High Tech E-Banking

HIGH TECH E-BANKING

1 Payment system in india

2 Paper based

3 e-payments

4 Electronic banking

5 Plastic money &E-money

6 Forecasting of cash demand at ATMs

7 Security threats in e-banking &RBIs initives.

1 Payment System In India

According to BIS - A payment system consist of instruments, banking procedures and typically interbank funds transfer that ensures and facilitate the circulation of money. In essence, it facilitates corporation, businesses and consumers to transfer funds to one other‖.

The Reserve Bank of India‘s publication on Payment Systems in India (2009–12). India has multiple payments and settlement systems.

RBI Still continues to evolve new payment methods and slowly revamping the payments and settlement capability in India.

India supports a variety of electronic payments and settlement system,

A. Gross Settlement System:

Real Time Gross Settlement(RTGS)

         Net Settlement System:

         ECS - Credit

         ECS – debit

         Credit cards and Debit cards

         National Electronic Funds Transfer (NEFT)

         Indo-Nepal Remittance Facility Scheme

1.1 Real Time Gross Settlement(RTGS)

The Reserve Bank of India (India's Central Bank) maintains this payment network.

RTGS system is a funds transfer mechanism where transfer of money takes place from one bank to another on a 'real time' and on 'gross' basis. This is the fastest possible money transfer system through the banking channel.

Settlement in 'real time' means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed.

'Gross settlement' means the transaction is settled on one to one basis without bunching with any other transaction.

Fees for RTGS vary from bank to bank.

RTGS is a large value . Minimum value of transaction should be  2,00,000.

Customers can access the RTGS facility between 9 am to 4:30 pm on weekdays and 9 am to 2:00 pm on Saturdays.

The RTGS service window for customer's transactions is available from 9:00 hours to 16:30 hours on week days and from 9:00 hours to 14:00 hours on Saturdays.

No Transaction on weekly holidays and public holidays.

Service Charge for RTGS

a) Inward transactions :

1%, no charge to be levied. b) Outward transactions :

For transactions of 2 lakhs to  5 lakhs - not exceeding 30 per transaction, (+ Service Tax).

Above 5 lakhs -Not exceeding 55 per transaction, (+ Service Tax).

National Electronic Fund Transfer(NEFT)

The national electronic fund transfer (NEFT) system is a nation-wide system that facilitates individuals, firms and corporates to electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country.

For being part of the NEFT funds transfer network, a bank branch has to be NEFT-enabled.

As at end-January 2011, 74,680 branches / offices of 101 banks in the country (out of around 82,400 bank branches) are NEFT-enabled.

Service Charges for NEFT

For transactions up to  10,000:

Not exceeding 2.50 (+ Service Tax)

For transactions above 10,000 up to  1 lakh:

Not exceeding 5 (+ Service Tax)

For transactions above 1 lakh and up to  2 lakhs:

Not exceeding 15 (+ Service Tax)

For transactions above 2 lakhs:

Not exceeding 25 (+ Service Tax)

Indo-Nepal Remittance Facility Scheme

Indo-Nepal Remittance Facility is a cross-border remittance scheme to transfer funds from India to Nepal, enabled under the NEFT Scheme.

The scheme was launched to provide a safe and cost-efficient avenue to migrant Nepalese workers in India to remit money back to their families in Nepal

A remitter can transfer funds up to 50,000 (maximum permissible amount) from any of the NEFT-enabled branches in India.The beneficiary would receive funds in Nepalese Rupees.

Inter Mobile Payment system (IMPS)

   Immediate Payment Service (IMPS) is an initiative of National Payments Corporation of India (NPCI). It is a service through which money can be transferred immediately from one account to the other account, within the same bank or accounts across other banks.

  Upon registration, both the individuals are issued an MMID(Mobile Money Identifier) Code from their respective banks.

  This is a 7 digit numeric code.

  To initiate the transaction, the sender in his mobile banking application need to enter the registered mobile number of the receiver, MMID of the receiver and amount to be transferred.

  Upon successful transaction, the money gets credited in the account of the receiver instantly.

  This facility is available 24X7 and can be used through mobile banking application.

Electronic Clearing Service (ECS Credit)

Known as ―Credit-push‖ facility or one-to-many facility this method is used mainly for large-value or bulk payments where the receiver‘s account is credited with the payment from the institution making the payment.

Such payments are made on a timely-basis like a year, half a year, etc. and used to pay salaries, dividends or commissions.

Over time it has become one of the most convenient methods of making large payments.

Electronic Clearing Services (ECS Debit)

Known as many-to-one or ―debit-pull‖ facility this method is used mainly for small value payments from consumers/ individuals to big organizations or companies.

It eliminates the need for paper and instead makes the payment through banks/corporate or government departments.

It facilitates individual payments like telephone bills, electricity bills, online and card payments and insurance payments.

2 Paper based payments

    Use of paper based instruments(like cheques, drafts,) accounts for nearly 60% of the volume of total non-cash transactions in the country.

    In value terms, the share is presently around 11%.

    Paper based payments occupy an important place in the country, Reserve Bank had introduced Magnetic Ink Character Recognition(MICR).

    Technology for speeding up and bringing in efficiency in processing of cheques.

3 E-payment

What is E-payment ?

E-payment as defined as electronic payment is subset of an E-commerce transaction. It includes electronic payment for buying/selling or services which are offered on the internet.

Objectives of E-payment

To understand the concept of Electronic Payment System and its security services. To bring out solution in the form of applications to uproot Electronic Payment. To understand working of various Electronic Payment System based applications. Principles and Recommendations

CPSS (committee on payment and settlement systems) core principles for systematically Important payment systems (SIPS)

CPSS-IOSCO Recommendations for securities settlement systems (SSS) CPSS-IOSCO Recommendations for Central Counter Parties (CCP)

Types of E-payment system

    E-cash

    Micro payments

    Debit and credit  cards

    Smart card

    Peer to payment

 B2B and B2C transactions E-cash

It is defined as Electronic cash. It is an internet based system generated by a computer

It allows fund to be transferred items should be purchased by debit/credit card, cheque or money order.

It is more efficient and has lower transaction cost Micro payments

A micropayment is an E-commerce transaction involving a very small sum of money in exchange for something made available online. such as application download, a service web based content etc.,

Debit card & Credit card Debit card :-

A debit card is a plastic card that provides the card holder electronic access to his bank account to withdraw cash or pay for goods and services.

It removes the need to go to your bank to make payments it also gives you the ability to take

directly cash from ATM‘s

Credit card:-

credit card is a card issued by a financial company giving the holder an option to borrower funds.credit card charge interest and are primarly used for short term financing. It is most used payment system given its high convenience.

Smart card :

Smart card is a plastic card in the size of credit card with an embedded microchip that can be loaded with data, used for telephone calling, electronic cash payments and other application.

It stores more information than magnetic strip card. It contain information such as

     A/c information

     Credit card no

     Health insurance etc., Peer to Peer payment

It allows the transfer of electronic cash (E-cash) Via E-mail between two people who have account at E-cash enabled Bank.

Peer to peer transaction allow online financial transfers between consumers. B2B and B2C Transactions

The fastest grossing sector of E-commerce Payment is B2B transactions.

 These payment are much larger than B2C transactions and involve complex business accounting system

E-Payment pros & cons Pros :

    Potential for great flexibility

    Low transaction costs

    Rapid and diverse purchase power

Cons:

   Perfect copying of transactions is possible

   Vulnerability to world wide attack

   Lack of anonymity, potential for privacy intrusion.

4 ELECTRONIC BANKING

Meaning

Electronic banking, also known as electronic funds transfer (EFT), is simply the use of electronic means to transfer funds directly from one account to another, rather than by check or cash.

E-CHEQUE:

Types of Electronic Currency

    Check Cards

    Smart Cards

    Digital checks

OTHER FORMS OF ELECTRONIC BANKING

    Direct Deposit

    Electronic Bill Payment

    Electronic Check Conversion

    Cash Value Stored, Etc.

objectives

   To receive complaints pertaining to unauthorized and invalid transactions leakage, tampering and theft of data and ensure that they are sufficiently and easily resolved through adequate legal and technical protection for E-banking consumers.

   To reduce risk handling of cash

   TO provide low cost and financial services

   To provide a system that delivers efficient payments linked to a bank

Advantages

   Very convenient

   unlimited service day and night

   No time constraint

   Easy to Access through PC

   Easy way of payment

   Easy transaction

   Ease of monitoring

Disadvantages

   Banking relationship

   Transaction problems

   Bank site problems

   Trust aspect

5 PLASTIC MONEY

Plastic money or ploymer money, made out of plastic, is a new and easier way of playing for goods and service. plastic money was introduced in the 1950s and is now an essential from of ready money which reduces the risk of handing a huge amount of cash.

Its include debits cards, ATMs, Smart card, etc…

Factors Affecting Utilization Of Plastic Money

  Modernization

  Globalization

  Quick service

  Security (less cash burden)

  Less botheration

  Add – on – facility

  Home and online shopping

Other Factors:

    Age of the customer,

    Education level of the customer,

    Monthly income of the customer,

    Technological innovation,

    Age of the bank,

    Reputation of the bank,

^Ø Lower bank charges.

Advantages of Plastic Money

    Offer free use of funds, provided the customer to pay full balance in time.

    It is more convenient to carry than cash.

    Helps in establishing a good credit history

    Provide a convenient payment method for purchases made on the internet and over the telephone.

    Give incentive, such as reward points, thatwe can redeem.

Disadvantage Of Plastic Money

    Cost much more than other forms of credits, such as a line of credit or a personal loan, if the customer does not pay on time.

    Damage customer credits rating if payments are late.

Different Forms Of Plastic Money

ATMCARD

A Plastic card used to withdraw money from a banking institution‘s called automatic teller machine. Sometime this card may also be used as a debit card, but not all ATM card have this capability.

CREDIT CARD

A credit card is plastic money that is used to pay for product and services at over the 20 million locationaroundworld.

DEBITCARD

Debit card are substitutes for cash or check payment, much the same way that credit card are. However, bank only issued them when the customer have an account with them.

CHARGECARD

A Charge card is mean f obtaining a very short – term (usually around 1 month) loan for a purchase.

AMEXCARD

International visa and master card are commonly used by the travellers to bear their expenses on their tripe. Believe it or not, most of travellers financial their trip with their business credit card.

MASTERCARDWORLDWIDE

Master card worldwide is multinational corporation based in purchase, New york, united states.

SMARTCARD

A Smart card is a plastic card embedded with a computer chip that stores and transacts data between user. This data is associated with either value or information or both and stored and processed within the card‘s either a memory or microprocessor.

GLOBALCARD

A Very special GOLD VISA CARD with all its prestige, and additional service especially designed for people looking for peace of mind in their second home.

6 FORECASTING OF CASH DEMAND AT ATM

Efficient cash demand forecasting models generally can be used for detection of the outliers in ATM cash demand behaviour ; they cannot state the reason of these outliers.

Advantages of ATM

To the customer

    Provide 24*7 and 365 days a year service.

    Offer quicker and efficient service.

    Allow privacy in transactions.

    Are errors free.

    Offer of cash withdrawal to the customer.

    Offer anywhere banking facility.

To the Banks

   Is an alternative to extended banking hours.

   Alternative to opening new branches.

   Reduces operating expenses of the banks.

   Increases market penetration.

Disadvantages of ATM

   Up-front equipment acquisition cost or network participation fee.

   Set-up fee to install and network the ATM.

   Usage fee, either per transaction or an a monthly basis.

   Monthly or annual service fee for support.

   Communications charges for dial-up leased lines, or wireless data links.

CREDIT CARDS

Meaning

A Credit Card is a plastic bearing an account number assigned to a cardholder with a credit limit that can be used to purchase goods and services and to obtain cash disbursements on credit, for which a cardholder is subsequently billed by an issuer for repayment of the credit extended at once or on an installment basis.

Features of Credit Cards

    All credit cards provide cash availing facility.

    Most of the cards provide for personal accident insurance coverage.

    All the credit cards generally provide free credit period.

    Most of the cards have associate relationship with international  credit  card  companies  like

diner‘s club, master card and visa       international.

^Ø Most of the cards provide Automated Teller Machine(ATM)        facility.

^Ø Installment credit facility is provided by many of the cards.

Advantages of Credit Cards

  Money from transactions credited into supplier‘s account within 2-4 days.

  No cash involved.

  Enable customers to buy expensive products immediately and make ‗impluse‘ purchases.

^Ø Enable customers to make a payment over the telephone or over the internet.

  Once transaction confirmed, payment to supplier guaranteed.

  Credit card holders can use card to obtain cash from a cash machine – through they pay interest on withdrawals from the movement they make the transaction.

  Credit card holders have additional protection if goods are faulty, provided each item cost over a minimum amount(normally 50 pounds).

Disadvantages

  Cost of installing and paying for an electronic terminal.

  Card holders may spend more than they can afford.

  Cost of processing the transactions.

  Interest can be high if card is not paid – off in full each month and cash withdrawals are expensive.

DEBIT CARDS

A Debit card is only accepted at outlets with electronic swipe- machines that can check and deduct amounts from the banks balance online. The banks only issue them to people if they hold an account with them.

ADVANTAGES OF DEBIT CARDS

     No need to carry cash.

    No need to make a trip to the bank every time the customer needs to withdraw money. He / She can use the card just about any where he / she goes, and can access money at an ATM machine any time of day or Night.

     No interest is paid on purchases.

DISADVANTAGES OF DEBIT CARDS

    There is no grace period to pay the bill.

    Debit card do not have as much protection as credit cards.

    Not all debit cards may be helping to build the credit score.

    Since debit cards are typically linked to bank accounts, if a debit card and PIN Number is stolen, the entire bank account could be drained of funds.

7Security Threats in E-banking

     Phishing Spyware&Adware Viruses

Trojans Key loggers

Phishing

Hoax e-mail claiming to be from financial institutions

Spyware and Adware

Spyware is a type of software that secretively collects user information while on the internet

Viruses

A computer virus is software that affixes itself to another program like a spreadsheet or word document

Trojans

A Trojan anti-virus software program that poses a harmless application

Unlike viruses, Trojan do no replicate themselves and do not need a host program to attach to

Key loggers

If fraudster installs a software called ―key logger‖ on the computer or the device on which the customer in accessing online banking, the software copies to a file, every keystock typed on that PC.

RBI INITIATIVES

The initiatives taken by RBI are follows:

^Ø Customer induced options may be provided for fixing a cap on the value and mode of transactions/beneficiaries. Additional authorization may be instead when the customer wants to exceed the cap

    Limiting the number of beneficiaries to be added per day to be considered

    System alert to be introduced for beneficiary addition

    Number of transactions per day/per beneficiary may be monitored for suspicious transactions

^Ø   Introduction    of            additional                    factor         of                authentication     for    unusual      transaction  to       be

authenticated on special request

    Bank may consider implementation of digital signature for large value payments for all customers, to start with for RTGS transactions

    IP address capture for transaction may be considered

    ―adaptive Authentication‖ (means of providing authentication for end users without them having to know it is as work) may be considered for fraud detection.