Financial sector plays an important role in the development of a country’s economy.

The financial
support required by the economy to grow and develop is provided by a strong and sustainable
banking system. Banks are the backbone of any economy. Digital banking plays a vital role in today’s
world where people are looking beyond the traditional way of going to the bank for doing their bank
transactions. In the present scenario, the demand of banking is anytime, anywhere banking. Digital
banking technologies have escalated over the years, with the availability of a large portfolio of
products such as deposits, ATMs, debit cards, mobile payments, and the like……………….

Basically, digitalization is a combination of two worlds: a new customer experience on the outside
and an efficient, effective operating model on the inside—both enabled by digitalization and the
underlying technologies, processes, and structures. In the recent years, there has been a boom in
mobile banking and many new services like de-mat and trading accounts, mobile applications and
wallets have been introduced to provide even more convenience to the customer who can access
the bank and it’s services even through his mobile. However, there are some challenges which banks
face due to digitalization, namely, security risks, financial illiteracy, lack of customer awareness, fear
factor, lack of training, etc………………

The period of 1990s, in India, was marred by various financial reforms. These along with
globalisation and liberalisation brought about monumental changes in India’s business environment,
which included banking.

Banks in India as a whole were very reluctant to adopt the changes brought about by technological
advancement. The putting in place standard cheque encoders was the first step forward in digital
transformation in banking.

The next step was more of a necessity than an innovation. Banking is a respective job and therefore
a labor intensive one where the worker is prone to making mistakes. In order to minimize errors and
speed up the process, banks began using…………………………………….

Digital India in the banking sector has grown sharply in recent times. Some trends in digital banking
in India are-

Increase- The government’s encouragement to use electronic wallets has contributed much to
people adopting the use of technology in financial transactions. There is a rapid increase in the use
of credit/debit cards as well as electronic wallets and the trend will continue. • Chat bots: A number
of banks have already employed chat bots in their customer care operations. There is steady
increase in the number of chat bots employed as well as improvements in their speed of response,
quality of interaction and the quality of services rendered. • Merge Physical and Digital Process:
Many banks today offer a mixed physical and digital process to their customers. The customers could
walk into the bank and then use devices there to carry out their transactions. In the Indian context
we will certainly see a steady increase in this kind of service especially in the rural areas.

• Mobile Technology: The proliferation of mobile phones and the easy and cheap availability of
internet have meant that the banking sector had to provide digital services via mobile phones. A
number of banks have developed apps to help customers handle banking transactions on their
mobile phones. • End to End Digital Banking in India: A number of customers are already using
devices to handle their banking tasks. Banks have come to realize that digitization is the only way
forward. Hence a number of banks have already started on the path of end to end digitization in
their effort to provide all kinds of services over the internet resulting in paperless transactions. ……
• Debit/Credit Card: This facility promote cashless purchasing i.e. enables the customers to
purchase goods without holding cash. A credit card allows the customer to borrow money within
settled limits and Credit Card Company charged certain amount of interest for the money being used
for purchasing by the customer. However, the debit card linked directly to the customer account and
the money debited automatically from the customer account on every purchase. • NEFT: National
Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating one-to-one funds
transfer. Under this Scheme, individuals can electronically transfer funds from any bank branch to
any individual having an account with any other bank branch in the country participating in the
Scheme

Immediate Payment Service (IMPS): Immediate Payment Service (IMPS) is an instant real-time inter-
bank electronic funds transfer system in India. IMPS offer an inter-bank electronic fund transfer
service through mobile phones. Unlike NEFT and RTGS, the service is available 24/7 throughout the
year including bank holidays. Unified Payment Interface (UPI): This is the most convenient form of
financial transaction interface launched on 23rd August, 2016. UPI allows for instant money transfer
through the mobile device anytime anywhere. It facilitates accessing different bank accounts
through a single mobile application merging several banking features and single click two factor
authentication (security standard that is prescribed by regulations). Every bank has its own for UPI
for different operating systems like Android, iOS, Windows etc. • Bharat Interface for Money
(BHIM): It is a mobile application that provides simple, secure, quick and reliable payment
transactions using Unified Payments Interface (UPI). Instant bank-to-bank payments and Pay and
Collect Options are facilitated using just Mobile number and Virtual Payment Address (VPA). •
Unstructured Supplementary Service Data (USSD):

E-Wallet: Suitable for small ticket transactions. Transaction limits 20,000 per month (1 Lakh for KYC
compliant wallet holders. Login ID is required.) Some of the largest issuers of wallets include Paytm,
Mobikwik and ItzCash. Mobile Banking: All the customers need to do is to download and install the
bank’s mobile application from their smart phone or tablet’s application store. The customers can
then use these applications with their unique customer ID/ username and IPIN/Password. Mobile
banking to customers is like carrying a virtual bank on their mobile devices. Customers using a bank’s
mobile application can download ministatements, get alerts on account activity QR CODE-
Merchants can display these QR codes at their premises and customers can pay through linked
account by scanning these QR codes via Bharat QR enabled application. This relieves free the
customers from the stress of their card not be accepted at a particular merchant outlet………..

adv

• Taxes with less money in the home and more in the bank have little scope for hiding the income
list and avoiding taxes, thus increasing the number of taxpayers across the country.

• Transparency and accountability are easy to track cash flows with every transaction being recorded
with buyers, sellers and regulators, making the system more transparent and compatible. Over the
long term, this has led to greater business and investment potential for the whole economy, and the
currency in banks will mean more money flowing into high liquidity economies.

• Reduced red-tapism and bureaucracy through non-cash transactions, electronic means tracking,
electronic exchange tracking, and reporting on people cutting down corruption and increasing
service time.
• Digital banking banks have significantly reduced bank operating costs. This allows banks to charge
fees down and provide higher interest rates for deposits. Low operating costs mean more profits for
the bank.

• There are technologies that are convenient for banks and customers to get great services just by
getting into the system. These services include financial planning, budget preparation, and predictive
tools, credit calculators, investment analysis and stock trading. The forum contains a simple program
on the Bank's website.

7. DISADVANTAGES OF DIGITAL BANKING

• The cashless economy will increase theft of personal information via the Internet, such as debit
cards and credit cards, passwords, card numbers, and other sensitive information due to increased
digital transactions. Cybercrimes and hacking are a big reality in India and even the most trusted
firms are not safe from it. This has led to a decline in trust on digital activities of banks.

• A country requires an adequate level of infrastructure in order to adopt the technology and
provide necessary support for its growth and usage. However, the infrastructure in India is still as a
nascent stage. Internet connectivity is yet to reach many.

• In rural areas, lack of internet connectivity, and even misplaced telecommunications signals,
people are not interested in digital operations.

• Technological boom in the banking sector has led to new kinds of products/services and new ways
of delivering them. However, these require various additional legal definitions, such as meaning of
electronic signature, and permissions. At the same time, existing legal definitions and permissions
are also required to be rethought.

• Although RBI is coming up with frameworks for specific activities, these regulatory norms are yet
to be defined unambiguously and executed timely. Certain regulations, such as KYC requirements,
warrant personal contact and face-to-face meetings between the banker and customer, which may
not be possible in case of a pure digital bank