from public computers or shared
PCs. The fraud here takes advantage of unsecured cyber cafes. A police office says, "Sometimes,
the cafe owners are hand-in-glove with the thugs."

CONCLUSION
 More and more banks are coming to realize that internet is a part of banks' alternative
delivery channel strategies activities concentrated in the business-to-consumer segment, focused
on retaining clients

In Internet banking, security is a primary concern. Security concerns have been addressed from
every angle within the architecture of the Internet banking application

Internet banking is now being widely accepted because of the following reasons:-
It accelerates the process of creating new markets
It Reduces operational costs and workforce
 Checking with no monthly fee, free bill payment and rebates on ATM surcharges

It facilitates faster, easier and more reliable service to clients

It helps in the development of Corporate image
 Exceptional rates on Savings, CDs, and IRAs
 Credit cards with low rates
 Easy online applications for all accounts, including personal loans and mortgages

 24 hour account access

 Quality customer service with personal attention

The potential of “E-banking is huge. With the increase in connectivity, the number of users
will explode”, The strategy for banks is to provide value-added services to products to customers
utilizing the Internet extensively. Web based banking service or E-Banking, the latest generation of
banking transactions, has opened up new window of opportunity to the banks and existing
financial institutions. Since its evolution in 90th decade, it is having unprecedented growth.

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By-S.Gurusamy

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By- K.C.Shekhar

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By- Gordon and Natrajan

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By- Dr. P.K. Srivastava