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technology to improve its services and efficiency. Banks have been quick to adopt rapidly evolving electronic and telecommunication technologies to deliver an extensive line of value added products and services to their customers. By the early 1990s, direct dial-up connections, personal computers, tele banking and automated teller machines (ATMs) became common in most developed nations. Internet banking evolved in the mid-1990s when Internet and the World Wide Web began to catch on. Soon, many major banks in the US and Europe began to use the Internet to provide banking services. Internet banking is a web-based service that enables the bank's authorized customers to access their account information. It allows the customers to log on to the bank's website with the help of a bank-issued identification and a personal identification number (PIN). The banking system verifies the user and provides access to the requested services. The range of products and services offered by each bank on the Internet differs widely in their content. Most banks offer Internet banking as a value-added service. Internet banking has also led to the emergence of new banks, which operate only through the Internet and do not exist physically. Such banks are called 'Virtual' banks or 'Internet only' banks. The products and services offered by the banks on the Internet can be divided into three types: • Information Kiosks: It includes providing information regarding various products and services offered by the bank to its customers and others in general. The bank's site receives and answers queries of customers through e-mails. • Basic Internet Banking: It includes enabling customers to open new accounts, check account balance and pay utility bills. • E-commerce Banking: Banks function as electronic market places (e-market place) enabling customers to use their accounts for money transfers, bills payment, purchase and sale of securities and online real time purchases and payments. In a typical Internet banking transaction, customers' requests for online banking information are passed on from Web server to the bank's Internet banking server through the WWW interface. These requests pass through a firewall before they reach
the Internet banking server. Due to the use of SSL technology, only authenticated requests reach the Internet banking server. The customer information database is stored on a bank's server, which is protected by the use of various security tools in addition to the firewall technology. The WWW interface is the only media of communication with the Internet banking server and Internet banking server is the only media of communication with the customer database, thus ensuring the safety of operation and customer data. When the customer requests reach the Internet banking server it passes the requests to the bank server hoarding customer database. The database provides the required information to the Internet banking server, which is in turn passed on to the web server, through the firewall, from where the customer is able to access it (Refer Figure I). This sort of architecture, known as the 'three-tiered architecture' (comprising of a web server, Internet banking server and customer database protected by firewalls) creates a controlled environment, which allows quick incorporation of Internet security technologies. ICICI bank was incorporated as a commercial banking company, by the Industrial Credit and Investment Corporation of India (ICICI), in May 1994. The first ICICI branch was started in June 1994 at Chennai. The bank provides an array of domestic and international banking services to enable national and international trade and business, investment and foreign exchange and treasury services. Right from its inception the bank focused more on incorporating advanced technology. The bank operated the largest chain of ATMs in the country, which amounted to more than 450 in 2000. All the bank's branches were fully computerized and networked through V-SAT technology. By 1999, the number of branches increased to 65 and the bank plans to have over 200 branches by the end of 2002. In April 2000, ICICI became the first Indian bank to be listed on the New York Stock Exchange. ICICI was always regarded as one of the best private banks to foster advanced technologies in the banking sector. As part of its technology drive, in 1997, ICICI launched 'Infinity,' the first Indian Internet banking service. The service was launched to reduce transaction cost and offer convenient banking to customers. This meant enabling the customers to access their bank account and make transactions at any time. ICICI realized that to make Infinity a success, it
would have to invest heavily in sound Internet banking e-commerce technology. During 1995-99, ICICI invested Rs 50 million in online banking technology solutions. In 1997, ICICI bought the 'BankAway' software from Infosys. BankAway was an ecommerce solution that provided the bank a platform to offer an integrated financial services portal to the customers. It offered access to account information, bill payment, cash management, trade finance and online shopping. Infinity' was initially targeted at the non-resident Indians (NRIs) to enable them to manage their bank accounts in India through the Internet. According to the bank's sources, Infinity helped to increase the business generated from NRI customers from Rs 300 million in 1997 to Rs 1.4 billion in 1998. The service was also aimed at individuals in the age group of 30 to 50 years working in the corporate sector and proficient in using technology. However, over the next few years, the bank enhanced its services to attract other customers as well. As a result, by early 2000, ICICI had over 110,000 Internet banking customers. In the first half of 2000, ICICI's Internet banking customer base touched 275,000. On account of the growing competition in the Internet banking sector, ICICI focused on enhancing and extending its business-to-business (B2B) and B2C services through tie-ups and acquisitions. The bank entered into a 50-50 joint venture with Satyam Infoway in December 1999 to offer retail banking products and services on the Internet. SUMMARY: In 2001, a Reserve Bank of India survey revealed that of 46 major banks operating in India, around 50% were either offering Internet banking services at various levels or planned to in the near future. According to a research report, while in 2001, India's Internet user base was an estimated 9 lakh; it was expected to reach 90 lakh by 2003. Also, while only 1% of these Internet users utilized the Internet banking services in 1998, the Internet banking user base increased to 16.7% by mid- 2000. Many of the major banks like ICICI, HDFC, IndusInd, IDBI, Citibank, Global Trust Bank (GTB), Bank of Punjab and UTI were offering Internet banking services. Based on the above statistics and the analysts' comments that India had a high growth potential for Internet banking, the players focused on increasing and improving their Internet banking services. As a part of this, the banks began to collaborate with various utility companies
to enable the customers to perform various functions online. ICICI's 'Infinity,' which was already a leader in the Indian Internet banking arena, began to allow its customers to pay their online real time shopping bills. HDFC, through its 'payment gateway' feature, allowed its Internet banking customers to make online and real time payments for their purchases. HDFC also entered into tie-ups with various portals to provide these businessto-customer (B2C) e-commerce transactions. Centurion bank acquired an equity stake in the teauction.com portal to bring together buyers, sellers, suppliers, registered brokers and associations in the tea market and eliminate the need for their physical presence at various auctions. As more banks entered Internet banking arena, the competition between the banks also increased. This compelled the banks to focus on capturing new markets and customers and adopting advanced technology on the Internet. In the light of these developments, industry watchers remarked that Internet banking had arrived in a big way. Though it had a long way to go compared to the global standards, it was beginning to be seen as a replacement for the traditional banking set up in the future. IDENTIFICATION OF ISSUES: Apart from the security issues, there are a host of other problems like: • PC user base in India is extremely low compared to global standards. • The Internet user base is limited. • Lack of infrastructure to advanced technology based banking services. • The absence of a regulatory framework for Internet banking transactions in India. • The mindset of the Indian consumer, who prefers personal interactions and is not very comfortable, doing transactions through the Internet. • Limited awareness about the potential of Internet banking on the part of banks.
IDENTIFICATION OF ALTERNATIVES: The internet user base must be advanced and the people are to be educated. The infrastructure is to be maintained so that the framework of banking system can be enhanced. Awareness must be created among the people to educate the potential of Internet Banking.
CHOOSE THE BEST ALTERNATIVES: The issue of banks not being ready to realize the full benefits of Internet banking was aptly summed up by a critic, "Much of what is now on display at bank websites is an embarrassment, to put it politely. The average site has information about certain products, e-mail contacts of bank department, perhaps the Chairman's annual general meeting speech as well. A mere information booth. This is definitely not Internet banking." However, banks are working towards addressing these problems. The security issues can be tackled by having the bank's systems technologically equipped to evade operational and security risks. Reputation risks can be prevented by testing of the system before implementation, developing contingency plans (to handle system disruptions, system hackers, security lapses and virus attacks) and creating back-up facilities. Legal and cross-border risks can be avoided through proper customer identification devices, information screening techniques, periodic reviews on compliance with various laws, and gaining knowledge of various national laws (applicable) and guide the customers through their cross-border dealings. Apart from ensuring the security of the Internet-based transactions, ICICI is taking steps to overcome the other hurdles. The bank is tying up with computer manufacturers to make PCs available to customers at low prices. The bank also plans to tie-up with Sify to place its ATMs in Sify cybercafes. In 2000, ICICI opened Internet kiosks (cabins) at its ATMs to enable easy Internet access to its customers for banking. Many other banks are also adopting such practices. Analysts claim that Internet banking holds lots of potential with the emergence of growing Internet awareness among customers, integration of banking services with e-commerce service, the increasing reach of the Internet and the entry of global players in the banking sector. Even the Reserve Bank of India has come out with Internet banking related guidelines. With ICICI already having decided to make the Internet an integral part of its future business plans and other banks reportedly following suit, Internet banking seems poised to become an important part of the Indian banking sector in the years to come. CONCLUSION:
However, analysts felt the biggest gain was BoM's IT-savvy employees. By 2001, ICICI bank had emerged as one of the leading providers of Internet banking services in India. The bank was reportedly moving towards becoming a full-fledged ecommerce company in a couple of years. Nachiket Mor, Head of ICICI Treasury said, "The Seven-Eleven supermarket chain in Japan has recently applied for a banking license. This is the way world is moving. If supermarkets get into banking, then it is also time for banks to get into the selling of consumer durables."
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