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[Document Subtitle]
April, 2011


APRIL, 2011

Submitted To






32 44 60

Index Introduction - about the particular industry from which the duct or service belong to. SWOT analysis etc. - Pranali More Research - method of data collection, sample size, data analysis - ShraddhaSalvi Results and findings - SachinZende conclusion& Major Players - what r the major factors/ drivers of consumer demand, what r d new opportunities for the product/ service etc. - Mubasshir A. 2. Bibliography - it should be written in standard format. For this refer to any standard reference book.


Sr. No. Title of Chapter Page No.

1 2


SWOT Analysis

3 4 5


Method of Data Collection

Sample Size

6 7 8 9 10

Data Analysis


Major Players



We are earnestly happy to present the Project Report on Online Banking to Prof. Rama Deshmukhlecturer of our Management Institute & Research center of Indian Education Society. We must express our sincere thanks to Prof. (Dr.) Dinesh D. Harsolekar- Director IES and Prof. PrakashJagdaleprogram chairman &H.O.D. of part time course of management 2010-13. We would also thank our Institution and our faculty members, computer lab team, library team & specially program coordinator Ms Vidya without whom this project would have been a distant reality. We also extend our heartfelt thanks to our well wishers.

Thanking You

Introduction to Online Banking

Introduction to Online Banking. Online banking can be a confusing mix of options and banking providers. These resources will help you choose a bank with online accounts (or a bank that does business entirely online), and determine which services you need.

How to Open

a Joint Bank Account Online

How to Open a Business Bank Account Online

About Investing Online About Investing Online

About Wachovia Online Banking

About Chase Online Banking

About Wells Fargo Online Banking

How to Send Money Using an Online Bank Account

About Personal Online Bank Loans

How Does Internet Banking Work?

Online Banking Advantages & Disadvantages

Ways to Pay Bills Online

Using an Online Bank Account

How to Earn More Interest With an Online Savings Account

About the Advantages of Online Banking


Online Banking A Global Way to Bank!

Today we are in the era of globalisation. Multinational organisations worldwide have adopted globalisation as their first strategic choice. Advancement in technology has facilitated globalisation too. Same holds true for banking industry. Technological advancement, changes and innovations have always leveraged the standards of mankind. It has given new dimensions to society. It has also altered the way services can be offered. Information Technology has been a major driving force of economies worldwide during the last 2 decades. Its impact has been readily felt in banking industry also. With the invention of computer, operations and database management became quite handy. When ARPANET project of Defence Academy of US began, a new technology was born with the advent of internet. The two technological breakthroughs computers and internet has radically changed the way world can interact and business could be done. Metamorphosis and clubbing of these technologies gave rise to the growth of ITeS (Information Technology enabled Services) across the globe. There has been a marked improvement particularly in the area of maintenance, storage, availability and transfer of data. The world has literally shrunk to become a "global village". IT has played a crucial role in the financial services. Internet has proved a magic wand for financial services and products, banking in particular. Banking sector has been early adopter of technology to offer latest modes for transacting business. Banks have transformed themselves and are offering services through internet. From computerization to networking to ATMs and now E-Banking, banks have moved up the value chain. This phenomenon of offering services through internet is referred as internet banking. The current article discusses internet banking in India and focuses upon key challenges before banking industry.
Online banking systems in India and the features available with different banks across India. If you look into the modern age of banking , online banks or net banking made things much easier for the people and saves lot of time. The traditional way of standing in the queue and filling up all the forms, now its no hassle for making any transaction with the banks. Every bank has their own features and some banks still not having the more advanced features like transferring money to any banks across India, easy registration for net banking, etc.

The Internet banking is changing the banking industry and is having the major effects on banking relationships. Even the Morgan Stanley Dean Witter Internet research emphasised that Web is more important for retail financial services than for many other industries. Internet banking involves use of Internet for delivery of banking products & services. It falls into four main categories, from Level 1 - minimum functionality sites that offer only access to deposit account data - to Level 4 sites - highly sophisticated offerings enabling integrated sales of additional products and access to other financial services- such as investment and insurance. In other words a successful Internet banking solution offers Exceptional rates on Savings, CDs, and IRAs Checking with no monthly fee, free bill payment and rebates on ATM surcharges 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

Advantage of Internet Banking Facility Advantages previously held by large financial institutions have shrunk considerably. The Internet has leveled the playing field and afforded open access to customers in the global marketplace. Internet banking is a cost-effective delivery channel for financial institutions. Consumers are embracing the many benefits of Internet banking. Access to ones accounts at anytime and from any location via the World Wide Web is a convenience unknown a short time ago. Thus, a banks Internet presence transforms from brouchreware status to Internet banking status once the bank goes through a technology integration effort to enable the customer to access information about his or her specific account relationship. The six primary drivers of Internet banking includes, in order of primacy are: Improve customer access Facilitate the offering of more services Increase customer loyalty Attract new customers Provide services offered by competitors Reduce customer attrition Banks with Internet Banking In the current scenario, every bank in India has the internet banking facility. Recently the banks are extending their presence in rural areas to lure more customers and show them the advantages of internet making by educating into the new system. This gives the countries entire population to get the benefit of technology advancement. As I said, still it is evolving and not all the banks provide very advanced features. In our article I will take few leading banks and explain the features they are offering. Note that, the online banking can be for managing your Savings Accounts, Credit Cards, Fixed Deposit, Insurance, etc. The following are the list of banks and their online website address. ICICI Net Banking

HDFC Net Banking SBI Cards LIC India CitiBank Login


List of Banks in India RBI Axis Bank Barclays Bank Citibank Deutsche Bank HSBC Indiabulls Financial Services ING Vysya National Housing Bank Punjab & Sind Bank Standard Chartered United Bank of India ABN AMRO Bank Bank of Baroda Canara Bank Corporation Bank GE Financial ICICI Indian Bank Andhra Bank Bank Of India Central Bank of India Dena Bank HDFC IDBI Indian Overseas Bank

Kotak Mahindra Bank LIC Housing Finance Corporation Oriental Bank of Commerce Reliance Money Syndicate Bank PNB SBI Union Bank of India

DRIVERS OF CHANGE Advantages previously held by large financial institutions have shrunk considerably. The Internet has leveled the playing field and afforded open access to customers in the global marketplace. Internet banking is a cost-effective delivery channel for financial institutions. Consumers are embracing the many benefits of Internet banking. Access to one's accounts at anytime and from any location via the World Wide Web is a convenience unknown a short time ago. Thus, a bank's Internet presence transforms from 'brouchreware' status to 'Internet banking' status once the bank goes through a technology integration effort to enable the customer to access information about his or her specific account relationship. The six primary drivers of Internet banking includes, in order of primacy are: Improve customer access Facilitate the offering of more services Increase customer loyalty Attract new customers Provide services offered by competitors Reduce customer attrition

INDIAN BANKS ON WEB The banking industry in India is facing unprecedented competition from nontraditional banking institutions, which now offer banking and financial services over the Internet. The deregulation of the banking industry coupled with the emergence of new technologies, are enabling new competitors to enter the financial services market quickly and efficiently. Indian banks are going for the retail banking in a big way. However, much is still to be achieved. This study which was conducted by students of IIML shows some interesting facts: Throughout the country, the Internet Banking is in the nascent stage of development (only 50 banks are offering varied kind of Internet banking services). In general, these Internet sites offer only the most basic services. 55% are so called 'entry level' sites, offering little more than company information and basic marketing materials. Only 8% offer 'advanced transactions' such as online funds transfer, transactions & cash management services. Foreign & Private banks are much advanced in terms of the number of sites & their level of development. EMERGING CHALLENGES Information technology analyst firm, the Meta Group, recently reported that "financial institutions who don't offer home banking by the year 2000 will become marginalized." By the year of 2002, a large sophisticated and highly competitive Internet Banking Market will develop which will be driven by Demand side pressure due to increasing access to low cost electronic services. Emergence of open standards for banking functionality. Growing customer awareness and need of transparency. Global players in the fray Close integration of bank services with web based E-commerce or even disintermediation of services through direct electronic payments (E- Cash). More convenient international transactions due to the fact that the Internet along with general deregulation trends, eliminate geographic boundaries. Move from one stop shopping to 'Banking Portfolio' i.e. unbundled product purchases. Certainly some existing brick and mortar banks will go out of business. But that's because they fail to respond to the challenge of the Internet. The Internet and it's underlying technologies will change and transform not just banking, but all aspects of finance and commerce. It represents much more than a new distribution opportunity. It will enable nimble players to leverage their brick and mortar presence to improve customer satisfaction and gain share. It will force lethargic

13 players who are struck with legacy cost basis, out of business-since they are unable to bring to play in the new context. 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. STRATEGIES TO BE ADOPTED BY INDIAN BANKS Internet banking would drive us into an age of creative destruction due to nonphysical exchange, complete transparency giving rise to perfectly electronic market place and customer supremacy. The question to be asked right now is "What the Indian Banks should do" Whatever is the strategy chosen and options adopted, certain key parameters would determine the bank's success on web: 1. For long term success, a bank may follow: Adopting a webs mindset Catching on the first mover's advantage Recognising the core competencies Ability to deal multiplicity with simplicity Senior Management initiative to transform the organisation from inward to outward looking Aligning roles and value propositions with the customer segments Redesigning optimal channel portfolio Acquiring new capabilities through strategic alliances. 2. The above can be implemented in four steps: Familiarising the customer to new environment by demo version of software on

bank's web site. This should contain tour through the features which are to be included. It will enable users to give suggestions for improvements, which can be incorporated in later versions wherever feasible. Second phase provides services such as account information and balances, statement of account, transaction tracking, mail box, check book issue, stop payment, financial and customised information. The third phase may include additional services such as fund transfers, DD issue, standing instructions, opening fixed deposits, intimation of loss of ATM cards. The last step should include advanced corporate banking services like third party payments, utility bill payments, establishment of L/Cs, Cash Management Services etc. Enhanced plan for the customers in future can include requests for demand drafts and pay orders and many more to bring in the ultimate in banking convenience. All the above strategies will help banks in translating their traditional business model into an Internet one, falling into three main categories One stop shop Virtual one-stop-shop Best of breed supplier.

SWOT ANALYSIS: A SWOT Analysis is an effective tool which can be used to examine the issues which will directly affect the success of alternative delivery mechanisms. In our opinion, the SWOT


analysis is as follows: Strengths: Customer access to information 24 hours per day. Timely access to information. The ability to offer a customer more than one method of retrieving information. Sophisticated technology systems will help to make a banking institute "future-proof." Diversity helps capture different types of markets. The ability to cut internal costs due to advanced technology. Increased efficiency due to automation. Increased accuracy of banking transactions. Weaknesses: High price of service. Continual altering of customer wants and needs. Hostile feelings of employees due to possible pending lay-offs due to automation. Multiple options for the customer. Initial investment in technology will be expensive. Opportunities: The ability to obtain a larger customer base. Global expansion. This is an enormous market, which will be a great opportunity in the future. The ability to take advantage of the growing popularity of Internet banking. Threats: Continual changing technology. Uncertainty of the banking industry. Competition from "lower price" operations. Possible failure of product due to non-acceptance of customer. General competitiveness of the banking industry.

After reviewing this internal analysis, an aggressive strategy as well as a diversification strategy is recommended. In other words, according to the SWOT analysis, the retail banking industry should diversity by adding this new technology. The results of the focus groups and survey influence this decision.

1. What do you know about Online Banking?: Well Informed/Much: 2.What Enough/Little: Nothing at all:

kind of transactions can you prefer to perform using online banking (Rank from 5 to 1) Review account history and transactions___ Transfer funds between accounts_____ Send customer service requests_____ View cleared checks,pay bills and more_____
3. What type of account(s) do you have with CCB?: ON Shore/Local Account: Off Shore Account: Both:

4. How important would Online Banking be in your daily banking activities?: Significant: Infrequent: Not at all:

4. Which online service you think is more user friendly: Internet Banking: Telephone Banking: ATM Services:

5. Do you think that Internet Banking is convenient?: Yes: No: Not Sure:

6. What type of Banking would you do over the Internet?: Personal Banking: Business Transactions: Both:

7.How long does it take to open an account through online banking? Week Quarter Month

8. Of our Internet Banking features which would you use most? Make as many selections as you wish.: Inter Account Funds Transfer: Bill Payments from Savings/DDA: Balance on Transaction

Savings/DDA/Term Deposits/Loans: History:

Stop and Hold Inquiries on Savings/DDA:

9. Are you aware of our Telephone Banking Services?: Yes: Yes, but not sure how to use the service: No:

10. How often have you used our Telephone Banking service?: All the time: Regularly: Infrequently: Not at all:

11. Do you know of our online 24hr ATM Services?: Yes: Yes, but not sure how to use the service: No: Not at all:

12. How often do you log on to our website?: All the Time: Regularly: Infrequently: Not at all:

13. Have you had difficulty logging onto the bank's website?: All the time: Regularly: Infrequently: Not at all:

14. Is the information on the website updated often enough?: Yes: No:

15. If you answered NO, what improvements would you suggest we make?:

16. Are the services being offered adequate?: Yes: No:

17. What other improvements would you like us to make?:

18.How many accounts can you view using online banking? o Nationwide Bank checking

o Saving, money market o Certificate of deposits account. 19.what is your preferred mode of access to your account (rank 1 to3) Wireless Apple safari Netscape 20What browser do you prefer to use online banking? Apple safari Netscape MozillaFirefox Microsoft Internet Explorer 21How long does it take to open an account through online banking? Week Quarter Month 22what types of accounts will you transfer funds to and from? Checking Savings Money market accounts
Demographic Questions:
23) Full Name
Online SurveysSurvey On Health Chec

*24) Gender

23) Age

*25) Anual Income


26) Profession

Banks and financial institutions in India are in the process of Web-enabling their services in order to offer Internet banking to its customers. The RBI has drafted certain Internet banking guidelines that have to be followed by banks about to venture into online banking. Here's what banking CIOs need to do. bySoutiman Das Gupta It's the new generation of banking in India. Most private and MNC banks have already setup an elaborate Internet banking infrastructure. And this exercise has provided them numerous benefits like: Greater reach to customers Quicker time to market Ability to introduce new products and services quickly and successfully Ability to understand its customers needs Customers are given access to information easily across any location Greater customer loyalty

Multi-national and private sector banks in India have been very successful in setting up Internet banking services. This is mainly because these banks already had a robust automated banking environment on which they could build the Internet banking infrastructure. Most multi-national banks already have efficient Internet banking infrastructures running in other countries which could be emulated in India. And the private banks, which are relatively young, did not have to carry the burden of legacy systems. They merely invested in best-of-breed Internet banking solutions from the start. In a fix Unfortunately nationalized banks have been unable to evolve as fast as most private sector and MNC banks. As a result, in many organizations there may be a mix of automated systems and manual systems, with both systems running parallel, and using half-baked applications created by smaller vendors which run in certain departments. This creates a chaotic scenario. Network management is a nightmare, the legacy systems may buckle any moment, new users and locations keep coming up, and there are also issues of security and consolidation. This is a typical situation at a usual nationalized bank: A very large network of branches nationwide growing fast Lack of connectivity in remote locations A very large base of customers increasing fast 75-80 percent automation in main branches with less automation in remote cities and smaller branches Large amount of legacy equipment which doesn't integrate well with other systems

Inefficient and outdated applications in some departments which are not flexible and don't integrate well with other applications Slow-to-change mentality of an Indian customer who is used to dealing with a human teller

Web-enabling banks with such infrastructure and number of branches nationwide at one go is a near-impossible task. However each of the challenges can be overcome with good planning, phased implementation, and lots of grit on the part of the CIOs. The RBI steps in The Reserve Bank of India (RBI) has created a comprehensive document which lays down number of security-related guidelines and strategies for banks to follow in order to offer Internet banking. The guidelines broadly talk about the types of risks associated with Internet banking, the technology and security standards, legal issues involved, and regulatory and supervisory concerns. Any bank that wants to offer Internet banking must follow these guidelines and adhere to them as a legal necessity. VaidyanathanIyer, National Manager, eSecurity Business, Computer Associates provides solutions to banks which can help them go online. He says, "the guidelines have been created with a lot of thought regarding the banking scenario in India. It is at par with international banking standards and is very comprehensive." Background The document broadly categorizes levels of Internet banking services into three types: The basic level service in which the banks' websites disseminate information on different products and services to customers. It may receive and reply to customers' queries through e-mail. Simple transactional websites which allow customers to submit their instructions, applications for different services, and queries on their account balances. They do not permit any fund-based transactions on their accounts. The third level of Internet banking services offered by fully-transactional websites which allow 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.

Internet banking The document lays down some of the distinctive features of Internet banking. They are: It removes the traditional geographical barriers as it could reach out to customers of different countries/legal jurisdiction. This has raised the question of jurisdiction of law/supervisory system to which such transactions should be subjected. It has added a new dimension to different kinds of risks traditionally associated with banking, heightening some of them and throwing new risk control challenges. Security of banking transactions, validity of electronic contract, customers' privacy, etc., which have all along been concerns of both bankers and supervisors have assumed different dimensions given that Internet is a public domain, not subject to control by any single authority or group of users. It poses a strategic risk of loss of business to those banks who do not respond in time to this new technology, being the efficient and cost effective delivery.

Securitythe key concern It's evident from the document and from a general study of the business case of Internet banking, that security is perhaps the biggest concern. Connectivity issues to remote locations is also very important, but the need to be secure is far more pressing. The document says that security issues include questions of adopting internationally accepted state-of-the-art minimum technology standards for access control, encryption/decryption (minimum key length), firewalls, verification of digital signature, and Public Key Infrastructure (PKI). Concerns in Chapter 5 and 6 The concerns and guidelines about security are discussed in detail in Chapter 5 and Chapter 6 of the report. The key components of security concerns are Authentication: The assurance of identity of the person in a deal Authorization: A party doing a transaction is authorized to do so Privacy: The confidentiality of data and information relating to any deal Data integrity: Assurance that the data has not been altered Non-repudiation: A party to the deal cannot deny that it originated the communication or data

If these areas are not addressed, the bank may suffer operational risk, reputational risk, legal risk, money laundering risk, and strategic risk. Chapter 6 of the report talks about technology and security standards for Internet banking. It talks about TCP/IP, the OSI Layers, and application architectures. There are guidelines for backup and recovery, list of the different types of attacks and the ways in which they can compromise a system, like sniffer attacks, DoS, and e-mail bombs. Authentication techniques like tokens, biometrics, and smart cards are described. The concepts of firewalls, proxy servers, cryptography, digital signatures, certification, SSL, and PKI are explained in detail. Security tools like scanners, sniffers, and IDSs are also described. Physical security is talked about and followed by guidelines of a security policy and a number of recommendations. The recommendations talk about access control, isolation of application servers, security logs (audit trails), penetration testing, backup and recovery practices, monitoring against threats, and education. Comprehensiveness and Indian banks The RBI guidelines are very exhaustive and extremely comprehensive. But are Indian banks following the guidelines accordingly? Experts at Global E-Secure Limited, a security solutions company say that none of the Indian banks which offer Internet banking facilities have an IT security policy as stipulated by the RBI. While banks have been asked to file monthly reports to show compliance to the guidelines, most of them have sought time to satisfy the security policy criterion. The RBI is insisting on a written document, signed by the Board of Directors to make the banks aware that IT security is not just an IT concern, but something that could affect overall business as well. The company also says that while these banks do have security measures, there is no clearcut program which incorporates all the aspects of a comprehensive security policy. Also,

some banks do not have straight-through processing. There is manual intervention, which poses a great security risk for the customer. In order to fill such gaps, the security policy guidelines clearly lay out the areas which should be looked into. To provide a further check, the RBI is also empowered to audit the compliance to the policy. Rajeev Wadhwa, COO, Global E-Secure Limited says, "Following the release of its guideline, the RBI will also come out with a policy on similar lines. Hence, it's imperative that banks immediately act upon the same. The RBI has asked I-banking and e-trading banks to perform ethical hacking of their servers and submit their reports. Since there is no proper ethical hacking policy and methodology published in the IT-Act nor by the RBI, these banking organizations have to depend on only security specialists who have the Service Level Agreement (SLA) and a procedure in place." A practical approach IDBI Bank has successfully implemented a robust Internet banking architecture for its customers. NeerajBhai, the CTO of the bank says, "RBI guidelines are stringent, but not very difficult to implement if one goes about in a systematic fashion. The rule which stipulates that the bank must have a client-level certificate, is somewhat difficult and expensive to implement in a retail banking scenario. The guidelines also prescribe certain functions be authorized at the Board level. This provision has potential to introduce delays in deployment." "It is not important to look at which policy is to be applied first. One has to take a holistic view. Certain prescriptions of the RBI, like having an information security policy, are general in nature and not specific to Internet banking. If an organization is alive to such issues even before launching Internet banking, things become simpler. It should be viewed as a crossfunctional project and managed in a controlled fashion. Many banks make the mistake of believing that all their customers would be interested in Internet banking and therefore start enabling the service to all their customers. In reality most of such 'enabled' customers do not access the service and the banks end up loading their systems unnecessarily and spending big sums on sending PIN mailers." "Like any other product or service, Internet banking is not a one-time activity. The bank has to persuade its customers to use the service to achieve cost advantage. Since many customers do not use Internet banking, the bank has to enrich its services by additional payment tie-ups so that customers have more options. In this case, data security needs to be very thorough."

Concluding PartConclusion Online-banking has become a necessary survival weapon and is fundamentally changing the banking industry worldwide. To day, 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. No country today has a choice-

23 whether to implement online-banking or not given the global and competitive nature of the economy. Banks have to upgrade and constantly think of new innovative customized packages and services to remain competitive. The invasion of banking by technology has created an information age and commoditization of banking services. Banks have come to realize 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. The rise of online-banking is redefining business relationships and the most successful banks will be those that can truly strengthen their relationship with their customers. Without any doubt, the international scope of E banking provides new growth perspectives and Internet business is a catalyst for new technologies and newbusiness processes. With rapid advances in telecommunication systems and digital technology, Online-banking has become a strategic weapon for banks to remain profitable. It has been transformed beyond what anyone could have foreseen 25 years ago. However, banks are uncertain about the regulatory framework for conducting online-business and the regulatory and taxation issues for governing cyberspace presents formidable problems. Developing such a system is not easy as the Internet is not organized geographically and it is almost meaningless to refer to a website as national or local. Any successful attempt at governing cyberspace will involve significant international cooperation. Tax issues are being dealt with through O.E.C.D codes along with intergovernmental cooperation. The Indian experience of online-banking is gradually merging with its international counterparts. While the private sector and foreign banks have been fast in adopting Internet technology in client servicing, there is a gradual trend for the major public sectors and numerous cooperative units to move in the same direction. A mix of policy support and security assurance should propel further Online-banking adoption in India.

Bibliography Websites

Books E-banking Global Perspectives ICFAI (Banking Series)By: Vivek Gupta Internet Banking The Second Wave by Sanjiv Singh