ONLINE BANKING History and Evolution of Online Banking Internet banking has actually been around longer than most people think. It . nl the in} banks Cipgiatine Nin Canis ea offeled home’banking services. Services never became popular except in France where the use of videotex (Minitel) was subsidised by the telecom provider and the UK, where the Prestel system was used. The Nottingham Building Society (NBS) set up the UK’s first home online banking services in 1983 ("History of the Nottingham" Retrieved on 20Q7-12- 14.). The system used was based on the UK's Prestel system and used a computer, such as thebe Micro, or keyboard (Tan data TaT400) connected to the telephone system and television set. The system (known as 'Home link’) allowed on-line viewing of statements, bank transfers and bill payments. In order to make bank transfers and bill payments, a written instruction giving details of the Scanned with CamScannerur ent to the NBS 0.-set_the details up on the Home NBS system by the account holder. There have been significant developments in the e-financial services sector in the past 30 years. According to Devlin (1995), until the early 1970s functional demarcation was predominant with many regulatory restrictions imposed. One main consequence of this was limited competition both domestically and internationally. As a result there was heavy reliance on traditional branch based delivery of financial services and little pressure for change. This changed gradually with deregulation of the industry during 1980s and 1990s, whilst during this time, the increasingly important role of information and communication technologies brought stiffer competition and pressure for a faster pace of change. x Scanned with CamScannerInternet Banking in India / ; the most preferred choice of of banking customer rbe an ) individual cor a body corporate, have become available _over the Interne, which has thus become an important distribution channel for a number of banks, address revenue, c Banks boost technology investment spending strongly to address r O5t concerns, (A study on the Internet_users conducted by and competitivene ee Internet and Mobile Association of India (IAMAD, found that about 23% of the M which js online users prefer TB as the banking channel in India, second to ATI protered by 8396 OWT-GT the 6365 Internet users sampled, 35% use onlin banking Channels i in India) This shows that a significant number of online users do not use 1B, and hence there is a need to understand the reasons for not using it, Until the advent of ATMs, people were unaware and/or not directly affected by the technological revolutions happening in the banking sector. ATMs became the major revelation for customers, since it offered the facility to avoid long queues in front of the cashiers in banks. It also provided them the flexibility of withdrawing money— anytime, anywhere. In the study by IAMAI, it was found that the people are not doing financial transactions on the banks‘ Internet sites in India because of reasons such as security concerns (43%), preference for face-to- face transactions (39%), lack of knowledge about transferring online (22%), lack of user friendliness (10%), or lack of the facility in the current bank (2%). - Concept of Internet Banking The Reserve Bank of India Jonstituted a working group on Internet Banking. The group divided the internet banking products in India into > types based on ————— $s eee the levels of access granted. They are: In this Internet age, Internet | for majority of customers. Be th The financial products and servi © communication is between the customer Scanned with CamScannera. 's application sy: and bank's @PF ystem. No identification of the customer is done. I “Hon of the customer is done. In gystem, here is no possibil this Ys p lity OF any unauthorized prion ystems of the bank through internet d person getting, into et, plectronie Informati AZ. siti information in the f alTeation aod authentication of the_cuaomer Ts th gh ‘ i = 1 information is fetche fie aon ae °” the bank's Sea a : ¢ application Sst nima Webel ee tb - cully Electronic Transactiotia 4 Thi pully ao oat sl al System: This system allows bi- sehen. The ‘ustomer_for online _update_can_submit transactions. This system requires high degree of security and control. In this environment, web 7 server and application’ system; i Gaara It comprises techno! ogy. covering computerization, networking and security, inter- bank payment gateway and legal infrastructure. > are linked_over secure Lm in The six primary drivers of Internet banking is very well defined by Dr. Mishra (Mishra, 2002), in order of primacy are + Improve customer access a prove customer access + — Facilitate the offering in services * Increase customer loyalty DD 5 siatne sims a + Provide services offered iby Sade services offered by competitors ma + — Reduce customer af As of 2013, India has th third largest number of Internet users, the United States and China in terms of sheer number © isers.}While there is no concrete data available, India is expected to have in excess of 125 million users by 2013 end. significant number of users of Za Due to large population of India, there are a ——< Draw! ah of omg De fla bly eee Coah Rihsntig Beene) chine, rag <& Scanned with CamScannispat without the need for a human clerk or bank telloy. post modern ATMs, D the customer identifies hin or herself 2 ee Se 1 also allow people to deposit cash or checks, transfer money between their bank accounts, pay bills, or purchase goods and services. . - lectronic Funds Transfer (EFT) :Between the customers own checkin: and savings accounts,or to another customer's account. Without personal visit to bank through internet customer can trarisfer the money to his or her own account or to the esr scour 1994, RBI appointed a committee to review the u mechanization in the banks and also to review the Electronic Clearma Servi (ECS) {Gredit-clearing facili fe available to all corporate bodies > — | for making repetitive low value payment like dividend, interest, refund, salary, P&G: pension or commission, —_—"_ _3-National Electronic Fund Transfer (NEFT) : NEET full_form is het National Electronic Fund Jranstes, and it is a_system of transfer between two Any NEFT Transfer done i — 5 pm generally gets settled on the same day, but if you deposit the: money ‘after 5 pm, then that will ‘the _next working day, Ip case_of Saturday, any money deposited between Sam-12 SU noon can be expected to reach the beneficiary account the same day. 4. Real Time Gross Settlement (RTGS) :RT.GS full form is Real Time ross Settlement and it is a system of money transfer between tw inks in real time basis, which means the moment one bank account transfer the money to anol ank account, its settled at that time 1 DirTeal time basis betweenthe banks,\but the beneficiary bank has to make the Final settlement _to_theybank The mopey) RTGS is the fastest possible account within two hours_of gettin; Money transfer between two banks in India through a secure channel 5 adi to . wnt [Rw eT tera Me Scanp ith be Sonn5. Electronic Bill Payment (EBP) :Bill Payment Service Banks Bill Pay j the easiest way to manage bills older can pay their regular month|, casi y gi - = bills i.e. tel ie, electricity, mobile phone, insurance etc. at anytime, any wher. ills i.e, telephone, Ys . - - for free. Saves time and effort. Make bill payments at customer's convenience for free. form their home or office. Lets a/c holders check their hil amount BeTore Tt j, debited form their assorint. No debits to account without their knowledge, Nic, more missed deadlines, no more loss of interest - we hold fer_can_schedule their bills in adv ; avoid missing the bill deadlines as well as earn extra interest on their money. Track payment history — all payments to a biller_are stored automatically for future reference. No queuing up at collection centers or writin, cheque any more! Just a few clicks and customers account will be debited for the exact amount they as EBP attracts the customers because of the fast and efficien: bill payment. Most of the Indian banks are trying to adopt the EBP portal. ICIcr started a portal called Billjunction.com. Banks tie up with MINL,, Airtel Vos piens. Plone No tenth pts. Phone Banking : Customer can now dial u the_bank‘s designed telephone number and by digling ID number will be able to act ivity “s designated computer. Phe software provided in the ine interactive wth the computer asking himrto dial the code number OF ike service uired by |e the customer and auable asian ie seme recorder (AVR) for {ple querig tions for complicated queries and truncations, the customer can actually do entire non- cash relating banking on telephone...anywhere anytime. J-Tele-Banking :Tele banking is another innovation which provided the fility of 24 hour banking to the customer. Tele banking is-based om voice rhe caller usually a customer calls the bank anytime and can inquire balance in his account or other transaction history. In this system, the computers at bank are connected to a telephone Ji wih the help of {modem Worse processing facility is provided in the software. This software ident RES Th TeS The voice of caller and provides him suitable reply. Some banks also use telephonic answering machine but this is limited t9 some brief functions. This is only telephone answering system and now Tele banking. Tek banking is becoming popular since queries at ATMs are now becoming too long. 8. Mobile Banking : With the increase in mobile banking activities can be trahsacted easily throu, latest and most innovative Platform offered for b: Versatile multifunctional, free service Penetration among masses. mobile banking. This is the anking for the customers. 4 that is accessible and_yiewable on the Scanned with CamScannerOPER! itor of mobile phone. , a en ee According to Reserve bank of India (RBI) data, a total ores ions (ook plac STi i i - place between Fe id Ne ber 2, jumping around . n February and November eee esa aes 1.7 times in volumes over this 10-month period. These transactions SAW nearly a three-fold increase 1 period. 75 in value over the same period. Increasing Smartphone i Phone adoption and initiatives such as media promotions yistomer educati " j and vomets. Hh Programs for mobile banking have led to this uptrend. 7 omers, Mobile ine i ‘ For cust ile banking is convenient while banks benefit th cost channel. benefit through a low- oy Banking / On-line Banki a neil on line Banking : The advent of the Internet and the mee son comptes presented both an opportunity and a challenge for tl g industry. For years, financial institutions have used powerful compute Hetworks (0 automate-million of daily transactions; loday, often. the. only paper ECOMTS the customer's receipt_at i thar ther jow that their ores ‘are connected to the Internet via personal computers, banks envision similar a ivanenaes by adopting those same internal electronic processes to home Banks view online banking as a powerful ‘value added’ tool to attract and use. retain new customers while helping to eliminate costly paper handling and teller interactions in an increasingly competitive banking environment. In India first one to move into this area was ICICI Bank. They started web based banking as early as august 1997. Net banking 1s a web-based service that et the ban So a000ss their account information. It allows the customers authorize g to log on to the banks abSHe WH The help of bank's issued WentTTeaTion and, personal identifroation number © banking system verifies the user and {requested service) the rage of products: ‘ind service offered Tops widely in there content. Mostbanks-offer net i" — fet banking has also.led to ‘the. emergent of h the internet and do not exists physically, h banks are called —virtual banks or Internet Only banks. A couple of ‘years ago, there was 4 belief even among bankers that customers opening new accounts wanted the online banking facility, just to (feel good‘ and very few of the m actually used that services. Today, bankers believe -that-the trend from ‘nice to have‘ is changing to ‘need to have‘. After all it depends on how busy & person is, Services provided through Internet Banking. 4 - account information we E: cheques (Online Fund Transfer) — 3 Bill Payment Service provides access to by each bank on the internet di banking as a valye-added_service\N new banks, which (OI roug! Scanned with CamScannerad 4. Requests And Intimations S$. Demat Account share trading. ae MICR Clearing :NICR_means_magnetic_ink character_readeg o, Tecognition. It hnology_adopted_n mainly to facilitate processing of acess _was demonstrated to the American Banke And iLawas_almost universally implemented by; (653 MiCR characters are printed with magnetic ink oF tone, Magnetic printing is issued so the characters can be-rettabTy read thromgh the = computer system. 1462 + 1933- In India MICR wa introduced jj four metro cities of the country, clearing transaction is large. oe JK ccount Information : Bank provides summary of all_bank ac Allow transggtion tracking which enables retrieval of Transaction detal a a — ons gf Aransaction amoup Zand Wate, Provide account_statemey transaction reports sports used on user-defined criteria. Customers can even downloxj and print the state a DematAccount :Demat is commonly__used_ abbreviation ¢| al swe lem: rities Te terjalizgtiag’, which is a process whereby securities Tike share, debenturs ———_— are converted from the material‘ (paper documents documents) unto electronic unto. lectronic data ani u 5 fur ‘banks,‘ where dematerialized meat securities ar J and fom eats they can be traded This facilitates faster, risk-free and lows cost settlement Zt Ke Share Trading : In share trading a customer can buy and sell securits Kenn stepping into a brokgrsaffive. Once the share is Sematerialize! e n the trading can be done from home or office. As demat a/c are e direct linked to the customer‘s bank a/c, so there is no need to write cheque for te payments or to fill up the slips to deposit the cheque. Amount for the purchae and sale of securities is automatically debi edited to their bank a/c.sitsl brings the same convenience while investing in Mutual funds also Hassle fit and Paperless, 14, Electronic Clearing Service : ECS is an electronic mode of fast J transfer from one bank account to another. It can be used by institutions fee Bees making payments such as distribution of dividend interest, salary, pe" among others, It can also be used to pai s and other chargesss" Scanned with CamScannerwee nee ee earns OPERATIONS, OF E-COMMERCE 1 one, electricity, wa telephone, Y: payments on loans as well as SIP investments. ler or for making eq ed monthly _installments_ S can be used for both credit and debit purposes thei Electronic Clearance Service (ECS) scheme provides an alternative method of effecting bulk payment transactions like periodic (monthly/ quarterly/ half-yearly/ yearly) payments of interest/ salary/ pension/ commission/ dividend/ refund by Banks/Companies /Corporations /Government Departments. The transactions under this scheme move from a single User source (i.e. Banks/Companies /Corporations /Government Departments) to a large number of Destination Account Holders (Customers/Investors). This scheme obviates the need for issuing and handling paper instruments and thereby facilitates improved customer service by the Banks and Companies/Corporations/Government Departments effecting bulk payment. Other Featares of E-Banking are : * Credit Card © Debit Card S Digital Cash (DIGI Cash) * Net Cash © E-Cheaues (Online Fund Transfer) Scanned with CamScanner