E-Banking

Sanjeev Kumar Chaswal

Advocate and IPR Attorney
LL.M (IPR,ARB&ADR)
M.S (Cyber Law and Cyber Security)
Definitions
* e-banking can be defined as:
the automated delivery of new and traditional banking
products and services directly to customers through
electronic, interactive communication channels.
A system of banking in which customers can view their
account details, pay bills, and transfer money by means
of the internet.

The remote delivery of new and traditional banking
products and services through electronic delivery
channels.
What is E-banking or Net banking

E-Banking is the use of electronic channels to
communicate and transact business with both domestic
and international customers through internet.
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.
E banking is providing the same banking services such as
payment, inquiry, information processing but with internet.
It can be offered in two ways.
First an existing bank with physical offices can also
establish an online website and offer e banking services.
Secondly, e-banks can only exist only on Internet, thus
allowing users to work withVirtual Bank.


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E-banking vis-A-vis Traditional banking
Speed
Accessibility
Electronic documentation
Time saving
Satisfaction to the customer
Complimentary to traditional banking
Geographical boundaries surpassed
Scince rather than art



Why E banking?

Differentiation of products from the others.

A combination of regulatory and competitive
reasons.

Stress on branchless banking.

Increasing volumes of banking transactions.

Providing customers with cost effective services
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E Banking Delivery It can help in
Increasing customer satisfaction and
retention

Shifting of costs

Increasing the brand value

Providing real time access (i.e. convenience)

Delivering Services and products to
customers through supporting technology
Technology Commencement in Banking
In 70s, banks started to establish centralized data
processing centers.
Essentially the roles of these data processing
centers are:
collect the handwritten documents from branches
compile the documents
manual data entry by the operators
generate reports for the bank staff and the central
bank
execute some banking transactions
E Banking in India

Opening up of economy in 1991 marked the entry of foreign
banks. They brought new technology with them. Banking
products became more and more competitive. Need for
differentiation of products and services was felt.

ICICI was the first bank to initiate the Internet banking
revolution in India as early as 1997 under the brand name
'Infinity'. The ICICI Bank kicked off online banking in 1996.
Currently 78% of its customer base is registered for online
banking.

1996 to 1998 marked the adoption phase, while usage
increased only in 1999, owing to lower ISP online charges,
increased PC penetration and a tech-friendly atmosphere.


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Banks Branch Automations
Indias banks have started automation of their bank
branches in 90s, by started putting heavy
technology investments for the branches.

The first step is offline branches.

Terminals connected to local branch computers.

Second step is online branches connected centrally.
Most of the transactions started to be performed in
the central mainframe.
Product Based Banking
In the late-1990s, banks accepted product based
banking and competed with their products.
Banks developed new products for their customers.
Credit card
Credit deposit account (Super Account)
Debit cards
Beside branch, banks brought new channels to give
better service to their customers.
ATM
POS (Point of sale)
IVR
RBI & E-Banking
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:
ii) Electronic Information Transfer System:
iii) Fully Electronic Transactional System:

RBI & E-Banking
Guidelines for E banking

The Internet Banking policy has been approved by the
Reserve Banks Board.
The policy fits into the bank's overall Information
Technology and Information Security policy and
ensures confidentiality of records and security
systems.
The policy takes into account operational risk.
The policy clearly lays down the procedure to be
followed in respect of "Know Your Customer"
requirements, and
The policy broadly meets the parameters laid down in
the earlier circular.
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General Types of e-banking(RBI)



Fully electronic
transactional
system
Electronic
information
transfer
system
Information
only system
Information Website:
It gives general information about 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.
Electronic Information Transfer System:
The system provides customer- specific information in
the form of account balances, transaction details, and
statement of accounts
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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
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

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RBI Role in E Banking
Electronic Clearing Service (ECS)

Electronic Funds Transfer (EFT)

Real Time Gross Settlement (RTGS)

National Electronic Fund Transfer (NEFT)s

Cheque Truncation System (CTS)





Types E Banking
PC Banking
Internet Banking
SMS Banking
Virtual banking
Digital TV Banking
Automated teller machine
Tele banking
Plastic cards
E-cheque

E-Banking Configuration
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How ATMs work?
Bank
computer
Host
computer
ATM
Tele banking
Customer
Bank
Enquiry
Request
facility

Loans

Cheque Status

Fixed Deposit
details

How mobile banking work?
BANK DATABASE
E BANK SERVICES

Bill payment service

Credit card customers

Railway pass

Recharging your prepaid phone

Shopping at your fingertips

E Banking products and services

Offered in a two tier structure
A basic tier of Internet banking products includes
customer account inquiry, funds transfer and electronic
bill payment.
A second or premium tier includes basic services plus
one or more additional services like brokerage, cash
management, credit applications, credit and debit cards,
customer correspondence, demat holdings, financial
advice, foreign exchange trading, insurance, online
trading, opening accounts, requests and intimations, tax
services, e-shopping, standing instructions,
investments, asset management services etc.
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E-BANKING SUPPORT SERVICES

Web linking

Account Aggregation

Electronic Authentication

Website Hosting

Payments for e-commerce

Wireless banking activities

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Plastic cards
BENEFITS OF E-BANKING
Any time banking
Any where banking
Cash free banking
Reduction in Cost of transaction
Easy to make utility payments
On-line purchases
Competitive advantage
Unlimited network
Lesser work load
Lesser chances of fraud & misappropriation
Better profitability
Better customer relationship
Advantages to banks

Very low setup cost.
Capability to cater to a very large customer
base.
Saves a lot of operational costs. Adds to the
baseline.
Banks san offer a lot of personalized
services to their customers.
Reduction of burden on branch banking.
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E Banking Drawbacks
Difficult in the adoption of technology

Fear of technology

High cost of technology

Lack of preparedness

Restrictions on usage of technology
Advantages Disadvantages
Check account balances and track
recent account activity
Need an account with an Internet
Service Provider (ISP)
Transfer money between accounts Security concerns, like hackers
accessing your bank accounts
Authorize electronic bill payments Original setup for bill paying time is
time-consuming but will ultimately
be a time-saver
Issue stop payment requests Switching banks can be more
cumbersome online than in person
Apply for auto, mortgage, home
equity, student, or personal loans
Must have basic computer skills
and Internet knowledge
Receive investment product and
service information
Must be comfortable using a
computer
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E-BANKING RISKS

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Transactional/Operational Risks

Credit Risk

Liquidity/Interest Rate Risk

Reputation Risk

Compliance/ Legal Risk

Strategic Risk

Transactional/Operational Risks
It arises because of inaccurate processing of transactions,
non-enforceability of contracts, compromises in data
accuracy, data privacy and confidentiality or unauthorized
access to banks system and transaction etc. It arises during
day to day activity of banking transaction.
Credit Risk
It is the risk that counter party will not settle an obligation i.e.
pay their debt for full value, either when due or any time
thereafter.
Liquidity/Interest Rate Risk
It arises out of a banks inability to meet the required
obligation when they become due without incurring
unacceptable losses, even though the bank may ultimately
be able to meet its obligations.

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Reputation Risk
It is the risk of getting significant negative public
opinion, which may result in a critical loss of lending
or customer.
Compliance/ Legal Risk
It arises from violation of or non conformation with
laws, rules, regulations or prescribed practices or
when the legal rights and obligations of parties to a
transaction are not well established.
Strategic Risk
It is the risk associated with the financial
institutions future business plans and strategies

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SAFE GUARDS FOR E BANKING
Ensuring security while banking online, is to keep your password
and pin number a secret.
The security of your personal computer is very important for safe
internet banking. Therefore, always install antivirus software and
software to remove spyware.
Checking your bank statements regularly will help you detect any
transaction that has taken place without your knowledge or
consent.
While banking through the internet, make sure that the banking
session is secure.
In addition, always remember to completely log off, after
completing the banking session.
Nowadays, the banking institutions have come up with a number
of safety measures for ensuring secure internet banking.






Security Features E Banking Include:
Security token devices. Protection through single
password authentication, as its the case in most secure
internet shopping sites, it is not considered secure
enough for personal online banking applications in some
countries. Specifically, here are two different methods for
internet banking:
The PIN / TAN system where the PIN represents a
password, used for the login and TANs representing one-
time passwords to authenticate transactions.
These token generated TANs depend on the time and a
unique secret, stored in the security token. Usually,
internet banking with PIN/TAN is done via a web browser
using SSL secured connections, so that there is no
additional encryption needed
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Signature based internet 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
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Attacks.
Most of attacks in internet banking are based on deceiving
the user to steal login data. There are well known examples
for those attacks are phishing and pharming.
Increasing number of fraudulent bank websites, Fake emails
purporting to be sent from banks, Use of Trojan Horse
programs to capture user IDs and passwords.
A suspicious bank website: wwwsbonline.com,
Original bank web site: www. onlinesbi.com,
These website are believed to aim to trick persons into
disclosing their sensitive personal information.
When we open some suspicious websites or emails contains
Viruses. Trojan Horse Program will install in our computer
secretly. Viruses hidden in our computer sends data when you
access. Fraudulent bank links of bank websites operated by
hacker Capture our account and the password.

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Email send from Fraudulent banks.
Ask for Verification of the personal information.
Guiding the customer enter the fraud link.
Customer gets in to Fraud link and Discloses their ATM card
numbers, their details and passwords.
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Countermeasures
There exist few countermeasures which try to avoid
attacks. For instance, digital certificates are used
against phishing and pharming, the use of class 3
card readers is also a measure to avoid manipulation
of transactions by the software in signature based
internet banking variants. To secure their systems
against viruses, trojan horses and worms,
customers must use virus scanners and be careful
with downloaded software or e-mail attachments.
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CHALLENGES IN E BANKING
E-banking is a generic term for delivery of banking services
and products
E-banking has improved efficiency and convenience
The government of India enacted the IT act, 2000
It issued guidelines on risks and control in computer and
telecommunication system .
there are four main technology issues that need to be
resolved. These issues are:
Security
Anonymity
Authentication
Divisibility
Security
Security of the transactions is a main concern for banks
while the lack of security may result in serious actual
loss. Examples of potential hazards of internet banking
include online transactions, minting electronic currency,
etc.
Anonymity
The privacy issue is a subset of the security issues
banks face. By strengthening the secrecy of the sender's
personal information and enhance the security of the
transactions. Examples of private information relating to
the internet banking industry include the amount of
transactions, the date and time of a transaction as well as
the name of the merchant where the transaction is taking
place.
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Authentication
Encryption may help make the transactions more
secure but there is also a need to guarantee that no one
can change data at either end of the transaction. In
doing so, there are two possible ways that someone can
verify the integrity of the message.
Divisibility
Electronic funds may be divisible into different units of
currency similar to real money value. Internet banking, at
least to some degree, has become the norm for many simple
bank transactions. And thats not a bad thing - the easier and
more secure it is for consumers to check their accounts, pay
their bills and transfer money from one account to another,
the more likely they are to actually do these things and
maintain a more organized financial life.
Thanks
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