A REPORT ON BANKING CHANGING RULES OF THE GAME THROUGH TECHNOLOGY

Submitted to: Prof. Suryanarayana Mohapatra

By Bachan Das IBS, Hyderabad 10BSPHH010895

1|Page

TABLE OF CONTENTS

PURPOSE AND OBJECTIVE OF THE PROJECT...03 METHODOLOGY AND SOURCES OF DATA....04 INTRODUCTION ...05 BANKING BEFORE & AFTER TECHNOLOGY..06 TECHNOLOGY AND BANKS TRANSFORMATION....07

CHANNELS AND PRODUCTS OF BANKING EVOLVED THROUGH TECHNOLOGY...10

THE INDIAN SCENARIO..19 CONVERGENCE OF TELECOM AND BANKING INDUSTRY...23 EMERGING AREAS OF TECHNOLOGY IN BANKING INDUSTRY.25 CONCLUSION.....27

2|Page

PURPOSE OF THE PROJECT

Technology adoption has changed the face of the Banking industry. Think of any large bank these days and much of it is done online or with automated teller machines. Check images are being photographed, deposits no longer need deposit slips, and balances are calculated in real time. What started as a mere automation of some routine work processes in banks has moved on to become business process re-engineering which has resulted in making banking services branchless, anytime and anywhere; facilitated new product development and enabled near real time service delivery. Technology has helped banks to reach the doorsteps of the customer by overcoming the limitations on geographical/physical reach in branch banking and easing the resource and volume constraints posed by the brick and mortar model. All the stake holders have benefitted from the expansion of delivery channels, product innovation and efficiency enhancement which have been facilitated by technology adoption. It is imperative to trace how the benefits of technology has percolated and is continuing to do so in terms of its increased reach of banking services to a larger section of the population. This project titled Banking changing rules of the game through technology aims to bring out the impact technology has had over the banking industry as a differentiator in enhancing customer experience in terms facilitating cheaper, faster and easier transactions and also its benefits will also percolate to the un-banked population.

OBJECTIVES OF THE PROJECT

1. Analyzing the Banking industry before and after technology. 2. Assessing the various forms, branches and products of Banking evolved through technology. 3. Assessing the emerging areas of technology and convergence of Telecom and Banking industry. 4. Identifying the necessary innovations in technology required to expand the frontiers of banking.

3|Page

METHODOLOGY
1. Analysis and study of technology in the banking industry, its impact, emerging trends etc. through secondary sources. 2. Recommendations based on analysis. 3. Conclusion.

SOURCES OF DATA
Secondary sources: Databases/cases/articles/journals Websites BANKING TECHNOLOGY BANKNETINDIA.COM WIKIPEDIA RBI PUBLIC AND PRIVATE SECTOR BANKS

4|Page

INTRODUCTION
The usage of technology, broadly referring to computers and peripheral equipment, has seen tremendous growth in service industries in the recent past. The most obvious example is perhaps the banking industry, where through the introduction of information technology (IT) related products in internet banking, electronic payments, security investments, information exchanges, banks now can provide more diverse services to customers with less manpower. Seeing this pattern of growth, it seems obvious that IT can bring about equivalent contribution to profits. In general, existing studies have concluded two positive effects regarding the relation between IT and banks performance. First, IT can reduce banks operational costs (the cost advantage). For example, internet helps banks to conduct standardized, low value-added transactions (e.g. bill payments, balance inquiries, account transfer) through the online channel, while focusing their resources into specialized, high-value added transactions (e.g.small business lending, personal trust services, investment banking) through branches. Second, IT can facilitate transactions among customers within the same network. Let us consider the case of automated teller machines (ATMs) by banks. If ATMs are largely available over geographically dispersed areas, the benefit from using an ATM will increase since customers will be able to access their bank accounts from any geographic location they want. This would imply that the value of an ATM network increases with the number of available ATM locations, and the value of a banks network to a customer will be determined in part by the final network size of the bank.

5|Page

BANKING - BEFORE AND AFTER TECHNOLOGY If you're a people person, you may prefer to walk into a bank or ride through the drive-through to conduct your financial transactions face to face. This is particularly appealing in smaller towns and communities where tellers tend to recognize regular customers and greet them by name. However, if time is one of your most precious commodities, online banking, when and wherever it's convenient for you, might just be the ticket. In 1980s, the banking industry consisted of a large number of relatively small firms operating in geographically distinct local markets. Products and services primarily taking deposits and making loans were delivered via the branch and the calling officer, which emphasized faceto-face contact with customers. These customers were, for the most part, relatively unsophisticated and trusted their bankers to act in their best interest. Twenty years later, with dramatic advancements in IT, banking customers have become increasingly savvy, making use of multiple distribution channels and demanding an ever-increasing variety of complex products. And competition has emerged from nontraditional quarters to take advantage of new technology and challenge old certainties. What banks deliver and how they deliver it have changed dramatically. And these changes are likely not over yet. This explosion of technology has changed the banking industry from paper and branch banks to digitized and networked banking services. It has already changed the internal accounting and management systems of banks. It is now fundamentally changing the delivery systems banks use to interact with their customers. It is clear that new technology is changing the banking industry forever. Banks with the ability to invest and integrate information technology will become dominate in the highly competitive global market. Bankers are convinced that investing in IT is critical. Its potential and consequences on the banking industry future is enormous.

6|Page

Technology and Banks Transformation

In the world of banking and finance nothing stands still. The biggest change of all is in the, scope of the business of banking. Banking in its traditional from is concerned with the acceptance of deposits from the customers, the lending of surplus of deposited money to suitable customers who wish to borrow and transmission of funds. Apart from traditional business, banks now a days provide a wide range of services to satisfy the financial and non financial needs of all types of customers from the smallest account holder to the largest company and in some cases of non customers. The range of services offered differs from bank to bank depending mainly on the type and size of the bank. Computers are getting more sophisticated. They have given banks a potential they could only dream about and have given bank customers high expectations. The changes that new technologies have brought to banking are enormous in their impact on officers, employees, and customers of banks. Advances in technology are allowing for delivery of banking products and services more conveniently and effectively than ever before - thus creating new bases of competition. Rapid access to critical information and the ability to act quickly and effectively will distinguish the successful banks of the future. The bank gains a vital competitive advantage by having a direct marketing and accountable customer service environment and new, streamlined business processes. Consistent management and decision support systems provide the bank that competitive edge to forge ahead in the banking marketplace.

Major applications: The advantages accruing from computerization are three-directional - to

the customer, to the bank and to the employee.

For the customer

Banks are aware of customer's need for new services and plan to make them available. IT has increased the level of competition and forced them to integrate the new technologies in order to satisfy their customers. They have already developed and implemented a certain number of solutions among them:

7|Page

Self-inquiry facility: Facility for logging into specified self-inquiry terminals at the branch to inquire and view the transactions in the account.

Remote banking: Remote terminals at the customer site connected to the respective branch through a modem, enabling the customer to make inquiries regarding his accounts, on-line, without having to move from his office.

Anytime banking-Anywhere banking: Installation of ATMs which offer non-stop cash withdrawal, remittances and inquiry facilities. Networking of computerized branches inter-city and intra-city, will permit customers of these branches, when interconnected, to transact from any of these branches.

Telebanking: A 24-hour service through which inquiries regarding balances and transactions in the account can be made over the phone.

Electronic Banking: This enables the bank to provide corporate or high value customers with a Graphical User Interface (GUI) software on a PC, to inquire about their financial transactions and accounts, cash transfers, check book issue and inquiry on rates without visiting the bank. Moreover, LC text and details on bills can be sent by the customer, and the bank can download the same. The technology used to provide this service is called electronic data interchange (EDI). It is used to transmit business transactions in computer-readable form between organizations and individuals in a standard format.

As information is centralized and updates are available simultaneously at all places, single-window service becomes possible, leading to effective reduction in waiting time.

For the bank

During the last decade, banks applied IT to a wide range of back and front office tasks in addition to a great number of new products. The major advantages for the bank to implement IT are:

Availability of a wide range of inquiry facilities, assisting the bank in business development and follow-up.

Immediate replies to customer queries without reference to ledger-keeper as terminals are provided to Managers and Chief Managers.

8|Page

Automatic and prompt carrying out of standing instructions on due date and generation of reports.

Generation of various MIS reports and periodical returns on due dates. Fast and up-to-date information transfer enabling speedier decisions, by interconnecting computerized branches and controlling offices.

For the employees

IT has increased their productivity through the followings:

Accurate computing of cumbersome and time-consuming jobs such as balancing and interest calculations on due dates.

Automatic printing of covering schedules, deposit receipts, pass book / pass sheet, freeing the staff from performing these time-consuming jobs, and enabling them to give more attention to the needs of the customer.

Signature retrieval facility, assisting in verification of transactions, sitting at their own terminal.

Avoidance of duplication of entries due to existence of single-point data entry.

9|Page

CHANNELS AND PRODUCTS OF BANKING EVOLVED THROUGH TECHNOLOGY CHANNELS

AUTOMATED TELLER MACHINE(ATM): An automated teller machine (ATM), also known as a Cash Point or Cash Machine is a computerized telecommunications device that provides the clients of a financial institution with access to financial transactions in a public space without the need for a cashier, human clerk or bank teller. ATMs are known by various other names including ATM Machine, automatic banking machine, and various regional variants derived from trademarks on ATM systems held by particular banks. Invented by IBM, the first ATM was introduced in December 1972 at Lloyds Bank in the UK. On most modern ATMs, the customer is identified by inserting a plastic ATM card with a magnetic stripe or a plastic smart card with a chip, that contains a unique card number and some security information such as an expiration date or CVVC (CVV). Authentication is provided by the customer entering a personal identification number (PIN). Using an ATM, customers can access their bank accounts in order to make cash withdrawals, credit card cash advances, and check their account balances as well as purchase prepaid cell phone credit. If the currency being withdrawn from the ATM is different from that which the bank account is denominated in (e.g.: Withdrawing Japanese Yen from a bank account containing US Dollars), the money will be converted at a wholesale exchange rate. Thus, ATMs often provide the best possible exchange rate for foreign travelers and are heavily used for this purpose as well. Although ATMs were originally developed as just cash dispensers, they have evolved to include many other bank-related functions. In some countries, especially those which benefit from a fully integrated cross-bank ATM network, ATMs include many functions which are not directly related to the management of one's own bank account, such as:

Deposit currency recognition, acceptance, and recycling Paying routine bills, fees, and taxes (utilities, phone bills, social security, legal fees, taxes, etc.) Printing bank statements Updating passbooks Loading monetary value into stored value cards Purchasing

Postage stamps.
10 | P a g e

Lottery tickets Train tickets Concert tickets Movie tickets Shopping mall gift certificates.

Games and promotional features Fastloans CRM at the ATM Donating to charities Cheque Processing Module Adding pre-paid cell phone / mobile phone credit. Paying (in full or partially) the credit balance on a card linked to a specific current account. Transferring money between linked accounts (such as transferring between checking and savings accounts)

MOBILE BANKING: Also known as M-Banking, mbanking, SMS Banking, Mobile

banking is a term used for performing balance checks, account transactions, payments, credit applications and other banking transactions through a mobile device such as a mobile phone or Personal Digital Assistant (PDA). The earliest mobile banking services were offered over SMS. With the introduction of the first primitive smart phones with WAP support enabling the use of the mobile web in 1999, the first European banks started to offer mobile banking on this platform to their customers[1]. Mobile banking has until recently most often been performed via SMS or the Mobile Web. Apple's initial success with iPhone and the rapid growth of phones based on Google's Android (operating system) have led to increasing use of special client programs, called apps, downloaded to the mobile device. Mobile Banking can be said to consist of three inter-related concepts:

Mobile Accounting Mobile Brokerage Mobile Financial Information Services Most services in the categories designated Accounting and Brokerage are transaction-based. The non-transaction-based services of an informational nature are however essential for
11 | P a g e

conducting transactions - for instance, balance inquiries might be needed before committing a money remittance. Over the last few years, the mobile and wireless market has been one of the fastest growing markets in the world and it is still growing at a rapid pace. Mobile banking can offer services such as the following: Account Information 1. Mini-statements and checking of account history 2. Alerts on account activity or passing of set thresholds 3. Monitoring of term deposits 4. Access to loan statements 5. Access to card statements 6. Mutual funds / equity statements 7. Insurance policy management 8. Pension plan management 9. Status on check, stop payment on check 10. Ordering check books 11. Balance checking in the account 12. Recent transactions 13. Due date of payment (functionality for stop, change and deleting of payments) 14. PIN provision, Change of PIN and reminder over the Internet 15. Blocking of (lost, stolen) cards Payments, Deposits, Withdrawals, and Transfers 1. Domestic and international fund transfers 2. Micro-payment handling 3. Mobile recharging 4. Commercial payment processing 5. Bill payment processing 6. Peer to Peer payments 7. Withdrawal at banking agent 8. Deposit at banking agent
12 | P a g e

Investments 1. Portfolio management services 2. Real-time stock quotes 3. Personalized alerts and notifications on security prices Support 1. Status of requests for credit, including mortgage approval, and insurance coverage 2. Check (cheque) book and card requests 3. Exchange of data messages and email, including complaint submission and tracking 4. ATM Location Content Services 1. General information such as weather updates, news 2. Loyalty-related offers 3. Location-based services

ONLINE BANKING: Online banking (or Internet banking) allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank, credit union or building society. Online banking solutions have many features and capabilities in common, but traditionally also have some that are application specific. The common features fall broadly into several categories

Transactional (e.g., performing a financial transaction such as an account to account transfer, paying a bill, wire transfer, apply for a loan, new account, etc.)

Payments to third parties, including bill payments and telegraphic/wire transfers Funds transfers between a customer's own transactional account and savings accounts Investment purchase or sale Loan applications and transactions, such as repayments of enrollments

Non-transactional (e.g., online statements, cheque links, cobrowsing, chat)

Viewing recent transactions

13 | P a g e

Downloading bank statements, for example in PDF format Viewing images of paid cheques

Financial Institution Administration Management of multiple users having varying levels of authority Transaction approval process

Features commonly unique to Internet banking include

Personal financial management support, such as importing data into personal accounting software. Some online banking platforms support account aggregation to allow the customers to monitor all of their accounts in one place whether they are with their main bank or with other institutions.

TELEPHONE BANKING: Telephone banking is a service provided by a financial institution, which allows its customers to perform transactions over the telephone. Most telephone banking services use an automated phone answering system with phone keypad response or voice recognition capability. To guarantee security, the customer must first authenticate through a numeric or verbal password or through security questions asked by a live representative (see below). With the obvious exception of cash withdrawals and deposits, it offers virtually all the features of an automated teller machine: account balance information and list of latest transactions, electronic bill payments, funds transfers between a customer's accounts, etc. Usually, customers can also speak to a live representative located in a call centre or a branch, although this feature is not always guaranteed to be offered 24/7. In addition to the self-service transactions listed earlier, telephone banking representatives are usually trained to do what was traditionally available only at the branch: loan applications, investment purchases and redemptions,chequebook orders, debit card replacements, change of address, etc. Banks which operate mostly or exclusively by telephone are known as phone banks. They also help modernise the user by using special technology.

CALL CENTRE: Most banking institutions use call centers nowadays to interact with their customers. A call centre or call center is a centralized office used for the purpose of receiving and transmitting a large volume of requests by telephone. A call centre is operated by
14 | P a g e

a company to administer incoming product support or information inquiries from consumers. Outgoing calls for telemarketing, clientele, product services, and debt collection are also made. In addition to a call centre, collective handling of letters, faxes, live chat, and e-mails at one location is known as a contact centre.

VIDEO BANKING: Video banking is a term used for performing banking transactions or professional banking consultations via a remote video connection. Video banking can be performed via purpose built banking transaction machines (similar to an Automated teller machine), or via a videoconference enabled bank branch. Video banking can be conducted in a traditional banking branch. This form of video banking replaces or partially displaces the traditional banking tellers to a location outside of the main banking branch area. Via the video and audio link, the tellers are able to service the banking customer. The customer in the branch uses a purpose built machine to process viable medias such as cheques, cash, or coins. Video banking can also provide professional banking services to bank customers during nontraditional banking hours at convenient times such as in after hours banking branch vestibules that could be open up to 24 hours a day. This gives bank customers the benefit of personal teller service during hours when bank branches are not typically open. VIDEO BANKING SERVICES: Depending on the type of video banking solution deployed there are numerous types of services that can be offered. In conjunction with transaction hardware video banking can include all of the following types of services

Customer authentication Cash Deposits Check Deposits Cash Withdrawal Coin Withdrawals Check Print Account Transfers Bill Payments
15 | P a g e

Account inquiries Process New Accounts

With all types of video banking the following services are enabled:

Process New Loans Consult with banking professionals Process New Accounts Inquire about banking services

PRODUCTS & SERVICES

ELECTRONIC FUNDS TRANSFER: Electronic funds transfer or EFT is the electronic exchange or transfer of money from one account to another, either within a single financial institution or across multiple institutions, through computer-based systems. The term covers a number of different concepts:

Cardholder-initiated transactions, where a cardholder makes use of a payment card Direct deposit payroll payments for a business to its employees, possibly via a payroll service bureau

Direct debit payments, sometimes called electronic checks, for which a business debits the consumer's bank accounts for payment for goods or services

Electronic bill payment in online banking, which may be delivered by EFT or paper check Wire transfer via an international banking network (carries a higher fee in North America) Electronic Benefit Transfer

DIRECT DEPOSIT: Direct deposit is simply the process of your employer's bank communicating directly with your bank, so your paycheck gets deposited automatically instead of being passed around at your company until--hopefully--it finally reaches you. No more long

16 | P a g e

lines, wasted lunch hours, or trying to write up a deposit slip against the steering wheel at a drive-through ATM. Here's how the process works:

You authorize the transfer of funds directly into your bank account(s) by providing your employer with a voided blank check or deposit slip for your bank account.

Typically, you may specify how much of your paycheck you want into each of your accounts.

The appropriate wages--minus taxes, deductions, 401(k) salary deferrals, etc.--are automatically deposited into your bank account(s) each pay period.

On payday, you'll receive a voucher that confirms the amount deposited into your account.

DIRECT DEBIT: A direct debit or direct withdrawal is an instruction that a bank account holder gives to his or her bank to collect an amount directly from another account. It is similar to a direct deposit but initiated by the beneficiary. It is also called pre-authorized debit (PAD) or pre-authorized payment (PAP). It is typical to use these pulled collections to make recurring payments for credit card or utility bills. Unlike standing orders, which require the amounts to be fixed, direct debits can be used for varying amounts, and are more similar to direct deposits, which are initiated by the payer. With direct debits, the payee can simply indicate a different amount each time. However, in countries where setting up authorization for direct debit is easy enough, it can also be used for one-time payments in the mail order business or even at a point of sale. ELECTRONIC BILL PRESENTMENT AND PAYMENT (EBPP): It is a fairly new technique that allows consumers to view and pay bills electronically. There are a significant number of bills that consumers pay on a regular basis, which include: power bills, water, oil, internet, phone service, mortgages, car payments etc. EBPP systems send bills from service

17 | P a g e

providers to individual consumers via the internet. The systems also enable payments to be made by consumers, given that the amount appearing on the e-bill is correct. The biggest difference between EBPP systems and the traditional method of bill payment, is that of technology. Rather than receiving a bill through the mail, writing out and sending a cheque, consumers receive their bills in an email, or are prompted to visit a website to view and pay their bills.

REMOTE DEPOSIT: Remote deposit refers to the ability to deposit a check into a bank account from a remote location, such as an office or home, without having to physically deliver the check to the bank. This is typically accomplished by scanning a digital image of a check into a computer, then transmitting that image to the bank, a practice that became legal in the United States in 2004 when the Check Clearing for the 21st Century Act (or Check 21 Act) took effect. This service is typically used by businesses, though a remote deposit application for consumers has been developed and has begun to be implemented by a handful of banks. It should not be confused with Direct deposit and Online deposit.

SMS BANKING: SMS banking is a technology-enabled service offering from banks to its customers, permitting them to operate selected banking services over their mobilephones using SMS messaging. SMS banking services are operated using both push and pull messages. Push messages are those that the bank chooses to send out to a customer's mobile phone, without the customer initiating a request for the information. Typically push messages could be either Mobile marketing messages or messages alerting an event which happens in the customer's bank account, such as a large withdrawal of funds from the ATM or a large payment using the customer's credit card, etc. Pull messages are those that are initiated by the customer, using a mobile phone, for obtaining information or performing a transaction in the bank account. Examples of pull messages for information include an account balance enquiry, or requests for current information like currency exchange rates and deposit interest rates, as published and updated by the bank.
18 | P a g e

SMART CARDS: A Smartcard is similar to a credit card; however it contains an embedded 8bit microprocessor and uses electronic cash which transfers from the consumers card to the sellers device. A popular smartcard initiative is the VISA Smartcard. Using the VISA Smartcard you can transfer electronic cash to your card from your bank account, and you can then use your card at various retailers and on the internet. The above are few of the technologies adopted and integrated by the banks in their daily operations.

THE INDIAN SCENARIO

RBIs EARLY INITIATIVES As a central bank in a developing country, the Reserve Bank of India (RBI) has adopted development of the banking and financial market as one of its prime objectives. "Institutional development" was the hallmark of this approach from 1950s to 1970s. In the 1980s, the Reserve Bank focused on "improvements in the productivity" of the banking sector. Being convinced that technology is the key for improving in productivity, the Reserve Bank took several initiatives to popularize the usage of technology by banks in India. Periodically, almost once in five years since the early 1980s, the Reserve Bank appointed committees and working Groups to deliberate on and recommend the appropriate use of technology by banks give the circumstances and the need. These committees were: Rangarajan committee I in early 1980s Rangarajan committee II in late 1980s Saraf working committee in early 1990s Vasudevan working group in late 1990s Barman working group in early 2000s

Based on the recommendations of these committees and working groups, the Reserve Bank issued suitable guidelines for the banks. In the 1980s, usage of technology for the back office
19 | P a g e

operations of the banks predominated the scene. It was in the form of accounting of transactions and collection of MIS. In the inter-bank payment systems, it was in the form of clearing and settlement using MICR technology. Two momentous decisions of the Reserve Bank in the 1990s changed the scenario for ever there are: a) The prescription of compulsory usage of technology in full measure by the new private sector banks as a precondition of the license and b) The establishment of an exclusive banking research technology institute for development of technology in banking As the new private sector banks came on the scene as technology-savvy banks and offered several innovative products at the front office for the customers based on technology, the demonstration effect caught on the reset of the banks. Multi channel offerings like machine based (ATMs and pc-Banking), card based (credit/Debit/Smart cards), Communication based (Tele-Banking and Internet Banking) ushered in Anytime and Anywhere Banking by the banks in India. The IDRBT has been instrumental in establishing a safe and secure, state of the art communication backbone in the from of the Indian Financial NETwork (INFINET) as a closed user group exclusively for the banking and financial sector in India. CHANGING FACE OF BANKING SERVICES Liberalization brought several changes to Indian service industry. Probably Indian banking industry learnt a tremendous lesson. Pre-liberalization, all we did at a bank was deposit and withdraw money. Service standards were pathetic, but all we could do was grin and bear it. Postliberalization, the tables have turned. It's a consumer oriented market there. Technology is revolutionizing every field of human endeavor and activity. One of them is introduction of information technology into capital market. The internet banking is changing the banking industry and is having the major effects on banking relationship. Web is more important for retail financial services than for many other industries. Retail banking in India is maturing with time, several products, which further could be customized. Most happening sector is housing loan, which is witnessing a cut-throat competition.
20 | P a g e

The home loans are very popular as they help you to realize your most cherished dream. Interest rates are coming down and market has seen some innovative products as well. Other retail banking products are personal loan, education loan and vehicles loan. Almost every bank and financial institution is offering these products, but it is essential to understand the different aspects of these loan products, which are not mentioned in their colored advertisements. PLASTIC MONEY Plastic money was a delicious gift to Indian market. Giving respite from carrying too much cash. Now several new features added to plastic money to make it more attractive. It works on formula purchase now repay later. There are different facts of plastic money credit card is synonyms of all. Credit card is a financial instrument, which can be used more than once to borrow money or buy products and services on credit. Banks, retail stores and other businesses generally issue these. On the basis of their credit limit, they are of different kinds like classic, gold or silver. Charged cards - these too carry almost same features as credit cards. The fundamental difference is you can not defer payments charged generally have higher credit limits or some times no credit limits. Debit cards - this card is may be characterized as accountholder's mobile ATM, for this you have to have account with any bank offering credit card. Over the years, the banking sector in India has seen a no. of changes. Most of the banks have begun to take an innovative approach towards banking with the objective of creating more value for customers and consequently, the banks. Some of the significant changes in the banking sector are discussed below. MOBILE BANKING Taking advantages of the booming market for mobile phones and cellular services, several banks have introduced mobile banking which allows customers to perform banking transactions using their mobile phones. For instances HDFC has introduced SMS services. Mobile banking has

21 | P a g e

been especially targeted at people who travel frequently and to keep track of their banking transaction. RURAL BANKING One of the innovative scheme to be launched in rural banking was the KISAN CREDIT CARD (KCC) SCHMME started in fiscal 1998-1999 by NABARD. KCC mode it easier for framers to purchase important agricultural inputs. In addition to regular agricultural loans, banks to offer several other products geared to the needs of the rural people. Private sector Banks also realized the potential in rural market. In the early 2000's ICICI bank began setting up internet kiosks in rural Tamil Nadu along with ATM machines. NRI SERVICES With a substantial number of Indians having relatives abroad, banks have begun to offer service that allows expatriate Indians to send money more conveniently to relatives India which is one of the major improvements in money transfer. E-BANKING E-Banking is becoming increasingly popular among retail banking customers. E-Banking helps in cutting costs by providing cheaper and faster ways of delivering products to customers. It also helps the customer to choose the time, place and method by which he wants to use the services and gives effect to multichannel delivery of service by the bank. This E-Banking is driven by twin engine of "customer-pull and Bank-push". Information and communication technology is the major advent in the field of technology which is used for access, process, storage and dissemination of information electronically. Banking industry is fast growing with the use of technology in the form of ATMs, on-line banking, Telephone banking, Mobile banking etc., plastic card is one of the banking products that cater to the needs of retail segment has seen its number grow in geometric progression in recent years. This growth has been strongly supported by the development of in the field of technology, without which this could not have been possible of course it will change our lifestyle in coming years.

22 | P a g e

Convergence of Telecom and Banking Industry

NEED: 1. M-commerce would enable microfinance institutions (MFIs) to offer more competitive loan rates to their users, as there is a reduced cost of dealing in cash 2. The interactivity to perform transactions on the spot saves the customer a lot of time and ease to perform transactions 3. Bankingmobile communications product is a way for wireless telecoms to move beyond commodity voice services and differentiate their products to improve customer retention in a business with a notoriously high churn rate.

OFFERINGS: 1. 2. I mode in Japan by NTT docomo Idea Cellular Signs Up As Banking Correspondent For Axis Bank - Idea and Axis bank will run a pilot project to enable mobile remittance between Mumbais Dharavi one of the largest slums in the world and Allahabad in Uttar Pradesh. Customers will be able to transfer money 3. Union Bank of India is planning to launch Union Bank Money, a mobile payments service, in partnership with Nokia and (Nokia funded) Obopay. The service allows customers to store money, transfer money and make payments: it is, by the looks of it, a wallet service. Nokia plans to preinstall the application in Nokia mobile devices. The rollout is expected to be complete in 12-18 months 4. Obopay has launched bill payments services for government owned telecom operator BSNL, in the West Zone, including in Gujarat, Maharashtra, Madhya Pradesh, Chhatisgarh. 5. 6. Nokia has also partnered with Yes Bank to launch similar service for mobile payments Competitor Paymate has partnered with Essars retail chain MobileStore to offer mobile payment services across its 1,300 stores in over 200 cities 7. Movilpago, a joint-venture subsidiary of Telefonica Moviles, the cellular unit of Spanish telecom Telefonica SA, and Spains largest bank, Banco Bilbao Vizcaya Argentaria SA (BBVA), will provide a wireless payment system over Telefonicas cellular network.
23 | P a g e

8.

Mannesmann, the German subsidiary of the U.K.s Vodafone Group PLC, has a joint venture with Deutsche Bank. Telecom Italia has one with Banco di Roma.

TRENDS: 1. MChek has clocked more than a million users with Airtel since its commercial launch in June 2008. 2. M-Pesa by Safaricom in Kenya was first introduced in March 2007. By mid-quarter of 2010, the application had over 2.3 million registered users with over 18 Billion (about $230 million) Kenyan Shilling (Ksh) moved through the system, via person-to-person transfers. The service has now been transitioned to be operationally run by IBM Global Services on behalf of Vodafone; the initial three markets (Kenya, Tanzania and Afghanistan) are hosted MTN and Western Union have formed an alliance that is bound to ignite the biggest international mobile remittance services or mobile money transfer, if you like, on the continent by Rackspace. 3. With new forecasts from ABI Research indicating that in 2015 about 244 million people worldwide will carry out financial transactions using their mobile phones

CHALLENGES: 1. Regulation, not keeping up pace with technology.

2. No clear-cut approach to addressing the challenge and there is still no defined predictability as to what level of changes could occur with adoption of MobileMoney in a big mobile market 3. Telecoms need certain capabilities in order to provide wireless finance services. Those they do not already possess, they can acquire relatively cheaply by allying themselves with banks. 4. 5. Security issues concerning wireless transfer of money using third party applications. Privacy of customer and account information to be securely transferred.

24 | P a g e

RECOMMENDATIONS: 1. Regulators must encourage such alliances to sustain the relevance of the different segment players otherwise nothing stops a mega Telco from becoming a mega-multi services provider offering all services in one converged pipe 2. 3. 4. No-KYC Prepaid Instruments should not be encouraged by the operators. Transparency to the customer and all the other parties involved. Interoperability: by making all mobile payment offerings inter-operable it would allow pre- paid instrument issuers to connect networks and reduce the cost of establishing a businesscorrespondent/retail network.

Emerging areas of Technology in Banking and necessary innovations required to expand the frontiers of banking.
The "beep" of the automated teller machine may soon follow. Even the silent swipe of a card with a magnetic strip is destined to disappear. In their place, youll wave a plastic card or a key chain fob over a receiver to complete a "contactless" purchase. Youll deposit checks and cash without using an envelope and walk away with a more detailed receipt and nearly immediate access to those funds. New technologies are being rolled out on a grand scale by banks to introduce their customers to the latest, coolest payment methods, hoping to build brand loyalty and save users time while waiting in line. Contactless Credit Cards In addition to the magnetic strip on the back of your credit card, there soon may be an embedded radio chip that will change the way you pay at the point of sale. Instead of swiping, youll wave your card over a receiver to complete a purchase. Or at least thats what many banks, credit card issuers and merchants hope. Big banks like Bank of America, Chase, Citibank, and Wells Fargo are running pilot programs in major metropolitan areas like New York, Washington, Atlanta and
25 | P a g e

San Francisco. Even though contactless cards are still officially in testing phase, users already number in the millions. Users can wave these cards around today at more than 30,000 shopping establishments, from local cafes to national chains like McDonalds and Arbys. Some contactless systems are connected to credit cards, adding purchases to account balances. Others work like gift cards, with specific amounts loaded into each card or key fob. Some are reloadable, carrying a value that can be replenished as it is used up. No-envelope ATMs Banks are also introducing advanced ATMs with no-envelope deposits. The benefits: Your receipt shows a copy of your deposited check and the numbers and denominations of deposited cash bills. Plus, you get faster access to deposited funds. The new ATM technology is expanding rapidly because of the new Federal regulation popularly known as Check 21, which allows the image of a check to be as legally valid as the check itself. Now when consumers deposit a check, the check image can be electronically transferred to the issuing bank, which will clear the funds in much faster time. With the new technology, you dont need to key in an amount. Just insert your money into a slot and the machine sorts, counts and verifies it. The scanned check images and your total deposit amount appear on the ATM screen. You must confirm whether the amount is correct. If not, you can cancel your transaction, and the machine quickly spits out your cash. If you experience a mechanical failure or another problem while making a deposit, the ATM logs a record of your information as well as the machine malfunction. Radio frequency identification (RFID) technology For most people, visiting their High Street bank is at worst, a frustrating and occasionally exasperating experience and the service often leaves something to be desired. But how much more rewarding would it be if you were personally greeted on arrival, rarely had to queue and the cashier immediately grasped what you needed and how to help you? This might seem fanciful. However, new technology currently being trialed by a handful of banks around the world is designed to change all that.

26 | P a g e

At the heart of this potential revolution is the use of radio frequency identification (RFID) technology. These are tiny chips holding a unique ID number which emit radio waves and can be tracked and scanned. These "radio barcodes" are well established in the US, with retailers putting them on packaging and products to monitor stock levels. But the technology is being rapidly developing, being adopted by credit card companies and even some mobile phone providers.

Simply put, RFID chips embedded into credit cards or special loyalty cards would enable banks to identify customers the moment they walk through the door. From that point on, what customers do in-store will automatically transmit information to staff. For instance, when a customer picks up a brochure about car insurance, relevant information would flash up on a plasma screen and alert staff to a customer's interest in the product. By collecting information at an early stage - combined with new systems speeding up data processing - cashiers would be better informed, able to offer a more productive, quicker service.

Other technologies are on the horizon which could potentially reduce customers' headaches. Biometric tools such as fingerprint recognition could soon be used to verify IDs, while some firms are already using specialist cameras to track customer behavior in their branches and monitor how long queues are. Digital pens, which are designed to remove the need for staff to key in all customer information themselves, could make many administrative errors a thing of the past.

CONCLUSION The epicenter for a transformation of consumer banking has been the convergence of banking and telecommunications players, as well as Internet service providers and Web portals. The conventional intra-industry consolidation that has preoccupied the telecom and banking sectors for the past few years has run its course, and as it does so, atypical communications and financial services partnerships, aimed at creating new forms of competition, has accelerated.

27 | P a g e