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  1. 1. Introduction of Electronic bankingElectronic banking is an umbrella term for the process by which acustomer may perform banking transactions electronically withoutvisiting a brick-and-mortar institution. The following terms all refer to one form or another of electronicbanking: personal computer (PC) banking, Internet banking, virtualbanking, online banking, home banking, remote electronic banking, andphone banking. PC banking and Internet or online banking is the mostfrequently used designations. It should be noted, however, that the termsused to describe the various types of electronic banking are often usedinterchangeably. Electronic banking is an activity that is not new to banks or theircustomers. Banks having been providing their services to customerselectronically for years through software programs. These softwareprograms allowed the user‟s personal computer to dial up the bankdirectly. In the past however, banks have been very reluctant to providetheir customers with banking via the Internet due to security concerns.Today, banks seem to be jumping on the bandwagon of Internet banking.Why is there a sudden increase of bank interests in the Internet? The firstmajor reason is because of the improved security and encryptionmethods developed on the Internet. The second reason is that banks didnot want to lose a potential market share to banks that were quick tooffer their services on the Internet. Many of the banks like ICICI,HDFC, IndusInd, IDBI, Citibank, Global Trust Bank (GTB), Bank ofPunjab and UTI were offering E-banking services. Based on the abovestatistics and the analysts‟ comments that India had a high growthpotential for e-banking the players focused on increasing and improvingtheir E-banking services. As a part of this, the banks began tocollaborate with functions online.
  2. 2. Why is there a sudden increase of bank interests in the Internet? The firstmajor reason is because of the improved security and encryptionmethods developed on the Internet. Thesecond reason is that banks didnot want to lose a potential market share to banks thatwere quick to offertheir services on the Internet.E banking is defined -as the automated delivery of new and traditional banking products andservices directly to customers through electronic, interactivecommunication channels. E-banking includes the systems that enablefinancial institution customers. Individuals or businesses, to accessaccounts, transact business, or obtain information on financial productsand services through a public or private network including the Internet,Customers access e-banking services using an intelligent electronicdevice.The E-banking was firstly introduced in India by the ICICI around 1996.There after many other banks like HDFC, IndusInd bank, IDBI, CitibankTrust Banks, UTI, etc. followed the service. As today private and foreignbank had started capturing the market through e-banking hence “thecompetition is heating up and the lack of technology can make a bankloose a customer” so now the public banks are breaking the shacklesof traditional set-up and gearing up to face the competition posed by theprivate sector counterparts.
  3. 3. The Global E-Banking ScenarioThe banking industry is expected to be a leading player in e-business.While the banks in developed countries are working primarily viaInternet as non-branch banks, banks in the developing countries use theInternet as an information delivery tool to improve relationship withcustomers.In early 2001, approximately 60 percent of e-business in the UK wasconcentrated in the financial services sector, and with the expected 10-fold increase of the British e-business market by 2004, the share of thefinancial services will further increase. Around one fifth of Finish andSwedish bank customers are banking online, while in the US, accordingto UNCTAD, online banking is growing at an annual rate of 60 percentand the numbers of online accounts are expected to reach 15 million by2003.Banks have established an Internet presence with variousobjectives. Most of them are using the Internet as a new distributionchannel. Financial services, with the use of Internet, may be offered inan equivalent quantity with lower costs to the more potential customers. There may be contacts from each corner of the world at any time of dayor night. This means that banks may enlarge their market withoutopening new branches.The banks in the US are using the Web to reach opportunities in threedifferent categories: to market information, to deliver banking productsand services, and to improve customer relationship.
  4. 4. In Asia The major factor restricting growth of e-banking is security, in spite ofseveral countries being well connected via Internet. Access to high-quality e-banking products is an issue as well. Majority of banks in Asiaare just offering basic services compared with those of developedcountries. Still, e-banking seems to have a future in Asia. According toMcKinsey survey, e-banking will succeed if the basic features,especially bill payment, are handled well. Bill payment was the mostpopular feature, cited by 40 percent of respondents of the survey.However, providing this service would be difficult for banks in Asiabecause it requires a high level of security and involves arrangingtransactions with a variety of players.In India Approximately one percent of high and middle-income group bankingcustomers conducted banking on the Internet in 2000 compared to 5 to 6percent in Singapore and South Korea. In 2001, a Reserve Bank of Indiasurvey revealed that more than 20 major banks were either offering e-banking services at various levels or planned to do so in the near future.Some of the private banks included ICICI Bank, HDFC Bank, IndusIndBank, IDBI Bank, Citibank, Global Trust Bank, Bank of Punjab and UTIBank. In the same year, out of an estimated 0.9 million Internet user base,approximately 17 percent were reported to be banking on the Internet.The above statistics reveal that India does have a high growth potentialfor e-banking. The banks have already started focusing on increasingand improving their e-banking services. As a part of this, the bankshave begun to collaborate with various utility companies to enable thecustomers to perform various functions online. In 2001, over 50 percentof the banks in the US were offering e-banking services.
  5. 5. However, large banks appeared to have a clear advantage over smallbanks in the range of services they offered. Some banks in the US weretargeting their Internet strategies towards business customers. Apartfrom affecting the way customers received banking services; e-bankingwas expected to influence the banking industry structure. The economicsof e-banking was expected to favor large banks because of economies ofscale and scope, and the ability to advertise heavily. Moreover, e-banking offered entry and expansion opportunities that small bankstraditionally lacked.In Europethe Internet is accelerating the reconfiguration of the banking industryinto three separate businesses: production, distribution and advice. Thisreconfiguration is being further driven by the Internet, due to thecombined impact of: 1) The emergence of new, more focused business models. 2) New technological capabilities that reduces banking relationship and transaction costs. 3) High degree of uncertainty over the impact that new entrants will have on current business models.Though e-banking in the Europe is still in the evolutionary stage, it isvery clear that it is having a significant impact on traditional bankingactivities. Unlike in the US, though large banks in the Europe have acompetitive edge due to their ability to invest heavily in newtechnologies, they are still not ready to embrace e-banking. Hence,medium-sized banks and start-ups have an important role to play on thee-banking front if they can take concrete measures quickly andeffectively.
  6. 6. Indian E-banking ScenarioAs per the international report the banking transactions on a brick andmortar banking costs around $ 1.1. While through ATM it costs around$ 0.27 and just 1 percent of over the counter banking in case of Internetbanking. Statistics such as these have woken the Indian BankingIndustry. Thus, the Indian banking system is seeing a fabulous change inthe quality of service provided by them. Technology is the root of thischange, which is implemented by the banks‟ to win more business fromcustomers. Almost all the private sector banks are moving towards e-enabling their existing products. HDFC Bank and ICICI Bank havetaken a lead in introducing e-banking in India. Internet banking startsfrom migrating existing products to the net. This started initially withsimple functions such as getting information about interest rates,checking account balances and computing loan eligibility. Then theservices were extended to online bill payment, transfer of funds betweenaccounts and cash management services for corporates. Recently, banksstarted setting up payment gateways for B2B and B2Ctransactions. Thisis to facilitate payment for e-commerce transactions by directly debitingbank accounts or through credit cards. Banks can earn a commissionbased income, on the transaction or sale value resulting in higher otherincome. This could be more than the revenues they can generate fromcredit card transactions. Private sector banks have leveraged the Interneteffectively in taking away the customers from public sector banks andsignificantly increased their revenue potential. Internet banking is justone manifestation of these banks‟ technological capabilities. They havea complete automation, an electronic customer database, real timetransaction processing capabilities and the latest technological platforms.Management of these banks is very focused in using technology as a keycompetitive tool. The capability of the management is also visible interms of their profitability. Among the private sector banks HDFC
  7. 7. Bank and ICICI Bank have excellent returns on equity compared to theirpeers in the industry.These banks commenced operations few years and have negligibleexcess in terms of branches and employees. Therefore unlike mostother banks around the world, e-banking is not an added cost for them.In fact it is expected to contribute significantly to their revenues andprofits in years to come.Who offers what?Citibank See up-to-date account information View transaction details View account statement for up to 12 months Order demand drafts to couriered free to over 200 locations Order a cheque book stop payments Request a deposit Pay utility bills E-mail queries
  8. 8. ICICI BankAccount information – summary of account and transactionsBills paymentFunds Transfer including third-party transfersRequests for cheque books, stop payment, account openingReporting loss of ATMs cardOnline e-shopping paymentsCommunication with Account ManagerPersonalized viewing of content updates – personal finance, selectarticles one-commerce,HDFC BankReal-time account information incl. transactionsTransfer money between accounts
  9. 9. Bill payment facilityThird party funds transfer – within HDFC bankRequest for De, and Draft/Bankers ChequeStop payment requestsOpening fixed-deposit accountsSending messages to the bank via e-mailMediums of E-bankingVarious products and servicesElectronic banking, also known electronic fund transfer (EFT),uses computer and electronic technology as a substitute for checksand other paper transactions. EFTs are initiated through deviceslike cards or codes that let you, or those you authorize, access youraccount. Many financial institutions use ATM or debit cards andPersonal Identification Numbers (PINs) for this purpose. Some useother forms of debit cards and personal Identification Numbers(PINs) for this purpose. Some use other forms of debit cards suchas those that require, at the most, your signature or a scan. The
  10. 10. federal Electronic Fund Transfer Act (EFT Act) covers some electronic consumer transactions. Following are the electronic medium by which services are generally provided by the banks as a part of e-banking services. 1) Internet Banking2) ATM (Automatic Teller Machine) 3) Phone Banking 4) Mobile Banking 5) Payment Cards (Debits/Credit Card) All the above mediums provide services, which can be, also know as “any time anywhere banking”. This facilitates the customer of the bank to operate their account from any corner of the world, without visiting local or any subsidiary branch of their banks. Efforts are made by the bank not only to provide the facility to the customer, but also to reduce the operational cost of the bank by providing e-banking services. So with this, banks have to employ less staff and still would be able to deliver service to the customer,round the corner.Internet Banking Net banking is a web-based service that enables the banks authorizedcustomers to access their account information. It allows the customers tolog on to the banks website with the help of bank‟s issued identificationand personal identification number (PIN). The banking system verifiesthe user and provides access to the requested services, the rage of products and service offered by each bank on the internet differs widelyin there content. Most banks offer net banking as a value-added service.Net banking has also led to the emergent of new banks, which operate
  11. 11. only through the internet and do not exists physically, Such banks arecalled “virtual” banks or “Internet Only” banks. A couple of years ago,there was a belief even among bankers that customers opening newaccounts wanted the online banking facility, just to „feel good‟ and veryfew of them actually used that services. Today, bankers believe that thetrend from „nice to have‟ is changing to „need to have‟ .after all itdepends on how busy a person is. Services provided through InternetBanking1) account information2) Echeques (Online Fund Transfer)3) Bill Payment Service4) RequestsAnd Intimations5) Demat Account share tradingAccount informationProvides summary of all bank accounts.Allow transaction tracking which enables retrieval of transaction detailsbased on cheque number, transaction amount, and date.Provide account statement and transaction reportsused on user-defined criteria. Customers can even download and print thestatement of accounts.E- Cheques ( Online Fund Transfer)Customer can transfer funds: Transfer funds between accounts, even ifthey are in different branches‟ cities Customer can also transfer funds toany person having an account with the same bank any time, anywhere,using third party funds transfer option.
  12. 12. Bill Payment ServiceBanks Bill Pa is the easiest way to manage bills. A/c holder can pay theirregular monthly bills i.e. telephone, electricity, mobile phone, insuranceetc. at anytime, anywhere for free. Saves time and effort. Make billpayments at customer‟s convenience form their home or office. Lets a/cholders check their hill amount before it is debited form their account.No debits to account without their knowledge. No more misseddeadlines, no more loss of interest – a/c holder can schedule their bills inadvance, avoid missing the bill deadlines as well as earn extra interest ontheir money. Track payment history – all payments to a biller are storedautomatically for future reference. No queuing up at collection centers orwriting cheque any more! Just a few clicks and customers account willbe debited for the exact amount they ask.Requests And IntimationsCan electronically submit a request for:cheque-book Stop payment instructionsOpening a fixed depositOpening a recurring depositIntimate for the loss of ATM cardRegister online for phone and mobile bankingCheque statusOnline application for debit cardIssue a DD or a Banker‟s cheque form account at special rates. Justselect the account to be debited form and give details of the amount,
  13. 13. location and beneficiary. The demanddraft will be couriered to a/cholder at their mailing address.Customers can get their applications for issuance of Letters of Credit andBank Guarantees processed onlineBook your Railways Ticket OnlineDemat Account and Share TradingDemat AccountDemat is commonly used abbreviation of „Dematerialisation‟, which is aprocess where by securities like share, debentures are converted from the„material‟ (paper documents)unto electronic data and stored in thecomputer of an electronic Depository.A depository is a security „banks,‟where dematerialized physical securities are held incustody, and formwhere they can be traded. This facilitates faster, risk-free and lowcostsettlement.Share TradingIn share trading a customer can buy and sell securities online withoutstepping into a broker‟s office. Once the share are dematerialized thenthe trading can be done from It is worth noting that, due to market saturation, overall ATM usage isincreasing whiletransaction volume on a per-ATM basis is now indecline.Cash withdrawal: Withdraw upto Rs.15,000/- per day from your account. Fastcashoptions provides the facility of withdrawing prefixed amounts. UltraFast Cash opetionallows you to withdraw Rs.3000/- in one shot.Balance Enquiry:Know your ledger balance and available balanceMini Statement:Get a printout of your last 8 transactions and your current balance.Deposit Cash / Cheques :
  14. 14. available at all full function ATMs. Customers can deposit both cash andcheques. / Cash deposited in ATMs will be credited to the account onthesame day (provided cash is deposited before the clearing) andcheques are sent for clearing on the next working day.Funds Transfer:Transfer funds from one account to another linked account in thesame branch.PIN Changes: Change the Personal Identification Number (PIN) of ATM or Debitcard.Payments: The latest feature of our ATMs, this functionality can be used forpayment of bills, making donations to temples / trusts, buying internetpacks, airtime recharges for prepaid mobile phones and much more…Others: Request for a checkbook from our ATMs and our concerned branchwilldispatch it such that it reaches you within 10 working days.ATM Advantages24-hour access to cashYou can withdraw up to Rs. 10,000/- per day on your ATM Card. Thefast cashoption saves your time by providing the cash in denominations of Rs.500/-Balance inquiryYour updated balance will appear on the screen and will also be printedon thetransaction slip.Mini-statement requestGet details of the last 9 transactions on your account with the mini-statement, alongwith your balance.
  15. 15. Cheque book requestSend us a request for a cheque book or account statement it will arrive atyour doorstep.Funds transferTransfer money from one of your accounts to another. It‟s easy, selectthe acoountfrom which you want to transfer, then indicate the amountand the accont to whichyour want it transferred. Both accounts must belinked to your ATM card andcustomer ID. A maximum of 5 saving and5 Current accounts can be linked.PIN changeYour can conveniently charge your (PIN) given at the time of openingyour account)whenever you wish. Stay totally in control and ensurecomplete security for your ATM Card.Bill PayPay your cellular, telephone and electricity bills using your ATM Card.Anytime cash depositsYour cash or cheques can be deposited into your account and the ATMwillimmediately print a receipt for the same.Credit card market in IndiaThe card industry, which is growing at the rate of 20% per annum,is flooded withcards ranging from gold, silver, global, smart tosecure>>> the list is endless. From just two players in early 80s, theindustry now houses over 10 major players vying for a major chunk ofthe card pie.Currently four major bishops are ruling the card empire –Citibank, StandardChartered Bank. HSBC and State Bank of India(SBI). The industry, which is cateringto over 3.8 million card users, is
  16. 16. expected to double by the fiscal 2003. Accordinglyto a study conductedby State bank of India, Citibank is the dominant player, havingissued 1.5million cards so far. Stanch art follows way behind with 0.67million,while Hong Kong Bank has 0.3 million credit card customers.Among thenationalized banks, SBI tops the list with 0.28 million cards,followed by Blanks of Baroda at 0.22 million.The credit card market inIndia, which started out in 1981, is on the verge of anunprecedentedboom. Between 1987 and 2000, the market has virtually grown toover 3.8 million cards with almost 25-30% growth in newcardholders.The latest innovation in credit cards is the introduction of amagnetic slip in the cardfor use in withdrawing cash at the automaticteller machine (ATM), of which abut60000 are already in existence inthe world. In India also ATMs have made lateappearance, but nowspreading very rapidly. As per statistics published by RBI thereare 895ATMs in India as at the end of the year 2001 but it is alsoregularlyincreasing.Advantages of Credit Card E-money E-money may be broadly defined as “an electronic store of monetary value on atechnical device used for making payments to undertakings other than the issuer on atechnical device used for making payments to undertakings other than the issuer on atechnical device used for making payments to undertakings other than the issuer without necessarily involving bank accounts in the transaction, but acting as a prepaid bearer instrument” (Eropean Central Bank, 1998)These products could be classifiedin to two broad categories viz.,A) Pre-paid stored value card (sometimes called “electronic purse”) andB) Pre-paid software based product that used computer networks such as internet(sometimes referred to as “digital cash” or “network money”)The stored value card
  17. 17. scheme typically uses a microprocessor chip embedded in a plasticcard while software based scheme typically specialized softwareinstalled in a personal computer. The stored value card could be ofthree types single-purpose card,closed-system or limited-purposecard could be of three types single-purpose card,closed-system orlimited-purpose card and general-purpose or multi-purposecard.The single-purpose card generally with a magnetic chiprecording the amount of fundtherein is designed to facilitate onlyone type of transaction e.g telephone calls, publictransportation,laundry, parking facilities etc. Here, the distinguishing point is thattheissuer and the service provider (acceptor ) are identical for thecards. These cards areexpected to substitute coins and currencynotes. It is important to note that theEuropean Central Bank (ECB)has exempted these single-purpose pre-paid cardsfrom the purviewof their policy initiatives on e-money because of theirsmaller denominations as well as limited risk exposure forcustomers and the financial systemas a whole.The closed-systemor the limited-purpose cards are generally used in a smallnumber of well-identified points of sale within a well-identifiedlocation such ascorporate/university campus. EVB has recommended that thesecards be subject tolighter regulations and be issued by creditinstitutions.The multipurpose card on the other hand can performvariety of functions withseveral vendors‟ viz., credit card, debitcard, stored value card, identifications card,repository of thesecards with respect to regulatory oversight, restrictions onissuersand their implications or monetary policy. These cards mayreduce demand for current accounts in the bank for likely reductionin transaction costs, and prudent portfolio management.Phone Banking Now your bank account is now just a phone call away. ThroughPhone Banking youcan:
  18. 18. Check your account balance.Check the last 5 transactions in your account.Enquire on the cheque status.Have a mini statement faxed across to you.Request for a cheque book / Account statement.Enquire on your Fixed deposits / TDS.Open a fixed depositRequest for Demand Draft / Managers Cheques.Transfer funds amongst your linked accountsPay utility and HDFC Bank Credit Card bills.Do a stop cheque payments.Report loss of your ATM /Debit Card.Product information.
  19. 19. Enquire on the interest / Exchange rates.Phone banking facility isavailable round the clock, everyday, in Mumbai, Delhi,Chennai,Kolkata, Banglore, Hyderabad, Ahmedabad, Chandigarh and Pune.E-age AdvantagesSecurityWhen you use the Phone Banking facilities, your transactions arecompletely secure.When you open an account with us, you aregiven a unique Telephone Identification Number (TIN), which iscompletely confidential.Choose your languageYou can choose between English and Hindi for guidance throughthe InteractiveVoice Response (IVR) menu of services, at the timeof calling the bank.Account derails/balance enquiryGet up-to-the-second details of your Savings or Current Accountsand your fixedDeposits. Get details of the last five transactions (onthe IVR), which would be readout to you at the touch of a button,.What‟s more, you can even have a mini accountstatement of thelast 9 transactions faxed to you.Cheque book / account statement requestsRegister a request for statement of accounts for the current periodthrough the IVR and the same will be mailed to you on the nextworking day.Stop payment requests
  20. 20. Stop payment of a cheque, 24 hours a day. You have the facility tostop a singlecheque or a series of cheques.Fixed DepositsYou can easily open a Fixed Deposit over the phone, by simplyauthorizing a transfer of funds from your savings Account. Thedeposits can be opened in the names of theaccount holders in thefunding account. You may also book the Fixed Deposit inyour name alone in the funding account. You may also book theFixed Deposit in your name alone and maintain a sweep-in facility.You can also enquire about the details