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Chapter 1: - E-Banking

 1.1 Introduction of E-Banking

 1.2 Meaning of E-Banking

 1.3 Functions of E-Banking

 1.4 Types of E-Banking

 1.5 Advantages of E-Banking

 1.6 Limitations of E-Banking

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1.1 Introduction of E-Banking: -

The acceleration in technology has produced an extraordinary effect

upon our economy in general has had a particularly profound impact in
expanding the scope and utility of financial products over the last ten
years. Information technology has made possible the creation,
valuation, and exchange of complex financial products on a global
basis and even that just in recent years. Derivatives are obviously the
most evident of the many products that technology has inspired, but the
substantial increase in our calculation has permitted a variety of other
products and, most beneficially, new ways to unbundled risk.

What is really quite extraordinary is that there is no sign that

this process of acceleration in financial technology is approaching an
end. We are moving at an exceptionally rapid pace, fueled not only by
the enhanced mathematical applications produced by our ever rising
computing capabilities but also by our expanding telecommunications
capabilities and the associated substantial broadening of our markets.

All the new financial products that have been created in recent years
contribute economic value by unbundling risks and reallocating them
in a highly calibrated manner. The rising share of finance in the
business output of India and other countries is a measure of the
economic value added by the ability of these new instruments and
techniques to enhance the process of wealth creation. The reason of
course, is that information is critical to the evaluation of risk. The less
that is known about the current state of a market or a venture, the less

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the ability to project future outcomes and, hence, the more those
potential outcomes will be discontinued.
1.2 Meaning of E-Banking: -

E-bank is the electronic bank that provides the financial service for the
individual client by means of Internet.

1.3 Functions of E-Banking: -

At present, the personal e-bank system provides the following services:

-

1. Inquiry about the information of account: -

The client inquires about the details of his own account information
such as the card’s / account’s balance and the detailed historical
records of the account and downloads the report list.

2. Card accounts’ transfer: -

The client can achieve the fund to another person’s Credit
Card in the same city.

3. Bank-securities accounts transfer: -

The client can achieve the fund transfer between his own
bank savings accounts of his own Credit Card account and his own
capital account in the securities company. Moreover, the client can
inquire about the present balance at real time.

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4. The transaction of foreign exchange: -

The client can trade the foreign exchange, cancel orders
and inquire about the information of the transaction of foreign
exchange according to the exchange rate given by our bank on net.

5. The B2C disbursement on net: -

The client can do the real-time transfer and get the
feedback information about payment from our bank when the client
does shopping in the appointed web-site.

6. Client service: -
The client can modify the login password, information of
the Credit Card and the client information in e-bank on net.

7. Account management: -
The client can modify his own limits of right and state of
the registered account in the personal e-bank, such as modifying his
own login password, freezing or deleting some cards and so on.

8. Reporting the loss if the account: -

The client can report the loss in the local area (not
nationwide) when the client’s Credit Card or passbook is missing or
stolen.

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1.4 Types of E-Banking: -

1. Deposits, withdrawals, inter-account transfer and payment of

linked accounts at an ATM;

2. Buying and paying for goods and services using debit cards or
smart cards without having to carry cash or a cheques book;

3. Using a telephone to perform direct banking- make a balance

enquiry, inter-account transfers and pay linked accounts;

4. Using a computer to perform direct banking- make a balance

enquiry, inter-account transfers and pay linked

1.5 Advantages of E-Banking: -

1. Account Information: Real time balance information and

summary of day’s transaction.

2. Fund Transfer: Manage your Supply-Chain network, effectively

by using our online hand transfer mechanism. We can effect
fund transfer on a real time basis across the bank locations.

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3. Request: Make a banking request online.

4. Account information: The complete database that the banks has

about our company is available to us at our terminal. It provides
us:

 Current balance in our account on real-time basis.

 Day’s transactions in the account.
 Details of cash credit limit, drawing power, amount
utilized, etc.

5. Downloading of account statements as an excel file or text file.

The statements can be integrated with your ERP systems for
auto-reconciliation.

6. Fund Transfers: Manage our Supply-Chain network, effectively

by using our online fund transfer mechanism. We can effect fund
transfer on a real time basis across the bank locations. The
product facilities.

(a) One-to-one fund transfer between two linked

account.

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(b) Bulk fund transfers; In bulk fund transfers, we

upload a flat file containing payment / collection
information. Our systems take care of processing
the entire file and once the file is processed file to
our ERP for auto reconciliation.

7. The real life situation of user-wise limits and multilevel

signatories can be mapped in the net-based fund transfer module
too. We can specify user-wise cap for fund transfer and the
number of approvals needed for each fund transfer. The fund
transfer will not take place unless the required number of
signatories has approved it.

8. With a power of Attorney from our dealers, we can link the

dealer’s accounts to our account in order to have an online fund
transfer, saving us time and money involved with cheques
collections systems. Alternatively, the dealer can credit our
account through this channel. Similarly, we could also effect
vendor and other payments online.

9. Customers can also submit the following requests online:

Registration for account statements by e-mail daily / weekly /
fortnightly / monthly basis.

(1) Stop payment or cheques

(2) Cheque book replenishment
(3) Demand Draft / Pay-order

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(4) Opening of fixed deposit account

(5) Opening of Letter of credit

10.The company does not have to spend anything extra to avail

such facilities. All it requires is an Internet connectivity. The
product enables the company to pro-actively manage its cash
flows, ease reconciliation efforts as all the MIS is available at
the click of the mouse.

11.Customers can Integrate the System with his own ERP: The
customer can download the account statements either as a text
file or as an excel file. The bank can help him in integrating the
account statements and bulk payments files with his ERP
system. The bank may charge a nominal fee depending upon the
nature of work involved.

12.Bill Payment through Electronic Banking: Internet has thus

ushered the concept of anytime and anywhere banking. To the
individual the onerous task of visiting several places to settle his
service bills like telephone, water, electricity, etc., can be
overcome through the electronic Bill Pay service provided by
the bank. He can pay his regular monthly bills (telephone,
electricity, mobile phone, insurance, etc.) right from his desktop.
No more missed deadlines, no more loss of interest. He can
schedule his bills in advance, and thus avoid missing the bill
deadlines as well as earn extra interest on his money.

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13.The Electronic Shopping Mall: The customer can also make his
shopping payment through the Bank’s secure website-so that he
can shop online without any security worries, as the bank can
provide online real time shopping mail services through partner
shopping sites.

14.Effecting Personal Investments through Electronic Banking: The

bank’s website can also allow the customer to invest in shares,
mutual funds and other financial products.

15.Investing in Mutual funds: Electronic banking also brings the

customer the same convenience while investing in Mutual funds-
Hassle free and Paperless Investing. He can invest in mutual
funds without the hassles of filling application forms or any
other paperwork. He needs to provide no signatures or proof of
identify for investing. Once he places a request for investing in a
particular fund, there are no manual processes involved. His
bank funds are automatically debited or credited while
simultaneously crediting or debiting his unit holdings.

16.Initial Public Offers Online: The customer could also invest in

initial public offers online without going through the hassles of
filling ANY application form / paperwork. Get in-depth analyses
of new initial public offers issues, which are about to hit the

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market and analysis on these. Initial public offer calendar, recent

initial public offers listings, prospectus / offer documents, and
initial public offer analysis are few of the features, which help a
customer to keep on top of the initial public offers markets.

17.Other benefits: The e-banking provides some other benefits also.

They are:

(1) Convenience.

(2) Speed of concluding transactions.

(3) Safety-banking from own home.

(4) Economy- banking without visiting your bank.

(5) Cheaper service fees.

(6) Seamless Integration with existing environment (IDM-

Intelligent Data Module).

(7) Highly Scaleable.

(8) Easy Customization.

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(9) Lower Costs of both Installation and Maintenance.

(10)Platform Independence.

(11)Round-the-Clock and Cross-Border Availability.

(12)Remote Authorization.

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1.6 Limitation of E-Banking: -

1. Safety situations around ATMs.

2. Abuse of bank cards by fraudsters at ATMs.

3. Danger of giving your card number when buying on-line.

The modern technology has influenced the financial sector to a large

extent. It increases the competitive efficiency of the firms and provides
sophistication to the end users. It makes everyone fittest to survive.

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Chapter 2: - Internet Banking

 2.1 Internet Banking

a) Introduction
b) Banking service though Internet
c) The Indian Scenario
d) Product & Service offered
e) The future scenario

 2.2 Risk & Rewards

a) Operational Risk
b) Security Risk
c) System architecture & design
d) Reputational Risk
e) Legal Risk
f) Money Laundering Risk
g) Cross Border Risks
h) Strategic Risk
i) Other Risk
j) Risk of unfair competion

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2.1 Internet Banking:-

a) Introduction: -

The delivery channels include direct dialup connections, private

networks, public networks, etc. with the popularity of computers, easy
access to Internet 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 services offered by different banks vary widely both in
their content and sophistication.

b) Banking Services through Internet: -

i. The Basic Level Service is the banks’ web sites which

disseminate information on different products and services
offered to customers and members of public in general. It may
receive and reply to customer’s queries through e-mail,

ii. In the next level are Simple Transactional Web sites which
allows customers to submit their instructions, applications for
different services, queries in their account balances, etc. but do
not permit any fund-based transactions on their accounts,

iii. The third level of Internet banking service are offered by Fully
Transactional Web sites which allow the customers to operate

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on their accounts for transfer of funds, payment of different

bills, subscribing to other products of the bank and to transact
purchase and sale of securities, etc. The above forms of Internet
banking service the customer or by new banks, who deliver
banking service primarily through Internet or other electronic
delivery channels as the value added services. Some of these
banks are known as ‘Virtual’ banks or ‘Internet only’ banks and
may not have physical presence in a country despite offering
different banking services.

c) The Indian Scenario: -

The entry of India banks into Net Banking

• Internet banking, both as a medium of delivery of banking
services and as a strategic tool for business development.

• At present, the total internet users in the country are estimated at

9 lakh. However, this is expected to grow exponentially to 90
lakh by 2003. only about 1 percent of Internet users did banking
online in 1998. This is increased to 16.7 percent in March 2000
(India Research, May 29, 2000, Kotak Securities).

• Cost of banking service through the Internet from a fraction of

costs through conventional methods. Rough estimates assume
teller cost at Re.1 per transaction, ATM transaction cost at 45
paise, phone banking at 35 paise, debit cards at 20 paise and
Internet banking at 10 paise per transaction.

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d) Product and Services Offered: -

 Banks in India are at different stages of the web-enabled banking

cycle. Initially, a bank, which is not having a web site, allows its
customer to communicate with it through an e-mail address’
communication is limited to a small number of branches and
offices which have access to this e-mail count.

 With gradual adoption of Information Technology, the bank puts

up a web site that provides general information on deposits
products, application forms for downloading and e-mail option
for enquiries and feedback.

 Vijaya Bank provides information on its website about its NRI

and other services. Customers are required to fill in applications
on the Net and can later receive loans or other products
requested for at their local branch.

 A few banks provide the customer to enquire into his demat

account (security/shares) holding details, transaction details and
status of instructions given by him. These web sites still do not
allow online transactions for their customers.

 Some of the banks permit customers to interact with them and

transact electronically with them. Such services include request
for opening of accounts, requisition for cheque books, stop
payment of cheques, viewing and printing statements of

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accounts, movement of funds between accounts within the same

bank, querying on status or requests, instructions for opening of
Letter of Credit and Bank Guarantees, etc.

 These services are being initiated by banks like ICICI Bank Ltd.,
Citibank, Global Trust Bank Ltd., UTI Bank Ltd., Bank of
Citibank Bank of Madura Ltd., Federal Bank Ltd., etc.

 Some of the more aggressive players in this area such as ICICI

Bank Ltd., HDFC Bank Ltd., UTI Bank Ltd., Citibank, Global
Trust Bank Ltd., and Bank of Punjab Ltd., offer the facility of
receipt, review and payment of bills online.

 The ‘Infinity’ service of ICICI Bank Ltd. Also allows online real
time shopping all payments to be made by customers.

 HDFC Bank Ltd. Has made e-shopping online and real time
with the launch of its payment gateway.

 Banks providing internet banking services have been entering

into agreements with their customers setting out the terms and
conditions of the services.

 The terms and conditions include information on the access

through user-ID and secret password, minimum balance and
charges, authority to the bank for carrying out transactions
performed through the service, liability of the user and the bank,

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disclosure of personal information for statistical analysis and

credit scoring also, non-transferability of the facility, notices and
termination, etc.

e) The Future Scenario: -

o Compared to banks abroad, India banks offering online services

still have a long way to go. For online banking to reach a critical
mass, there has to be sufficient number of users and the
sufficient infrastructure in place.

o Various security options like line encryption, branch connection

encryption, firewalls, digital certificates, automatic sign-offs,
random pop-ups and disaster recovery sites are is in place or are
being looked at, there is as yet no Certification Authority in
India offering Public Key Infrastructure, which is absolutely
necessary for online banking.

o The communication bandwidth available today in India is also

not enough to meet the needs of high priority services like online
banking and trading.

o Banks offering online facilities also need to calculate their

downtime losses, because even a few minutes of downtime in a
week could mean substantial losses.

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o Users of Internet Banking Services are required to fill up the

application froms online and send a copy of the same by mail or
fax to the bank.

o A contractual agreement is entered into by the customer with the

bank for using the Internet banking services.

o Domestic customers for whom other access points such as

ATMs, telebanking, personal contact, etc. are available, are often
hesitant to use the Internet banking services offered by Indian
banks. Internet Banking, as an additional delivery channel, may,
therefore, be attractive/ appealing as a value added service to
domestic customers. Non-resident Indians, for whom, it is
expensive and time consuming to access their bank accounts
maintained in India find net banking very convenient and useful.

o Cyber crimes are, therefore, difficult to be identified and

controlled.

o In order to promote Internet banking services, it is necessary that

the proper legal infrastructure is in place.

o The Department of Telecommunications (DoT) is moving fast to

make available additional bandwidth, with the result that internet
access will become much faster in the future.

o Reserve Bank of India has constituted a group to examine

different issues relating to i-banking and recommend technology,

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security legal standards and operational standards keeping in

view the international best practices. In the following paragraphs
a generic set of risks discussed as the basis for formulating
general risk control guidelines.
2.2 Risk & Rewards: -

a) Operational Risk: -

 Operational risk, also referred to as transactional risk is the most

common form of risk associated with i-banking.

 It takes the from of inaccurate processing of transactions, non-

enforceability of contracts, compromises in data integrity, data
privacy and confidentiality, unauthorized access / intrusion to
bank’s systems and transaction, etc.

 Such risks can arise out of weaknesses in design,

implementation and monitoring of banks information system.

 Besides inadequacies in technology, human factors like

negligence by customers and employees, fraudulent activity of
employees and crackers/ hackers, etc. can become potential
source of operational risk.

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b) Security Risk: -

 Security risk arises on account of unauthorized access to a

bank’s critical information stores like accounting system, risk
management system, portfolio management system, etc.

 Other related risks are loss of reputation, infringing customers’

privacy and its legal implications, etc.

 Attackers could be hackers, unscrupulous vendors, disgruntled

employee or even pure thrill seekers.

 In addition to external attacks banks are exposed to security risk

from internal sources e.g. employee fraud. Employee being
familiar with different systems and their weaknesses become
potential security threats in a loosely controlled environment.
They can manage to acquire the authentication data in order to
access the customer accounts causing losses to the bank.

 Unless specifically protected, all data/ information transfer over

the internet can be monitored or read by unauthorized persons.

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c) System architecture and design: -

 Banks face the risk of wrong choice of technology, improper

system design and inadequate control processes.

 Numerous protocols are used for communication across internet.

Each protocol is designed for specific types of data transfer.

 A system allowing communications with all protocols, say

HTTP (Hyper Text Transfer Protocol), FTP (File Transfer
Protocol), telnet, etc. is more prone to attack than one designed
to permit say, only HTTP.

 Many banks rely on outside service providers to implement,

operate and maintain their e-banking system.

 Security related operational risk include access control, use of

firewalls, cryptographic techniques, public key encryption,
digital signature, etc.

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d) Reputational Risk: -

 Reputational risk is the risks of getting significant negative

public opinion, which may result in a critical loss of funding or
customers. Such risks arise from actions which cause major loss
of the public confidence in the banks’ ability to perform critical
functions or impair bank-customer relationship. It may be due to
banks’ own action or due to third party’s action.

 The main reasons for this risk may be system or product not
working to the expectations of the customers, significant
security breach (both due to internal and external attack),
inadequate information to customers about product use and
problem resolution procedures, significant problems with
communication networks that impair customers’ access to their
funds or account information especially if, there are, no
alternative means of account access.

e) Legal Risk: -

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 Legal risk arises from violation of, or non-conformance with

laws, rules, regulations, or prescribed practices, or when the
legal rights and obligations of parties to a transaction are not
well established.

 A customer, inadequately informed about his rights and

obligations, may not take proper precautions in using Internet
banking products or services, leading to disputed transactions,
unwanted suits against the bank or other regulatory sanctions.

f) Money Laundering Risk: -

o As internet banking transactions are conducted remotely banks

may find it difficult to apply traditional method for detecting and
preventing undesirable criminal activities. Application of money
laundering rules may also be inappropriate for some forms of
electronic payments.

o To avoid this, banks need to design proper customer

identification and screening techniques, develop audit trails,
conduct periodic compliance reviews, frame policies in internet
transactions.

g) Cross-Border Risks: -

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 Internet banking is based on technology that, by its very nature,

is designed to extend the geographic reach of banks and
customers. Such market expansion can extend beyond national
borders. This causes various risks.

 Such considerations may expose banks to legal risks associated

with non-compliance of different national laws and regulations,
including consumer protection laws, record keeping and
reporting requirements, privacy rules and money laundering
laws.

 The foreign-based service provider or foreign participants in

internet banking are sources of country risk to the extent that
foreign parties become unable to fulfil their obligations due to
economic, social or political factors.

h) Strategic Risk: -

 For reducing such risk, banks need to conduct proper survey,

consult experts from various fields, establish achievable goals
and monitor performance.

 Also they need to analyze the availability and cost of additional

resources, provision of adequate supporting staff, proper training
of staff and adequate insurance coverage.

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i) Other Risk: -

 Traditional banking risks such as credit risk, liquidity risk,

interest rate risk and market risk are also present in internet
banking.

 These risks get intensified due to the very nature of internet

banking on account of use of electronic channels as well as
absence of geographical limits.

 Credit risk: Is the risk that a counterparty will not settle an

obligation for full value, either when due or at any time
thereafter. Banks may not be able to properly evaluate the
creditworthiness of the customer while extending credit through
remote banking procedures, which could enhance the credit risk.

 Another facility of internet banking is electronic money. It

brings various types of risks associated with it. If a bank
purchases e-money from an issuer in order to resell it to a
customer, it exposes itself to credit risk in the event of the issuer
defaulting on its obligation to redeem electronic money.

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 Liquidity risk: It is important for a bank engaged in electronic

money transfer activities that it ensures that funds are adequate

to cover redemption and settlement demands at any particular
time. Failure to do so, besides exposing the bank to liquidity
risk, may even give rise to legal action and reputational risk.

j) Risk of unfair competion: -

 Internet banking is going to intensify the competition among

various banks. The open nature of internet may induce a few
banks to use unfair practices to take advantage over rivals. Any
leaks at network connection or operating system, etc. may allow
them to interfere in a rival bank’s system.

 Thus, one can find that along with the benefits internet banking
carries various risks for bank itself as well as banking system as
a whole.

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Chapter 3: - Internet Banking: Challenges for

Banks & Regulators.

3.1 Internet Banking in the United States

• New Risks

3.2 The Basel Committee’s Electronic Banking

Group

3.3 e-Finance Oversight

3.4 Security Controls

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3.5 Legal & Reputational Risk Management

3.1 Internet Banking in the United States: -

• An average industry estimates indicates the about 13 million US

households banked online by the end of 2000 – twice as many as
in the pervious years.

• At the beginning of 2001, 37% of all US national banks,

including nearly all of the largest national banks, were offering
full transactional capabilities online – a near twofold increase in
little over a year.

• Banks offering Internet-based transaction service – and there are

more of them each day – should be well positioned to compete
in the financial markets of the future.

New Risks: -

 Internet banking poses risks that are different from those that
bank supervisors customarily dealt with in assessing credit,
market, or interest rate risk.

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 First, banks must manage the unprecedented speed of

technological change, and assess how it relates to their
technology investments and their ability to provide consistently
high-quality customer service.

 Second, bank are increasingly dependent on third parties to

provide the necessary information technology.

 Security is another area of significant risk. So far, relatively few

financial institutions have reported being victimized by online
security violations.

3.2 The Basel Committee’s Electronic banking Group: -

o The Basel Committee on Banking Supervision has taken

the lead in this area through the creation of its Electronic
Banking Group (EBG) in late 1999 – a group whose
members represent 17 Central banks and bank supervisory
agencies.

o The major focus of the EBG’s work has been to develop

risk management guidance for Internet banking that will
guide bankers and promote effective and consistent bank
supervision around the world.

o The EBG has identified fourteen Risk Management

Principles for Electronic Banking to promote sound risk

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management of e-banking. These principles are intended

to help banking institutions expand their existing
oversight policies and processes to cover their e-banking
activities.

3.3 e-Finance Oversight: -

 The EBG has dedicated considerable time and effort to

communicating supervisory expectations and guidance for home
country supervisors to oversee cross-border Internet banking
activity conducted by their local institutions.

 In February of this year, the Financial Stability Forum’s Contact

Group on E-Finance held its first formal meeting. This group
was formed to promote enhanced information-sharing among the
various international sector-based working groups dealing with
e-finance supervisory issues – e-banking, e-trading, retail
payments systems, e-commerce, and so on.

3.4 Security Controls: -

 Authentication of e-banking customers.

 Nonrepudiation and accountability for e-banking

transaction of duties.

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 Appropriate measures to ensure segregation of duties.

 Proper authorization controls within e-banking systems,

databases and applications.

 Data integrity of e-banking transactions, records and

information.

 Establishment of clear audit trails for e-banking

transactions.

 Confidentiality of key bank information.

3.5 Legal & Reputational Risk Management: -

 Appropriate disclosure for e-banking services.

 Privacy of customer information.

 Capacity, business continuity and contingency planning to

ensure availability of e-banking systems and services.

 Incident response planning. The complete EBG Report on Risk

Management Principles for Electronic Banking can be obtained

at the Bank for International Settlements’ web site at
www.bis.org.

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Chapter 4: - What do Computers do in Banks

The different uses of Information Technology: -

a) Single Window System

b) Any Time Banking
c) Automated Teller machine
d) Shared Payment Network System
e) Customer Service
f) Telebanking
g) Home Banking
h) Electronic Fund Transfer
i) Plastic Cards as Media for Payment
1. Credit Card

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2. Debit Card
3. Smart Card
4. ATM Card
j) Intra-bank and Inter-bank Applications

4.1 The different uses of Information Technology: -

a) Single Window System (SWS): -

o The cashier or teller who accepts the cash, keys in the data from
his terminal after receipt of the amount.

o The amount is straight away posted to the system.

o If the customer wishes to update passbook the same is also

updated through the security form printer/pass book printer.

o If a customer wishes to obtain a draft, the clerk keys in the

details of the account to be debited and the particulars of the
drafts to be issued on the machine.

o The customer’s account is debited and security form printer

prints out draft and clerk can hand over the same to customer
duly signed.

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b) Any Time Banking: -

 This refers to banking service available 24 hours a day and 365

days a year.

 Such facility is made available to the customer through the

Automated Teller machine.

 Banking, being a service industry, is primarily driven by

customers needs.

 Each customer is willing to pay a price for the services provided

it is made available to him when he wants and where he wants.

 In the present day of server competion, banking services are

driven by technology, which is more oriented towards providing
better services to the customer.

 The concept of banking hours has been changed from the fixed 4
hours to 24 hours.

 This has been made possible through use of ATMs. Even under
the manual service, the banks have stated to extend the service
from the traditional 4 hours to 5 hours and even up to 12 hours
say from 8 AM to 8 PM.

 Some banks have introduced the practice of Sunday Banking or

Holiday Banking.

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c) Automated Teller Machine (ATM): -

 ATM is a machine in the nature of a computer in general sense,

but is dedicated to do certain types of specific jobs only.

 The hardware and the proprietary i.e. the software used in one
machine can not be used in one machine.

d) Shared Payment Network System (SPNS): -

 The SPNS, named SWADHAN, has been sponsored by the

Indian Bank’s Association (IBA).

 It is a network of ATMs, points of sale terminals and Cash

Dispensers with a view to pool the resources of the banks and
underlines the spirit of competition through cooperation.

 It became operational in Mumbai on 1st February 1997 and in

two years about 150 ATMs were owned and installed by 38

banks including foreign banks, public and private sector Indian
commercial banks as also cooperative banks.

 The biggest advantage of the network is that the ATM cards

issued by different banks can used at any member banks ATM.

 Banks can have as many ATM as they want and follow some
standards set by the SPNS committee.

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 The heart of the network is the Switch and its main components
are: Tandem Mainframe Computer, BASE 24 Software,
Motorola networking equipments and the leased lines.

e) Customer Services: -

The following customer services are offered through the system:

i. Cash withdrawal (up to a specified limit)

ii. Cheque/Cash deposit (the receipt being only for the deposit of
the envelope containing cash but not for the amount therein)
iii. Enquiry about balances
iv. Printing of statement of accounts
v. Request for cheque book and standing instructions.
vi. Transfer of funds
vii. PIN change

f) Telebanking: -

 From the conventional banking, where the services were

provided manually across the table, it has come to a stage where
the customer is not required to visit the bank enquiry of balance

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in the account, sending a remittance, to get a statement of

account, etc.

 The concept has become so popular that in USA customers do

not visit the bank for 97% of their transactions and these are
done from either customer’s residence or office using a
telephone or a home PC.

 In telebanking the customer is required to open the account with

the bank initially by visiting the bank.

 Telebanking services are, generally, provided by the bank over

the telephone on a special number.

 The number at the bank is connected to a terminal in the bank,

which is either handled manually or is automated by connecting
the same to the computer network.

 Where the system is automated, two types of technology are

used.

g) Home Banking: -

• Under home banking the customer is served at his residence and

there is no need for the customer to visit the bank’s premises for
a number of routine transactions.

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• If the customer needs some information the same can be got by

contacting the bank over the phone as described in the
telebanking.

• If the customer wants to put through transaction and wishes to

see his account or to get a statement of his account, he may have
to use a PC.

• This type of facility is available with a town, city or

metropolitan area.

• Under such a situation the customer should have a:

 PC
 Modem
 Telephone line
 A compatible software for the home PC

• The home banking service can be broadly classified under two

groups, one without using the information technology and
another using information technology.

• When customer contacts the bank o the phone no specific

technology is involved and the service of telebanking are
provided to him.

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h) Electronic Fund Transfer (EFT): -

o In India the fund transfers are basically done through Mail

Transfer, Draft or Telegraphic Transfer.

o In case of Telegraphic Transfer (TT) again the Department of

Telecommunication was the sole provider of Telephone, Telex
and Telegram facilities.

o With the process of liberalization private operators have started

providing alternative voice communication channels through
mobile phones and vast communication as an alternative
channels for data communication.

o It was normal for any TT to be credited to the beneficiary’s

account after delay of 2 to 4 days

o The different forms of EFT prevalent in the use are:

 EFT through Electronic Data Interchange

 BANKNET
 RBINET
 IDRBT VSAT Network
 EFT from Point of Sales
 Electronic Cash
 SWIFT- Global System for Funds Transfer
 Electronic Clearing Settlement

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i) Plastic Cards as Media for Payment: -

There are four types of plastic cards being used ad media for making
payments. These are:

1. Credit Card
2. Debit Card
3. Smart Card
4. ATM Card

1. Credit Cards: -

The credit card enables the cardholders to:

 Purchase any item like clothes, jewellery, railway/air tickets, etc.
 Pay bills for dining in a restaurant or boarding and lodging in a
hotel
 Avail of any service like car rental, etc.

2. Debit Card: -

A debit card is issued on payment of a specified amount by the issuing

company like a telephone company to a customer on cash payment or
on debiting his account by a bank.

Thus it is like an electronic purse, which can be read and debited by

the required amount.

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It may be noted that while through a credit card, the customer first
makes a purchase or avails service and pays later on, but for getting the
debit card, a customer has to first pay the due amount and then make a
purchase or avail the service. For this reason, debit card are not as
popular as credit cards.

3. Smart Cards: -

Smart Cards have a built-in microcomputer chip, which can be used for
storing and processing information. For example, a person can have a
smart card from a bank with the specified amount stored electronically
on it. As he goes on making transactions with the help of the card, the
balance keeps on reducing electronically. When the specified amount is
utilized by the customer, he can approach the bank to get his card
validated for a further specified amount. Such cards are used for
paying small amounts like telephone calls, petrol bills, etc.

In India, a smart card, suiting Indian banking environment, is being

developed and tested at IIT, Mumbai, in collaboration with the RBI and
SBI. The card is being used as an experimental tool for promoting
cashless society in and around the IIT Campus. The latest smart card
being developed will combine all the features of electronic purses,
credit cards and ATM cards.

4. ATM Cards: -

The card contains a PIN (Personal Identification Number) which is

selected by the customer or conveyed to the customer and enables him

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to withdraw cash up to the transaction limit for the day. He can also
deposit cash or cheque.

Function of ATM Card: -

 The customer has to enter the card into the machine slot. The
machine first reads for hot carding of the card number, i.e. it
checks whether the card has already been cancelled or placed on
the rejection list.
 Rejection can be because of the reason like lost card or stolen
card.
 The machine then reads the PIN and asks for the PIN from the
customer.
 If the PIN matches, it present the main menu on the screen. The
menu contains options from which the withdrawal option is
selected.
 The ATM then checks whether the amount is under the day limit
magnetically inscribed by the customer. Accordingly, the ATM
dispenses cash. It then releases the card and a printed statement
comes out of the slot.

5. Intra-Bank & Inter-Bank applications: -

Computerization is now all pervasive in banks. Almost all the activities

in a bank can be performed more efficiently with the help of
computers. Broadly, we can divide the applications of computerization
in banks in two types

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A) Intra-Bank Applications: -
i. Funds transfer and payment message
ii. Banks owned ATM/Credit Card and other application on the
corporate network
iii. Inter-Branch Reconciliation
iv. Quick disposal of loan/investment proposal
v. Funds information from clearing centers to the fund
management office for optimal allocation of funds.
vi. Cash Management Product
vii. Treasury Management
viii. Any Branch Banking
ix. Asset Liability Management
x. E-mail
xi. Software distribution in the bank
xii. Organizational bulletin boards may contain the following:
a. Circulars
b. News letters, phone and address directories
c. Undesirable parties
d. Missing security items
e. Confidential circular on attempted frauds.
xiii. Human Resources Development and Personnel Administration
xiv. Auditing and Inspecting computerized branches using the
network
xv. Organizational database may include
a. Statutory returns
b. Control returns
c. Standardized returns
xvi. Management Information Systems

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a. Borrower’s profile
b. Branch profile
c. Employee analysis
d. Product/service profile
e. Business profile of branches.
xvii. Apart from providing efficient service to customers the
financial network will also fulfill the following objectives:
a. Timely information to top management
b. Helping in development of new products
c. Speedy communication among branches and with the
controlling offices.

B) Inter-Bank Applications: -

i. Electronic Funds Transfer

a. Retail EFT (Small value credit transfer) on net settlement
basis.
b. Wholesale EFT (Large value credit transfer) on Real Time
Gross Settlement (RTGS) basis for time critical payments.
ii. Clearing and settlement systems for securities – Delivery vs.
Payment (DVP). The final delivery of securities will occur if and
only if final payment occurs.
iii. Transferring balance from net settlement systems to RTGS
Server at periodic intervals. The net obligation could be from:
a. Local paper-based clearing
b. Inter-city paper-based clearing (including IT discounting
facilities)
c. Bulk payments – ECS (Debit, Credit, RAPID) including
intercity.

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d. Shared ATM networks

e. Smart cards and other pre-paid/pre-authorized debit cards
iv. Exchange of defaulting borrowers list among RBI and banks
v. EDI services to the extent they pertain to payment cycle to EDI
(Electronic Data Interchange)
vi. Consolidation of current account balance from the existing DAD
(Deposit Accounts Department in RBI Offices) applications
synchronously/asynchronously to facilitate balance enquiry by
banks on all India/center-wise basis and if necessary to activate
transfer of funds among DADs at different centers.
vii. Reporting of government account transactions
viii. Reporting of BSR (Basic Statistical Returns) etc. to RBI
ix. Asset Liability Management
x. Intranet in RBI to enable banks to get circulars, press releases
etc.
xi. Returns to be submitted by the banks to Departments of Banking
Supervision (DBS) for off-site supervision and monitoring.

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Chapter 5: Credit Card Frauds

5.1 Credit Card Frauds

• Meaning
• Defrauder

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• Aware of Credit Card

• Advantages of Credit Card
• Credit Card Frauds

5.2 The Prevention of Frauds

• Duplicate Card
• White plastics
• Banker’s Role
• Cyber Laws
• Altering Sale terminals
• Internet Relays
• Monitoring Deposit
• Risk Management
• Central Credit Card Clearing House
• Loss of Credit Cards in Transit
• Fraud Consciousness
• Physical Evidence
• Check the handwriting

5.3 How to Accept the Master Card

5.4 How to get reimbursed

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5.1 Credit Card Frauds: -

Meaning: -

A credit card is a money transaction device without using cash or

fiduciary documents.

Defrauder: -

The defrauder has been slow to exploit the credit card, for making a
fast buck. In USA, he made 15 million dollars. through the cards, in
1981. in 1982 his earning through the card, rose to 50 million dollars.
in 1983, the fraudulent card brought over 100 million dollars to its
creators. The fraudulent card industry is rising higher and higher to

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dizzy height every year. Like other countries if the genuine credit card
has come in India, the fraudulent credit card cannot be far behind.

Aware of Credit Card: -

The credit card, as already seen, is a money transaction device. The

institutions issuing the credit card give the card holders authority to
obtain money, goods, services or any other thing of value, on credit.
They guarantee payment of debit so raised. These institutions are banks
and other financial institutions, clubs and travel agencies and
departmental stores, etc. Credit Cards, Bob Cards, Master Cards, Visa
Cards, express Cards, Euro Cards have wide circulation. Some of them
have wide circulation. Some of them have world-wide circulation..

Advantages of Credit Cards: -

Following types of safety measures are being introduced increasingly

in the credit card manufacture. They can be adopted with advantages

1. Simultaneous printing on both sides of the cards,; creating some

superimposed graphics, patterns, digits or writings.
2. Multi-layered laminates incorporating lateen images which may
distinguish the genuine from the forged.
3. Intricate graphics and distinctive letter and digit designs.
4. Laser printing to engrave the letter and digits on the credit card.
5. Three dimensional insignia, logo of high artistic quality on the
credit card.
6. Encoded information track in magnetic inks on magnetic stripe.

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7. Cards inserted in the imprinter head, designed and manufactured

to rigid specification to permit limited tolerance to admit only
genuine credit cards.
8. Secure Signature Panel.
9. 3- Dimensional hologram.
10.U.V. fluorescent images and designs.
11.Micro printing
12. Optically illusive figures, designs, etc.
13.heavy duty embossing logo.

Credit Card Frauds: -

Credit card frauds manifest themselves in a number of ways:
1. Genuine cards are manipulated.
2. Genuine cards are altered.
3. Counterfeit cards are created.
4. Fraudulent telemarketing is done with credit cards.
5. Genuine cards are obtained on fraudulent applications in the
names/addresses of other persons and used.

It is feared that with the expansion of E-Commerce, M-Commerce, and

Internet facilities being available on massive scale, the fraudulent fund
freaking via credit cards will increase tremendously. The shape it takes
will be limited only by the ingenuity of the future.

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5.2 The Prevention of Frauds

Duplicate Card: -

The duplicate fraudulent credit cards are those where the defrauders
have made sincere efforts to duplicate the original cards through photo-
mechanical processes.

They follow the footsteps of the original manufactures of the genuine

credit cards to produce as close a replica of the genuine card as
possible, employing similar materials and similar processes of printing
and embossing, besides magnetic encodings.

White Plastic: -

The counterfeit credit cards known as ‘white plastics’ are imitations of

credit cards in general aspect.

Banker’s Role: -

The credit card industry is one of the fastest growing activities of the
banking industry. The artist has to be there (where the money is). The
banks have to suffer losses.

Cyber Laws: -

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Information Technology Ministry be approached for stringent laws

against credit card crimes.

Altering Sales terminals: -

Internet E-Mail should be utilized on the pattern of Hot Box organized

about a decade ago, suitably modified to benefit from the advances the
information technology has made since them.

Internet Relays: -

Computers should be pressed into service via internet connection by

suitably upgrading the Television System Vertical blanking Intervals
for notifying the fraudulent cards in the market.

Monitoring Deposit: -

Monitoring system can help locate the unscrupulous merchants who

use or allow the use of ‘white plastics’ and fraudulent cards, knowing
fully well their fraudulent nature for making a fast back.

Risk Management: -

To meet the menace one of the top card companies has imitated risk
management service to identify these high risk centers where daily all
the inter-change transactions of the areas are scrutinized and the credit
card number are checked against those which have been declared
fraudulent, stolen or lost.

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Central credit Card Clearing House: -

There should be a joint list of credit card holders on central basis with
their addresses and other details, if any. New applicants to any bank for
credit cards should be checked: -
• If he is holding card from other issuers.
• If he has held a card at other times. If so, when? Why did he
discontinue?
• If he has applied to more than one credit card issuers
• The new card holder’s business transactions should be watched
for some time.

Loss of Credit cards in Transit: -

It must be prevented.

It is simple for either the customer to collect personally or the banker

should deliver it personally, or it should be sent by courier and
confirmation obtained on telephone, in addition to the paper receipt.

Fraud Consciousness: -

The problem of credit card frauds must be brought to the notice of

users as well as of the servers at sale terminals.

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Proper training in the check up of the credit card in its various aspects
has no substitute and in view of the huge issues the same is
indispensable.

Physical Evidence: -

Immediately on the discovery of fraud all the physical evidence

available should at once be taken into possession and the case reported
to the police for investigation.

Check the Handwriting: -

Handwriting (in signatures) is available on sale drafts and on credit

cards. The comparison of hand-writing inter se and with that of the
suspect and of genuine card holders, can lead to the identity or non-
identity of alleged writer.

How to accept: -

Master Card International guarantees payment of all Master Card

Travelers Cheques if the following procedures are followed: -

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• Watch the customer signs each cheque in ink on the

countersignature line.
• Compare this signature to the original signature. Ensure they
look the same.
• If a cheque is already countersigned, or if you doubt the two
signatures are the same, ask the customer to sign the cheque
again on the back for comparison. Also, request identification
such as a passport, driving license or similar document, and
write the details on the back of the cheque.
• If a cheque is presented by anyone other than the original
purchaser, treat it the same way you would a personal check
from a third party. You should know the customer and be able to
contact the customer if there’s problem.

How to get Reimbursed: -

• Stamp or write your company name on the front of the cheque

where it says, “Issuer will pay to the order of…..” and also
endorse at the back of the cheque.
• Deposit cheques in your bank as cash items. US dollar Master
Card Travelers Cheques, regardless of location of issuer, are
cleared and paid in the US.
• Do not send cheque directly to the issuing institution.

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Chapter 6: - Banks Control in Online Banking

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6.1 Will Banks Control Online Banking: -

• Internet Banking in India

• Real threats
• Online

6.2 Banking in the Cyberworld: -

• Internet Purchases without Payment Gateways
• Risk of Gateway

6.1 Will Banks Control Online Banking: -

Internet Banking in India: -

Online banking is expected to explode in the ext few years. We will be

entering the age of non-physical exchange of cash aided by complete
transparency leading to perfectly competitive electronic market place
and inevitably to customer supremacy. Growth in online banking will
be driven by the following reasons:

 Increasing access to low cost electronic services

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 Emergence of open standards in the banking industry

 Improved customer awareness
 Entry of global majors in the market
 Integration of banking services with e-commerce and emergence
of e-cash
 Convenient international transactions as Internet eliminates
geographic boundaries
 Shift from one-stop shopping to unbundled product purchases

Internet Banking – An Overview: -

Internet Banking sites can be segregated into four categories from

Level I, which offer just minimum functionalities such as access to
one’s deposit account data, to Level IV sites that offer sophisticated
services. To be successful, an Internet bank must offer:

 High rates on deposits

 24 hour access
 Free checking and bill payment facilities with rebates on ATM
surcharges
 Credit cards with low rates
 Simple and easy online applications for all accounts including
personal loans
 Innovative products
 High quality customer service

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Real Threats: -

A majority of leading online brokers are beginning to offer

banking products and services as part of their overall offers.

They are actively seeking to capture “excess” balances in existing

checking and saving accounts by offering better rates.

There are other threats to banks as well. Several leading system

providers have developed “bank-in-a-box” solution – unbranded,
electronic, full-service, virtual-bank system – that can be bought,
branded, and offered to consumer by any authorized company
that wishes to provide banking service.

Online: -

An online service that merely mimics an offline one has a second

problem as well; it doesn’t give customers an adequate inducement to
move a significant portion of their banking online.

As a result, most customers tend to tend to treat online banking as no

more than an extra channel to check their balance and transaction

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histories, and they continue to do the rest of their business at the ATM
or the teller window.

A vicious offering increase the banks’ total costs. This makes the banks
reluctant to make further large investments in the online channel,
which thus, does nothing to move customers away from tellers and
ATMs.

In fact, consumers didn’t stop using tellers to the extent that banks has
hoped, but they also used ATMs so frequently that the reduction in cost
per use was more than offset by the higher volume of transactions.

The study of information systems through broad band connection,

satellite, a network or through a view chat.

This online information systems provides information about all

aspects, Information providing on the demand of the subscriber.

This online information systems may be of study program, a

graduation program or sharing of data through internets, extranet and
internet.

Sharing of Data: -

The data base store data and information extracted from selected
operational and external databases. The database has most needed
information by a manager or any end users. This database can be
accessed by the ONLINE ANALYTICAL POCESSING (OLAP)
systems.

This network model can access a data element by several paths. In an

organization departmental records can be related to more than one
employee record.

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Thus in an organization data can be shared through internet, internet

and extranet.

ONLINE LEARNING: -

This online information system provides online courses through

internet, broad band satellite connection.

The recent online course is provided by XLRI, (Xavier Labour

Relations Institute) joined hands with Hughes Escorts communication
limited. Their main course is on BUSINESS MANAGEMENT.

Hughes Escorts is the Indian Operations of US – based communication

major, Hughes network systems, which is a wing of Hughes electronic.
This job is being done by Directing Global education which is joint
venture between Hughes network systems and one touch knowledge
systems.

This job arrangement with Hughes Escorts to offer Management

training on satellite platform will take expertise of XLRI faculty
beyond the borders of their concern.

This information has live videos, voice and transmission to classes

through Hughes broadband satellite network. Interaction is through
voice and data.

This course is conducted across through four metros, Trichy,

Bangalore, Hyderabad, Chandigarh, Pune, Kochi, Coimbatore and
Madurai.

This course is targeted at working executives

COUNTRY STUDIES: -

This country studies by online service is from 1988 onwards. In this,

the study of every country is made.

B-B (Business – Business E-Commerce). Despite all the buzz, we still

don’t know about what makes B-B. there is a growing relation that B-B

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will take years to mature, and the rate of adoption – even if companies
deliver a huge value equation improvement – will be gradual because it
requires system and individuals to act in fundamentally new ways.

The next thing after B-B is enabling technologies to incorporate more

sophisticated back-end integration system, financing options and
logistical support.

In India, NASSCOM puts the value of online B-B transactions at Rs.

400 crore in 1999-00 of total E – Commerce of Rs. 450.

But the question is how much B-B-E-Commerce is really happening in

India? It is hard to quantify in terms of real numbers with no
established data available in specific reverence to the Indian context.
But there is a possibility of this business assuming a huge proportion in
future.

B-B has been happening all through and a new channel has been
opened with the advent of the Internet. Obviously organizations will
switch over to this channel for the cost – effectiveness it provides. The
market is emerging in the country and it will be a boom time in the
next year.

6.2 Banking in the Cyberworld: -

Internet Purchases without Payment Gateway: -

The dangers are three-fold

• Since a manual process requires human intervention, risk of

information leakage exists.

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• No exchange of Digital ID, so no authentication of the merchant

– risk of bogus merchant.
• No exchange of Digital Certificate to authenticate card holder –
risk of repudiation of transaction by the card holder.

The benefits which the user would get by using the Internet payment
gateway are

• Card details travel encrypted on the Net (if encryption facility

available on the gateway).
• On-line status of order, if the gateway has on-line authorization.
• Secure Merchant identification, so that fraudulent web sites
posing as genuine merchants get weeded out

What’s a Payment Gateway?

A payment gateway is software that supports multiple payment models

simultaneously in a safe and secure manner.

Funds can be transferred through credit, debit and smart cards,

cheques, electronic payment wallets and even direct debits through a
central payment switch.

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Put simply, a payment gateway enables on-line commercial

transactions on the internet on a secure system, which have firewalls
against hacking.

Risk of Gateways: -

• Currently, in India – HDFC Bank and ICICI – have launched

payment gateways for business to customer (B2C) transactions.

• Payments can be effected through credit cards or through

directly debiting the account of the customers of the respective
banks.

• Some payment mechanisms on the Internet are not safe, as they

are in the open-loop where a merchant portal can see the credit
card number.

• This is unsafe for credit card holder and is susceptible to fraud as

his number can be physically seen.

• The dust is yet to settle in the B2C payment gateways, but action
is already heating up in the business to business (B2B) arena.

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• Besides HDFC Bank and ICIC, Global Tele-System and a few

other non-bank companies are toying the idea of launching
payment gateways for inter bank and B2B transactions.

• No prizes for guessing who are they targeting, Nationalized

banks, of course.

Recommendations: -

• Technological development has been nothing less than

explosion. Banks have been harnessing such technological

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innovations on one hand and adapting themselves to such

changes on the other hand.

• The most significant event has been development of semi-

conductor technology, which has resulted in spectacular
expansion of automation.

• Processing, storage and transmission of information is very

essence of banking and financial services.

• The electronic technology has bought revolutionary changes in

these areas. The elimination of paper as medium for processing
and storage of transactions / information has been a great event.
Large volume of information can be processed, stored and
retrieved very economically at terrific speed, which is not
possible manually.

• The space required for managing enormous volume of

information has been reduced dramatically.

• With the revolution in telecommunication technology,

information can be made accessible from remote distance at
lightening speed. The final output of information after
manipulation and analysis can be printed by printer at high speed
directly from computers.

• Thus, the computer now has the ability to retrieve data or update
files instantaneously. Subsequently with the development in

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telecommunication, Local Area Network (LAN)/Wide Area

Network (WAN) have been established.

Suggestions: -

 To prevent online banking from remaining an expensive

additional channel that does little to retain footloose customers,
banks must act quickly.

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 The first and most obvious step they should take is to see to it
that the basic problem fueling dissatisfaction have been
addressed.

 After repairing this basic deficiency, banks must ensure that

there services is competitive.

 Obviously, it should include checking, savings and brokerage

services, which anchor customers to the institution.

 In addition, to meet the challenge of online brokerage and other

new entrants, banks would need to add “supermarkets” selling
products such as mortgage, mutual funds and insurance.

Conclusion: -

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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. The
integration of e-banking application with legacy system implies an
integrated risk management approach for all banking activities of a
banking institution. Latest recommendations of Basle Committee
recognize that each bank’s risk profile is different and requires a
tailored risk mitigation approach appropriate for the scale of e-banking
operations, the materiality of the risks present and the willingness and
ability of the institution to manage their risks. This implies that a “one
size fits all” approach to e-banking risk management issues may not be
appropriate.

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

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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. The Basle
Committee on banking Supervision has taken the lead in this area
through the creation of its Electronic Banking Group – a group
comprising 17 central banks and bank supervisory agencies in the late
1999. The main focus of this group has been to develop sound risk
management practices.

Internet has created plenty of opportunities for players in the banking

sector. While the new entrants have the advantage of latest technology,
the good-will of the established banks gives them a special opportunity
to lead the online world. By merely putting existing service online
won’t help the banks in holding their customer close. Instead, banks
must learn to capitalize their customer’s different online financial-
services relationships. The article “Will Banks Control Online
Banking?” focuses on how banks have to reinvent their role to remain
as their customers’ preferred bank.

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 lion’s share in the
market. Highlighting the benefits of payment gateway over the open-
loop payment mechanism, the article “Banking in the Cyber worlds”

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gives a brief report of the tug of war between the two major Indian e-
banking players.

ROLE AND SIGNIFICANCE :

If computerization has today become a byword in banking, its

sustained growth is wholly due to its role as an enabler in the smooth

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and efficient conduct of a whole range of banking practices. Computers

were originally destined for a minor role in banks, primarily intended
to facilitate accounting transactions. Subsequently, once its superiority
was firmly established, it grew in status as a tool for a management
information information and a host of other inventions. Although the
accounting aspect is still quite important and relevant, IT has a far
greater role to play to day to day banking operations, especially in
decision making process. Further, facilities like ATM, Anywhere
Banking, Internet as well as Mobile Banking have been increasing
their presence. It has, to be conceded that ‘ Information Technology’ is
not the end in itself, but is useful tool in the hands of the management
to leverage business prospects in its favour and enchance efficiency.

Banks now have come under great pressure to reduce operational costs
to safeguard their bottom lines. With banking tuning more and more
customer-centric with every passing day, technology as an enabler has
helped banks to launch a whole array of customer-centric products
such as ATMs, Debit Cards, 24 hour Anywhere Banking. The
nomenclature ‘Banking Accounts’ have also yielded to more
sophisticated term ‘banking relationship’. Customer Relations
Management is now a very potent and potential concept. E-Banking
also has a role to play in ensuring a fair return to shareholders, by
facilitating in ensuring greater profits to the banking sector. The recent
emerging trends in self-service channels, namely ATM,s, Call-centers,
Internet and mobile banking would increase the use of E-banking as
this offer the twin benefit i.e convenience to the customers and
reduction and cost of operation to the banks. E- banking can increase
the easy access of internet facilities among the masses which would
rise the comfort level for transacting via the web. The popularity of
internet banking likely depends upon inculcating in customers about
their security and personal privacy of their money and assests.

BIBLIOGRAHY: -

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• O’ Brien James. A, Management Information System, Galgotia

Publication

• Muedic & Ross, Management Information System

• Lucae, Management Information System

• Sen, Management Information System

• Indian Banking, S. Natarahan and R. Parameswaran

• Banking – In the New Millennium, ICFAI University

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