This document provides an overview of internet banking architecture and implementation. It discusses what internet banking is, the different models and levels of internet banking. It then covers the key drivers for internet banking like globalization, technology changes, and customer needs. It describes the essential components of an internet banking architecture like centralized or distributed systems. It also discusses security issues and risks as well as the implementation needs for a bank to deploy internet banking.

1. Banking Technology
Internet Banking Architecture
and Implementation

2. Banking Technology – M.Tech (IT)
Agenda
• What is Internet Banking?
• Levels and Models of Internet Banking
• The Drivers
• The Essentials
• Architecture – Distributed, Centralised, Hybrid
• Issues
• Security
• Implementation – Needs & Necessities

3. Banking Technology – M.Tech (IT)
What is Internet Banking?
Traditionally, Internet Banking refers to: “to the use of the Internet
as a remote delivery channel for banking services”
But today, this definition is not adequate…
“Internet Banking refers to the use of Internet as a channel for:
• Delivery of traditional & new banking services
• Delivery of customer-oriented services such as EBPP
• Facilitating several ancillary products and services such as e-
commerce, electronic payments, CRM
• Integrating multiple delivery channels such as ATMs, call
centres, mobile banking”
It is an all-pervasive medium for bank-customer interaction
Three Levels of Internet Banking:
• Basic Level – Websites only
• Second Level – “simple transactional” websites
• Third Level – “fully transactional”

4. Banking Technology – M.Tech (IT)
Key Drivers for Internet Banking
Globalization
Greater range of easy-to-find products/services
More buyers, sellers & Competitors
Price no longer an edge – speed, reliability & access are!
Rapid Growth of Internet
www no longer means “world wide wait”
Internet is penetrating 3 times faster than radio
Given power to Buyers
Pace of Technology Change
“Market disequilibrium”
Non-traditional payment intermediaries are benefiting from it
Need for Flexibility and Adaptability to technology in motion
Customer Perceptions
As per AFP Research survey, more than 50% find Internet Banking useful in
performing own enquiries, gaining updated information, sharing data &
access from multiple locations.

5. Banking Technology – M.Tech (IT)
The Rise of Internet Banking
A Four Factor Model of Benefits
Convenience
Flexibility
Cost
Efficiency
Several more drivers
LLow Internet banking penetrationow Internet banking penetration;; DDevelopment & adoption of electronicevelopment & adoption of electronic
payment systemspayment systems andand IImplementation of strong security solutions such asmplementation of strong security solutions such as
PKI (Public Key Infrastructure)PKI (Public Key Infrastructure)

6. Banking Technology – M.Tech (IT)
Three Models of Internet Banking
• Pure Internet model, where all the services are exclusively
delivered over the Internet.
– Independent venture, where Internet banking venture is created from the
scratch by shareholders, who have no relationship to an existing financial
institution. Eg. Security First Network Bank in US – 1st
such bank ever
– Subsidiary project (e-bank-in-the bank), where Internet banking initiative is
launched by a large organisation as distinct entity, isolated from the rest of
organisation. Eg. Egg launched by Prudential Plc.
• Click and mortar model, combining Internet delivery with the
traditional physical branch network.
– Two undisputed champions of Internet banking, Wells Fargo in the United
States and Nordea in Scandinavia have adopted this model from the very
beginning of their foray
• On-line services extension model, existing provider of on-line
financial services, extends its offerings into the on-line banking.
– E-trade (a brokerage firm) bought Telebank in 1999 to offer Internet banking
services

7. Banking Technology – M.Tech (IT)
The Essentials
The Essentials for Internet Banking:
• A central customer data profile
• Networking
• Requisite hardware (servers)
• Centralised banking solutions for multi-channel integration
– Internet can be used with any channel!
• APIs to various sites
• Security technologies

8. Banking Technology – M.Tech (IT)
3 Options of Distributed Environment
1. Bank has its web site hosted at its own location (data centre)
• Advantages: No single point failure; Own location of data centre means
that no involvement of third-party.
• Disadvantages: Latency induced due to the amount of routing involved;
Failure of a single branch means the inability of the customers of that
branch to do Internet Banking.
2. Bank has its web site hosted in a Closed User Group (CUG) environment
• Advantages: No major investment in network infrastructure, No
dependency on any third-party for data centre.
• Disadvantages: Latency, Failure of the CUG network paralyses Internet
Banking, Failure of a single branch means the inability of the customers of
that branch to do Internet Banking.
3. Web hosting by Third Party Service Provider (TSP) with no CUG network
• Advantages: Pay and use facility of the data centre; No cost on
infrastructure establishment.
• Disadvantages: Dependency on third-party for the data centre, Failure at
data centre means failure of Internet Banking, Failure of the distributed
architecture.

9. Banking Technology – M.Tech (IT)
3 Options of Centralized Environment
• Bank has its web site hosted at its own
location (data centre)
• Bank has its web site hosted in the data
centre of the CUG network
• Bank has its web site hosted in a Third
party Data Centre with a shared
database

10. Banking Technology – M.Tech (IT)
Customer Connects through Internet
•Deny every
Thing except
port 80
•Permit Traffic
only to the IP
address of the
web server
Customer
Internet Banking
application server
Web server
Internet Banking
Local Database
Middle ware
Central Database
ATM Switch
Layer3 Device
DMZ zoneDMZ zone
Local LANLocal LAN
Host based
IDS
Web server
Firewall
Internet Banking Architecture

11. Banking Technology – M.Tech (IT)
InternetInternet
DMZ
App
Srv
WS
Branch 1Branch 1
Branch 2Branch 2
Branch NBranch N
ATM switch /Router
L 3 Switch
MW & DB
MW & DB
MW
& DB
VLAN
Bank WAN
Internet Banking – Distributed
Environment
(With Own Website at Data Center)

12. Banking Technology – M.Tech (IT)
InternetInternet
DMZ
WS
L 3 Switch
App
Srv
VLAN
Bank Data Centre
with WAN
DB
Srv
VLAN
MW
VLAN
CUGCUG
DMZ
WS
Internet Banking – Centralized
Environment
(With Own Website at Data Center)

13. Banking Technology – M.Tech (IT)
InternetInternet
DMZ
WS
Branch 1Branch 1
Branch 2Branch 2
Branch NBranch N
ATM switch /Router
L 3 Switch
DB
DB
DB
App
Srv
VLAN
Bank WAN
Centralise
d DB
Bank’s
Data Centre
Hybrid Environment Internet Banking
Architecture

14. Banking Technology – M.Tech (IT)
Web
Browser
Firewall
Internet Banking App
Server
Web Host
Web
Server
Management
Internet Banking DB
Server
Middleware
Database
Internal Network
Data Centre
People
Security
Component
Model

15. Banking Technology – M.Tech (IT)
The Various Risks
• Web Browser - Browser Crash, System Damage, Lack of Privacy,
Misuse of personal information
• Firewall - System failure, System compromise, Misconfiguration,
Improper administration
• Web Server- System failure, Presence of unnecessary services,
Misconfiguration, Multiple administrator-level access, Not
protected by the firewall
• Web Host - Unrestricted access to users, Unknown and unnecessary
services on the OS, Loopholes like missing updates and patches.
• Internet Banking Application Server - System failure, Unrestricted
access to users, Poorly configured OS
• Database - Poor database design, Tampering/loss of data
• Data Centre – Physical & access security, Disasters
• Internal Network - Unauthorised access to Network resources, Poor
maintenance of Network

16. Banking Technology – M.Tech (IT)
The Issues
• Security Concerns – Eavesdropping, Hacking,
Identity Theft, Tampering, Impersonation
• Fraud
• Privacy Issues
• Legal & Regulatory Issues
• Cross-border issues – Cross certification, legalities,
jurisdiction, etc.
• Law-enforcement issues
• Standards
• Change Management

17. Banking Technology – M.Tech (IT)
Internet Banking Implementation –
Needs and Necessities
• Role of Board of Directors
• Creation of a Working Group
• Feasibility study
• Requirements Analysis
• Design
• Development
• Deployment & Implementation
• Maintenance

18. Banking Technology – M.Tech (IT)
Internet & FIs in India
Internet Banking witnessing rapid growth –most of the domestic
banks in India have Internet banking capabilities
Stock exchanges
• Regional stock exchanges connected through Interconnected
Stock Exchange (ISE) of India Ltd. (holding company)
• Bombay Stock Exchange and National Stock Exchange – are
online
• NSE – uses satellite technology for trading. Has floorless trading
system
• BOLT of Bombay Stock Exchange - floorless and fully
automated screen-based trading facilities in capital market
instruments
• BSE WebX – Web-based trading facility

19. Banking Technology – M.Tech (IT)