E banking by sanjeev kumar chaswal [compatibility mode]
E-Banking Sanjeev Kumar Chaswal LL.M (IPR,ARB&ADR)M.S (Cyber Law and Cyber Security)
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.
What is E-banking or Net banking E-E-Banking is the use of electronic channels tocommunicate and transact business with both domesticand international customers through internet.Internet banking (or E-banking) means any user with apersonal computer and a browser can get connected to hisbank -s website to perform any of the virtual bankingfunctions.E banking is providing the same banking services such aspayment, inquiry, information processing but with internet.It can be offered in two ways.First an existing bank with physical offices can alsoestablish an online website and offer e banking services.Secondly, e-banks can only exist only on Internet, thusallowing users to work with”Virtual Bank”. 3
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
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
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. 6
Guidelines for E banking The Internet Banking policy has been approved by the Bank‘s Board. The policy fits into the banks 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. 7
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.
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 9
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
NEED FOR E-BANKING E-It is a flexible service provided by banks wherecustomer can work according to their needs.It removes the geographical barrier, thus customer canaccess from anywhere and at anytime. It provides 24hour-7 days services.It increases bank efficiency and competitiveness andlower the operating cost.It provides higher transaction speed. 11
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)
E Banking Delivery – It can help inIncreasing customer satisfaction andretentionShifting of costsIncreasing the brand valueProviding real time access (i.e. convenience)Delivering Services and products tocustomers through supporting technology
General Types of e-banking(RBI) Fully electronic transactional system Electronic Information information only system transfer system
The Website related to E-banking can be of two types:Information Website:It gives general information about the financial instituteand its products or services to the customer.Transactional Website:Simple Transactional Website: It allows customer tosubmit their instructions, applications for differentservices, queries on their account balances etc but donot permit any fund based transactions on theiraccounts.Fully Transactional Website:It allows the customers to operate on their accounts fortransfer of funds, payment of different bills, subscribingto other products of the banks and to transact purchase 15and sales security.
E-BANKING SUPPORT SERVICES Web linking Account Aggregation Electronic Authentication Website Hosting Payments for e-commerce Wireless banking activities 16
Types E Banking PC Banking Internet Banking SMS Banking Virtual banking Digital TV Banking Automated teller machine Tele banking Plastic cards E-cheque
E BANK SERVICESBill payment serviceCredit card customersRailway passRecharging your prepaid phoneShopping at your fingertips
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. 24
BENEFITS OF E-BANKING E-Any time bankingAny where bankingCash free bankingReduction in Cost of transactionEasy to make utility paymentsOn-line purchasesCompetitive advantageUnlimited networkLesser work loadLesser chances of fraud & misappropriationBetter profitabilityBetter customer relationship
Advantages to banks Very low setup cost. Capability to cater to a very large customer base. Saves a lot of operational costs. Adds to thebaseline. Banks san offer a lot of personalized services to their customers. Reduction of burden on branch banking. 27
E Banking Drawbacks Difficult in the adoption of technology Fear of technology High cost of technology Lack of preparedness Restrictions on usage of technology
Advantages DisadvantagesCheck account balances and track Need an account with an Internetrecent account activity Service Provider (ISP)Transfer money between accounts Security concerns, like ‘hackers’ accessing your bank accountsAuthorize electronic bill payments Original setup for bill paying time is time-consuming but will ultimately be a time-saverIssue stop payment requests Switching banks can be more cumbersome online than in personApply for auto, mortgage, home Must have basic computer skillsequity, student, or personal loans and Internet knowledgeReceive investment product and Must be comfortable using aservice information computer 29
Transactional/Operational RisksIt arises because of inaccurate processing of transactions, non-enforceability of contracts, compromises in data accuracy, dataprivacy and confidentiality or unauthorized access to banks systemand transaction etc. It arises during day to day activity of bankingtransaction.Credit RiskIt is the risk that counter party will not settle an obligation i.e. paytheir debt for full value, either when due or any time thereafter.Liquidity/Interest Rate RiskIt arises out of a banks inability to meet the required obligationwhen they become due without incurring unacceptable losses,even though the bank may ultimately be able to meet itsobligations.Reputation RiskIt is the risk of getting significant negative public opinion, which 31may result in a critical loss of lending or customer.
Compliance/ Legal RiskIt arises from violation of or non conformation withlaws, rules, regulations or prescribed practices orwhen the legal rights and obligations of parties to atransaction are not well established.Strategic RiskIt is the risk associated with the financialinstitution’s future business plans and strategies 32
SAFE GUARDS FOR E BANKINGEnsuring security while banking online, is to keep your passwordand pin number a secret.The security of your personal computer is very important for safeinternet banking. Therefore, always install antivirus software andsoftware to remove spyware.Checking your bank statements regularly will help you detect anytransaction that has taken place without your knowledge orconsent.While banking through the internet, make sure that the bankingsession is secure.In addition, always remember to completely log off, aftercompleting the banking session.Nowadays, the banking institutions have come up with a numberof safety measures for ensuring secure internet banking.
CHALLENGES IN E BANKINGE-banking is a generic term for delivery of bankingservices and productsE-banking has improved efficiency andconvenienceThe government of India enacted the IT act, 2000It issued guidelines on risks and control incomputer and telecommunication system
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
Signature based internet banking where alltransactions are signed and encrypted digitally. TheKeys for the signature generation and encryptioncan be stored on smartcards or any memorymedium, depending on the concrete implementation 36
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. 37
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. 38