E-BANKING

BY : Ramanathan.sp
 CONTENT
• ABSTRACT
• INTRODUCTION
• DEFINITION OF E-BANKING
• HISTORY
• E-BANKING IN INDIA
• MEANING
• VARIOUS ACTIVITES UNDER E-BANKING
• VARIOUS FORMS OF E-BANKING
• PROS AND CONS OF E-BANKING
• IMPACT OF E-BANKING ON TRADITIONAL SERVICES
• INTERNET SECURITY
• CONCLUSION
 ABSTRACT
Financial liberalization and technology revolution have allowed the developments of new and more efficient delivery
and processing channels as well as more innovative products and services in banking industry. Banking institutions
are facing competition not only from each other but also from non-bank financial intermediaries as well as from
alternative sources of financing. Another strategic challenge facing banking institutions today is the growing and
changing needs and expectations of consumers in tandem with increased education levels and growing wealth.
Consumers are becoming increasingly discerning and have become more involved in their financial decisions. For
many consumers, 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. Electronic banking, also known as electronic fund transfer (EFT), uses computer and electronic
technology as a substitute for checks and other paper transactions. EFTs is initiated through devices like cards or
codes that let you, or those you authorize, access your account. Many financial institutions use ATM or debit cards
and Personal Identification Numbers (PINs) for this purpose. Some use other types of debit cards such as those that
require, at the most, your signature or a scan. For example, some use radio frequency identification (RFID) or other
forms of “contactless” technology that scan your information without direct contact. The federal Electronic Fund
Transfer Act (EFT Act) covers electronic consumer transactions.
 INTRODUCTION
E-banking refers to electronic banking. It is like e-business in banking industry. E-
banking is also called as "Virtual Banking" or "Online Banking". E-banking is a
result of the growing expectations of bank's customers. E-banking involves
information technology based banking. Under this I.T system, the banking services are
delivered by way of a Computer-Controlled System. This bank's system does involve
direct interface with the customers. The customers do not have to visit the premises. In
India E-banking is of fairly recent origin. The traditional model for banking has been
through branch banking. Only in the early 1990s there has been start of non-branch
banking services. The good old manual systems on which Indian banking depended
upon for centuries seem to have no place today.
 E-BANKING IN INDIA
• After the economic liberalisation , there has been a considerable
changes in the banking operations in India. India banks were forced
to change their approach towards their customers in view of the
competition from multinational banks. The govt. had realised this and
brought in sweeping changes in the banking operations. After
experiencing the system, their resistance mellowed down and we find
in many Indian banks computers have become a part of their
operations. Having tasted the benefits, they slowly extending the
electronic network to their rural branches . Employment
opportunities have increased both in the banking and other sectors
by using electronic banking. Thus,we can say that e-banking in India
has done a lot of good to the banking industry and the emergence of
Merchant Bankers is an outcome of e-Banking.
 E_BANKING
• E-banking is nothing but electronics
banking, wherein most of the operations of
the banks are carried out through the
electronic media. Even the traditional
functions like accepting deposits and
granting of loans are done through the
electronic media it is called e-banking.
 VARIOUS ACTIVITIES UNDER E
BANKING
• Pass book entry
• Home banking
• Identification of customers signature
• Debit card and Credit card
• Transfer funds through Electronic Clearance
System[ECS]
• ATMs
• Foreign exchange transaction
VARIOUS FORMS OF E-BANKING:
• INTERNET BANKING:
Internet Banking lets you handle many banking
transactions via your personal computer. For instance,
you may use your computer to view your account balance,
request transfers between accounts, and pay bills
electronically. Internet banking system and method in
which a personal computer is connected by a network
service provider directly to a host computer system of a
bank such that customer service requests can be processed
automatically without need for intervention by customer
service representatives. The system is capable of
distinguishing between those customer service requests
which are capable of automated fulfillment and those
requests which require handling by a customer service
representative.
AUTOMATED TELLER MACHINES
(ATM):

An unattended electronic machine in a public place,

connected to a data system and related equipment and
activated by a bank customer to obtain cash withdrawals and
other banking services .Also called automatic teller machine,
cash machine; Also called money machine.
An automated teller machine or automatic teller
machine(ATM) is an electronic computerized
telecommunications device that allows a financial
institution's customers to directly use a secure method of
communication to access their bank accounts, order or make
cash withdrawals (or cash advances using a credit card) and
check their account balances without the need for a human
bank teller (or cashier in the UK).
TELE BANKING:
Undertaking a host of banking related services
including financial transactions from the
convenience of customers chosen place
anywhere across the GLOBE and any time of
date and night has now been made possible by
introducing on-line Tele banking services. By
dialing the given Tele banking number through
a landline or a mobile from anywhere, the
customer can access his account and by
following the user-friendly menu, entire
banking can be done through Interactive Voice
Response (IVR) system . With sufficient
numbers of hunting lines made available,
customer call will hardly fail.
DEBIT CARD:
Debit cards are also known as check cards.
Debit cards look like credit cards or ATM
(automated teller machine) cards, but operate
like cash or a personal check. Debit cards are
different from credit.
E-BANKING cards.
While a credit card is a way to "pay later," a
debit card is a way to "pay now." When you
use a debit card, your money is quickly
deducted from your checking or savings
account
 CREDIT CARD
• A credit card is a payment card issued to users (cardholders) to enable
the cardholder to pay a merchant for goods and services, based on the
cardholder's promise to the card issuer to pay them for the amounts so
paid plus other agreed charges. The card issuer (usually a bank)
creates a revolving account and grants a line of credit to the
cardholder, from which the cardholder can borrow money for payment
to a merchant or as a cash advance.
• A credit card is different from a charge card, where it requires the
balance to be repaid in full each month . In contrast, credit cards allow
the consumers a continuing balance of debt, subject to interest being
charged. A credit card also differs from a cash card, which can be used
like currency by the owner of the card. A credit card differs from a
charge card also in that a credit card typically involves a third-party
entity that pays the seller and is reimbursed by the buyer, whereas a
charge card simply defers payment by the buyer until a later date.
SMART CARD:
A smart card usually contains an embedded 8-
bit microprocessor (a kind of computer chip).
The microprocessor is under a contact pad on
one side of the card. Think of the
microprocessor as
replacing the usual magnetic stripe present on
a credit card or debit card. The microprocessor
on the smart card is there for security. The host
computer and card reader actually "talk" to
the E-BANKING microprocessor. The
microprocessor enforces access to the data on
the card . The chips in these cards are capable
of many kinds of transactions.
4. THE ADVANTAGES OF INTERNET BANKING
 Customer’s convenience
Direct banks are open for business anywhere there is an internet connection. They are also 24 hours a day, 365
days a year open while if internet service is not available, customer services is normally
provided around the clock via telephone. Real-time account balances and information are available at the touch of
a few buttons thus, making banking faster, easier and more efficient. In addition, updating and maintaining a
direct account is easy since it takes only a few minutes to change the mailing address, order additional checks and
be informed for market interest rates.

More efficient rates

The lack of significant infrastructure and overhead costs allow direct banks to pay higher interest
rates on savings and charge lower mortgage and loan rates. Some offer high-yield checking
accounts, high yield certificate of deposits (CDs), and even no-penalty CDs for early withdrawal. In
addition, some accounts can be opened with no minimum deposits and carry no minimum balance or
service fees.
 Services
Direct banks typically have more robust websites that offer a comprehensive set of features that may not be found on
the websites of traditional banks. These include functional budgeting and forecasting tools, financial planning
capabilities, investment analysis tools, loan calculators and equity trading platforms. In addition, they offer free
online bill payments, online tax forms and tax preparation.

 Mobility
Internet banking also includes mobile capabilities. New applications are continually being created to
expand and improve this capability or smart-phones and other mobile devices.

 Transfers
Accounts can be automatically funded from a traditional bank account via electronic transfer. Most
direct banks offer unlimited transfers at no cost, including those destined for outside financial
institutions. They will also accept direct deposits and withdrawals that the customer authorizes such
as payroll deposits and automatic bill payment.
 Ease of use
Online accounts are easy to set up and require no more
information than a traditional bank account. Many offer
the option of inputting the customer's data online or
downloading the forms and mailing them in. If the
customer runs into a problem, he has the option of
calling or e-mailing the bank directly.
 Environment friendly
Internet banking is also environmentally friendly.
Electronic transmissions require no paper, reduce
vehicle traffic and are virtually pollution-free.
They also eliminate the need for buildings and
office equipment.
DISADVANTAGES OF E BANKING
 Bank relationship
A traditional bank provides the opportunity to develop a personal relationship with that bank.
Getting to know the people at your local branch can be an advantage when a customer needs a loan
or a special service that is not normally offered to the public. A bank manager usually has some
discretion in changing the terms of customer's account if the customer's personal circumstances
change. They can help customers solve problems such as reversing an undeserved fee. The banker
also will get to know the customer and his unique needs. If the customer has a business account, this
personal relationship may help if the customer needs capital to expand. It’s easier to get the bank’s
support if there is someone who understands customer's business and vouch for his operating plan.

 Transaction issues
Sometimes a face-to-face meeting is required to complete complex transactions and address
complicated problems. A traditional bank can host meetings and call in experts to solve a specific issue .
Moreover, international transactions may be more difficult (or impossible) with some direct banks. If a customer
deposits cash on a regular basis, a traditional bank with a drive-through window may be more practical and
efficient.
 Service issues
Some direct banks may not offer all the comprehensive financial services such as insurance and
brokerage accounts that traditional banks offer. Traditional banks sometimes offer special services to loyal
customers such as preferred rates ad investment advice at no extra charge. In addition, routine services such as
notarization and bank signature quarantee are not available online. These services are required for many
financial and legal transactions.

 Security
Direct banks are subject to the same laws and regulations as traditional banks and accounts are
protected by the FDIC. Sophisticated encryption software is designed to protect your account
information but no system is perfect. Accounts may be subject to phishing, hacker attacks, malware
and other un authorised activity. Most banks now make scanned copies of cleared checks available
online which helps to avoid and identify check fraud. It enables verification that all checks are
signed by the customer and that dollar or euro amounts have not been changed. The timely
discovery of discrepancies can be reported and investigated immediately.
OTHER FORMS OF ELECTRONIC BANKING

· Direct Deposit
· Electronic Bill Payment
· Electronic Check Conversion
· Cash Value Stored, Etc.
 IMPACT OF E-BANKING ON
TRADITIONAL SERVICES
• One of the issues currently being addressed is the impact of e-banking on traditional banking
players . After all, if there are risks inherent in going into e-banking there are other risks in
not doing so. It is too early to have a firm view on this yet. Even to practitioners the future of
e-banking and its implications are unclear .It might be convenient nevertheless to outline
briefly two views that are prevalent in the market .The view that the Internet is a revolution
that will sweep away the old order holds much sway. Arguments in favour areas follows :E-
banking transactions are much cheaper than branch or even phone transactions. This could
turn yesterday’s competitive advantage - a large branch network, into a comparative
disadvantage ,allowing e banks to undercut bricks-and-mortar banks. This is commonly
known as the "beached dinosaur" theory .E banks are easy to set up so lots of new entrants
will arrive. ‘Old-world’ systems, cultures and structures will not encumber these new entrants.
Instead, they will be adaptable and responsive. E-banking gives consumers much more choice.
Consumers will be less inclined to remain loyal .E-banking will lead to an erosion of the
‘endowment effect’ currently enjoyed by the major UK banks .Deposits will go elsewhere with
the consequence that these banks will have to fight to regain and retain their customer base.
This will increase 63 their cost of funds, possibly making their business less viable. Lost
revenue may even result in these banks taking more risks to breach the gap.
 INTERNET BANKING
SECURITY
Internet banking is a new specific banking area, part
of e-banking industry, which allows people to interact
with their banking accounts virtually from anywhere
in the world. Internet banking addresses few
emerging trends such as customer demand for any
time, anywhere services, product time to market
essentials, and increasingly complex back-office
integration challenges. One such challenge is the
security of online financial transactions. In order for
the industry to develop further, secure transactions
with the trust of the customers are necessary aspects.
Many banks advertise secure online services, and
allow their customers to do a wide range of banking
 CONCLUSION
In India, E-banking is in a nascent stage. No doubt Indian banks are
making sincere efforts for the adoption of advanced technology and
installation of e-delivery channels but still masses are wary of the
concept. E-banks should create awareness among people about E-
banking products and services. Customers should be made literate about
the use of e-banking products and services. Indicators of the challenges
of E-banking should be taken into account to reap the maximum benefits
of E-banking in India.