E-Banking

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 Signature of the

Guide/ Examiner 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 Signature of

Project Co-ordinator Principle of college

Signature of

External Guide/ Examiner

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 PAGE NO.

1

Introduction of E-Banking 1-13

2

Evolution of E-Banking 14-28

3

Issues related to E-Banking 29-38

4

Future prospects of E-Banking 39-43

5

Case study 44-45

6

Interview 46-48

7 Survey 49-53

8 Conclusion 54

9 Reference 55

10 Annexure 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

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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. The financial sector operations and policy department has 49

staff. Financial sector reform work is also coordinated by the Bank'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 mapped to the health sector.

Bank support for financial sector reform was first underpinned by

the 1989 World Development Report on financial systems and 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 2007. The IEG report (international environmental governance)

described the 2000 strategy paper: “The financial sector strategy draws on

the literature in arguing for strong banking systems based on good

governance of banking institutions and a reliable legal and judicial

environment. Also consistent with research findings on competition is the

strategy’s point that increasing competition in the financial sector may be

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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 good job of allocating funds and allocating risks" by improving

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 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 of work. A 2005 Independent Evaluation Group analysis financial

sector reform at the Bank and found three main pillars for the Bank's work:

privatization of state-owned banks, improvement of regulatory frameworks

and strengthened supervision of banks. Between 1993 and 2003, 40

countries took Bank loans aimed at the privatization of banks. Another key

thrust of World Bank work in this area is to allow market forces to

determine interest rates and to eliminate the practice of governments

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.

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Lending for adjustment in the financial sector comes through both

financial sector-specific loans and multi-sector loans that include 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 lending', which

finances technical assistance or involves support for bank privatizations,

comprised 83 loans for a total $5.1 billion in the period. Most lending was in

response to financial crises, meaning that volumes in the sector varied wildly

from year to year. A further 115 multi-sector adjustment 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 some

financial sector component. In 2006 the Bank's spending on 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 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).

The marketing accessibility of financial institutions is extended and

increased to remote areas or countries via the new Telecommunication

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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.

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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

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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.

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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.

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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 ).

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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.

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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.

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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.

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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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2. 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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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.

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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 Small business loan applications, approvals, or advancesConsumer wire transfers

Investment/Brokerage services Commercial wire transfers

Loan application and approval Business-to-business payments

Account aggregationEmployee benefits/pension

administration

162.2 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 one-

time 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.

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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 non-

customer's identities cannot be reliably confirmed.

The Indian market today has approximately more than 17,000 ATM’s.

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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.

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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.

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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.23

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.242.4 E-

B anking 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.25E-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

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.

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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.

303.2 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.

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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.

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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, out-

of-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 rate-

sensitive 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.

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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.

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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.

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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.

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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 in-

house 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: Staff response?

Ans: 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 54 %NON-USERS 46 %

2) No. of user of the banks

ICICI 3 %

SBI 8 %BANK OF INDIA 18 %

BANK OF MAHARASHTRA 6%HDFC 35 %

BHARAT CO.OP BANK 11 %OTHER BANKS 19 %

50

3) PREFERENCE FOR ONLINE BILL PAYMENT

Yes 52 %No 48 %

4) PREFERENCE FOR ONLINE FUND TRANSFER `

Yes 53 %No 47 %

515) PREFERENCE FOR ONLINE SHOPPING

Yes 26 %No 74 %

6) INVESTING THROUGH THE INTERNET

Yes 24 %No 76 %

527) SATISFIED CUSTOMERS

Yes 55%

No 45%

Electronic banking is greenA 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.

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6. REFERENCE

WEBLIOGRAPHY

www.bankersonline.com

jobfunctions.bnet.com

www.brettonwoodsproject.org

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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

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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?

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ANNEXURE 2

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