Sana Internet Banking

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A

DISSERTATION REPORTON

Submitted to Uttrakhand technical university in the fulfillment ofMaster of business administration

(TWO YEAR FULL TIME DEGREE PROGRAMME)

SUBMITTED BY UNDER THE OF SUPERVISIONSana Zaidi Mrs. Aditi SharmaM.B.A (4th SEMESTER)

Batch 2009-2011

Quantum School of Technology Mandawar (22 Km milestone)Roorkee - Dehradun Highway (NH 73)Roorkee 247167, Uttrakhand

India.

QUANTUM SCHOOL OF BUSINESS


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CONTENTS

1. Internet Banking.(8-18)

2. Challenges for Banks and Regulators.(18-23)

3. What do Computers do in Banks?(24-35)

Credit Card Frauds.

Banks Control in Online Banking.

4. ICICI Bank A Case Study.

5. Recommendations.6. Suggestions.

7. Role and Significance.

8. Conclusion.


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1: - Internet Banking

1.1 Internet Banking

a) Introduction

b) Banking service though Internet

c) The Indian Scenario

d) Product & Service offered

e) The future scenario

1.2 Risk & Rewards

a) Operational Riskb) Security Risk

c) System architecture & design

d) Reputational Risk

e) Legal Risk

f) Money Laundering Risk

g) Cross Border Risks

h) Strategic Risk

i) Other Risk

j) Risk of unfair completion


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TO WHOM IT MAY CONCERN

This is to certify that aforesaid candidate of MASTER OF BUSINESS

ADMINISTRATION (MBA) of the QUANTUM SCHOOL OF BUSINESS have

satisfactory completed dissertation project on the topic INTERNET BANKING IN INDIA

WITH REFERENCE TO A CASE STUDY OF ICICI per rules of UTTARAKHAND

TECHNICAL UNIVERSITY, DEHRADUN in academic session 2009-2011.

His performance was satisfactory during the period of dissertation work.

(MRS. ADITI ARORA)

Dated:


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DECLARATION

I, hereby declare that the project report entitled A study on INTERNET BANKING IN

INDIA WITH REFERENCE TO A CASE STUDY OF ICICI as prepared and submitted

by me is an original work conducted by me under the guidance of MRS. ADITI ARORA

and nothing has been taken from other such documents.

SANA ZAIDI(MBA 4thSemester)


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ACKNOWLEDGEMENT

An attempt has been made to examine the Microfinance in India with Special Reference

to the Linkage Banking Programme a Case Study of SKS.

The report is the outcome of the guidance and valuable suggestions provided by all the

faculty of QUANTUM BUSINESS SCHOOL (QBS). I would like to express my sincere

thanks and primarily the gratitude to Mrs. ADITI ARORA , MBA Department,

QUANTUM, Roorkee who had been the main driving force in guiding, in the analysis

and presentation of the project work right from the initiation to the final stage.

I also wish to express my sincere thanks to my parents, friends and well wishers for

their enthusiastic support and who have directly or indirectly helped me in one way or

the other in preparation of the final report.


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Research Objectives of the study

Objectives of a project tell us why project has been taken under study. It helps

us to know more about the topic that is being undertaken and helps us to

explore future prospects of the topic. Basically it tells what all have been

studied while making the project.

The various research objectives of the study are:

1. To study the internet banking facilities offered by the banks to

its customers

2. To study as to how much internet banking has penetrated in the

minds of the customers

3. To gain insights about functioning of internet banking.

4. To explore the future prospects of internet banking.

5. To study the benefits that are provided to the individual under

internet banking


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Internet Banking:-

a) Introduction: -

The delivery channels include direct dialup connections, private networks, public

networks, etc. with the popularity of computers, easy access to Internet and World Wide

Web (WWW), Internet is increasingly used by banks as a channel for receiving

instructions and delivering their products and services to their customers. This form of

banking is generally referred to as Internet Banking, although the range of products and

services offered by different banks vary widely both in their content and sophistication.

b) Banking Services through Internet: -

i. The Basic Level Service is the banks web sites which disseminate information

on different products and services offered to customers and members of public

in general. It may receive and reply to customers queries through e-mail,

ii. In the next level are Simple Transactional Web sites which allows customers to

submit their instructions, applications for different services, queries in their

account balances, etc. but do not permit any fund-based transactions on their

accounts,

iii. The third level of Internet banking service are offered by Fully Transactional Web

sites which allow the customers to operate on their accounts for transfer of

funds, payment of different bills, subscribing to other products of the bank and to

transact purchase and sale of securities, etc. The above forms of Internet


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banking service the customer or by new banks, who deliver banking service

primarily through Internet or other electronic delivery channels as the value

added services. Some of these banks are known as Virtual banks or Internet

only banks and may not have physical presence in a country despite offering

different banking services.

c) The Indian Scenario: -

The entry of India banks into Net Banking

Internet banking, both as a medium of delivery of banking services and as a

strategic tool for business development.

At present, the total internet users in the country are estimated at 9 lakh.

However, this is expected to grow exponentially to 90 lakh by 2003. Only about 1

percent of Internet users did banking online in 1998. This is increased to 16.7

percent in March 2000 (India Research, May 29, 2000, Kotak Securities).

Cost of banking service through the Internet from a fraction of costs through

conventional methods. Rough estimates assume teller cost at Re.1 per

transaction, ATM transaction cost at 45 paise, phone banking at 35 paise, debit

cards at 20 paise and Internet banking at 10 paise per transaction.

d) Product and Services Offered: -

Banks in India are at different stages of the web-enabled banking cycle. Initially,

a bank, which is not having a web site, allows its customer to communicate with it

through an e-mail address communication, is limited to a small number of

branches and offices which have access to this e-mail count.


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With gradual adoption of Information Technology, the bank puts up a web site

that provides general information on deposits products, application forms for

downloading and e-mail option for enquiries and feedback.

Vijaya Bank provides information on its website about its NRI and other services.

Customers are required to fill in applications on the Net and can later receive

loans or other products requested for at their local branch.

A few banks provide the customer to enquire into his demat account

(security/shares) holding details, transaction details and status of instructions

given by him. These web sites still do not allow online transactions for their

customers.

Some of the banks permit customers to interact with them and transact

electronically with them. Such services include request for opening of accounts,

requisition for cheque books, stop payment of cheques, viewing and printing

statements of accounts, movement of funds between accounts within the same

bank, querying on status or requests, instructions for opening of Letter of Credit

and Bank Guarantees, etc.

These services are being initiated by banks like ICICI Bank Ltd., Citibank, Global

Trust Bank Ltd., UTI Bank Ltd., Bank of Citibank Bank of Madura Ltd., Federal

Bank Ltd., etc.

Some of the more aggressive players in this area such as ICICI Bank Ltd., HDFC

Bank Ltd., UTI Bank Ltd., Citibank, Global Trust Bank Ltd., and Bank of Punjab

Ltd., offer the facility of receipt, review and payment of bills online.

The Infinity service of ICICI Bank Ltd. Also allows online real time shopping all

payments to be made by customers.


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HDFC Bank Ltd. Has made e-shopping online and real time with the launch of its

payment gateway.

Banks providing internet banking services have been entering into agreements

with their customers setting out the terms and conditions of the services.

The terms and conditions include information on the access through user-ID and

secret password, minimum balance and charges, authority to the bank for

carrying out transactions performed through the service, liability of the user and

the bank, disclosure of personal information for statistical analysis and credit

scoring also, non-transferability of the facility, notices and termination, etc.

e) The Future Scenario: -

o Compared to banks abroad, India banks offering online services still have a long

way to go. For online banking to reach a critical mass, there has to be sufficient

number of users and the sufficient infrastructure in place.

o Various security options like line encryption, branch connection encryption,

firewalls, digital certificates, automatic sign-offs, random pop-ups and disaster

recovery sites are is in place or are being looked at, there is as yet no

Certification Authority in India offering Public Key Infrastructure, which is

absolutely necessary for online banking.

o The communication bandwidth available today in India is also not enough to

meet the needs of high priority services like online banking and trading.


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o Banks offering online facilities also need to calculate their downtime losses,

because even a few minutes of downtime in a week could mean substantial

losses.

o Users of Internet Banking Services are required to fill up the application forms

online and send a copy of the same by mail or fax to the bank.

o A contractual agreement is entered into by the customer with the bank for using

the Internet banking services.

o Domestic customers, for whom other access points such as ATMs, telebanking,

personal contact, etc. are available, are often hesitant to use the Internet banking

services offered by Indian banks. Internet Banking, as an additional delivery

channel, may, therefore, be attractive/ appealing as a value added service to

domestic customers. Non-resident Indians, for whom, it is expensive and time

consuming to access their bank accounts maintained in India find net banking

very convenient and useful.

o Cyber crimes are, therefore, difficult to be identified and controlled.

o In order to promote Internet banking services, it is necessary that the proper legal

infrastructure is in place.

o The Department of Telecommunications (DoT) is moving fast to make available

additional bandwidth, with the result that internet access will become much faster

in the future.

o Reserve Bank of India has constituted a group to examine different issues

relating to i-banking and recommend technology, security legal standards and

operational standards keeping in view the international best practices. In the

following paragraphs a generic set of risks discussed as the basis for formulating

general risk control guidelines.


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1.2 Risk & Rewards: -

a) Operational Risk: -

Operational risk, also referred to as transactional risk is the most common form

of risk associated with i-banking.

It takes them from of inaccurate processing of transactions, non-enforceability of

contracts, compromises in data integrity, data privacy and confidentiality,

unauthorized access / intrusion to banks systems and transaction, etc.

Such risks can arise out of weaknesses in design, implementation and

monitoring of banks information system.

Besides inadequacies in technology, human factors like negligence by customers

and employees, fraudulent activity of employees and crackers/ hackers, etc. can

become potential source of operational risk.

b) Security Risk: -

Security risk arises on account of unauthorized access to a banks critical

information stores like accounting system, risk management system, portfolio

management system, etc.


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Other related risks are loss of reputation, infringing customers privacy and its

legal implications, etc.

Attackers could be hackers, unscrupulous vendors, disgruntled employee or

even pure thrill seekers.

In addition to external attacks banks are exposed to security risk from internal

sources e.g. employee fraud. Employee being familiar with different systems and

their weaknesses become potential security threats in a loosely controlled

environment. They can manage to acquire the authentication data in order to

access the customer accounts causing losses to the bank.

Unless specifically protected, all data/ information transfer over the internet can

be monitored or read by unauthorized persons.

c) System architecture and design: -

Banks face the risk of wrong choice of technology, improper system design and

inadequate control processes.

Numerous protocols are used for communication across internet. Each protocol

is designed for specific types of data transfer.

A system allowing communications with all protocols, say HTTP (Hyper Text

Transfer Protocol), FTP (File Transfer Protocol), telnet, etc. is more prone to

attack than one designed to permit say, only HTTP.

Many banks rely on outside service providers to implement, operate and maintain

their e-banking system.


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Security related operational risk include access control, use of firewalls,

cryptographic techniques, public key encryption, digital signature, etc.

d) Reputational Risk: -

Reputational risk is the risks of getting significant negative public opinion, which

may result in a critical loss of funding or customers. Such risks arise from actions

which cause major loss of the public confidence in the banks ability to perform

critical functions or impair bank-customer relationship. It may be due to banks

own action or due to third parties action.

The main reasons for this risk may be system or product not working to the

expectations of the customers, significant security breach (both due to internal

and external attack), inadequate information to customers about product use and

problem resolution procedures, significant problems with communicationnetworks that impair customers access to their funds or account information

especially if, there are, no alternative means of account access.

e) Legal Risk: -

Legal risk arises from violation of, or non-conformance with laws, rules,

regulations, or prescribed practices, or when the legal rights and obligations of

parties to a transaction are not well established.


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A customer inadequately informed about his rights and obligations, may not take

proper precautions in using Internet banking products or services, leading to

disputed transactions, unwanted suits against the bank or other regulatory

sanctions.

f) Money Laundering Risk: -

o As internet banking transactions are conducted remotely banks may find it

difficult to apply traditional method for detecting and preventing undesirable

criminal activities. Application of money laundering rules may also be

inappropriate for some forms of electronic payments.

o To avoid this, banks need to design proper customer identification and screening

techniques, develop audit trails, conduct periodic compliance reviews, and frame

policies in internet transactions.

g) Cross-Border Risks: -

Internet banking is based on technology that, by its very nature, is designed to

extend the geographic reach of banks and customers. Such market expansion

can extend beyond national borders. This causes various risks.

Such considerations may expose banks to legal risks associated with non-

compliance of different national laws and regulations, including consumer


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protection laws, record keeping and reporting requirements, privacy rules and

money laundering laws.

The foreign-based service provider or foreign participants in internet banking are

sources of country risk to the extent that foreign parties become unable to fulfill

their obligations due to economic, social or political factors.

h) Strategic Risk: -

For reducing such risk, banks need to conduct proper survey, consult experts

from various fields, establish achievable goals and monitor performance.

Also they need to analyze the availability and cost of additional resources,

provision of adequate supporting staff, proper training of staff and adequate

insurance coverage.

i) Other Risk: -

Traditional banking risks such as credit risk, liquidity risk, interest rate risk and

market risk are also present in internet banking.

These risks get intensified due to the very nature of internet banking on accountof use of electronic channels as well as absence of geographical limits.

Credit risk: Is the risk that a counterparty will not settle an obligation for full value,

either when due or at any time thereafter. Banks may not be able to properly


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evaluate the creditworthiness of the customer while extending credit through

remote banking procedures, which could enhance the credit risk.

Another facility of internet banking is electronic money. It brings various types of

risks associated with it. If a bank purchases e-money from an issuer in order to

resell it to a customer, it exposes itself to credit risk in the event of the issuer

defaulting on its obligation to redeem electronic money.

Liquidity risk: It is important for a bank engaged in electronic money transfer

activities that it ensures that funds are adequate to cover redemption and

settlement demands at any particular time. Failure to do so, besides exposing the

bank to liquidity risk, may even give rise to legal action and reputational risk.

j) Risk of unfair completion: -

Internet banking is going to intensify the competition among various banks. The

open nature of internet may induce a few banks to use unfair practices to take

advantage over rivals. Any leaks at network connection or operating system, etc.

may allow them to interfere in a rival banks system.

Thus, one can find that along with the benefits internet banking carries various

risks for bank itself as well as banking system as a whole.


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2: - Internet Banking: Challenges for Banks & Regulators.

2.1 Internet Banking in the United States

New Risks

2.2 The Basel Committees Electronic Banking Group

2.3 e-Finance Oversight

2.4 Security Controls

2.5 Legal & Reputational Risk Management

Internet Banking in the United States: -

An average industry estimates indicates the about 13 million US households

banked online by the end of 2000 twice as many as in the previous years.

At the beginning of 2001, 37% of all US national banks, including nearly all of the

largest national banks, were offering full transactional capabilities online a near

twofold increase in little over a year.


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Banks offering Internet-based transaction service and there are more of them

each day should be well positioned to compete in the financial markets of the

future.

New Risks: -

Internet banking poses risks that are different from those that bank supervisors

customarily dealt with in assessing credit, market, or interest rate risk.

First, banks must manage the unprecedented speed of technological change,

and assess how it relates to their technology investments and their ability to

provide consistently high-quality customer service.

Second, bank is increasingly dependent on third parties to provide the necessary

information technology.

Security is another area of significant risk. So far, relatively few financial

institutions have reported being victimized by online security violations.

2.2 The Basel Committees Electronic banking Group: -

o

The Basel Committee on Banking Supervision has taken the lead in thisarea through the creation of its Electronic Banking Group (EBG) in late

1999 a group whose members represent 17 Central banks and bank

supervisory agencies.


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The major focus of the EBGs work has been to develop risk management

guidance for Internet banking that will guide bankers and promote

effective and consistent bank supervision around the world.

o The EBG has identified fourteen Risk Management Principles for

Electronic Banking to promote sound risk management of e-banking.

These principles are intended to help banking institutions expand their

existing oversight policies and processes to cover their e-banking

activities.


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e-Finance Oversight: -

The EBG has dedicated considerable time and effort to communicating

supervisory expectations and guidance for home country supervisors to overseecross-border Internet banking activity conducted by their local institutions.

In February of this year, the Financial Stability Forums Contact Group on E-

Finance held its first formal meeting. This group was formed to promote

enhanced information-sharing among the various international sector-based

working groups dealing with e-finance supervisory issues e-banking, e-trading,

retail payments systems, e-commerce, and so on.

Security Controls: -

Authentication of e-banking customers.

No repudiation and accountability for e-banking transaction of duties.

Appropriate measures to ensure segregation of duties.

Proper authorization controls within e-banking systems, databases and

applications.

Data integrity of e-banking transactions, records and information.

Establishment of clear audit trails for e-banking transactions.

Confidentiality of key bank information.


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Legal & Reputational Risk Management: -

Appropriate disclosure for e-banking services.

Privacy of customer information.

Capacity, business continuity and contingency planning to ensure availability of

e-banking systems and services.

Incident response planning. The complete EBG Report on Risk Management

Principles for Electronic Banking can be obtained at the Bank for International

Settlements web site at


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3: - What do Computers do in Banks

The different uses of Information Technology: -

a) Single Window System

b) Any Time Banking

c) Automated Teller machine

d) Shared Payment Network System

e) Customer Service

f) Telebanking

g) Home Banking

h) Electronic Fund Transfer

i) Plastic Cards as Media for Payment

1. Credit Card

2. Debit Card

3. Smart Card

4. ATM Card

j) Intra-bank and Inter-bank Applications


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The different uses of Information Technology: -

a) Single Window System (SWS): -

o The cashier or teller who accepts the cash, keys in the data from his terminal

after receipt of the amount.

o The amount is straight away posted to the system.

o If the customer wishes to update passbook the same is also updated through the

security form printer/pass book printer.

o If a customer wishes to obtain a draft, the clerk keys in the details of the account

to be debited and the particulars of the drafts to be issued on the machine.

o The customers account is debited and security form printer prints out draft and

clerk can hand over the same to customer duly signed.

b) Any Time Banking: -

This refers to banking service available 24 hours a day and 365 days a year.

Such facility is made available to the customer through the Automated Teller

machine.

Banking, being a service industry, is primarily driven by customers needs.

Each customer is willing to pay a price for the services provided it is made

available to him when he wants and where he wants.


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In the present day of server competition, banking services are driven by

technology, which is more oriented towards providing better services to the

customer.

The concept of banking hours has been changed from the fixed 4 hours to 24

hours.

This has been made possible through use of ATMs. Even under the manual

service, the banks have stated to extend the service from the traditional 4 hours

to 5 hours and even up to 12 hours say from 8 AM to 8 PM.

Some banks have introduced the practice of Sunday Banking or Holiday

Banking.

c) Automated Teller Machine (ATM): -

ATM is a machine in the nature of a computer in general sense, but is dedicated

to do certain types of specific jobs only.

The hardware and the proprietary i.e. the software used in one machine cannot

be used in one machine.

d) Shared Payment Network System (SPNS): -

The SPNS, named SWADHAN, has been sponsored by the Indian Banks

Association (IBA).


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It is a network of ATMs, points of sale terminals and Cash Dispensers with a view

to pool the resources of the banks and underlines the spirit of competition

through cooperation.

It became operational in Mumbai on 1st February 1997 and in two years about

150 ATMs were owned and installed by 38 banks including foreign banks, public

and private sector Indian commercial banks as also cooperative banks.

The biggest advantage of the network is that the ATM cards issued by different

banks can used at any member banks ATM.

Banks can have as many ATM as they want and follow some standards set by

the SPNS committee.

The heart of the network is the Switch and its main components are: Tandem

Mainframe Computer, BASE 24 Software, Motorola networking equipments and

the leased lines.

e) Customer Services: -

The following customer services are offered through the system:

i. Cash withdrawal (up to a specified limit)

ii. Cheque/Cash deposit (the receipt being only for the deposit of the envelope

containing cash but not for the amount therein)

iii. Enquiry about balances

iv. Printing of statement of accounts

v. Request for cheque book and standing instructions.


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vi. Transfer of funds

vii. PIN change

f) Telebanking: -

From the conventional banking, where the services were provided manually

across the table, it has come to a stage where the customer is not required to

visit the bank enquiry of balance in the account, sending a remittance, to get a

statement of account, etc.

The concept has become so popular that in USA customers do not visit the bank

for 97% of their transactions and these are done from either customers

residence or office using a telephone or a home PC.

In telebanking the customer is required to open the account with the bank initially

by visiting the bank.

Telebanking services are, generally, provided by the bank over the telephone ona special number.

The number at the bank is connected to a terminal in the bank, which is either

handled manually or is automated by connecting the same to the computer

network.

Where the system is automated, two types of technology are used.


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g) Home Banking: -

Under home banking the customer is served at his residence and there is noneed for the customer to visit the banks premises for a number of routine

transactions.

If the customer needs some information the same can be got by contacting the

bank over the phone as described in the telebanking.

If the customer wants to put through transaction and wishes to see his account or

to get a statement of his account, he may have to use a PC.

This type of facility is available with a town, city or metropolitan area.

Under such a situation the customer should have a:

PC

Modem

Telephone line

A compatible software for the home PC

The home banking service can be broadly classified under two groups, one

without using the information technology and another using information

technology.

When customer contacts the bank o the phone no specific technology is involved

and the service of telebanking is provided to him.


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h) Electronic Fund Transfer (EFT): -

o In India the fund transfers are basically done through Mail Transfer, Draft or

Telegraphic Transfer.

o In case of Telegraphic Transfer (TT) again the Department of Telecommunication

was the sole provider of Telephone, Telex and Telegram facilities.

o With the process of liberalization private operators have started providing

alternative voice communication channels through mobile phones and vast

communication as an alternative channels for data communication.

o It was normal for any TT to be credited to the beneficiarys account after delay of

2 to 4 days

o The different forms of EFT prevalent in the use are:

EFT through Electronic Data Interchange

BANKNET

RBINET

IDRBT VSAT Network

EFT from Point of Sales

Electronic Cash

SWIFT- Global System for Funds Transfer

Electronic Clearing Settlement


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i) Plastic Cards as Media for Payment: -

There are four types of plastic cards being used ad media for making payments. Theseare:

1. Credit Card

2. Debit Card

3. Smart Card

4. ATM Card

1. Credit Cards: -

The credit card enables the cardholders to:

Purchase any item like clothes, jewellery, railway/air tickets, etc.

Pay bills for dining in a restaurant or boarding and lodging in a hotel

Avail of any service like car rental, etc.

2. Debit Card: -

A debit card is issued on payment of a specified amount by the issuing company like a

telephone company to a customer on cash payment or on debiting his account by a

bank.

Thus it is like an electronic purse, which can be read and debited by the required

amount.


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It may be noted that while through a credit card, the customer first makes a purchase or

avails service and pays later on, but for getting the debit card, a customer has to first

pay the due amount and then make a purchase or avail the service. For this reason,

debit card are not as popular as credit cards.

3. Smart Cards: -

Smart Cards have a built-in microcomputer chip, which can be used for storing and

processing information. For example, a person can have a smart card from a bank with

the specified amount stored electronically on it. As he goes on making transactions with

the help of the card, the balance keeps on reducing electronically. When the specified

amount is utilized by the customer, he can approach the bank to get his card validated

for a further specified amount. Such cards are used for paying small amounts like

telephone calls, petrol bills, etc.

In India, a smart card, suiting Indian banking environment, is being developed and

tested at IIT, Mumbai, in collaboration with the RBI and SBI. The card is being used as

an experimental tool for promoting cashless society in and around the IIT Campus. Thelatest smart card being developed will combine all the features of electronic purses,

credit cards and ATM cards.

4. ATM Cards: -

The card contains a PIN (Personal Identification Number) which is selected by thecustomer or conveyed to the customer and enables him to withdraw cash up to the

transaction limit for the day. He can also deposit cash or cheque.


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Function of ATM Card: -

The customer has to enter the card into the machine slot. The machine firstreads for hot carding of the card number, i.e. it checks whether the card has

already been cancelled or placed on the rejection list.

Rejection can be because of the reason like lost card or stolen card.

The machine then reads the PIN and asks for the PIN from the customer.

If the PIN matches, it presents the main menu on the screen. The menu contains

options from which the withdrawal option is selected.

The ATM then checks whether the amount is under the day limit magnetically

inscribed by the customer. Accordingly, the ATM dispenses cash. It then

releases the card and a printed statement comes out of the slot.

5. Intra-Bank & Inter-Bank applications: -

Computerization is now all pervasive in banks. Almost all the activities in a bank can be

performed more efficiently with the help of computers. Broadly, we can divide the

applications of computerization in banks in two types

A) Intra-Bank Applications: -

i. Funds transfer and payment message

ii. Banks owned ATM/Credit Card and other application on the corporate networkiii. Inter-Branch Reconciliation

iv. Quick disposal of loan/investment proposal

v. Funds information from clearing centers to the fund management office for

optimal allocation of funds.

vi. Cash Management Product


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vii. Treasury Management

viii. Any Branch Banking

ix. Asset Liability Management

x. E-mail

xi. Software distribution in the bank

xii. Organizational bulletin boards may contain the following:

a. Circulars

b. Newsletters, phone and address directories

c. Undesirable parties

d. Missing security items

e. Confidential circular on attempted frauds.

xiii. Human Resources Development and Personnel Administration

xiv. Auditing and Inspecting computerized branches using the network

xv. Organizational database may include

a. Statutory returns

b. Control returns

c. Standardized returns

xvi. Management Information Systems

a. Borrowers profileb. Branch profile

c. Employee analysis

d. Product/service profile

e. Business profile of branches.

xvii. Apart from providing efficient service to customers the financial network will also

fulfill the following objectives:

a. Timely information to top management

b. Helping in development of new products

c. Speedy communication among branches and with the controlling offices.


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B) Inter-Bank Applications: -

i. Electronic Funds Transfera. Retail EFT (Small value credit transfer) on net settlement basis.

b. Wholesale EFT (Large value credit transfer) on Real Time Gross

Settlement (RTGS) basis for time critical payments.

ii. Clearing and settlement systems for securities Delivery vs. Payment (DVP).

The final delivery of securities will occur if and only if final payment occurs.

iii. Transferring balance from net settlement systems to RTGS Server at periodic

intervals. The net obligation could be from:

a. Local paper-based clearing

b. Inter-city paper-based clearing (including IT discounting facilities)

c. Bulk payments ECS (Debit, Credit, RAPID) including intercity.

d. Shared ATM networks

e. Smart cards and other pre-paid/pre-authorized debit cards

iv. Exchange of defaulting borrowers list among RBI and banks

v. EDI services to the extent they pertain to payment cycle to EDI (Electronic Data

Interchange)vi. Consolidation of current account balance from the existing DAD (Deposit

Accounts Department in RBI Offices) applications synchronously/asynchronously

to facilitate balance enquiry by banks on all India/center-wise basis and if

necessary to activate transfer of funds among DADs at different centers.

vii. Reporting of government account transactions

viii. Reporting of BSR (Basic Statistical Returns) etc. to RBI

ix. Asset Liability Management

x. Intranet in RBI to enable banks to get circulars, press releases etc.

xi. Returns to be submitted by the banks to Departments of Banking Supervision

(DBS) for off-site supervision and monitoring.


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4: Credit Card Frauds

4.1 Credit Card Frauds

Meaning

Defrauder

Aware of Credit Card

Advantages of Credit Card

Credit Card Frauds

4.2 The Prevention of Frauds

Duplicate Card

White plastics

Bankers Role

Cyber Laws

Altering Sale terminals

Internet Relays

Monitoring Deposit


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Risk Management

Central Credit Card Clearing House

Loss of Credit Cards in Transit

Fraud Consciousness Physical Evidence

Check the handwriting

4.3 How to Accept the Master Card

4.4 How to get Reimbursed

4.5 ICICI Bank: Case Study


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4.1 Credit Card Frauds: -

Meaning: -

A credit card is a money transaction device without using cash or fiduciary documents.

Defrauder: -

The defrauder has been slow to exploit the credit card, for making a fast buck. In USA,

he made 15 million dollars. Through the cards, in 1981, In 1982 his earning through thecard, rose to 50 million dollars. In 1983, the fraudulent card brought over 100 million

dollars to its creators. The fraudulent card industry is rising higher and higher to dizzy

height every year. Like other countries if the genuine credit card has come in India, the

fraudulent credit card cannot be far behind.

Aware of Credit Card: -

The credit card, as already seen, is a money transaction device. The institutions issuing

the credit card give the card holders authority to obtain money, goods, services or any

other thing of value, on credit. They guarantee payment of debit so raised. These

institutions are banks and other financial institutions, clubs and travel agencies and

departmental stores, etc. Credit Cards, Bob Cards, Master Cards, Visa Cards, express

Cards, Euro Cards have wide circulation. Some of them have wide circulation. Some of

them have world-wide circulation..


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Advantages of Credit Cards: -

Following types of safety measures are being introduced increasingly in the credit card

manufacture. They can be adopted with advantages

1. Simultaneous printing on both sides of the cards,; creating some superimposed

graphics, patterns, digits or writings.

2. Multi-layered laminates incorporating lateen images which may distinguish the

genuine from the forged.

3. Intricate graphics and distinctive letter and digit designs.

4. Laser printing to engrave the letter and digits on the credit card.

5. Three dimensional insignia, logo of high artistic quality on the credit card.

6. Encoded information track in magnetic inks on magnetic stripe.

7. Cards inserted in the imprinter head, designed and manufactured to rigid

specification to permit limited tolerance to admit only genuine credit cards.

8. Secure Signature Panel.

9. 3- Dimensional hologram.

10. U.V. fluorescent images and designs.

11. Micro printing

12. Optically illusive figures, designs, etc.

13. Heavy duty embossing logo.


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Credit Card Frauds: -

Credit card frauds manifest themselves in a number of ways:1. Genuine cards are manipulated.

2. Genuine cards are altered.

3. Counterfeit cards are created.

4. Fraudulent telemarketing is done with credit cards.

5. Genuine cards are obtained on fraudulent applications in the names/addresses

of other persons and used.

It is feared that with the expansion of E-Commerce, M-Commerce, and Internet facilities

being available on massive scale, the fraudulent fund freaking via credit cards will

increase tremendously. The shape it takes will be limited only by the ingenuity of the

future.

4.2 The Prevention of Frauds

Duplicate Card: -

The duplicate fraudulent credit cards are those where the defrauders have made

sincere efforts to duplicate the original cards through photo-mechanical processes.

They follow the footsteps of the original manufactures of the genuine credit cards to

produce as close a replica of the genuine card as possible, employing similar materials

and similar processes of printing and embossing, besides magnetic encodings.


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White Plastic: -

The counterfeit credit cards known as white plastics are imitations of credit cards in

general aspect.

Bankers Role: -

The credit card industry is one of the fastest growing activities of the banking industry.The artist has to be there (where the money is). The banks have to suffer losses.

Cyber Laws: -

Information Technology Ministry be approached for stringent laws against credit card

crimes.

Altering Sales terminals: -

Internet E-Mail should be utilized on the pattern of Hot Box organized about a decade

ago suitably modified to benefit from the advances the information technology has made

since them.

Internet Relays: -

Computers should be pressed into service via internet connection by suitably upgrading

the Television System Vertical blanking Intervals for notifying the fraudulent cards in the

market.


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Monitoring Deposit: -

Monitoring system can help locate the unscrupulous merchants who use or allow the

use of white plastics and fraudulent cards, knowing full well their fraudulent nature for

making a fast back.

Risk Management: -

To meet the menace one of the top card companies has imitated risk management

service to identify these high risk centers where daily all the inter-change transactions of

the areas are scrutinized and the credit card number are checked against those which

have been declared fraudulent, stolen or lost.

Central credit Card Clearing House: -

There should be a joint list of credit card holders on central basis with their addresses

and other details, if any. New applicants to any bank for credit cards should be checked:

-

If he is holding card from other issuers.

If he has held a card at other times. If so, when? Why did he discontinue?

If he has applied to more than one credit card issuers

The new card holders business transactions should be watched for some time.


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Loss of Credit cards in Transit: -

It must be prevented.

It is simple for either the customer to collect personally or the banker should deliver it

personally, or it should be sent by courier and confirmation obtained on telephone, in

addition to the paper receipt.

Fraud Consciousness: -

The problem of credit card frauds must be brought to the notice of users as well as of

the servers at sale terminals.

Proper training in the check up of the credit card in its various aspects has no substitute

and in view of the huge issues the same is indispensable.

Physical Evidence: -

Immediately on the discovery of fraud all the physical evidence available should at once

be taken into possession and the case reported to the police for investigation.

Check the Handwriting: -

Handwriting (in signatures) is available on sale drafts and on credit cards. The

comparison of hand-writing inter se and with that of the suspect and of genuine card

holders, can lead to the identity or non-identity of alleged writer.


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4.3 How to accept the Master Card: -

Master Card International guarantees payment of all Master Card Travelers Cheques if

the following procedures are followed: -

Watch the customer signs each cheque in ink on the countersignature line.

Compare this signature to the original signature. Ensure they look the same.

If a cheque is already countersigned, or if you doubt the two signatures are the

same, ask the customer to sign the cheque again on the back for comparison.

Also, request identification such as a passport, driving license or similar

document, and write the details on the back of the cheque.

If a cheque is presented by anyone other than the original purchaser, treat it the

same way you would a personal check from a third party. You should know the

customer and be able to contact the customer if theres problem.

4.4: How to get Reimbursed: -

Stamp or write your company name on the front of the cheque where it says,

Issuer will pay to the order of.. and also endorse at the back of the cheque .

Deposit cheques in your bank as cash items. US dollar Master Card Travelers

Cheques, regardless of location of issuer, are cleared and paid in the US.

Do not send cheque directly to the issuing institution.


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4.5: Credit Card Fraud in ICICI Bank:

ICICI Bank Credit Card Division is a Shame:

I lost my card a few months back and it was used by someone to make a transaction of

about 18k I raised a dispute with ICICI Bank which was settled against me. After

spending a month trying to get a copy of the investigation report from ICICI Bank

customer care and their hallowed and inaccessible Chargeback Department - I have

finally received it, and guess what, its an utterpack of LIES!!

I am not kidding - some of it is plain unbelievable.

Here are some snippets from the report. CM=customer, ME=merchant

ME told us that CM came to his outlet and taken original charge slip & bill, no cluefound, however the identity of card user was not ascertained, on asking CM of showcharge slip and bill copy he refused to show.

Wow! I was never asked for a charge slip by the investigator, nor did I have one.I accompanied the police to Big Bazaar (the merchant), where the police collected theIMEI codes (the card was used to buy a couple of phones), but not the charge slips. I

went again recently, and I was told that I could not get the charge slip from themerchant now, without the consent of the bank.

So the investigator not only turned me into someone who refused to show charge slip(when he has a disputed transaction of 18k!), he has turned the merchant into a liar aswell! So they dont just screw their retail customers, but even their merchants!

CM had not informed field team that he himself had visited to ME BIG BAZAAR forinvestigation, When asked for charge slips CM refused to show charge slip and billcopy.

CM was not responding well during Investigation.

The point is reiterated, and evidently I had not informed the field team I had visited themerchant. This when I myself, gave the field team the contact numbe r of the concernedemployee at Big Bazaar. Oh! By the way that amounts to not responding well duringinvestigation

CM is not working anywhere and staying in a hostel in Gurgaon.


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This one takes the cake. It literally threw me over the edge. Here I am, a director of apvt. ltd. company, staying with my parents in Gurgaon - he turns me into an unemployedhosteller! Phew! Unbelievable. And this is when the investigator visited me at myresidence!

So, you see what a fraud ICICI Bank credit card division is. Until now, my concernswere around long waiting times, long turnaround times - but this takes it to a whole newlevel.


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5: - Banks Control in Online Banking

S

5.1 Will Banks Control Online Banking: -

Internet Banking in India

Real threats

Online

5.2 Banking in the Cyber world: -

Internet Purchases without Payment Gateways

Risk of Gateway

5

.1 Will Banks Control Online Banking: -

Internet Banking in India: -


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Online banking is expected to explode in the next few years. We will be entering the age

of non-physical exchange of cash aided by complete transparency leading to perfectly

competitive electronic market place and inevitably to customer supremacy. Growth in

online banking will be driven by the following reasons:

Increasing access to low cost electronic services

Emergence of open standards in the banking industry

Improved customer awareness

Entry of global majors in the market

Integration of banking services with e-commerce and emergence of e-cash

Convenient international transactions as Internet eliminates geographic

boundaries

Shift from one-stop shopping to unbundled product purchases

E-BANKING TRANSACTIONS:


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The introduction of new technologies has radically transformed

banking transactions. In the past, customers had to come physically into

the bank branch to do banking transactions including transfers, deposits

and withdrawals. Banks had to employ several tellers to physically make all

those transactions. Automatic Teller Machines (ATMs) were then

introduced which allowed people to do their banking on their own,

practically anytime and anywhere. This helped the banks cut down on the

number of tellers and focus on managing money. The Internet then brought

another venue with which customers could do banking, reducing the need

for ATMs. Online banking allowed customers to do financial transactions

from their PCs at home via Internet. Now, with the emergence of Wireless

Application Protocol (WAP) technology, banks can use the infrastructure

and applications developed for the Internet and move it to mobile phones.

Now people no longer have to be tied to a desktop PC to do their banking.

The WAP interface is much faster and convenient than the Internet,

allowing customers to see account details, transaction details, make bill

payments, and even check credit card balance.

The cost of the average payment transaction on the Internet is

minimum. Several studies found that the estimated transaction cost

through mobile phone is16 cents, a fully computerized bank using its

own software is 26 cents, a telephone bank is 54 cents, a bank

branch, $1.27, an ATM, 27 cents, and on the Internet it costs just 13

cents. As a result, the use of the Internet for commercial transactions

started to gain momentum in 1995. More than 2,000 banks in the

world now have transactional websites and the growth of online

lending solutions is making them more cost efficient. Recent

developments are now encouraging banks to target small businesses

as a separate lending category online.

Banks are increasingly building payment infrastructure with

various security mechanisms (SSL, SET) because there is tremendous


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potential for profit, as more and more payments will pass through the

Internet. However, the challenge for banks is to offer a payments back-

bone system that will be open enough to support multiple payment

instruments (credit cards, debit cards, direct debit to accounts, e-

checks, digital money etc.) and scalable enough to allow for a stable

service regardless of the workload.

The market for Electronic Bill Presentment and Payment

(EBPP) is growing. According to a study, 18 million households in

the US are expected to pay their bills online by 2003 compared to 2

million households in 2001. As more number of bill payers are

getting online, several banks are making efforts to find ways to meetthe growing needs of EBPP. Established banks can emerge as key

online integrators of customer bills and can capitalize on this high

potential market. Growing with the popularity of EBPP is also the

paying of multiple bills at a single site known as bill aggregation.

Offering online bill payment and aggregation will increase the

competitiveness and attractiveness of E-banking services and will

allow banks to generate service-fee income from the billers.

In the B2B segment, the customer value proposition for

online bill payment is more compelling. B2B e-commerce is expected

to grow from $406 bn in 2000 to $2.7 tn by 2004, and more than half

of all transactions will be routed through online B2B marketplaces.

There is a need for automated payment systems to reduce cost and

human error, and enhance cash-flow management. To meet this

need, a group of banks and non-financial institutions led by Citibankand Wells Fargo have formed a company called

FinancialSettlementsMatrix (FSMx). It provides business buyers and

sellers with access to secure payment processing, invoicing and other

services that participating financial services firms offer.


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A B2B marketplace would provide minimum value to its customers if it just

matches buyers and sellers, leaving the financial aspects of transactions to be

handled through traditional non-Internet channels. Hence, the marketplace

must be capable of providing the payments processing, treasury management

services, payables/receivables data flows, and credit solutions to complete the

full cycle of a commercial transaction on the Internet. The web-based B2B e-

commerce offers tremendous opportunities for banks, payment technology

vendors and e-commerce companies to form strategic alliances. This new

form of collaboration between partners with complementary core

competencies may prove to be an effective business model for e-business.


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E-BANKING TREND

Internet banking is gaining ground. Banks increasingly operate websites

through which customers are able not only to inquire about account

balances and interest and exchange rates but also to conduct a range

of transactions. Unfortunately, data on Internet banking are scarce, and

differences in definitions make cross-country comparisons difficult.

Even so, one finds that Internet banking is particularly widespread in

Austria, Korea, the Scandinavian countries, Singapore, Spain, and

Switzerland, where more than 75 percent of all banks offer such

services (see chart). The Scandinavian countries have the largest

number of Internet users, with up to one-third of bank customers in

Finland and Sweden taking advantage of E-banking.


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In the United States, Internet banking is still concentrated in the

largest banks. In mid-2001, 44 percent of national banks maintained

transactional websites, almost double the number in the third quarter of

1999. These banks account for over 90 percent of national banking

system assets. The larger banks tend to offer a wider array of electronic

banking services, including loan applications and brokerage services.

While most U.S. consumers have accounts with banks that offer

Internet services, only about 6 percent of them use these services.

To date, most banks have combined the new electronic delivery

channels with traditional brick and mortar branches ("brick and click"

banks), but a small number have emerged that offer their products andservices predominantly, or only, through electronic distribution

channels. These "virtual" or Internet-only banks do not have a branch

network but might have a physical presence, for example, an

administrative office or nonbranch facilities like kiosks or automatic

teller machines. The United States has about 30 virtual banks; Asia has

2, launched in 2000 and 2001; and the European Union has several

either as separately licensed entities or as subsidiaries or branches of

brick and mortar banks.


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THE INDIAN EXPERIENCE

India is still in the early stages of E-banking growth and

development. Competition and changes in technology and lifestyle inthe last five years have changed the face of . The changes that have

taken place impose on banks tough standards of competition and

compliance. The issue here is 'Where does India stand in the scheme

of Ebanking.' E-banking is likely to bring a host of opportunities as well

as unprecedented risks to the fundamental nature of banking in India.

The impact of E- Banking in India is not yet apparent. Many

global research companies believe that Ebanking adoption in India in

the near future would be slow compared to other major Asian

countries.Indian E-banking is still nascent, although it is fast becoming a

strategic necessity for most commercial banks, as competition

increases from private banks and non banking financial institutions.

Despite the global economic challenges facing the IT software

and services sector, the outlook for the Indian industry remainsoptimistic.

The Reserve Bank of India has also set up a "Working Group

on E-banking to examine different aspects of E-banking. The group

focused on three major areas of E-banking i.e. (1) Technology and

Security issues (2) Legal issues and (3) Regulatory and Supervisory

issues. RBI has accepted the guidelines of the group and they provide a

good insight into the security requirements of E-banking.

The importance of the impact of technology and information

security cannot be doubted. Technological developments have been

one of the key drivers of the global economy and represent an


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instrument that if exploited well can boost the efficiency and

competitivity of the banking sector. However, the rapid growth of the

Internet has introduced a completely new level of security related

problems. The problem here is that since the Internet is not a regulated

technology and it is readily accessible to millions of people, there will

always be people who want to use it to make illicit gains. The security

issue can be addressed at three levels. The first is the security of

customer information as it is sent from the customer's PC to the Web

server. The second is the security of the environment in which the

Internet banking server and customer information database reside.

Third, security measures must be in place to prevent unauthorized

users from attempting to long into the online banking section of the

website.

From a legal perspective, security procedure adopted by banks

for authenticating users needs to be recognized by law as a substitute

for signature. In India, the Information Technology Act, 2000, in section

3(2) provides for a particular technology (viz., the asymmetric crypto

system and hash function) as a means of authenticating electronicrecord. Any other method used by banks for authentication should be

recognized as a source of legal risk..

Regarding the regulatory and supervisory issues, only such

banks which are licensed and supervised and have a physical presence

in India will be permitted to offer E-banking products to residents of

India. With institutions becoming more and more global and complex,

the nature of risks in the international financial system has changed.

The Regulators themselves who will now be paying much more

attention to the qualitative aspects of risk management have recognized

this.


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Though the Indian Government has announced cyber laws,

most corporate are not clear about them, and feel they are insufficient

for the growth of E-commerce. Lack of consumer protection laws is

another issue that needs to be tackled, if people have to feel more

comfortable about transacting online.

Taxation of E-commerce transaction has been one of the most

debated issues that are yet to be resolved by India and most other

countries. The explosive growth of e-commerce has led many

executives to question how their companies can properly administer

taxes on Internet sales. Without sales tax, online sellers get a price

advantage over brick and mortar companies. While e-commerce has

been causing loss of tax revenues to the Government, many politicians

continue to insist that the Net must remain tax-free to ensure continued

growth, and that collecting sales taxes on Net commerce could restrict

its expansion.

A permanent ban on custom duties on electronic transmissions,

international tax rules that are neutral, simple and certain andsimplification of state and local sales taxes. The Central Board of Direct

Taxes, which submitted its report in September 2001, recommended

that e-commerce transaction should be taxed just like traditional

commerce.

Also RBI is about to become the first Government owned digital

signature Certifying Authority (CA) in India. The move is expected to

initiate the electronic transaction process in the banking sector and will

have far-reaching results in terms of cost and speed of transactions

between government- owned banks.


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Thus efficiency, growth and the need to satisfy a growing tech-

survey consumer base are three clear rationales for implementing E-

banking in India. The four forces-customers, technology, convergence

and globalization have the most important effect on the Indian financial

sector and these changes are forcing banks to

redefine their business models and integrate technology into all

aspect of operation.

Internet Banking An Overview: -

Internet Banking sites can be segregated into four categories from Level I, which offer

just minimum functionalities such as access to ones deposit account data, to Level IV

sites that offer sophisticated services. To be successful, an Internet bank must offer:

High rates on deposits

24 hour access

Free checking and bill payment facilities with rebates on ATM surcharges

Credit cards with low rates Simple and easy online applications for all accounts including personal loans

Innovative products

High quality customer service

Real Threats: -

A majority of leading online brokers are beginning to offer banking products andservices as part of their overall offers.

They are actively seeking to capture excess balances in existing checking and

saving accounts by offering better rates.


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There are other threats to banks as well. Several leading system providers have

developed bank-in-a-box solution unbranded, electronic, full-service, virtual-

bank system that can be bought, branded, and offered to consumer by any

authorized company that wishes to provide banking service.

Online: -

An online service that merely mimics an offline one has a second problem as well; it

doesnt give customers an adequate inducement to move a significant portion of their

banking online.

As a result, most customers tend to tend to treat online banking as no more than an

extra channel to check their balance and transaction histories, and they continue to do

the rest of their business at the ATM or the teller window.

A vicious offering increase the banks total costs. This makes the banks reluctant to

make further large investments in the online channel, which thus, does nothing to move

customers away from tellers and ATMs.

In fact, consumers didnt stop using tellers to the extent that banks has hoped, but they

also used ATMs so frequently that the reduction in cost per use was more than offset by

the higher volume of transactions.

The study of information systems through broad band connection, satellite, a network orthrough a view chat.

This online information system provides information about all aspects, Informationproviding on the demand of the subscriber.

This online information system may be of study program, a graduation program orsharing of data through internets, extranet and internet.


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Sharing of Data: -

The data base store data and information extracted from selected operational andexternal databases. The database has most needed information by a manager or anyend users. This database can be accessed by the ONLINE ANALYTICAL POCESSING

(OLAP) systems.

This network model can access a data element by several paths. In an organizationdepartmental records can be related to more than one employee record.

Thus in an organization data can be shared through internet, internet and extranet.

ONLINE LEARNING: -

This online information system provides online courses through internet, broad bandsatellite connection.

The recent online course is provided by XLRI, (Xavier Labour Relations Institute) joinedhands with Hughes Escorts communication limited. Their main course is on BUSINESSMANAGEMENT.

Hughes Escorts is the Indian Operations of US based communication major, Hughesnetwork systems, which is a wing of Hughes electronics. This job is being done byDirecting Global education which is joint venture between Hughes network systems andone touch knowledge systems.

This job arrangement with Hughes Escorts to offer Management training on satelliteplatform will take expertise of XLRI faculty beyond the borders of their concern.

This information has live videos, voice and transmission to classes through Hughesbroadband satellite network. Interaction is through voice and data.

This course is conducted across through four metros, Trichy, Bangalore, Hyderabad,Chandigarh, Pune, Kochi, Coimbatore and Madurai.

This course is targeted at working executives


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COUNTRY STUDIES: -

This country studies by online service is from 1988 onwards. In this, the study of everycountry is made.

B-B (Business Business E-Commerce). Despite the entire buzz, we still dont knowabout what makes B-B. there is a growing relation that B-B will take years to mature,and the rate of adoption even if companies deliver a huge value equationimprovement will be gradual because it requires system and individuals to act infundamentally new ways.

The next thing after B-B is enabling technologies to incorporate more sophisticatedback-end integration system, financing options and logistical support.

In India, NASSCOM puts the value of online B-B transactions at Rs. 400 crore in 1999-00 of total E Commerce of Rs. 450.

But the question is how much B-B-E-Commerce is really happening in India? It is hardto quantify in terms of real numbers with no established data available in specificreference to the Indian context. But there is a possibility of this business assuming ahuge proportion in future.

B-B has been happening all through and a new channel has been opened with theadvent of the Internet. Obviously organizations will switch over to this channel for thecost effectiveness it provides. The market is emerging in the country and it will be aboom time in the next year.

Banking in the Cyber world: -

Internet Purchases without Payment Gateway: -

The dangers are three-fold

Since a manual process requires human intervention, risk of information leakage

exists.

No exchange of Digital ID, so no authentication of the merchant risk of bogus

merchant.

No exchange of Digital Certificate to authenticate card holder risk of repudiation

of transaction by the card holder.


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The benefits which the user would get by using the Internet payment gateway are

Card details travel encrypted on the Net (if encryption facility available on the

gateway).

On-line status of order, if the gateway has on-line authorization.

Secure Merchant identification, so that fraudulent web sites posing as genuine

merchants get weeded out

Whats a Payment Gateway?

A payment gateway is software that supports multiple payment models simultaneously

in a safe and secure manner.

Funds can be transferred through credit, debit and smart cards, cheques, electronic

payment wallets and even direct debits through a central payment switch.

Put simply, a payment gateway enables on-line commercial transactions on the internet

on a secure system, which have firewalls against hacking.


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Risk of Gateways: -

Currently, in India HDFC Bank and ICICI have launched payment gatewaysfor business to customer (B2C) transactions.

Payments can be effected through credit cards or through directly debiting the

account of the customers of the respective banks.

Some payment mechanisms on the Internet are not safe, as they are in the open-

loop where a merchant portal can see the credit card number.

This is unsafe for credit card holder and is susceptible to fraud as his number can

be physically seen.

The dust is yet to settle in the B2C payment gateways, but action is already

heating up in the business to business (B2B) arena.

Besides HDFC Bank and ICIC, Global Tele-System and a few other non-bank

companies are toying the idea of launching payment gateways for inter bank and

B2B transactions.

No prizes for guessing who they are targeting, Nationalized banks, of course.


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6: ICICI BANK: A CASE STUDY: -

6.1: ICICI Bank and Sify for online distribution of retail banking products & services.In a major development in the Internet world, ICICI Bank, the banking subsidiary of

ICICI Ltd. (NYSE: IC and IC.D) and Satyam Infoway Ltd. (NASDAQ: SIFY) announced

the setting up of a new .COM company for on-line distribution of retail banking

products and services on the Internet. This landmark agreement marks the coming

together of Indias first Internet Banking provider, ICICI Bank, and Indias largest private

ISP and mega-Portal, Satyam Infoway, to create a unique partnership between a major

Bank and a mega-Portal. The marriage between banking and portals is expected to be

a win-win potent combination, which is expected to result in improved customer

orientation, lower distribution cost, long-term customer relationships with ease of

banking wherever and whenever the customer wants it and enhanced profitability. The

range of retail banking products to be distributed through the portal would include

savings accounts, current accounts, fixed deposits, bill payments and other retail

banking products that ICICI Bank may offer through this on-line channel.

The surge in demand for e-commerce related services stems from the rapid growth in

Internet penetration in the country and a fundamental change in the business paradigm.The two companies would therefore also explore several opportunities to complement

each others strengths to capitalist on the opportunities in e-commerce. This would

include providing a platform for trade facilitation and payments over the Internet using

innovative banking products of ICICI Bank. SIFY has a buyer to seller ordering/selling

website, SeekandSource.com, which is on-line except for the payments that are still

physical. ICICI Bank has developed an Internet based business to business payment

module for purchasers and sellers to effect payments online. A synergistic offering of

these two products would be made so that such customers/users can complete the

entire transaction and payments online.

The two companies would expect to co-operate wherever feasible to extend the reach

and channels for distribution of financial products from ICICI Bank and Internet products

from SIFY. ICICI Bank, as a part of its Click and Brick strategic focus would set up
http://click.adbrite.com/mb/click.php?sid=766626&banner_id=12214123&variation_id=1244514&uts=1217005889&cpc=302e3035&keyword_id=2953911&inline=y&zk_id=34719338&ab=171966534&sscup=27811c5e5a9887e53f12cdf95da8b18c&sscra=1ee7f8cf52c9e469b4dca03ccf1f0cae&ub=3413331387&guid=7d4839b668f9148d179975ba7429f254&rs=&r=http://click.adbrite.com/mb/click.php?sid=766626&banner_id=12214123&variation_id=1244514&uts=1217005889&cpc=302e3035&keyword_id=2953911&inline=y&zk_id=34719338&ab=171966534&sscup=27811c5e5a9887e53f12cdf95da8b18c&sscra=1ee7f8cf52c9e469b4dca03ccf1f0cae&ub=3413331387&guid=7d4839b668f9148d179975ba7429f254&rs=&r=


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ATMs at the Satyam Access Points and Cyber Cafes, thereby increasing its reach

across the country. It would also offer Satyam Internet terminals at its branches,

enabling visitors to surf the Internet, thereby attracting new customers to branches. The

two companies shall examine further business opportunities, which would effectively

synergies the financial services strength of ICICI Bank and its Affiliates and the

technological expertise of Satyam Infoway and its Affiliates. ICICI Bank and Satyam

Infoway through this partnership will play a strategic role in providing revolutionary e-

commerce solutions in India.

The memorandum of understanding was signed today between Mr. H.N Sinor,

Managing Director & CEO of ICICI Bank and Mr. R. Ramraj, Managing Director of

Satyam Infoway.

ICICI is a diversified financial services company offering a wide range of products and

services to corporate and retail customers in India. ICICI Bank, a subsidiary company

has been the pioneer of Internet banking in India. ICICI Bank has been gearing itself for

the opportunities that would be created from the e-Commerce revolution.

Satyam Infoway Ltd. Is the leading integrated Internet and e-commerce company

operating in India. SatyamOnline, the most comprehensive portal site of Indian origin is

one of the key offerings from SIFY in the business to consumer segment. Recently it

entered into an agreement to acquire IndiaWorld Communications Private Limited,which would result in the integration of IndiaWorlds popular websites like

samachar.com, khel.com and khoj.com with SIFYs portals. The combined portal would

be the largest India related Internet portal.


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Recent E-Mail Fraud:-

ONLINE fraudsters targeted ICICI Bank customers through spam mail that asked them

to disclose passwords and other information, but the bank said no financial loss was

reported so far.

E-mails from `[email protected]' with the subject `Important information from ICICIBank' and `Official information from ICICI Bank' started circulating from Monday. Onceopened, the mail asked customers to click on a link.

"For security purposes your account has been randomly chosen for verification. Toverify your account information we are asking you to provide us with all the data we arerequesting. Otherwise we will not be able to verify your identity and access to youraccount will be denied. Please click on the link below to get to the ICICI secure pageand verify your account details. Thank you," the e-mail said.

The ingenuity of the e-mail is striking as when clicked on the link, it opens a Web pagethat is an exact replica of ICICI Bank's and simultaneously opens the bank Web site.

Customers were asked to key in their identification number, login and fund transferpasswords. The link, however, didn't work on Wednesday.

An ICICI Bank spokesman said so far no financial loss was reported because of thefraud. "It's not easy to say how many of our customers have got it. First, we felt it will bea large number. But now our assessment is it's a small number," the spokesman said.

ICICI Bank sent e-mail to its customers, warning them about the fraud and urging not torespond to such mails. "Such fraudulent communication may also be sent via SMS orthe phone," the bank said.

The ICICI Bank spokesman said the bank has alerted the cyber crime cells about thespam mails. But the origin of the spam mail had not been traced, he said.

Such fraudulent mails are becoming rampant across the world as Internet banking hasgrown in popularity.

6.3 Online fraud: 60-yr-old seeks police action against ICICI Bank officials:-

Karve Nagar resident Vinod Malhotra suffered a loss of Rs 95,000, which wastransferred through 19 phone bank transactions in just two minutes


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While cyber criminals are on the prowl, the increasing number of online fraud has alsoput a question mark on the security system of banks. Vinod Malhotra, a 60-year-oldcitizen from Karve Nagar, who lost Rs 95,000 to an online fraud, gave a letter to theShivajinagar police station today requesting the investigation officer, police subinspector S B Ghorpade, to book the ICICI Bank authorities in the case.

The police have so far booked Bhavin Gunwantilal Kakadia of Chira Bazaar, Mumbai.That is because Malhotras money was transferred into Kakadias account on June 2.But Malhotra has alleged that the loss occurred because ICICI Bank failed to protect hisaccount.

Malhotra received a fraudulent e-mail on April 18, carrying a logo of ICICI Bank, seekinghis credit card account details. Taking it to be genuine request, the elderly citizensubmitted the details. He then sent an e-mail to ICICI Bank to check if they had actuallysought the information.

On April 20, the bank replied that it was a fraudulent email. But on April 21, fraudstersused his credit card for booking tickets worth Rs 4,000 for Adlabs theatre, Mumbai. OnApril 21, the credit card was again used for online shopping worth Rs 3,083 through aUS-based website.

Malhotra received the customary SMS alert about this transaction. He immediatelycontacted the bank and submitted details of the illegal transactions. The bank repliedthat it was a phishing attack. The bank then blocked his credit card and issued a newone, assuring him that his account would be protected properly.

But again on June 2, Rs 95,000 was transferred from his savings account. A stunned

Malhotra filed a complaint with the Kothrud police on June 3.

The case was transferred to Shivajinagar police station since his account was with theShivajinagar branch of ICICI Bank. When I went to the bank with the police, a seniorofficer from the Operations Department said that money was transferred from mysavings account through phone banking, said Malhotra.

The officer said that my mobile number was changed from the system. T he fraudsterreplaced it with an Airtel mobile number from Punjab and then transferred money toKakadias account through 19 phone banking transactions of Rs 5,000 each in just twominutes, he added. The money was further transferred to a private business firms

account in Mumbai and withdrawn by the fraudster using cheques, he added.

Malhotra said that he had given his mobile phone number to ICICI Bank only forreceiving SMS alerts on account details. I never used the net banking and phonebanking facility. I dont even remember the passwords required for these facilities. Sothere was no chance of me submitting the passwords to any phishing mail or person. Ibelieve the fraud could have been avoided if ICICI Bank had not failed to keep vigilanceon its internal security system, he said.


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Malhotra communicated with K V Kamath, the MD and CEO of the bank, requesting himto investigate the case and repay his money. After a 30-day internal investigation, ICICIBank replied that it was not at fault and would not compensate for the loss. So Malhotralodged a first information report (FIR) with the police on July 12. On Tuesday, the bankreplied that his case would be re-investigated.

When contacted, ICICI Bank Head (Corporate Communications) CharuduttaDeshpande said, ICICI Bank has a fool-proof security system. But we dont doubt thegenuineness of our customers. Proper investigations will be done.

Police Sub-Inspector Ghorpade said, We have dispatched a team to Mumbai forinvestigations. But there is not much progress because the bank has not yet given uscomplete information about the suspects. We have not yet booked the ICICI bankofficials. But we would be interrogating bank officials if required, he said.

Pune police Cyber Committee Coordinator Sudam Choure said, There have been

cases in the past where secret information was leaked from banks. Usually, the bankemployees on contract basis or courier companies were involved in the frauds. There isneed for the banks to increase their internal security system.


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ANALYSIS

1. Are you aware of net banking services offered by the

banks?

(a) Yes

(b) No

Analysis of the above diagram

It is good for the banks as most of the respondents were

aware of the internet banking and all the services provided

under internet banking

2. In which company bank do you have your acccount?

(a) Axis bank

(b) Standard Chartered Bank

(c) HSBC Bank


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(d) HDFC Bank

(e) State Bank of India


It was witnessed that today public sector bank State bank of

India has the largest customer base but the private banks arealso catching up and after State bank of India HDFC has the

highest customer base .Multi-national banks are also making

their presence noticeable in the Indian scenario

3. Do you feel safe in disclosing your details on net?

(a) Yes

(b) No


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This question witnessed a fifty fifty answer from most of the

respondents, few of the respondents felt safe in disclosing

their details but still there were a lot people who felt unsafe in

disclosing and feared their personal information may used by

some other person

4. Are you satisfy with your bank services?

(a) Yes

(b) No

7/29/2019 Sana Internet Bank

Sana Internet Banking

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