CHALLENEGES AND ISSUES IN DIGITAL BANKING

INTRODUCTION:
The banking industry in India has experienced radical changes since independence with the
improvements in technology & automation. The banking sector has become highly
competitive. To survive & grow in the changing market scenario banks are opting for best in
class & latest technologies. Introduction of IT has changed the banking industry from paper
& branch banks to digitize & network based banking services. Information Technology has
become the base of the recent financial sector reforms and has helped the banks in developing
leaner and more flexible structure that can respond quickly to the dynamic of a fast changing
market. The use of IT in the banking sector has increased beyond ones imagination with
features like Online loan application, Online uploads of documents, net banking online bill
payments etc. before couple of decades who would have thought these things could have
been possible. Internet banking is a web-based service that enables the banks authorized
customers to access their account information. It permits the customers to log on to the banks
website with the help of bank‟s issued identification and personal identification number
(PIN). The banking system verifies the user and provides access to the requested services, the
range of products and service offered by each bank on the internet differs widely in their
content. The banking industry can kill two birds with one stone that is with help of
technology.

E-BANKING:
E-banking refers to performing basic banking transactions by the customers round the clock
globally through electronic media by sitting at their office or at homes through PC or
LAPTOP. The customers can access the banks website for viewing their account details and
perform the transactions on account as per their requirement. Modern banking is more
information based speedy & boundary less due to the impact of E-Revolution. Electronic
banking, also known as electronic funds transfer (EFT), is simply the use of electronic means
to transfer funds directly from one account to another, rather than by cheque or cash.
FEATURES OF ELECTRONIC BANKING:

 Easy Electronic Fund transfer facility.

 Better efficiency in Customer relationship management.
 Making the Payments of bills like electricity, telephone bills, and mobile recharge.
 It introduces virgin & innovative banking products & services.
 It can view of balance of accounts and statements.
 E-banking can bring doorstep services.
 Balance and transaction history search.
 Transaction history exports
 Order mini statements.
 Mobile banking.
 Pay anyone payments Multi Payments.
 SMS banking services.
CHALLENGES OF DIGITAL BANKING:
 Security Risk: Security problem has become major concern for banks. Due to
security reasons many people refuses to opt for e-banking. So it’s a big challenge for
marketers and makers to satisfy customers regarding security issues.
 The Trust Factor: Trust is the biggest huddle to online banking for the most of the
customers. Conventional banking is preferred by the customers because of lack of
trust on the online security. They have a perception that online transactions is risky
due to which frauds can take place.
 Privacy Risk: The risk of disclosing private information & fear of identity theft is
one of the major factors that inhibit the customers while opting for internet banking
services. Most of the consumers believe that using online banking services make them
vulnerable to identify theft.
 Strengthening the public support:In developing countries, in the past, most e-
finance initiatives have been the result of joint efforts between the private and public
sectors. If the public sector does not have the necessary resources to implement the
projects it is important that joint efforts between public and private sectors along with
the multilateral agencies like the World Bank, be developed to enable public support
for e-finance related initiatives.
 Availability of personnel services:In present times, banks are to provide several
services like social banking with financial possibilities, selective up gradation,
computerization and innovative mechanization, better customer services, effective
managerial culture, internal supervision and control, adequate profitability, strong
organization culture etc. Therefore, banks must be able to provide complete personnel
service to the customers who come with expectations.
 Implementation of Global Technology: There is a need to have an adequate level of
infrastructure and human capacity building before the developing countries can adopt
global technology for their local requirements. In developing countries, many
consumers either do not trust or do not access to the necessary infrastructure to be
able to process e-payments.
 Non-Performing Assets (NPA): Nonperforming assets are another challenge to the
banking sector. Vehicle loans and unsecured loans increases N.P.A. which terms 50%
of banks retail portfolio was also hit due to upward movement in interest rates,
restrictions on collection practices and soaring real estate prices. So that every bank
have to take care about regular repayment of loans.
 Competition: The nationalized banks and commercial banks have the competition
from foreign and new private sector banks. Competition in banking sector brings
various challenges before the banks such as product positioning, innovative ideas and
channels, new market trends, cross selling ad at managerial and organizational part
this system needs to be manage, assets and contain risk. Banks are restricting their
administrative folio by converting manpower into machine power i.e. banks are
decreasing manual powers and getting maximum work done through machine power.
Skilled and specialized man power is to be utilized and result oriented targeted staff
will be appointed.
 Handling Technology: Developing or acquiring the right technology, deploying it
optimally and then leveraging it to the maximum extent is essential to achieve and
maintain high service and efficiency standards while remaining cost effective and
delivering sustainable return to shareholders. Early adopters of technology acquire
significant competitive advances Managing technology is therefore, a key challenge
for the Indian banking sector.
ISSUES OF DIGITAL BANKING:
Prime Minister Narendra Modi’s ambitious vision is to see all transactions done through
banks and that too digitally. There have been many steps to discourage cash transactions
and promote digital banking transactions. We are redoubling our efforts to go digital
without fixing an anti-consumer practice, which is already fixed by most countries

Liability for e-wallet transactions:

The Reserve Bank of India (RBI) has banking rules for reconciling failed ATM transactions
(within seven working days after a customer complaint. Any delay attracts a penalty of Rs
100 per day of delay.) But there are no such guidelines for wallets or the Unified Payment
Interface (UPI) yet.Even the structure of some platforms (NEFT, IMPS) punishes the user for
a tiny mistake in keying in an account number because tracking and recovering the payment
are difficult if not impossible.

Inadequate laws:
The laws on digital payments are vague. E-wallets are non-banking financial companies
(NBFCs) so the rules that cover banks don’t apply to them, while security compliance for
“fintech” companies falls under Section 43 A of the Information Technology Act (which
covers data protection).Transactions between a user and a mobile wallet service provider are
merely contractual agreements, according to Supreme Court advocate PavanDuggal. They
“can always be repudiated.

There’s a heightened need to legally back digital payments in India, not only to ensure the
safety of consumer money but also for the safety of these companies themselves”, he told this
paper a few months ago.

There is no clarity as to how and who will enforce a fair decision when something goes
wrong. “There are no legal mechanisms available in the case of disputes pertaining to digital
payments,” says Duggal bluntly.
Overcharging/stealth charges: The best practice in the digital world is opt-in. Customers
must give explicit consent to avail of a service. Indian banks seem to believe in the worst
practices of the 1990s - customers must opt out, or they would be charged. That apart, banks
are frequently increasing charges and reducing choices - easily justifying them in the name of
digital transformation.

While digital financial transformation has been rapid all over the world, led by the tech
evangelists (and in India’s case, the government itself), policymakers all over the world
usually think of the customers last.'

LEGAL ISSUES IN ONLINE BANKING: When considering about the legal issues
commonly in online banking, there is a high percentage of responsibility for bankers to
handle them, not only to establish the identity or individuality. Also they have to make
enquiries regarding honesty and reputation of future customers. If the customer request for
opening an account through online and this should be accepted only after correct information
and physical verification of the identity of the client is done. information and physical
verification of the identity of the client. That was the most difficult step in this method and if
there are no issues with the details which are given by the client, we can reduce legal issues
which are facing in future. From a legal outlook, privacy procedure approved by banking
institution for confirming users needs to be recognized by law as a replacement for signature.
In this online banking field, there is little scope for the bankers to take action on stop-
payment commands from the customers. For this reason, bankers should be evidently inform
to the clients the period and the conditions which are used in any stop payment commands
could be accepted by the bankers.

For the safety and privacy protection of both clients and bankers, there are some legally
accepted online banking laws. According to the ATM and overdraft fees transactions, clients
have options to participate in online banking overdraft coverage or insurance. And also in a
case where someone may have an unauthorized withdrawal from someone else bank account
the banking institution must inspect about the transaction. Also there is customer rights which
are using in online banking. For a example, client has a right to stop payment of a pre-
authorized electronic finance transfer.

PROFESSIONAL ISSUES: The possible for information abuse is very high in online
banking, therefore ethics play very important role. Ethical issues that arise for privacy in
online banking gives reason for concern, As example about 24000 HSBC customers were
faced by infringe in the storage of their privacy information in the main bank database on
15th of March 2010,this infringe was happen as a result of data theft by one of the IT
employee(BCS,2010). So it is essential for IT professionals to follow code of ethics that
helps in valuing client’s privacy while performing transaction methods online banking.