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Bonfring International Journal of Industrial Engineering and Management Science, Vol. 9, No.

1, March 2019 1

Novelties and Best Practices of On-line Banking

Sector by Using Mobile Apps for Potential
Customer to Avoid Risk Factors
E. Kalaivani and Dr.A. Lakshmi

Abstract--- Online banking (Internet banking) has arises c) Electronic Clearing System (ECS) – Individuals or
as one of the most profitable e-commerce applications over corporate can easily make payments from their
the last decade. This paper mainly focused the implementation occupying place to various purpose like telephone
of innovational internet banking and also it focused the risk bills, electricity bills, insurance premier, credit card
which involved while using the internet banking. In this paper payments and loan repayments, etc.
we discussed the types of risk involved, its various uses and its d) Immediate Payment Service (IMPS) - it offers
implementations. Banking sectors to identify that they have to interbank electronic fund transfer service through
persistently to make the innovate and update the datasets to mobile phones. IMPS is an tool to transfer money
retain their demanding and sensitive customers and to provide quickly within banks across India through mobile,
convenient, reliable, and beneficial services. It also faces the internet and ATM which is not only safe but save time
risk involved in innovative internet banking services. On-line & money both in financial and non-financial
banking system has always been extremely statistics data with perspectives.
rigorous activity that trusts on Information and In order to face the competitive world, many banks might
Communication Technology (ICT) to acquire, process, and rethink their IT strategies through the emergence of Internet
deliver the information to all relevant users. The emergence of banking which helps the customers needs & demand in
Internet banking which helps the customer’s needs & demand banking services.
in banking services.
For business, many opportunities and threats arises by
Keywords--- Internet Banking Services, Innovation rapid growth of the Internet.
Practices, Type of Services, Risk Factors. Internet is the best path to become a full-fledged delivery
and distribution channel among the consumer-oriented
I. INTRODUCTION TO INTERNET BANKING applications riding at the forefront of this evolution are
electronic financial products and services.
I NTERNET banking plays a vital role in electronic payment
system, it can be called by various terms such as online
banking, e-banking or virtual banking that enables bank
Fast growing expectations of customers & business
customers today demand payment methods that are as follows:
customers and various financial institution to conduct a range
of financial transactions through the financial institution's • Conform to the highest standards
website. There are different types of online financial • Don’t have identification methods.
transactions are: • Are complexed within hours.
• Use devices that exist for other reasons.
a) National Electronic Fund Transfer (NEFT) - is a • Are 100% accurate & reliasble.
nation-wide payment system facilitating one-to-one
• Are widely accepted by businesses.
funds transfer. By using this Scheme,
• Are globally usable.
public/individuals and firms/ corporate can transfer
funds from any bank branch to any individual • Are value of money.
electronically, if corporate having an account with any • Use data to enhance the bank’s offer, but not intrude.
other bank branch in the country also participating in
b) Real Time Gross Settlement (RTGS) - defined as The term ‘Innovation’ means to make something new,
the continuous (real-time) settlement of funds following is types of innovative online banking. Table 1.1
transfers individually on an order by order basis shows the Innovating of banking Sector.
(without netting).

E. Kalaivani, Assistant Professor, Department of Management Studies,

K.S. Rangasamy College of Technology, Tiruchengode, Tamilnadu, India.
Dr.A. Lakshmi, Director, Department of Management Studies, K.S.
Rangasamy College of Technology, Tiruchengode, Tamilnadu, India.

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Bonfring International Journal of Industrial Engineering and Management Science, Vol. 9, No. 1, March 2019 2

Table 1.1: Type of Innovations in Banking Sectors

S.No. Types of online Description Uses Example
Also known as virtual banking It provides all functions which are provided at
& web banking. It allows its a local bank such as deposit of money , bill
1. user to execute transactions payment. ICICI BANK
Internet with the help of internet. ( first bank to introduce it.

It is a system that allows Bill payment, Utility bill payment , ATM

customers to perform a number location , Interbank Mobile Payment Service.
2. of transactions through mobile ICICI BANK
Mobile device.
Banking institution executes Services it includes – saving & checking
transactions directly with accounts , personal loans, Debit cards, Credit
3 Retail banking customers rather than corporate cards BANK OF AMERICA
or other banks.
4 It conducting banking business Corporates , Trading houses , Multi-national Cash management, Wire
with industrial & business companies & domestic companies. Fund and transfer, ACH
Wholesale entities Non-fund based services, Value added services (Automated clearing
banking & Internet banking services. house),Bill presentment ,
It is a combination of It offers many financial services such as
commercial banking, Merchant Banking, Mutual Funds, Factoring,
investment banking, insurance Credit cards, Housing Finance, Auto loans, ICICI BANK
Universal & many other financial Retail loans, Insurance service and commercial
5 banking activities. banking service.

It involves mobilizing largest It helps to reduce NPA’s in banks. Government securities.

6 Narrow part of deposits in risk free
banking assets.
It describes banking activities Offshore financial institutions can also be used ICICI BANK at Special
in currencies other than for illicit purposes such as money laundering Economic Zone , Mumbai ,
currency of the country in and tax evasion Aug 9,2003 Banks in Andorra,
Offshore which bank accounts are Luxembourg, Switzerland
7 banking shield.
Multinational Operated in more than one International operations through network of Indian bank – 1st bank open
banking country. It is called as branches, Unity of control , Professional branch in outside India.In
international bank. management overseas , maximum position
occupied by
8 Bank Of Baroda.
internet facilities and their services with mobile banking.
The following table 1.2 shows the various innovations of
Table 1.2: Innovations in Internet and Mobile Banking
Services Types of services Examples Example of innovation

Store monetary value Starbucks, Apple Stored-value card

Savings PayPal Personal finance tools apps
Withdrawal Common Bank Mobile technologies
Services related to deposits Payments Apple pay, Alipay, Stripe and Square, Touch ID, NFC, and
Transferwise, Forex, Kantox Bluetooth technologies and
cross border transactions
Account Information Gem alto, foundry Mobile technologies
Intermediation Supplier pay initiative, Alibaba Small Loans, Online platform
Services related to loans Lending club, On-Deck, Funding-Circle
a) Risks associated to the transformation activity, and
IV. TYPES OF RISKS INVOLVED IN INTERNET BANKING b) Risks occurring at the transaction level for payments
Risks arises mainly during transaction level can provide or loans.
banks with incentives to invest in security standards. Risk is Risk associated with innovation payment services – (credit
classified into two broad categories: risk, settlement risk, liquidity risk, and operational
risk),Innovations offered by entrants - banks’ liquidity risk,

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Bonfring International Journal of Industrial Engineering and Management Science, Vol. 9, No. 1, March 2019 3

operational risks are related to internal or external events that the customer’s personal data. RBI issue the notification on
result in monetary losses (Example :Data security risks, fraud 14th June, 2001 regarging legal requirements and regulatory
risks, risk of counterfeit, human error...) guidance that frequently used to e-banking products and
services , which were the findings of a working group on
• Operational risk
Internet Banking.
• Security risk
• System architecture & design risk 6. Money Laundering Risk
• Reputational risk Banks find some difficulties in applying traditional
• Legal risks method for detecting and preventing undesirable criminal
• Money laundering risk activities through Internet banking transactions. Money
• Strategic risk laundering rules may also be inappropriate for some forms of
• Other risk electronic payments so banks expose themselves to the money
laundering risk. The source of illegally obtained funds is
1. Operational Risk obscured through a succession of transfers and deals in order
This type of risk occur mainly due to fraud, processing that those same funds can eventually be made to appear as
errors, system disruptions, or other unanticipated events legitimate income.
resulting in the institution’s inability to deliver products or
services. In banking operations , certain risk may occur. They 7. Strategic Risk
are The poor service of e-banking planning and investment
decisions can increase a financial institution’s strategic risk. E-
a) Volume forecasts banking services act as innovators who anticipate the needs of
b) Management Information System their customers, but may do so by incurring higher costs and
c) Outsourcing increased complexity in their operations. It occurs due to lack
2. Security Risk of understanding among senior management about its potential
On account of unauthorized access to a banks critical and implications.
information databases like accounting system, risk 8. Other Risks
management system, portfolio management system, etc this Various risks such as credit risk, liquidity risk, interest rate
security risk arises. System hackers operating through the risk, and market risk may also arise from electronic banking
Internet could access, retrieve and use confidential customer and electronic money activities, though their practical
information. consequences than operational, reputational, and legal risks.
3. System Architecture and Design Risk This may be realistics for banks engaged in a variety of
An important factor in managing various kinds of banking activities, as compared to banks or bank subsidiaries
operational and security risks are appropriate system that specialize in electronic medium.
architecture and control . If systems are not well designed or Credit Risk: Credit risk is the risk that a counter party will
implemented , bank faces the risk . The risk of an interruption not settle an obligation for full value, either due or at any time
or slow-down of its existing systems occur if the electronic thereafter. Banks electronic activities may extend credit via
banking or electronic money system it chooses is not non-traditional channels, and expand their market beyond
compatible with user requirements. Internet service providers traditional geographic boundaries. The procedures is not
and external experts to implement, operate, and support sufficient to determine the credit worthiness of borrowers
portions of their electronic money and electronic banking applying for credit via remote banking procedures could
activities but service providers may not have the requisite heighten credit risk for banks. Banks may face credit risk if a
expertise to deliver services expected by the bank, or may fail third party intermediary fails to carry out its obligations with
to update their technology in time. So, his operations could be respect to payment.
interrupted due to system breakdowns or financial difficulties.
Liquidity Risks: This type of risk is the risk arising from a
4. Reputational Risk bank’s inability to meet its obligations when they come due,
This risk may cause major loss to public confident and it without incurring unacceptable losses, although the bank may
creates a negative public opinion .The main reasons for this ultimately be able to meet its obligations.
risk may be system or product not working to the expectations Interest Rate Risk: It arises when there is an adverse
of the customers, significant system deficiencies, significant movements in interest rates. Banks specializing in the
security breach, inadequate information to customers about provision of electronic money may face significant interest
product. rate risk to the extent adverse movements in interest rates
5. Legal / Compliance Risk decrease the value of assets relative to electronic money
liabilities outstanding.
This type of risk is the risk of non-compliance with legal
or regulatory requirements. It directly related to the electronic Market Risk: This type of risk arises from movements in
banking due to high usage .Each country puts its own rules market prices, it is the risk of losses in on- and off-balance
into effect and it is difficult for a bank to constantly adapt its sheet positions arising, including foreign exchange rates. For
services. The other legal risk is related with the protection of payments banks may accepts foreign currencies electronic
money are subject to this type of risk.

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Business Risks: It arises when it find difficult to predict based on technology that by its very nature is designed to
customer volumes and the stickiness of e-deposits , it could be extend the geographic reach of banks and customers is shown
very difficult to manage liquidity. in table 1.3 Expansion of market can extend beyond national
borders, highlighting certain risks.
Electronic banking and electronic money activities are
Table 1.3: Internet Vs Mail Surveys
S.No Characteristics Internet Survey Mail Survey
1. Manpower Design Web page and write JavaScript. Insert survey into envelopes, paste stamps or frank
2. Cost Rental/maintenance of server space to host Web page. Envelopes, stamps, photocopying of
3. Sampling frame Restricted to people with access to the Internet. Restricted to sample that Received the
4. Time frame Responses can usually be collected within two weeks. Responses can usually takes about a month for
surveys to be returned.
5. Quality of data General Internet user population is adequate if the target Dependent on whether target
respondent is potential for systematic bias if only people Respondents, e.g., CIO, respond to questionnaire.
with certain characteristics respond. With the use of random sample, systematic bias is
reduced by obtaining a high response rate.
6. Generalizability of It is very difficult to determine since there may be a Results generalizable to target
results systematic bias in terms of who actually responds to the population if response rate is
questionnaire. Adequate.
7. People/companies involved in survey with Internet access Must be able to identify potential
Suitability or who are users of the Internet. Respondents. Can reach out to
the general public regardless of
Computer access.
8. Problems Unable to control who responds. Screening of data for Costly and slow.
unsuitable respondents (e.g., responses from children or
other Countries).
9. Response rate Cannot be computed. Major percentage of respondents is Can be computed. Major percentage
dependent on publicity of the survey as well as follow-up of respondents is dependent on
reminders via e-mails to potential respondents. Follow-up mailings.
Factors that influencing internet banking services shows provided by the banks and lot of development by innovation
the value of mean and standard deviation is shown in table 1.4. methods by developers. Literature survey support for
identifying the various methods and new ideas are emerged
Table 1.4: Mean, Standard Deviation of Internet Banking
internet banking concepts though authors citied their
references has been presented in this article. It is concluded
Internet Banking Service Mean* Standard that for proper use of internet services a bank and mobile
Deviation banking should provide a attractive and easy to use interface.
Proper security concerns should be provided by the banks to
Account information and balance 6.54 0.96 the customers so that customers can easily use the internet
enquiry services provided by the innovation internet banks.
Electronic bill payments 6.13 1.30
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