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BANKING TECHNOLOGY SESSION 4

4/18/2012 Dr.P.R.Kulkarni

Dr P.R.Kulkani

DISTRIBUTION CHANNELS
4/18/2012

New distribution channels have transformed the way banking is conducted. More and more banks are offering services like disbursement and servicing of consumer loans, credit card business Most of the banks have been selling their products through Direct Selling Agents (DSAs). Home banking, telephone banking and Internet banking have already become common. ICICI bank was the first among the new private banks to launch its net banking service, called Infinity. It allows the user to access account information over a secure line, request cheques books and stop payment, and even transfer funds between ICICI Bank accounts. Citibank has been offering net banking through its Suvidha program to customers. Products like debit cards, credit cards, flexi deposits, ATM cards, personal loans including consumer loans, housing loans and vehicle loans have been introduced by a number of banks.

Dr.P.R.Kulkarni

DISTRIBUTION CHANNELS
4/18/2012

Retail banking includes a comprehensive range of financial products viz. deposit products, residential mortgage loans, credit cards, auto finance, personal loans, consumer durable loans, loans against equity shares, loans for subscribing to Initial Public Offers (IPOs), debit cards, bill payment services, mutual funds, and investment advisory services. These products provide the banks an opportunity to diversify the asset portfolio with high profitability and relatively low NPAs.

Dr.P.R.Kulkarni

TECHNOLOGY BASED CHANNELS


4/18/2012 Dr.P.R.Kulkarni

Easier access to information

Rapid advances in technology

Globalization & changing regulations

TECHNOLOGY BASED CHANNELS


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1. 2. 3. 4.

As technology makes the dissemination of information easier, an increasing variety of distribution channels are emerging. Throughout the world, financial service providers are looking towards a new concept of anytime, anywhere, anyhow banking, which demands that retail banks of the future find better ways of delivering a complete set of lifestyle-based financial services which simplify their customers lives and allow them have more personal time. Following are technology based channels: ATM Tele/Mobile-banking Internet banking Kiosk banking
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Dr.P.R.Kulkarni

ATM (AUTOMATED TELLER MACHINES)


4/18/2012

Customer is provided with an ATM card, which is an electronic card with few sensors embedded on it. When the customer inserts his card into the ATM it checks for the authorization and asks for the Personal Identification Number (PIN), which is known only to him. After the customer types his PIN, the ATM provides access to a range of services. Some of the features in Any Time Banking are: Check account balances View account activity/account summary Transfer money between accounts (regular and recurring transfers) Make loan payments Place a stop payment on a check Reorder checks Export transaction history View check images.
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Dr.P.R.Kulkarni

TELE/MOBILE-BANKING
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Consumers are becoming more tech-literate, buying mobile phones, So banks are trying to harness banking and mobile telephony into a set of applications and services, called m-banking Though there were many plans to enhance mobile-banking offerings and services, in reality the initiatives were very restricted As of now most applications were informative, such as bank balances or credit-card or bank accounts, rather than interactive services like buying or trading. Problems with Tele-banking security concerns and cost constraints WAP (Wireless Application Protocol) proved to be too slow and cumbersome to satisfy the customer on the go security is an important consideration for people seeking to access personal financial data displays on phone screens are user-unfriendly

Dr.P.R.Kulkarni

INTERNET BANKING
4/18/2012

Networking and internet-based technologies, besides enabling banks to handle large volumes of businesses in an orderly manner, have also helped provide many advantages such as demolish physical boundaries for delivering cross-border services, enabling the customer to avail major banking services from any corner. Networking and usage of internet-based solutions has made it possible for any customer to view his/her accounts details, undertake fund transfers and comply with standing instructions. Continuous fall in the price of hardware and networking cost and increased bandwidth accelerate the pace of such advancement, enabling the banks to reduce the cost of transactions and overheads
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Dr.P.R.Kulkarni

KIOSK BANKING
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Kiosks are aesthetically and ergonomically designed cabins c o n t a i n i n g computers. They are used for advertising, promotion and information purposes. By equipping them with necessary security conditions. Kiosks can be used for viewing or doing b a n k i n g t r a n s a c t i o n s .

Dr.P.R.Kulkarni

3.1 ELECTRONIC NANKING


Anytime Banking With introduction of computer in Indian Banks and introduction of ATM, the banking services are provided across the India. Because of tele-banking or remote banking facilities the customer need not visit the bank. Any-Time Banking : ATM have eliminated the time limitation of customer service and hot of banking services. It helps to deposits withdraw, instruction and transfer the funds. The security has been provided all ATM centers.The access is controlled by means of customers card and PIN suppose to know to the cardholder

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Dr.P.R.Kulkarni

ANYWHERE BANKING
With the introduction of ATM and tele- banking financial details can be available from anywhere. Inter -station connectivity of ATM has also facilitated withdrawal from other stations. Mutual arrangement between bank also facilitated for the withdrawal of money. Home Banking :( corporate and personal ) Corporate Banking :The remote banking become very popular among the corporate customers- big industrial houses which are already automated. Banks are providing customers terminals right in the customer office

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4/18/2012

The corporate customer can access the information like : Getting their current balance Ordering cheque book Intra- bank fund transfer, Instruction to stop payment. Forex matter Opening letter of credit. Personal Banking :The customer who have modems and personal computer can have direct connectivity to branch computer through telephone line.

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Dr.P.R.Kulkarni

4/18/2012

By using tele-banking services bank computer can get connected by providing identification. The customer can have access to his balance and order for cheque book and selected few services. Tele Banking : The function of the tele-banking services is based on the voice processing facilities available with the bank s computer. The caller will able to call the bank anytime and inquire balance or transaction history and transfer the funds The voice processing facility provided in the softwhare identifies the caller by keyword and provide him services

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Dr.P.R.Kulkarni

3.1 CORE BANKING


Core banking services offers integrated products and services to customer round the clock. In core banking, there is a central database for the bank and transaction are done centrally. Core banking has centralized branch computerization model where the branches are connected with central host. The multiple delivery channel like ATM, Debit card, telebanking, mobile banking ,internet banking work under on roof. Business Components : (a) to have a retail consumer modules, deposits, loan ,bill ;remittances, locker clearing, trade finance, to have a MIS modules, Integrate with existing ATM, HRM, Government schemes

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BENEFITS
Enables the establishment of reliable centralized data repository. Facilitates data warehouse and data mining technology Easy to implement ation of integrated customer centric services. Efficient and efficient MIS, ALM risk management using central data. Facilitates process reengineering to streamline the existing processes. Servers are not mandatory at branch level. Core infrastructure can be used for future expansion

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Essential Requirement : Creation of primary data centre : (a) for business the central server for on line transactions, (b)The central database will be used for all customer centric delivery channels. (c) To be manned round the clock to offer 24x7 services Disaster Recovery site (DRS) : It is used for the following purpose. (a) to avoid disruption in the business activities (b) to ensure non-stop functioning of branches and online delivery channels integrated. ( C) to act as a backup for providing reliable and continuous processing environment. Business Process Re-engineering: The process helps in (a) to help the bank to realgin the existing business process in tune with benefits provided by new technology platform. (b) take the advantage of the best business practices available in the technology platform to provide more efficient services.

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Dr.P.R.Kulkarni

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3.4 PAYMENT FACILITIES


4/18/2012

A Payment system is a process that comprises a set of instruments for effecting payments. Payment systems constitute the means by which inter-bank transfer of funds takes place across both domestic and international financial systems and markets. Traditional payment methods include cash and cheques. Following are payment and settlement methods Electronic fund transfers (EFTs) Plastic Money Electronic clearing services (ECS) Electronic data interchange (EDI) Real-time gross settlement system (RTGS)

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Dr.P.R.Kulkarni

ELECTRONIC FUND TRANSFERS (EFTS)


4/18/2012

The Reserve Bank of India had introduced the Electronic Funds Transfer System (EFT) in the year 1996. Currently, the scheme is available for transfer of funds across 8,500 branches of banks. EFT is the safest and fastest way to transfer money from your account to another individual in another city regardless of which bank the payee uses. All the transferor needs is payees account number. The facility can be availed of even if the branch from where you are sending the amount is not fully computerized. The EFT package, a software package developed by RBI, can run on even a Windows platform Almost every district in the country is enabled with the facility of electronic fund transfer with the tie-up of SBI and the central bank.

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Dr.P.R.Kulkarni

ELECTRONIC CLEARING SERVICES (ECS)


4/18/2012

It is aimed at effecting electronically, repetitive credits or debits for a large population of customers spread across a large number of branches of many banks. ECS (Credit Clearing) - This is a new method of payment whereby the institutions having to make a large number of payments (such as interest/dividend) can directly deposit the amount into the bank accounts of the shareholders/depositors/investors without having to issue paper instruments ECS (Debit clearing) - Utility Companies, banks/institutions receive periodic/repetitive payments towards electricity bills/telephone bills/loan installments/insurance get direct debit to their accounts with banks from customers and subscribers bank account.

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Dr.P.R.Kulkarni

PAYMENT & SETTLEMENT SYSTEMS CONTD.


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Real Time Gross Settlement (RTGS):


RTGS is an internationally accepted system to minimize the settlement risk. It is the centerpiece of an integrated payment system. The settlement occurs simultaneously for delivery of payments (i.e. in real time) for full value of each payment (i.e. gross) The system allows banks to give electronic instructions to transfer funds from their account to that of another bank. Under this system payment occurs only if there is transfer of settlement balances between accounts at the Reserve Bank of India. All payments settled under real-time gross settlement are same day funds. The RTGS system is maintained and operated by the RBI.
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Dr.P.R.Kulkarni

REAL-TIME GROSS SETTLEMENT SYSTEM (RTGS)


4/18/2012

Real-Time Gross Settlement System is now, the preferred mode of the settlement of large value interbank payments, with more and more countries moving towards it The Real Time Gross Settlement system is designed to provide large value funds transfer and settlement in an on-line real time environment to the banking industry, with settlement on a gross basis Under RTGS, the practically instant settlement ensures fast, secure, final and irrevocable settlement of payment transactions.

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Dr.P.R.Kulkarni

PAYMENT & SETTLEMENT SYSTEMS CONTD.


4/18/2012

Magnetic Ink Character Recognition(MICR) :

Cheques, to facilitate clearing, have critical data such as the location, city, amount and type of transaction printed with a special ink which can recognize characters. This is by the imbedding of metal in the ink. The process is known as Magnetic Ink Character Recognition or MICR. MICR technology enabled machines to sort cheques into banks and amounts due from each and thus ensuring speed and accuracy.

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Dr.P.R.Kulkarni

PAYMENT & SETTLEMENT SYSTEMS CONTD.

Electronic Payment Systems :


ATM IBA has set up a Shared Payment Network System(SPNS) or SWADHAN Network of ATMs of its member banks in Mumbai. Truncated Cheque Clearance Cheque truncated is a system of cheuqe clearing and settlement between banks based on electronic data / images or both without physical exchange of instrument.

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Dr.P.R.Kulkarni

PAYMENT & SETTLEMENT SYSTEMS CONTD.


4/18/2012

S. W. I. F. T. :

S.W.I.F.T (SWIFT) is the acronym for the Society for Worldwide Interbank Financial Telecommunications. Its headquarters are in La Hulpe near Brussels, Belgium. It runs a worldwide network by which messages concerning financial transactions are exchanged between banks and other financial institutions globally. It was started to establish a common language for financial transactions and a shared data processing system through a worldwide network communications network. It has members in excess of 7000 in over 200 countries worldwide and handles over 7 million messages every day. A part from a hub in Brussels, SWIFT has hubs in New York and in the Netherlands.

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Dr.P.R.Kulkarni

3.3 ONLINE-INTERNET BANKING??


4/18/2012 Dr.P.R.Kulkarni

Online banking (or Internet banking) is a term used for performing transactions, payments etc. over the Internet through a bank, credit union or building society's secure website. This allows customers to do their banking outside of bank hours and from anywhere where Internet access is available. In most cases a web browser is utilized and any normal internet connection is suitable. No special software or hardware is usually needed.

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WHAT IS ON-LINE BANKING


CONVENIENT

FAST

CHEAP
INNEVITABLE

WHY IS IT IMPORTANT
8/15/2011

For Customers:
Theres a seemingly receptive audience out there waiting Most dont feel the need to have a face-to-face conversation with tellers or think its important to have a checking account with a local branch office.

Dr.P.R.Kulkarni

For Banks:
The most important reason being ECONOMICS. Each Internet transaction typically costs the bank one cent Compare that with 27 cents for each ATM transaction USD 1.07 every time you go up to a tellers window !!!

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PC VS. INTERNET BANKING


8/15/2011

PC Banking (also known as Home Banking):


The use of proprietary financial software running on a computer in the home. Direct dial-in into the banks servers.

Dr.P.R.Kulkarni

Internet Banking:
Similar in functionality to PC Banking Allows access through a browser eliminating the need for proprietary software Can be accessed through a regular Internet connection, through the sites public web site.

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SERVICES PRESENTLY AVAILABLE


8/15/2011

Product / Function

Standard Services

Advanced Services

ATMs
Checking

ATM locator with addresses Locator, Mapping and Pricing


Dr.P.R.Kulkarni

Balance & transaction historyAnimated report generation Download to OFX enabled Archival searches software Bill payment & presentment

Available credit & Tn. History Tn. History reports Skip-pay & balance transfer Bill payment and cash adv. Customer Services FAQs and Emails/contacts Customer query forms Real time chat with CSR Immediate mail response Balance Transfer & Loan Home Equity LoansRates & pay. Calculators Advance forms Balance & Trans. History Rate History 30 Investments (non FDIC) Yields, Prospectus & Sign-up Portfolio tracking Forms News Alerts Credit Cards

SERVICES PRESENTLY AVAILABLE


Product / Function Standard Services Advanced Services

Loan Applications Standard Online application Interactive Loan application Instant approval Application status tracking Rates & Calculators Mortgages Extra Principle payment form Quick home equity loan Escrow account analysis Refinance analysis Home value reports
Privacy/Security Info. On how to order credit Credit Report access Bank branded cybercash wallets reports Zero liability for e-commerce Online applications Remembered data inputs

Sales Savings/ CDs

Rates; Savings/Retirement Automatic savings plans that can be fine-tuned on the Web calculators

FEATURES
4/18/2012

bank statements, with the possibility to import data in a personal finance program such as Quicken or Microsoft Money electronic bill payment funds transfer between a customer's own checking and savings accounts, or to another customer's account investment purchase or sale loan applications and transactions, such as repayments account aggregation to allow the customers to monitor all of their accounts in one place whether they are with their main bank or with other institutions. There is a growing number of banks that operate exclusively online. Because these online banks have low costs compared to traditional banks they can offer high interest rates.

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Dr.P.R.Kulkarni

PAST, PRESENT & FUTURE


Past:
8/15/2011

No automated services, simple brochureware (1-7 pages of simple brochure ware) This further developed into Detailed brochureware (5 or more pages of information; attractive branding)

Dr.P.R.Kulkarni

[a] Services Offered

Present:

Interactive Bank (Includes formatted email service, online calculator) Intermediate Cyberbank (Lets customers consult accounts online) Advanced Cyberbank (Fully transactional for transfers, payments, sales)

Future:

Interfaced Services (Banking services streamlined into other services, not limiting online banking to the computer)

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[c] On-line Banking Problems


On-line bankers need & want the following 5 features: [a] A sophisticated security system Security is probably one thing that holds potential customers from signing up It is also the main concern of current e-bank customers [b] Low fees Generally speaking, Internet Banking is cheap, with an average fee of $5 When it comes to PC banking, its FEES GALORE!! [c] Real-time information & detailed account info. E-Banking customers expect transactions to happen instantly, but with most banks a transaction would take a full day to clear [d] 24 Hour customer service features & duplicated branch banking Quick responses to e-mail/ chats with CRS & FAQs are a challenge [e] Wide array of products Many banking products cant be bought online without having to pick up the phone, walk to the nearest branch, or wait for a sales associate to call.

Financial Services
The day-to-day transactions in banks and insurance companies are automated which provide better service in processing transactions. Better customer service is provided using various IT aided developments such as introduction of ATMs, Magnetic Ink Character Recognition (MICR) cheques, credit cards, debit cards, smart cards, digital e-cash and electronic funds transfer. These developments have helped reduce the transaction processing time and also have made available the services to the customer at a convenient place. The advent of online transactions, speedy and secure payments settlement have lead to the globalization of financial services. With the help of satellite communication and software tools organizations like Reuters, Bloomberg and Telerate provide online 35 data related to current developments in financial services.
4/18/2012 Dr.P.R.Kulkarni

Emerging Trends

E-banking An Introduction
Evolution Of E-banking
The Advent Of Technology Deregulation
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Security Solutions
Availability Of Software Use Of Intranet

Types Of Electronic Banking


Traditional High Street Bank Direct-dial/Pc Banking

Web-based Internet Banking


Internet-only Bank
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Services on Offer
The Internet-only banks offer a range of services, some of which are similar to those offered by traditional banking methods in the high street branch, that include: Viewing account balances and recent transactions. Paying bills to utilities companies and suppliers etc, without having to write cheques. Scheduling bill payments in advance. Transferring money between the business accounts. Setting up and checking direct debits. Setting up and making direct payments to other banks and building societies. Viewing the bank statement.
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Services on Offer
Viewing, activating or canceling standing order details. Sending messages to the bank via e-mail. ATM access. Debit and checking cards. Download ability into Microsoft Money or Quicken applications. Instant account updates. Interest bearing checking, savings and money-market accounts with 24-hour online access. Mortgage and home equity loans. Online check ordering and direct-deposit set-up. Overdraft protection and line of credit. Small business services. 38 Stock quotes and trading.
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4/18/2012

Security Measures Banks Security Access Security Account Holders Vigilance

Not divulging their PIN number or password to any third party. Not leaving their PIN number anywhere around. Not leaving their PC while still being logged on to the bank website. The customer should not rely on the online bank website to automatically time out.

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4/18/2012

Making sure nobody can see the details on the computer screen or ensuring that the equipment will not allow electronic eaves-dropping. Not sending e-mails containing their password or membership number. Always removing any data that has been exported to a financial management package. Taking note when the PC/Internet screen indicates whether the customer is operating in a secure environment.

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Advantages
Cost Effectiveness Cash Flow Convenience Time-saving

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Disadvantages
Internet Connection Speeds Extra Staff Security
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E-Banking and Corporate Clients


Account Information: Real time balance information and summary of days transaction. Request: Make a banking request online. Account Information: The complete database that the bank has about a company is available at the terminal; Current balance in the companys account on real time basis Days transactions in the account Details of cash credit limit, drawing power, amount utilized, etc. Downloading the account statements as an excel or text file. The statements can be integrated with the ERP system for automatic reconciliation.
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E-Banking and Corporate Clients


Fund Transfers: One can manage Supply-Chain network effectively by using online fund transfer mechanism. The fund transfer takes place on a real time basis across the bank locations. This product facilitates One-to-one fund transfer between two linked accounts. Bulk fund transfers. In bulk fund transfers, you upload a flat file containing payment/collection information. Some of the banks systems take care of processing the entire file, and once the file is processed you can integrate the processed file to your ERP for auto 43 reconciliation.
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Dr.P.R.Kulkarni

Customers can also submit the following requests online:


The account statements by e-mail either on daily/weekly/ fortnightly/monthly basis Stop payment of cheque Cheque book replenishment Demand Draft/Pay-order Fixed deposit account opening Opening of letter of credit. Operation of Corporate Internet Banking:
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The Security Features Embedded in the Software


Benefits to the Customer
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Integration with the Clients ERP System

E-Banking and Individuals


Bill Payment through E-Banking The Electronic Shopping Mall Effecting Personal Investments
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Trading in Shares: Cash Trading


Trading in Shares: Margin Trading Trading in Shares: Spot Trading

Investing in Mutual Funds


Trade in Derivatives: Futures Trade in Derivatives: Options

IPOs Online

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E-BANKING IN INDIA
How to meet customers service expectations? How to cut costs? How to manage competition? Technology is the Key Evolution of Technology in Indian Banks Centralized Infrastructure Core Banking Applications Focus on Customer Satisfaction CRM TOOLS Data Mining for Intelligence
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INTERNAL DEVELOPMENTS AND THE INTRANET


RISKS IN E-BANKING WHAT IS AHEAD?

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