L.S. RAHEJA COLLEGE OF ARTS & COMMERCE JUHU ROAD, SANTACRUZ (WEST), MUMBAI 400 054
PROJECT REPORT ON
“ELECTRONIC BANKING”
SUBMITTED BY
SNEHA .A. DESAI In partial fulfillment of the requirement of T.Y.B. COM (BANKING & INSURANCE) Semester V
PROJECT GUIDE PROF: SUCHETA PAWAR
UNIVERSITY OF MUMBAI ACADEMIC YEAR 2010-2011
L.S. RAHEJA COLLEGE OF ARTS & COMMERCE JUHU ROAD, SANTACRUZ (WEST), MUMBAI 400 054
PROJECT REPORT ON
“ELECTRONIC BANKING”
SUBMITTED BY
SNEHA .A. DESAI In partial fulfillment of the requirement of T.Y.B. COM (BANKING & INSURANCE) Semester V
PROJECT GUIDE PROF: SUCHETA PAWAR
UNIVERSITY OF MUMBAI ACADEMIC YEAR 2010-2011
L.S. RAHEJA COLLEGE OF ARTS & COMMERCE JUHU ROAD, SANTACRUZ (WEST), MUMBAI 400 054
PROJECT REPORT ON
“ELECTRONIC BANKING”
SUBMITTED BY
SNEHA .A. DESAI In partial fulfillment of the requirement of T.Y.B. COM (BANKING & INSURANCE) Semester V
PROJECT GUIDE PROF: SUCHETA PAWAR
UNIVERSITY OF MUMBAI ACADEMIC YEAR 2010-2011
DECLARATION
I, SNEHA DESAI, of L. S. Raheja College of Arts & Commerce of T.Y.Banking and Insurance Semester V, hereby declare that I have completed this project on Electronic Banking in the Academic Year 2010-2011. The information submitted is true and original to the best of my knowledge.
Signature of Internal Guide/ Examiner
Signature of the Student
CERTIFICATE I, Prof. SUCHETA PAWAR, of L. S. Raheja College of Arts & Commerce, hereby certify that Miss. Sneha Desai student of T.Y.Banking and Insurance Semester V has completed her project on Electronic Banking in the Academic Year 2010-2011. The information submitted is true and original to the best of my knowledge.
Signature of Project Co-ordinator
Signature of External Guide/ Examiner
Signature of Principle of college
ACKNOWLEDGEMENT The satisfaction and euphoria that accompanies the successful completion of any task would be incomplete without mentioning the names of the people who made it possible, whose constant guidance and encouragement crown all the efforts with success. I my grateful to well wishers for their help and support extended for the completion of this project. I am greatly indebted to the manager of HDFC and the various people who helped me in my survey through their kind co-operation by providing the relevant information. I would like to express my sincere thanks to Mrs. Sucheta Pawar my project guide for her constant encouragement. Also sincere thanks to my friends for their help and assistance. Last but not the least, I thank everybody, who helped me directly or indirectly in completing the project that will go a long way in my career, the project is really knowledgeable & memorable one.
ELECTRONIC-BANKING
SR.NO.
CHAPTER NAMES
1
Introduction of E-Banking
2
Evolution of E-Banking
3
Issues related to E-Banking
4
Future prospects of E-Banking
5
Case study
6
Interview
7
Survey
8
Conclusion
9
Reference
10
Annexure
PAGE NO. 1-13 14-28 29-38 39-43 44-45 46-48 49-53 54 55 56-57
1. INTRODUCTION TO E-BANKING The developments taking place in information and communication technology are increasing competition in financial institutions worldwide.
Thus, the deployment of advanced technologies is essential to achieve a competitive edge. Recently, the banking industry was highly affected by the technological evolution that transformed the way banks deliver their services, using technologies such as automated teller machines, phones, the Internet, credit cards, and electronic cash. This project covers the introduction and diffusion of retail banking and the development in electronic delivery channels and payment systems in its marketplace which is termed as E-BANKING. Electronic banking is an umbrella term for the process by which a customer may perform banking transactions electronically without visiting any 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 is the most frequently used designations. It should be noted, however, that the terms used to describe the various types of electronic banking are often used interchangeably. 1.1
Importance of banks in financial sector
Financial sector reform constitutes a major area of work for the Banks. The financial and private sector development vice presidency - which is jointly run by the International Finance Corporation (IFC), the private-sector 1
funding arm of the Bank, and the main part of the Bank undertakes reform work in the sector through its financial sector operations and policy department. Additional private sector work is undertaken separately within
the IFC by the global financial markets department within the industries vice presidency. presidency. The financial sector operations operations and policy department department has 49 staf staff. f. Fina Financ ncia iall sect sector or refo reform rm work work is also also coor coordi dina nate ted d by the the Bank Bank's 's financial sector board, a cross-departmental body, and the financial sector network, an informal group of staff from across all departments and regional units. In total the Bank has 125 staff mapped to this sector, in comparison to just over 200 staff staff mapped to the health health sector. Bank support for financial sector reform was first underpinned by the 1989 World Development Report on financial systems and development. development. In 1992 the Bank developed its first operational directive on the financial sector. This was replaced in 1998 by an operational policy on lending to financial intermediaries. Lending for financial sector reform was covered under a 2000 financial sector strategy paper. A subsequent private sector development strategy paper from 2002 also covered aspects of the Bank’s work in the financial sector. Lending for financial sector reform is now covered by a revised financial sector strategy paper approved by the board in April April 20 2007. 07. The IEG IEG repor reportt (inte (interna rnatio tional nal enviro environm nment ental al go gover vernan nance) ce) described the 2000 strategy paper: “The financial sector strategy draws on the the lite litera ratu ture re in arg arguing uing for stro strong ng bank bankin ing g syst system emss base based d on go good od gove go vern rnan ance ce of bank bankin ing g inst instit itut utio ions ns and and a reli reliab able le lega legall and and judi judici cial al environment. Also consistent with research findings on competition is the strategy’s point that increasing competition in the financial sector may be 2
inappropriate for small financial systems, which characterize many of the Bank borrowers. The strategy is arguably less consistent with the literature
in promoting capital market development, to the extent that the literature is ambiguous on this point.” The central goals of the new strategy are to build financial systems that "do a go good od job of alloca allocatin ting g funds funds and and alloca allocatin ting g risks" risks" by impro improvin ving g investment opportunities, accessibility, transparency and risk management. The Bank plans to do this by "building and strengthening financial market and institutional infrastructure - enabling environment for financial market transactions - and actively facilitating the development of well-regulated, diversified financial financial institutions and markets." While the World Bank's work in financial sector reform covers many areas - i.e. credit markets, payments systems, insurance regulation - the banking sector has been the dominant area area of work. work. A 20 2005 05 Indep Independ endent ent Evalua Evaluatio tion n Group Group analy analysis sis finan financia ciall sector reform at the Bank and found three main pillars for the Bank's work: privatization privatization of state-owned banks, improvement improvement of regulatory frameworks frameworks and and stre streng ngth then ened ed supe superv rvisi ision on of bank banks. s. Betw Betwee een n 19 1993 93 and and 20 2003 03,, 40 countries took Bank loans aimed at the privatization of banks. Another key thru thrust st of World orld Bank Bank work work in this this area area is to allo allow w mark market et forc forces es to dete determ rmin inee inte intere rest st rate ratess and and to elim elimin inat atee the the prac practi tice ce of go gove vern rnme ment ntss directing the allocation of credit. Additionally the World Bank sought to increase competition and efficiency in the banking sector. The new strategy paper proposes a shift in emphasis from banking markets to more systemic issues like capital markers, regulation and oversight. 3
Lending for adjustment in the financial sector comes through both fina financi ncial al sector sector-sp -speci ecific fic loans loans and mu multi lti-se -secto ctorr loans loans that that includ includee some some
financial sector component. Between 1993 and 2003 the Bank funded 53 financial sector-specific adjustment programmers, now called 'development policy loans', to the tune of $19.7 billion. 'Investment 'Investment lending', lending', which finance financess technica technicall assistance assistance or involves involves supp support ort for bank privatizatio privatizations, ns, comprised 83 loans for a total $5.1 billion in the period. Most lending was in respon response se to fina financi ncial al crise crises, s, meani meaning ng that that vo volum lumes es in the sector sector varie varied d wildl wildly y from from year year to year. year. A furth further er 11 115 5 mu multi lti-se -secto ctorr adjus adjustm tment ent loans loans between 1993 and 2003 contained financial sector components, but it is impossible to attribute a specific amount of resources to the financial sector reform elements. Including adjustment and investment lending, 14 per cent of all Bank loans, representing 24 per cent of the Bank's entire portfolio had somee finan som financia ciall sector sector compon component ent.. In 20 2006 06 the Bank' Bank'ss spendi spending ng on non non-lending activities such as analytical and advisory work totaled $48.5 million, about 30 per cent of which was directed at the Africa region. 1.2 Globalization Globalization and and its impact on E-banking
During the past decade, commercial banks have witnessed dramatic change in information and telecommunications technologies (called ICT). For instance, the use of electronic communication, such as electronic bill paying, home banking, and internet transaction, has been altering the relationship of business-to-business (B2B) and business-to-customer (B2C). Thee mark Th market etin ing g acce accessi ssibi bili lity ty of fina financ ncia iall inst instit itut utio ions ns is exte extend nded ed and and increased to remote areas or countries via the new Telecommunication Telecommunication 4
technology. Hence, the role of ICT investments becomes more important in the banking industry. This trend is also called e-banking. The impacts of ICT in banking are categorized into three categories: 1) globalization, 2) deregulation, and 3) consolidation (Nieto, 2001). First, commercial banks can outreach remote clients via electronic communications devices to the extent that foreign customers are able to process transactions across national borders. Thus, the banking markets are marching toward globalization. Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world. Second, accompanying globalization, deregulation in the banking industry prevails in many countries in order to improve the competitive strength of the financial industry of a nation. Third, new technologies also enlarge the capacities of financial institutions and thus improve their cost efficiency. Therefore, more and more commercial banks have merged together to attain a higher level of efficiency than before. These issues on e-banking are international. Since the consolidation of financial institutions may take place across countries with different regulatory rules, the international supervision on the banking regulation is urgent. In other words, we must set up proper international banking regulations in order to satisfy the needs of the international e-banking. 5
Electronic banking is the wave of the future. It provides enormous benefits to consumers in terms of the ease and cost of transactions. But it also poses new challenges for country authorities in regulating and supervising the financial system and in designing and implementing macroeconomic policy. Electronic banking has been around for some time in the form of automatic teller machines and telephone transactions. More recently, it has been transformed by the Internet, a new delivery channel for banking services that benefits both customers and banks. Access is fast, convenient, and available around the clock, whatever the customer's location may be. Plus, banks can provide services more efficiently and at substantially lower costs. For example, a typical customer transaction costing about $1 in a traditional "brick and mortar" bank branch or $0.60 through a phone call costs only about $0.02 online. Electronic banking also makes it easier for customers to compare banks' services and products, which increases competition among banks, and allows banks to penetrate new markets and thus expand their geographical reach. Some even see electronic banking as an opportunity for countries with underdeveloped financial systems to leapfrog developmental stages. Customers in such countries can access services more easily from banks abroad and through wireless communication systems, which are developing more rapidly than traditional "wired" communication networks. The flip side of this technological boom is that electronic banking is not only subject to, but may get worsen in some of the same risks-particularly governance, legal, operational, and reputation in traditional banking. In addition, it poses new challenges. In response, many national regulators have already modified 6
their regulations to achieve their main objectives: ensuring the safety and soundness of the domestic banking system, promoting market discipline, and protecting customer rights and the public trust in the banking system. Policymakers are also becoming increasingly aware of the greater potential impact of macroeconomic policy on capital movements. 1.3
WHAT IS E-BANKING
E-banking is an abbreviation for electronic banking. E-banking allows you to conduct bank transactions online, instead of finding a bank and interacting with a teller. Most U.S. banks offer e-banking, though the extent of the services may vary. For instance, some banks may offer unlimited bill pay options while others restrict online activity. For many consumers, electronic banking means 24-hour access to cash through an automated teller machine (ATM) or Direct Deposit of paychecks into checking or savings accounts. But electronic banking now involves many different types of transactions.
Traditional banks offer many services to their customers,
including accepting customer money deposits, providing various banking services to customers, and making loans to individuals and companies. Compared with traditional channels of offering banking services through physical branches, e-banking uses the Internet to deliver traditional banking services to their customers, such as opening accounts, transferring funds, and electronic bill payment. First conceptualized in the mid-1970s, some banks offered customer’s electronic banking in 1985. The Internet explosion in the late-1990s made people more comfortable with making transactions over the web. Despite the dot-com crash, e-banking grew alongside the Internet.
7
1.4
DEFINITION OF E-BANKING
E-banking is defined as the automated delivery of new and traditional banking products and services directly to customers through electronic interactive communication channels. It 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 PC, personal digital assistant, ATM, kiosk, Touch tone telephone. E-banking
is the term that describes all transactions that take place among companies, organizations, and individuals and their banking institutions. 8 1.5 THE ADVANTAGES OF ELECTRONIC BANKING
The difference between electronic banking and online banking is negligible. Banks have been using electronic banking longer than their customers have, and online banking is just a form of electronic banking. Banks and their customers both benefit from electronic banking. Electronic banking allows you to conveniently conduct your banking activities online. You can view you account balances and status from your home computer. 1) Direct deposit Before the advent of direct deposit, Americans handled their pay differently. On payday you would receive a cheque (or possibly cash). You then had to take the check to your bank and deposit it, but that would require between two and ten days to clear the funds for your use. Alternatively you could go to the bank the cheque was written from and cash it, then drive back to your bank and deposit the funds in order to make the funds immediately available. Direct deposit allows the banks and employers to use fewer employee hours to get the job done, saving their money. For customers and employees, direct deposit allows you to have your funds instantly. 2)Portability If you are an online banking customer, you have the option of accessing your banking information from your home computer. Additionally you can use any computer that is connected to the Internet, and, if your bank has the
ability, any smart device that can access the Internet can also give you this functionality. You can do your banking from local coffee shop also(Wi-Fi ). 9
3)BillPay Bill pay is a service that banks offer to help you pay your bills on time, at the same time every month. You collect the bills that you want to be included in the bill pay service and set up your bank account to pay a certain amount each month to each biller. Online banking customers can do this from home; otherwise visit your bank to set this up. 4)MoneyTransfer If you hold multiple accounts within the same bank and need to transfer money between them, electronic banking makes it very simple. In fact, online banking customers do not even need to leave their computer to do it. Just pick the amount you would like to transfer, and to which account it will be transferred, complete the transfer and the money is instantly transferred. 5)Request You can make a banking request online with the help of net and your request will be accessed within few minutes. 6) Account information The complete database that the banks have about our company is available to us at our terminal. It provides us: •
Current balance in our account on real-time basis.
•
Day’s transactions in the account.
•
Details of cash credit limit, drawing power, amount utilized, etc.
10
7) Customers can also submit the following requests online (1) Stop payment or cheques (2) Cheque book replacement
(3) Demand Draft / Pay-order (4) Opening of fixed deposit account (5) Opening of Letter of credit
8) Customers can integrate the System with his own ERP: The customer can download the account statements either as a text file or as an excel file. The bank can help him in integrating the account statements and bulk payments files with his ERP system. The bank may charge a nominal fee depending upon the nature of work involved
9) Investing in Mutual funds: Electronic banking also brings the customer the same convenience while investing in Mutual funds- Hassle free and Paperless Investing. He can invest in mutual funds without the hassles of filling application forms or any other paperwork. He needs to provide no signatures or proof of identify for investing. Once he places a request for investing in a particular fund, there are no manual processes involved. His bank funds are automatically debited or credited while simultaneously crediting or debiting his unit holdings.
Effecting Personal Investments through Electronic Banking can also be conducted .The bank’s website can also allow the customer to invest in shares and other financial products.
11
10) Initial Public Offers Online: The customer could also invest in IPO online without going through the hassles of filling any application form / paperwork. Get in-depth analysis of new IPO issues, which are about to hit the market and analysis. IPO calendar, recent initial public offers listings, prospectus / offer documents, and initial public offer analysis are few of the features, which help a customer to keep on top of the initial public offers markets.
Other benefits: a) Convenience: It is very convenient mode of transaction with the use of Internet. b) Speedy transactions: It provides a high level of speed and gives quick results. c) Safety-banking from own home: It ensures high level of safety and security to the customers. d) Home banking without having to visit your banks: It helps to conduct the transaction sitting at one’s place without having to visit the bank personally. e) Cheaper service fees: The fees charged for providing these services is comparatively very low. f) Highly saleable: It is a highly saleable activity provided by banks.
g) Easy customization: It is easy to customize and operate. h) Lower Costs of both Installation and Maintenance: The cost of installation and maintenance is very cheap. 12
Being a student of Banking, I was keenly interested in finding out importance and scope of E-Banking in this modern world. Broad objectives of my project are: MY OBJECTIVES •
People appreciate the need and purpose of e-banking.
•
Understand the costs and benefits of e-banking.
•
Take necessary steps to avoid and minimize risks associated with doing business electronically.
•
Educate the staff and customers on banking electronically.
•
Understand the basic services provided through E-banking and utilize it in better manner.
•
Adopt the best practices to protect electronic property interests.
Sources of Data: Most of my project is based on secondary data which I have taken from various books, magazines and internet sights and the primary data is based on interview that I have taken from the assistant manager of HDFC from the Malad branch and surveys I have taken from the general public residing in my locality.
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EVOLUTION Electronic banking started after Second World War with the use of proprietary software and private networks. But the whole credit of making E-Banking big hit goes to Internet. Internet made E-Banking trustworthy and useful. International trade has increased significantly in post world war period and with it monetary transactions between different countries have increased. Banking has facilitated trading between distant corners of the world without worrying about monetary transactions. In 1980’s E-Banking got a new dimension by the use of credit cards, ATM and telephone banking. This was the revolutionary period in E-Banking. Now whole Commerce seems to be shouldering on these electronic systems.
2.1 What made e-banking so hit?
E-banking has certain features which give it edge over traditional banking. Real time banking Unlike traditional banking which suffers from time consuming procedures, E-Banking provides real time banking to the customers. You get all the relevant information about your account instantly. You can access all the details about your account sitting at home or at any distant location.
24/7 banking E-banking has removed the time constraint from banking. Now you can withdraw cash or get any banking facility anytime.
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B2B, B2C and C2C e-Commerce Business
e-Business Consumer
Business
B2B e-Trade B2C
e-Business Consumer
e-Banking Clearing Bank A
Bank B BankServ
Settlement
Banking from anywhere Don’t worry if you are sitting in Middle East country and want to check your account in New York. E-Banking certainly leaves no room for blaming the distances. Smart banking is ready to serve you anywhere, anytime. Safe and secure Banking Electronic- banking is more immune to security and safety related problems. Password Based Encryption (PBE), Secure Socket Layer (SSL), electronic
signatures and electronic tokens gives a high level of security. Any malfunctioning or any inconsistency in your account can be traced easily. This makes E-Banking more reliable.
15
Easy Loans, Instant Loans Use of smart cards, debit cards, credit cards has eased you from hatred, time consuming loaning procedures. Your banks provide you instant loans. No need to keep cash with you at all, a small chip card has replaced piles of cash. Certain web sites provide facility of online loaning .You can get instant loan there, just by filling a small form.
High Performance and flexibility E-Banking is a high performance system satisfying it’s customers for their every banking related queries and desires. What makes it more interesting is its flexibility. Banking is using everyday advancements in technology, which makes it smart and banking system of today and tomorrow. Common E-Banking Services
Retail Services
Wholesale Services
Account management
Account management
Bill payment and presentment
Cash management
New account opening Consumer wire transfers
Small business loan applications, approvals, or advances
Investment/Brokerage services
Commercial wire transfers
Loan application and approval
Business-to-business payments
Account aggregation
Employee benefits/pension administration
16 2.2 You can avail the following services through E-Banking.
Bill payment service You can facilitate payment of electricity and telephone bills, mobile phone, credit card and insurance premium bills as each bank has tie-ups with various utility companies, service providers and insurance companies, across the country. To pay your bills, all you need to do is complete a simple onetime registration for each bill. Generally, the bank does not charge customers for online bill payment
Fund transfer You can transfer any amount from one account to another. 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.
Credit card customers With Internet banking, customers can not only pay their credit card bills online but also get a loan on their cards. If you lose your credit card, you can report lost card online.
Railway pass
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, Thane, Nashik, Pune etc.
17
Investing through Internet banking You can now open an FD online through funds transfer. 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. 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, this will link your two accounts.
Recharging your prepaid phone Now 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.
Shopping 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.
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2.3 VARIOUS FORMS OF E-BANKING:
INTERNET BANKING:
It helps you handle many banking transactions via your personal computer. For instance, you may use your computer to view your account balance, request transfers between accounts, and pay bills electronically. Internet banking system is a method in which a personal computer is connected by a network service provider directly to a host computer system of a bank such that customer service requests can be processed automatically without need for intervention by customer service representatives. The system is capable of distinguishing between those customer service requests which are capable of automated fulfillment and those requests which require handling by a customer service representative. The system is integrated with the host computer system of the bank so that the remote banking customer can access other automated services of the bank. The method of the intervention includes the steps of inputting a customer banking request from among a menu of banking requests at a remote personnel computer, transmitting the banking requests to a host computer and receiving it, identifying the type of customer banking request received, automatic logging of the service request, comparing the received request to a stored table of request types, each of the request types having an attribute to indicate whether the request
type is capable of being fulfilled by a customer service representative or by an automated system and depending upon the attribute, directing the request either for handling by a customer service representative or to a queue for processing by an automated system. 19
AUTOMATED TELLER MACHINES (ATM): An unattended electronic machine in a public place, connected to a data system and related equipment and activated by a bank customer to obtain cash withdrawals and other banking services is called as automatic teller machine, cash machine or called money machine. An automated teller machine (ATM) is an electronic computerized telecommunications device that allows a financial institution's customers to directly use a secure method of communication to access their bank accounts, in order to make cash withdrawals (or cash advances using a credit card) and check their account balances without the need for a human bank teller . Many ATMs also allow people to deposit cash or cheques, transfer money between their bank accounts, top up their mobile phones' pre-paid accounts or even buy stamps. On most modern ATMs, the customer identifies him or herself by inserting a plastic card with a magnetic stripe or a plastic smartcard with a chip that contains his or her account number. The customer then verifies their identity by entering a pass code, often referred to as a PIN (Personal Identification Number) of four or more digits. Upon successful entry of the PIN, the customer may perform a transaction. If the number is entered incorrectly several times in a row (usually three attempts per card insertion), some ATMs will attempt retain the card as a security precaution to prevent an unauthorized user from discovering the PIN by guesswork. Captured cards
are often destroyed if the ATM owner is not the card issuing bank, as noncustomer's identities cannot be reliably confirmed. The Indian market today has approximately more than 17,000 ATM’s. 20
TELE BANKING: Undertaking a host of banking related services including financial transactions from the convenience of customers chosen place anywhere across the globe and any time of day and night has now been made possible by introducing on-line Telebanking services. By dialing the given Telebanking number through a landline or a mobile from anywhere, the customer can access his account and by following the user-friendly menu, entire banking can be done through Interactive Voice Response (IVR) system. With sufficient numbers of hunting lines made available, customer call will hardly fail. The system is bi-lingual and has following facilities offered: 1. Automatic balance voice out for the default account. 2. Balance inquiry and transaction inquiry 3. Inquiry of all term deposit accounts 4. Statement of account by Fax, e-mail or ordinary mail 5. Cheque book request 6. Stop payment which is on-line and instantaneous
7. Utility Bill Payments 8. Renewal of term deposit which is automatic And instantaneous 9. Voice out of last five transactions. 21
SMART CARD A smart card usually contains an embedded 8-bit microprocessor (a kind of computer chip). The microprocessor is under a contact pad on one side of the card. Think of the microprocessor as replacing the usual magnetic stripe present on a credit card or debit card. The microprocessor on the smart card is there for security. The host computer and card reader actually "talk" to the microprocessor. The microprocessor enforces access to the data on the card. The chips in these cards are capable of many kinds of transactions. For example, a person could make purchases from their credit account, debit account or from a stored account value that's reload able. The enhanced memory and processing capacity of the smart card is many times that of traditional magnetic-stripe cards and can accommodate several different applications on a single card. It can also hold identification information, which means no more shuffling through cards in the wallet to find the right one, the Smart Card will be the only one needed.
Smart cards can also be used with a smart card reader attachment to a personal computer to authenticate a user. Smart cards are much more popular in Europe than in the U.S. In Europe the health insurance and banking industries use smart cards extensively. Every German citizen has a smart card for health insurance. Even though smart cards have been around in their modern form for at least a decade, they are just starting to take off in the U.S. 22
DEBIT CARD: Debit cards are also known as check cards. Debit cards look like credit cards or ATM (automated teller machine) cards, but operate like cash or a personal check. Debit cards are different from credit cards. While a credit card is a way to "pay later," a debit card is a way to "pay now." When you use a debit card, your money is quickly deducted from your checking or savings account. Debit cards are accepted at many locations, including grocery stores, retail stores, gasoline stations, and restaurants. You can use your card anywhere merchants display your card's brand name or logo. They offer an alternative to carrying a checkbook or cash.
E-CHEQUE: •
An E-Cheque is the electronic version or representation of paper
cheque. •
The Information and Legal Framework on the E-Cheque is the same
as that of the paper cheque.
•
It can now be used in place of paper cheques to do any and all remote
transactions.
•
An E-cheque work the same way a cheque does, the cheque writer
"writes" the e-Cheque using one of many types of electronic devices and "gives" the e-Cheque to the payee electronically. The payee "deposits" the Electronic Cheque receives credit, and the payee's bank "clears" the e-Cheque to the paying bank. The paying bank validates the e-Cheque and then "charges" the check writer's account for the check.
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Inter Bank Transfer Inter Bank Transfer is a special service that allows you to transfer funds electronically to accounts in other banks in India through: NEFT The acronym “NEFT” stands for National Electronic Funds Transfer. Funds are transferred to the credit account with the other participating Bank using RBI's NEFT service. RBI acts as the service provider and transfers the credit to the other bank's account. RTGS The acronym “RTGS” stands for Real Time Gross Settlement. The RTGS system facilitates transfer of funds from accounts in one bank to another on a “real time” and on “gross settlement” basis. The RTGS system is the fastest possible inter bank money transfer facility available through secure
banking channels in India. In other words, this is an electronic payment processing environment wherein transactions are settled as soon as they are processed. EFT Electronic Fund Transfer is the new facility provided to the Exporters for submitting the license fee through the Internet without visiting the Bank for the payment. This procedure is being proposed to facilitate payments through electronic means. The facility shall be available only for electronically filed applications. Currently Electronic payment can be made through following banks: ICICI, IDBI, HDFC, UTI, State Bank of India, Bank of India, Punjab National Bank, and Union Bank of India.
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2.4 E-Banking components Financial institutions may choose to support their e-banking services internally. Alternatively, financial institutions can outsource any aspect of their e-banking systems to third parties. The following entities could provide or host (i.e., allow applications to reside on their servers) e-banking-related services for financial institutions: Another financial institution Internet service provider Internet banking software vendor or processor Core banking vendor or processor Managed security service provider Bill payment provider Credit bureau Credit scoring company
Through a combination of internal and outsourced solutions, management has many alternatives when determining the overall system configuration for the various components of an e-banking system. However, for the sake of simplicity, it presents only basic variations. One or more technology service providers can host the e-banking application and numerous network components .While the institution does not have to manage the daily administration of these component systems, its management and board remain responsible for the content, performance, and security of the e banking system. 25
E-banking systems rely on a number of common components or processes. The following list includes many of the potential components and processes seen in a typical institution: Website design and hosting Firewall configuration and management Intrusion detection system or IDS (network and host-based) Network administration Security management Internet banking server E-commerce applications (e.g., bill payment, lending, brokerage) Internal network servers Core processing system Programming support Automated decision support systems
2.5 Type of banks providing e-banking
There are two types of bank that offer e banking service; traditional high street bank and internet – only bank •
Many high street banks are offering e-banking service for business customer as an alternative to, or to complement traditional branch banking. Some of them are SBI, HSBC, and Syndicate bank. But, they 26
also started providing e-banking service partially. They are providing two different method of connection to the customers account direct dial\pc banking and verb based internet banking •
A number of banks have no branch networks and are elusive to the internet. The internet –only bank are; Griffon bank, Zion’s bank, Comp bank, and first-e bank. Internet bank offers a number of services in addition to regular bank account, from credit card and also loan to Insurance and Investment. Such bank tends to offer better rate and deal than regular high street bank. It is cost effective than high street bank.
2.6 Significance
Customers who use e-banking tend to be more profitable, loyal, and willing to refer their bank to friends and family than do traditional banking customers. Online customers also maintain higher balances, require less customer support and have lower attrition rates than offline consumers. Online banking customers who use online bill pay and e-bill services are happier with their banks, which provide efficient services.
27
2.7 Driving forces to E-banking According IT analyst firm, by coming years, a large sophisticated and highly competitive E-banking market will develop will be driven by:
•
Demand side pressure due to increasing access to low cost electronic services.
•
Growing customer awareness and need of transparencies.
•
Global players in the dispute.
•
Close Integration of bank with web based E-commerce or even disintegration of services through direct electronic payment.
•
More convenient international transaction due to the fact that Internet along with general deregulation trends eliminates geographic boundaries.
28
3. ISSUES RELATED TO E-BANKING 3.1 Issues in Electronic Banking
Electronic banking is convenient and often quite safe, but problems do exist. Electronic banking is a popular form of banking since the Internet became widespread. Electronic banking occurs at the individual, commercial and investment levels. While fraud prevention measures are taken very seriously at banking institutions, there are still some issues in electronic banking that cause unrest and frustration. Transaction Errors Transaction errors can occur in your checking, savings, or credit card accounts . These transaction problems can be caused by human error, but they're often as a result of technical glitches or lost information. Consumers
have 60 days to contact their financial institution and notify them of the error. The company then has 30 days to respond to your enquiry and another 60 days to resolve and correct the issue. They do reserve the right to ask for supporting documentation to agree with the inaccuracy of the issue. Automatic Debits Automatic debits are offered as convenience to banking and loan customers. These debits are automatically withdrawn from your bank and paid to the vendor or lender. While this convenience does save a stamp and a hassle, it can make mistakes. Customers often need to request a halting of this process 29
in writing at least seven days in advance. In addition, if you use an automatic debit to pay for a recurring service and the service suddenly is unsatisfactory, you must work out a refund with the service provider, not your bank. Privacy Concerns Sometimes electronic banking customers find themselves on marketing lists for other financial institutions . This can lead to unsolicited offers on mortgages, loans, credit cards, auto loans and investment products. Most electronic banks now have privacy agreements that allow customers to opt in or out of unsolicited offers.
30 3.2 DISADVANTAGES OF INTERNET BANKING
The reason that not many people have started using Internet banking is because they do not trust the services of the bank through the net. Some human beings prefer to trust others like them and may have some difficulty in trusting a machine, especially in the matters of money. They may always have a doubt about whether their money is safe, while being processed through Internet banking. In addition to this, a few fake cases have been reported in online banking. There is some fraud or proxy websites, which can hack information (user name and password), entered by a person for some transaction, and later misuse it. In such cases, people lose their money without knowing and by the time, they get the bill, huge loses may have been incurred. Another disadvantage of Internet banking is that it may take some time, to get the Internet account started, as it requires a lot of paper work. Some
people avoid using Internet banking services because they find it difficult to understand how it works. Also, the fact that a wrong click can cause monetary losses may be a restraint. One very common disadvantage of online banking is when a person has some problem or query. In a normal bank, if one faces some problem, one can go to some employee of the bank to solve it. However, in the case of Internet banking, one will find oneself helpless. Although, Internet banking has certain disadvantages, one can avail of its customer-friendly services, if one is a little careful. One should never give away his/her password to any unknown person and must use sites that are familiar and reliable. E-banking is very advantageous if it is used in a systematic and proper manner. 31 3.3 TYPES OF RISK INVOLVED IN E-BANKING
TRANSACTION/OPERATIONS RISK It arises from fraud, processing errors, system disruptions, or other unanticipated events resulting in the institution’s inability to deliver products or services. The level of transaction risk is affected by the structure of the institution’s processing environment, including the types of services offered and the complexity of the processes and supporting technology. In most instances, e-banking activities will increase the complexity of the institution’s activities and the quantity of its transaction/operations risk, especially if the institution is offering innovative services that have not been standardized. Since customers expect e-banking services to be available 24 hours a day, financial institutions should ensure their e-banking
infrastructures contain sufficient capacity to ensure reliable service availability. Even institutions that do not consider e-banking a critical financial service due to the availability of alternate processing channels, should carefully consider customer expectations and the potential impact of service disruptions on customer satisfaction and loyalty. The key to controlling transaction risk lies in adapting effective polices, procedures, and controls to meet the new risk exposures introduced by e-banking. Information security controls, in particular, become more significant requiring additional processes, tools, expertise, and testing. Institutions should determine the appropriate level of security controls based on the assessment. 32
CREDIT RISK Generally, a financial institution’s credit risk is not increased by the mere fact that a loan is originated through an e-banking channel. However, management should consider additional precautions when originating and approving loans electronically, including assured management information systems and effectively track the performance of portfolios originated through e-banking channels. The following aspects of on-line loan origination and approval tend to make risk management of the lending process more challenging. If not properly managed, these aspects can significantly increase credit risk. Verifying the customer’s identity for on-line credit applications and executing an enforceable contract
Monitoring and controlling the growth, pricing, underwriting standards, and ongoing credit quality of loans originated through e-banking channels Monitoring and oversight of third-parties doing business as agents or on behalf of the financial institution (for example, an Internet loan origination site or electronic payments processor) Valuing collateral and perfecting liens over a potentially wider geographic area Collecting loans from individuals over a potentially wider geographic area Monitoring any increased volume of, and possible concentration in, outof-area lending.
33
LIQUIDITY, INTEREST RATE, PRICE/MARKET RISKS Funding and investment-related risks could increase with an institution’s e-banking initiatives depending on the volatility and pricing of the acquired deposits. The Internet provides institutions with the ability to market their products and services globally. Internet-based advertising programs can effectively match towards yield-focused investors with potentially high-yielding deposits. But Internet-originated deposits have the potential to attract customers who focus exclusively on rates and may provide a funding source with risk characteristics similar to brokered deposits. An institution can control this potential volatility and expanded geographic reach through its deposit contract and account opening practices, which might involve face-to-face meetings or the exchange of paper
correspondence. The institution should modify its policies as necessary to address the following e-banking funding issues: Potential increase in dependence on brokered funds or other highly ratesensitive deposits Potential acquisition of funds from markets where the institution is not licensed to engage in banking, particularly if the institution does not establish, disclose, and enforce geographic restrictions Potential impact of loan or deposit growth from an expanded Internet market, including the impact of such growth on capital ratios and Potential increase in volatility of funds in e-banking security problems
34
COMPLIANCE/LEGAL RISK Compliance and legal issues arise out of the rapid growth in usage of e-banking and the differences between electronic and paper-based processes. E-banking is a new delivery channel where the laws and rules governing the electronic delivery of certain financial institution products or services may be ambiguous or still evolving. Specific regulatory and legal challenges include: Uncertainty over legal jurisdictions and which state’s or country’s laws govern a specific e-banking transaction, Delivery of credit and deposit-related disclosures/notices as required by law or regulation, Retention of required compliance documentation for on-line advertising,
applications, statements, disclosures and notices and Establishment of legally binding electronic agreements. Laws and regulations governing consumer transactions require specific types of disclosures, notices, or record keeping requirements. These requirements also apply to e-banking, and federal banking agencies continue to update consumer laws and regulations to reflect the impact of e-banking and on-line customer relationships. Some of the legal requirements and regulatory guidance that frequently apply to e-banking products and services include:
35
Solicitation, collection and reporting of government monitoring information on applications and loans, as required by Equal Credit Opportunity Act and Home Mortgage Disclosure Act. Advertising requirements, customer disclosures, or notices required by the Real Estate Settlement Procedures Act (RESPA), Truth in Lending, Truth In Savings and Fair Housing regulations. Proper and conspicuous display of FDIC or NCUA insurance notices Conspicuous webpage disclosures indicating that certain types of investment, brokerage, and insurance products offered have certain associated risks, and they are not insured by federal deposit insurance. Customer identification programs, as well as record retention and customer notification requirements, required by the Bank Secrecy Act Customer identification processes to determine whether transactions are prohibited by the Office of Foreign Asset Control (OFAC) and, when necessary, whether customers appear on any list of known or suspected
terrorists or terrorist organization provided by any government agency Delivery of privacy and opt-out notices by hand, by mail, or with customer acknowledgement of electronic receipt and record retention requirements of the Equal Credit Opportunity Act and Fair Credit Reporting Act . Institutions
that offer
e-banking
services,
both informational
and
transactional, assume a higher level of compliance risk because of the changing nature of the technology, the speed at which errors can be replicated, and the frequency of regulatory changes to address e-banking issues. 36
STRATEGIC A financial institution’s board and management should understand the risks associated with e-banking services and evaluate risk management costs against the return on investment prior to offering e-banking services. Poor e-banking planning and investment decisions can increase a financial institution’s strategic risk. Early adopters of new e-banking services can establish themselves as innovators who anticipate the needs of their customers, but may do so by incurring higher costs and increased complexity in operations. Late adopters may be able to avoid the higher expense and added complexity, but do so at the risk of not meeting customer demand for additional products and services. In managing the strategic risk associated with e-banking services, financial institutions should develop defined e-banking objectives and should pay attention to the following: Adequacy of management information systems (MIS) to track e-banking usage and profitability
Costs involved in monitoring e-banking activities or costs involved in overseeing e-banking vendors and technology service providers Delivery and pricing of services adequate to generate sufficient demand Retention of electronic loan agreements and other electronic contracts in a format that will be admissible and enforceable in litigation Availability of staff to provide technical support for interchange involving multiple operating systems, web browsers, and communication devices Competition from other e-banking providers and adequacy of technical, operational, or marketing support for e-banking products and services. 37
REPUTATION RISK An institution’s decision to offer e-banking services, especially the more complex transactional services, significantly increases its level of reputation risk. Some of the ways in which e-banking can influence an institution’s reputation include: Loss of trust due to unauthorized activity on customer accounts, Disclosure or theft of confidential customer information to unauthorized parties (e.g., hackers), Failure to deliver on marketing claims Failure to provide reliable service due to the frequency or duration of service disruptions Customer complaints about the difficulty in using e-banking services and the inability of the institution’s help desk to resolve problems, and Confusion between services provided by the financial institution and services provided by other businesses linked from the website.
38
4. A GLIMPSE TO FUTURE E-BANKING The evolution of electronic banking started from the use of automatic teller machines (ATM) and has passed through telephone banking, direct bill payment, electronic fund transfer and the revolutionary online banking. The future of electronic banking according to some is the acceptance of WAP enabled banking and interactive-TV banking (Petrus & Nelson, 2006). But it has been forecasted that among all the categories, online banking is the future of electronic financial transactions. The rise in the e-commerce and the use of internet in its facilitation along with the enhanced online security of transactions and sensitive information has been the core reasons for the penetration of online banking in everyday life.
4.1 The Indian Scenario: The entry of India banks into Net Banking:
Internet banking, both as a medium of delivery of banking services and
•
as a strategic tool for business development. 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 percent of Internet users did banking online in 1998. This is increased to 16.7 percent in March 2000 (Research-Kotak Securities). Cost of banking service through the Internet from a fraction of costs
•
through conventional methods. Rough estimates assume teller cost at Re.1 per transaction, ATM transaction cost at 45 paisa, phone banking at 35 paisa, debit cards at 20 paisa and Internet banking at 10 paisa per transaction. 39
4.2 The Future Scenario •
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.
•
Various security options like line encryption, branch connection encryption, firewalls, digital certificates, automatic sign-offs, 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 available today in India is also not enough to meet the needs of high priority services like online banking and trading.
•
Banks offering online facilities also need to calculate their downtime losses, because even a few minutes of downtime in a week could mean substantial losses.
•
Users of Internet Banking are required to fill up the application forms online and send a copy of the same by mail or fax to the bank.
•
A contractual agreement is entered into by the customer with the bank for using the Internet banking services.
•
Domestic customers, for whom other access points such as ATMs, telebanking, personal contact, etc. are available, are often hesitant to use the Internet banking services offered by Indian banks. Internet Banking, as an additional delivery channel, may, therefore, be attractive/ appealing as a value added service to domestic customers. 40
Non-resident Indians, for whom, it is expensive and time consuming to access their bank accounts maintained in India find net banking very convenient and useful. •
Cyber crimes are, therefore, difficult to be identified and controlled.
•
In order to promote Internet banking services, it is necessary that the proper legal infrastructure is in 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.
•
Reserve Bank of India has constituted a group to examine different issues relating to e-banking and recommend technology, security legal standards and operational standards keeping in view the international best practices
4.3 Developments in Internet banking Banks and financial institutions in India are in the process of Web-enabling their services in order to offer Internet banking services to its customers . It’s the new generation of banking in India. Most private and MNC banks have already setup an elaborate Internet banking infrastructure. And this exercise has provided them numerous benefits like: •
Greater reach to customers and quicker time to market
•
Ability to introduce new products and services successfully
•
Ability to understand its customers needs
•
Customers are given access to information easily across any location
•
Greater customer loyalty 41
The Internet banking is changing the banking industry and is having the major effects on banking relationships. Even the Morgan Stanley Dean Witter Internet research emphasized that Web is more important for retail financial services than for many other industries. Internet banking involves use of Internet for delivery of banking products & services. It falls into four main categories, from Level 1 - minimum functionality sites that offer only access to deposit account data - to Level 4 sites - highly sophisticated offerings enabling integrated sales of additional products and access to other financial services- such as investment and insurance. In other words a successful Internet banking solution offers
· Exceptional rates on Savings, CDs, and IRAs · Checking with no monthly fee, free bill payment and rebates on
ATM surcharges · Credit cards with low rates · Easy online applications for all accounts, including personal Loans and mortgages · 24 hour account access · Quality customer service with personal attention
42
4.4 Banking in the next century:
More and more non banking institutions are going to provide the banking functions than the designated banks in the coming century .Banks are going to be vanished from its existing strong positions. Financial liberalization, internationalization and technological advancement are going to further pressurize the banks to make their struggle for existence. If a bank overcome all these pressures survival of the fittest comes again because of the technological innovation and the type of competition in the banking industry. Banks also need to revitalize their fee income flows to supplement and supplant if necessary their net interest margin for which they are required to
re-emphasis risk management on a daily basis .Banks are forced to give up isolated approaches to the challenges of competition profitably and risk management .Strategic panning has superseded the isolated approaches. The need for sound conceptual and technical skills has been seared into every bankers mind. For banks to survive profitably they have to improve the operational methods with latest hi-tech financial modeling content.
43
CASE STUDY – ICICI ICICI is one of the leading private sector banks in India, which combines financial strength with a reputation for innovation and a universal culture that embraces change. On March 31, 2002 ICICI formally merged with ICICI bank and emerged as India's first Universal Bank. The strategy of ICICI bank after the merger with ICICI Ltd. is that of building a diversified portfolio. The merged entity will continue to be into project finance and the focus will be to tap the potential in retail financing. ICICI bank offers a wide spectrum of domestic and international banking services to facilitate trade, investment, cross border business, treasury and foreign exchange services. ICICI bank has been quick to realize that E- banking has
changed from a somewhat experimental delivery vehicle into an increasingly mainstream one for delivery of broad spectrum of banking products and services. Basic E- banking services are rapidly changing from competitive differentiator to competitive necessity. The group has leveraged on a number of tie-ups to come up with its various offering. For its Internet banking offering the ICICI bank uses Infinity from Infosys, for its credit card business its uses Vision Plus from Pay Sys, USA, for WAP services the tie-up with cellular service providers Orange and Airtel helps reach out to these users, while the WAP technology is being implemented by the inhouse ICICI InfoTech service. To leverage the Net for its marketing initiatives ICICI bank and Satyam Info way have jointly set up a "COM" company to promote banking products on the Net. The bank has also entered into agreements with leading corporate like BPL, Rediff.com. Usha Martin
44
and Tata Communications for B to C solutions in a bid to further strengthen its Internet banking product offering and services. Also ICICI has joined hands with a consortium led by Compaq to take the lead in offering a solution to the Indian e-commerce community. This consortium offers a B2B and B2C ecommerce payment gateway within India. The Bank has been offering phone banking free of charge and was first to launch an Internet Banking service in the country named Infinity. Infinity now provides a host of online banking solutions to retail as well as corporate customers. ICICI's constant endeavor in providing more value to the customers has resulted in Infinity being the front-runner amongst online banking offerings in the country. Also, in keeping with the customers need
for increased security, Corporate Infinity now provides multiple levels of authentication besides user ID/ password and includes security tokens. ICICI also strives to be a center for leading research on financial engineering in India, particularly in the area of valuation of securities, risk management and derivatives. By leveraging on the groups resources ICICI provides custom tailored solution that can support even the most complex business strategy. ICICI is now moving all its operations into the era of 'virtual integration'. Not only has this drastically reduced costs, but it has also increased and improved its services to customers. 1488 Money 2 India offers a unique facility by ICICI of transferring funds to India. Additional modules were added-gifting and reminders to broaden its scope and enhance ICICI's relationship with customers.
45 An interview with Mr. Bhushan.S.Sonavane
This interview I have taken from the assistant manager of HDFC Mr.Bhushan Sonavane (Malad branch). This interview proved to be a very effective one from the learning point of view. He answered many of my questions in a sincere manner increasing my knowledge level. With this interview I came to know the working of E-banking in HDFC to a smaller extent.
Q1: Since when your bank started e-banking system? Ans: 5 years back in 2005.
Q2: What prompted your bank to start this facility? Ans: We started this facility to reduce our burden. This facility enabled us to carry out the transaction in an easy and efficient manner. It made the process simpler and convenient especially for our online customers.
Q3: How does the process of e-banking works? Ans: We give password to each of our customer this password is confidential , we then mail this password in a sealed envelope to their residence. The customer should log to the password and then have to change the password which is given to them, type their user id and later can log in for net banking.
Q4.
Is it a time consuming / saving process?
Ans. No, it is not time consuming but it saves a lot of time of the customers as they can transact online. 46
Q5 : Has the business increased after the introduction of e-banking? Ans: Yes definitely.
Q6: Ans:
Staff response? It has reduced the burden of the staff as they no more have to
entertain each and every customers queries and suggestions. It has decreased their paper work making their process simpler .
Q7: Customer response? Ans: Customers are quite satisfied with this facility as they no more have to
visit the bank for their banking transactions.
Q8. Is E-banking training provided to your bank employees and other officers? Ans: No, training is not provided to our staff.
Q9. What are the new innovations in your bank apart from Traditional banking? •
Online banking
•
Tele banking
•
Credit card facility
•
ATM facility
•
Cheque transactions
47
Q10. Does your bank have a separate E-banking committee or some Department? Ans: Yes, there is a different department for e-banking for the purpose of account and data entry and it is especially conducted at the back office of our Bank.
Q11. Customer visits have increased / decreased after adopting e-banking System? Ans: The customer visits have decreased as they have started transacting online.
Q12. Will this system help you to avoid any kind of fraud? Ans: Yes, a higher level of security is maintained due to e-banking which helps to track frauds and reduce them to a greater extent.
Q13. How is your bank superior than any other bank? Ans: HDFC has quick server, best online transactions with immediate effects and good results.
HDFC is thus one of the leading bank which provides faster and efficient services to their customers.
48
These surveys have been conducted from different classes of people such as salary earners, businessmen, housewives, youngsters, senior citizen etc. Preferred Forms of Payments By Consumers Cash 32 % Credit Cards 7% Cheque 19 % Others 4% The survey, that I conducted, showed that 32 % of consumers had a preference for cash transactions. The evidence from this survey is noteworthy, as it is easy to see the vast market potential for a product such
as the smart card that is designed to be a replacement primarily for cash transactions. The number of cash purchases far exceeded any other payment method, although their value accounts for less than 20 percent of the value of total consumer transactions on a monthly basis. Cash is used most often at food stores, for purchases at gasoline filling stations, for dining out, traveling, and shopping. The reasons given for using cash where that 1) it is convenient for small, inexpensive purchases, 2) force of habit, and 3) easy to carry 4) liquid form . Mostly salaried people and businessmen use cheques as they deal in larger portion of money. Credit cards are also preferred by many customers as they are easy to carry and simple to operate, the people are relieved from the burden of carrying cash. Most consumer transactions represent only a small share of the total expenditures. Also at times people prefer some other modes of payment such as ATM cards, debit cards and demand drafts as per their convenience. Thus there are various modes of payment and you can choose the best one for yourself. 49
SURVEY CONDUCTED FROM VARIOUS CUSTOMERS 1) USERS OF E-BANKING USERS NON-USERS
54 % 46 %
2) NO. OF USER OF THE BANKS ICICI
3%
SBI BANK OF INDIA BANK OF MAHARASHTRA HDFC BHARAT CO.OP BANK OTHER BANKS
8% 18 % 6% 35 % 11 % 19 %
50 3) PREFERENCE FOR ONLINE BILL PAYMENT
Yes No
52 % 48 %
45% 55%
YE S NO
4) PREFERENCE FOR ONLINE FUND TRANSFER `
Yes
53 %
No
47 %
51 5) PREFERENCE FOR ONLINE SHOPPING Yes
26 %
No
74 %
INVESTING THROUGH THE INTERNET Yes
24 %
No
76 %
52
6) SATISFIED CUSTOMERS Yes
55%
No
45%
45% yes 55%
no
Electronic banking is green A recent study sheds light on how electronic payments can help save
resources - and money. PayItGreen reports that most US employees (72%) get paid via direct deposit. However, small companies are less likely to offer the service. PayItGreen is hoping to convince everybody that it's worth it to go electronic. You can view your "Financial Paper Footprint", and learn how to reduce it. In addition, the PayItGreen.org 2010 survey reports that businesses can save "anywhere from $2.87 to $3.15 per paycheck" by setting up direct deposit. In addition to financial and environmental benefits, it did add that electronic banking saves time and makes life easier. 53
5.CONCLUSION The Internet has grown exponentially, with more than 30 million users
worldwide currently. The Internet enhances the interaction between two businesses as well as between individuals and businesses. As a result of the growth of the Internet, electronic commerce has emerged and offered tremendous market potential for today’s businesses. One industry that benefits from this new communication channel is the banking industry. E- Banking is offering its customers with a wide range of services: Customers are able to interact with their banking accounts as well as make financial transactions from virtually anywhere without time restrictions. E- Banking is offered by many banking institutions due to pressures from competitions. To add further convenience to the customers, many banking institutions are working together to form an integrated system. On the other hand, this has not been readily accepted by its users due to the concerns raised by various groups, especially in the areas of security and privacy. Moreover, there are many potential problems associate with this young industry due to imperfection of the security methods. In order to reduce the potential vulnerabilities regarding security, many vendors have developed various solutions in both software and hardware-based systems.Software based solutions are more common because they are easier to distribute and less expensive. In order for e- banking to continue to grow, the security and the privacy aspects need to be improved. With the security and privacy issues resolved, the future of e-banking can be very prosperous. The future of e- banking will be a system where users are able to interact with their banks “worry-free” and banks are operated under one common standard. 54
6. REFERENCE
WEBLIOGRAPHY
www.bankersonline.com jobfunctions.bnet.com www.brettonwoodsproject.org www.findarticles.com www.ftc.gov/bcp/edu/pubs/consumer/credit/cre14.shtm www.encyclopedia.com www.worldjute.com www.ehow.com www.1888articles.com
www.management paradise.com www.buzzle.com www.acadjournal.com
BIBLIOGRAPHY
Online Banking in India – by R.K. Uppal n N.K. Jha E-banking and E-commerce Emerging Issue in India by Dr. N. Subramani, Dr, M. Murugesan, V.Ganesan, Prof. D. Anbalagan E- Banking in India: The Paradigm Shift- Jayshree Bose
55
7. ANNEXURE 1
Question schedule: 1. Since when your bank started e-banking system? 2. What prompted your bank to start this facility? 3. How does the process of e-banking works? 4. Is it a time consuming / saving process? 5. Has the business increased after the introduction of e-banking? 6. Staff response? 7. Customer response? 8. Is E-banking training provided to your bank employees and other
officers? 9. What are the new innovations in your bank apart from Traditional
banking? 10. Does your bank have a separate E-banking committee or some
Department? 11. Customer visits have increased / decreased after adopting e-banking
System? 12.Will this system help you to avoid any kind of fraud? 13.How is your bank superior than any other bank? 56
ANNEXURE 2
