A Report On

TECHNOLOGY IN BANKING
SUBMITTED BY :
MISS USHA R YADAV
TYBCBI Sem (V)
PROECT GUIDE :
PRO!" PRANA SHETTY
SUBMITTED TO :#
UNIVERSITY O! MUMBAI
Rajasthani Sammelans
Ghanshyamdas Saraf
College of Arts & commerce
Affiliate to University of Mumbai
Reaccredited by NAAC ith !A Grade
R" S cam#us$ S" %" Road$
Malad &'est($ Mumbai ) *++ +,*
A" -" .+/0 1 .+/*
DECLARATION
Miss Ushadevi R -adav$ student of Ghanshyamdas Saraf College
of Arts and Commerce$ Malad &'( hereby state that 2 have
com#leted #roject on $TECHNOLOGY IN BANKING % in the
academic -3AR .+/0 ) .+/*" 4his information submitted is true
and original to be of my 5noledge"
6ate 7 Signature of the Student
Rajesthani Sammelans
Ghanshyamdas Saraf
College of Arts and Commerce
Affiliated to University of Mumbai
Reaccredited by NAAC ith !A Grade
R" S" Cam#us$ S" %" Road$
Malad &'est($ Mumbai ) *++ +,*
C3R4282CA43
2$ 9rof" 9rajna Shetty hereby certify that Ms" Ushadevi R
-adav$ a student of Ghanshyamdas Saraf College has
com#leted #roject on !43C:N;<;G- 2N =AN>2NG in
the Academic year .+/0 ) .+/*" 4hus information submitted
is true and original to best of my 5noledge"
9roject Co)ordinator7 9rinci#al7
6ate7
3?ternal 3?aminer7 College Seal
6ate7
ACKNO&LEDGEMENT
2 ta5e this o##ortunity to than5 the UN2%3RS24- ;8 MUM=A2
for giving me a chance to do this #roject"
2 e?#ress my sincere gratitude to the 9rinci#al Mrs" Sujata
>armar5ar$ Course Co)ordinator 9rof" Urvi @ain$ Guide 9rof" 9rajna
Shetty$ librarian and other teachers for their constant su##ort and
hel#ing me for com#leting the #roject"
My dee# sense of gratitude to the staff and em#loyees of Canara
=an5 for their su##ort and guidance" 4han5s and a##reciation to
the hel#ful #eo#le at Canara =an5 for their su##ort"
2 am also grateful to my friends for giving su##ort in my #roject"
<astly 2 ould li5e to than5 each and every #erson ho hel#ed
me in com#leting the #roject es#ecially my #arents"
Signature of the Student
SR"
NO"
TOPIC
PAGE
NO"
/" 3A3C3U42%3 SUMMAR-
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3A3CU42%3 SUMMAR-
4echnology has become a #art of all al5s of life and across all business sectors$ and even
more so in ban5ing" 4here has been massive use of technology across many areas of ban5ing
business in 2ndia$ both from the asset and the liability side of a ban5s balance sheet"
6elivery channels have immensely increased the choices offered to the customer to conduct
transactions ith ease and convenience" %arious holesale and retail #ayment and settlement
systems have enabled faster means of moving the money to settle funds among ban5s and
customers$ facilitating im#roved turnover of commercial and financial transactions" =an5s
have been ta5ing u# ne #rojects li5e data arehousing$ customer relationshi# management
and financial inclusion initiatives to further innovate and strategies for the future and to
iden the reach of ban5ing"
OBECTIVES
4he Main objective of this #roject is to revie the im#lementation of
4echnology in =an5ing 2ndustry" 4echnological innovations have enabled the
industry to o#en u# ne delivery channels" 4a5ing the hel# of 24 to deal ith
the challenges that the ne economy #oses" 2t is vital system for develo#ing
economy for the nation" =an5s can #lay a dynamic role in delivery and
#urchase of consumer durables"
INTRODUCTION
TECHNOLOGY AND TRANS!ORMATION IN INDIAN BANKING
4echnology has brought about a com#lete change in the functioning of ban5s and delivery of
ban5ing services" Gone are the days hen every ban5ing transaction reHuired a visit to the ban5
branch" 4oday$ most of the transactions can be done from the comforts of ones home and
customers need not visit the ban5 branch for anything" 4echnology is no longer an enabler$ but a
business driver" 4he groth of the internet$ mobiles and communication technology has added a
different dimension to ban5ing" 4he information technology &24( available today is being leveraged
in customer acHuisitions$ driving automation and #rocess efficiency$ delivering ease and efficiency to
customers"
4he increased #enetration and im#act on the scale of business can be judged from metrics such as
de#osit and credit #er account$ hich according to the R=2 data as 2NR ,$ */. and 2NR .+$ CBC
in /EE. and 2NR /E$ DED and 2NR D*$ ,/D in .+++ I these metrics increased to 2NR BE$ ./C and
2NR .BD$ CB/ in .++E$ res#ectively$ a##ro?imately thrice the levels in .+++ and /+ times the levels
in /EE." Many of the 24 initiatives of ban5s started in the late /EE+s or early .+++ ith an
em#hasis on the ado#tion of core ban5ing solutions &C=S($ automation of branches and
centraliJation of o#erations in the C=S" ;ver the last decade$ most of the ban5s com#leted the
transformation to technology ) driven organiJations" Moving from a manual$ scale)constrained
environment to a global #resence ith automated systems and #rocesses$ it is difficult to envisage
the adverse scenario the sector as in the era before the reforms$ hen a sim#le de#osit or
ithdraal of cash ould reHuire a day" A4Ms$ Mobile ban5ing and online bill #ayments facilities
1
to vendors and utility service #roviders have almost obviated the need for customers to visit a
branch" =ranches are also transforming from o#erating as transaction #rocessing #oints into
relationshi# management hubs" 4he change has been very #roductive for ban5s bringing in an
increase in #roductivity and o#erational efficiency to be more com#etitive" =etter ris5 management
due to centraliJation of information and real time availability of critical data for decision ma5ing"
'ith most of the ban5s being technology)enabled$ the focus is shifting to com#uteriJing regional
rural ban5s &RR=s(" 2n addition$ ban5s are moving toard decision ma5ing and business intelligence
softare and trying to o#timiJe the 24 infrastructure created"
2
INNOVATION IN BANKING
2nnovation drives organiJations to gro$ #ros#er and transform in sync ith the changes in the
environment$ both internal and e?ternal" =an5ing is no e?ce#tion to this" 2n fact$ this sector has
itnessed radical transformation of late$ based on many innovations in #roducts$ #rocesses$ services$
systems$ business models$ technology$ governance and regulation" A liberaliJed and globaliJe
financial infrastructure has #rovided an additional im#etus to this gigantic effort" 4he #ervasive
influence of information technology has revolutioniJed ban5ing" 4ransaction costs have crumbled
and handling of astronomical number of transactions in no time has become a reality"
2nternationally$ the number bric5 and mortar structure has been ra#idly yielding ground to clic5 and
order electronic ban5ing ith a #lethora of ne #roducts" =an5ing has become boundary less and
virtual ith a .* K C model" =an5s ho strongly rely on the merits of relationshi# ban5ing as a
time tested ay of targeting and serving clients$ have readily embraced Customer Relationshi#
Management &CRM($ ith shar# focus on customer centricity$ facilitated by the availability of
su#erior technology" CRM has$ therefore$ become the ne mantra in customer service management$
hich is both relationshi# based and information intensive" Ris5 management is no longer a mere
regulatory issue" basel). has accorded a #rimacy of #lace to this fascinating e?ercise by
3
re#ositioning it as the core of ban5ing" 'e no see the evolution of many novel deferral #roducts
li5e credit derivatives$ es#ecially the Credit Ris5 4ransfer &CR4( mechanism$ as a conseHuence"
CR4$ characteriJed by significant #roduct innovation$ is a very useful credit ris5 management tool
that enhances liHuidity and mar5et efficiency" SecuritiJation is yet another e?am#le in this regard$
hose strategic use has been ra#idly rising globally" So is outsourcing"
4
TECHNOLOGY IN BANKING

Nobel <aureate Robert Solo had once remar5ed that com#uters are seen everyhere e?ce#ting in
#roductivity statistics" More recent develo#ments have shon ho far this state of affairs has
changed" 2nnovation in technology and orldide revolution in information and communication
technology &2C4( have emerged as dynamic sources of #roductivity groth" 4he relationshi# beteen
24 and ban5ing is fundamentally symbiotic" 2n the ban5ing sector$ 24 can reduce costs$ increase
volumes$ and facilitate customiJed #roductsL similarly$ 24 reHuires ban5ing and financial services to
facilitate its groth" As far as the ban5ing system is concerned$ the #ayment system is #erha#s the
most im#ortant mechanism through hich such interactive dynamics gets manifested" RecogniJing
the im#ortance of #ayments and settlement systems in the economy$ e have embar5ed on
technology based solutions for the im#rovement of the #ayment and settlement system infrastructure$
cou#led ith the introduction of ne #ayment #roducts such as the com#uteriJed settlement of
clearing transactions$ use of Magnetic 2n5 Character Recognition &M2CR( technology for cheHue
clearing hich currently accounts for ,B #er cent of the value of cheHues #rocessed in the country$
the com#uteriJation of Government Accounts and Currency Chest transactions$ o#erationaliJation of
6elivery versus 9ayment &6v9( for Government securities transactions" 4o)ay inter)city cheHue
collection and imaging have been o#erationaliJed at the four metros" 4he coverage of 3lectronic
Clearing Service &6ebit and Credit( has been significantly e?#anded to encourage non)#a#er based
funds movement and develo# the #rovision of a centraliJed facility for effecting #ayments" 4he
scheme for 3lectronic 8unds 4ransfer o#erated by the Reserve =an5 has been significantly
augmented and is no available across thirteen major cities" 4he scheme$ hich as originally
intended for small value transactions$ is #rocessing high value &u# to Rs". core( from ;ctober /$
.++/" 4he CentraliJed 8unds Management System&C8MS($ hich ould enable ban5s to obtain
consolidated account)ise and centre)ise #ositions of their balances ith all /C offices of the
5
6e#osits Accounts 6e#artments of the Reserve =an5$ has begun to be im#lemented in a #hased
manner from November .++/" A holistic a##roach has been ado#ted toards designing and
develo#ment of a modern$ robust$ efficient$ secure and integrated #ayment and settlement system
ta5ing into account certain as#ects relating to #otential ris5s$ legal frameor5 and the im#act on the
o#erational frameor5 of monetary #olicy" 4he a##roach to the moderniJation of the #ayment and
settlement system in 2ndia has been three)#ronged7 &a( consolidation$ &b( develo#ment$ and &c(
integration" 4he consolidation of the e?isting #ayment systems revolves around strengthening
Com#uteriJed CheHue clearing$ e?#anding the reach of 3lectronic Clearing Services and 3lectronic
8unds 4ransfer by #roviding for systems ith the latest levels of technology" 4he critical elements
in the develo#mental strategy are the o#ening of ne clearing houses$ interconnection of clearing
houses through the 2N82N34L o#timiJing the de#loyment of resources by ban5s through Real 4ime
Gross Settlement System$ CentraliJed 8unds Management System &C8MS(L Nero tiated 6ealing
System &N6S( and the Structured 8inancial Messaging Solution &S8MS(" 'hile integration of the
various #ayment #roducts ith the systems of individual ban5s is the thrust area$ it reHuires a high
degree of standardiJation ithin a ban5 and seamless interfaces across ban5s" 4he setting u# of the
a#e?)level National 9ayments Council in May /EEE and the o#erationaliJation of the 2N82N34 by
the 2nstitute for 6evelo#ment and Research in =an5ing 4echnology &26R=4($ :yderabad have been
some im#ortant develo#ments in the direction of #roviding a communication netor5 for the
e?clusive use of ban5s and financial institutions" Membershi# in the 2N82N34 has been o#ened u#
to all ban5s in addition to those in the #ublic sector" At the base of all inter)ban5 message
transfers using the 2N82N34 is the Structured 8inancial Messaging System &S8MS(" 2t ould serve
as a secure communication carrier ith tem#lates for intra) and inter)ban5 messages in fi?ed
message formats that ill facilitate !straight through #rocessing" All inter)ban5 transactions ould
be stored and sitched at the central hub at :yderabad hile intra)ban5 messages ill be sitched
and stored by the ban5 gateay" Security features of the S8MS ould match international
6
standards" 2n order to ma?imiJe the benefits of such efforts$ ban5s have to ta5e #ro)active measures
to7 8urther strengthen their infrastructure in res#ect of standardiJation$ high levels of security and
communication and netor5ingL Achieve inter)branch connectivity earlyL
9o#ulariJe the usage of the scheme of electronic funds transfer &384(L and 2nstitute arrangements
for an R4GS environment online ith a vie to integrating into a secure and consolidated #ayment
system" 2nformation technology has immense unta##ed #otential in ban5ing" Strengthening of
information technology in ban5s could im#rove the effectiveness of asset)liability management in
ban5s" =uilding u# of a related data)base on a real time basis ould enhance the forecasting of
liHuidity greatly even at the branch level" 4his could contribute to enhancing the ris5 management
ca#abilities of ban5s"
7
ADOPTION O! BANKING TECHNOLOGY
4he 24 revolution had a great im#act in the 2ndian ban5ing system" 4he use of com#uters had led
to introduction of online ban5ing in 2ndia" 4he use of the modern innovation and com#uterisation
of the ban5ing sector of 2ndia has increased many fold after the economic liberalisation of /EE/ as
the countryMs ban5ing sector has been e?#osed to the orldMs mar5et" 4he 2ndian ban5s ere finding
it difficult to com#ete ith the international ban5s in terms of the customer service ithout the use
of the information technology and com#uters"
4he R=2 set u# a number of committees to define and co)ordinate ban5ing technology" 4hese have
included7
2n /ED* formed the Committee on Mechanisation in the =an5ing 2ndustry &/ED*( hose
chairman as 6r C Rangarajan$ 6e#uty Governor$ Reserve =an5 of 2ndia" 4he major
recommendation of this committee as introducing M2CR technology in all the ban5s in the
metro#olis in 2ndia" 4his #rovided use of standardiJed cheHue forms and encoders"
2n /EDD$ the R=2 set u# the Committee on Com#uterisation in =an5s &/EDD( headed by 6r"
C"R" Rangarajan hich em#hasiJed that settlement o#eration must be com#uteriJed in the
clearing houses of R=2 in =hubaneshar$ Guahati$ @ai#ur$ 9atna and 4hiruvanantha#uram" 2t
further stated that there should be National Clearing of inter)city cheHues at >ol5ata$ Mumbai$
6elhi$ Chennai and M2CR should be made ;#erational" 2t also focused on com#uterisation of
branches and increasing connectivity among branches through com#uters" 2t also suggested
modalities for im#lementing on)line ban5ing" 4he committee submitted its re#orts in /EDE and
com#uterisation began from /EE0 ith the settlement beteen 2=A and ban5 em#loyeesM
association"
8
2n /EE*$ Committee on 4echnology 2ssues relating to 9ayment systems$ CheHue Clearing and
Securities Settlement in the =an5ing 2ndustry &/EE*( as set u# under chairman Shri ' S
Saraf" 2t em#hasiJed 3lectronic 8unds 4ransfer &384( system$ ith the =AN>N34
communications netor5 as its carrier" 2t also said that M2CR clearing should be set u# in all
branches of all ban5s ith more than /++ branches"
2n /EEB$ Committee for #ro#osing <egislation on 3lectronic 8unds 4ransfer and other
3lectronic 9ayments &/EEB( again em#hasiJed 384 system"
4otal numbers of A4Ms installed in 2ndia by various ban5s as on end @une .+/. is EE$./D" 4he
Ne 9rivate Sector =an5s in 2ndia is having the largest numbers of A4Ms hich is folloed by
off)site A4Ms belonging to S=2 and its subsidiaries and then it is folloed by Ne 9rivate =an5s$
Nationalised ban5s and 8oreign ban5s" 'hile on site is highest for the Nationalised ban5s of 2ndia"
Br'n()e* 'n+ ATM* o, S()e+-.e+ Commer(/'. B'n0* '* on en+ M'r() 1223
B'n0 t4pe N-m5er o, 5r'n()e* On#*/te ATM* O,,#*/te ATM* Tot'. ATM*
Nationalised ban5s 00,.C 0.+B /B,C *CC.
States ban5 of 2ndia /0,,/ /B*D 0,C. B..+
;ld #rivate sector ban5s *B// D++ **/ /.*/
Ne #rivate sector ban5s /,DB /DD0 0C.E B,/.
8oreign ban5s .*. ./D BD. D++
ELECTRONIC DELIVERY CHANNELS AND PRODUCTS
9
E.e(tron/( B'n0/n6 /n In+/' /* '* -n+er:#
384 &3lectronic 8und 4ransfer(
3CS &3lectronic Clearing System(
4ele#hone =an5ing
A4M &Automated 4eller Machine(
Credit Cards N 6ebit Cards
Cor#orate =an5ing 4erminals
9oint of Sale 4erminal
2nternet =an5ing
Mobile =an5ing
E.e(tron/( !-n+ Tr'n*,er (E!T)
10
4his e?#losive groth in mobile data ill see ireless data communications eventually out#acing
voice as the mobile mar5etMs driving factor$ ith C+O of mobile subscribers orldide using data
in .++B"
6es#ite the business concerns$ the big and groing siJe of the ireless internet mar5et$ #ushes the
#layers from all industries to see5 ne service offerings beyond their traditional industry roles and
establish #artnershi#s in order to ma?imiJe value creation and revenue generation"
9ersonaliJation of content and the o#timiJation of the mobility$ time and location sensitive features
ill also #rove crucial in the relevance and ta5e u# of ireless data services"
An electronic fund transfer$ 384 for short$ is basically any sale$ ithdraal$ transfer of moneys
beteen accounts$ and #ayment initiatives #erformed electronically" A ban5ing customer$ for instance$
can ma5e an electronic fund transfer hen she de#osits a #ay chec5" Similarly$ a business oner
can ma5e an 384 hen she ithdras a cash advance from an automatic teller machine to fund
discretionary business e?#enses" 2n order for an 384 be com#leted$ a com#le? suite of
communications must ta5e #lace beteen the merchant or business and the issuerMs account" 2f a
credit card machine is offline$ for instance$ a customer may still ma5e a delayed electronic fund
transfer via a #rocess 5non as the #reauthoriJation" 2n this situation$ a merchant first vets the
ban5ing card via fraud lists and other methods and then debits the account" <ater$ hen the
merchant hoo5s u# to an online system$ he can finish the transaction via a #rocess 5non as
settlement"
11
Some ban5ing atchdogs have raised concerns over the security of electronic fund transfer
mechanisms" After all$ although ban5ing institutions themselves generally need not concern
themselves ith the fractional #ercentage of 384s hich go rong$ consumers need to be aare of
the ris5s" Ma5ing an 384 ban5ing transfer on an unsecured line$ for instance$ can lead to the
dis#ensation of critical #ersonal information or ban5ing account data to unrecogniJed or
ina##ro#riate third #arties"
2ndeed$ the com#uteriJed nature of modern 384 ban5ing has made it difficult for even veteran
ban5ing account #atrols to 26 and sto# certain ty#es of fraud" 4his isnMt to say that using 384
ban5ing initiatives isnMt safeL hoever$ the smart ban5ing customer e?amines her re#orts regularly to
loo5 for inaccuracies"
-ou may also sign u# for s#ecial services hich #rovide additional chec5s and balances for any
and all 384 transactions you ma5e$ if youMre a business oner or an individual ith multi#le large
consumer ban5ing accounts$ it may behove you to ta5e advantage of these #rotections" 2f you s#ot
irregularities$ contact a ban5ing re#resentative as soon as #ossible to rectify any damage to your
account"
E.e(tron/( C.e'r/n6 S4*tem (ECS)
12
2n order to bring the #ayment system at #ar ith the international standards$ the Reserve =an5 too5
several initiatives hich include the introduction of 3CS services in 2ndia hich is the counter#art
of the automated clearing house" 2t is an electronic fund transfer mode from one ban5 account to
another ban5 account using the services of a clearing house" 4his is used normally for bul5
transfers from one account to many accounts or vice versa" 4his can be used for ma5ing #ayments
li5e distribution of dividend$ interest$ salary$ #ension$ etc" by institutions or for collection of
amounts for #ur#oses$ such as #ayments to utility com#anies li5e tele#hone$ electricity$ charges such
as house ta?$ ater ta?$ etc" or for loan instalments of financial institutionsNban5s or regular
investments of #ersons" Clearing services are of to ty#es7
(/) E.e(tron/( Cre+/t C.e'r/n6
(//) E.e(tron/( De5/t C.e'r/n6"
(I) E.e(tron/( Cre+/t C.e'r/n6
2t is a sim#le$ reliable and cost effective solution for bul5 and re#etitive #ayment transactions li5e
salary$ #ension$ interest$ commission$ dividend$ etc" by #ublic or #rivate com#anies and government
de#artments through ban5s" Under the said system$ com#anies ho have to ma5e bul5 #ayments to
a large number of beneficiaries$ #re#are the credit instructions on the magnetic media and submit
the same to R=2 through their ban5ers" R=2 #rocesses the data$ arrives at interban5 settlement$ and
#rovides ban5 and branch ise re#orts containing the details of #ayments to facilitate fast #ayment
to the beneficiaries" 4he institutions hich ant to avail 3CS facility have to get them registered
ith s#onsor ban5" 4he s#onsor ban5 ill forard a co#y of registration form to R=2 after
allotting a registration number" 4he institution that has to ma5e #ayment to a large number of
customers has to #re#are the #ayment data on a magnetic media and submit it to the ban5" 4he
ban5 ould #resent the #ayment data to the local clearing house through its service branch in a
sealed cover duty encry#ted in consultation ith R=2" 4he clearing house debits its account and
13
credits the ban5s here the beneficiaries of the transaction maintain their accounts" 4here is no
limit for ma5ing 3CS credit #ayment" 4he scheme benefits to all the users es#ecially to cor#orate
bodies ho have to #rint and dis#atch numerous #a#er instruments in reconciling the figures
&Sudha5ar$ .++,("
Bene,/t* to Corpor'te Bo+47In*t/t-t/on
P <oss of instruments in transit or fraudulent encashment thereof totally eliminated"
P Reconciliation of transactions is automatic" =y the time the 3CS cycle is com#leted$ the user
institution gets an electronic data file from its ban5 ith the date of #ayment and ban5ers
confirmation thereon"
P Cash management becomes easier as arrangement for funds is reHuired to be made only on the
s#ecified date"
P 3nsuring better customerNinvestor service"
(II) E.e(tron/( De5/t C.e'r/n6
3lectronic debit clearing covers the #ayment to utility com#anies li5e tele#hone and electricity
boards" Utility service #roviders include M4N<$ 4ele#honeNMobile com#anies$ 4elecom 6e#artments$
State 3lectricity =oards$ =an5s$ <2C$ :ousing 8inance Com#anies$ 2ntermediaries$ Clubs$ etc" &for
collection of credit cards dues("4hese com#anies collect their #eriodical bills from customers" Under
the said scheme$ the customer on the recei#t of bill from the utility com#any and having satisfied
himself for its correctness$ can a##roach his ban5er and authoriJe the ban5 branch to debit his
account for the amount of the bill and transfer the amount to the ban5 account of the utility
com#any"
Bene,/t* -n+er ECS (De5/t)
14
P 8aster collection of bills by the com#anies and better cash management"
P 3liminates the need to go to the collection centres Nban5s by the customers and no need to stand
in long Hueues for #ayment"
P Automatic debiting to the accounts$ to that effect cuts don the #rocedural delay"
Te.ep)one B'n0/n6
15
=an5s and other financial businesses im#lement call centers for one sim#le reason7 #rofits" Call
centers automate the most basic e?changes$ li5e reHuesting an account balance or ma5ing a de#osit$
so that agents can devote more time to ma5ing sales or #roviding customers ith more
#ersonaliJed service" Moreover$ ith loer facility costs$ a transaction fulfilled by a live agent over
the #hone can be as lo as /N,th of that of the branch agent" Call centers also hel# to secure
customers loyalty$ ensuring that their individual needs are met by an automated system or a live
agent over the #hone as Huic5ly as #ossible" Com#anies in the financial industry are collectively
s#ending more money to im#rove their call centers ith additional staff and ith ne hardare and
softare" 6ata monitor$ a research and management consulting firm$ estimates that the number of
agents or5ing at call centers for ban5s and for retail financial businesses in US$ ill rise from
an estimated /D0$+++ agents in /EED to ./B$+++ by .++0" 6ata monitor estimates that labor
accounts for ,*O of the cost of running a call center$ leaving managers ith only the remaining
0,O to or5 ith hen #urchasing ne eHui#ment and meeting any additional overhead costs"
6ata monitor$ re#orts that ban5s have s#ent a total of QD0B million on call center #roducts and
services by the end of /EEE" 2t is #redicted that they ill s#end Q/"+C billion this year and Q/"0B
billion in .++/L #arallel trends in other financial services sectors li5e insurance & bro5erage firms"
As financial businesses e?#and their call centers$ they must or5 ithin their budgets to create the
most reliable systems #ossible" 4here is a number of strategic issues in designing a call center 7
16
/" S/te *e.e(t/on 7 A center of large siJe may not necessarily find enough Hualified labor in one
location alone and it ould also be e?#ensive to o#erate" 4herefore a number of centers can be
maintained and the co)or5ing or routing calls can be accom#lished by intelligent netor5ing"
9rudential$ a multi)faceted financial firm based in Near5$ N@ that offers investment$ securities$
insurance and real estate services$ established a netor5 of .+ call centers to accommodate its
e?#ansive customer base in the US and currently em#loys more than *$+++ agents$ ho handled
a##ro?imately .+ million inbound and outbound calls in /EEE" 4raining and maintaining a high
#erformer agent is not easy" Centers can also em#loy remote agents ho use telecommuting
softare that routes calls and trac5s them from the call centers server"
." T)e o,,/(e 7 ;ffice layout is carefully designed to ensure that agents dont feel isolated" Agent
#sychology is an immediate concern for the center" Agents are #rovided ith all means to
achieve higher #erformance" 4hey use ergonomic des5s and seating" 4hey ear cordless headsets$
ith #ossibly noise cancellation ca#abilities" Still$ for an average call center$ agent turnover may
reach u#to O*+" Since they are trained usually about a month$ turnovers are very undesirable
for the center"
0" D/'.o6 ,.o8 *(en'r/o* :'ith the huge volume of calls that centers handle in a day$ every
second saved$ every dialog ste# s5i##ed or covered by 2%R$ returns as hours of savings in
terms of agent labor"
*" Inter'(t/9e Vo/(e Re*pon*e (IVR) 7 4hese systems are used to eliminate the need for ansering
and routing certain ty#es of calls" 8or basic services li5e finding out hat the customers
balance is an 2%R #rovides a self service functionality" 2n general 2%R can be utiliJed to
manage u#to D+O of investment calls$ ,+O of securities calls$ and .BO of retail ban5ing calls"
B" Comp-ter Te.ep)on4 Inter,'(e(CTI) 7 4his is the unit hich initiates database Hueries or
transactions by calling functions on the bac5)end systems" 2t controls the dialogs and generates
17
onscreen scri#ts that #rom#t agents to #erform all the necessary tas5s such as as5ing Huestions
to hel# them identify customers$ in#ut account information in the right order etc"
," Cont/n-o-* De9e.opment :4oday$ call center technologies is a fast develo#ing technology arena"
6evelo#ers offer numerous highly technical #roducts to increase agent #erformance" Since the
return of investment is almost immediate$ it is not at all hard to sell #roducts" Some #o#ular
e?am#les are 7
Sm'rtRo-te 7 2dentifies callers by ca#turing the #hone numbers they are calling from before
routing calls to agents"
S/:t) Sen*e 7 Receives data from the 2%R system and the customer database$ to dis#lay
screen #o#s on agents 9Cs ith customers histories and other relevant information"
Vo/(e o9er IP 7 Ma5es use of internet as a free medium for s#eech communications to dro#
the cost"
C" E9o.9/n6 ,rom ' ('.. (enter /nto ' (ont'(t (enter: 4he latest trend that call centers are
folloing to ensure ra#id customer service is to route and anser e)mail messages along ith
#hone calls" Agents can anser an average of .++ to 0++ e)mail messages a day or as many as
/$+++ during busy #eriods" Call centers o#erate ith less agents at night shifts" Customers ho
send e)mail during off)hours receive an automated res#onse to confirm that their messages
arrived at the call center successfully and that agents ill hel# them by the ne?t business day"
An e?am#le #roduct$ Genesys 2nternet Suite$ automatically res#onds to customer e)mail or
suggests res#onses" 2t also enables agents to engage in live on)line chat sessions ith customers
and s#ea5 ith them through voice over 29"
D" Mer6er* 'n+ '(;-/*/t/on* : 4echnical innovations are not the only factors that affect call center
develo#ment for the financial sector" Mergers have been just as influential$ #articularly among
ban5s" 8unctionally$ the technical infrastructure of a call center can be utiliJed to serve other
18
ban5s or even com#anies from other industries" Adding a ne set of dialog scenarios reHuire
only agent training to u#scale a call centers to or5 for an additional com#any"
19
ATM
As the first re#lacement of a human teller in ban5ing industry$ A4M as a hard #roduct for
advertising de#artments to develo# #ublic acce#tance" 4hey even used catchy names for these ne
machines in the ho#es that they ould be thought of as more human by their customers7" 4illie the
4eller$ 4he =read =o?$ 4he Green Machine$ Anne the Anytime 4eller$ Fi##y$ Millie$ 4he Money
4ree$ 4he Cash Co$ etc" 8inally$ 4he American =an5er declared that they ould hereafter refer to
the full)function machine as an automated teller machineR or RA4MR" Res#onses to A4Ms ere
mi?ed even in the ban5 industry" A ban5 manager is #o#ularly Huoted to say 7 R<et me get this
straight" -ou ant me to #o5e a hole in the all of my branch" 4hen you ant me to stic5 a
one)ton machine through that all" 4hen that machine is going to s#it money out onto the
sideal5" 6o 2 have it right so farSR Another anecdote from C+s is the TSeven Reasons 'hy
A4Ms 'ill Never Catch ;n 7
/" Customers ill never remember a * or ,)digit number"
." Most #eo#le do not believe it is right to have such easy access to their money"
0" Not enough customers ill carry the e?tra #lastic card in their allets"
*" 4here is no demand for .*)hour availability"
20
B" -ou canMt as5 customers to learn to use a machine
," Customers ill reject A4Ms because they cannot record the transaction in their chec5 register"
C" Customers ill use their cards at the #oint of sale$ and obviate the need for cash"
8or one thing$ these reasons did not turn out to be com#letely rong" 3ven today$ for a retail
ban5$ an average of 0+O of consumers still does not use A4Ms"
21
Cre+/t C'r+*

Credit cards constitute an im#ortant #art of e)#ayment system and have shon a tremendous groth
in retail e)#ayment system" 4he transactions to the tune of ,+ #ercent in volume are held by credit
cards &R=2$ .++D(" 2t is an arrangement hich enables the customer to obtain the goods and
services through various sho#s those having the arrangement ith issuing agency even though the
customer does not have any balance in the customer account" 2t is eHuivalent to the loan sanctioned
by the ban5 to its customers" Credit Card facilitates and ma5es #ossible to Tuse first and #ay
laterU" 4he amount of credit varies from ban5 to ban5" 2t #rovides the o##ortunity to customers to
do sho##ing even ithout carrying the cash" 4he facility is #rovided to customer based u#on the
net orth of a client" 4he credit card can also be used to ithdra cash from A4Ms ithin the
cash limit a##roved to that client"
De5/t C'r+*
22
A 6ebit card #rovides for online electronic #ayment from saving or current accounts of the
cardholder for #urchase and access to A4Ms for cash ithdraals and enHuiries" A4M)cum)debit
card is used both as an A4M card and as a method of #ayment other than cash or cheHues hen
#urchasing goods and services in 2ndia and overseas" A #erson desirous of getting issued an A4M)
cum)debit card &smart card( in his name is reHuired to have a savings ban5 account or a current
account in ban5 hose card he intends to obtain" 4hereafter$ a customer is reHuired to fill in an
a##lication form for the #ur#ose hich contains terms and conditions on hich A4M)cum)debit card
is issued"
Corpor'te B'n0/n6 Term/n'.
23
<arge Cor#orate customer can lag into the ban5s data base and have access to their
account N transactions from their business houses" :oever$ it ould still ta5e some
more time for the 2ndian =an5s to e?tend this facility to their customers"
Po/nt o, S'.e Term/n'.
2t consists of to com#onents a com#uter terminal that is lin5ed online to com#uteriJed customer
information files in a ban5 and a #lastic magnetically encoded transaction the customer to the
com#uter" 6uring a transaction the customers account is debited and the retailers account is
credited by the com#uter for the amount of #urchase"
Internet B'n0/n6
24
2nternet ban5ing belongs to the s#ecies of financial services variously 5non as home ban5ing$
remote electronic ban5ing$ online ban5ing$ self)service ban5ing$ and other names indicating that
customers do their ban5ing at home or at or5" ;ver /$.++ 3uro#ean financial institutions offer
2nternet ban5ing today$ more than tice as many as si? months ago" 2n fact internet turns out to
be the most economic delivery channel for ban5s" So much so that in Seden$ here ban5s ere
the first to deliver internet access service$ #eo#le consider ban5s their #ortals and this enabled them
to ca#ture mar5et share before the #ortals became big" According to a study released in Se#tember
.+++ by >9MG 2nternational$ 8inancial institutions currently derive /0O of their revenues from
business done on the 2nternet$ and that share is e?#ected to jum# to .DO in the ne?t /D months"
4he orldMs first 2nternet ban5 o#ened its virtual doors in the fall of /EEB" 4oday$ all ban5s in
USA and OD+ of ban5s in 3uro#e offer 2nternet based ban5ing" 'ells 8argo$ a US ban5 ho is a
very aggressive 2nternet #layer$ claims *B+$+++ online customers as of S#ring.+++$ u# B+O from
the start of last year"
Advantages of online ban5ing to the customers can be listed as follos7
Convenient
2ne?#ensive
Convenient bill #aying medium
CN.* availability
25
=an5 from anyhere in the orld &as long as you have access to a com#uter and the netor5(
!e8 +/*'+9'nt'6e* 're:
ReHuirement for basic com#uter and broser literacy"
Need for a com#uter ith netor5 connection
Security concerns
;ne of the to main #roblems$ the com#uter literacy and internet access$ is eroding aay as more
and more #eo#le are starting to use internet every day" A recent Gallu#NAmerican =an5er survey
found that ;ver ,DO of U"S" households have access to the internet and ,0O of U"S" households
no on #ersonal com#uters$ but only /.O use them for ban5ing transactions" American =an5er
concludes that Tif not for the fact that 9C onershi# is e?#anding$ there ould be no groth in
online ban5ing customers"U Nevertheless$ 9C onershi# is groing" =y .++0$ 3uro#e is #rojected to
have /C+ million 2nternet users$ about the number forecast for the United States" Moreover$ ban5ing
services over the Net is getting mature" 9erha#s eHually telling in the Gallu# survey$ ,EO of online
customers said they ere Tvery satisfiedU ith the service this year$ u# from BEO in /EEE"
A major #romise by online ban5ing is the global reach" U"S" financial #layers are
already see5ing to e?#and their #resence in 3uro#e" 2n addition$ there is li5ely to be a #roliferation
of #an)3uro#ean internet ban5s" 4he Huest to build an on)line 3uro#ean ban5ing #resence ill no
doubt be com#licated by current las and standards$ hich differ from country to country" 2n many
instances$ the #ioneers in 3uro#e ma5e their a##lications to the regulators on a case)by)case basis$
ta5ing their time to e?#and" An e?am#le is ScandinaviaMs largest asset management ban5$ S3=$
hich is striving to #lay a larger role across 3uro#e via the 2nternet" S3=$ ith 0+B$+++ on)line
customers as of .G.+++ in the Nordic region$ ho#es to have five million customers ban5ing via the
2nternet by .++*" 2t offers a full range of services that include ban5ing$ bro5erage$ mutual funds$
loans$ mortgages$ and bill #ay and #resentment"
Mo5/.e B'n0/n6
26
=efore the advent of internet access using mobile
#hones$ mobile ban5ing as already #ossible by
sim#ly calling the ban5 call center the mobile
#hone" 4hen$ hat does the ireless internet
access #rovideS
;nce again the anser is Tcost reductionU" 4he savings are both for the customer and for the ban57
C-*tomer */+e : 2n the case of fi?ed line tele#hony access to the ban5$ call charges are lo
enough to be subsidiJed by the ban5" :oever$ mobile call charges are shared not only because
they are very high but also ban5s do not ant to share customer information ith the #rivately
oned mobile o#erators" ;#erators ith all their calls routed over a fe Mobile services
Sitching Centers &MSC( can dig into the digital data and #roduce detailed call statistics"
B'n0 */+e : Customers ho use the mobile broser on the #hone to commit ban5ing are
essentially doing a self)service" 4his is a number of times chea#er for the ban5$ then
transactions committed by live agents over the #hone"
3stablishing the business case for mobile ban5ing$ the industry has to ma5e sure they are building
a trusted environment here the customer is oned by the ban5" At the moment$ ireless data
services are technically not able to achieve end)to)end security" Secure connection from the handset
to the ban5 is breached at least at one #oint$ hen the mobile data #ac5ets are converted into
internet data #ac5ets at the mobile o#erator #remises" Customers are billed by the o#erator for
using the ireless data service hence the general conce#tion is that Tthe customer is using a mobile
ban5ing service brought by the mobile o#eratorU" =an5ing industry$ hose core business de#ends on
27
trust build on direct communication ith the customer$ do not favor this notion" 4herefore ban5s
have to develo# the business case for mobile internet ban5ing and bro5ing very carefully"
;ne major drive hich effects the com#romise of cost versus business concerns of the ban5s is the
increasing number of ireless devices hich #rovide internet access" Ne research has found that
the number of mobile data users ill total nearly /". billion orldide in .++B" 4his ill e?ceed
users of fi?ed 2nternet$ hich ill gro to around CB+ million during the same #eriod" 'estern
3uro#e ill lead the ay in this ra#idly develo#ing mar5et ith over *++ million #eo#le using
data in this region in B years time" Strategies Grou#$ estimates that by .++B$ 3uro#ean ireless
voice revenue ill be /BB billionQNyear hile just location based mobile data services ill generate
0B billionQNyr"
SOME RECENT INNOVATIONS IN INDIAN BANKING
:68C =an5s !Net Safe card is a one)time use card ith a limit thats s#ecified$ ta5en from
4andons credit or debit card" 3ven if 4andon fails to utiliJe the full amount ithin .* hours of
creating the card$ the card sim#ly dies and the uns#ent amount in the tem#orary card reverts to his
28
original credit or debit card" 'elcome to one of the myriad ays in hich ban5ers have been
trying to innovate" 4heyre bringing A4Ms$ cash and even foreign e?change to their customers
doorste#s" 2ndeed$ innovation has become the hottest ban5ing game in ton" 'ant to buy a house
but dont ant to go through the hassles of haggling ith bro5ers and the mounds of #a#eror5S
Not to orry" -our ban5 ill tac5le all this" 2ts ready to come every ste# of the ay for you to
buy a house" Standard Chartered$ for instance$ has #ro#erty advisors to guide a customer through
the entire #rocess of selecting and buying a house" 4hey also lend a hand ith the cumbersome
documentation formalities and the registration" 6ont fret if youve already bought your house or
car 1 you can do other things ith both" -ou can leverage your ne house or car these days ith
ban5s li5e 2C2C2 =an5 and Standard chartered ready to e?tend loans against either$ till its about
five years old" <oans are available to all car oners for almost all brands of cars manufactured in
2ndia that are u# to five years old" Still$ innovation is more evident in retail ban5ing" 4rue$ all
ban5s offer #retty much the same suite of asset and liability #roducts" =ut its the small tea5ing
here and there that ma5es all the difference" 4a5e$ for e?am#le$ the once staid de#osits" Some ban5
accounts combine a savings de#osit account ith a fi?ed de#osit" A see#)in account$ as it is
called$ or5s li5e this7 the account ill have a cut)off$ say$ Rs .B$+++L any amount over and above
that gets automatically transferred to a fi?ed de#osit hich ill earn the customer a clean . #er
cent more than the returns that a savings account gives" Some month ago$ >ota5 Mahindra =an5
introduced a variant of the see#)in account" 2f the balance to#s Rs /"B la5h$ the e?cess runs into
>ota5s liHuid mutual fund" T3ven if the money is there only for the ee5end$ a liHuid fund can
earn you a clean *"B #er cent #er annum$U #oints out Shashi Arora$ vice #resident$ mar5eting$
>ota5 Mahindra =an5" 4hats not a small gain considering that your current account does not #ay
you any interest" And if$ meanhile$ you ant to buy a big)tic5et home theatre system$ the minute
you si#e your card the invested sum ill return to your account" 4heres #lenty of innovation on
home loans" A=N Amro sent the home mortgage mar5et afire ith its , #er cent home loan
29
offering last year" 4he #roduct offers a , #er cent interest rate for to years after hich the
interest rate is reset in tune ith the #revailing mar5et rate" All the other big home loan #layers
slashed their rates after this as announced" <oo5 too at the home saver #roduct and its variants
from Citiban5$ :S=C and Standard chartered" 4he interest rate on the loan is determined by the
balance you maintain in the savings account ith the ban5" 4he home builder can maintain a
higher balance in his other savings account and bring don the interest rate on the home loan" 4he
rate is calculated on a daily basis on the net loan amount" Standard chartered claims that since the
launch of its home saver #roduct in A#ril .++.$ close to *+ #er cent of its customers have chosen
it" Says %ishu Ramachandran$ regional head$ consumer ban5ing$ Standard Chartered7 T'e believe
that there are several ays to innovate and create value in the #rocess$ even in develo#ed #roduct
areas" T=an5s are also attem#ting to reach out to residents of metro#olitan cities here #eo#le are
#ressed for time &hat ith long commuting hours$ traffic jams and both s#ouses or5ing($ beyond
conventional ban5ing hours" 2C2C2 =an5$ for e?am#le$ introduced eight to eight ban5ing hours$
seven days of the ee5$ in major cities" Not to be outdone$ some of the other #rivate ban5s have
also done this too" :68C =an5 even has a.*)hour branch at Mumbais international air#ort" Several
ban5s are even bringing A4Ms to customer doorste#s" 2C2C2 =an5$ State =an5 of 2ndia and =an5
of 2ndia no have mobile A4Ms or vans that go along #articular route in a city and are stationed
at strategic locations for a fe hours every day" 4his saves the ban5 infrastructure costs since it
has one mobile A4M instead of multi#le stationary ones" 4hats not all" 3ven money is delivered to
customers at home" >ota5 Mahindra =an5$ a late entrant into #rivate ban5ing$ delivers cash at the
doorste#" A customer can ithdra a minimum of Rs B$+++ and u# to a ma?imum of Rs . la5h
and get the money at home" And$ mind you$ >ota5 is not alone" 4he list of ban5s offering a
similar service includes Citiban5$ Stanchart$ A=N Amro and :68C =an5" :68C =an5 brings even
foreign e?change$ hether travellers cheHues or cash$ to your doorste# courtesy its tie)u# ith
4ravele? 2ndia" All one has to do is call u# the branch or :68C =an5s #hone ban5ing number"
30
4he ban5s country head$ retail$ Neeraj Saroo#$ believes that continuous innovation ill alays
ma5e a difference$ ith customer needs changing day by day" T2nnovation ill never become less
im#ortant for us$U he says"
:68C =an5 has #ioneered other innovations" 4a5e #oint of sale &9;S( terminals$ a #rereHuisite in
any store or restaurant orth its name in the country" 3arlier this year$ it tied u# ith Reliance
2nfo comm to offer mobile 9;S terminals" Although this might sound a tad too fancy today$ there
could soon be a day hen you can si#e your card to #ay your cabby$ the #iJJa home delivery
boy and even for the groceries from the local 5irana store" =ut internet ban5ing and sho##ing have
been slo starters$ given the lo com#uter #enetration in the country but ban5s are going all out
to get the customer online" Not only is electronic fund transfer beteen ban5s across cities #ossible
through internet ban5ing today but ban5s also offer other features that benefit the customer" :68C
=an5$ for instance$ has an o#tion called !;ne %ie on its internet ban5ing site hich #rovides
customers a com#rehensive vie of their investments and fund movements" Customers can loo5 at
their accounts in si? different ban5s on one screen" 4hese include :68C =an5 accounts and demat
accounts$ 2C2C2 =an5$ Citiban5$ :S=C and Standard Chartered =an5 accounts$ a#art from details of
Citiban5 credit card dues and so on" =an5s are also innovating on the com#any and treasury
o#erations fronts" 2ncor#orate loans$ #lain loans are #assed" Mumbai inter)ban5 offered rate
&M2=;R()lin5ed and commercial #a#er)lin5ed interest rates on loans are common" M2=;R is a
reference rate arrived at every day at * #m by Reuters" 2t is the eighted average rate of call
money business transacted by .. institutions$ including ban5s$ #rimary dealers and financial
institutions" 4he State =an5 of 2ndia as the first to usher in M2=;R)lin5ed loans for to#
com#anies" Soon enough$ other ban5s folloed" 2C2C2 =an5 carried out the orlds first ever
securitiJation of a micro finance #ortfolio last year" 4he ban5 securitiJed Rs *".crore for =haratiya
Samruddhi 8inance <td for cro# #roduction" =an5s$ of course$ realiJe that innovation gives them
only a first mover advantage until their rivals catch u#" =ut then$ they can console themselves"
31
BANKING PRODUCTS
TRADITIONAL PRODUCTS
3ssentially$ your Mbric5 & mortarM ban5 offers you three ty#es of services7
/" Tr'n*'(t/on'. 7 Clearing your CheHue$ #aying your bills$ #rocessing direct #ayments"
32
." Cre+/t 7 9roviding you ith credit$ either through mortgages$ credit cards or basic loans"
0" In9e*tment* 7 9roviding you ith investment o#tions$ including advice"
=ut you ould sometimes have to ma5e an a##ointment$ or orse stand in a long Hueue"
3lectronic delivery channels #rovide all these #lus moreV
THE NE& BANKING PRODUCTS
4he cost reduction of the ne channels together ith increasingly many #rocesses being automated
and com#uteriJed in the financial industry have let many ne ban5ing #roducts to emerge 7
/" !ree C)e;-e 7 ;nline ban5s no offer you free #ersonaliJed CheHue$ mailed to your home"
." !ree *to(0 tr'+/n6 7 8ierce com#etition among the ban5s has #rom#ted major #oerful
ban5s to offer free stoc5 trading"
0" !ree E.e(tron/( !-n+ Tr'n*,er* (E!T) 7 All online ban5s offer you the ability to
transfer money beteen accounts$ or even beteen ban5s for freeV
*" !ree on./ne 5/.. p'4ment 7 9ay your utility$ #hone$ credit card and other bills electronically
ithout standing in a Hueue"
B" E:port ,/n'n(/'. +'t' 7 ;ne of the forthcoming services$ es#ecially for the small or
medium siJed enter#rises &SM3s( ill be the transfer of their ban5 statements electronically to
their financial softare"
," In*t'nt mort6'6e 'ppro9'.* 7 ;nline a##lication to obtain mortgage loans ithin minutes
ill be among the ne?t set of services"
C" In*t'nt (re+/t ('r+ 'pp./('t/on* 7 A##lying for credit cards online to get a decision
ithin minutes"
D" B-4 CD* on./ne 7 Not the music variety$ but the Certificates of 6e#osit &C6(" Soon it
ill even be #ossible to #rice the rate of interest you ould #refer on your C6"
33
E" Re,er to p'*t tr'n*'(t/on* : ;nline ban5s allo you to refer to #ast transactions
&committed hether online or offline($ even u# to many months online"
/+" !ree /nter'(t/9e )e.p 7 ;nline ban5s can #rovide resources to hel# you #lan a budget$ buy
a ne home and many other financial decisions"
//" Yo-r o8n ,/n'n(/'. (omm-n/t4 : =an5s offering bro5erage services ill #rovide their
customers to contact li5e)minded others" 3?changing gossi# can be #rofitableV
BANKING SYSTEMS !OR ELECTRONIC DELIVERY
3ver since com#uters are manufactured mainstream$ ban5s have been using them for their core
transaction #rocessing needs" 4he #ractice as to run batch transactions overnight and use the
com#uting #oer for real)time transaction reHuests daytime" Aside from ban5s on batches of
transactions$ all the demand for transactions ere received through ban5 branches" <ately tough$ this
34
com#uting ca#acity is being shared by the alternative channels of the ban5$ all of hich are
electronic and hence can be consolidated to use a centraliJed common 5'(0#en+"
4hese reHuests for transactions are collected in various forms and a so called m/++.e8're became
im#erative to translate the reHuest into a form that the transaction engine ould understand"
4o com#lete the #icture$ the user interfaces that the customers interfere ith to #lace their reHuests$
together ith interfaces that call center agents use$ constitute the ,ront#en+" A second #ers#ective to
com#rehend the three)tier architecture is the business a##roach 7
T4he consum#tion of a financial #roduct$ is initiated by a business encounter$ hich results in a
number of business transactions$ set by the business rulesU"
B-*/ne** en(o-nter* are events in hich the customer comes in contact ith the delivery channel
&e"g"$ al5ing u# to an A4M(" A single business encounter could result in multi#le business
transactions" 2n the A4M e?am#le$ a funds transfer and a ithdraal ould be to business
transaction in one business encounter"
B-*/ne** r-.e* that define the functional ca#ability of the channel are #rograms that define the
#artici#ants and the business #rocesses used to e?ecute a #articular transaction" 8or e?am#le$ if a
customer ma5es a transfer funds reHuest$ the business rule defines hat a transfer is and ho the
system must chec5 the e?isting balance against the Huantity of the transfer before subtracting the
amount and relocating it"
B-*/ne** tr'n*'(t/on* are the individual ban5ing transactions that com#rise a business function
fulfilled by a number of com#uter transactions" An A4M funds transfer is one business transaction
that reHuires five se#arate com#uter transactions))92N authentication$ balance verification$ debit$
credit and customer recei#t"
4he technical reHuirements for this three)tier architecture can be listed as follos 7
35
/" Pro9/+/n6 ' Ro5-*t 'n+ S('.'5.e Ar()/te(t-re 7 4he successful infrastructure in the
ne ban5ing environment ill need to #rovide a highly robust and scalable architecture$ ith
the ability to #rovide at least ,)fold groth in the short term"
." A5*or5/n6 S-++en C)'n6e : 24 infrastructures must have the ability to absorb additional
significant groth from mergers and acHuisitions"
0" Emp)'*/</n6 Spee+ 'n+ A9'/.'5/./t4 724 infrastructures must be able to offer a res#onse
time of less than three seconds as seen from the customer$ decreasing to less than one second
by the end of the decade" ;verall customer availability ill be EE"B #ercent$ increasing to EE"E
#ercent by the end of the decade"
*" S)/,t/n6 !o(-* 76irectors must shift their focus from branch systems to virtual systems$ and
build a single real)time customer)related vie of data across the entire ban5"
!RONT#END AND PRESENTATION
4he front end$ otherise 5non as the user interface$ is the core of the user e?#erience$ as it is
hat customers use to authenticate themselves and initiate their orders for financial #roducts" 4he
first of one of the electronic front)ends as the A4M" 4he latest ones are internet and 4% ban5ing"
8or the tele#hony channel$ the real front)end is the tele#hony handset$ the 2%R and the live call)
center agent"
A #o#ular #aradigm for the ban5s is to use the same #resentation at all their front)ends but ith
minor ada#tations" Assume that the call center agents use the same :4M< interface as the internet
customers use but ith additional ca#abilities or that the 4% ban5 is the lo resolution gra#hics
version of the same eb #age or the N4 com#uter in the A4M runs 'indos o#erating system
and a #ublicly available broser ith a disguise"
36
4he unified :4M< front)end solution gains its #o#ularity by the fact that each additional #roduct
ould be reflected to all the channels at the same time" 2n cases here the ban5 #refers to
develo# different sets of #roducts to be delivered from each channel$ it can still 5ee# some of
them common" A ell)5non #ractice is to #rovide both the call)center agents and the internet
customers ith the same :4M< #resentation #ages"
Among the electronic channels internet is the one hich #rovides the ban5 ith at least three main
technology models for develo#ing front ends7
/" C./ent#*/+e 5ro8*er '((e** to t)e &e5 *er9er7 4his o#tion is a sim#le 'eb site model$
hereby the financial institution builds a 'eb site that is su##orted either in)house or through
an outsourcer" Consumers sim#ly log onto the 'eb site and navigate through the content and
the transaction services ith a sim#le 'eb broser$ such as Netsca#e Navigator or Microsoft
2nternet 3?#lorer$ resident on their 9C"
." C./ent#*/+e t)/n (./ent '((e** to t)e &e5 *er9er7 4his model allos customers to
donload a thin client softare #roduct to their hard drive to access the 'eb site and store
data locally" 4he thin client softare resident on the consumers 9C has buttons corres#onding
to 2nternet functions$ such as R#ay billsR or Rchec5 accounts"R 'hen customers reHuest a
transaction that reHuires u#dated information$ the thin client softare launches Navigator or MS
2nternet 3?#lorer from the des5to#$ hich brings them to the 'eb site of the institution to
e?ecute transactions" 4he thin client softare is branded by the ban5$ so users e?#eriences are
consistent hether they are connected to the ban5s 'eb site or sim#ly loo5ing at account data
in an offline mode"
0" C./ent#*/+e t)/(0 (./ent '((e** to t)e &e5 *er9er: 4his model is used to su##ort
access ith #ersonal financial management &98M( #roducts" 98Ms are commonly used #roducts
in USA" Major vendors are Guic5en and MS Money" As ith the thin client model$ the thic5
37
client can be branded to the ban5 site in the transaction)oriented sections and can launch
Navigator or 3?#lorer to allo the customer to access the 'eb site and donload information
into the 98M"
2t is im#ortant to note that these models are not mutually e?clusive of each other" Many financial
institutions that su##ort 98M access to their 2nternet financial services functions also su##ort a
broser)based access method"
MIDDLE&ARE AND MESSAGING
4he second technology com#onent in the three)tier architecture is the middleare$ in other ords
the transaction #latform" 2n general$ it serves to main functions7
1. 6efinition of the functional ca#abilities of the channel"
2. 6efinition of the interfaces$ or integration$ beteen the front)end a##lications and the bac5)end
#rocessors$ &be them core #rocessing systems$ remittance #rocessors$ #ayment #rocessors$
#resentment aggregators or #roduct s#ecific a##lications(
4he middleare softare$ hich acts as an a##lication intermediator$ enables communication
beteen dis#arate a##lications$ beteen an a##lication and a database$ or beteen dis#arate
databases" Middleare facilitates the communication by receiving information in the language or
communication method of one a##lication and translating it into something understandable by the
other"
3ach a##lication can be controlled by a set of commands called A##lication 9rogramming 2nterface
&A92(" 4he A92 of an a##lication can be used to integrated it ith other a##lications either directly
&the ay that 9oer9oint gra#hs can be #asted into a Microsoft 'ord document($ or by the
middleare" A92s can be bought from the vendor of the a##lication or an already #urchased A92
of another a##lication can be used if the vendors of the dis#arate a##lications are in #artnershi#
and have agreed to share A92s to facilitate communication beteen their a##lications"
38
2t must be considered that the ban5ing environment consists of many a##lications and the
middleare can be overloaded ith softare code to mani#ulate each of these by using se#arate
A92s" 8ortunately$ a basic trend in the com#uter industry is to use messages beteen a##lications
that ould trigger right events in the a##lication to fulfill the desired command" =eing a strong
alternative to direct commanding ith A92s$ messaging standards can successfully integrate
a##lications that are develo#ed by se#arate vendors" Messaging 2ntegration through a common
messaging standard essentially means that the a##lications use the same messaging #rotocol to
interface ith each other and #ass information and reHuests bac5 and forth" 4he #rotocol defines
the method of engagement and transfer of information beteen #artici#ants on a netor5" An
e?am#le of a financial services system that interfaces on the #rotocol level is the use of the
standard 2S; DBD* Automated 4eller Machine netor5 standard for integration ith ban5 core
#rocessing systems" Another commonly used middleare #roduct in the ban5ing industry is the 2=M
MGSeries messaging #latform"
2n the recent years a number of reasons have multi#lied the functions reHuired from the
middleare7
/" 2ncreasing number of electronic delivery channels
." 2ncreasing number of financial #roducts
0" 8reHuent mergers and acHuisitions in the financial industry
8inancial institutions ho use additional A92s$ every time a ne #roduct had to be integrated or
those ho distributed their a##lications along remote nodes of the enter#rise using @ava$ have
started to suffer from the Ts#aghetti syndromeU" 4he Huestion as ho to bring together all the
different digital information flos and hold them there" 4he natural anser as to evolve the
middleare into a fat #i#e here messages from all the a##lications ere carried to and from the
bac5)end seamlessly"
39
BACK#END AND THE BUSINESS RULES
8or a financial institution to allo a #articular transaction to be e?ecuted$ such as bill #ayment or
a stoc5 trade$ there must be a business rule associated ith it to define it" 4raditional ban5s that
decide to ma5e use of electronic delivery channels can do the develo#ments in)house and they can
leverage their e?isting business rules" 4here are to main ays of architecturally structuring the
location of the business rules7
/" B-*/ne** r-.e* '((e**e+ o,, t)e 5'(0 en+: 'ith this method$ for e?am#le the 2nternet
transactional business rules are maintained on the bac5 end and accessed$ hen needed$ by the
transactional #latform &middleare( through defined interfaces" 4his method is most common
ith an in)house develo#ed system here an object reHuest bro5er or terminal emulation #roduct
is integrated to ma5e calls to engage the business rules on the bac5 end"
." B-*/ne** r-.e* m'/nt'/ne+ /n t)e m/++.e t/er: 'ith this method$ for e?am#le the 2nternet
transactional business rules are maintained on the middle tier ithin the transaction #latform"
4his is most common ith #ac5aged a##lication vendors or outsourcers in hich the vendor has
defined the 2nternet financial services functions ithin its a##lication and integrates to the bac5
end only to retrieve information and to u#date accounts"
'hether business rules are considered to be a #art of it or not$ bac5)end surely reHuires a #otent
com#uting #oer" 4his #oer is mainly consumed by u#dating tables of databases ith an
enormous freHuency" 4he total aggregated transaction reHuests and the accom#anying data is
constantly fed to the bac5)end com#uting facilities to be e?ecuted real time or batch" 8or such
com#uters used as transacting engines$ it is clear that 2n#utNout#ut s#eed is more im#erative than
the calculation #oer"
40
2t is e?#ected that in short term the reHuired #oer for the bac5)end ill increase significantly
because of to major accelerators7
/" More (omp-ter tr'n*'(t/on* per 5-*/ne** tr'n*'(t/on 7 Convenience for the customer means
more com#le? business transactions$ hich result in more com#uter transactions to com#lete a
single business encounter
." More (omp-te po8er per (omp-ter tr'n*'(t/on 7 3ach com#uter transaction reHuires more
com#ute #oer because of the migration from batch to on)line transactions$ richer functional
design to im#rove ease of use$ additional security measures such as encry#tion$ and use of
advanced #rogramming techniHues such as object)oriented design"
Accom#anying the com#utational concentration the bac5)end invariably includes three facilities 7
1. Stor'6e 7 An array of high s#eed dis5 drives must be attached to augment the memory in the
transacting com#uting system"
2. B'(0#-p 7 4he state and the recent data #rocessed by the transacting system must be bac5ed)u#
on digital ta#es ith freHuent enough intervals" 2nstitutions of middle or large siJe$ usually
chose to install automated ta#e libraries hich utiliJe robotic arms and can be
managedNcontrolled by the same system that controls the transactions"
0" D/*'*ter Re(o9er4 7 A major core com#etence of ban5s is the reliability" 4his customer
e?#ectation enforces ban5s to ta5e #recautions against all 5inds of disasters including natural
catastro#hes" Common #ractice is to maintain or outsource the re#lica of the hole bac5)end
system together ith the bac5ed)u# ta#es" 2=M$ hose bac5)end systems are idely used in the
ban5ing orld$ #rovides this service for all the ban5s that have de#loyed its #roducts and ould
chose to outsource the disaster recovery #recautions"
41
SECURITY
Security is the most im#ortant core com#etence of the financial institutions" 4hese institutions are
su##osed to be the ones that ould manage the ris5 for #eo#le ho ould li5e to invest or
de#osit their money" 'ith the acce#tance of electronic mediums to transfer the location of currency$
security started to mean much more than just strong building constructions and safe)de#osit bo?es"
3ach electronic delivery channel comes ith its on concerns of security" Since most segments of
these channels are used to transmit digital data$ the 5inds of attac5s are rather technical then by
forceV 'hen considering the security of the channels to com#onents must be identified 7
1) T)e Net8or0 : 4he attac5s on the netor5 is generally in the form of ta##ing)in and stealing
data" 4he #recaution is to use strong enough encry#tion of the data as it is being transferred
over the netor5"
2) T)e !'(/./t4 : 4he attac5s on the ban5ing facility could be either to disable its functions
&6enial of Service 1 6oS attac5s( or to login as an intruder for committing transactions or to
s#reading viruses to corru#t" 4he #recaution is to use firealls at the #oint here the facility is
connected to the netor5"
Aside from their core businesses$ ban5s and bro5erages have hel#ed lead the e)business and e)
commerce charges over the #ast fe years" 4his groth has also left them more vulnerable to a
broader range of threats and uncertainties" ConseHuently$ s#ending on 24 security in financial
services has ballooned in recent years" 26C re#orts that$ orldide security)vendor revenues in the
financeNinsurance sector gre from ."* fold every year for the last B" :S=C Securities$ the
bro5erage unit of :S=C :oldings 9<C of <ondon$ has de#loyed a #roduct called SurfinGate at a
cost of around Q/++ #er user"
42
ENCRYPTION
3ncry#tion is the #rocess of converting information into a more secure format for transmission" 2n
other ords the #lain te?t is converted to scrambled code hile being transmitted$ and then
decry#ted bac5 to #lain te?t at the receiving end of the transmission" 2t is com#arable to riting a
letter$ converting it to code$ #utting it in an envelo#e and mailing it ith the reci#ient descrambling
the code"
8or encry#tion to or5 #ro#erly$ both the sender and receiver have to 5no hat rule$ or ci#her$
as used to transform the original information into its coded form$ often called ci#her te?t" A
sim#le ci#her might be to shift all characters in a message by an arbitrary number of characters$
say B" As long as the receiver 5nos thatMs hat the sender did to the message$ the receiver ill
subtract B characters from the message received to e?tract the original te?t" &2t is believed that this
#articular ty#e of ci#her as used by @ulius Caesar to communicate ith his commanders"(
Currently$ there are . levels of encry#tion generally available in eb brosers7 *+)bit encry#tion$
and /.D)bit encry#tion" Most commonly available internet brosers use /.D)bit encry#tion" :andheld
devices or smartcards usually #rovide the eHuivalents of *+)bit encry#tion" 4he difference beteen
these to ty#es of encry#tion is one of ca#ability" /.D)bit encry#tion is e?#onentially more
#oerful than *+)bit encry#tion"
4his encry#ted channel beteen the customer and the institution is established just above the
#hysical layer of the netor5 and hence called Secure Soc5et layer &SS<("
4here are 0 ays to determine if the site on hich youMre ban5ing is secure 7
/" Go to your ban5Ms home#age and log into your account by in#utting your user)id and #assord"
Notice that the lettering in the UR< address ill change from Rhtt#R to Rhtt#s"R 4he e?tra RsR
stands for Rsecurity$R and lets you 5no that the #age is indeed secure"
43
." At the bottom left corner of your screen$ a #adloc5 icon ill a##ear"
0" -ou may also find a gold seal somehere on the site that reads$ R%eriSign Secure SiteR
%eriSign is a leading #rovider of 2nternet trust services$ and its insignia is confirmation that
your ban5 is certified as a secure domain"
!IRE&ALLS
6os attac5s are just one of many invasion threats that ban5s and bro5erages face" 4o counteract
them$ institutions most commonly use firealls$ intrusion detectors li5e anti)virus softare &also
called malicious code detectors( and vulnerability scanners"
8irealls are installed beteen the institutionMs connection ith the 2nternet and its on netor5s"
4hey are configured either by the user or the fireall itself to filter traffic #assing into or out of
the internal netor5s" 4hey can$ for e?am#le$ #revent #rograms from being donloaded off the
2nternet or bloc5 some 5inds of de#arting email"
2ntrusion detectors identify and deactivate Rmalicious codes$R or unelcome online guests such as
viruses$ so)called 4rojan :orses$ and @ava a##lets and ActiveA controls" 4rojan :orses enter systems
because they are in the form of something that firealls have been #re)configured to admit)
generally an email message" @ava a##lets and MicrosoftMs com#eting version$ ActiveA Controls$
are 5non as Rmobile codeR because they are automatically donloaded off the 2nternet and
e?ecuted along ith the a##lication they are attached to" 4his ma5es them difficult to be filtered
out of a netor5"
2n the case of ban5s and bro5erages additional security means may also be necessary li5e firealls
enhanced ith intrusion)detection softare" 2ntegration of such additional softare ty#ically occurs at
the fireall level" Symantec recently develo#ed Norton Antivirus for 8irealls /"B$ hich can be
installed on 2=M) and C%9)com#liant firealls" Com#uter Associates mar5ets firealls integrated
44
ith content filters and malicious)code scanners that can be instantly u#graded hen ne invaders
a##ear"
Unfortunately$ most malicious)code detectors can only eliminate intruders that are already 5non"
4hatMs a #roblem because a ne fast)s#reading code li5e that based on @ava a##lets and ActiveA
controls can do enormous damage before RantibodiesR can be generated"
A relatively ne line of #roducts against mobile malicious)code$ resides on the fireall and #rotects
netor5s from all mobile code" 2t scans incoming traffic for mobile code$ isolates it and tests the
a##lication it ill run in a #re)configured Rsandbo?"R 2f the a##lication is outside #re)set #arameters$
the entry is bloc5ed"
4his ould #revent$ for e?am#le$ a ban5Ms netor5 from being breached by a brand)ne #iece of
malicious mobile code$ such as last yearMs Melissa email virus" Such #revention could save a ban5
both from having its on and customersM data com#romised and from incurring dontime e?#enses"
AUTHENTICATION
More and more com#anies are conducting high)value transactions ith their ban5s and bro5erages
over the 2nternet$ as ell as conducting business ith other com#anies through their financial
services #roviders online" 4hat has #ushed ban5s and bro5erages to invest more heavily than other
industries in cutting)edge access contro technologies" Most forms of netor5 access control involve
some form of Ruser)authenticationR technologies" 4hese allo both the sender and reci#ient of online
transactions to verify themselves and each other$ most commonly by attaching a Rdigital certificateR
or some other form of digital signature$ hich could even be an electronic finger#rint"
4he necessary infrastructure for user authentication$ 5non as #ublic 5ey infrastructure$ or 9>2$
consists of to security R5eys"R ;ne is the #ublic 5ey &the digital certificate($ hich is either
donloaded from a broser or called u# from a hard drive and attached to the transaction
45
command or document" =y ratifying the sender of the message as the subject of the reHuest$ it acts
as a 5ind of digital driverMs license that identifies the sender of a transaction and #rovides certain
details about him"
4he other com#onent is the #rivate 5ey$ also called the RSA 5ey$ after RSA Security 2nc"$ the
com#any hose subsidiary is the mar5et leader in digital certificate su##ly" 4he #rivate 5ey sits on
the hard drive of a com#uter and$ hen activated by a user name and #assord$ unloc5s the userMs
9>2 access"
;n the other hand$ some ban5ers and security analysts #oint out that the 9>2)digital certificate
system has security ea5nesses" 4hey say the #rivate 5ey can still be reached by a clever hac5er
over the 2nternet$ so sealing entry to the #rivate 5ey ith RjustR a user name and #assord is no
longer considered secure enough" Security #roviders have develo#ed a variety of solutions to this
#roblem$ collectively 5non as Re?tended user)authentication"R 3ssentially$ these technologies$ hich
can be hardare) or softare)based$ reHuire the user to enter some form of secured identification to
access the #assord or the #rivate 5ey"
4o5ens$ also called R5eys to the 5ey$R are e?ternal hardare devices #lugged into the com#uter"
4hey generate a code that the user must enter into the system to unloc5 access to their #rivate
5ey" 4he device adds to security by changing this code each time it is used"
4heoretically$ to establish com#lete authentication three means are enough 7
/" Something the user 5nos
." Something the user has
0" Something the user is
4he third means is the study of the science called biometrics" An e?am#le a##lication of biometrics
is an e?ternal device$ such as a smart card$ that carries an authentication biometrics$ such as a
46
finger#rint" 8inger#rint imaging$ li5e other biometrics such as iris)scanning and signature)reading$
converts the different recurring #atterns in uniHue human #hysical #ro#erties into a digital code to
be stored$ using s#ecial algorithms"
BANKING ORGANI=ATION !OR ELECTRONIC DELIVERY
4he functional a##roach challenges ban5ers to determine ho they can most efficiently #erform the
various financial functions their customers ant" 2n todays financial mar5ets$ here currency can
find many ays of multi#lying itself or be transferred$ hat is the com#arative advantage of ban5sS
47
Another ay of addressing this Huestion is to thin5 about hat functions can a ban5 #rofitably
outsource" Money mar5et mutual funds$ for e?am#le$ outsource some ris5 management" =y engaging
in loan sales and securitiJation$ a ban5ing firm can outsource the transfer and #ooling functions$
but 5ee# the credit evaluation and monitoring &for e?am#le$ ris5 management and incentive(
functions"
2n functional thin5ing$ the initial tendency is to assume that everything can get outsourced$ bro5en
u#$ and reduced to a commodity" 4he main argument for outsourcing is that the ban5Ms staff needs
all the hel# it can get in dealing ith ne technologies" 4he counter argument is that outsourcing
reduces the ban5Ms control over its services" A Rbest)of)both)orldsR solution brings in the e?#erts at
the start of a #rogram" 4hen$ hen staffers get the hang of the ne technology$ they can ta5e
over"
Clearly for ta5ing any of the sides$ to identify the costs is the main #arameter" ;ne obstacle for
evaluating costs of engagements is that most ban5s have established their utiliJation of electronic
channels by a joint effort of their various e?isting de#artments" 4his as a short term solution as
the channels ere evolving fast" :aving no centraliJed o#eration$ #revents the ban5s from scaling
u# their resources for increased demand" 2t also ma5es it hard for them to identify the cost of the
endeavor and the o#eration"
4his is the reason hy many financial com#anies are restructuring at the moment to establish their
electronic delivery channels ith related functions$ as se#arate business units and cost centers"
UPGRADATION IN BANKING ON TECHNOLOGY
=an5s are li5ely to 5ee# their leading role as fast technology ado#ters in the years to come"
48
C-*tomer re.'t/on*)/p m'n'6ement # CRM
'ithin the ne?t fe years$ you can e?#ect call centers in the finance and ban5ing industry to
continue automating their customer service #rocedures" Most ban5s$ no have an 2%R system hich
has been evolving many years and could handle u#to D+O of the incoming traffic" Although they
ill rely more on 2%R systems and on e)mail than in the #ast$ there is no great danger of feer
job o##ortunities or layoffs for agents" 4echnical advances arent intended to ma5e live #hone
service obsolete$ but rather to enable agents to or5 more efficiently" Customers dont alays mind
or5ing ith an 2%R systems menu)driven format or aiting for an e)mail res#onse for a sim#le
matter li5e reHuesting an account balance$ and they are more li5ely to s#ea5 to agents only about
more com#le? transactions"
S#eech recognition is also a mature technology no$ that the call centers can readily ma5e use of"
2t is available for many languages" 2n fact the advancements in s#eech recognition is mostly on
#orting the e?isting systems on other languages"
;ther features of s#eech technology currently being develo#ed are 7
1. Vo/(e re(o6n/t/on: %ocal models of customers can be collected and chec5ed in a manner hich
ould be trans#arent to the user" 3s#ecially for the tele#hony channel$ voice recognition can be
a very effective au?iliary authentication method"
2. N't-r'. 'n+ (ont/n-o-* *pee() re(o6n/t/on: Regarded as the ultimate achievement in the
s#eech technology$ com#uter recognition of human language ould reHuire advancements in the
recognition of s#eech in continuous form" 4his ould give ay to more natural interactions ith
the customer" ;n the other hand$ as the natural language understanding technology evolves not
only tele#hony agents ould benefit$ but also 3mail automation facilities ould be greatly
im#roved" Natural language #rocessing abilities are considered to be great ste#s in evolving call
centers into contact centers"
49
V/rt-'. 5'n0*
Generally$ the future ill rely more on #eo#le and technology$ and less on #hysical location" 9eo#le
ill #hone or e)mail an e?#ert rather than tal5 face)to)face ith a local teller$ es#ecially in areas
here e?#ertise is vital7 life insurance$ financial #lanning$ and mutual funds" =ut 2nternet)only
subsidiaries first must overcome many hurdles" :aving conscious customers is one thingL
establishing RcoreR online relationshi#s is Huite another" Cyber 6ialogue$ an 2nternet database
mar5eting com#any$ estimates that almost a third of the E"* million #eo#le ho have signed u#
for online ban5ing have discontinued the service and says only 0BO of the defectors are inclined
to try it again" 4he #roblem as overly com#licated technology and inadeHuate levels of customer
service" 2n the United >ingdom$ for e?am#le$ to established #layers have set u# 2nternet
com#anies ith catchy names 3gg from 9rudential =an5ing 9<C$ and Smile from Co)o#erative
=an5" 4hey are com#eting fiercely for customers$ against 8irst 6irect and %irgin 6irect$ both of
hich started out by conducting transactions over the tele#hone and no have added 2nternet
access" 3gg has managed to ma5e a bigger im#ression on the U">" mar5et than =an5 ;neMs
'ings#an has in the United States" 'ings#an has attracted about B+$+++ customers over about si?
months" 3gg$ ith more than Q/. billion of de#osits and ,++$+++ customers$ celebrated its first
anniversary in ;ctober/EEE" 4hese numbers ma5e 3gg si? times bigger than 4eleban5$ a U"S"
branchless ban5 that has been on the 2nternet for four years and has Q. billion of de#osits and
/++$+++ customers" 3gg has set itself a target of to million 2nternet customers by .++*"
2n USA$ eb users can gain access to these services at some ell)5non sites such as CN=C"com
and Ameritrade"com$ but the bul5 of the data)gathering$ record)5ee#ing$ and security functions
belong to one of to com#anies 7%ertical;ne Cor#"&a subsidiary of ban5 adviser S/( and -odlee
2nc" =oth data #rocessors$ or MMaggregators$MM are little more than a year old" Unli5e ban5s and
bro5ers$ they are unregulated and may have no res#onsibility for fraud" 4he to are Huietly
50
amassing huge amounts of valuable data on consumersM buying$ borroing$ #ayment$ and investment
habits"
:ereMs ho the aggregation #rocess or5s 7 A customer signs u# for the finance)managing service
at a MM#artnerMM 'eb site such as CN=C"com" 2n setting u# the account$ customers must ty#e in their
account numbers and #assords))information that goes directly to %ertical;ne or -odlee" 3very
night$ their com#uters go online to 'eb sites run by the ban5s and bro5ers$ and log on ith the
customerMs name$ account number$ and #assord to retrieve information" 4his data)gathering #rocess
is 5non as MMscreen scra#ing"MM
4he account information is se#arated into names$ numbers$ and #assords" 2tMs then encoded and
stored in high)security databases that use #alm)scanners for access" Although together the com#anies
have several hundred em#loyees$ there are only si? &three e?ecutives at %ertical;ne and three at
-odlee( ho have com#lete access to the information" %ertical;ne and -odlee insist their security is
bullet#roof"
D't' m/n/n6
=an5s are also beginning to realiJe that they have a large amount of information about their
customers in their electronic data bases and are ma5ing an effort to consolidate this information
into data arehouses so that they can target certain customer segments for ne #roduct offerings
and not aste resources ma5ing the same #roduct offering to other segments that #robably ould
not be interested" 4he transmission of the #roduct offerings to the targeted consumer segments ill
become more electronic$ ith ban5s R#ushing outR the information over the A4M and #ersonal
com#uter netor5s" 9ersonaliJed messages ill a##ear on the com#uter or A4M screens hen the
targeted consumers access these netor5s for their routine ban5ing business" 2nformation
consolidation ill lead to cost reduction as ell" =an5s can use the information from de#osits to
better #rice and monitor loans" =ecause it is the intense information uniHueness that #revents
51
illiHuid loans$ such as small business loans$ from being customiJed and securitiJed$ this added
informational advantage is decisive"
Inte../6ent '6ent*
2ntelligent agents &2As(are softare a##lications ith s#ecific goals hich are delegated to them by
their user" 4heir other #ro#erties are being autonomous and communicative" ;nce their #ur#ose is
established and o#erational #arameters are set$ 2As have control over their on actions and do
their or5 in a self)#er#etuating$ self)monitoring fashion" 2As are reactive they can sense changes
in their environment and res#ond accordingly" 4hey can communicate ith each other and relevant
systems that constitute their surroundings" 4he general activity areas for 2As can be listed as
follos7
2As can s#eed the retrieval of customer related information by ra#idly searching multi#le data
sources$ ma5ing them es#ecially ell)suited for troubleshooting assistance or ad hoc Hueries"
4he result is fast and more effective customer service"
2As can boost 2nternet)based self)service effectiveness by sharing the e?#ertise RlearnedR during
interactions ith other customers" As a result$ customer searches gro continually more effective
and efficient over time" 2As can be used by organiJations to enhance their relationshi# ith
high)net)orth customers"
2As can assist in data)mining activities by searching tirelessly for trends in customer data$ even
if the data resides in multi#le data stores" As a result$ data relationshi#s can be discovered that
might otherise go unnoticed by human eyes"
B/ometr/(*
4raditionally ban5s have relied on very sim#le forms of identification such as #assords or #ersonal
identification numbers for ban5ing transactions" 4hese methods are inaccurate and #rovide an
52
o##ortunity for unauthoriJed individuals to access ban5ing accounts" :oever$ vendors are #roducing
ne devices that use biometrics technology for ban5ing security" Currently almost all ban5s are
investigating some form of biometrics for their alternative$ electronic delivery channels" 4his
technology$ though mature enough$ is not yet cost effective for the ban5s" :oever ith the ever
dro##ing #rices of silicon chi#s$ ithin a fe years various biometrics measures are e?#ected to be
common#lace in the ban5ing services"
T'5.e >ey 8unctions for =iometrics in Retail =an5ing 9roduct and Service 6istribution
CONCLUSION:
Certain 4echnological changes have im#roved the ban5ing sector tremendously"
9olicy ma5ers have made some notable changes li5e enhancing #ayments system$ integrating
regulations beteen commercial & Co)o#erative ban5s"
2t can be concluded that for better #erformance 2ndian ban5s need ne technology"
53
C'*e St-+/e*
In9e*tment In Te()no.o64 Y/e.+/n6 R/() D/9/+en+* To+'4
B'n0 Pro,/.e
3stablished in /EE*$ 2C2C2 =an5 is today the second largest ban5 in 2ndia and among the to# /B+
in the orld" 2n less than a decade$ the ban5 has become a universal ban5 offering a ell)
diversified #ortfolio of financial services" 2t currently has assets of over USQ CE billion and a
mar5et ca#italiJation of USQ E billion and services over /* million customers through a netor5 of
54
about EB+ branches$ 00++ A4MMs and a 0.++ seat call center &as of .++C(" 4he hallmar5 of this
e?#onential groth is 2C2C2 =an5s unavering focus on technology"
Ke4 B-*/ne** Dr/9er*
2C2C2 =an5 as set u# hen the #rocess of deregulation and liberaliJation had just begun in 2ndia
and the Reserve =an5 of 2ndia &2ndias central ban5( had #aved the ay for #rivate #layers in the
ban5ing sector$ hich at that time as dominated by state)oned and foreign ban5s" Serving the
majority of the countrys #o#ulace$ state oned ban5s had a large branch netor5$ ith minimal or
no automation and little focus on service" 8oreign ban5s$ on the other hand$ de#loyed high)end
technology$ had innovative #roduct offerings$ but had a very small branch netor5 that serviced
only cor#orateMs and individuals ith high net)orth" Sensing an unta##ed o##ortunity$ 2C2C2 =an5
decided to target 2ndias burgeoning middle class and cor#orateMs by offering a high level of
customer service and efficiency that rivaled the foreign ban5s$ on a much larger scale$ at a loer
cost" A crucial as#ect of this strategy as the em#hasis on technology" 2C2C2 =an5 #ositioned itself
as technology)savvy customer friendly ban5"
4o su##ort its technology focused strategy$ 2C2C2 =an5 needed a robust technology #latform that
ould hel# it achieve its business goals" After an intense evaluation of several global vendors$
2C2C2 =an5 identified 2nfosys as its technology #artner and selected 8inacle$ the universal ban5ing
solution from 2nfosys$ as its core ban5ing #latform" An o#en systems a##roach and lo 4C; &4otal
Cost of ;nershi#( ere some of the 5ey benefits 8inacle offered the ban5" Unli5e most ban5s of
that era$ 2C2C2 =an5 as automated from day one$ hen its first branch o#ened in the city of
Chennai" Some of the reasons cited by the ban5 for its decision to select 8inacle include 8inacles
future)#roof technology$ best)of)breed retail and cor#orate ban5ing features$ scalable architecture and
#roven im#lementation trac5 record"
So.-t/on O9er9/e8
;ne of the biggest challenges for 8inacle as ensuring straight through #rocessing &S49( of most
of the financial transactions" 'ith the 2C2C2 grou# having several com#anies under its umbrella$
8inacle needed to seamlessly integrate ith multi#le a##lications such as credit cards$ mutual funds$
bro5erage$ call center and data arehousing systems" Another 5ey challenge as managing
transaction volumes" 2C2C2 =an5 underent a #hase of organic and inorganic groth$ first by
acHuiring =an5 of Madura folloed by a reverse merger of the ban5 ith its #arent organiJation$
2C2C2 <imited" 4he scalable and o#en systems based architecture$ enabled 8inacle to successfully
55
manage the resultant increase in transaction levels from *++$+++ transactions a day in .+++ to
nearly ."/ million by .++B ith an associated groth in #ea5 volumes by B"B times" 'ith 8inacle$
the ban5 currently has the ability to #rocess +".C million cheHues #er day and manage C+++
concurrent users"
;ver the years$ the strategic #artnershi# beteen 2C2C2 =an5 and 2nfosys that started in /EE* has
gron stronger and the close collaboration has resulted in many innovations" 8or instance$ in /EEC$
it as the first ban5 in 2ndia to offer 2nternet ban5ing ith 8inacles e)ban5ing solution and
established itself as a leader in the 2nternet and eCommerce s#ace" 4he ban5 folloed it u# ith
offering several e)Commerce services li5e =ill 9ayments$ 8unds 4ransfers and Cor#orate =an5ing
over the net" 4he internet is a critical element of 2C2C2 =an5s aard inning multi)channel
strategy that is one of the main engines of groth for the ban5" =eteen .+++ and .++*$ the ban5
has been able to successfully move over C+ #ercent of routine ban5ing transactions from the branch
to the other delivery channels$ thus increasing overall efficiency" Currently$ only .B #ercent of all
transactions ta5e #lace through branches and CB #ercent through other delivery channels" 4his
reduction in routine transactions through the branch has enabled 2C2C2 =an5 to aggressively use its
branch netor5 as customer acHuisition units" ;n an average$ 2C2C2 =an5 adds 0++$+++ customers a
month$ hich is among the highest in the orld"
56
Re'p/n6 T)e Bene,/t*
A #oerful$ scalable and fle?ible technology #latform is essential for ban5s to manage groth and
com#ete successfully" And 8inacle #rovides just the right #latform to 2C2C2 =an5 thus fueling its
groth"
4he ban5 has successfully leveraged the #oer of 8inacle and has de#loyed the solution in the
areas of core ban5ing$ consumer e)ban5ing$ cor#orate e)ban5ing and CRM" 'ith 8inacle$ 2C2C2
=an5 has also gained the fle?ibility to easily develo# ne #roducts targeted at s#ecific segments
such as 2C2C2 =an5 -oung Stars) a #roduct targeting children$ 'omenMs Account addressing or5ing
omen and =an5Wcam#us targeting students"
2C2C2 =an5 is today recogniJed as a clear leader in the region and has on numerous accolades
orldide for its technology)driven initiatives" 2n .++0$ the ban5 received the best multi)channel
strategy aard from 4he =an5er magaJine and this year it as rated as the .nd best retail ban5 in
Asia by 4he Asian =an5er @ournal" 4he ban5 has effectively used technology as a strategic
differentiator$ thus not only redefining the rules of ban5ing in 2ndia$ but also shocasing ho
technology can hel# in transforming a ban5s business"
57
V/e8 !rom t)e Top
T;ur objective of creating a universal ban5 #roviding end to end financial services clearly reHuired
solutions hich ere based on ne generation technology$ offered end to end functionality and
ere highly fle?ible and scalable" 8inacle offered all this and much more"U
C)'n+' Ko())'r
3?ecutive 6irector$ 2C2C2 =an5
58
>UESTIONNAIRE
?" &)'t Are t)e Bene,/t* o, Mo5/.e B'n0/n6@
An* 7 4here are a number of benefits of mobile ban5ing that customers e?#erience$ namely
convenience and time saved" Customers ho can com#lete their ban5ing tas5s by sim#ly using a
cell #hone or smart#hone do not need to ma5e a s#ecial tri# to the ban5$ #lace a #hone call$ or
even get on their com#uter to log into a ebsite" 2n addition$ another one of the main benefits of
mobile ban5ing is that it hel#s customers stay on to# of their finances$ giving them the ability to
chec5 balances or receive alerts based on account activity"
1" &HAT IS RTGS SYSTEM@
Ans: 4he acronym RR4GSR stands for Real 4ime Gross Settlement" R4GS system is a funds
transfer mechanism here transfer of money ta5es #lace from one ban5 to another on a Rreal timeR
and on RgrossR basis" 4his is the fastest #ossible money transfer system through the ban5ing
channel" Settlement in Rreal timeR means #ayment transaction is not subjected to any aiting #eriod"
4he transactions are settled as soon as they are #rocessed" RGross settlementR means the transaction
is settled on one to one basis ithout bunching ith any other transaction" Considering that money
transfer ta5es #lace in the boo5s of the Reserve =an5 of 2ndia $ the #ayment is ta5en as final and
irrevocable"
A" Ho8 're t)e C-*tomer* Prote(te+ ,rom !r'-+* /n C'n'r' B'n0
Internet B'n0/n6@
An*: =y CanSecure
CanSecure is the ne?t generation 2nternet =an5ing security solution that is being offered by Canara
=an5 to its all retail and cor#orate 2nternet ban5ing users" CanSecure is intended to facilitate you
ith a secure 2nternet ban5ing e?#erience"
CanSecure 5ee#s you safe from a variety of 2nternet ban5ing threats" 2t is easy to install and
activate and once activated #rovides all)round #rotection hen you #erform 2nternet ban5ing"
CanSecure #rovides security against usernameN #assord theft$ #hishing attac5s and against malicious
59
softare on the machine" CanSure #rovides the u#graded level of secure 2nternet ban5ing
environment$ as com#ared to that #rovided by the non)CanSecure based 2nternet ban5ing"
B" &)'t /* Net#B'n0/n6@
An* 7 Net =an5ing is the 2nternet =an5ing Service #rovided by Canara =an5 for the customers of
its Core =an5ing &C=S( =ranches" Net)=an5ing is offered to both Retail as ell as Cor#orate
customers" 'hile Net)=an5ing Retail services the Retail Customers$ Net)=an5ing Cor#orate is
tailored to suit the needs of Cor#orate Customers" Net)=an5ing is the most comfortable channel for
you to e?#erience round the cloc5 ban5ing from any #art of the orld"
3" Am I e./6/5.e ,or Net B'n0/n6@
An*L 2f you are maintaining your accounts ith any of our C=S =ranches$ you are eligible to
enroll for Net =an5ing 8acility" -ou ill have to a##ly for Net =an5ing by submitting the
a##lication at the branch"
C" &)'t /* SMS '.ert Ser9/(e @
An*: SMS refers to Short Messaging System" 2n our =an5 e send messages to the customers ho
o#t for alert service$ informing them the balance in their account at #eriodical intervals and also
henever any transaction ha##ens in the account &if the amount is more than Rs B+++N)(
60
BIBLIOGRAPHY
Book: - Technology in Banking by R K Uppal
http://books.google.co.in/books?id=h2X-
Dk!k"#$%p&intsec='&ontco!e&%d=technology(in(banking%hl=en
%sa=X%ei=)*opUs+,-#X*l./01#23.3%&edi&*esc=y4!=onepage%
=technology526in526banking%'='alse
http://en.7ikipedia.o&g/7iki/Banking*in*"ndia
http://shodhganga.in8ibnet.ac.in/bitst&ea9/:6;6)/)<;)/:#/:#*chapt
e&526;.pd'
http://777.=enith&esea&ch.o&g.in/i9ages/sto&ies/pd'/26::/oct/=i,9&/:
6*!ol-:*iss>e-;*526a&chna526sha&9a
5269obile*banking*as*technology*t&ans'e&*,o>&nal*pape&.pd'
http://777.slidesha&e.net/&a,chalas/inte&net-bankingo'sbi
http://777.b>lentsen!e&.co9/yeditepe/doc/elect&onicbanking526eb
526o'526's526:1.doc
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