Meaning of E-Banking:

Banks give administrations or bank services to draw in clients, from giving advances,
issuing of debit cards and credit cards, computerised monetary services, and
surprisingly personal services or administrations. Even so, some fundamental
present-day administrations are presented by many commercial banks.
Electronic banking has many names like web-based banking, e-banking, virtual
banking, or web banking, and online banking. It is just the utilisation of
telecommunications networks and electronic networks for conveying different
financial services and products. Through e-banking, a client can acquire his record
and manage numerous exchanges utilising his cell phone or personal computer.

Classification of E-Banking:
Banks offer different kinds of services through electronic financial stages. These are
of three sorts:

Type 1:
This is the essential degree of administrations or services that banks offer through
their sites. Through this assistance, the bank offers data, information regarding its
services and products to clients. Further, a few banks might respond to an inquiry
through email as well.

Type 2:
In this category, banks permit their clients to submit directions or applications for
various administrations, check their record balance, and so on. Be that as it may,
banks don‟t allow their clients to do any fund-based exchanges with respect to their
records or accounts.

Type 3:
In the third category, banks permit their clients to work or operate their records or
accounts for bill payments, purchase and redeem securities and fund transfers, and
so on.
Most conventional banks offer e-banking administrations as an extra technique for
offering support. Further, many new banks convey banking administrations
principally through the other electronic conveyance channels or web. Likewise, a few
banks are „internet only‟ banks with no actual branch anyplace in the country.

In this way, banking sites are of two sorts:

Transactional Websites: These sites permit clients to go through with exchanges
on the bank‟s site. Further, these exchanges can go from a plain retail account
balance request to huge business-to-business liquid assets transfers. The
accompanying table records some normal wholesale and retail e-banking
administrations presented by financial institutions and by banks.
Informational Websites: These sites offer general data regarding the bank and its
services and products to the clients.
Wholesale services by banks: Include Account management, Cash management,
Small business loan applications, Approvals or advances, Commercial wire transfer,
Business-to-business payments, Employee benefit, and Pension administration.
Retail services by banks: Include Account management, Bill payment, New
account opening, Consumer wire transfers, Investment and brokerage services,
Loan application and approval, and Account Aggregation.

Services Under E-Banking:

Mobile Banking:
Mobile banking (otherwise called M-banking) is a name utilised for performing
account exchanges or transactions, bill payments, credit applications, balance
checks, and other financial exchanges through a mobile phone like a Personal
Digital Assistant (PDA) or cell phone.

Electronic Clearing System (ECS):

The Electronic Clearing System is a creative provision for occupied individuals. With
this provision, an individual‟s credit card bill is consequently charged from the same
individual‟s savings bank account, so one doesn‟t have to stress over missed or late
payments.

Smart Cards:
A smart card is a card that stores data on a microchip or memory chip or a
microprocessor in lieu of the magnetic stripe found on debit cards and credit cards.
Smart cards are not utilised for transferring or moving monetary data alone, but also
they can be utilised for an assortment of identification grounds. Exchanges made
with smart cards are scrambled or encrypted to shield the exchange of data from one
party to another. Each encoded exchange can‟t be hacked and doesn‟t transmit any
extra data past what‟s required for finishing the single exchange or transaction.

Electronic Fund Transfers (ETFs):

Electronic fund transfer (EFT) is the electronic exchange of cash starting with an
individual account in the bank to another individual account of the same bank, or
within or with other financial institutions or with multiple institutions, by means of
personal computers based frameworks, without the immediate intercession of bank
staff.

Telephone Banking:
Telephone banking is an assistance given by a bank or other monetary foundation or
other financial institutions, that empower clients to perform via telephone a scope of
monetary exchanges which don‟t include cash or financial instruments, without the
need to visit an ATM or a bank branch.

Internet banking:
Web-based banking is an assistance presented by banks that permits account
holders to get their record information by means of the web or the internet. Web-
based banking or Internet banking is otherwise called “Web banking” or “Online
banking.”
Internet banking through customary banks empowers clients to play out every
standard exchange, for example, bill payments, balance requests, stop-payment
requests, and balance inquiries. Some banks even proposition online credit card and
loan applications.
Account data can be acquired day or night, and should be possible from any place.

Home banking:
Home banking is the most common way of concluding the monetary exchange from
one‟s own home as opposed to using a bank‟s branch. It incorporates making
account requests, moving cash, covering bills, applying for credits, and directing
deposits.

Significance of E-Banking:
Importance to clients:
 Lower cost per exchange: Since the client doesn‟t need to visit the branch
for each exchange, it saves him both time and cash.
 No topographical hindrances: In conventional financial frameworks,
geological distances could hamper specific financial exchanges. Nonetheless,
with e-banking, geological obstructions are diminished.
 Convenience: A client can get to his record or bank account and execute
from any place at any time.

Importance to Businesses:
Better efficiency: Electronic banking further develops usefulness. It permits the
computerisation of ordinary, regularly scheduled payments and provides further
banking activities to upgrade the efficiency of the business.
Lower costs: Usually, costs in financial relationships and connections depend on
the assets used. Assuming that a specific business needs more help with deposits,
wire transfers, and so on, then, at that point, the bank charges its higher expenses.
With internet banking, these costs are limited.
Lesser errors: Electronic financial diminishes mistakes in normal financial
exchanges. Awful penmanship, mixed-up data or information, and so on can cause
mistakes that can be exorbitant. Likewise, a simple audit of the record or account
activity, movement upgrades the precision of monetary exchanges.
Diminished misrepresentation: Electronic banking gives an advanced impression
to all representatives who reserve the privilege to alter banking exercises. In this
manner, the business has better perceivability into its exchanges, making it hard for
any fraudsters from committing crimes.
Account reviews: Business proprietors and assigned staff individuals can get to the
records rapidly utilising a web-based financial interface. This permits them to audit
the record action and, furthermore, guarantee the smooth working of the account.

Importance to banks:
 Lesser exchange costs: Electronic exchanges are the least expensive
methods of exchange.
 A decreased edge for human blunder: Since the data is handed-off
electronically, there is no space for human mistakes or errors.
 Lesser desk work: Advanced records decrease desk work, paperwork, and
make the cycle simpler to deal with. Likewise, it is ecological.
 Decreased fixed expenses: A lesser requirement for branches which
converts into a lower fixed expense.
 More steadfast clients: Since e-banking administrations or services are
convenient to the clients, banks experience higher reliability from their clients.

Risks of E-Banking

Here are the risks of e-banking in detail:

Operational Risk

Operation risk or transactional risk is the most common type of risk of e-banking. It includes:

 Incorrect transaction processing

  Compromises in the integrity of data, data privacy, and confidentiality

 Unauthorized access to the bank’s systems

 Non-enforceability of contracts, etc.

Apart from technological errors, human factors like negligence (customers or employees),
employee frauds, hackers, etc. are a potential source of operational risk of e-banking.

Security Risk
When we talk about banking transactions, security of the transaction is of paramount
importance. All customers want their transactions to be confidential.

However, since all information is online, there is always a chance that someone might retrieve
the information and misuse it. The security risk of e-banking also arises from hacking threats
and unauthorized access to the bank’s systems.

System Architecture and Design

In order to manage various operational and security risks of e-banking, it is important that the
bank has appropriate system architecture and controls in place. Banks always carry the risk of
choosing the wring system design or technology or have inadequate control processes.

If the bank has an outdated system which is not upgradable, then it can turn into
an investment loss for the bank along with inefficient service.
Banks need to keep updating their systems to keep up with the rapidly changing technology to
avoid any holes in its security system. Further, the bank’s staff requires regular training to keep
up with the new technologies too.

Reputational Risk
For any business, its reputation is of critical importance. When it comes to electronic banking, if
a bank fails to perform critical functions or not work according to the expectations of its
customers, then it faces a risk of loss of reputation. This eventually leads to a loss of funding or
customers.

Some reasons for this risk are a system or product not functioning as expected, significant
deficiencies in the system, security breaches (external or internal), misinforming customers
about the processes and policies of using e-banking, certain communication issues that hinder
the customer from accessing his account, etc.

Legal Risk
Whenever there is a violation of laws, regulations, or prescribed practices, or when the legal
rights and obligations of any of the parties to a transaction are not established, then there is a
legal risk involved.

E-Banking is relatively new to the industry and there is a lot of uncertainty and ambiguity about
certain laws and rules. This increases the legal risk.

Money Laundering Risk

All transactions through the e-banking channel are done remotely. Therefore, it is difficult for
banks to use traditional methods to detect and prevent criminal activities.

While there are certain money laundering rules in place, for electronic payments, their feasibility
is questionable. Therefore, banks carry the risk of money laundering.

Cross-border Risks

The core idea of electronic banking is to extend the geographical reach of both banks as well as
customers. This means that the expansion can go beyond national borders. This leads to several
cross-border risks:
  Legal and Regulatory risks – There is a possibility about uncertainties regarding the
legal requirements in certain countries and jurisdiction ambiguities of different national
authorities.

 Operational risk – If the bank uses a service provider located in a different country, then
it is difficult to monitor it causing operational risk.

 Credit risk – Cross-border transactions can increase credit risk. This is because it is
difficult to appraise an application for a loan from a customer in a different country.

Strategic Risk
This risk is associated with issues pertaining to:

 The development of a business plan

 Having sufficient resources available to support the business plan

 In the case of outsourced activities, the credibility of the vendor

 For employees, any change in the work environment

 Level of technology used in comparison with the available technology, etc.

Other Risks
The other risks of e-banking are the same as those of traditional banking like credit risk, liquidity
risk, interest rate risk, market risk, etc. However, in e-banking, these risks are magnified due to
the use of electronic channels and the absence of geographical boundaries.

All the risks mentioned above can arise due to some flaws in design, insufficient technology,
negligent employees, and unauthorized system access (intentional or not). Therefore, it is
important that banks adopt the right technology and systems and have proper access control for a
secure transacting environment.

RBI’s recommendation on E-Banking

The Reserve Bank of India (RBI) has a working group which examines various issues of e-
banking and suggests different ways to solve them. Some of these recommendations are:

 Keeping security concerns in mind, all banks in India must follow a standard. Also, the
Indian Banks Association should design this standard.

 All banks must adopt adequate security measures to maintain the secrecy and
confidentiality of data. Further, they must use logical access control to implement it.
 In order to mitigate the money laundering risk, banks must develop an anti-money
laundering (ALM) technology for reporting and querying.

 Banks must have an internal grievance redressal system to adopt a fraud-free culture of
banking.

 All banks must have an explicit security plan along with documentation. Further, banks
must strictly ensure physical access control.

 Banks must adopt an extensive e-banking network so that the rural and remote areas of
the country can also benefit.
An ATM (Automated Teller Machine) is an electronic machine used for financial
transactions. As the term implies, it is an ‘automated’ banking platform that does not require
any banking representative/teller or a human cashier.

Meaning : ATM is the automation of the Teller. An ATM is an electronic cash providing and
accepting machine. These machines are installed to provide access to cash to the bank
customers any time of the day. One need not worry about the working hours of the bank. It is
a self service counter open 24 hours a day for 365 days of the year. A customer who wishes
to avail of the ATM facility has to maintain certain minimum balance. There is maximum
limit on withdrawal.

The customer is issued with the ATM card. It has a Personal Identification Number (PIN)
which is known only to the customer. The customer first inserts the card in the slot. The
machine examines the genuineness of the card and the door is opened automatically. After
that, the customer presses the keys of his PIN and the required cash flows out. The ATM also
accepts cheques and cash deposits. They may be installed at shopping centres, airports,
railway stations or located within bank premises. The ATM requires currency notes which are
not folded and can move easily in a machine. The ATM supplies notes of certain
denominations only.

What is Automated Teller Machine – Definition

ATM full form is Automated Teller Machine which is a self-service banking outlet. You can
withdraw money, check your balance, or even transfer funds. Different banks provide their
ATM services by installing cash machines in different parts of the country. You can
withdraw money from any of these machines irrespective of whether or not you are an
account holder in the same bank.

Transactions are either free or bear a nominal charge depending upon the banks. Banks
usually do not charge for the first 3-5 transactions in a month. Once you cross the limit of
free transactions, you may have to pay a nominal charge. Also, some banks levy charges if
you withdraw money from another bank’s ATM of which you are not an account holder.

Types of Automated Teller Machines (ATM)

Automated Teller Machines (ATMs) are mainly of two types. One is a simple basic unit that
allows you to withdraw cash, check your balance, change the PIN, get mini statements and
receive account updates. The more complex units provide facilities for cash or cheque
deposits and line of credit & bill payments.

There are also onsite and offsite Automated Teller Machines: the onsite ATMs are within the
bank premises, unlike the offsite ones which are present in different nooks and corners of the
country to assure that people have basic banking facilities and instant cash withdrawals if
they can’t go to a bank branch.

ATMs can also be categorized based on the labels assigned to them. Some of these labels are
listed below-

 Green Label ATMs: Used for agricultural purposes

 Yellow Label ATMs: Used for e-commerce transactions

 Orange Label ATMs: Used for share transactions

 Pink Label ATMs: Specifically for females to help avoid the long queues and
waiting time

 White Label ATMs: Introduced by the TATA group, white label ATMs are not
owned by a particular bank but by entities other than the bank

 Brown Label Banks: Operated by a third party other than a bank

There are also a few biometric Automated Teller Machines that need fingerprints & eye
scanners to be operated.

Uses of an Automated Teller Machine

Automated Teller Machines have revolutionized the banking sector by providing easy access
to customers and loading off the burden from bank officials. Some of the uses of an ATM
are-

 The most common uses of an Automated Teller Machine include withdrawing money
and checking balance. Bank a/c holders can also transfer money or change the PIN
(Personal Identification Number)

 Newer and advanced ATMs also provide options to open/withdraw a Fixed Deposit
(FD), or to apply for a personal loan. You can also book railway tickets, pay the
insurance premiums, income tax & utility bills, recharge your mobile, and deposit
cash. Some of these facilities may require you to register at the bank branch

 Customers can now do money transactions at their convenience. Banks have installed
their ATMs today in public spaces, highways, malls, marketplaces, railway/airport
stations, hospitals, etc.

 Automated Teller Machines provide 24×7 access anywhere

 It helps to avoid the hassle of standing in long queues at the bank even for simpler
transactions like withdrawing money. It has also helped in reducing the workload of
the bank officials
How to Use ATMs?

To avail of the facility of Automated Teller Machines, you need to have a bank account and
an ATM card against the account for the same. Most of the time, banks issue a debit card that
you can use not only at ATMs but also at online payment gateways or card swipe payments.

Every Automated Teller Machine has some common basic parts, even if they may differ in
size and design. These are:

1. Input Devices

 Card Reader – Every Automated Teller Machine has a space to insert the debit or the
ATM card. The ATM card generally has a magnetic strip on the back, and in a few
cases, a chip on the front, that contains the account details. Card Reader recognizes
these details and passes them on to the user server

 Keypad – All ATMs have a keypad where you can insert numbers, clear them, or
cancel any transaction. You can use it to enter the PIN and the amount you wish to
withdraw. These keypads can either be physical buttons on the ATM or virtual
keypads on the touchscreen

2. Output Devices

 Display Screen – There is a display screen in every ATM, usually LCD or CRT that
displays the transaction information like steps to do the transaction or balance after
withdrawal. Therefore, it acts as a guide to performing a transaction. It displays
options of PIN change, quick cash withdrawal, balance check, etc.

 Cash Dispenser – Cash is safely stocked into the Automated Teller Machine by bank
officials. There is a cash dispenser from where you can collect cash after withdrawing
a certain amount from the ATM

 Receipt Printer – After completing a transaction, the receipt printer in the ATM
records the type of transaction, amount withdrawn, and the remaining balance. In an
ongoing transaction, ATMs generally display the question if the customers want the
receipt or not. So, if requested, you get the receipt from the receipt printer

 Speaker – There is a speaker in most of the ATMs which gives the audio instructions
for accessing the machine & doing transactions. Therefore, it further enables the users
to perform the transaction smoothly

Facilities :
In the automated teller machine facility following points to be considered :

a) ATM Machine : ATM is terminal of the bank’s computer which can be operated by the
customer himself for withdrawal, deposits of cash, balance enquiries, transfer of funds,
statements of accounts round the clock.
b) Video Screen : The terminal is coupled with a video screen. It has also a cash dispenser
which gives currency notes as per instruction of the computer.

c) ATM Card : The customer is supplied with an ATM card. It has MICR coding by which
computer identifies the customer. Besides this, the customer is given his secret personal
identification number (PIN). He can operate the computer by inserting the card in the slot of
ATM window and then giving his identification number.

d) PIN : PIN is given by the computer while operating the account and even Bank staff does
not know this number.

e) Terms and Conditions about Withdrawal : The ATM card provides the term and
conditions of operation like maximum withdrawal per transaction per day, the maximum
balance to be maintained, etc. compared with credit card, an ATM card is a debit card.

Advantages :

The advantages of automated teller machine services are as follows :

a) 24 Hours Availability : Service is available 24 hours a day and seven days a week.

b) Convenient Place : It can be placed in convenient off branch locations like shops,
factories, offices.

c) Privacy of Operation : It ensures privacy of operation through self-service.

d) No Need of RBI’s Permission : Banks need not obtain RBI’s permission for installing
ATMs in their branches/ extension counters.

e) No Time Limit for Transaction : One can do the transaction while going to office or
while returning home or while going to shopping or on holidays. The choice of time is
unlimited.

f) Quick and Efficient Service : automated teller machine offers quick and efficient service.
It is professional service. Since the machine is programmed and many driven the customer
knows how to operate the ATM in simple specified steps and no time is wasted.

g) Fixed Response to Customer : Response of automated teller machine to customer is

fixed. The ways the transactions are to be carried out in logical steps are programmed.
Further, the operation is to be carried out within specific time limit. If the customer does not
respond within that time, the transaction is aborted. This time limit is pre-set by the bank

Limitations:

The limitations of ATM are as follows:

  a) Limitation on Withdrawals: Cash withdrawals for large amount are not
permitted. It is restricted by the amount fixed for the card.
 b) Restriction on Cash Dispensations: Cash dispensations are generally restricted to
certain denominations of currency. As such, withdrawals are to be made only in
certain multiples.
 c) Limited Functioning: The automated teller machine performs only the limited
functions. For other banking activities like credit limits, locker facilities, etc. the
customer has to approach the bank in person or by other means.

How do ATMs Work

ATMs are connected to a network of computers linked to the financial institution’s

central computer system. When a customer inserts their ATM card into the machine, it
reads the magnetic strip on the card, which contains the customer’s account
information. The ATM then communicates with the financial institution’s computer
system to verify the customer’s identity and account balance. Once the customer’s
identity is confirmed, they can perform the desired transaction, such as withdrawing
cash or checking their account balance.

Services offered by ATMs in India

1. Use as Cash withdrawal:

Customers can withdraw cash from their accounts using ATMs. They can choose the
amount they want to withdraw, and the ATM will dispense the Money.

2. You can Deposit Money:

Customers can deposit cash and cheques into their accounts using ATMs. They can
insert the cash or cheque into the machine, and the ATM will credit the amount to
their account.

3. Use as Transfer funds:

Customers can transfer money between their accounts using ATMs. They can select
the bank account from which they want to withdraw the funds and the account they
want to share.

4. Check your bank account balance:

Customers can check their account balance using ATMs. They can select the account
they want to check off, and the ATM will display the current balance.

5. Other Services offered at ATM:

Many ATMs also offer additional services, such as the ability to print mini-statements,
change personal identification numbers (PIN), pay bills, and many more.
ATMs are a convenient and efficient way to access our bank accounts and perform
various financial transactions. They offer a wide range of services that make banking
more accessible and convenient for customers.

Types of Automated Teller Machines (ATM) in India

In India, ATMs have become common in urban and rural areas, with many banks and
financial institutions operating them. However, not all ATMs are the same, and there
are several ATMs in India, each with unique features and functions. This article will
discuss the different types of ATMs in India and their uses.

1. White Label ATMs

White Label ATMs are owned and operated by non-banking companies, such as Tata
Communications Payment Solutions Limited, Prizm Payment Services, Hitachi
Payment Services, and AGS Transact Technologies Ltd. These ATMs are not branded
with any specific bank’s logo and offer services such as cash withdrawal, deposit,
balance inquiry, and mini-statement. They are often located in remote or underserved
areas, and their main objective is to increase financial inclusion and provide banking
services to the unbanked population.

2. Brown Label ATMs

Brown Label ATMs are owned and operated by non-banking companies but are
branded with a specific bank’s logo. These ATMs offer services similar to White
Label ATMs, but customers can only use them if they have an account with the bank
with which the ATM is branded. They are often located in urban and semi-urban
areas, and their main objective is to increase the bank’s reach and provide more
convenience to its customers.

3. On-Site ATMs

On-site ATMs are owned and operated by banks and are located within the bank’s
premises. These ATMs are available only to the bank’s customers and offer services
such as cash withdrawal, deposit, balance inquiry, and mini-statement. They are often
used by customers who want to avoid long queues at the bank’s counters.

4. Off-Site ATMs

Off-site ATMs are owned and operated by banks, but they are located outside the
bank’s premises. These ATMs offer services similar to On-site ATMs but are
available to all customers, regardless of which bank they have an account associated
with. They are often located in high-traffic areas, such as shopping malls and airports,
to provide more convenience to customers.
5. Micro ATMs

Micro ATMs are small, handheld devices that provide banking services in remote or
underserved areas. These ATMs are often used by business correspondents (BCs),
whom banks authorize to provide customer banking services. They offer services such
as cash withdrawal, deposit, balance inquiry, and mini-statement.