What is E banking? The use of computers to carry out banking transactions such as withdrawals through cash dispensers or transfer of funds at point of sale

For many people, electronic banking means 24-hour access to cash through an automated teller machine (ATM) or Direct Deposit of paychecks into checking or savings accounts. But electronic banking involves many different types of transactions, rights, responsibilities — and sometimes, fees.

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 cheque or cash.

Objectives of E-Banking

→ Receiving instant information→ Deposit and withdraw in short

time and low cost→ Advantageous payment of

goods and services→ L/C, fund transferring, investing sitting at home

→ Maintaining secrecy of accounts of clients

→ Enjoying utmost protection

→ Detailed service at reduced cost → Reduction of Administrative expenses→ Reduction of volume of paper work→ Increasing income Strengthening the position in competitive environment→ Expanding services in remote areas

From bankers point of view From Clients point of view

Traditional Banking

Modern Banking

Electronic Banking

Virtual Banking

HISTORY AND DEVELOPMENT OF E- BANKING

Structure Of EB

In front Services Counter

of EB

Back Office EB

Primitive stage Intermediate stage Modern stage

Primitive stage Intermediate stage Modern stage

Cash Disbursement strategy

Telephone bills, POS, Cheque verification etc

Home banking, EFT, Internet banking, AOFT, EDD etc.

Ledger, Cash management ans Head office-MIS

Fund transfer, automated clearing house, offline transaction processing etc.

Online transaction processing, Internet banking, Intra banking transaction

Basic component of E Banking

Banking System Software

Communication Network

Delivery Channel

Switching System

1

2

3

4

Type of E-BankingRetail EB Service

ATM

Debit Card

Credit Card

ACH

Cheque Truncation

Home Banking

POS

Wholesale EB

Cash Management

Wire Transfer

ACH

ATM- Automated Teller MachinAn electronic banking outlet, which allows customers to complete basic transactions without the aid of a branch representative or teller. There are two primary types of automated teller machines, or ATMs. The basic units allow the customer to only withdraw cash and receive a report of the account's balance. The more complex machines will accept deposits, facilitate credit card payments and report account information. 

Increase profit Reduce internal

operational expenses Creating market in

domestic and foreign countries

Highly efficient services Ensuring the

computational accuracy

Objectives:

How does a customer operates ATM?

Securities of ATM

Fraudulent

Authorization

Violation of data link

Dishonest Personnel

Physical Penetration

1. Speaker2. Display Screen3. Receipt Printer4. Cash Dispenser

Components of ATM

Debit Card

• An electronic card issued by a bank which allows bank clients access to their account to withdraw cash or pay for goods and services. This removes the need for bank clients to go to the bank to remove cash from their account as they can now just go to an ATM or pay electronically at merchant locations.

• The debit card system was invented by Frenchman Roland Moreno in 1974. He was only 29 years old when he introduced the debit card system and today the debit cards are world wide used.The First National Bank of Seattle issued the first debit card to business executives with large savings accounts in 1978.

Credit card

A card issued by a financial company giving the holder an option to borrow funds, usually at point of sale. Credit cards charge interest and are primarily used for short-term financing. Interest usually begins one month after a purchase is made and borrowing limits are pre-set according to the individual's credit rating.

• According to Encyclopedia Britannica, "the use of credit cards originated in the United States during the 1920s, when individual firms, such as oil companies and hotel chains, began issuing them to customers." However, references to credit cards have been made as far back as 1890 in Europe.

Point of sales• The place where sales are made. On a macro level, a

point of sale may be a mall, market or city. On a micro-level, retailers consider a point of sale to be the area surrounding the counter where customers pay.

Also known as "point of purchase".

Check truncation.

• To process payments faster and more efficiently, many banks no longer transport paper checks, but replace them with digital images -called substitute checks -- that can be transferred electronically, in a system called check truncation.

• Cheque truncation is the conversion of a physical cheque into a substitute electronic form for transmission to the paying bank. Cheque truncation eliminates cumbersome physical presentation of the cheque and saves time and processing costs.

Retail Automated Clearing House Services

• An electronic funds-transfer system run by the National Automated Clearing House Association. This payment system deals with payroll, direct deposit, tax refunds, consumer bills, tax payments and many more payment services.

Three types of transactions occus through ACH

1. Credit Entry2. Debit Entry3. Pre-notification Entry

Home Banking• The practice of conducting banking transactions from home rather than at

branch locations. Home banking generally refers to either banking over the telephone or on the internet. The first experiments with internet banking started in the early 1980s, but it did not become popular until the mid 1990s when home internet access was widespread. Today, a variety of internet banks exist which maintain few, if any, physical branches.

Wholesale Electronic Banking

Cash Management

Cheque Collection

1. Mail float2. Processing float3. Collection float

Disbursement

The act of paying out or disbursing money. Disbursements can include money paid out to run a business, spending cash, dividend payments, and/or the amounts that a lawyer might have to pay out on a person's behalf in connection with a transaction.

Controlled Disbursement

• A technique commonly employed in corporate cash management. Controlled disbursement is used to regulate the flow of checks through the banking system on a daily basis, usually by mandating once-daily distributions of checks (usually early in the day.) This is done in order to meet certain investment or fund management objectives.

Important Internal Controls for Cash Disbursements• Segregate duties.• Review authorized signors• Consider requiring dual signatures• Remember the wire transfers• Reconcile bank accounts in a timely manner

Wire Transfer

• An electronic transfer of funds across a network administered by hundreds of banks around the world. Wire transfers allow for individualized transfer of funds from single individuals or entities to other individuals or entities, while still maintaining efficiencies of fast and secure movement of funds.

Fed wire

Areal-time gross settlement system that enables participants to initiate funds transfer that are immediate, final, and irrevocable once processed.

How it works?

Bank Wire

An electronic message system allowing major banks to communicate various actions or occurrences regarding client accounts. The wire represents a secure computerized messaging system that sends account information, notifications and transaction requests between banks.

Online or internet Banking

• The performance of banking activities via the Internet. Online banking is also known as "Internet banking" or "Web banking." A good online bank will offer customers just about every service traditionally available through a local branch, including accepting deposits (which is done online or through the mail), paying interest on savings and providing an online bill payment system.

Risk in Electronic Banking

• Operational Security risk• Legal risk• Reputation Risk• Traditional Banking Risk

Handling Risk In EB

• Human resources• Policy and Procedures• External threats, security and technology• Regulatory and Legal compliance• Uses and Transaction