3. Electronic banking and it's objective
Structure of electronic banking
Types of electronic banking
Automatic teller machine (ATM)42-
1
2
3
4
5 Debit card
Table of
Contents
Credit card
6
4. Risk in electronic banking
Islamic banking and its nature
Sources of fund
7
10
8
9 Islamic banking management
Table of
Contents
Utilization of fund
11
Separation from traditional banking
12
6. Electronic Banking
Electronic banking, also known as e-banking or online banking, refers to the use of
electronic channels, such as the internet or mobile devices, to conduct banking
transactions and manage financial activities. E-banking allows customers to perform
various financial tasks, including checking account balances, transferring funds
between accounts, paying bills, and applying for loans or credit cards, all from the
comfort of their own devices.
7. From the perspective of the bank:
1. Cost-effectiveness
2. Competitive Advantage
3. Data Analysis:
4. Security
5. Innovation
Objectives
8. From the perspective of the user:
1. Convenience
2. Accessibility
3. Efficiency
4. 24/7 Availability
5. Security
10. Structure of electronic banking
The structure of electronic banking typically involves the following components:
Customer Interface :
1. Login and Authentication
2. Account Overview
3. Transaction History
4. Fund Transfers
5. Bill Payments
6. Account Management
7. A and Notifications
8. Mobile Banking
9. Customer Support
Banking server :
1. Data Storage and Management
2. Account Management
3. Authentication and Security
4. Transaction Processing
5. Communication and Integration
6. Security Monitoring and Fraud
Detection
7. Reporting and Analytics
11. Communication Network :
1. Internet Connectivity
2. Wide Area Network (WAN)
3. Virtual Private Network (VPN)
4. Secure Socket Layer/Transport Layer
Security (SSL/TLS)
5. Firewalls and Intrusion
Detection/Prevention Systems
(IDS/IPS)
6. Data Centers
7. Mobile Communication Networks
8. Payment Gateways
9. Two-Factor Authentication (2FA)
Security protocols :
1. Encryption
2. Secure Access
3. Firewalls
4. Intrusion Detection and Prevention
Systems (IDPS)
5. Secure Coding Practices
6. Regular Security Audits
7. Data Encryption at Rest
8. Fraud Detection and Monitoring
9. Regular Software Updates and
Patch Management
10. Disaster Recovery and Business
Continuity
12. Payment gateway :
1. Transmission to the acquiring bank
2. Authorization request
3. Authorization response
4. Merchant notification
5. Settlement and funds transfer
6. Confirmation to customer
14. Types of Electronic Banking
Online Banking Mobile Banking ATMs
Phone Banking Electronic Fund
Transfers
Online Bill
Payment
Electronic
Wallets
Internet
Payment
Systems
16. An automated teller machine (ATM) is an electronic banking outlet
that allows customers to complete basic transactions without the
aid of a branch representative or teller.
Automated teller machine (ATM)
17. Automated Teller Machines (ATMs) are mainly of two types.
1. Simple basic unit that allows you to
-withdraw cash
-check your balance
-change the PIN
-get mini statements and receive account updates
2. The complex units provide facilities for
-cash or cheque deposits
-line of credit & bill payments.
18. 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
20. Debit card
A debit card is a plastic card that is linked directly to a bank
account, allowing customers to make purchases and withdraw
cash at any time from ATMs or point-of-sale terminals. This
means that you can use it to make purchases, withdraw cash,
and transfer funds from your account, all without having to
carry large amounts of cash or write out paper checks.
21. Advantages
• Convenience: With a debit card, you can make purchases and
withdraw cash at any time of the day or night, without having
to go to a bank. You can use your card to shop online, pay bills,
and transfer money to other accounts or withdraw cash form
ATM.
• Security: Debit cards are a safer way to carry money than cash,
as you can block your card if it's lost or stolen. Many banks in
Bangladesh also offer two-factor authentication to help prevent
fraudulent transactions.
• Access to discounts and rewards: Some banks in Bangladesh
offer discounts and rewards programs for customers who use
their debit cards, such as cashback or discounts on purchases.
• Enhanced financial management: Debit cards allow you to
keep track of your spending by providing a detailed transaction
history. Many banks also offer online banking services, which
allow you to check your account balance and transactions, pay
bills, and transfer money between accounts.
Disadvantages
• Limited acceptance: Not all stores, restaurants, or service
providers accept debit cards in Bangladesh. This means you
may need to carry cash or have another payment option
available, such as a credit card.
• ATM fees: Some banks may charge fees for using their ATMs or
for using other banks' ATMs to withdraw cash. This can be an
added expense for customers who use their debit card
frequently.
• Security concerns: While debit cards offer security features
such as PIN codes and two-factor authentication, they are still
vulnerable to fraud and hacking. Customers should be cautious
when using their debit cards online or at unfamiliar locations to
avoid potential scams or data breaches.
• Overdraft fees: If you spend more money than you have in your
bank account, you may be charged overdraft fees. These fees
can be expensive and can add up quickly if you frequently
overspend.
23. Credit card
A credit card is a payment card issued to users (cardholders) to enable the cardholder
to pay a merchant for goods and services based on the cardholder's accrued debt.The
card issuer creates a revolving account and grants a line of credit to the cardholder,
from which the cardholder can borrow money for payment to a merchant or as a cash
advance. There are two credit card groups: consumer credit cards and business credit
cards. Most cards are plastic, but some are metal cards (stainless steel, gold,
palladium, titanium) and a few gemstone-encrusted metal cards.
A regular credit card is different from a charge card and debit card.
24. An example of the front in a typical credit card :
An example of the reverse side of a typical credit card:
25. Here are the top benefits to help you to know more about credit cards:
• Hassle-free shopping experience
• No need to carry cash
• Rewards, cashback, and offers
• Easy cash withdrawal
• Widely accepted
• Meet emergencies
29. Islamic banking and its nature
Islamic banking is a financial system that operates
according to Islamic law, also known as Shariah law
The principles of Islamic banking are based on
ethical and moral values, and the objective is to
promote social and economic justice by prohibiting
interest and promoting risk-sharing between the
bank and its customers.
30. Nature of Islamic banking
o financial transactions are based on a shared-risk model
o prohibit investment on business which are harmful to society
like: gambling alcohol, pornography
o focus on socially responsible investment like: healthcare,
education ,infrastructure development
32. Islamic banking is a system of financial management that operates on the principles
of Islamic law, also known as Shariah law.
The management of Islamic banks is similar to that of conventional banks in many
ways, but there are also some key differences. Here are some of the important
aspects of Islamic banking management:
Islamic Banking management
33. 1. Shariah Supervisory Board
2. Profit and Loss Sharing
3. Investment in Ethical Businesses
4. Risk Management
5. Regulatory Framework
35. Sources of Funds
The bank has various sources of funds that it uses to support its operations and provide financing to its customers.
Here are some of the main sources of funds for Islami Bank:
Deposits: Deposits are the primary source of funds for any bank, and Islami Bank is no exception. The bank accepts
different types of deposits such as current deposits, savings deposits, fixed deposits, and foreign currency deposits.
These deposits are considered as interest-free loans to the bank, and the bank uses these funds to provide
financing to its customers.
Mudaraba Certificates: Mudaraba Certificates are similar to fixed deposits, but they are issued by Islamic banks.
These certificates are a popular investment option among customers who want to earn a profit on their savings
without compromising their religious beliefs. The bank uses the funds raised from Mudaraba certificates to finance
its operations and provide financing to its customers.
Investment Funds: Investment funds are a type of collective investment scheme where multiple investors pool
their money together to invest in a portfolio of assets. Islami Bank offers several investment funds, including Islamic
mutual funds and Shariah-compliant equity funds. The bank uses the funds raised from these investment funds to
invest in various Shariah-compliant assets and generate returns for its investors.
36. Sukuk: Sukuk is an Islamic financial instrument that represents ownership in a portfolio of assets. The bank
issues Sukuk to raise funds from investors who want to invest in Shariah-compliant assets. The bank uses the
funds raised from Sukuk to finance its operations and provide financing to its customers.
Financing from Islamic Development Bank (IDB): The Islamic Development Bank is an international financial
institution that provides financing to Islamic banks and other Islamic financial institutions. Islami Bank has
received financing from IDB to support its operations and expand its business.
In conclusion, Islami Bank has various sources of funds, including deposits, Mudaraba certificates, investment
funds, Sukuk, and financing from the Islamic Development Bank. These funds are used to support the bank's
operations and provide financing to its customers while adhering to Islamic principles.
38. Utilization of fund
In terms of fund utilization, Islamic banks typically use funds in a socially responsible
manner, investing in projects that are deemed beneficial for the society as a whole
and avoiding investments in industries that are considered harmful.
Some common uses of funds for Islamic banks may include:
1. Providing financing for small and medium-sized enterprises (SMEs)
2. Investment in infrastructure projects
3. Funding healthcare and education projects
4. Supporting the agricultural sector
5. Investing in companies.
Overall, fund utilization for Islamic banks is focused on creating value for society
while adhering to ethical and religious principles.
40. Islamic banking
Islamic banking is an Ethical Banking System, and its practices are based on Islamic
(Shariah) laws. Interest in completely prohibited in Islamic banking. It is asset based
financing, in which trade of elements prohibited by Islam are not allowed. For
example, you cannot take a loan for a Wine Shop.
Traditional banking
Conventional Banking is an Un-Ethical Banking system based on Man-Made Laws. It is
profit-oriented and its purpose is to make money through interest”.
41. Now, let us review some major differences between Islamic banking and conventional
banking systems:
Serial No Traditional banking Islamic banking
01 Money is a product besides a medium of exchange
and a store of value.
Real Asset is a products. Money just a medium of
exchange.
02 Time value is the basis for charging interest on capital. Profit on the exchange of goods & services is the basis
for earning profit.
03 Interest is charged even in the case,the organization
suffers losses.Thus no concept of sharing loss.
Loss is shared when the organization suffers a loss.
04 Due to the failure of the projects the loan is written
off as it becomes a nonperforming loan.
Due to the failure of the project, the management of
the organization can be taken over to hand over to
better management.
05 Due to a decrease in the real GDP, the net export
amount becomes negative.This invites further foreign
debts and the local currency becomes weaker.
Due to an increase in the real GDP, the net export
amount becomes positive, this reduces the foreign
debt burden and the local currency becomes stronger.
