Download VTU MBA 3rd Sem 16MBAFM301-Principles and Practices of Banking PPB Notes Module 3 -Important Notes

Download VTU (Visvesvaraya Technological University) MBA 3rd Semester (Third Semester) 16MBAFM301-Principles and Practices of Banking PPB Notes Module 3 Important Lecture Notes (MBA Study Material Notes)

MODULE 4
BANKING TECHNOLGY
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MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
ELECTRONIC PAYMENTS SYSTEM
n Electronic Payment is a financial exchange that
takes place online between buyers and sellers.
The content of this exchange is usually some
form of digital financial instrument (such as
encrypted credit card numbers, electronic
Cheques or digital cash) that is backed by a bank
or an intermediary, or by a legal tender.
n Electronic payment system is a system which
helps the customer or user to make online
payment for their shopping.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
ELECTRONIC PAYMENTS SYSTEM
n Electronic Payment is a financial exchange that
takes place online between buyers and sellers.
The content of this exchange is usually some
form of digital financial instrument (such as
encrypted credit card numbers, electronic
Cheques or digital cash) that is backed by a bank
or an intermediary, or by a legal tender.
n Electronic payment system is a system which
helps the customer or user to make online
payment for their shopping.
IFSC Code
n IFSC Code Means Indian Financial System Code. IFSC Code is being
used as the address code in one user to another user. RTGS and NEFT
payment system of RBI use these codes. IFSC code consists of 11
characters identified as under (Example of Madhapur, Hyderabad)
n First Four Digits show identity of the Bank i.e SBIN
n 5
th
Digit in default as zero ( for future Use) i.e. 0
n Last 6 characters display the branch identity i.e. 004187
n So IFSC Code for SBI, Madhapur, Hyderabad is SBIN-0-004187.
IFSC is excellent unique code for international electronic
payment system
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
ELECTRONIC PAYMENTS SYSTEM
n Electronic Payment is a financial exchange that
takes place online between buyers and sellers.
The content of this exchange is usually some
form of digital financial instrument (such as
encrypted credit card numbers, electronic
Cheques or digital cash) that is backed by a bank
or an intermediary, or by a legal tender.
n Electronic payment system is a system which
helps the customer or user to make online
payment for their shopping.
IFSC Code
n IFSC Code Means Indian Financial System Code. IFSC Code is being
used as the address code in one user to another user. RTGS and NEFT
payment system of RBI use these codes. IFSC code consists of 11
characters identified as under (Example of Madhapur, Hyderabad)
n First Four Digits show identity of the Bank i.e SBIN
n 5
th
Digit in default as zero ( for future Use) i.e. 0
n Last 6 characters display the branch identity i.e. 004187
n So IFSC Code for SBI, Madhapur, Hyderabad is SBIN-0-004187.
IFSC is excellent unique code for international electronic
payment system
MICR
n Means magnetic Ink character recognition code which contains 9
digits appearing at the bottom of the cheque, following the cheque
number each bank branch has a unique MICR Code. To understand
how the MICR works lets take the example of 9 digits MICR code of
SBI Madhpur, Hyderabad ? 500081 which has a MICR code of 500-
002-072.
n First three digits of the code display the city and is derived from first
three characters of the PIN which is 500
n Digits 4,5, and 6 display the bank codes allotted to each bank by RBI .
in the case of SBI the code allooted is 002
n Digits 7,8 and 9 display the bank branch codes allotted to each
branches of the Bank for example of SBI Madhpur Hyderabad 500081
branch has been allotted code no 72
n Therefore, 9 digits of MICR of SBI Madhpur, Hyderabad ?
500081 will be 500-002-072
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
ELECTRONIC PAYMENTS SYSTEM
n Electronic Payment is a financial exchange that
takes place online between buyers and sellers.
The content of this exchange is usually some
form of digital financial instrument (such as
encrypted credit card numbers, electronic
Cheques or digital cash) that is backed by a bank
or an intermediary, or by a legal tender.
n Electronic payment system is a system which
helps the customer or user to make online
payment for their shopping.
IFSC Code
n IFSC Code Means Indian Financial System Code. IFSC Code is being
used as the address code in one user to another user. RTGS and NEFT
payment system of RBI use these codes. IFSC code consists of 11
characters identified as under (Example of Madhapur, Hyderabad)
n First Four Digits show identity of the Bank i.e SBIN
n 5
th
Digit in default as zero ( for future Use) i.e. 0
n Last 6 characters display the branch identity i.e. 004187
n So IFSC Code for SBI, Madhapur, Hyderabad is SBIN-0-004187.
IFSC is excellent unique code for international electronic
payment system
MICR
n Means magnetic Ink character recognition code which contains 9
digits appearing at the bottom of the cheque, following the cheque
number each bank branch has a unique MICR Code. To understand
how the MICR works lets take the example of 9 digits MICR code of
SBI Madhpur, Hyderabad ? 500081 which has a MICR code of 500-
002-072.
n First three digits of the code display the city and is derived from first
three characters of the PIN which is 500
n Digits 4,5, and 6 display the bank codes allotted to each bank by RBI .
in the case of SBI the code allooted is 002
n Digits 7,8 and 9 display the bank branch codes allotted to each
branches of the Bank for example of SBI Madhpur Hyderabad 500081
branch has been allotted code no 72
n Therefore, 9 digits of MICR of SBI Madhpur, Hyderabad ?
500081 will be 500-002-072
CHEQUE TRUNCATION
Truncation is the process of stopping the flow of the physical cheque issued
by a drawer at some point by the presenting bank en-route to the paying
bank branch.
In its place an electronic image of the cheque is transmitted to the paying
branch through the clearing house, along with relevant information like
data on the MICR band, date of presentation, presenting bank, etc.
Cheque truncation thus obviates the need to move the physical instruments
across bank branches, other than in exceptional circumstances for
clearing purposes. This effectively eliminates the associated cost of
movement of the physical cheques, reduces the time required for their
collection and brings elegance to the entire activity of cheque processing.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
ELECTRONIC PAYMENTS SYSTEM
n Electronic Payment is a financial exchange that
takes place online between buyers and sellers.
The content of this exchange is usually some
form of digital financial instrument (such as
encrypted credit card numbers, electronic
Cheques or digital cash) that is backed by a bank
or an intermediary, or by a legal tender.
n Electronic payment system is a system which
helps the customer or user to make online
payment for their shopping.
IFSC Code
n IFSC Code Means Indian Financial System Code. IFSC Code is being
used as the address code in one user to another user. RTGS and NEFT
payment system of RBI use these codes. IFSC code consists of 11
characters identified as under (Example of Madhapur, Hyderabad)
n First Four Digits show identity of the Bank i.e SBIN
n 5
th
Digit in default as zero ( for future Use) i.e. 0
n Last 6 characters display the branch identity i.e. 004187
n So IFSC Code for SBI, Madhapur, Hyderabad is SBIN-0-004187.
IFSC is excellent unique code for international electronic
payment system
MICR
n Means magnetic Ink character recognition code which contains 9
digits appearing at the bottom of the cheque, following the cheque
number each bank branch has a unique MICR Code. To understand
how the MICR works lets take the example of 9 digits MICR code of
SBI Madhpur, Hyderabad ? 500081 which has a MICR code of 500-
002-072.
n First three digits of the code display the city and is derived from first
three characters of the PIN which is 500
n Digits 4,5, and 6 display the bank codes allotted to each bank by RBI .
in the case of SBI the code allooted is 002
n Digits 7,8 and 9 display the bank branch codes allotted to each
branches of the Bank for example of SBI Madhpur Hyderabad 500081
branch has been allotted code no 72
n Therefore, 9 digits of MICR of SBI Madhpur, Hyderabad ?
500081 will be 500-002-072
CHEQUE TRUNCATION
Truncation is the process of stopping the flow of the physical cheque issued
by a drawer at some point by the presenting bank en-route to the paying
bank branch.
In its place an electronic image of the cheque is transmitted to the paying
branch through the clearing house, along with relevant information like
data on the MICR band, date of presentation, presenting bank, etc.
Cheque truncation thus obviates the need to move the physical instruments
across bank branches, other than in exceptional circumstances for
clearing purposes. This effectively eliminates the associated cost of
movement of the physical cheques, reduces the time required for their
collection and brings elegance to the entire activity of cheque processing.
n As explained above, Cheque Truncation speeds up
the process of collection of cheques resulting in
better service to customers, reduces the scope of loss
of instruments in transit, lowers the cost of collection
of cheques, and removes reconciliation-related and
logistics-related problems, thus benefitting the system
as a whole.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
ELECTRONIC PAYMENTS SYSTEM
n Electronic Payment is a financial exchange that
takes place online between buyers and sellers.
The content of this exchange is usually some
form of digital financial instrument (such as
encrypted credit card numbers, electronic
Cheques or digital cash) that is backed by a bank
or an intermediary, or by a legal tender.
n Electronic payment system is a system which
helps the customer or user to make online
payment for their shopping.
IFSC Code
n IFSC Code Means Indian Financial System Code. IFSC Code is being
used as the address code in one user to another user. RTGS and NEFT
payment system of RBI use these codes. IFSC code consists of 11
characters identified as under (Example of Madhapur, Hyderabad)
n First Four Digits show identity of the Bank i.e SBIN
n 5
th
Digit in default as zero ( for future Use) i.e. 0
n Last 6 characters display the branch identity i.e. 004187
n So IFSC Code for SBI, Madhapur, Hyderabad is SBIN-0-004187.
IFSC is excellent unique code for international electronic
payment system
MICR
n Means magnetic Ink character recognition code which contains 9
digits appearing at the bottom of the cheque, following the cheque
number each bank branch has a unique MICR Code. To understand
how the MICR works lets take the example of 9 digits MICR code of
SBI Madhpur, Hyderabad ? 500081 which has a MICR code of 500-
002-072.
n First three digits of the code display the city and is derived from first
three characters of the PIN which is 500
n Digits 4,5, and 6 display the bank codes allotted to each bank by RBI .
in the case of SBI the code allooted is 002
n Digits 7,8 and 9 display the bank branch codes allotted to each
branches of the Bank for example of SBI Madhpur Hyderabad 500081
branch has been allotted code no 72
n Therefore, 9 digits of MICR of SBI Madhpur, Hyderabad ?
500081 will be 500-002-072
CHEQUE TRUNCATION
Truncation is the process of stopping the flow of the physical cheque issued
by a drawer at some point by the presenting bank en-route to the paying
bank branch.
In its place an electronic image of the cheque is transmitted to the paying
branch through the clearing house, along with relevant information like
data on the MICR band, date of presentation, presenting bank, etc.
Cheque truncation thus obviates the need to move the physical instruments
across bank branches, other than in exceptional circumstances for
clearing purposes. This effectively eliminates the associated cost of
movement of the physical cheques, reduces the time required for their
collection and brings elegance to the entire activity of cheque processing.
n As explained above, Cheque Truncation speeds up
the process of collection of cheques resulting in
better service to customers, reduces the scope of loss
of instruments in transit, lowers the cost of collection
of cheques, and removes reconciliation-related and
logistics-related problems, thus benefitting the system
as a whole.
ECS ( ELECTRONIC CLEARING SYSTEM)
n Electronic mode of payment / receipt for 1
transactions that are repetitive and periodic in nature.
n ? ECS is used by institutions for making bulk 2
payment of amounts towards distribution of
dividend, interest, salary, pension, etc
n ? For bulk collection of amounts towards telephone
/ electricity / water dues, cess / tax collections, loan
installment repayments, periodic investments in
mutual funds, insurance premium etc
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
ELECTRONIC PAYMENTS SYSTEM
n Electronic Payment is a financial exchange that
takes place online between buyers and sellers.
The content of this exchange is usually some
form of digital financial instrument (such as
encrypted credit card numbers, electronic
Cheques or digital cash) that is backed by a bank
or an intermediary, or by a legal tender.
n Electronic payment system is a system which
helps the customer or user to make online
payment for their shopping.
IFSC Code
n IFSC Code Means Indian Financial System Code. IFSC Code is being
used as the address code in one user to another user. RTGS and NEFT
payment system of RBI use these codes. IFSC code consists of 11
characters identified as under (Example of Madhapur, Hyderabad)
n First Four Digits show identity of the Bank i.e SBIN
n 5
th
Digit in default as zero ( for future Use) i.e. 0
n Last 6 characters display the branch identity i.e. 004187
n So IFSC Code for SBI, Madhapur, Hyderabad is SBIN-0-004187.
IFSC is excellent unique code for international electronic
payment system
MICR
n Means magnetic Ink character recognition code which contains 9
digits appearing at the bottom of the cheque, following the cheque
number each bank branch has a unique MICR Code. To understand
how the MICR works lets take the example of 9 digits MICR code of
SBI Madhpur, Hyderabad ? 500081 which has a MICR code of 500-
002-072.
n First three digits of the code display the city and is derived from first
three characters of the PIN which is 500
n Digits 4,5, and 6 display the bank codes allotted to each bank by RBI .
in the case of SBI the code allooted is 002
n Digits 7,8 and 9 display the bank branch codes allotted to each
branches of the Bank for example of SBI Madhpur Hyderabad 500081
branch has been allotted code no 72
n Therefore, 9 digits of MICR of SBI Madhpur, Hyderabad ?
500081 will be 500-002-072
CHEQUE TRUNCATION
Truncation is the process of stopping the flow of the physical cheque issued
by a drawer at some point by the presenting bank en-route to the paying
bank branch.
In its place an electronic image of the cheque is transmitted to the paying
branch through the clearing house, along with relevant information like
data on the MICR band, date of presentation, presenting bank, etc.
Cheque truncation thus obviates the need to move the physical instruments
across bank branches, other than in exceptional circumstances for
clearing purposes. This effectively eliminates the associated cost of
movement of the physical cheques, reduces the time required for their
collection and brings elegance to the entire activity of cheque processing.
n As explained above, Cheque Truncation speeds up
the process of collection of cheques resulting in
better service to customers, reduces the scope of loss
of instruments in transit, lowers the cost of collection
of cheques, and removes reconciliation-related and
logistics-related problems, thus benefitting the system
as a whole.
ECS ( ELECTRONIC CLEARING SYSTEM)
n Electronic mode of payment / receipt for 1
transactions that are repetitive and periodic in nature.
n ? ECS is used by institutions for making bulk 2
payment of amounts towards distribution of
dividend, interest, salary, pension, etc
n ? For bulk collection of amounts towards telephone
/ electricity / water dues, cess / tax collections, loan
installment repayments, periodic investments in
mutual funds, insurance premium etc
Parties Involved
n Payee- one who is going to receive
n ? Payer- one who is going to pay
n ? Payee?s bank
n ? Payer?s bank
n ? Clearing House- Facilitates the interaction
between two banks
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
ELECTRONIC PAYMENTS SYSTEM
n Electronic Payment is a financial exchange that
takes place online between buyers and sellers.
The content of this exchange is usually some
form of digital financial instrument (such as
encrypted credit card numbers, electronic
Cheques or digital cash) that is backed by a bank
or an intermediary, or by a legal tender.
n Electronic payment system is a system which
helps the customer or user to make online
payment for their shopping.
IFSC Code
n IFSC Code Means Indian Financial System Code. IFSC Code is being
used as the address code in one user to another user. RTGS and NEFT
payment system of RBI use these codes. IFSC code consists of 11
characters identified as under (Example of Madhapur, Hyderabad)
n First Four Digits show identity of the Bank i.e SBIN
n 5
th
Digit in default as zero ( for future Use) i.e. 0
n Last 6 characters display the branch identity i.e. 004187
n So IFSC Code for SBI, Madhapur, Hyderabad is SBIN-0-004187.
IFSC is excellent unique code for international electronic
payment system
MICR
n Means magnetic Ink character recognition code which contains 9
digits appearing at the bottom of the cheque, following the cheque
number each bank branch has a unique MICR Code. To understand
how the MICR works lets take the example of 9 digits MICR code of
SBI Madhpur, Hyderabad ? 500081 which has a MICR code of 500-
002-072.
n First three digits of the code display the city and is derived from first
three characters of the PIN which is 500
n Digits 4,5, and 6 display the bank codes allotted to each bank by RBI .
in the case of SBI the code allooted is 002
n Digits 7,8 and 9 display the bank branch codes allotted to each
branches of the Bank for example of SBI Madhpur Hyderabad 500081
branch has been allotted code no 72
n Therefore, 9 digits of MICR of SBI Madhpur, Hyderabad ?
500081 will be 500-002-072
CHEQUE TRUNCATION
Truncation is the process of stopping the flow of the physical cheque issued
by a drawer at some point by the presenting bank en-route to the paying
bank branch.
In its place an electronic image of the cheque is transmitted to the paying
branch through the clearing house, along with relevant information like
data on the MICR band, date of presentation, presenting bank, etc.
Cheque truncation thus obviates the need to move the physical instruments
across bank branches, other than in exceptional circumstances for
clearing purposes. This effectively eliminates the associated cost of
movement of the physical cheques, reduces the time required for their
collection and brings elegance to the entire activity of cheque processing.
n As explained above, Cheque Truncation speeds up
the process of collection of cheques resulting in
better service to customers, reduces the scope of loss
of instruments in transit, lowers the cost of collection
of cheques, and removes reconciliation-related and
logistics-related problems, thus benefitting the system
as a whole.
ECS ( ELECTRONIC CLEARING SYSTEM)
n Electronic mode of payment / receipt for 1
transactions that are repetitive and periodic in nature.
n ? ECS is used by institutions for making bulk 2
payment of amounts towards distribution of
dividend, interest, salary, pension, etc
n ? For bulk collection of amounts towards telephone
/ electricity / water dues, cess / tax collections, loan
installment repayments, periodic investments in
mutual funds, insurance premium etc
Parties Involved
n Payee- one who is going to receive
n ? Payer- one who is going to pay
n ? Payee?s bank
n ? Payer?s bank
n ? Clearing House- Facilitates the interaction
between two banks
Types of ECS process
Credit request
n ? Example of a credit request:
n ? Jivan Tyres Ltd. has to pay monthly salaries to its
employees who have accounts across different banks
n ? The initiator can be the paying bank, requesting a credit to
the receiving bank
Debit Request
n ? Example of a Debit request
n ? State Electricity board wants to receive monthly bill
payment monthly from its customers
n ? In this case the initiator of the process is the payee?s bank
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
ELECTRONIC PAYMENTS SYSTEM
n Electronic Payment is a financial exchange that
takes place online between buyers and sellers.
The content of this exchange is usually some
form of digital financial instrument (such as
encrypted credit card numbers, electronic
Cheques or digital cash) that is backed by a bank
or an intermediary, or by a legal tender.
n Electronic payment system is a system which
helps the customer or user to make online
payment for their shopping.
IFSC Code
n IFSC Code Means Indian Financial System Code. IFSC Code is being
used as the address code in one user to another user. RTGS and NEFT
payment system of RBI use these codes. IFSC code consists of 11
characters identified as under (Example of Madhapur, Hyderabad)
n First Four Digits show identity of the Bank i.e SBIN
n 5
th
Digit in default as zero ( for future Use) i.e. 0
n Last 6 characters display the branch identity i.e. 004187
n So IFSC Code for SBI, Madhapur, Hyderabad is SBIN-0-004187.
IFSC is excellent unique code for international electronic
payment system
MICR
n Means magnetic Ink character recognition code which contains 9
digits appearing at the bottom of the cheque, following the cheque
number each bank branch has a unique MICR Code. To understand
how the MICR works lets take the example of 9 digits MICR code of
SBI Madhpur, Hyderabad ? 500081 which has a MICR code of 500-
002-072.
n First three digits of the code display the city and is derived from first
three characters of the PIN which is 500
n Digits 4,5, and 6 display the bank codes allotted to each bank by RBI .
in the case of SBI the code allooted is 002
n Digits 7,8 and 9 display the bank branch codes allotted to each
branches of the Bank for example of SBI Madhpur Hyderabad 500081
branch has been allotted code no 72
n Therefore, 9 digits of MICR of SBI Madhpur, Hyderabad ?
500081 will be 500-002-072
CHEQUE TRUNCATION
Truncation is the process of stopping the flow of the physical cheque issued
by a drawer at some point by the presenting bank en-route to the paying
bank branch.
In its place an electronic image of the cheque is transmitted to the paying
branch through the clearing house, along with relevant information like
data on the MICR band, date of presentation, presenting bank, etc.
Cheque truncation thus obviates the need to move the physical instruments
across bank branches, other than in exceptional circumstances for
clearing purposes. This effectively eliminates the associated cost of
movement of the physical cheques, reduces the time required for their
collection and brings elegance to the entire activity of cheque processing.
n As explained above, Cheque Truncation speeds up
the process of collection of cheques resulting in
better service to customers, reduces the scope of loss
of instruments in transit, lowers the cost of collection
of cheques, and removes reconciliation-related and
logistics-related problems, thus benefitting the system
as a whole.
ECS ( ELECTRONIC CLEARING SYSTEM)
n Electronic mode of payment / receipt for 1
transactions that are repetitive and periodic in nature.
n ? ECS is used by institutions for making bulk 2
payment of amounts towards distribution of
dividend, interest, salary, pension, etc
n ? For bulk collection of amounts towards telephone
/ electricity / water dues, cess / tax collections, loan
installment repayments, periodic investments in
mutual funds, insurance premium etc
Parties Involved
n Payee- one who is going to receive
n ? Payer- one who is going to pay
n ? Payee?s bank
n ? Payer?s bank
n ? Clearing House- Facilitates the interaction
between two banks
Types of ECS process
Credit request
n ? Example of a credit request:
n ? Jivan Tyres Ltd. has to pay monthly salaries to its
employees who have accounts across different banks
n ? The initiator can be the paying bank, requesting a credit to
the receiving bank
Debit Request
n ? Example of a Debit request
n ? State Electricity board wants to receive monthly bill
payment monthly from its customers
n ? In this case the initiator of the process is the payee?s bank
EFT
Electronic Funds Transfer(EFT) is a system where by anyone
who wants to make payment to another person or company
etc..
Can approach his bank and make cash payment or give
instructions /authorization to transfer funds directly from his
own account to the bank account of the receiver or
beneficiary.
Complete details such as the receiver?s name, bank account
number, account type, bank name, city branch name should be
furnished to the bank at the time of requesting for such
transfers so that the amount reaches the beneficiaries account
correctly and faster.
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MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
ELECTRONIC PAYMENTS SYSTEM
n Electronic Payment is a financial exchange that
takes place online between buyers and sellers.
The content of this exchange is usually some
form of digital financial instrument (such as
encrypted credit card numbers, electronic
Cheques or digital cash) that is backed by a bank
or an intermediary, or by a legal tender.
n Electronic payment system is a system which
helps the customer or user to make online
payment for their shopping.
IFSC Code
n IFSC Code Means Indian Financial System Code. IFSC Code is being
used as the address code in one user to another user. RTGS and NEFT
payment system of RBI use these codes. IFSC code consists of 11
characters identified as under (Example of Madhapur, Hyderabad)
n First Four Digits show identity of the Bank i.e SBIN
n 5
th
Digit in default as zero ( for future Use) i.e. 0
n Last 6 characters display the branch identity i.e. 004187
n So IFSC Code for SBI, Madhapur, Hyderabad is SBIN-0-004187.
IFSC is excellent unique code for international electronic
payment system
MICR
n Means magnetic Ink character recognition code which contains 9
digits appearing at the bottom of the cheque, following the cheque
number each bank branch has a unique MICR Code. To understand
how the MICR works lets take the example of 9 digits MICR code of
SBI Madhpur, Hyderabad ? 500081 which has a MICR code of 500-
002-072.
n First three digits of the code display the city and is derived from first
three characters of the PIN which is 500
n Digits 4,5, and 6 display the bank codes allotted to each bank by RBI .
in the case of SBI the code allooted is 002
n Digits 7,8 and 9 display the bank branch codes allotted to each
branches of the Bank for example of SBI Madhpur Hyderabad 500081
branch has been allotted code no 72
n Therefore, 9 digits of MICR of SBI Madhpur, Hyderabad ?
500081 will be 500-002-072
CHEQUE TRUNCATION
Truncation is the process of stopping the flow of the physical cheque issued
by a drawer at some point by the presenting bank en-route to the paying
bank branch.
In its place an electronic image of the cheque is transmitted to the paying
branch through the clearing house, along with relevant information like
data on the MICR band, date of presentation, presenting bank, etc.
Cheque truncation thus obviates the need to move the physical instruments
across bank branches, other than in exceptional circumstances for
clearing purposes. This effectively eliminates the associated cost of
movement of the physical cheques, reduces the time required for their
collection and brings elegance to the entire activity of cheque processing.
n As explained above, Cheque Truncation speeds up
the process of collection of cheques resulting in
better service to customers, reduces the scope of loss
of instruments in transit, lowers the cost of collection
of cheques, and removes reconciliation-related and
logistics-related problems, thus benefitting the system
as a whole.
ECS ( ELECTRONIC CLEARING SYSTEM)
n Electronic mode of payment / receipt for 1
transactions that are repetitive and periodic in nature.
n ? ECS is used by institutions for making bulk 2
payment of amounts towards distribution of
dividend, interest, salary, pension, etc
n ? For bulk collection of amounts towards telephone
/ electricity / water dues, cess / tax collections, loan
installment repayments, periodic investments in
mutual funds, insurance premium etc
Parties Involved
n Payee- one who is going to receive
n ? Payer- one who is going to pay
n ? Payee?s bank
n ? Payer?s bank
n ? Clearing House- Facilitates the interaction
between two banks
Types of ECS process
Credit request
n ? Example of a credit request:
n ? Jivan Tyres Ltd. has to pay monthly salaries to its
employees who have accounts across different banks
n ? The initiator can be the paying bank, requesting a credit to
the receiving bank
Debit Request
n ? Example of a Debit request
n ? State Electricity board wants to receive monthly bill
payment monthly from its customers
n ? In this case the initiator of the process is the payee?s bank
EFT
Electronic Funds Transfer(EFT) is a system where by anyone
who wants to make payment to another person or company
etc..
Can approach his bank and make cash payment or give
instructions /authorization to transfer funds directly from his
own account to the bank account of the receiver or
beneficiary.
Complete details such as the receiver?s name, bank account
number, account type, bank name, city branch name should be
furnished to the bank at the time of requesting for such
transfers so that the amount reaches the beneficiaries account
correctly and faster.
FEATURES OF EFT
n Quick movement of money.
n No intermediation of paper based system.
n Encryption key for protection and security.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
ELECTRONIC PAYMENTS SYSTEM
n Electronic Payment is a financial exchange that
takes place online between buyers and sellers.
The content of this exchange is usually some
form of digital financial instrument (such as
encrypted credit card numbers, electronic
Cheques or digital cash) that is backed by a bank
or an intermediary, or by a legal tender.
n Electronic payment system is a system which
helps the customer or user to make online
payment for their shopping.
IFSC Code
n IFSC Code Means Indian Financial System Code. IFSC Code is being
used as the address code in one user to another user. RTGS and NEFT
payment system of RBI use these codes. IFSC code consists of 11
characters identified as under (Example of Madhapur, Hyderabad)
n First Four Digits show identity of the Bank i.e SBIN
n 5
th
Digit in default as zero ( for future Use) i.e. 0
n Last 6 characters display the branch identity i.e. 004187
n So IFSC Code for SBI, Madhapur, Hyderabad is SBIN-0-004187.
IFSC is excellent unique code for international electronic
payment system
MICR
n Means magnetic Ink character recognition code which contains 9
digits appearing at the bottom of the cheque, following the cheque
number each bank branch has a unique MICR Code. To understand
how the MICR works lets take the example of 9 digits MICR code of
SBI Madhpur, Hyderabad ? 500081 which has a MICR code of 500-
002-072.
n First three digits of the code display the city and is derived from first
three characters of the PIN which is 500
n Digits 4,5, and 6 display the bank codes allotted to each bank by RBI .
in the case of SBI the code allooted is 002
n Digits 7,8 and 9 display the bank branch codes allotted to each
branches of the Bank for example of SBI Madhpur Hyderabad 500081
branch has been allotted code no 72
n Therefore, 9 digits of MICR of SBI Madhpur, Hyderabad ?
500081 will be 500-002-072
CHEQUE TRUNCATION
Truncation is the process of stopping the flow of the physical cheque issued
by a drawer at some point by the presenting bank en-route to the paying
bank branch.
In its place an electronic image of the cheque is transmitted to the paying
branch through the clearing house, along with relevant information like
data on the MICR band, date of presentation, presenting bank, etc.
Cheque truncation thus obviates the need to move the physical instruments
across bank branches, other than in exceptional circumstances for
clearing purposes. This effectively eliminates the associated cost of
movement of the physical cheques, reduces the time required for their
collection and brings elegance to the entire activity of cheque processing.
n As explained above, Cheque Truncation speeds up
the process of collection of cheques resulting in
better service to customers, reduces the scope of loss
of instruments in transit, lowers the cost of collection
of cheques, and removes reconciliation-related and
logistics-related problems, thus benefitting the system
as a whole.
ECS ( ELECTRONIC CLEARING SYSTEM)
n Electronic mode of payment / receipt for 1
transactions that are repetitive and periodic in nature.
n ? ECS is used by institutions for making bulk 2
payment of amounts towards distribution of
dividend, interest, salary, pension, etc
n ? For bulk collection of amounts towards telephone
/ electricity / water dues, cess / tax collections, loan
installment repayments, periodic investments in
mutual funds, insurance premium etc
Parties Involved
n Payee- one who is going to receive
n ? Payer- one who is going to pay
n ? Payee?s bank
n ? Payer?s bank
n ? Clearing House- Facilitates the interaction
between two banks
Types of ECS process
Credit request
n ? Example of a credit request:
n ? Jivan Tyres Ltd. has to pay monthly salaries to its
employees who have accounts across different banks
n ? The initiator can be the paying bank, requesting a credit to
the receiving bank
Debit Request
n ? Example of a Debit request
n ? State Electricity board wants to receive monthly bill
payment monthly from its customers
n ? In this case the initiator of the process is the payee?s bank
EFT
Electronic Funds Transfer(EFT) is a system where by anyone
who wants to make payment to another person or company
etc..
Can approach his bank and make cash payment or give
instructions /authorization to transfer funds directly from his
own account to the bank account of the receiver or
beneficiary.
Complete details such as the receiver?s name, bank account
number, account type, bank name, city branch name should be
furnished to the bank at the time of requesting for such
transfers so that the amount reaches the beneficiaries account
correctly and faster.
FEATURES OF EFT
n Quick movement of money.
n No intermediation of paper based system.
n Encryption key for protection and security.
VARIOUS TYPES OF EFT?s ARE AS FOLLOWS
n Credit Transfer : Payment of interest, dividents,
salary etc.
n Debit Transfer: Payment of bills upon recipt of
interest of payee.
n Low value fund transfer
n High value fund transfer
n Automated teller machine
n Cheque Truncation
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MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
ELECTRONIC PAYMENTS SYSTEM
n Electronic Payment is a financial exchange that
takes place online between buyers and sellers.
The content of this exchange is usually some
form of digital financial instrument (such as
encrypted credit card numbers, electronic
Cheques or digital cash) that is backed by a bank
or an intermediary, or by a legal tender.
n Electronic payment system is a system which
helps the customer or user to make online
payment for their shopping.
IFSC Code
n IFSC Code Means Indian Financial System Code. IFSC Code is being
used as the address code in one user to another user. RTGS and NEFT
payment system of RBI use these codes. IFSC code consists of 11
characters identified as under (Example of Madhapur, Hyderabad)
n First Four Digits show identity of the Bank i.e SBIN
n 5
th
Digit in default as zero ( for future Use) i.e. 0
n Last 6 characters display the branch identity i.e. 004187
n So IFSC Code for SBI, Madhapur, Hyderabad is SBIN-0-004187.
IFSC is excellent unique code for international electronic
payment system
MICR
n Means magnetic Ink character recognition code which contains 9
digits appearing at the bottom of the cheque, following the cheque
number each bank branch has a unique MICR Code. To understand
how the MICR works lets take the example of 9 digits MICR code of
SBI Madhpur, Hyderabad ? 500081 which has a MICR code of 500-
002-072.
n First three digits of the code display the city and is derived from first
three characters of the PIN which is 500
n Digits 4,5, and 6 display the bank codes allotted to each bank by RBI .
in the case of SBI the code allooted is 002
n Digits 7,8 and 9 display the bank branch codes allotted to each
branches of the Bank for example of SBI Madhpur Hyderabad 500081
branch has been allotted code no 72
n Therefore, 9 digits of MICR of SBI Madhpur, Hyderabad ?
500081 will be 500-002-072
CHEQUE TRUNCATION
Truncation is the process of stopping the flow of the physical cheque issued
by a drawer at some point by the presenting bank en-route to the paying
bank branch.
In its place an electronic image of the cheque is transmitted to the paying
branch through the clearing house, along with relevant information like
data on the MICR band, date of presentation, presenting bank, etc.
Cheque truncation thus obviates the need to move the physical instruments
across bank branches, other than in exceptional circumstances for
clearing purposes. This effectively eliminates the associated cost of
movement of the physical cheques, reduces the time required for their
collection and brings elegance to the entire activity of cheque processing.
n As explained above, Cheque Truncation speeds up
the process of collection of cheques resulting in
better service to customers, reduces the scope of loss
of instruments in transit, lowers the cost of collection
of cheques, and removes reconciliation-related and
logistics-related problems, thus benefitting the system
as a whole.
ECS ( ELECTRONIC CLEARING SYSTEM)
n Electronic mode of payment / receipt for 1
transactions that are repetitive and periodic in nature.
n ? ECS is used by institutions for making bulk 2
payment of amounts towards distribution of
dividend, interest, salary, pension, etc
n ? For bulk collection of amounts towards telephone
/ electricity / water dues, cess / tax collections, loan
installment repayments, periodic investments in
mutual funds, insurance premium etc
Parties Involved
n Payee- one who is going to receive
n ? Payer- one who is going to pay
n ? Payee?s bank
n ? Payer?s bank
n ? Clearing House- Facilitates the interaction
between two banks
Types of ECS process
Credit request
n ? Example of a credit request:
n ? Jivan Tyres Ltd. has to pay monthly salaries to its
employees who have accounts across different banks
n ? The initiator can be the paying bank, requesting a credit to
the receiving bank
Debit Request
n ? Example of a Debit request
n ? State Electricity board wants to receive monthly bill
payment monthly from its customers
n ? In this case the initiator of the process is the payee?s bank
EFT
Electronic Funds Transfer(EFT) is a system where by anyone
who wants to make payment to another person or company
etc..
Can approach his bank and make cash payment or give
instructions /authorization to transfer funds directly from his
own account to the bank account of the receiver or
beneficiary.
Complete details such as the receiver?s name, bank account
number, account type, bank name, city branch name should be
furnished to the bank at the time of requesting for such
transfers so that the amount reaches the beneficiaries account
correctly and faster.
FEATURES OF EFT
n Quick movement of money.
n No intermediation of paper based system.
n Encryption key for protection and security.
VARIOUS TYPES OF EFT?s ARE AS FOLLOWS
n Credit Transfer : Payment of interest, dividents,
salary etc.
n Debit Transfer: Payment of bills upon recipt of
interest of payee.
n Low value fund transfer
n High value fund transfer
n Automated teller machine
n Cheque Truncation
RTGS
The acronym 'RTGS' stands for Real Time Gross Settlement, which
can be defined as the continuous (real-time) settlement of funds
transfers individually on an order by order basis (without netting).
'Real Time' means the processing of instructions at the time they
are received rather than at some later time; 'Gross Settlement'
means the settlement of funds transfer instructions occurs
individually (on an instruction by instruction basis). Considering
that the funds settlement takes place in the books of the Reserve
Bank of India, the payments are final and irrevocable.
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MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
ELECTRONIC PAYMENTS SYSTEM
n Electronic Payment is a financial exchange that
takes place online between buyers and sellers.
The content of this exchange is usually some
form of digital financial instrument (such as
encrypted credit card numbers, electronic
Cheques or digital cash) that is backed by a bank
or an intermediary, or by a legal tender.
n Electronic payment system is a system which
helps the customer or user to make online
payment for their shopping.
IFSC Code
n IFSC Code Means Indian Financial System Code. IFSC Code is being
used as the address code in one user to another user. RTGS and NEFT
payment system of RBI use these codes. IFSC code consists of 11
characters identified as under (Example of Madhapur, Hyderabad)
n First Four Digits show identity of the Bank i.e SBIN
n 5
th
Digit in default as zero ( for future Use) i.e. 0
n Last 6 characters display the branch identity i.e. 004187
n So IFSC Code for SBI, Madhapur, Hyderabad is SBIN-0-004187.
IFSC is excellent unique code for international electronic
payment system
MICR
n Means magnetic Ink character recognition code which contains 9
digits appearing at the bottom of the cheque, following the cheque
number each bank branch has a unique MICR Code. To understand
how the MICR works lets take the example of 9 digits MICR code of
SBI Madhpur, Hyderabad ? 500081 which has a MICR code of 500-
002-072.
n First three digits of the code display the city and is derived from first
three characters of the PIN which is 500
n Digits 4,5, and 6 display the bank codes allotted to each bank by RBI .
in the case of SBI the code allooted is 002
n Digits 7,8 and 9 display the bank branch codes allotted to each
branches of the Bank for example of SBI Madhpur Hyderabad 500081
branch has been allotted code no 72
n Therefore, 9 digits of MICR of SBI Madhpur, Hyderabad ?
500081 will be 500-002-072
CHEQUE TRUNCATION
Truncation is the process of stopping the flow of the physical cheque issued
by a drawer at some point by the presenting bank en-route to the paying
bank branch.
In its place an electronic image of the cheque is transmitted to the paying
branch through the clearing house, along with relevant information like
data on the MICR band, date of presentation, presenting bank, etc.
Cheque truncation thus obviates the need to move the physical instruments
across bank branches, other than in exceptional circumstances for
clearing purposes. This effectively eliminates the associated cost of
movement of the physical cheques, reduces the time required for their
collection and brings elegance to the entire activity of cheque processing.
n As explained above, Cheque Truncation speeds up
the process of collection of cheques resulting in
better service to customers, reduces the scope of loss
of instruments in transit, lowers the cost of collection
of cheques, and removes reconciliation-related and
logistics-related problems, thus benefitting the system
as a whole.
ECS ( ELECTRONIC CLEARING SYSTEM)
n Electronic mode of payment / receipt for 1
transactions that are repetitive and periodic in nature.
n ? ECS is used by institutions for making bulk 2
payment of amounts towards distribution of
dividend, interest, salary, pension, etc
n ? For bulk collection of amounts towards telephone
/ electricity / water dues, cess / tax collections, loan
installment repayments, periodic investments in
mutual funds, insurance premium etc
Parties Involved
n Payee- one who is going to receive
n ? Payer- one who is going to pay
n ? Payee?s bank
n ? Payer?s bank
n ? Clearing House- Facilitates the interaction
between two banks
Types of ECS process
Credit request
n ? Example of a credit request:
n ? Jivan Tyres Ltd. has to pay monthly salaries to its
employees who have accounts across different banks
n ? The initiator can be the paying bank, requesting a credit to
the receiving bank
Debit Request
n ? Example of a Debit request
n ? State Electricity board wants to receive monthly bill
payment monthly from its customers
n ? In this case the initiator of the process is the payee?s bank
EFT
Electronic Funds Transfer(EFT) is a system where by anyone
who wants to make payment to another person or company
etc..
Can approach his bank and make cash payment or give
instructions /authorization to transfer funds directly from his
own account to the bank account of the receiver or
beneficiary.
Complete details such as the receiver?s name, bank account
number, account type, bank name, city branch name should be
furnished to the bank at the time of requesting for such
transfers so that the amount reaches the beneficiaries account
correctly and faster.
FEATURES OF EFT
n Quick movement of money.
n No intermediation of paper based system.
n Encryption key for protection and security.
VARIOUS TYPES OF EFT?s ARE AS FOLLOWS
n Credit Transfer : Payment of interest, dividents,
salary etc.
n Debit Transfer: Payment of bills upon recipt of
interest of payee.
n Low value fund transfer
n High value fund transfer
n Automated teller machine
n Cheque Truncation
RTGS
The acronym 'RTGS' stands for Real Time Gross Settlement, which
can be defined as the continuous (real-time) settlement of funds
transfers individually on an order by order basis (without netting).
'Real Time' means the processing of instructions at the time they
are received rather than at some later time; 'Gross Settlement'
means the settlement of funds transfer instructions occurs
individually (on an instruction by instruction basis). Considering
that the funds settlement takes place in the books of the Reserve
Bank of India, the payments are final and irrevocable.
n It is a real time fundsfacilitates you to transfer funds from one bank to
another in real time or on a gross basis. The transaction isn?t put on a
waiting list and cleared out instantly.
n ? RTGS payment gateway, maintained by the Reserve Bank of India
makes transactions between banks electronically. The transferred amount
is instantly deducted from the account of one banks and credited to the
other bank?s account.
n ? The minimum value that can be transferred using RTGS is Rs. 2
Lakhs and above. However there is no upper cap on the amount that can
be transacted.
n The remitting customer needs to add the beneficiary and his bank
account details prior to transacting funds via RTGS. The details required
while transferring funds would be the beneficiary?s name; his/her
account number, receiver?s bank address and the IFSC code of the
respective bank.
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MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
ELECTRONIC PAYMENTS SYSTEM
n Electronic Payment is a financial exchange that
takes place online between buyers and sellers.
The content of this exchange is usually some
form of digital financial instrument (such as
encrypted credit card numbers, electronic
Cheques or digital cash) that is backed by a bank
or an intermediary, or by a legal tender.
n Electronic payment system is a system which
helps the customer or user to make online
payment for their shopping.
IFSC Code
n IFSC Code Means Indian Financial System Code. IFSC Code is being
used as the address code in one user to another user. RTGS and NEFT
payment system of RBI use these codes. IFSC code consists of 11
characters identified as under (Example of Madhapur, Hyderabad)
n First Four Digits show identity of the Bank i.e SBIN
n 5
th
Digit in default as zero ( for future Use) i.e. 0
n Last 6 characters display the branch identity i.e. 004187
n So IFSC Code for SBI, Madhapur, Hyderabad is SBIN-0-004187.
IFSC is excellent unique code for international electronic
payment system
MICR
n Means magnetic Ink character recognition code which contains 9
digits appearing at the bottom of the cheque, following the cheque
number each bank branch has a unique MICR Code. To understand
how the MICR works lets take the example of 9 digits MICR code of
SBI Madhpur, Hyderabad ? 500081 which has a MICR code of 500-
002-072.
n First three digits of the code display the city and is derived from first
three characters of the PIN which is 500
n Digits 4,5, and 6 display the bank codes allotted to each bank by RBI .
in the case of SBI the code allooted is 002
n Digits 7,8 and 9 display the bank branch codes allotted to each
branches of the Bank for example of SBI Madhpur Hyderabad 500081
branch has been allotted code no 72
n Therefore, 9 digits of MICR of SBI Madhpur, Hyderabad ?
500081 will be 500-002-072
CHEQUE TRUNCATION
Truncation is the process of stopping the flow of the physical cheque issued
by a drawer at some point by the presenting bank en-route to the paying
bank branch.
In its place an electronic image of the cheque is transmitted to the paying
branch through the clearing house, along with relevant information like
data on the MICR band, date of presentation, presenting bank, etc.
Cheque truncation thus obviates the need to move the physical instruments
across bank branches, other than in exceptional circumstances for
clearing purposes. This effectively eliminates the associated cost of
movement of the physical cheques, reduces the time required for their
collection and brings elegance to the entire activity of cheque processing.
n As explained above, Cheque Truncation speeds up
the process of collection of cheques resulting in
better service to customers, reduces the scope of loss
of instruments in transit, lowers the cost of collection
of cheques, and removes reconciliation-related and
logistics-related problems, thus benefitting the system
as a whole.
ECS ( ELECTRONIC CLEARING SYSTEM)
n Electronic mode of payment / receipt for 1
transactions that are repetitive and periodic in nature.
n ? ECS is used by institutions for making bulk 2
payment of amounts towards distribution of
dividend, interest, salary, pension, etc
n ? For bulk collection of amounts towards telephone
/ electricity / water dues, cess / tax collections, loan
installment repayments, periodic investments in
mutual funds, insurance premium etc
Parties Involved
n Payee- one who is going to receive
n ? Payer- one who is going to pay
n ? Payee?s bank
n ? Payer?s bank
n ? Clearing House- Facilitates the interaction
between two banks
Types of ECS process
Credit request
n ? Example of a credit request:
n ? Jivan Tyres Ltd. has to pay monthly salaries to its
employees who have accounts across different banks
n ? The initiator can be the paying bank, requesting a credit to
the receiving bank
Debit Request
n ? Example of a Debit request
n ? State Electricity board wants to receive monthly bill
payment monthly from its customers
n ? In this case the initiator of the process is the payee?s bank
EFT
Electronic Funds Transfer(EFT) is a system where by anyone
who wants to make payment to another person or company
etc..
Can approach his bank and make cash payment or give
instructions /authorization to transfer funds directly from his
own account to the bank account of the receiver or
beneficiary.
Complete details such as the receiver?s name, bank account
number, account type, bank name, city branch name should be
furnished to the bank at the time of requesting for such
transfers so that the amount reaches the beneficiaries account
correctly and faster.
FEATURES OF EFT
n Quick movement of money.
n No intermediation of paper based system.
n Encryption key for protection and security.
VARIOUS TYPES OF EFT?s ARE AS FOLLOWS
n Credit Transfer : Payment of interest, dividents,
salary etc.
n Debit Transfer: Payment of bills upon recipt of
interest of payee.
n Low value fund transfer
n High value fund transfer
n Automated teller machine
n Cheque Truncation
RTGS
The acronym 'RTGS' stands for Real Time Gross Settlement, which
can be defined as the continuous (real-time) settlement of funds
transfers individually on an order by order basis (without netting).
'Real Time' means the processing of instructions at the time they
are received rather than at some later time; 'Gross Settlement'
means the settlement of funds transfer instructions occurs
individually (on an instruction by instruction basis). Considering
that the funds settlement takes place in the books of the Reserve
Bank of India, the payments are final and irrevocable.
n It is a real time fundsfacilitates you to transfer funds from one bank to
another in real time or on a gross basis. The transaction isn?t put on a
waiting list and cleared out instantly.
n ? RTGS payment gateway, maintained by the Reserve Bank of India
makes transactions between banks electronically. The transferred amount
is instantly deducted from the account of one banks and credited to the
other bank?s account.
n ? The minimum value that can be transferred using RTGS is Rs. 2
Lakhs and above. However there is no upper cap on the amount that can
be transacted.
n The remitting customer needs to add the beneficiary and his bank
account details prior to transacting funds via RTGS. The details required
while transferring funds would be the beneficiary?s name; his/her
account number, receiver?s bank address and the IFSC code of the
respective bank.
ADVANTAGES OF RTGS
n Certainty of payment
n Faster collection of funds
n No risk settlement
n Improved liquidity management
n Less fraud and less processing cost
n Better inventory management
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
ELECTRONIC PAYMENTS SYSTEM
n Electronic Payment is a financial exchange that
takes place online between buyers and sellers.
The content of this exchange is usually some
form of digital financial instrument (such as
encrypted credit card numbers, electronic
Cheques or digital cash) that is backed by a bank
or an intermediary, or by a legal tender.
n Electronic payment system is a system which
helps the customer or user to make online
payment for their shopping.
IFSC Code
n IFSC Code Means Indian Financial System Code. IFSC Code is being
used as the address code in one user to another user. RTGS and NEFT
payment system of RBI use these codes. IFSC code consists of 11
characters identified as under (Example of Madhapur, Hyderabad)
n First Four Digits show identity of the Bank i.e SBIN
n 5
th
Digit in default as zero ( for future Use) i.e. 0
n Last 6 characters display the branch identity i.e. 004187
n So IFSC Code for SBI, Madhapur, Hyderabad is SBIN-0-004187.
IFSC is excellent unique code for international electronic
payment system
MICR
n Means magnetic Ink character recognition code which contains 9
digits appearing at the bottom of the cheque, following the cheque
number each bank branch has a unique MICR Code. To understand
how the MICR works lets take the example of 9 digits MICR code of
SBI Madhpur, Hyderabad ? 500081 which has a MICR code of 500-
002-072.
n First three digits of the code display the city and is derived from first
three characters of the PIN which is 500
n Digits 4,5, and 6 display the bank codes allotted to each bank by RBI .
in the case of SBI the code allooted is 002
n Digits 7,8 and 9 display the bank branch codes allotted to each
branches of the Bank for example of SBI Madhpur Hyderabad 500081
branch has been allotted code no 72
n Therefore, 9 digits of MICR of SBI Madhpur, Hyderabad ?
500081 will be 500-002-072
CHEQUE TRUNCATION
Truncation is the process of stopping the flow of the physical cheque issued
by a drawer at some point by the presenting bank en-route to the paying
bank branch.
In its place an electronic image of the cheque is transmitted to the paying
branch through the clearing house, along with relevant information like
data on the MICR band, date of presentation, presenting bank, etc.
Cheque truncation thus obviates the need to move the physical instruments
across bank branches, other than in exceptional circumstances for
clearing purposes. This effectively eliminates the associated cost of
movement of the physical cheques, reduces the time required for their
collection and brings elegance to the entire activity of cheque processing.
n As explained above, Cheque Truncation speeds up
the process of collection of cheques resulting in
better service to customers, reduces the scope of loss
of instruments in transit, lowers the cost of collection
of cheques, and removes reconciliation-related and
logistics-related problems, thus benefitting the system
as a whole.
ECS ( ELECTRONIC CLEARING SYSTEM)
n Electronic mode of payment / receipt for 1
transactions that are repetitive and periodic in nature.
n ? ECS is used by institutions for making bulk 2
payment of amounts towards distribution of
dividend, interest, salary, pension, etc
n ? For bulk collection of amounts towards telephone
/ electricity / water dues, cess / tax collections, loan
installment repayments, periodic investments in
mutual funds, insurance premium etc
Parties Involved
n Payee- one who is going to receive
n ? Payer- one who is going to pay
n ? Payee?s bank
n ? Payer?s bank
n ? Clearing House- Facilitates the interaction
between two banks
Types of ECS process
Credit request
n ? Example of a credit request:
n ? Jivan Tyres Ltd. has to pay monthly salaries to its
employees who have accounts across different banks
n ? The initiator can be the paying bank, requesting a credit to
the receiving bank
Debit Request
n ? Example of a Debit request
n ? State Electricity board wants to receive monthly bill
payment monthly from its customers
n ? In this case the initiator of the process is the payee?s bank
EFT
Electronic Funds Transfer(EFT) is a system where by anyone
who wants to make payment to another person or company
etc..
Can approach his bank and make cash payment or give
instructions /authorization to transfer funds directly from his
own account to the bank account of the receiver or
beneficiary.
Complete details such as the receiver?s name, bank account
number, account type, bank name, city branch name should be
furnished to the bank at the time of requesting for such
transfers so that the amount reaches the beneficiaries account
correctly and faster.
FEATURES OF EFT
n Quick movement of money.
n No intermediation of paper based system.
n Encryption key for protection and security.
VARIOUS TYPES OF EFT?s ARE AS FOLLOWS
n Credit Transfer : Payment of interest, dividents,
salary etc.
n Debit Transfer: Payment of bills upon recipt of
interest of payee.
n Low value fund transfer
n High value fund transfer
n Automated teller machine
n Cheque Truncation
RTGS
The acronym 'RTGS' stands for Real Time Gross Settlement, which
can be defined as the continuous (real-time) settlement of funds
transfers individually on an order by order basis (without netting).
'Real Time' means the processing of instructions at the time they
are received rather than at some later time; 'Gross Settlement'
means the settlement of funds transfer instructions occurs
individually (on an instruction by instruction basis). Considering
that the funds settlement takes place in the books of the Reserve
Bank of India, the payments are final and irrevocable.
n It is a real time fundsfacilitates you to transfer funds from one bank to
another in real time or on a gross basis. The transaction isn?t put on a
waiting list and cleared out instantly.
n ? RTGS payment gateway, maintained by the Reserve Bank of India
makes transactions between banks electronically. The transferred amount
is instantly deducted from the account of one banks and credited to the
other bank?s account.
n ? The minimum value that can be transferred using RTGS is Rs. 2
Lakhs and above. However there is no upper cap on the amount that can
be transacted.
n The remitting customer needs to add the beneficiary and his bank
account details prior to transacting funds via RTGS. The details required
while transferring funds would be the beneficiary?s name; his/her
account number, receiver?s bank address and the IFSC code of the
respective bank.
ADVANTAGES OF RTGS
n Certainty of payment
n Faster collection of funds
n No risk settlement
n Improved liquidity management
n Less fraud and less processing cost
n Better inventory management
National Electronic Funds Transfer (NEFT)
The National Electronic Funds Transfer is a nation-wide money
transfer system which allows customers with the facility to
electronically transfer funds from their respective bank accounts to
any other account of the same bank or of any other bank network
? Funds transfer through NEFT requires a transferring bank and a
destination bank.
? Before transferring funds via NEFT you register the beneficiary,
receiving funds. For this you must possess information such as
name of the recipient, recipient?s bank name, a valid account
number belonging to the recipient and his respective bank?s IFSC
code.
? Any sum of money can be transferred using the NEFT system
with a maximum capital of Rs. 10, 00, 000.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
ELECTRONIC PAYMENTS SYSTEM
n Electronic Payment is a financial exchange that
takes place online between buyers and sellers.
The content of this exchange is usually some
form of digital financial instrument (such as
encrypted credit card numbers, electronic
Cheques or digital cash) that is backed by a bank
or an intermediary, or by a legal tender.
n Electronic payment system is a system which
helps the customer or user to make online
payment for their shopping.
IFSC Code
n IFSC Code Means Indian Financial System Code. IFSC Code is being
used as the address code in one user to another user. RTGS and NEFT
payment system of RBI use these codes. IFSC code consists of 11
characters identified as under (Example of Madhapur, Hyderabad)
n First Four Digits show identity of the Bank i.e SBIN
n 5
th
Digit in default as zero ( for future Use) i.e. 0
n Last 6 characters display the branch identity i.e. 004187
n So IFSC Code for SBI, Madhapur, Hyderabad is SBIN-0-004187.
IFSC is excellent unique code for international electronic
payment system
MICR
n Means magnetic Ink character recognition code which contains 9
digits appearing at the bottom of the cheque, following the cheque
number each bank branch has a unique MICR Code. To understand
how the MICR works lets take the example of 9 digits MICR code of
SBI Madhpur, Hyderabad ? 500081 which has a MICR code of 500-
002-072.
n First three digits of the code display the city and is derived from first
three characters of the PIN which is 500
n Digits 4,5, and 6 display the bank codes allotted to each bank by RBI .
in the case of SBI the code allooted is 002
n Digits 7,8 and 9 display the bank branch codes allotted to each
branches of the Bank for example of SBI Madhpur Hyderabad 500081
branch has been allotted code no 72
n Therefore, 9 digits of MICR of SBI Madhpur, Hyderabad ?
500081 will be 500-002-072
CHEQUE TRUNCATION
Truncation is the process of stopping the flow of the physical cheque issued
by a drawer at some point by the presenting bank en-route to the paying
bank branch.
In its place an electronic image of the cheque is transmitted to the paying
branch through the clearing house, along with relevant information like
data on the MICR band, date of presentation, presenting bank, etc.
Cheque truncation thus obviates the need to move the physical instruments
across bank branches, other than in exceptional circumstances for
clearing purposes. This effectively eliminates the associated cost of
movement of the physical cheques, reduces the time required for their
collection and brings elegance to the entire activity of cheque processing.
n As explained above, Cheque Truncation speeds up
the process of collection of cheques resulting in
better service to customers, reduces the scope of loss
of instruments in transit, lowers the cost of collection
of cheques, and removes reconciliation-related and
logistics-related problems, thus benefitting the system
as a whole.
ECS ( ELECTRONIC CLEARING SYSTEM)
n Electronic mode of payment / receipt for 1
transactions that are repetitive and periodic in nature.
n ? ECS is used by institutions for making bulk 2
payment of amounts towards distribution of
dividend, interest, salary, pension, etc
n ? For bulk collection of amounts towards telephone
/ electricity / water dues, cess / tax collections, loan
installment repayments, periodic investments in
mutual funds, insurance premium etc
Parties Involved
n Payee- one who is going to receive
n ? Payer- one who is going to pay
n ? Payee?s bank
n ? Payer?s bank
n ? Clearing House- Facilitates the interaction
between two banks
Types of ECS process
Credit request
n ? Example of a credit request:
n ? Jivan Tyres Ltd. has to pay monthly salaries to its
employees who have accounts across different banks
n ? The initiator can be the paying bank, requesting a credit to
the receiving bank
Debit Request
n ? Example of a Debit request
n ? State Electricity board wants to receive monthly bill
payment monthly from its customers
n ? In this case the initiator of the process is the payee?s bank
EFT
Electronic Funds Transfer(EFT) is a system where by anyone
who wants to make payment to another person or company
etc..
Can approach his bank and make cash payment or give
instructions /authorization to transfer funds directly from his
own account to the bank account of the receiver or
beneficiary.
Complete details such as the receiver?s name, bank account
number, account type, bank name, city branch name should be
furnished to the bank at the time of requesting for such
transfers so that the amount reaches the beneficiaries account
correctly and faster.
FEATURES OF EFT
n Quick movement of money.
n No intermediation of paper based system.
n Encryption key for protection and security.
VARIOUS TYPES OF EFT?s ARE AS FOLLOWS
n Credit Transfer : Payment of interest, dividents,
salary etc.
n Debit Transfer: Payment of bills upon recipt of
interest of payee.
n Low value fund transfer
n High value fund transfer
n Automated teller machine
n Cheque Truncation
RTGS
The acronym 'RTGS' stands for Real Time Gross Settlement, which
can be defined as the continuous (real-time) settlement of funds
transfers individually on an order by order basis (without netting).
'Real Time' means the processing of instructions at the time they
are received rather than at some later time; 'Gross Settlement'
means the settlement of funds transfer instructions occurs
individually (on an instruction by instruction basis). Considering
that the funds settlement takes place in the books of the Reserve
Bank of India, the payments are final and irrevocable.
n It is a real time fundsfacilitates you to transfer funds from one bank to
another in real time or on a gross basis. The transaction isn?t put on a
waiting list and cleared out instantly.
n ? RTGS payment gateway, maintained by the Reserve Bank of India
makes transactions between banks electronically. The transferred amount
is instantly deducted from the account of one banks and credited to the
other bank?s account.
n ? The minimum value that can be transferred using RTGS is Rs. 2
Lakhs and above. However there is no upper cap on the amount that can
be transacted.
n The remitting customer needs to add the beneficiary and his bank
account details prior to transacting funds via RTGS. The details required
while transferring funds would be the beneficiary?s name; his/her
account number, receiver?s bank address and the IFSC code of the
respective bank.
ADVANTAGES OF RTGS
n Certainty of payment
n Faster collection of funds
n No risk settlement
n Improved liquidity management
n Less fraud and less processing cost
n Better inventory management
National Electronic Funds Transfer (NEFT)
The National Electronic Funds Transfer is a nation-wide money
transfer system which allows customers with the facility to
electronically transfer funds from their respective bank accounts to
any other account of the same bank or of any other bank network
? Funds transfer through NEFT requires a transferring bank and a
destination bank.
? Before transferring funds via NEFT you register the beneficiary,
receiving funds. For this you must possess information such as
name of the recipient, recipient?s bank name, a valid account
number belonging to the recipient and his respective bank?s IFSC
code.
? Any sum of money can be transferred using the NEFT system
with a maximum capital of Rs. 10, 00, 000.
n Operating Details of NEFT
? Settlement of funds between receiving and paying banks takes
place centrally from Mumbai.
? Bank branches participating with NEFT can be located anywhere
in the country.
? Customer through an application form provides details of the
required transfer.
? Customer operating through a net banking facility can also initiate
the fund transfer through their bank.
? Through the Indian Financial System Code (IFSC) the bank branch
participant is identified and is used in the transfer of funds.
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
ELECTRONIC PAYMENTS SYSTEM
n Electronic Payment is a financial exchange that
takes place online between buyers and sellers.
The content of this exchange is usually some
form of digital financial instrument (such as
encrypted credit card numbers, electronic
Cheques or digital cash) that is backed by a bank
or an intermediary, or by a legal tender.
n Electronic payment system is a system which
helps the customer or user to make online
payment for their shopping.
IFSC Code
n IFSC Code Means Indian Financial System Code. IFSC Code is being
used as the address code in one user to another user. RTGS and NEFT
payment system of RBI use these codes. IFSC code consists of 11
characters identified as under (Example of Madhapur, Hyderabad)
n First Four Digits show identity of the Bank i.e SBIN
n 5
th
Digit in default as zero ( for future Use) i.e. 0
n Last 6 characters display the branch identity i.e. 004187
n So IFSC Code for SBI, Madhapur, Hyderabad is SBIN-0-004187.
IFSC is excellent unique code for international electronic
payment system
MICR
n Means magnetic Ink character recognition code which contains 9
digits appearing at the bottom of the cheque, following the cheque
number each bank branch has a unique MICR Code. To understand
how the MICR works lets take the example of 9 digits MICR code of
SBI Madhpur, Hyderabad ? 500081 which has a MICR code of 500-
002-072.
n First three digits of the code display the city and is derived from first
three characters of the PIN which is 500
n Digits 4,5, and 6 display the bank codes allotted to each bank by RBI .
in the case of SBI the code allooted is 002
n Digits 7,8 and 9 display the bank branch codes allotted to each
branches of the Bank for example of SBI Madhpur Hyderabad 500081
branch has been allotted code no 72
n Therefore, 9 digits of MICR of SBI Madhpur, Hyderabad ?
500081 will be 500-002-072
CHEQUE TRUNCATION
Truncation is the process of stopping the flow of the physical cheque issued
by a drawer at some point by the presenting bank en-route to the paying
bank branch.
In its place an electronic image of the cheque is transmitted to the paying
branch through the clearing house, along with relevant information like
data on the MICR band, date of presentation, presenting bank, etc.
Cheque truncation thus obviates the need to move the physical instruments
across bank branches, other than in exceptional circumstances for
clearing purposes. This effectively eliminates the associated cost of
movement of the physical cheques, reduces the time required for their
collection and brings elegance to the entire activity of cheque processing.
n As explained above, Cheque Truncation speeds up
the process of collection of cheques resulting in
better service to customers, reduces the scope of loss
of instruments in transit, lowers the cost of collection
of cheques, and removes reconciliation-related and
logistics-related problems, thus benefitting the system
as a whole.
ECS ( ELECTRONIC CLEARING SYSTEM)
n Electronic mode of payment / receipt for 1
transactions that are repetitive and periodic in nature.
n ? ECS is used by institutions for making bulk 2
payment of amounts towards distribution of
dividend, interest, salary, pension, etc
n ? For bulk collection of amounts towards telephone
/ electricity / water dues, cess / tax collections, loan
installment repayments, periodic investments in
mutual funds, insurance premium etc
Parties Involved
n Payee- one who is going to receive
n ? Payer- one who is going to pay
n ? Payee?s bank
n ? Payer?s bank
n ? Clearing House- Facilitates the interaction
between two banks
Types of ECS process
Credit request
n ? Example of a credit request:
n ? Jivan Tyres Ltd. has to pay monthly salaries to its
employees who have accounts across different banks
n ? The initiator can be the paying bank, requesting a credit to
the receiving bank
Debit Request
n ? Example of a Debit request
n ? State Electricity board wants to receive monthly bill
payment monthly from its customers
n ? In this case the initiator of the process is the payee?s bank
EFT
Electronic Funds Transfer(EFT) is a system where by anyone
who wants to make payment to another person or company
etc..
Can approach his bank and make cash payment or give
instructions /authorization to transfer funds directly from his
own account to the bank account of the receiver or
beneficiary.
Complete details such as the receiver?s name, bank account
number, account type, bank name, city branch name should be
furnished to the bank at the time of requesting for such
transfers so that the amount reaches the beneficiaries account
correctly and faster.
FEATURES OF EFT
n Quick movement of money.
n No intermediation of paper based system.
n Encryption key for protection and security.
VARIOUS TYPES OF EFT?s ARE AS FOLLOWS
n Credit Transfer : Payment of interest, dividents,
salary etc.
n Debit Transfer: Payment of bills upon recipt of
interest of payee.
n Low value fund transfer
n High value fund transfer
n Automated teller machine
n Cheque Truncation
RTGS
The acronym 'RTGS' stands for Real Time Gross Settlement, which
can be defined as the continuous (real-time) settlement of funds
transfers individually on an order by order basis (without netting).
'Real Time' means the processing of instructions at the time they
are received rather than at some later time; 'Gross Settlement'
means the settlement of funds transfer instructions occurs
individually (on an instruction by instruction basis). Considering
that the funds settlement takes place in the books of the Reserve
Bank of India, the payments are final and irrevocable.
n It is a real time fundsfacilitates you to transfer funds from one bank to
another in real time or on a gross basis. The transaction isn?t put on a
waiting list and cleared out instantly.
n ? RTGS payment gateway, maintained by the Reserve Bank of India
makes transactions between banks electronically. The transferred amount
is instantly deducted from the account of one banks and credited to the
other bank?s account.
n ? The minimum value that can be transferred using RTGS is Rs. 2
Lakhs and above. However there is no upper cap on the amount that can
be transacted.
n The remitting customer needs to add the beneficiary and his bank
account details prior to transacting funds via RTGS. The details required
while transferring funds would be the beneficiary?s name; his/her
account number, receiver?s bank address and the IFSC code of the
respective bank.
ADVANTAGES OF RTGS
n Certainty of payment
n Faster collection of funds
n No risk settlement
n Improved liquidity management
n Less fraud and less processing cost
n Better inventory management
National Electronic Funds Transfer (NEFT)
The National Electronic Funds Transfer is a nation-wide money
transfer system which allows customers with the facility to
electronically transfer funds from their respective bank accounts to
any other account of the same bank or of any other bank network
? Funds transfer through NEFT requires a transferring bank and a
destination bank.
? Before transferring funds via NEFT you register the beneficiary,
receiving funds. For this you must possess information such as
name of the recipient, recipient?s bank name, a valid account
number belonging to the recipient and his respective bank?s IFSC
code.
? Any sum of money can be transferred using the NEFT system
with a maximum capital of Rs. 10, 00, 000.
n Operating Details of NEFT
? Settlement of funds between receiving and paying banks takes
place centrally from Mumbai.
? Bank branches participating with NEFT can be located anywhere
in the country.
? Customer through an application form provides details of the
required transfer.
? Customer operating through a net banking facility can also initiate
the fund transfer through their bank.
? Through the Indian Financial System Code (IFSC) the bank branch
participant is identified and is used in the transfer of funds.
Benefits of using NEFT
? No physical transfer of cheque or demand draft
? Possibility of loss of funds in transfer is not there
? Transaction cost is less when compared with other
payment methods
? Service is enabled through internet banking / email /
mobile and thus minimizes the effort of the transfer
? Real time transfer of funds
FirstRanker.com - FirstRanker's Choice
MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
ELECTRONIC PAYMENTS SYSTEM
n Electronic Payment is a financial exchange that
takes place online between buyers and sellers.
The content of this exchange is usually some
form of digital financial instrument (such as
encrypted credit card numbers, electronic
Cheques or digital cash) that is backed by a bank
or an intermediary, or by a legal tender.
n Electronic payment system is a system which
helps the customer or user to make online
payment for their shopping.
IFSC Code
n IFSC Code Means Indian Financial System Code. IFSC Code is being
used as the address code in one user to another user. RTGS and NEFT
payment system of RBI use these codes. IFSC code consists of 11
characters identified as under (Example of Madhapur, Hyderabad)
n First Four Digits show identity of the Bank i.e SBIN
n 5
th
Digit in default as zero ( for future Use) i.e. 0
n Last 6 characters display the branch identity i.e. 004187
n So IFSC Code for SBI, Madhapur, Hyderabad is SBIN-0-004187.
IFSC is excellent unique code for international electronic
payment system
MICR
n Means magnetic Ink character recognition code which contains 9
digits appearing at the bottom of the cheque, following the cheque
number each bank branch has a unique MICR Code. To understand
how the MICR works lets take the example of 9 digits MICR code of
SBI Madhpur, Hyderabad ? 500081 which has a MICR code of 500-
002-072.
n First three digits of the code display the city and is derived from first
three characters of the PIN which is 500
n Digits 4,5, and 6 display the bank codes allotted to each bank by RBI .
in the case of SBI the code allooted is 002
n Digits 7,8 and 9 display the bank branch codes allotted to each
branches of the Bank for example of SBI Madhpur Hyderabad 500081
branch has been allotted code no 72
n Therefore, 9 digits of MICR of SBI Madhpur, Hyderabad ?
500081 will be 500-002-072
CHEQUE TRUNCATION
Truncation is the process of stopping the flow of the physical cheque issued
by a drawer at some point by the presenting bank en-route to the paying
bank branch.
In its place an electronic image of the cheque is transmitted to the paying
branch through the clearing house, along with relevant information like
data on the MICR band, date of presentation, presenting bank, etc.
Cheque truncation thus obviates the need to move the physical instruments
across bank branches, other than in exceptional circumstances for
clearing purposes. This effectively eliminates the associated cost of
movement of the physical cheques, reduces the time required for their
collection and brings elegance to the entire activity of cheque processing.
n As explained above, Cheque Truncation speeds up
the process of collection of cheques resulting in
better service to customers, reduces the scope of loss
of instruments in transit, lowers the cost of collection
of cheques, and removes reconciliation-related and
logistics-related problems, thus benefitting the system
as a whole.
ECS ( ELECTRONIC CLEARING SYSTEM)
n Electronic mode of payment / receipt for 1
transactions that are repetitive and periodic in nature.
n ? ECS is used by institutions for making bulk 2
payment of amounts towards distribution of
dividend, interest, salary, pension, etc
n ? For bulk collection of amounts towards telephone
/ electricity / water dues, cess / tax collections, loan
installment repayments, periodic investments in
mutual funds, insurance premium etc
Parties Involved
n Payee- one who is going to receive
n ? Payer- one who is going to pay
n ? Payee?s bank
n ? Payer?s bank
n ? Clearing House- Facilitates the interaction
between two banks
Types of ECS process
Credit request
n ? Example of a credit request:
n ? Jivan Tyres Ltd. has to pay monthly salaries to its
employees who have accounts across different banks
n ? The initiator can be the paying bank, requesting a credit to
the receiving bank
Debit Request
n ? Example of a Debit request
n ? State Electricity board wants to receive monthly bill
payment monthly from its customers
n ? In this case the initiator of the process is the payee?s bank
EFT
Electronic Funds Transfer(EFT) is a system where by anyone
who wants to make payment to another person or company
etc..
Can approach his bank and make cash payment or give
instructions /authorization to transfer funds directly from his
own account to the bank account of the receiver or
beneficiary.
Complete details such as the receiver?s name, bank account
number, account type, bank name, city branch name should be
furnished to the bank at the time of requesting for such
transfers so that the amount reaches the beneficiaries account
correctly and faster.
FEATURES OF EFT
n Quick movement of money.
n No intermediation of paper based system.
n Encryption key for protection and security.
VARIOUS TYPES OF EFT?s ARE AS FOLLOWS
n Credit Transfer : Payment of interest, dividents,
salary etc.
n Debit Transfer: Payment of bills upon recipt of
interest of payee.
n Low value fund transfer
n High value fund transfer
n Automated teller machine
n Cheque Truncation
RTGS
The acronym 'RTGS' stands for Real Time Gross Settlement, which
can be defined as the continuous (real-time) settlement of funds
transfers individually on an order by order basis (without netting).
'Real Time' means the processing of instructions at the time they
are received rather than at some later time; 'Gross Settlement'
means the settlement of funds transfer instructions occurs
individually (on an instruction by instruction basis). Considering
that the funds settlement takes place in the books of the Reserve
Bank of India, the payments are final and irrevocable.
n It is a real time fundsfacilitates you to transfer funds from one bank to
another in real time or on a gross basis. The transaction isn?t put on a
waiting list and cleared out instantly.
n ? RTGS payment gateway, maintained by the Reserve Bank of India
makes transactions between banks electronically. The transferred amount
is instantly deducted from the account of one banks and credited to the
other bank?s account.
n ? The minimum value that can be transferred using RTGS is Rs. 2
Lakhs and above. However there is no upper cap on the amount that can
be transacted.
n The remitting customer needs to add the beneficiary and his bank
account details prior to transacting funds via RTGS. The details required
while transferring funds would be the beneficiary?s name; his/her
account number, receiver?s bank address and the IFSC code of the
respective bank.
ADVANTAGES OF RTGS
n Certainty of payment
n Faster collection of funds
n No risk settlement
n Improved liquidity management
n Less fraud and less processing cost
n Better inventory management
National Electronic Funds Transfer (NEFT)
The National Electronic Funds Transfer is a nation-wide money
transfer system which allows customers with the facility to
electronically transfer funds from their respective bank accounts to
any other account of the same bank or of any other bank network
? Funds transfer through NEFT requires a transferring bank and a
destination bank.
? Before transferring funds via NEFT you register the beneficiary,
receiving funds. For this you must possess information such as
name of the recipient, recipient?s bank name, a valid account
number belonging to the recipient and his respective bank?s IFSC
code.
? Any sum of money can be transferred using the NEFT system
with a maximum capital of Rs. 10, 00, 000.
n Operating Details of NEFT
? Settlement of funds between receiving and paying banks takes
place centrally from Mumbai.
? Bank branches participating with NEFT can be located anywhere
in the country.
? Customer through an application form provides details of the
required transfer.
? Customer operating through a net banking facility can also initiate
the fund transfer through their bank.
? Through the Indian Financial System Code (IFSC) the bank branch
participant is identified and is used in the transfer of funds.
Benefits of using NEFT
? No physical transfer of cheque or demand draft
? Possibility of loss of funds in transfer is not there
? Transaction cost is less when compared with other
payment methods
? Service is enabled through internet banking / email /
mobile and thus minimizes the effort of the transfer
? Real time transfer of funds
BASIC DIFFERENCES BETWEEN NEFT AND RTGS
Criteria NEFT RTGS (Retail)
Settlement Done in batches (Slower) Real time (Faster)
Full Form National Electronic Fund Transfer Real Time Gross Settlement
Timings on Mon ? Fri 8:00 am ? 6:30 pm 9:00 am ? 4:30 pm
Timings on Saturday 8:00 am ? 12:30 pm 9:00 am ? 1:30 pm
Minimum amount of money transfer limit No Minimum 2 lacs
Maximum amount of money transfer limit No Limit No Limit
When does the Credit Happen in
beneficiary account
Happens in the hourly batch Between
Banks
Real time between Banks
Maximum Charges as per RBI Upto 10,000 ? Rs. 2.5
from 10,001 ? 1 lac ? Rs. 5
from 1 ? 2 lacs ? Rs. 15
Above 2 lacs ? Rs. 25
Rs. 25-30 (Upto 2 ? 5 lacs)
Rs. 50-55 (Above 5 lacs)
(Lower charges for first half of day)
Suitable for Small Money Transfer Large Money Transfer
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MODULE 4
BANKING TECHNOLGY
OUTLINE:
n Concept of Universal Banking
n Home Banking
n ATM?s
n Internet Banking
n Mobile Banking
n Core Banking solutions
n Debit, Credit and Smart cards
n Electronic payment systems
n MICR
n Cheque Truncation
n ECS
n EFT
n NEFT
n RTGS
Banking on technology: India?s banking industry
n Banks today have become synonymous with technology and
have leveraged IT in all areas of governance, operations and
control. Banks have put in place fairly robust ?IT Strategy? to
support the vision and business objectives.
n E Commerce the propelling force of E Banking
n E Banking Means conduct of Banking Electronically
n Today banks have to focus on two major aspects ? delivering
customer satisfaction and driving business optimization.
n Mobile banking is starting to gain traction with
approximately 55 million customers registered .
CONCEPT OF UNIVERSAL BANKING
n A universal bank participates in many kinds of
banking activities and is both a commercial
and an investment bank.
n Universal banking is a multi purpose and multi
functional financial supermarket providing
both financial and banking services through a
single window.
MEANING OF UNIVERSAL BANKING
n A universal banking is a superstore for financial
products under one roof. One can get loan and
avail other handy services while can borrow and
deposit. It includes not only the services related
to the savings and loans but also investments.
ADVANTAGES OF UNIVERSAL BANKING
n Economies of scale
n Profitable diversion
n Resource utilization
n Easy marketing on the foundation of a brand name
n One-stop shopping
n Investor friendly activities
Advantages of Universal Banking
n 1. It saves many transaction costs and increases the speed of economic activity.
n 2. Universal Banking is emerging as the global players in the financial market.
n 3. It helps in earning revenue with less cost.
n 4. It helps in earning non-fund income from business sourced in insurance.
n 5. There are less Govt. Regulatory restrictions in Universal Banking.
n 6. It helps in reducing the corporate financing costs of the banks.
n 7. It helps in expanding the client base of the bank.
n 8. Universal Banking helps in reaching the remotest clients.
n 9. It provides an opportunity to exploitation of technology in banking to full.
n 10. Universal Banking helps in acquiring expertise in the diversified activities
in all financial services.
n 11. It helps in using the instrument in one activity to exploit the other.
n 12. Universal Banking helps in gearing up the marketing/selling activities with
lesser cost due to the concept of all financial services under one roof.
DISADVANTAGES OF UNIVERSAL BANKING
n Grey area of universal bank
n No expertise in long term lending
n NPA problem remained intact
INTERNET BANKING
n Internet Banking services is an additional delivery
channel just like telebanking, ATM with internet as the
medium of operation.
n The major advantage of Internet Banking is that the
user can utilize the services from anywhere at any time.
n It simply requires a computer and a internet
connection.
n The user connects to the website through internet and
log in to the services by using valid corporate id, user
id and password.
Functions that can be performed through Online Banking
n Checking account Balance
n Making account enquiry
n Requesting a cheque book
n Transferring funds
n Opening deposit accounts
n Making a stop payment request
n Payment of utility bills
ADVANTAGES OF INTERNET BANKING
n Convenience banking
n Available anywhere/anytime
n Low cost, unlimited access
n Better customer/ better relationship
n Wider reach to public, competitive reach to
banks, enhance image of banks as technology
driven bank
n An effective marketing tool for promotion of
various schemes of bank
How secure is internet banking?
n Complies with RBI Guidelines for Internet Banking
n Information security policy for internet banking
framed and implemented by all banks
n Secure flow of information through the host of
security features like firewalls, content filtering and
intrusion detection systems.
n Periodical audit of information security by qualified
independent
n Application software has a inbuilt security features
Distinctive features of online banking over traditional banking
n Round the clock transaction
n No personal visit to the branch required
n Anywhere banking due to online banking
n Reduced cost of banking transaction
n Quick and effective customer service
n Staff required gets reduced for servicing the customer
n Faster decision making possible
n Paves way for catering to the fast growing e commerce
n Increases the customers convenience in the present days of
traffic and pollution
MOBILE BANKING
n Mobile banking?refers to the use of a
smartphone or other cellular device to perform
online?banking?tasks while away from your
home computer, such as monitoring account
balances, transferring funds between accounts,
bill payment and locating an ATM.
MOBILE BANKING
q Axis Bank was the first Indian Bank to introduce
innovative services like ?Swipeon? ?
q a mobile phone based card acceptance service that
convert any mobile phone into a card acceptance
device by simply attaching the Mswipe card reader to
the phone,
q ?Instant Money Transfer (IMT)?, a new and innovative
remittance service that enables customers of Axis
Bank to make instant payments to a receiver anywhere
in India through mobile phones and withdraw the
amount at any Axis Bank ATM without a card,
CORE BANKING SOLUTIONS
n Centralized banking solutions
n The customer can transact in any branch of the bank in
the country
n It is a process that is conducted in a centralized
environment
n This means all the information is stored at the central
server of the bank which is connected to the branches
through networking system
n This makes withdrawal or deposit of funds or transactions
of business anywhere in the country from a branch
connected under CBS possible
Core Banking
n Core Banking Solution (CBS) is networking of
branches, which enables Customers to operate their
accounts, and avail banking services from any
branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no
more the customer of a Branch. He becomes the
Bank?s Customer. Thus CBS is a step towards
enhancing customer convenience through
Anywhere and Anytime Banking.
Core Banking
n It has centralized branch computerization model
where the branches are connected to a central host,
which incorporates branch automation models and
online multiple delivery channels like, ATM Debit
card, Telebanking, Mobile banking and internet
banking under one roof.
n In core banking, there is a central database for the
bank and transactions are done centrally, online.
Benefits
n Enables establishment of a reliable centralized data repository for the
bank
n Facilitates data warehousing data mining technologies
n Easy implementation of customer centric services like ATM Debit
cards etc
n Enables Centralised MIS and DSS
n Enables centralized management and control
n Standardization of Branch automation and quick adoption of
technology
n Facilitates business process re engineering to streamline the existing
processes
n Relives bank branches of the tasks like data back up etc
n Servers are not mandatory at bank branches marginal cost of
implementation for further banks
n Core infrastructure can be used for future expansion.
Home banking
n The practice of conducting banking transactions
from home rather than at branch locations. Home
banking generally refers to either banking over the
telephone or on the internet.
n The first experiments with internet banking started
in the early 1980s, but it did not become popular
until the mid-1990s when home internet access was
widespread. Today, a variety of internet banks exist
which maintain few, if any, physical branches.
ATMs (Automated Teller Machines)
n ATMs are primarily used for performing
some of the banking functions such as the
withdrawal of cash or the deposit of
cash/cheque, etc., by using an ATM card.
Conveniences Of ATM
To the customer
n ? 24/7 access availability
n ? Less time for transactions (less queue)
n ? Privacy in transactions
n ? Any branch/anywhere banking enabled
n ? Acceptability of card across multiple bank ATMs, even
foreign tourists can access Maestro/visa ATMs
n ? Other services enabled in ATMs in addition to cash
dispending includes clearing cheques deposits balance
enquiry, cheque book requisition, details of recent
transactions.
Conveniences Of ATM
To the Bank
n ? Cost of setting up ATMs is lower than setting up a
branch
n ? Migration of the routine transactions to the ATMs
frees the bank staff for more productive work
n ? ATMs serve as the crucial touch point for cross-
selling of the bank?s products
n ? Enable the banks to display products on the screen
and serves as a media for publicity for the bank
n ? Less hassle in handling cash.
DEBIT, CREDIT AND SMART CARDS
A?debit card?(also known as a bank?card?or
check?card) is a plastic payment?card?that can
be used instead of cash when making purchases.
It is similar to a credit?card, but unlike a
credit?card, the money comes directly from
the user's bank account when using a?debit
card.
A credit card is a small plastic card issued by
a bank, building society, etc., allowing the
holder to purchase goods or services on
credit.
SMART CARD
n A smart is a device that includes
an embedded integrated circuit
that can be either a secure
microcontroller or equivalent
intelligence with internal
memory or a memory chip alone.
n The card connects to a reader
with direct physical contact or
with a remote contactless radio
frequency interface.
DEBIT CARD
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
n Credit Card is a card or mechanism which
enables cardholders to purchase goods and
services without making immediate payment.
Credit Cards
Types of Credit Cards
n General-purpose credit cards?are credit
cards that can be used to pay for just
about anything, any where from clothes at
department stores to meals at restaurants
as well as to get cash advances.
n American Express, Visa, MasterCard and
Discover cards are examples
Types of Credit Cards
n Based on mode of credit recovery
n ? Charge Card-A card that charges no interest but requires
the user to pay his/her balance in full upon receipt of the
statement, usually on a monthly basis. While it is similar to a
credit card, the major benefit offered by a charge card is that
it has much higher, often unlimited, spending limits.
n ? Revolving credit card-A line of credit where the customer
pays a commitment fee and is then allowed to use the funds
when they are needed. It is usually used for operating
purposes, fluctuating each month depending on the
customer's current cash flow needs
n Based on status of credit card
n ? Standard Card- it is a generally issued credit card
n ? Business Card- (Executive cards) it is issued to small
partnership firms, tax- consultants, for use by
executives on their business trips.
n ? Gold Card-a credit card issued by credit-card
companies to favoured clients, entitling them to high
unsecured overdrafts, some insurance cover, etc
n Based on geographical validity
n ? Domestic card- Cards that are valid only in
within the country are called domestic cards.
n ? International Card- credit Cards that are valid
internationally are called international cards.
n Based on franchise/ Tie-up
n Proprietary card- A bank issues such cards under its
own brands. E.g. SBI card Cancard of Canara bank
n ? Master Card- this card is issued under the umbrella
of ?MasterCard International?
n ? VISA Card ? it is issued by any bank having tie up
with ?VISA international?
n ? Domestic Tie-up Card- it is issued by any bank
having tie up with domestic credit card brands such
as CanCard and IndCard.
n Based on issuer Category
n ? Individual Cards- Non-corporate cards that are issued
to individuals
n ? Corporate Cards- Issued to corporate and business
firms.
Debit Cards
n Debit card holders can present the card to the
merchant sign sales slip and buy the goods and
services. The amount is automatically debited to
the account of the cardholder. The issuance of
the Debit card requires the customers to open an
account with the bank.
Smart Card
n Integrated Circuit Card (ICC), a?smart card?is a small, credit card-
sized device, with a microprocessor and other circuits embedded
inside it. These devices are generally made up of synthetic plastic,
and are used for a variety of purposes as enlisted below.
n They are used in?ATM and?credit cards and contain the Personal
Identification Number (PIN) and the account details of an
individual.
n They are used in SIMs, which need to be placed inside a mobile
phone, and this is necessary to acquire the services of a network
provider.
n They can be used as electronic wallets, and can be used as a
payment mode at many different sources.
n They can be used to pay for many public transportation
services.
n They can be used for identification and time log purposes in
business organizations.
n When a transaction is made using the card, the value is
debited and the balance comes down automatically. Once the
monetary value comes down to nil, the balances is to be
restored all over again for the card to become operational.
This is highly secured and prevents card related frauds and
crimes.
SMART CARD
DIFFERENCES BETWEEN DEBIT CARD AND CREDIT CARD
BASIS DEBIT CARD CREDIT CARD
Nature It is a pay now product It is a pay later product
Mode of Operations Money is automatically
deducted from the account
Money has to be paid
afterwards
Requirement of the Bank
Account for the holder
Bank account for the cardholder
is compulsory
Bank account for the cardholder
is optional
Types of financing Owned money Consumer loan
Basis of alternative Alternative to the cheque or
cash
No such alternative
Default chance for bankers Default chance for banker are
zero
Default chance for banker are
sustainable
Recovery cost for bankers Recovery cost of banker are
zero
Recovery cost of banker are
sustainable
Cost incurred by the customer Cost incurred by customer is
zero
2-3% of interest will be charged
if not paid in time.
ELECTRONIC PAYMENTS SYSTEM
n Electronic Payment is a financial exchange that
takes place online between buyers and sellers.
The content of this exchange is usually some
form of digital financial instrument (such as
encrypted credit card numbers, electronic
Cheques or digital cash) that is backed by a bank
or an intermediary, or by a legal tender.
n Electronic payment system is a system which
helps the customer or user to make online
payment for their shopping.
IFSC Code
n IFSC Code Means Indian Financial System Code. IFSC Code is being
used as the address code in one user to another user. RTGS and NEFT
payment system of RBI use these codes. IFSC code consists of 11
characters identified as under (Example of Madhapur, Hyderabad)
n First Four Digits show identity of the Bank i.e SBIN
n 5
th
Digit in default as zero ( for future Use) i.e. 0
n Last 6 characters display the branch identity i.e. 004187
n So IFSC Code for SBI, Madhapur, Hyderabad is SBIN-0-004187.
IFSC is excellent unique code for international electronic
payment system
MICR
n Means magnetic Ink character recognition code which contains 9
digits appearing at the bottom of the cheque, following the cheque
number each bank branch has a unique MICR Code. To understand
how the MICR works lets take the example of 9 digits MICR code of
SBI Madhpur, Hyderabad ? 500081 which has a MICR code of 500-
002-072.
n First three digits of the code display the city and is derived from first
three characters of the PIN which is 500
n Digits 4,5, and 6 display the bank codes allotted to each bank by RBI .
in the case of SBI the code allooted is 002
n Digits 7,8 and 9 display the bank branch codes allotted to each
branches of the Bank for example of SBI Madhpur Hyderabad 500081
branch has been allotted code no 72
n Therefore, 9 digits of MICR of SBI Madhpur, Hyderabad ?
500081 will be 500-002-072
CHEQUE TRUNCATION
Truncation is the process of stopping the flow of the physical cheque issued
by a drawer at some point by the presenting bank en-route to the paying
bank branch.
In its place an electronic image of the cheque is transmitted to the paying
branch through the clearing house, along with relevant information like
data on the MICR band, date of presentation, presenting bank, etc.
Cheque truncation thus obviates the need to move the physical instruments
across bank branches, other than in exceptional circumstances for
clearing purposes. This effectively eliminates the associated cost of
movement of the physical cheques, reduces the time required for their
collection and brings elegance to the entire activity of cheque processing.
n As explained above, Cheque Truncation speeds up
the process of collection of cheques resulting in
better service to customers, reduces the scope of loss
of instruments in transit, lowers the cost of collection
of cheques, and removes reconciliation-related and
logistics-related problems, thus benefitting the system
as a whole.
ECS ( ELECTRONIC CLEARING SYSTEM)
n Electronic mode of payment / receipt for 1
transactions that are repetitive and periodic in nature.
n ? ECS is used by institutions for making bulk 2
payment of amounts towards distribution of
dividend, interest, salary, pension, etc
n ? For bulk collection of amounts towards telephone
/ electricity / water dues, cess / tax collections, loan
installment repayments, periodic investments in
mutual funds, insurance premium etc
Parties Involved
n Payee- one who is going to receive
n ? Payer- one who is going to pay
n ? Payee?s bank
n ? Payer?s bank
n ? Clearing House- Facilitates the interaction
between two banks
Types of ECS process
Credit request
n ? Example of a credit request:
n ? Jivan Tyres Ltd. has to pay monthly salaries to its
employees who have accounts across different banks
n ? The initiator can be the paying bank, requesting a credit to
the receiving bank
Debit Request
n ? Example of a Debit request
n ? State Electricity board wants to receive monthly bill
payment monthly from its customers
n ? In this case the initiator of the process is the payee?s bank
EFT
Electronic Funds Transfer(EFT) is a system where by anyone
who wants to make payment to another person or company
etc..
Can approach his bank and make cash payment or give
instructions /authorization to transfer funds directly from his
own account to the bank account of the receiver or
beneficiary.
Complete details such as the receiver?s name, bank account
number, account type, bank name, city branch name should be
furnished to the bank at the time of requesting for such
transfers so that the amount reaches the beneficiaries account
correctly and faster.
FEATURES OF EFT
n Quick movement of money.
n No intermediation of paper based system.
n Encryption key for protection and security.
VARIOUS TYPES OF EFT?s ARE AS FOLLOWS
n Credit Transfer : Payment of interest, dividents,
salary etc.
n Debit Transfer: Payment of bills upon recipt of
interest of payee.
n Low value fund transfer
n High value fund transfer
n Automated teller machine
n Cheque Truncation
RTGS
The acronym 'RTGS' stands for Real Time Gross Settlement, which
can be defined as the continuous (real-time) settlement of funds
transfers individually on an order by order basis (without netting).
'Real Time' means the processing of instructions at the time they
are received rather than at some later time; 'Gross Settlement'
means the settlement of funds transfer instructions occurs
individually (on an instruction by instruction basis). Considering
that the funds settlement takes place in the books of the Reserve
Bank of India, the payments are final and irrevocable.
n It is a real time fundsfacilitates you to transfer funds from one bank to
another in real time or on a gross basis. The transaction isn?t put on a
waiting list and cleared out instantly.
n ? RTGS payment gateway, maintained by the Reserve Bank of India
makes transactions between banks electronically. The transferred amount
is instantly deducted from the account of one banks and credited to the
other bank?s account.
n ? The minimum value that can be transferred using RTGS is Rs. 2
Lakhs and above. However there is no upper cap on the amount that can
be transacted.
n The remitting customer needs to add the beneficiary and his bank
account details prior to transacting funds via RTGS. The details required
while transferring funds would be the beneficiary?s name; his/her
account number, receiver?s bank address and the IFSC code of the
respective bank.
ADVANTAGES OF RTGS
n Certainty of payment
n Faster collection of funds
n No risk settlement
n Improved liquidity management
n Less fraud and less processing cost
n Better inventory management
National Electronic Funds Transfer (NEFT)
The National Electronic Funds Transfer is a nation-wide money
transfer system which allows customers with the facility to
electronically transfer funds from their respective bank accounts to
any other account of the same bank or of any other bank network
? Funds transfer through NEFT requires a transferring bank and a
destination bank.
? Before transferring funds via NEFT you register the beneficiary,
receiving funds. For this you must possess information such as
name of the recipient, recipient?s bank name, a valid account
number belonging to the recipient and his respective bank?s IFSC
code.
? Any sum of money can be transferred using the NEFT system
with a maximum capital of Rs. 10, 00, 000.
n Operating Details of NEFT
? Settlement of funds between receiving and paying banks takes
place centrally from Mumbai.
? Bank branches participating with NEFT can be located anywhere
in the country.
? Customer through an application form provides details of the
required transfer.
? Customer operating through a net banking facility can also initiate
the fund transfer through their bank.
? Through the Indian Financial System Code (IFSC) the bank branch
participant is identified and is used in the transfer of funds.
Benefits of using NEFT
? No physical transfer of cheque or demand draft
? Possibility of loss of funds in transfer is not there
? Transaction cost is less when compared with other
payment methods
? Service is enabled through internet banking / email /
mobile and thus minimizes the effort of the transfer
? Real time transfer of funds
BASIC DIFFERENCES BETWEEN NEFT AND RTGS
Criteria NEFT RTGS (Retail)
Settlement Done in batches (Slower) Real time (Faster)
Full Form National Electronic Fund Transfer Real Time Gross Settlement
Timings on Mon ? Fri 8:00 am ? 6:30 pm 9:00 am ? 4:30 pm
Timings on Saturday 8:00 am ? 12:30 pm 9:00 am ? 1:30 pm
Minimum amount of money transfer limit No Minimum 2 lacs
Maximum amount of money transfer limit No Limit No Limit
When does the Credit Happen in
beneficiary account
Happens in the hourly batch Between
Banks
Real time between Banks
Maximum Charges as per RBI Upto 10,000 ? Rs. 2.5
from 10,001 ? 1 lac ? Rs. 5
from 1 ? 2 lacs ? Rs. 15
Above 2 lacs ? Rs. 25
Rs. 25-30 (Upto 2 ? 5 lacs)
Rs. 50-55 (Above 5 lacs)
(Lower charges for first half of day)
Suitable for Small Money Transfer Large Money Transfer
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This post was last modified on 18 February 2020