E-BANKING AND E-PAYMENTS

MEANING OF E-BANKING
E-banking is an arrangement between a bank or a financial institution and its customers that enables
encrypted transactions over the internet. Short for electronic banking, E-banking has various types
that cater to customers’ different requirements, which can be resolved online.
E-banking is also helpful for non-financial transactions such as changing your ATM PIN, getting a
mini statement, updating your personal details, balance inquiry or printing an account statement.
Essentially, it refers to any transaction that doesn’t involve any movement of funds to or from your
account.
Classification of E-Banking:
Banks offer different kinds of services through electronic financial stages. These are of three sorts:
Type 1:
This is the essential degree of administrations or services that banks offer through their sites. Through
this assistance, the bank offers data, information regarding its services and products to clients. Further,
a few banks might respond to an inquiry through email as well.
Type 2:
In this category, banks permit their clients to submit directions or applications for various
administrations, check their record balance, and so on. Be that as it may, banks don’t allow their
clients to do any fund-based exchanges with respect to their records or accounts.
Type 3:
In the third category, banks permit their clients to work or operate their records or accounts for bill
payments, purchase and redeem securities and fund transfers, and so on.
Most conventional banks offer e-banking administrations as an extra technique for offering support.
Further, many new banks convey banking administrations principally through the other electronic
conveyance channels or web. Likewise, a few banks are ‘internet only’ banks with no actual branch
anyplace in the country.

Services Under E-Banking:

Mobile Banking:
Mobile banking (otherwise called M-banking) is a name utilised for performing account exchanges or
transactions, bill payments, credit applications, balance checks, and other financial exchanges through
a mobile phone like a Personal Digital Assistant (PDA) or cell phone.

Electronic Clearing System (ECS):

The Electronic Clearing System is a creative provision for occupied individuals. With this provision,
an individual’s credit card bill is consequently charged from the same individual’s savings bank
account, so one doesn’t have to stress over missed or late payments.

Smart Cards:
A smart card is a card that stores data on a microchip or memory chip or a microprocessor in lieu of
the magnetic stripe found on debit cards and credit cards. Smart cards are not utilised for transferring
or moving monetary data alone, but also they can be utilised for an assortment of identification
grounds. Exchanges made with smart cards are scrambled or encrypted to shield the exchange of data
from one party to another. Each encoded exchange can’t be hacked and doesn’t transmit any extra
data past what’s required for finishing the single exchange or transaction.

Electronic Fund Transfers (ETFs):

Electronic fund transfer (EFT) is the electronic exchange of cash starting with an individual account
in the bank to another individual account of the same bank, or within or with other financial
institutions or with multiple institutions, by means of personal computers based frameworks, without
the immediate intercession of bank staff.

Telephone Banking:
Telephone banking is an assistance given by a bank or other monetary foundation or other financial
institutions, that empower clients to perform via telephone a scope of monetary exchanges which
don’t include cash or financial instruments, without the need to visit an ATM or a bank branch.

Internet banking:
Web-based banking is an assistance presented by banks that permits account holders to get their
record information by means of the web or the internet. Web-based banking or Internet banking is
otherwise called “Web banking” or “Online banking.”
Internet banking through customary banks empowers clients to play out every standard exchange, for
example, bill payments, balance requests, stop-payment requests, and balance inquiries. Some banks
even proposition online credit card and loan applications.
Account data can be acquired day or night, and should be possible from any place.

Home banking:
Home banking is the most common way of concluding the monetary exchange from one’s own home
as opposed to using a bank’s branch. It incorporates making account requests, moving cash, covering
bills, applying for credits, and directing deposits.

Significance of E-Banking:
Importance to clients:
Lower cost per exchange: Since the client doesn’t need to visit the branch for each exchange, it
saves him both time and cash.
No topographical hindrances: In conventional financial frameworks, geological distances could
hamper specific financial exchanges. Nonetheless, with e-banking, geological obstructions are
diminished.
Convenience: A client can get to his record or bank account and execute from any place at any time.
Importance to Businesses:
Better efficiency: Electronic banking further develops usefulness. It permits the computerisation of
ordinary, regularly scheduled payments and provides further banking activities to upgrade the
efficiency of the business.
Lower costs: Usually, costs in financial relationships and connections depend on the assets used.
Assuming that a specific business needs more help with deposits, wire transfers, and so on, then, at
that point, the bank charges its higher expenses. With internet banking, these costs are limited.
Lesser errors: Electronic financial diminishes mistakes in normal financial exchanges. Awful
penmanship, mixed-up data or information, and so on can cause mistakes that can be exorbitant.
Likewise, a simple audit of the record or account activity, movement upgrades the precision of
monetary exchanges.
Diminished misrepresentation: Electronic banking gives an advanced impression to all
representatives who reserve the privilege to alter banking exercises. In this manner, the business has
better perceivability into its exchanges, making it hard for any fraudsters from committing crimes.
Account reviews: Business proprietors and assigned staff individuals can get to the records rapidly
utilising a web-based financial interface. This permits them to audit the record action and,
furthermore, guarantee the smooth working of the account.

Importance to banks:
Lesser exchange costs: Electronic exchanges are the least expensive methods of exchange.
A decreased edge for human blunder: Since the data is handed-off electronically, there is no space
for human mistakes or errors.
Lesser desk work: Advanced records decrease desk work, paperwork, and make the cycle simpler to
deal with. Likewise, it is ecological.
Decreased fixed expenses: A lesser requirement for branches which converts into a lower fixed
expense.
More steadfast clients: Since e-banking administrations or services are convenient to the clients,
banks experience higher reliability from their clients.

E-PAYMENT
Electronic Payment is a financial exchange that takes place online between buyers and sellers. The
content of this exchange is usually some form of digital financial instrument (such as encrypted credit
card numbers, electronic cheques or digital cash) that is backed by a bank or an intermediary, or by a
legal tender.
An E- payment system is an online system that facilitates the acceptance of electronic payment for
online transactions and any kind of non-cash payment that doesn’t involve a paper check.

The electronic payment system has grown increasingly over the last decades due to the widely spread
of internet-based banking and shopping. As the world advance more on technology development, a lot
of electronic payment systems and payment processing devices have been developed to increase,
improve and provide secure e-payment transactions while decreasing the percentage of check and
cash transaction.

TYPES OF E-PAYMENT SYSTEMS

1. A one-time customer-to-vendor payment:
 It is commonly used when user shop online at an e-commerce site, such as Amazon.
User clicks on the shopping cart icon, type in the credit card information and click on
the checkout button. The site processes the credit card information and sends an e-
mail notifying the user that the payment was received. On some Web sites, an e-check
can be used instead of a credit card.

2. Recurring customer-to-vendor payment:

 It is used when user pay a bill through a regularly scheduled direct debit from their
checking account or an automatic charge to their credit card. This type of payment
plan is commonly offered by car insurance companies, phone companies and loan
management companies.

3. Automatic bank-to-vendor payment:

 User’s bank must offer a service called online bill pay where the user log on to the
bank’s Web site, enter the vendor’s information and authorize the bank to
electronically transfer money from their account to pay their bill. User can choose
whether to do this manually for each billing cycle or have their bills automatically
paid on the same day each month.

METHODS OF ELECTRONIC PAYMENTS

1. BANKING AND FINANCIAL PAYMENTS
2. ON-LINE ELECTRONIC COMMERCE PAYMENTS

1. BANKING AND FINANCIAL PAYMENTS

The banks can accept a restricted deposit which is limited to a specific amount per customer. The
banks cannot issue loans and credit cards. Both current account and savings accounts can be operated
by banks. Payments banks can issue services like ATM cards, debit cards, online banking and mobile
banking.
Banking and financial payments include:
· Large-Scale or wholesale payments (e.g. bank to bank transfer)
· Small-Scale or Retail payments (e.g. automated teller machine and cash dispenses)
· Home banking (e.g. bill payment)

2. ON-LINE ELECTRONIC COMMERCE PAYMENTS

[i] Token Based Payments system-Electronic cash, Electronic cheques, Smart Cards or debit cards.
[ii] Credit card based payment system.

 DIGITAL TOKEN-BASED E-PAYMENT

A token based payment system is one in which tokens are purchased from authorized vendors may be
used as credit in the purchase of goods and services. E-token is equivalent to cash that is backed by a
bank.

Digital token payment is of 3 types:

1. Cash or real time: Transactions are settled with the exchange of electronic currency. Example-
E-cash.
2. Debit or prepaid: Users pay in advance. Example-Smart Cards.
3. Credit or postpaid: The server authenticates the customers and verifies with the bank that funds
are adequate before purchase.

Advantages of e-payments:
1. Increased speed:
We do not have to worry about carrying paper money or wait in line to withdraw money from
ATMs. Through E-payments you can pay anyone at any time.

2. Increased Sales:
As people are able to pay to anyone and are not much dependant, the demands of products in
the market have increased which resulted to increase in sales of almost every product.

3. Instant Receipts:
 As soon as you make an online payment, you receive receipts and feedback almost instantly.

4. Better Deals:
As people are getting more indulged in e-payments, almost every payment service provider
has started giving exciting offers helping people get good deals.

Disadvantages of e-payments:

1. Service Fees:
Many a time while using e-payment services we are liable to pay service fees or a
convenience fee which adds to our expense.

2. Risk of Theft:
There have been many incidents in which cybercriminals have manipulated people and
money has been looted.

3. Technical Problems:
As it is an online service, it may go down due to technical issues and people who get 100%
reliable on this service for their payments may face an issue.

4. Remote Areas:
Remote areas still rely on cash. You might find it difficult in making payments on the go
while traveling to some remote areas.