NAME :- TUSHAR. D. SAIL.

Acknowledgement

During the course of this project, Ive been helped and supported by a lot of people whose
names if not mentioned, would be inconsiderate on my part. Id like to thank all of
them.

I would like to thank my guide PROF.KIRAN GOMES who guided me throughout and has
been a helpful guide. Working under his guidance has been great experience.

Im deeply obliged to our college Liberian who guided me through the reference book, without
which my project wouldnt have seen the light of the day

Most of all, I wish to thank my family for dealing with me patiently and supporting
me while I was working on this project.
RESEARCH METHODOLOGY

The primary source of the information in this research study is the secondary data.
The available information on internet regarding the E: Banking has been extensively
used to complete the dissertation report.

All the available Journals, Articles, papers provided necessary information to the group
to finalize the research study.

OBJECTIVES

Internet banking has become very much popular now a days throughout the globe. It
has made the banking activities easier, faster and more accessible. Now people are
trying to learn more about the E-banking. The primary objective of the research is to get
the full acquaintance of the internet banking and its benefits. To add more knowledge
about internet banking the following are the secondary objectives of this research study

1.To know how the internet banking has revolutionized the banking sector.

2. To help the leaners to know about the current concerns in the internet
banking.

3. To know how challenging internet banking has become and how the banking sector
applies different strategies to cope up with the challenging environment.
Why Is e-Banking Important?

Understanding e-banking is important for several stakeholders, not least of which is

management of banking related organizations, since it helps them to derive benefits
from it. The Internet as a channel for services delivery is fundamentally different from other
channels such as branch networks, telephone banking or Automated Teller Machines (ATMs).
Therefore, it brings up unique types of challenges and requires innovative solutions.
Many banks and other organizations have already implemented or are planning to implement e-
banking because of the numerous potential benefits associated with it. Some of these
major benefits are briefly described below.

Choice and Convenience for Customers

In the fierce battle over customers, providing a unique experience is the compelling
element that will retain customers. A customer first approach is critical for success in e-
banking. Customers hold the key to success and companies must find out what different
customers want and provide it using the best available technology, ensuring that they are acting
on the latest, most up-to-date information.

In modern business environments, customers want greater choice. They want

the traditional range of banking services, augmented by the convenience of online
capabilities and a stronger focus by banks on developing personal relationships
with customers. Avkiran (1999) stressed the importance of the human touch in
the customer services. Politeness and neatness, recognition in terms of greeting,
willingness to provide prompt service, ability to apologise and express concern for
a mistake are all important for bank customer. Most of these aspects of customer
service cannot be automated. The adequacy of staff members serving customers can be
expected to directly influence the customers satisfaction. However, e-banking backed up
by data mining technologies can help in better understanding customers needs and customizing
products/services according to those needs.
Offering extra service delivery channels means wider choice and convenience
For customers, which itself is an improvement in customer service. E-banking can
be made available 24 hours a day throughout the year, and a widespread availability of the
Internet, even on mobile phones, means that customers can conduct many of their financial
tasks virtually anywhere and anytime. This is especially true of developed countries, but
increasingly in developing countries, the spread of wireless communications means that services
such as e-banking are becoming accessible .
Attracting High Value Customers
E-banking often attracts high profit customers with higher than average income and
education levels, which helps to increase the size of revenue streams. For a retail bank, e-
banking customers are therefore of particular interest, and such customers are likely to have a
higher demand for banking products. Most of them are using online channels regularly for a
variety of purposes, and for some there is no need for regular personal contacts with the banks
branch network, which is an expensive channel for banks to run (Berger & Gensler, 2007).
Some research suggests that adding the Internet delivery channel to an existing portfolio of
service delivery channels results in nontrivial increases in bank profitability (Young,
2007). These extra revenues mainly come from increases in noninterest income from service
charges on deposit/current accounts. These customers also tend to be of high income earners
with greater profit potential.

Enhanced Image
E-banking helps to enhance the image of the organization as a customer focused
innovative organization. This was especially true in early days when only the most
innovative organizations were implementing this channel. Despite its common
availability today, an attractive banking website with a large portfolio of innovative products still
enhances a banks image. This image also helps in becoming effective at e-marketing and
attracting young/professional customer base.
Increased Revenues
Increased revenues as a result of offering e-channels are often reported, because
of possible increases in the number of customers, retention of existing customers,
and cross selling opportunities. Whether these revenues are enough for reasonable
return on investment (ROI) from these channels is an ongoing debate. It has also
allowed banks to diversify their value creation activities. E-banking has changed
the traditional retail banking business model in many ways, for example by making
it possible for banks to allow the production and delivery of financial services to be
separated into different businesses. This means that banks can sell and manage services offered
by other banks (often foreign banks) to increase their revenues. This is an especially attractive
possibility for smaller banks with a limited product range.

E-banking has also resulted in increased credit card lending as it is a sort of

transactional loan that is most easily deliverable over the Internet. Electronic bill
payment is also on rapid rise (Young, 2007) which suggests that electronic bill
payment and other related capabilities of e-banking have a real impact on retail
banking practices and rapidly expanded revenue streams.

Easier Expansion
Traditionally, when a bank wanted to expand geographically it had to open new
branches, thereby incurring high start up and maintenance costs. E-channels, such
as the Internet, have made this unnecessary in many circumstances. Now banks with a traditional
customer base in one part of the country or world can attract customers from other parts, as
most of the financial transactions do not require a physical presence near customers
living/working place. In one case study presented in Chapter VIII, a bank based in the southern
part of the UK was attracting customers from northern England, where it resources such as
ATMs or use post offices as their main interaction points, with customers for services such
as cash and cheques deposits.
Load Reduction on Other Channels
E-Channels are largely automatic, and most of the routine activity such as account
checking or bill payment may be carried out using these channels. This usually
results in load reduction on other delivery channels, such as branches or call centres.

This trend is likely to continue as more sophisticated services such as mortgages

or asset finance are offered using e-Banking channels. In some countries, routine branch
transactions such as cash/cheque deposit related activities are also being automated, further
reducing the workload of branch staff, and enabling the time to be used for providing better
quality customer services.

Cost Reduction
The main economic argument of e-banking so far has been reduction of overhead
costs of other channels such as branches, which require expensive buildings and a
staff presence. It also seems that the cost per transaction of e-banking often falls
more rapidly than that of traditional banks once a critical mass of customers is
achieved. The research in this area is still inconclusive, and often contradicting
reports appear in different parts the world. The general consensus is that fixed costs of e-
banking are much greater than variable costs, so the larger the customer base of a bank, the lower
the cost per transaction would be. Whilst this implies that cost per transaction for smaller banks
would in most cases be greater than those of larger banks, even in small banks it is seen as likely
that the cost per transaction will be below that of other banking channels.
Having said that some sources of research in this area suggest that banks so far have made little
savings from introducing e-banking (Young, 2007). It implies that, any efficiency related
savings are offset by above average wages and benefits per worker due to the need for a
more skilled labor force to run the more sophisticated delivery system. Other costs such as
systems integration and extra security measures also take their toll.
Organizational Efficiency
To implement e-banking, organizations often have to re-engineer their business
processes, integrate systems and promote agile working practices. These steps,
which are often pushed to the top of the agenda by the desire to achieve e-banking,
often result in greater efficiency and agility in organizations. However, radical had no
branches. In many countries banks sharorganizational changes are also often linked to risks such
as low employee morale,
or the collapse of traditional services or the customer base.
 INDEX

CHAPTER PARTICULAR PAGE NO.

NO.

CHAPTERS
E-BANKING SERVICES 18-21
E-MARKETING 22-23
DELIVERY OF RETAIL BANKING SERVICES 24-27
FUTURE OF E-BANKING 28-30
BENEFITS & CONCERNS 31-32

GLOBAL PERSPECTIVE 33
CHALLENGES IN E-BANKING 34-36
REGULATORY TOOLS TO OVERCOME 37-38
CHALLENGES IN EBANKING

LOOKING FORWARD 39-40

CONCLUSION 41
BIBLIGRAPHY 42
 CHAPTERS

INTERNET BANKING:

Internet Banking lets you handle many banking transactions via your personal
computer. For instance, you may use your computer to view your account balance,
request transfers between accounts, and pay bills electronically.
Internet banking system and method in which a personal computer is connected by a
network service provider directly to a host computer system of a bank such that
customer service requests can be processed automatically without need for intervention
by customer service representatives. The system is capable of distinguishing between
those customer service requests which are capable of automated fulfillment and those
requests which require handling by a customer service representative.
The system is integrated with the host computer system of the bank so that the remote
banking customer can access other automated services of the bank. The method of the
invention includes the steps of inputting a customer banking request from among a
menu of banking requests at a remote personnel computer; transmitting the banking
requests to a host computer over a network; receiving the request at the host computer;
identifying the type of customer banking request received; automatic logging of the
service request, comparing the received request to a stored table of request types, each
of the request types having an attribute to indicate whether the request type is capable
of being fulfilled by a customer service representative or by an automated system; and,
depending upon the attribute, directing the request either to a queue for handling by a
customer service representative or to a queue for processing by an automated system.
AUTOMATED TELLER MACHINES (ATM):

An automated teller machine or automatic teller machine(ATM) is an electronic

computerized telecommunications device that allows a financial institution's customers
to directly use a secure method of communication to access their bank accounts, order
or make cash withdrawals (or cash advances using a credit card) and check their
account balances without the need for a human bank teller. Many ATMs also allow
people to deposit cash or cheques, transfer money between their bank accounts, top up
their mobile phones' pre-paid accounts or even buy postage stamps.
On most modern ATMs, the customer identifies him or herself by inserting a plastic card
with a magnetic stripe or a plastic smartcard with a chip that contains his or her account
number.

The customer then verifies their identity by entering a passcode, often referred to as a
PIN (Personal Identification Number) of four or more digits.
Upon successful entry of the PIN, the customer may perform a transaction. The growth
of ATMs has rapidly grown in the public places around the globe.

TELE BANKING:
Undertaking a host of banking related services including financial transactions from the
convenience of customers chosen place anywhere across the GLOBE and any time of
date and night has now been made possible by introducing on-line

Telebanking services. By dialing the given Telebanking number through a landline or a

mobile from anywhere, the customer gets the following facilities

Automatic balance voice out for the default account.

Balance inquiry and transaction inquiry in all
Inquiry of all term deposit accounts
Statement of account by Fax, e-mail or ordinary mail.
Cheque book request
Stop payment which is on-line and instantaneous
Transfer of funds with CBS which is automatic and instantaneous
Utility Bill Payments
Renewal of term deposit which is automatic and instantaneous
Voice out of last five transactions.
SMART CARD:
A smart card usually contains an embedded 8-bit microprocessor (a kind of computer
chip). The microprocessor is under a contact pad on one side of the card. Think of the
microprocessor as replacing the usual magnetic stripe present on a credit card or debit
card.
The microprocessor on the smart card is there for security. The host computer and card
reader actually "talk" to the microprocessor. The microprocessor enforces access to the
data on the card.
The chips in these cards are capable of many kinds of transactions. For example, a
person could make purchases from their credit account, debit account or from a stored
account value that's reload able. The enhanced memory and processing capacity of the
smart card is many times that of traditional magnetic-stripe cards and can
accommodate several different applications on a single card. It can also hold
identification information, which means no more shuffling through cards in the wallet to
find the right one -- the Smart Card will be the only one needed.

Smart cards can also be used with a smart card reader attachment to a personal
computer to authenticate a user.

Smart cards are much more popular in Europe than in the U.S. In Europe the health
insurance and banking industries use smart cards extensively. Every German citizen
has a smart card for health insurance. Even though smart cards have been around in
their modern form for at least a decade, they are just starting to take off in the U.S.

DEBIT CARD:
Debit cards are also known as check cards. Debit cards look like credit cards or ATM
(automated teller machine) cards, but operate like cash or a personal check. Debit
cards are different from credit cards. While a credit card is a way to "pay later," a debit
card is a way to "pay now." When you use a debit card, your money is quickly deducted
from your checking or savings account.
Debit cards are accepted at many locations, including grocery stores, retail stores,
gasoline stations, and restaurants.
E-CHEQUE:

An e-Cheque is the electronic version or representation of paper cheque.

The Information and Legal Framework on the E-Cheque is the same as that of
the paper cheques.
It can now be used in place of paper cheques to do any and all remote
transactions.

An E- cheque work the same way a cheque does, the cheque writer "writes" the e-
Cheque using one of many types of electronic devices and "gives" the e- Cheque to the
payee electronically. The payee "deposits" the Electronic Cheque receives credit, and
the payee's bank "clears" the e-Cheque to the paying bank.
The paying bank validates the e-Cheque and then "charges" the check writer's account
for the check.
E-MARKETING

E-marketing in the financial services sector (which is covered later) was made possible
by the arrival of e-banking. E-marketing builds on the e-channels ability to provide detailed
data about customers financial profiles and purchasing behaviour. Detailed understanding
of customers enables customised advertising, customized products and enrichment of the
relationship with customers through such activities as cross selling.
Other potential benefits of e-banking to organizations may include: improved
use of IT resources and business processes; better relationships with suppliers/
customers; quick delivery of products and services; and a reduction in data entry
and customer services related errors.

It is important to note that e-channels do not automatically bring these benefits,

as other organizational issues also have been dealt with. There are only a few examples reported
in the literature where e-banking is realising its promised potential. One such example is the
Royal Bank of Canada, where its number of online relationships was 340,000 and was growing
at a rate of almost 700 new enrolments a day during year 2002-2003. Another example of
realisation of the above benefits is the Woolwich
Building Society in the UK, which is described in Chapter VIII. The number of its
online customer was growing so fast that it was cited as one of the main reason for
its takeover by a much bigger bank, Barclays. Not only did the number of its online
customer grow very quickly, but the new customer base was also very profitable.
According to Woolwichs own figures, its online customers bought four financial
their products each - much higher than its branch banking only customers.
OTHER FORMS OF ELECTRONIC BANKING

Direct Deposit

Electronic Bill Payment

Electronic Check Conversion

Cash Value Stored, etc.

DELIVERY OF RETAIL
BANKING SERVICES

Introduction:
The purpose of this chapter is to outline the online revolution which occurred in the banking
sector, mainly in the developed world. It will briefly cover the history of banking and how it
evolved through the centuries into a service which touches many aspects of our life on a daily
basis.
Financial services is one of the largest and most important industries in developed economies.
Within this, banking is the largest sector. There are several types
Of banks, such as retail banks, commercial banks, investment banks and credit
unions. Increasingly other types of businesses such as supermarkets are also offering financial
services.
Banks exist in a wide range of sizes and differ in the type and number of services
they provide. Commercial banks dominate this industry, offering a full range of
services for individuals and businesses, from safeguarding money and valuables to
the provision of loans, credit, and bill payment services. This book largely covers
the issues related to retail commercial banks which offer services such as current
accounts, saving products and various types of loans to individuals as well as businesses. Issues
related to private banking or investment banking are similar in many ways but are outside the
scope of this book.

History of retail banking

Basic banking services such as deposits for safe keeping, saving, or borrowing for
personal or business use is as old as human civilisation. Organised banking services started in
15th and 16 century Europe, when banks began opening branches in commercial areas of large
cities. By the last quarter of the 19th century, banks were consolidating their branch networks so
that they could operate in a more integrated manner (Consoli, 2003). Mergers and acquisitions
allowed banks to grow quickly but, in the absence initially of information and communication
technologies, their services remained largely local.
The policy of opening new branches continued throughout the twentieth century
as a means of business expansion, but services were limited to the provision of routine operations
such as deposits, withdrawals and basic loan services. To cope with the increasing volume of
work, and to achieve consistency across branch networks, banks started to standardise their
record keeping and accounting practices. This also helped them to effectively connect branches.
Standard record keeping also resulted in the appearance of new professions such as bank clerks.
The arrival of the typewriter in the late nineteenth century helped to standardise internal/external
communications, and other tools such as the telegraph made communications between branches
and headquarters a daily routine.
After the end of the Second World War, early forms of computers began to find their way
into the banking industry, initially to automate routine data processing operations. This later gave
way to more organized data processing to make data more accurate and easier to access. More
advance database tools enabled the automation of clearing systems and retail money transfer
which cleared the way for banks to widen their reach and improve and increase the
delivery of financial services.
At this stage, these technological developments were often confined to the banks
headquarters, while branches continued to operate paper based systems.
In the mid 1960s IBM developed a magnetic strip on which data could be stored
to be used through plastic cards for electronic reading (Consoli, 2003). Banks were
again one of the first users of this technology, beginning with the development of cash
machines. Later these became known as Automated Teller Machines (ATMs).
ATMs not only provided cash but also showed balances, mini statements and requests for
banking stationary such as cheque books.
During the 1980s the automation of data processing spread rapidly to branches, and most internal
operations were fully automated, making considerable savings
for banks. Their benefits to customers however remained very limited. In the late 80s and
early 90s the use of computers started spreading to all areas of banking, and intra-bank networks
further enhanced and enabled standardization of products and service delivery. This meant that
technology itself was ceasing to be a source of competitive advantage, and banks had to
differentiate their products and services in order to grow. The standardization of products,
processes and technologies, as well as liberalization of banking regulations, allowed the
entry of new financial agents who operated in a diversified manner by offering, at lower
prices, services traditionally available exclusively from banks. The use of IT, which drastically
reduced entry costs (Consoli, 2003), further accelerated this trend. ATM use grew significantly
as functionality improved, and this growth continues to the present day.

Travel and Tourism Sector

The Internet is an ideal place to plan, explore and arrange almost any trip. People
can make potential savings by buying on the Internet, eliminating travel agents and
buying directly from the providers. Websites like CheapFlights.com and lastminute. com allow
customers to buy flexible fares on the Internet, where they can also make use of last minute
deals. E-services are provided by all major airlines: American Airlines, Air Portugal and others
conduct online auctions in which passengers can bid for tickets.

Broker Based Services

Brokers usually work for a commission, acting as intermediaries between buyers and sellers of
services. The buyers can be an individual or a company. Some of the most notable services are
travel agencies, insurance agencies, and stock market brokerages. The agents role in an e-
commerce environment is changing, and increasingly they will nee Assisting in comparison
shopping from multiple sources;
Providing total quality solutions by combining services from several vendors;
and
Providing certifications and third party control and evaluation systems.
The Job Market
Thousands of employment agencies operate on the Internet, with companies advertising on their
home pages. There are sites where one can assess market wages rate by entering skills sets.
Similarly, it is possible to seek employment anywhere in the world as jobs are advertised on the
Internet. Many recruitment agencies such as www.hays.com use the Internet as their main
communication channel, both with employers and job-seekers.

The Property Market

One of the booming uses of the Internet is that of buying or renting property, through websites
such as Yahoo, loot.com or Yourmove.com. Properties can be viewed on screen, sorted and
organised according to customer criteria, and previewed. In short, e-commerce is creating
fundamental changes in the ways business operate, their functions, and the way they compete.
Engaging in e-commerce requires rethinking the very nature of the buyer/seller relationship. It
requires the fundamental transformation of business, because all or most human interactions and
paper-based processes within the value chain will need to be changed.d to put more emphasis on
providing value added services.

From E-commerce to E-banking

In its very basic form, e-banking can mean the provision of information about a
bank and its services via a home page on the World Wide Web (WWW). A more
Sophisticated Internet based service provides the customer with access to their accounts, the
ability to move money between different accounts, make payment or
apply for loans and other financial products. The term e-banking will be used in this
book to describe the all types of provision of financial services by an organization to its
customers. Such customers may be an individual or another business.
To understand the electronic distribution of goods and services, the work of
Rayport and Sviokla (1994, 1995) is a good starting point. They highlight the differences
between the physical market place and the virtual market place, which they
describe as an information-defined arena. In the context of e-banking, electronicdelivery
of services means a customer conducting his transactions from a remote
location (e.g. home) rather that visiting a local branch.
Automated teller machines (ATMs) were the first means of providing electronic access to
retail customers, made possible through the introduction of computer networks. Telephone
banking arrived next, which was a revolutionary concept since it made banking possible from
anywhere as long as telephones were available. In the mid eighties, online banking arrived. In its
early form online banking services requiring a computer, modem and software provided
by the financial services vendors. Generally, these services failed to get widespread acceptance
due to high call costs and unfriendly system interfaces, and were discontinued by most providers.
With the arrival and widespread adoption of The World Wide Web, banks renewed their interest
in this area and started developing a web presence. The goal was for a banks website to provide
many, if not all, of the services offered at a branch. This may include transactions as well as
information, advice, administration, and even cross-selling. However, the interactive nature of
the Web not only allows banks to enhance these core services, but also enables banks to
communicate more effectively and expand customer relationships. When combined with the
improving analytical capabilities of data mining and related technologies, the potential for
enriching the relationship with customers is unlimited.

Most banks and other financial institutions in the developed world have established an
Internet presence with various objectives. Some banks are there because their competitors have
done it. Others prefer a wait and see practice. Some are using it as a banking channel being part
of their distribution /delivery management.

E-banking largely came into being as a result of technological developments in

the field of computing and communications but there have been a number of other
factors or challenges which played an important part in its development. According to
Jayawardhena and Foley (2000) the challenges for banks are fourfold. First, they need to satisfy
customer requirements that are complex and ever changing. Second, they need to deal with
increased competition from old as well as new entrants coming into the market. Third, they need
to address the pressures on the supply chain to deliver their services quickly. Finally, they must
continually develop new and innovative services to differentiate themselves from the
competition, as having a large branch network is no longer seen as a main source of competitive
advantage.

E-banking is seen by many banks as a key tool to address these challenges.

Other reasons for the adoption of e-banking by banks may include achieving
competitive advantage (at least in short term), creating new distribution channels,
improving image, and reducing costs.
FUTURE OF E-BANKING

It is notoriously difficult to predict the future, but some educated guesses can be made
using past and current experiences. In our view, the next developments in ebanking will involve
new products and services that were not feasible in traditional banking models. This could
involve enabling instant payments using mobile devices, or tools to help people manage their
multi-bank financial portfolio, simultaneously.

Internet only banking may also become more viable as the functionality of e-banking systems
grows, and customers adapt to the new ways of conducting their financial activities.
International banking might become a reality for ordinary consumers as banking payments
systems are increasingly harmonised across borders. For example, in Europe, new measures are
being introduced by the European Union to allow cross-border provision of e-commerce services
by providing a single payment system. Similar initiatives are due to be implemented in other
parts of the world.

E-banking has the potential to be a very rich and pleasant experience, and
may provide more opportunities for banks to develop mutually satisfying, tailor
made services to enrich relationship with customers. As technology evolves, the
opportunities to extend the relationship beyond what is possible in the physical
world continue to grow and will only be limited by a banks ability to innovate or
commitment to e-banking.

Some companies such as IBM have expressed their vision of the future of financial
services, complete with biometrics, state-of-the-art branch offices, enterprise risk-
management systems, and advanced customer interaction (Marlin, 2005). The use of financial
decision-aid tools in e-banking is also set to grow. To date, the experiences of many e-
banking users with these tools have proved unsatisfactory: with many firms do not even
offering online advice tools, people often have little idea of the benefits such tools could
bring. Banks need to promote the availability and use of these, and educate consumers
about their benefits (Clarke, et al. 2008). One good example of a bank offering useful
financial management tools is UBS which in addition to the usual e-banking functions,
provides a number of such tools,
for example (UBS, 2008)
Mobile Banking Technologies

Some banks are making significant investments in mobile systems to deliver a range of
types of business value, from increased efficiency and cost reduction, to improved
operational effectiveness and customer service to provide a competitive advantage. A factor that
has contributed to this development has been the extended availability and capacity of mobile
communications infrastructure around the world. The number of types of mobile devices has
been increasing rapidly and the functionality available has also improved. The shrinking costs of
data transmission and, due to the intense competition from suppliers, the reduced costs of
devices have catalysed the distribution of mobile technologies and amplified the growth of
the worldwide mobile market. In those countries where traditional telecommunication
infrastructure is not well developed, mobile technologies is transforming accessibility to the
Internet based services.

Mobile banking may be described as the newest channel in electronic banking to

provide a convenient way of performing banking transaction using mobile phones
or other mobile devices. The potential for mobile banking may be far greater than
typical desk-top access, as there are several times more mobile phone users than
online PC users. Increasingly mobile life styles may also fuel the growth of
anywhere, anytime applications.

There are two main types of technologies available for use in mobile Banking:
Wireless Application Protocol (WAP) and Wireless Internet Gateway (WIG).
WAP is an application environment and set of communication protocols for
wireless devices designed to enable manufacturer, vendor, and platform independent access to
the Internet and advanced telephony services. WIG is a Short Message Service (SMS)-based
service, in which a menu of available banking options is initially downloaded from the bank to
the phone device (Brown et al. 2003). This enables users to browse bank accounts and conduct
other banking related tasks.

Mobile banking was offered in the UK by the banks such as The Woolwich
during early 2000s, but it failed to achieve a critical mass of users. The same story
has been repeated in many other counties with mixed results.

Social Issues
E-banking literature is dominated by technical issues and human issues get little
attention. We have argued that human activity is more fundamental to the success
of e-banking, so the investigation of approaches underpinned by theories of social
interaction are outlined in this book. From research in the social domain, a foundation in critical
social theory emerges as a promising direction (see Chapter VI for details).
Within such an approach, the first issue to be addressed is that of understanding the
problem context. For this, critical social theory points to the use of critical systems heuristics and
critical boundary judgements to critique and determine the system boundary. Boundary critique
further informs intervention strategy. The methods required must embrace functionalist
(technological), interpretivist (human-centered), and radical humanist (emancipatory,
participatory, social inclusion) issues. In any future work, the ongoing research in the
application of critical theory to management issues must be considered, and a brief outline of this
is provided.

Given these findings, how might a manager seek to action them? He or she should:

Determine the initial scope of the system of concern, identify the social group(s)
involved in and affected by that system and form representative samples from
these groups. In terms of management action, the challenge here is not to see
e-banking development and management as a problem to be solved by an
expert group of developers. A framework (for example, of user groups) needs
to be established, from which the contribution from those participating in web
usage can be drawn.

Managers should also:

Conduct boundary critique to initially determine the system of concern and

continue this throughout the project.
Use participative forums to discuss all issues of web design, development and
implementation.
Choose and implement the relevant methodological approaches in a critical framework.
Initially, formal boundary setting sessions will be needed to set the scene. Quite
quickly, groups will form their own clear views about the scope of e-banking developments
within a particular organisational context (it will become culturally
ingrained), and less time will be necessary in formal sessions to discuss this. The
particular forums can then be used to surface the issues, the only primary requirement in terms of
expertise will be a facilitator who can assist with guidance on the process and lead the forum.
We argue that e-banking management is a task to be conducted within a social
framework. A purely technical approach or even a technical approach, even where
informed from participative analysis, is insufficient to address the complexity of the
problem contexts encountered. It is essential to recognise that what is being dealt with is a social
system, albeit enabled by technology, and, this being so, it is difficult to envisage how such an
undertaking could be informed from anywhere other than social theory.
BENEFITS/CONCERNS OF E-BANKING

BENEFITS OF E-BANKING

For Banks:
Price- In the long run a bank can save on money by not paying for tellers or for
managing branches. Plus, it's cheaper to make transactions over the Internet.
Customer Base- the Internet allows banks to reach a whole new market- and a well off
one too, because there are no geographic boundaries with the Internet. The Internet
also provides a level playing field for small banks who want to add to their customer
base.
Efficiency- Banks can become more efficient than they already are by providing Internet
access for their customers. The Internet provides the bank with an almost paper less
system.
Customer Service and Satisfaction- Banking on the Internet not only allow the customer
to have a full range of services available to them but it also allows them some services
not offered at any of the branches. The person does not have to go to a branch where
that service may or may not be offer. A person can print of information, forms, and
applications via the Internet and be able to search for information efficiently instead of
waiting in line and asking a teller. With more better and faster options a bank will surely
be able to create better customer relations and satisfaction.
Image- A bank seems more state of the art to a customer if they offer Internet access.
A person may not want to use Internet banking but having the service available gives a
person the feeling that their bank is on the cutting image.

For Customers:

Bill Pay: Bill Pay is a service offered through Internet banking that allows the customer
to set up bill payments to just about anyone. Customer can select the person or
company whom he wants to make a payment and Bill Pay will withdraw the money from
his account and send the payee a paper check or an electronic payment.
Other Important Facilities: E- banking gives customer the control over nearly every
aspect of managing his bank accounts. Besides the Customers can, Buy and Sell
Securities, Check Stock Market Information, Check Currency Rates, Check Balances,
See which checks are cleared, Transfer Money, View Transaction History and avoid
going to an actual bank. The best benefit is that Internet banking is free. At many banks
the customer doesn't have to maintain a required minimum balance. The second big
benefit is better interest rates for the customer.

CONCERNS WITH E-BANKING:

As with any new technology new problems are faced.

Customer support - banks will have to create a whole new customer relations
department to help customers. Banks have to make sure that the customers receive
assistance quickly if they need help. Any major problems or disastrous can destroy the
banks reputation quickly an easily. By showing the customer that the Internet is reliable
you are able to get the customer to trust online banking more and more.

Laws - While Internet banking does not have national or state boundaries, the law does.
Companies will have to make sure that they have software in place software market,
creating a monopoly.

Security: customer always worries about their protection and security or

accuracy.There is always question whether or not something took place.
Other challenges: lack of knowledge from customers end, sit changes by the banks, etc.
E-BANKING GLOBAL PERSPECTIVE
The advent of Internet has initiated an electronic revolution in the global banking sector.
The dynamic and flexible nature of this communication channel as well as its ubiquitous
reach has helped in leveraging a variety of banking activities. New banking
intermediaries offering entirely new types of banking services have emerged as a result
of innovative e-business models. The Internet has emerged as one of the major
distribution channels of banking products and services, for the banks in US and in the
European countries.
Initially, banks promoted their core capabilities i.e., products, services and advice
through Internet. Then, they entered the e-commerce market as providers/distributors of
their own products and services. More recently, due to advances in Internet security and
the advent of relevant protocols, banks have discovered that they can play their primary
role as financial intermediates and facilitators of complete commercial transactions via
electronic networks especially through the Internet.
Some banks have chosen a route of establishing a direct web presence while others
have opted for either being an owner of financial services centric electronic marketplace
or being participants of a non-financial services centric electronic marketplace.

The trend towards electronic delivery of banking products and services is occurring
partly as a result of consumer demand and partly because of the increasing competitive
environment in the global banking industry. The Internet has changed the customers'
behaviors who are demanding more customized products/services at a lower price.
Moreover, new competition from pure online banks has put the profitability of even
established brick and mortar banks under pressure. However, very few banks have
been successful in developing effective strategies for fully exploiting the opportunities
offered by the Internet. For traditional banks to define

What niche markets to serve and decide what products/services to offer there is a need
for a clear and concise Internet commerce strategy.
Banking transactions had already started taking place through the Internet way back in
1995.

The Internet promised an ideal platform for commercial exchange, helping banks to
achieve new levels of efficiency in financial transactions by strengthening customer
relationship, promoting price discovery and spend aggregation and increasing the
reach. Electronic finance offered considerable opportunities for banks to expand their
client base and rationalize their business while the customers received value in the form
of savings in time and money.
CHALLENGES OF THE "E-BANKING
REVOLUTION
Electronic banking is the wave of the future. It provides enormous benefits to
consumers in terms of the ease and cost of transactions. But it also poses new
challenges for country authorities in regulating and supervising the financial system and
in designing and implementing macroeconomic policy.
Electronic banking has been around for some time in the form of automatic teller
machines and telephone transactions. More recently, it has been transformed by the
Internet, a new delivery channel for banking services that benefits both customers and
banks. Access is fast, convenient, and available around the clock, whatever the
customer's location (see illustration above). Plus, banks can provide services more
efficiently and at substantially lower costs. For example, a typical customer transaction
costing about $1 in a traditional "brick and mortar" bank branch or $0.60 through a
phone call costs only about $0.02 online.
Electronic banking also makes it easier for customers to compare banks' services and
products, can increase competition among banks, and allows banks to penetrate new
markets and thus expand their geographical reach. Some even see electronic banking
as an opportunity for countries with underdeveloped financial systems to leapfrog
developmental stages. Customers in such countries can access services more easily
from banks abroad and through wireless communication systems, which are developing
more rapidly than traditional "wired" communication networks.
The flip side of this technological boom is that electronic banking is not only susceptible
to, but may exacerbate, some of the same risksparticularly governance, legal,
operational, and reputationalinherent in traditional banking. In addition, it poses new
challenges. In response, many national regulators have already modified their
regulations to achieve their main objectives: ensuring the safety and soundness of the
domestic banking system, promoting market discipline, and protecting customer rights
and the public trust in the banking system. Policymakers are also becoming increasingly
aware of the greater potential impact of macroeconomic policy
on capital movements.
NEW CHALLENGES FOR REGULATORS

This changing financial landscape brings with it new challenges for bank
Management and regulatory and supervisory authorities. The major ones stem from
increased cross-bor and the greater ease of banking activities, and from the reliance on
technology to provide banking services with the necessary security.

Regulatory Risk : Because the Internet allows services to be provided from anywhere
in the world, there is a danger that banks will try to avoid regulation and supervision.
What can regulators do? They can require even banks that provide their services from a
remote location through the Internet to be licensed. Licensing would be particularly
appropriate where supervision is weak and cooperation between a virtual bank and the
home supervisor is not adequate. Licensing is the norm, for example, in the United
States and most of the countries of the European Union. A virtual bank licensed outside
these jurisdictions that wishes to offer electronic banking services
and take deposits in these countries must first establish a licensed branch.
Determining when a bank's electronic services trigger the need for a license can be
difficult, but indicators showing where banking services originate and where they are
provided can help. For example, a virtual bank licensed in country X is not seen as
taking deposits in country Y if customers make their deposits by posting checks to an
address in country X. If a customer makes a deposit at an automatic teller machine in
country Y, however, that transaction would most likely be considered deposit taking in
country Y. Regulators need to establish guidelines to clarify the gray areas between
these two cases.

Legal Risk: Electronic banking carries heightened legal risks for banks. Banks can
potentially expand the geographical scope of their services faster through electronic
banking than through traditional banks. In some cases, however, they might not be fully
versed in a jurisdiction's local laws and regulations before they begin to offer services
there, either with a license or without a license if one is not required. When a license is
not required, a virtual banklacking contact with its host country supervisormay find it
even more difficult to stay abreast of regulatory changes. As
a consequence, virtual banks could unknowingly violate customer protection laws,
including on data collection and privacy, and regulations on soliciting. In doing so, they
expose themselves to losses through lawsuits or crimes that are not prosecutedder
transactions resulting from drastically lower transaction costs.

Operational Risk: The reliance on new technology to provide services makes security
and system availability the central operational risk of electronic banking.
Security threats can come from inside or outside the system, so banking regulators and
supervisors must ensure that banks have appropriate practices in place to guarantee
the confidentiality of data, as well as the integrity of the system and the data. Banks'
security practices should be regularly tested and reviewed by outside experts to analyze
network vulnerabilities and recovery preparedness. Capacity planning to address
increasing transaction volumes and new technological developments should take
account of the budgetary impact of new investments, the
ability to attract staff with the necessary expertise, and potential dependence on
external service providers. Managing heightened operational risks needs to become an
integral part of banks' overall management of risk, and supervisors need to include
operational risks in their safety and soundness evaluations.

Reputational Risk: Breaches of security and disruptions to the system's availability can
damage a bank's reputation. The more a bank relies on electronic delivery channels, the
greater the potential for reputational risks. If one electronic bank encounters problems
that cause customers to lose confidence in electronic delivery channels as a whole or to
view bank failures as system wide supervisory deficiencies, these problems can
potentially affect other providers of electronic banking services.
In many countries where electronic banking is becoming the trend, bank supervisors
have put in place internal guidance notes for examiners, and many have released risk
management guidelines for banks.
Reputational risks also stem from customer misuse of security precautions or ignorance
about the need for such precautions. Security risks can be amplified and may result in a
loss of confidence in electronic delivery

channels. The solution is consumer educationa process in which regulators and

supervisors can assist. For example, some bank supervisors provide links on their
websites allowing customers to identify online banks with legitimate charters and
deposit insurance. They also issue tips on Internet banking, offer consumer help lines,
and issue warnings about specific entities that may be conducting unauthorized banking
operations in the country.
REGULATORY TOOLS TO OVERCOME
CHALLENGES

There are four key tools that regulators need to focus on to address the new challenges
posed by the arrival of E-banking.

Adaptation: In light of how rapidly technology is changing and what the changes mean
for banking activities, keeping regulations up to date has been, and continues to be, a
far-reaching, time-consuming, and complex task. In May 2001, the Bank for
International Settlements issued its "Risk Management Principles for Electronic
Banking," which discusses how to extend, adapt, and tailor the existing risk
management framework to the electronic banking setting. For example, it recommends
that a bank's board of directors and senior management review and approve the key
aspects of the security control process, which should include measures to authenticate
the identity and authorization of customers, promote
nonrepudiation of transactions, protect data integrity, and ensure segregation of duties
within E-banking systems, databases, and applications. Regulators and supervisors
must also ensure that their staffs have the relevant technological expertise to assess
potential changes in risks, which may require significant investment in training and in
hardware and software.

Legalization: New methods for conducting transactions, new instruments, and new
service providers will require legal definition, recognition, and permission. For example,
it will be essential to define an electronic signature and give it the same legal status as
the handwritten signature. Existing legal definitions and permissions such as the legal
definition of a bank and the concept of a national borderwill also need to be rethought.

Harmonization: International harmonization of electronic banking regulation must be a

top priority. This means intensifying cross-border cooperation between supervisors and
coordinating laws and regulatory practices internationally and domestically across
different regulatory agencies. The problem of jurisdiction that arises from "borderless"
transactions is, as of this writing, in limbo. For now, each country must decide who has
jurisdiction over electronic banking involving its citizens. The task of international
harmonization and cooperation can be viewed as
the most daunting in addressing the challenges of electronic banking.
Integration: This is the process of including information technology issues and their
accompanying operational risks in bank supervisors' safety and soundness evaluations.
In addition to the issues of privacy and security, for example, bank examiners will want
to know how well the bank's management has elaborated its business plan for
electronic banking. A special challenge for regulators will be supervising the functions
that are outsourced to third-party vendors.
LOOKING FORWARD
An old Chinese saying goes: If you don't know where you are going -
You will never get there. Globally, the financial sector is metamorphosing
under the impact of competitive, regulatory and technological forces. The banking
sector is currently in a transition phase with re-alignment, mergers and entry of new
players from different industry is becoming common. Many countries including are de-
regulating their banking sector and government policies no longer form an entry barrier
to banks competitors.
Technology has leveled the playing field: the bargaining power of consumers is
increasing, switching costs are becoming lower and consumer loyalties are harder to
retain. Primary goal of the banking sector including every Bank is mainly to make profit,
which in turn is ploughed back to increase business and reach, and pay dividends or
share profits to the stakeholders. This is perfectly correct, yet generic goal. More over
the product (schemes) differentiation is very difficult for banks as most of the products
sold are constrained by legal or industry regulations.

Now, if you are already thinking about Technology as a tool in Banking you could
probably set some of these goals:

Selling financial products and services

Cutting operational costs

Branding & Market recognition

Keeping profitable customers

Every day more and more people are turning to the Technology for their personal
banking. It is a safe, convenient way to shop for financial services, maintain bank
accounts and conduct business 24 hours a day. Every one of us has always enjoyed a
special relationship with their neighborhood bank. Why are so many people suddenly
choosing their personal computers as the new way to view and manage their money?

Quite simple - because it is a valuable option to have. Bank customers can save time by
banking online. There is no need to stand in one more line to perform the most basic
transactions when they can be done quickly from the desktop PC anytime, day or night.
But even with more complicated transactions or investment decisions, people like
having direct control over their finances themselves. They find it convenient to access
all of their financial information in one place. Ease of use is one of the most important
factors. Navigation through online banking should be simple and intuitive. Banks need
to appeal to customers who may not be technologically
sophisticated, and should not require an engineering degree to get started or use the
service. Customers also choose banks whose online services are reliable. Most Banks
now offers a comprehensive range of financial products and services, including a FREE
checking account and internet bill paying services. In addition, an array of checking
accounts is available in which you may also request a FREE check card.

Hence most Banks of following Electronic Banking or Internet Banking FREE

have following services:

Get your balance details, Obtain your last 3 transaction details, Request a cheque book,
Stop a cheque payment, Enquire cheque status, Request an account statement,Get
Fixed Deposit details, Bill payment details for electricity, mobile phone and telephone
services, Convenience of setting an operative account, Designate a particular account
linked to your customer id as the operative account. Customer Service available 24
hours a day, 7 days a week E-banking Benefits
Benefits for the bank should always reflect benefits for the customer of banking
services.
CONCLUSION

From all of this, we have learnt that information technology has empowered
customers and businesses with information needed to make better investment
decisions. At the same time, technology is allowing banks to offer new products,
operate more efficiently, raise productivity, expand geographically and compete
globally. A more efficient, productive banking industry is providing services of greater
quality and value.
E-banking has become a necessary survival weapon and is fundamentally changing the
banking industry worldwide. Today, the click of the mouse offers customers banking
services at a much lower cost and also empowers them with unprecedented freedom in
choosing vendors for their financial service needs. No country today has a choice
whether to implement E-banking or not given the global and competitive
nature of the economy. The invasion of banking by technology has created an
information age and commoditization of banking services. Banks have come to realize
that survival in the new e-economy depends on delivering some or all of their banking
services on the Internet while continuing to support their traditional infrastructure.

The rise of E-banking is redefining business relationships and the most successful
banks will be those that can truly strengthen their relationship with their customers.
Without any doubt, the international scope of E-banking provides new growth
perspectives and Internet business is a catalyst for new technologies and new business
processes. With rapid advances in telecommunication systems and digital technology,
E-banking has become a strategic weapon for banks to remain profitable. It has been
transformed beyond what anyone could have foreseen 25 years ago.
Two years ago, E-banking was a strategic advantage, nowadays; it is a business reality,
if not a necessity.
BIBLIGRAPHY:
1 - Obaid, Magda (2007). E-BANKING. Amman, Dar Safa to post.

2 - Rousan, Farouk (2003). Introduction to the E-BANKING, Oman, House thought of

printing and publishing.

3 - El, Amal (2002). Society and the ways of the E-BANKING. Cairo, Dar Al-Arab
Thought.

4 - Marina, Kamal (1999). Reference in the E-BANKING, Cairo, the publisher of the
universities.

6 - Robert Lafon- Gramon, E-BANKING, translated by Nadia Kabbani, Review: George

Aziz, the publisher of the Arabic edition: "Tradxim", 1977.