1. E-Banking
Sanjeev Kumar Chaswal
LL.M (IPR,ARB&ADR)
M.S (Cyber Law and Cyber Security)
2. Definitions
* e-banking can be defined as:
…the automated delivery of new and traditional banking
products and services directly to customers through
electronic, interactive communication channels.
A system of banking in which customers can view their
account details, pay bills, and transfer money by means
of the internet.
The remote delivery of new and traditional banking
products and services through electronic delivery
channels.
3. What is E-banking or Net banking
E-
E-Banking is the use of electronic channels to
communicate and transact business with both domestic
and international customers through internet.
Internet banking (or E-banking) means any user with a
personal computer and a browser can get connected to his
bank -s website to perform any of the virtual banking
functions.
E banking is providing the same banking services such as
payment, inquiry, information processing but with internet.
It can be offered in two ways.
First an existing bank with physical offices can also
establish an online website and offer e banking services.
Secondly, e-banks can only exist only on Internet, thus
allowing users to work with”Virtual Bank”. 3
4. E-banking vis-A-vis Traditional banking
Speed
Accessibility
Electronic documentation
Time saving
Satisfaction to the customer
Complimentary to traditional banking
Geographical boundaries surpassed
Scince rather than art
5. Technology Commencement in Banking
In 70’s, 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
execute some banking transactions
6. E Banking in India
Opening up of economy in 1991 marked the entry of
foreign banks. They brought new technology with them.
Banking products became more and more competitive.
Need
for differentiation of products and services was felt.
The ICICI Bank kicked off online banking in 1996.
Currently
78% of its customer base is registered for online banking.
1996 to 1998 marked the adoption phase, while usage
increased only in 1999, owing to lower ISP online
charges, increased PC penetration and a tech-friendly
atmosphere.
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7. Guidelines for E banking
The Internet Banking policy has been approved by the
Bank‘s Board.
The policy fits into the bank's overall Information
Technology and Information Security policy and
ensures confidentiality of records and security
systems.
The policy takes into account operational risk.
The policy clearly lays down the procedure to be
followed in respect of "Know Your Customer"
requirements, and
The policy broadly meets the parameters laid down in
the earlier circular.
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8. Banks Branch Automations
India’s banks have started automation of their bank
branches in 90’s, by started putting heavy
technology investments for the branches.
The first step is offline branches.
Terminals connected to local branch computers.
Second step is online branches connected centrally.
Most of the transactions started to be performed in
the central mainframe.
9. Why E banking?
Differentiation of products from the others.
A combination of regulatory and competitive
reasons.
Stress on branchless banking.
Increasing volumes of banking transactions.
Providing customers with cost effective services
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10. Product Based Banking
In the late-1990s, 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 (Point of sale)
IVR
11. NEED FOR E-BANKING
E-
It is a flexible service provided by banks where
customer can work according to their needs.
It removes the geographical barrier, thus customer can
access from anywhere and at anytime. It provides 24
hour-7 days services.
It increases bank efficiency and competitiveness and
lower the operating cost.
It provides higher transaction speed.
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12. Role of RBI in E Banking
Electronic Clearing Service (ECS)
Electronic Funds Transfer (EFT)
Real Time Gross Settlement (RTGS)
National Electronic Fund Transfer (NEFT)s
Cheque Truncation System (CTS)
13. E Banking Delivery – It can help in
Increasing customer satisfaction and
retention
Shifting of costs
Increasing the brand value
Providing real time access (i.e. convenience)
Delivering Services and products to
customers through supporting technology
14. General Types of e-banking(RBI)
Fully electronic
transactional
system
Electronic
Information information
only system transfer
system
15. The Website related to E-banking can be of two types:
Information Website:
It gives general information about the financial institute
and its products or services to the customer.
Transactional Website:
Simple Transactional Website: It allows customer to
submit their instructions, applications for different
services, queries on their account balances etc but do
not permit any fund based transactions on their
accounts.
Fully Transactional Website:
It allows the customers to operate on their accounts for
transfer of funds, payment of different bills, subscribing
to other products of the banks and to transact purchase
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and sales security.
16. E-BANKING SUPPORT SERVICES
Web linking
Account Aggregation
Electronic Authentication
Website Hosting
Payments for e-commerce
Wireless banking activities 16
17. Types E Banking
PC Banking
Internet Banking
SMS Banking
Virtual banking
Digital TV Banking
Automated teller machine
Tele banking
Plastic cards
E-cheque
23. E BANK SERVICES
Bill payment service
Credit card customers
Railway pass
Recharging your prepaid phone
Shopping at your fingertips
24. E Banking products and services
Offered in a two tier structure
A basic tier of Internet banking products includes
customer account inquiry, funds transfer and electronic
bill payment.
A second or premium tier includes basic services plus
one or more additional services like brokerage, cash
management, credit applications, credit and debit cards,
customer correspondence, demat holdings, financial
advice, foreign exchange trading, insurance, online
trading, opening accounts, requests and intimations, tax
services, e-shopping, standing instructions,
investments, asset management services etc.
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26. BENEFITS OF E-BANKING
E-
Any time banking
Any where banking
Cash free banking
Reduction in Cost of transaction
Easy to make utility payments
On-line purchases
Competitive advantage
Unlimited network
Lesser work load
Lesser chances of fraud & misappropriation
Better profitability
Better customer relationship
27. Advantages to banks
Very low setup cost.
Capability to cater to a very large customer
base.
Saves a lot of operational costs. Adds to the
baseline.
Banks san offer a lot of personalized
services to their customers.
Reduction of burden on branch banking.
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28. E Banking Drawbacks
Difficult in the adoption of technology
Fear of technology
High cost of technology
Lack of preparedness
Restrictions on usage of technology
29. Advantages Disadvantages
Check account balances and track Need an account with an Internet
recent account activity Service Provider (ISP)
Transfer money between accounts Security concerns, like ‘hackers’
accessing your bank accounts
Authorize electronic bill payments Original setup for bill paying time is
time-consuming but will ultimately
be a time-saver
Issue stop payment requests Switching banks can be more
cumbersome online than in person
Apply for auto, mortgage, home Must have basic computer skills
equity, student, or personal loans and Internet knowledge
Receive investment product and Must be comfortable using a
service information computer
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31. Transactional/Operational Risks
It arises because of inaccurate processing of transactions, non-
enforceability of contracts, compromises in data accuracy, data
privacy and confidentiality or unauthorized access to banks system
and transaction etc. It arises during day to day activity of banking
transaction.
Credit Risk
It is the risk that counter party will not settle an obligation i.e. pay
their debt for full value, either when due or any time thereafter.
Liquidity/Interest Rate Risk
It arises out of a banks inability to meet the required obligation
when they become due without incurring unacceptable losses,
even though the bank may ultimately be able to meet its
obligations.
Reputation Risk
It is the risk of getting significant negative public opinion, which
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may result in a critical loss of lending or customer.
32. Compliance/ Legal Risk
It arises from violation of or non conformation with
laws, rules, regulations or prescribed practices or
when the legal rights and obligations of parties to a
transaction are not well established.
Strategic Risk
It is the risk associated with the financial
institution’s future business plans and strategies
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33. SAFE GUARDS FOR E BANKING
Ensuring security while banking online, is to keep your password
and pin number a secret.
The security of your personal computer is very important for safe
internet banking. Therefore, always install antivirus software and
software to remove spyware.
Checking your bank statements regularly will help you detect any
transaction that has taken place without your knowledge or
consent.
While banking through the internet, make sure that the banking
session is secure.
In addition, always remember to completely log off, after
completing the banking session.
Nowadays, the banking institutions have come up with a number
of safety measures for ensuring secure internet banking.
34. CHALLENGES IN E BANKING
E-banking is a generic term for delivery of banking
services and products
E-banking has improved efficiency and
convenience
The government of India enacted the IT act, 2000
It issued guidelines on risks and control in
computer and telecommunication system
35. Security Features E Banking Include:
Security token devices. Protection through single
password authentication, as its the case in most secure
internet shopping sites, it is not considered secure
enough for personal online banking applications in some
countries. Specifically, here are two different methods for
internet banking:
The PIN / TAN system where the PIN represents a
password, used for the login and TANs representing one-
time passwords to authenticate transactions.
These token generated TANs depend on the time and a
unique secret, stored in the security token. Usually,
internet banking with PIN/TAN is done via a web browser
using SSL secured connections, so that there is no
additional encryption needed 35
36. Signature based internet banking where all
transactions are signed and encrypted digitally. The
Keys for the signature generation and encryption
can be stored on smartcards or any memory
medium, depending on the concrete implementation
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37. Attacks.
Most of attacks in internet banking are based on deceiving
the user to steal login data and valid TANs.
Two well known examples for those attacks are phishing
and pharming.
Cross-site scripting and keylogger/ trojan horses can also
be used to steal login information. A method to attack
signature based internet banking methods is to manipulate
the used software in a way, that correct transactions are
shown on the screen and faked transactions are signed in
the background. A recent FDIC Technology Incident Report,
generated form security risk activities reports that banks
record quarterly, lists 536 cases of computer intrusion with
an average loss per incident of $30,000. That adds up to
nearly $16 million loss in the second quarter of 2007.
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38. Countermeasures
There exist few countermeasures which try to avoid
attacks. For instance, digital certificates are used
against phishing and pharming, the use of class 3
card readers is also a measure to avoid manipulation
of transactions by the software in signature based
internet banking variants. To secure their systems
against viruses, trojan horses and worms,
customers must use virus scanners and be careful
with downloaded software or e-mail attachments.
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