Electronic Banking

BY

Bahaa Abas Noor abo han

Definition
* e-banking is defined as: the automated delivery of new and traditional banking products and services directly to customers through electronic, interactive communication channels.

Definition
This definition includes delivering services and products such as:
*Account information *Access to funds *Business transactions and transfers

Electronic Delivery How it can help ?

Increases customer satisfaction and retention Shift costs Increases brand value Provides real time access (i.e. convenience)

Shift Costs
Shift Costs - Tranaction Distribution September 2007
140 120 100
US$'Bil

80 60 40 20 0
Branch E-Channels

EPIN TOP-UP 0 21,988,080.00

BILL PAYMENTS 3,526,891,674.26 345,362,174.91

TRANSFERS 131,468,529,187.96 347,368,142.83

CASH WDL 10,155,127,584.95 2,742,174,300.00

DEPOSITS 9,803,591,028.47 74,080,308.79

Services

Source: PRINCETON SURVEY RESEARCH ASSOCIATES INTL. SEPTEMBER 2007

Specific Perspective

Services and products delivered to customers Supporting technology.

E-Banking Devices

Personal computers (PCs) Personal digital assistants (PDAs) Automated teller machines (ATMs) Touch tone telephones Cellular and smart phones

Internet-Based Services
Although there is risk in using any of these remote access devices (e.g. PCs, PDAs, mobile phones) for financial services, those that involve Internet access typically pose the greatest risk. This is because the Internet is such a widely accessible and public network

Internet Banking Primary Types :1.

Informational

General information about the financial institution Products or services offered

Initiating banking transactions Buying products and services

2.

Transactional

Transactional Websites
*Provide two separate types of services: 1. Retail services 2. Wholesale services

Retail Services

Account management Bill presentment and bill payment New account initiation Wire transfers Investment and brokerage services, Loan applications and approval Account aggregation for individual consumers

Wholesale Services

Account management Corporate cash management Small business loan applications, approvals, and advances Wire transfers Business-to-business payments Employee benefits and pension administration for business customers

Issues Impacting E-Banking

Informational Website: Potential liability and consumer violations The insider threat if the website is not properly isolated Avenue for spreading viruses and other malicious code Reputational risk for service disruption and defacing

Issues Impacting E-Banking

Transactional websites: Safeguarding customer information Authentication processes (e.g. ID theft) Liability for unauthorized transactions Losses from fraud

E-Banking Risks
Sectors 2008 Percentages Financial ISP Retail Insurance Internet community 79% 8% 4% 2% 2% 2007 Percentages 83% 7% 4% 2% 2%

Telecom
Computer hardware Government

2%
1% 1%

<1%
1% 1%

Computer software
Transportation

<1%
<1%

1%
1%

E-Banking Risks

Data breaches

Identities exposed

E-Banking Risks
*The types of e-banking risks include: Transaction or operations risk Credit risk Liquidity, interest rate, price, and market risks Compliance or legal risk Strategic risk

Operational (Technology) Risk Elements

Technology Element
1)

Risks

Management processes
Architecture

Management oversight Inadequate audit coverage New products process

Poor development standards Mis-configuration of hardware/software Datacenter burns Back officer mistake Errors of judgment

2)

3)

Integrity

4)

Security

Inadequate password administration Breach of policy Viruses, malware, phishing, etc

Natural disaster Failure to backup

5)

Availability

Compliance and Legal Risks

Uncertainty over legal jurisdictions Delivery of credit and depositrelated disclosures/notices as required by law Establishment of legally binding electronic agreements

Compliance and Legal Risks

Solicitation, collection and reporting of government monitoring information on applications and loans (e.g. AML requirements) Delivery of privacy and opt-out notices Record retention requirements

Strategic Risk

Risk management costs against the potential return on investment MIS to track e-banking costs, usage and profitability Generation of sufficient customer demand Adequacy of technical, operational, compliance or marketing support Competition

E-Banking Configuration

E-Banking Trends

Account aggregation Wireless Banking