MSRIM-National Conference on “Business
Innovation and Competitive Strategies (BICS-
TITLE: A CIRCUMSCRIBES STUDY ON ROLE ON E-FINANCE.
Author : NITIN KUMAR
Co-Author : --------
Designation : MBA (FINANCE) Final Year
INTERNATIONAL INSTITUTE OF BUSINESS STUDIES
Cell: +91-7204808400 Email id: firstname.lastname@example.org
Abstract: E-Finance is defined as the provision of financial services and markets using
electronic communication and computation. Though E-finance acquired anew field retail finance
and is still in budding stage, it has a greater importance and is playing a vital role for
developing economies like India, China, and Brazil. The proposed E-finance portal provides an
integrated enterprise platform for retail banking services as well as for other financial services.
In the meantime, the proposed multilevel solution will keep monitoring and analyzing the huge
volume of dynamic information flowing through the portal.
Purpose: In this paper we outline research issues related to retail e-finance that we believe set
the stage for further work in this field. Three areas are focused on. These are the use of
electronic payments systems, the operations of financial services firms and the operation of
Methodology-The methodology is exploratory and uses secondary analysis like literature review
and past research report.
Research gap: A number of research issues are raised. For example, is the widespread use of
paper-based checks efficient? Will the financial services in retail industry be fundamentally
changed by the advent of the internet. How retail industry would be able to integrate with e-
Why have there been such large differences in changes to market microstructure across different
financial markets? The purpose of this article is to review these, frame the issues related to the
use of the Internet and other types of electronic communication technologies in finance, and
stimulate future research.
Key words: electronic communication, retail, electronic payment, electronic operation of
“Finance” is a commercial term, refers to the use of monetary resources by an
entrepreneur, firm or any business house in a project or venture. The state of a business is
evaluated by the position of its finance. With the emergence of ecommerce, the field of finance
has not been untouched by technology. As a result of the use of internet and technology in the
field of financial activities, its allocation and financial services, the term “E-finance” came in to
the light. It simply means the allocation, implementation and treatment of financial resources
through a virtual communication system i.e. by using internet technology. As it is itself a key
component of “E-commerce”, the various components that empower the concept of E-finance
are like e-banking, e-payment system, e-cash, digital currency and IMPS (International Mobile
What is E-Finance?
The Term 'E-Finance' is used differently by different people. It can be defined as a
provisioning of financing instruments to business organizations using electronic tools and
technology for the lengthwise process and this incorporates the use of electronic channels for
mobilizing e-finance services and electronic methods to set up proper finance conditions and
deal with the risk related to the finance itself. E-finance in simple words is use of Internet and
technologies in financial services. It has enabled the people to have any financial transactions
without any human interaction. It saves time reduces the paper works and chances of fraudulent.
Nowadays, with the emergence of e-commerce, E-finance has become a buzzword among the
entrepreneur, business firms and investors. Due to the increasing awareness about the use of
internet and computer technology in commercial purpose, E-finance has emerged as solution to
simplify the complexions involved in dealing with finance. It is somewhat the shift of system of
financial service from the real world to a virtual one.
E-Finance to banking services has been more varied across countries. It allows countries
to establish a financial system without first building a fully functioning financial infrastructure
by its much cheaper since it lowers processing costs for providers and search and switching costs
for consumers. Internet banking and e-commerce is changing the finance industry, having the
major effects on banking relationships. Banking is now no longer confined to the branches where
one has to approach the branch in person, to withdraw cash or deposit a cheque or request a
statement of accounts. In true Internet banking is increasingly becoming a "need to have" than a
“nice to have" service. The net banking, thus now is more of a norm rather than an exception in
many developed countries due to the fact that it is the cheapest way of providing banking
services. As of 2013 there are more than 15 million online banking users in India and 53 banks
are providing ATM facilities across the country.
Secondly, the facility of e-banking can be provided solely through the internet without
having any physical office. The adoption of mobile banking has increased substantially in the
past year, in a world nearly 28 percent of mobile phone users in the survey report that they used
mobile banking in the past 12 months. E-banking provides enormous benefits to consumers in
terms of ease and cost of transactions, either through the Internet, telephone or other electronic
delivery. Electronic finance (E-finance) has become one of the most essential technological
changes in the financial industry.
E-finance as the provision of financial services and markets using Electronic
communication and computation in practice e-finance includes e-payment, e-trading, and e-
banking. Three major factors impacting financial services are Globalization, Deregulation
(geographic and product), Advances in information technology, Massive cost reductions in
technology and communications cost. In the B2C(retail) category are included single e-shops,
shopping malls, e-broking, e-auction, e-banking, service providers like travel related services,
financial services, etc., education, entertainment and any other form of business targeted at the
Scope of E-finance:
Financial market- Financial market refers to the market where financial assets are exchanged
by dealers such as stock exchange market by e-finance facility it has become easier to perform
the activities related to financial market through internet technology.
Online banking- Online banking began in mid 1990 also called as e-banking, refers to the
process of getting connected to the official website of the bank through the internet and
performing the task even if the customer is not present in the bank. It enables the user to
maintain his financial activities through the e-banking system.
Internet transactions- Internet transaction generally includes e-cash, e-payment, digital
currency and ATM. It is a way to transact through the internet without using real currency.
Online trade finance- Trade Finance provides services that resolve payment and delivery issues
between buyers and sellers in international trade.
Credit information and management-E-finance becomes the most powerful tool to gather data
of various department and market. Many research companies like CRISIL are providing useful
Objective of this paper is to
Understand the growing importance of E-finance in retail as well as SME.
To know trends in E-finance.
To find out what is still lacking in E-finance.
Integration with retail financing
Illustrate opportunity and challenges in E-finance
Growing importance of E-finance-This is the era where the internet facilities and computer systems are
easily available to everyone, affordable and are more powerful, all these facility has made the work easier to us.
Many of the companies have been using them to build their own virtual network like e-mail (Electronic Mail)
which enables the people to end the messages faster, creates the possibilities to expand and promote their
business outside their business network.
However some there are some key factors which make the E-finance important especially in developing
countries, as:- It is cheaper Round-the-clock operation in 'click-and-conquer' world. Exchange of finance
through the internet is an easier way to reach to the global customers and expand the business area globally. No
more need of mediator is there, though a direct approach to the investors, entrepreneur and customers has been
made possible. A dramatic change has occurred, as the 'face to face' interaction is shifting to 'screen to face'
interaction Reduces the cost of acquiring customers & new business area, providing financial services and
expansion of corporate network.
GROWTH OF E-FINANCE:
E-finance is a newly emerged field of knowledge but has a great impetus over the business world
especially in developing countries like India, China and Brazil. Another key factor for development of E-
finance is Information and Communication Technology (ICTs). It has immensely changed the financial
structure all over the world, although it safe to say that ICT’s impact has been more on financial sector of
business world than any other sector. Four key channels of ICT through which it provides the various financial
services are Internet, ATMs Telephone and IMPS.
Moreover, in the context of the impact of E-finance in developing countries we, it would be worth
mentioning about the role of Small and Medium Enterprises (SME) on the developing economy of a country.
SMEs have played a vital role in the development of developing countries like India and China by raising
employment, rational allocation of scarce resources. China is probably the best example of, to what extent the
SMEs can be important in the development of a country. They depict the blue print of the fundamental structure
of economy of a developing country. E-finance has an enormous impact over the SMEs as it lets them to have
low cost and convenient financial services that are must and beneficial for such economic structure where
resources are scarce and opaque financial information creates the chaos.
The Government of India created the Small Industries Development Bank (SIDBI) alongside the larger
Industrial Development Bank (IDB). SIDBI introduced a full range of information technology (IT) facilities,
including Internet cafes and mobile telecommunications, and made them available to small enterprises.
E-FINANCE IN INDIA:
By the end of the 1990s, E-Finance technology had argued affected all aspects ofthe business of banking
and financial intermediation, with the possible exception of lending to large business. The Internet has evolved
from a mere information dispensing vehicle into a robust transaction facilitating environment. New software
tools and safer architecture with multiple security and access control structures have enabled banks to take
advantage of Internet Technology and software protocols for devising a host of products and services which
could be distributed and made available through the Internet. E-finance encompasses all financial products and
services which are available to the consumer through the Internet.
ICICI is the first bank to launch the website for banking in 1996, later on, in 1997 ICICI primarily started
the Internet banking. Online bill payment (1999). In India it is governed by Information Technology (IT) Act,
2000, Internet Banking guidelines of the Central Bank and India is the India is the 2nd
country in Asia to initiate
technology related act.
E-finance has made the greatest inroads in securities markets, especially on the retail side, where online
trading has quickly taken large market shares. About 28 percent of brokerage services are now provided online
in industrial countries and in some emerging markets. This rapid acceptance of e-finance in securities markets
partly reflects the technology-driven nature of these markets and the ease with which consumers can switch
brokers. Moreover, the low costs of introducing standalone and integrated brokerage services have permitted
rapid growth around the world. The rapid spread also suggests that the technology of e-brokerage is easy to
introduce and market to users, and that cost reductions are quickly being passed on to consumers. Through
various channels computers, cell phones, Kiosks, e-finance is spreading around the globe, including in emerging
Having computation abilities that allow the use of large database has made this possible. For consumers,
the application and approval process for both mortgage and credit cards has become sufficiently automated so
that it can be done without any personal contact with the lender. With respect to credit cards, their use asia
medium to make payment, along with debit cards, has grown dramatically, fueled by rapid communications that
allow vendors to validate a person’s credit worthiness in seconds. Although there is variation by market and
region in terms of the main medium used to deliver financial services, the types of services provided, and the
rate of Penetration there are significant commonalities in the development.
Bank Number of bank Number of bank
Number of internet
Internet bank as %
New private 7 7 7 100%
Old private 21 27 10 47.6%
Nationalized 20 20 18 90%
Foreign bank 29 29 6 20.7%
All banks 85 84 49 57.6%
Source-international journal of research (ijr) vol-1 issue, 4 may 2014
All the information presented in paper is from trusted sources like official website of various
government organizations like (WTO) world trade organization, (RBI) reserve bank of India,
(UNCTAD) and various banks websites etc.
Research method is partly descriptive, partly explorative and partly casual and containing both
quantitative and qualitative methodology. Data published in this paper is collected from magazine,
newspaper, past research, journal, E-journal, article etc.
After collecting and gathering data at one place in such a systematic way so we can arrive at a point of
decision. So here our research result can be of two type one is opportunity and other one is threat. we
can say advantages and disadvantages of E-finance.
By careful analysis of literature we can easily find out the risk associated with E-finance. Risk may be
of various type like
System architecture and design
End user risk
ADVANTAGES OF E-FINANCE SYSTEM
Various advantages of E-Finance can be divided into three categories viz. Financial Institutions,
Customers and Government;
ADVANTAGES TO FINANCIAL INSTITUTIONS
Fewer transaction Costs.
Less Loan initiation costs.
Enhanced customer relationship management
Ease at use of credit scoring
Easy availability of credit information
More target Customers in less manpower.
ADVANTAGES TO CUSTOMERS
Availability of Cheaper Finance from financing institutions
Quick and early delivery of financial services
Less personal visit to financial institution is required
Ease at taking loan from global institutions.
More convenience process
For Securing Loan less collateral is required
ADVANTAGES TO GOVERNMENT
Dynamic SME Sector
Help in employment generation
Healthy completion in financial market
Contribution in GDP of country
Helpful in poverty alleviation
HOW TO REDUCE RISK:
As per literature review we can defiantly say that the scope of E-finance is increasing
with passing of time. so after doing that research I feel that the E-finance system should be more
smarter, innovative and quick. Yes I am talking about risk associated with this.
Here the risk management is the process of identification, analysis and either acceptance
or mitigation of uncertainty electronic banking. For this purpose there are many strategies which
are Risk avoidance, Risk prevention, Risk retention, Risk transfer and Risk insurance. For
reducing risk, banks need to conduct a proper survey, consult experts from various fields,
establish achievable goals and monitor performance. Also, they need to analyze the availability
and cost of additional resources, provision of adequate supporting staff, proper training of staff
and adequate insurance coverage. Due diligence needs to be observed in the selection of vendors,
audit of their performance and establishing alternative arrangements for the possible inability of
a vendor to fulfill its obligation. Besides this, periodic evaluations of new technologies and
appropriate consideration for the costs of technological up gradation are required. These are
some methods to overcome the risks which are below.
1. Management Oversight of E-Banking Activities-
The Board of Directors or senior management should establish effective management as
per the risks associated with E-banking activities, including the establishment of specific
accountabilities, policies and controls to manage these risks. In addition e-banking risk
management should be integrated within the institutions overall risk management processes.
2. Comprehensive Security Control Process-
Banking institutions should establish authorization privileges, logical and physical access
controls and adequate infrastructure security to maintain appropriate boundaries and restrictions
on both internal and external user activities and properly safeguard the security of E-banking
assets and information. Security in Internet banking comprises both the computer and
communication security. The aim of computer security is to preserve computing resources
against abuse and unauthorized use, and to protect data from accidental and deliberate damage,
disclosure and modification.
3. Segregation of Duties-
The Board of Directors and senior management should make certain that appropriate
measures are in place to ensure proper segregation of duties within e-banking systems, databases
4. Clear Audit Trail for E-Banking Transactions-
The Board of Directors and senior management should ensure that a clear audit trail
exists for all e-banking transactions.
5. Authentication of Any Entity, Counterparts or Data-
It is a process of verifying claimed identity of an individual user, machine, software
component or any other entity. For example, an IP Address identifies a computer system on the
Internet, much like a phone number identifies a telephone. It may be to ensure that unauthorized
users do not enter, or for verifying the sources from where the data are received. It is important
because it ensures authorization and accountability.
6. Accountability for E-Banking Transaction-
Banking institutions should ensure non repudiation to hold users accountable for e-
banking transactions and information.
7. Integrity of E-Banking Transactions, Records and Information-
Banks should prevent unauthorized changes; ensure the reliability, accuracy and
completeness of e-banking transactions, records and information.
8. Confidentiality and Privacy of Customer Information-
Banking institutions should take appropriate measures to preserve the confidentiality of
customer information and ensure adherence to customer privacy requirements. Measures taken to
preserve confidentiality and privacy should commensurate with the sensitivity of the information
9. Data Confidentiality-
The concept of providing for the protection of data from unauthorized disclosure is called
data confidentiality. Due to the open nature of Internet, unless otherwise protected, all data
transfers can be monitored or read by others. Although it is difficult to monitor a transmission at
random because of numerous paths available, special programs such as “Sniffers”, set up at an
opportune location like Web server, can collect vital information.
This may include credit card number, deposits, loans or password etc. Confidentiality extends
beyond data transfer and includes any connected data storage system, including network storage
systems. Password and other
10. Data Integrity-
It ensures that information cannot be modified in unexpected ways. Loss of data integrity
could result from human error, intentional tampering, or even catastrophic events. Failure to
protect the correctness of data may render data useless, or worse, dangerous. Efforts must be
made to ensure the accuracy and soundness of data at all times. Access control, encryption and
digital signatures are the methods to ensure data integrity.
Banking plays a vital role in E-financing, which allows countries to establish a financial
system without functioning financial infrastructure by its much cheaper since it lowers
processing costs for providers and search and switching costs for consumers.
In India the position of E-finance is still in its initial stage and has a lot to grow up,
counted in one of the newest digitalized part of E-commerce. It has put a great impetus on the
other parts of business like international market and financial accounting. It is a tool to
overcome the lacuna of physical delivery of financial services and has been proved as an aid for
SMEs and developing countries.
1. Golden research thought may 2014, issue-11, volume-3.
2. Business navigator on E-finance for SMEs exporter in developing countries
3. International trade center, UNCTAD, WTO.
8. E-finance, an introduction-research done by Wharton school, university of Pennsylvania,