E-BANKING

ACW-401
SUBMITTED BY:ADITI MANGAL HARSHA SRIVASTAVA NAKUL AGARWAL

ELECTRONIC BANKING

delivery of banks services to a customer at his office or home by using electronic technology.

Technology Commencement in Banking

In

70s, banks started to establish centralized data processing centers. Essentially the roles of these data processing centers are:
collect the handwritten documents from branches compile the documents manual data entry by the operators generate reports for the bank staff and the central bank

Product Based Banking

In the mid-1980s, banks accepted product based banking and competed with their products. Banks developed new products for their customers.

Credit card Credit deposit account (Super Account) Debit cards

Beside branch, banks brought new channels to give better service to their customers.
ATM POS

Delivery Platforms for Electronic Banking

Type of Service Description

PC banking

Uses special software distributed by the bank, which is installed in the users PC. Customers access banks via modem linked directly to the bank. Customers access their bank account via Internet The bank makes use of an online service provided by another party such as AOL Use of satellite or cable to deliver account information to TV screens of customers Customers can access their bank via regular phones or mobile phones using SMS or WAP services ATMs provide cash accessibility and account information and in some cases enable to transfer funds Electronic funds transfer at point of sale (EFTPOS) is essentially a payment system for purchases through debit cards within the store itself. Microchip based cards can be used between individuals to exchange electronic cash or can interface with ATMs, telephones and retailers. Uses computer and electronic technology as a substitute for checks and other paper transactions. Transmit financial information and payments in electronic form. Paperless mode of effecting payment for handling bulk and repetitive payment transactions. A large network of ATMs, Cash Dispensers belonging to different banks to provide anytime and anywhere banking service.

Internet banking Managed network TV based banking Telephone banking ATM EFTPOS

Smart cards Electronic Funds Transfer (EFT) Electronic Data Interchange (EDI) Electronic Clearing System (ECS) Shared Payment Network System (SPNS)

Different Delivery Channels in E-Banking

ATM and POS Application Architecture

Debit Card Authorization

Switch System

Credit Card Authorization

7x24 banking through the phone Main components Switch IVR CTI(Computer Telephony Integration)

Telephone Banking

Manage each call using the computer Pop up the user information while transferring the call

Agent Desktop Application

Win32,ActiveX, HTML

Host Application

Internet Banking

More and more banks are coming to realize that internet is a part of banks' alternative delivery channel strategies activities concentrated in the business-to-consumer segment, focused on retaining clients In Internet banking, security is a primary concern. Security concerns have been addressed from every angle within the architecture of the Internet banking application.

Sample Internet Banking Architecture

SMS Banking
Basic banking inquiry transactions(balance inquiry, funds, exchange rate inquiry) are performed by the cooperation of bank and the GSM operator Security is the main problem

GSM Operator Application Server

Leased line Bank SMS Gateway

GSM Network

GSM Operator SMS DB

WAP Banking

Wireless application protocol (WAP) is an application environment and set of communication protocols for wireless devices designed to enable manufacturer-, vendor-, and technology-independent access to the Internet and advanced telephony services. WAP is a global standard and is not controlled by any single company Various banking transactions offered in WAP environment by banks. Similar architecture with SMS banking

SIM Toolkit

SIM card enables to keep and load different applications. SIM Application Toolkit has been agreed as a GSM standard SIM Application Toolkit is independent of phone manufacturers and designs. SIM Application Toolkit allows the flexibility to update the SIM to alter the services and download new services over the air SIM Application Toolkit is designed as a client-server application. On the server side, SimCard platform and the client side, phone that supports the SIM Application Toolkit In the near future, banks will start to offer banking transactions in this platform.

ATM
In the mid-1980s, that cash dispensers truly became a worldwide phenomenon. It took 16 years for the first 100,000 cash dispensers to be installed, but only four years more for the next 100,000. Now,ATM became the electronic face of banking for most customers. Beside cash withdrawal, there exist various transaction options from transfer to fund buying/selling.

IVR

Interactive Voice Response (IVR) is a software application that accepts a combination of voice telephone input and touch-tone keypad selection and provides appropriate responses in the form of voice

IVR has come into our life at the beginnings of 90s. First step in Telephone Banking Peak transaction volume in salary payment days for balance inquiry Integrated with ATM system

Smart Cards

About the size of a credit card, a smart card is a plastic card with an embedded microchip that can be loaded with data, used for telephone calling, electronic cash payments, and other applications, and then periodically "recharged" for additional use. smart card contains more information than a magnetic stripe card and it can be programmed for different applications. Some cards can contain programming and data to support multiple applications and some can be updated to add new applications after they are issued

Benefit of smart cards:

enhanced security off line transaction

programmable card

Banking Transaction Cost Comparison

Type of E-Banking
Normal Branch Banking Telephone Banking ATMs PC Banking Internet Banking

Average Cost
$ 1.07 $ 0.54 $ 0.27 $ 0.02 $ 0.01

The Benefits of Electronic banking

Customer Benefits
Convenience Tailored products and services Ease of access to product information Ease of shopping around for best price Ease of changing supplier Low cost.

Supplier Benefits
Lower cost per transaction Increased customer knowledge Ability to tailor products and services Ability to access a large market Increased customer relationships Reduced errors, time, and overhead costs

Financial planning capability

Automated Teller Machines

Bank
March 2008 510

March 2009
1000

March 2010 1675

ICICI Bank

UTI Bank
DBI Bank

303
207 77 101 1198

480
410 225 200 2315

1150
900 225
200

IHDFC Bank GTB Total

4150

Internet Banking
Number of Banks
Number of Banks With Websites Number of Banks With Transactional Sites 15 (50.0) 9 (100.0) 6 (28.6) 13(48.1) 20(55.6) 48 (51.6)

Private Sector Banks New Old Public Sector Banks Foreign Banks All Banks

30 9 21 27 36 93

28 9 19 27 35 90

Shared Payment Network System (SPNS) or SWADHAN

Under the initiative of Indian Bank Association (IBA) in Mumbai, a pilot project to link up 165 ATMs of 31 member banks has come up in the form of SWADHAN a shared payment network system which has a card base of 1, 00,000 with 30,000 transactions per month. The objective is to provide anytime and anywhere electronic banking services to the customers in the city of Mumbai, Vashi and Thane.

Volume of Credit Cards in India

Year
2005 Credit Cards (in Millions) 4.2 Credit Card Amount (Rs. in Crores) 6500

2006
2007 2007

4.9
5.3 6.4

8500
10500 14175

2008
2009 2010

8.3
10.3 13.0

19136
25833 34874

Factors Affecting the Adoption of E-Banking in India

Ease

of use Level of Security The cost of adopting the technology Preference for personalized services Reluctance to adopt new technology Opposition from Staff Unions Developments in Law Haste of banks to adopt new technology

Banking Application Architecture

Relationship Management
CIF ATM Product Factory Portfolio Management I N F O POS Deposit (TD,DD) Loans&Credits FBS Securities Promissory Notes FX Import / Export

Delivery Services

Teletel

NBS

EFT

Cheques

Merchant

Telerom

Sales Support System

CMS

Treasury

Payments

YKB HR

Teller (Branch)

Corporate Tables DAL

Internet Banking

GL / Accounting Settlement Reporting

Phone Banking

Batch Operations

Internet Shopping PCM Campaign Management Credit Risk Management Productivity

Management & Control

Information Delivery

C E N T E R

Concerns about Electronic Banking

Government Businesses

Banks

- Legal Risk - Operational Risk - Outsourcing Risk - Reputational Risk Individuals Technology - Security - Anonymity (Privacy) - Authentication

Banking Risks
Same inherent risk and issues as Internet Banking, primary risks affected Strategic Transaction Reputation Compliance

Strategic Risk
Determining

wireless banking role in delivering products and services Defining risk versus reward goals and objectives
Is the reward added revenue, saving lost revenues, and/or increased efficiency? Are capital expenditures (at purchase and retirement), maintenance and operating costs less than the reward (i.e., income)?

 Implementing

emerging e-banking

strategies
First Mover (bleeding edge) vs. wait and see (permanently lose market share) Ease of implementing outsourced solution to keep up with the competition Financial stability of vendors Uncertain customer acceptance
Using

standards not designed for secure banking environment needs Rapidly changing technology standards Expertise

Transaction Risk
Security Issues Wireless transmission encryption
Standards retro-fitted once security became an issue Designed to protect transmitted data from unauthorized access/use Early standards 802.11 and Wireless Access Protocols (i.e., WAP) have known vulnerabilities Potential need to upgrade equipment as standards change

 Access

codes stored on device may allow account access if device lost or accessed User names and passwords may be entered in clear view on the screen Customer acceptance of alphanumeric PINs
Mobile phones require pressing a number key multiple times for certain letters, which may be challenging even if display is not asterisked out (i,.e., ****)

Security Lessons Reinforced

Unproven

standards can have security weaknesses

Risk of external attacks increases as services expand to allow greater access to systems Companies need to maintain knowledge of attack techniques, known and newly identified

End-to-end

security is key

Do not rely on wireless transport layer security for banking application security
Need

effective change management processes Encourage customers to use good

Transaction and Reputation Risk

Outsourcing Access to expertise
Knowledge of wireless communication standards and encryption methods Developing and converting existing products and services for wireless transmission and use Effect of device characteristics
Smaller screens

REPUTATION RISK
Reliability

of delivery network Customer acceptance of no-service due to telecommunications issues when they are in areas they expect service - Consumer Expectations Processing and handling of interrupted transactions Integration of wireless applications with existing products and services

Compliance Issues
Disclosures

Wireless

banking devices are easier to lose and may increase potential of unauthorized usage Types of services offered affects level of risk (e.g., P2P payments increase risk) Privacy concerns from location based services

The Role of Banks in the New Economy

Internet

and mobile devices have brought new rules to economy and shaped the way to do business Banks has also evolved according to the new economy and took their places in this new world to add value to their customer The new ways to do business are :
e-commerce (B2C) m-commerce

M-commerce

Mobile commerce applications involve using a mobile phone to carry out financial transactions- this usually means making a payment for goods or transferring funds electronically. As content delivery over wireless devices becomes faster, more secure, and scalable, there is wide speculation that m-commerce will surpass wireline e-commerce as the method of choice for digital commerce transactions

B2B

A housands of companies that sell products to other companies have discovered that the Web provides not only a 24-hour-a-day showcase for their products but a quick way to reach the right people in a company for more information.

In the B2B, the bank role is to provide a reliable payment infrastructure that add value to corporate business This infrastructure should cover:

Bill presentment Bill payment Different payment types(credit card, deposit account, loan)

B2B, B2C and C2C e-Commerce

Business
e-Business
Consumer

Business B2B

e-Trade
B2C e-Banking
Clearing Bank A
BankServ

e-Business Consumer

Bank B

Settlement

E-Banking CSFs
e-Business e-Business

e-Banking
Clearing

Bank A
BankServ

Bank B
Settlement

B2B CSFs
e-Business e-Business

e-Banking
e-Business:
Internal processes Infrastructure Clearing Cost effectiveness Market segmentation Change Management

Bank A

Bank B

Settlement

B2C CSFs
Consumer

e-Trade
e-Business

e-Business

e-Individual: e-Banking
Tradition Trust Sophistication Clearing Socio economic impact Cost effectiveness Access to technology Convenience Settlement

Bank A

Bank B

E-Trade CSFs
e-Business

e-Trade

e-Business

e-Banking e-Trade:
e-Communities Infrastructure Clearing Cost effectiveness Market segmentation Legacy Convenience Change Management

Bank A

Bank B

E-Security
To improve the e-business, all the users should feel secure to perform the transaction this environment The main concepts in e-security are:

PKI (public key infrastructure) enables users of a basically unsecure public network such as the Internet to securely and privately exchange data and money through the use of a public and a private cryptographic key pair that is obtained and shared through a trusted authority. Public key is a value provided by some designated authority as a key that, combined with a private key derived from the public key, can be used to effectively encryption messages and digital signature. Private or secret key is an encryption/decryption key known only to the party or parties that exchange secret messages. Public key is used together with a private key

Digital certificate is an electronic "credit card" that establishes your credentials when doing business or other transactions on the Web. It is issued by a certification authority (CA). CA (certificate authority) is an authority in a network that issues and manages security credentials and public key for message encryption. As part of a public key infrastructure, a CA checks with a registration authority to verify information provided by the requestor of a digital certificate An RA (registration authority) is an authority in a network that verifies user requests for a digital

Conclusion
E-Banking

Enable Better Business Anywhere,

Anytime. E-Banking represent a tremendous opportunity in India. However, Factors such as illiteracy in India, availability of cheaper labor force, reluctance to change by the existing staff of banks and slow growth of technology in India are responsible for slow growth of e-banking in India. Development and acceptance of standards by financial institutions will clearly have a positive impact on the level of security achieved by banks and bank customers.

THANK YOU