BANKING SERVICES IN INDIA ? Banking services in India was started in the year 1786 with “The General Bank of India” being the first. Reserve Bank of India came in 1935, soon after RBI came into existence it became the central banking authority in 1965. ? After it Banking Companies Act was passed in 1949. ? State Bank of India was formed in 1955. ? Nationalization of 14 major banks in 1969. Seven more in 1980. ? Opening up of economy, implementations of recommendations of the Narsimham committee. TYPES OF BANKING SERVICES ? Business loans. ? Checking accounts. ? Savings accounts. ? Debit and credit cards. ? Merchant services (credit card processing, reconciliation and reporting, check collection) ? Cash management (payroll services, deposit services, etc.) HISTORY OF E-BANKING WORLD PERSPECTIVE Electronic banking, or e-banking, is the term that describes all transactions that take place among companies, organizations, and individuals and their banking institutions. ? E banking history dates back to 1980 ? The term “online banking” initially gained popularity in the late 1980s, the phrase referred to the use of a terminal, keyboard and television or computer monitor to access one’s bank account using a landline telephone. ? The online banking definition, or net banking definition, includes any electronic payment system that allows customers of a financial institution to conduct financial transactions through the financial institution’s internet-enabled website or app. Here’s where it all began- 1994: Bank of Scotland Institutes First UK Internet Banking Service. 1981: New York City Banks Test At-Home Banking. 1983: Bank of Scotland Institutes First UK Internet Banking Service. 1996: NetBank Is Founded. 1999: Bank of Internet USA Is Founded. 2000: 80% of U.S. Banks Offer Internet Banking. 2001: Bank of America Has 3 Million Online Customers. 2017: Online Banking Is Standard Practice 2009: Ally Bank Is Launched. 2010: Online Banking Is Growing Faster Than the Internet INDIAN PERSPECTIVE Opening up of economy in 1991 marked the entry of foreign banks. They brought new technology with them. Banking products became more and more competitive therefor Need for differentiation of products and services was felt. The ICICI Bank kicked off online banking in 1996. Currently 78% of its customer base is registered for online banking. 1996 to 1998 marked the adoption phase, while usage increased only in 1999, owing to lower ISP online charges, increased PC penetration and a tech-friendly atmosphere. The Government of India enacted the IT Act, 2000 with effect from October 17, 2000 which provided legal recognition to electronic transactions and other means of electronic commerce. The Reserve Bank is monitoring and reviewing the legal and other requirements of e-banking on a continuous basis to ensure that e-banking would develop on sound lines and e-banking related challenges would not pose a threat to financial stability. RBI also issued numerous guidelines for e-banking in India and it review them periodically. It is compulsory for banks to have a prior approval from RBI to provide any new online service. Although, this guideline suspended later and banks have given autonomy for e-banking services but they have to ensure that online services offered by them should come under provisions of the Reserve Bank of India.According to report of RBI in Jan 2016, there are 196079 ATM and 1337310 point of sale devices in India. WHY E-BANKING? The following points mentioned below are the main reasons that led to the development of EBanking services in India- ? Stress on branchless banking. ? Increasing volumes of banking transactions. ? Providing customers with cost effective services. ? One of the important reason for adopting e banking was teller cost which can be understood from graph below. 00.20.40.60.811.2TELLER TELEPHONE MAIL ATM P/C BANKING INTERNET/ MOBILECOST PER DISTRIBUTION CHANNELWHAT IS E-BANKING Internet banking (or E-banking) means any user with a personal computer and a browser can get connected to his bank’s website to perform any of the virtual banking functions & can conduct the banking activities anywhere in the world. The term “electronic banking” or “e-banking” covers both computer and telephone banking. The major types of virtual banking services includes: 1. Automated Teller Machines (ATMs). 2. Smart Cards. 3. Phone banking. 4. Internet banking. REQUIREMENTS FOR E-BANKING ? Internet access ? Registration with institution ? Authorized website ? User name and Password Limitations of E-Banking ? Start-up cost. ? Training & maintenance. ? Security. ? Legal issues. TECHNOLOGY USED IN E-BANKING 1. National Electronic Fund Transfer (NEFT): This is the faster mode of fund transfer in which the funds are credited to the beneficiary’s account on the same day. It is offered by computerized branches of certain banks. 2. Automated Teller Machines: The Automated Teller Machines are installed, now-adays, at every nook and corner in most of the towns & cities. These are meant for balance enquiries, cash withdrawals and many other facilities depending upon the policies of the bank. This requires a valid Customer Id and password to log in and is therefore safe to be used. Despite of using ATM cards, Debit cards can also be used in the ATMs. Automated Teller Machines. 3. Debit Cards: Debit Cards is another advanced technology of the electronic banking, now-a-days. These cards are the multi-purpose cards and can be used in ATMs for balance enquiry and cash withdrawal or can be used for easy shopping at various counters. Debit Cards ensure the automatic deduction of amount from the account just by scratching it on the machine 4. Credit Cards: Credit Cards, unlike debit cards, provide credit to the consumers. A credit card system is a type of retail transaction settlement and credit system, named after the small plastic card issued to users of the system. A credit card is different from a debit card in that it does not remove money from the user’s account after every transaction. 5. Charge Cards: A charge card is a means of obtaining a very short term (usually around 1 month) loan for a purchase. It is similar to a credit card, except that the contract with the card issuer requires that the cardholder must each month pay charges made to it in full — there is no “minimum payment” other than the full balance. ISSUE RELATED TO E-BANKING 1. Online Banking Frauds 2. Password + Fishing The “phishing” scheme involves using fake emails and/or fake websites. Criminals send emails that appear to be from the customer’s bank that direct customers to a fake website. 3. Skimming Skimming is a more advanced version of an identity theft. Fraudsters illegally copy the information from the magnetic strip on the back of your plastic without interfering with the legitimate payment transaction. ADVANTAGES OF E-BANKING TO CUSTOMERS ? It is convenient. ? It isn’t bound by operational timings. ? There are no geographical barriers. ? Services can be offered at a miniscule cost. ? Check your transactions at any time of the day, and as many times as you want to. ? Getting quarterly statements from the bank, transferring fundsto outstation, and other such activities can be done free of charge through online banking. CHALLENGES IN E-BANKING 1. Security Risk: The problem related to the security has become one of the major concerns for banks. A large group of customers refuses to opt for e-banking facilities due to uncertainty and security concerns. 2. The Trust Factor: Trust is the biggest hurdle to online banking for most of the customers. Conventional banking is preferred by the customers because of lack of trust on the online security. They have a perception that online transaction is risky due to which frauds can take place. While using e-banking facilities lot of questions arises in the mind of customers such as: Did transaction go through? 3. Customer Awareness: Awareness among consumers about the e-banking facilities and procedures is still at lower side in Indian scenario. Banks are not able to disseminate proper information about the use, benefits and facility of internet banking. 4. Privacy risk: The risk of disclosing private information & fear of identity theft is one of the major factors that inhibit the consumers while opting for internet banking services. Most of the consumers believe that using online banking services make them vulnerable to identity theft. According to the study consumers? worry about their privacy and feel that bank may invade their privacy by utilizing their information for marketing and other secondary purposes without consent of consumers.