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TYBBI E-BANKING IN INDIA
A
Project
On
INDIAN BANKING STUCTURE
SUBMITTED BY
Surbhi Anjeev Singhal
TY BCBI, Sem- V
PROJECT GUIDE
PROF. Rashmi Bhatacharya
SUMITTED TO
UNIVERSITY OF MUMBAI
RAJASTHANI SAMMELAN’S
Ghyamshamdas Saraf College
Of Arts & Commerce
Affiliated to University of Mumbai
Reaccredited by NAAC with ‘A’Grade
S.V Road, Malad (W)
Mumbai- 400064
A.Y. 2014- 2015
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RAJASTHANI SAMMELAN’S
Ghyamshamdas Saraf College
Of Arts & Commerce
Affiliated to University of Mumbai
Reaccredited by NAAC with ‘A’Grade
S.V Road, Malad (W)
Mumbai- 400064
A.Y. 2014- 2015
CERTIFICATE
I Prof. Rashmi Bhatacharya hereby certify that Surbhi Anjeev Singhal a
student of Ghyanshyamdas Saraf College of Arts & Commerce,
TYBCBI Sem-V as completed Project on “E-Banking in India” in the
Academic Year 2014-2015.
Thus information submitted is true and original to the best of the
Knowledge.
Project Guide: Principal
Date:
External Examiner: College Seal
Date:
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ACKNOWLEDGEMENT
I take this opportunity to thank the UNIVERSITY OF MUMBAI for
giving me a chance to do this project.
I express my sincere gratitude to the Principal Dr. Sujata Karmarkar ,
Chief Co-ordinator Dr. Rajyalakshmi Rao , Guide Prof. Rashmi
Bhatacharya , teaching faculty and our librarian for their constant
support and helping for completing the project.
My deep sense of gratitude to the staff and employees of State Bank of
India (Branch: Liberty Garden) for their support and guidance.
I am also grateful to my friends for giving me moral support during the
course of my project work. Lastly, I would like to thank each and every
person who helped me in completing the project successfully especially
MY PARENTS.
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DECLARATION
Surbhi Anjeev Singhal a student of Ghyanshamdas Saraf College of
Arts & Commerce, Malad (W) TY BMS Sem- V hereby declare that I
have completed project on “E-Banking in India” in the Academic Year
2014-2015. This information Submitted is true and Original to best of
my Knowledge.
Date: Signature of Student
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E- BANKING IN INDIA
Sr.
No.
Contents Page
No.
E-Banking In India
1. Intoduction of E-Banking In India
1.1 Introduction 1
1.2 Definition 2
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1.3 Scope of E-Banking 3
1.4 Objectives of E-Banking 4
1.5 What is E-Banking 5
1.6 Evolution of E-Banking
1.6.1 Reasons of E-Banking Evolution
1.7 Need For E-Banking
1.8 History of E-Banking
1.9 Why is E-Banking Important
1.9.1 Choice And Convenience For Customers
1.9.2 Attracting High Value of Customers
1.9.3 Enhanced Image
1.9.4 Increased Revenue
1.9.5 Easier Expansion
1.9.6 Load Reduction on Other Channels
1.9.7 Cost Reduction
1.9.8 Organizational Efficiency
1.10 E-Marketing
1.11 Features Of E-Banking
1.12 Usage Of E-Banking
1.13 Global View Of E-Banking
2. Risk, Security, Benefits, Challenges, Swot Of E-
Banking
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2.1 Risk In E-Banking
2.1.1 Transactional or Operational Risk
2.1.2 Credit Risk
2.1.3 Reputional Risk
2.1.4 Compliance or Legal Risk
2.1.5 Strategic or Legal Risk
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2.2 Security Measures 7
2.3 Security Problems 9
2.4 Security Precautions
2.5 Benefits of E-Banking
2.5.1 Benefits to Consumers
2.5.2 Benefits to Banking Industry
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2.5.3 Benefits to General Economy
2.6 Challenges and Opportunities
2.7 SWOT ANALYSIS
2.8 E-Banking to E-Commerce
3. Products of E-Banking
3.1 Online Banking
3.1.1 Features and Benefits of E-Banking
3.1.2 Disadvantages of E-Banking
3.2 Mobile Banking
3.2.1 Advantages of Mobile Banking
3.2.2 Reserve Bank has brought out a set of operating
guidelines for adoption by Banks
3.3 Tele Banking
3.3.1 Features and Benefits of E-Banking
3.4 Automated Teller Machine(ATM)
3.4.1 Benefits of ATM
3.4.2 Disadvantages of ATM
3.5 Debit Card
3.5.1 Advantages of Debit Card
3.5.2 Disadvantages of Debit Card
3.6 Credit Card
3.6.1 Advantages of Credit Card
3.6.2 Disadvantages of Credit Card
3.7 Potential Area Where E-Banking Used
4. Scenario,How E-Banking Ease your life and
Internet Banking v/s Traditional Banking
4.1 Indian Scenario
4.1.1 The Entry of Indian Bank into Net Banking
4.1.2 Product and Services Offered
4.2 Future Scenario
4.3 How E-Banking Ease Your Life
4.4 Internet Banking v/s Traditional Banking
5. INTRODUCTION TO BANK OF BARODA
5.1 INTRODUCTION
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5.2 HISTORY
5.3 E-BANKING IN BARODA
5.4 CASE STUDY OF E-BANKING
6. CONCLUSION DATA ANALYSIS APPENDIX
BIBLOGRAPHY
6.1 CONCLUSION
6.2 DATA ANALYSIS
6.3 APPENDIX
6.4 BIBLOGRAPHY
Chapter 1 An Introduction On E-Banking
1.1 Introduction:
Electronic banking is an umbrella term for the process by which a customer may
perform banking transactions electronically without visiting a brick-and-mortar institution.
The following terms all refer to one form or another of electronic banking: personal
computer (PC) banking, Internet banking, virtual banking, online banking, home banking,
remote electronic banking, and phone banking. PC banking and Internet or online
banking are the most frequently used designations. Customers access e-banking services
using an intelligent electronic device, such as a personal computer (PC), personal digital
assistant (PDA), automated teller machine (ATM), kiosk, or Touch Tone telephone.
This allows customers to do their banking outside of bank hours and from anywhere
where Internet access is available. In most cases a web browser such as Internet
Explorer or Mozilla Firefox is utilized and any normal Internet connection is suitable.
No special software or hardware is usually needed.
Like any other business you have to select a bank that has a good reputation and that’s
very important because you will be providing them with your account number and
password. It is also advisable to save or print any transaction done on your behalf.
Online banking isn't out to change your money habits. Instead, it uses today's computer
technology to give you the option of bypassing the time-consuming, paper-based aspects
of traditional banking in order to manage your finances more quickly and efficiently.
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1.2 Definition:
E-banking is defined as the automated delivery of new and traditional banking products
and services directly to customers through electronic, interactive communication channels.
E-banking includes the systems that enable financial institution customers, individuals or
businesses, to access accounts, transact business, or obtain information on financial
products and services through a public or private network, including the Internet.
Customers access e-banking services using an intelligent electronic device, such as a
personal computer (PC), personal digital assistant (PDA), automated teller machine
(ATM), kiosk, or Touch Tone telephone. While the risks and controls are similar for the
various e-banking access channels, this booklet focuses specifically on Internet-based
services due to the Internet’s widely accessible public network. Accordingly, this booklet
begins with a discussion of the two primary types of Internet websites: informational and
transactional
Our e-banking and e-commerce solutions facilitate integration with a variety of electronic
delivery channels, like ATM, tele-banking, Internet and mobile banking, and call centre
operations. And our development efforts have helped us design popular e-Banking
products such as eTreasury, eBankWorks and eHelpdesk, an Internet-based assistance tool.
The flexibility of our business offerings provides our banking clients the choice of
engaging us right through to implementation, or only up to a particular stage, or to even
proceed from wherever another consultant may have left off. The considerable experience
that we bring to the table makes our highly regarded implementation and integration
expertise available to your organization. And we focus on the functional perspective
rather than on the information system.
Electronic banking, also known as
electronic funds transfer (EFT), is simply the use of electronic means to transfer funds
directly from one account to another, rather than by cheque or cash. You can use
electronic funds transfer to:
•Have your paycheck deposited directly into your bank or credit union checking account
•Withdraw money from your checking account from an ATM machine with a personal
identification number (PIN), at your convenience, day or night.
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•Instruct your bank or credit union to automatically pay certain monthly bills from your
account, such as your auto loan or your mortgage payment.
•Have the bank or credit union transfer funds each month from your checking account to
your mutual fund account.
•Have your government social security benefits check or your tax refund deposited
directly into your checking account.
•Buy groceries, gasoline and other purchases at the point-of-sale, using a check card
rather than cash, credit or a personal check.
•Use a smart card with a prepaid amount of money embedded in it for use instead of
cash at a pay phone, expressway road toll, or on college campuses at the library's
photocopy machine or bookstores.
•Use your computer and personal finance software to coordinate your total personal
financial management process, integrating data and activities related to your income,
spending, saving, investing, record keeping, bill-paying and taxes, along with basic
financial analysis and decision making .
1.3 Evolution of E-Banking :
There have been significant developments in the e-financial services sector in the past
30 years. According to Devlin (1995), until the early 1970s functional demarcation was
predominant with many regulatory restrictions imposed. One main consequence of this
was limited competition both domestically and internationally. As a result there was
heavy reliance on traditional branch based delivery of financial services and little
pressure for change. This changed gradually with deregulation of the industry during
1980s and 1990s, whilst during this time, the increasingly important role of information
and communication technologies brought stiffer competition and pressure for a faster pace
of change. The Internet is a relatively new channel for delivering banking services. Its
early form ‘online banking services’, requiring a PC, modem and software provided by
the financial services vendors, were first introduced in the early 1980s. However, it
failed to get widespread acceptance and most initiatives of this kind were discon- tinued.
With the rapid growth of other types of electronic services since mid 1990s, banks
renewed their interest in electronic modes of delivery using the Internet. The bursting of
the Internet bubble in early 2001 caused speculation that the opportunities for Internet
services firms had vanished. The “dot.com” companies and Internet players struggled for
survival during that time but e-commerce recovered from that shock quickly and most of
its branches including e-banking have been steadily, and in some cases dramatically,
growing in most parts of the world. One survey conducted by the TechWeb News in
2005 (TechWeb News, 2005) found e-banking to be the fastest growing commercial
activity on the Internet. In its survey of Internet users, it found that 13 million
Americans carry out some banking activity online on a typical day, a 58 percent jump
from late 2002. The spread of online banking has coincided with the spread of high-
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speed broad- band connections and the increasing maturation of the Internet user
population. Another factor in e-banking growth is that banks have discovered the benefits
of e-banking and have become keener to offer it as an option to customers.
1.5 Features of "e-banking":
 You can do all of your banking 24 hours a day, seven days a week.
 Internet banking is simply a means of providing Customers with more banking
choices.
 Many of the transactions you do over-the-counter can now be done on the Internet,
on a computer, in your home - or anywhere else in the world.
 E-banking provides a range of convenient online banking services.
 Transaction History - an online list of your transactions with a convenient search
option.
 Bill payment provider.
 Pay all your bills online.
 Pay Anyone - transfer funds to any account.
Chapter 2 Security Measures And Benefits of E-Banking
2.1 Fraud or Risk in "e-banking"
Some customers avoid online banking as they perceive it as being too to fraud. The
security measures employed by most banks are never 100% safe, but in practice the
number of fraud victims due to online banking is very small. Indeed, conventional
banking practices may be more prone to abuse by fraudsters than online banking. Credit
card fraud, signature forgery vulnerable and identity theft are far more widespread
"offline" crimes than malicious hacking. Bank transactions are generally traceable and
criminal penalties for bank fraud are high. Online banking can be more insecure if users
are careless, gullible or computer illiterate. An increasingly popular criminal practice to
gain access to a user's finances is phishing, whereby the user is in some way persuaded
to hand over their password(s) to a fraudster.
However, management should consider additional precautions when originating and
approving loans electronically, including assuring management information systems
effectively track the performance of portfolios originated through e-banking channels.
2.2 Security Measures:
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Protection through single password authentication, as is the case in most secure Internet
shopping sites, is not considered secure enough for personal online banking applications
in some countries. Online banking user interfaces are secure sites (generally employing
the https protocol) and traffic of all information - including the password - is encrypted,
making it next to impossible for a third party to obtain or modify information after it is
sent. However, encryption alone does not rule out the possibility of hackers gaining
access to vulnerable home PCs and intercepting the password as it is typed in (key
logging). There is also the danger of password cracking and physical theft of passwords
written down by careless users.
Many online banking services therefore impose a second layer of security. Strategies
vary, but a common method is the use of transaction numbers, or Tans, which are
essentially single, use passwords. Another strategy is the use of two passwords, only
random parts of which are entered at the start of every online banking session. This is
however slightly less secure than the TAN alternative and more inconvenient for the
user. A third option, used in many European countries and currently being trialled in the
UK is providing customers with security token devices capable of generating single use
passwords unique to the customer's token (this is called two-factor authentication or
2FA). Another option is using digital certificates, which digitally sign or authenticate the
transactions, by linking them to the physical device (e.g. computer, mobile phone, etc).
While most online banking in the United States still uses single password protection, the
FDIC has issued regulations requiring that banks implement more secure authentication
mechanisms by the end of the year 2006.
2.3 Security Problems:
Internet security is still one of the major issues hindering the growth of Internet related
trade. Owing to the structure and intention of the Internet to be an open network,
financial transactions may involve high security risks. Internet frauds are common, and
related stories get immediate media attention, making people hesi- tant to bank online.
Different security methods (for both hardware and software) are being tested and
employed continuously but there is still some way to go to win the trust of many
customers. E-banking managers need to be aware of new security threats as well as new
methods of combating those threats to stay on top of this challenge. Managing
information security is a very complex issue.
2.3 Security Precautions
Security Precautions
Customers should never share personal information like PIN numbers, passwords etc with
anyone, including employees of the bank. It is important that documents that contain
confidential information are safeguarded. PIN or password mailers should not be stored,
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the PIN and/or passwords should be changed immediately and memorized before
destroying the mailers.
Customers are advised not to provide sensitive account-related information over unsecured
e-mails or over the phone. Take simple precautions like changing the ATM PIN and
online login and transaction passwords on a regular basis. Also ensure that the logged in
session is properly signed out.
2.5 Benefits of e-banking
In recent time E-banking has spread rapidly all over the globe. All Banks are making
greater use of E-banking facilities to provide batter service and to excel in competition.
The spread of E-banking has also greatly benefited the ordinary customer in general and
corporate world in particular. The following points summarize benefits of E-Banking.
2.5.1 Benefits to Consumers:
General consumers have been significantly affected in a positive manner by E-banking.
Many of the ordinary tasks have now been fully automated resulting in greater ease and
comfort.
• Customer’s account is extremely accesses able with an online account.
• Customer can withdraw can at any time through ATMs that are now widely available
throughout the country.
• Beside withdrawing cash customers can also have mini banks statements, balance
inquiry at these ATMs
• Through Internet banking customer can operate his account while sitting in his office
or home. There is no need to go to the bank in person for such matter.
• E banking has also greatly helped in payment of utility bill. Now there is no need to
stand in long queues outside banks for his purpose.
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• All services that are usually available from the local bank can be found on a single
website.
• The Growth of credit card usage also owes greatly to E-banking. Now a customer can
shop world wide without any need of carrying paper money with him.
• Banks are available 24 hours a day, seven days a week and they are only a mouse
click away.
2.5.2 Benefits to Banking Industry:
Banking industry has also received numerous benefits due to growth of E-Banking
infrastructure. There are highlighted below:
• The growth of E-banking has greatly helped the banks in controlling their over heads
and operating cost
• Many repetitive and tedious tasks have now been fully automated resulting in greater
efficiency, better time usage and enhanced control.
• The rise of E-banking has made banks more competitive. It has also led to expansion
of the banking industry, opening of new avenues for banking operations.
• Electronic banking has greatly helped the banking industry to reduce paper work, thus
helping them to move the paper less environment.
• Electronic banking has also helped bank in proper documentation of their records and
transactions.
• The reach and delivery capabilities of computer networks, such as the Internet, are far
better than any branch network.
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2.5.3 Benefits to General Economy:
Electronic Banking as already stated has greatly serviced both the general public and the
banking industry. This has resulted in creation of a better enabling environment that
supports growth, productivity and prosperity. Besides many tangible benefit in form of
reduction if cost, reduced delivery time, increased efficiency, reduced wastage, e-banking
electronically controlled and thoroughly monitored environment discourage many illegal
and illegitimate practices associated with banking industry like money laundering, frauds
and embezzlements. Further E-banking has helped banks in better monitoring of their
customer base. This it is a useful tool in the hand of the bank to device suitable
commercial packages that are in conformity with customer needs. As e banking provide
opportunity to banking sector to enlarge their customer base, a consequence to increase
the of volume of credit creation which results in better economic condition, Besides all
this E-banking has also helped in documentation of the economic activity of the masses.
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2.6 E-banking in India - Challenges and Opportunities
E-banking is a generic term for delivery of banking services and products through
electronic channels, such as the telephone, the internet, the cell phone, etc. The concept
and scope of E-banking is still evolving. It facilitates an effective payment and
accounting system thereby enhancing the speed of delivery of banking services
considerably. While E-banking has improved efficiency and convenience, it has also
posed several challenges to the regulators and supervisors. Several initiatives taken by the
government of India, as well as the Reserve Bank of India (RBI), have facilitated the
development of E-banking in India. The government of India enacted the IT Act, 2000,
which provides legal recognition to electronic transactions and other means of electronic
commerce. The RBI has been preparing to upgrade itself as a regulator and supervisor of
the technologically dominated financial system. It issued guidelines on risks and control
in computer and telecommunication system to all banks, advising them to evaluate the
risks inherent in the systems and put in place adequate control mechanisms to address
these risks. The existing regulatory framework over banks has also been extended to E-
banking. It covers various issues that fall within the framework of technology, security
standards, and legal and regulatory issues.
Chapter 3 E-Banking Product Provided By Banks
TYPES OF E-BANKING PRODUCTS PROVIDED BY BANKS
1] ONLINE BANKING
2] MOBILE BANKING
3] TELE BANKING
4] AUTOMATED TELER MACHINE (ATM)
5] DEBIT CARD
6] CREDIT CARD
3.1 Online banking:
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Since the internet has become a popular place to buy and sell goods, online banking
services have made their way into most homes. Easier to pay bills, manage money, and
transfer money to other accounts, internet banking is a convenient way to handle money.
Many employers now have direct deposit, which makes it easier to put money into one's
account. No more trips to the bank every day. The money is in the account the night
before and is available for use on next morning. Most banks now offer some type of
banking services on the net.
3.1.1 Features & benefits
1] Account services :
You can now access up to date information on your accounts, ANYWHERE, ANYTIME.
Complete account details like account balance, monthly statements, uncleared funds or
cheque status is available for your Savings account and Current account.
2] Funds Transfers & Payments:
Transfer funds instantly within your accounts or to any third party account in Barclays.
You can also leave standing instructions for frequent / periodic transfers.
3] Requests
Request a cheque book or give stop payment instructions.
4] Bill Payments
Our Bill Payment facility allows you to pay your utility bills online, at your
convenience.
5] Other Services
Services (Secure Mail box and Bulletins).
6] Protection Cover
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As a personal customer, you are fully protected against third party fraud when banking
using Barclays Online Banking/mobile banking. You will not suffer any loss if money is
taken from your account without your permission provided you have not acted
fraudulently or negligently.
7] Security
Admittedly, such a service requires complete privacy protection and security of the
highest nature. We provide a completely secure environment, using 128-bit encryption
SSL (Secure Sockets Layer), digitally certified by Verisign. 128-bit SSL guarantees
world-class security for Internet and e-commerce applications.
3.1.2 Disadvantages
The world has come from far and we are every day digging into the unknown, what
was unthinkable then is now a practice. Today, you can bank right from the comfort of
you home and benefits come with it. However, though internet banking is such a good
and desirable innocent, it has some disadvantages as listed;
1] Setting up an account may take time:
In order to register for your bank's online program, you will probably have to provide
ID and sign a form at a bank branch. Some banks even ask for photos
2] Legal issues:
If you and your spouse wish to view and manage your assets together online, one of
you may have to sign a durable power of attorney before the bank will display all of
your holdings together.
3] Learning difficulties:
Banking sites can be difficult to navigate at first. Getting acquitted with the banking
sites software may require some time to read the tutorials in order to become
comfortable in your virtual lobby.
4] Site changes and upgrades:
Even the largest banks periodically upgrade their online programs, adding new features
in unfamiliar places. In some cases, you may have to re-enter account information.
5] Customer service:
There is no personal contact with any of the staff, and if talk to any staff through the
telephone, you have guarantee you are talking to the best person available
6] Internet account:
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You need to get an account with an Internet Service Provider (ISP) which may be
another hectic experience
7] Security concern:
Even though online banking sites are heavily encrypted, with the developing technology,
it’s hard to rule out the "hackers" who may access your bank accounts
8] Switching banks:
This can be more cumbersome online than in person
9] Money usage:
You can’t spend your money from the online bank account as you wish, in the end;
you will need to go to an ATM to withdraw money for usage.
3.2 MOBILE BANKING:
3.2.1 Advantages Of Using Mobile Banking Through Cell Phone
Mobile banking through cell phone is really catching up. Now you can access your
account, transfer funds or make payments with your mobile. Mobile connectivity is vast
and this makes mobile banking very successful.
Advantages of Mobile Banking
Mobile banking through cell phone offers many advantages for customers as well as
banks. Some of them are as follows:-
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1] Mobile banking has an edge over internet banking. In case of online banking, you
must have an internet connection and a computer. This is a problem in developing
countries. However, with mobile banking, connectivity is not a problem. You can find
mobile connectivity in the remotest of places also where having an internet connection
is a problem.
2] You can make transactions or pay bills anytime. It saves a lot of time
3] Mobile banking thorough cell phone is user friendly. The interface is also very
simple. You just need to follow the instructions to make the transaction. It also saves
the record of any transactions made.
4]. Cell phone banking is cost effective. Various banks provide this facility at a lower
cost as compared to banking by self.
5] Banking through mobile reduces the risk of fraud. You will get an SMS whenever
there is an activity in your account. This includes deposits, cash withdrawals, funds
transfer etc. You will get a notice as soon as any amount is deducted or deposited in
your account.
6] Banking through cell phone benefits the banks too. It cuts down on the cost of
tele- banking and is more economical.
7] Mobile banking through cell phone is very advantageous to the banks as it serves
as a guide in order to help the banks improve their customer care services.
8] Banks can be in touch with their clients with mobile banking.
9] Banks can also promote and sell their products and services like credit cards, loans
etc. to a specific group of customers.
10] Various banking services like Account Balance Enquiry , Credit/Debit Alerts, Bill
Payment Alerts, Transaction History, Fund Transfer Facilities, Minimum Balance Alerts
etc. can be accessed from your mobile.
11] You can transfer money instantly to another account in the same bank using
mobile banking.
Mobile banking has become really popular owing to the convenience that it gives its
customers. You can access your account, pay bills, and make cash transfers through cell
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phone banking. It offers many benefits over internet banking and banking in person.
With the wide range of mobile connectivity, mobile banking through cell phone can be
accessed by anyone.
3.2.2 Pros of Mobile Banking:
1] Three ways to connect from your phone.
Arising from the need to accommodate the limitations of different cell phones, banks are
trying to offer a connection to meet most models. The typical method to access your
banking information is via a web browser on those phones with Internet surfing
capability. You would log on in the same way as when using your computer. For those
phones without Internet capability, some banks provide special software that you can
download onto your phone. Other banks offer balance information via text messaging.
How you access your banking information is really is a matter of cell phone
compatibility.
2] Accounts number are not displayed over wireless cell phone
When you log into your account from your cell phone you will not be asked for
account information and once you access your account the number is not visible. Such
precautions make it less likely (although not impossible) for your sensitive financial
information to be breached by hackers.
3] The servers of most banks are encrypted for wireless transactions.
Although safety does vary from bank to bank, if handled correctly, wireless transactions
can actually be more secure than wired or landline connections due to the use of
encrypted servers—though, again, there is no guarantee.
4] Mobile banking is generally offered free by your bank.
Most banks are not charging their customers additional fees for this service. However,
your cell phone bill will increase due to Internet usage. Some mobile banking programs
also allow customers to pay their bills from their phone. In this regard, the service might
actually be less expensive than online bill payment programs.
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3.2.3 Reserve Bank has brought out a set of operating
guidelines for adoption by banks.
1] For the purpose of these Guidelines, “mobile banking transactions” is undertaking
banking transactions using mobile phones by bank customers that involve credit/debit to
their accounts. It also covers accessing the bank accounts by customers for non-monetary
transactions like balance enquiry etc.
2] Regulatory & Supervisory Issues
 Only banks which are licensed and supervised in India and have a physical
presence in India will be permitted to offer mobile banking services.
 The services shall be restricted only to customers of banks and holders of
debit/credit cards issued as per the extant Reserve Bank of India guidelines.
 Only Indian Rupee based domestic services shall be provided. Use of mobile
banking services for cross border transfers is strictly prohibited.
 Banks may also use the services of Business Correspondent appointed in
compliance with RBI guidelines, for extending this facility to their customers.
 The guidelines issued by the Reserve Bank on ‘Risks and Controls in Computers
and Telecommunications’ vide circular DBS.CO.ITC.BC. 10/ 31.09.001/ 97-98
dated 4th February 1998 will apply mutatis mutandis to mobile banking.
 The guidelines issued by Reserve Bank on “Know Your Customer (KYC)”, “Anti
Money Laundering (AML)” and combating the Financing of Terrorism (CFT)
from time to time would be applicable to mobile based banking services also.
 Only banks who have implemented core banking solutions would be permitted to
provide mobile banking services.
 Banks shall file Suspected Transaction Report (STR) to Financial Intelligence Unit
– India (FID-IND) for mobile banking transactions as in the case of normal
banking transactions.
3. Registration of customers for mobile service
 Banks shall put in place a system of document based registration with mandatory
physical presence of their customers, before commencing mobile banking service.
 On registration of the customer, the full details of the Terms and Conditions of
the service offered shall be communicated to the customer.
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4. Technology and Security Standards
 Information Security is most critical to the business of mobile banking services
and its underlying operations. Therefore, technology used for mobile banking
must be secure and should ensure confidentiality, integrity, authenticity and non-
repudiability. An illustrative, but not exhaustive framework is given at Annex-I.
5. Inter-operability
 Banks offering mobile banking service must ensure that customers having mobile
phones of any network operator is in a position to avail of the service.
Restriction, if any, to the customers of particular mobile operator(s) is permissible
only during the initial stages of offering the service, up to a maximum period of
six months subject to review.
 The long term goal of mobile banking framework in India would be to enable
funds transfer from account in one bank to any other account in the same or
any other bank on a real time basis irrespective of the mobile network a
customer has subscribed to. This would require inter-operability between mobile
banking service providers and banks and development of a host of message
formats. To ensure inter-operability between banks, and between their mobile
banking service provider’s banks shall adopt the message formats like ISO 8583,
with suitable modification to address specific needs.
6. Clearing and Settlement for inter-bank funds transfer transactions
 To meet the objective of a nation-wide mobile banking framework, facilitating
inter-bank settlement, a robust clearing and settlement infrastructure operating on
a 24x7 basis would be necessary. Pending creation of such a national
infrastructure, banks may enter into bilateral or multilateral arrangement for inter-
bank settlements, with express permission from Reserve Bank of India, wherever
necessary.
7. Customer Complaints and Grievance Redressal Mechanism
 The customer /consumer protection issues assume a special significance in view
of the fact that the delivery of banking services through mobile phones is
relatively new. Some of the key issues in this regard are given at Annex-II.
8. Transaction limit
 A per transaction limit of Rs. 2500/- shall be imposed on all Mobile Banking
transactions. Subject to an overall cap of Rs. 5000/- per day, per customer.
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 Banks may also put in place monthly transaction limit depending on the bank’s
own risk perception of the customer.
9. Board approval
 Approval of the Board of Directors (Local Board in case of foreign banks) for
the product as also the related security policies must be obtained before
launching the scheme.
10. Approval of Reserve Bank of India
 Banks wishing to provide mobile banking services shall seek prior one time
approval of the Reserve Bank of India, by furnishing full details of the proposal.
3.3 TELE BANKING
3.3.1 Introduction
Telebank helps track and control finances, all from the comfort of home or office.
Designed to save time and money, Telebank allows 24 hour access to bank accounts via
the telephone. You can access current balances, transfer money between accounts, and
much more. It is safe and secure…and free!
United Bank of India offers Tele-Banking Services to its Retail Customers. The IVR
(Interactive Voice Response) supports three languages Hindi, English & Bengali. The
facility is available for Savings, Current, Cash Credit, Overdraft, Deposit and Loan
accounts.
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3.3.2 FEATURES AND BENEFITS OF TELEPHONE BANKING
 With balance and basic account enquiries
 Order cheque and paying-in books
 Stop a cheque
 Set up, cancel and amend standing orders
 Order foreign currency and traveler’s cheques
 Transfer money between your business and personal accounts
 Order copies of your statements and change the date you receive them
 With information on business products and services
3.4 Automated teller machine
3.4.1 Introduction
A wallet-sized plastic Automatic Teller Machine (ATM) card linked to your bank account
makes financial transactions a breeze by eliminating the waste of writing checks or the
dangers of carrying large sums of cash. Also known as a debit card, ATM cards benefit
both consumers and the banking institution where they originated.
On most modern ATMs, the customer is identified by inserting a plastic ATM card with
a magnetic or a plastic smart card with a chip, that contains a unique card number and
30

some security information such as an expiration date or CVVC (CVV). Authentication is
provided by the customer entering a personal identification number (PIN). The newest
ATM at Royal operates without a card to withdraw cash up to £100. The customers
should register first their mobile phone number and bank will give a six-digit code to
enter into ATM to withdraw the cash.[1]
Using an ATM, customers can access their bank accounts in order to make cash
withdrawals, debit card cash advances, and check their account balances as well as
purchase prepaid cell phone credit. If the currency being withdrawn from the ATM is
different from that which the bank account is denominated in (e.g.: Withdrawing
Japanese Yen from a bank account containing US Dollars), the money will be converted
at an official wholesale exchange. Thus, ATMs often provide one of the best possible
official exchange rates for foreign travelers, and are also widely used for this purpose.
3.4.2 BENEFITS OF ATM:
3.4.2.1 Benefits for Consumers
Use an ATM card to keep accurate records of banking transactions. Monthly statements,
usually available online or printed and mailed, itemize each transaction made with the card.
This benefit leads to fewer accidental overdrafts, and provides a visual record of spending
habits, unlike using cash. Transactions are processed quickly with an ATM card. Sliding the
card is faster than writing a check, more accurate than paying with cash (since change can
be miscounted), and makes some transactions quicker. For example, using an ATM card at a
gasoline pump eliminates the hassle of standing in line in a convenience store to complete
the sale. After a quick swipe and approval, a receipt is often printed at the gas pump for
user convenience. ATM cards are usually free, according to Merchant's State Bank. Unlike
checks, many financial institutions do not charge their customers for an ATM card.
3.4.2.2Benefits for Businesses
When consumers use ATM cards to pay for purchases, funds are deposited quickly into the
business account. In as little as 48 hours, businesses will have access to money from ATM
card transactions. Checks can take up to seven days to clear, putting a hold on accessible
funds. Business owners pay to offer the convenience of credit card transactions for their
customers. For each transaction, a small percentage is paid to the credit card company as a
convenience fee. ATM card transactions are a win-win for both the businesses that accept
the ATM card and the consumer. When consumers pay retailers with an ATM card, the
31

business owner doesn't have to pay a fee. And, consumers don't have to pay interest or
annual fees when using an ATM card, like they would with use of a credit card.
3.4.2.3 Benefits for Travel
When you're trying to pack light, leave the checkbook and stack of paper money at
home. One simple ATM card can pay for purchases with funds directly withdrawn
from your checking account. The small card is simple to tuck in a small purse or in
a snug pocket. When cash is needed, get a better exchange rate in foreign countries
by using an ATM card. Foreign ATM machines offer users access to the wholesale
exchange rate, which is often less expensive than paying service fees when
exchanging cash or travelers checks in a foreign bank or currency exchange office.
3.4.3 Disadvantages of Automatic Teller Machines
Automated teller machines, or ATMs, are machines that function like bank tellers,
allowing customers to perform basic banking functions, such as making deposits, making
withdraws and shifting money between different accounts. In place of identification, bank
members use personalized debit cards to access their holdings. There are a number of
disadvantages to these machines.
3.4.3.1 Security
Unlike bank tellers, ATMs do not require the person
performing the transaction to present a picture identification. Rather, the person must
only insert a bank card and enter a personal identification number. If the bank card is
stolen and the number ascertained, an unauthorized person can easily access the account.
3.4.3.2 Inability to Perform Complex Transactions
ATMs can only perform relatively basic transactions. This means that
people who need to complete these longer transactions will be forced to use the teller,
restricting use of the ATM for people who need to complete simple business. In this
sense, the ATM Is rather like the express line in a supermarket--faster for some, but
unavailable to others.
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3.4.3.3 Fees
With the advent of ATMs came ATM fees. Not only do banks of which
you are not a member charge fees for the use of their ATMs, but users are often
charged surreptitious fees by their own banks for using other banks' ATMs--meaning the
customer is docked twice for the same transaction.
3.4.3.4 Privacy
Unlike banks, in which security guards and tellers are present to ensure the
person performing a transaction receives privacy, there is no such guarantee when using an
ATM. People may try to spy on users as delicate information appears on the screen, without
the user being aware.
3.4.4 Difficulty of Use
The performance of business at an ATM is generally quicker than that at a
human teller. However, the ATM is incapable of providing personalized instruction to the
user in a way that a human teller can. This can result in longer wait times if the user
currently using the machine is struggling to complete a transaction.
3.4.5 Eating a Card
Occasionally, ATMs will malfunction and swallow a user's ATM card. The
customer will then be directed to contact a service number or their bank and wait for a
repair technician to retrieve this card. While this happens only rarely, if it occurs on a
weekend or at night, the user may be left to wait for several days before they can again
use their card, something that would not happen with a human cashier.
33

Debit card:
3.5.1 Introduction
A debit card (also known as a bank card or check card) is a plastic card that
provides the cardholder electronic access to his or her bank account(s) at a financial
institution. Some cards have a value with which a payment is made, while most relay a
message to the cardholder's bank to withdraw funds from a designated account in favor
of the payee's designated bank account. The card can be used as an alternative payment
method to cash when making purchases. In some cases, the primary account number is
assigned exclusively for use on the Internet and there is no physical card.[1][2]
In many countries, the use of debit cards has become so widespread that their volume
has overtaken or entirely replaced cheques and, in some instances, cash transactions. The
development of debit cards, unlike credit cards and charge cards, has generally been
country specific resulting in a number of different systems around the world, which were
often incompatible. Since the mid 2000s, a number of initiatives have allowed debit
cards issued in one country to be used in other countries and allowed their use for
internet and phone purchases.
Unlike credit and charge cards, payments using a debit card are immediately transferred
from the cardholder's designated bank account, instead of the them paying the money
back at a later date.
Debit cards usually also allow for instant withdrawal of cash, acting as the ATM card
for withdrawing cash. Merchants may also offer cash back facilities to customers, where
a customer can withdraw cash along with their purchase.
3.5.1.2 Advantages of debit cards
34

 Obtaining a debit card is often easier than getting a credit card. If you qualify to
open a bank account, you can usually get a debit card.
 Unlike when you write a check, using a debit card saves you from having to
show identification or give out personal information at the time of the transaction.
 It frees you from carrying cash or a checkbook.
 It can save you from having to stock up on traveler's checks or cash when you
travel.
 Debit cards may be more readily accepted than checks, especially in other states
or countries.
 If you return merchandise or cancel services paid for with a debit card, the
transaction will be treated as if it were made with cash or a check. Customers
usually get cash back for on-line purchases; for off-line transactions, the amount
is credited to your account.
 Most ATMs will allow you to get a cash advance against the line of credit on
your credit card, using your credit card and a separate PIN. You do not
necessarily have to have a bank account to do this.
3.5.1.3 Disadvantages of debit cards
 Unlike a credit card, debit card transactions give you no grace period. They are a
quick, pay-now deal.
35

 They can make balancing your account tricky if you are not fastidious about
keeping receipts and recording transactions in a timely fashion. It is easy to
forget, for example, when you pay at the gas pump with a debit card and drive
off without your receipt.
 Using a debit card may mean you have less protection than you would with a
credit card for goods that are never delivered, are defective or were
misrepresented. But, as with credit cards, you can dispute unauthorized charges or
other mistakes within 60 days. Contact your bank if a problem with a merchant
cannot be resolved.
 Fees -- The convenience can be costly, especially when using an ATM that is not
affiliated with your bank.
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3.6.1 Introduction
A credit card is a payment card issued to users as a system of payment. It allows the
cardholder to pay for goods and services based on the holder's promise to pay for them.
[1]
The issuer of the card creates a revolving account and grants a line of credit to the
consumer (or the user) from which the user can borrow money for payment to a
merchant or as a cash advance to the user.
A credit card is different from a charge card: a charge card requires the balance to be
paid in full each month.[2]
In contrast, credit cards allow the consumers a continuing
balance of debt, subject to interest being charged. A credit card also differs from a cash
card, which can be used like currency by the owner of the card.
The size of most credit cards is 85.60 × 53.98 mm (33
/8 × 21
/8 in),[3]
and conform to
the ISO/IEC 7810ID-1 standard. Credit cards have an embossed bank card number
complying with the ISO/IEC 7812numbering standard.
3.6.1.2 Advantage of credit cards:
1. They allow you to make purchases on credit without carrying around a lot of
cash. This allows you a lot of flexibility.
2. They allow accurate record-keeping by consolidating purchases into a single
statement.
3. They allow convenient remote purchasing - ordering/shopping online or by phone.
They allow you to pay for large purchases in small, monthly installments.
4. Under certain circumstances, they allow you to withhold payment for
merchandise which proves defective.
4. They are cheaper for short-term borrowing - interest is only paid on the
remaining debt, not the full loan amount.
37

5. Many cards offer additional benefits such as additional insurance cover on
purchases, cash back, air miles and discounts on holidays.
3.6.1.3 Disadvantages:
1. You may become an impulsive buyer and tend to overspend because of the ease
of using credit cards. Cards can encourage the purchasing of goods and services
you cannot really afford.
2. Credit cards are a relatively expensive way of obtaining credit if you don't use
them carefully, especially because of the high interest rates and other costs.
3. Lost or stolen cards may result in some unwanted expense and inconvenience.
4. The use of a large number of credit cards can get you even further into debt.
5. Using a credit card, especially remotely, introduces an element of risk as the card
details may fall into the wrong hands resulting in fraudulent purchases on the
card. Fraudulent or unauthorized charges may take months to dispute, investigate,
and resolve.
3.7.1 Potential Areas Where E-Banking Is Successfully Used
Online bill payment: Internet banking is frequently used for tax payments, Bill payments
like of electricity, water, municipal and telephones. Many public sector companies are
offering online payment services, for e.g. MTNL, BSNL etc. Indian Railways has started
online reservation system for credit card and debit cardholders. In coming future even
persons having Internet bank account can book seat online at ease of their home. Online
brokerage: Strong financial markets are always backbone of any economy. Through e-
banking channels stock trading can reach to the people who want to invest their money
in financial markets but due to time constraints they are not able to visit the broker. At
Asian tigers like Korea and Taiwan 30% of the stock trading is done online. This will
create more dynamic environment and there will be more choice for small investor for
his investment. The small investor is not only dependent on government bonds or other
fixed deposits schemes. Online Account Management: Citizens can manage their account
online. Anytime banking, it will reduce the time delays and dependency on bank staff
38

and timing of operations. Anywhere banking: Citizen can deposit/withdraw their money
anywhere in country irrespective of the branch where their parent account is held. This
will give greater security for traveling business people to deposit money collected from
traders/clients. ATMs is another mode of anywhere banking, consumer can use services
of ATMs anywhere in country, reducing burden of carrying money while traveling. Smart
Card Solutions: Smart cards will give helpful in bringing governmental services and
banking more closer to people. Farmer service centers are example of this initiative.
Smart cards will be greater flexibility to users reducing the frauds and malpractices what
debit cards and credit cards are not able to offer. On the other hand smart card can be
used as identification card for number of other services like driving license, passport,
election id card and other things. The application of online banking in e-governance can
explain by two real life case studies.
39

Chapter 4 Scenario of E-Banking and How it ease your life
4.1 THE INDIAN SCENARIO
4.1.1The entry of Indian banks into Net Banking
Internet banking, both as a medium of delivery of banking services and as a strategic
tool for business development, has gained wide acceptance internationally and is fast
catching up in India with more and more banks entering the fray. India can be said to
be on the threshold of a major banking revolution with net banking having already been
unveiled. A recent questionnaire to which 46 banks responded, has revealed that at
present, 11 banks in India are providing Internet banking services at different levels, 22
banks propose to offer Internet banking in near future while the remaining 13 banks
have no immediate plans to offer such facility.
At present, the total Internet users in the country are estimated at 9 lakh. However, this
is expected to grow exponentially to 90 lakh by 2003. Only about 1% of Internet users
did banking online in 1998. This increased to 16.7% in March 2000.
The growth potential is, therefore, immense. Further incentives provided by banks would
dissuade customers from visiting physical branches, and thus get ‘hooked’ to the
convenience of arm-chair banking. The facility of accessing their accounts from
anywhere in the world by using a home computer with Internet connection, is
particularly fascinating to Non-Resident Indians and High Net worth Individuals having
multiple bank accounts.
40

4.1.2 Products and services offered
Banks in India are at different stages of the web-enabled banking cycle. Initially, a
bank, which is not having a web site, allows its customer to communicate with it
through an e-mail address; communication is limited to a small number of branches and
offices which have access to this e-mail account. As yet, many scheduled commercial
banks in India are still in the first stage of Internet banking operations.
With gradual adoption of Information Technology, the bank puts up a web-site that
provides general information on the banks, its location, services available e.g. loan and
deposits products, application forms for downloading and e-mail option for enquiries and
feedback. Customers are required to fill in applications on the Net and can later receive
loans or other products requested for at their local branch.
Some of the more aggressive players in this area such as ICICI Bank Ltd., HDFC
Bank Ltd., UTI Bank Ltd., Citibank, Global Trust Bank Ltd. and Bank of Punjab Ltd.
offer the facility of receipt, review and payment of bills on-line. These banks have tied
up with a number of utility companies. The ‘Infinity’ service of ICICI Bank Ltd. Also
allows online real time shopping mall payments to be made by customers. HDFC Bank
Ltd. has made e-shopping online and real time with the launch of its payment gateway.
It has tied up with a number of portals to offer business-to-consumer (B2C) ecommerce
transactions. The first online real time e-commerce credit card transaction in the country
was carried out on the Easy3shoppe.com shopping mall, enabled by HDFC Bank Ltd.
on a VISA card.
4.1.3The Future Scenario of E-banking in India
Compared to banks abroad, Indian banks offering online services still have a long way
to go. For online banking to reach a critical mass, there has to be sufficient number of
users and the sufficient infrastructure in place. The ‘Infinity’ product of ICICI Bank Ltd.
gets only about 30,000 hits per month, with around 3,000 transactions taking place on
the Net per month through this service. Though various security options like line
41

encryption, branch connection encryption, firewalls, digital certificates, automatic signoffs,
random pop-ups and disaster recovery sites are in place or are being looked at, there is
as yet no Certification Authority in India offering Public Key Infrastructure which is
absolutely necessary for online banking.
The communication bandwidth available today in India is also not enough to meet the
needs of high priority services like online banking and trading. Some banks even today
do not have uninterrupted power supply unit or systems to take care of prolonged
power breakdown. Proper encryption of data and effective use of passwords are also
matters that leave a lot to be desired. Systems and processes have to be put in place to
ensure that errors do not take place.
The Department of Telecommunications (DoT) is moving fast to make available
additional bandwidth, with the result that Internet access will become much faster in the
future. This is expected to give a fillip to Internet banking in India.
Reserve Bank of India has taken the initiative for facilitating real time funds transfer
through the Real Time Gross Settlement (RTGS) System. Under the RTGS system,
transmission, processing and settlements of the instructions will be done on a continuous
basis. Gross settlement in a real time mode eliminates credit and liquidity risks. Any
member of the system will be able to access it through only one specified gateway in
order to ensure rigorous access control measures at the user level. The system will have
various levels of security, viz., Access security, 128 bit cryptography, firewall,
certification etc. Further, Generic Architecture, both domestic and cross border, aimed at
providing inter-connectivity across banks has been accepted for implementation by RBI.
Following a reference made this year, in the Monetary and Credit Policy statement of
the Governor, banks have been advised to develop domestic generic model in their
computerization plans to ensure seamless integration. The abovementioned efforts would
enable online banking to become more secure and efficient.
4.2 How e-banking can ease your life :
42

Penalty due to non-payment of bill is not new to anyone of us. And quite obviously,
who likes the long procedure of writing a cheque, standing in a long queue and then
ensuring that the particular amount is available in your bank account?.
Indian banks are trying to make your life easier. Not just bill payment, you can make
investments, shop or buy tickets and plan a holiday at your fingertips. In fact, sources
from ICICI Bank [ Get Quote ] tell us, "Our Internet banking base has been growing at
an exponential pace over the last few years. Currently around 78 per cent of the bank's
customer base is registered for Internet banking."
To get started, all you need is a computer with a modem or other dial-up device, a
checking account with a bank that offers online service and the patience to complete
about a one-page application--which can usually be done online. You can avail the
following services.
4.2.1 Bill payment service
Each bank has tie-ups with various utility companies, service providers and insurance
companies, across the country. You can facilitate payment of electricity and telephone
bills, mobile phone, credit card and insurance premium bills.
To pay your bills, all you need to do is complete a simple one-time registration for
each biller. You can also set up standing instructions online to pay your recurring bills,
automatically. One-time standing instruction will ensure that you don't miss out on your
bill payments due to lack of time. Most interestingly, the bank does not charge
customers for online bill payment.
4.2.2 Fund transfer
You can transfer any amount from one account to another of the same or any another
bank. Customers can send money anywhere in India . Once you login to your account,
you need to mention the payee’s account number, his bank and the branch. The transfer
will take place in a day or so, whereas in a traditional method, it takes about three
working days. ICICI Bank says that online bill payment service and fund transfer facility
have been their most popular online services.
4.2.3 Credit card customers
Credit card users have a lot in store. With Internet banking, customers can not only pay
their credit card bills online but also get a loan on their cards. Not just this, they can
also apply for an additional card, request a credit line increase and God forbid if you
lose your credit card, you can report lost card online.
43

4.2.4 Railway pass
The bank would just charge Rs 10 + 12.24 per cent of service tax. This is
something that would interest all the aam janta. Indian Railways has tied up with
ICICI bank and you can now make your railway pass for local trains online. The
pass will be delivered to you at your doorstep. But the facility is limited to Mumbai
[ Images ], Thane, Nashik, Surat
4.3 Investing through Internet banking
Opening a fixed deposit account cannot get easier than this. You can now open an FD
online through funds transfer. Online banking can also be a great friend for lazy
investors.
Now investors with interlinked demat account and bank account can easily trade in the
stock market and the amount will be automatically debited from their respective bank
accounts and the shares will be credited in their demat account.
Moreover, some banks even give you the facility to purchase mutual funds directly from
the online banking system.
So you need not worry about filling those big forms for mutual funds, they will now be
just a few clicks away. Nowadays, most leading banks offer both online banking and
demat account. However if you have your demat account with independent share brokers,
then you need to sign a special form, which will link your two accounts.
4.4 Recharging your prepaid phone
Now you no longer need to rush to the vendor to recharge your prepaid phone, every
time your talk time runs out. Just top-up your prepaid mobile cards by logging in to
Internet banking. By just selecting your operator's name, entering your mobile number
and the amount for recharge, your phone is again back in action within few minutes.
4.5 Shopping at your fingertips
Leading banks have tie ups with various shopping websites. With a range of all kind of
products, you can shop online and the payment is also made conveniently through your
account. You can also buy railway and air tickets through Internet banking.
4.6 Internet banking v/s traditional method
44

In spite of so many facilities that Internet banking offers us, we still seem to trust our
traditional method of banking and is reluctant to use online banking. But here are few
cases where Internet banking will turn out to be a better option in terms of saving your
money.
'Stop payment' done through Internet banking will not cost any extra fees but when done
through the branch, the bank may charge you Rs 50 per cheque plus the service tax.
Through Internet banking, you can check your transactions at any time of the day, and
as many times as you want to.
On the other hand, in a traditional method, you get quarterly statements from the bank
and if you request for a statement at your required time, it may turn out to be an
expensive affair. The branch may charge you Rs 25 per page, which includes only 30
transactions. Moreover, the bank branch would take eight days to deliver it at your
doorstep.
If the fund transfer has to be made outstation, where the bank does not have a branch,
the bank would demand outstation charges. Whereas with the help of online banking, it
will be absolutely free for you.
As per the Internet and Mobile Association of India's report on online banking 2006,
"There are many advantages of online banking. It is convenient, it isn't bound by
operational timings, there are no geographical barriers and the services can be offered at
a miniscule cost."
Case Study - Bank A Background
This case was developed from a research conducted by the one of the
authors of this book. For confidentiality reasons we call it Bank A. The Bank
A is one of the UK’s leading providers of personal financial services and
products It is a very innovative company and its enthusiasm for new
technologies means that it is in forefront of providing financial services
through its e-banking channel. It is one of the medium sized banks in United
Kingdom with over 400 branches nationwide. Initially it was opened as a
small building society and remained so until World War One. Following the
development boom of the ‘30s, the Bank A was able to expand rapidly and
45

by mid nineteen thirties it was the third largest building society in the
country with assets of over £38m. Growth continued during the 1940s and
50s. The 1960’s saw the transformation of the Bank A into a modern
financial services institution, with the opening of a new dedicated
administration centre. By 1970, half of all UK families owned their own
homes and the strong demand for mortgages enabled the Bank A to
establish itself as a national building society, with high street branches in
most of England. The Bank A was one of the first financial institution to
network its branches, using countertop on-line terminals linked to the central
mainframe. Deregulation in the mid-1980s enabled building societies to
compete in many new areas that had previously been the traditional
preserve of the banks and insurance companies. The Bank A took a lead in
this through diversification into new areas. It developed several subsidiary
companies offering a wide range of services including life assurance unit
trusts, estate agency, insurance and direct sales. Abroad, the Bank A has
established it’s subsidiaries in many European countries such as Italy, France
and Germany. In late 1990s, like any other building societies it floated in
London Stock Exchange to become a Public Limited Company
E-Banking at Bank A
Most of the financial services at the Bank A are designed to be accessible through a
variety of different channels such as branches, telephone, the Internet, digital televisions
and mobile phones. This means that many customers (those with right equipment of
course) have all-time access to their finances. This gives a flexibility to customers to
manage their finances wherever they are, and whenever they want, instantly. Using any
of the e-Channels available at the Bank A, customers can view their current account and
saving accounts; view the balance/valuation of any Bank A account including mortgage;
savings, current account, personal loan, and unit trusts; pay bills; arrange to pay bills or
transfer funds on future dates up to six weeks ahead; move money between their
accounts and mortgage; change their pin; apply for personal loans, new accounts or
mortgages. To provide this kind of access and flexibility, the Bank A continuously
invested heavily in technology and has gone through many organizational changes, which
are discussed in a later section.
Reasons for Participation in E-Commerce
Since becoming a PLC, Bank A’s strategy has been focused on adapting to the new
world of multiple distribution outlets beyond the traditional branches network. The main
reason behind this was top management’s belief that winners will be those organizations
which combine new technologies with traditional business to provide integrated
46

solutions which meet customer needs Another reason was the fast changing environment
in the retail banking industry with new entrants, such as Egg and Smile providing
financial services using innovative business models and technologies. Relative maturity
of Internet technologies meant provision of convenient services (via Internet, mobile
phones and iTV) to customers was now more feasible with a promise of much lower
transaction costs. Taking these factors into account, the Woolwich decided to be an
innovation leader in the area of e-commerce rather than drag behind its competitors.
Enhancement of the company’s image for both customers, as well as investors, was
another key objective. Increasing customer retention through depth of relationship and
service was also an important objective. Internet technology was seen as a key enabler
for this purpose because it can provide rich information about customers, enabling the
Woolwich to personalise financial services according to the needs of the individual
customers, thus enriching the relationship and as a result achieving greater loyalty. Very
early into the e-banking implementation, they noticed that customers who have signed up
to Woolwich e-banking service are 65 per cent more profitable for the bank because
these channels were attracting high-income customers. They were also getting customers
from the remote areas of UK, where they had no penetra- tion in past.
CSFs in E-commerce at the Bank A
E-banking has been a very successful initiative for the Woolwich winning the approval
of existing customers (many of them have signed up the online banking channel) and
attracting new ones. The following is brief description of the factors which were reported
(by our research participants) to be critical to the success of e-banking.
Understanding Customers
This factor has been seen as a key to success at the Bank A. They invested heavily in
relevant technologies, which enables them to gather and analyze extensive customer
information. At a basic level they used a systems called QuickStream which helped them
to analyze (by providing the record of customer’s clicks in the form of a stream)
customer’s behaviour during their visit to the Bank A’s website. “This information is
very useful for both design and marketing purposes”, said the Manager for Customer
Support for e-Channels. They also used a software tool, called ‘Webtrend’, which records
where people enter the home page and how they navigate through it and how they leave
the site. According to the e-commerce En- hancement Manager, “This enables us to
evaluate our advertising campaigns as well as get continuous feedback on our services
and accessibility issues (design of website etc.)”. They also used a software web-
collaboration tool, which was a call agent that could see where a customer is on their
47

website. It could record how long they have been on each individual page. Viewing this
information on screen in real time, a sales agent could type in a message on customers’
screen, offering help and advice. This initiative was aimed at improving their customer
services and increasing sales. This combined with other factors has helped them expand
current customer base by acquiring new customers as well as enriching existing
relationships.
Organizational Flexibility
The Bank A has changed considerably in terms of departmental structures and business
process in order to web-enable itself. There are new teams such as the e-commerce
development team, which they did not have before but also other business processes
behind that team have been significantly changed. According to e-commerce Enhancement
Manager “we did it the wrong way, the re-engineering of business process followed the
introduction of e-commerce rather than other way round”. There are many processes
which have now been totally integrated and automated such as delivering check or
deposit books on customer’s request. Staff number has not reduced, instead their role has
changed and they all are very much geared towards sales. The ability to focus on sales
has resulted in 3.6 products held by each customer, which is much higher than its
competitors. This radical transformation from being a mortgage centred building society
to a customer focused and integrated bank was another reason for its takeover by the
Barclays. Bank A’s Principal Technical Specialist, pointed out that “Barclays want to
utilise the experience of the Bank A’s managers to transform themselves in similar ways.
That is why there have been number of senior appointments within Barclays from the
Bank A’s staff.
Web-Specific Marketing
The Bank A is aware of the power and uniqueness of the Internet medium. The Internet
requires a different way of marketing to sell products. Their Manager for Customers’
Support for e-Channels stated that, “e-Channels have opened up a whole new way of
communicating with customers and we have a dedicated area within our marketing
function that deals with the e-Channels. This means that e- commerce has changed the
way the marketing department works in order to cope with new ways of marketing.
Now the focus is on understanding customers and using that understanding to enrich
relationships with them”. Their home website presents adverts on the right hand side of
the screen which keep asking customers about their requirements for other financial
services. If a customer clicks on any of those advertisement windows, they are led to
the relevant page. According to e-commerce Enhancements Manager “from next year
48

we’re going to start tailoring advertisements to personalise them. For example, when a
customer logs into our system, we will be able to conduct a quick profile of his/her
account, look at what he/she hasn’t got with us and that’s what we would start
advertising”. This profil- ing ability is also likely to enable them to assess the
requirements of individual customers and offer services accordingly. The main idea
behind this is replacing high margin products with smaller margin – multi-product
relations with customers. The management believes that e-banking is key to success in
relationship marketing. So far this strategy has resulted in 65% increase in the average
income per e-banking customer.
Rapid Delivery of Services
E-commerce has raised people’s expectations regarding the time it takes to deliver
services. Whereas in past, people were ready to accept a couple of day’s delay in funds
transfer, now it has come down to real time. As indicated by e-commerce Enhancement
Manager “people move money between their accounts and walk straight to the branch to
draw it out. WAP service is heavily used for this purpose on Saturdays”. People want
other services such as loan or mortgage approval quickly too. This demand for instant
services is becoming a critical success factor and the Bank A see it as an opportunity to
gain more business.
Integration
-banking will not drain into upgrading legacy systems. This architecture also allows the
Bank A to add new off-the-shelf systems to quickly increase the capacity of the systems.
Another aspect of integration is helping customers to see the whole financial picture.
This means providing customers with information about all products with the Bank A,
analyzed and summarised on a single page. For example a customer may have a current
account, a saving account distributed into many pots, mortgage and credit card with the
Bank A. It would be useful for him to know at a glance, his financial position to make
informed decisions. Another word used for this type of services is account aggregation.
The Bank A was one of the first bank to offer this kind of services to its customers.
Availability of Resource Instant delivery required extensive integration of business
processes and Informa- tion Systems (IS). One of their senior IT Manager explained that,
“the Bank A uses a middleware layer for integration of different systems and channels.
This allows a host of different clients (front end systems) to access a whole lot of back-
end systems”. This middleware layer which provides common interface to all existing
systems, enables them add new systems quickly as the interface has to be implemented
49

just once, to the middleware rather than to the all range of different systems. In
addition, said Head of e-commerce at the Bank A, “this middleware enabled us to
implement a component-based architecture. Tasks such as checking accounts are available
as business objects in the middleware and can be used by all channels”. This makes the
channels interchangeable and allows the bank to add new channels or services without
disrupting core services. As shown in Figure 8.1 the middleware allows access to all
services through all channels. The downside is that if the middleware goes down, it can
have quite a lot of effect on all channels. The technology architecture shown in Figure
8.1. has enabled the Bank A to easily adapt its business model to the new requirements
of e-banking, without touching the legacy mainframes used in the back-end environment.
This ensures that the system will evolve over time and the resources allocated for e
Availability of human and financial resources is critical in all types of projects. In new
technology projects such as e-banking, shortage of readily skilled human resources can
be a severe handicap. The Bank A got round this problem by imple- menting a very
intensive training programme for some carefully selected members of the existing staff.
As an example, their e-commerce Enhancements Manager stated that “when we
implemented Wireless Application Protocol (WAP), there was no one in the country who
knew about the implementation of WAP technology for financial services so we decided
to send seven of our people to Helsinki for training. They were the people who
implemented WAP technology on their return from that training. Where need dictated,
people from other organizations such as Unisys were also brought in”. Regarding
financial resources, they did not have any considerable problems as top management was
firmly behind this project and providing sufficient resources for uninterrupted progress.
Support from the Top Management
Support from the top Management is widely considered to be a key success factor in
technological projects (Turban et al., 2000). In the Bank A’s case, its chief execu- tive at
the time of implementation of project, worked out the open plan, came up with finances
for it and participated in day- to-day implementation of the project. “Without his
absolute commitment we wouldn’t have done it” (e-commerce En- hancements Manager).
Security
Security is a mentioned as very critical success factor by almost everybody in e-
banking field. In fact, lack of it, or consumers’ fears about it, is one of the biggest
obstacles in the growth of e-banking. The Bank A uses highest levels of encryption to
secure their system. Their Analyst/Programmer further elaborated on this point by saying,
50

“we use secure layer technology which encrypts all of the information, from a customer
logging in or filling in an application form to storage and feedback to the customer”.
Costs of this high level of security are very high but they see it as necessary evil.
Established Brand Name
Having an established brand name was also cited by many informants at the Bank A as
a critical success factor. The main reason for this given by most informants was that, a
household name such as the Bank A gives customers added confidence to conduct
business online. Other reasons may include their previous positive ex- periences with the
company and the non-substantial nature of the online medium which makes trust in a
well-known name even more important than when more traditional channels are used.
Bank A’s approach to using their brand name to enhance trust in online environment is
well supported in e-commerce related literature. For example, Turban et al. (2000)
proposed branding as a transferable resource across physical and social barriers to entry
for customers in a new and perceptibly daunting environment. The importance of brand
factor is widely recognised now and some virtual financial organizations are opening or
considering to open some high street branches to enhance their brands.
Having Multiple Channels
This factor is also related to the non-substantial nature of the online medium. Most of
the informants at the Bank A stated that e-banking by an organization, which is also
accessible through other channels such as branches and phone banking, is most likely to
successful in the long run. This is because customers can use the most desirable channel
suitable for task in hand. For example, a customer may use the Internet for checking
account balances or transfer money between accounts but may ring in to settle a dispute
or go to a branch for a face to face discussion on complex matters such as mortgages.
To fully utilise multiple channels advantage, channel integration is required which may
include: sharing of business rules and other components across channels, a common set
of interfaces into core systems for use across all channels, high quality customer-centred
functionality across all channels, ability to deliver all products and services through all
channels and customer services which are able to support all channels. The Bank A
was very close to these ideals for channels integration.
Fast Responsive Customer Service
There is usually higher expectation for customer service from the e-Channels. Also, to
support 24 hours e-Channels, customer service has to be available 24 hours too. Before
51

the arrival of e-commerce at the Bank A, customer services were not available 24 hours
a day. To meet these expectations and requirements, support to customers has improved
considerably, with this all- time availability of customer services and increased choice for
customers to use whichever channel they wish to use at any time. The technical help
desk to solve technical problem experienced by the customers’ support services helpdesk
at the call centres. According to the Bank A’s Technical Support Analyst “our aim is to
develop seamless integrated architecture that will allow the customer to view, access and
interact with the set of services that the Bank A is offering and a few technical
problems are preventing us from this ideal, but we’ll get there soon”. To minimise these
technical problems, every new component has to be tested across numerous hardware and
software platforms resulting in very high testing costs. However, it is also a necessity to
reduce load on customer services and to reduce any inconvenience to the customers.
Mixed Strategy for Selection of Vendors
In information technology projects, choice of vendors is generally an important issue.
Some companies go for a single vendor solution to ensure easy integration whereas
others chose best of breed products to find products, which meet their requirements
better. At the Bank A, they have adopted a mixed strategy. They try to get most of the
components from Microsoft but where requirements dictate, they also get some
components from other vendors or develop themselves. They have a Microsoft
consultancy team operating within their headquarters and in many projects, their expertise
of Microsoft products is heavily utilised. Therefore, they try to use Microsoft products as
their first choice. Another reason for this may be the easier integration of different
components from same vendor.
Systematic Change Management
The Bank A paid special attention to this issue from beginning. They consulted most of
the employees on major decisions. E-banking was quite aggressively promoted within the
organization in a number of ways. First, they made sure that every employee has access
to the Internet. Second, they encouraged them to open “open plan” accounts by putting
£100 in the accounts of those who did, so they can actually experience new e-Channels.
Third, when mobile phone banking was launched, they provided everyone who wanted,
with a mobile phone. Fourth, they put Internet booths in branches so staff can
experiment with it and promote it to the customers. As stated by the Bank A’s Principal
Technical Specialist, “changes are communicated to the Bank A’s staff in weekly or
monthly team talks, where staff get a chance to discuss all aspects of a change. In
addition the company’s intranet and monthly newsletters are used for this purpose”. This
52

strategy helps make staff feel an important part of the change and eases resistance to
change. A major benefit of this strategy they experienced was useful feedback, which
was invaluable for improving services and system interface. Another major benefit of
promotion of e-commerce within the organization was that most members of staff were
willing to go along with the changes it brought with it. Their Principal Technical
Specialist stated that “we’ve seen a massive change in technologies and work practices
during the last few years, active promotion of e-commerce helped us get the required
commitment from our people”.
General comments about Bank a’s E-Banking
They did not consider incentivising e-Services (i.e. cheaper loans or higher interest
rates on savings in the Internet accounts) was necessary to attract customers to their new
channels. The main reason cited by them for this was that, their brand name, customer
service and technological leadership was enough for this purpose. Another reason cited
by their Customers Support Manager for e-Channels was that “we don’t differentiate
products for e-Channels because our main target is customers who prefer a multi-channel
solution rather than hunt for bargains from Internet only banks”. While this may be true,
in our opinion product differentiation (offering higher value products on e-Channels)
would attract even larger numbers of customers because many of them expect this from
e-Channels. Their website design and operational functionality was a rare weak link in
the Bank A’s e-commerce approach. The following criteria was used for evaluation of the
Bank A and other websites: the homepage, online quotation, online application, pricing
information, clarity of explanations, ease of navigation, on site resources, return visit
incentives and overall ease of doing business. On many occasions, the Bank A’s financial
calculator was ‘down for upgrade’ and the table of typical examples of their financial
products was just one long page and was difficult to read. Application forms were also a
touch too long and difficult to fill in. A positive aspect of the Bank A’s website
operations is that they are keeping it fairly fresh with regular changes on a monthly
basis to its look and feel. Another area in which they can build on their existing
successes is to broaden the scope of their information gathering and analysing
technologies across all channels. Whereas it’s true that e-Channels are better suited to
this kind of activity, understanding customers’ interaction patterns with all channels
would be very useful as it would provide a fuller picture to be utilised to further
enhance their relationship with customers. The Bank A’s attitude and approach to e-
banking is very impressive. In the beginning, they made the mistake of jumping on to e-
banking without much plan- ning and realisation of its organizational impacts. However
they learnt from their mistakes quickly and followed e-banking with the organizational
53

changes required for e-banking, such as the re-engineering of business processes and
some modifi- cations in the organization’s management structure to speed up decision-
making process.
54

CONCLUSION
While electronic banking can provide a number of benefits for customers and new
business opportunities for banks, it exacerbates traditional banking risks. Even though
considerable work has been done in some countries in adapting banking and supervision
regulations, continuous vigilance and revisions will be essential as the scope of e-banking
increases. In particular, there is still a need to establish greater harmonization and
coordination at the international level. Moreover, the ease with which capital can
potentially be moved between banks and across borders in an electronic environment
creates a greater sensitivity to economic policy management. To understand the impact of
e-banking on the conduct of economic policy, policymakers need a solid analytical
foundation. Without one, the markets will provide the answer, possibly at a high
economic cost. Further research on policy-related issues in the period ahead is therefore
critical.
Current scenario of E-banking
 E-banking cannot only improve the access to finance, particularly for SMES
but also allows access to finance with better and more competitive rates.
 Uses online banking as new delivery tools to improve to access to finance and
alleviate financial constraints
BIBLIOGRAPHY
Books:
 Banking Finance & Service System
 E-Banking
57

Website :
 www.thefreedictionery.com
 www.google.com
o http://kalyan-city.blogspot.in/2011/02/e-banking-online-banking-
advantages-of.html
o http://www.rediff.com/money/2006/nov/17mc.htm
o http://www.worldjute.com/ebank.html
o http://www.scribd.com/doc/21099962/Project-on-E-Banking
 www.yahoo.com
o http://www.scribd.com/doc/19146199/ebanking
58

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