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E-Banking

1.1 Introduction of E-Banking

1.2 Meaning of E-Banking

1.3 Functions of E-Banking

1.4 Types of E-Banking

1.5 Adantages of E-Banking

1.! "i#itations of E-Banking

The acceleration in technology has produced an extraordinary effect upon our

economy in general has had a particularly profound impact in expanding the

scope and utility of financial products over the last ten years. Information

technology has made possible the creation, valuation, and exchange of complex

financial products on a global basis and even that just in recent years.

Derivatives are obviously the most evident of the many products that

technology has inspired, but the substantial increase in our calculation has

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permitted a variety of other products and, most beneficially, ne" "ays to

unbundled ris#.

$hat is really %uite extraordinary is that there is no sign that this

process of acceleration in financial technology is approaching an end. $e are

moving at an exceptionally rapid pace, fueled not only by the enhanced

mathematical applications produced by our ever rising computing capabilities

but also by our expanding telecommunications capabilities and the associated

substantial broadening of our mar#ets.

&ll the ne" financial products that have been created in recent years contribute

economic value by unbundling ris#s and reallocating them in a highly calibrated

manner. The rising share of finance in the business output of India and other

countries is a measure of the economic value added by the ability of these ne"

instruments and techni%ues to enhance the process of "ealth creation. The

reason of course, is that information is critical to the evaluation of ris#. The less

that is #no"n about the current state of a mar#et or a venture, the less the ability

to project future outcomes and, hence, the more those potential outcomes "ill

be discontinued.

1.2 Meaning of E-Banking$ -

'(ban# is the electronic ban# that provides the financial service for theindividual client by means of Internet.

1.3 Functions of E-Banking$ -

&t present, the personal e(ban# system provides the follo"ing services) (

1. In%uiry a&out t'e infor#ation of account$ -

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The client in%uires about the details of his o"n account information such as the

card+s account+s balance and the detailed historical records of the account and

do"nloads the report list.

2. (ard accounts) transfer$ -

The client can achieve the fund to another person+s -redit -ard in

the same city.

3. Bank-securities accounts transfer$ -

The client can achieve the fund transfer bet"een his o"n ban#

savings accounts of his o"n -redit -ard account and his o"n capital account in

the securities company. oreover, the client can in%uire about the presentbalance at real time.

4. T'e transaction of foreign e*c'ange$ -

The client can trade the foreign exchange, cancel orders and

in%uire about the information of the transaction of foreign exchange according

to the exchange rate given by our ban# on net

5. T'e B2( dis&urse#ent on net$ -

The client can do the real(time transfer and get the feedbac#

information about payment from our ban# "hen the client does shopping in the

appointed "eb(site.

!. (+ient serice$ -

The client can modify the login pass"ord, information of the

-redit -ard and the client information in e(ban# on net.

,. Account #anage#ent$ -

The client can modify his o"n limits of right and state of the

registered account in the personal e(ban#, such as modifying his o"n login

pass"ord, free/ing or deleting some cards and so on.

. eporting t'e +oss if t'e account$ -

The client can report the loss in the local area 0not nation"ide

"hen the client+s -redit -ard or passboo# is missing or stolen.

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1.4 Types of E-Banking$ -

1. Deposits, "ithdra"als, inter(account transfer and payment of lin#ed

accounts at an &T2

*. 3uying and paying for goods and services using debit cards or smart

cards "ithout having to carry cash or a che%ues boo#2

!. 4sing a telephone to perform direct ban#ing( ma#e a balance en%uiry,

inter(account transfers and pay lin#ed accounts2

5. 4sing a computer to perform direct ban#ing( ma#e a balance en%uiry,

inter(account transfers and pay lin#ed

1.5 Adantages of E-Banking$ -

1. &ccount Information) 6eal time balance information and summary of

day+s transaction.

*. 7und Transfer) anage your 8upply(-hain net"or#, effectively by usingour online hand transfer mechanism. $e can effect fund transfer on a real

time basis across the ban# locations.

!. 6e%uest) a#e a ban#ing re%uest online.

5. &ccount information) The complete database that the ban#s has about our

company is available to us at our terminal. It provides us)

-urrent balance in our account on real(time basis.

Day+s transactions in the account.

Details of cash credit limit, dra"ing po"er, amount utili/ed, etc.

9. Do"nloading of account statements as an excel file or text file. The

statements can be integrated "ith your '6P systems for auto(

reconciliation.

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:. 7und Transfers) anage our 8upply(-hain net"or#, effectively by using

our online fund transfer mechanism. $e can effect fund transfer on a real

time basis across the ban# locations. The product facilities.

0a ;ne(to(one fund transfer bet"een t"o lin#ed account.

0b 3ul# fund transfers2 In bul# fund transfers, "e upload a flat

file containing payment collection information. ;ur

systems ta#e care of processing the entire file and once the

file is processed file to our '6P for auto reconciliation.

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des#top. Ao more missed deadlines, no more loss of interest. @e can

schedule his bills in advance, and thus avoid missing the bill deadlines as

"ell as earn extra interest on his money.

11.The 'lectronic 8hopping all) The customer can also ma#e his shopping

payment through the 3an#+s secure "ebsite(so that he can shop online

"ithout any security "orries, as the ban# can provide online real time

shopping mail services through partner shopping sites

1*.'ffecting Personal Investments through 'lectronic 3an#ing) The ban#+s

"ebsite can also allo" the customer to invest in shares, mutual funds and

other financial products.

1!.Investing in utual funds) 'lectronic ban#ing also brings the customer

the same convenience "hile investing in utual funds( @assle free and

Paperless Investing. @e can invest in mutual funds "ithout the hassles of

filling application forms or any other paper"or#. @e needs to provide no

signatures or proof of identify for investing. ;nce he places a re%uest for

investing in a particular fund, there are no manual processes involved.

@is ban# funds are automatically debited or credited "hile

simultaneously crediting or debiting his unit holdings.

15.Initial Public ;ffers ;nline) The customer could also invest in initial

public offers online "ithout going through the hassles of filling &AB

application form paper"or#. Cet in(depth analyses of ne" initial public

offers issues, "hich are about to hit the mar#et and analysis on these.Initial public offer calendar, recent initial public offers listings,

prospectus offer documents, and initial public offer analysis are fe" of

the features, "hich help a customer to #eep on top of the initial public

offers mar#ets.

19.;ther benefits) The e(ban#ing provides some other benefits also.some of

them are) -onvenience, speed of concluding transactions, safety(ban#ing

from o"n home, cheaper service fees, highly scaleable, easy

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customi/ation, lo"er cost of both installation and maintenance,platform

independence.

1.! "i#itation of E-Banking$

1. 8afety situations around &Ts.

*. &buse of ban# cards by fraudsters at &Ts.

!. Danger of giving your card number "hen buying on(line.

The modern technology has influenced the financial sector to a large extent. It

increases the competitive efficiency of the firms and provides sophistication to

the end users. It ma#es everyone fittest to survive.

('apter 2$ - Internet Banking

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2.1 Internet Banking

a/ Introduction

&/ T'e Indian 0cenario

c/ roduct 0erice offered

2.2 isk eards

a/ perationa+ isk

&/ 0ecurity isk

c/ 0yste# arc'itecture design

d/ eputationa+ isk

e/ "ega+ isk

f/ Money "aundering isk

g/ (ross Border isks

'/ 0trategic isk

i/ t'er isk

/ isk of unfair co#petion

2.1 Internet Banking$-

a/ Introduction$ -

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The delivery channels include direct dialup connections, private net"or#s,

public net"or#s, etc. "ith the popularity of computers, easy access to Internet

and $orld $ide $eb 0$$$, Internet is increasingly used by ban#s as a

channel for receiving instructions and delivering their products and services to

their customers. This form of ban#ing is generally referred to as Internet

3an#ing, although the range of products and services offered by different ban#s

vary "idely both in their content and sophistication.

&/ T'e Indian 0cenario$ -

The entry of India ban#s into Aet 3an#ing

Internet ban#ing, both as a medium of delivery of ban#ing services and as

a strategic tool for business development.

&t present, the total internet users in the country are estimated at > la#h.

@o"ever, this is expected to gro" exponentially to >? la#h by *??!. only

about 1 percent of Internet users did ban#ing online in 1>>=. This is

increased to 1:.< percent in arch *??? 0India 6esearch, ay *>, *???,

ota# 8ecurities.

-ost of ban#ing service through the Internet from a fraction of costs

through conventional methods. 6ough estimates assume teller cost at

6e.1 per transaction, &T transaction cost at 59 paise, phone ban#ing at

!9 paise, debit cards at *? paise and Internet ban#ing at 1? paise per

transaction.d/ roduct and 0erices ffered$ -

3an#s in India are at different stages of the "eb(enabled ban#ing cycle.

Initially, a ban#, "hich is not having a "eb site, allo"s its customer to

communicate "ith it through an e(mail address+ communication is limited

mail account.

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$ith gradual adoption of Information Technology, the ban# puts up a "eb

site that provides general information on deposits products, application

forms for do"nloading and e(mail option for en%uiries and feedbac#.

Eijaya 3an# provides information on its "ebsite about its A6I and other

services. -ustomers are re%uired to fill in applications on the Aet and can

later receive loans or other products re%uested for at their local branch.

& fe" ban#s provide the customer to en%uire into his demat account

0securityshares holding details, transaction details and status of

instructions given by him. These "eb sites still do not allo" online

transactions for their customers.

8ome of the ban#s permit customers to interact "ith them and transact

electronically "ith them. 8uch services include re%uest for opening of

accounts, re%uisition for che%ue boo#s, stop payment of che%ues, vie"ing

and printing statements of accounts, movement of funds bet"een

accounts "ithin the same ban#, %uerying on status or re%uests,

instructions for opening of Fetter of -redit and 3an# Cuarantees, etc.

These services are being initiated by ban#s li#e I-I-I 3an# Ftd.,

-itiban#, Clobal Trust 3an# Ftd., 4TI 3an# Ftd., 3an# of -itiban# 3an#

of adura Ftd., 7ederal 3an# Ftd., etc.

8ome of the more aggressive players in this area such as I-I-I 3an# Ftd.,

@D7- 3an# Ftd., 4TI 3an# Ftd., -itiban#, Clobal Trust 3an# Ftd., and

3an# of Punjab Ftd., offer the facility of receipt, revie" and payment of

bills online.

The GInfinity+ service of I-I-I 3an# Ftd. &lso allo"s online real time

shopping all payments to be made by customers.

@D7- 3an# Ftd. @as made e(shopping online and real time "ith the

launch of its payment gate"ay.

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3an#s providing internet ban#ing services have been entering into

agreements "ith their customers setting out the terms and conditions of

the services.

The terms and conditions include information on the access through user(

ID and secret pass"ord, minimum balance and charges, authority to the

ban# for carrying out transactions performed through the service, liability

of the user and the ban#, disclosure of personal information for statistical

analysis and credit scoring also, non(transferability of the facility, notices

and termination, etc.

2.2 isk eards$ -

a/ perationa+ isk$ -

;perational ris#, also referred to as transactional ris# is the most common

form of ris# associated "ith i(ban#ing.

It ta#es the from of inaccurate processing of transactions, non(

enforceability of contracts, compromises in data integrity, data privacy

and confidentiality, unauthori/ed access intrusion to ban#+s systems and

transaction, etc.

8uch ris#s can arise out of "ea#nesses in design, implementation and

monitoring of ban#s information system.

3esides inade%uacies in technology, human factors li#e negligence by

customers and employees, fraudulent activity of employees and crac#ers

hac#ers, etc. can become potential source of operational ris#.

&/ 0ecurity isk$ -

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8ecurity ris# arises on account of unauthori/ed access to a ban#+s critical

information stores li#e accounting system, ris# management system,

portfolio management system, etc.

;ther related ris#s are loss of reputation, infringing customers+ privacy

and its legal implications, etc.

&ttac#ers could be hac#ers, unscrupulous vendors, disgruntled employee

or even pure thrill see#ers.

In addition to external attac#s ban#s are exposed to security ris# from

internal sources e.g. employee fraud. 'mployee being familiar "ith

different systems and their "ea#nesses become potential security threats

in a loosely controlled environment. They can manage to ac%uire the

authentication data in order to access the customer accounts causing

losses to the ban#.

4nless specifically protected, all data information transfer over the

internet can be monitored or read by unauthori/ed persons.

c/ 0yste# arc'itecture and design$ -

3an#s face the ris# of "rong choice of technology, improper system

design and inade%uate control processes.

Aumerous protocols are used for communication across internet. 'ach

protocol is designed for specific types of data transfer.

& system allo"ing communications "ith all protocols, say @TTP 0@yperText Transfer Protocol, 7TP 07ile Transfer Protocol, telnet, etc. is more

prone to attac# than one designed to permit say, only @TTP.

any ban#s rely on outside service providers to implement, operate and

maintain their e(ban#ing system

8ecurity related operational ris# include access control, use of fire"alls,

cryptographic techni%ues, public #ey encryption, digital signature, etc.

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d/ eputationa+ isk$

6eputational ris# is the ris#s of getting significant negative public

opinion, "hich may result in a critical loss of funding or customers. 8uch

ris#s arise from actions "hich cause major loss of the public confidence

in the ban#s+ ability to perform critical functions or impair ban#(customer

relationship. It may be due to ban#s+ o"n action or due to third party+s

action.

The main reasons for this ris# may be system or product not "or#ing to

the expectations of the customers, significant security breach 0both due to

internal and external attac#, inade%uate information to customers about

product use and problem resolution procedures, significant problems "ith

communication net"or#s that impair customers+ access to their funds or

account information especially if, there are, no alternative means of

account access.

e/ "ega+ isk$ -

Fegal ris# arises from violation of, or non(conformance "ith la"s, rules,

regulations, or prescribed practices, or "hen the legal rights and

obligations of parties to a transaction are not "ell established.

& customer, inade%uately informed about his rights and obligations, may

not ta#e proper precautions in using Internet ban#ing products or

services, leading to disputed transactions, un"anted suits against the ban#

or other regulatory sanctions.

f/ Money "aundering isk$ -

o &s internet ban#ing transactions are conducted remotely ban#s may find

it difficult to apply traditional method for detecting and preventing

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undesirable criminal activities. &pplication of money laundering rules

may also be inappropriate for some forms of electronic payments.

o To avoid this, ban#s need to design proper customer identification and

screening techni%ues, develop audit trails, conduct periodic compliance

revie"s, frame policies in internet transactions.

g/ (ross-Border isks$ -

Internet ban#ing is based on technology that, by its very nature, is

designed to extend the geographic reach of ban#s and customers. 8uch

mar#et expansion can extend beyond national borders. This causes

various ris#s.

8uch considerations may expose ban#s to legal ris#s associated "ith non(

compliance of different national la"s and regulations, including

consumer protection la"s, record #eeping and reporting re%uirements,

privacy rules and money laundering la"s.

The foreign(based service provider or foreign participants in internet

ban#ing are sources of country ris# to the extent that foreign parties

become unable to fulfil their obligations due to economic, social or

political factors.

'/ 0trategic isk$ -

7or reducing such ris#, ban#s need to conduct proper survey, consult

experts from various fields, establish achievable goals and monitor

performance.

&lso they need to analy/e the availability and cost of additional

resources, provision of ade%uate supporting staff, proper training of staff

and ade%uate insurance coverage.

i/ t'er isk$ -

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Traditional ban#ing ris#s such as credit ris#, li%uidity ris#, interest rate

ris# and mar#et ris# are also present in internet ban#ing.

These ris#s get intensified due to the very nature of internet ban#ing on

account of use of electronic channels as "ell as absence of geographical

limits.

-redit ris#) Is the ris# that a counterparty "ill not settle an obligation for

full value, either "hen due or at any time thereafter. 3an#s may not be

able to properly evaluate the credit"orthiness of the customer "hile

extending credit through remote ban#ing procedures, "hich could

enhance the credit ris#.

&nother facility of internet ban#ing is electronic money. It brings various

types of ris#s associated "ith it. If a ban# purchases e(money from an

issuer in order to resell it to a customer, it exposes itself to credit ris# in

the event of the issuer defaulting on its obligation to redeem electronic

money.

Fi%uidity ris#) It is important for a ban# engaged in electronic money

transfer activities that it ensures that funds are ade%uate to cover

redemption and settlement demands at any particular time. 7ailure to do

so,besides exposing the ban# to li%uidity ris#, may even give rise to legal

action and reputational ris#.

/ isk of unfair co#petion$ -

Internet ban#ing is going to intensify the competition among various

ban#s. The open nature of internet may induce a fe" ban#s to use unfair

practices to ta#e advantage over rivals. &ny lea#s at net"or# connection

or operating system, etc. may allo" them to interfere in a rival ban#+s

system.

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Thus, one can find that along "ith the benefits internet ban#ing carries

various ris#s for ban# itself as "ell as ban#ing system as a "hole.

('apter 4$ - 6'at do (o#puters do in Banks

T'e different uses of Infor#ation Tec'no+ogy$ -

a/ 0ing+e 6indo 0yste#

&/ Any Ti#e Banking

c/ Auto#ated Te++er #ac'ine

d/ 0'ared ay#ent 7etork 0yste#

e/ (usto#er 0erice

f/ Te+e&anking

g/ 8o#e Banking

'/ E+ectronic Fund Transferi/ +astic (ards as Media for ay#ent

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1. (redit (ard

2. 9e&it (ard

3. 0#art (ard

4. ATM (ard

4.1 T'e different uses of Infor#ation Tec'no+ogy$ -

a/ 0ing+e 6indo 0yste# :060/$ -

o The cashier or teller "ho accepts the cash, #eys in the data from his

terminal after receipt of the amount.

o The amount is straight a"ay posted to the system.

o If the customer "ishes to update passboo# the same is also updated

through the security form printerpass boo# printer.

o If a customer "ishes to obtain a draft, the cler# #eys in the details of the

account to be debited and the particulars of the drafts to be issued on the

machine.

o The customer+s account is debited and security form printer prints out

draft and cler# can hand over the same to customer duly signed.&/ Any Ti#e Banking$ -

This refers to ban#ing service available *5 hours a day and !:9 days a

year.

8uch facility is made available to the customer through the &utomated

Teller machine.

3an#ing, being a service industry, is primarily driven by customers needs.

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'ach customer is "illing to pay a price for the services provided it is

made available to him "hen he "ants and "here he "ants.

In the present day of server competion, ban#ing services are driven by

technology, "hich is more oriented to"ards providing better services to

the customer.

The concept of ban#ing hours has been changed from the fixed 5 hours to

*5 hours.

This has been made possible through use of &Ts. 'ven under the

manual service, the ban#s have stated to extend the service from the

traditional 5 hours to 9 hours and even up to 1* hours say from = & to =

P.

8ome ban#s have introduced the practice of 8unday 3an#ing or @oliday

3an#ing.

c/ Auto#ated Te++er Mac'ine :ATM/$ -

&T is a machine in the nature of a computer in general sense, but is

dedicated to do certain types of specific jobs only.

The hard"are and the proprietary i.e. the soft"are used in one machine

can not be used in one machine.

d/ 0'ared ay#ent 7etork 0yste# :070/$ -

The 8PA8, named 8$&D@&A, has been sponsored by the Indian 3an#+s

&ssociation 0I3&.

It is a net"or# of &Ts, points of sale terminals and -ash Dispensers

"ith a vie" to pool the resources of the ban#s and underlines the spirit of

competition through cooperation.

It became operational in umbai on 1st7ebruary 1>>< and in t"o years

about 19? &Ts "ere o"ned and installed by != ban#s including foreign

ban#s, public and private sector Indian commercial ban#s as also

cooperative ban#s.

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The biggest advantage of the net"or# is that the &T cards issued by

different ban#s can used at any member ban#s &T.

3an#s can have as many &T as they "ant and follo" some standards

set by the 8PA8 committee.

The heart of the net"or# is the 8"itch and its main components are)

Tandem ainframe -omputer, 3&8' *5 8oft"are, otorola net"or#ing

e%uipments and the leased lines.

e/ (usto#er 0erices$ -

The follo"ing customer services are offered through the system

i. -ash "ithdra"al 0up to a specified limit

ii. -he%ue-ash deposit 0the receipt being only for the deposit of the

envelope containing cash but not for the amount therein

iii. 'n%uiry about balances

iv. Printing of statement of accounts

v. 6e%uest for che%ue boo# and standing instructions.

vi. Transfer of funds

vii. PIA change

f/ Te+e&anking$ -

7rom the conventional ban#ing, "here the services "ere provided

manually across the table, it has come to a stage "here the customer is

not re%uired to visit the ban# en%uiry of balance in the account, sending a

remittance, to get a statement of account, etc.

The concept has become so popular that in 48& customers do not visit

the ban# for >

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Teleban#ing services are, generally, provided by the ban# over the

telephone on a special number.

The number at the ban# is connected to a terminal in the ban#, "hich is

either handled manually or is automated by connecting the same to the

computer net"or#.

$here the system is automated, t"o types of technology are used.

g/ 8o#e Banking$ -

4nder home ban#ing the customer is served at his residence and there is

no need for the customer to visit the ban#+s premises for a number of

routine transactions.

If the customer needs some information the same can be got by

contacting the ban# over the phone as described in the teleban#ing.

If the customer "ants to put through transaction and "ishes to see his

account or to get a statement of his account, he may have to use a P-.

The home ban#ing service can be broadly classified under t"o

groups, one "ithout using the information technology and another using

information technology.

$hen customer contacts the ban# o the phone no specific

technology is involved and the service of teleban#ing are provided to

him.

'/ E+ectronic Fund Transfer :EFT/$ -

o In India the fund transfers are basically done through ail Transfer, Draft

or Telegraphic Transfer.

o In case of Telegraphic Transfer 0TT again the Department of

Telecommunication "as the sole provider of Telephone, Telex and

Telegram facilities.

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o $ith the process of liberali/ation private operators have started providing

alternative voice communication channels through mobile phones and

vast communication as an alternative channels for data communication.

o It "as normal for any TT to be credited to the beneficiary+s account after

delay of * to 5 days

o The different forms of '7T prevalent in the use are)

'7T through 'lectronic Data Interchange

3&AA'T

63IA'T

ID63T E8&T Aet"or#

'7T from Point of 8ales

'lectronic -ash

8$I7T( Clobal 8ystem for 7unds Transfer

'lectronic -learing 8ettlement

i/ +astic (ards as Media for ay#ent$ -There are four types of plastic cards being used ad media for ma#ing payments.

These are)

1. -redit -ard

*. Debit -ard

!. 8mart -ard

5. &T -ard

1. (redit (ards$ -

The credit card enables the cardholders to)

Purchase any item li#e clothes, je"ellery, rail"ayair tic#ets, etc.

Pay bills for dining in a restaurant or boarding and lodging in a hotel

&vail of any service li#e car rental, etc

2. 9e&it (ard$ -

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& debit card is issued on payment of a specified amount by the issuing company

li#e a telephone company to a customer on cash payment or on debiting his

account by a ban#.

Thus it is li#e an electronic purse, "hich can be read and debited by the re%uired

amount.

It may be noted that "hile through a credit card, the customer first ma#es a

purchase or avails service and pays later on, but for getting the debit card, a

customer has to first pay the due amount and then ma#e a purchase or avail the

service. 7or this reason, debit card are not as popular as credit cards.

3. 0#art (ards$ -

8mart -ards have a built(in microcomputer chip, "hich can be used for storing

and processing information. 7or example, a person can have a smart card from a

ban# "ith the specified amount stored electronically on it. &s he goes on

ma#ing transactions "ith the help of the card, the balance #eeps on reducing

electronically. $hen the specified amount is utili/ed by the customer, he can

approach the ban# to get his card validated for a further specified amount. 8uch

cards are used for paying small amounts li#e telephone calls, petrol bills, etc.

In India, a smart card, suiting Indian ban#ing environment, is being developed

and tested at IIT, umbai, in collaboration "ith the 63I and 83I. The card is

being used as an experimental tool for promoting cashless society in and aroundthe IIT -ampus. The latest smart card being developed "ill combine all the

features of electronic purses, credit cards and &T cards.

4. ATM (ards$ -

The card contains a PIA 0Personal Identification Aumber "hich is selected by

the customer or conveyed to the customer and enables him to "ithdra" cash up

to the transaction limit for the day. @e can also deposit cash or che%ue.

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('apter 5$ (redit (ard Frauds

5.1 (redit (ard Frauds

Meaning

9efrauder

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Aare of (redit (ard

Adantages of (redit (ard

(redit (ard Frauds

5.2 T'e reention of Frauds

9up+icate (ard

6'ite p+astics

Banker)s o+e

(y&er "as

A+tering 0a+e ter#ina+s

Internet e+ays

Monitoring 9eposit

isk Manage#ent

(entra+ (redit (ard (+earing 8ouse

"oss of (redit (ards in Transit

Fraud (onsciousness

'ysica+ Eidence

('eck t'e 'andriting

5.1 (redit (ard Frauds$ -

Meaning$ -

& credit card is a money transaction device "ithout using cash or fiduciary

documents.

9efrauder$ -

The defrauder has been slo" to exploit the credit card, for ma#ing a fast buc#.

In 48&, he made 19 million dollars. through the cards, in 1>=1. in 1>=* his

earning through the card, rose to 9? million dollars. in 1>=!, the fraudulent card

brought over 1?? million dollars to its creators. The fraudulent card industry is

rising higher and higher to di//y height every year. Fi#e other countries if the

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genuine credit card has come in India, the fraudulent credit card cannot be far

behind.

Aare of (redit (ard$ -

The credit card, as already seen, is a money transaction device. The institutions

issuing the credit card give the card holders authority to obtain money, goods,

services or any other thing of value, on credit. They guarantee payment of debit

so raised. These institutions are ban#s and other financial institutions, clubs and

travel agencies and departmental stores, etc. -redit -ards, 3ob -ards, aster

-ards, Eisa -ards, express -ards, 'uro -ards have "ide circulation. 8ome of

them have "ide circulation. 8ome of them have "orld("ide circulation..

(redit (ard Frauds$ -

-redit card frauds manifest themselves in a number of "ays)

1. Cenuine cards are manipulated.

*. Cenuine cards are altered.

!. -ounterfeit cards are created.

5. 7raudulent telemar#eting is done "ith credit cards.

9. Cenuine cards are obtained on fraudulent applications in the

namesaddresses of other persons and used.

It is feared that "ith the expansion of '(-ommerce, (-ommerce, and Internet

facilities being available on massive scale, the fraudulent fund frea#ing via

credit cards "ill increase tremendously. The shape it ta#es "ill be limited only

by the ingenuity of the future.5.2 T'e reention of Frauds

9up+icate (ard$ -

The duplicate fraudulent credit cards are those "here the defrauders have made

sincere efforts to duplicate the original cards through photo(mechanical

processes.

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They follo" the footsteps of the original manufactures of the genuine credit

cards to produce as close a replica of the genuine card as possible, employing

similar materials and similar processes of printing and embossing, besides

magnetic encodings.

6'ite +astic$ -

The counterfeit credit cards #no"n as G"hite plastics+ are imitations of credit

cards in general aspect.

Banker)s o+e$ -

The credit card industry is one of the fastest gro"ing activities of the ban#ing

industry. The artist has to be there 0"here the money is. The ban#s have to

suffer losses.

(y&er "as$ -

Information Technology inistry be approached for stringent la"s against

credit card crimes.

A+tering 0a+es ter#ina+s$ -

Internet '(ail should be utili/ed on the pattern of @ot 3ox organi/ed about a

decade ago, suitably modified to benefit from the advances the information

technology has made since them.

Internet e+ays$ -

-omputers should be pressed into service via internet connection by suitably

upgrading the Television 8ystem Eertical blan#ing Intervals for notifying the

fraudulent cards in the mar#et.Monitoring 9eposit$ -

onitoring system can help locate the unscrupulous merchants "ho use or

allo" the use of G"hite plastics+ and fraudulent cards, #no"ing fully "ell their

fraudulent nature for ma#ing a fast bac#.

isk Manage#ent$ -

To meet the menace one of the top card companies has imitated ris#

management service to

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identify these high ris# centers "here daily all the inter(change transactions of

the areas are scrutini/ed and the credit card number are chec#ed against those

"hich have been declared fraudulent, stolen or lost.

(entra+ credit (ard (+earing 8ouse$ -

There should be a joint list of credit card holders on central basis "ith their

addresses and other details, if any. Ae" applicants to any ban# for credit cards

should be chec#ed) (

If he is holding card from other issuers.

If he has held a card at other times. If so, "hen $hy did he discontinue

If he has applied to more than one credit card issuers

The ne" card holder+s business transactions should be "atched for some

time.

"oss of (redit cards in Transit$ -It must be prevented.It is simple for either

the customer to collect personally or the ban#er should deliver it personally, or

it should be sent by courier and confirmation obtained on telephone, in addition

to the paper receipt.

Fraud (onsciousness$ -

The problem of credit card frauds must be brought to the notice of users as "ell

as of the servers at sale terminals.

Proper training in the chec# up of the credit card in its various aspects has no

substitute and in vie" of the huge issues the same is indispensable.

'ysica+ Eidence$

Immediately on the discovery of fraud all the physical evidence available

should at once be ta#en into possession and the case reported to the police for

investigation.

('eck t'e 8andriting$ -

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@and"riting 0in signatures is available on sale drafts and on credit cards. The

comparison of hand("riting inter se and "ith that of the suspect and of genuine

card holders, can lead to the identity or non(identity of alleged "riter.

('apter !$ - Banks (ontro+ in n+ine Banking

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!.1 6i++ Banks (ontro+ n+ine Banking$ -

Internet Banking in India

ea+ t'reats

n+ine

!.2 0uggestions

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!.1 6i++ Banks (ontro+ n+ine Banking$ -

Internet Banking in India$ -

;nline ban#ing is expected to explode in the ext fe" years. $e "ill be entering

the age of non(physical exchange of cash aided by complete transparency

leading to perfectly competitive electronic mar#et place and inevitably to

customer supremacy. Cro"th in online ban#ing "ill be driven by the follo"ing

reasons)

Increasing access to lo" cost electronic services

'mergence of open standards in the ban#ing industry

Improved customer a"areness

'ntry of global majors in the mar#et

Integration of ban#ing services "ith e(commerce and emergence of e(

cash

-onvenient international transactions as Internet eliminates geographic

boundaries

8hift from one(stop shopping to unbundled product purchases

ea+ T'reats$ -

& majority of leading online bro#ers are beginning to offer ban#ing

products and services as part of their overall offers.

They are actively see#ing to capture excess balances in existing

chec#ing and saving accounts by offering better rates.

There are other threats to ban#s as "ell. 8everal leading system providers

have developed ban#(in(a(box solution J unbranded, electronic, full(

service, virtual(ban# system J that can be bought, branded, and offered to

consumer by any authori/ed company that "ishes to provide ban#ing

service.

!.2 0uggestions$ -

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To prevent online ban#ing from remaining an expensive additional

channel that does little to retain footloose customers, ban#s must act

%uic#ly.

The first and most obvious step they should ta#e is to see to it that the

basic problem fueling dissatisfaction have been addressed.

&fter repairing this basic deficiency, ban#s must ensure that there

services is competitive.

;bviously, it should include chec#ing, savings and bro#erage services,

"hich anchor customers to the institution.

In addition, to meet the challenge of online bro#erage and other ne"

entrants, ban#s "ould need to add supermar#ets selling products suchas mortgage, mutual funds and insurance.

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(onc+usion$ -

Technology innovation and fierce competition among existing ban#s have

enable a "ide array of ban#ing products and services, being made available to

retail and "holesale customer through an electronic distribution channel,

collectively referred to as e(ban#ing. The integration of e(ban#ing application

"ith legacy system implies an integrated ris# management approach for all

ban#ing activities of a ban#ing institution.

3an#s have traditionally been in the forefront of harnessing technology toimprove product and efficiency. Technology is altering the relationships

bet"een ban#s and its internal and external customers. Technology has also

eroded the entry barriers faced by many industries. $ith one time investment,

technology has brought about superior products and channel management "ith a

special focus on customer relationship. The incremental costs incurred for

expansion and diversification are also more beneficial.

The major driving force behind the rapid spread of e(ban#ing is its acceptance

as an extremely cost effective delivery channel. 3ut on the

flipside, it is associated "ith ris#s such as reputation ris#, security ris#, cross(

border ris# and strategic ris#, "hich are uni%ue to e(ban#ing. 3an#s need to

have an effective disaster recovery plan along "ith comprehensive ris#

management tool is significant not only to the ban# but also to the ban#ing

system as a "hole.

-oming home, India is on threshold of a major ban#ing revolution "ith the

invasion of net ban#ing. $ith the concept of payment gate"ay coming in, ban#s

are vying "ith one another for the lion+s share in the mar#et.

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BIB"I;A8