K.E.S SHROFF COLLEGE OF ARTS AND COMMERCE A REPORT ON: INTERNET BANKING PREPARED BY: JAINAM A CHIKANI ROLL NO: 06 PREPARED FOR : UNIVERSITY OF MUMBAI PREPARED UNDER GUIDANCE OF: MRS. VANITHA ACADEMIC YEAR: 2010-2011 DATE:01.10.2010
INTERNET BANKING
DECLARATION
My self CHIKANI JAINAM AJIT from K.E.S SHROFF COLLEGE OF ARTS AND COMMERCE student of T.Y. BANKING AND INSURANCE (semester v) here by submit my project report on internet banking with reference to banking. I also declared that this project which has been the partial fulfillment of the requirement for the degree of T.Y. BANKING AND INSURANCE of the Mumbai University has been the result of my own efforts.
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ACKNOWLEDGEMENT
I have sincerely done the project allotted to me. I would like to thank to MRS. VANITHA the coordinator of his valuable suggession and her guidance. I would also like to thank all those who were instrumental in making of this project. I gives me immense pleasure to present this project in the course of Banking and Insurance and I also would like to share credit with all those who has supported me by giving important understanding the concept Internet Banking.
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TABLE OF CONTENT
Serial no: 1) 2) 3) 4) 5) Chapter name: Introduction of internet banking Internet banking in India E-banking Cyber crime E-banking maximize value for the customer Page no:
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material or stock in trade in the form of deposits or sell the same by way of loans and advances. Hence the bank functions primarily as bank meeting the saving credit requirement of society. But the universal realization in the recent year that banks have to play a crucial roles in the development process of a country has brought sweeping change in the organizations as well as technical functions which resulted as in internet banking or ecommerce.in order to customer friendly, internet banks products or services are divided into three types.: 1) Information kiosks : 2) Basic internet banking : 3) E-commerce banking : 1) Information kiosks: It provides information regarding various products and service offered by banks to its customer apart from other general information. In additions customers queries are received and answer through e-mail. 2) Basic internet banking: In this, customer are allowed to open new accounts, check account balance and utility bills. 3) E-commerce banking: Banking transactions are conduct through electronic media, where in customers are able to use their accounts for transferring money, payments of various bill purchase, and sale of sale security and online real time purchase and payments. Further the customer banking information is passed from web server to the bank internet banking service through the www interface, to comply with customers request. The www interface and internet banking service are significant and internet service in the internet banking transactions if they are the only media through the communications is passed from one another, ensuring the safety of operation in customer data.
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Introduction E-COMMERCE
The term e-commerce is used by describing the variety of market transactions, enabled by information technology and conducted over the electronic network. In the past a dominant firm in the value chain typically put out network. In the past, a dominant firm in the value chain typically put out network that deployed proprietary applications over private network and required all its part and sub essentially supplier to participate in its electronic data interchange (EDI) over the network. To achieve this, electronic commerce is concerned with system and business processes that support: Creation of information source. Movement of information over global network. Effective and efficient interaction among producers, consumers, intermediaries, and sellers. E-commerce utilize electronic network to implement daily economic activities such as pricing, contracting, payment in some case even the shipment and delivery of goods and services. E-commerce in todays world are growing rapidly because of new technology growing very fast in the world by using electronic commerce people are normally their time saving online shopping ,mobile bill paid, payment of shopping, bills that is why now in todays world E-commerce are very popular in the Indian culture it is a time saving but it is costly because of the internet banking there are varies factor include in E-commerce like credit card , debit card, EDI (electronic data interchange) etc.
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Definition of E-commerce
Electronic commerce is like so much in the areas of business and information systems, the subject of numerous definitions. Some authors see to E-commerce as largely or entirely in internet phenomenon. Seddon has suggested that world has just entered a third new phase in the evolution of information technology (it) and 20 years periods: 1955-1974: The electronic data processing (EDP) 1975-1994: The management information system(MIS) 1995-2010: The internet It is commercialization and popularization of the internet that has put E-commerce towards the top of public and political agenda but Ecommerce using electronic market and EDI have been an established part of the business scene for at least decade prior of the internet data.
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A HISTORY OF E-COMMERCE
The origins of E-commerce date back some 30 years and lie in electronic data interchange a standard way of data exchanging between companies. Created by the trucking Industrys in the early 1970s. EDI became a major force in the industry such as food manufacturing and car making. Where Suppliers in high volumes at its simplest. It is a way of automated purchasing. Retailer often is used because of it allow store to link their suppliers directly into their database. The paper work including the order and the sale bill. Also takes place in the secure, safe and verifiable electronic environment. It has changed some industries, EDI has some serious short comings. It can still save time and money, but it usually required an expensive private or dedicated network connection between two established trading partners. It is not interactive meaning partners. It is not interactive meaning there is no opportunity for discussion or negotiation. It also resis change. According to forester research, a high tech consultancy EDI is so deep in the bowls of old systems that change cost and arms and a leg. That disadvantages means that EDI has been typically confined to and used by large firms. After 30 years EDI is out of sync with the business environment speed is the order of the day. Companies need, safe, reliable and access to a large, fluid pool of partners and suppliers so they can find customers and deliver the goods quickly. The arrival of the internet promises a solution, now EDI is being integrated into some internet technologies. Security is the biggest concern and its holding back developments. The internet is everything is EDI is not. It is cheap and easy to run. It can work both inside and outside the company in internet or extranet form. And it is global. Before the internet E-commerce way largely a hidden business to business affairs.
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from the early 1980s. The term online became popular in the late '80s and referred to the use of a terminal, keyboard and TV (or monitor) to access the banking system using a phone line. Home banking can also refer to the use of a numeric keypad to send tones down a phone line with instructions to the bank. Online services started in New York in 1981 when four of the citys major banks (Citibank, Chase Manhattan, Chemical and Manufacturers Hanover) offered home banking services using the videotex system. Because of the commercial failure of videotex these banking services ever became popular except in France where the use of videotex (Minitel) was subsidised by the telecom provider and the UK, where the Prestel system was used. The UK's first home online banking services was set up by Bank of Scotland for customers of the Nottingham Building Society (NBS) in 1983 The system used was based on the UK's Prestel system and used a computer, such as the BBC Micro, or keyboard (Tandata Td1400) connected to the telephone system and television set. The system (known as 'Homelink') allowed on-line viewing of statements, bank transfers and bill payments. In order to make bank transfers and bill payments, a written instruction giving details of the intended recipient had to be sent to the NBS who set the details up on the Homelink system. Typical recipients were gas, electricity and telephone companies and accounts with other banks. Details of payments to be made were input into the NBS system by the account holder via Prestel. A cheque was then sent by NBS to the payee and an advice giving details of the payment was sent to the account holder. BACS was later used to transfer the payment directly. Stanford Federal Credit Union was the first financial institution to offer online internet banking services to all of its members in October 1994.[4] Today, many banks are internet only banks. Unlike their predecessors, these internet only banks do not maintain brick and mortar bank branches. Instead, they typically differentiate themselves by offering better interest rates and online banking features.
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automatically render the account inactive. The customer then has to go through a detailed procedure to get his Internet banking account reactivated. However, banks keep on updating their technological back ups to ensure that their customers feel safe banking with them.
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b. Technology and Information Security policy and ensures confidentiality of records and security systems. c The policy takes into account operational risk. d. The policy clearly lays down the procedure to be followed in respect of "Know Your Customer" requirements, and e. The policy broadly meets the parameters laid down in the earlier circular.
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Features
Online banking solutions have many features and capabilities in common, but traditionally also have some that are application specific. The common features fall broadly into several categories
Transactional (e.g., performing a financial transaction such as an account to account transfer, paying a bill, wire transfer... and applications... apply for a loan, new account, etc.) o Electronic bill presentment and payment - EBPP o Funds transfer between a customer's own checking and savings accounts, or to another customer's account o Investment purchase or sale o Loan applications and transactions, such as repayments of enrollments Non-transactional (e.g., online statements, check links, cobrowsing, chat) o Bank statements Financial Institution Administration Support of multiple users having varying levels of authority Transaction approval process Wire transfer
Features commonly unique to Internet banking include Personal financial management support, such as importing data into personal accounting software. Some online banking platforms support account aggregation to allow the customers to monitor all of their accounts in one place whether they are with their main bank or with other institutions. We are always looking at ways of providing you with the best service possible. With Internet Banking you have access to all the online banking features you expect plus more, including SMS banking
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services and increased online security with the BOQ Security Token. Key features All the key features of Internet Banking are explained for you: balance and transaction history search transaction history export order new statements Mobile banking transfers pay bills with BPAY receive bills online with BPAY View Pay Anyone payments Multi Payments Foreign currency calculator International and RTGS payments Open or apply for selected accounts Daily Limits Packages for BPAY, Pay Anyone and Multi Payments SMS banking services extra online security with the BOQ Security Token
Business features If you have a business, find out how Internet Banking can assist you: payments file upload direct debit payments and payment templates related account access multi user transaction authorization and privilege delegation
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Security
Security token devices Protection through single password authentication, as is the case in most secure Internet shopping sites, is not considered secure enough for personal online banking applications in some countries. Basically there exist two different security methods for online banking.
The PIN/TAN system where the PIN represents a password, used for the login and TANs representing one-time passwords to authenticate transactions. TANs can be distributed in different ways, the most popular one is to send a list of TANs to the online banking user by postal letter. The most secure way of using TANs is to generate them by need using a security token. These token generated TANs depend on the time and a unique secret, stored in the security token (this is called twofactor authentication or 2FA). Usually online banking with PIN/TAN is done via a web browser using SSL secured connections, so that there is no additional encryption needed.
Signature based online banking where all transactions are signed and encrypted digitally. The Keys for the signature generation and encryption can be stored on smartcards or any memory medium ,depending on the concrete implementation
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In spite of rapid efforts to offer net banking facilities the Indian internet banking system need to overcome many obstacle, such as operational risk, security risk system, architecture risk, and legal risk. Though banks are striving to overcome these problems, there is a lot to be done towards security of net banking operations. The bank have to be technologically strong to avoid operational insecurity problem. They should also be prepared to handle system disruption, system hackers, security lapses, and virus attacks. They should be familiarised with the proper customer identification devices, information screening techniques, and various laws that would help guide their customers, thus, with the growing internet awareness among the customers, integration of banking services with e-commerce and entry of global banking players, internet banking has gained enormous importance. This fact is further provide by RBI guidelines, with encouraged the implementation of internet banking in India.
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Technology:
1) Debit cards: Most of the high net worth individuals are not interested in paying 30 to 36 percent on the credit made available on credit cards. Instead they prefer to use debit card which server the purpose of a credit card and ATM card. A few of the HNIs who want to avail credit at a relatively cheap rate are offered overdraft facilities of 12 to 14 percent along with debit cards. If this trend continues, interest conscious customers may switch over the debit cards from credit cards. 2) Credit cards: These have been vogue in India for more than two decades. It has to be found as a convenient way of making payments without the necessity to carry cash or check books. Aware of the popularity of debit cards, banks issuing credit cards have decided to retain interest conscious HNIs, by offering to debit their accounts on the due date on the basis of the standing instructions, there by offering the convenience of the debit card and the normal credit periods. 3) Instant banking: In order to meet a young needs of customers, who wants speed the instant service, bank have introduced tele banking, mobile phone banking, internet banking, and other services. Mere introduction of modern technology will not help, unless back by competent staff who can provide the service effectively and efficiently. The success of IT initiative is to be measured by the benefits derived by the customers and not by the benefits accrued to banks employees.
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services also give you the option of handling several different bank accounts from one site itself. Most online banking sites are compatible with programs like Microsoft Money and Quicken, which makes management of assets more effective.
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The reason that not many people have started using Internet banking is because they do not trust the services of the bank through the net. Some human beings prefer to trust others like them and may have some difficulty in trusting a machine, especially in the matters of money. They may always have a doubt about whether their money is safe, while being processed through Internet banking.
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In addition to this, a few cases of forgery have been reported in online banking. There are some fraud or proxy websites, which can hack information (user name and password) entered by a person for some transaction, and later misuse it. In such cases, people lose their money without knowing and by the time, they get the bill, huge loses may have been incurred. Another disadvantage of Internet banking is that it may take some time, to get the Internet account started, as it requires a lot of paper work. Some people avoid using Internet banking services because they find it difficult to understand how it works. Also, the fact that a wrong click can cause monetary losses may be a deterrent. Internet banking can also pose a problem, if the network is down in one's area. This may cause difficulty, if the person has to do an important transaction. One very common disadvantage of online banking is when a person has some problem or query. In a normal bank, if one faces some problem, one can go to some employee of the bank to solve it. However, in the case of Internet banking, one will find oneself making endless calls to the customer service department. There have been cases, where the person is put on hold or has been passed around from one person to another. Although, Internet banking has certain disadvantages, one can avail of its customer-friendly services, if one is a little careful. One should never give away one's password to any unknown person and to make the experience of Internet banking a smooth process, one must use sites that are familiar and reliable. Just like with anything else, there are disadvantages to online banking services too! The biggest problem is that most people lack trust. How many times have you performed transactions online and wondered whether you did the right thing? Of course, you can overcome any uneasiness by printing the transaction receipt. This receipt will conform whether or not your transaction has gone through successfully.
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Online banking can be difficult to learn for a beginner and a site could take time to start up. Some sites ask for photo identification, which can be very inconvenient. However, most online banking sites provide tutorials for online banking. Some sites provide live online customer support to provide solutions for any problems. The number of cases of banking frauds is considerably low so you dont have to worry about the safety of your money. Clearly, the whole concept of online banking has its fair share of advantages as well as disadvantages. For some people, online banking simplifies life, while for the others it is intimidating and complex. Taking into consideration these perceptions, most banks have now started offering online banking services and a viable option to their clients. Some people prefer talking personally to a person in case of a problem. They prefer the personal touch aspect of customer service. If you are this kind of a person, then youll probably never feel comfortable with Internet banking. On the other hand, if unlimited access to your bank accounts and convenience is highest on your list of banking priorities, then nothing can beat online banking. What with the security of the FDIC standing like a fortress behind them, it is very clear that online banking is here to stay.
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Chapter :3
DEFINITION OF E-BANKING
This booklet, one of several comprising the FFIEC Information Technology Examination Handbook (IT Handbook), provides guidance to examiners and financial institutions on identifying and controlling the risks associated with electronic banking (e-banking) activities. The booklet primarily discusses e-banking risks from the perspective of the services or products provided to customers. This approach differs from other booklets that discuss risks from the perspective of the technology and systems that support automated information processing. To avoid duplication of material, this booklet refers the reader to other IT Handbook booklets for detailed explanations of technology-specific issues or controls. Examiners may use the examination procedures and request letter items included in this booklet in appendix A to review risks in the electronic delivery of financial products and services. These procedures address services and products of varied complexity. Examiners should adjust the procedures, as appropriate, for the scope of the examination and the risk profile of the institution. The procedures may be used independently or in combination with procedures from other IT Handbook booklets or from agency handbooks covering non-IT areas. Internet banking (or E-banking) means any user with a personal computer and a browser can get connected to his bank -s website to perform any of the virtual banking functions. In internet banking system the bank has a centralized database that is web-enabled. All the services that the bank has permitted on the internet are displayed in menu. Any service can be selected and further interaction is dictated by the nature of service. The traditional branch model of bank is now giving place to an alternative delivery channels with ATM network. Once the branch offices of bank are interconnected through terrestrial or satellite links, there would be no physical identity for any branch. It would a borderless entity permitting anytime, anywhere and anyhow banking. The network which connects the various locations and gives connectivity to the central office within the organization is called intranet. These networks are limited to organizations for which they are set up. SWIFT is a live example of intranet application.
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E-Banking Introduction
For this booklet, e-banking is defined as the automated delivery of new and traditional banking products and services directly to customers through electronic, interactive communication channels. Ebanking includes the systems that enable financial institution customers, individuals or businesses, to access accounts, transact business, or obtain information on financial products and services through a public or private network, including the Internet. Customers access e-banking services using an intelligent electronic device, such as a personal computer (PC), personal digital assistant (PDA), automated teller machine (ATM), kiosk, or Touch Tone telephone. While the risks and controls are similar for the various e-banking access channels, this booklet focuses specifically on Internet-based services due to the Internets widely accessible public network. Accordingly, this booklet begins with a discussion of the two primary types of Internet websites: informational and transactional.
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e banking in india
The Reserve Bank of India constituted a working group on Internet Banking. The group divided the internet banking products in India into 3 types based on the levels of access granted. They are: i) Information Only System: General purpose information like interest rates, branch location, bank products and their features, loan and deposit calculations are provided in the banks website. There exist facilities for downloading various types of application forms. The communication is normally done through e-mail. There is no interaction between the customer and bank's application system. No identification of the customer is done. In this system, there is no possibility of any unauthorized person getting into production systems of the bank through internet. ii) Electronic Information Transfer System: The system provides customer- specific information in the form of account balances, transaction details, and statement of accounts. The information is still largely of the 'read only' format. Identification and authentication of the customer is through password. The information is fetched from the bank's application system either in batch mode or off-line. The application systems cannot directly access through the internet. iii) Fully Electronic Transactional System: This system allows bi-directional capabilities. Transactions can be submitted by the customer for online update. This system requires high degree of security and control. In this environment, web server and application systems are linked over secure infrastructure. It comprises technology covering computerization, networking and security, inter-
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bank payment gateway and legal infrastructure. Automated Teller Machine (ATM): ATM is designed to perform the most important function of bank. It is operated by plastic card with its special features. The plastic card is replacing cheque, personal attendance of the customer, banking hours restrictions and paper based verification. There are debit cards. ATMs used as spring board for Electronic Fund Transfer. ATM itself can provide information about customers account and also receive instructions from customers - ATM cardholders. An ATM is an Electronic Fund Transfer terminal capable of handling cash deposits, transfer between accounts, balance enquiries, cash withdrawals and pay bills. It may be on-line or 0ff-line. The on-line ATN enables the customer to avail banking facilities from anywhere. In off-line the facilities are confined to that particular ATM assigned. Any customer possessing ATM card issued by the Shared Payment Network System can go to any ATM linked to Shared Payment Networks and perform his transactions. Credit Cards/Debit Cards: The Credit Card holder is empowered to spend wherever and whenever he wants with his Credit Card within the limits fixed by his bank. Credit Card is a post paid card. Debit Card, on the other hand, is a prepaid card with some stored value. Every time a person uses this card, the Internet Banking house gets money transferred to its account from the bank of the buyer. The buyers account is debited with the exact amount of purchases. An individual has to open an account with the issuing bank which gives debit card with a Personal Identification Number (PIN). When he makes a purchase, he enters his PIN on shops PIN pad. When the card is slurped through the electronic terminal, it dials the acquiring bank system - either Master Card or VISA that validates the PIN and finds out from the issuing bank whether to accept or decline the transactions.
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The customer can never overspend because the system rejects any transaction which exceeds the balance in his account. The bank never faces a default because the amount spent is debited immediately from the customers account. Smart Card: Banks are adding chips to their current magnetic stripe cards to enhance security and offer new service, called Smart Cards. Smart Cards allow thousands of times of information storable on magnetic stripe cards. In addition, these cards are highly secure, more reliable and perform multiple functions. They hold a large amount of personal information, from medical and health history to personal banking and personal preferences. You can avail the following services through EBanking. Bill payment service You can facilitate payment of electricity and telephone bills, mobile phone, credit card and insurance premium bills as each bank has tie-ups with various utility companies, service providers and insurance companies, across the country. To pay your bills, all you need to do is complete a simple one-time registration for each biller. You can also set up standing instructions online to pay your recurring bills, automatically. Generally, the bank does not charge customers for online bill payment. Fund transfer You can transfer any amount from one account to another of the same or any another bank. Customers can send money anywhere in India. Once you login to your account, you need to mention the payees's account number, his bank and the branch. The transfer will take place in a day or so, whereas in a traditional method, it takes about three working days. ICICI Bank says that online
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bill payment service and fund transfer facility have been their most popular online services. Credit card customers With Internet banking, customers can not only pay their credit card bills online but also get a loan on their cards. If you lose your credit card, you can report lost card online. Railway pass This is something that would interest all the aam janta. Indian Railways has tied up with ICICI bank and you can now make your railway pass for local trains online. The pass will be delivered to you at your doorstep. But the facility is limited to Mumbai, Thane, Nashik, Surat and Pune. Investing through Internet banking You can now open an FD online through funds transfer. Now investors with interlinked Demat account and bank account can easily trade in the stock market and the amount will be automatically debited from their respective bank accounts and the shares will be credited in their demat account. Moreover, some banks even give you the facility to purchase mutual funds directly from the online banking system. Nowadays, most leading banks offer both online banking and demat account. However if you have your demat account with independent share brokers, then you need to sign a special form, which will link your two accounts. Recharging your prepaid phone Now just top-up your prepaid mobile cards by logging in to Internet banking. By just selecting
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your operator's name, entering your mobile number and the amount for recharge, your phone is again back in action within few minutes. Shopping With a range of all kind of products, you can shop online and the payment is also made conveniently through your account. You can also buy railway and air tickets through Internet banking. Advantage of Internet banking As per the Internet and Mobile Association of India's report on online banking 2006, "There are many advantages of online banking. It is convenient, it isn't bound by operational timings, there are no geographical barriers and the services can be offered at a miniscule cost." Through Internet banking, you can check your transactions at any time of the day, and as many times as you want to. Where in a traditional method, you get quarterly statements from the bank. If the fund transfer has to be made outstation, where the bank does not have a branch, the bank would demand outstation charges. Whereas with the help of online banking, it will be absolutely free for you. Security Precautions Customers should never share personal information like PIN numbers, passwords etc with anyone, including employees of the bank. It is important that documents that contain confidential information are safeguarded. PIN or password mailers should not be stored, the PIN and/or passwords should be changed immediately and memorised before destroying the mailers. Customers are advised not to provide sensitive account-related information over unsecured e-mails or over the phone. Take simple precautions like changing the ATM PIN and online login and transaction passwords on a
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regular basis. Also ensure that the logged in session is properly signed out.
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E-BANKING COMPONENTS E-banking systems can vary significantly in their configuration depending on a number of factors. Financial institutions should choose their e-banking system configuration, including outsourcing relationships, based on four factors: Strategic objectives for e-banking; Scope, scale, and complexity of equipment, systems, and activities; Technology expertise; and Security and internal control requirements. Financial institutions may choose to support their e-banking services internally. Alternatively, financial institutions can outsource any aspect of their e-banking systems to third parties. The following entities could provide or host (i.e., allow applications to reside on their servers) ebanking-related services for financial institutions: Another financial institution, Internet service provider, Internet banking software vendor or processor, Core banking vendor or processor, Managed security service provider, Bill payment provider, Credit bureau, and Credit scoring company. E-banking systems rely on a number of common components or processes. The following list includes many of the potential
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components and processes seen in a typical institution: Website design and hosting, Firewall configuration and management, Intrusion detection system or IDS (network and host-based), Network administration, Security management, Internet banking server, E-commerce applications (e.g., bill payment, lending, brokerage), Internal network servers, Core processing system, Programming support, and Automated decision support systems. These components work together to deliver e-banking services. Each component represents a control point to consider. Through a combination of internal and outsourced solutions, management has many alternatives when determining the overall system configuration for the various components of an e-banking system. However, for the sake of simplicity, this booklet presents only two basic variations. First, one or more technology service providers can host the ebanking application and numerous network components as illustrated in the following diagram. In this configuration, the institutions service provider hosts the institutions website, Internet banking server, firewall, and intrusion detection system. While the institution does not have to manage the daily administration of these component systems, its management and board remain responsible for the content, performance, and security of the e-banking system. Second, the institution can host all or a large portion of its e-banking systems internally. A typical configuration for in-house hosted,
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e-banking services is illustrated below. In this case, a provider is not between the Internet access and the financial institutions core processing system. Thus, the institution has day-to-day responsibility for system administration.
E-BANKING SUPPORT SERVICES In addition to traditional banking products and services, financial institutions can provide a variety of services that have been designed or adapted to support e-commerce. Management should understand these services and the risks they pose to the institution. This section discusses some of the most common support services: weblinking, account aggregation, electronic authentication, website hosting, payments for e-commerce, and wireless banking activities. WEBLINKING A large number of financial institutions maintain sites on the World Wide Web. Some websites are strictly informational, while others also offer customers the ability to perform financial transactions, such as paying bills or transferring funds between accounts. Virtually every website contains weblinks. A weblink is a word, phrase, or image on a webpage that contains coding that will transport the viewer to a different part of the website or a completely different website by just clicking the mouse. While weblinks are a convenient and accepted tool in website design, their use can present certain risks. Generally, the primary risk posed by weblinking is that viewers can become confused about whose website they are viewing and who is responsible for the information, products, and services available through that website. There are a variety of risk management techniques institutions should consider using to mitigate these risks. These risk management techniques are for those institutions that develop and maintain their own websites, as well as institutions that use third-party service providers for this function. The agencies have issued guidance on weblinking that provides details on risks and risk management techniques financial institutions should consider ACCOUNT AGGREGATION Account aggregation is a service that gathers information from many
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websites, presents that information to the customer in a consolidated format, and, in some cases, may allow the customer to initiate activity on the aggregated accounts. The information gathered or aggregated can range from publicly available information to personal account information (e.g., credit card, brokerage, and banking data). Aggregation services can improve customer convenience by avoiding multiple log-ins and providing access to tools that help customers analyze and manage their various account portfolios. Some aggregators use the customer-provided user IDs and passwords to sign in as the customer. Once the customers account is accessed, the aggregator copies the personal account information from the website for representation on the aggregators site (i.e., screen scraping). Other aggregators use direct data-feed arrangements with website operators or other firms to obtain the customers information. Generally, direct data feeds are thought to provide greater legal protection to the aggregator than does screen scraping. Financial institutions are involved in account aggregation both as aggregators and as aggregation targets. Risk management issues examiners should consider when reviewing aggregation services include: Protection of customer passwords and user IDs both those used to access the institutions aggregation services and those the aggregator uses to retrieve customer information from aggregated third parties to assure the confidentiality of customer information and to prevent unauthorized activity, Disclosure of potential customer liability if customers share their authentication information (i.e., IDs and passwords) with third parties, and Assurance of the accuracy and completeness of information retrieved from the aggregated parties sites, including required disclosures Additional information regarding management of risks in aggregation services can be found in appendix D. ELECTRONIC AUTHENTICATION Verifying the identities of customers and authorizing e-banking activities are
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integral parts of e-banking financial services. Since traditional paper-based and in-person identity authentication methods reduce the speed and efficiency of electronic transactions, financial institutions have adopted alternative authentication methods, including: Passwords and personal identification numbers (PINs), Digital certificates using a public key infrastructure (PKI), Microchip-based devices such as smart cards or other types of tokens, Database comparisons (e.g., fraud-screening applications), and Biometric identifiers. The authentication methods listed above vary in the level of security and reliability they provide and in the cost and complexity of their underlying infrastructures. As such, the choice of which technique(s) to use should be commensurate with the risks in the products and services for which they control access. Additional information on customer authentication techniques can be found in this booklet under the heading Authenticating E-Banking Customers. The Electronic Signatures in Global and National Commerce (E-Sign) Act establishes some uniform federal rules concerning the legal status of electronic signatures and records in commercial and consumer transactions so as to provide more legal certainty and promote the growth of electronic commerce. The development of secure digital signatures continues to evolve with some financial institutions either acting as the certification authority for digital signatures or providing repository services for digital certificates. WEBSITE HOSTING Some financial institutions host websites for both themselves as well as for other businesses. Financial institutions that host a business customers website usually store, or arrange for the storage of, the electronic files that make up the website. These files are stored on one or more servers that may be located on the hosting financial institutions premises. Website hosting services require strong skills in networking, security, and
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programming. The technology and software change rapidly. Institutions developing websites should monitor the need to adopt new interoperability standards and protocols such as Extensible Mark-Up Language (XML) to facilitate data exchange among the diverse population of Internet users. Risk issues examiners should consider when reviewing website hosting services include damage to reputation, loss of customers, or potential liability resulting from: Downtime (i.e., times when website is not available) or inability to meet service levels specified in the contract, Inaccurate website content (e.g., products, pricing) resulting from actions of the institutions staff or unauthorized changes by third parties (e.g., hackers), Unauthorized disclosure of confidential information stemming from security breaches, and Damage to computer systems of website visitors due to malicious code (e.g., virus, worm, active content) spread through institution-hosted sites. PAYMENTS FOR E-COMMERCE Many businesses accept various forms of electronic payments for their products and services. Financial institutions play an important role in electronic payment systems by creating and distributing a variety of electronic payment instruments, accepting a similar variety of instruments, processing those payments, and participating in clearing and settlement systems. However, increasingly, financial institutions are competing with third parties to provide support services for e-commerce payment systems. Among the electronic payments mechanisms that financial institutions provide for e-commerce are automated clearing house (ACH) debits and credits through the Internet, electronic bill payment and presentment, electronic checks, e-mail money, and electronic credit card payments. Additional information on payments systems can be found in other sections of the IT Handbook. Most financial institutions permit intra bank transfers between a customers accounts as part of their basic transactional e-banking services. However,
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third-party transfers with their heightened risk for fraud often require additional security safeguards in the form of additional authentication and payment confirmation. Bill Payment and Presentment Bill payment services permit customers to electronically instruct their financial institution to transfer funds to a businesss account at some future specified date. Customers can make payments on a one-time or recurring basis, with fees typically assessed as a per item or monthly charge. In response to the customers electronic payment instructions, the financial institution (or its bill payment provider) generates an electronic transaction usually an automated clearinghouse (ACH) credit or mails a paper check to the business on the customers behalf. To allow for the possibility of a paper-based transfer, financial institutions typically advise customers to make payments effective 37 days before the bills due date. Internet-based cash management is the commercial version of retail bill payment. Business customers use the system to initiate third-party payments or to transfer money between company accounts. Cash management services also include minimum balance maintenance, recurring transfers between accounts and on-line account reconciliation. Businesses typically require stronger controls, including the ability to administer security and transaction controls among several users within the business. This booklet discusses the front-end controls related to the initiation, storage, and transmission of bill payment transactions prior to their entry into the industrys retail payment systems (e.g., ACH, check processing, etc.). The IT Handbooks Retail Payments Systems Booklet provides additional information regarding the various electronic transactions that comprise the back end for bill payment processing. The extent of front-end operating controls directly under the financial institutions control varies with the system configuration. Some examples of typical configurations are listed below in order of increasing complexity, along with potential control considerations. Financial institutions that do not provide bill payment services, but may direct customers to select from several unaffiliated bill payment providers.
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Caution customers regarding security and privacy issues through the use of on-line disclosures or, more conservatively, e-banking agreements. Financial institutions that rely on a third-party bill payment provider including Internet banking providers that subcontract to third parties. Set dollar and volume thresholds and review bill payment transactions for suspicious activity. Gain independent audit assurance over the bill payment providers processing controls. Restrict employees administrative access to ensure that the internal controls limiting their capabilities to originate, modify, or delete bill payment transactions are at least as strong as those applicable to the underlying retail payment system ultimately transmitting the transaction. Restrict by vendor contract and identify the use of any subcontractors associated with the bill payment application to ensure adequate oversight of underlying bill payment system performance and availability. Evaluate the adequacy of authentication methods given the higher risk associated with funds transfer capabilities rather than with basic account access. Consider the additional guidance contained in the IT Handbooks Information Security, Retail Payment Systems, and Outsourcing Technology Services booklets. Financial institutions that use third-party software to host a bill payment application internally. Determine the extent of any independent assessments or certification
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of the security of application source code. Ensure software is adequately tested prior to installation on the live system. Ensure vendor access for software maintenance is controlled and monitored. Financial institutions that develop, maintain, and host their own bill payment system. Consider additional guidance in the IT Handbooks Development and Acquisition Booklet. Financial institutions can offer bill payment as a stand-alone service or in combination with bill presentment. Bill presentment arrangements permit a business to submit a customers bill in electronic form to the customers financial institution. Customers can view their bills by clicking on links on their accounts e-banking screen or menu. After viewing a bill, the customer can initiate bill payment instructions or elect to pay the bill through a different payment channel. In addition, some businesses have begun offering electronic bill presentment directly from their own websites rather than through links on the e-banking screens of a financial institution. Under such arrangements, customers can log on to the businesss website to view their periodic bills. Then, if so desired, they can electronically authorize the business to take the payment from their account. The payment then occurs as an ACH debit originated by the businesss financial institution as compared to the ACH credit originated by the customers financial institution in the bill payment scenario described above. Institutions should ensure proper approval of businesses allowed to use ACH payment technology to initiate payments from customer accounts. Cash management applications would include the same control considerations described above, but the institution should consider additional controls because of the higher risk associated with commercial transactions. The adequacy of authentication methods becomes a higher priority and requires greater assurance due to the larger average dollar size
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of transactions. Institutions should also establish additional controls to ensure binding agreements consistent with any existing ACH or wire transfer agreements exist with commercial customers. Additionally, cash management systems should provide adequate security administration capabilities to enable the business owners to restrict access rights and dollar limits associated with multiple-user access to their accounts. Person-to-Person Payments Electronic person-to-person payments, also known as e-mail money, permit consumers to send money to any person or business with an e-mail address. Under this scenario, a consumer electronically instructs the person-to-person payment service to transfer funds to another individual. The payment service then sends an e-mail notifying the individual that the funds are available and informs him or her of the methods available to access the funds including requesting a check, transferring the funds to an account at an insured financial institution, or retransmitting the funds to someone else. Person-to-person payments are typically funded by credit card charges or by an ACH transfer from the consumers account at a financial institution. Since neither the payee nor the payer in the transaction has to have an account with the payment service, such services may be offered by an insured financial institution, but are frequently offered by other businesses as well. Some of the risk issues examiners should consider when reviewing bill payment, presentment, and e-mail money services include: Potential liability for late payments due to service disruptions, Liability for bill payment instructions originating from someone other than the deposit account holder, Losses from person-to-person payments funded by transfers from credit cards or deposit accounts over which the payee does not have signature authority, Losses from employee misappropriation of funds held pending access instructions from the payer, and Potential liability directing payment availability information to the wrong
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e-mail or for releasing funds in response to e-mail from someone other than the intended payee. WIRELESS E-BANKING Wireless banking is a delivery channel that can extend the reach and enhance the convenience of Internet banking products and services. Wireless banking occurs when customers access a financial institution's network(s) using cellular phones, pagers, and personal digital assistants (or similar devices) through telecommunication companies wireless networks. Wireless banking services in the United States typically supplement a financial institution's e-banking products and services. Wireless devices have limitations that increase the security risks of wireless-based transactions and that may adversely affect customer acceptance rates. Device limitations include reduced processing speeds, limited battery life, smaller screen sizes, different data entry formats, and limited capabilities to transfer stored records. These limitations combine to make the most recognized Internet language, Hypertext Markup Language (HTML), ineffective for delivering content to wireless devices. Wireless Markup Language (WML) has emerged as one of a few common language standards for developing wireless device content. Wireless Application Protocol (WAP) has emerged as a data transmission standard to deliver WML content. Manufacturers of wireless devices are working to improve device usability and to take advantage of enhanced third-generation (3G) services. Device improvements are anticipated to include bigger screens, color displays, voice recognition applications, location identification technology (e.g., Federal Communications Commission (FCC) Enhanced 911), and increased battery capacity. These improvements are geared towards increasing customer acceptance and usage. Increased communication speeds and improvements in devices during the next few years should lead to continued increases in wireless subscriptions.
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` 1) it is generally a single event from the perspective of the victim. For example, the victim unknowingly downloads a trojan horse, which install a key stroke logger on his or her machine. Alternatively the victim might receive as email containing what claim to be a link to known entity, but in reality is a link to known entity but in reality is a link to a hostile website. 2) crime ware programs such as keystroke loggers, viruses, root kites often facilates it or trojan horses. 3) software flaws or vulnerabilities often provide the food hold for the attacker. For examples, criminal controlling a web site may take advantage of a vulnerability in a web browser to place a Trojan horse on the victims computers. Examples of this type of cyber crime includes but are not limited to pushing, theft or manipulation of data of service via hacking or viruses, identify theft, and bank of e-commerce.
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At the other end of the spectrum, includes, but is not limited to activities such as cyber stalking and harassment, child predation extortion, blackmail, stock market, manipulation, complex corporates espionage, and planning or carrying out terrorist activities. The characteristic of type 2 cuber crime are as follows: It is generally an ongoing series of events, involving repeated interaction with the tarhet. For examples someone who , over time, attempts to establish a relationship contact the targets in am chat room. Eventually, the criminal exploits the relationship to commit a crime or, members of terrorist cell or criminal organization may use hidden message to communicate in a public forum to plan activities of discuss money- laundering location for examples. Programmers that do not fit into the under the classifications crime ware generally facilitate it. For examples conversations may take place using I m (instant messaging) clients or files may be transfer using the FTP.
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convince the judiciary. The challenge in cyber crime cases includes getting evidence that will stand scrutiny and in a foreign court. For this India need total international corporation with special agencies of different countries. Police has to ensure that they have seized exactly what was there exactly at the scene of crime. Is the same that has been analyzed and the report presented in the court is based on the evidence. It has to maintain to chain of custody. The threat is not from the intelligence of criminals but from our ignorance and the will to fight it. The law is stricter now on producing evidence especially where electronic documents are concerned. The computer is the target and the tool for the perpetration of crime. It is used for the communication of the criminal activity such as the injection of virus, which can crash entire network. The information technology (IT) Act, 2000 specified act, which have been made punishable. The primary objective of this act is to create an enabling environment for commercial use of IT. With the legal recognition of electronic records and the amendment made in the several section of the IPC vide the IT act, 2000, several offences having bearing on cyber arena are also registered under the appropriate sections of the IPC. Technology nuances are important in a spam infested environment where privacy can be comprised and individuals can be subjected to become a victim unsuspectingly. We need to sensitize our investigators and judges to the nuances of the system. Most cyber crime have a counter part in the real world. If loss of property and person is caused the criminal is punishable under the IPC also. Since the law enforcement agencies find it is easier to find out under the IPC. IT act cases are not get reported and when reported are not necessarily dealt with under the IT act.
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2) My notifications: A notification service that informs you of transaction that are being carried out on the internet banking platform. The delivery mechanism supported or e-mail and SMS address while the support notification are restricted to logons, profile amendments to existing beneficiary and once off payment notifications. 3) Payment confirmation: A notification process that informs both the payer and payee that transfer transaction has been successfully completed. 4) McAfee anti virus software: We are the only local bank that offers the McAfee range of security product, including anti-virus and firewall software, as a free online service to our customers. Many of our customers have already demonstrated their willing to adopt more secure processor with more than 190000, over a third of our internet banking customers. Already adopting one time password. This secure system is designed to protect you from these types of attacks. The service is monedatory for all new internet banking customers and will became manadatory for all existing customers with effect from october 2006. Customers should continue to play their part in the security relationship by protecting the secrecy of their PINs and password as they would protect their secret codes to their home alarm system. Threat perceptions : Uk has larger number of infected computers in the world followed by the US and China. Financial attacks are the 16 events per 1000. The highest among all kinds of attacks. The US is the leading source country for attacked but this has declined. China is second and germany is third. It is hard to determine where the attacks came originally.
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2) Andhra pradesh tax case: Dubious techtique of a promitent businessman from andhra pradesh was exposed after official of the department got hold of computers used by the accused person. The owner of the plastic firm was arrested and the Rs 22 crore cash was recover from his house and by sleths of the villigence department. They sought and explanation from him regarding the unaccounted cash within 10days. The accused person submitted 6,000 vouchers to prove the legitimacy of trade and thought its offence would go undetected but after careful scrutinity of vouchers and contain of his computer and revealed that all of them were made after the raids were conducted. It later releved that the accused was running five businesses under the guise of one company and use fake and computerised vouchers to show show sales record and save tax. 3) The bank NSP case: It was one where a management trainee of the bank was engaged to be married. The couples exchange many e-mails using the company computers. After some time the two broke up and the girl created fradulent e-mail IDs such as Indian bar associated and send emails to the boys foreign clients. She used the bank computer to do this. The boys company lost a larger number of clients and took the bank to court. The bank was held liable for the e-mails sent using the bank system.
4) HSBC fraud:
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An HSBC employee in banglore was arrested on Tuesday night june 28 for illegally accessing confidential information of the customers and helping to the fraudelent in UK to siphon of large amount of money from their accounts. The corps of detective took 24 years old nadim hameed kashimiri into custody, who joints HSBC electronic data processing India (HDPI), bannerghatta road, on december 12, 2005. Allegadly accessed personal information, security information and debit card information of some customers from march to may this year. These details were passed from the fraudsters, who diverted $233,000 from the clients accounts. According to a compliant lodged by HDPI, with the banglore cyber crime police. The nadeem trail landed some of his family members and friend in custody. Nadeem in from pillanna garden. The cyber crime police, probing the fraud, are contacting the UK police. The incident came to light when around 20 customers informed the bank of money being debited from their accounts without authorization. An internal inquiries by the banks related nadeems involvment. In his compliance with the cyber crime police on june 22, HDPI vice president puneet dar said ack-end system records showed nadeem has access the confidential information without authorization. The access such information for any business requirement, prior permission is needed. Nadeem were missing after he got to know about internal probe. The bank also found out that nadeem, who goes by several aliases, had furnished false mobile number and address of the time of employment.
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share. Too many bank have used proprietary online platform to offer exactly the same bundle of products and choice that they provide in the offline world. But the few bank they have created distinctive online offering have attracted large number of customers. The Boston consulting Group estimate that more then 25% of US checking account will be online by 2003 up from less then 5% in 1999. In United Kingdom percentage will soar less then 3 to more than 15. The shift will be more momentous than even these numbers indicate. The customers most valuable for banks are precisely the once who will be moving online. The affluent and educated typically the most profitable banking customers will account for the bulk of this growth. In addition, younger customers-the source of future profits-will go online faster than older once.
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Bankers have to realize they have no choice but to act. Yahoo! And other newcomers are building online capabilities quickly and are already exploring the internet ability to offer convent consolidation financial services. According to surveys consumer remain as interested as ever in consolidation their financial needs. Online service promise to make it much easier for them to do. In some market pressure from the new competitors has already substantially reduced margins. Ironically some bankers site dangerous or reduced margins as a reason to be wary about e-banking. However it is better for a bank to cannibalize its own business then allow to competitor to destroyed it. Example the direct British bank opened in October 1998 had launched 6,00,000 new account by the end of 1999 by paying more for deposits then its competitors did an by offering free internet access and email. It has thus squeezed internet margins on savings account throughout the UK.
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Online priorities
As bankers set out to built their online business they will have to wrestle with a host of strategic questioned. Do they have the right business model for the online world? Should they rely on their own website and products? Should they partner with the others to create a uniquely attractive? Portal? How should they monitor and port value their internet assets. How should they price their online offering? The following are some guidelines: Keep your option open and do not bet everything on one approach: senior executive should explore different option, make several investment from a variety of partnership, and be prepared to push ventures the prosper and abandon those that falter. The sky is to buy the right to compare in the future in other words to time to buy identify the best opportunities and to learn what works and what does not works. In opening minded about new pricing strategies. Traditional bank face dilemma. If they are too aggressive in using price incentives to built their online businesses. They risk undermining the profitable f their traditional businesses. But if they do not offer sufficient price incentives for the customers to bank online, their efforts to built substantial internet businesses will suffer. Although there is no easiest answer, bank should realize e-banking is coming whether they like it or not. It will cause prices to fall and the pressure to continue to cut cost will only intensify. Figuring out exactly which prices to offer to whom and which cost to attack most aggressively are the big challenges. Bank must be agile and flexible in their approach to pricing without succumbing to the temptation to buy market share recklessely at unprofitable prices. But at times it may make sense to sacrifice short-term profits to build the online business for the long term.
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Focus on customers needs and dissatisfactions. one of the big advantage of online businesses is their ability to gather vast amount of customer data quickly and easily. To prevail online, however, banks will have to excel at interpreting information about customers and acting on it quickly. The most successful online enterprises continuously refine their offering very day. For eg: skillful newcomers like next card quickly identify their most valuable customers and rapidly revise their segmentation and pricing of each offering. Leverage the assets of the traditional businesses. The challenges of getting the online and off-line organization to work effectively with each other are formidable. Creating is completely autonomous online enterprises is often the easiest not best, solution. The assets of the traditional businesses with a substantial advantages. Rich and nimble newcomers like Yahoo! Simply dont have them. Be creatively in rethinking organizational structures and management processes. Of course getting people in the traditional businesses to help the help build an online enterprises could devour their existing will be no easy task. And banks their conservative images, will not find it easy to attack and retake online business still both can be done. But that will require a revision of incentives systems, planning, and budgeting processes and management roles. For example: option best planning allows bank to be flexible about their investment. It gives time to them to see what does and does not work. The successful approach may include filling key position in the online businesses with the newcomers who brings fresh perspective and veterans who know how the traditional businesses work and have network they can activate to get thing done. It may include using transfer pricing to reward the traditional businesses for allowing the online businesses to use its core assets and capabilities. It should include having the heads of the online businesses report to a senior executive-even directly to the CEO.
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The online word creating a host of opportunities in financial services. Banks enjoy many natural advantages that could give them the Upper hand in the emerging battle to exploit those opportunities. But it will require coverage imagination and decision action.
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ONLINE FINANCE:
By 2003, 18 million households will be paying their bill online, according to Jupiter media matrix (new York). By contrast less than 2 million house hold pay that way today, financial are joining a growing rosters of players, from processor to internet portals that are looking to capitalize on this high-potential market. The growth of market will be driven in the part of electronic bill presentment & payment (EBPP) capability on mass scale over the next few years, research firm data monitor (London) project that 7,500 new billers will have EBPP infrastructure to place by 2004. Even consumer who embrace the concept of online bill paying want to view their bills, not just summery of total amount owned, which is the only option they have today in many cases.
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online and real time with launch of its payment gateway. It has tied up with the numbers of portals to offer business-to-consumer e-commerce transactions. ICICI bank Ltd has set up a web-based joint venture for online distribution of its retail banking products & services on the internet, in collaboration with satyam infoway, a private ISP through a portal named as icicisify.com. HDFC bank Ltd with its freedom the e age saving account service. Citibank with suvidha & ICICI bank Ltd. With its mobile commerce service have tied up with its cellphone operation to offer mobile banking to their customers.
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security risk:
security risk arises on account of unauthorized access to banks critical information stores like accounting system, risk management system etc. a breach of security could result in direct financial loss to the bank. Other risk are related loss of reputation, infringing customers privacy and its legal implications etc.
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3) legal risk:
legal arises from violation of, or non-conformance with laws rules regulation or prescribed practices or when the legal rights & obligation of parties to a transaction are not well established. Given the relatively new nature of e-banking rights & obligation in some cases are certain & applicability of laws & rules in uncertain or ambiguous, thus causing legal risk. 4)
Cross-border risk:
Cross-border transaction accentuates risk, since it is difficult to appraise an application for a loan from a customers in another country compared to a customer from a familiar customer base.
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Conclusion:
Coverage is one of the clear visible trends in the banking industry. Here coverage means not offering banking broking & insurance service under one corporate name through the internet. It covers different dimensions, including channel delivery, sales culture, and back office processes & the knowledge management instructions all being integrated via internet. Another trend in internet banking is a shift of focus of the bank from being product centric to customer centric. Access to the Internet have put wealth management decision & demand side technology in customer hands. The bank continued is dominant positions. To succeed internet bank must continually differentiate from their competitors broaden their market & provide value through their products and services.
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BIBILOGRAPHY:
BOOKS: E-banking by IFCAI edited by Vivek Gupta. E-banking by Vasu Deva Internet banking Websites: www.google.com www.wikepedia.org News paper: Times of India
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