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In this age of information technology, electronic communication is the cornerstone of a country for its business, every government agency and economy. Modern banks play a pivotal role in promoting economic advancement of a country. Electronic banking is a modern banking system that delivers the new and traditional banking products and services to the customers electronically. Electronic banking systems allow business parties or individual to pay directly or to debit accounts via telecommunication systems. It provides users, working with a home computer attached by network to their bank, with the ability to authorize payments, reconcile accounts, and access a variety of other banking services with the help of ATM (Automated Teller machine), visa card, master card, Q-cash, E-cash, Ready cash, mobile, internet etc. This paper represents the scenario of electronic banking in Bangladesh how it is up surging, makes our country with more state of the art facilities and also highlights some drawbacks and recommendations of overcoming the drawbacks of electronic banking. The number of customers who choose Internet banking as their preferred method of dealing with their finances is growing rapidly. Online banking (or Internet banking) is a term used for performing transactions, payments etc. over the Internet through a bank's secure website. First-ever online Banking system was introduced in the American Bank namely Wells Fargo Bank of California back in the year 1990 and within a few years of launching, this banking system got momentum worldwide. Now almost all the big-size banks in Europe, America and in other parts of the world introduced on-line banking to provide 24-hour automated services to their constituents. In Bangladesh Standard Chattered (2000) first introduced online banking service. This can be very useful, especially for banking outside bank hours (which tend to be very short) and banking from anywhere where Internet access is available. Online banking isn't out to change the usual money habits. Instead, it uses today's computer technology to give the

option of bypassing the time-consuming, paper-based aspects of traditional banking in order to manage our finances more quickly and efficiently. The advent of the Internet and the popularity of personal computers presented both an opportunity and a challenge for the banking industry. For years, financial institutions have used powerful computer networks to automate millions of daily transactions. Today, often the only paper record is the customer's receipt at the point of sale. Now that its customers are connected to the Internet via personal computers, banks envision similar economic advantages by adapting those same internal electronic processes to home use. The challenge for the banking industry has been to design this new service channel in such a way that its customers will readily learn to use and trust it. After all, banks have spent generations earning our trust; they aren't about to risk that on a Web site that is frustrating, confusing or less than secure. Today, most large national banks, many regional banks and even smaller banks and credit unions offer some form of online banking, variously known as PC banking, home banking, electronic banking or Internet banking. Those that do are sometimes referred to as "brick-to-click" banks, both to distinguish them from brick-and-mortar banks that have yet to offer online banking. Banks view online banking as a powerful "value added" tool to attract and retain new customers while helping to eliminate costly paper handling and teller interactions in an increasingly competitive banking environment. In this report we will talk about the Online Banking System of Hong Kong and Shanghai Banking Corporation (HSBC) Ltd. in Bangladesh. It will also include the possibility of the growth of online banking system in our country.

The Organization
HSBC The HSBC Group is named after its founding member, The Hongkong and Shanghai Banking Corporation Limited, which was established in 1865 in Hong Kong and Shanghai. It is one of the largest banking and financial services organizations in the world, with well-established businesses in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. HSBC is an old company with a very young brand identity. It is only since 1998 that HSBC has operated under a single brand name combined with the graphic hexagon logo. Even more recently, in 2002, a positioning statement for the brand was developed and added to the name and graphic logo. The world s local bank has come to sum up HSBC s role in financial services, globally. Over the past decade HSBC has built one of the strongest and most relevant brands in the world today, ranked number one by Brand Finance Top 500, The Banker, for the third year in a row (2007, 2008, 2009) and the highest rated bank in the Interbrand annual survey of the Best Global Brands (2009).

HSBC IN B ANGLADESH The HSBC Group is represented in Bangladesh by its Head Office in Dhaka (Sonargaon Road), a second full-service branch in Chittagong (Agrabad) and two booths in Gulshan and Motijheel with a vision to satisfy its customer with high quality service that reflects its global image as the premier International Bank. The Bank has recently opened another branch in Dhanmondi. The Bank has been serving customers in Bangladesh since 1996. It has also an Offshore Banking Unit, which provides banking services for foreign companies based in the Export Processing Zones in Dhaka and Chittagong. HSBC has been offering Internet banking service from 2001 in Bangladesh.

Name of the Organization Year of Establishment Head Office Nature of the organization Shareholders

The Hong Kong Shanghai Banking Corporation Bangladesh LTD 1996 Anchor Tower, 1/1-B Sonargaon Road, Dhaka-1205. Multinational company with subsidiary group in Bangladesh HSBC group shareholders Internet Banking Savings & deposit services Loan products Corporate and Institutional services Trade services Hexagon Mr. David C. Griffith (Chief Executive Officer) Mr. Mamoon Mahmood Shah (Head of Personal Financial Services) Mr. Adil Islam (Head of Corporate Banking) Mr. Syed Akhtar Hossain Uddin (Human Resource Manager) Mr. Munir Hussain (Marketing Manager) Mr. Wasim Adnan Wahed (Chief Operating Officer) 5 10 200 Offers full online banking from branch to branch and also from Dhaka to Chittagong. Serves individual and corporate customers within Dhaka & Chittagong.



Number of Offices Number of ATM s Online Address Number of employees Technology Service Coverage & Customers

Services Offered Over Online

Internet Banking service is a great way to save a trip to the high street, it's secure and best of all it's free customer only pay for the cost of accessing the internet. With HSBC Banking Account, it is no longer necessary to call the Bank or go to any of the branches/ATMs. Just need logon from HSBC web page from ANY appropriate Internet enabled PC. View balances and transactions Make payments to other HSBC accounts Manage your standing orders and Direct Debits Statements can be downloaded Transfer money between your accounts Update personal details, including mailing address and email address Thoose the frequency of paper statements or stop them all together All 24 hours a day. Paying bills any time of day and night is as easy and accessible than ever before with HSBC online services. Bangladesh Telephone & Telegraph Board Dhaka Electric Supply Company Ltd. Dhaka WASA Grameenphone Ltd. Robi Banglalink gsm Citycell American Life Insurance Co Ltd.

ELIGIBILITY FOR INTERNET BANKING B ANGLADESH Any individual customer can apply for using Internet Banking service. Both retail and corporate customer must have these following eligibilities to use online service. Customer must have a Current and Savings account with HSBC. Customer submits filled in Internet Banking Application Form Customer agrees (through signing) that he read and understood the terms and conditions of Online Banking and agrees to follow those. After fulfilling these terms user is given a User ID and Password to log on in the bank s secure website and do online banking. This ID and Password are unique secret words/characters to each user to ensure confidentiality. A customer needs both of them to login into the web page.

Technological Setup for Online Banking Systems

Online banking is possible only if the concerned branches are linked through Wide Area Network (WAN). Although most of the branches in Bangladesh have introduced computerization, the software is not yet, in most cases, centralized. Centralized software ensures better security, strong monitoring system and easy accessibility of data at Head Office level of a bank. In case of HSBC, they strictly maintain a central database in regional Head office of Hong Kong as well as in Dhaka. Thus, they always have a backup database to use in case of emergency and unavoidable circumstances. Unfortunately the indigenously developed software, which is currently in use in the local banks, is not in a position to respond to the ever-increasing demand of the clients. Apart from this, for connecting the individual branches HSBC has a centralized communications system with the help of HUB (HSBC Universal Banking System). HUB is developed by the programmers who extensively work for HSBC. These highly skilled programmers are devoted to overall HSBC software and networking system throughout the world (United Kingdom, USA Mainland, China and Hong Kong, Africa, Middle East). HSBC networking system has already come up with its concurrent communication infrastructure. Therefore, they have already synchronized their setup with all available connectivity. A few years back, HSBC got an opportunity to have Fiber Optics connectivity, which could provide a range of multifarious communication facilities in information and Communications Technology (ICT) including worldwide Internet faster accessibility. Because of its folly, HSBC could not take advantage of the Fiber Optics system, which it could probably get free of cost if HSBC decided in favor of it a few years back. Although HSBC have finally agreed to go for Fiber Optics communication system, they have to fairly a high price for the service now and the whole thing has been delayed by a couple of years. So, in the absence of Fiber Optics communication system HSBC currently using

radio link, DSL for connectivity between short distanced local HSBC banks and VSAT (Very Small Apertures Terminal) for long distanced branches like Chittagong to Dhaka. For Real-Time Online system which will allow the clients to hit their accounts with the bank, HSBC need centralized ISO standard world class computer software, which is again rather expensive and only a few banks in our country have so far been able to afford such highly efficient software and HSBC is one of the leading pioneer in this regard. Many of the local banks are currently in the process of procuring such world-class software. Banks in Bangladesh are in a transition period. Only a few banks, which could by now acquire world-class centralized computer software, are in position to provide realtime online facilities to the clients. Most of the other banks are on offline banking system, which implies that the clients can still draw cash from a branch having an account in some other branch with or without an arrangement with the bank. Only after procuring world-class centralized software all the banks will be able to provide real-time online banking facilities to the clients.

HSBC Network Function

Internet offers the Banking industry a global inexpensive delivery mechanism for online banking. The rapid growth of internet banking driving the need for scalable, reliable, and flexible e-Banking systems. To meet performance and scalability requirements of growing user populations Banks are forced to find alternative systems that meet current needs and can scale to meet anticipated user growth over the next 3 to 5 years without disruption. From the stand point of HSBC, the picture remains the same. But relying on internet has never been easy for security reason and HSBC is adequately concerned about this factor. Keeping this key factor HSBC has organized its whole network system accordingly. From the major financial centers of the world to the remote branch locations, HSBC uses one hardware platform family from a single vendor. Using one architecture and being able to control the network from a single point, HSBC can dramatically reduce the network management resources required. Thus it helps to concentrate on solving problems with network management resources. They concentrate on solving problems with carriers and maximizing the use of their bandwidth. The HSBC Group Wideband Network (GWN) offers an integrated suite of services that supports the primary communications requirements of HSBC s regional and local subsidiaries, including Hong Kong Bank. The GWN employs a variety of different types of digital circuits from over 30 international and domestic carriers, including fractional T1/E1 services. The GWN uses General DataComm s Transport Management System (TMS) 3000 and Office Communications Manager (OCM) internetworking platforms for its core technology. The GDC products integrate and manage each office s voice, fax and data applications. Each

Group subsidiary has very different telecommunications needs, which HSBC has integrated using a single family of products from GDC. By standardizing on the GDC OCM platform, the HSBC Group is consolidating all voice and data traffic onto common high-speed digital links and bringing the sophistication of the network backbone down to the branches, regardless of their location. Using the OCM, HSBC can extend the network anywhere in the world, interconnect buildings at T1 and E1 transmission rates, and offer seamless integration between computer centers, head office buildings and branches. This can offer in-house T1 or N x 64 Kbps lines within a building.


The GDC Office Communications Manager is an internetworking platform that integrates voice, fax, data, fractional channels, LAN and Frame Relay onto one common hardware and management platform. The OCM is available in several versions (each either standalone or rack mountable), and in either point-to-point configuration or as a multi-aggregate feeder platform feeding services to a TMS 3000.

The GWN is centrally managed, using GDC s PC-based network management software, from the Global Data Network Control Center (GDNCC) in Hong Kong Bank s radically-designed Head Office at 1 Queen s Road Central in Hong Kong. In the event of a disaster, the entire network can be administered, using the same corporate procedures, from Buffalo, London or Hong Kong, within minutes. In Asia things move rapidly for HSBC. It is using GDC s TMS and OCM products on top of national carrier, alternative carrier and its own private VSAT service to provide a reliable and highly managed network to deliver banking products to its customers. HSBC has been in Asia for well over a century and are very familiar with the way business is


conducted here. Rapid and reliable service is a must. The GDC OCM makes it easier to deliver such service in a controlled fashion. In HSBC Bangladesh Head office, there is a central database, which is synchronized to Hong Kong and Shanghai Bank through VSAT. Besides, Hong Kong Head Office can maintain monitoring through VSAT in different time shift. As VSAT has efficient bandwidth for online transaction therefore, it makes the transmission smoothly. HSBC networking system has already coped up with its concurrent communication infrastructure. Therefore, they have already synchronized their setup with all available connectivity. At individual level HSBC provide Hexagon software (now it s distribution is limited) for users to access their server. User is given a range of number through which he/she can get access to the HSBC account for necessary information and action. Users have to have the following components to login into HSBC server. Although logging from HSBC online server is also possible. Using a unique Internet Banking ID with First, Fourth and Last security number any online account holder can log in to his account. Users are instructed through proper guidelines provided by HSBC to make sure privacy is well kept. They maintain this commitment to data security by implementing appropriate physical, electronic and managerial measures to safeguard and secure the personal data. The secure area of the website of HSBC supports the use of Secure Socket Layer (SSL) protocol and 128-encryption technology an industry standard for encryption

over the Internet to protect data. When customer provides sensitive information such as credit card details, it will be automatically converted into codes before being securely dispatched over the Internet. Besides SSL there are constantly active firewalls to prevent unauthorized access.


The following system diagram represents a typical large-bank Internet banking implementation. The firewalls, routers, and network hubs can be whatever the financial institution prefer


The following diagram also illustrates how the platform stores bill payment and presentment data as well as external data that supplement the data from back-end systems. The database includes session activity information in an audit log for review by the financial institution. The personalization database stores personalized customer preference settings within the platform. This permits the bank to define look-and-feel for various customer segments, and allows the customer to create additional personalization settings.


HSBC Web Interface

Online Banking is a new concept for Bangladeshi people. Besides, average people don t want to use online banking because of complex procedure. Therefore, HSBC has developed a user friendly web interface to make Online banking more interactive and easy going. They even included a Demo Tour for novice users, which is as follows: Step-1 (Logging in)

Step-2 (Security assurance)


Step-3 (Logged in)

Checking Account statement, Standing orders and Direct orders


Privacy & Security

HSBC PRIVACY PRINCIPLES Business is built on trust between the customers and the company. To preserve the confidentiality of all information that the customer provide to HSBC, they maintain the following privacy principles: 1. HSBC only collect personal information that they believe to be relevant and required to understand one s financial needs and to conduct their business. 2. They use the personal information to provide better customer services and products. If they ask to provide personal information, they will always specify the purpose for which such personal information is collected and ensure that it is only used for the purpose specified at the time of collection. 3. They may pass the personal information to other HSBC Group companies or agents, as permitted by law. 4. They will not disclose any personal information to any external organization unless they have the consent or are required by law or have previously informed the customer. 5. They may be required from time to time to disclose any personal information to Governmental or judicial bodies or agencies or our regulators, but they will only do so under proper authority. 6. They aim to keep customer s personal information on their records accurate and up-to-date. 7. They maintain strict security systems designed to prevent unauthorized access to any personal information by anyone, including their staff. 8. All HSBC Group companies, all their staff and all third parties with permitted access to the information are specifically required to observe the confidentiality obligations of HSBC.


By maintaining the commitment to these principles, HSBC will ensure that they respect the inherent trust that people place in them. SECURITY TECHNOLOGY Security is the top priority. The Hong Kong and Shanghai Banking Corporation Limited ('the Bank') will strive at all times to ensure that personal data will be protected against unauthorized or accidental access, processing or erasure. They maintain this commitment to data security by implementing appropriate physical, electronic and managerial measures to safeguard and secure the personal data. The secure area of the website of HSBC supports the use of Secure Socket Layer (SSL) protocol and 128encryption technology an industry standard for encryption over the Internet to protect data. When customer provides sensitive information such as credit card details, it will be automatically converted into codes before being securely dispatched over the Internet. Besides SSL there are constantly active firewalls to prevent unauthorized access. 21 layers of security system protect their web servers and the systems are constantly monitored to prevent any unwanted access. HSBC will not send personal information to any of the customers by ordinary email. All practical steps will be taken to ensure that personal data will not be kept longer than necessary and that the Bank will comply with all statutory and regulatory requirements concerning the retention of personally identifiable information. SECURITY ASSURANCE Both the customer and HSBC play an important role in protecting against online fraud. Any person who is using the online banking system should be careful that the bank account details including the User ID and/or Password are not compromised by ensuring that the customer do not knowingly or accidentally share, provide or facilitate unauthorized use of it. User ID and/or password should not be shared with others and


allow access or use of it by others should be forbidden. They endeavor to put in place high standards of security to protect customer s interests. If, in the unlikely event, unauthorized transactions have been conducted through one s account through no fraud, fault or negligence on one s part, they will see that s/he is covered for the direct loss up to the full amount of the unauthorized transactions. Customer should safeguard his/her unique User ID and Password by keeping it secret confidential. It should not be written down or share the details with anyone. HSBC will never ask for the Internet Banking Password, in order to ensure that the customer is the only person who knows this information. When choosing the unique User ID and Password for the first time, it should not created by using easily identifiable information such as birthday, telephone number or a recognizable part of the name. If the customer thinks that the User ID and/or password has been disclosed to a third party, is lost or stolen and unauthorized transactions may have been conducted, s/he should inform them immediately.


SWOT Analysis
STRENGTHS Strong Corporate Identity: HSBC is the leading provider of financial services worldwide. With its strong corporate image and identity, it can better position in the minds of customers. This image has helped HSBC grab the personal banking sector of Bangladesh very rapidly. Distinct Operating Procedures: HSBC in known worldwide for its distinct operating procedure. The company is managing for Value strategy had better satisfy customers needs and keeps the firm profitable time. Secured Security System: HSBC has a 21 layers of security system. So it is fully safe to do online banking with HSBC. Efficient Performance: HSBC provides hassle free customer service to its client base comparing to the other financial institutions of Bangladesh. Personalized approach to the needs of customers is its motto. Modern Equipment & Technology: HSBC owns the best banking and information technology equipments in Bangladesh. It ultra modern banking systems starting from terminal pc s to HUB s are based on the international HSBC group standards and are the latest.


WEAKNESSES Narrow Operating Span: HSBC has a very narrow operating span in Bangladesh. It has only two full service branches in Bangladesh situated only at Dhaka and Chittagong. Absence of Strong Marketing Activities: Internet can be used for extensive marketing activities where HSBC seemed to be lagging behind. Gaining Mass Customer Confidence: Internet Banking in Bangladesh is getting more and more popular but still a large number of customers don t have that confidence about it. HSBC also didn t succeeded to gain the confidence of a big number of customers about using their internet banking.

OPPORTUNITIES Countrywide Network: The ultimate goal of HSBC is to expand its operations to whole Bangladesh. Nurturing this type of vision & mission & to act as required, will not only increase HSBC s profitability but also will secure its existence in the long run. As a result, more people will know about their Internet banking service and will use it for their convenience. More Personal Banking: There are so many services that are still awaited to be offered through internet banking. As a matter of fact in other countries Global HSBC already offered such services. These can be introduced in Bangladesh as well.


THREATS Upcoming Banks: The upcoming private local & multinational banks posses a serious threat to the existing banking networks of HSBC. Some local private banks like Eastern bank Ltd, Dutch Bangla Bank, Dhaka Bank is truly offering good Internet banking to their customers. It is expected that in the next few years more commercial banks will emerge. If that happens the intensity of competition will rise further and banks will have to develop strategies to compete against and win the battle of banks. Hackers: Hackers are the main threat for any bank that is serving Internet banking service. It is the main reason of the customers for not being interested to use Internet banking. Losing Customers: Absence of various products and services over internet is causing various customers to detract from HSBC. This is a serious threat for HSBC Bangladesh.


Now days internet banking has proved to be the most prospective concern for any bank. Some valuable issues for HSBC regarding the online banking are discussed in this part of recommendations. These were the aspects that came out while working for the report. Such general recommendations are discussed below: The management of HSBC should regularly administer marketing research activities in order to keep a regular track of consumer satisfaction levels with the online banking. HSBC should actively manage the complaints of various customers and encourage customers to give feedback about the services. Research showed that this strategy will radically improve the overall online banking. Individual attention should be given to customers in order to understand their needs properly. When customers come with their problems they should be well focused. As HSBC provides services from only 5 branches throughout Bangladesh new branches should be constructed to serve more geographic service.