technology and banking final project done done
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INTRODUCTION
The term ―banking technology‖ refers to the use of sophisticated information and
communication technologies together with computer science to enable banks to
offer better services to its customers in a secure, reliable, and affordable manner,
and sustain competitive advantage over other banks. In the five decades since
independence, banking in India has evolved through four distinct phases.
During Fourth phase, also called as Reform Phase, Recommendations of the
Narasimham Committee (1991) paved the way for the reform phase in the banking.
Important initiatives with regard to the reform of the banking system were taken in
this phase. Important among these have been introduction of new accounting and
prudential norms relating to income recognition, provisioning and capital
adequacy, deregulation of interest rates & easing of norms for entry in the field of
banking.
Entry of new banks resulted in a paradigm shift in the ways of banking in India.The growing competition, growing expectations led to increased awareness
amongst banks on the role and importance of technology in banking. The arrival of
foreign and private banks with their superior state-of-the-art technology-based
services pushed Indian Banks also to follow suit by going in for the latest
technologies so as to meet the threat of competition and retain their customer base.
Indian banking industry, today is in the midst of an IT revolution.
A combination of regulatory and competitive reasons has led to increasing
importance of total banking automation in the Indian Banking Industry.
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Information Technology has basically been used under two different avenues in
Banking. One is Communication and Connectivity and other is Business Process
Reengineering. Information technology enables sophisticated product
development, better market infrastructure, implementation of reliable techniques
for control of risks and helps the financial intermediaries to reach geographically
distant and diversified markets.
In view of this, technology has changed the contours of three major functions
performed by banks, i.e., access to liquidity, transformation of assets and
monitoring of risks. Further, Information technology and the communication
networking systems have a crucial bearing on the efficiency of money, capital and
foreign exchange markets.
The Software Packages for Banking Applications in India had their beginnings in
the middle of 80s, when the Banks started computerizing the branches in a limited
manner. The early 90s saw the plummeting hardware prices and advent of cheap
and inexpensive but high-powered PCs and servers and banks went in for what was
called Total Branch Automation (TBA) Packages.
The middle and late 90s witnessed the tornado of financial reforms, deregulation,
globalization etc coupled with rapid revolution in communication technologies and
evolution of novel concept of 'convergence' of computer and communication
technologies, like Internet, mobile / cell phones etc.
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OBJECTIVE OF THE STUDY
1. The study is based on Role and Evolution of technology in banking
2. The study is based on Positive and Negative effects of technology in banking
METHODOLOGY OF THE STUDY
This study is based on primary and secondary data
LIMITATIONS OF THE STUDY
The study is based on general bank and not any specific public and private sectors
banks
CHAPTER ARRANGEMENT
Chapter I deals with introduction
Chapter II gives Role and Evolution of technology in banking
Chapter III gives Positive and Negative Effects of technology in banking
Chapter IV deals with Conclusion
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Figure1.1
Different constituents of banking technology
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EVOLUTION AND ROLE OF TECHNOLOGY IN
BANKING
Evolution
Despite the enormous changes the banking industry has undergone through during
the past 20 years let alone since 1943 one factor has remained the same: the
fundamental nature of the need customers have for banking services. However, the
framework and paradigm within which these services are delivered has changed
out of recognition. It is clear that people‘s needs have not changed, and neither hasthe basic nature of banking services people require. But the way banks meet those
needs is completely different today.
They are simply striving to provide a service at a profit. Banking had to adjust to
the changing needs of societies, where people not only regard a bank account as a
right rather than a privilege, but also are aware that their business is valuable to the
bank, and if the bank does not look after them, they can take their businesselsewhere.
Indeed, technological and regulatory changes have influenced the banking industry
during the past 20 years so much so that they are the most important changes to
have occurred in the banking industry, apart from the ones directly caused by the
changing nature of the society itself. In this book, technology is used
interchangeably with information and communication technologies together with
computer science. The relationship between banking and technology is such that
nowadays it is almost impossible to think of the former without the latter.
Technology is as much part of the banking industry today as a ship‘s engine is part
of the ship. Thus, like a ship‘s engine, technology drives the whole thing forward
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Technology in banking ceased being simply a convenient tool for automating
processes. Today banks use technology as a revolutionary means of delivering
services to customers by designing new delivery channels and payment systems.
For example, in the case of ATMs, people realized that it was a wrong approach to
provide the service as an additional convenience for privileged and wealthy
customers. It should be offered to the people who find it difficult to visit the bank
branch. Further, the cost of delivering the services through these channels is also
less. Banks then went on to create collaborative ATM networks to cut the capital
costs of establishing ATM networks, to offer services to customers at convenient
locations under a unified banner.
People interact with banks to obtain access to money and payment systems they
need. Banks, in fact, offer only what might be termed as a secondary level of utility
to customers, meaning that customers use the money access that banks provide as a
means of buying the things they really want from retailers who offer them a
primary level of utility. Customers, therefore, naturally want to get the interaction
with their bank over as quickly as possible and then get on with doing something
they really want to do or with buying something they really want to buy. That
explains why new types of delivery channels that allow rapid, convenient, accurate
delivery of banking services to customers are so popular.
Nowadays, customers enjoy the fact that their banking chores are done quickly and
easily. This does not mean that the brick-and-mortar bank branches will
completely disappear. Just as increasing proliferation of mobile phones does not
mean that landline telephone kiosks will disappear, so also the popularity of high-
tech delivery channels does not mean that physical branches will disappear
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altogether. It has been found that corporate and older persons prefer to conduct
their business through bank branches.
The kind of enormous and far-reaching developments discussed above have taken
place along with the blurring of demarcations between different types of banking
and financial industry activities. Five reasons can be attributed to it:
1. Governments have implemented philosophies and policies based on an increase
in competition in order to maximize efficiency. This has resulted in the creation of
large new financial institutions that operate simultaneously in several financial
sectors such as retail, wholesale, insurance, and asset management.
2. New technology creates an infrastructure allowing a player to carry out a wide
range of banking and financial services, again simultaneously.
3. Banks had to respond to the increased prosperity of their customers and to
customers‘ desire to get the best deal possible. This has encouraged banks to
extend their activities into other areas.
4. Banks had to develop products and extend their services to accommodate the
fact that their customers are now far more mobile. Therefore demarcations are
breaking down.
5. Banks have every motivation to move into new sectors of activity in order to try
to deal with the problem that, if they only offer banking services, they are
condemned forever to provide only a secondary level of utility to customers.
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Role of Technology in Banking
Technology is no longer being used simply as a means for automating processes.
Instead it is being used as a revolutionary means of delivering services to
customers. The adoption of technology has led to the following benefits: greater
productivity, profitability, and efficiency; faster service and customer satisfaction;
convenience and flexibility; 24x7 operations; and space and cost savings. Harrison
Jr., chairman and chief executive officer of Chase Manhattan, which pioneered
many innovative applications of ICT in banking industry, observed that the
Internet caused a technology revolution and it could have greater impact on change
than the industrial revolution.
Technology has been used to offer banking services in the following ways :
1. ATMs are the cash dispensing machines that can be seen at banks and other
locations where crowd proximity is more. ATMs started as a substitute to a
bank to allow its customers to withdraw cash at anytime and to provide services
where it would not be viable to open another physical branch. The ATM is the
most visited delivery channel in retail banking, with more than 40 billion
transactions annually worldwide. In fact, the delivery channel revolution is said
to have begun with the ATM. It was indeed a pleasant change for customers to
be in charge of their transaction, as no longer would they need to depend on an
indifferent bank employee. ATMs have made banks realize that they could
divert the huge branch traffic to the ATM. The benefits hence were
mutual.Once banks realized the convenience of ATMs, new services started to
be added.
2. The phenomenal success of ATMs had made the banking sector develop more
innovative delivery channels to build on cost and service efficiencies. As a
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consequence, banks have introduced telebanking, call centers, Internet banking,
and mobile banking. Telebanking is a good medium for customers to make
routine queries and also an efficient tool for banks to cut down on their
manpower resources. The call center is another channel that captured the
imagination of banks as well as customers. At these centers, enormous amount
of information is at the fingertips of trained customer service representatives. A
call center meets a bank‘s infrastructural, as well as customer service
requirements. Not only does a call center cut down on costs, it also results in
customer satisfaction. Moreover, it facilitates 24x7 working and offers the
―human touch‖ that customers seek. The call center has large potential
dividends by way of improved customer relationship management (CRM) and
return on investment (ROI).
3. With the Internet boom, banks realized that Internet banking would be a good
way to reach out to customers. Currently, some banks are attempting to harness
the benefits of Internet banking, while others have already made Internet
banking an important and popular paymet system. Internet banking is on the
rise, as is evident from the statistics. Predictions of Internet banking to go the
ATM way have not materialized as much as anticipated; many reasons can be
cited for this. During 2003, the usage of the Internet as a banking channel
accounted for 8.5%. But this was due to the false, unrealistic expectations tied
to it. Some of the factors that were detrimental in bringing down, or rather, not
being supportive, are low Internet penetration, high telecom tariffs, slow
Internet speed and inadequate bandwidth availability, lack of extended
applications, And lack of a trusted environment.
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4. Mobile banking however is being regarded in the industry as ―the delivery
channel of the future‖ for various reasons. First and foremost is the convenience
and portability afforded. It is just like having a bank in the pocket. Other key
reasons include the higher level of security in comparison to the Internet and
relatively low costs involved. The possibility that customers will adopt mobile
banking is high, considering the exponential growth of mobile phone users
worldwide. Mobile banking typically provides services such as the latest
information on account balances, previous transactions, bank account debits and
credits, and credit card balance and payment status. They also provide their
online share trading customers with alerts for pre-market movements and post-
market information and stock price movements based on triggers. Fallout of the
ICT-driven revolution in the banking industry is the Centralized Banking
Solution (CBS). A CBS can be defined as a solution that enables banks to offer
a multitude of customer-centric services on a 24x7 basis from a single location,
supporting retail as well as corporate banking activities, as well as all possible
delivery channels existing and proposed. The centralization thus afforded
makes a ―one-stop‖ shop for financial services a reality. Using CBS, customers
can access their accounts from any branch, anywhere, irrespective of where
they physically opened their accounts.
Information technology has not only helped banks to deliver robust and reliable
services to their customers at a lower cost, but also helped banks make better
decisions. Here a data warehouse plays an extremely important role. It essentially
involves collecting data from several disparate sources to build a central data
warehouse to store and analyze the data. A data warehouse in a bank typically
stores both internal data and data pertaining to its competitors. Data mining
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techniques can then be applied on a data warehouse for knowledge discovery
(Hwang, Ku, Yen, & Cheng, 2004). Data warehousing also allows banks to
perform time series analysis and online analytical processing (OLAP) to answer
various business questions that would put the banks ahead of their competitors.
Technology Products:
(1). INTERNET BANKING
(2). CREDIT CARD
(3). MOBILE BANKING
(4). ELECTRONIC FUND TRANSFER
(5). ONLINE PAYMENT OF EXCISE AND SERVICE TAX
(6) TELEPHONE BANKING
(7). MICR (magnetic ink character recognition)
(8). BANKNET
(9) INFINET
(10) SWIFT
(11) ELECTRONIC DATA INTERCHANGE
(12) ELECTRONIC CLEARING SERVICES (ECS)
(13) ATM‘S
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INTERNET 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. E-banking 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 personal computer (PC), personal digital assistant (PDA), automated teller
machine (ATM), kiosk, or Touch Tone telephone. While the risks and controls are
similar for the various e-banking access channels, this booklet focuses specifically
on Internet- based services due to the Internet‘s widely accessible public network.
Accordingly, this booklet begins with a discussion of the two primary types of
Internet websites: informational and transactional.
CREDIT CARD ONLINE
A credit card is part of a system of payments named after the small plastic card
issued to users of the system. It is a card entitling its holder to buy goods and
services based on the holder's promise to pay for these goods and services. The
issuer of the card grants a line of credit to the consumer (or the user) from which
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the user can borrow money for payment to a merchant or as a cash advance to the
user.
MOBILE BANKING
The kind of banking and financial service that gives a real-time mobile access to
customer on the move is called mobile banking the services being offered through
mobile phone. Mobile banking to the banking activity that are carried out on
mobile (cell) phones that is banking is enabled even while a person is on the move
In modern times, information exchange takes place at great speed. The
dependence of people on computing devices such as computers, cellular phone,
pager, facsimile machine, e-mail and internet is growing at galloping rate. Such as
growth has made the real time exchange of information a reality. At the same time
it has also thrown challenges to modern enterprises. Which prompt them to act in a
proactive manner so as to stay competitive in the business world? The constant
innovation happening in the realm of electronic banking and financial services has
contributed to a new development called ‗mobile banking‘ this may be attributed to
the forth coming demand from the mobile workforce. The increasingly growing
number of mobile workforce has really given a cutting edge to the progress of the
electronic banking.
The mobile banking refers to the facility allowed by certain banks in India whereby
the mobile phone holder can undertake certain banking transaction through their
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mobile phones. This value added services has very little human interface and
private banks like ICICI, HDFC etc. have started offering this service. The
customer is required to type a text message on the mobile phone which travel
through the server of the cell phone service provider to bank‘s internet service;
information is retrieved and routed back the same way in 15-30 second. To avail
the service, the client has to fill up form at any of bank‘s branches and bank
informs the cellular service provider to activate the module instantly.
The information which includes checking of account balance, request for a Cheque
book, stop payment instruction, changing primary operation account, request for
current periods‘ account statement to the mailed and access summaries of last three
transactions performed on the account.
The number of people using mobile banking services has increased. While the
trend is growing, lack of awareness of services, apart from perceived security
issues are inhibiting faster takeoff. ―-Dataquest.
It was clear at the start itself that this would be a battle focused not on technology,
but on the mindset of the target audience. Over two years after the launch of
mobile banking services in the country, that bridge has been reached and many are
beginning to walk those cautious steps across it. Yes, the usage of mobile banking
services is increasing, and fast against Dataquest‘s estimated user base of under
10,000 for mobile banking services in 2000, there are over 120,000 today who
SMS from their banking. Even our survey despite targeting a respondent profile
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that would bring in more positive answers than negative (see methodology), threw
up very low usage numbers.
Also, e-commerce as a medium of purchasing and transacting has not really caught
on, and the basket of mobile banking offerings is, in itself, very limited. The good
news the technology backbone is in place, and getting better. There‘s CDMA,
there‘s GSM. Forget their battles on the mobile telephony front from the
consumer‘s point of view; he never had it so good.
The recent price cuts are also likely to help, ―say banking experts, adding that this
will lead to ―increasing willingness to move on to mobile, and therefore, to the
value-added services that most operators offer today‖
The Internet is revolutionizing the way the financial industry conducts business,empowering organization with new business model and new ways to interact with
customers. The ability to perform banking transactions online banks and brokers
who offer personalized services through their web portals.
This increased competition is driving traditional financial institutions to find new
ways to add value to their product and services, gain competitive advantage and
increase customer loyalty while also attracting new, high-value client.
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ELECTRONIC FUND TRANSFER
Electronic funds transfer or EFT is the electronic exchange or transfer of money
from one account to another, either within a single financial institution or across
multiple institutions, through computer-based systems.
The term is used for a number of different concepts:
1. Cardholder-initiated transactions, where a cardholder makes use of a payment
card
2. Direct deposit payroll payments for a business to its employees, possibly via
a payroll service bureau
3. Direct debit payments, sometimes called electronic checks, for which a business
debits the consumer's bank accounts for payment for goods or services
4. Electronic bill payment in online banking, which may be delivered by EFT or
paper check
5. Transactions involving stored value of electronic money, possibly in a private
currency
6. Wire transfer via an international banking network (generally carries a higher
fee)
7. Electronic Benefit Transfer
In 1978 U.S. Congress passed the Electronic Funds Transfer Act to establish the
rights and liabilities of consumers as well as the responsibilities of all participants
in EFT activities in the United States.
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ONLINE PAYMENT OF EXCISE AND SERVICE TAX
For taxpayers who opt to maintain account with the concerned bank and willing to
use Internet banking facility:
1. Taxpayer logs on to the bank‘s web site.
2. The bank‘s site allows the taxpayer to enter into the secure banking area
after verifying the user ID and password provided to the taxpayer by the
bank;
3. Once in the secure banking area of the bank, the tax payer can select the
―Pay Tax‖ menu which will further offer option to select various taxes he
can pay on-line;
4. Once opted for CBEC (Indirect Tax), the taxpayer is guided to the challan
form for filling up the details;
5. There will be an on-line validation for Assessee Code, Location Code,
Account Head against the masters provided to the bank from the concerned
Pay and Accounts Office. The validation is mandatory and only successful
entrants will be allowed to proceed further;
6. Banks will obtain and keep only such Assessee Codes, in their master, which
belongs to the Assessee who falls under the Commission rates for which the
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bank is authorized to collect Indirect Tax revenue. This will ensure that the
bank is not collecting and accounting indirect tax revenue for a
Commissioner ate for which it is not authorized;
7. On successful validation of the details in the challan format, the taxpayer is
guided to a ‗make payment screen‘ showing the payment details filled in by
the taxpayer on the challan format;
8. The taxpayer gets an option to ―Continue‖ or ―Cancel‖;
9. On selecting ―Cancel‖, the taxpayer is prompt for entering his user ID and
password to enter into the bank‘s e-transaction module;
10. On selecting ―continue‖, the taxpayer is prompt for entering his user ID and
password to enter into the bank‘s transaction module;
11. This screen further leads the taxpayer to the page describing his account
details with the bank;
12. Taxpayer selects the account to be debited;
13. Authorize the payment transaction;
14. On successful payment transaction, the account of the taxpayer gets debited
and taxpayer gets a unique system generated payment confirmation number;
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15. The concerned Focal Point Bank prints the challan and include in the scroll
on a day to day basis and forward to the concerned PAO and, to the Range
Officer as per the existing procedure and ensures two copies of the challan in
delivered to the taxpayer;
16. Fund transaction and settlement with Government will be the exclusive
responsibility of the bank as per the existing procedure.
TELEPHONE BANKING
Telephone banking is a service provided by a financial institution, which allows its
customers to perform transactions over the telephone. Most telephone banking
services use an automated phone answering system with phone keypad response or
voice recognition capability.
To guarantee security, the customer must first authenticate through a numeric orverbal password or through security questions asked by a live representative (see
below).
With the obvious exception of cash withdrawals and deposits, it offers virtually all
the features of an automated teller machine: account balance information and list
of latest transactions, electronic bill payments, funds transfers between a
customer's accounts, etc.
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Usually, customers can also speak to a live representative located in a call centre or
a branch, although this feature is not always guaranteed to be offered 24/7. In
addition to the self-service transactions listed earlier, telephone banking
representatives are usually trained to do what was traditionally available only at the
branch: loan applications, investment purchases and redemptions, Cheque book
orders, debit card placements, change of address, etc.
Banks which operate mostly or exclusively by telephone are known as phone
banks. They also help modernize the user by using special technology.
MICR (magnetic ink character recognition)
1. Magnetic Ink Character Recognition
2. Introduced in 1987 in the four metros
3. 1,047 Clearing Houses; 42 with MICR
4. SB/CA Cheque leaves standardized size (8 X 3 2/3‖) are pre-printed with the
bank-branch code and account type in MICR strip, while the amount is read
manually and fed into the system using the encoders for funds settlements
5. Speeds up clearing work
6. BC/DW/TC/DD/PO/GC/IW/RW/SI...
BANKNET
1. Set up in 1991 by RBI
2. Meant to facilitate transfer of inter-bank/ inter-branch messages within India
by Public Sector banks who are members of this network
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3. Wide connectivity - Major Centers like Mumbai, Delhi, Calcutta, Madras,
Nagpur, Bangalore, Hyderabad, Pune, Ahmedabad, Kanpur, Lucknow,
Chandigarh, Kochi, Jaipur, Bhopal, Patna, Bhubaneswar,
Thiruvananthapuram, Guwahati, Panaji, Jammu, etc
INFINET
1. Indian Financial network
2. Set up by RBI in June 1999
3. Satellite based WAN using VSAT ( Very small Aperture Terminal ) technology
4. The hub and network Management System of INFINET are located in the
institute for development and research in banking Technology.
SWIFT
1. Society for worldwide Inter- bank financial institutions
2. HQ La Hulpe, Brussels, Belgium
3. Provides reliable, fast telecommunication facilities for exchange of financial
messages all over the world between banks and FIs
4. As non-profit making co-operative society in 1973 by 239 banks in 15
countries
5. Hubs in Brussels, New York and Netherlands
6. Rules in 1975; first message in 1977
7. >7,000 members in 200 countries now
8. Handles over 7 million messages every day
9. India – a member since 1991
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10. 88 Indian banks are members as on date
11. Any Bank / FI can become a member
12. Allots an address called Bank Identi-fication Code (BIC) of 8 characters
13. Enables members to send secure and reliable messages – authenticated...
14. Correspondent bank arrangements...
15. Advantages: 24 hours service, system based – fraud-free – faster – accurate
– confidential – funds/LCs/Guara
ELECTRONIC DATA INTERCHANGE
1. Facilitates transfer of banking transactions using agreed protocol and standard
data structure b/w computers
2. Norms developed in respect of specific messages for transmission of business
transactions which are electronic equivalents of commercial invoices, purchase
orders, transport bookings, payment instructions etc
3. Appropriate message formats and standards for financial applications in EDI
developed by Message Development Group-Finance (constituted by IBA)
ELECTRONIC CLEARING SERVICE
1. Electronic Clearing Scheme (ECS) operated by the RBI since 1996-97
2. Utilizes BANKNET and INFINET
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3. Facilitates payment from a single account at a bank branch to any number
of accounts maintained with the branches of the same or other banks – Eg.,
Payment of dividends
4. RBI has also launched ECS – Debit for payment to utility companies like
Telephones, Electricity etc
AUTOMATED TELLER MACHINES
1. ATMs or 24 hour Tellers – Electronic Terminals - allow to bank at any
time...
2. On-site (near branch) and Off-site ATM
3. ATMs facilitate withdrawal/deposit....
4. Customer provided with a PIN / Card
5. Introduced in India by Foreign Banks
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POSITIVE AND NEGATIVE EFFECTS OF TECHNOLOGY
IN BANKING, SOLUTIONS
Positive Effects of Technology
Competition — Studies show that competitive pressure is the chief driving force
behind increasing use of Internet banking technology, ranking ahead of cost
reduction and revenue enhancement, in second and third place respectively. Banks
see Internet banking as a way to keep existing customers and attract new ones to
the bank.
Cost Efficiencies — National banks can deliver banking services on the
Internet at transaction costs far lower than traditional brick-and-mortar branches.
The actual costs to execute a transaction will vary depending on the delivery
channel used. For example, according to Booz, Allen & Hamilton, as of mid- 1999,
the cost to deliver manual transactions at a branch was typically more than a dollar,
ATM and call center transactions cost about 25 cents, and Internet transactions cost
about a penny. These costs are expected to continue to decline.
National banks have significant reasons to develop the technologies that will help
them deliver banking products and services by the most cost-effective channels.
Many bankers believe that shifting only a small portion of the estimated 19-billion
payments mailed annually in the U.S. to electronic delivery channels could save
banks and other businesses substantial sums of money. However, national banks
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should use care in making product decisions. Management should include in their
decision making the development and ongoing costs associated with a new product
or service, including the technology, marketing, maintenance, and customer
support functions. This will help management exercise due diligence, make more
informed decisions, and measure the success of their business venture.
Geographical Reach — Internet banking allows expanded customer contact
through increased geographical reach and lower cost delivery channels. In fact
some banks are doing business exclusively via the Internet — they do not have
traditional banking offices and only reach their customers online. Other financial
institutions are using the Internet as an alternative delivery channel to reach
existing customers and attract new customers.
Branding — Relationship building is a strategic priority for many national banks.
Internet banking technology and products can provide a means for national banks
to develop and maintain an ongoing relationship with their customers by offering
easy access to a broad array of products and services. Internet Banking 4
Comptroller‘s Handbook By capitalizing on brand identification and by providing
a broad array of financial services, banks hope to build customer loyalty, cross-sell,
and enhance repeat business.
Customer Demographics — Internet banking allows national banks to offer a
wide array of options to their banking customers. Some customers will rely on
traditional branches to conduct their banking business. For many, this is the most
comfortable way for them to transact their banking business. Those customers
place a premium on person-to-person contact. Other customers are early adopters
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of new technologies that arrive in the marketplace. These customers were the first
to obtain PCs and the first to employ them in conducting their banking business.
The demographics of banking customers will continue to change. The challenge to
national banks is to understand their customer base and find the right mix of
delivery channels to deliver products and services profitably to their various
market segments.
Benefits to customer
1.
More convenience & flexi timings2. Better awareness of products & services
3. Up-to-date information on accounts
4. Low cost of accessing the accounts
Negative Effects of Technology
While ICT provides so many advantages to the banking industry, it also poses
security challenges to banks and their customers. Even though Internet banking
provides ease and convenience, it is most vulnerable to hackers and cyber
criminals. Online fraud is still big business around the world.
Even though surveillance cameras, guards, alarms, security screens, dye packs, and
law enforcement efforts have reduced the chances of criminal stealing cash from a
bank branch, criminals can still penetrate the formidable edifice like the banking
industry through other means. Using Internet banking and high tech credit card
fraud, it is now possible to steal large amounts of money anonymously from
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financial institutions from the comfort of your own home, and it is happening all
over the world.
Further, identity theft, also known as phishing, is one of the fastest growing
epidemics in electronic fraud in the world. Identity theft occurs when ―fraudsters‖
gain access to personal details of unsuspecting victims through various electronic
and non-electronic means.
This information is then used to open accounts (usually credit card), or initialize
loans and mobile phone accounts or anything else involving a line of credit.
Account theft, which is commonly mistaken for identity theft, occurs when
existing credit or debit cards or financial records are used to steal from existing
accounts. Although account theft is a more common occurrence than identity theft,
financial losses caused by identity theft are on average greater and usually require
a longer period of time to resolve.
Spam scams involve fraudsters sending spam e-mails informing customers of some
seemingly legitimate reason to login to their accounts. A link is provided in the e-
mail to take the user to a login screen at their bank site; however the link that is
provided actually takes the user to a ghost site, where the fraudster can record the
login details. This information is then used to pay bills and or transfer balances for
the fraudster‘s financial reward.
Card skimming refers to the use of portable swiping devices to obtain credit card
and EFT card data. This data is rewritten to a dummy card, which is then usually
taken on elaborate shopping sprees. As the fraudster can sign the back of the card
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himself or herself, the merchant will usually be unaware that they have fallen
victim to the fraud. One can curb these hi-tech frauds by using equally hi-tech
security mechanisms such as biometrics and smart cards.
The key focus in minimizing credit card and electronic fraud is to enable the actua
er of the account to be correctly identified. The notion of allowing a card to prove
your identity is fast becoming antiquated and unreliable. With this in mind, using
biometrics to develop a more accurate identification process could greatly reduce
fraud and increase convenience by allowing consumers to move closer to a ―no
wallet‖ society.
Many industry analysts such as the American Bankers Association are proposing
that the smart payment cards are finally poised to change the future of electronic
payments. The smart card combines a secure portable payment platform with a
selection of payment, financial, and nonfinancial applications.
The reach of the smart card potentially goes beyond the debit and credit card
model. Instead of a smart card, ISO uses the term ‗integrated circuit card‘ (ICC),
which includes all devices where an integrated circuit is contained within the card.
The benefits provided by smart cards to consumers include: convenience (easy
access to services with multiple loading points), flexibility (high/low value
payments with faster transaction times), and increased security. The benefits
offered to merchants include: immediate guaranteed cash flow, lower processing
costs, and operational convenience.
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CONCLUSION
This report describes in a nutshell the evolution of banking and defines banking
technology as a Consortium of several disciplines, namely finance subsuming risk
management, information and communication technology, computer science, and
marketing science. It also highlights the quintessential role played by these
disciplines in helping banks:
(1) Run their day-to-day operations in offering efficient, reliable, and secure
services to customers;
(2) Meet their business objectives of attracting more customers and thereby
making huge profits; and
(3) Protect themselves from several kinds of risks. The role played by smart cards,
storage area networks, data warehousing, customer relationship management,
cryptography, statistics, and artificial intelligence in modern banking is very well
brought out.
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The report also highlights the important role played by data mining algorithms in
helping banks achieve their marketing objectives, fraud detection, anti-money
laundering, and so forth.
In summary, it is quite clear that banking technology has emerged as a separate
discipline in its own right. As regards future directions, the proliferating research
in all fields of Technology and computer science can make steady inroads into
banking technology because any new research idea in these disciplines can
potentially have a great impact on banking technology.
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BIBLIOGRAPHY
www.google.com
www.wikipedia.com