Introduction

E-banking:
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. 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 delivery channels include direct dialup connections, private networks, public networks, etc. with the popularity of computers, easy access to Internet and World Wide Web (WWW), Internet is increasingly used by banks as a channel for receiving instructions and delivering their products and services to their customers. This form of banking is generally referred to as Internet Banking, although the range of products and services offered by different banks vary widely both in their content and sophistication.

Meaning of E-Banking
E-bank is the electronic bank that provides the financial service for the individual client by means of Internet. application of electronic technology towards transfer of funds through an electronic terminal, computer or magnetic tape to conduct various transactions like cash receipts, 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.

OBJECTIVES OF THE STUDY

This research work intends to assess the extent of electronic payment in bank activities as well as identify the various types of electronic banking. The researcher will also evaluate the major problems associated with the development electronic banking system in Nigeria as well as evaluate possible solutions to these problems. The effect of electronic banking on profitability of banks will also be assessed. There are different types of electronic banking used in Nigeria banks; the researcher will like to evaluate the impact of these e-payment systems on banking industry and also assess the impact of electronic banking in Nigeria economy.

SIGNIFICANCE OF THE STUDY

Electronic banking in our economy today is a welcome development and also its impacts in the society are over-whelming, so this research is significant in so many ways. It will expose the strength and weakness of electronic banking. It will motivate banks and other economic agents to computerize their services. Knowledge in the area of electronic banking will be advanced. Apart from contributing to the knowledge of electronic banking, it forms a reference for future research in this area.

SCOPE OF STUDY
This research is on economic implication of electronic banking in Nigeria banks and also the various forms of payment and electronic systems used by banks. The researcher will base this work on the entire deposit money banks in Nigeria but to Diamond Bank in particular

Limitation of Study
Banks are not giving me all information about E-banking services. They do not permit to meet any of the employees in their bank.

Features of e banking:
Anywhere any time banking:customers can avail banking facility while sitting at their home/office. Globalization of service:- E-Banking has a special feature of globalising banks services all over.

Intense competition:- E-Commerce is a product of handling intense competition among various banks. Cash less banking:- E-Commerce also provides feature of cash less banking as cash is not require in raw form but electronic cash like debit or credit cards may serve the purpose.

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

Functions of e banking

Online banking is the practice of making bank transactions via the Internet. It will give you an excellent opportunity to bypass the time-consuming, paper-based aspects of traditional banking in order to manage your finances more efficiently. By switching to electronic bills, statements, and payments, the average American household can save 6.6 pounds of paper in one year! And you can catch any fraudulent transactions faster than if you received a statement by snail post. Thanks to innovative technology and the Internet in particular, we no longer have to leave the house to make payments. Online banking is available 24 hours a day, 7 days a week, so you can do it anytime, anywhere. Online banking allows us to perform various services with the click of a mouse. You can: 1. Pay a bill.

Electronic bill payment service allows a depositor to send money from his or her online account to a creditor or merchant, for example to a public utility or a department store. There is no need to stand in a long line on a weekend morning to handle your transactions! The payment is virtually instant, though some financial institutions can wait until the next business day to send out the payment. If it is necessary, the bank can generate and mail a paper cheque or banker's draft to a creditor who is not set up to receive electronic payments. 2. Schedule payments in advance.

Most banks offer customers the ability to schedule a payment on a specified date. Once the amount is entered and the payee is checked off, the funds are automatically deducted from your online bank account. It is especially useful if you always forget due dates. For example, you can schedule credit card or mortgage payments to make sure that you will not incur late fees and damage your FICO score. 3. Transfer funds.

Do you want to send money quickly and securely? With online banking, you can make money transfers between your own accounts, or send money to a third party account. All you need is recipient/payee information and enough funds in your account. Quite often, the operations are performed in real time. 4. Manage all your accounts in one place.

Online banking is a great time saver because it provides an opportunity to handle several bank accounts (checking, savings, CDs, IRAs, etc.) from one site. Most new accounts you open will be automatically added to online banking. 5. View images of your checks online.

Do you need a copy of a paid check? With online banking, you can view and print scanned images of the front and back of all checks you have written. It is easy and convenient. 6. Apply for a loan or credit card.

Having an account online, you can apply for a credit card or a loan (a car loan, a student loan, a mortgage, a home equity loan, etc.) from the same bank. If you have a good credit score and long relationship history with your bank, your application is likely to be approved. 7. Purchase and manage CD accounts.

If you have some amount of money you want to invest, you can purchase a certificate of deposit from your bank. Online banking lets you compare all available offers and their terms, for example APY or maturity periods. When you confirm the purchase, the funds will be automatically deducted from your account. 8. Order traveler's checks.

You can order American Express Travelers Cheques online. The bank will typically charge your online account for the amount of the cheques you bought and an express delivery fee. 9. Increase your overdraft.

Going into the red shouldn't leave you red-faced! You can increase your overdraft online. Log in to online banking and click on 'Overdraft' in the menu. 10. Order a cheque book.

Save yourself at least one trip to the bank by ordering cheque book online. You will need to visit your bank once when you get a confirmation message that your cheque book is

ready for collection. 11. View up-to-the-minute account statements and balance.

There is no need to wait for the bank statement to arrive in the snail post to check account balances. You can view all transactions and withdrawals every day just by logging in to your online account. In addition, you can immediately notice errors or unauthorized transactions in the statement. 12. View automatically updated spending report.

All your purchases are sorted into familiar categories automatically - no receipts to save, no expenses to enter. It is easy to see where your money goes! 13. Track your payment history.

Online banking gives you an opportunity to search your payments by transaction type, date, description or amount. When did you last pay Company X? When did you buy your computer? To whom did you make your most recent payment? Your bank knows the answers. 14. Integrate the data with personal finance programs.

Online banking lets you import electronic payment data in personal finance software such as Quicken or Microsoft Money. You will be able to access your online accounts directly from your personal finance program. An Internet connection and online account log in information is required. 15. Change contact details.

Have you moved to a new house? Changed your telephone number? You can log in to your online account and change contact information (e-mail address, telephone number)
16. Take advantage of online brokerage.

Internet banking lets you invest online. You can place and confirm trades 24 hours a day, seven days a week. Most banks provide a wide range of money market instruments from various issuers.
17. Get alerts.

This service allows you to receive timely e-mail messages from your bank about any critical changes related to your Internet accounts. For example, you can get alerts when you make a withdrawal or change your contact information.
18. Verify terms and conditions.

Did you forget your interest rates or payment due date? You can verify all information about your account online. 19. Chat with your customer assistant department. If you need help, you can send message to your banks customer assistant department. They will help you solve your problem.

Process of E-Banking/ procedure of E-Banking

E-Banking process can be explained with the help of following diagram and explanation as under:

Log on to website

Verificatio n
Of password

Final Approval

Credit Card request request

Processing Of informatio n n

To make the use of E-Banking user has to go to the World Wide Web and log on to the website. Next step follows verification of user ID and password by the website server.

As soon as password is approved on the server, then processing of information 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:

Advantage s To Govt. To merchant Trader

To banks

To cust omer

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

Global coverage: E-Banking provides global network coverage of banks

services i.e. through the concept of Anywhere Anytime Banking.

Good customer relationship: E-Banking helps in attracting and retaining

the customer by properly handling their grievances.

Reduction in paper work: E-Banking helps in eliminating endless paper

based bank statements, spreadsheets, bulky books of accounts, ledger including the use of calculator.

Reduction in frauds and misappropriations: Through E-Banking frauds

and misappropriations 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 to
customers.

Anywhere banking: customers can avail any sort of banking services

from anywhere around the globe from sitting at anyplace.

Prompt services: Customer can avail the services of details regarding

their accounts and transactional details instantly.

On line purchase: Customer can buy product of bank or invest in any

scheme without actually insisting the bank branch but only through online.

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

III. Benefits to government

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

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

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

IV. Benefits to merchant traders Promotion of business: with the help of E-Banking business of merchants traders
will be promoted because of increased purchasing power of credit holder.

Immediate settlement: E-Banking helps settlement, and payment of cash is

possible by the customer.

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

Limitations of E Banking:

 Problems of security: Security and privacy aspects are major issue in case of EBanking 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 very high.
The banks not only have to automate front-end services but also back office services, which involves high cost.

Lack of awareness: Another great hindrance is lack of awareness because

effective and wide media efforts in publishing Internet banking need to be emphasized.

Lack of computerization: Lack of computerization and low density of telephone

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 on the
assumption that it is more expensive than the traditional method of dealing with bank transactions. They still prefer going to bank to perform transactions.

Services provide by banks

ICICI Bank
ICICI Bank Online Banking Services provide the largest private bank in India right here at your desktops. Banking becomes a pleasure as the transactions and services become instant with ICICI Bank online Internet banking. The services provided are totally secure and unique. These cover online account transactions and operations, credit card and account applications and payments, share trading and investments through mutual funds, bill payments, statement generation and a virtual demo of each service. See in brief in final report.

Role of customer when using e-banking

You can access ICICIBank.com only by using your User ID and Password.

During the first login attempt, it is mandatory to change both passwords - login and transaction which would have been mailed to you by the bank.

If you forget your password, you will have written to us using the "Email Us"

option. The Bank will then issue a new password and send it to your mailing address as per our records. Kindly check with your branch that this address is updated...

Make sure no one can see the account login name or password you are Logout of ICICIBank.com before moving on to other Websites. Before leaving the PC please "close" the browser. Do not write your ICICIBank.com login name or password anywhere. Do not leave your login name and password such that someone sitting at your Never reveal your ICICIBank.com login name and password to anyone (no

entering when you log on to ICICIBank.com.

computer could see them.

representative of ICICI Bank will ever ask you for your ICICIBank.com password).

Notify ICICI Bank immediately if you notice any unusual account activity. Keep all documents that include your account information in a secure When you login you can view the date and time of your last log in.

location.

Features offered by ICICI bank for internet banking

Balance enquiry and statement Transfer fund online Card to card fund transfer Use debit card online Prepaid mobile recharge Subscribe for mobile banking Link bank account to ATM Lock / activate debit cards /ATM Request a cheque book

HDFC
Net Banking is HDFC Bank's Internet Banking service. Providing up-to-the-second account information, Net Banking lets you manage your account from the comfort of your mouse - anytime, anywhere.

Features offered by HDFC bank for internet banking

View account balances and statements Transfer funds between accounts Request stop payments Pay bills Create fixed deposit online Order cheque books

USE OF E-BANKING IN INDIA FEOM LAST FEW YEARS Year Incr. % 2002 2003 2004 2005 2006 2007 2008 2009 9 12 15 20 25 32 40 50

Finding
In 2002-2009 the user of the E-banking is increase in more in every year.

Types of E-Banking services

E-banking ATM Car d Services Echeque Mobile Bankin g Telepho ne Banking

EFT

1.Automatic Teller Machine (ATM): ATM facility was started in early 1990s by foreign banks like HSBC, City bank. ATM is made to work 24Hrs a day. For the purpose of withdrawing cash from ATM machine, plastic currency 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:. Telephone banking is another main service provide by ebanking 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). 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.

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.

Issues relating to M-Banking

Cost saving: SMS offers revenue opportunities for operators by changing
SMS 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-friendly

interface and range of services it offers.

Market research: Proper understanding of specific market is key in the

success 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. Few are 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 in finding out if some one else is using your ATM card.

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 World Wide 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.

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 the instructions, 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 the customers of a financial institution with access to financial transactions in a public space without the need for a human clerk or bank 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 (CVV). Security is provided by the customer entering a personal identification number (PIN).

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), and Any Time Money (in India).

Working of ATM Insertion of Card into ATM Transmission of Tape data to processer Activatiati onof account

Actual Transaction

Clicking of keys of keyboard

Display of details on screen

ATM will give various options on the screen like: Balance enquiry Mini statement Deposits Cash 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. Various facilities produced by ATMs: Cash withdrawals Personal identification number (PIN) change On line balance enquiry Transfer of funds between accounts linked to ones card Request for cheque book

HISTORY:
The first mechanical cash dispenser was developed and built by Luther George Simjian and installed in 1939 in New York City by the City 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 on 27 June 1967 by Barclays Bank. This instance of 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 the British variety artist and actor Reg 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 lowcoercivity 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 engineer James Goodfellow in 1965 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 of Lloyds 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 the IBM 3624 and 473x series, Diebold 10xx and TABS 9000 series, and NCR 5xxx series.

Introduction:
Debit cards combine 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. Advantages: are as follows (most of them applying only to a some countries, but the countries to which they apply are unspecified):

A consumer who is not credit worthy and may find it difficult or impossible to obtain 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 is linked, 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 writing altogether. Check cards debit funds from the user's account on the spot, thereby 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 identification and 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 cash advance 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.

Disadvantages of debit card:

Some banks are now charging over-limit fees or non-sufficient funds fees based upon 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 a customer'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 security protection 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 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 a credit 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 as gasoline, 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 for virtually all transactions where an equivalent credit card is taken, a major exception (in some unspecified countries only, is at car rental facilities. In some 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 the United Statesand Australia, 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 the point of sale (POS) and sometimes also a separate PINpad 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 processing lag on transactions that may have been forgotten or not authorized by the owner of the card. Banks in some countries, such as Canada and Brazil, only issue online debit cards.

Introduction:
A credit card is 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 a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash 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 local banks or credit 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 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 the United Kingdom and Ireland commonly known as Chip and PIN, but is more technically an EMV card. 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 code printed 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 credit 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 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 encourage balance 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.

Advantages: The main advantages are as follows:

Advantag es

To customers Benefits to customers:

Grace period

To merchants

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.

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 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 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.

E-BANKING SUPPORT SERVICES

WIRELESS E-BANKING Wireless banking is a delivery channel that can extend the reach and enhance the convenience of Internet banking products and services. Wireless banking occurs when customers access a financial institution's network(s) using cellular phones, pagers, and personal digital assistants (or similar devices) through telecommunication companies wireless networks. Wireless banking services in the United States typically supplement a financial institution's e-banking products and services.

Person-to-Person Payments
Electronic person-to-person payments, also known as e-mail money, permit consumers to send money to any person or business with an e-mail address. Under this scenario, a consumer electronically instructs the person-to-person payment service to transfer funds to another individual. The payment service then sends an e-mail notifying the individual that the funds are available and informs him or her of the methods available to access the funds including requesting a check, transferring the funds to an account at an insured financial institution, or retransmitting the funds to someone else. Person-to-person payments are typically funded by credit card charges transfer from the consumers account at a financial institution. Since neither the payee nor the payer in the transaction has to have an account with the payment service, such services may be offered by an insured financial institution, but are frequently offered by other businesses as well.

Parties involved

Cardholder: The holder of the card used to make a purchase; the consumer. Card-issuing bank: The financial institution or other organization that issued the 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 for products or services sold to the cardholder Acquiring bank: The financial institution accepting payment for the products or services on behalf of the merchant.

Independent sales organization: Resellers (to merchants) of the services of the acquiring bank. Merchant account: This could refer to the acquiring bank or the independent sales 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.

Transaction network: The system that implements the mechanics of the electronic 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 attract customers 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 parties always through the card associations is known as the interchange.

Features:
As well as convenient, accessible credit, credit cards offer consumers an easy way to track expenses, which is necessary for both monitoring personal expenditures and the tracking of work-related expenses for taxation and reimbursement purposes. Credit cards are accepted worldwide, and are available with a large variety of credit limits, repayment arrangement, and other perks (such as rewards schemes in which points

earned by purchasing goods with the card can be redeemed for further goods and services or credit card cashback). Some countries, such as the United States, the United Kingdom, and France, limit the amount for which a consumer can be held liable due to fraudulent transactions as a result of a consumer's credit card being lost or stolen.

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 uses SSL 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 humanreadable before being processed at the acquiring bank, a security risk is created.

Introduction:
Online banking (or Internet banking) allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank, credit union or building 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 to account transfer, paying a bill, wire transfer... and applications... apply for a loan, new account, etc.)
o o

Electronic bill presentment and payment - EBPP Funds transfer between a customer's own checking and savings accounts, or to another customer's account Investment purchase or sale Loan applications and transactions, such as repayments

o o

Non-transactional (e.g., online statements, check links, cobrowsing, chat)

o

Bank statements

Financial Institution Administration - features allowing the financial institution to manage the online experience of their end users

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

Banking Services through Internet:

1.The Basic Level Service is the banks web sites which disseminate information on different products and services offered to customers and members of public in general. It may receive and reply to customers queries through e-mail;

2. In the next level are Simple Transactional Web sites which allows customers to submit their instructions, applications for different services, queries in their account balances, etc. but do not permit any fund-based transactions on their accounts; 3. The third level of Internet banking service are offered by Fully Transactional Web sites which allow the customers to operate on their accounts for transfer of funds, payment of different bills, subscribing to other products of the bank and to transact purchase and sale of securities, etc. The above forms of Internet banking service the customer or by new banks, who deliver banking service primarily through Internet or other electronic delivery channels as the value added services. Some of these banks are known as Virtual banks or Internet only banks and may not have physical presence in a country despite offering different banking services.

The Indian Scenario: Internet banking, both as a medium of delivery of banking services and as a strategic tool for business development. At present, the total internet users in the country are estimated at 9 lakh. However, this is expected to grow exponentially to 90 lakh by 2003. Only about 1 percent of Internet users did banking online in 1998. This is increased to 16.7 percent in March 2000. - (India Research, May 29, 2000, Kotak Securities) Cost of banking service through the Internet from a fraction of costs through conventional methods. Rough estimates assume teller cost at Re.1 per transaction, ATM transaction cost at 45 paise, phone banking at 35 paise, debit cards at 20 paise and Internet banking at 10 paise per transaction.

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 methods for online banking.

The PIN/TAN system where the PIN represents a password, used for the login and TANs representing one-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 a security 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 encrypted digitally. 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 and pharming. Cross-site scripting and keylogger/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 the first 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
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 attachment.

This is includes innovations in banking branches such as Universal banking, offshore banking, retail banking, and wholesale banking.

Introduction: Universal banking is bank engaged in diverse kind of banking

activities. Under the universal banking system the banks do broad based and comprehensive activities. R.H.Khan committee had recommended the concept of universal banking. As per universal banking financial institutions and banks are allowed to undertake all kinds of activities of banking, development financing and related

activities subject to compliance of statutory and other requirements prescribed by RBI, Govt. and related legal acts.

Meaning: Universal banking is a multipurpose and multi functional financial

superstore providing both banking and financial services. A universal bank may undertake multifarious services under one roof, which includes: a) Receiving money on current or deposit accounts and lending of money for trade, industries, exports, agriculture etc. b) Mortgage financing; project financing infrastructure lending, asset securitisation, leasing, factory etc. c) Remittance of funds, custodial services, credit/debit cards, collection of cheque/bills etc. d) Corporate advisory services, insurance depository service, merchant banking (brokerage, underwriting new debt and equity shares) foreign exchange operations. Therefore in universal banking under one roof, corporate can get loans and avail, other financial services, while individuals can bank and borrow. The few objectives of universal banking are as follows: To help in bringing harmony in the role of financial institutions and banks. To offer world-class financial services to the clients by using information technology and cross selling. To reduce per customer cost. To increase per customer revenue. To take benefit of economies of scale. To compete with international banks by expanding business beyond the national boundaries.

RBI Guidelines:
According to RBI guidelines of April 2001, financial institutions have an option to convert into a bank provided they ensure compliance with following provisions.

Reserve provisions (CRR/SLR): A financial institution will have to comply with CRR and SLR provisions after its conversion into a universal banking. Permissible activities: In case an activity, which is not permissible for a bank under section 6(1) of B.R.Act 1949, is presently undertaken by financial institution, such activity will have to be stopped after its conversion into a universal banking. Composition of board: The section 10(A) of B.R. Act 1949 requires that at least 51% of that total number of directors should have special knowledge and experience. This provision has to be complied with constituting the board after transformation from financial institution to a bank.

Benefits of universal banking

The benefits of universal banking are as follows:

To Organization

Benefits To Customers

To Shareholders

1. To the organization: When a bank diversifies its activities as a universal bank it

can use its existing expertise in one type of financial service in providing the other types. So, it entails less cost in performing all the functions by one entity instead of separate specialized bodies. A bank possesses information on the risk characteristics of its clients, which it can use to pursue other activities with the same clients. A bank has an existing network of branches, which can acts as shops for selling products like insurance. This way a big bank can reach the remotest client without having to recourse to an agent. Many financial services are interlinked activities, e.g. insurance and lending. A bank can use its instruments in one activity to exploit the other, e.g. in case of project lending to the same firm which has purchased insurance from the bank.

2. To the customers: Universal banking being a one-stop shops for all varied
services, some a lot of transaction costs and increases the speed of economic activity. The wide range of financial products and services offered by universal

banks are preferred by the customers than the specialized banks due to comprehensive service provided by these banks.

3. To the shareholders: One manifestation of universal banking is a bank holding

stakes in a firm. When a lender has a stake in the firm he is in a better position to monitor the firm to safeguard his interest, which sends a good signal about the financial health the firm to the investors. This situation is beneficial from investors point of view. All these benefits have to be weighed out against the problems. The main drawbacks are that: a. Universal banking leads to a loss in economies of specialization. b. Problem of the bank indulging in too many risky activities. To account for this, appropriate regulation can be devised, which will ultimately benefit all the participants in the market, including the banks themselves. In spite of these problems, there is a lot of interest expressed by banks and financial institutions in universal banking. In India, too a lot of opportunities are there to be exploited. Banks mainly the financial institutions are aware of it, and most of the groups have plans to diversify in big way. Even though there might not be profits forthcoming in the short run due to the switching costs incurred in moving to a new business.

Introduction: offshore banking refers to the banking business related to borrowing and
lending funds abroad and meeting the special needs of international investors. An offshore bank is a bank located outside the resident country of the depositor. These banks are not subject to domestic monetary and fiscal regulations. Moreover offshore banks are also exempted from the regulations, which govern the branches of foreign banks. Rather they are situated in a low tax jurisdiction that provides, financial and legal advantages. These advantages may include strong privacy, low or no taxation protection against local political or financial instability. Services/functions The important functions or financial services, which offshore banking units can provide, are: Deposit taking Project financing Syndication of loans Issuing short-term instruments like negotiable certificates to deposits.

Carry merchant banking activities in foreign currency denominated bonds. Electronic funds transfer Foreign exchange Letter of credit and trade finance Investment management and investment custody Trustee services Corporate administration Although every bank does not provide each service. Banks try to polarize between retail

services (which are low cost) and private banking (which tries to bring personalized suite of services to the client).

Benefits/advantages
The main advantages of offshore banking are:

Econom ic And Political Payment Stability of Higher Interest

Advantages

Tax Benefit s

Special Banking

Developm ent Of nation/

Remote Services areas Economic and political stability: Offshore banking provides Rates
economically politically stable jurisdictions especially for those resident in areas where there is a risk of political turmoil, and who fear their assets may be seized or disappear. Although, developed economies

with regulated banking system offer same advantages in terms of stability.

Payment of higher interest rates: Some of these banks which

function at a lower cost base provide higher interest rates than the legal rates prevailing in their home countries due to lack of government intervention and lower overheads.

Tax benefits: Generally the interest paid by offshore banks is

without tax deduction. This acts as a benefit for individuals who do not pay tax on worldwide income, or who do not pay tax until the tax return is agreed.

Special banking services: Certain offshore banks offer special

banking services not offered else where such as anonymous bank accounts, higher or lower rate loans based on risk and investment opportunities.

Development of remote areas/nation: offshore banking helps

even geographically remote nations to generate investment and create growth in their economies.

Disadvantages
There are some limitations of offshore banking are as follows:

Disadvantag es

Involved in

Encourag es

Difficult Physical

Financial Disturban

Involved in crime: Off shore banking has been found associated with the underground economy and organized crime through money lending. After September 11,2001 these banks have been accused of helping various organized crime gangs, terrorist groups.

Encourages tax evasion: Offshore banks encourages tax evasion

by giving people seeking tax evasion an attractive place to deposit their hidden income.

Difficult physical access: As offshore banks are often remotely

situated therefore the physical access is difficult. Access to information can be difficult, however in a global tele communication networks this does not seen to be a big problem as information can be set up on line, by phone or by mail.

Developing

countries

may

face

financial

disturbance:

sometimes developing countries may face problem due to speed at which money can be transferred in and out of their economy. This hot money coming from offshore accounts can be definitely increase problems countries. of financial and economic disturbance in developing

Introduction: The coming up of middle class with substantial purchasing power in India during the last decade has given rise to its desire to spend according to the changing life style. This has offered the Indian banking system, a ready market, for mobilization and

development of their funds. Given the rising purchasing power of this class, there is huge untapped potential for business. Meaning: Retail banking is activity devised in past few years and now used extensively. It represents any banking, which is not wholesale based. It includes any business that is conducted through branch network, which is mainly focused towards personal sector. It encompasses all institutions that provide a related range of banking servicesmoney deposit, credit services and some form of financial advice. Retail banking today is characterized by three areas: Multiple products (deposits, credit cards, insurance, investment) Multiple channels of distribution (call center, branch internet) Multiple customer groups (consumer, small business)

Need for retail banking Economic prosperity and the consequent increase in the purchasing Technological factors also added to the requirement convenience of using credit cards, power of consumer. internet and phone banking anywhere and any time banking has also flood customers into banking. Decline in interest rates have also contributed to increase retail With the large corporate borrowers having diversified the banking. sources to fund their financial requirements, frequent reduction in cash reserve ratio resulting in pumping in of liquidity, declining bank rate leading to decline in spreads un- attractive yields on government securities etc. have all forced banks to be in search of alternative opportunity to deploy their funds. Segments in retail banking: There are three segments in retail banking which included:

a. Deposit products (convenient deposit schemes such as flexi deposits) b. Loan products (such as housing loans, education loans, conveyance loans, personal loans for diverse purposes such as medical expenses, travel abroad) c. Other products Besides there are a number of value added services such as free collection of outstation instrument, concession in service fee in case of remittances, issue of free ATM cards, waiver of fee on credit cards and utility services such as payment of water, electricity and phone bills. Developments in retail banking in India: Commercial banks in India are involving more and more in retail banking as it is now an attractive market segment having lot of opportunities for growth and profit. Retail banking refers to housing loans for purchasing durables, auto loans, credit cards and educational loans. The loan values can average between Rs.20000 to Rs.1 crore. These loans are of period of 5 to 7 years, with an exception of housing loan being granted up to 15 years. The speed of growth of retail banking can be accelerated by growth in banking technology and automation of banking processes. Although the retail banking offers phenomenal opportunities for growth and profits but how far it is able to lead to growth will depend on the capacity of banks to meet these opportunities profitably. There is need for constant innovation to revalidate and upgrade existing internal systems. Banks can now use retail as growth trigger. This requires product differentiation, innovation, product pricing technological up gradation, cost reduction and cross selling.

Wholesale banking is the provision of services by banks to the like of large corporate clients, mid-sized companies, real estate developers and investors, international trade finance businesses, institutional customers (such as pension funds and government entities/agencies), and services offered to other banks or other financial institutions. In essence, wholesale banking services usually involve high value transactions. Wholesale banking contrasts with retail banking, which is the provision of banking services to individuals. (Wholesale finance means financial services, which are conducted between financial services companies and institutions such as banks, insurers, fund managers, and stockbrokers.) Modern wholesale banks are engaged in: finance wholesaling, underwriting, market making, consultancy, mergers and acquisitions, fund management.