A non-resident Indian (NRI) in Paris has an easy way to access money in this fashion capital of the world.

His Citibank account in India can be accessed through an ATM in Paris, which in turn transmits information to Citibank’s central hub in the US.

The Indian rupees are converted to US dollars, which are in turn converted into French Francs at the current exchange rate, the Indian account is debited and the Francs made available to the NRI.

Welcome to the era of technology banking!

Imagine a Scenario

Technology Commencement in Banking

• In 70’s, 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

Branch Automation

• In 80’s, banks started technology investments for the branches.

• The first step is offline branches.

• Terminals connected to local branch computer

• Second step is online branches connected centrally. Most of the transactions started to be performed in the central mainframe.

Product Based Banking

• In the mid-1980s, 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

– IVR

Online Banking

• A powerful "value added" tool to attract and retain new customers while helping to eliminate costly paper handling and teller interactions

• Variously known as PC banking, home banking, electronic banking or Internet banking

• “Brick-to-click" banks: different from brick-and-mortar banks as well as from “virtual banks”

• Performing banking transactions, payments etc over the internet through a bank

• No special software or hardware needed

Features of online banking:

• Bank statements• Electronic bill payment• Funds transfer between customer’s own

accounts or another’s customer’s account• Investment purchase or sale• Loan applications and transactions such as

repayment• Account aggregation

What is E-banking?

• Online banking or Internet banking• In simple terms it does not involve any physical

exchange of money, but it’s all done electronically, from one account to another, using the Internet.

• From a personal computer, you can access your bank account information, and perform many banking functions, like transferring money, making a loan payment

What is E-banking?

• Once you register yourself on a bank website, you can view o Your accounts, credit card & home loan balanceso Accrued interest, fees and taxeso Transaction details of each accounto Pay billso Transfer funds to third party accounts which you

nominateo Open a deposit right from the terminal you are sitting

at.

What is E-banking?

• However, till now Internet services in India only allows for a minimum level of interactivity such aso Answering e-mail querieso Feedback forms o Articles asking for readers’ opinion at the end

• An accountholder, armed with a password, can use the Net to order a cheque book, stop payment of a cheque and spot the balance and individual operations in the account and transfer funds.

Customer Based Banking

• Customer introduction on different systems• Difficulty in creating new products• Different user interfaces for different environments• Product based Customer - Bank relation

•One customer informationfile

•Product factory

•Standard graphical user interface

•Consolidated customer data

Product Based Customer Based

Banking Application Architecture

Loans&Credits

FX Import / Export

Deposit (TD,DD)

FBS Securities PromissoryNotes

MerchantChequesNBS EFT

DAL

Batch Operations

ATM

POS

Teletel

Telerom

Teller (Branch)

Internet Banking

Phone Banking

Internet Shopping

PCMCampaign

ManagementCredit Risk

ManagementProductivity

CIF Product Factory PortfolioManagement

INFO

CENTER

Sales SupportSystem YKB HRPaymentsCMS Treasury

Relationship Management

De

liv

ery

Se

rvic

es

Management & Control

Reporting

Info

rma

tio

n D

eli

ve

ry

Settlement

GL / Accounting

Corporate Tables

Alternative Delivery Channels

Anytime, anywhere banking» Telephone Banking

» Internet Banking

» Mobile Banking

» Television banking

» Next ???

Telephone Banking

• 7x24 banking through the phone

• Main components

– Switch

– IVR

– CTI(Computer Telephony Integration)

• Manage each call using the computer

• Pop up the user information while transferring the call

– Agent Desktop Application

• Win32,ActiveX, HTML

– Host Application

Telephone Banking Infrastructure

Telecom

IVR CTI HOST

Mobile Banking

• Current Mobile Banking Applications:– SMS Banking– WAP Banking– STK (Sim Toolkit) Banking

SMS Banking

• Basic banking inquiry transactions(balance inquiry, funds, exchange rate inquiry…) are performed by the cooperation of bank and the GSM operator

• Security is the main problem

Bank SMS Gateway

Bank SMS DB

Leased lineGSM Operator

Application Server

GSM Operator SMS DB

GSM Network

Bank Host

WAP Banking

• Wireless application protocol (WAP) is an application environment and set of communication protocols for wireless devices designed to enable manufacturer-, vendor-, and technology-independent access to the Internet and advanced telephony services.

• WAP is a global standard and is not controlled by any single company

• Various banking transactions offered in WAP environment by banks.

• Similar architecture with SMS banking

SIM Toolkit

• SIM card enables to keep and load different applications.

• SIM Application Toolkit has been agreed as a GSM standard

• SIM Application Toolkit is independent of phone manufacturers and designs.

• SIM Application Toolkit allows the flexibility to update the SIM to alter the services and download new services over the air

• SIM Application Toolkit is designed as a client-server application. On the server side, SimCard platform and the client side, phone that supports the SIM Application Toolkit

• In the near future, banks will start to offer banking transactions in this platform.

Television Banking

• Digital television (DTV) is the transmission of television signals using digital rather than conventional analog methods.

• Advantages of DTV over analog TV include:

Superior image resolution (detail) for a given bandwidth

Smaller bandwidth for a given image resolution

Compatibility with computers and the Internet

Interactivity

Superior audio quality

Consistency of reception over varying distances

Banks offer their banking transaction in this new environment

T-commerce in the near future.

Internet Banking

Sample Internet Banking Architecture

• More and more banks are coming to realize that internet is a part of banks' alternative delivery channel strategies activities concentrated in the business-to-consumer segment, focused on retaining clients

• In Internet banking, security is a primary concern. Security concerns have been addressed from every angle within the architecture of the Internet banking application.

E-commerce - B2C

• E-commerce is the buying and selling of goods and services on the Internet.

• Main feature of e-commerce

– 24-hour availability

– a global reach

– the ability to interact

– provide custom information and ordering

– and multimedia prospects,

• The Web is rapidly becoming a multibillion dollar source of revenue for the

world's businesses. • Banks provide secure payments infrastructure - virtual POS

B2B

• A housands of companies that sell products to other companies have discovered that the Web provides not only a 24-hour-a-day showcase for their products but a quick way to reach the right people in a company for more information.

• In the B2B, the bank role is to provide a reliable payment infrastructure that add value to corporate business

• This infrastructure should cover:

– Bill presentment

– Bill payment

– Different payment types(credit card, deposit account, loan)

– Information after payment

Elements of an E- Banking System

• Hardwareo Serverso Storage device and databaseo Communication channels and lineso Gateways and remotely located devices (e.g.,

thin clients or Internet appliances) serving as interfaces between users and computers

• Software

Elements of an E- Banking System

o Operating systemso Firewallso Database management systemso Security application programs.

E- Banking Setup

E-Security

• To improve the e-business, all the users should feel secure to perform the transaction this environment

• The main concepts in e-security are:– PKI (public key infrastructure) enables users of a basically unsecure public network

such as the Internet to securely and privately exchange data and money through the use of a public and a private cryptographic key pair that is obtained and shared through a trusted authority.

– Public key is a value provided by some designated authority as a key that, combined with a private key derived from the public key, can be used to effectively encryption messages and digital signature.

– Private or secret key is an encryption/decryption key known only to the party or parties that exchange secret messages. Public key is used together with a private key

E-Security - continued

– Digital certificate is an electronic "credit card" that establishes your credentials when doing business or other transactions on the Web. It is issued by a certification authority (CA).

– CA (certificate authority) is an authority in a network that issues and manages security credentials and public key for message encryption. As part of a public key infrastructure, a CA checks with a registration authority to verify information provided by the requestor of a digital certificate

– An RA (registration authority) is an authority in a network that verifies user requests for a digital certificate and tells the certificate authority to issue it.

Areas Of Security

• Authentication o Verifying your identity using passwords/pass

phrases and certificates

• Confidentiality

• Non Repudiation o Method by which the sender of data is provided

with proof of delivery and the recipient is assured of the senders identity

Areas Of Security

• Integrity

• Access Controlo Mechanisms and policies that restrict access to

computer resources

• Availability

Access Control

• Access control restricts the flow of data traffic

• Internet Banking uses firewalls in the area of access control.

• Internet Banking two firewalls are usedo One before the Internet Banking server o Before the SQL database

Access Control

• Banking uses firewall which fall into two categorieso Packet-filtering Gateways o Proxy services.

Data Transmission and Confidentiality

• Public Key Encryption

• Secure Socket Layer (SSL)

Authentication

• Digital Certificateo A digital certificate is an electronic ID, which is

verified by a third party, a certification authority (CA)

o The CA controls the Public Key Infrastructure (PKI).

o A security certificate ,associates an identity with a public key. Only the owner knows the corresponding private key that allows the owner to "decrypt" or make a digital signature.

o Eg Barclays UK’s Digital certificate

Transaction costs

Source : Booz ,Allen and Hamilton

SERVICES PROVIDED BY ICICI BANK THROUGH INTERNET

• ONLINE BILL PAYMENT• FUND TRANSFER• SHOPPING• TICKET BOOKING• PREPAID MOBILE RECHARGE• SHARE TRADING • CHARITY

Corporate Banking services

ACCOUNT INFORMATION BANKING AT YOUR CONVENIENCE MARKET WATCH1.Daily market report2.Market pulse3.Market strategy TRANSACTION BANKING REQUEST ( Following requests can be made online)1.Registration for statements through e.mail2.Stop of payment3.cheque book replenishment4.Opening a fixed deposit account5.Opening a letter of credit.

Advantages of online banking:

• Convenience• Ubiquity• Transaction speed• Efficiency• Effectiveness• However, till now Internet services in India only allows for a

minimum level of interactivity such aso Answering e-mail querieso Feedback forms o Articles asking for readers’ opinion at the end

• An accountholder, armed with a password, can use the Net to order a cheque book, stop payment of a cheque and spot the balance and individual operations in the account and transfer funds.

• It comes with a world of other benefits

o Interest earning checking accounts, o Automatic bill paymento ATM/Debit cardso Credit Cardso Direct Deposito Online Statementso Loanso Money market accounts

Disadvantages of online banking:

• Start-up may take time

• Learning curve

• Bank site changes

• Money Laundering

• The “trust thing”

Changing Role of IT in Banking

Impact of IT Revolution in Banking..

• Transaction processing - From Manual to Computerized environment.

• Basic accounting registers to rolls of papers.• Computerization - automating routine and

repetitive manual operations to Direct transaction processing.

• Out look of banking hall - from clumsy look to neat counters.

Impact of IT Revolution in Banking..

• Concept of Banking hours - Loose its meaning -Tele banking/ Home banking/ATM.

• Concept of remittance/withdrawals from one point many no longer relevant.

• Cash payment is getting replaced by credit card/ debit card/ smart card.

Impact of IT Revolution in Banking..

• Communication channel …

• Internal communication….

Banking industry - takes advantage by., Reducing cost of operation, Better efficiency,better customer service.

IT - Competitive advantage in banking

• Competitive edge in customer service.• Competitive edge in risk assessment.• Competitive edge risk management.• Competitive edge in operational efficiency.• Competitive edge data warehousing & decision

making.• Competitive edge transaction cost & capital

expenditure.• Competitive edge in value added services.

Customer service

• As an online bank customer, you have a website that is at your disposal 24/7

• You can get your online statement for the month, week, day, or year

• You can send e-mails with questions or concerns

• You can pay bills

E-banking – Trends Worldwide

• Concept of E-banking is more prevalent in the technologically developed parts of the world such as Europe and the US

• The number of online banks in Western Europe has mushroomed. As per Bluesky International Marketing, a US based research agency, the  number is quoted at 1,845 in  mid 1999.

• The scene is similar in the US where a recent Dataquest survey forecasts that the number of US households banking online will reach 24.2 million by 2004.

Indian Banking Scenario

• 33 private banks and 43 foreign banks • 27 public sector banks account for over 84% of

the total deposits and over 82% of the total banking  advances in India

• Rough estimates assuming teller at Re 1 per transaction put ATM transaction costs at 45p, phone banking at 35p, debit cards at 20p and Internet banking a measly 10p.

E-banking in India

• Marriage of technology and banking is inevitable to keep pace with changes in the global scenario.

• The Verma Committee recommended the need for greater use of IT even in the weak Public sector banks.

• Presently Net Banking facility is offered by ICICI Bank, Citibank, HDFC Bank, Global Trust Bank etc.

SERVICES PROVIDED BY ICICI BANK THROUGH INTERNET

• ONLINE BILL PAYMENT• FUND TRANSFER• SHOPPING• TICKET BOOKING• PREPAID MOBILE RECHARGE• SHARE TRADING • CHARITY

Electronic Banking

ATM

Head Office

Branch Banking

Branch 1

Branch 2 Branch 3

Branch 4

Branch 5

Branch 6

Branch n

Trends in Technology Banking

Email SWIFT Single window system Anytime banking Tele banking Home banking Internet banking• Corporate banking.• EFT.• RTGS

Electronics Funds Transfer (EFT)

• Transfer of funds by computer from one account to another without written cheques

• Accounts payable information sent electronically to Automated Clearing House (ACH)

• ACH transfers funds into banks where receivers’ hold accounts

Components of an EFT system:

1. Electronic means for authorizing transactions

--machine readable identifier

--prevention of unauthorized and

fraudulent attempts to transfer funds

--e.g.: machine readable cards/badges

or pattern recognition devices

Contd..

2. Communication networks

--link the person initiating the transfer,

account where funds are stored & the

recipient’s account

3. Information systems capable of processing desired transactions

Benefits of EFT:

• Reduction of cost in making financial transactions

• Home Banking

• Home Shopping

Issues involved in EFT:

• Float

• Security and Privacy

• Lack of public confidence

• Cost

• Preference for cash

POS Terminal and Cash Dispenser

POS Terminal

Connected to Cash dispenser

Technology and Banking

The Quintessence Nature of Banking harmonizes

closely with Technology –

Banking TechnologyInformation

StorageProcessing

Transmission

Tasks Common to Both