E-banking

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.
E-banking can be offered in two main ways. First, an existing bank with physical offices can also establish an online site and offer e-banking services to
its customers in addition to the regular channel. For example, Citibank is a leader in e-banking, offering walk-in, face-to-face banking at its branches
throughout many parts of the world as well as e-banking services through the World Wide Web. Citibank customers can access their bank accounts
through the Internet, and in addition to the core e-banking services such as account balance inquiry, funds transfer, and electronic bill payment,
Citibank also provides premium services including financial calculators, online stock quotes, brokerage services, and insurance.
E-banking from banks like Citibank complements those banks' physical presence. Generally, e-banking is provided without extra cost to customers.
Customers are attracted by the convenience of e-banking through the Internet, and in turn, banks can operate more efficiently when customers perform
transactions by themselves rather than going to a branch and dealing with a branch representative.
In addition to traditional banks that have both a physical and online presence, there are several e-banks that exist only on the Internet, allowing users
to work with a "virtual" bank. NetBank is such an Internet-only bank. Without physical branches, NetBank can cut operating costs and can potentially
offer higher deposit rates to its customers and waive many fees normally charged by a bank with a large network of physical branches. The challenge
for Internet-only banks is to provide quality customer services without physical offices. One way in which NetBank is dealing with this issue is via an
agreement with the MAC ATM Network (automated teller machine network), thus providing its customers access to nearly 18,000 ATMs across the
United States. NetBank customers can deposit and withdraw funds from their NetBank accounts through these ATMs, and in addition, customers can
also deposit and receive funds through wire transfer.
E-banking services are delivered to customers through the Internet and the web using Hypertext Markup Language (HTML) . In order to use e-
banking services, customers need Internet access and web browser software. Multimedia information in HTML format from online banks can be
displayed in web browsers. The heart of the e-banking application is the computer system, which includes web servers, database management
systems, and web application programs that can generate dynamic HTML pages.
Bank customers' account and transaction information is stored in a database, a specialized software that can store and process large amounts of data
in high speed. The function of the web server is to interact with online customers and deliver information to users through the Internet. When the web
server receives a request such as an account inquiry from an online customer, it requires an external web application program to process the request.
C, Visual Basic, VBScript, and Java are some of the languages that can be used to develop web application programs to process customer requests,
interact with the database, and generate dynamic responses. Then, the web server will forward the response HTML files to e-banking customers.
Several banks, such as NationsBank, also use state-of-the-art imaging systems, allowing customers to view images of checks and invoices over the
Internet.
One of the main concerns of e-banking is security. Without great confidence in security, customers are unwilling to use a public network, such as the
Internet, to view their financial information online and conduct financial transactions. Some of the security threats include invasion of individuals' privacy
and theft of confidential information. Banks with e-banking service offer several methods to ensure a high level of security: (1) identification and
authentication, (2) encryption, and (3) firewalls . First, the identification of an online bank takes the form of a known Uniform Resource Locator (URL)
or Internet address, while a customer is generally identified by his or her login ID and password to ensure only authenticated customers can access
their accounts. Second, messages between customers and online banks are all encrypted so that a hacker cannot view the message even if the
message is intercepted over the Internet. The particular encryption standard adopted by most browsers is called Secure Socket Layer (SSL). It is built
in the web browser program and users do not have to take any extra steps to set up the program. Third, banks have built firewalls, which are software
or hardware barriers between the corporate network and the external Internet, to protect the servers and bank databases from outside intruders. For
example, Wells Fargo Bank connected to the Internet only after it had installed a firewall and made sure the firewall was sufficiently impenetrable.
The range of e-banking services is likely to increase in the future. Some banks plan to introduce electronic money and electronic checks. Electronic
money can be stored in computers or smart cards and consumers can use the electronic money to purchase small value items over the Internet.
Electronic checks will look similar to paper checks, but they can be sent from buyers to sellers over the Internet, electronically endorsed by the seller,
and forwarded to the seller's bank for electronic collection from the buyer's bank. Further, banks seek to offer their customers more products and
services such as insurance, mortgage, financial planning, and brokerage. This will not only deliver more value to the customers but also help banks to
grow business and revenues.
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E-banking in India - Challenges and Opportunities
E-banking is a generic term for delivery of banking services and products through electronic channels, such as the telephone, the internet, the
cell phone, etc. The concept and scope of E-banking is still evolving. It facilitates an effective payment and accounting system thereby
enhancing the speed of delivery of banking services considerably. While E-banking has improved efficiency and convenience, it has also posed
several challenges to the regulators and supervisors. Several initiatives taken by the government of India, as well as the Reserve Bank of
India (RBI), have facilitated the development of E-banking in India. The government of India enacted the IT Act, 2000, which provides legal
recognition to electronic transactions and other means of electronic commerce. The RBI has been preparing to upgrade itself as a regulator
and supervisor of the technologically dominated financial system. It issued guidelines on risks and control in computer and telecommunication
system to all banks, advising them to evaluate the risks inherent in the systems and put in place adequate control mechanisms to address
these risks. The existing regulatory framework over banks has also been extended to E-banking. It covers various issues that fall within the
framework of technology, security standards, and legal and regulatory issues. This book — containing 12 scholarly articles — will benefit
those interested in the technological developments of E-banking in India.

Internet banking (or E-banking) means any user with a personal computer and a browser can get
connected to his bank -s website to perform any of the virtual banking functions. In internet banking
system the bank has a centralized database that is web-enabled. All the services that the bank has
permitted on the internet are displayed in menu. Any service can be selected and further interaction is
dictated by the nature of service. The traditional branch model of bank is now giving place to an
alternative delivery channels with ATM network. Once the branch offices of bank are interconnected
through terrestrial or satellite links, there would be no physical identity for any branch. It would a
borderless entity permitting anytime, anywhere and anyhow banking.
The network which connects the various locations and gives connectivity to the central office within the
organization is called intranet. These networks are limited to organizations for which they are set up.
SWIFT is a live example of intranet application.
Internet banking in india
The Reserve Bank of India constituted a working group on Internet Banking. The group divided the
internet banking products in India into 3 types based on the levels of access granted. They are:
i) Information Only System: General purpose information like interest rates, branch location, bank
products and their features, loan and deposit calculations are provided in the banks website. There exist
facilities for downloading various types of application forms. The communication is normally done through
e-mail. There is no interaction between the customer and bank's application system. No identification of
the customer is done. In this system, there is no possibility of any unauthorized person getting into
production systems of the bank through internet.
ii) Electronic Information Transfer System: The system provides customer- specific information
in the form of account balances, transaction details, and statement of accounts. The information is still
largely of the 'read only' format. Identification and authentication of the customer is through password.
The information is fetched from the bank's application system either in batch mode or off-line. The
application systems cannot directly access through the internet.
iii) Fully Electronic Transactional System: This system allows bi-directional capabilities.
Transactions can be submitted by the customer for online update. This system requires high degree of
security and control. In this environment, web server and application systems are linked over secure
infrastructure. It comprises technology covering computerization, networking and security, inter-bank
payment gateway and legal infrastructure.
Automated Teller Machine (ATM):
ATM is designed to perform the most important function of bank. It is operated by plastic card with its
special features. The plastic card is replacing cheque, personal attendance of the customer, banking
hours restrictions and paper based verification. There are debit cards. ATMs used as spring board for
Electronic Fund Transfer. ATM itself can provide information about customers account and also receive
instructions from customers - ATM cardholders. An ATM is an Electronic Fund Transfer terminal capable
of handling cash deposits, transfer between accounts, balance enquiries, cash withdrawals and pay bills.
It may be on-line or 0ff-line. The on-line ATN enables the customer to avail banking facilities from
anywhere. In off-line the facilities are confined to that particular ATM assigned. Any customer possessing
ATM card issued by the Shared Payment Network System can go to any ATM linked to Shared Payment
Networks and perform his transactions.
Credit Cards/Debit Cards:
The Credit Card holder is empowered to spend wherever and whenever he wants with his Credit Card
within the limits fixed by his bank. Credit Card is a post paid card. Debit Card, on the other hand, is a
prepaid card with some stored value. Every time a person uses this card, the Internet Banking house gets
money transferred to its account from the bank of the buyer. The buyers account is debited with the exact
amount of purchases. An individual has to open an account with the issuing bank which gives debit card
with a Personal Identification Number (PIN). When he makes a purchase, he enters his PIN on shops PIN
pad. When the card is slurped through the electronic terminal, it dials the acquiring bank system - either
Master Card or VISA that validates the PIN and finds out from the issuing bank whether to accept or
decline the transactions. The customer can never overspend because the system rejects any transaction
which exceeds the balance in his account. The bank never faces a default because the amount spent is
debited immediately from the customers account.
Smart Card:
Banks are adding chips to their current magnetic stripe cards to enhance security and offer new service,
called Smart Cards. Smart Cards allow thousands of times of information storable on magnetic stripe
cards. In addition, these cards are highly secure, more reliable and perform multiple functions. They hold
a large amount of personal information, from medical and health history to personal banking and personal
preferences.
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 biller. You can also set up standing instructions online to pay your recurring bills,
automatically. Generally, the bank does not charge customers for online bill payment.
Fund transfer
 You can transfer any amount from one account to another of the same or any another bank. Customers
can send money anywhere in India. Once you login to your account, you need to mention the payees's
account number, his bank and the branch. The transfer will take place in a day or so, whereas in a
traditional method, it takes about three working days. ICICI Bank says that online bill payment service and
fund transfer facility have been their most popular online services.
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
This is something that would interest all the aam janta. 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, Surat and Pune.
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, which 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.
Advantage of Internet banking
As per the Internet and Mobile Association of India's report on online banking 2006, "There are many
advantages of online banking. It is convenient, it isn't bound by operational timings, there are no
geographical barriers and the services can be offered at a miniscule cost."
Through Internet banking, you can check your transactions at any time of the day, and as many times as
you want to. Where in a traditional method, you get quarterly statements from the bank. If the fund
transfer has to be made outstation, where the bank does not have a branch, the bank would demand
outstation charges. Whereas with the help of online banking, it will be absolutely free for you.
Security Precautions
Customers should never share personal information like PIN numbers, passwords etc with anyone,
including employees of the bank. It is important that documents that contain confidential information are
safeguarded. PIN or password mailers should not be stored, the PIN and/or passwords should be
changed immediately and memorised before destroying the mailers.
Customers are advised not to provide sensitive account-related information over unsecured e-mails or
over the phone. Take simple precautions like changing the ATM PIN and online login and transaction
passwords on a regular basis. Also ensure that the logged in session is properly signed out.
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Electronic banking
It is an umbrella term for the process by which a customer may perform banking
transactions electronically without visiting a brick-and-mortar 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 are 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.

PC banking is a form of online banking that enables customers to execute bank

transactions from a PC via a modem. In most PC banking ventures, the bank offers the
customer a proprietary financial software program that allows the customer to perform
financial transactions from his or her home computer. The customer then dials into the bank
with his or her modem, downloads data, and runs the programs that are resident on the
customer's computer. Currently, many banks offer PC banking systems that allow customers
to obtain account balances and credit card statements, pay bills, and transfer funds
between accounts.

Internet banking, sometimes called online banking, is an outgrowth of PC banking.

Internet banking uses the Internet as the delivery channel by which to conduct banking
activity, for example, transferring funds, paying bills, viewing checking and savings account
balances, paying mortgages, and purchasing financial instruments and certificates of
deposit. An Internet banking customer accesses his or her accounts from a browser-
software that runs Internet banking programs resident on the bank's World Wide Web
server, not on the user's PC. NetBanker defines a " true Internet bank" as one that provides
account balances and some transactional capabilities to retail customers over the World
Wide Web. Internet banks are also known as virtual, cyber, net, interactive, or web banks.

To date, more banks have established an advertising presence on the Internet- primarily in
the form of informational or interactive web sites-than have created transactional web sites.
However, a number of Banks that do not yet offer transactional Internet banking services
have indicated on their web sites that they will offer such banking activities in the future.

Internet banks generally have lower operational and transactional costs than do traditional
brick-and-mortar banks, they are often able to offer low-cost checking and high-yield
Certificates of deposit. Internet banking is not limited to a physical site; some Internet
banks exist without physical branches, for example, Telebank (Arlington, Virginia) and
Banknet (UK). Further, in some cases, web banks are not restricted to conducting
transactions within national borders and have the ability to make transactions involving
large amounts of assets instantaneously. According to industry analysts, electronic banking
provides a variety of attractive possibilities for remote account access, including:
• Availability of inquiry and transaction services around the clock;
• worldwide connectivity;
• Easy access to transaction data, both recent and historical; and
• "Direct customer control of international movement of funds without intermediation
of financial institutions in customer's jurisdiction."
Opening an Account
There are several ways to open and fund an electronic banking account in the United States.
Customers who have existing accounts at brick-and-mortar banks and want to begin using
electronic banking services may simply ask their institution for the software needed for PC
banking or obtain a password for Internet banking. Either approach requires minimal
paperwork. Once they have joined the system, customers have electronic access to all of
their accounts at the bank. New customers can establish an account either by completing a
PC banking application form and mailing it to an institution offering such a service or by
accessing a bank's web site and applying online for Internet banking. In either instance, the
customer can fund the new online account with a check, wire transfer, or other form of
remittance. No physical interface between the customer and the institution is required.
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. 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.
How Internet Banking Works
Internet banking works much like traditional banking. The primary difference is you are
accessing your account and information, making payments and reconciling statements using your
computer rather than paper or the phone to complete transactions. Instead of going down to your
local branch office when you bank online you can accomplish multiple tasks at once with the
click of a button.
Online banking is rapidly becoming more and more popular as consumers recognize the
advantages online banking has to offer. For one most banks charge fewer fees if you take
advantage of their online banking services. You can also stop receiving paper statements if you
like in many cases and conduct 95% of your business over the Web when you take advantage of
Internet banking.
What Internet Banks Do
What to Internet Banks do? The same things traditional banks do. They hold onto our money and
lend it out to others respectively. The manage loans and help us keep track of our finances.
Chances are if you own a bank account at a traditional bank they offer some type of Internet
banking or online services. The next time you stop into your branch office you should ask them
about online banking. You may find once you start you have no desire to go back to traditional
banking.
For those that have a hard time keeping track of paper statements, Internet banking is a life saver.
Internet banking is also advantageous for frequent travelers that need to keep a close eye on their
finances from abroad.
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