Banking (ebanking

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 Advantages of E-Banking

1.6 Limitations of E-Banking

1.1 Introduction of E-Banking

1

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

permitted a variety of other products and, most beneficially, new ways to

unbundled risk.

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What is really quite extraordinary is that there is no sign that this

process of acceleration in financial technology is approaching an end. We 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 markets.

All the new financial products that have been created in recent years contribute

economic value by unbundling risks 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 new

instruments and techniques to enhance the process of wealth creation. The

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

that is known about the current state of a market or a venture, the less the ability

to project future outcomes and, hence, the more those potential outcomes will

be discontinued.

1.2 Meaning of E-Banking: -

E-bank is the electronic bank that provides the financial service for the

individual client by means of Internet.

1.3 Functions of E-Banking: -

At present, the personal e-bank system provides the following services: -1. Inquiry about the information of account: -

The client inquires about the details of his own account information such as the

card’s / account’s balance and the detailed historical records of the account and

downloads the report list. 2. Card accounts’ transfer: -

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The client can achieve the fund to another person’s Credit Card in

the same city.3. Bank-securities accounts transfer: -

The client can achieve the fund transfer between his own bank

savings accounts of his own Credit Card account and his own capital account in

the securities company. Moreover, the client can inquire about the present

balance at real time.4. The transaction of foreign exchange: -

The client can trade the foreign exchange, cancel orders and

inquire about the information of the transaction of foreign exchange according

to the exchange rate given by our bank on net5. The B2C disbursement on net: -

The client can do the real-time transfer and get the feedback

information about payment from our bank when the client does shopping in the

appointed web-site.6. Client service: -

The client can modify the login password, information of the

Credit Card and the client information in e-bank on net.

7. Account management: -

The client can modify his own limits of right and state of the

registered account in the personal e-bank, such as modifying his own login

password, freezing or deleting some cards and so on.8. Reporting the loss if the account: -

The client can report the loss in the local area (not nationwide)

when the client’s Credit Card or passbook is missing or stolen.

1.4 Types of E-Banking: -

1. Deposits, withdrawals, inter-account transfer and payment of linked

accounts at an ATM;

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2. Buying and paying for goods and services using debit cards or smart

cards without having to carry cash or a cheques book;

3. Using a telephone to perform direct banking- make a balance enquiry,

inter-account transfers and pay linked accounts;

4. Using a computer to perform direct banking- make a balance enquiry,

inter-account transfers and pay linked

1.5 Advantages of E-Banking: -

1. Account Information: Real time balance information and summary of

day’s transaction.

2. Fund Transfer: Manage your Supply-Chain network, effectively by using

our online hand transfer mechanism. We can effect fund transfer on a real

time basis across the bank locations.

3. Request: Make a banking request online.

4. Account information: The complete database that the banks has about our

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

Current balance in our account on real-time basis.

Day’s transactions in the account.

Details of cash credit limit, drawing power, amount utilized, etc.

5. Downloading of account statements as an excel file or text file. The

statements can be integrated with your ERP systems for auto-

reconciliation.

6. Fund Transfers: Manage our Supply-Chain network, effectively by using

our online fund transfer mechanism. We can effect fund transfer on a real

time basis across the bank locations. The product facilities.

(a) One-to-one fund transfer between two linked account.

(b)Bulk fund transfers; In bulk fund transfers, we upload a flat

file containing payment / collection information. Our

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systems take care of processing the entire file and once the

file is processed file to our ERP for auto reconciliation.

7. The real life situation of user-wise limits and multilevel signatories can

be mapped in the net-based fund transfer module too. We can specify

user-wise cap for fund transfer and the number of approvals needed for

each fund transfer. The fund transfer will not take place unless the

required number of signatories has approved it.

8. With a power of Attorney from our dealers, we can link the dealer’s

accounts to our account in order to have an online fund transfer, saving us

time and money involved with cheques collections systems.

Alternatively, the dealer can credit our account through this channel.

Similarly, we could also effect vendor and other payments online.

9. Customers can Integrate the System with his own ERP: The customer can

download the account statements either as a text file or as an excel file.

The bank can help him in integrating the account statements and bulk

payments files with his ERP system. The bank may charge a nominal fee

depending upon the nature of work involved.

10.Bill Payment through Electronic Banking: Internet has thus ushered the

concept of anytime and anywhere banking. To the individual the onerous

task of visiting several places to settle his service bills like telephone,

water, electricity, etc., can be overcome through the electronic Bill Pay

service provided by the bank. He can pay his regular monthly bills

(telephone, electricity, mobile phone, insurance, etc.) right from his

desktop. No more missed deadlines, no more loss of interest. He can

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

well as earn extra interest on his money.

11.The Electronic Shopping Mall: The customer can also make his shopping

payment through the Bank’s secure website-so that he can shop online

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without any security worries, as the bank can provide online real time

shopping mail services through partner shopping sites

12.Effecting Personal Investments through Electronic Banking: The bank’s

website can also allow the customer to invest in shares, mutual funds and

other financial products.

13.Investing in Mutual funds: Electronic banking also brings the customer

the same convenience while investing in Mutual funds- Hassle free and

Paperless Investing. He can invest in mutual funds without the hassles of

filling application forms or any other paperwork. He needs to provide no

signatures or proof of identify for investing. Once he places a request for

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

His bank funds are automatically debited or credited while

simultaneously crediting or debiting his unit holdings.

14.Initial Public Offers Online: The customer could also invest in initial

public offers online without going through the hassles of filling ANY

application form / paperwork. Get in-depth analyses of new initial public

offers issues, which are about to hit the market and analysis on these.

Initial public offer calendar, recent initial public offers listings,

prospectus / offer documents, and initial public offer analysis are few of

the features, which help a customer to keep on top of the initial public

offers markets.

15.Other benefits: The e-banking provides some other benefits also.some of

them are: Convenience, speed of concluding transactions, safety-banking

from own home, cheaper service fees, highly scaleable, easy

customization, lower cost of both installation and maintenance,platform

independence.

1.6 Limitation of E-Banking:

1. Safety situations around ATMs.

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2. Abuse of bank cards by fraudsters at ATMs.

3. Danger of giving your card number when 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 makes everyone fittest to survive.

Chapter 2: - Internet Banking

2.1 Internet Banking

a) Introduction

b) The Indian Scenario

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c) Product & Service offered

2.2 Risk & Rewards

a) Operational Risk

b) Security Risk

c) System architecture & design

d) Reputational Risk

e) Legal Risk

f) Money Laundering Risk

g) Cross Border Risks

h) Strategic Risk

i) Other Risk

j) Risk of unfair competion

2.1 Internet Banking:-

a) Introduction: -

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.

b) The Indian Scenario: -

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The entry of India banks into Net Banking

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.

d) Product and Services Offered: -

Banks in India are at different stages of the web-enabled banking cycle.

Initially, a bank, which is not having a web site, allows its customer to

communicate with it through an e-mail address’ communication is limited

mail account.

With gradual adoption of Information Technology, the bank puts up a

web site that provides general information on deposits products,

application forms for downloading and e-mail option for enquiries and

feedback.

Vijaya Bank provides information on its website about its NRI and other

services. Customers are required to fill in applications on the Net and can

later receive loans or other products requested for at their local branch.

A few banks provide the customer to enquire into his demat account

(security/shares) holding details, transaction details and status of

instructions given by him. These web sites still do not allow online

transactions for their customers.

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Some of the banks permit customers to interact with them and transact

electronically with them. Such services include request for opening of

accounts, requisition for cheque books, stop payment of cheques, viewing

and printing statements of accounts, movement of funds between

accounts within the same bank, querying on status or requests,

instructions for opening of Letter of Credit and Bank Guarantees, etc.

These services are being initiated by banks like ICICI Bank Ltd.,

Citibank, Global Trust Bank Ltd., UTI Bank Ltd., Bank of Citibank Bank

of Madura Ltd., Federal Bank Ltd., etc.

Some of the more aggressive players in this area such as ICICI Bank Ltd.,

HDFC Bank Ltd., UTI Bank Ltd., Citibank, Global Trust Bank Ltd., and

Bank of Punjab Ltd., offer the facility of receipt, review and payment of

bills online.

The ‘Infinity’ service of ICICI Bank Ltd. Also allows online real time

shopping all payments to be made by customers.

HDFC Bank Ltd. Has made e-shopping online and real time with the

launch of its payment gateway.

Banks providing internet banking services have been entering into

agreements with 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 password, minimum balance and charges, authority to the

bank for carrying out transactions performed through the service, liability

of the user and the bank, disclosure of personal information for statistical

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

and termination, etc.

2.2 Risk & Rewards: -

a) Operational Risk: -

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Operational risk, also referred to as transactional risk is the most common

form of risk associated with i-banking.

It takes the from of inaccurate processing of transactions, non-

enforceability of contracts, compromises in data integrity, data privacy

and confidentiality, unauthorized access / intrusion to bank’s systems and

transaction, etc.

Such risks can arise out of weaknesses in design, implementation and

monitoring of banks information system.

Besides inadequacies in technology, human factors like negligence by

customers and employees, fraudulent activity of employees and crackers/

hackers, etc. can become potential source of operational risk.

b) Security Risk: -

Security risk arises on account of unauthorized access to a bank’s critical

information stores like accounting system, risk management system,

portfolio management system, etc.

Other related risks are loss of reputation, infringing customers’ privacy

and its legal implications, etc.

Attackers could be hackers, unscrupulous vendors, disgruntled employee

or even pure thrill seekers.

In addition to external attacks banks are exposed to security risk from

internal sources e.g. employee fraud. Employee being familiar with

different systems and their weaknesses become potential security threats

in a loosely controlled environment. They can manage to acquire the

authentication data in order to access the customer accounts causing

losses to the bank.

Unless specifically protected, all data/ information transfer over the

internet can be monitored or read by unauthorized persons.

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c) System architecture and design: -

Banks face the risk of wrong choice of technology, improper system

design and inadequate control processes.

Numerous protocols are used for communication across internet. Each

protocol is designed for specific types of data transfer.

A system allowing communications with all protocols, say HTTP (Hyper

Text Transfer Protocol), FTP (File Transfer Protocol), telnet, etc. is more

prone to attack than one designed to permit say, only HTTP.

Many banks rely on outside service providers to implement, operate and

maintain their e-banking system

Security related operational risk include access control, use of firewalls,

cryptographic techniques, public key encryption, digital signature, etc.

d) Reputational Risk:

Reputational risk is the risks of getting significant negative public

opinion, which may result in a critical loss of funding or customers. Such

risks arise from actions which cause major loss of the public confidence

in the banks’ ability to perform critical functions or impair bank-customer

relationship. It may be due to banks’ own action or due to third party’s

action.

The main reasons for this risk may be system or product not working to

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

internal and external attack), inadequate information to customers about

product use and problem resolution procedures, significant problems with

communication networks that impair customers’ access to their funds or

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

account access.

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e) Legal Risk: -

Legal risk arises from violation of, or non-conformance with laws, rules,

regulations, or prescribed practices, or when the legal rights and

obligations of parties to a transaction are not well established.

A customer, inadequately informed about his rights and obligations, may

not take proper precautions in using Internet banking products or

services, leading to disputed transactions, unwanted suits against the bank

or other regulatory sanctions.

f) Money Laundering Risk: -

o As internet banking transactions are conducted remotely banks may find

it difficult to apply traditional method for detecting and preventing

undesirable criminal activities. Application of money laundering rules

may also be inappropriate for some forms of electronic payments.

o To avoid this, banks need to design proper customer identification and

screening techniques, develop audit trails, conduct periodic compliance

reviews, frame policies in internet transactions.

g) Cross-Border Risks: -

Internet banking is based on technology that, by its very nature, is

designed to extend the geographic reach of banks and customers. Such

market expansion can extend beyond national borders. This causes

various risks.

Such considerations may expose banks to legal risks associated with non-

compliance of different national laws and regulations, including

consumer protection laws, record keeping and reporting requirements,

privacy rules and money laundering laws.

The foreign-based service provider or foreign participants in internet

banking are sources of country risk to the extent that foreign parties

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

political factors.

h) Strategic Risk: -

For reducing such risk, banks need to conduct proper survey, consult

experts from various fields, establish achievable goals and monitor

performance.

Also they need to analyze the availability and cost of additional

resources, provision of adequate supporting staff, proper training of staff

and adequate insurance coverage.

i) Other Risk: -

Traditional banking risks such as credit risk, liquidity risk, interest rate

risk and market risk are also present in internet banking.

These risks get intensified due to the very nature of internet banking on

account of use of electronic channels as well as absence of geographical

limits.

Credit risk: Is the risk that a counterparty will not settle an obligation for

full value, either when due or at any time thereafter. Banks may not be

able to properly evaluate the creditworthiness of the customer while

extending credit through remote banking procedures, which could

enhance the credit risk.

Another facility of internet banking is electronic money. It brings various

types of risks associated with it. If a bank purchases e-money from an

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

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

money.

Liquidity risk: It is important for a bank engaged in electronic money

transfer activities that it ensures that funds are adequate to cover

redemption and settlement demands at any particular time. Failure to do

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so, besides exposing the bank to liquidity risk, may even give rise to legal

action and reputational risk.

j) Risk of unfair competion: -

Internet banking is going to intensify the competition among various

banks. The open nature of internet may induce a few banks to use unfair

practices to take advantage over rivals. Any leaks at network connection

or operating system, etc. may allow them to interfere in a rival bank’s

system.

Thus, one can find that along with the benefits internet banking carries

various risks for bank itself as well as banking system as a whole.

Chapter 4: - What do Computers do in Banks

The different uses of Information Technology: -

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a) Single Window System

b) Any Time Banking

c) Automated Teller machine

d) Shared Payment Network System

e) Customer Service

f) Telebanking

g) Home Banking

h) Electronic Fund Transfer

i) Plastic Cards as Media for Payment

1. Credit Card

2. Debit Card

3. Smart Card

4. ATM Card

4.1 The different uses of Information Technology: -

a) Single Window System (SWS): -

o The cashier or teller who accepts the cash, keys in the data from his

terminal after receipt of the amount.

o The amount is straight away posted to the system.

o If the customer wishes to update passbook the same is also updated

through the security form printer/pass book printer.

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o If a customer wishes to obtain a draft, the clerk keys 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 clerk can hand over the same to customer duly signed.

b) Any Time Banking: -

This refers to banking service available 24 hours a day and 365 days a

year.

Such facility is made available to the customer through the Automated

Teller machine.

Banking, being a service industry, is primarily driven by customers

needs.

Each customer is willing to pay a price for the services provided it is

made available to him when he wants and where he wants.

In the present day of server competion, banking services are driven by

technology, which is more oriented towards providing better services to

the customer.

The concept of banking hours has been changed from the fixed 4 hours to

24 hours.

This has been made possible through use of ATMs. Even under the

manual service, the banks have stated to extend the service from the

traditional 4 hours to 5 hours and even up to 12 hours say from 8 AM to 8

PM.

Some banks have introduced the practice of Sunday Banking or Holiday

Banking.

c) Automated Teller Machine (ATM): -

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

dedicated to do certain types of specific jobs only.

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The hardware and the proprietary i.e. the software used in one machine

can not be used in one machine.

d) Shared Payment Network System (SPNS): -

The SPNS, named SWADHAN, has been sponsored by the Indian Bank’s

Association (IBA).

It is a network of ATMs, points of sale terminals and Cash Dispensers

with a view to pool the resources of the banks and underlines the spirit of

competition through cooperation.

It became operational in Mumbai on 1st February 1997 and in two years

about 150 ATMs were owned and installed by 38 banks including foreign

banks, public and private sector Indian commercial banks as also

cooperative banks.

The biggest advantage of the network is that the ATM cards issued by

different banks can used at any member banks ATM.

Banks can have as many ATM as they want and follow some standards

set by the SPNS committee.

The heart of the network is the Switch and its main components are:

Tandem Mainframe Computer, BASE 24 Software, Motorola networking

equipments and the leased lines.

e) Customer Services: -

The following customer services are offered through the system

i. Cash withdrawal (up to a specified limit)

ii. Cheque/Cash deposit (the receipt being only for the deposit of the

envelope containing cash but not for the amount therein)

iii. Enquiry about balances

iv. Printing of statement of accounts

v. Request for cheque book and standing instructions.

vi. Transfer of funds

vii. PIN change

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f) Telebanking: -

From the conventional banking, where the services were provided

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

not required to visit the bank enquiry of balance in the account, sending a

remittance, to get a statement of account, etc.

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

the bank for 97% of their transactions and these are done from either

customer’s residence or office using a telephone or a home PC.

In telebanking the customer is required to open the account with the bank

initially by visiting the bank.

Telebanking services are, generally, provided by the bank over the

telephone on a special number.

The number at the bank is connected to a terminal in the bank, which is

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

computer network.

Where the system is automated, two types of technology are used.

g) Home Banking: -

Under home banking the customer is served at his residence and there is

no need for the customer to visit the bank’s premises for a number of

routine transactions.

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

contacting the bank over the phone as described in the telebanking.

If the customer wants to put through transaction and wishes to see his

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

The home banking service can be broadly classified under two

groups, one without using the information technology and another using

information technology.

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When customer contacts the bank o the phone no specific

technology is involved and the service of telebanking are provided to

him.

h) Electronic Fund Transfer (EFT): -

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

or Telegraphic Transfer.

o In case of Telegraphic Transfer (TT) again the Department of

Telecommunication was the sole provider of Telephone, Telex and

Telegram facilities.

o With the process of liberalization private operators have started providing

alternative voice communication channels through mobile phones and

vast communication as an alternative channels for data communication.

o It was normal for any TT to be credited to the beneficiary’s account after

delay of 2 to 4 days

o The different forms of EFT prevalent in the use are:

EFT through Electronic Data Interchange

BANKNET

RBINET

IDRBT VSAT Network

EFT from Point of Sales

Electronic Cash

SWIFT- Global System for Funds Transfer

Electronic Clearing Settlement

i) Plastic Cards as Media for Payment: -

There are four types of plastic cards being used ad media for making payments.

These are:

1. Credit Card

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2. Debit Card

3. Smart Card

4. ATM Card

1. Credit Cards: -

The credit card enables the cardholders to:

Purchase any item like clothes, jewellery, railway/air tickets, etc.

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

Avail of any service like car rental, etc

2. Debit Card: -

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

like a telephone company to a customer on cash payment or on debiting his

account by a bank.

Thus it is like an electronic purse, which can be read and debited by the required

amount.

It may be noted that while through a credit card, the customer first makes 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 make a purchase or avail the

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

3. Smart Cards: -

Smart Cards have a built-in microcomputer chip, which can be used for storing

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

bank with the specified amount stored electronically on it. As he goes on

making transactions with the help of the card, the balance keeps on reducing

electronically. When the specified amount is utilized by the customer, he can

approach the bank to get his card validated for a further specified amount. Such

cards are used for paying small amounts like telephone calls, petrol bills, etc.

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In India, a smart card, suiting Indian banking environment, is being developed

and tested at IIT, Mumbai, in collaboration with the RBI and SBI. The card is

being used as an experimental tool for promoting cashless society in and around

the IIT Campus. The latest smart card being developed will combine all the

features of electronic purses, credit cards and ATM cards.

4. ATM Cards: -

The card contains a PIN (Personal Identification Number) which is selected by

the customer or conveyed to the customer and enables him to withdraw cash up

to the transaction limit for the day. He can also deposit cash or cheque.

Chapter 5: Credit Card Frauds

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5.1 Credit Card Frauds

Meaning

Defrauder

Aware of Credit Card

Advantages of Credit Card

Credit Card Frauds

5.2 The Prevention of Frauds

Duplicate Card

White plastics

Banker’s Role

Cyber Laws

Altering Sale terminals

Internet Relays

Monitoring Deposit

Risk Management

Central Credit Card Clearing House

Loss of Credit Cards in Transit

Fraud Consciousness

Physical Evidence

Check the handwriting

5.1 Credit Card Frauds: -

Meaning: -

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A credit card is a money transaction device without using cash or fiduciary

documents.

Defrauder: -

The defrauder has been slow to exploit the credit card, for making a fast buck.

In USA, he made 15 million dollars. through the cards, in 1981. in 1982 his

earning through the card, rose to 50 million dollars. in 1983, the fraudulent card

brought over 100 million dollars to its creators. The fraudulent card industry is

rising higher and higher to dizzy height every year. Like other countries if the

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

behind.

Aware of Credit Card: -

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 banks and other financial institutions, clubs and

travel agencies and departmental stores, etc. Credit Cards, Bob Cards, Master

Cards, Visa Cards, express Cards, Euro Cards have wide circulation. Some of

them have wide circulation. Some of them have world-wide circulation..

Credit Card Frauds: -

Credit card frauds manifest themselves in a number of ways:

1. Genuine cards are manipulated.

2. Genuine cards are altered.

3. Counterfeit cards are created.

4. Fraudulent telemarketing is done with credit cards.

5. Genuine cards are obtained on fraudulent applications in the

names/addresses of other persons and used.

It is feared that with the expansion of E-Commerce, M-Commerce, and Internet

facilities being available on massive scale, the fraudulent fund freaking via

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credit cards will increase tremendously. The shape it takes will be limited only

by the ingenuity of the future.

5.2 The Prevention of Frauds

Duplicate Card: -

The duplicate fraudulent credit cards are those where the defrauders have made

sincere efforts to duplicate the original cards through photo-mechanical

processes.

They follow 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.

White Plastic: -

The counterfeit credit cards known as ‘white plastics’ are imitations of credit

cards in general aspect.

Banker’s Role: -

The credit card industry is one of the fastest growing activities of the banking

industry. The artist has to be there (where the money is). The banks have to

suffer losses.

Cyber Laws: -

Information Technology Ministry be approached for stringent laws against

credit card crimes.

Altering Sales terminals: -

Internet E-Mail should be utilized on the pattern of Hot Box organized about a

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

technology has made since them.

Internet Relays: -

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Computers should be pressed into service via internet connection by suitably

upgrading the Television System Vertical blanking Intervals for notifying the

fraudulent cards in the market.

Monitoring Deposit: -

Monitoring system can help locate the unscrupulous merchants who use or

allow the use of ‘white plastics’ and fraudulent cards, knowing fully well their

fraudulent nature for making a fast back.

Risk Management: -

To meet the menace one of the top card companies has imitated risk

management service to

identify these high risk centers where daily all the inter-change transactions of

the areas are scrutinized and the credit card number are checked against those

which have been declared fraudulent, stolen or lost.

Central credit Card Clearing House: -

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

addresses and other details, if any. New applicants to any bank for credit cards

should be checked: -

If he is holding card from other issuers.

If he has held a card at other times. If so, when? Why did he discontinue?

If he has applied to more than one credit card issuers

The new card holder’s business transactions should be watched for some

time.

Loss of Credit cards in Transit: -It must be prevented.It is simple for either

the customer to collect personally or the banker should deliver it personally, or

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

to the paper receipt.

Fraud Consciousness: -

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

as of the servers at sale terminals.

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

substitute and in view of the huge issues the same is indispensable.

Physical Evidence:

Immediately on the discovery of fraud all the physical evidence available

should at once be taken into possession and the case reported to the police for

investigation.

Check the Handwriting: -

Handwriting (in signatures) is available on sale drafts and on credit cards. The

comparison of hand-writing inter se and with that of the suspect and of genuine

card holders, can lead to the identity or non-identity of alleged writer.

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Chapter 6: - Banks Control in Online Banking

6.1 Will Banks Control Online Banking: -

Internet Banking in India

Real threats

Online

6.2 Suggestions

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6.1 Will Banks Control Online Banking: -

Internet Banking in India: -

Online banking is expected to explode in the ext few years. We will be entering

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

leading to perfectly competitive electronic market place and inevitably to

customer supremacy. Growth in online banking will be driven by the following

reasons:

Increasing access to low cost electronic services

Emergence of open standards in the banking industry

Improved customer awareness

Entry of global majors in the market

Integration of banking services with e-commerce and emergence of e-

cash

Convenient international transactions as Internet eliminates geographic

boundaries

Shift from one-stop shopping to unbundled product purchases

Real Threats: -

A majority of leading online brokers are beginning to offer banking

products and services as part of their overall offers.

They are actively seeking to capture “excess” balances in existing

checking and saving accounts by offering better rates.

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There are other threats to banks as well. Several leading system providers

have developed “bank-in-a-box” solution – unbranded, electronic, full-

service, virtual-bank system – that can be bought, branded, and offered to

consumer by any authorized company that wishes to provide banking

service.

6.2 Suggestions: - To prevent online banking from remaining an expensive additional

channel that does little to retain footloose customers, banks must act

quickly.

The first and most obvious step they should take is to see to it that the

basic problem fueling dissatisfaction have been addressed.

After repairing this basic deficiency, banks must ensure that there

services is competitive.

Obviously, it should include checking, savings and brokerage services,

which anchor customers to the institution.

In addition, to meet the challenge of online brokerage and other new

entrants, banks would need to add “supermarkets” selling products such

as mortgage, mutual funds and insurance.

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Conclusion: -

Technology innovation and fierce competition among existing banks have

enable a wide array of banking products and services, being made available to

retail and wholesale customer through an electronic distribution channel,

collectively referred to as e-banking. The integration of e-banking application

with legacy system implies an integrated risk management approach for all

banking activities of a banking institution.

Banks have traditionally been in the forefront of harnessing technology to

improve product and efficiency. Technology is altering the relationships

between banks and its internal and external customers. Technology has also

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

technology has brought about superior products and channel management with 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-banking is its acceptance

as an extremely cost effective delivery channel. But on the

flipside, it is associated with risks such as reputation risk, security risk, cross-

border risk and strategic risk, which are unique to e-banking. Banks need to

have an effective disaster recovery plan along with comprehensive risk

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management tool is significant not only to the bank but also to the banking

system as a whole.

Coming home, India is on threshold of a major banking revolution with the

invasion of net banking. With the concept of payment gateway coming in, banks

are vying with one another for the lion’s share in the market.

BIBLIOGRAHY: -

O’ Brien James. A, Management Information System, Galgotia

Publication

Muedic & Ross, Management Information System

Lucae, Management Information System

Sen, Management Information System

Indian Banking, S. Natarahan and R. Parameswaran

Banking – In the New Millennium, ICFAI University

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