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Financial services are the economic services provided by the finance industry,

which encompasses a broad range of organizations that manage money, including

credit unions, banks, credit card companies, insurance companies, accountancy

companies, consumer finance companies, stock brokerages, investment funds and

some government sponsored enterprises.

The term "financial services" became more prevalent in the United States partly as

a result of the Gramm-Leach-Bliley Act of the late 1990s, which enabled different

types of companies operating in the U.S. financial services industry at that time tomerge.

Companies usually have two distinct approaches to this new type of business. One

approach would be a bank which simply buys an insurance company or an

investment bank, keeps the original brands of the acquired firm, and adds the

acquisition to its holding company simply to diversify its earnings. Outside the

U.S. (e.g., in Japan), non-financial services companies are permitted within the

holding company. In this scenario, each company still looks independent, and has

its own customers, etc. In the other style, a bank would simply create its own

brokerage division or insurance division and attempt to sell those products to its

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own existing customers, with incentives for combining all things with one

company.

This chapter contains the different innovations in banking products such asE-

Banking, Mobile Banking, Debit Cards, Credit Cards, ATM, Internet

Banking.

Introduction:

With the trend of globalization all over the world, it

is difficult for any nation whether big or small, developed, to remain isolated from

what is happening around. The growth of e-commerce and Internet has

transformed the world into the GLOBAL VILLAGE. Fast development in

electronic technology has concerned the computers to take over the bank counters

and to convert brick banking into electronic banking.

Usage of technology by banks is due to challenge of competition, rising

consumer expectations and shrinking margins of banks, which lead to reduction

in cost, and enhancement of productivity, efficiency and customer convenience.

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Meaning:E-banking means, application of electronic technology towards

transfer of funds through an electronic terminal , computer or magnetic tape to

conduct var ious transactions l ike cash r eceipts, payments, transfer of funds

etc.

It is often known as banking on net. It does not involve any physical

exchange of money, but its all done electronically, from one account to another,

using the Internet. With the advent of e banking, customers are benefited by

unlimited accessibility through the network of Automated Teller Machines,

personal computers or even through mobile phones. Customer can perform

various banking transactions such as balance enquires, bill payments, and

transaction histories, transfer money between accounts, without having to step to

office of the branch.

Features of e banking:

Anywhere any time banking: customers can avail bankingfacility while sitting at their home/office.

Globalization of service: E-Banking has a special feature ofglobalising banks services all over.

Intense competition: E-Commerce is a product of handling intensecompetition among various banks.

Cash less banking: E-Commerce also provides feature of cash lessbanking as cash is not require in raw form but electronic

cash like debit or credit cards may serve the purpose.

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Promptness: Another feature of E-Commerce is provides promptnessin services.

Process of E-Banking/ procedure of E-Banking

E-Banking process can be explained with the help of following diagram and

explanation as under:

To make the use of E-Banking user has to go to the World Wide Web andlog on to the website.

Log on to

website

Verification

Of

password

ProcessingOf

information

CreditCard

request

FinalApproval

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Next step follows verification of user ID and password by the websiteserver.

As soon as password is approved on the server, then processing ofinformation will start on the web.

In this step, credit card number will be demanded for online transaction. If all security measures are completed then the transaction is approved

accordingly.

Advantages of E-Banking:

Importance of E-Banking can be explained from four aspects:

I. Benefits to banks Reduction in cost: E-Banking is helpful to banks by reducing the cost ofvarious transactions as compared to traditional cost by way of ATMs Telephone

banking.

Global coverage: E-Banking provides global network coverage of banksservices i.e.through the concept of Anywhere Anytime Banking.

Good customer relationship:E-Banking helps in attracting and retaining thecustomer by properly handling their grievances.

Reduction in paper work: E-Banking helps in eliminating endless paperbased bank statements, spreadsheets, bulky books of accounts, ledger including

the use of calculator.

Advantages

To banks Tocustomers

To

Govt.

To merchant

Trader

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Reduction in frauds and misappropriations:Through E-Banking frauds andmisappropriations can be reduced as inter branch reconciliation is possible

through internet.

II.Benefits to customers Anytime banking: E-banking provides 24 hours, 365 days services tocustomers.

Anywhere banking:customers can avail any sort of banking services fromanywhere around the globe from sitting at anyplace. Prompt services:Customer can avail the services of details regarding theiraccounts and transactional details instantly.

On line purchase: Customer can buy product of bank or invest in anyscheme without actually insisting the bank branch but only through online.

Saving in time: With the help of E-banking there is no need for bankcustomers to stand in queue for hours to complete financial transactions.

III. Benefits to government

Transparency in transactions: E-Banking provides transparency intransactions i.e. access to information is possible easily.

Global market:With the help of E-Banking products of our country will getglobal market to be popularized properly.

Risk of carrying cash:E-Banking provides the facility of cash less bankingwhich helps in growth of economy.

IV. Benefits to merchant traders

Promotion of business: with the help of E-Banking business of merchantstraders will be promoted because of increased purchasing power of credit holder.

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Immediate settlement:E-Banking helps settlement, and payment of cashis possible by the customer.

Avoids risks: it helps merchants bankers also as there is no risk ofhandling cash.

Limitations of E Banking:

Problems of security:Security and privacy aspects are major issue in caseof E-Banking transaction. Various sites are not properly locked at to ensure

weather customers money is safe in cyber world or not.

High cost: The infrastructural cost of providing E-Banking facility is veryhigh. The banks not only have to automate front-end services but also back officeservices, which involves high cost.

Lack of awareness: Another great hindrance is lack of awareness becauseeffective and wide media efforts in publishing Internet banking need to be

emphasized.

Lack of computerization: Lack of computerization and low density oftelephone lines is also a bottleneck for online banking. In India, out of 65000

bank branches, only 5000 branches are computerized.

Wrong assumption by people:Many people are away from net banking onthe assumption that it is more expensive than the traditional method of dealing

with bank transactions. They still prefer going to bank to perform transactions.

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Types of E-Banking services

1.Automatic Teller Machine (ATM): ATM facility was started in early 1990s

by foreign banks like HSBC, City bank. ATM is made to work 24

Hrs a day. For the purpose of withdrawing cash from ATM machine, plasticcurrency and debit cards are used.

2.Credit Cards: Credit card is another facility produced by E-Banking. Credit

card is a product with the help of which a customer can avail various facilities or

buy products/services without making immediate payment and that payment

could be made at later stage of time.

3. Mobile Banking:Mobile banking provides customer to access their account

on mobile phone screen. Routine banking transactions can be performed by just

punching a few buttons on the mobile.

4. Telephone Banking: Tele banking is another main service provide by e-

banking Tele banking is a service where banks get various phone calls during

their working hours. It helps the user to transact various transactions while

remaining at home.

5.Electronic Fund Transfer (EFT): E-Banking has given a system of

electronically transferring funds .i.e. EFT which involves transfer of funds from

bank account of one customer to bank account of another customer electronically.

This is done through electronic data interchange (EDI).

E-banking

ATM Card E-cheque MobileBanking

TelephoneBanking

EFT

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6. Electronic Cheques:E-cheque is a system, which provides more security and

reduction in overall cost. E-cheque facilitates on line payment. It needs no

clearance charges. Issue of E-cheque is more familiar in various advanced

countries.

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Introduction:

There are rapid changes in the financial services environment, which has

led to increased competition by few players and product innovations. Recent

innovations in tele communications have opened up an additional channel for

electronic banking.Meaning:

Banks have noticed and availed the opportunity that exists between

banking and mobile telephony. SMS (short messaging services)

and GSM(global system mobile)of mobile can be used for banking transactions.

The mobile banking enables the customers to bank anywhere and at any time.

These wireless devices may give services as hand held PCs. Mobile devices

are enabled now days to perform many activities which earlier have been

available only as internet services.

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Issues relating to M-Banking

Cost saving: SMS offers revenue opportunities for operators by changingSMS into higher value added applications. The service offerings in SMS banking

are numerous and highly cost saving.

Simple to operate: The success of M- Banking is due to its user-friendlyinterface and range of services it offers.

Market research: Proper understanding of specific market is key in thesuccess of mobile banking. Research on available payment methods, user habits

and key players is required to be done. Players will have to be creative to make

users perceive it as beneficial.

Services:

Global system mobile (GSM) is not just about voice communications but also

supports wireless personal digital assistant and other devices, just as it supports

telephony. SMS tariffs should be lowered in order to capture the markets and to

exploits the potential for commercial transactions over mobile device.

Many services and schemes are being piloted and some are already available. Feware mentioned here under:

Balance enquiry can be made. Requesting for providing bank statement. Requesting countermanding cheque payments (stop cheque) Chequebook request can be made. Cheque clearance alerts are given to customers. Sending account balances every time one makes a withdrawal, which helps infinding out if some one else is using your ATM card.

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Limitations /problems in M-Banking:

Possibility of error is higher than in internet banking. The data transmission is very slow. M-banking services are risky and not secure trials and pilots are still on WorldWide Web to developed enhanced security.

M-banking services are not enough versatile. The information knowledge available related to M-Banking is not sufficient.Some non-users of mobile banking perceive it to be complicated due to lack of

guidance available.

M Banking is not just a service reserved for international banks but for any

financial institution wishing to take it. There is a great opportunity to exploit the

combination of fast growing consumer device the mobile phone with the richness

of internet protocols that will surpass a similar revolution imitated by pc related

banking M-Banking has a lot to offer banks and to its customers, but its success

depend upon of variety of services, security and user friendly interface its make it

easy, cheaper it simple to use.

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Introduction:

ATM facility was started in early 1990s by foreign banks like HSBC,

City bank. ATM is made to work 24 Hrs a day. For the purpose of withdrawing

cash from ATM machine, plastic currency and debit cards are used. The account

number and credit limit of customers are magnetically embedded on a strip of the

tape on the back of card.

ATM enables user to perform banking transactions by actually interacting with

the human teller. This is one of the unattended or unmanned devices usually

located on or off the banks premises. Its function is to receive and dispense cash

and to handle routine financial transactions.

The operation mechanism is that card is inserted into the ATM; the terminal

reads the tape data to processes, which activates the accounts. According to theinstructions, the details are displayed on the screen and by checking a few keys of

the keyboard the user can direct the computer to carry out the financial

transactions.

An automated teller machine (ATM) is a computerized telecommunications

device that provides thecustomers of afinancial institution with access tofinancial

transactions in a public space without the need for a humanclerk orbank teller.On

most modern ATMs, the customer is identified by inserting a plastic ATM card

with a magnetic stripe or a plastic smartcard with a chip, that contains a unique

card number and some security information, such as an expiration date or CVC

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(CVV). Security is provided by the customer entering a personal identification

number (PIN).

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Using an ATM, customers can access their bank accounts in order to make cash

withdrawals (or credit card cash advances) and check their account balances as

well as purchasing mobile cell phone prepaid credit. ATMs are known by various

other names including automated banking machine, money machine, bank

machine, cash machine, hole-in-the-wall, cashpoint, Bancomat (in various

countries in Europe and Russia), Multibanco (after a registered trade mark, in

Portugal), andAny Time Money(inIndia).

Working of ATM

ATM will give various options on the screenlike:

Balance enquiryMini statementDepositsCash withdrawals etc.

Banks have launched the operation of accepting payments for utility

services like electricity and telephone bills etc. Banking on the net is only an

extension of the ATM and tele banking services.

Insertion ofCard into ATM

Activationof account

Transmission of Tapedata to Processor

ActualTransaction

O eration b user

Clicking of keysof keyboard

Display of details

on screen

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Various facilities produced by ATMs:

Cash withdrawalsPersonal identification number (PIN) changeOn line balance enquiryTransfer of funds between accounts linked to ones cardRequest for cheque bookRequest for account statement

HISTORY:

The first mechanical cash dispenser was developed and built by Luther

George Simjian and installed in 1939 inNew York Cityby theCity Bank of New

York,but removed after 6 months due to the lack of customer acceptance.

Thereafter, the history of ATMs paused for over 25 years, until De La Rue

developed the first electronic ATM, which was installed first in Enfield Town in

North London,United Kingdom on27 June1967byBarclays Bank.This instanceof the invention is credited to John Shepherd-Barron, although various other

engineers were awarded patents for related technologies at the time. Shepherd-

Barron was awarded an OBE in the 2005 New Year's Honours List. The first

person to use the machine was theBritish variety artist and actorReg Varney.The

first ATMs accepted only a single-use token or voucher, which was retained by the

machine. These worked on various principles including radiation and low-

coercivity magnetism that was wiped by the card reader to make fraud more

difficult. The machine dispensed pre-packaged envelopes containing ten pounds

sterling. The idea of a PIN stored on the card was developed by the British

engineerJames Goodfellow in 1965

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In 1968 the networked ATM was pioneered in Dallas,Texas, by Donald Wetzel

who was a department head at an automated baggage-handling company called

Docutel. In 1995 the Smithsonian's National Museum of American History

recognised Docutel and Wetzel as the inventors of the networked ATM.

ATMs first came into wide UK use in 1973; the IBM 2984 was designed at the

request ofLloyds Bank.The 2984 CIT (Cash Issuing Terminal) was the first true

Cashpoint, similar in function to today's machines; Cashpoint is still a registered

trademark of Lloyds TSB in the U.K. All were online and issued a variable amount

which was immediately deducted from the account. A small number of 2984s were

supplied to a USA bank. Notable historical models of ATMs include theIBM 3624

and473x series,Diebold 10xx andTABS 9000 series, andNCR 5xxx series.

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Introduction:

Debit cardscombine the functions of ATM cards and checks. When you

pay with a debit card, the money is automatically deducted from your checking

account. Many banks issue a combined ATM/debit card that looks just like a credit

card and can be used in places where credit cards are accepted. But don't be

mistaken -- they are not credit cards. The money you spend comes out of your

checking account immediately.

Debit and check cards, as they have become widespread, have revealed

numerous advantages and disadvantages to the consumer and retailer alike.

Advantagesare as follows(most of them applying only to a some countries, butthe countries to which they apply are unspecified):

A consumer who is not credit worthy and may find it difficult or impossible toobtain a credit card can more easily obtain a debit card, allowing him/her to make

plastic transactions.

Use of a debit card is limited to the existing funds in the account to which it islinked, thereby preventing the consumer from racking up debt as a result of its use,

or being charged interest,late fees,or fees exclusive to credit cards.

For most transactions, a check card can be used to avoid check writingaltogether. Check cards debit funds from the user's account on the spot, thereby

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finalizing the transaction at the time of purchase, and bypassing the requirement to

pay a credit card bill at a later date, or to write an insecure check containing the

account holder's personal information.

Like credit cards, debit cards are accepted by merchants with less identificationand scrutiny than personal checks, thereby making transactions quicker and less

intrusive. Unlike personal checks, merchants generally do not believe that a

payment via a debit card may be later dishonored.

Unlike a credit card, which charges higher fees and interest rates when a cashadvance is obtained, a debit card may be used to obtain cash from an ATM or a

PIN-based transaction at no extra charge, other than a foreign ATM fee.

The Debit card has many disadvantages as opposed to cash or credit:

Some banks are now charging over-limit fees or non-sufficient funds fees basedupon pre-authorizations, and even attempted but refused transactions by the

merchant (some of which may not even be known by the client).

Many merchants mistakenly believe that amounts owed can be "taken" from acustomer's account after a debit card (or number) has been presented, without

agreement as to date, payee name, amount and currency, thus causing penalty fees

for overdrafts, over-the-limit, amounts not available causing further rejections or

overdrafts, and rejected transactions by some banks.

In some unspecified countries, debit cards offer lower levels of securityprotection than credit cards. Theft of the users PIN using skimming devices can be

accomplished much easier with a PIN input than with a signature-based credit

transaction. However, theft of users' PIN codes using skimming devices van be

equally easily accomplished with a debit transaction PIN input, as with a credit

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transation PIN input, and theft using a signature-based credit transation is equally

easy as theft using a signature-based debit transaction.

In many places, laws protect the consumer from fraud a lot less than with acredit card. While the holder of a credit card is legally responsible for only a

minimal amount of a fraudulent transaction made with a credit card, which is often

waived by the bank, the consumer may be held liable for hundreds of dollars in

fraudulent debit transactions. The consumer also has a much shorter time (usually

just two days) to report such fraud to the bank in order to be eligible for such a

waiver with a debit card, whereas with a credit card, this time may be up to 60

days. A thief who obtains or clones a debit card along with its PIN may be able to

clean out the consumer's bank account, and the consumer will have no recourse.

When a transaction is made using a credit card, the bank's money is being spent,and therefore, the bank has a vested interest in claiming its money where there is

fraud or a dispute. The bank may fight to void the charges of a consumer who is

dissatisfied with a purchase, or who has otherwise been treated unfairly by the

merchant. But when a debit purchase is made, the consumer has spent his/her own

money, and the bank has little if any motivation to collect the funds.

In some unspecified coutriesand for certain types of purchases, such asgasoline,lodging,or car rental,the bank may place a hold on funds much greater

than the actual purchase for a fixed period of time. However, this isn't the case in

other countries, such as Sweden. Until the hold is released, any other transactions

presented to the account, including checks, may be dishonored, or may be paid at

the expense of an overdraft fee if the account lacks any additional funds to pay

those items.

While debit cards bearing the logo of a major credit card are accepted forvirtually all transactions where an equivalent credit card is taken, a major

exception (in some unspecified countries only, is at car rental facilities. In some

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unspecified countries, car rental agencies require an actual credit card to be used,

or at the very least, will verify the creditworthiness of the renter using a debit

cardThere are currently two ways that debit card transactions are processed: online

debit (also known as PIN debit) and offline debit (also known as signature debit).

In some countries including theUnited States andAustralia,they are often referred

to at point of sale as "debit" and "credit" respectively, even though in either case

the user's bank account is debited and no credit is involved.

Some cards are blocked from making either online or offline transactions, while

other cards are enabled for both kinds of transactions.

Online debit ("PIN debit" or "debit")

Online debit cards require electronic authorization of every transaction and the

debits are reflected in the users account immediately. The transaction may be

additionally secured with the personal identification number (PIN) authentication

system and some online cards require such authentication for every transaction,

essentially becoming enhanced automatic teller machine (ATM) cards. One

difficulty in using online debit cards is the necessity of an electronic authorization

device at thepoint of sale (POS) and sometimes also a separatePINpad to enter the

PIN, although this is becoming commonplace for all card transactions in many

countries. Overall, the online debit card is generally viewed as superior to the

offline debit card because of its more secure authentication system and live status,

which alleviates problems with processinglag on transactions that may have beenforgotten or not authorized by the owner of the card. Banks in some countries, such

asCanada andBrazil,only issue online debit cards.

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Introduction:

A credit cardis a system of payment named after the small plastic card

issued to users of the system. A credit card is different from a debit card in that it

does not remove money from the user's account after every transaction. In the

case of credit cards, the issuer lends money to the consumer (or the user). It is

also different from a charge card (though this name is sometimes used by the

public to describe credit cards), which requires the balance to be paid in full each

month. In contrast, a credit card allows the consumer to 'revolve' their balance, at

the cost of having interest charged. Most credit cards are the same shape and size,

as specified by the ISO 7810 standard.

The issuer of the card grants aline of credit to theconsumer (or the user) from

which the user can borrow money for payment to amerchant or as acash advance

to the user. A credit card is different from a charge card, where a charge card

requires the balance to be paid in full each month. In contrast, credit cards allow

the consumers to 'revolve' their balance, at the cost of having interest charged.

Most credit cards are issued by localbanks orcredit unions.

Credit cards are issued after an account has been approved by the credit provider,

after which cardholders can use it to make purchases at merchants accepting that

card.

When a purchase is made, the credit card user agrees to pay the card issuer. The

cardholder indicates his/her consent to pay, by signing a receipt with a record of

the card details and indicating the amount to be paid or by entering a Personal

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identification number (PIN). Also, many merchants now accept verbal

authorizations via telephone and electronic authorization using the Internet, known

as a 'Card/Cardholder Not Present' (CNP) transaction.

Electronic verification systems allow merchants to verify that the card is

valid and the credit card customer has sufficient credit to cover the purchase in a

few seconds, allowing the verification to happen at time of purchase. The

verification is performed using a credit card payment terminal or Point of Sale

(POS) system with a communications link to the merchant's acquiring bank.Data

from the card is obtained from a magnetic stripe or chip on the card; the latter

system is in theUnited Kingdom and Ireland commonly known asChip and PIN,

but is more technically anEMV card.

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Other variations of verification systems are used by eCommerce merchants to

determine if the user's account is valid and able to accept the charge. These will

typically involve the cardholder providing additional information, such as the

security codeprinted on the back of the card, or the address of the cardholder.

Each month, the credit card user is sent a statement indicating the purchases

undertaken with the card, any outstanding fees, and the total amount owed. After

receiving the statement, the cardholder may dispute any charges that he or she

thinks are incorrect (see Fair Credit Billing Act for details of the US regulations).

Otherwise, the cardholder must pay a defined minimum proportion of the bill by a

due date,or may choose to pay a higher amount up to the entire amount owed. The

cr

Cit provider charges interest on the amount owed if the balance is not paid in full

(typically at a much higher rate than most other forms of debt). Some financial

institutions can arrange for automatic payments to be deducted from the user's

bank accounts, thus avoiding late payment altogether as long as the cardholder has

sufficient funds.

Interest charges

Credit card issuers usually waive interest charges if the balance is paid in full each

month, but typically will charge full interest on the entire outstanding balance from

the date of each purchase if the total balance is not paid.

For example, if a user had a $1,000 transaction and repaid it in full within this

grace period, there would be no interest charged. If, however, even $1.00 of the

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total amount remained unpaid, interest would be charged on the $1,000 from the

date of purchase until the payment is received.

The credit card may simply serve as a form of revolving credit, or it may

become a complicated financial instrument with multiple balance segments each at

a different interest rate, possibly with a single umbrella credit limit, or with

separate credit limits applicable to the various balance segments. Usually this

compartmentalization is the result of special incentive offers from the issuing bank,

to encouragebalance transfers from cards of other issuers. In the event that several

interest rates apply to various balance segments, payment allocation is generally at

the discretion of the issuing bank, and payments will therefore usually be allocated

towards the lowest rate balances until paid in full before any money is paid

towards higher rate balances. Interest rates can vary considerably from card to

card, and the interest rate on a particular card may jump dramatically if the card

user is late with a payment on that card or any other credit instrument, or even if

the issuing bank decides to raise its revenue.

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Advantages: The main advantages are as follows:

Benefits to customers:

Because of intense competition in the credit card industry, credit card providers

often offer incentives such as frequent flyer points, gift certificates,or cash back

(typically up to 1 percent based on total purchases) to try to attract customers to

their programs.

Low interest credit cards or even 0% interest credit cards are available. The only

downside to consumers is that the period of low interest credit cards is limited to a

fixed term, usually between 6 and 12 months after which a higher rate is charged.

However, services are available which alert credit card holders when their low

interest period is due to expire. Most such services charge a monthly or annual fee.

Grace period

A credit card's grace period is the time the customer has to pay the balance before

interest is charged to the balance. Grace periods vary, but usually range from 20 to

Advantages

To customers Grace period To merchants

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40 days depending on the type of credit card and the issuing bank. Some policies

allow for reinstatement after certain conditions are met.

Usually, if a customer is late paying the balance, finance charges will be calculated

and the grace period does not apply. Finance charges incurred depend on the grace

period and balance; with most credit cards there is no grace period if there is any

outstanding balance from the previous billing cycle or statement (i.e. interest is

applied on both the previous balance and new transactions). However, there are

some credit cards that will only apply finance charge on the previous or old

balance, excluding new transactions.

Benefits to merchants

An example of street markets accepting credit cards

For merchants, a credit card transaction is often more secure than other forms of

payment, such as checks, because the issuing bank commits to pay the merchant

the moment the transaction is authorized, regardless of whether the consumer

defaults on the credit card payment (except for legitimate disputes, which are

discussed below, and can result in charges back to the merchant). In most cases,

cards are even more secure than cash, because they discourage theft by the

merchant's employees and reduce the amount of cash on the premises. Prior to

credit cards, each merchant had to evaluate each customer's credit history before

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extending credit. That task is now performed by the banks which assume the credit

risk.

For each purchase, the bank charges the merchant a commission (discount fee) for

this service and there may be a certain delay before the agreed payment is received

by the merchant. The commission is often a percentage of the transaction amount,

plus a fixed fee.

Parties involved

Cardholder:The holder of the card used to make a purchase; theconsumer. Card-issuing bank:The financial institution or other organization that issuedthe credit card to the cardholder. This bank bills the consumer for repayment and

bears the risk that the card is used fraudulently. American Express and Discover

were previously the only card-issuing banks for their respective brands, but as of

2007, this is no longer the case.

Merchant: The individual or business accepting credit card payments forproducts or services sold to the cardholder

Acquiring bank:The financial institution accepting payment for the productsor services on behalf of the merchant.

Independent sales organization: Resellers (to merchants) of the services ofthe acquiring bank.

Merchant account:This could refer to the acquiring bank or the independentsales organization, but in general is the organization that the merchant deals with. Credit Card association:An association of card-issuing banks such as Visa,MasterCard, Discover, American Express, etc. that set transaction terms for

merchants, card-issuing banks, and acquiring banks.

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Transaction network: The system that implements the mechanics of theelectronic transactions. May be operated by an independent company, and one

company may operate multiple networks. Transaction processing networks

include: Cardnet, Nabanco, Omaha, Paymentech, NDC Atlanta, Nova, TSYS,

Concord EFSnet, and VisaNet.

Affinity partner: Some institutions lend their names to an issuer to attractcustomers that have a strong relationship with that institution, and get paid a fee or

a percentage of the balance for each card issued using their name. Examples of

typical affinity partners are sports teams, universities, charities, professional

organizations, and major retailers.

The flow of information and money between these partiesalways through the

card associationsis known as the interchange.

Features:

As well as convenient, accessible credit, credit cards offer consumers an easy

way to trackexpenses,which is necessary for both monitoring personal

expenditures and the tracking of work-related expenses fortaxation and

reimbursementpurposes. Credit cards are accepted worldwide, and are available

with a large variety of credit limits, repayment arrangement, and other perks

(such asrewards schemes in which points earned by purchasing goods with the

card can be redeemed for furthergoods andservices orcredit card cashback).

Some countries, such as theUnited States,theUnited Kingdom,andFrance,limit

the amount for which a consumer can be heldliable due to fraudulent transactions

as a result of a consumer's credit card being lost or stolen.

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Problems

A smart card, combining credit card and debit card properties. The 3 by 5 mm

security chip embedded in the card is shown enlarged in the inset. The contact pads

on the card enable electronic access to the chip.

The low security of the credit card system presents countless opportunities for

fraud. This opportunity has created a huge black market in stolen credit card

numbers,which are generally used quickly before the cards are reported stolen.

The goal of the credit card companies is not to eliminate fraud, but to "reduce it to

manageable levels". This implies that high-cost low-return fraud prevention

measures will not be used if their cost exceeds the potential gains from fraud

reduction.

Most internet fraud is done through the use of stolen credit card information which

is obtained in many ways, the simplest being copying information from retailers,

either online or offline.Despite efforts to improve security for remote purchases

using credit cards, systems with security holes are usually the result of poor

implementations of card acquisition by merchants.

For example, a website that usesSSL to encrypt card numbers from a

client may simply email the number from the webserver to someone who manually

processes the card details at a card terminal. Naturally, anywhere card details

become human-readable before being processed at the acquiring bank, a security

risk is created.

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Smart Cards or Stored Value Cards is relatively new payments technology.

It is a plastic card, with or without magnetic stripe, capable of storing, retrieving

and manipulating data and used in variety of applications.1 It is also known as

Electronic Money or E Purse issued by banks to its customers having the size as of

credit card. A customer needs not to have currency in his pocket as value or

amount is stored in the card itself by transferring it from his account, due to this

feature it is regarded as electronic purse. The emergence of Smart Card arises in

order to issue multipurpose cards which function as credit cards, debit cards and

ATM cards so that it suits all types of customer base and their choice. These are

generally the reloadable cards in which money is loaded into it by transferring the

required amount from customers account via ATMs, telephone or internet.

When a customer makes purchases through smart card, unlike credit card, no

validations and authentications from vendor's bank and bank card association are

required as the money is available in the card itself. Funds are directly deducted

from the cards and transferred to the vendor's terminal.

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Smart cards are multipurpose in nature which can serve as an identity card

for a cardholder, a medical card that contains the medical history of the holder and

as a credit card/debit card, facilitating off-line transactions where settlement across

different banks is involved. The Smart Rupee System (SMARS) pilot project

sponsored by Reserve Bank of India (RBI) has set the foundation for usage of

smart card-based financial applications in India. These are currently being issued

by few banks in India having tied up with FINO (Financial Information Network

and Operations Ltd). IDBI bank has introduced its smart card called MoneySmart,

Corporation Bank has issued CorpSmart, and Bank of India has issued its E-purse

cards. PNB, SBI, ABN Amro, ICICI bank and Bank of Baroda have also launched

smart card-based banking solutions. Thus, banks are now showing interest in the

smartcards approach to reach out to the unbanked population. FINO is focusing

more on increasing the number of cards of its current partners.2With the spread of

rapid technological developments and the potential of the usage of smart cards for

many purposes, the Reserve Bank also teamed up with the Government of India,

banks and the card industry to conduct pilot project for the use of smart cards for

multiple purposes.

The future prospects of plastic cards in India are bright enough to bring

paradigm change in its popularity among customers as well as banks. The number

of debit and credit card users in India is anticipated to reach 73.4 million and 406

million by the year 2010 and 2011.3 Also, plastic money has immense

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continue the momentum.5 However, operational risk involved with the usage of

plastic cards like chances of fraud, card damage etc. plays the negative part too.

Moreover, some customers are not able to utilise cards effectively due to its

complex nature and they don't actually know how to operate it for specific purpose.

Thus, the banks should give them some training regarding its usage. The banks can

also provide them facility to use plastic cards on trail basis so that they can become

more confident while using their own cards. Cost has also remained an issue in

case of credit cards. The interest levied on outstanding amount is very high which

sometimes takes the customers in debt trap ultimately discouraging the potential

customers to make use of it. However, all these hurdles will diminish over time

and positively influencing trends are expected to continue in the near and far-

future. Also, the growth of plastic cards in future would depend upon the capacity

building of the banks to meet the challenges and make use of the opportunities

profitably. However, the kind of technology used and the efficiency of operations

would provide the much needed competitive edge for success in plastic cards

business. Furthermore, in all these customers' interest is of paramount importance.6

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Introduction:

Online banking (or Internet banking) allows customers to conduct

financial transactions on a secure website operated by their retail or virtualbank,

credit union orbuilding society.

Features:

Online banking solutions have many features and capabilities in common, but

traditionally also have some that are application specific.

The common features fall broadly into several categories

Transactional (e.g., performing a financial transaction such as an account toaccount transfer, paying a bill, wire transfer... and applications... apply for a loan,

new account, etc.)

o Electronic bill presentment and payment - EBPP

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o Funds transferbetween a customer's ownchecking andsavings accounts,or toanother customer's account

o Investmentpurchase or saleo Loan applications and transactions, such as repayments Non-transactional (e.g., online statements, check links, cobrowsing, chat)o Bank statements Financial Institution Administration - features allowing the financial institutionto manage the online experience of their end users

ASP/Hosting Administration - features allowing the hosting company toadminister the solution across financial institutions

Security

Security token devices

Protection through single password authentication, as is the case in most secure

Internet shopping sites, is not considered secure enough for personal online

banking applications in some countries. Basically there exist two different security

methodsfor online banking.

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ThePIN/TAN system where the PIN represents a password, used for the loginand TANs representingone-time passwords to authenticate transactions. TANs can

be distributed in different ways, the most popular one is to send a list of TANs to

the online banking user by postal letter. The most secure way of using TANs is to

generate them by need using asecurity token.These token generated TANs depend

on the time and a unique secret, stored in the security token (this is called two-

factor authentication or 2FA). Usually online banking with PIN/TAN is done via a

web browser using SSL secured connections, so that there is no additional

encryption needed.

Signature based online banking where all transactions are signed and encrypteddigitally. The Keys for the signature generation and encryption can be stored on

smartcards or any memory medium, depending on the concrete implementation.

Attacks

Most of the attacks on online banking used today are based on deceiving the user

to steal login data and valid TANs. Two well known examples for those attacks are

phishing andpharming.Cross-site scripting andkeylogger/Trojan horses can also

be used to steal login information.

A recent FDIC Technology Incident Report, compiled from suspicious activity

reports banks file quarterly, lists 536 cases of computer intrusion, with an average

loss per incident of $30,000. That adds up to a nearly $16-million loss in the

second quarter of 2007. Computer intrusions increased by 150 percent between thefirst quarter of 2007 and the second. In 80 percent of the cases, the source of the

intrusion is unknown but it occurred during online banking, the report states.[4]

Countermeasures

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There exist several countermeasures which try to avoid attacks.Digital certificates

are used against phishing and pharming, the use of class-3 card readers is a

measure to avoid manipulation of transactions by the software in signature based

online banking variants. To protect their systems against Trojan horses, users

should use virus scanners and be careful with downloaded software or e-mail

attachments.

This chapter represents a conclusive review of the efforts made since up till about

the different innovations by in services banking sector.

Various innovations of the bank provide benefits to the various business

and Industries in many different ways. The innovations of bank are of two types:

innovations in products & innovations in branches

Innovations in products includes, E-banking, ATM, debit cards, credit

cards & mobile banking whereas innovations in branches includes, universal

banking, offshore banking, retail banking, wholesale banking.

The project report summarizes about the facilities of CBI

accounts and deposits and also provides the different products. This information

is based on the primary and secondary data available from different sources.

FINDINGS

The Project work is done on basis of certain objectives, which are as

follows:

To understand the various innovations in banking sector by the bank.

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To know about the different products of the bank.

To know about the benefits of innovations of the bank.

In the light of these objectives the following are the findingsthat represent

the changing environment of Indian economy in global scenario in the wake of

liberalization and globalization.

The study reveals about the different types of innovations of the bank, whichhelps the people in many ways.

The study presents the different types of products available in the bank for thehelp of its customers.

So, these are the findings, which the project reveals by making an analysis of

the topic. Moreover to making efficient central bank of India, certain suggestions

have to be followed by these banks. These are as follows:

Central bank of India has to provide ATM facility to its customers so that thepeople can get benefit of this facility and withdraw money at any time at any place

with this they would not have to face any problem regarding to money.

Central bank of Indias branch network should be wider as, we have alreadydiscussed about ATM network in each branch.

Central bank of India has to improve its disclosure policies so that everyone canget easily all information regarding banking policies and other information related

to bank.

Indian market will provide for high growth market so bank should makestrategies to grab such opportunities.

Bank should open their branches in rural area.

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www.wikepeadia.com

www.google.com

www.lycos.com

www.centralbank of india.com

Value notes.com

White papers.com

Banknetindia.com

Finance biz.com

Yahoo.com

Google.com

Banking Law and Practice by Sharma publications.

Banking theory and practices by kalyani publishers.

Principles of banking by AIBA (All India banking associations)