A PROJECT REPORT ON

INFORMATION TECHNOLOGY IN BANKING

SUBMITTED BY
IMRAN KHAN

BECHELOR OF COMMERCE (BANKING & INSURANCE)

SEMESTER V
SEAT NO: BI163011
UNDER THE GUIDANCE OF
MS. MONICA BHATIA

ST.PAUL DEGREE COLLEGE

ULHASNAGAR

SUBMITTED TO
UNIVERSITY OF MUMBAI
ACADEMIC YEAR 2016-2017
ST.PAUL DEGREE COLLEGE & JUNIOR COLLEGE

INFORMATION
TECHNOLOGY IN
BANKING

IMRAN KHAN

1
 PROJECT ON
INFORMATION TECHNOLOGY IN BANKING

BECHELOR OF COMMERCE (BANKING & INSURANCE)

SEMESTER V
2016-2017

SUBMITTED BY
IMRAN KHAN
SEAT NO: BI163011

ST.PAUL COLLEGE
ULHASNAGER-4

2
 DECLARATION

I Imran Khan the student of B.Com Banking and Insurance

Semester V (2016-17) hereby declare that I have
Information
completed the project on
Technology in Banking.

The information submitted is true and original to the best

of my knowledge.

_____________________
(Signature of Student)
IMRAN KHAN

St. Paul College

Behind V.T.C. Ground, Near Ganesh Mandir,
Ashelepada,Ulhasnagar 4, Ulhasnagar, Maharashtra 421004

3
 CERTIFICATE

This is to certify that Mr./Ms. IMRAN.A.KHAN, Roll no:BI163011of

Third Year B.B.I., Semester V (2016- 2017) has successfully completed
the project on INFORMATION TECHNOLOGY IN BANKING during
the academic years 2016-17, under the guidance of Ms. MONICA
BHATIA submitted to this college in fulfillment of curriculum of

BACHELOR OF BANKING & INSURANCE (BBI),

UNIVERSITY OF MUMBAI.

This is a bonafide project work and the information presented is

true and original to the best of our knowledge and belief.

________________ ____________
Course Coordinator Principal

_________________ _____________
Project Guide/ Internal Examiner External Examiner

4
 ACKNOWLEDGEMENT

Many people have played a part in making this project study a success
by giving their valuable inputs and useful suggestions.

Firstly I would express my gratitude to the University Of Mumbai for

providing me the opportunity to study the practical aspects of banking
and insurance.

I am thankful to the principal Dr. Antony Lawrence for giving me an

opportunity to work on this project.

I am also thankful to our coordinator Amelia Antony for her

immeasurable encouragement and support.

I am also particularly grateful to my project guide Ms. Monica Bhatia

Madam for extending his support and time.

5
 INDEX
Chapter No. Titles Pg. No.
1 Introduction 6
2 Role Of Technology 14
3 E-Banking 14
4 Digital Signatures 19
5 Card Skimming 22
6 Credit Cards 23
7 Mobile Banking 29
8 Electronic Funds Transfer 30
9 Debit Cards 30
10 Telephone Banking 36
11 Uses Of Information Technology 36
In Banks
12 Technology Vision 2020 41
13 Present Level of Computerization 45
14 Advantages of Technology 47
15 Disadvantages of Technology 49
16 Nature and Change in Banking 50
17 Issues and Challenges 53
18 Countermeasures to Frauds 55
19 Conclusion 56
20 Bibliography 57

6
INTRODUCTION

In the five decades since independence, banking in India has evolved through four
distinct phases. During Fourth phase, also called as Reform Phase,
Recommendations of the Narasimham Committee (1991) paved the way for the
reform phase in the banking. Important initiatives with regard to the reform of the
banking system were taken in this phase. Important among these have been
introduction of new accounting and prudential norms relating to income
recognition, provisioning and capital adequacy, deregulation of interest rates &
easing of norms for entry in the field of banking.

7
Entry of new banks resulted in a paradigm shift in the ways of banking in India.
The growing competition, growing expectations led to increased awareness
amongst banks on the role and importance of technology in banking. The arrival of
foreign and private banks with their superior state-of-the-art technology-based
services pushed Indian Banks also to follow suit by going in for the latest
technologies so as to meet the threat of competition and retain their customer base.

Indian banking industry, today is in the midst of an IT revolution. A combination of

regulatory and competitive reasons have led to increasing importance of total
banking automation in the Indian Banking Industry.

Information Technology has basically been used under two different avenues in
Banking. One is Communication and Connectivity and other is Business Process
Reengineering. Information technology enables sophisticated product
development, better market infrastructure, implementation of reliable techniques
for control of risks and helps the financial intermediaries to reach geographically
distant and diversified markets.

In view of this, technology has changed the contours of three major functions
performed by banks, i.e., access to liquidity, transformation of assets and
monitoring of risks. Further, Information technology and the communication
networking systems have a crucial bearing on the efficiency of money, capital and
foreign exchange markets.

The Software Packages for Banking Applications in India had their beginnings in
the middle of 80s, when the Banks started computerising the branches in a limited
manner. The early 90s saw the plummeting hardware prices and advent of cheap
and inexpensive but high-powered PCs and servers and banks went in for what was
called Total Branch Automation (TBA) Packages. The middle and late 90s
witnessed the tornado of financial reforms, deregulation, globalisation etc coupled

8
with rapid revolution in communication technologies and evolution of novel
concept of 'convergence' of computer and communication technologies, like
Internet, mobile / cell phones etc.

MILESTONES

In India, banks as well as other financial entities entered the world of information
technology and with Indian Financial Net (INFINET). INFINET, a wide area
satellite based network (WAN) using VSAT (Very Small Aperture Terminals)
technology, was jointly set up by the Reserve Bank and Institute for Development
and Research in Banking Technology (IDRBT) in June 1999.

The Indian Financial Network (INFINET) which initially comprised only the
public sector banks was opened up for participation by other categories of
members.

The first set of applications that could benefit greatly from the use of technological
advances in the computer and communications area relate to the Payment systems
which form the lifeline of any banking activity. The process of reforms in payment
and settlement systems has gained momentum with the implementation of projects
such as NDS ((Negotiated Dealing System), CFMS (Centralised Funds
Management System) for better funds management by banks and SFMS
(Structured Financial Messaging Solution) for secure message transfer. This would
result in funds transfers and funds-related message transfer to be routed
electronically across banks using the medium of the INFINET. Negotiated dealing
system (NDS), which has become operational since February 2002 and RTGS
(Real Time Gross Settlement system) scheduled towards the end of 2003 are other
major developments in the area.

9
Internet has significantly influenced delivery channels of the banks. Internet has
emerged as an important medium for delivery of banking products & services.
Detailed guidelines of RBI for Internet Banking has prepared the necessary ground
for growth of Internet Banking in India.

The Information Technology Act, 2000 has given legal recognition to creation,
trans-mission and retention of an electronic (or magnetic) data to be treated as
valid proof in a court of law, except in those areas, which continue to be governed
by the provisions of the Negotiable Instruments Act, 1881.

As stated in RBI's Annual Monetary and Credit Policy 2002-2003: "To reap the full
benefits of such electronic message transfers, it is necessary that banks bestow
sufficient attention on the computerisation and networking of the branches situated
at commercially important centres on a time-bound basis. Intra-city and intra-bank
networking would facilitate in addressing the "last mile" problem which would in
turn result in quick and efficient funds transfers across the country".

Implementation of Centralised Funds Management System

The centralised funds management system (CFMS) provides for a centralised

viewing of balance positions of the account holders across different accounts
maintained at various locations of RBI. While the first phase of the system
covering the centralised funds enquiry system (CFES) has been made available to
the users, the second phase comprising the centralised funds transfer system
(CFTS) would be made available by the middle of 2003. So far, 54 banks have
implemented the system at their treasuries/funds management branches.

Certification and Digital Signatures

10
The mid-term Review of October 2002 indicated the need for information security
on the network and the use of public key infrastructure (PKI) by banks. The
Controller of Certifying Authorities, Government of India, have approved the
Institute for Development and Research in Banking Technology (IDRBT) as a
Certification Authority (CA) for digital signatures. Consequently, the process of
setting up of registration authorities (RA) under the CA has commenced at various
banks. In addition to the negotiated dealing system (NDS), the electronic clearing
service (ECS) and electronic funds transfer (EFT) are also being enhanced in terms
of security by means of implementation of PKI and digital signatures using the
facilities offered by the CA.

Committee on Payment Systems

In order to examine the entire gamut of the process of reforms in payment and
settlement systems which would be culminating with the real time gross settlement
(RTGS) system, a Committee on Payment Systems (Chairman: Dr. R.H. Patil) was
set up in 2002. The Committee, after examining the various aspects relating to
payment and settlement systems, submitted its report in September 2002 along
with a draft Payment Systems Bill. The draft Bill provides, inter alia, a legal basis
for netting, apart from empowering RBI to have regulatory and oversight powers
over payment and settlement systems of the country. The report of the Committee
was put on the RBI website for wider dissemination. The draft Bill has been
forwarded to the Government.

Multi-application Smart Cards

Recognising the need for technology based payment products and the growing
importance of smart card based payment flows, a pilot project for multi-application
smart cards in conjunction with a few banks and vendors, under the aegis of the
Ministry of Communications and Information Technology, Government of India,
has been initiated. The project is aimed at the formulation of standards for multi-

11
application smart cards on the basis of inter-operable systems and technological
components of the entire system.

Special Electronic Funds Transfer

As indicated in the mid-term Review of October 2002, national EFT (NEFT) is

being introduced using the backbone of the structured financial messaging system
(SFMS) of the IDRBT. NEFT would provide for movement of electronic transfer
of funds in a safe, secure and quick manner across branches of any bank to any
other bank through a central gateway of each bank, with the inter-bank settlement
being effected in the books of account of banks maintained at RBI. Since this
scheme requires connectivity across a large number of branches at many cities, a
special EFT (SEFT) was introduced in April 2003 covering about 3000 branches in
500 cities. This has facilitated same day transfer of funds across accounts of
constituents at all these branches.

National Settlement System (NSS)

The clearing and settlement activities are dispersed through 1,047 clearing houses
managed by RBI, the State Bank of India and its associates, public sector banks
and other institutions. In order to facilitate banks to have better control over their
funds, it is proposed to introduce national settlement system (NSS) in a phased
manner.

Real Time Gross Settlement System (RTGS)

As indicated in the mid-term Review of October 2002, development of the various

software modules for the RTGS system is in progress. The initial set of modules is
expected to be delivered by June 2003 for members to conduct tests and

12
familiarisation exercises. The live run of RTGS is scheduled towards the end of
2003.

Reporting of Call/Notice Money Market Transactions on NDS Platform

Negotiated dealing system (NDS), which has become operational since February
2002, enables on-line dealing and dissemination of trade information relating to
instruments in money, government securities and foreign exchange markets.
Membership in NDS is open to all institutions which are members of INFINET and
are maintaining subsidiary general ledger (SGL) Account with RBI. These include
banks, financial institutions (FIs), primary dealers (PDs), insurance companies,
mutual funds and any other institution as admitted by RBI. At present, all deals in
government securities, call/notice/term money, CDs and CP executed among NDS
members have to be reported automatically through NDS, if the deal is done on
NDS and within 15 minutes of concluding the deal, if done outside NDS. However,
it has been observed that a very sizeable proportion of daily call/notice money
market deals is not reported by members on NDS as stipulated. With a view to
improving transparency and strengthening efficiency in the market, it is proposed
that:

1. From the fortnight beginning May 3, 2003, it would be mandatory for all NDS
members to report all their call/notice money market deals on NDS. Deals done
outside NDS should be reported within 15 minutes on NDS, irrespective of the size
of the deal or whether the counterparty is a member of the NDS or not.

2. Full compliance with the reporting requirement to NDS will be reviewed in

September 2003. In case there is repeated non-reporting of deals by an NDS
member, it will be considered whether non-reported deals by that member should
be treated as invalid with effect from a future date.

13
ROLE OF TECHNOLOGY

Information Technology has basically been used under two different avenues in
Banking. One is Communication and Connectivity and other is Business Process
Reengineering. Information technology enables sophisticated product
development, better market infrastructure, implementation of reliable techniques
for control of risks and helps the financial intermediaries to reach geographically
distant and diversified markets. In view of this, technology has changed the
contours of three major functions performed by banks, i.e., access to liquidity,
transformation of assets and monitoring of risks. Further, Information technology
and the communication networking systems have a crucial bearing on the
efficiency of money, capital and foreign exchange markets. 1Internet has
significantly influenced delivery channels of the banks. Internet has emerged as an
important medium for delivery of banking products & services. Detailed guidelines
of RBI for Internet Banking has prepared the necessary ground for growth of
Internet Banking in India.

The Information Technology Act, 2000 has given legal recognition to creation,
transmission and retention of an electronic (or magnetic) data to be treated as valid
proof in a court of law, except in those areas, which continue to be governed by the
provisions of the Negotiable Instruments Act, 1881. As stated in RBI's Annual
Monetary and Credit Policy 2002-2003: "To reap the full benefits of such
electronic message transfers, it is necessary that banks bestow sufficient attention
on the computerisation and networking of the branches situated at commercially
important centres on a time-bound basis. Intra-city and intra-bank networking
would facilitate in addressing the "last mile" problem which would in turn result in
quick and efficient funds transfers across the country".

E-BANKING

14
Online banking (or Internet banking) allows customers to conduct financial
transactions on a secure website operated by their retail or virtual bank, credit
union or building society.

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

o Transactional (e.g., performing a financial transaction such as an

account to account transfer, paying a bill, wire transfer, apply for a
loan, new account, etc.)
o Payments to third parties, including bill payments and
telegraphic/wire transfers
o Funds transfers between a customer's own transactional account and
savings accounts
o Investment purchase or sale
o Loan applications and transactions, such as repayments of enrollments
o Non-transactional (e.g., online statements, cheque links, cobrowsing,
chat)
o Viewing recent transactions
o Downloading bank statements , for example in PDF format
o Viewing images of paid cheques
o Financial Institution Administration
o Management of multiple users having varying levels of authority
o Transaction approval process

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.

History of E-Banking

The precursor for the modern home online banking services were the distance
banking services over electronic media from the early 1980s. The term online
became popular in the late '80s and referred to the use of a terminal, keyboard and
15
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 andManufacturers
Hanover) offered home banking services[1] using the videotex system. Because of
the commercial failure of videotex these banking services never 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[2] was set up by Bank of Scotland for
customers of the Nottingham Building Society (NBS) in 1983.[3] 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.[citation needed]

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.

Security

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.

16
1. 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 asecurity token. These token generated
TANs depend on the time and a unique secret, stored in the security token (this is
called two-factor 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.

Another way to provide TANs to an online banking user is to send the TAN of the
current bank transaction to the user's (GSM) mobile phone via SMS. The SMS text
usually quotes the transaction amount and details, the TAN is only valid for a short
period of time. Especially in Germany and Austria, many banks have adopted this
"SMS TAN" service as it is considered very secure.

2. 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.

Attacks

Most of the attacks on online banking used today are based on deceiving the user
to steal login data and valid TANs. Two well known examples for those attacks are
phishing and pharming. Cross-site scripting and keylogger/Trojan horses can also
be used to steal login information.

A method to attack signature based online banking methods is to manipulate the

used software in a way, that correct transactions are shown on the screen and faked
transactions are signed in the background.

A recent FDIC Technology Incident Report, compiled from suspicious activity

reports banks file quarterly, lists 536 cases of computer intrusion, with an average
loss per incident of $30,000. That adds up to a nearly $16-million loss in the
second quarter of 2007. Computer intrusions increased by 150 percent between the

17
first quarter of 2007 and the second. In 80 percent of the cases, the source of the
intrusion is unknown but it occurred during online banking, the report states.

The most recent kind of attack is the so-called Man in the Browser attack, where a
Trojan horse permits a remote attacker to modify the destination account number
and also the amount.

Countermeasures

There exist several countermeasures which try to avoid attacks. Digital certificates
are used against phishing and pharming, the use of class-3 card readers is a
measure to avoid manipulation of transactions by the software in signature based
online banking variants. To protect their systems against Trojan horses, users
should use virus scanners and be careful with downloaded software or e-mail
attachments.

DIGITAL SIGNATURES

A digital signature or digital signature scheme is a mathematical scheme for

demonstrating the authenticity of a digital message or document. A valid digital
signature gives a recipient reason to believe that the message was created by a
known sender, and that it was not altered in transit. Digital signatures are
commonly used for software distribution, financial transactions, and in other cases
where it is important to detect forgery or tampering.

Digital signatures are often used to implement electronic signatures, a broader term
that refers to any electronic data that carries the intent of a signature, but not all
electronic signatures use digital signatures. In some countries, including the United
States, India, and members of the European Union, electronic signatures have legal
significance. However, laws concerning electronic signatures do not always make
clear whether they are digital cryptographic signatures in the sense used here,
leaving the legal definition, and so their importance, somewhat confused.

18
Digital signatures employ a type of asymmetric cryptography. For messages sent
through a nonsecure channel, a properly implemented digital signature gives the
receiver reason to believe the message was sent by the claimed sender. Digital
signatures are equivalent to traditional handwritten signatures in many respects;
properly implemented digital signatures are more difficult to forge than the
handwritten type. Digital signature schemes in the sense used here are
cryptographically based, and must be implemented properly to be effective. Digital
signatures can also provide non-repudiation, meaning that the signer cannot
successfully claim they did not sign a message, while also claiming their private
key remains secret; further, some non-repudiation schemes offer a time stamp for
the digital signature, so that even if the private key is exposed, the signature is
valid nonetheless. Digitally signed messages may be anything representable as a
bitstring: examples include electronic mail, contracts, or a message sent via some
other cryptographic protocol.

A digital signature scheme typically consists of three algorithms:

1. A key generation algorithm that selects a private key uniformly at random

from a set of possible private keys. The algorithm outputs the private key and a
corresponding public key.

2. A signing algorithm that, given a message and a private key, produces a

signature.

3. A signature verifying algorithm that, given a message, public key and a

signature, either accepts or rejects the message's claim to authenticity.

Two main properties are required. First, a signature generated from a fixed
message and fixed private key should verify the authenticity of that message by
using the corresponding public key. Secondly, it should be computationally
infeasible to generate a valid signature for a party who does not possess the private
key.

Uses of digital signatures

As organizations move away from paper documents with ink signatures or

authenticity stamps, digital signatures can provide added assurances of the
evidence to provenance, identity, and status of an electronic document as well as

19
acknowledging informed consent and approval by a signatory. The United States
Government Printing Office (GPO) publishes electronic versions of the budget,
public and private laws, and congressional bills with digital signatures.
Universities including Penn State, University of Chicago, and Stanford are
publishing electronic student transcripts with digital signatures.

Below are some common reasons for applying a digital signature to

communications:

Authentication

Although messages may often include information about the entity sending a
message, that information may not be accurate. Digital signatures can be used to
authenticate the source of messages. When ownership of a digital signature secret
key is bound to a specific user, a valid signature shows that the message was sent
by that user. The importance of high confidence in sender authenticity is especially
obvious in a financial context. For example, suppose a bank's branch office sends
instructions to the central office requesting a change in the balance of an account.
If the central office is not convinced that such a message is truly sent from an
authorized source, acting on such a request could be a grave mistake.

Integrity

In many scenarios, the sender and receiver of a message may have a need for
confidence that the message has not been altered during transmission. Although
encryption hides the contents of a message, it may be possible to change an
encrypted message without understanding it. (Some encryption algorithms, known
as nonmalleable ones, prevent this, but others do not.) However, if a message is
digitally signed, any change in the message after signature will invalidate the
signature. Furthermore, there is no efficient way to modify a message and its
signature to produce a new message with a valid signature, because this is still

20
considered to be computationally infeasible by most cryptographic hash functions
(see collision resistance).

Digital signatures vs. ink on paper signatures

An ink signature can be easily replicated from one document to another by copying
the image manually or digitally. Digital signatures cryptographically bind an
electronic identity to an electronic document and the digital signature cannot be
copied to another document. Paper contracts often have the ink signature block on
the last page, and the previous pages may be replaced after a signature is applied.
Digital signatures can be applied to an entire document, such that the digital
signature on the last page will indicate tampering if any data on any of the pages
have been altered.

CARD SKIMMING

Card skimming is the illegal copying of information from the magnetic strip of a
credit or ATM card. It is a more direct version of a phishing scam.The scammers
try to steal your details so they can access your accounts. Once scammers have
skimmed your card, they can create a fake or cloned card with your details on it.
The scammer is then able to run up charges on your account.Card skimming is also
a way for scammers to steal your identity (your personal details) and use it to
commit identity fraud. By stealing your personal details and account numbers the
scammer may be able to borrow money or take out loans in your name.

Warning signs

A shop assistant takes your card out of your sight in order to process your
transaction.

You are asked to swipe your card through more than one machine.

You see a shop assistant swipe the card through a different machine to the
one you used.

You notice something suspicious about the card slot on an ATM (e.g. an
attached device).

21
 You notice unusual or unauthorised transactions on your account or credit
card statement.

Protect yourself from card skimming

Keep your credit card and ATM cards safe. Do not share your personal
identity number (PIN) with anyone. Do not keep any written copy of your PIN
with the card.

Check your bank account and credit card statements when you get them. If
you see a transaction you cannot explain, report it to your credit union or bank.

Choose passwords that would be difficult for anyone else to guess.

CREDIT CARDS

A credit card is a small plastic card issued to users as a system of payment. It

allows its holder to buy goods and services based on the holder's promise to pay
for these goods and services.[1] The issuer of the card creates a revolving account
and grants a line of credit to the consumer (or the user) from which the user can
borrow money for payment to a merchant or as a cash advance to the user.

A credit card is different from a charge card: a charge card requires the balance to
be paid 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.
Most credit cards are issued by banks or credit unions, and are the shape and size
specified by the ISO/IEC 7810standard as ID-1. This is defined as 85.60 53.98
mm (3.370 2.125 in) (33/8 21/8 in) in size

How credit cards work

Credit cards are issued by a credit card issuer, such as a bank or credit union, after
an account has been approved by the credit provider, after which cardholders can
use it to make purchases at merchants accepting that card. Merchants often
advertise which cards they accept by displaying acceptance marks generally
22
derived from logos or may communicate this orally, as in "Credit cards are fine"
(implicitly meaning "major brands"), "We take (brands X, Y, and Z)", or "We don't
take credit cards".

When a purchase is made, the credit card user agrees to pay the card issuer. The
cardholder indicates consent to pay by signing a receiptwith a record of the card
details and indicating the amount to be paid or by entering a personal identification
number (PIN). Also, many merchants now accept verbal authorizations via
telephone and electronic authorization using the Internet, known as a card not
present transaction (CNP).

Electronic verification systems allow merchants to verify in a few seconds that the
card is valid and the credit card customer has sufficient credit to cover the
purchase, allowing the verification to happen at time of purchase. The verification
is performed using a credit card payment terminal or point-of-sale (POS) system
with a communications link to the merchant's acquiring bank. Data from the card is
obtained from amagnetic stripe or chip on the card; the latter system is called Chip
and PIN in the United Kingdom and Ireland, and is implemented as anEMV card.

For card not present transactions where the card is not shown (e.g., e-commerce,
mail order, and telephone sales), merchants additionally verify that the customer is
in physical possession of the card and is the authorized user by asking for
additional information such as thesecurity code printed on the back of the card,
date of expiry, and billing address.

Each month, the credit card user is sent a statement indicating the purchases
undertaken with the card, any outstanding fees, and the total amount owed. After
receiving the statement, the cardholder may dispute any charges that he or she
thinks are incorrect (see 15 U.S.C. 1643, which limits cardholder liability for
unauthorized use of a credit card to $50, and the Fair Credit Billing Act for details
of the US regulations). Otherwise, the cardholder must pay a defined minimum
proportion of the bill by a due date, or may choose to pay a higher amount up to
the entire amount owed. The credit issuer charges interest on the amount owed if
the balance is not paid in full (typically at a much higher rate than most other
forms of debt). In addition, if the credit card user fails to make at least the
minimum payment by the due date, the issuer may impose a "late fee" and/or other

23
penalties on the user. To help mitigate this, some financial institutions can arrange
for automatic payments to be deducted from the user's bank accounts, thus
avoiding such penalties altogether as long as the cardholder has sufficient funds.

Interest charges

Credit card issuers usually waive interest charges if the balance is paid in full each
month, but typically will charge full interest on the entire outstanding balance from
the date of each purchase if the total balance is not paid.

For example, if a user had a $1,000 transaction and repaid it in full within this
grace period, there would be no interest charged. If, however, even $1.00 of the
total amount remained unpaid, interest would be charged on the $1,000 from the
date of purchase until the payment is received. The precise manner in which
interest is charged is usually detailed in a cardholder agreement which may be
summarized on the back of the monthly statement. The general calculation formula
most financial institutions use to determine the amount of interest to be charged is
APR/100 x ADB/365 x number of days revolved. Take the annual percentage rate
(APR) and divide by 100 then multiply to the amount of the average daily balance
(ADB) divided by 365 and then take this total and multiply by the total number of
days the amount revolved before payment was made on the account. Financial
institutions refer to interest charged back to the original time of the transaction and
up to the time a payment was made, if not in full, as RRFC or residual retail
finance charge. Thus after an amount has revolved and a payment has been made,
the user of the card will still receive interest charges on their statement after paying
the next statement in full (in fact the statement may only have a charge for interest
that collected up until the date the full balance was paid, i.e. when the balance
stopped revolving).

The credit card may simply serve as a form of revolving credit, or it may become a
complicated financial instrument with multiple balance segments each at a
different interest rate, possibly with a single umbrella credit limit, or with separate
credit limits applicable to the various balance segments. Usually this
compartmentalization is the result of special incentive offers from the issuing bank,
to encourage balance transfers from cards of other issuers. In the event that several
interest rates apply to various balance segments, payment allocation is generally at

24
the discretion of the issuing bank, and payments will therefore usually be allocated
towards the lowest rate balances until paid in full before any money is paid
towards higher rate balances. Interest rates can vary considerably from card to
card, and the interest rate on a particular card may jump dramatically if the card
user is late with a payment on that card or any other credit instrument, or even if
the issuing bank decides to raise its revenue.

Benefits to customers

The main benefit to each customer is convenience. Compared to debit cards and
cheques, a credit card allows small short-term loans to be quickly made to a
customer who need not calculate a balance remaining before every transaction,
provided the total charges do not exceed the maximum credit line for the card.
Credit cards also provide more fraud protection than debit cards. In the UK for
example, the bank is jointly liable with the merchant for purchases of defective
products over 100.[5]

Many credit cards offer rewards and benefits packages, such as offering enhanced
product warranties at no cost, free loss/damage coverage on new purchases, and
points which may be redeemed for cash, products, or airline tickets. Additionally,
carrying a credit card may be a convenience to some customers as it eliminates the
need to carry any cash for most purposes.

MOBILE BANKING

Mobile banking (also known as M-Banking, mbanking, SMS Banking) is a term

used for performing balance checks, account transactions, payments, credit
applications and other banking transactions through a mobile device such as a
mobile phone or Personal Digital Assistant (PDA). The earliest mobile banking
services were offered over SMS. With the introduction of the first primitive smart
phones withWAP support enabling the use of the mobile web in 1999, the first
European banks started to offer mobile banking on this platform to their
customers .

Mobile banking has until recently (2010) most often been performed via SMS or
the Mobile Web. Apple'sinitial success with iPhone and the rapid growth of phones

25
based on Google's Android (operating system)have led to increasing use of special
client programs, called apps, downloaded to the mobile device.

Mobile Banking Services

Mobile banking can offer services such as the following:

Account Information

1. Mini-statements and checking of account history

2. Alerts on account activity or passing of set thresholds

3. Monitoring of term deposits

4. Access to loan statements

5. Access to card statements

6. Mutual funds / equity statements

7. Insurance policy management

8. Pension plan management

9. Status on cheque, stop payment on cheque

10. Ordering cheque books

11. Balance checking in the account

12. Recent transactions

13. Due date of payment (functionality for stop, change and deleting of
payments)

14. PIN provision, Change of PIN and reminder over the Internet

15. Blocking of (lost, stolen) cards

Payments, Deposits, Withdrawals, and Transfers

1. Domestic and international fund transfers

26
2. Micro-payment handling

3. Mobile recharging

4. Commercial payment processing

5. Bill payment processing

6. Peer to Peer payments

7. Withdrawal at banking agent

8. Deposit at banking agent

2A specific sequence of SMS messages will enable the system to verify if the
client has sufficient funds in his or her wallet and authorize a deposit or withdrawal
transaction at the agent. When depositing money, the merchant receives cash and
the system credits the client's bank account or mobile wallet. In the same way the
client can also withdraw money at the merchant: through exchanging sms to
provide authorization, the merchant hands the client cash and debits the merchant's
account.

Investments

1. Portfolio management services

2. Real-time stock quotes

3. Personalized alerts and notifications on security prices

Support

1. Status of requests for credit, including mortgage approval, and insurance

coverage

2. Check (cheque) book and card requests

3. Exchange of data messages and email, including complaint submission and

tracking

4. ATM Location

27
Content Services

1. General information such as weather updates, news

2. Loyalty-related offers

3. Location-based services

Based on a survey conducted by Forrester, mobile banking will be attractive

mainly to the younger, more "tech-savvy" customer segment. A third of mobile
phone users say that they may consider performing some kind of financial
transaction through their mobile phone. But most of the users are interested in
performing basic transactions such as querying for account balance and making bill
payment.

ELECTRONIC FUNDS TRANSFER

Electronic funds transfer or EFT is the electronic exchange or transfer of money

from one account to another, either within a single financial institution or across
multiple institutions, through computer-based systems.

The term is used for a number of different concepts:

o Cardholder-initiated transactions, where a cardholder makes use of a

payment card
o Direct deposit payroll payments for a business to its employees,
possibly via a payroll service bureau
o Direct debit payments, sometimes called electronic checks, for which
a business debits the consumer's bank accounts for payment for goods
or services
o Electronic bill payment in online banking, which may be delivered by
EFT or paper check
o Transactions involving stored value of electronic money, possibly in a
private currency
o Wire transfer via an international banking network (carries a higher
fee in North America)
o Electronic Benefit Transfer

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In 1978 U.S. Congress passed the Electronic Funds Transfer Act to establish the
rights and liabilities of consumers as well as the responsibilities of all participants
in EFT activities in the United States.

RTGS

Real time gross settlement systems (RTGS) are funds transfer systems where
transfer of money or securities[1] takes place from one bank to another on a "real
time" and on "gross" basis. Settlement in "real time" means payment transaction is
not subjected to any waiting period. The transactions are settled as soon as they are
processed. "Gross settlement" means the transaction is settled on one to one basis
without bunching or netting with any other transaction. Once processed, payments
are final and irrevocable.

Fees for RTGS vary from bank to bank.RBI has prescribed upper limit for the fees
which can be charged by all banks both for NEFT and RTGS. Both the remitting
and receiving must have Core banking in place to enter into RTGS transactions.
Core Banking enabled banks and branches are assigned an Indian Financial System
Code (IFSC) for RTGS and NEFT purposes. This is an eleven digit alphanumeric
code and unique to each branch of bank. The first four alphabets indicate the
identity of the bank and remaining seven numerals indicate a single branch. This
code is provided on the cheque books, which are required for transactions along
with recipient's account number.

RTGS is a large value (minimum value of transaction should be Rs 2,00,000) funds

transfer system whereby financial intermediaries can settle interbank transfers for
their own account as well as for their customers. The system effects final
settlement of interbank funds transfers on a continuous, transaction-by-transaction
basis throughout the processing day. Customers can access the RTGS facility
between 9 am to 4:30 pm on week days and 9 am to 1:30 pm on Saturday.
However, the timings that the banks follow may vary depending on the customer
timings of the bank branches.

Banks could use balances maintained under the cash reserve ratio (CRR) and the
intra-day liquidity (IDL) to be supplied by the central bank, for meeting any
eventuality arising out of the real time gross settlement (RTGS). The RBI fixed the
IDL limit for banks to three times their net owned fund (NOF).

29
The IDL will be charged at Rs 25 per transaction entered into by the bank on the
RTGS platform. The marketable securities and treasury billswill have to be placed
as collateral with a margin of five per cent. However, the apex bank will also
impose severe penalties if the IDL is not paid back at the end of the day.

National Electronic Fund Transfer

National Electronic Fund Transfer (NEFT) is an online system for transferring

funds of Indian financial institution (especially banks).There is no minimum limit
for fund transfer in NEFT system.

DEBIT CARDS

A debit card (also known as a bank card or check card) is a plastic card that
provides the cardholder electronic access to his or her bank account/s at a financial
institution. Some cards have a stored value with which a payment is made, while
most relay a message to the cardholder's bank to withdraw funds from a designated
account in favor of the payee's designated bank account. The card can be used as
an alternative payment method to cash when making purchases. In some cases, the
cards are designed exclusively for use on the Internet, and so there is no physical
card.

In many countries the use of debit cards has become so widespread that their
volume of use has overtaken or entirely replaced the check and, in some instances,
cash transactions. Like credit cards, debit cards are used widely for telephone and
Internet purchases.

However, unlike credit cards, the funds paid using a debit card are transferred
immediately from the bearer's bank account, instead of having the bearer pay back
the money at a later date.

Debit cards usually also allow for instant withdrawal of cash, acting as the ATM
card for withdrawing cash and as a check guarantee card. Merchants may also offer
cashback facilities to customers, where a customer can withdraw cash along with
their purchase.

Online Debit System

30
Online debit cards require electronic authorization of every transaction and the
debits are reflected in the users account immediately. The transaction may be
additionally secured with the personal identification number (PIN) authentication
system and some online cards require such authentication for every transaction,
essentially becoming enhanced automatic teller machine(ATM) cards. One
difficulty in using online debit cards is the necessity of an electronic authorization
device at the point of sale (POS) and sometimes also a separate PINpad to enter the
PIN, although this is becoming commonplace for all card transactions in many
countries. Overall, the online debit card is generally viewed as superior to the
offline debit card because of its more secure authentication system and live status,
which alleviates problems with processing lag on transactions that may only issue
online debit cards. Some on-line debit systems are using the normal authentication
processes of Internet banking to provide real-time on-line debit transactions. The
most notable of these are Ideal and POLi.

Offline Debit System

Offline debit cards have the logos of major credit cards (for example, Visa or
MasterCard) or major debit cards (for example, Maestro in the United Kingdom
and other countries, but not the United States) and are used at the point of sale like
a credit card (with payer's signature). This type of debit card may be subject to a
daily limit, and/or a maximum limit equal to the current/checking account balance
from which it draws funds. Transactions conducted with offline debit cards require
23 days to be reflected on users account balances. In some countries and with
some banks and merchant service organizations, a "credit" or offline debit
transaction is without cost to the purchaser beyond the face value of the
transaction, while a small fee may be charged for a "debit" or online debit
transaction (although it is often absorbed by the retailer). Other differences are that
online debit purchasers may opt to withdraw cash in addition to the amount of the
debit purchase (if the merchant supports that functionality); also, from the
merchant's standpoint, the merchant pays lower fees on online debit transaction as
compared to "credit" (offline) debit transaction.

Prepaid debit cards

31
Prepaid debit cards, also called reloadable debit cards or reloadable prepaid cards,
are often used for recurring payments. The payer loads funds to the cardholder's
card account. Prepaid debit cards use either the offline debit system or the online
debit system to access these funds. Particularly for companies with a large number
of payment recipients abroad, prepaid debit cards allow the delivery of
international payments without the delays and fees associated with international
checks and bank transfers. Providers include Caxton FX prepaid cards, Escape
prepaid cards, Travelex prepaid cards and TransCash prepaid Visa cards. Whereas,
web-based services such as stock photography websites (istockphoto), outsourced
services (oDesk),money transfer services (Western Union) and affiliate networks
(MediaWhiz) have all started offering prepaid debit cards for their
contributors/freelancers/vendors.

Advantages of debit cards

a. A consumer who is not credit worthy and may find it difficult or

impossible to obtain a credit card can more easily obtain a debit card,
allowing him/her to make plastic transactions. For example,
legislation often prevents minors from taking out debt, which includes
the use of a credit card, but not online debit card transactions.
b. For most transactions, a check card can be used to avoid check writing
altogether. Check cards debit funds from the user's account on the
spot, thereby finalizing the transaction at the time of purchase, and
bypassing the requirement to pay a credit card bill at a later date, or to
write an insecure check containing the account holder's personal
information.
c. Like credit cards, debit cards are accepted by merchants with less
identification and scrutiny than personal checks, thereby making
transactions quicker and less intrusive. Unlike personal checks,
merchants generally do not believe that a payment via a debit card
may be later dishonored.
d. Unlike a credit card, which charges higher fees and interest rates when
a cash advance is obtained, a debit card may be used to obtain cash
from an ATM or a PIN-based transaction at no extra charge, other than
a foreign ATM fee.

32
Disadvantages of debit cards

a. Use of a debit card is not usually limited to the existing funds in the
account to which it is linked, most banks allow a certain threshold
over the available bank balance which can cause overdraft fees if the
users transaction does not reflect available balance.
b. Many banks are now charging over-limit fees or non-sufficient funds
fees based upon pre-authorizations, and even attempted but refused
transactions by the merchant (some of which may be unknown until
later discovery by account holder).
c. Many merchants mistakenly believe that amounts owed can be
"taken" from a customer's account after a debit card (or number) has
been presented, without agreement as to date, payee name, amount
and currency, thus causing penalty fees for overdrafts, over-the-limit,
amounts not available causing further rejections or overdrafts, and
rejected transactions by some banks.
d. In some countries debit cards offer lower levels of security protection
than credit cards.[9] Theft of the users PIN using skimming devices
can be accomplished much easier with a PIN input than with a
signature-based credit transaction. However, theft of users' PIN codes
using skimming devices can be equally easily accomplished with a
debit transaction PIN input, as with a credit transaction PIN input, and
theft using a signature-based credit transaction is equally easy as theft
using a signature-based debit transaction.
e. In many places, laws protect the consumer from fraud much less than
with a credit card. While the holder of a credit card is legally
responsible for only a minimal amount of a fraudulent transaction
made with a credit card, which is often waived by the bank, the
consumer may be held liable for hundreds of dollars, or even the
entire value of fraudulent debit transactions. The consumer also has a
shorter time (usually just two days) to report such fraud to the bank in
order to be eligible for such a waiver with a debit card,[9] whereas
with a credit card, this time may be up to 60 days. A thief who obtains
or clones a debit card along with its PIN may be able to clean out the
consumer's bank account, and the consumer will have no recourse.

33
 f. An automated teller machine (ATM), also known as a Cash Point,
Cash Machine or sometimes a Hole in the Wall in British English, is a
computerised telecommunications device that provides the clients of a
financial institution with access to financial transactions in a public
space without the need for a cashier, human clerk or bank teller. ATMs
are known by various other names including automatic banking
machine, cash machine, and various regional variants derived from
trademarks on ATM systems held by particular banks.
g. On most modern ATMs, the customer is identified by inserting a
plastic ATM card with a magnetic stripe or a plastic smart card with a
chip, that contains a unique card number and some security
information such as an expiration date or CVVC (CVV).
Authentication is provided by the customer entering a personal
identification number (PIN).
h. Using an ATM, customers can access their bank accounts in order to
make cash withdrawals,credit card cash advances, and check their
account balances as well as purchase prepaid cellphone credit. If the
currency being withdrawn from the ATM is different from that which
the bank account is denominated in (e.g.: Withdrawing Japanese Yen
from a bank account containing US Dollars), the money will be
converted at a wholesale exchange rate. Thus, ATMs often provide the
best possible exchange rate for foreign travelers and are heavily used
for this purpose as well

Alternative uses

Two NCR Personas 84 ATMs at a bank inJersey dispensing two types of pound
sterling banknotes: Bank of England noteson the left, and States of Jersey notes on
the right

Although ATMs were originally developed as just cash dispensers, they have
evolved to include many other bank-related functions. In some countries,
especially those which benefit from a fully integrated cross-bank ATM network
(e.g.: Multibanco in Portugal), ATMs include many functions which are not
directly related to the management of one's own bank account, such as:

34
 1. Deposit currency recognition, acceptance, and recycling[61][62]
2. Paying routine bills, fees, and taxes (utilities, phone bills, social security,
legal fees, taxes, etc.)
3. Printing bank statements
4. Updating passbooks
5. Loading monetary value into stored value cards
6. Purchasing
7. Postage stamps.
8. Lottery tickets
9. Train tickets
10.Concert tickets
11.Movie tickets
12.Shopping mall gift certificates.
13.Games and promotional features
14.Fastloans
15.CRM at the ATM
16.Cheque Processing Module
17.Adding pre-paid cell phone / mobile phone credit.

Increasingly banks are seeking to use the ATM as a sales device to deliver pre
approved loans and targeted advertising using products such as ITM (the
Intelligent Teller Machine) from Aptra Relate from NCR. ATMs can also act as an
advertising channel for companies to advertise their own products or third-party
products and services.

In Canada, ATMs are called guichets automatiques in French and sometimes "Bank
Machines" in English. The Interac shared cash network does not allow for the
selling of goods from ATMs due to specific security requirements for PIN entry
when buying goods.CIBC machines in Canada, are able to top-up the minutes on
certain pay as you go phones.

TELEPHONE BANKING

Telephone banking is a service provided by a financial institution, which allows its

customers to perform transactions over the telephone.

Most telephone banking services use an automated phone answering system with
phone keypad response or voice recognition capability. To guarantee security, the
customer must first authenticate through a numeric or verbal password or through

35
security questions asked by a live representative (see below). With the obvious
exception of cash withdrawals and deposits, it offers virtually all the features of an
automated teller machine: account balance information and list of latest
transactions, electronic bill payments, funds transfers between a
customer'saccounts, etc.

Usually, customers can also speak to a live representative located in a call centre or
a branch, although this feature is not always guaranteed to be offered 24/7. In
addition to the self-service transactions listed earlier, telephone banking
representatives are usually trained to do what was traditionally available only at the
branch: loan applications, investment purchases and redemptions, chequebook
orders, debit cardreplacements, change of address, etc.

Banks which operate mostly or exclusively by telephone are known as phone

banks. They also help modernise the user by using special technology.

A credit card balance transfer is the transfer of the balance (the money) in a credit
card account to an account held at another credit cardcompany.

This process is actively encouraged by almost all credit card issuers as a means to
attract new customers. Such an arrangement is attractive to the consumer because
the new bank or credit card issuer will offer incentives such as a low interest or
interest-free period, loyalty points or some such other device or combination of
incentives. It is also attractive to the credit card company which uses this process
to gain that new customer, and of course detrimental to the prior credit card
company.

An order of payments for every credit card specifies which balance(s) will be paid
first. In nearly all cases payments apply to lowest-rate balances first - highest-rate
last. Any balance under a teaser rate or fixed rate will be paid off sooner than any
purchases or cash advances (which usually have the highest APR). By avoiding
making purchases or taking cash advances altogether, the borrower can ensure they
maintain the full benefits of the original balance transfer.

The process is extremely fast and can be concluded within a matter of hours in
some cases. Automated services exist to help facilitate such balance transfers.
Other similar services do exist, but they may not be free to use.

36
USES OF INFORMATION TECHNOLOGY IN BANKS

Information Technology uses in Banking sector: -

Business banking

Retail banking

Banking technology

Banking environment

Card Market

Business banking:

BMI-Tec Knowledge has been publishing their annual report on Business

Electronic Banking for the past 13 years. The report provides valuable year on year
trend analysis for the major banks in South Africa. There are two parallel research
objectives of the publication, to report on business banking trends and more
specific information on each of the electronic banking products offered by the
banks. Each year, the questionnaire used for the research process retains a generic
core but incorporates changes that reflect the ever changing banking environment
and the related impact of technology.

The research is focused on business banking and specifically for companies that
use an online or electronic banking product in their day-to-day administration of
their business banking administration.

The key area of segmentation for this report is by the four major banks in South
Africa: Absa, First National Bank, Nedbank and Standard Bank. Other areas of
segmentation include size of company by employees and annual turnover and
whether these companies are single banked or multi banked.

Retail banking:

Understanding the financial delivery channels

37
BMI-T has conducted a recent benchmarking study to highlight external expertise
and knowledge that is currently available in the ATM and SST environment. From
this collated information, the client was able will be able to benchmark their own
operations against these parameters.

This study assisted the client in identifying and determining the current and
potential best practices around ATMs and to see where they are currently placed in
this context.

The scope of the research covered both local and international perspectives with
the international perspective be segmented further by a split between Africa in
comparison with the Rest of the World and South Africa

Business Electronic Banking in the Small to Medium Business sector

BMI-Tec Knowledge has been publishing their annual report on Business

Electronic Banking in the corporate sector for the past 13 years. This new report,
Business electronic banking in the SMB sector will be a parallel report in order to
fully understand both markets; corporates and the SMB sector. There are two
parallel research objectives of the publication, to report on business banking trends
in the small to medium business sector and provide more specific information on
each of the electronic banking products offered by the banks.

The research is focused on business banking and specifically for companies that
use an online or electronic banking product in their day-to-day administration of
their business banking administration.

The key area of segmentation for this report is the four major banks in South
Africa: Absa, First National Bank, Nedbank and Standard Bank. Other areas of
segmentation include size of company by employees and annual turnover and
whether these companies are single banked or multi banked.

Multi-Channel Banking for Retail Financial Services 2005:

BMI-T conducts research in the financial delivery channels to the retail market.
This research covers the following issues:

The optimum balance between customer experience and lower costs,

38
 International overview of financial delivery channels and the road to multi-
channel integration,

Trends and market drivers and/or inhibitors that have driven the changes in
global banks,

South African comparison of financial delivery channels and their related

offerings from the banks,

Comparison of pricing and products and services that are available on each
channel from each financial provider,

Number of customer points such as ATMs,

Number of banking branches and level of change and expected growth for
the future.

Research to test the future for High-value-low frequency channels or low-value-

high frequency channels, current and future usage patterns of financial delivery
channels from the South African retail customers (which channels, frequency,
timing and for which transactions plus trend analysis with past annual data).

Banking technology:

South Africa is in many ways a global leader in the adoption and use of technology
to improve competitiveness and delivery in the financial services industry. The
purpose of this research is to provide a detailed trend analysis of technology
adoption at the major banks in South Africa. Specific focus on market
expectations, decision criteria and future outlook are the thrust of this initiative.
This sector study will investigate the following key business questions that are
critical for success in this competitive arena:

What is the size and structure of the banking market in South Africa and
how is technology expenditure prioritized and allocated from a technology and
functional perspective?

What drives key IT adoption drivers and inhibitors facing banks today and in
the near future and what are the foremost IT investment criteria in the SA banking
sector?

39
Banking environment: -

Financial delivery channels for the SME and Underbanked sector in South Africa

BMI-T conducts research into the SME and underbanked markets on an ongoing
basis. This research addresses the following issues:

Global case studies, their varying levels of success and reasons behind these
levels,

Profiles and initiatives of the key players in the environment, e.g. the banks,
non-banks, micro lenders, NGOs, government et al,

The key benefits and risks facing current and potential providers in this
market,

Current and potential size of the market in transaction volume and revenue,

Logistics of access and delivery channels to delivery banking services to the

underbanked - the role of technology and use of existing infrastructure in the
applicable areas.

TECHNOLOGY VISION 2020

Technology Information, Forecasting and Assessment Council (TIFAC), an

autonomous organization under the aegis of the Department of Science &
Technology (Govt. of India) plays a vital role in technology development and
promotion in India through its various programmes

Main feature of Technology Vision: 2020

While Technology Vision: 2020 exercise covered classical technology sectors like
Banking sector, Agro- Food Processing, Chemical Industry, Engineering Industry,
Electronics etc., this article focuses on Services sector due to its immense potential
for value-addition and employment generation. The services sector draws heavily
on Information Technology (IT) for its advanced applications:

Banking Sector

Banking the 'tertiary sector' of the economy covers a wide gamut of activities like
trading, finance, infotainment, real estate, management & technical consultancy
40
among several others. The contribution from banking sector today stands over
satisfactory percent of the total GDP in India. The sector currently employs close
to 20 million people in India. The TIFAC study on Services covered nine select
sub-sectors ranging from advertising, HRD services, testing & certification to
Government administration.

For all the aforesaid areas IT plays the prime role in information processing,
storage & access with a view to providing improved services to the consumers.
Some of the typical IT applications in major services sector are outlined in the
following sections.

Financial Services

Financial services have been the major users of IT and communication

technologies. IT expenditure by US banks has recorded a compounded annual
growth rate of 8.4 per cent. The Management Information System (MIS),
distributed computing devices, open systems, high-speed data networks (LAN,
NIAN, WAN, ISDN etc.), RDBMS have been important development milestones
in IT with ma or impact on financial services.

The development of optical fiber has greatly improved the communication speed,
anticipated to touch 2 trillion bits per second eventually. Packet switching
transmission method like asynchronous transfer mode achieving a speed unto 622
million bits per second have been the major breakthrough in communication
technology. CD-ROMs with storage capacity of 1.6 GB of data have been
instrumental in fast information retrieval and access. Use of multimedia for storage
of text, graphics, video, sound etc. has immensely benefited the information
storage system. All these technologies are used extensively by the banking and
financial services sector.

Automated Teller Machines (ATM)

ATMs though operational in the country for quite some time, are expected to make
a big headway in India. It has been estimated that there are around 400,000 ATMs
worldwide out of which 100,000 are located in Japan alone. The latest generation
networked ATMs allow the user to perform up to 150 kinds of transactions ranging
from simple cast withdrawals & deposits, to fund transfer to trading in stocks to

41
buying mutual funds to something mundane like payment of electricity bills,
booking air-tickets and making hotel reservations.

ATMs are synonymous with credit cards - 578 million credit cards issued
worldwide were involved in a transaction of US $ 1092 billion by June 1993. India
is poised to become one of the world's largest credit card users by 2000 AD.

'Virtual' Bank

Multimedia technology has been quite effective 'm bringing the banking services
to the doorstep of its customers. The Customer Activated Terminal (CA]) or Kiosk
is an interactive multimedia display unit, housed in a small enclosure, typically
consisting of a computer workstation, monitor, videodisk player and a card reader.
It allows the customers to browse through information and use the available
banking services at their own speed. Some banks are thinking of establishing
'virtual' branches where a customer can walk through the door, explore services by
touching parts of the screen and at any time call up a member of the bank staff by
video conferencing. While the banks do not need to 'mvest heavily in real estate for
setting up such a branch, the customer gets the benefit of 'one-stop banking' at a
convenient location.

Home Banking

Smart phones with screen built-in modems and programmable microprocessors let
the customer access a variety of financial services from home.

Electronic Funds Transfer at Point of Sale (EFTPOS)

While travelers cheques meant 'pay-now-buy-later and credit cards had 'buy-now-
pay-later advantages, EFTPOS or debit cards signify 'buy-now-pay-now' but
without cash transaction. The user presents his ATM card when he buys goods and
the EFTPOS system immediately debits his bank account.

Smart Cards

42
The 'processor' type Smart Cards with in-built integrated circuits (ICs) or
microchips offer a wide range of transactional opportunities even from remote
areas. The Smart Cards are extensively being used for employee 'clocking in',
withdrawing cash from ATM, using pay phones, payment of various bills etc.

Electronic Data Interchange (EDI)

EDI typically denotes paperless financial transactions across the locations. EDI is
fast becoming the norm for inter-company transactions and also for procurement of
bought-out items from the suppliers. The companies can now operate their bank
accounts through corporate banking terminals in their own offices, which are
linked to the bank computers. Companies can thus carry out transactions like
transferring funds, managing its cash flow, opening Letters of Credit etc. without
any paper work. Singapore has established Trade- Net to facilitate electronic
submission of trade documents by traders to various Govt. agencies and the
response of these agencies to the sender. It has reduced document-processing time
from one day to 15-30 minutes and the estimated savings are of the order of $ 1
billion annually.

Image Processing

As financial services including capital markets and banking are highly document
intensive, image-processing technology can have a far-reaching impact for such
applications for its 'less paper' handling characteristics.

In banks, image technology could be used for automatic identification or character

recognition to read text and diagram wherein the cheques or documents can be
scanned.

Expert Systems

The financial services sector is increasingly using decision support systems (DSS)
or expert systems for functions such as credit risk appraisal, forecasting loan
delinquencies, investment decisions etc. One of the most promising developments
in this field is the use of 'neural network' approach to build an expert system, which
lets the software literally learn from example and experience. Several banks today

43
are using neural network programmes to detect credit card fraud. Some leading
investment banks to track stock price patterns and predict their movements are also
using it.

Information Technology & Financial Services: Key Issues

While the technological possibilities of IT may be unlimited, their applications and

adoption in India need a conscious approach towards Business Process
Reengineering of existing practices and procedures to take the fullest advantage of
IT. Continuous training & skill up gradation of human resources assume critical
importance towards absorption of new technologies.

The elimination of manual records, the introduction of electronic fund transfer,

ATMs etc. raise the important issue of security and integrity of data. This includes
issues relating to confidentiality of information, preventing data corruption and
prevention of fraud. Appropriate technologies for encryption of data for secured
transaction, regular & multiple backups, extensive use of passwords and other
forms of authorization would need to be adopted.

For paperless and electronic financial transactions in India, a host of legal aspects
need to be looked into. As in case of EFT, a cheque is not required to be presented
physically for making payment as per the current practice. Also the legal liabilities
of banks and customers in case of loss of ATM cards, ATM frauds etc. are not quite
understood in the present system. The adoption of new technologies would warrant
a thorough review of the system towards changed legal stipulations.

Finally, the most important aspect of costs involved and benefits expected need a
closer scrutiny. Expenditure on IT has always not been in tune with the returns
envisaged. The American example of spending US $ 100 billion on IT applications
in financial services during 1970-80 has been a pointer. With 100 per cent more
expenditure on IT per worker, it increased productivity by only 0.7 per cent per
year. Hence, proper implementation program and technology management aspects
assume much importance.

PRESENT LEVEL OF COMPUTERISATION

Based on the norms worked out by Rangarajan Committee (II), 7827 branches of
the Public Sector banks were identified for full branch computerisation upto March

44
2000 of which around 4620 were computerised as on March 99. Meanwhile, the
networking of the already-computerised branches also assumed urgency and some
of the Banks have started inter-connecting their computerised branches using
leased telephone lines or Very Small Aperture Terminals (VSATS). This is meant to
provide a more comprehensive service to customers and at the same time give
banks better centralised control over the branch operations. As of now, New Private
Sector and Foreign Banks have an edge over Public Sector Banks as far as
implementation of technological solutions is concerned. However, the latter are in
the process of making huge investments in technology.

The Financial Reforms that were initiated in the early 90s and the globalisation and
liberalisation measures brought in a completely new operating environment to the
Banks that were till then operating in a highly protected milieu. The arrival of
foreign Banks and Financial Institutions, the setting up of a number of private
banks and the measures of de-regulation that encouraged competition has led to a
situation where the survival of those who do not join the race will become difficult.
Unless the state-of- the-art IT was introduced as early as possible, winning new
business and even holding on to the old one will become increasingly difficult.
Services and products like "Anywhere Banking" "Tele-Banking" "Internet
banking" "Web Banking" , e-banking, e-commerce, e-business etc. have become
the buzzwords of the day and the Banks are trying to cope with the competition by
offering innovative and attractively packaged technology-based services to their
customers.

Simultaneously, the importance of effective MIS for control of operations and of

maintaining customer and business/industry data bases for strategic planning has
also surfaced; while Banks are looking at Data warehousing, Data mining,
Business Restructuring etc. as most essential things to have as early as possible,
they are taking urgent steps to computerise the operations in their administrative
and controlling offices (viz. head /zonal/regional offices) as well as the data
collection machinery, so as to evolve an effective MIS. In this phase, the new
communication revolution sweeping the nation and the world has come in
extremely handy, as the communication infrastructure has improved significantly
and the Internet technologies are available to network branches at a relatively low
and affordable cost with a high degree of reliability.

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The present level of MIS covers, basically, information needed for control,
performance monitoring, decision making etc. and encompasses most activities in
administrative offices like processing of statutory returns under Reserve Bank of
India Act, monthly/quarterly performance reports from branches, credit
information/BSR, inter-branch transactions, personnel inventory, provident fund
accounting, profit and loss accounts, cash and investment management, stationery
stock accounting, and branch house keeping etc.

Computerisation in Public Sector Banks (As on March 31, 2006)

i) Branches already Fully Computerised # 48.5%

ii) Branches Under Core Banking Solutions 28.9%

iii) Fully Computerised Branches (i+ii) 77.5%

iv) Partially Computerised Branches 18.2%

v) Non Computerised Branches 4.3%

#: Other than branches under Core Banking Solutions.

(Source- Reserve Bank of India)

ADVANTAGES OF TECHNOLOGY

1. From both customer and banking perspectives it shows that the Internet is a
convenience tool available whenever and wherever customers need it. It is also
found that the Internet has improved the factors in service quality like
responsiveness, communication and access. It is concluded that the Internet has an
important and positive effect on customer perceived banking services and the
service quality has been improved since the Internet has been used in banking
sector.

2. It's generally secure. But make sure that the website you're using has a valid
security certificate. This lets you know that the site is protected from cyber-thieves
looking to steal your personal and financial information.

3. It gives twenty-four-hour access. When the neighborhood bank closes, you can
still access your account and make transactions online. It's a very convenient

46
alternative for those that can't get to the bank during normal hours because of their
work schedule, health or any other reason.

4. It allows us to access our account from virtually anywhere. If we're on a

business trip or vacationing away from home, we can still keep a watchful on our
money and financial transactions regardless of our location.

5. Conducting business online is generally faster than going to the bank. Long
teller lines can be time-consuming, especially on a Pay Day. But online, there are
no lines to contend with. You can access your account instantly and at your leisure.

6. Many features and services are typically available online. For example, with just
a few clicks you can apply for loans, check the progress of your investments,
review interest rates and gather other important information that may be spread out
over several different brochures in the local bank.

7. Technology has opened up new markets, new products, new services and
efficient delivery channels for the banking industry. Online electronics banking,
mobile banking and internet banking are just a few examples.

8. Information Technology has also provided banking industry with the

wherewithal to deal with the challenges the new economy poses. Information
technology has been the cornerstone of recent financial sector reforms aimed at
increasing the speed and reliability of financial operations and of initiatives to
strengthen the banking sector.

9. The IT revolution has set the stage for unprecedented increase in financial
activity across the globe. The progress of technology and the development of
worldwide networks have significantly reduced the cost and time of global funds
transfer.

10. It is information technology which enables banks in meeting such high

expectations of the customers who are more demanding and are also more
technosavvy compared to their counterparts of the yester years. They demand
instant, anytime and anywhere banking facilities.

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 11. IT has been providing solutions to banks to take care of their accounting and
back office requirements. This has, however, now given way to large scale usage in
services aimed at the customer of the banks.

12. IT also facilitates the introduction of new delivery channels--in the form of
Automated Teller Machines, Net Banking, Mobile Banking and the like.

13. Use of de-mat account and online trading enables a person to buy and sell
shares any time. The share trading companies and AMCs can give improved and
faster service with help of technology.

14. There are many useful features and services available online besides for the
usual transactions. For example, you can apply for credit cards, manage
investments, and pay bills through your online account portal. You can also
perform more mundane tasks such as ordering new checks, requesting additional
deposit slips, or reporting a lost or stolen debit card. Certainly the above mentioned
advantages if technology have improved the quality of service in a banking and
financial sector.

DISADVANTAGES OF TECHNOLOGY

1. Yes, online banking is generally secure, but it certainly isn't always secure.

Identity theft is running rampant, and banks are by no means immune. And once
your information is compromised, it can take months or even years to correct the
damage, not to mention possibly costing you thousands of dollars, as well. This
generally does not happen in case of traditional method of banking.

2. Some online banks are more stable than others. Not all online setups are an
extension of a brick-and-mortar bank. Some operate completely in cyberspace,
without the benefit of a branch that you can actually visit if need be. With no way
to physically check out the operation, you must be sure to thoroughly do your
homework about the bank's background before giving them any of your money.

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3. Before using a banking site that you aren't familiar with, check to make sure
thattheir deposits are FDIC-insured. If not, you could possibly lose all of your
deposits if the bank goes under, or its major shareholders decide to take an
extended vacation in Switzerland.

4. Customer service can be below the quality that you're used to. Some people
simply take comfort in being able to talk to another human being face-to-face if
they experience a problem. Although most major banks employ a dedicated
customer service department specifically for online users, going through the
dreaded telephone menu can still be quite irritating to many. Again, some are
considerably better (or worse) than others.

5. Not all online transactions are immediate. Online banking is subject to the same
business-day parameters as traditional banking. Therefore, printing out and
keeping receipts is still very important, even when banking online.

6. If your bank operates only online or simply does not have a branch office in
your local area, you will not be able to reach a representative in person for
discussion of account issues. Normally this is not a problem, but sometimes
customer service by telephone or email can be spotty and may prove to be more of
a hassle if you have a serious issue that is not easily resolved. Some banks are
better than others in this department, so you will need to do some research if this is
an important consideration for you.

7. Using online banking effectively requires some basic computer literacy and
familiarity with navigating the Internet. While this is not a problem for people like
me, those who are afflicted with technophobia or are simply inexperienced with
this particular genre may not be comfortable with this concept. There are also a
significant number of people who are suspicious of anything having to do with the
Internet because it is outside of their comfort zone. Others are simply too stubborn
to acquire the relevant knowledge and skills.

NATURE AND CHANGE IN BANKING

The changes in the political, economical, social, cultural and environmental

perspective can be seen in business environment too. Above all, the business
scenario is highly influenced by the changes in the needs and aspirations of the

49
people. The human factors such as, the mindset of the people, ethics and values,
social system, lifestyle, work culture etc. are greatly induce the different sections
of the people for changing their day-to-day requirements. But today, the degree of
such changes is so fast and more frequently experienced by them. Therefore, the
consumer status is changed from; isolated to connected, unaware to well-informed,
passive to active.

Consumers now seek to exercise their influence in every walk of the business
system, interact with firms and co-create value. As the outreach is enlarged in the
industry with the increased number of banks and wider network, the customer
demands convenience, comfort, speed, cost- effective and quality services in the
banking operations. In the recent years the Indian banking industry saw a host of
new faces called new generation banks entering with their innovative strategies.
All these bankers are generally slim in structure but heavily using the technology
and multi-channel facilities to reach out to a large section of the customers.

Information Technology and Banking Services The Trend

In this context, Information Technology and Enabled Services (ITES) have

emerged as the integrator; assisting banks in managing transformation that takes
place continuously. RBI has taken several initiatives with the broad objective of
providing systems which impact beneficially on efficient housekeeping in banks,
better customer service and overall systemic efficiency. The Reserve Bank has
assigned priority to the up gradation of technological infrastructure in the Indian
financial system. The RBIs role in the transformational of IT deployment in
banking has been commendable. RBI established in 1996 with a vision and
foresight, the Institute for Research and Development in Banking Technology
(IDRBT). In order to establish an efficient, cost-effective and dependable
communication backbone, the Indian Financial Network (INFINET) has been set
up. About 150 banks, primary dealers and mutual funds have become members.

Technology has a definitive role in facilitating transactions in the banking sector

and the impact of technology implementation has resulted in the introduction of
new products and services by various banks in India. During the last decade,
payment services offered by banks to the common persons as well as the corporate
bodies have improved substantially. It is partly due to increased use of technology

50
in service delivery and partly due to procedural changes necessitated in the wake of
competition amongst the banks.

With the introduction of electronic banking, banks are moving their focus of
payments from the physical presence of money to the use of electronic money.
Electronic banking refers to the use of technology which allows customers to
access banking services electronically whether it is to pay bills, transfer funds,
view accounts or to obtain information and advices. It refers to the electronic
services that are made available to the customers through phone, personal
computer, television and the Internet. Customers can perform banking transactions
such as balance enquiries, bill payments, transaction histories, and transfer of
money between accounts, obtain quotes and submit equity option and mutual fund
offers without having to step into the office on the branch. Payments can be made
in India in the form of cash, cheque, demand drafts, credit cards, debit cards and
also by means of giving electronic instructions to the banker who will make such a
payment on behalf of his customers.

Developmental Role of the RBI

The Reserve Bank of India (RBI) as the central bank of the country has been
playing this developmental role and has taken several initiatives for a safe, secure,
sound and efficient payment system under electronic banking. Payment systems
are used by individuals, banks, companies, governments, etc. to make payments to
one another. In other words, anybody who has to make a payment to any one else
can use one or the other form of payment system to make such a payment for
which IT enabled channels crate a platform.

Regulation and Supervision

The Board for regulation and supervision of Payment and Settlement Systems
(BPSS) is a sub-committee of the Central Board of the RBI and is the highest
policy making body on payment system. The Board is assisted by a technical
committee called National Payments Council (NPC) with eminent experts in the
field as members. The Board as well as the council is assisted by a newly created
department the Department of Payment and settlement Systems (DPSS).

51
The Board has been entrusted with the responsibility to authorize, prescribe
policies and set standards for all existing and future payment systems in the
country. The Board also has the powers to determine membership criteria to these
systems and related policies. The customer may approach the bank concerned to
redress the complaint. In case of lack of response / satisfactory redressal by the
bank, the customer may approach the Grievance Redressal Cell in the local RBI
office, if any. The customer may also approach the office of the Banking
Ombudsman for redressal of his complaint.

Most people today convinced that the Information Technology is going to hold the
key of future banking. These developments changed the course of banking in India
as it altered the basic platform of the Indian banking. This would not have made
possible with out the IT revolution. However, technology driven banking can be
traced in; hyper competition, shrinking margins and need to reduce cost, meeting
the changing customer expectations, offer better and improved products and
services, simplify the process and procedures for better management, reduce or
alter the risk, resource constraints such as physical and or financial, pressure from
regulators or the conglomeration of few of the above or all.

ISSUES AND CHALLENGES

For the last ten years, technology has been the driving force in the banking
industry. As foreign and private banks poured huge sums of money to counter the
branch advantage of public sector banks, they discovered that technology gives
them a large competitive advantage. Technology is helping the banks to reduce
transaction cost and improve efficiency. ITES becomes Unique Selling
Proposition (USP) of the many players in the industry as it facilitates the
innovations in all functional management activities whether accounting and
finance, production and designing, marketing and customer management, research
and development activities, and so on. In the last decade banks have invested
heavily in the technology such as e-commerce, data warehousing and data mining,
customer relationship management solution software, knowledge management
systems etc.

Some are investing in it to drive the business growth, while others are having no
option but to invest, to stay in business. The choice of right channel, justification of

52
IT investment on ROI, e-governance, customer relationship management, security
concerns, technological obsolescence, mergers and acquisitions, penetration of IT
in rural areas, and outsourcing of IT operations are the major challenges and issues
in the use of IT in banking operations. The main challenge, however, remains to
motivate the customers to increasingly make use of IT while transacting with
banks. For small banks, heavy investment requirement is the compressing need in
addition to their capital requirements. The coming years will see even more
investment in banking technology, but reaping ROI will call for more strategic
thinking.

Everyone today is convinced that the technology is going to hold the key to future
of banking. The achievements in the banking today would not have make possible
without IT revolution. Therefore, the key point is while changing to the current
environment the banks has to understand properly the trigger for change and
accordingly find out the suitable departure point for the change.

COUNTERMEASURES FOR FRAUDS

The nature of problem

The nature of problem can be best understood by having an insight of the

modus operandi used for the commission of ATM frauds. One method of the
same is by placing a device on an ATM that prevents the machine from reading a
card. Once an inserted card is struck a fraudster pretending as a genuine cardholder
will suggest that the intended victim re-enter his or her security code. When the
cardholder ultimately leaves in despair, the fraudster retrieves the card and enters
the code that he has watched clandestinely. Another method involves use of fake
cards using data collected from tiny cameras and devices called "skimmers" that
capture and record bank account information. This is lesser risky as it do not
involve any fraudster-victim interaction and the absence of any fraudster makes the
cardholder more relaxed and lesser conscious about the safety of the password.
Another interesting method of ATM frauds involves the use of duplicate ATMs
by the fraudsters that uses software which records the passwords typed on those
machines. Thereafter, duplicate cards are manufactured and money is withdrawn
with the use of stolen passwords. Sometimes such frauds are an inside job with the
collusion of the employees of the company issuing those cards. Whatever the mode

53
of these frauds but it is definitely illegal and punishable as per the law of the
concerned country. The punishment may, however, not bring back the money lost
in the process. Thus, the punishment of an offender will though prove deterrent to
other offenders yet it may not be the best method of restoration of stolen property.
Thus, preventive safeguards and insuring the ATM fraud risks seems to be the right
approach.

Preventive solutions

The discussion for this heading can be grouped as follows:

(A) Solutions for banks, and

(B) Solutions for customers.

(A) Solutions for banks: The solutions for the banks providing ATM services can
further be grouped as:

(i) Technological solutions, and

(ii) Insurance solutions.

(i) Technological solutions: These may include:

(a) Designated time: The customers can choose times for using ATMs by phone.
The customers can change the chosen time any time and even defer total use of
ATMs as per their convenience. This method is not only economical but also
effective to tackle forged cash card scams as the fraudster has to match not only the
password but equally the timing as well.

(b) Microchip technology: The banks can also provide cards containing a
microchip that can make them harder to forge.

(c) Biometric tokens: Biometrics tokens are the safest bet for prevention of ATM
frauds. The most widely used biometric tokens include those of fingerprints, irises,
faces and palms. The fraudster can match everything but he can never match the
biometric peculiarities.

(d) Enhanced security: The banks may enhance the security features of the ATMs
for providing a better service.

54
 (e) ATM Monitoring: The banks can monitor ATMs continuously by installing
closed-circuit cameras and other devices.

(f) Customised softwares: The banks must use customised softwares that records
relevant information on ATM cards or credit cards so that banks can establish
whether an unauthorised ATM transaction has taken place by using a counterfeit
card;

(g) Customer motivation: The banks must encourage customers to report any
suspicious activity on ATMs by providing the basic infrastructure.

(h) Alerts: The bank must alert customers if the customised softwares note any
unusual transaction patterns.

(ii) Insurance solutions: The banks must also secure themselves the protection of
insurance cover since they may find themselves liable for the payment of money
lost due to these frauds. This is generally happening in foreign countries and very
soon the same may be the position in India. In the world of Internet Banking no
bank can afford to remain indifferent and aloof to this possibility. Thus, an
insurance cover is a must for these banks.

(B) Solutions for customers: The solutions for the customers availing ATM
services can be grouped as:

(i) Precautionary solutions, and

(ii) Insurance solutions.

(i) Precautionary solutions: It is very important for cardholders to protect their

cards from being misused. Here are some of the measures a cardholder should
adopt to protect his card from being misused:

Never leave your credit card unattended in a vehicle or changing room.

Avoid leaving your card loose in pockets or bags.

Always keep your card secure in your wallet or handbag.

Keep a close watch on your credit card and wallet/bag/briefcase in public

places.

55
 Never allow anyone else to use your card.

Sign new cards as soon as they arrive and cut up old cards when they expire.

When purchasing goods, please be patient if your card is sent for

authorisation or verification.

If your card is lost, stolen or not received, please inform the card issuing
bank/organisation immediately.

Always retain sales/charge slips to compare with the amount specified on the
billing statement.

When travelling abroad or within the country, ensure that you carry the
telephone number of the card issuing bank/organisation.

Do not disclose your PIN (Personal Identification Number) to anyone.

Always memorise your PIN.

If you forget your PIN, please contact card-issuing bank/institution and

intimate them of the same. The bank will then send you a new card with a new
PIN, on receipt of which you should immediately cut up your old card.

If your card ever gets stuck in the ATM, do not reveal your PIN even to the
concerned bank official/institution. It would suffice to let him / her know that your
card has got stuck in the ATM.

These are some of the measures that could help protect the credit cards of
customers from possible misuse.

(ii) Insurance solutions: The customers, like banks, can also secure themselves the
protection of insurance cover for the money lost due to these frauds.Is very popular
in foreign countries and very soon the same may find a place in India as well.

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CONCLUSION

Indian banking today is witnessing drastic changes. Technology has a definitive

role in facilitating transactions in the banking sector and the impact of technology
implementation has resulted in the introduction of new products and services by
various banks in India. For the last ten years, technology has been the driving force
in the banking industry. As foreign and private banks poured huge sums of money
to counter the branch advantage of public sector banks, they discovered that
technology gives them a large competitive advantage. Some are investing in it to
drive the business growth, while others are having no option but to invest, to stay
in business. Everyone today is convinced that the technology is going to hold the
key to future of banking. The achievements in the banking today would not have
make possible without IT revolution. In this backdrop, the paper attempts to trace
the latest trends and the role of IT in the banking services, its implications, issues
and challenges.

The banking today is re-defined and re-engineered with the use of Information
Technology and it is sure that the future of banking will offer more sophisticated
services to the customers with the continuous product and process innovations.
Thus, there is a paradigm shift form the sellers market to buyers market in the
industry and finally it effected at the bankers level to change their approach from
conventional banking to convenience banking and mass banking to class
banking. The shift has also increased the degree of accessibility of a common man
to bank for his variety of needs and requirements.

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 BIBLIOGRAPHY

www.wikipedia.com
www.banknetindia.com
www.moneycontrol.com

Thank you

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