E-Banking By Sanjeev Kumar Chaswal

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This presentation is about what is e banking

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E-Banking :

E-Banking Sanjeev Kumar Chaswal LL.M (IPR,ARB&ADR) M.S (Cyber Law and Cyber Security)

Definitions:

Definitions * e-banking can be defined as: … the automated delivery of new and traditional banking products and services directly to customers through electronic, interactive communication channels. A system of banking in which customers can view their account details, pay bills, and transfer money by means of the internet. The remote delivery of new and traditional banking products and services through electronic delivery channels.

What is E-banking or Net banking :

What is E-banking or Net banking E-Banking is the use of electronic channels to communicate and transact business with both domestic and international customers through internet. Internet banking (or E-banking) means any user with a personal computer and a browser can get connected to his bank -s website to perform any of the virtual banking functions. E banking is providing the same banking services such as payment, inquiry, information processing but with internet. It can be offered in two ways. First an existing bank with physical offices can also establish an online website and offer e banking services. Secondly, e-banks can only exist only on Internet, thus allowing users to work with”Virtual Bank”. 3

E-banking vis-A-vis Traditional banking:

E-banking vis-A-vis Traditional banking Speed Accessibility Electronic documentation Time saving Satisfaction to the customer Complimentary to traditional banking Geographical boundaries surpassed Scince rather than art

Technology Commencement in Banking :

Technology Commencement in Banking In 70’s, banks started to establish centralized data processing centers. Essentially the roles of these data processing centers are: collect the handwritten documents from branches compile the documents manual data entry by the operators generate reports for the bank staff and the central bank execute some banking transactions

E Banking in India :

E Banking in India Opening up of economy in 1991 marked the entry of foreign banks. They brought new technology with them. Banking products became more and more competitive. Need for differentiation of products and services was felt. The ICICI Bank kicked off online banking in 1996. Currently 78% of its customer base is registered for online banking. 1996 to 1998 marked the adoption phase, while usage increased only in 1999, owing to lower ISP online charges, increased PC penetration and a tech-friendly atmosphere . 6

Guidelines for E banking :

Guidelines for E banking The Internet Banking policy has been approved by the Bank‘s Board. The policy fits into the bank's overall Information Technology and Information Security policy and ensures confidentiality of records and security systems. The policy takes into account operational risk. The policy clearly lays down the procedure to be followed in respect of "Know Your Customer" requirements, and The policy broadly meets the parameters laid down in the earlier circular. 7

Banks Branch Automations:

Banks Branch Automations India’s banks have started automation of their bank branches in 90’s, by started putting heavy technology investments for the branches. The first step is offline branches. Terminals connected to local branch computers. Second step is online branches connected centrally. Most of the transactions started to be performed in the central mainframe.

Why E banking? :

Why E banking? Differentiation of products from the others. A combination of regulatory and competitive reasons. Stress on branchless banking. Increasing volumes of banking transactions. Providing customers with cost effective services 9

Product Based Banking:

Product Based Banking In the late-1990s, banks accepted product based banking and competed with their products. Banks developed new products for their customers. Credit card Credit deposit account (Super Account) Debit cards Beside branch, banks brought new channels to give better service to their customers. ATM POS (Point of sale) IVR

NEED FOR E-BANKING :

NEED FOR E-BANKING It is a flexible service provided by banks where customer can work according to their needs. It removes the geographical barrier, thus customer can access from anywhere and at anytime. It provides 24 hour-7 days services . It increases bank efficiency and competitiveness and lower the operating cost. It provides higher transaction speed. 11

Role of RBI in E Banking:

Role of RBI in E Banking Electronic Clearing Service (ECS) Electronic Funds Transfer (EFT) Real Time Gross Settlement (RTGS ) National Electronic Fund Transfer (NEFT)s Cheque Truncation System (CTS)

E Banking Delivery – It can help in:

E Banking Delivery – It can help in Increasing customer satisfaction and retention Shifting of costs Increasing the brand value Providing real time access (i.e. convenience) Delivering Services and products to customers through supporting technology

General Types of e-banking(RBI):

General Types of e-banking(RBI)

PowerPoint Presentation:

The Website related to E-banking can be of two types: Information Website: It gives general information about the financial institute and its products or services to the customer. Transactional Website: Simple Transactional Website: It allows customer to submit their instructions, applications for different services, queries on their account balances etc but do not permit any fund based transactions on their accounts. Fully Transactional Website: It allows the customers to operate on their accounts for transfer of funds, payment of different bills, subscribing to other products of the banks and to transact purchase and sales security . 15

E-BANKING SUPPORT SERVICES :

E-BANKING SUPPORT SERVICES Web linking Account Aggregation Electronic Authentication Website Hosting Payments for e-commerce Wireless banking activities 16

Types E Banking:

Types E Banking PC Banking Internet Banking SMS Banking Virtual banking Digital TV Banking Automated teller machine Tele banking Plastic cards E- cheque

E-Banking Configuration:

E-Banking Configuration

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How ATM’s work?:

How ATM’s work? Bank computer Host computer ATM

Tele banking:

Tele banking Customer Bank Enquiry Request facility Loans Cheque Status Fixed Deposit details

How mobile banking work?:

How mobile banking work? BANK DATABASE

E BANK SERVICES:

E BANK SERVICES Bill payment service Credit card customers Railway pass Recharging your prepaid phone Shopping at your fingertips

E Banking products and services :

E Banking products and services Offered in a two tier structure A basic tier of Internet banking products includes customer account inquiry, funds transfer and electronic bill payment. A second or premium tier includes basic services plus one or more additional services like brokerage, cash management, credit applications, credit and debit cards, customer correspondence, demat holdings, financial advice, foreign exchange trading, insurance, online trading, opening accounts, requests and intimations, tax services, e-shopping, standing instructions, investments, asset management services etc. 24

Plastic cards:

Plastic cards

BENEFITS OF E-BANKING:

BENEFITS OF E-BANKING Any time banking Any where banking Cash free banking Reduction in Cost of transaction Easy to make utility payments On-line purchases Competitive advantage Unlimited network Lesser work load Lesser chances of fraud & misappropriation Better profitability Better customer relationship

Advantages to banks :

Advantages to banks Very low setup cost. Capability to cater to a very large customer base. Saves a lot of operational costs. Adds to the baseline. Banks san offer a lot of personalized services to their customers. Reduction of burden on branch banking . 27

E Banking Drawbacks:

E Banking Drawbacks Difficult in the adoption of technology Fear of technology High cost of technology Lack of preparedness Restrictions on usage of technology

PowerPoint Presentation:

Advantages Disadvantages Check account balances and track recent account activity Need an account with an Internet Service Provider (ISP) Transfer money between accounts Security concerns, like ‘hackers’ accessing your bank accounts Authorize electronic bill payments Original setup for bill paying time is time-consuming but will ultimately be a time-saver Issue stop payment requests Switching banks can be more cumbersome online than in person Apply for auto, mortgage, home equity, student, or personal loans Must have basic computer skills and Internet knowledge Receive investment product and service information Must be comfortable using a computer 29

E-BANKING RISKS :

E-BANKING RISKS 30 Transactional/Operational Risks Credit Risk Liquidity/Interest Rate Risk Reputation Risk Compliance/ Legal Risk Strategic Risk

PowerPoint Presentation:

Transactional/Operational Risks It arises because of inaccurate processing of transactions, non-enforceability of contracts, compromises in data accuracy, data privacy and confidentiality or unauthorized access to banks system and transaction etc. It arises during day to day activity of banking transaction. Credit Risk It is the risk that counter party will not settle an obligation i.e. pay their debt for full value, either when due or any time thereafter . Liquidity/Interest Rate Risk It arises out of a banks inability to meet the required obligation when they become due without incurring unacceptable losses, even though the bank may ultimately be able to meet its obligations. Reputation Risk It is the risk of getting significant negative public opinion, which may result in a critical loss of lending or customer. 31

PowerPoint Presentation:

Compliance/ Legal Risk It arises from violation of or non conformation with laws, rules, regulations or prescribed practices or when the legal rights and obligations of parties to a transaction are not well established. Strategic Risk It is the risk associated with the financial institution’s future business plans and strategies 32

SAFE GUARDS FOR E BANKING:

SAFE GUARDS FOR E BANKING Ensuring security while banking online, is to keep your password and pin number a secret. The security of your personal computer is very important for safe internet banking. Therefore, always install antivirus software and software to remove spyware. Checking your bank statements regularly will help you detect any transaction that has taken place without your knowledge or consent. While banking through the internet, make sure that the banking session is secure. In addition, always remember to completely log off, after completing the banking session. Nowadays, the banking institutions have come up with a number of safety measures for ensuring secure internet banking.

CHALLENGES IN E BANKING:

CHALLENGES IN E BANKING E-banking is a generic term for delivery of banking services and products E-banking has improved efficiency and convenience The government of India enacted the IT act, 2000 It issued guidelines on risks and control in computer and telecommunication system

Security Features E Banking Include::

Security Features E Banking Include: Security token devices. Protection through single password authentication, as its the case in most secure internet shopping sites, it is not considered secure enough for personal online banking applications in some countries. Specifically, here are two different methods for internet banking: The PIN / TAN system where the PIN represents a password, used for the login and TANs representing one-time passwords to authenticate transactions. These token generated TANs depend on the time and a unique secret, stored in the security token. Usually, internet banking with PIN/TAN is done via a web browser using SSL secured connections, so that there is no additional encryption needed 35

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Signature based internet banking where all transactions are signed and encrypted digitally. The Keys for the signature generation and encryption can be stored on smartcards or any memory medium, depending on the concrete implementatio n 36

Attacks.:

Attacks. Most of attacks in internet banking are based on deceiving the user to steal login data and valid TANs. Two well known examples for those attacks are phishing and pharming . Cross-site scripting and keylogger / trojan horses can also be used to steal login information. A method to attack signature based internet banking methods is to manipulate the used software in a way, that correct transactions are shown on the screen and faked transactions are signed in the background. A recent FDIC Technology Incident Report, generated form security risk activities reports that banks record quarterly, lists 536 cases of computer intrusion with an average loss per incident of $30,000. That adds up to nearly $16 million loss in the second quarter of 2007 . 37

Countermeasures:

Countermeasures There exist few countermeasures which try to avoid attacks. For instance, digital certificates are used against phishing and pharming , the use of class 3 card readers is also a measure to avoid manipulation of transactions by the software in signature based internet banking variants. To secure their systems against viruses, trojan horses and worms, customers must use virus scanners and be careful with downloaded software or e-mail attachments . 38

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