E-Banking Dr Rana Singh Associate Professor www ranasingh

E-Banking Dr. Rana Singh Associate Professor www. ranasingh. org

Agenda n n E-Banking – Concepts and advantages Technical Framework Indian Banking Scenario ICICI “Infinity” - A Case Study

Imagine a Scenario A non-resident Indian (NRI) in Paris has an easy way to access money in this fashion capital of the world. His Citibank account in India can be accessed through an ATM in Paris, which in turn transmits information to Citibank’s central hub in the US. The Indian rupees are converted to US dollars, which are in turn converted into French Francs at the current exchange rate, the Indian account is debited and the Francs made available to the NRI. Welcome to the era of technology banking!

Definition E-Banking "is an umbrella term for the process by which a customer may perform banking transactions electronically without visiting a brick-and-mortar institution. "

What is E-banking? n n n Online banking or Internet banking In simple terms it does not involve any physical exchange of money, but it’s all done electronically, from one account to another, using the Internet. From a personal computer, you can access your bank account information, and perform many banking functions, like transferring money, making a loan payment

What is E-banking? n Once you register yourself on a bank website, you can view o o o Your accounts, credit card & home loan balances Accrued interest, fees and taxes Transaction details of each account Pay bills Transfer funds to third party accounts which you nominate Open a deposit right from the terminal you are sitting at.

What is E-banking? n However, till now Internet services in India only allows for a minimum level of interactivity such as o o o n Answering e-mail queries Feedback forms Articles asking for readers’ opinion at the end An accountholder, armed with a password, can use the Net to order a cheque book, stop payment of a cheque and spot the balance and individual operations in the account and transfer funds.

Advantages n n n Eliminates the use of paper and replaces it with computer screens No need to stand in line at the bank, because all you have to do is log onto the internet & access your account It’s safe, hassle free, saves hours of time a month

Advantages n It comes with a world of other benefits o o o o Interest earning checking accounts, Automatic bill payment ATM/Debit cards Credit Cards Direct Deposit Online Statements Loans Money market accounts

Transaction costs Source : Booz , Allen and Hamilton

Customer service n n As an online bank customer, you have a website that is at your disposal 24/7 You can get your online statement for the month, week, day, or year You can send e-mails with questions or concerns You can pay bills

E- Banking Setup

Elements of an E- Banking System n Hardware o o n Servers Storage device and database Communication channels and lines Gateways and remotely located devices (e. g. , thin clients or Internet appliances) serving as interfaces between users and computers Software

Elements of an E- Banking System o o Operating systems Firewalls Database management systems Security application programs.

E- Banking Setup

Areas Of Security n Authentication o n n Verifying your identity using passwords/pass phrases and certificates Confidentiality Non Repudiation o Method by which the sender of data is provided with proof of delivery and the recipient is assured of the senders identity

Areas Of Security n n Integrity Access Control o n Mechanisms and policies that restrict access to computer resources Availability

Access Control n n n Access control restricts the flow of data traffic Internet Banking uses firewalls in the area of access control. Internet Banking two firewalls are used o o One before the Internet Banking server Before the SQL database

Access Control n Banking uses firewall which fall into two categories o o Packet-filtering Gateways Proxy services.

Data Transmission and Confidentiality n Public Key Encryption n Secure Socket Layer (SSL)

Authentication n Digital Certificate o o A digital certificate is an electronic ID, which is verified by a third party, a certification authority (CA) The CA controls the Public Key Infrastructure (PKI). A security certificate , associates an identity with a public key. Only the owner knows the corresponding private key that allows the owner to "decrypt" or make a digital signature. Eg Barclays UK’s Digital certificate

E-Banking Scenario

E-banking – Trends Worldwide n n n Concept of E-banking is more prevalent in the technologically developed parts of the world such as Europe and the US The number of online banks in Western Europe has mushroomed. As per Bluesky International Marketing, a US based research agency, the number is quoted at 1, 845 in mid 1999. The scene is similar in the US where a recent Dataquest survey forecasts that the number of US households banking online will reach 24. 2 million by 2004.

Indian Banking Scenario n n n 33 private banks and 43 foreign banks 27 public sector banks account for over 84% of the total deposits and over 82% of the total banking advances in India Rough estimates assuming teller at Re 1 per transaction put ATM transaction costs at 45 p, phone banking at 35 p, debit cards at 20 p and Internet banking a measly 10 p.

E-banking in India n n n Marriage of technology and banking is inevitable to keep pace with changes in the global scenario. The Verma Committee recommended the need for greater use of IT even in the weak Public sector banks. Presently Net Banking facility is offered by ICICI Bank, Citibank, HDFC Bank, Global Trust Bank etc.

Changing Scenario n n n Jurassic banking is passé. The Internet is slowly converting retail banking into a commodity where the days of loyalty to bricks and mortar banking are obsolete. Retention of customers Survival in competitive markets Reduction of transaction costs

New Initiatives n n n HDFC Bank is planning to introduce third party payments whereby account holders will be in a position to make payments to predetermined parties through the Net. The ICICI group has also launched an Internet payment gateway for handling Net transactions of its clients. HSBC is working on a comprehensive interactive financial services in collaboration with IBM which would be a state-of-the-art local platform.

Relationship Banking

IT enabled Relationship banking n n n Emphasis on “Human Capital” Customer oriented. IT enabled Customer relationship management for banking services. Maximisation of profitability through the use of detailed Customer information. Financial portfolios tailormade to Customer’s individual needs.

Tools used in Relationship banking Networking Techniques. n Parallel Systems. n Data Warehousing n Data Mining n

Advantages of Relationship Banking n n Higher customer retention More cost effective marketing Reduced Credit risk Reduced Customer Acquisition costs

Customer Service n n n ATMs Personal banking centres Retail delivery Channels Home Banking Telephone Banking

Difficulties n n n The picture in India, however, is a bit grey. The RBI does not still allow inter-bank funds transfer through the Net since the cyber laws are still not in place. Once allowed, this could pave the way for smooth cash management. Security also continues to remain a major issue, especially in the case of corporates, as bulk transactions are done in a day. Bankers are aware of the fact reliable transaction technology as well as management of the security perceptions of customers are the keys to success.

Difficulties n n The infrastructural costs of providing such services are quite high. A bank not only has to automate its front-end systems which the customer interfaces with but also the back-end systems so that the bank is able to provide “robust functionality”.

ICICI’s Infinity Internet Banking Service

As per Mr. K. V. Kamath, MD and CEO ICICI Ltd. , “Technology today, particularly via the internet, is creating a platform-independent, low cost communication infrastructure permeating all sectors of the economy and providing an affordable medium to conduct business”.

Infinity - Internet Banking Service was launched in December ’ 97 and has 15, 000 customers. It offers you convenient remote banking facility. It provides you an easy and secure access to your accounts with us. With just a PC connected to the Internet, you can have your account information at your fingertips, from anywhere in the world, anytime. So, if you don't want brick and mortar bank timings to hassle you, Infinity Internet banking is just the service for you.

Online Services Offered n Account information n n Summary of all your Accounts by giving details of each account, snapshot of balances, available credit lines, record of payments and transfers. Allows transaction tracking (retrieval of transaction details based on cheque number, transaction amount etc) Provides account statement and transaction reports based on user defined criteria. Displays account balance message and also a warning when the Account balance limit has been crossed. Allows you to view details of fixed deposits and loan installments due.

• Funds transfer -Transfer money between your accounts across any of the branches - Third party funds transfer which means you can transfer money to any other ICICI bank holder. • Requests and intimations -electronically submit a request for : -Cheque-book -Stop Payment Instruction -Opening a Fixed Deposit -Opening a Recurring Deposit

• Communication with your account manager -Mail-box facility enables you to send secure mail to your account manager to find out the status of a request or for any clarifications. • Personalised Content - Infinity provides customised content exclusively for its users. - Personal Finance containing views of experts - Select articles on electronic commerce, information technology - Lifestyle articles on various places of tourist attraction - News updates

• Online investments • Online real time e-shopping payments -Online shopping payments at rediff. com, fabmart. com, malamall. com, magiccart. com, indiainfoline. com, eindia. com, indbazaar. com, shoppersstop. com, sify. com • Utility bill payments -ICICI Bank has now tied-up with Life Insurance Corporation to accept the payment of life insurance premium over Internet -Payment of Bills of the cellular operators

Which equipment and software do I need to access Infinity? If you have a PC connected to the Internet, you will be able to use Infinity. For optimal performance and security, the recommended browsers are : • Microsoft Internet Explorer 4. x or later • Netscape Navigator 4. x or later

n n n ICICI Bank launched a web banking service for non-resident Indians (NRIs). NRIs can now open an account with the bank online by visiting its NRI services section on the web -site. The bank presently has over 15, 000 NRI customers, a majority of whom are in the United States, Middle East and Europe.

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