• • • • • • • • • What is Online banking? Why Online banking? Online banking in India Guidelines Online Banking Activities Tools of Online Banking Services Advantages Road Ahead
What is Online banking?
Internet banking (or E-banking) means any user with a personal computer and a browser can get connected to his bank’s website to perform any of the virtual banking functions. The term "electronic banking" or "e-banking" covers both computer and telephone banking. In other words it is said that it is updated 'on-line, real time'. The system is updated immediately after every transaction automatically.
Why Online banking?
Differentiation of products from the others. A combination of regulatory and competitive reasons Stress on branchless banking. Increasing volumes of banking transactions. Providing customers with cost effective services
Online banking in India
Opening up of economy in 1991 marked the entry of foreign banks. They brought new technology with them. Banking products became more and more competitive. Need for differentiation of products and services was felt. The ICICI Bank kicked off online banking in 1996. Currently78% of its customer base is registered for online banking. 1996 to 1998 marked the adoption phase, while usage increased only in 1999, owing to lower ISP online charges, increased PC penetration and a tech-friendly atmosphere.
• The Internet Banking policy has to be approved by the Bank's Board. • The policy fits into the bank's overall Information Technology and Information Security policy and ensures confidentiality of records and security systems. • The policy takes into account operational risk. • The policy clearly lays down the procedure to be followed in respect of "Know Your Customer" requirements, and • The policy broadly meets the parameters laid down in the earlier circular.
Facts and figures
• Internet population is expected to grow to 100 million by 2008-09. • At present 4.6 million of these use internet banking. This figure is estimated to grow to 16 million by the end of 08-09. • Only 59 per cent of adult population have access to a bank account. This implies 41 per cent of adult population is “unbanked”.
Tools of Online banking
Automated Teller Machine Credit Cards/Debit Cards Smart Card
Answering routine queries Bill payment service Electronic Fund transfer(EFT) Electronic Clearing System(ECS) Credit card customers Railway Pass Investing through internet banking Recharging your prepaid phone Shopping
Advantages Disadvantages Check account balances and track Need an account with an Internet recent account activity Service Provider (ISP) Transfer money between accounts Security concerns, like ‘hackers’ accessing your bank accounts
Authorize electronic bill payments Original setup for e-bill paying time is time-consuming but will ultimately be a time-saver Apply for auto, mortgage, home Must have basic computer skills equity, and student, or personal loans Internet knowledge
Advantages to banks
• Very low setup cost. • Capability to cater to a very large customer base. • Saves a lot of operational costs. Adds to the baseline. • Banks can offer a lot of personalized services to their customers. • Reduction of burden on branch banking.
Advantages to customers
• • • • It is convenient. It isn't bound by operational timings. There are no geographical barriers. Services can be offered at a miniscule cost. • Check your transactions at any time of the day, and as many times as you want to. • Getting quarterly statements from the bank, transferring funds to outstation, and other such activities can be done free of charge through online banking.
Pre cautions to be taken
• Customers should never share personal information like PIN numbers, passwords etc with anyone, including employees of the bank. • Documents that contain confidential information should be safeguarded. • PIN or password mailers should not be stored, the PIN and/or passwords should be changed immediately and memorized before destroying the
• Customers are advised not to provide sensitive account related information over unsecured e-mails or over the phone. • Take simple precautions like changing the ATM PIN and online login and transaction passwords on a regular basis. • Ensure that the logged in session is properly signedout.
The road ahead
• Reduction in branch banking. • Gradual evolution of Virtual banking • People will want to process more transactions on the Internet. • Geography will not be an inhibitor any more. • The future of banking would be in terms of integration.