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UNIVERSITY OF MUMBAI PROJECT ON E-BANKING BACHELOR OF COMMERCE (BANKING AND INSURANCE) SEMESTER V KRITIKA SIVASUBRAMANIAN (A025) PROJECT GUIDE MR. KANE KETS V.G VAZE COLLEGE OF ARTS, SCIANCE AND COMMERCE MULUND (E), MUMBAI- 400081

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DECLARATION I Ms. KRITIKA SIVASUBRAMANAIAN , student of KETs V. G. Vaze College of Arts, Science and Commerce, Mulund studying in T. Y. Bcom Banking and Insurance, Semester V, Hereby declare that I have completed the project on EBANKING in the academic year 2011-2012. This information is true and to the best of my knowledge and belief.

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E-BANKING ACKNOWLEDGEMENT After so many days of hard work in completing this project, it finally comes to a day of expressing to a number of people. I would like to extend highest appreciation and gratitude to our Principal, Dr. BHARAT. B. SHARMA. A special thanks to Mr. KANE who has always been a combination of strict, vigilant and guided nature. I would also like to thank our Course Coordinator, Mrs. Seema Pawar for providing guidance regarding this project. I thank them for their continuous support and valuable inputs of this project. A special mention must be made to Librarian Mr. Paritosh Pawar and Assisstant Librarian Mrs. Kavita Mehta and also other library staff who have provided me the right information and study material at the right point of time. I would also like to thank the University for giving a chance to conduct this project. From this project I was able to gain more knowledge for the future. I cannot end without thanking my parents and friends on whose constant encouragement and love I have relied throughout my project. Last but not least, thanks to God. May your name be exalted, honored and glorified. THANK YOU ALL.

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E-BANKING DESIGN OF THE STUDY SCOPE The researcher has tried to study about E-BANKING. The project has been designed to cover the concept of INTERNET BANKING. The project tries to take a glance over the various aspects of E-BANKING, its meaning, features, and importance, E-BANKING in Indian context and E-BANKING against the traditional Indian banks. OBJECTIVE To understand the concept of E-BANKING. To study E-BANKING IN INDIA. To cover various aspects relating to E-BANKING and its services.

LIMITATIONS People are not fully aware of E-BANKING concept hence a common The questionnaire and the case study is only limited to Bank of Baroda and not questionnaire survey could not be conducted. to the entire Banking Industry. RESEARCH METHODOLOGY The research methodology for this project was done in one way: 1. Secondary data The secondary information is collected from websites and newspapers.

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EXECUTIVE SUMMARY With cyber cafes and kiosks springing up in different cities access to the Net is going to be easy. Internet banking (also referred as e banking) is the latest in this series of technological wonders in the recent past involving use of Internet for delivery of banking products & services. Even the Morgan Stanley Dean Witter Internet research emphasised that Web is more important for retail financial services than for many other industries. Internet banking is changing the banking industry and is having the major effects on banking relationships. Banking is now no longer confined to the branches were one has to approach the branch in person, to withdraw cash or deposit a cheque or request a statement of accounts. In true Internet banking, any inquiry or transaction is processed online without any reference to the branch (anywhere banking) at any time. Providing Internet banking is increasingly becoming a "need to have" than a "nice to have" service. The net banking, thus, now is more of a norm rather than an exception in many developed countries due to the fact that it is the cheapest way of providing banking services. This project provides a highlight about E-banking and its various services, features, advantages disadvantages and also a case study on one of Indias leading banks: Bank of Baroda.

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INDEX
CHAPTER NO. E-BANKING I. 1.1 MEANING OF E-BANKING 1.2 BACKGROUND OF E-BANKING 1.3 EVOLUTION OF E-BANKING 1.4 NEED FOR E-BANKING 10 11 12 13 TOPIC PAGE NO.

E-BANKING V/S TRADITIONAL BANKING 2.1 USAGE OF E-BANKING II. 2.2 E-BANKING V/S TRADITIONAL BANKING 2.3 IMPACT OF E-BANKING ON TRADITIONAL SERVICES 2.4 CHALLENGES IN E-BANKING FOR DEVELOPING COUNTRIES 2.5 TYPES OF E-BANKING 22 16 17 18 20

SERVICES PROVIDED BY E-BANKING 3.1 ATM SERVICES 3.2 CREDIT CARDS/DEBIT CARDS 3.3 SMART CARD III. 3.4 ELECTRONIC BILL PRESENTMENT AND PAYMENT (EBPP) SERVICE 3.5 F UND TRANSFER 37 7 25 31 33 34

E-BANKING 3.6 RAILWAY PASS, SHOPPING, RECHARGE ETC. 3.7 CONSUMER E-BANKING 3.8 CORPORATE E-BANKING 41 43 45

ADVANTAGES/DISADVANTAGES OF E-BANKING IV. 4.1 MAIN CONCERNS OF E-BANKING 4.2 FEATURES OF E-BANKING 4.3 ADVANTAGES OF E-BANKING 4.4 DISADVANTAGES OF E-BANKING 50 51 52 55

E-BANKING IN INDIA 5.1 E-BANKING IN INDIA V. 5.2 SECURITY IN E-BANKING 5.3 E-BANKING IN INDIA- GUIDELINES BY RBI 5.4 MAJOR BANKS PROVIDING E-BANKING SERVICES VI. CONCLUSION 58 60 61 62 64

VII.

CASE STUDY BANK OF BARODA

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VIII

QUESTIONNAIRE

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CHAPTER I: E-BANKING
WHAT IS e-BANKING? BACKGROUND OF e-BANKING EVOLUTION OF e-BANKING WHY e-BANKING?

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CHAPTER I MEANING OF E-BANKING E-banking means any user with a personal computer and a browser can get connected to his banks website to perform any of the virtual banking functions. In internet banking system the bank has a centralized database that is web-enabled. All the services that the bank has permitted on the internet are displayed in menu. Any service can be selected and further interaction is dictated by the nature of service. The traditional branch model of bank is now giving place to an alternative delivery channels with ATM network. Once the branch offices of bank are interconnected through terrestrial or satellite links, there would be no physical identity for any branch. It would a borderless entity permitting anytime, anywhere and anyhow banking. The network which connects the various locations and gives connectivity to the central office within the organization is called intranet. These networks are limited to organizations for which they are set up. SWIFT is a live example of intranet application. Internet banking (or E-banking) in simple, means any user with a personal computer and a browser can get connected to his banks website to perform any of the virtual banking functions. In internet banking system he bank has a centralized database that is web-enabled. All the services that the bank has permitted on the internet are displayed in menu. Any ser vice can be selected and further interaction is dictated by the nature of service. Once the branch 10

E-BANKING offices of bank are interconnected through terrestrial or satellite links, there would be no physical identity for any branch. It would a borderless entity permitting anytime, anywhere and anyhow banking. The delivery channels include direct dialup connections, private networks, public networks, etc. with the popularity of computers, easy access to Inter net and World Wide Web (WWW), Internet is increasingly used by banks as a channel for receiving instructions and delivering their products and services to their customers. This form of banking is generally referred to as Internet Banking, although the range of products and ser vices offered by different banks vary widely both in their content and sophistication. E-banking is defined as the automated delivery of new and traditional banking products and services directly to customers through electronic, interactive communication channels. E-banking includes the systems that enable financial institution customers, individuals or businesses, to access accounts, transact business, or obtain information on financial products and services through a public or private network, including the Internet. BACKGROUND 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 11

E-BANKING 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. EVOLUTION OF E-BANKING The story of technology in banking started with the use of punched card machines like Accounting Machines or Ledger Posting Machines. The use of technology, at that time, was limited to keeping books of the bank. It further developed with the birth of online real time system and vast improvement in telecommunications during late1970s and 1980s.it resulted in a revolution in the field of banking with convenience banking as a buzzword. Through Convenience banking, the bank is carried to the doorstep of the customer. The 1990s saw the birth of distributed computing technologies and Relational Data Base Management System. The banking industry was simply waiting for these technologies. Now with distribution technologies, one could configure dedicated machines called front-end machines for 12

E-BANKING customer service and risk control while communication in the batch mode without hampering the response time on the front-end machine. Intense competition has forced banks to rethink the way they operated their business. They had to reinvent and improve their products and services to make them more beneficial and cost effective. Technology in the form of Ebanking has made it possible to find alternate banking practices at lower costs. More and more people are using electronic banking products and services because large section of the banks future customer base will be made up of computer literate customer, the banks must be able to offer these customer products and services that allow them to do their banking by electronic means. If they fail to do this will, simply, not survive. New products and services are emerging that are set to change the way we look at money and the monetary system. NEED FOR E-BANKING There are not many inventions that have changed the business of banking as quickly as the e-banking revolution. World over banks are reorienting the business strategies towards new opportunities offered by e-banking. Ebanking has enabled banks to scale borders, charge strategic behavior and thus bring about new possibilities. E-banking has moved real banking behavior closer to neo-classical economic theories of market functioning. Due to the absolute transparency of the market, clients can compare more easily, the services of various banks. For instance on the internet, competitors are only one click away. If clients are not happy with the products, prices, or services offered by a particular bank, they are able to change their banking partner much more easily than in the physical or real 13

E-BANKING bank- client relationship. From the banks point of view, the use of internet has significantly reduced the physical cost of banking operations. The progress in Information Technology has slashed the costs of processing information, while the internet has facilitated its transmission, thus facilitating change in the very essence of the banking business. Around the world, electronic banking services, whether delivered online or through other mechanisms, have spread quickly in recent years. It must be noted that the impact of e-banking is not limited to industrial and advanced emerging economies. Even in countries with underdeveloped banking systems, ebanking has offered many new business opportunities.

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CHAPTER II: TRADITIONAL BANKING V/S INTERNET BANKING

CHAPTER II USAGE OF e-BANKING E-BANKING V/S TRADITIONAL BANKING IMPACT OF E-BANKING ON TRADITIONAL SERVICES TYPES OF INTERNET BANKING OR E-BANKING CHALLENGES IN e-BANKING FOR DEVELOPING COUNTRIES

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USAGE OF E-BANKING The rise in the e-commerce and the use of internet in its facilitation along with the enhanced online security of transactions and sensitive information has been the core reason for the penetration of online banking in everyday life. According to the latest official figures from the office of National Statistics ( ONS 2007) indicate that subscriptions to the internet has grown more than 50% from 25 million in 2005 to 45million in 2007 in India. It has also been estimated that 60% of the population in India use internet in their daily lives. The fundamental shift towards the involvement of the customer in the financial service provision with the help of the technology especially internet has helped to reduce the costs of financial institutions as well as helped client to use the service at anytime and from virtually anywhere with access to an internet connection. The use of electronic banking has removed personnel that facilitate the transactions and has placed additional responsibilities on the customers to transact with the service. The computerization of the banking operations has made maximum impact on:1) Internal Accounting System 2) Customer service 3) Diversification of system

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INTERNET BANKING VERSUS TRADITIONAL BANKING In spite of so many facilities that Internet banking offers us, we still seem to trust our traditional method of banking and is reluctant to use online banking. But here are few cases where Internet banking will turn out to be a better option in terms of saving our money. 'Stop payment' done through Internet banking will not cost any extra fees but when done through the branch, the bank may charge we Rs.50 per cheque plus the service tax. Through Internet banking, we can check our transactions at any time of the day, and as many times as we want to. On the other hand, in a traditional method, we get quarterly statements from the bank and if we request for a statement at our required time, it may turn out to be an expensive affair. The branch may charge us Rs.25 per page, which includes only 30 transactions. Moreover, the bank branch would take eight days to deliver it at our doorstep. If the fund transfer has to be made outstation, where the bank does not have a branch, the bank would demand outstation charges. Whereas with the help of online banking, it will be absolutely free for we. As per the Internet and Mobile Association of India's report on online banking 2006, "There are many advantages of online banking. It is convenient, it isn't bound by operational timings, there are no geographical barriers and the services can be offered at a miniscule cost."

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IMPACT OF E-BANKING ON TRADITIONAL SERVICES One of the issues currently being addressed is the impact of e-banking on traditional banking players. After all, if there are risks inherent in going into e-banking there are other risks in not doing so. It is too early to have a firm view on this yet. Even to practitioners the future of e-banking and its implications are unclear. It might be convenient nevertheless to outline briefly two views that are prevalent in the market. The view that the Internet is a revolution that will sweep away the old order holds much sway. Arguments in favor are as follows: E-banking transactions are much cheaper than branch or even phone transactions. E-banks are easy to set up so lots of new entrants will arrive. E-banking gives consumers much more choice. Consumers will be less inclined to remain loyal. E-banking will lead to an erosion of the endowment effect currently enjoyed by the major UK banks. Deposits will go elsewhere with the consequence that these banks will have to fight to regain and retain their customer base. This will increase their cost of funds, possibly making their business less viable. Lost revenue may even result in these banks taking more risks to breach the gap. Portal providers are likely to attract the most significant share of banking profits. Indeed banks could become glorified marriage brokers. They would simply bring two parties together e.g. buyer and seller, payer and payee. The products will be provided by mono lines, experts in their field. Traditional banks may 18

E-BANKING simply be left with payment and settlement business even this could be cast into doubt. Traditional banks will find it difficult to evolve. Not only will they be unable to make acquisitions for cash as opposed to being able to offer shares, they will be unable to obtain additional capital from the stock market. This is in contrast to the situation for Internet firms for whom it seems relatively easy to attract investment. There is of course another view which sees e-banking more as an evolution than a revolution. E-banking is just banking offered via a new delivery channel. It simply gives consumers another service (just as ATMs did). Like ATMs, e-banking will impact on the nature of branches but will not remove their value. Experience in Scandinavia (arguably the most advanced e-banking area in the world) appears to confirm that the future is clicks and mortar banking. Customers want full service banking via a number of delivery channels. The future is therefore Martini Banking (any time, any place, anywhere, anyhow).Traditional banks are starting to fight back. The start-up costs of an e-bank are high. Establishing a trusted brand is very costly as it requires significant advertising expenditure in addition to the purchase of expensive technology (as security and privacy are keys to gaining customer approval). E-banks have already found that retail banking only becomes profitable once a large critical mass is achieved. Consequently many e-banks are limiting themselves to providing a tailored service to the better off. Nobody really knows which of these versions will triumph. This is something that the market will determine. However, supervisors will need to pay close attention to the impact of e-banks on the traditional banks, for example by surveillance of: 19

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strategy customer levels earnings and costs advertising spending margins funding costs Merger opportunities and threats, both in the UK and abroad. CHALLENGES IN e-BANKING FOR DEVELOPING COUNTRIES: Based on the best practices in developed countries, United Nations Conference on trade and development report has identified four challenges that developing countries in general, are expected to overcome to achieve the advantages that e-banking initiatives can bring about. 1. The ability to adopt global technology to local requirements. An adequate level of infrastructure and human capacity building are required before developing countries can adopt the global technology for their local requirements. For example, the review of the migration plan of Society for Worldwide Interbank Financial Telecommunication [SWIFT] to the internet shows that to date full migration has not occurred in many developing countries due to the lack of adequate infrastructure, working capital and required technical expertise. Broadly accepted e-payment systems is another such example. Many corporates and consumers in some developing countries either do not trust or do not have access to the necessary infrastructure to be able to process e-payments. 20

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2. The ability to strengthen public support for e-finance. Historically, most e-finance initiatives in developing countries have been a result of cooperative efforts between the private and public sectors. For example, Singapores successful TradeNet system was a government sponsored project. 3. The ability to a necessary level if regulatory and institutional framework: The lack of regulatory framework, trust, security ad private standards, high trade barriers, customers and investor protections impede progress in implementing e-Banking initiatives on a larger scale I many developing countries. 4. The ability to mainstream Small and Medium Scale Enterprise (SMEs) towards e-Banking: The availability of and access to quality data and banking information is required for SMEs in developing countries to move towards e-Banking. Similarly, online credit information will enhance SMEs ability to secure financing.

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E-BANKING TYPES OF INTERNET BANKING OR E-BANKING: Understanding the various types of Internet banking will help examiners assess the risks involved. Currently, the following three basic kinds of Internet banking are being employed in the marketplace. 1. InformationalThis is the basic level of Internet banking. Typically, the bank has marketing information about the banks products and services on a stand-alone server. The risk is relatively low, as informational systems typically have no path between the server and the banks internal network. This level of Internet banking can be provided by the banks or outsourced. While the risk to a bank is relatively low, the server or web site may be vulnerable to alteration. Appropriate controls therefore must be in place to prevent unauthorized alterations to the banks server or web site. 2. CommunicativeThis type of Internet banking systems and the customer. The interaction between the banks system and the customer. The interaction maybe limited to electronic mail, account enquiry, loan applications, or static file updates (name and address change). Because these servers may have a path to the banks internal networks, the risk is higher with this configuration than with informational systems. Appropriate controls need to be in the place to prevent, monitor, and alert management of any unauthorized attempt to access the banks internal networks and computer systems. Virus controls also become much more critical in this environment.

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E-BANKING 3. Transactional This level of Internet banking allows customers to execute transactions. Since a path typically exists between the server and the bank or outsourcers internal network, this is the highest risk architecture and must have the strongest controls. Customer transactions can include accessing accounts, paying bills, transferring funds etc.

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CHAPTER III: SERVICES PROVIDED BY E-BANKING

SERVICES PROVIDED BY e-BANKING ATM services Credit Cards/Debit Cards Smart Card Electronic Bill Presentment and payment (EBPP) service Fund transfer Railway pass Recharging wer prepaid phone Shopping

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SERVICES PROVIDED BY E-BANKING 1. AUTOMATED TELLER MACHINES (ATM): ATMs could be the best way to teach e-Banking to customers at minimal cost. It would help banks to reduce the cost and offer hassle-free services. ATM is designed to perform the most important function of bank. It is operated by plastic card with its special features. The plastic card is replacing cheque, personal attendance of the customer, banking hours restrictions and paper based verification. There are debit cards. ATMs used as spring board for Electronic Fund Transfer. ATM itself can provide information about customers account and also receive instructions from customers - ATM cardholders. An ATM is an Electronic Fund Transfer terminal capable of handling cash deposits, transfer between accounts, balance enquiries, cash withdrawals and pay bills. It may be on-line or 0ffline. The on-line ATN enables the customer to avail banking facilities from anywhere. In off-line the facilities are confined to that particular ATM assigned. Any customer possessing ATM card issued by the Shared Payment Network System can go to any ATM linked to Shared Payment Networks and perform his transactions. Popularity of ATMs: To the common man who does not have much knowledge of technology, ATM is a great hit with him. He may not know how to operate the computer of his own. At the same time operating an ATM is easy and there are no 25

E-BANKING intricacies involved. This is the reason behind the popularity of ATM, even with the aged. Banks are constantly in the process of upgrading themselves for newer ways of doing transactions. From plastic to virtual money, these banks are adopting technology to offer the latest modes for transacting business. Internet banking, or e-banking as it is popularly called offers banks and customers a huge opportunity by way of convenience and reach. ATM is the right place in terms of accessibility. But, extension of technology and required infrastructure still are to take place at ATM level to make the numerous facilities of e-banking easily accessible to the public. Banks need to adopt required technology primarily, in this area to improve customer satisfaction as they are forced to remain competitive by reducing costs.

Advantages of ATM:

ATM supports voice, video and data allowing multimedia and mixed services over a single network. High evolution potential, works with existing, legacy technologies Provides the best multiple service support Supports delay close to that of dedicated services Supports the broadest range of burstiness, delay tolerance and loss performance through the implementation of multiple QoS classes Provides the capability to support both connection-oriented and connectionless traffic using AALs Able to use all common physical transmission paths like SONET. Cable can be twisted-pair, coaxial or fiber-optic 26

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Ability to connect LAN to WAN Legacy LAN emulation Efficient bandwidth use by statistical multiplexing Scalability Higher aggregate bandwidth High speed Mbps and possibly Gbps

1. ATM provides 24 hour service: ATMs provide service round the clock. The customers can withdraw cash up to a certain limit during anytime of the day or night. 2. ATM gives convenience to banks customers: ATMs provide convenience to the customers. Now-a-days, ATMS are located at convenient places, such as, airports, railway stations, etc. and not necessarily at the banks premises. It is to be noted that ATMs are installed off-site (away from premises) as well as on site (within banks premises). ATMs provide mobility in banking services for withdrawal. 3. ATM reduces the workload of banks staff: ATMs reduce the work pressure in the banks staff and avoids queues in bank premises. 4. ATM provide service without error: ATMs provide service without error. The customer can obtain exact amount. There is no human error as far as ATMs are concerned. 5. ATMs are very beneficial for travelers: ATMs are of great help to travelers. They need not carry large amount of cash with them. They can withdraw cash from any city or state, across the country and even from outside the country with the help of an ATM. 27

E-BANKING 6. ATM may give customers new currency notes: The customer also gets brand new currency notes from ATMs. In other words, customers do not get soiled notes from ATMs 7. ATM provides privacy in banking transactions: Most of all, ATMs provide privacy in banking transactions of the customer.

Disadvantages of ATMs There are a number of disadvantages to these machines. 1. Security Unlike bank tellers, ATMs do not require the person performing the transaction to present picture identification. Rather, the person must only insert a bank card and enter a personal identification number. If the bank card is stolen and the number ascertained, an unauthorized person can easily access the account. 2. Inability To Perform Complex Transactions ATMs can only perform relatively basic transactions. This means that people who need to complete these longer transactions will be forced to use the teller, restricting use of the ATM for people who need to complete simple business. In this sense, the ATM Is rather like the express line in a supermarket--faster for some, but unavailable to others. 3. Fees With the advent of ATMs came ATM fees. Not only do banks of which we are not a member charge fees for the use of their ATMs, but users are often charged surreptitious fees by their own banks for using other banks' ATMs--meaning the customer is docked twice for the same transaction. 28

E-BANKING 4. Privacy Unlike banks, in which security guards and tellers are present to ensure the person performing a transaction receives privacy, there is no such guarantee when using an ATM. People may try to spy on users as delicate information appears on the screen, without the user being aware. 5. Difficulty of Use The performance of business at an ATM is generally quicker than that at a human teller. However, the ATM is incapable of providing personalized instruction to the user in a way that a human teller can. This can result in longer wait times if the user currently using the machine is struggling to complete a transaction. 6. Eating a Card Occasionally, ATMs will malfunction and swallow a user's ATM card. The customer will then be directed to contact a service number or their bank and wait for a repair technician to retrieve this card. While this happens only rarely, if it occurs on a weekend or at night, the user may be left to wait for several days before they can again use their card, something that would not happen with a human cashier.

Plethora of ATMs Every bank is more concerned about opening its own ATM unit. In the process, the fixed and operational costs are going up and have become a reason for dwindling profit margins. The idea of opening new ATMs has to be discarded and the existing ATMs have to be shared. The ATMs should be a public restroom and concerned bank has to pay to the owner of the ATM 29

E-BANKING for the services utilized by the customer of its bank. Emphasis should be on the provision of service areas rather than opening ATMs. This releases funds. If ATM of that bank is not available the customer cannot withdraw cash. He has to run to the adjoining town where the ATM of his bank is located. The concept of anywhere banking is not to be limited to a particular bank but should be extended to the universal banking, as a whole, at least within the country. Banks should consider ATM as a window for them to improve their revenue earning ability. Each ATM owner, bank can display its name for popularity and advertising while projecting names of banks whose cards are accepted. In this way, each bank can retain its independent image of publicity by showing its own identity but can extend them to other banks to share their infrastructure as a means of making money. Future Focus The transactions through brick and mortar banking cost more than ATM, according to an international report. Statistics such as these have woken up the Indian banking industry, but not adequately. Global trends and practices cannot be adopted totally. They have to be indianized to suit the local constraints and conditions. Technology is the root of this change that can be bought. The Indian banking system can bring about a fabulous change in the quality of service that can be provided to the customers who are not so sound financially and technologically making ATMs as the window and vehicle for future e-banking operations.

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E-BANKING 2. CREDIT CARDS AND DEBIT CARDS: The Credit Card holder is empowered to spend wherever and whenever he wants with his Credit Card within the limits fixed by his bank. Credit Card is a post paid card. Debit Card, on the other hand, is a prepaid card with some stored value. Every time a person uses this card, the Internet Banking house gets money transferred to its account from the bank of the buyer. The buyers account is debited with the exact amount of purchases. An individual has to open an account with the issuing bank which gives debit card with a Personal Identification Number (PIN). When he makes a purchase, he enters his PIN on shops PIN pad. When the card is slurped through the electronic terminal, it dials the acquiring bank system - either Master Card or VISA that validates the PIN and finds out from the issuing bank whether to accept or decline the transactions. The customer can never overspend because the system rejects any transaction which exceeds the balance in his account. The bank never faces a default because the amount spent is debited immediately from the customers account. Credit card customers With Internet banking, customers can not only pay their credit card bills online but also get a loan on their cards. If we lose our credit card, we can report lost card online.

(a) Lost or Stolen ATM or Debit Cards If our credit card is lost or stolen, we cant lose more than $50. If someone uses our ATM or debit card without our permission, we can lose much more. 31

E-BANKING If we report an ATM or debit card missing to the card issuer before its used without our permission, we cant be held responsible for any unauthorized withdrawals. If unauthorized use occurs before we report it, the amount we can be held responsible for depends upon how quickly we report the loss to the card issuer.

If we report the loss within two business days after we realize our card is missing, we wont be responsible for more than $50 for unauthorized use.

If we fail to report the loss within two business days after we realize the card is missing, but do report its loss within 60 days after our statement is mailed to we, we could lose as much as $500 because of an unauthorized transfer.

If we fail to report an unauthorized transfer within 60 days after our statement is mailed to us, we risk unlimited loss. That means we could lose all the money in our account and the unused portion of our maximum line of credit established for overdrafts.

If we failed to notify the institution within the time periods allowed because of an extenuating circumstance, such as lengthy travel or illness, the issuer must reasonably extend the notification period. In addition, if state law or our contract imposes lower liability limits, those lower limits apply instead of the limits in the federal EFT Act. Once we report the loss or theft of our ATM or debit card, were no longer responsible for additional unauthorized transfers occurring after that time. 32

E-BANKING Because these unauthorized transfers may appear on our statements, however, we should carefully review each statement we receive after weve reported the loss or theft. If the statement shows transfers that we did not make or that we need more information about, contact the institution immediately, using the special procedures provided for reporting errors.

3. SMART CARDS: Banks are adding chips to their current magnetic stripe cards to enhance security and offer new service, called Smart Cards. Smart Cards allow thousands of times of information storable on magnetic stripe cards. In addition, these cards are highly secure, more reliable and perform multiple functions. They hold a large amount of personal information, from medical and health history to personal banking and personal preferences. Smart cards can provide identification, authentication, data storage and application processing. The benefits of smart cards are directly related to the volume of information and applications that are programmed for use on a card. A single contact/contact less smart card can be programmed with multiple banking credentials, medical entitlement, drivers license/public transport entitlement, loyalty programs and club memberships to name just a few. Multi-factor and proximity authentication can and has been embedded into smart cards to increase the security of all services on the card. For example, a smart card can be programmed to only allow a contact less transaction if it is also within range of another device like a uniquely paired mobile phone. This can significantly increase the security of the smart card.

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E-BANKING Governments gain a significant enhancement to the provision of publicly funded services through the increased security offered by smart cards. These savings are passed onto society through a reduction in the necessary funding or enhanced public services. Individuals gain increased security and convenience when using smart cards designed for interoperability between services. For example, consumers only need to replace one card if their wallet is lost or stolen. Additionally, the data storage available on a card could contain medical information that is critical in an emergency should the card holder allow access to this.

4. ELECTRONIC BILL PRESENTMENT AND PAYMENT (EBPP) SERVICE: We can facilitate payment of electricity and telephone bills, mobile phone, credit card and insurance premium bills as each bank has tie-ups with various utility companies, service providers and insurance companies, across the country. To pay our bills, all we need to do is complete a simple onetime registration for each bill. We can also set up standing instructions online to pay our recurring bills, automatically. Generally, the bank does not charge customers for online bill payment. To remain competitive, companies are increasingly turning to Electronic Bill Presentment and Payment (EBPP) that is, allowing customers to pay online. However, until there are sufficient adoption rate of both, consumers and billers, cost savings in customer service, paper, postage and float will remain negligible. Today, very few bills are delivered online. EBPP promises to be a new and efficient way to deliver bills to the consumer. Bills will become a marketing vehicle for the billers. They could engage in 34

E-BANKING multiple one-on-one dialogues with the consumers based on how they segment them. These channels will create new opportunities for billers to target consumers with new services. The EBPP Market The EBPP market is still in its early stages there is no one model being used, and standards are yet emerging. However, marketing information shows that the EBPP market is set to grow tremendously with the growth of Internet usage in households. The infrastructure is already in place for households to start using EBPP services. Close to 50 percent of US households have PCs, and more than a third of PC owners use financial management software. Another indicator of the ushering in of this new system is the decline in the usage of checks, which were used for 90 percent of all payments in 1990, and dropped to 76 percent in 1999. Before consumers make the switch, though, they need to become comfortable with switching from the paper-based form. Standards Open Financial Exchange (OFX) is a unified specification for the electronic exchange of financial data between financial institutions, business and consumers via the Internet. The format known as Electronic Commerce Modeling Language (ECML) uses a set of uniform field names that streamline the process by which merchants collect electronic data for shipping, billing and payment. Participating companies are American Express, AOL, Compaq, CyberCash, IBM, MasterCard, Microsoft, SETCo, Sun Microsystems, Transactor Networks, Trintech and Visa. Even though this standard does not directly 35

E-BANKING relate to EBPP, there should be awareness for companies building EBPP capabilities. 5. FUND TRANSFER We can transfer any amount from one account to another of the same or any another bank. Customers can send money anywhere in India. Once we login to wer account, we need to mention the payees account number, his bank and the branch. The transfer will take place in a day or so, whereas in a traditional method, it takes about three working days. ICICI Bank says that online bill payment service and fund transfer facility have been their most popular online services. For many consumers, electronic banking means 24hour access to cash through an automated teller machine (ATM) or Direct Deposit of paychecks into checking or savings accounts. But electronic banking now involves many different types of transactions. Electronic banking, also known as electronic fund transfer (EFT), uses computer and electronic technology as a substitute for checks and other paper transactions. EFTs are initiated through devices like cards or codes that let we, or those we authorize, access our account. Many financial institutions use ATM or debit cards and Personal Identification Numbers (PINs) for this purpose. Some use other forms of debit cards such as those that require, at the most, our signature or a scan. The federal Electronic Fund Transfer Act (EFT Act) covers some electronic consumer transactions.

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E-BANKING Electronic Fund Transfers EFT offers several services that consumers may find practical:

Automated Teller Machines or 24-hour Tellers are electronic terminals that let we bank almost any time. To withdraw cash, make deposits, or transfer funds between accounts, we generally insert an ATM card and enter our PIN. Some financial institutions and ATM owners charge a fee, particularly to consumers who dont have accounts with them or on transactions at remote locations. Generally, ATMs must tell we they charge a fee and its amount on or at the terminal screen before we complete the transaction. Check the rules of our institution and ATMs we use to find out when or whether a fee is charged.

Direct Deposit lets we authorize specific deposits, such as paychecks and Social Security checks, to our account on a regular basis. We also may pre-authorize direct withdrawals so that recurring bills, such as insurance premiums, mortgages, and utility bills, are paid automatically. Be cautious before we pre-authorize direct withdrawals to pay sellers or companies with whom we are unfamiliar; funds from our bank account could be withdrawn fraudulently.

Pay-by-Phone Systems let we call our financial institution with instructions to pay certain bills or to transfer funds between accounts. We must have an agreement with the institution to make such transfers.

Personal Computer Banking lets we handle many banking transactions via our personal computer. For instance, we may use our computer to

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E-BANKING view our account balance, request transfers between accounts, and pay bills electronically.

Debit Card Purchase Transactions let we make purchases with a debit card, which also may be our ATM card. This could occur at a store or business, on the Internet or online, or by phone. The process is similar to using a credit card, with some important exceptions. While the process is fast and easy, a debit card purchase transfers money fairly quickly from our bank account to the companys account. So its important that we have funds in our account to cover our purchase. This means we need to keep accurate records of the dates and amounts of our debit card purchases and ATM withdrawals in addition to any checks we write. Also be sure we know the store or business before we provide our debit card information, to avoid the possible loss of funds through fraud. our liability for unauthorized use, and our rights for error resolution, may differ with a debit card.

Electronic Check Conversion converts a paper check into an electronic payment in a store or when a company receives our check in the mail. In a store, when we give our check to a cashier, the check is run through an electronic system that captures our banking information and the amount of the check. Were asked to sign a receipt and we get a copy for our records. When our check has been handed back to us, it should be voided or marked by the merchant so that it cant be used again. The merchant electronically sends information from the check (but not the check itself) to our bank or other financial institution, and the funds are transferred into the merchants account. When we mail-in a check for payment to a merchant or other company, they may electronically send information 38

E-BANKING from our check (but not the check itself) through the system, and the funds are transferred into their account. For a mailed check, we should still receive advance notice from a company that expects to send our check information through the system electronically. The merchant or other company might include the notice on our monthly statement or under its terms and conditions. The notice also should state if the merchant or company will electronically collect from our account a fee like a bounced check fee if we have insufficient funds to cover the transaction. Be especially careful in Internet and telephone transactions that may involve use of our bank account information, rather than a check. A legitimate merchant that lets we use our bank account information to make a purchase or pay on an account should post information about the process on their website or explain the process over the telephone. The merchant also should ask for our permission to electronically debit our bank account for the item were purchasing or paying on. However, because Internet and telephone electronic debits dont occur face-to-face, we should be cautious with whom we reveal our bank account information. Dont give this information to sellers with whom we have no prior experience or with whom we have not initiated the call, or to companies that seem reluctant to provide information or discuss the process with us. 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 telephone cards, mass transit passes, and some gift cards. These stored-value cards, as well as transactions using them, may not be covered by the EFT Act. This means 39

E-BANKING we may not be covered for the loss or misuse of the card. Ask our financial institution or merchant about any protections offered for these cards. Disclosures: To understand our legal rights and responsibilities regarding our EFTs, read the documents we receive from the financial institution that issued our access device. That is, a card, code or other means of accessing our account to initiate electronic fund transfers. Although the means varies by institution, it often involves a card and/or a PIN. No one should know our PIN except we and select employees of the financial institution. We also should read the documents we receive for our bank account, which may contain more information about EFTs. Before we contract for EFT services or make our first electronic transfer, the institution must tell we the following information in a form we can keep.

A summary of our liability for unauthorized transfers. The telephone number and address of the person to be notified if we think an unauthorized transfer has been or may be made, a statement of the institutions business days (which is, generally, the days the institution is open to the public for normal business), and the number of days we have to report suspected unauthorized transfers.

The type of transfers we can make, fees for transfers, and any limits on the frequency and dollar amount of transfers.

A summary of our right to receive documentation of transfers, to stop payment on a pre-authorized transfer, and the procedures to follow to stop payment. 40

E-BANKING

A notice describing the procedures we must follow to report an error on a receipt for an EFT or our periodic statement, to request more information about a transfer listed on our statement, and how long we have to make our report.

A summary of the institutions liability to us if it fails to make or stop certain transactions.

Circumstances under which the institution will disclose information to third parties concerning our account.

A notice that we may be charged a fee by ATMs where we dont have an account.

6. RAILWAY PASS This is something that would interest all the aam janta. Indian Railways has tied up with ICICI bank and we can now make our railway pass for local trains online. The pass will be delivered to us at our doorstep. But the facility is limited to Mumbai, Thane, Nashik, Surat and Pune. 7. RECHARGING PREPAID PHONES: Now, just top-up our prepaid mobile cards by logging in to Internet banking. By just selecting our operator's name, entering our mobile number and the amount for recharge, our phone is again back in action within few minutes. 8. SHOPPING With a range of all kind of products, we can shop online and the payment is also made conveniently through our account. We can also buy railway and air tickets through Internet banking. 41

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Limited Stop-Payment Privileges: When we use an electronic fund transfer, the EFT Act does not give we the right to stop payment. If our purchase is defective or our order is not delivered, its as if we paid cash. That is, its up to we to resolve the problem with the seller and get our money back. There is one situation, however, when we can stop payment. If weve arranged for regular payments out of our account to third parties, such as insurance companies, we can stop payment if we notify our institution at least three business days before the scheduled transfer. The notice may be oral or written, but the institution may require a written follow-up within 14 days of the oral notice. If we fail to provide the written follow-up, the institutions responsibility to stop payment ends. Although federal law provides only limited rights to stop payment, individual financial institutions may offer more rights or state laws may require them. If this feature is important to we, we may want to shop around to be sure were getting the best stop-payment terms available. Other Rights: The EFT Act protects our right of choice in two specific situations regarding use of electronic fund transfers: First, the Act prohibits financial institutions from requiring us to repay a loan by electronic transfer. Second, if were required to receive our salary or government benefit check by EFT, we have the right to choose our institution.

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Investing through Internet banking We can now open an FD online through funds transfer. Now investors with interlinked demat account and bank account can easily trade in the stock market and the amount will be automatically debited from their respective bank accounts and the shares will be credited in their demat account. Moreover, some banks even give us the facility to purchase mutual funds directly from the online banking system. Nowadays, most leading banks offer both online banking and demat account. However if we have our demat account with independent share brokers, then we need to sign a special form, which will link our two accounts. CONSUMER E-BANKING: This solution can be interfaced with any core banking solution directly or through an industry standard middleware. It provides banking customers real time access to their relationships with the bank such as account inquiries, fund transfers, credit cards, mutual funds payments and remittances. It enables them to make payments to individuals or institutions, and other general payments online. It also has a powerful Electronic Bill Presentment and Payment (EBPP) module, designed to help customers make their utility bill payments. In addition, the powerful alerts solution provides two-way multi-channel (SMS, WAP, e-mail, fax and voice) alerts. Built on industrystandard platforms J2EE and .NET, the solution is platform independent. It is also highly secure and supports different authentication mechanisms.

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E-BANKING Key Modules

Core Module Payments Module Credit Card and Mutual Fund Modules Electronic Bill Payment and Presentment (EBPP) Module Alerts Module Security Features Mobile Banking Business Benefits

1. Improved Cross-sell Framework The consumer e-banking solution offers a unified view of the customer, allowing single point access to all the relationships the customer has forged with the bank, including mutual funds, insurance and credit cards. The customer-centric architecture enables the bank to launch a one-stop financial portal for its customers. This effectively supports true relationship banking, providing a robust framework for cross-sell opportunities. 2. Business Agility Built on industry standard platforms J2EE and .NET, the consumer ebanking solution provides the bank tremendous flexibility to extend its product portfolio and customize the solution according to requirements. The architecture of the solution enables the bank to write business rules once and deploy them anywhere, add new rules, modify existing ones or integrate them with other applications seamlessly. All this enhances agility of 44

E-BANKING operation, helping the bank identify new opportunities and roll out new products. 3. Robust Security The consumer e-banking solution offers extensive application security features and provides a robust framework to integrate with specialized security software. This enables the bank to confidently offer products that are highly secure and geared to withstand the onslaught of security threats that abound around Internet transactions. 4. Client Value With the growing popularity of mobile devices, banks can offer the convenience of anywhere- anytime banking, using WAP or SMS. Finacle consumer e-banking solution makes it possible for customers to inquire on account balances and make fund transfers. Banks can also proactively send timely information to customers in a completely secure environment, whenever a customer-defined event occurs. CORPORATE E-BANKING Corporate e-banking is a comprehensive, corporate and small business banking solution providing a single unified view of corporate banking relationships across asset and liability products, limits, trade finance and cash management. It is designed to support multiple channels including the Internet and mobile, and can be interfaced with disparate host systems and third-party applications. The solution is built on new-generation industry standard technologies J2EE 45

E-BANKING and .NET. This empowers banks to provide their corporate customers anytime anywhere access to real-time consolidated information. It also offers banks the flexibility to go to market with an innovative product and service offerings portfolio. Corporate e-banking solution is modular and enables banks to hand-pick from its comprehensive set of features. Additionally, the infrastructure services layer of the application provides a framework that aids in deploying new modules rapidly. The solution is multi-currency enabled and offers multilingual support. Key Modules

Accounts and Transfers Electronic Invoice Presentment & Payment (EIPP) Payments Collections Management Liquidity Management Reconciliation Reporting Trade Finance Business Benefits

1. Aggregated Cross Border Service The corporate e-banking solutions rich financial information portal provides corporate customers a comprehensive facility to view critical information and monitor transactions across geographies through a single interface. This plays a vital role in enabling the bank to provide all the global financial solutions demanded by business houses expanding their footprint across geographies. 46

E-BANKING

2. Business Agility Built on industry standard platforms J2EE and .NET, the corporate ebanking solution provides the bank tremendous flexibility to extend its product portfolio and customize the solution according to requirements. The architecture of the solution enables the bank to write business rules once and deploy them anywhere, add new rules, modify existing ones or integrate them with other applications seamlessly. The solution also provides an additional layer that can be extended to interface with multiple back office systems. All this enhances agility of operation, helping the bank identify new opportunities and roll out new products. 3. Robust Security The corporate e-banking solution offers extensive application security features and provides a robust framework to integrate with specialized security software. This enables the bank to confidently offer products that are highly secure and geared to withstand the onslaught of security threats that abound around Internet transactions. 4. Lower TCO The deployment of Finacle enables a relatively cost-efficient channel through which to serve customers. As the number of transactions completed on-line increases, the number of more expensive branch transactions decreases. This is especially true of small business customers who tend to use the branch as the primary channel. Greater automation and productivity, as well as reduced human error lead to increased cost savings. The thin47

E-BANKING client architecture over the Internet also reduces maintenance costs associated with frequent upgrades and support. 5. Client Value Finacle corporate e-banking solution enables subscription based alerts ensure that a customer receives requisite information through the preferred channel. This leads to greater convenience and enables better monitoring of banking transactions in real time.

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CHAPTER IV: ADVANTAGES/DISADVANTAGES OF E-BANKING

MAIN CONCERNS IN INTERNET BANKING FEATURES OF E-BANKING ADVANTAGE OF E-BANKING DISADVANTAGES OF E-BANKING

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E-BANKING MAIN CONCERNS IN INTERNET BANKING In a survey conducted by the Online Banking Association, member institutions rated security as the most important issue of online banking. There is a dual requirement to protect customers' privacy and protect against fraud. Banking Securely: Online Banking via the World Wide Web provides an overview of Internet commerce and how one company handles secure banking for its financial institution clients and their customers. Some basic information on the transmission of confidential data is presented in Security and Encryption on the Web. PC Magazine Online also offers a primer: How Encryption Works. A multi-layered security architecture comprising firewalls, filtering routers, encryption and digital certification ensures that our account information is protected from unauthorized access. DRIVERS OF CHANGE Advantages previously held by large financial institutions have shrunk considerably. T he Internet has leveled the playing field and afforded open access to customers in the global marketplace. Internet banking is a costeffective delivery channel for financial institutions. Consumers are embracing the many benefits of Internet banking. Access to one's accounts at anytime and from any location via the World Wide Web is a convenience unknown a short time ago. The six primary drivers of Internet banking includes, in order of primacy are: _ Improve customer access _ Facilitate the offering of more services _ Increase customer loyalty _ Attract new customers 50

E-BANKING _ Provide services offered by competitors _ Reduce customer attrition The banking industry in India is facing unprecedented competition from non-traditional banking institutions, which now offer banking and financial services over the Internet. The deregulation of the banking industry coupled with the emergence of new technologies, are enabling new competitors to enter the financial services market quickly and efficiently. FEATURES OF E-BANKING Transactional: (e.g. performing a financial transaction such as an account to account transfer, paying a bill or applications like applying for a loan, new account, etc.) Electronic Bill Presentment and Payment (EBPP) Funds transfer between customers own checking and savings accounts, or to another customers account. Investment purchase or sale. Loan application and transactions such as repayments. Non-transactional: (e.g. online statements, Check links, Chat, Co-browsing etc.) Financial Institution Administration- features allowing financial institutions to manage the online experience of their end users. ASP/ Hosting Administration features allowing the hosting company to administer the solution across financial institution 51

E-BANKING The features available from an on-line bank account are similar to those which are available via 'phone banking or visiting the local branch. On-line banking features do differ between the banks, but usually include The features available from an on-line bank account are similar to those which are available via 'phone banking or visiting the local branch. On-line banking features do differ between the banks, but usually include: Transfer of funds between accounts; It brings efficiency in CRM (Customer relationship Management) Make Payment of bills Introduces new & innovative products &services View balance and statements; Brings door to door services Create, view and maintain Standing Orders Have evolutionary trend at a global scenario Customer can View Direct Debits ADVANTAGES OF E-BANKING As per the Internet and Mobile Association of India's report on online banking 2006, "There are many advantages of online banking. It is convenient, it isn't bound by operational timings, there are no geographical barriers and the services can be offered at a miniscule cost." Through Internet banking, we can check wer transactions at any time of the day, and as many times as we want to. Whereas in a traditional method, we get quarterly statements from the bank. If the fund transfer has to be made outstation, where the bank does not have a branch, the bank would demand 52

E-BANKING outstation charges. Whereas with the help of online banking, it will be absolutely free for we. Refer to conducting banking transactions through internet. They are, Opening & closing of accounts Make the payments of merchandise transaction through Debit & Credit cards. It gives relief to their customer from carrying heavy cash. Enables prompt & speedy operation to clients. It saves lot of time to their customers &convenient to access. 1. Convenience Unlike our corner bank, online banking sites never close; theyre available 24 hours a day, seven days a week, and theyre only a mouse click away. With pressures on time and longer traveling periods, more and more people find it tiresome waiting in queues. People want flexibility, and Internet banking offers just that. 2. Ubiquity If were out of state or even out of the country when a money problem arises, we can log on instantly to our online bank and take care of business, 24\7. 3. Transaction speed Online bank sites generally execute and confirm transactions at or quicker than ATM processing speeds. 53

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4. Efficiency We can access and manage all of our bank accounts, including IRAs, CDs, even securities, from one secure site. 5. EffectivenessMany online banking sites now offer sophisticated tools, including account aggregation, stock quotes, rate alert and portfolio managing program to help we manage all of our assets more effectively. Most are also compatible with money managing programs such as quicken and Microsoft money. 6. Cheaper alternative With increasing competition, it seems to be the cost factor that is driving banks to offer the facility. The Internet is still a very cheap alternative to opening a physical branch, and most of the push seems to be coming from the supply side. The costs of a banking service through the Internet form a fraction of costs through conventional methods. 7. From snob value to necessity A couple of years ago, there was a belief even among bankers that customers opening new accounts wanted the online banking facility, just to "feel good" and very few of them actually used the services. Today, bankers believe that the trend from `nice to have' is changing to `need to have'. The "snob value" of banking with an organisation that could offer service on the Internet has given way to a genuine necessity, he feels. "It all depends on how busy a person is." 54

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DISADVANTAGES OF E-BANKING Customer may have to face risky transaction & fraud. Failure of power supply cause to break down of system. Loss of heavy income at the time of settlements of higher magnitude. Cost involved in training staff may not be profitable especially in times of attrition. Development of a lethargic attitude. Security is by far the biggest concern surrounding internet banks, with consumers worrying that hackers will get into their account and spend their money. Banks are adamant that the sites are secure, but while there have been no reports of large-scale theft, there have been plenty about unwitting surfers stumbling across peoples' details. Consumer groups have asked the bank to provide a guarantee, similar to the Direct Debit guarantee, promising to return any funds straight away and investigate afterwards. So far the banks have refused, raising suspicions that they don't trust their own security systems. After all, if they did, they would have no qualms about providing the guarantee, the consumer groups say. The biggest day to day problem with internet banking appears to be access. We might find it difficult to get on to the internet at certain times of day weekday evenings are the most popular. The speed with which we access our account will also depend on the amount of memory our computer has or the speed of our modem. And if our computer crashes completely we will have to resort to the telephone or branch until it is back up. In addition, our bank may need to shut down its website for maintenance from time to time. 55

E-BANKING Here, the existing banks have the advantage over the standalone banks, as telephone support is free and most have branches on the high street. High street banks also have the advantage of being able to offer face to face support and advice, which some people find useful. If we intend to access our account through a company computer, we may need to ask our system administrator first, especially if our company operates a firewall. Some of the banks cannot operate on Apple Macintosh computers, so check that ours is compatible. We will also need to have the relevant operating system, typically Windows 95, 98 or NT, and the right system browser, usually Microsoft Internet Explorer 4 or above or Netscape Navigator 4 or above. However, banks may update the browser they use from time to time, which means we will have to update as well if we want to access our account. Updating our browser is free, it just requires time and effort. It is also worth remembering that these systems can use up a lot of memory so the more our computer has the better. We might want to think about buying additional memory

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CHAPTER V: E-BANKING IN INDIA

INTERNET BANKING IN INDIA HOW SAFE IS E-BANKING? INTERNET BANKING IN INDIA- GUIDELINES MAJOR BANKS IN INIDA PROVIDING E-BANKING SERVICES

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E-BANKING E-BANKING IN INDIA The banking industry in India is facing unprecedented competition from non-traditional banking institutions, which now offer banking and financial services over the Internet. The deregulation of the banking industry coupled with the emergence of new technologies, are enabling new competitors to enter the financial services market quickly and efficiently. Indian banks are going for the retail banking in a big way. However, much is still to be achieved. This study which was conducted by students of IIML shows some interesting facts: Throughout the country, the Internet Banking is in the nascent stage of development (only 50 banks are offering varied kind of Internet banking services). In general, these Internet sites offer only the most basic services. 55% are so called 'entry level' sites, offering little more than company information and basic marketing materials. Only 8% offer 'advanced transactions' such as online funds transfer, transactions & cash management services. Foreign & Private banks are much advanced in terms of the number of sites & their level of development. The Reserve Bank of India constituted a working group on Internet Banking. The group divided the internet banking products in India into 3 types based on the levels of access granted. They are: i) Information Only System: General purpose information like interest rates, branch location, bank products and their features, loan and deposit calculations are provided in the 58

E-BANKING banks website. There exist facilities for downloading various types of application forms. The communication is normally done through e-mail. There is no interaction between the customer and bank's application system. No identification of the customer is done. In this system, there is no possibility of any unauthorized person getting into production systems of the bank through internet. ii) Electronic Information Transfer System: The system provides customer- specific information in the form of account balances, transaction details, and statement of accounts. The information is still largely of the 'read only' format. Identification and authentication of the customer is through password. The information is fetched from the bank's application system either in batch mode or off-line. The application systems cannot directly access through the internet. iii) Fully Electronic Transactional System: This system allows bi-directional capabilities. Transactions can be submitted by the customer for online update. This system requires high degree of security and control. In this environment, web server and application systems are linked over secure infrastructure. It comprises technology covering computerization, networking and security, inter-bank payment gateway and legal infrastructure.

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E-BANKING SECURITY IN E-BANKING? Banking online, though convenient, still does not claim to be the safest method of banking. Internet banking is mostly conducted automatically over a relatively safe internet connection, the Secure Socket Layers. Further, the banks themselves have high security which can rarely be breached. The weak link, however, is the customers own personal computer. The computer at work, running on a big network is more likely to be a safer one than the one used at home. The limitations on its usage pose to be a fairly good measure of its level of security. If we are not able to download software from the Internet and install it on our machine, or view all kinds of files on the Internet, including Java and streaming content, then, there is a good likelihood that the security at work is very good. Such a computer may well be used for the online banking transactions without any fear of being hacked (unless our employer has forbidden us to do so). The network manager may however have access to our workstation and may know our password while we are typing the same. Assuming the character of the manager with whom we are working, to be good, there is no other breach of security concerns in a well-managed network system. Most personal computers are shot through with security holes more number of times when they run on Windows. Once the hacker is able to get through the security on our computer, he can access our internet bank account through it and pretend to be us. He can carry out the transactions that the bank assumes to be carried out by us. The bank will not be able to catch the difference at the first instance and we will find it very difficult to persuade them to believe that somebody else transferred all the money out of our 60

E-BANKING account, even though the transaction was conducted on our computer using our telephone and our internet connection. our home PC has to be highly equipped incase we decide to use it not only for our online banking transactions but for other transactions as well. Antivirus software and a firewall is a must for us in that case to keep out hackers. Keep our system on the latest version of our operating system. Do not carry out internet banking on Windows 95. It is too insecure. Windows 98 is marginal, whereas Windows 2000 is better and even that still has a few security holes. Windows NT with a few additional service patches is pretty good. So far, Linux has been able to sustain most of the attacks from hackers. However, make sure that we know a fair amount about computer vulnerabilities ourselves. INTERNET BANKING IN INDIA- GUIDELINES FROM RBI Reserve Bank of India had set up a Working Group on Internet Banking to examine different aspects of Internet Banking (I-banking). The Group had focused on three major areas of I-banking, i.e, (i) technology and security issues, (ii) legal issues and (iii) regulatory and supervisory issues. RBI has accepted the recommendations of the Group to be implemented in a phased manner. Accordingly, the following guidelines are issued for 61

E-BANKING implementation by banks. Banks are also advised that they may be guided by the original report, for a detailed guidance on different issues.

MAJOR BANKS THAT PROVIDE E-BANKING SERVICES IN INDIA BANK OF INDIA- StarConnect Internet Banking Services HDFC BANK- NetBanking BANK OF BARODA- Baroda Connect UNION BANK OF INDIA- Union e-Banking Corporate STATE BANK OF INDIA- OnlineSBI

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CHAPTER VI: CONCLUSION

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CONCLUSION: Technology innovation and fierce competition among existing banks have enable a wide array of banking products and services, being made available to retail and wholesale customer through an electronic distribution channel, collectively referred to as e-banking. Banks have traditionally been in the forefront of harnessing technology to improve product and efficiency. Technology is altering the relationships between banks and its internal and external customers. Technology has also eroded the entry barriers faced by many industries. With one time investment, technology has brought about superior products and channel management with a special focus on customer relationship. The incremental costs incurred for expansion and diversification are also more beneficial. The major driving force behind the rapid spread of e-banking is its acceptance as an extremely cost effective delivery channel. But on the flipside, it is associated with risks such as reputation risk, security risk, cross-border risk and strategic risk, which are unique to e-banking. Banks need to have an effective disaster recovery plan along with comprehensive risk management tool is significant not only to the bank but also to the banking system as a whole. All these issues underscore the importance of sound supervisory policies and high level of international co-operation among the bank regulators. Internet has created plenty of opportunities for players in the banking sector. While the new entrants have the advantage of latest technology, the goodwill of the established banks gives them a special opportunity to lead the 64

E-BANKING online world. By merely putting existing service online wont help the banks in holding their customer close. Instead, banks must learn to capitalize their customers different online financial-services relationships. Coming home, India is on threshold of a major banking revolution with the invasion of net banking. With the concept of payment gateway coming in, banks are vying with one another for the lions share in the market, highlighting the benefits of payment gateway over the open-loop payment mechanism.

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CHAPTER VII: CASE STUDY

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E-BANKING BANK OF BARODA Banks IT-enabled Business Transformation Programme:

The Banks Technology initiatives are clearly focused on the customer. The Business Transformation Programme encompassing technology is being implemented by the Bank with a view to provide its customer, convenience banking on 24 X 7 basis in India and abroad.

As compared to other banks our technology deployment is not restricted to only core banking solution. It also covers other applications like SWIFT, RTGS, NEFT, Internet Payment gateway, etc.

ATM Network:

The Bank has large network of ATMs in India. ATM/ Branch Locator

The Banks plans are to extend this network in stages in future. The Bank also plans to deploy low cost ATMs at Rural centers.

Bank has launched School fees collection module which enables payment of School fees through Banks ATM.

ATM-cum-Debit Cards:

Banks Debit Card holders can use their card at all VISA ATMs in India and around the world. Master Card holders and holders of VISA 67

E-BANKING cards issued by other banks can also access their accounts through our Banks ATM network.

Banks Debit card supports multiple accounts of card holders whereby multiple accounts can be linked to a single Debit card.

Internet Banking: "Baroda Connect" is an internet banking facility introduced as an alternative delivery channel for rendering effective customer service on 24 X 7 basis. It offers unique customized services to both Retail & Corporate customers.

The Bank has launched full-fledged transaction-enabled Internet Banking in India. Through this platform, customers have the facility to pay both Direct and Indirect Taxes online, make payment of utility bills, Insurance premiums and also book railway tickets.

To protect our customers from phishing attempts Bank has implemented beneficiary registration for third party fund transfer activities.

Rapid Funds2India an online money transfer service:

NRIs can avail this service from our Overseas branches in UAE, Oman, UK, Mauritius, Seychelles, Botswana, Hongkong, Fiji, Ghana, Kenia, Guyana, S. Africa, Tanzania, Uganda, Trinidad & Tobago, US and Zambia which facilitates almost instant credit to their accounts with us in India.

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E-BANKING Internet Payment Gateway:

3D secure implementation has been completed under Internet Payment Gateway. IPG facilitates direct customer merchant transactions and settlement through the Banks Central ATM Switch.

Real Time Gross Settlement System (RTGS) & National Electronic Fund Transfer (NEFT):

All branches are RTGS and NEFT enabled. RTGS and NEFT have been interfaced with our Internet banking portal. This provides customers the facility of making inter bank money transfers online using Internet banking.

SWIFT: SWIFT facility for worldwide inter-bank financial communication is provided at Foreign Exchange Authorised Branches in India as also in overseas territories Web-based Lending Process Automation for Corporate and Retail lending Operations: Bank of Baroda is the first Public Sector Bank in India to implement a Web-Based Lending Automation System and its in use in all its branches for its Retail Lending Operation.

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E-BANKING On-line Tax Accounting System (OLTAS):

Bank has implemented Online Tax Accounting System (OLTAS) for collection of taxes on behalf of Central Board of Direct Taxes, Govt. of India at 551 branches.

Electronics Data Interchange (EDI):

This is operational between Banks Kaligram branch, Ahmedabad, and ICD, Sabarmati (Centre for payment of customs duty and duty drawback), Ahmedabad.

The system is also operational between Banks Navrangpura Branch, Ahmedabad and Customs & Central Excise Department, Air Cargo Complex, Ahmedabad.

Global Treasury:

Bank of Baroda is the first Public Sector Bank in India to implement Integrated Treasury and Risk Management solution at its Treasury Branch, Mumbai.

Disaster Recovery Site (DRS) for Treasury has also been operationalized.

Corporate Intranet & e-mail:

Web-based

Corporate

Intranet

and

e-mail

for

electronic

communication, information sharing & knowledge management is fully operational. 70

E-BANKING Information Security:

Bank of Baroda has put in place robust Information Security Management System to ensure confidentiality, integrity, and availability of its IT resources..

To prevent fraudulent fund transfers, mandatory beneficiary registration has been implemented for third party fund transfers in internet banking.

Banks IT assets are subjected to periodical audits, vulnerability assessment and penetration testing to assess the vulnerabilities / risks and implement necessary risk mitigation measures.

Under VIEW facility customer can

View Account summary of all operative, deposit and loan accounts View all multiple Account information online with a single userid Get Account statements

Under Transaction facility customer can:

Transfer funds immediately or schedule for a future date to self linked and third party Pay through Online Tax - Direct and Indirect taxes online such as Excise Duty, Service Tax, Customs Duty, Income Tax etc.

Pay through Baroda Easy Pay - utility bills like electricity, mobile etc, Donations, Subscription, Travel plan booking online 71

E-BANKING

Pay school/institutional fees Book Rail Ticket IRCTC Additionally a Corporate user can Set up multiple workflow of initiators and approvers for transactions and requests View all trade finance related facilities availed eg. Export / Import LC, Inland/ Export Bills, Forward Contracts Bank Guarantees, Packing Credit account etc Use upload facility for single debit-multiple credit, multiple debitmultiple credit and single credit-multiple debit. Payment of Indirect Taxes ( Service Tax, Excise duty and Customs duty) Payment of Direct Taxes( Corporation Tax, Income Tax, TDS, Securities tax etc.) Payment of Utility Bills Booking of Rail Tickets

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E-BANKING QUESTIONNAIRE Q1. WHAT ARE THE NEW TECHNOLOGIES IN E-BANKING? Q2. WHAT CAN BE SAID ABOUT THE SECURITY PROCEDURES OF BANK OF BARODA? Q3. DOES THE BANK PROVIDE ELECTRONIC FUND TRANSFER? YES NO Q4. DOES THE BANK PROVIDE ONLINE TAX PAYMENT SERVICES? YES NO Q5. DOES THE BANK HAVE ELECTRONIC DATA INTERCHANGE FACILITY? Q6. DOES THE BANK HAVE RTGS, NEFT AND SWIFT? YES NO Q7. WHAT ARE THE OTHER E-BANKING SERVICES THAT THE CUSTOMERS CAN AVAIL?

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E-BANKING TOPIC REFERENCE BIBLIOGRAPHY E-BANKING AND IT CAIIB E-BANKING IN INDIA-BOSE JAYASHREE E-BANKING: GLOBAL PERSPECTIVES- IIB WEBLIOGRAPHY www.wikipedia.org www.banknetindia.com www.rbi.org www.bankofbaroda.com

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