E - BANKING

BANKING

1.1 INTRODUCTOIN TO BANKING

A bank is a financial institution which accepts deposits, pays interest on pre-defined rates,
clears checks, makes loans, and often acts as an intermediary in financial transactions. It
also provides other financial services to its customers

1.2: DEFINATION.

A bank is a financial institution that accepts deposits from the public and creates credit. Lending
activities can be performed either directly or indirectly through capital markets. Due to their
importance in the financial stability of a country, banks are highly regulated in most countries.

1.3: WHAT IS BANK?

According to Banking Encyclopedia, Bank is a financial institution which receives

deposits from the public and lends them for investment purpose i.e., deposits of money and
advances of the Main function of banks, but in the era of globalization banks indulges
themselves in many activities like Insurance, Mutual Fund Business and Investment in
Stock Exchanges. These activities of banking are considered as Para Banking Activities.

1
1.4: FUNCTION OF BANK

The main functions of banks are accepting deposit and lending loans: A – accepting
deposits

Fixed deposits: - These deposits mature after a considerable long period like 1 year or
more than that the rate of interest is fixed the amount deposited cannot be withdrawn before
maturity date.

Current A/C deposit: - These are mainly maintaining by business community to facilitate
frequent transaction with big amounts. Generally, no rate of interest or very low rate of
interest is paid on this account.

Savings bank A/C: - It is kind of demand deposits which is generally kept by the people
for the sake of safety. These facility is given for small saver and normally a small rate of
interest is paid.

Recurring deposit, A/C: - In case of recurring deposit the fixed amount is deposited in a
bank every month for a fixed period of time.

Lending loans

1. Call loans: - These loan is called back at any time. Normally, this loans are taken by bill
brokers or stock brokers.

2. Short term loans: - These are sanctioned for a period up to 1 year.

3.Medium term loans: - These are sanctioned for the period varying between 1 and 5 years.

These loan are sanctioned for a period of more than 5 years it includes:

1. Overdraft: - The bank grants overdraft facility to its reliable and respectable depositors.
It enables companies, firms and businessmen to withdraw amount over and above their
actual balance in their current account.

2. Cash credit: Under this facility, the bank allows the borrower to withdraw cash against
certain security.

2
3. Bills of Exchange: - The bank provides funds to their customers by purchasing or
discounting bills of exchange. The bank charges commission up to the maturity period of
bills

A part from the main functions, the banks also provide financial services to the corporate
sector and business and society.

They are as follows:

Merchant Banking: - Merchant banking is an organization which underwrites securities

for companies, advises in various activities. No person is allowed to carry out any activity
as a Merchant Banker unless holds a certificate granted by SEBI. Thus, merchant banks
are financial institutions which provide specialized services including acceptance of bills
of exchange, corporate finance, portfolio management and other services.

Leasing: - Banks have started funding the fixed assets through leasing. It refers to the
renting out of immovable property by the bank to the businessmen on a specified rent for
a specific period on terms which may be mutually agreed upon. A written agreement is
made in this respect.

Mutual funds: - The main function of mutual fund is to mobilize the savings of the general
public and invest them in stock market and money market.

Venture Capital (VC): -Venture Capital is financial capital provided to early-stage, high-
potential, high risk, growth startup companies. The venture capital fund makes money by
owning equity in the companies it invests in, which usually have a novel technology or
business model in high technology industries, such as biotechnology, IT, software, etc.

ATM: - An ATM is also known as cash point. The banks nowadays provide ATM
facilities. The customers can withdraw money easily and quickly 24 hours a day.

Telebanking: - Telebanking is a throwback to the days when people would call into a
central number at their bank/financial institution in order to get balance, check status and
other account-related information. Most financial organizations offer telebanking services
today; however, the public representation is known as telephone-based customer service or
just customer service

3
Credit cards: - Credit cards allow a person to buy goods and services up to a certain limit
without immediate payment. The amount is paid to the shops, hotel, etc. by the commercial
banks.

Locker Service: - Under this service, lockers are provided to the public in various sizes on
payment of fixed rent. Customers can deposit their valuables, documents, jeweler,
securities, etc. in these lockers.

Underwriting: - This facility is provided to the joint stock companies and to the
government. The banks guarantee the purchase of certain proportion of shares, if not sold
in the market.

4
2: E - BANKING

2.1: Introduction

The term Internet Banking or E-Banking Internet both are used as

supplement. E-Banking is the one of the major part of E-Financing. Internet banking
refers to the deployment over the Internet of retail and wholesale banking services. E-
Banking uses the web browser for the user interface and the Internet for data transfer
and download of software, and so has a potential for reducing maintenance costs.
For users, E-Banking provides current information, 24-hours-a-day access to banking
services. The primary services provided by e-banks are transferring money among
one’s own accounts, paying bills, and checking account balances. Loans, brokering,
share trading, service bundling, and a host of other financial services are being added to
these primary services (Dewan & Seidmann, 2001).

2.2: DEFINITION

Internet banking refers to the deployment over the Internet of retail and
wholesale banking services. It involves individual and corporate clients, and includes
bank transfers, payments and settlements, documentary collections and credits,
corporate and household lending, card business and some others (UNCTAD, 2002)

2.3: EVOLUTION

The concept of online banking as we know it today dates back to the early 1980s, when it
was first envisioned and experimented with. However, it was only in 1995 (on October 6,
to be exact) that Presidential Savings Bank of USA first announced the facility for regular
client use (Bainbridge, 2006). The idea was quickly snapped by other banks as well. But
on the client’s part, since the late 1990s, online banking has developed from virtual
insignificance to tens of millions of users worldwide (OECD, 2001). However, E-Banking
is the product of different generations of electronic transactions. Since its inception,
electronic banking or online banking has gone through different transitions. Automated

5
teller machines(ATMs) were the first well-known machines to provide electronic access
to customers where as in phone banking, users call their bank’s computer system on
their ordinary phone and use the phone keypad to perform banking transactions. PC
banking superseded phone banking and allowed users to interact with their bank by
means of a computer with a dial-up modem connection to the phone network. Phone and
PC banking entailed maintenance costs associated with keeping up to date with
diverse modems and with avoiding prohibitively complex installation procedures

2.4: BENEFIT OF E BANKING

TO BANK

Price- In the long run a bank can save on money by not paying for tellers or for managing branches.
Plus, it’s cheaper to make transactions over the Internet.

Customer Base- The Internet allows banks to reach a whole new market- and a well off one too,
because there are no geographic boundaries with the Internet. The Internet also provides a level
playing field for small banks who want to add to their customer base.

Efficiency- Banks can become more efficient than they already are by providing Internet access for
their customers. The Internet provides the bank with an almost paper less system.

Customer Service and Satisfaction- Banking on the Internet not only allow the customer to have a
full range of services available to them but it also allows them some services not offered at any of
the branches. The person does not have to go to a branch where that service may or may not be
offer. A person can print of information, forms, and applications via the Internet and be able to
search for information efficiently instead of waiting in line and asking a teller. With better and
faster options, a bank will surely be able to create better customer relations and satisfaction.

Image- A bank seems more state of the art to a customer if they offer Internet access. A person may
not want to use Internet banking but having the service available gives a person the feeling that
their bank is on the cutting image.

6
TO CUSTOMERS

Bill Pay: Bill Pay is a service offered through Internet banking that allows the customer to set up
bill payments to just about anyone. Customer can select the person or company whom he wants to
make a payment and Bill Pay will withdraw the money from his account and send the payee a paper
check or an electronic payment

Other Important Facilities: E- banking gives customer the control over nearly every aspect of
managing his bank accounts. Besides the Customers can, Buy and Sell Securities, Check Stock
Market Information, Check Currency Rates, Check Balances, See which checks are cleared,
Transfer Money, View Transaction History and avoid going to an actual bank. The best benefit is
that Internet banking is free. At many banks the customer doesn’t have to maintain a required
minimum balance. The second big benefit is better interest rates for the customer.

2.5: IMPORTANTS OF E BANKING

E banking provides many advantages for banks and customer’s. e-banking has made life
much easier and banking much faster for both customers and banks.

Main advantages are as follows.

It saves time spent in banks

It provides ways for international banking.

It provides banking throughout the year 24/7 days from any place have internet access.

It provides well-organized cash management for internet optimization

It provides convenience in terms of capital, labor, time all the resources needed to make a
transaction.

Taking advantage of integrated banking services, banks may compete in new markets, can
get new customers and grow their market share.

It provides some security and privacy to customers, by using state-of-the-art encryption

and security technologies

7
2.6: HISTORY OF E BANKING

While financial institutions took steps to implement e-banking services in the mid-1990s,
many consumers were hesitant to conduct monetary transactions over the web. It took
widespread adoption of electronic commerce, based on trailblazing companies such as
America Online, Amazon.com and eBay, to make the idea of paying for items online
widespread. By 2000, 80 percent of U.S. banks offered e-banking. Customer use grew
slowly. At Bank of America, for example, it took 10 years to acquire 2 million e-banking
customers. However, a significant cultural change took place after the Y2K scare ended.
In 2001, Bank of America became the first bank to top 3 million online banking customers,
more than 20 percent of its customer base. In comparison, larger national institutions, such
as Citigroup claimed 2.2 million online relationships globally, while J.P. Morgan Chase
estimated it had more than 750,000 online banking customers. Wells Fargo had 2.5 million
online banking customers, including small businesses. Online customers proved more loyal
and profitable than regular customers. In October 2001, Bank of America customers
executed a record 3.1 million electronic bill payments, totaling more than $1 billion. In
2009, a report by Gartner Group estimated that 47 percent of U.S. adults and 30 percent in
the United Kingdom bank online.

2.7: ADVANTAGE AND DISADVANTAGE OF E – BANKING

Advantages of e - banking

 The main advantages of e-banking are

 The operating cost unit services is lower for the bank
 It offers convenient to customers as they are not required to go to the banks
premises.
 There is very low incidence of errors.
 The customer can obtain funds at any time from ATM machines.
 The credit cards and debit cards enables the customers to obtain discounts from
retail outlets

8
  The customers can easily transfer the funds from one place to another place
electronically.

Disadvantages of e-banking

 E-banking promotes lock of socializing social contacts.

 Hackers may internet data and defrock customers.
 Phone bills can interlace.
 Customers will be more vulnerable to phishing.
 Customers are compelled to have computers at home, internet access and computers
skills.

9
 3. TYPES OF E- BANKING

1. MOBILE BANKING
2. INTERNET BANKING
3. HOME BANKING
4. CHEQUE TRANACTION PAYMENT SYSTEM
5. TELE BANKING

10
3.1: MOBILE BANKING

It is another important service provided by the banks recently. The customers can utilize it
with the help of a cell phone. The bank will install particular software and provide a
password to enable a customer to utilize this service.

Meaning

Mobile banking is the performing of finance related functions on a mobile device like a
Smartphone or tablet. With the use of a mobile device, the user can perform mobile banking
via call, text, website, or app.

There are both advantages and disadvantages of mobile banking some of which have been
highlighted below.

ADVANTAGES

 It utilizes the mobile connectivity of

telecom operators and therefore does
not require an internet connection.
 With mobile banking, users of mobile
phones can perform several financial
functions conveniently and securely
from their mobile.
 You can check your account balance, review recent transaction, transfer funds, pay
bills, locate ATMs, deposit cheques, manage investments, etc.
 Mobile banking is available round the clock 24/7/365, it is easy and convenient and
an ideal choice for accessing financial services for most mobile phone owners in
the rural areas.
 Mobile banking is said to be even more secure than online/internet banking.

11
DISADVANTAGES

 Mobile banking users are at risk of receiving fake SMS messages and scams.
 The loss of a person’s mobile device often means that criminals can gain access to
your mobile banking PIN and other sensitive information.
 Modern mobile devices like Smartphone and tablets are better suited for mobile
banking than old models of mobile phones and devices.
 Regular users of mobile banking over time can accumulate significant charges from
their banks.
 In recent years mobile banking has become quite popular and convenient for many
people. Have you tried mobile banking?

12
3.2: INTERNET BANKING

It is the recent trend in the Indian banking sector. It is the result of development took place
in information technology. Internet banking means any user or customer with personal
computer and browser can get connected to his banks website and perform any service
possible through electronic delivery channel. There is no human operator present in the
remote location to respond. All the services listed in the menu of bank website will be
available

WHAT IS INTERNET BANKING

Internet Banking refers to the banking services provided by the banks over the internet.
Some of these services include paying of bills, funds transfer, viewing account statement,
etc. Banks also deliver their latest products and services over the internet. Internet banking
is performed through a computer system or similar devices that can connect to the banking
site via the internet. Nowadays, you can also use internet banking on your mobile phones
using a Wi-Fi or 3G connection. With the ease of availability of cyber cafes in the cities, it
has become quite popular.

purposes like depositing and withdrawing money, requesting for account statement, stop a
Banking is now no more limited in going and visiting the bank in person for various
payment, etc. You can do all these tasks and many more using the online services offered
by the banks. You can also keep a track of your account transactions and balance all the
time. Now getting passbooks updated to know the total account balance is a matter of past.

13
ADVANTAGES OF INTERNET BANKING

 services. The services include loans, investment options, and many others.
 Internet Banking has several advantages over traditional one which makes
operating an account simple and convenient. It allows you to conduct various
transactions using the bank's website and offers several advantages. Some of the
advantages of internet banking are:
 Online account is simple to open and easy to operate.
 It is quite convenient as you can easily pay your bills, can transfer funds between
accounts, etc. Now you do not have to stand in a queue to pay off your bills; also
you do not have to keep receipts of all the bills as you can now easily view your
transactions.
 It is available all the time, i.e. 24x7. You can perform your tasks from anywhere
and at any time; even in night when the bank is closed or on holidays. The only
thing you need to have is an active internet connection.
 It is fast and efficient. Funds get transferred from one account to the other very fast.
You can also manage several accounts easily through internet banking.
 Through Internet banking, you can keep an eye on your transactions and account
balance all the time. This facility also keeps your account safe. This means that by
the ease of monitoring your account at any time, you can get to know about any
fraudulent activity or threat to your account before it can pose your account to
severe damage.
 It also acts as a great medium for the banks to endorse their products and

14
DISADVANTAGES OF INTERNET BANKING

 Though there are many advantages of internet banking, but nothing comes without
disadvantages and everything has its pros and cons; same is with internet banking.
It also has some disadvantages which must be taken care of. The disadvantages of
online banking include the following:
 Understanding the usage
 e of internet banking might be difficult for a beginner at the first go. Though there
are some sites which offer a demo on how to access online accounts, but not all
banks offer this facility. So, a person who is new, might face some difficulty.
 You cannot have access to online banking if you don’t have an internet connection;
thus without the availability of internet access, it may not be useful.
 Security of transactions is a big issue. Your account information might
get hacked by unauthorized people over the internet.
 Password security is a must. After receiving your password, do change it and
memorize it otherwise your account may be misused by someone who gets to know
your password inadvertently.
 You cannot use it, in case, the bank’s server is down.
 Another issue is that sometimes it becomes difficult to note whether your
transaction was successful or not. It may be due to the loss of net connectivity in
between, or due to a slow connection, or the bank’s server is down.
 Internet Banking has definitely made the life easy for users by providing online
access to various banking services.

15
3.3: HOME BANKING

It is another important innovation took place in Indian banking sector. The customers can
perform a no. of transactions from their home or office. They can check the balance and
transfer the funds with the help of a telephone. But it is not that popularly utilized in our
country

MEANING

Home banking is another feature in banking services. As with increase in technology you
get to use many banking facilities sitting at home or any convenient place you like. In
simple words home banking means you do not go to bank branch only. However, you sit
at home and continue with bank processes. In addition, there are advantages of home
banking also. You can keep reading to know more about this here.

FEATURES OF HOME BANKING

 Pay bills while you are at home

 Online transactions
 Check account details
 Get notifications or alerts about account activity on your phone through text
message
 Or you may receive alerts or notifications regarding your bank account through
registered email ID
 Finally, you use one simple and secure home banking option

16
ADVATAGES OF HOME BANKING

Fast Transactions

☞ As already mentioned before, online systems are rapidly quick.

☞ You do not have to wait in a long line or run along from pillar to post to get your job
done.
☞ Anything that needs to be done can be done quickly and easily. For instance, let's say
the day's agenda is to pay bills, transfer cash, and deposit cash.
☞ Without online systems, these tasks may take you more than 4 to 5 hours. With online
banking, the same tasks will require a maximum of an hour.

Easy Access

☞ You can easily access and monitor your accounts.

☞ You can monitor your cash flow and other transactions and stay abreast of the latest
techniques with a mere click of a button.

17
☞ The rates offered in online banking systems are much more convenient and friendly.

☞ Since there are virtually no overhead costs, you are offered low rates of interest on loans
and higher rates of interest on savings accounts.

Security

☞ Online accounts are always protected with special encryption software.

☞ As the transactions involve a huge amount of money, the designers of the banking
software make sure that complete protection is given to the system.
☞ Passwords are protected by virtual keyboard, digital signature is involved, periodic
notifications are added, beside many other protection mechanisms.
☞ As a customer, we should ensure that the bank's website has a valid security certificate
(to be insured by the FDIC.)

Time and Location Constraint

18
☞ This is one of the most obvious and best advantages of online banking.

☞ With traditional banks, you must have gone through the woes of 'Oh, it's a Sunday, I
cannot go to the bank' or 'It's past 6 in the evening, the bank must have closed for the day'
often.
☞ With online banking, you can happily bid these woes goodbye, since they are available
24X7, 365 days in a year.

☞ And, there is no location constraint as well. You do not have a physical structure as the
bank, your bank is available right where you need it - yes, in your hands.
☞ Online banking is available on mobile applications and tablets as well, making it all the
more convenient and easy to use.

Online Features

☞ Though traditional banks also offer many features, the frequency and variety is
considerably more with online services.
☞ Moreover, you are easily updated with the latest offers, as opposed to traditional banks.
☞ Many online services offer different types of certificates of deposit (CDs) and low rates
on mortgages.
☞ Some banks offer services of opening accounts with a mandatory deposit limit or fees.

☞ Some other banks may offer financial planning tools, and other investment platforms

19
DISADVANTAGES

Security

☞ While bank accounts are mostly protected, this security may or may not be completely
reliable or permanent.

☞ This is a major weakness of online systems; they are always vulnerable to fraud, despite
excelled insecurity.
☞ If your account is not protected, it is likely to be infiltrated upon and stolen.
☞ Most banks use intelligent encryption software and firewall protection; yet, cyber
criminals are not reliable and may devise new strategies to hack bank accounts.

Online Features and Transactions

☞ While most transactions are easy to handle, some may require a direct communication
or meetings, instead of an online portal. This is not available with online banking.

20
☞ Also, not all features may be available with all banks - the interest rates and offers may
differ.
☞ Though most transactions are quick, some banks may have exceptionally outdated
software that leads to slow transfer - so much so, that you may prefer traditional banking.

Location

☞ While location is a positive factor in the scenario when you need quick access to your
account, it is problematic when you need a physical structure to resolve your queries.
☞ Undoubtedly, all the online services have the FAQ section as well as sufficiently long
brochures to explain everything; yet, the absence of actually having to go to a building and
conduct a transaction is sorely missed, in case of certain transactions.

☞ With banks that have no physical location, you miss out on the benefit of actually going
and checking out your account and depending only on the online portal.

Customer Service

21
☞ One of the primary advantages of traditional banks was the direct, face-to-face
communication with people working in customer service.
☞ This kind of service led to a working, healthy relationship between a bank and its clients.
Online systems do not have a direct communication media; they have a lot of customized
web pages that solve client queries.
☞ Though this is helpful, it lacks the old-fashioned touch, which may be frustrating at
times

☞ With traditional banks, the banker knows you as a regular customer, he is aware of your
transactional history and the way your mind works. With online banks, you are a just a
number - among the several thousand that exist.
☞ However convenient the online system is, the lack of personal touch may be
uncomfortable for many.

3.4: CHEQUE TRANACTION PAYMENT SYSTEM

Truncation is the process of stopping the flow of the physical cheque issued by a drawer to
the drawee branch. The physical instrument will be truncated at some point enroute to the
drawee branch and an electronic image of the cheque would be sent to the drawee branch
along with the relevant information like the MICR fields, date of presentation, presenting
banks etc. Thus with the implementation of cheque truncation, the need to move the
physical instruments across branches would not be required, except in exceptional
circumstances. This would effectively reduce the time required for payment of cheques,
the associated cost of transit and delay in processing, etc., thus speeding up the process of
collection or realization of the cheques.

22
3.5: TELE BANKING

It is increasingly used in these days. It is a delivery channel for marketing, banking services.
A customer can do non-cash business related banking over the phone anywhere and at any
time. Automatic voice recorders are used for rendering tale-banking services.

Meaning

A telephone is an instrument that transmit voice over a distance. A person can talk and
communicate with another person at distant place with the use of a telephone.

format. It is a gadget that you can use to talk to someone who is present at A telephone is
a device that converts the human sound into a form that is transmittable through wire or
radio technology, and reproduces it at a far away place in an audible some other place.

A telephone is a voice input-output apparatus. It receives the voice of one person through
the microphone, transmit it over long distance in a way that the receiver can listen to the
voice through the speaker provided with the telephone. Nowadays, mobile phones are also
widely used as a communicating device.

Telephone Banking is easy and convenient

 Caller Identification: Your calls are automatically recognized when called from
registered mobile number.

 International call prioritization – International calls are automatically identified and

prioritized in the queue.
 Dynamic Card activation – IVR provides instant card activation menu if you have
any cards pending activation.
 IBAN SMS: Receive your IBAN number via SMS through Telephone Banking.

23
 Instant TPIN Registration: Telephone Banking Pin registration is made simpler,
faster and more secure.
 Updating mobile number: Now you can update your local or international mobile
number in quick steps.
 Card PIN Change: Change your Credit and Debit Card PIN through IVR instantly.

Types
The various types of telephone include fixed landlines, cordless telephone, mobile phones,
etc.
1. Fixed telephone: A fixed telephone (also land-line telephone, corded telephone.) is one
that is connected through a set of wires. It is immobile.

2. Cordless telephone: A cordless telephone (also portable telephone) comes with a

wireless handset that uses radio technology to communicate with the base station. The
base-station is fixed at a place and the telephone wires are connected to it. These telephones
are portable, but within works within very limited distances, typically within the same or
few floors from the base-station.

3. Mobile phone: A mobile phone (also cellular phone) is a wireless handset that
enables users to make calls and send messages while moving around wide range of
geographical areas.

4. A smart phone is a mobile phone that has enhances features comparable with those of
a computer. It has smart features such as operating system, web-browser, touchscreen,
music-player, etc.

24
Advantages

Telephone is one the biggest invention of modern science that has eased the life of common
people. Further, the use of wireless radio technologies in mobile phones entirely changed
the mode of voice and text communication. The advantages of telephones are given below:

 Indispensable part of life: It was the invention of telephone which really opened
the way for communication revolution. Nowadays it has become an indispensable
part of commercial, industrial and domestic life.
 Communication with distant person: People can communicate to distant people
and get instant feedback instant over telephone. For example, a person in India can
talk with another person in the United Kingdom over telephone.
 Wireless communication: The invention of mobile phones is of vital importance.
It helps the transmission of voice using wireless technologies.
 Saves time and energy: A telephone serves us like an honest servant in all the
fields. It saves our valuable time and energy to great extent.
 Business deals over telephone: A telephone has a great advantage to a business
person, or to a doctor. A business person can make business deals on telephone.
The entire sale and purchase can be done on the telephone.
 Improved communication between doctor and patients: Patients can take the
doctor’s appointment over telephone. For a doctor, it is very useful to attend on his
patients without losing time.
 Security: In big cities a telephone has its own utility in terms of safety and security.
You may call police if there is some need for them.
 Improved parents-teachers-student relationship: If there is a telephone in the
school, students can talk to the Principal or teachers to get any information.
Messages to distant places can be conveyed in no time through calls, sums, etc. If
the telephone is in at parents’ house, the principal or teachers find it easy to contact
the parents, and the parents can take information from the teachers about their
children.

25
  Easy travelling: Railway booking, calling a taxi from the stand-all can be done on
the telephone. You can also download mobile applications of various taxi-operator
and book a taxi from within the application. You will need a smart phone and
internet connection for this.
 High-speed internet: Most of the smartphones are enabled with high-speed
internet features. Smartphones with internet connections enable users to browse
websites, play videos and send emails. You can also make calls over internet and
avoid the calling charges. However, data charges may apply in case of internet calls.
 Healthy relationships: Telephone encourages regular voice-communication
between friends. It helps keep up healthy relationships with friends.
 Low cost: The cost of voice-communication over telephone and mobile-phones has
reduced significantly in the last few years. Thus, even common people can make
full use of tele-communication technology.
 Telephone banking: People can make banking transactions over telephone. They
can send and receive funds from the comfort of their home or office. Customers can
also ask for bank statement and cheque-book by calling the support team of the
bank.
 Telephone interviews: Many large and small companies prefer to conduct the
initial interview over telephone. The interviewer asks relevant questions and if the
answers are satisfactory, the candidate is further invited for the final interview.
 Telephone marketing: One of the biggest advantage of telephone can be seen in
the field of marketing. Companies communicate information about new products
to their customers. However, companies resorting to telemarketing for promoting
products should never make unsolicited calls.

Disadvantages

 A telephone invites enmity and unfriendliness in your neighborhood. The neighbors

want to use the telephone for their benefits and you have to pay the bill.
 You cannot talk if the recipient of the call is unavailable or engaged in talking to
someone else.

26
  Some of the neighbors are so frank and free that they give your number to their
relatives and friends. If you fail to call the neighbor at an odd hour when the phone
rings for him, he will become angry and sweetness of neighborhood would change
into bitterness. They fail to think of your comfort.
 When we are forced to attend too many calls over telephone, then our peace is
disturbed.
 People wastes much of their time over useless gossip over the telephone or mobile
devices.
 Telephone is often misused by tele-marketers. Very often, telemarketers makes
unsolicited calls and disturbs people during office hours.
 You need to charge the battery of your mobile phone almost everyday to keep it
running.
 Now-a-days, technology changes very fast. You may need to keep updated the
software of your mobile-phones. However, the standard wired telephones are easy
to manage and seldom needs up-gradation.
 We may waste our time in useless gossiping. Hence, we should remain cautious of
time while taking to people over phone.
 Excessive use of telephone may cause headache and negatively affect the health.

3.6: Different types of e-commerce payment systems

When you purchase goods and services online, you pay for them using an electronic
medium. This mode of payment, without using cash or cheque, is called an e-commerce
payment system and is also known as online or electronic payment systems.

The growing use of internet-based banking and shopping has seen the growth of various e-
commerce payment systems and technology has been developed to increase, improve and
provide secure e-payment transactions.

Paperless e-commerce payments have revolutionized the payment processing by reducing

paper work, transaction costs, and personnel cost. The systems are user-friendly and
consume less time than manual processing and help businesses extend their market reach.

27
The different types of e-commerce payments in use today are:
Credit Card
The most popular form of payment for e-commerce transactions is through credit cards. It
is simple to use; the customer has to just enter their credit card number and date of expiry
in the appropriate area on the seller’s web page. To improve the security system, increased
security measures, such as the use of a card verification number (CVN), have been
introduced to on-line credit card payments. The CVN system helps detect fraud by
comparing the CVN number with the cardholder's information.

Debit Card
Debit cards are the second largest e-commerce payment medium in India. Customers who
want to spend online within their financial limits prefer to pay with their Debit cards. With
the debit card, the customer can only pay for purchased goods with the money that is
already there in his/her bank account as opposed to the credit card where the amounts that
the buyer spends are billed to him/her and payments are made at the end of the billing
period.

Smart Card
It is a plastic card embedded with a microprocessor that has the customer’s personal
information stored in it and can be loaded with funds to make online transactions and
instant payment of bills. The money that is loaded in the smart card reduces as per the
usage by the customer and has to be reloaded from his/her bank account.

E-Wallet
E-Wallet is a prepaid account that allows the customer to store multiple credit cards, debit
card and bank account numbers in a secure environment. This eliminates the need to key
in account information every time while making payments. Once the customer has
registered and created E-Wallet profile, he/she can make payments faster.

28
Net banking
This is another popular way of making e-commerce payments. It is a simple way of paying
for online purchases directly from the customer’s bank. It uses a similar method to the debit
card of paying money that is already there in the customer’s bank. Net banking does not
require the user to have a card for payment purposes but the user needs to register with
his/her bank for the net banking facility. While completing the purchase the customer just
needs to put in their net banking id and pin.

Mobile Payment
One of the latest ways of making online payments are through mobile phones. Instead of
using a credit card or cash, all the customer has to do is send a payment request to his/her
service provider via text message; the customer’s mobile account or credit card is charged
for the purchase. To set up the mobile payment system, the customer just has to download
a software from his/her service provider’s website and then link the credit card or mobile
billing information to the software.

Amazon Pay
Another convenient, secure and quick way to pay for online purchases is through Amazon
Pay. Use your information which is already stored in your Amazon account credentials to
log in and pay at leading merchant websites and apps. Your payment information is safely
stored with Amazon and accessible on thousands of websites and apps where you love to
shop.

If you are planning to sell your products online, Amazon would be happy to help you in
setting up payment gateways for your products and services. You can also consider selling
on Amazon, one of the most popular e-commerce platforms in the world. To sell on
Amazon, please register yourself for free.

29
3.7: Some of the Statistics are:

 Half of the customers registering for online banking are giving up before signing
up.
 10% people who used internet banking services gave up due to poor usability or
security concerns.
 In 2001 ,1/3 rd. of the top European banks offered some form of interactive TV
banking.
 In 2004 it is approximated that there were ten million users of interactive-TV based
banking services in Europe.
 In 2007, the estimated number of Europeans using internet banking is 130 million
 88% of e-banking users visit their banking websites as a at least once a week
 It is estimated that 35% of online banking households will be using mobile banking
by 2010.
 By 2011 it is predicted that 80% of the bank customers in UK will use the internet
to connect to their bank.
 Problems encountered by disabled people and the ageing population using e-
banking

Physically Impaired:
The people with physical impairments who are using telephone banking finds hard to hold
and activate the buttons. People with physical disability cannot have proper control on
hands and arms therefore it is difficult to use mouse effectively so using the banking
website becomes a problem.

Hearing impaired:
People with hearing impairments require visual representation of the auditory information
that is in the banking website. With increasing use of multimedia e.g. video streaming the
banking people should take care that these will be understood by the people having hearing
problems.

30
One of the straight forward way to make the banking site accessible to the hearing impaired
people is to make the language simple particularly for BSL users for whom English is
second language.so it is necessary to use a simple language and the inclusion of a glossary
of banking terms.

The people who are hearing impaired, cannot use telephone banking. And the users of
hearing aids will experience electromagnetic interference, from mobile phones. The radio
signals from mobile telephones can arise humming and buzzing inside hearing aid.

Blind and Partially sighted

People having vision problems have a problem to insert the card into the ATM machine
and typing their PIN .And people with vision problems can use online banking based on
how the site is designed for the people with vision disabilities i.e. blind people use browsers
should with speech or Braille output which are text-based systems and should be browsed
independent of graphics. The browser should have the option to vary the text size so that
they can increase the font. The main problem for them is the graphics in the websites are
not meaningful when they are accessing with a text browser

And people with vision problems find hard to use telephone banking because of the
decreasing in the size of mobile phones. Due to the compact size of mobiles people with
low sight find hard to use the small keypads and smaller screens. And some people are
unable to distinguish color combinations used in mobile keypads and screens.

And mailed notifications regarding e-banking are inaccessible to blind and people with low
vision if they are not providing in alternate formats.

Cognitively impaired
The Banking websites with too many steps and unhelpful messages are difficult to browse
for cognitively impaired people. The websites designed with complex page layouts, tables
and navigation structures confuse these people and are become difficult to browse.

31
And in telephone banking, mobile phones of latest technology are coming with so many
features and complex operating systems. People with Cognitive disabilities find difficult
to operate these kind of mobile phones

People having dyslexia finds difficult to remember the PIN in the correct order and may
enter incorrectly. So these people are prone to writing them down which lessens the
security and can be misused.

Age-related Impairments
People as they age will experience so many changes in memory, eye sight, hearing and
dexterity and they might not consider to have disabilities. These people will be benefited
by the accessibility provisions that make websites accessible. People having age related
eye sight may access the website by changing the text size. These people also find difficult
to use the mouse. Older people finds difficult to use mobiles having complex operating
systems and too many options.

4: SERVICES OF E- BANKING

For many people, electronic banking means 24-hour access to cash through an automated
teller machine (ATM) or Direct Deposit of paychecks into checking or savings accounts.
But electronic banking involves many different types of transactions, rights,
responsibilities — and sometimes, fees. Do your research. You may find some electronic
banking services more practical for your lifestyle than others.

 Electronic Fund Transfers

 Disclosures
 Errors
 Lost or Stolen ATM or Debit Cards
 Overdrafts for One-Time Debit Card Transactions and ATM Cards
 Limited Stop-Payment Privileges
 Additional Rights
 For More Information and Complaints

32
Electronic Fund Transfers
Electronic banking, also known as electronic fund transfer (EFT), uses computer and
electronic technology in place of checks and other paper transactions. EFTs are initiated
through devices like cards or codes that let you, or those you authorize, access your
account. Many financial institutions use ATM or debit cards and Personal Identification
Numbers (PINs) for this purpose. Some use other types of debit cards that require your
signature or a scan. For example, some use radio frequency identification (RFID) or other
forms of "contactless" technology that scan your information without direct contact with
you. The federal Electronic Fund Transfer Act (EFT Act) covers some electronic consumer
transactions.

Here are some common EFT services:

ATMs are electronic terminals that let you bank almost virtually any time. To withdraw
cash, make deposits, or transfer funds between accounts, you generally insert an ATM card
and enter your PIN. Some financial institutions and ATM owners charge a fee, particularly
if you don't have accounts with them or if your transactions take place at remote locations.
Generally, ATMs must tell you they charge a fee and the amount on or at the terminal
screen before you complete the transaction. Check with your institution and at ATMs you
use for more information about these fees.
Direct Deposit lets you authorize specific deposits — like paychecks, Social Security
checks, and other benefits — to your account on a regular basis. You also may pre-
authorize direct withdrawals so that recurring bills — like insurance premiums, mortgages,
utility bills, and gym memberships — are paid automatically. Be cautious before you pre-
authorize recurring withdrawals to pay companies you aren't familiar with; funds from your
bank account could be withdrawn improperly. Monitor your bank account to make sure
direct recurring payments take place and are for the right amount.
Pay-by-Phone Systems let you call your financial institution with instructions to pay certain
bills or to transfer funds between accounts. You must have an agreement with your
institution to make these transfers.

33
Personal Computer Banking lets you handle many banking transactions using your
personal computer. For example, you may use your computer to request transfers between
accounts and pay bills electronically.
Debit Card Purchase or Payment Transactions let you make purchases or payments with a
debit card, which also may be your ATM card. Transactions can take place in-person,
online, or by phone. The process is similar to using a credit card, with some important
exceptions: a debit card purchases or payment transfers money quickly from your bank
account to the company's account, so you have to have sufficient funds in your account to
cover your purchase. This means you need to keep accurate records of the dates and
amounts of your debit card purchases, payments, and ATM withdrawals. Be sure you know
the store or business before you provide your debit card information to avoid the possible
loss of funds through fraud. Your liability for unauthorized use, and your rights for dealing
with errors, may be different for a debit card than a credit card.
Electronic Check Conversion converts a paper check into an electronic payment in a store
or when a company gets your check in the mail.
When you give your check to a cashier in a store, the check is run through an electronic
system that captures your banking information and the amount of the check. You sign a
receipt and you get a copy for your records. When your check is given back to you, it
should be voided or marked by the merchant so that it can't be used again. The merchant
electronically sends information from the check (but not the check itself) to your bank or
other financial institution, and the funds are transferred into the merchant's account.

When you mail a check for payment to a merchant or other company, they may
electronically send information from your check (but not the check itself) through the
system; the funds are transferred from your account into their account. For a mailed check,
you still should get notice from a company that expects to send your check information
through the system electronically. For example, the company might include the notice on
your monthly statement. The notice also should state if the company will electronically
collect a fee from your account — like a "bounced check" fee — if you don’t have enough
money to cover the transaction.
Be careful with online and telephone transactions that may involve the use of your bank
account information, rather than a check. A legitimate merchant that lets you use your bank
34
account information to make a purchase or pay on an account should post information
about the process on its website or explain the process on the phone. The merchant also
should ask for your permission to electronically debit your bank account for the item you're
buying or paying on. However, because online and telephone electronic debits don't occur
face-to-face, be cautious about sharing your bank account information. Don't give out this
information when you have no experience with the business, when you didn’t initiate the
call, or when the business seems reluctant to discuss the process with you. Check your bank
account regularly to be sure that the right amounts were transferred.

Not all electronic fund transfers are covered by the EFT Act. For example, some financial
institutions and merchants issue cards with cash value stored electronically on the card
itself. Examples include prepaid phone cards, mass transit passes, general purpose
reloadable cards, and some gift cards. These "stored-value" cards, as well as transactions
using them, may not be covered by the EFT Act, or they may be subject to different rules
under the EFT Act. This means you may not be covered for the loss or misuse of the card.
Ask your financial institution or merchant about any protections offered for these cards

Disclosures
To understand your rights and responsibilities for your EFTs, read the documents you get
from the financial institution that issued your "access device" – the card, code or other way
you access your account to transfer money electronically. Although the method varies by
institution, it often involves a card and/or a PIN. No one should know your PIN but you
and select employees at your financial institution. You also should read the documents you
receive for your bank account, which may contain more information about EFTs.

Before you contract for EFT services or make your first electronic transfer, the institution
must give you the following information in a format you can keep.

 a summary of your liability for unauthorized transfers

 the phone number and address for a contact if you think an unauthorized transfer
has been or may be made, the institution's "business days" (when the institution is

35
 open to the public for normal business), and the number of days you have to report
suspected unauthorized transfers

 the type of transfers you can make, fees for transfers, and any limits on the
frequency and dollar amount of transfers

 a summary of your right to get documentation of transfers and to stop payment on

a pre-authorized transfer, and how you stop payment

 a notice describing how to report an error on a receipt for an EFT or your statement,
to request more information about a transfer listed on your statement, and how long
you have to make your report

 a summary of the institution's liability to you if it fails to make or stop certain

transactions

 circumstances when the institution will share information about your account with
third parties

 a notice that you may have to pay a fee charged by operators of ATMs where you
don't have an account, for an EFT or a balance inquiry at the ATM, and charged by
networks to complete the transfer.

You also will get two more types of information for most transactions: terminal receipts
and periodic statements. Separate rules apply to deposit accounts from which pre-
authorized transfers are drawn. For example, pre-authorized transfers from your account
need your written or similar authorization, and a copy of that authorization must be given
to you. Additional information about pre-authorized transfers is in your contract with the
financial institution for that account. You're entitled to a terminal receipt each time you
initiate an electronic transfer, whether you use an ATM or make a point-of-sale electronic
transfer, for transfers over $15. The receipt must show the amount and date of the transfer,
and its type, like "from savings to checking." It also must show a number or code that
identifies the account, and list the terminal location and other information. When you make
a point-of-sale transfer, you'll probably get your terminal receipt from the salesperson.

You won't get a terminal receipt for regularly occurring electronic payments that you've
pre-authorized, like insurance premiums, mortgages, or utility bills. Instead, these transfers

36
will appear on your statement. If the pre-authorized payments vary, however, you should
get a notice of the amount that will be debited at least 10 days before the debit takes place.

You're also entitled to a periodic statement for each statement cycle in which an electronic
transfer is made. The statement must show the amount of any transfer, the date it was
credited or debited to your account, the type of transfer and type of account(s) to or from
which funds were transferred, the account number, the amount of any fees charged, the
account balances at the beginning and end of the statement cycle, and the address and phone
number for inquiries. You're entitled to a quarterly statement whether or not electronic
transfers were made.

Keep and compare your EFT receipts with your periodic statements the same way you
compare your credit card receipts with your monthly credit card statement. This will help
you make the best use of your rights under federal law to dispute errors and avoid liability
for unauthorized transfers.

Errors
You have 60 days from the date a periodic statement containing a problem or error was
sent to you to notify your financial institution. The best way to protect yourself if an error
occurs is to notify the financial institution by certified letter. Ask for a return receipt so you
can prove that the institution got your letter. Keep a copy of the letter for your records.

Under federal law, the institution has no obligation to conduct an investigation if you miss
the 60-day deadline.
Once you've notified the financial institution about an error on your statement, it has 10
business days to investigate. The institution must tell you the results of its investigation
within three business days after completing it, and must correct an error within one business
day after determining that the error has occurred. An institution usually is permitted to take
more time — up to 45 days — to complete the investigation, but only if the money in
dispute is returned to your account and you're notified promptly of the credit. At the end of
the investigation, if no error has been found, the institution may take the money back if it
sends you a written explanation.

37
An error also may occur in connection with a point-of-sale purchase with a debit card. For
example, an oil company might give you a debit card that lets you pay for gas directly from
your bank account. Or you may have a debit card that can be used for a various types of
retail purchases. These purchases will appear on your bank statement. In case of an error
on your account, however, you should contact the card issuer (for example, the oil company
or bank) at the address or phone number provided by the company for errors. Once you've
notified the company about the error, it has 10 business days to investigate and tell you the
results. In this situation, it may take up to 90 days to complete an investigation, if the money
in dispute is returned to your account and you're notified promptly of the credit. If no error
is found at the end of the investigation, the institution may take back the money if it sends
you a written explanation.

Lost or Stolen ATM or Debit Cards

If your credit card is lost or stolen, you can't lose more than $50. If someone uses your
ATM or debit card without your permission, you can lose much more.

If you report an ATM or debit card missing to the institution that issues the card before
someone uses the card without your permission, you can't be responsible for any
unauthorized withdrawals. But if unauthorized use occurs before you report it, the amount
you can be responsible for depends on how quickly you report the loss to the card issuer.

 If you report the loss within two business days after you realize your card is missing,
you won't be responsible for more than $50 of unauthorized use.

 If you report the loss within 60 days after your statement is mailed to you, you could
lose as much as $500 because of an unauthorized transfer.

 If you don’t report an unauthorized use of your card within 60 days after the card
issuer mails your statement to you, you risk unlimited loss; you could lose all the
money in that account, the unused portion of your maximum line of credit
established for overdrafts, and maybe more.

If an extenuating circumstance, like lengthy travel or illness, keeps you from notifying the
card issuer within the time allowed, the notification period must be extended. In addition,

38
if state law or your contract imposes lower liability limits than the federal EFT Act, the
lower limits apply.

Once you report the loss or theft of your ATM or debit card to the card issuer, you're not
responsible for additional unauthorized use. Because unauthorized transfers may appear on
your statements, though, read each statement you receive after you've reported the loss or
theft. If the statement shows transfers that you didn't make or that you need more
information about, contact the card issuer immediately, using the special procedures it
provided for reporting errors.

Overdrafts for One-Time Debit Card Transactions and ATM Cards

If you make a one-time purchase or payment with your debit card or use your ATM
card and don't have sufficient funds, an overdraft can occur. Your bank must get
your permission to charge you a fee to pay for your overdraft on a one-time debit
card transaction or ATM transaction. They also must send you a notice and get your
opt-in agreement before charging you.

For accounts that you already have, unless you opt-in, the transaction will be
declined if you don't have the funds to pay it, and you can't be charged an overdraft
fee. If you open a new account, the bank can't charge you an overdraft fee for your
one-time debit card or ATM transactions, either, unless you opt-in to the fees. The
bank will give you a notice about opting-in when you open the account, and you can
decide whether to opt-in. If you opt-in, you can cancel any time; if you don’t opt-
in, you can do it later.

These rules do not apply to recurring payments from your account. For those
transactions, your bank can enroll you in their usual overdraft coverage. If you don’t
want the coverage (and the fees), contact your bank to see if they will let you
discontinue it for those payments.

39
Limited Stop-Payment Privileges
When you use an electronic fund transfer, the EFT Act does not give you the right to stop
payment. If your purchase is defective or your order isn't delivered, it's as if you paid cash:
It's up to you to resolve the problem with the seller and get your money back.

One exception: If you arranged for recurring payments out of your account to third parties,
like insurance companies or utilities, you can stop payment if you notify your institution at
least three business days before the scheduled transfer. The notice may be written or oral,
but the institution may require a written follow-up within 14 days of your oral notice. If
you don’t follow-up in writing, the institution's responsibility to stop payment ends.

Although federal law provides limited rights to stop payment, financial institutions may
offer more rights or state laws may require them. If this feature is important to you, shop
around to be sure you're getting the best "stop-payment" terms available.

Additional Rights
The EFT Act protects your right of choice in two specific situations: First, financial
institutions can't require you to repay a loan by preauthorized electronic transfers. Second,
if you're required to get your salary or government benefit check by EFT, you can choose
the institution where those payments will be deposited.

For More Information and Complaints

If you decide to use EFT, keep these tips in mind:

 Take care of your ATM or debit card. Know where it is at all times; if you lose it,
report it as soon as possible.

 Choose a PIN for your ATM or debit card that's different from your address,
telephone number, Social Security number, or birthdate. This will make it more
difficult for a thief to use your card.

 Keep and compare your receipts for all types of EFT transactions with your
statements so you can find errors or unauthorized transfers and report them.

40
  Make sure you know and trust a merchant or other company before you share any
bank account information or pre-authorize debits to your account. Be aware that
some merchants or companies may process your check information electronically
when you pay by check.

 Read your monthly statements promptly and carefully. Contact your bank or other
financial institution immediately if you find unauthorized transactions and errors.

 If you think a financial institution or company hasn’t met its responsibilities to you
under the EFT Act, you can complain to the appropriate federal agency. Visit the
Consumer Financial Protection Bureau or HelpWithMyBank.gov, a site maintained
by the Office of the Comptroller of the Currency, for answers to frequently-asked
questions on topics like bank accounts, deposit insurance, credit cards, consumer
loans, insurance, mortgages, identity theft, and safe deposit boxes, and for other
information about federal agencies that have responsibility for financial
institutions.

4.2: 5 Issues and Challenges in The Online Banking Sector

Online banking has many benefits. Two of the most important are speed and convenience.
People who participate in online banking can access their accounts, view their statements,
make transactions, pay bills, and more, all from their homes, or on the go. It is because of
these benefits that roughly 51 percent of U.S. adults participate in online banking.

However, despite the benefits of online banking, there is also a number of distinct issues
and challenges in the online banking sector. These are highly significant both for banks
that offer online banking, but also for their customers, who depend on the banks to operate
effectively.

41
Online banking marketers need to know these challenges so that they can efficiently
navigate them.

Here are some of the top issues and challenges in the online banking sector that
marketers need to be aware of:

1. Traditional Banking Habits

Despite the benefits of online banking, 49 percent of American adults do not participate in
it at all. This happens mainly because traditional banking is what many people are used to
and it can take time for them to break habits. So, online banking marketers should focus
on ways to convince traditional banking users to start using online banking services.

These marketing efforts should specifically highlight the numerous benefits of online
banking. They need to show people how online banking can solve traditional banking
problems more efficiently (having to actually go to bank branches, higher fees, etc.)

2. Security

42
 .

Security is one of the most significant challenges for online banking marketers. This is
because, in the past, if a robber was going to steal a person’s bank savings, he or she would
have to break into the bank vault, and make a daring escape with the money. This was an
extremely difficult prospect and involved a lot of danger and risk.

With online banking, cyber criminals simply need to ascertain certain personal information
to break into a person’s account and steal their money. It can be done anonymously, and
involves significantly less physical danger than in the past.

In fact, in the U.K. in 2015, roughly 130 million British pounds were stolen from online
bank accounts through fraud. So, security is still a major issue for online banks, and their
customers.

Marketing professionals in the online banking sector need to focus on demonstrating and
explaining the security of online banks to overcome this challenge.

43
3. Transaction Difficulty

It can be significantly more difficult and time consuming to deposit or withdraw money
from an online bank. Not only do online banks often have fewer ATM’s than their
traditional counterparts, but it also can simply take longer amounts of time for deposits to
be processed and put into a bank account.

For example, it takes roughly 3-5 days for deposits to show up in accounts for PayPal, one
of the largest online banks. This is an issue that online banking marketers will most likely
struggle with, until online banks speed up their transaction times.

4. Technical Issues

Because online banks rely so heavily on their online platforms, this means that they can
generate substantial losses if their systems crash or if there are bugs in their code. A single
technical issue that causes a bank to be down for a day could cost the bank millions in
losses.

44
It can also wreak havoc for the bank customers who may not be able to make payments or
conduct transactions during the time that the site is down. 54 percent of consumers now
use a mobile banking app. So, it is key not just for banks to have their online platforms
running smoothly, but also, their mobile apps.

A loss of funds or data due to a crash is something that can be very worrisome for bank
customers. So, marketers should prioritize alleviating this worry by explaining how
account funds will not be lost if technical issues occur.

5. Small Budgets

Many startups have to operate on shoestring marketing budgets before they grow to a
larger size. Obviously this can be a major challenge. If your marketing budget is small,
then you need to focus on the priority expenses.

The inbound marketing strategies of creating a search engine optimized website, making
accounts for all of the biggest social media networks (Facebook, LinkedIn, Twitter, etc)
and starting a blog should all be prioritized.

On your website, you should also have an option to allow visitors to join your mailing list.
Furthermore, a good PPC campaign can be a very good investment for your company. In
fact, businesses make an average of $3 on every $1.60 they spend on AdWords.

45
4.2: 8 tips to use internet banking safely

There are various ways in which fraudsters may try to deceive you into giving them
your personal and security details. Here are 8 tips to use internet banking safely

The recent financial breach in the Indian banking system which led to details of over 3.2
million debit cards being compromised, has put a question mark over the security of
'convenient' electronic transactions. Technology has made banking very easy: Many
banking functions are now available to you 24X7 and at your fingertips via the mobile. But
the flip side of the coin has now shown up. With all the advantages that the world of internet
banking offers, there are certain risks involved, which remain huge concerns for the users.

If a recent survey by Telenor is to be believed Indians are losing more money to online
fraudsters than their Asian counterparts. As per the statistics, 36% Indians were cheated
online, which is about Rest 8.19 lakh average financial loss per person from Internet scams,
compared with Rest 6.81 lakh per person in Asia. The survey further reveals 17% of the
respondents have fallen prey to fake bank e-mail fraud.

There are various ways in which fraudsters may try to deceive you into giving them your
personal and security details. Here are some of the common online banking frauds that are
prevalent -

Trojan: Trojan is an internet virus that gets installed in your computer while browsing
internet or downloading from unsecured websites. . Once a Trojan is installed in your
system the malware monitors your online activities and reads/steals sensitive information
such as passwords and credit card numbers etc.

Phishing Emails: As the name suggests, these are fraudulent emails, claiming to come
from the authorized channel. Further explaining the Phishing scams, Deepak Kinged, Vice
President, Banking and Financial Services, Virtusa Polaris, a financial technology firm
serving leading software vendors in banking & financial services, said, "Phishing involves
installing 'malware' or 'spyware' that reads sensitive client information including client

46
details, passwords and PINs at the point of contact on channel. This channel could be an
ATM, internet banking site, mobile banking app or the payment interface on an ecommerce
site."

Money mule / Additional income email scam: Money Mules are unaware
victims, invariably job-seekers and those seeking to make easy-money online. They are
lured by fraudsters posing as coming from companies with websites and offering them high
commission to get a small job done or huge salary for a part time work from home job.

Such fraudsters will either ask you for an upfront payment as an investment, that will get
you stupendous returns or offer you a commission to make transactions using your account.
He will ask for your bank account details and deposit money in it and then further direct
you to transfer it to accounts of other money mules on commission basis. This transferring
of funds could lead you into criminal misdemeanors.

Speaking about the risks involved in using smart phones, Kinged said, "In today's context,
the threat of fraud happening on the mobile channel is a lot higher than the other channels.
Many users install apps on their phones that grant unconditional access to their data and
other apps installed on the phone. These 'malware' apps can then monitor your inputs on a
mobile banking app for example and retrieve sensitive data to be passed on to the app
owner."

Here are 8 tips to use internet banking safely:

1. Always use genuine anti-virus software

To protect your computer from phishing, malware, and other security threats always use
genuine anti-virus software. Anti-virus helps in detecting and removing spyware that can
steal your sensitive information.

2. Avoid Using Public Wi-Fi or Use VPN software

The biggest threat of an open Wi-Fi network is that the hacker can sit in between the end
user and the hotspot and can trace all the data without any difficulty. Hackers see unsecured
connection as an opportunity to introduce malware into your device. So, usage of public

47
Wi-Fi hotspots for internet or mobile banking and making payments on ecommerce sites
should be avoided.
However if you are a regular public Wi-Fi user, consider setting up a VPN software on
your computer. It creates a secure tunnel between the computer and the internet and
prevents hackers from intercepting the traffic.

3. Check for latest updates of your Smartphone's operating system

Smartphone users should make sure their operating system is updated with the latest
security patches and updates. They should also not remove the security controls from the
phone often called 'jail breaking' or 'rooting'. They should always look to restrict access
that apps ask for when being installed to only what the app really needs.

4. Change your password regularly and ensure it's a strong one

This might sound clichéd but, it is important to keep your account safe and helps you
maintain confidentiality. And needless to say, don't share your details with anyone. Your
bank will never ask for your confidential information via phone or email. If you have
written your banking passwords in a notepad or a dairy, make sure it remains confidential.
Further, be sure to choose strong and long passwords. For additional security to financial
transactions through Internet Banking, create and maintain different passwords for log-in
and for transactions.

5. Subscribe for mobile notifications

If you haven't done it already, do it now. These notifications will alert you quickly of any
suspicious transaction. Whether the transaction exceeds the specified limit or is within it,
you'll get an alert which will tell you the remaining account balance. Not just the
transactions, the bank will alert you of the unsuccessful login attempts to your net-banking
account.

6. Avoid signing-in to your net-banking account via mailers

It is always safer to type the bank URL yourself than getting redirected to it via a
promotional mail or any other third party website. As mentioned earlier a bank will never

48
ask you to for the login credentials to your account. So if there's a fraudulent email which
offers to redirect you to your bank's website and you enter your personal details on landing
page after clicking it, there's a huge risk of your login credentials being stolen. Hence, if
you receive an email from a bank asking for login details, treat it with suspicion.

How can I tell if a web page is secured?

Usually, while browsing internet, the URLs of the website begin with the letters "http".
However, over a secure connection the address displayed should begin with "https" - note
the "s" at the end.

So, while logging on, check for 'https://' in the URL, which assures that all communications
between your browser and the website are encrypted and ensure that it is your bank's
authentic website. Further, the lock icon before the 'https://' is an assurance for a secure
connection.

7. Do not use public computers to login to net banking

If you are using a public computer, the risk of compromising your login credentials is
higher. However if you have to login from such places, make sure you clear the cache and
browsing history, and delete all the temporary files from the computer. Also, never allow
the browser to remember your ID and password. Or just go incognito.

49
8. Check your account regularly
Most banks have a 'last logged in' or 'login history' tab on their web sites. So, if you notice
irregularities change your password and get in touch with your bank immediately.

4.3: The Various Forms of E Banking Information Technology Essay

Electronic banking, also known as electronic funds transfer (EFT), is simply the use of
electronic means to transfer funds directly from one account to another, rather than by
cheque or cash. You can use electronic funds transfer to:

Have your paycheck deposited directly into your bank or credit union checking account.

Withdraw money from your checking account from an ATM machine with a personal
identification number (PIN), at your convenience, day or night.

Instruct your bank or credit union to automatically pay certain monthly bills from your
account, such as your auto loan or your mortgage payment.

Have the bank or credit union transfer funds each month from your checking account to
your mutual fund account.

Have your government social security benefits check or your tax refund deposited directly
into your checking account.

Buy groceries, gasoline and other purchases at the point-of-sale, using a check card rather
than cash, credit or a personal check.

Use a smart card with a prepaid amount of money embedded in it for use instead of cash at
a pay phone, expressway road toll, or on college campuses at the library’s photocopy
machine or bookstores

50
 .Use your computer and personal finance software to coordinate your total personal
financial management process, integrating data and activities related to your income,
spending, saving, investing, recordkeeping, bill-paying and taxes, along with basic
financial analysis and decision making.

OTHER FORMS OF ELECTRONIC BANKING

Direct Deposit-

The quick and easy way to have immediate access to your money

Enjoy the peace of mind knowing your monthly bills are paid, and pay cheques and pension
cheques are automatically deposited into your account. Direct Deposit is easy and
convenient to arrange and gives you immediate access to your money.

Enrol in direct deposit today! It’s:

 Convenient — there is no risk of your money being held up as a result of unforeseen

circumstances.
 Secure — your payment is safe and secure with virtually no risk of it being lost, stolen or
damaged.
 Reliable — your payment will always be on time, and your money can begin to earn
interest right away.

Two ways to deposit your money:

1. Payroll Direct Deposit

Have your pay cheque deposited automatically into your account when you set up Direct
Deposit for payroll. Simply complete this payroll form with your account information and
provide it to your employer to process.

51
2. Direct Deposit of Government Payments

You can also set up Direct Deposit for recurring government payments such as monthly
pension cheques.

https://www.scotiabank.com/ca/en/personal/bank-accounts/account-services/direct-
deposit.html

Electronic Bill Payment-

Electronic bill presentment and payment (EBPP) is a process that allows the creation and
delivery of bills or invoices as well as facilitates the payment for those invoices over the
Internet. The process or service is primarily used in industries such as retail, financial
services, telecommunications service providers and even utilities providers.

Electronic Check Conversion-

An e-Cheque is the electronic version or representation of paper cheque.

Cash Value Stored

A stored-value card is a payment card with a monetary value stored on the card itself, not
in an external account maintained by a financial institution. Etc.

52
4.4: CONCERNS WITH E-BANKING
As with any new technology new problems are faced.

Customer support – banks will have to create a whole new customer relations department
to help customers. Banks have to make sure that the customers receive assistance quickly
if they need help. Any major problems or disastrous can destroy the banks reputation
quickly and easily. By showing the customer that the Internet is reliable you are able to get
the customer to trust online banking more and more.

Laws – While Internet banking does not have national or state boundaries, the law does.
Companies will have to make sure that they have software in place software market,
creating a monopoly.

Security: customer always worries about their protection and security or accuracy. There
are always question whether or not something took place.

Other challenges: lack of knowledge from customer’s end, sit changes by the banks, etc

53
4.5: E-BANKING GLOBAL PERSPECTIVE
The advent of Internet has initiated an electronic revolution in the global banking sector.
The dynamic and flexible nature of this communication channel as well as its ubiquitous
reach has helped in leveraging a variety of banking activities. New banking intermediaries
offering entirely new types of banking services have emerged as a result of innovative e-
business models. The Internet has emerged as one of the major distribution channels of
banking products and services, for the banks in US and in the European countries.

Initially, banks promoted their core capabilities i.e., products, services and advice through
Internet. Then, they entered the e-commerce market as providers/distributors of their own
products and services. More recently, due to advances in Internet security and the advent
of relevant protocols, banks have discovered that they can play their primary role as
financial intermediators and facilitators of complete commercial transactions via electronic
networks especially through the Internet. Some banks have chosen a route of establishing
a direct web presence while others have opted for either being an owner of financial
services centric electronic marketplace or being participants of a non-financial services
centric electronic marketplace.

The trend towards electronic delivery of banking products and services is occurring partly
as a result of consumer demand and partly because of the increasing competitive
environment in the global banking industry. The Internet has changed the customers’
behaviors who are demanding more customized products/services at a lower price.
Moreover, new competition from pure online banks has put the profitability of even
established brick and mortar banks under pressure. However, very few banks have been
successful in developing effective strategies for fully exploiting the opportunities offered
by the Internet. For traditional banks to define what niche markets to serve and decide what
products/services to offer there is a need for a clear and concise Internet commerce strategy.

Banking transactions had already started taking place through the Internet way back in
1995. The Internet promised an ideal platform for commercial exchange, helping banks to
achieve new levels of efficiency in financial transactions by strengthening customer

54
relationship, promoting price discovery and spend aggregation and increasing the reach.
Electronic finance offered considerable opportunities for banks to expand their client base
and rationalize their business while the customers received value in the form of savings in
time and money.

Global E-banking industry is covered by the following four sections:

E-banking Scenario: It discusses the actual state, prospects, and issues related to E-
banking in Asia with a focus on India, US and Europe. It also deals with the impact of E-
banking on the banking industry structure.

E-banking Strategies: It reveals the key strategies that banks must implement to
derive maximum value through the online channel. It also brings guidance for those
banks, which are planning to build online businesses.

E-banking Transactions: It discusses how Internet has radically transformed

banking transactions. The section focuses on cross border transactions, B2B transactions,
electronic bill payment and presentment and mobile payments. In spite of all the hype, E-
banking has been a non-starter in several countries.

E-banking Trends: It discusses the innovation of new technologies in banks.

E-BANKING SCENARIO:
The banking industry is expected to be a leading player in E-business. While the banks
in developed countries are working primarily via Internet as non-branch banks, banks in
the developing countries use the Internet as an information delivery tool to improve
relationship with customers.
In early 2001, approximately 60 percent of E-business in UK was concentrated in the
financial services sector, and with the expected 10-fold increase of the British E-business
market by 2005, the share of the financial services will further increase. Around one fifth

55
of Finish and Swedish bank customers are banking online, while in US, according to
UNCTAD, online banking is growing at an annual rate of 60 percent and the number of
online accounts has approximately reached 15 million by 2006.
Banks have established an Internet presence with various objectives. Most of them are
using the Internet as a new distribution channel. Financial services, with the use of
Internet, may be offered in an equivalent quantity with lower costs to the more potential
customers. There may be contacts from each corner of the world at any time of day or
night. This means that banks may enlarge their market without opening new branches.
The banks in US are using the Web to reach opportunities in three different categories
i.e., to market information, to deliver banking products and services, and to improve
customer relationship.
In Asia, the major factor restricting growth of E-banking is security, in spite of several
countries being well connected via Internet. Access to high-quality E-banking products is
an issue as well. Majority of the banks in Asia are just offering basic services compared
with those of developed countries. Still, E-banking seems to have a future in Asia. It is
considered that E-banking will succeed if the basic features, especially bill payment, are
handled well. Bill payment was the most popular feature, cited by 40 percent of
respondents of the survey. However, providing this service would be difficult for banks
in Asia because it requires a high level of security and involves arranging transactions
with a variety of players.
In 2001, over 50 percent of the banks in the US were offering E-banking services.
However, large banks appeared to have a clear advantage over small banks in the range
of services they offered. Some banks in US were targeting their Internet strategies
towards business customers. Apart from affecting the way customers received banking
services; E-banking was expected to influence the banking industry structure. The
economics of E-banking was expected to favor large banks because of economies of scale
and scope, and the ability to advertise heavily. Moreover, E-banking offered entry and
expansion opportunities that small banks traditionally lacked.
In Europe, the Internet is accelerating the reconfiguration of the banking industry into
three separate businesses: production, distribution and advice.

56
This reconfiguration is being further driven by the Internet, due to the combined impact
of:

 The emergence of new and more focused business models

 New technological capabilities that reduces the banking relationship and transaction
costs.
 High degree of uncertainty over the impact that new entrants will have on current
business models.

Though E-banking in Europe is still in the evolutionary stage, it is very clear that it is
having a significant impact on traditional banking activities. Unlike in the US, though
large banks in the Europe have a competitive edge due to their ability to invest heavily in
new technologies, they are still not ready to embrace E-banking. Hence, medium-sized
banks and start-ups have an important role to play on the E-banking front if they can take
concrete measures quickly and effectively.

E-BANKING STRATEGIES
Though E-banking offers vast opportunities, yet even less than one in three banks
have an E-banking strategy in place. According to a study, less than 15 percent of banks
with transactional websites will realize profits directly attributable to those sites. Hence,
banks must recognize the seriousness of the challenge ahead and develop a strategy that
will enable them to leverage the opportunities presented by the Internet.
No single E-banking strategy is right for every banking company. But whether they adopt
an offensive or a defensive posture, they must constantly re-evaluate their strategy. In the
fast-paced e-economy, banks have to keep up with the constantly evolving business
models and technology innovations of the Internet space. Early e-business adopter like
Wells Fargo not only entered the E-banking industry first but also showed flexibility to
change as the market developed. Not many banks have been as e-business-savvy. But the
pressure is now building for all banks to develop sound e-business strategies that will
attract and retain increasingly discriminating customers.
The major problem with the banks, which have already invested huge amounts in their

57
online initiatives, is that their online offerings remain unprofitable. Though banks have
led some existing customers in their online programs, they are not getting customers in
large numbers. This has made banks wonder whether there is any value in the online
channel. Just ling customers for online banking may not be sufficient until and unless
they use the site actively. Banks must make efforts to increase their site usage by
customers and effectively co-ordinate the online channel with branches and call centers.
Then only they will be able to derive maximum value that includes cost reduction, cross-
selling opportunities, and higher customer retention.
Customers have some rational reasons for staying offline. Some of these reasons include
usability features of the site, concerns about security and frequent complaints that signing
up is complicated and time-consuming. Banks can solve these problems by refocusing
investment on improving the site's basic functionality and user-friendliness, and avoiding
advanced features that most customers neither understand nor value. Developing
advanced features that appeal to a relatively small numbers of customers, creates far less
value than strengthening core capabilities and getting customers to use them. Banks must
make efforts to familiarize customers with their sites and show them how easy and
efficient the online channel is to use.
Integrating the online channel with the rest of the bank is another important issue that
banks must focus upon. This is important because nearly all the value of the online
channel is realized offline _ in cross sales completed in other channels and in cost
reductions. An actively used online channel should also serve as a medium to sell
banking services for the branch staff, the call center, and the relationship manager.
Integrated channels working together are far more effective than a group of channels
working without any coordination.
To facilitate this integration, banks must formulate paths that people in various customer
segments are likely to take among the channels. The interactions in each channel can then
be worked around these paths. For example, a call center representative must work out
which channel(s) the customer used before coming to her, and which channel(s) the
customer is likely to visit next. Each channel must have entry and exit points that must
welcome customers and then send to other channels. Hence, the overall goal of banks is
to create a seamless multichannel experience.

58
On the other hand, those banks that are planning to build their online businesses will have
to understand several strategic issues like do they have the right business model for E-
banking? How should they price their E-banking products and services? Bankers
planning to move into E-banking have to explore different options, make investments and
have to develop a variety of partnerships. They have to put their time and efforts to
identify the best opportunities. In the case of traditional banks, if they are too aggressive
in using price incentives to build their e-business, they risk the profitability of their
traditional business. However, if they do not offer sufficient price incentives for
customers to bank online their efforts to build a sound e- banking business may not
fructify.
Banks have to be creative in rethinking organizational structures and management
processes. Traditional banks that are conservative in nature may find it difficult to attract
and retain online talent. Moreover, getting people in the traditional business to help build
an e-enterprise would not be an easy task. To make all this happen, requires a major
revision of incentive systems, planning and budgeting processes, and management roles.
Banks can exploit the opportunities provided by the Internet if they demonstrate courage,
use their imagination, and take decisive action.
While most of the banks have started focusing on E-banking activities, a new challenge
in the form of mobile banking has emerged. M-Banking is both an additional opportunity
for banks to offer their online services and an additional channel from which to access
new customers and cross-sell to existing customers. Rapidly changing lifestyles of
customers and their demand for more speed and convenience has subdued the role of
branch banking to a certain extent. With the proliferation of new technologies, dis-
intermediation of traditional channels is being witnessed. Banks can go beyond their
traditional role as a channel for banking/financial services and can become providers of
personalized information.

They can successfully leverage m-banking to:

 Provide personalized products and services to specific customers and thus increase
customer loyalty.

59
 Exploit additional sources of revenue from subscriptions, transactions and third-party
referrals.

M-Banking gives banks the opportunity to significantly expand their customer

relationships provided they position themselves effectively. To leverage these
opportunities, they must form structured alliances with service affiliates, and acquire
competitive advantage in collecting, processing and deploying customer information

E-BANKING TRANSACTIONS
The introduction of new technologies has radically transformed banking transactions.
In the past, customers had to come physically into the bank branch to do banking
transactions including transfers, deposits and withdrawals. Banks had to employ several
tellers to physically make all those transactions. Automatic Teller Machines (ATMs)
were then introduced which allowed people to do their banking on their own, practically
anytime and anywhere. This helped the banks cut down on the number of tellers and
focus on managing money. The Internet then brought another venue with which
customers could do banking, reducing the need for ATMs. Online banking allowed
customers to do financial transactions from their PCs at home via Internet. Now, with the
emergence of Wireless Application Protocol (WAP) technology, banks can use the
infrastructure and applications developed for the Internet and move it to mobile phones.
Now people no longer have to be tied to a desktop PC to do their banking. The WAP
interface is much faster and convenient than the Internet, allowing customers to see
account details, transaction details, make bill payments, and even check credit card
balance.
The cost of the average payment transaction on the Internet is minimum. Several studies
found that the estimated transaction cost through mobile phone is 16 cents, a fully
computerized bank using its own software is 26 cents, a telephone bank is 54 cents, a
bank branch, $1.27, an ATM, 27 cents, and on the Internet it costs just 13 cents. As a
result, the use of the Internet for commercial transactions started to gain momentum in
1995. More than 2,000 banks in the world now have transactional websites and the
growth of online lending solutions is making them more cost efficient. Recent
developments are now encouraging banks to target small businesses as a separate lending

60
category online.
Banks are increasingly building payment infrastructure with various security mechanisms
(SSL, SET) because there is tremendous potential for profit, as more and more payments
will pass through the Internet. However, the challenge for banks is to offer a payments
back-bone system that will be open enough to support multiple payment instruments
(credit cards, debit cards, direct debit to accounts, e-checks, digital money etc.) and
scalable enough to allow for a stable service regardless of the workload.
The market for Electronic Bill Presentment and Payment (EBPP) is growing. According
to a study, 18 million households in the US are expected to pay their bills online by 2003
compared to 2 million households in 2001. As more number of bill payers are getting
online, several banks are making efforts to find ways to meet the growing needs of EBPP.
Established banks can emerge as key online integrators of customer bills and can
capitalize on this high potential market. Growing with the popularity of EBPP is also the
paying of multiple bills at a single site known as bill aggregation. Offering online bill
payment and aggregation will increase the competitiveness and attractiveness of E-
banking services and will allow banks to generate service-fee income from the billers.
In the B2B segment, the customer value proposition for online bill payment is more
compelling. B2B e-commerce is expected to grow from $406 ban in 2000 to $2.7 TN by
2004, and more than half of all transactions will be routed through online B2B
marketplaces. There is a need for automated payment systems to reduce cost and human
error, and enhance cash-flow management. To meet this need, a group of banks and non-
financial institutions led by Citibank and Wells Fargo have formed a company called
Financial Settlements Matrix (FM). It provides business buyers and sellers with access to
secure payment processing, invoicing and other services that participating financial
services firms offer.
A B2B marketplace would provide minimum value to its customers if it just matches
buyers and sellers, leaving the financial aspects of transactions to be handled through
traditional non-Internet channels. Hence, the marketplace must be capable of providing
the payments processing, treasury management services, payables/receivables data flows,
and credit solutions to complete the full cycle of a commercial transaction on the Internet.
The web-based B2B e-commerce offers tremendous opportunities for banks, payment

61
technology vendors and e-commerce companies to form strategic alliances. This new
form of collaboration between partners with complementary core competencies may
prove to be an effective business model for e-business.

E-BANKING TREND
Internet banking is gaining ground. Banks increasingly operate websites through
which customers are able not only to inquire about account balances and interest and
exchange rates but also to conduct a range of transactions. Unfortunately, data on Internet
banking are scarce, and differences in definitions make cross-country comparisons
difficult. Even so, one finds that Internet banking is particularly widespread in Austria,
Korea, the Scandinavian countries, Singapore, Spain, and Switzerland, where more than
75 percent of all banks offer such services (see chart). The Scandinavian countries have
the largest number of Internet users, with up to one-third of bank customers in Finland
and Sweden taking advantage of E-banking.
In the United States, Internet banking is still concentrated in the largest banks. In mid-
2001, 44 percent of national banks maintained transactional websites, almost double the
number in the third quarter of 1999. These banks account for over 90 percent of national
banking system assets. The larger banks tend to offer a wider array of electronic banking
services, including loan applications and brokerage services. While most U.S. consumers
have accounts with banks that offer Internet services, only about 6 percent of them use
these services.
To date, most banks have combined the new electronic delivery channels with traditional
brick and mortar branches ("brick and click" banks), but a small number have emerged
that offer their products and services predominantly, or only, through electronic
distribution channels. These "virtual" or Internet-only banks do not have a branch
network but might have a physical presence, for example, an administrative office or
non-branch facilities like kiosks or automatic teller machines. The United States has
about 30 virtual banks; Asia has 2, launched in 2000 and 2001; and the European Union

62
has several—either as separately licensed entities or as subsidiaries or branches of brick
and mortar banks.

4.6: THE INDIAN EXPERIENCE

India is still in the early stages of E-banking growth and development. Competition and
changes in technology and lifestyle in the last five years have changed the face of banking.
The changes that have taken place impose on banks tough standards of competition and
compliance. The issue here is – ‘Where does India stand in the scheme of E-banking.’ E-
banking is likely to bring a host of opportunities as well as unprecedented risks to the
fundamental nature of banking in India.

The impact of E- Banking in India is not yet apparent. Many global research companies
believe that Embanking adoption in India in the near future would be slow compared to
other major Asian countries. Indian E-banking is still nascent, although it is fast becoming
a strategic necessity for most commercial banks, as competition increases from private
banks and non-banking financial institutions.

Despite the global economic challenges facing the IT software and services sector, the
outlook for the Indian industry remains optimistic.

The Reserve Bank of India has also set up a “Working Group on E-banking to examine
different aspects of E-banking. The group focused on three major areas of E-banking i.e.
(1) Technology and Security issues (2) Legal issues and (3) Regulatory and Supervisory
issues. RBI has accepted the guidelines of the group and they provide a good insight into
the security requirements of E-banking.

63
The importance of the impact of technology and information security cannot be doubted.
Technological developments have been one of the key drivers of the global economy and
represent an instrument that if exploited well can boost the efficiency and competitively of
the banking sector. However, the rapid growth of the Internet has introduced a completely
new level of security related problems. The problem here is that since the Internet is not a
regulated technology and it is readily accessible to millions of people, there will always be
people who want to use it to make illicit gains. The security issue can be addressed at three
levels. The first is the security of customer information as it is sent from the customer’s PC
to the Web server. The second is the security of the environment in which the Internet
banking server and customer information database reside. Third, security measures must
be in place to prevent unauthorized users from attempting to long into the online banking
section of the website.

From a legal perspective, security procedure adopted by banks for authenticating users’
needs to be recognized by law as a substitute for signature. In India, the Information
Technology Act, 2000, in section 3(2) provides for a particular technology (viz., the
asymmetric crypto system and hash function) as a means of authenticating electronic
record. Any other method used by banks for authentication should be recognized as a
source of legal risk.

Regarding the regulatory and supervisory issues, only such banks which are licensed and
supervised and have a physical presence in India will be permitted to offer E-banking
products to residents of India. With institutions becoming more and more global and
complex, the nature of risks in the international financial system has changed. The
Regulators themselves who will now be paying much more attention to the qualitative
aspects of risk management have recognized this.

Though the Indian Government has announced cyber laws, most corporate are not clear
about them, and feel they are insufficient for the growth of E-commerce. Lack of consumer
protection laws is another issue that needs to be tackled, if people have to feel more
comfortable about transacting online.

64
Taxation of E-commerce transaction has been one of the most debated issues that are yet
to be resolved by India and most other countries. The explosive growth of e-commerce has
led many executives to question how their companies can properly administer taxes on
Internet sales. Without sales tax, online sellers get a price advantage over brick and mortar
companies. While e-commerce has been causing loss of tax revenues to the Government,
many politicians continue to insist that the Net must remain tax-free to ensure continued
growth, and that collecting sales taxes on Net commerce could restrict its expansion.

A permanent ban on custom duties on electronic transmissions, international tax rules that
are neutral, simple and certain and simplification of state and local sales taxes. The Central
Board of Direct Taxes, which submitted its report in September 2001, recommended that
e-commerce transaction should be taxed just like traditional commerce.

Also RBI is about to become the first Government owned digital signature Certifying
Authority (CA) in India. The move is expected to initiate the electronic transaction process
in the banking sector and will have far-reaching results in terms of cost and speed of
transactions between government- owned banks.

Thus efficiency, growth and the need to satisfy a growing tech-survey consumer base are
three clear rationales for implementing E-banking in India. The four forces-customers,
technology, convergence and globalization have the most important effect on the Indian
financial sector and these changes are forcing banks to

redefine their business models and integrate technology into all aspect of operation.

65