1. PRESENTATION ON
Risk Management Options for
E-Payment System
SUBMITTED TO: SUBMITTED BY:
Ms. Ramneek Kaur Gaganpreet (4617)
Shyna (4618)
M.Com IInd
2. Introduction
Electronic payment media are likely to figure importantly in the development of electronic
commerce, and retail electronic banking services and products, including electronic money,
could provide significant new opportunities for banks. Electronic banking may allow banks to
expand their markets for traditional deposit taking and credit extension activities, and to
office new products and services.
Purpose and Organization
The development and use of electronic money and some forms of electronic banking are still
in their early stages. Given the degree of uncertainity about future technological and market
developments in electronic banking and electronic money is important that supervisory
authorities avoid policies that hamper useful innovation and experimentation. At the some
time, the basic committee recognises that along with the benefits, electronic banking and
electronic money activities carry risks for banking organizations and these risks must be
balanced against the benefits.
3. Major steps in Risk Management process:
Assessing risks
Implementing measures to control risk exposures.
Monitoring risks
Electronic Banking
Refers to the provision of retail and small value banking products and services through
electronic channels. Such products and services can include deposit taking lending account
management and the provision of other electronic payment products and services such as
electronic money.
Electronic Money
Refers to “stored value” stored value products include “hardware” or “card-based”
mechanisms (also called electronic purses) and software or network based mechanisms (also
called digital cash)
4. Identification and Analysis of Risk
Basic types of risks generated by electronic banking and electronic money are note new some
of the risks and problems banks may face apply both to electronic money and electronic
banking activities:
1. Operational Risk
Operational risk arises from the potential for loss due to significant deficiencies in system
reliability or integrity. Operational risk can also arise from customer misuse and from
inadequately designed or implemented electronic banking and electronic money systems.
2. Reputational Risk
Reputational risk is the risk of significant negative public opinion that results in a critical loss of
funding or customers. It may also when systems or products do not work as expected and
cause negative public reaction.
5. 3. Legal Risk
Legal risk arises from violations of or non conformance with laws, rules, regulations, or
prescribed practices, or with the legal rights and obligations of parties to a transactions are
not well established.
4. Other Risks
Traditional risks such as credit risk, liquidity risk, interest rate risk, market risk may also arise
from electronic may also arise from electronic banking and electronic money activities,
though their practical consequences may be of difficult magnitude for banks and supervisor
than operational, reputational and legal risks.
6. Risk Management
For an increasing number of banks there may be strategic reason for engaging in electronic
banking and electronic money activities. In addition greater use of electronic banking and
electronic money may increase the efficiency of the banking and payment system benefitting
consumers and mechanism.
Steps:
1) Assessing risks
2) Managing and controlling risks
3) Monitoring risks