E-BANKING - April 6th, 2008 INDEX SR.NO PARTICULARS PAGE NO. 1 EXECUTIVE SUMMARY 2 INTRODUCTION 3 EVOLUTION 4 WHY IS E-BANKING IMPORTANT?

5 DEFINITION OF E-BANKING 6 TRADITIONAL BANKING v/s E-BANKING 7 FACETS OF E-BANKING 8 MODELS OF E-BANKING 9 ADVANTAGES OF E-BANKING 10 CONSTRAINTS OF E-BANKING 11 ELECTRONICS DELIVERY CHANNELS ¬ AUTOMATED TELLER MACHINE MOBILE BANKING¬ TELE BANKING¬ ¬ INTERNET BANKING 12 IMPACT OF I.T ON BANKING 13 E-BANKING TRANSACTIONS 14 ELECTRONIC FUND TRANSFER 15 CLEARING SYSTEM 16 SECURITY MEASURES 17 CONCLUSION 18 CASE STUDY ON ICICI BANK 19 ARTICLE EXECUTIVE SUMMARY ‘Electronic banking’ means banking done through electronic systems for customer’s transactions (front office computerization) and/or internal accounting and book-keeping (back office computerization), as against the traditional manual system. The new private sector banks, which began operating since 1994 with front office and Back office computerization, spurred a trend towards complete-computerization and electronic banking in public sector banks. Today, most of the public sector banks have computerized front office computerization in metros/cities and their back office computerization and information management systems are also fast getting computerized. Recent advancements in information and communication technologies have virtually replaced manual banking by electronic banking. Electronic banking has enabled banks to improve their customer service quality by speeding up most the routine banking transaction and by providing ‘anywhere, anytime banking’. New banking channels have been open up in the form of ATMs, Tele-Banking and Internet Banking, although the conventional ‘brick and mortar’ banking is also available at all branches. Electronic Banking has also improved internal bookkeeping and management information systems of the banks. Inter-connectivity between the branches is also being sought to achieve, to centralized the core banking operations on a common electronic platform, to be achieved economies of scale and to further improvise upon ‘anywhere banking’. Automated Teller Machines (ATMs) have become very popular for dispensing cash to customers on-site and off-site, 24 hours a day, 365 days a year. However, these have certain limitations as regards quantum of withdrawals and denomination of notes disbursed. Further, these cannot issue cheques books or drafts, like a teller/assistant at the bank counter, nor can these respond to an un-programmed query of a customer. These do not have a human face, nor can these show any empathy to a customer who has run into some problem. Mobile Banking goes to the customers for banking transactions, rather than the other way round (as in conventional banking). Mobile banks can have either computerized system or manual banking system. In either case, it reaches the customers on designated days/hours on specified places. It involves less capital investment, but has problems of security and safety, unlike a conventional branch, which provides safety, security and comfort coupled with complete banking facilities. Tele banking provides ‘anywhere and anytime’ banking, but only to a limited extent. It can provide general information about the account to a customer, but it cannot issue a cheques book or a draft instantly, which is possible in branch banking. Internet banking enables customers to access and view their ledger accounts and make limited transfer of funds from one account to another. However, Internet banking has not yet gained momentum in India, as it

requires certain infrastructure, which is not yet possessed by most customers. There are certain issues that require to be tackled before it can become more popular in cities and towns. Electronic Funds Transfer has made fund-transfer from one center to another in the same country or to another country faster and safer. Electronic Clearing system has enabled the banks abroad to handle the clearing of cheques and inter-banks settlement faster and in large volumes. In India the clearing system is not fully automated. This result in credit clearance to customer’s accounts being done on the third day after the cheques is deposited. Electronic credit/debit systems have saved the customers from the tedium involved in receiving/making payments by cheques. The corporate and banks have also preferred to adopt this hassle-free, cheques-less system of payments and receipts, by issuing mandates to the bankers for making periodic payments from their accounts of the specified company. INTRODUCTION The information technology has revolutionized various aspects of our life. The world at large is entering into the “Net Age”. Internet or simply “net” is an inter connection of computer communication networks covering the whole world. Electronic banking is conducted by using Automatic Teller Machines (ATMs), telephones or debit cards. Debit cards look like a credit card. But unlike a credit card, using a debit card removes funds from your bank account immediately. Electronic banking is using electronic means to transfer funds directly from one account to another. Some electronic banking services are ATMs, direct deposit and withdrawal services, pay by phone systems, point-of-sale transfer terminals, Web banking or PC banking services, even banking from your mobile phone. Electronic banking makes use of electronic currency. Check cards or debit cards, smart cards or stored-value cards, digital cash and digital checks are the different types of electronic currency. If you use a check card to make purchases, the funds are transferred immediately from your account to the store's account. Smart cards have a specific amount of credit embedded in it. The chip in the card contains both personal and financial information. Digital checks are used with electronic bill paying services. Consumers can use personal finance software packages or they can use software provided by a bank.. On line banking or PC banking offers a wider outreach for smaller institutions. Electronic banking offers consumers the convenience of accessing and transferring funds between their accounts, paying their bills and other purchases, twenty four hours a day, seven days a week. EVOLUTION The Rangarajan Committee report in early 1980s was the first step towards computerization of banks. Banks then started exploring the idea of 'Total Bank Automation (TBA)'. Although titled 'Total Bank Automation,' TBA was in most cases confined to branch automation. It was only in the early 1990s that banks started thinking about tying-up disparate branches together to facilitate information sharing. At the same time, private banks entered the banking arena with radically different strategies. Given the huge IT budgets at their disposal and with almost no legacy IT equipment to worry about; private banks hastened the adoption of technology. The philosophy for private banks was very clear: to provide a whole new range of financial products and services at minimal costs, and technology made this possible. K.N.C. Nair, Head (IT), Federal Bank, "The new generation banks showed the way and others had no option but to follow the tech infusion to retain and attract profitable customers." The improved connectivity and falling costs offered by leased lines provided a booster to inter-branch automation. With centralized infrastructure and numerous connectivity options, banks started exploring multiple delivery channels like ATM, Net-banking, mobile banking, and Tele-banking thus driving down cost per transaction.

WHY E-BANKING IS IMPORTANT? Over the past several years the Internet has grown tremendously, both in scope and number of users. . More people are using their computers to do tasks they had done manually in the past. In addition to the usual work that computers do, new uses like home automation and personal entertainment are become more common uses for the home PC. People are turning to their computers to manage their financial lives as well, and this is why electronic banking by computer is important both now and in the future. Consumers will take advantage of the convenience that electronic banking offers them in their busy

Not only does electronic banking encompass traditional cash accounts. TRADITIONAL BANKING . and phone banking. Internet banking. 2. virtual banking.Conventional banking is an art. Electronic banking will continue to grow along with the rest of electronic commerce in the future. that the terms used to describe the various types of electronic banking are often used interchangeably. Mobile banking. primarily the Internet. The obvious advantage to the consumer is convenience— Electronic banking is an umbrella term for the process by which a customer may perform banking transactions electronically without visiting a brick-and-mortar institution.It has a “BRICK AND MORTAR” structure. It provides the normal banking facilities to customers like accepting deposits." DEFINITION OF E-BANKING There is no official definition of this term.e. Telebanking. but can allow a user to make investment transactions electronically as well. telephone banking. "Our Internet banking base has been growing at an exponential pace over the last few years. PC banking and Internet or online banking are the most frequently used designations. Currently around 78 per cent of the bank's customer base is registered for Internet banking. The average person does not have time to visit stand in line at the bank to make transactions and electronic banking eliminates the need for most time-consuming trips to the bank. which is more convenient and cost-effective.it operates and provides services only during the working hours of the banks. however. electronic funds transfers and debit cards. account enquiry. the brick and mortar structure of a bank is essential to perform the basic functions. EBanking may include ATMs. funds transfer. The customers can access the banks website for viewing their Account details and perform the transactions on account as per their requirements. E-BANKING . TRADITIONAL BANKING v/s E-BANKING 1.E-banking facilitates banking transactions by customers round the clock globally (i. It should be noted. opening accounts. TRADITIONAL BANKING . These delivery channels include ATM. remote electronic banking.e.. Many government organizations offer publications and other materials related to E-Banking and the Internet.E-banking enables the customers to perform the basic banking transactions by sitting at their office or at homes through PC or LAPTOP. bank statements etc. Electronic Banking is the delivery of banking services through the use of electronic communication.such as at home or at the workplace.E-banking is no longer confined to branches. TRADITIONAL BANKING . 4. home banking. TRADITIONAL BANKING . It is a paper-based transaction E-BANKING . You may also see or hear E-Banking called Internet banking. e. (i. cash withdrawals etc. The following terms all refer to one form or another of electronic banking: personal computer (PC) banking. Web services allow users to login via their web browser and buy and sell stocks and other investments online. 5. but it generally implies a service that allows customers to use some form of computer to access account-specific information and possibly conduct transactions from a remote location . Safeguarding the privacy of personal confidential information and security can be concerns with E-Banking services.In traditional banking. Internet banking. E banking is knowledge based and mostly scientific in using the electronic devices of the computer revolution. . wire transfers. 24 hours a day).g. It provides additional delivery channels to customers. online banking.schedules. thereby giving a virtual banking a real shape.8am to 8 pm). account enquiries. E BANKING . It calls for elimination of the paper-based transaction. TRADITIONAL BANKING . E-BANKING . on-line banking or PC banking. 3.Traditional banking is confined to branches.In E-banking the “brick and mortar” structure of the traditional banking gets converted into “CLICK AND PORTAR” model. including privacy and security. the customer has to visit the branch of the bank in person to perform the basic banking transactions viz.E-banking is more of a science than art. E BANKING . home banking.

F World Bank and other international financial institutions through extranets. Electronic data Interchange etc. the central bank has to be connected with the government treasury on extranet to carry out its function as an agent of the government. Customers can make use of these services with no restricted office hours. On the other hand. Parameters involved with e-banking are: customer acceptance and satisfaction. open market operations. Under this E-central banking all the banks within the purview of a central bank are interconnected on extranet to facilities clearing of cheques. E-Banking will operate through internet. profitability. Extensive work is required to integrate internal and external communications of banking related information through banking internet and intranet for the development of the financial sector. but still being considered by smaller community banks.FACETS OF E-BANKING E-banking means the conduct of banking electronically. MODELS OF E-BANKING To implement effectively E-banking and augment the level of technology the following models have been suggested:1) Complete Centralised Solution (CCS). and competition from non-banking institutions. (1) COMPLETE CENTRALISED SOLUTION (CCS). value added for both the organization and consumer. service rendered. management of cash reserves. It calls for eliminating of paper based transactions and radical change in the banking operations. the bank has to provide web-server and the requisite software which is connected to the main server. operational risk. Extranet permits a bank to have full control over the users of intranet and information to be transmitted. the customers can access the web-server for their basic banking operations using any standard browser at any location.M. no tellers and waiting. Several network innovations of E-banking can be visualized such as smart cards. For the transactions that are internal to a bank. the central bank of all countries can be inter-linked with the I. no queues. between the bank and its branches and subsidiaries. privacy issues. 3) High Tech Bank within Bank. Once the required hardware and software are set in. Intranet procurements of banking are required. in fact. remittances. which is restricted to banks only. This is an ideal branch network model on which E-banking activities can be implemented uniformly and effectively. Again. (3) ELECTRONIC CENTRAL BANKING. E-Banking is therefore a banking on the information superhighways on the frontier of the internet. of course. This form of electronic banking is for transacting inter-bank transactions such as money at call etc. as well as all important banking information can be made available with easy access to customers on Internet. This type of E-Banking is driving extranets. Banking products and services such as deposits. (4) INTERNET PROCUREMENT. Under this model. (2) BANK TO BANK E-BANKING. credit cards etc. Hence it is well secured and unauthorized access is less. extranet and intranet. . E-banking is basically Internet based. Implementation of the online strategy is a given for large banking institutions. the banking operations have to be guarded against unauthorized access by intruders. (1) CUSTOMER TO E-BANKING. E-Banking must have at least the following dimensions:1) Customer to Bank E-Banking. 2) Cluster Approach. 2) Bank to Bank E-Banking 3) Electronic Central Banking 4) Intranet Procurement. The Extranet-Intranet-Internet relationship that exists in the process of E-Banking. discounting of bill etc.

Infact. • The banks could get a gestation period to cover more branches under the umbrella of High-Tech bank in a phased manner. CONVENIENT BANKINGE banking increases the customer’s convenience. Within each bank. 2. Under this model. . • All these branches should be interconnected with Regional servers through reliable network media. • The skilled manpower is required only at the centralized location. it is necessary that an integrated computerization is available at all branches so that connectivity amongst various branches can be established through Regional clusters. (3) HIGH TECH BANK WITH BANK: Under this model. FEATURES: The following are the important features of the cluster approach. Worldwide 24 hours and 7 days a week banking services are made possible. • Branches are provided online nodes to receive requests from customers and provide them services across the counter. FEATURES: The following are the features of High Tech Bank within bank:• Out of the entire branch network of the bank. ADVANTAGES OF E-BANKING E banking has the following advantages1. only certain branches are selected to offer E-banking depending upon the customers needs. This approach enables the banks to play a balanced role to offer state of the art service to ever demanding customers of major cities and simultaneously continue to offer traditional personalized services to the mass customers who still dominate the banking scene. data for the entire bank etc are stored in a centralised server with its hot standby server being replaced at different location and connected through high speed and efficient network. ROUND THE CLOCK BANKINGE-banking facilities performing of basic banking transactions by customers round the clock globally. Under this approach. complete computerization of all branches is avoided. High Tech banking providing E-Banking facilities through selected branches and traditional bank offering traditional services through other branches. • The High network customers may be encouraged to use E-Banking services through these selected branches.FEATURES : The following are the features of complete centralized solution:• The entire system software. (2) CLUSTER APPROACH. • The nodes provided at remote branches are connected through effective satellite links with enough redundancy to provide reliability as well as adequate bandwith. • The entire branch network of the bank should be computerized through integrated software. business potential. infrastructure facilities available etc. • The accounts of all the customers in those branches should be automated under a centralized system offering various electronic channels including Internet Banking. Customer can perform basic banking transactions by simply sitting at their office or at home through PC or LAPTOP. No personal visit to the branch is required. Thus E-banking facilitates Home Banking. there are no restricted office hours for E-banking. • It would not impose any technological burden on the customers who do not want to enjoy E-banking services. two different types of banks would function concurrently. Customers can get drafts at their doorsteps through e-mail call. computerized branches of each city are connected with Regional Processor located at each such city which are then connected through reliable media to a centralized High end server.

In a fast changing technological scenario. 6. SECURITY In paperless banking transaction. there is much saving on the cost of infrastructure.3. instant credit. 4. For a successful E-Banking. 5. START UP COSTMany banks have expressed their concern about the huge initial start-up cost for venturing into E-banking. QUALITY BANKINGE banking opens new vistas for providing efficient. software and other related components including Modem. Routers. c. 8. b. The network should be robust. efficient and scalable with inbuilt redundancy. requirements of staff at the banks get reduced to a greater extent. 3. 2. denial of services. LOW COST BANKING (ESTABLISHMENT)Brick and mortar structure of banking gets converted into Click and Portal Banking. bankers need to develop a coherent perspective of the role of network technologies and advancement of their EFT departments with a competitive introspection of their banking business. The training and retaining of skilled manpower is a major cause of concern. fraud. 7. modification of data. which would necessitate a well. Thus. websites. quality service to end users and other partners. 4. The cost of sophisticated hardware. skill level of employees etc. the obsolescence of technology is fast and hence there is always shortage of skilled personnel. The connection cost to the Internet or any other mode of electronic communication. immediate payments of utility bills. PROFITABLE BANKINGThe increased speed response to customer requirements under E-banking vis-à-vis branch banking can enhance customer satisfaction and. secured. Hence the bank has to spend a lot on training. There are chances that documents such as cheques. it increases the customer’s convenience to a greater extent and facilitates better customer retention. Moreover. many problems of security are involved. In brief. waste and abuse. instant transfer of funds etc. consequently can lead to higher profits via handling a larger number of customer accounts. LACK OF SKILLED PERSONNEL It is a well-known fact that there is an acute scarcity of web developers. E banking allows the possibility of improved quality and an enlarged range of services being made available to customers. and Network Management System etc. passbook etc. The cost of transactions through Internet banking is much less than any other traditional mode. content providers and knowledgeable professionals to route banking transactions through Internet. SPEED BANKINGThe increased speed of response customer requirements under E-banking will lead to greater customer satisfaction and handling a larger number of transactions at a lesser time. one day credit. d. would be made possible under E-banking. TRAINING AND MAINTENANCE The introduction of E-Banking involves 24 hours support environment. EDI etc. Hence. LOW COST BANKING (SERVICE)The operational costs have come down due to technology adoption. A security threat is defined as a circumstance decision or event with potential to cause economic hardship to data or network resources in the form of destruction. Bridges. can be modified without leaving any visible . the bank has to outsource certain functions and services to maintain the level of standards and state of readiness. Moreover. it adds conveniences to the entire banking services apart from widening the range. The cost of maintenance of all equipment. Banks can also offer many cash management products for the existing customers without any additional cost. CONSTRAINTS IN E-BANKING [ With the obvious benefits emerging out of E-banking mentioned above the following factors contribute as major impediments in the smooth implementation of E-banking: 1. The start up cost includesa. Banks can access to a greater number of potential customers without the commitment cost of physically opening branches. economic and quality service to the customers. disclosure. SERVICE BANKINGE-banking creates strong basic infrastructure for the banks to embark upon many cash management products and to venture in the new fields like E-Commerce. qualified robust group of skilled people to meet external and internal commitments. What is more important is their retention in their organization after necessary training. The cost of setting up organizational activities to implement E-Banking.

local calls are not free generally and so the customer has to pay every time he checks his balance. implementation of firewalls etc. 8. on a home PC. For example. it is uncertain as to what possible legal issues may pop up in future as banking on internet progresses. wrongful communication. the customer identifies him or herself by inserting a plastic card with a magnetic stripe or a plastic smartcard with a chip. Mail and distribution costs are still necessary as the statements. which operates 24 hours a day. Many ATMs also allow people to deposit cash or cheques. they can under cut the prices and provide stiff competition to established banks. Some banks have automated their front-end process for the customers. but still largely depend upon manual processes at the back-end. the country’s banking legislation needs to make suitable provisions with a thorough consultation and discussion among the legal as well as technical experts. computer driven system. ATM is a cash rending teller machine. Navigating around websites on home computers is often slow and frustrating. The customer then . What may happen if a customer sensitive data falls into the hands of a stranger or if his account shows a Nil balance all in a sudden without his knowledge? The legal issues should cover unauthorized access and authorized modification of data.trace. Providing appropriate security may require major initial investments in the form of application encryption techniques. Moreover. banks marketing programme and products are generally based on product or physical location. transfer money between their bank accounts. it displays easy-to-follow. Now players in the field have lower costs than old banks. The Internet creates perfect market conditions where prospective consumers have access to more information and can more readily compare rates and financial products offerings. customers can access their bank accounts in order to make cash withdrawals (or credit card cash advances) and check their account balances. that contains his or her account number. are still mailed. 6. requiring another seditious log-on. DESTRUCTION OF PRICING MECHANISM The Internet may also destroy the basic business pricing models. but paper statements are also sent by mail. 7 days a week. Inspite of implementation of several securities measures. and punishment to be meted out to combat computer crimes. It is a user-friendly. Many deposits and some withdrawals require the use of postal services. RESTRICTED CLIENTELE AND TECHNICAL PROBLEMS The user of E-Banking needs a computer and time to log on to the site. or purchase goods and services. Distortion of information is also possible. Though initial legal framework has been devised for E-banking activities. the modem connection often breaks off. RESTRICTED BUSINESS Not all transactions can be carried out electronically. pay bills. Moreover. 7. To prevent computer crimes. the INTERNET customers receive their statements online. • USAGE On most modern ATMs. ELECTRONIC DELIVERY CHANNELS AUTOMATED TELLER MACHINE¬ • INTRODUCTION An automated teller machine or automatic teller machine (ATM) is an computerized telecommunications device that allows a financial institution's customers a secure method of performing financial transactions in a public space without the need for a human bank teller or a clerk. Hence. 5. Using an ATM. Moreover. phone connections are not always perfect and. step-by-step instructions for the customer. LEGAL ISSUES Legal framework for recognizing the validity of banking transactions conducted through the NET is still being put in place. The web allows customers to easily compare all the products and their prices and sign-up for the products irrespective of location. cheques etc. A totally menu driven system. It means that the target clientele is restricted to those who have a home PC or can access the ‘NET’ through the office or cyber cafés. the possibility of a security breach cannot be ruled out.

Secure cryptoprocessor. Function key buttons (usually close to the display) or a Touchscreen (used to select the various aspects of the transaction) 7. PIN Pad (similar in layout to a Touch tone or Calculator keypad). as non-customer's identities cannot be reliably confirmed. a transaction record is printed. Request for a cheque book 5. usually constisting of the action taken. and available balance. customer wait times. Off premise machines are deployed by financial institutions and also ISO's (or Independent Sales Organizations) where there is usually just a straight need for cash. After the transaction is complete. Some ATMs are also built as fully self-contained exterior units designed to sit alone without the protection of a building and be completely exposed on all sides to the elements. or Windows XP Embedded). If the number is entered incorrectly several times in a row (usually three attempts per card insertion). CPU (to control the user interface and transaction devices) 2. Typical platforms used in ATM development include RMX. • Software With the migration to commodity PC hardware. installation location. An ATM typically is made up of the following devices: 1. location.verifies their identity by entering a passcode. Windows 2000. any applicable fees. often referred to as a PIN (Personal Identification Number) of four or more digits. Windows XP. Account balance enquiry 4. ATMs have moved away from custom hardware architectures using microcontrollers and/or application-specific integrated circuits to adopting a hardware architecture that is very similar to a personal computer. These represent two types of ATM installations. mutli-function machines that complement an actual bank branch's capabilities and thus more expensive. Housing (for aesthetics and to attach signage to) Recently. grocery stores. 5. On premise ATMs are typically more advanced. Types by installation locations ATMs are placed not only near or inside the premises of banks. Upon successful entry of the PIN. Generating statement of account 3. and Microsoft operating systems (such as Windows 98. dispensing cash. printing statements. standard commercial "off-the-shelf" operating systems and programming environments can be used inside of ATMs. Sun Microsystem's Java may also be used in these environments. Vault (to store the parts of the machinery requiring restricted access) 9. gas stations and restaurants. • Hardware A block diagram of an ATM. OS/2. some ATMs will attempt retain the card as a security precaution to prevent an unauthorised user from discovering the PIN by guesswork. on and off premise. Mono-function and multi-function devices are manufactured both regular "interior grade" and weatherresistant "exterior.) all within a single footprint. Display (used by the customer for performing the transaction) 6. desired reliability. Cash dispensing 2. Reasons for selecting either mono-function or multi-function and "interior" versus "exterior" ATMs include device cost. which only one type of mechanism for financial transactions is present (such as cash dispensing or statement printing) Multi-function devices. Record Printer (to provide the customer with a record of their transaction) 8. but also in locations such as shopping centres/malls. 4. Deposit of cash/ cheques . Types by physical characteristics There are two main types of ATMs that have developed over time: Mono-function devices. Windows NT. which incorporate multiple mechanisms to perform multiple services (such as accepting deposits. the customer may perform a transaction. through-the-wall grade" variants. often manufactured as part of a secure enclosure. so they typically are the cheaper mono-function device. Magnetic and/or Chip card reader (to identify the customer) 3. and historical preference. a transaction may be performed at the ATM that allows the customer's PIN to be changed securely. generally within a secure enclosure. In some cases. Many ATMs are now able to use operating systems such as Microsoft Windows and Linux. Linux is also finding some receiption in the ATM marketplace FUNCTIONS OF ATM 1. etc. due to heavier computing demands and the falling price of computer-like architectures. date and time. Captured cards are often destroyed if the ATM owner is not the card issuing bank.

Updating passbooks 5. Deposit currency recognition. electricity bills etc. Printing bank statements 4. 8. Customer security while using ATMs Security guards watching over ATMs that have been installed in a van. and recycling 2. MOBILE BANKING SERVICES Banks offering mobile access are mostly supporting some or all of the following services: .). banking can be done by the customer at any time on any day of the week. 50/ 100/ 500. get their bank statements. Quick and efficient service 3. especially those which benefit from a fully integrated cross-bank ATM network. it has been suggested that efforts are now more concentrated on deterring legislation than on solving the problem of forced withdrawals. ATMs also provide a practical demonstration of a number of security systems and concepts operating together and how various security concerns are dealt with. For other functions . 7. However the biggest limitation of Internet banking is the requirement of a PC with an Internet connection. tolls. Issue of gift cheques/ travellers cheques 7. as it reduces the customer requirement to just a mobile phone. the customer has to visit the branch or direct one’s enquiries to the concerned call centre. Paying routine bills.) 3. acceptance. multi purpose stored value cards. etc. concert. perform transactions like transferring money to other accounts and pay their bills sitting in the comfort of their homes and offices. such as: 1. Lottery ticket purchases 9. where the user is able to send a silent alarm in response to a threat. Cash withdrawals are restricted to certain amounts as fixed by the bank and notified to atm cash holders. when they are traveling or when they are waiting for their orders to come through in a restaurant. Customers now don't need access to a computer terminal to access their banks. Mobile banking addresses this fundamental limitation of Internet Banking.) 6. Loading monetary value into pre-paid cards (cell phones. multiple security cameras and security guards are an ubiquitous ATM feature. Utility payments like telephone bills. 3. etc. Customer's could check out their account details. as it relates to ATMs. has several dimensions. In some countries.6. ATM can perform only particulars functions. critics of the industry have called for the adoption of an emergency PIN system for ATMs. etc. ATMs can also act as an advertising channel for companies to advertise their own products or third-party products and services ¬ MOBILE BANKING The last time that technology had a major impact in helping banks service their customers was with the introduction of the Internet banking. social security. ADVANTAGES OF ATM 1. Donations to charity 11. 2. and taxes (utilities. 2. Purchasing postal stamps. they have evolved to include many other bank-related functions. Critics of ATM operators assert that the issue of customer security appears to have been abandoned by the banking industry. In some areas. 1986. phone bills. At least as far back as July 30. Games and promotional features 10. Response is uniform and fixed for all the customers as per the programme set. Internet Banking helped give the customer's anytime access to their banks. DISADVANTAGES OF ATM 1. Still. Cash dispensation is restricted to certain denomination of currency notes usually rs. • Security Security. Alternative uses Although ATMs were originally developed as just cash dispensers. thus leaving no scope for discourteous or subjective behaviour as may happen with human interaction at bank’s counters. Round the clock banking for 365 days a year. ATMs include many functions which are not directly related to the management of one's own bank account. fees. Ticket purchases (train. the main reason that Mobile Banking scores over Internet Banking is that it enables ‘Anywhere Banking'. taxes. they can now do so on the go – when they are waiting for their bus to work. legal fees.

1. Account Statement Enquiries. and are then read out the corresponding information. and from there it travels to the Bank's systems. mostly using a text to speech program. Also. by the nature of the service. IVR is more expensive as compared to other channels as it involves making a voice call which is generally more expensive than sending an SMS or making data transfer (as in WAP or Standalone clients). cheaper one's. customers of the Bank of Punjab can make fund transfer by sending the SMS ‘ TRN (A/c No)(PIN No)(Amount)'. 1. all in a matter of a few seconds. Bill Payment. 8. Customers can choose options by pressing the corresponding number in their keypads. The other way to categorize the mobile banking services. For instance. The way this works is that the customer requests for information by sending an SMS containing a service command to a pre-specified number. The information is retrieved and sent back to your mobile phone via the SMS Center. Mobile Banking Alerts Some banks also provide the facility of Mobile Banking Alerts where you can get regular updates of transactions in your account as they happen. SMS (short messaging services) uses the popular text-messaging standard to enable mobile application based banking. So a request for your bank statement is an enquiry based service and a request for your fund's transfer to some other account is a transaction-based service. Mobile banking based on IVR has some major limitations that they can be used only for Enquiry based services. One way to classify these services depending on the originator of a service session is the ‘Push/Pull' nature. Cheques Book Requests. 7. One way to enable IVR is by deploying a PBX system that can host IVR dial plans. Banks looking to go the low cost way should consider evaluating Asterisk. For example. ‘Pull' is when the customer explicitly requests a service or information from the bank. SMS (Short Messaging Service) 3. WAP (Wireless Access Protocol) 4. customers of the hdfc bank in India can get their account balance details by sending the keyword ‘HDFCBAL' and receive their balance information again by SMS. Most of the services rolled out by major banks using SMS have been limited to the Enquiry based ones. for example your banks sends out an alert when your account balance goes below a threshold level. IVR (Interactive Voice Response) 2. These include: . The main advantage of deploying mobile applications over SMS is that almost all mobile phones. gives us two kind of services – Transaction based and Enquiry Based. Atm on ship or airliner 1. Presently. Fund Transfer between Accounts. including the low end. 5. Credit/Debit Alerts. There are a couple of hosted IP based SMS gateways available in the market SMS Network Architecture How it works? The message sent by you travels from your mobile phone to the SMS Center of the Cellular Service Provider. Bill Payment Alerts. so a request for your last five transactions statement is a Pull based offering. An SMS based service is hosted on a SMS gateway that further connects to the Mobile service providers SMS Centre. . Mobile Banking is being deployed using mobile applications developed on one of the following four channels. which is an open source Linux PBX system 2. One of the major reasons that transaction based services have not taken of on SMS is because of concerns about security and because SMS doesn't enable the banks to deliver a custom user interface to make it convenient for customers to access more complex services such as transactions. However there have been few instances where even transaction-based services have been made available to customer using SMS. Banking through a mobile van 5. Customer's make a call at the IVR number and are usually greeted by a stored electronic message followed by a menu of different options. 3. Account Balance Enquiry 2. 4. 9. Minimum Balance Alerts. which are most popular in countries like India and China are SMS enabled. Cheques Status Enquiry. The bank responds with a reply SMS containing the specific information. ‘Push' is when the bank sends out information based upon an agreed set of rules.IVR or Interactive Voice Response service operates through pre-specified numbers that banks advertise to their customers. 6. Types of Mobile Banking Technically speaking most of these services can be deployed using more than one channel.

Main advantages of a mobile bank areLower capital investment as compared to a “BRICK AND¬ MORTAR” bank. letting you view and control your bank account on your mobile phone screen. Mini Statement. cheques collection. maturity date and maturity amount) etc A WAP based service requires hosting a WAP gateway. Cheques Book Request (It will be mailed to your address on record with the bank). The WAP Gateway forms an access point to the Internet from the mobile network. in the future. as your accounts will be displayed on the screen of your mobile phone once you sign on to use the service. 4. WAP sites offer the familiar form based interface and can also implement security quite effectively. Once you log onto your Bank's WAP site through your WAP/GPRS enabled mobile phone. Fast Net Mobile is password protected so only you can access it. pass book update etc. like exhibitions. withdrawals. In addition. You can transfer money between your accounts and you can see what's happening every step of the way on your mobile phone screen. Equipments and records. FAST NET MOBILE BANKING Fast Net Mobile will allow you to bank on your mobile phone while you are on the move . unlike micro-payment solutions. melas.. above which you'd like to be alerted) Debits to your account (you choose a threshold debit amount. The mPayment solution joins your mobile phone directly with your bank account. Fast Net Mobile lets you check your account balances and view mini statements (up to your last 10 transactions on each account). as it requires an alphanumeric password for authentication of your identity. Then go to the Transactions Menu after selecting your account. which simply charge costs to a mobile phone account. Select any one of the Transactions like Balance Inquiry. Fixed Deposit Inquiry( can get information on account number. will enable consumers to pay for goods and services from their bank account using their mobile phone. etc.Credits to your account (you choose a threshold credit amount. rate of interest. Banking through a mobile van with or without computerized banking system The mobile van moves from place to place on designated routes as designated hours and the customers can transact the banking business. all you need to do is enter your Customer ID and Net Banking IPIN. Emerging examples of micro-payment solutions worldwide include vending machine purchases and prepaid parking tickets. cheques book issue. What are mPayment? ASB and Telecom have launched a world-leading mobile payment service that. just enter your Fast Net Mobile Access Code and Password. such as cash deposit. and served on demand. above which you'd like to be alerted) Cheques returned (Get to know every time a cheques deposited in your account is returned) 3. mPayment means your spending power is not limited to the amount of credit available on your phone account.and to see your transactions on-screen. Banks maintain WAP sites which customer's access using a WAP compatible browser on their mobile phones. Fast Net Mobile is like a mini website. . Larger area coverage¬ It’s a novel concept with a banker¬ visiting the customers for banking rather than the other way round It¬ serves as a tool for marketing on special events. The actually forms that go into a mobile application are stored on a WAP server. principal amount. Stop Payment. MPayment delivers a secure service. • Online communication with base office • Wireless technology for data communication and online backup for transactions 5. You won't need to remember all your account numbers though. So you can access your accounts quickly without fuss – a real plus when you are on the move. Statement Request( A Statement of Accounts for the selected account for the current period will be mailed to your address on record with the bank). draft issuances. by providing payment direct from your bank account.WAP (wireless access protocol) uses a concept similar to that used in Internet banking. select an account from the list and you'll have the information you need. much like Internet users access a web portal for accessing the banks services WAP Network Architecture for Mobile Applications The following figure demonstrates the framework for enabling mobile applications over WAP. The issues connected with mobile bank are• Safety and security of cash. How it works Your mobile phone allows you to get immediate access to you accounts. Mobile Application users access the bank's site through the WAP gateway to carry out transactions. Cheques Status Inquiry(will tell you if the cheques has been paid/unpaid/stopped/invalid).

This solution will bridge the gap between digital data and human modality of listening and speaking. Electronic receipts (notification of transfers. Usage of dynamic SMS passwords 4. PIN when initiating transaction 3.Security The solution has all of the following security features: 1. Usage of dynamic SMS passwords 5. Private enquiry¬ This relates to account specific information and can be accessed only by the account holder by disclosing his/her secret PERSONAL IDENTIFICATION NUMBER (PIN) and customer ID. Telebanking through the telephone is the perfect solution for people on the go. . It is an easy to use. Telebanking ease users the hassle of going to the Bank or any Automatic Teller Machines to perform day-today banking transactions Telebanking is of two kinds: Public enquiry¬ General information about banking services/ facilities can be obtained by customers and the non-customers alike. anytime” banking access to one’s account as well as to the public information updated by the bank on its website. As such. It provides ‘anywhere. Request for a cheques book or statement 7. payments. Setting of transaction limits 6. TELE BANKING¬ In the current fast and active pace of our society. PIN when initiating transactions 3. Open a time deposit accounts 5. Transfer funds between accounts (including third party funds transfer) 4. cost effective and innovative solution designed to meet user needs for electronic banking application. most people have less or no time to go through the hassles of going to the bank just to perform some simple transactions/inquiries. Usage of code pages when transaction is authorized 4. It provides communication between information in IVRS system and off-site telephone caller/customer. Telebanking system is an Interactive Voice Response (IVR) application. Blocking access of the service if a PIN is entered incorrectly three times 5. Blocking access to the service if a PIN is entered incorrectly three times 6. Make enquiries on your credit card statement 9. by dialing a special enquiry number of the bank (call center) and the desired information can be obtained after reaching the concerned extension number/desk. Change maturity instructions for your time deposit 6. ID when accessing information services 2. cash withdrawals) 7. Check your credit card account balance Telebanking System advantages to users: 1 Provides round-the-clock availability of information and conduct banking transactions over the telephone 2 Improves services levels to off-site customers with efficiency of information release 3 Offers new ways to serve off-site customers and facilitate caller-specific or personalized information through TPIN or access number 4 Offer flexibility for change and growth through open system architecture 5 Improve efficient use of human resources 6 Project an affluent and service-oriented image Security 1. ID when accessing information services 2. Check your account balance 2. Features of Telebanking 1. which uses a telephone to access information from a database. Setting of transaction limits INTERNET BANKING¬ INTERNET BANKING means online banking from home or anywhere. Pay your credit card bills by transferring funds from any of your deposit accounts (except time deposit) to your credit card account 8. Enquire on the status of your cheques 3. Encrypted communication.

making payments and reconciling statements using your computer rather than paper or the phone to complete transactions. the customer can proceed with the transaction. Order traveler's. All the information transferred between the customer computer and the bank computers are encrypted. Internet banking is also advantageous for frequent travelers that need to keep a close eye on their finances from abroad How Internet Banking Works Internet banking works much like traditional banking. mortgage. If so. Features of Internet banking 1. Detailed Internet banking statistics and reporting . Online banking is rapidly becoming more and more popular as consumers recognize the advantages online banking has to offer.e. Frame Relay. Wireless access 9. Check account balances 2. What Internet Banks Do? What to Internet Banks do? The same things traditional banks do. The bank computer will check if both the user ID and PIN are valid. Account balances and history. Instead of going down to your local branch office when you bank online you can accomplish multiple tasks at once with the click of a button. Apply for auto.e. VPN or DSL Customs look and feel 2. You can also stop receiving paper statements if you like in many cases and conduct 95% of your business over the Web when you take advantage of Internet banking. 5. which have fully computerized their operations. Balance a checkbook 3. 2. images. Track recent account activity 5. For those that have a hard time keeping track of paper statements. The primary difference is you are accessing your account and information. Transfer money between accounts 4. Cross-account fund transfers 3. Authorize electronic bill payments 6. Request copies of past statements and processed checks 7.It has been introduced in India by most commercial banks. and stop payments 4. The sender encrypts the information while the receiver decrypts it. student. The customer enters his/her user ID and PIN. and regular checks 8. coded) and transferred to the bank computer through the Internet. The customer accesses the homepage for the Internet banking services by typing the bank's URL. Internet banking is a lifesaver. Check history. The next time you step into your branch office you should ask them about online banking. cashier's. They hold onto our money and lend it out to others respectively. Online loan payments 6. For one most banks charge fewer fees if you take advantage of their online banking services. home equity. 6. The customer connects his/her computer to the Internet. The manage loans and help us keep track of our finances. 3. withdrawals. otherwise he/she is asked to re-enter the information again. or personal loans Customer Advantages of Internet banking 1. You may find once you start you have no desire to go back to traditional banking. 4. the customer can also access his/her account online via Internet Operations of Internet Banking The following steps illustrate the operations of Internet banking: 1. inquiry. it will decrypt (i. When the bank computer receives this encrypted information. This information will be encrypted (i. Just as the bank staff accesses the account of a customer online. Available in three different layout versions 3. Dedicated banking server and communications hardware Robust online security systems to protect customers' confidential information complete set-up and installation at no additional cost 4. Online loan applications 7. Credit card and statement imaging 5. PIN changes 8. Affordable flat-fee pricing with no hidden charges or transaction fees Multiple choices of host connectivity. Chances are if you own a bank account at a traditional bank they offer some type of Internet banking or online services. 7. This process is required in order to ensure no third party can reveal and use the information. decode) it. including year-to-date information 2. Secure interactive messaging with staff Financial Institution Advantages of internet banking 1.

Non-repudiation of the transactions by the customers. fast and accurate. etc are entered incorrectly several times in a row 8. Achieving banking service through¬ inter-connectivity of branches. This is done by building a suitable certificate authority. Once the customer logs out of his account. 4. Data compressions techniques are used for faster communication. Blocking access to the service if a pin. Staff time thus can now be invested in marketing and such other work after the banking hours. Setting of transaction limits IMPACT OF INFORMATION TECHNOLOGY ON BANKING ‘ELECTRONIC BANKING’ means banking done through electronic systems for customers’ transactions (front office computerization) and/or internal accounting and book keeping (back office computerization).Security issues in Internet banking1. Integrity of transactions. Making routine banking transactions¬ speedier. Encryption techniques are used for secret transmission of data. integrated accounting system. thus making the account vulnerable to fraudulent practices 5. accuracy and security. Communication channel can be of three types-BIT SERIAL. Data exchange security is enabled by SSL protocol 6.g. Confidentiality of transactions has to be ensured as the account can fall prey to Internet hackers. Advancement achieved in the Information Technology and Communication Technology in the last two decades has resulted in the successful implementation of Electronic Banking in India. Static user authentication (ID. Let us briefly talk about communication systems. Advancements in information technology have had far reaching effects on Indian banking. Email can be used over dial-up line or a dedicated line. Customer service: This has been enhanced considerably in the following ways: Introducing new banking¬ channels such as ATMs. 3. Enhancing¬ costumer convenience through initiatives such as ‘anywhere and anytime’ banking and ‘24*7 days banking’. PIN. 3. home banking. Option to specify that the PC used for this season is not owned by the owner 9. Internet Banking and Tele-Banking. instead of using the traditional manual system of banking. Dedicated leased line connectivity can be established via satellite link or terrestrial link. . This is done by following encryption standards. Making banker customer communications fast¬ and neat. Carrying out non-banking services for the customers¬ 2. It may also include the decision support system for various level of management and marketing/cross-selling through electronic medium. However. this can be only by the customer. other passwords. These need to be removed by certain programme. communication and conferencing system and inter-connectivity of branches. VSAT networks are used across the banking industry for many on-line applications. 4. cookies or other devices. user ID. etc) 7. in order to ensure privacy by the customer’s transactions. Privacy when the account is accessed by the customers from some public places like the cyber cafe. BYTE SERIAL AND PARALLEL. Cross selling of various financial products has been made easy due to data Mining and electronic marketing channels. and not by the bank. e. which saves considerable time. which can be identified mainly in the following areas: 1. passwords. Hence. the banks prescribe stringent log in procedures in this regard. There are some traces of the transaction in the form of history files. Integrated internal accounting system Bank’s book keeping has been made automated. safe and secure. and providing Information service ‘24*7 days’ basis via calls centres. 2. Management information systems meant for the middle and top management has improved due to data classification and retrieval. E-mail is used for transmission of data from one place to another with speed.

In this configuration. in the initial phase most of the basic banking transactions can be performed conveniently through Internet banking. and security of the e-banking system. a provider is not between the Internet access and the financial institution’s core processing system. and intrusion detection system. and domain name server (DNS) in addition to the Internet banking application server The router will typically send the transaction around¬ the other application servers directly to the Internet banking server unless it is a non-banking transaction The website server and Internet banking server¬ may have host-based intrusion detection system (IDS) software monitoring the server and its files to provide alerts of potential unauthorized modifications . Internet banking server. e-mail server.E-BANKING TRANSACTIONS Though any type of transactions can be handled through e banking. wireless. which¬ directs the Internet-banking transaction through a firewall to the application running on the Internet banking server. proxy server. The transaction enters the provider's network through a router. or broadband connection The customer’s ISP routes the transaction through the¬ Internet and sends it to the e-banking service bank's ISP. The customer’s ISP routes the transaction through the Internet and sends it to the e-banking service provider's ISP. A typical configuration for in-house hosted. Thus. Internet banking customer sends an e-banking transaction through their Internet Service Provider (ISP) via a phone. its management and board remain responsible for the content. one or more technology service providers can host the e-banking application and numerous network components as illustrated in the following diagram. The Internet banking application processes the transaction against account balance data through a real time connection to the core banking system or a database of account balance data.¬ draft etc Statement of accounts¬ Access to latest schemes¬ Access¬ to rates of interest and other service charges Transactional websites provide customers with the ability to conduct transactions through the financial institution’s website by initiating banking transactions or buying products and services. e-banking services is illustrated below. Banking transactions can range from something as basic as a retail account balance inquiry to a large business-to-business funds transfer First. This diagram illustrates the transaction flow for one possible configuration in which the bank hosts the Internet banking application Internet banking customer sends an e-banking transaction¬ through their Internet Service Provider (ISP) via a phone. The bank typically has several¬ Internet application servers that could include a website server. the institution’s service provider hosts the institution’s website. water. the institution can host all or a large portion of its e-banking systems internally. which routes it the provider The transaction enters the bank's network through a router. firewall. 3. Network IDS software may reside at different points within the network to analyze the message for potential attack characteristics that suggest an intrusion attempt 6. which is updated periodically from the core banking system 7. 1. This diagram illustrates the transaction flow for one possible configuration where the bank relies on a technology service provider to host its Internet banking application. which routes it to the provider. 4. or broadband connection. While the institution does not have to manage the daily administration of these component systems. The following are some of the basic functions Account enquiry¬ Fund transfer¬ Payment of¬ electricity. telephone bills etc Online payments for transactions¬ actually performed through Internet Request for issuance of cheques book. performance. 2. The Internet banking server has a firewall filtering Internet traffic from its internal network Second. In this case. the institution has day-to-day responsibility for system administration. which directs the e-banking transaction through a firewall to the application running on the Internet banking server. The website server and Internet banking server may have host-based intrusion detection system (IDS) software monitoring the server and its files to provide alerts of potential unauthorized modifications 5. wireless.

Traditionally. electronic check (or cheque) clearing 4. where a cardholder makes use of a payment card 2. The transaction types offered depend on the terminal.g. including the following: Sale: where the cardholder pays for goods or service. ELECTRONIC FUND TRANSFER Electronic funds transfer or EFT refers to the computer-based systems used to perform financial transactions electronically. An ATM would offer different transactions from a POS terminal. The term is used for a number of different concepts: 1. Inter-account transfer: transferring funds between linked accounts belonging to the same cardholder) Payment: transferring funds to a third party account Inquiry: a transaction without financial impact. for instance balance inquiry. The Internet banking application¬ processes the transaction against account balance data through a real time connection to the core banking system or a database of account balance data. at peak shopping times . The term Cash Advance may also be used. where a customer can withdraw cash along with their purchase. e. EFTPOS (Electronic Funds Transfer at Point of Sale) is a device by which sales transactions can be directly debited to the customer's bank account at the point of sale. the latter being faster. Refund: where a merchant refunds an earlier payment made by a cardholder. Card-based EFT Credit cards EFT may be initiated by a cardholder when a payment card such as a credit card or debit card is used. which is updated periodically from the core banking system. for instance. transmission is much faster and safer. Card-based EFT transactions are often covered by the ISO 8583 standard. banks use post and telegraphic departments services and use certain codes to ensure confidentially and safety in transmission of the messages. from an ATM. or when the card is not present. available funds inquiry. the system can become overloaded and the delay will become extended or even time out. including salary payments 3. Several banks have started the following system for funds transfer: 1. In both kinds of transfer. There is usually a short delay while the EFTPOS terminal contacts the server (over a phone line or mobile connection) before a message of Accepted or Declined is returned. telephone order and internet purchases. Administrative: this covers a variety of non-financial transactions including PIN change. Merchants using EFTPOS can also offer cashout facilities to customers. typically when the funds are advanced by a merchant rather than at an ATM. electronic payments by businesses. cardholder-initiated transactions. Withdrawal: the cardholder withdraws funds from their account. through the use of a debit card (sometimes the same card used with Automatic Teller Machines). The Internet¬ banking server has a firewall filtering Internet traffic from the bank's internal network. card based electronic fund transfer Transaction types A number of transaction types may be performed. in the electronic system of communication. Now. funds are transfer by banks from one place to another by mail transfer and telegraphic transfer. or request for a statement of recent transactions on the account. which covers cards used for mail order. electronic fund transfer at point of sale 5. linked accounts inquiry. This may take place at an automated teller machine (ATM) or point of sale (POS). State bank of India has electronic payment system called STEPS whereby funds can effectively be . Often. Cashback: where a cardholder withdraws funds from their own account at the same time as making a purchase.Network IDS software may reside at different points within¬ the network to analyze the message for potential attack characteristics that suggest an unauthorized intrusion attempt. The customer's card is swiped through a card reader or inserted into chip reader and the merchant usually enters the amount of the transaction before the customer enters their account and PIN. EFTPOS are sometime also called POS Terminal or Payment Terminal and must not be confused with traditional Point of sale. Deposit: where a cardholder deposits funds to their own account (typically at an ATM).

g. In the electronic wallet. In big cities and metros. the buyer’s card information and digital ID. In a 6 digit code is pre-printed. so merchants do not see the customer’s identity. the buyer may have many different electronic credit cards issued by different banks. affordable. In power encoder. service branch of each bank carries out the clearinghouse operations and also the centralized draft payment function. In these bands details are encoded with special magnetic ink. (Actually it means that he chooses a credit card number to pay. The number of cheques in clearing house transactions is very large and the volume of transactions is huge. The funds transfer system is fast. Transactions via SET are encrypted all the way from the customer to the bank. Therefore. he can choose any of his credit cards to pay. 2. next 3 digits represent the bank code and the last 3 digits are for the branch code. As these are processed on high-speed machines. There are many different types of electronic payment systems. A 2 digit Transaction code indicating the type of account (e. but on the computer screen. The most common method of paying. nor do the malefactors who might lurk on the Net who pry on credit card information. the buyer has the equipment of an electronic wallet. secure and effic ient THE ELECTRONIC PAYMENT SYSTEM Internet shopping is a two-way electronic system.) Buyers also have digital IDs for each SET-enabled credit card—provided by the bank that issued the card. Member banks are connected through a highspeed closed user group communication system. Confirmations are sent back to all parties down the line and the goods are then delivered. the data on cheques is keyed at the branches and sent to the service branch along with floppy/CD . where the technology platform connects several branches of a bank located at distant places. Conduct of clearing house operations requires huge expenditure by way of premises. SWIFT: The Society of worldwide Inter-bank Financial Telecommunication is an International Society for enabling inter-national electronic funds transfer between member banks worldwide. transfer of funds from one account to another account at different places can be easily done between the inter-connected branches. Because using a computer to do shopping is not a person-to-person business. the cheques are printed on a specific type of paper and meet other specifications. 3. State Bank of India and several other banks in India are members of this society. software developers. and easy to use. how to pay is a big problem. Center code in 9 digits: first 3 digits represent city code. CLEARING SYSTEM Clearing House System: Inter-bank cheques drawn on branches of a city/town are cleared/paid through a system of ‘clearing house’. equipment and staff. A verification check is made from the merchant’s bank to the issuing bank. The inter-bank settlement of account is done via the correspondent banks. THE SET STANDARD In a SET transaction. The details encoded on the lower band are as follows: 1. Under core banking solutions. When the buyer wants to purchase something on the Internet. However. including two white bands on top and bottom. and credit card companies are pushing to deliver transaction systems that are trusted. and the merchant’s digital ID are encrypted and sent to the merchant’s bank. Structured and codified messages are sent by the remitting bank to the receiving bank for crediting the beneficiary’s account situated with it. is customers giving their credit card numbers to the merchants. Out-station cheques are sent for collection through a different system. Clearing house functions in all cities /towns where there are 5 or more banks. which should be free from any marking or impressions. The main elements of ACS are as follows: MICR Cheques: Magnetic Ink Character Recognition (MICR) cheques are used for clearing system in India. many customers worry that their credit card information will be divulged over the net or misappropriated by the merchants. Clearing house is a common service provided by RBI in metros and by scheduled banks in other cities. First 6 digits . When a purchase is made. the transaction details. savings/current) Encoder: This machine is used to write details of the cheques in the lower band with magnetic ink. 3. For speedier processing. banks. since Internet shopping emerged. 2.Cheques no. manual systems have been replaced by Automated Clearing System (ACS).remitted electronically from one customer’s account at one center on the same day. Two-way means interactive systems that allow the user to request specific information and to conduct transactions from a computer terminal (Strauss 1983). he can see his different virtual credit cards.

How does ECS(Debit) work? 1. The system helps the banker in cutting down on expenses. duly certified by the bank concerned. Cheques Reader cum Sorter: Cheques in the clearinghouse are run through this machine. tape or floppy) and submit the same to its banker (Sponsor Bank).g. Customer is not required to keep a track of his bills for ensuring that he pays before the due date. 3. account number. bank. Customer also need not take effort of writing the Payments cheques. account numbers and the respective amounts. Credit Clearing House: This is a total contrast to the Debit Clearing System. Step -2: The Sponsor Bank would present the payment data to the local Bankers' Clearing House (managed by Reserve Bank of India at 15 centres and by State Bank of India or Associate banks at other centres) authorizing the Manager of the Clearing House to debit the Sponsor Bank's account and credit the accounts (Destination Bank) of the banks where the beneficiaries of the transactions maintain their accounts. branch. . Utility Companies. Based on the details furnished in the mandates.. The letter of authority is submitted by the service provider to his banker.5: The service branches will in turn pass on the advices to the concerned branches of their bank. gas. the names of the beneficiaries. The sorter portion of the machine automatically sorts the cheques. e. drawee bank-wise/branch-wise and also list out the cheques in the same order. Step . in keeping with the letter of authority (or mandate) obtained from the customers. When the cheques are passed through the power encoder. It is used by the company for paying the dividends/interest of its shareholders/depositors at periodic intervals. 5. credits to the Customer’s accounts are made on the fixed date. name of bank/branch etc. 2. the user company prepares transaction data on electronic media and submits the encrypted data to the local Clearing House. The letter of authority contains all the relevant particulars. as cheques are not used for payment of the bills. The investors need not deposit the cheques to their bankers every time and wait for the credit clearance.containing the information. 2. account number. The company need not print the dividend/interest warrants and reconcile the paid and outstanding amounts. banks/institutions receiving periodic/repetitive payments towards electricity bills/telephone bills/loan installments/insurance premier initially collect mandates from their customers / subscribers for collection of amounts due from them by direct debit to their accounts with banks. How does ECS (Credit Clearing ) work ? Step-1: The corporate body institution (called "User”) which has to make payments to a large number of customers/investors would prepare the payment data on a magnetic media (i. Step . the local clearing house processes the same and arrives at the inter-bank settlement as also generates bank-wise/branch-wise reports (hard copies) 4. to the customer’s accounts. which raises a debit for the amount listed on the other bank maintaining the client account. Instead of sending out cheques to the investors. Advantages of the Debit Clearing System are as follows: 1. The service provider need not print out the bills and send it to the customers for payment. the data on the floppy get encoded on the cheques.4: The Clearing House will furnish to the service branches of the destination banks branch-wise credit reports indicating the beneficiary details such as the names of the branches where the accounts are maintained. which records the drawee bank-wise/branchwise presentation of cheques from the magnetic ink impression on the lower white band. electricity. Under the credit clearing system. the Clearing House will process the data and work out an interbank funds settlement. through its Sponsor bank. Service branches forward the branch-wise reports to the respective branches for debiting the accounts of customers with the indicated amounts. 2. NCC debits the destination banks' accounts with clearing house and simultaneously affords a consolidated credit to the sponsor bank's account and furnishes the bank-wise and branch-wise reports to the service branches of destination banks. The customers therefore get the credit on the third day. account type. The mandate provides details such as the name. 3. Debit Clearing System: Under this system. and insurance company) obtains an authorization from the customer to debit his specific bank account with the amount of the bills at regular intervals. Payee branches process the payments on the next day and all returns are submitted to the clearinghouse in the next day clearing. which will credit the beneficiaries' Advantages of Credit Clearing system to various parties: 1. After due validation of the data. the company directly credits the amount through the clearing system of its bank. the utility service provider (like telephone. Cheques segregated into packets that are sent to the service branch of each bank for further processing.e. Step -3: On receiving this authorization.

Authentication EFT transactions may be accompanied by methods to authenticate the card and the cardholder. especially those that offer web-based services. or the cardholder's Personal identification number (PIN) may be sent online in an encrypted form for validation by the card issuer. 4.3. Here are a few guidelines and warnings to those who may be interested in electronic banking services. Security: Although it is safer to transmit your credit card information over the internet than speak it over a cordless or cellular phone. What if there is a problem?? Find out what the bank's policy is on errors and mistakes. In addition. Fees & Charges: Be sure to find out exactly what it might cost for the service you are interested in and if there are special charges for certain types of transactions or a limit to the amount of transactions that can occur in a month. 9. Also be sure to find out any charges that could be assessed from a mistake in a transaction such as NSF charges or over limit fees. for venturing into E-Banking. and most banks are not liable if you do not give them enough notice of your payment. 4. Completeness controls: to make sure that no data is missing. 2. Time Periods: Ask your bank about the time periods required for transactions. be sure that the bank uses appropriate security measures to protect your information. Accuracy controls: to ensure the correctness of the data flowing across the Network 3. Audit Trail controls: to ensure keeping chronological role of events that is accrued in the system. as is done in the manual system. 5. and some of which may be requested from the cardholder (for instance the cardholder's address or the CVV2 value printed on the card). the consumer should always be wary of potential problems and take measures to prevent them from happening. Privacy controls: to protect the data from inadvertent or unauthorized access 6. or someone breaks into your account without authorization. merchants will begin accepting more payments from customers electronically rather than via cheques. The merchant may manually verify the cardholder's signature. The bank saves a lot of time spent in processing the large number of Cheques/warrants deposited by the customers. Transaction Limits: Find out exactly what your bank offers and what a user can and cannot do online. If the merchant does not accept electronic payments. Electronic bill payment does not give you an excuse to delay paying your bills on time. Some banks do not process electronic transactions past banking hours until the next business day so be sure to find out when your service is available and when transactions will be posted to your account. In some cases it might be faster for the user to prepare a manual cheques themselves. The bank may not be liable if you make a mistake and transfer too much money. 6. the usual seven-day float that a check grants will be eliminated or reduced to perhaps a few hours. Encryption controls: to enable only those who possess secret key to decrypt the cyber CONCLUSION . Caveat Emptor As with any other personal information. PIN 2. 7. However. The bank will send a packet of legal notices and terms that bind the customer when they sign up for the service. which are connected to Internet 10. Floats Disappear: As electronic banking becomes more accepted. Fire Wall controls: to prevent un-authorized users accessing the private Network. the bank will have to prepare and mail manual cheques to the merchant. the following major controls must be assured: 1. 3. Redundancy controls: to see that data is traveled and processed only once and there is no repetitive sending of data. Read through all of the information that the bank provides thoroughly. 1. SECURITY MEASURES Most of the problems mentioned above are in the nature of teething problems and hence they can be eliminated over a period of time. electronic bill payment services require different time limits than a regular account transfer. Existence controls: to make sure that on going availability of all the System resources with the same throughout 8. Authenticity controls: to verify identity to individuals like Password. Be aware of the time that a transaction may take place and plan accordingly. It is just as easy to bounce an electronic check as paper cheques. Also make sure to take the appropriate measures to protect yourself. When this happens. Efficient controls: to ensure that the system uses minimum resources to achieve the desired goals. which could take as much as 7 business days to receive and be posted on your account with the merchant. Other information may be included in the transaction. some of which is not visible to the cardholder (for instance magnetic stripe data). 5.

only 25 percent of all transactions take place through branches and 75 percent through other delivery channels. Through instant 24-access to accounts. Parents may be able to more accurately plan for their child's future.com. funds transfers and corporate banking over the Net. The bank has also entered into agreements with leading corporate like BPL. In less than a decade. ICICI bank offers a wide spectrum of domestic and international banking services to facilitate trade. future electronic commerce would be impossible. Electronic fund transfer System ICICI has already started a portal called BillJunction.000 ATMS across about 460 locations. Overall. The Bank has been offering phone banking free of charge and was first to launch an Internet Banking service in the country named Infinity. The hallmark of this exponential growth is ICICI Bank’s unwavering focus on technology. thus increasing overall efficiency. for its credit card business its uses Vision Plus from Pay Sys.As the Internet grows and people's lives become busier. ICICI Bank was the first bank in India to offer Internet banking with the help of Finacle’s e-banking solution and established itself as a leader in the Internet and e-commerce space. 2002 ICICI formally merged with ICICI bank and emerged as India's first Universal Bank.banking services are rapidly changing from competitive differentiator to competitive necessity. Right now. customers will be able to more accurately plan their finances and see exactly where their money is being spent instead of waiting for the bank statement to arrive at the end of every month. It currently has assets of over USD 41 billion. Without reliable financial methods. ICICI is one of the leading private sector banks in India. from standing in line to deposit a paycheque to balancing a chequebook. CASE STUDY ON ICICI BANK ICICI BANKS PROFILE Established in 1994. a customer who's received a bill in the physical form logs into the network in order to make an online . investment. To leverage the Net for its marketing initiatives ICICI bank and Satyam Info way have jointly set up a "COM" company to promote banking products on the Net. On March 31. Case Study on ICICI BANK. and BPL Mobile etc. while the WAP technology is being implemented by the in-house ICICI Infotech service. Currently. ICICI banks retail distribution network continues to expand and it now has 570 branches and extension counters and 2. New forms of electronic banking hold promise to alleviate some of these problems by providing a technology solution. Investors can take advantage of breaking news to make instant online trades of securities to maximize their profit or minimize their loss. a market capitalization of USD 9 billion and provides services to over 14 million customers through a network of about 570 branches. Usha Martin and Tata Communications for B to C solutions in a bid to further strengthen its Internet banking product offering and services. Basic E. Personal finance has long been a burden on the average person. treasury and foreign exchange services ICICI bank has been quick to realize that E.. Orange. electronic banking is one of the most important aspects of the upcoming electronic age. Between 2000 and 2004. 2000 ATMs and a 3200-seat call center (as of June 2005). in 1997. For its Internet banking offering the ICICI bank uses Infinity from Infosys. They are entering into tie-ups with utilities like MTNL.com. for WAP services the tie-up with cellular service providers Orange and Airtel helps reach out to these users. Airtel. USA. Rediff. The group has leveraged on a number of tie-ups to come up with its various offering. Banks are planning to use the Net for payment of utility bills. the need for efficient and fast methods to handle our daily necessities will become more important.banking has changed from a somewhat experimental delivery vehicle into an increasingly mainstream one for delivery of broad spectrum of banking products and services. The bank followed it up with several e-commerce services like bill payments. the bank has become a universal bank offering a well-diversified portfolio of financial services. The Internet is a critical element of ICICI Bank’s award-winning multi-channel strategy and is one of the main engines of growth for the bank. the bank has successfully been able to move over 70 percent of the routine banking transactions from the branch to other delivery channels. For instance. cross border business. ICICI Bank is today the second largest bank in India and among the top 250 in the world. which combines financial strength with a reputation for innovation and a universal culture that embraces change.

these bills will be sent to customers through the Net. HDFC bank. The citizen service centre and governmental departments are linked to main WAN through a LAN. Strengths Weakess FOREIGN BANK ICICI bank FOREIGN BANK ICICI bank (1) Established brand name 1) First mover advantage as innovation leader in Internet banking.E-Seva E-Seva . For ICICI. The rise of E-banking is redefining business relationships and the most successful banks will be those that can truly strengthen their relationship with their customers. The main data centre for E-Seva is at Khairatabad. permits and licenses. facilitate transaction and update local department servers. with back-up ISDN lines. Banks have to upgrade and constantly think of new innovative customized packages and services to remain competitive. The service will provide real-time utility bill payments for water. . technology is an integral part of their business.payment. their overall progress could have been smoother but for certain internal and extraneous factors and also a pressure on spreads due to a competitive market. connect the departmental servers to the eSeva data centre. Transactions are conducted on a real-time basis. Departmental servers are connected to the data centre. transport department services and other G2C (government-to-citizen) services . which is very common in western world. which is used to store all information. ICICI has been able to use technology to provide value-added service to its customers during the last few years. electricity. At present there are 35 E-Seva centres (with 280 service counters) The whole concept is based on real-time utility payment system. the click of the mouse offers customers banking services at a much lower cost and also empowers them with unprecedented freedom in choosing vendors for their financial service needs. Services provided by ICICI Bank. To day. which in turn is connected to the eSeva centres. ICICI has realized that survival in the new e-economy depends on delivering some or all of their banking services on the Internet while continuing to support their traditional infrastructure. municipal taxes. Global Trust bank and UTI bank for online payments. However. is Andhra Pradesh Government initiative to deliver government information and services online to the state's citizens. No country today has a choice. Leased lines. eSeva is based on three-tier network architecture. birth and death certificates.whether to implement E-banking or not given the global and competitive nature of the economy. Transactions done at the eSeva centres are recorded directly on the server of the department concerned.an online community bill payment system. eSeva has tied-up with ICICI bank. SWOT analysis of ICICI bank Strengths Weakness Advanced Technology Too many subsidiaries Providing innovative products & Services High cost of funds Leverage technology to satisfy customer demands Add value to the shareholders Opportunities Threats Higher capital base rivals like HDFC Competition from other industry First mover advantages Concern over NPA despite – provisioning Thus. telephone. i) Slow adaptation to Internet banking i) Slow moving regulatory reform in the banking sector especially with net banking (2) Developed Infrastructure (2) Branded as technology leader ii) Lack of demand due to saturation ii) Infrastructure issues at micro and macro levels (3) Responsiveness to consumer demand (3) Consumer relationships built on demand iii) Speed limitation due to telecom carriers (4) Increasing consumer conversion rate to Internet banking (4) Online banking growth driven by consumer perceptions iv) Cultural and distance barriers limiting the spread Opportunities Threats FOREIGN BANK ICICI BANK FOREIGN BANK ICICI BANK (1) Leverage the brand name i) Leverage the first mover advantage i) Market share loss to industry rivals as well as new players i) Market share loss to industry rivals as well as new players (2) Capitalise on infrastructure ii) Capitalise on innovation leader image ii) Threat of being acquired by multinational bank or public sector corporation Conclusion E-banking has become a necessary survival weapon and is fundamentally changing the banking industry worldwide. In the future. In August 2001 19 centres were started in the cities of Hyderabad and Secunderabad. passport applications.

LAW AND PRACTISE – GORDAN AND NATRAJAN .'' BIBLOGRAPHY BOOKS 1. which can be needed as a backup. ``I thin k we're at the start of a many-year task toward automating financial services for individuals. developers of personal-finance software are introducing on-line services that let you handle financial transactions without paper. vendors acknowledge that widespread acceptance of electronic financial services is not imminent. But both companies also admit that only a small percentage of their current customer base takes advantage of these features. an on-line service. There is something about having all of those tangibles under your control that automated systems may never be able to address. Much as vendors of imaging and electronic-forms software want to create the paperless office. Software developers and financial institutions must overcome hurdles that are both cultural and practical. ``Electronic banking is a ship that's been coming in for a long time.'' says Tom Smith. Smith says there are other practical reasons why users haven't yet eagerly embrac ed electronic banking. E-banking has become a strategic weapon for ICICI to remain profitable. Microsoft and Intuit are actively recruiting banks to do so. ``The average ATM is capable of much more than just dispensing cash. say they want to broaden the electroniccommerce services they will offer their customers. ``We're putting all the building blocks in place so that we can deliver these services at a cost that people will want to use them. says the company plans to offer a wide variety of electronic services. To address that problem. a certified financial planner and moderator of the financial conference on BIX. and the people that do use computers know that they can break. and the ability to download data like current stock prices. These electronic links have many benefits for consumers: faster and more accurate data entry.With rapid advances in telecommunication systems and digital technology. Electronic bank statements do not include the canceled check. ``But there's no question that in the long term it saves people money and time and hassle. which recently announced plans to merge.'' Another problem is that electronic statements are not universally provided by banks.'' Still. Ken Sheldon in Byte Digest. ``People that don't use computers are afraid of them.'' says Glickman. PCbased transaction verification and funds transfers. Microsoft and Intuit.'' Smith notes. ``But many people don't trust it for after-hours bank deposits. Matt Glickman. product manager of Quicken for Windows. ARTICLES • Electronic Banking Faces Numerous Hurdles By. Says Glickman.'' Smith says ATMs are analogous to electronic banking. BANKING.

4.INDIAN INSTITUTE OF BANKING AND FINANCE RETAIL BANKING – RAGHU PALAT E-FINANCE – V.2.C. JOSHI INTERNET BANKING – SINGHAL. 5. 6. 3. BASICS OF BANKING Advertisement . BANKING PRODUCTS AND SERVICES .

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