AXIS BANKMANIPAL UNIVERSITYBANGALORE CAMPUS

Trends and Technology in

Banking

The Technology Revolution

• The impact of technology on the real & financial world around the central banks

– E-governance – Choice of Channels , Confidence and

Convenience to the end-user– Efficiency – Facilitating growth of products and

services

Technology and Banks

So why are banks interested?

– The widespread adoption of technology . – The impact of technology on every

single core central banking function – Supervision and Regulation – Currency Management– Monetary & Financial Stability

– The potential technology offers to central banks for more effective processes and functions.

Technology and Banking

The Quintessence Nature of Banking harmonizes

closely with Technology -

Mass transaction & items processing – Pervasive branch network– Global Operations – Complex credit calculations– Innovative Risk Management

Regulation and Supervision – The Challenge

• Technology has …– opened up new markets, products, services,

delivery channels .

– opened up a market for “risks” – derivatives. – thrown up the challenge of financing tech firms &

IT innovation.

IT in Banking

• Technology that holds the key to the future success of Indian Banking. The significance of technology is greatly felt in the financial sector in view of the competitive advantage for banks resulting in efficient customer service.

IT in Banking

Why there is need for IT in Banking?

• To handle huge volume of transaction with ease.• To introduce innovative new services• To bring cost effectiveness in handling payments• To complete operation with great speed• To provide better customer services by obtaining

multi services from one counter itself.• To make ease of inter-branch reconciliation.• To ensure data accuracy and reduce frauds.

Increasing Inter-connectivity

• Stand Alone Computer SystemBest suited for the decision-making process, which involves processing and analysis of data.

• Multi-user SystemAll information is kept and processed at the main central machine and various terminals are attached to the main computer. Most of the banking system are developed using the centralized computing concept.

• Branch-level ComputerizationThe concept of LAN is becoming popular for branch computerization in banks.Customer interface is at the maximum at the branch level . The emphasis on online transaction processing at the branch level.

• Total Branch AutomationAll the customers and business transactions are done with the help of computers.

Ease of Payments• Automated Teller Machines(ATMs)• Core Banking Solution(CBS)• Electronic Banking(E-Banking)• Electronic money(E-money)• Electronic Cheque(E-cheque)• Debit Card • Credit Card• Mobile Banking• Tele Banking• Internet Banking• EFT, NEFT, RTGS, ECS

ECS-Electronic Clearance Service

• an alternative method of effecting bulk payment transactions

Managed by RBI(15 centres) and other banks on behalf of RBI(21 by SBI and 29 by others)

Advantages: (1) Timely Payment (2) Be sure of refund

Transaction:

Single USER source Multiple Destination A/c Holders(Banks, companies, (Customers/Investors)Govt. Dept(s))

General Concept:

•Facilitates automatic money transfer from user’s bank account to a third party. •After the ECS is authorized by the user ,the banks pays directly to the third party on his behalf.

Products where you can use it for

Systematic Investment Plans in mutual Funds

Premium payment of insurance policies

Payment of home loan

Income Tax Refund

Utility bill payment

RTGS-Real Time Gross Settlement System

FEATURES:1. No bundling up of transactions, 2. No netting 3. No deferral of final settlement

BENEFITS: 1. full value of individual transaction 2. Real time immediate value transfer

Member Bank

Member Bank

RTGS Inward

RTGS Inward Return

RTGS Outward

RTGS Outward Return

Banking Easy CBSHOST SYSTEM

PIIFTP/RTGS

Payment Request

Rejection (PI)

Payment Request

Success (PI) Payment Request

Sender Settlement Notification

Sender Settlement Notification

Payment Enquiry

RTGS Working concept

Participant interface (PI) - RTGS Client for the participating banksIFTP - Inter-bank Funds Transfer ProcessorIAS - Integrated Accounting SystemCFMS - Centralised Funds Management SystemINFINET - Indian FInance NETwork

Funds Available

No Queue

Yes Queue

DelaySubmit Now

LIQUIDITY

Participant Payment Participant Payment Participant Payment

E-payment Services: E-Cheque

• E-cheques are another form of electronic tokens

• To accommodate multiple entities that prefer to pay on credit or through some mechanism other than cash.

Payment Transaction Sequence in E- Cheque System:

Advantages:(1) eliminates the need for customer education(2) Electronic cheques are much faster.(3) Guarantee that the cheque would be honored.

--No offline entering of accounts to get account head statements.--Consumers able to keep track of all their expenses.

ATM-Automated Teller Machine

• Electronic telecommunications device that enables the clients of a financial institution to perform financial transactions without the need for a cashier, human clerk or bank teller.

• automated banking machine (ABM), cash machine, cashpoint,

cashline

Components involved in an ATM Working

TECHNOLOGIES USED WITH ATM:(1) Video Conferencing (2) Biometrics(3) Cheque/ Cash Acceptance(4) Bar Code Scanning(5) On Demand Printing of items(6) Dispensing additional media(7) Coordinating mobile phones(8) Customer Specific Advertising(9) Integrated non-banking equipments

H/W Block Diagram:

Related Devices:(1) Interactive kiosk(2) Talking ATM(3) Scrip Cash Dispenser(4) Teller Assist Unit

Related Issues:(1) Physical Security(2) Transactional secrecy and integrity(3) Customer Identity integrity(4) Device operation integrity(5) Customer Security

POS (Point Of Sale)POS is a computer terminal for

tansaction.

Contains costumer information in a bank database.

During transaction customer account debited and retailer credited.

TELE BANKINGFacilitates customer to do non-cash related

banking on telephone.

Automatic voice recorder used for simpler queries and transaction.

Manned phone terminal for complicated queries.

Easy for customer to operate from their place.

EDI (ELECTRONIC DATA INTERCHANGE)

EDI is the electronics exchange of business document.

Universally accepted format between trading partners.

Transmission of financial information and payment in electronic format.

EFT (Electronic Fund Transfer)

Transfer of fund from own account to receiver account.

Complete details of customer is needed.

RBI is the service provider of EFT.

IMPLICATION OF IT IN BANKING

ANYWHERE , ANYPLACE AND ANYTIME BANKING TIMELESS AD PLACELESS BANKING CONVENIENCE BANKING DISMANTLING OF PHYSICAL STRUCTURE GOODBYE TO TRADITIONAL INSTRUMENTS AND INVITATION

TO NEW INSTRUMENTS DISAPPEARANCE OF CONVENTIONAL RISK AND ARRIVAL OF

NEW RISKS LEADING TO CURRENCY-LESS MONETARY SYSTEM

CHALLENGES IN IMPLEMENTATION

• Choice of right channel• IT investment on ROI• Penetration of IT in rural areas• Technological Obsolescence• Security concerns

LEVELS OF SECURITY

INTERNAL SECURITY

NETWORK SECURITY

WELL-DOCUMENTED

SECURITY

With the help Of FireWall & IPS

By Honest Employee & Camera in Branches

Whoops…What a Relief. Thanks to

Information Technology Act-2000

Information Technology Act 2000

Legal Recognition of

Electronic Documents

Legal Recognition of

Digital Signatures

Offenses and Contraventions

Justice Dispensation

Systems for Cyber crime including Cyber Terrorism and

Data Protection

BEYOND CORE BANKING

1.Increased adoption of e-payments and mobile banking.

2.Focus towards systems and processes .3.Cost and profitability management.4.Internal effectiveness and efficiency.5.Vision of a comprehensive

infrastructure. 6.Training and techniques.7.Standards and expectations.

ROLE OF IT AS A BUSINESS

TRANSFORMER• Defining fundamental infrastructure goals • Chief information officers (CIOs)• IT fits into one of three broad categories:-• 1. UTILITY • 2. PROTECTOR

• 3. PERFORMER

CONCLUSION

• Future for banking sector is going to make rapid straights in near future.