RBI Acknowledges Risks Of E-Banking In India

Reserve Bank of India (RBI) has been playing a pro active role for securing Internet banking and online banking transactions. Recently, RBI showed its intention to boost ATM security in India. In the past, concerns have been raised from time to time for preventing online banking frauds in India by RBI.

There are many problems from which the online banking or Internet banking in India is suffering. The most important pertains to maintaining effective cyber security for banking and financial sectors of India. Similarly, there are no effective Internet banking laws in India or online banking laws in India. In the absence of stringent laws in this regard, online banking risks in India are increasing. However, of all the shortcomings, nothing can match the absence of encryption laws and standards in India. In the absence of proper encryption norms in India, e-banking in India is really insecure.

RBI has realised this fact and it has cautioned banks that e-banking must be used by them with proper security and safeguards. “The use of e-banking has brought many concerns from different stakeholders. Everybody’s primary concern is security. As more and more people are exposed to the information superhighway, privacy of information and the security that goes hand and hand with this information is crucial to the growth of electronic transactions,’’ said R Gandhi, executive director , Reserve Bank of India.

Gandhi said in order to provide effective and secure banking transactions, there are four technology issues that need to be resolved. “The key areas are the security, privacy and authentication,” he said. By strengthening the privacy technology, this will ensure the secrecy of sender’s personal information and enhance the system’s security. “Also encryption may help make the transactions more secure, but there is also a need to guarantee that no one alters the data at either end of the transaction,” Gandhi said.

Recently, G Gopalakrishna, the executive director of RBI, said that all Banks would have to create a position of Chief Information Officers (CIOs) as well as Steering Committees on Information Security at the Board Level at the earliest, informs Praveen Dalal, managing partner of New Delhi based ICT law firm Perry4Law and leading techno legal specialist of India. This step was taken to ensure proper Cyber Security Policies and Strategies at the highest Board Level of Banks, says Dalal.

Although, RBI has been taking many far reaching and important steps yet e-banking in India still very risky. Of late, cases of phishing and banking frauds have increased tremendously in India. Further, cyber due diligence of banks in India is still a far dream. Even the directions of RBI to appoint CIOs and steering committees on information security have not yet been implemented. The end result is that banking customers are still losing their hard earned money to cyber criminals. Hopefully, RBI would take some urgent steps in these directions as soon as possible, says Praveen Dalal.

Cyber crimes have increased a lot in India. Cyber crimes have not left any field or commercial activity untouched. Even the banking sector has not remained unaffected by

cyber crimes. Further, the cyber law of India has introduced its own set of due diligence requirements for banks operating in India.

Realising the gravity of the situation, the Reserve Bank of India (RBI) has recently released a report of its working group on information security, electronic banking, technology risk management, and cyber frauds. In this report, the RBI mandated cyber due diligence for banks in India.

The matter does not end here. It is clear that RBI has to meet great challenges before Indian banking industry can be considered reasonably safe from cyber criminals. This is more so when we have inadequate cyber laws and other laws to effectively tackle cyber crimes pertaining to banking sector of India.

Internet banking is increasingly becoming popular in India. However, Internet banking is a risky venture and India must be prepared to deal with the risks associated with it. The increasing cases of ATM frauds, online banking frauds, credit cards frauds, etc have shaken the confidence of Indian consumers in Internet banking in India.

However, Internet banking in India cannot succeed till a strong legal framework in this is enacted. According to Praveen Dalal, leading techno legal expert of India and a Supreme Court lawyer, we have no dedicated Internet Banking Law in India. Although, RBI has issued many guidelines in this regard and even our Information Technology Act, 2000 contains some indirect and implied provisions for Internet Banking yet we need a separate and dedicated law in this regard, opines Praveen Dalal.

Similarly, the present banking and other technology related legal frameworks are not conducive for mobile banking in India. We do not have a well developed e-governance infrastructure in India. Similarly, on the front of e-commerce as well, India is not much successful.

In this background, the requirements of cyber due diligence of banks in India has become more onerous. RBI has further made this requirement absolute through its Information Technology Vision Document 2011-17. According to this policy document, all banks now would have to create a position of chief information officers (CTOs) as well as steering committees on information security at the board level at the earliest.

The presence of CTO and steering committees on information security would ensure that banks are following cyber due diligence and other technology and non technology related due diligence requirements in India, says B.S.Dalal, a banking and financial law expert and senior partner of Perry4Law. Till now there was no such requirement and banks were taking cyber law related issues lightly. RBI has taken a good step in right direction and this would increase the confidence of bank customers of India.

Internet Banking Laws In India

nternet banking is increasingly becoming popular in India. However, Internet banking is a risky venture and India must be prepared to deal with the risks associated with it. The increasing cases of ATM frauds, online banking frauds, credit cards frauds, etc have shaken the confidence of Indian consumers in Internet banking in India.

Similarly, mobile banking in India is also being explored. Some segments have suggested active use of mobile banking in India. While the idea is great yet India is still not ready for mobile banking. In fact, mobile banking in India is a risky business.

The problem of Internet banking frauds has become even more sever due to absence of legal framework in this regard. However, the Reserve Bank of India (RBI) has recently recommended use of “cyber due diligence” for banks in India. With the present guidelines, banks can no more ignore due diligence requirements that they have been ignoring for long.

Although the requirements of due diligence may arise out of many laws, but cyber due diligence is the most required one. Realising the seriousness of the situation, RBI has recently released a report of its working group on information security, electronic banking, technology risk management, and cyber frauds.

Previously, banks were required to manage due diligence arising out of laws alone but now the responsibility of banks have become very wide. The banks must now manage due diligence requirements of both technical and legal nature. In other words, the due diligence requirements of banks have now become techno legal in nature.

However, Internet banking in India cannot succeed till a strong legal framework in this is enacted. According to Praveen Dalal, leading techno legal expert of India and a Supreme Court lawyer, we have no dedicated Internet Banking Law in India. Although, RBI has issued many guidelines in this regard and even our Information Technology Act, 2000 contains some indirect and implied provisions for Internet Banking yet we need a separate and dedicated law in this regard, opines Praveen Dalal.

It would be a good idea if RBI starts working in the direction of enacting a suitable Internet banking law of India. The same may also incorporate cyber due diligence requirements and punishments for cyber crimes against banking institutions. The call is for the RBI to take and it would definitely take it.

Electronic commerce

Electronic commerce, commonly known as e-commerce or eCommerce, consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks. The amount of trade conducted electronically has grown extraordinarily with widespread Internet usage. The use of commerce is conducted in this way, spurring and drawing on innovations in electronic funds transfer, supply chain

management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web at least at some point in the transaction's lifecycle, although it can encompass a wider range of technologies such as e-mail, mobile devices and telephones as well.

A large percentage of electronic commerce is conducted entirely electronically for virtual items such as access to premium content on a website, but most electronic commerce involves the transportation of physical items in some way. Online retailers are sometimes known as e-tailers and online retail is sometimes known as e-tail. Almost all big retailers have electronic commerce presence on the World Wide Web.

Electronic commerce that is conducted between businesses is referred to as business-to-business or B2B. B2B can be open to all interested parties (e.g. commodity exchange) or limited to specific, pre-qualified participants (private electronic market). Electronic commerce that is conducted between businesses and consumers, on the other hand, is referred to as business-to-consumer or B2C. This is the type of electronic commerce conducted by companies such as Amazon.com. Online shopping is a form of electronic commerce where the buyer is directly online to the seller's computer usually via the internet. There is no intermediary service. The sale and purchase transaction is completed electronically and interactively in real-time such as Amazon.com for new books. If an intermediary is present, then the sale and purchase transaction is called electronic commerce such as eBay.com.

Electronic commerce is generally considered to be the sales aspect of e-business. It also consists of the exchange of data to facilitate the financing and payment aspects of the business transactions.

Ecommerce in India

India has an internet user base of over 50 million [1] users. The penetration of e-commerce is low compared to markets like the US and the UK but is growing [2] at a much faster rate with a large number of new entrants [3]. The industry consensus is that growth is at an inflection point [4] with key drivers being:

Increasing broadband Internet (growing at 20% [5] MoM) and 3G penetration [6]. Increasing standards of living and a burgeoning, upwardly mobile middle class

with high disposable incomes Availability of much wider product range (including long tail and Direct Imports)

compared to what is available at brick and mortar retailers Busy lifestyles, urban traffic congestion and lack of time for offline shopping Lower prices compared to brick and mortar retail driven by disintermediation and

reduced inventory and real estate costs

Market Size & Growth

India’s e-commerce market was worth about $2.5 billion in 2009. About 75% of this is travel related (airline tickets, railway tickets, hotel bookings etc.). Online Retailing comprises about 12.5% ($300 Million[7]as of 2009). India has close to 10 million online shoppers and is growing at an estimated 30% [8] CAGR vis-à-vis a global growth rate of 8-10%. Electronics and Apparel are the biggest categories in terms of sales.

[edit] Unique to India

Some of the aspects of Indian e-commerce that are unique to India (and potentially to other develping countries) are:

Cash on Delivery as a preferred payment method. India has a vibrant cash economy as a result of which 80% of Indian e-Commerce tends to be Cash On Delivery (COD).

Direct Imports constitue a large component of online sales. Demand for international consumer products (including long-tail) is growing much faster than in-country supply from authorized distributors and E-commerce offerings like eBay Global Easy Buy [9], Amazon Global [10] and 20North.com [11] use sophisticated E-commerce and Logistics technology to create a cross-border supply chain that allows consumers to shop online for international products that are delivered duty paid to their doorstep.

Risk Management for Internet Banking 

he past few years have been characterized by rapid changes in technology and the introduction of corporate and retail banking services through the Internet. The unprecedented speed with which new technologies are being adopted, the ubiquitous and global nature of electronic networks, the integration of e-banking platforms with legacy systems and the increasing dependence of banks on third party information service providers, all dramatically amplify the magnitude of risks to which banks are exposed.

Many banks have assumed that Internet banking primarily increases information security risks and have not sufficiently focused on the effect on other banking-specific risks. Risk management disciplines have not evolved at the same speed and many institutions, especially the smaller ones, have not been able to incorporate Internet banking risk controls within their existing risk management structures. This article provides an overview of the various risks which are heightened with Internet banking, and a holistic approach to managing these risks.

Types of Internet Banking

Financial institution Internet offerings can be broadly classified into three groups with distinct risk profiles:1

Informational—Offers information about the bank's products and services ("brochureware") and is low risk

Communicative—Offers account-related information and possibly offers updates to static data (such as addresses). Since access is permitted to the bank's main systems, the risk is material.

Transactional—Allows customers to execute financial transactions and carries the highest risk. Some transactional models carry higher risks, for example, if the customer has never visited a branch throughout his entire relationship and prefers to carry out all his transactions remotely (this commonly happens with some online share trading sites).

Internet Banking Risks

Internet banking does not open up new risk categories, but rather accentuates the risks that any financial institution faces. The board and senior management must be cognizant of these risks and deal with them appropriately. These risks, which often overlap, are briefly described below:

Strategic risk—This is the current and prospective risk to earnings and capital arising from adverse business decisions or improper implementation of business decisions. Many senior managers do not fully understand the strategic and technical aspects of Internet banking. Spurred by competitive and peer pressures, banks may seek to introduce or expand Internet banking without an adequate cost-benefit analysis. The organization structure and resources may not have the skills to manage Internet banking.

Transaction risk—This is the current and prospective risk to earnings and capital arising from fraud, error, negligence and the inability to maintain expected service levels. A high level of transaction risk may exist with Internet banking products, because of the need to have sophisticated internal controls and constant availability. Most Internet banking platforms are based on new platforms which use complex interfaces to link with legacy systems, thereby increasing risk of transaction errors. There is also a need to ensure data integrity and nonrepudiation of transactions. Third-party providers also increase transaction risks, since the organization does not have full control over a third party. Without seamless process and system connections between the bank and the third party, there is a higher risk of transaction errors.

Compliance risk—This is the risk to earnings or capital arising from violations of, or nonconformance with, laws, regulations and ethical standards. Compliance risk may lead to diminished reputation, actual monetary losses and reduced business opportunities. Banks need to carefully understand and interpret existing laws as they apply to Internet banking and ensure consistency with other channels such as

branch banking. This risk is amplified when the customer, the bank and the transaction are in more than one country. Conflicting laws, tax procedures and reporting requirements across different jurisdictions add to the risk. The need to keep customer data private and seek customers' consent before sharing the data also adds to compliance risk. Customers are very concerned about the privacy of their data and banks need to be seen as reliable guardians of such data. Finally, the need to consummate transactions immediately (straight-through processing) may lead to banks relaxing traditional controls, which aim to reduce compliance risk.

Reputation risk—This is the current and prospective risk to earnings and capital arising from negative public opinion. A bank's reputation can be damaged by Internet banking services that are poorly executed (e.g., limited availability, buggy software, poor response). Customers are less forgiving of any problems and thus there are more stringent performance expectations from the Internet channel. Hypertext links could link a bank's site to other sites and may reflect an implicit endorsement of the other sites.

Information security risk—This is the risk to earnings and capital arising out of lax information security processes, thus exposing the institution to malicious hacker or insider attacks, viruses, denial-of-service attacks, data theft, data destruction and fraud. The speed of change of technology and the fact that the Internet channel is accessible universally makes this risk especially critical.

Credit risk—This is the risk to earnings or capital from a customer's failure to meet his financial obligations. Internet banking enables customers to apply for credit from anywhere in the world. Banks will find it extremely difficult to verify the identity of the customer, if they intend to offer instant credit through the Internet. Verifying collateral and perfecting security agreements are also difficult. Finally, there could be questions of which country's (or state's) jurisdiction applies to the transaction.

Interest rate risk—This is the risk to earnings or capital arising from movements in interest rates (e.g., interest rate differentials between assets and liabilities and how these are impacted by interest rate changes). Internet banking can attract loans and deposits from a larger pool of customers. Also, given that it is easy to compare rates across banks, pressure on interest rates is higher, accentuating the need to react quickly to changing interest rates in the market.

Liquidity risk—This is the risk to earnings or capital arising from a bank's inability to meet its obligations. Internet banking can increase deposit and asset volatility, especially from customers who maintain accounts solely because they are getting a better rate. These customers tend to pull out of the relationship if they get a slightly better rate elsewhere.

Price risk—This is the risk to earnings or capital arising from changes in the value of traded portfolios or financial instruments. Banks may be exposed to price risk, if they create or expand deposit brokering, loan sales or securitization programs as a result of Internet banking activities.

Foreign exchange risk—This arises when assets in one currency are funded by liabilities in another. Internet banking may encourage residents of other countries to transact in their domestic currencies. Due to the ease and lower cost of

transacting, it may also lead customers to take speculative positions in various currencies. Higher holdings and transactions in nondomestic currencies increase foreign exchange risk.

Online banking

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

Features

Online banking solutions have many features and capabilities in common, but traditionally also have some that are application specific.

The common features fall broadly into several categories Transactional (e.g., performing a financial transaction such as an account to

account transfer, paying a bill, wire transfer, apply for a loan, new account, etc.) o Payments to third parties, including bill payments and telegraphic/wire

transferso Funds transfers between a customer's own transactional account and

savings accountso Investment purchase or saleo Loan applications and transactions, such as repayments of enrollments

Non-transactional (e.g., online statements, cheque links, cobrowsing, chat) o Viewing recent transactionso Downloading bank statements, for example in PDF formato Viewing images of paid cheques

Financial Institution Administration Management of multiple users having varying levels of authority Transaction approval process

Features commonly unique to Internet banking include Personal financial management support, such as importing data into personal

accounting software. Some online banking platforms support account aggregation to allow the customers to monitor all of their accounts in one place whether they are with their main bank or with other institutions.

[edit] History

The precursor for the modern home online banking services were the distance banking services over electronic media from the early 1980s. The term online became popular in the late '80s and referred to the use of a terminal, keyboard and TV (or monitor) to access the banking system using a phone line. ‘Home banking’ can also refer to the use of a

numeric keypad to send tones down a phone line with instructions to the bank. Online services started in New York in 1981 when four of the city’s major banks (Citibank, Chase Manhattan, Chemical and Manufacturers Hanover) offered home banking services[1] using the videotex system. Because of the commercial failure of videotex these banking services never became popular except in France where the use of videotex (Minitel) was subsidised by the telecom provider and the UK, where the Prestel system was used.

The UK's first home online banking services[2] was set up by Bank of Scotland for customers of the Nottingham Building Society (NBS) in 1983.[3] The system used was based on the UK's Prestel system and used a computer, such as the BBC Micro, or keyboard (Tandata Td1400) connected to the telephone system and television set. The system (known as 'Homelink') allowed on-line viewing of statements, bank transfers and bill payments. In order to make bank transfers and bill payments, a written instruction giving details of the intended recipient had to be sent to the NBS who set the details up on the Homelink system. Typical recipients were gas, electricity and telephone companies and accounts with other banks. Details of payments to be made were input into the NBS system by the account holder via Prestel. A cheque was then sent by NBS to the payee and an advice giving details of the payment was sent to the account holder. BACS was later used to transfer the payment directly.

Stanford Federal Credit Union was the first financial institution to offer online internet banking services to all of its members in October 1994.[citation needed]

Today, many banks are internet only banks. Unlike their predecessors, these internet only banks do not maintain brick and mortar bank branches. Instead, they typically differentiate themselves by offering better interest rates and online banking features.

[edit] Security

Protection through single password authentication, as is the case in most secure Internet shopping sites, is not considered secure enough for personal online banking applications in some countries. Basically there exist two different security methods for online banking.

The PIN/TAN system where the PIN represents a password, used for the login and TANs representing one-time passwords to authenticate transactions. TANs can be distributed in different ways, the most popular one is to send a list of TANs to the online banking user by postal letter. The most secure way of using TANs is to generate them by need using a security token. These token generated TANs depend on the time and a unique secret, stored in the security token (this is called two-factor authentication or 2FA). Usually online banking with PIN/TAN is done via a web browser using SSL secured connections, so that there is no additional encryption needed.

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

Signature based online banking where all transactions are signed and encrypted digitally. The Keys for the signature generation and encryption can be stored on smartcards or any memory medium, depending on the concrete implementation.

Attacks

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

A method to attack signature based online banking methods is to manipulate the used software in a way, that correct transactions are shown on the screen and faked transactions are signed in the background.

A recent FDIC Technology Incident Report, compiled from suspicious activity reports banks file quarterly, lists 536 cases of computer intrusion, with an average loss per incident of $30,000. That adds up to a nearly $16-million loss in the second quarter of 2007. Computer intrusions increased by 150 percent between the first quarter of 2007 and the second. In 80 percent of the cases, the source of the intrusion is unknown but it occurred during online banking, the report states.[4]

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

Countermeasures

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

In 2001 the FFIEC issued guidance for multifactor authentication (MFA) and then required to be in place by the end of 2006.[

E-banking in India - Challenges and Opportunities

E-banking is a generic term for delivery of banking services and products through electronic channels, such as the telephone, the internet, the cell phone, etc. The concept

and scope of E-banking is still evolving. It facilitates an effective payment and accounting system thereby enhancing the speed of delivery of banking services considerably. While E-banking has improved efficiency and convenience, it has also posed several challenges to the regulators and supervisors. Several initiatives taken by the government of India, as well as the Reserve Bank of India (RBI), have facilitated the development of E-banking in India. The government of India enacted the IT Act, 2000, which provides legal recognition to electronic transactions and other means of electronic commerce. The RBI has been preparing to upgrade itself as a regulator and supervisor of the technologically dominated financial system. It issued guidelines on risks and control in computer and telecommunication system to all banks, advising them to evaluate the risks inherent in the systems and put in place adequate control mechanisms to address these risks. The existing regulatory framework over banks has also been extended to E-banking. It covers various issues that fall within the framework of technology, security standards, and legal and regulatory issues. This book — containing 12 scholarly articles — will benefit those interested in the technological developments of E-banking in India.

How e-banking can ease your life

Penalty due to non-payment of bill is not new to anyone of us. And quite obviously, who likes the long procedure of writing a cheque, standing in a long queue and then ensuring that the particular amount is available in your bank account? Similarly, Mr Sharma, who is on business tour for at least 25 days a month, finds it difficult to clear his dues on time because of his busy schedule.

He, like many of us, was possibly not aware of the online services, banks are offering these days. With just a click, all his dues would have been cleared long back. However, it's never too late to mend.

Indian banks are trying to make your life easier. Not just bill payment, you can make investments, shop or buy tickets and plan a holiday at your fingertips. In fact, sources from ICICI Bank [ Get Quote ] tell us, "Our Internet banking base has been growing at an exponential pace over the last few years. Currently around 78 per cent of the bank's customer base is registered for Internet banking."

To get started, all you need is a computer with a modem or other dial-up device, a checking account with a bank that offers online service and the patience to complete about a one-page application--which can usually be done online. You can avail the following services.

Bill payment service

Each bank has tie-ups with various utility companies, service providers and insurance companies, across the country. You can facilitate payment of electricity and telephone bills, mobile phone, credit card and insurance premium bills.

To pay your bills, all you need to do is complete a simple one-time registration for each biller. You can also set up standing instructions online to pay your recurring bills, automatically. One-time standing instruction will ensure that you don't miss out on your bill payments due to lack of time. Most interestingly, the bank does not charge customers for online bill payment.

Fund transfer

You can transfer any amount from one account to another of the same or any another bank. Customers can send money anywhere in India [ Images ]. Once you login to your account, you need to mention the payees's account number, his bank and the branch. The transfer will take place in a day or so, whereas in a traditional method, it takes about three working days. ICICI Bank says that online bill payment service and fund transfer facility have been their most popular online services.

Credit card customers

Credit card users have a lot in store. With Internet banking, customers can not only pay their credit card bills online but also get a loan on their cards. Not just this, they can also apply for an additional card, request a credit line increase and God forbid if you lose your credit card, you can report lost card online.

Railway pass

This is something that would interest all the aam janta. Indian Railways has tied up with ICICI bank and you can now make your railway pass for local trains online. The pass will be delivered to you at your doorstep. But the facility is limited to Mumbai [ Images ], Thane, Nashik, Surat [ Images ] and Pune. The bank would just charge Rs 10 + 12.24 per cent of service tax.

Investing through Internet banking

Opening a fixed deposit account cannot get easier than this. You can now open an FD online through funds transfer. Online banking can also be a great friend for lazy investors.

Now investors with interlinked demat account and bank account can easily trade in the stock market and the amount will be automatically debited from their respective bank accounts and the shares will be credited in their demat account.

Moreover, some banks even give you the facility to purchase mutual funds directly from the online banking system.

So you need not worry about filling those big forms for mutual funds, they will now be just a few clicks away. Nowadays, most leading banks offer both online banking and

demat account. However if you have your demat account with independent share brokers, then you need to sign a special form, which will link your two accounts.

Recharging your prepaid phone

Now you no longer need to rush to the vendor to recharge your prepaid phone, every time your talk time runs out. Just top-up your prepaid mobile cards by logging in to Internet banking. By just selecting your operator's name, entering your mobile number and the amount for recharge, your phone is again back in action within few minutes.

Shopping at your fingertips

Leading banks have tie ups with various shopping websites. With a range of all kind of products, you can shop online and the payment is also made conveniently through your account. You can also buy railway and air tickets through Internet banking.

Internet banking versus traditional method

Inspite of so many facilities that Internet banking offers us, we still seem to trust our traditional method of banking and is reluctant to use online banking. But here are few cases where Internet banking will turn out to be a better option in terms of saving your money.

'Stop payment' done through Internet banking will not cost any extra fees but when done through the branch, the bank may charge you Rs 50 per cheque plus the service tax.

Through Internet banking, you can check your transactions at any time of the day, and as many times as you want to.

On the other hand, in a traditional method, you get quarterly statements from the bank and if you request for a statement at your required time, it may turn out to be an expensive affair. The branch may charge you Rs 25 per page, which includes only 30 transactions. Moreover, the bank branch would take eight days to deliver it at your doorstep.

If the fund transfer has to be made outstation, where the bank does not have a branch, the bank would demand outstation charges. Whereas with the help of online banking, it will be absolutely free for you.

As per the Internet and Mobile Association of India's report on online banking 2006, "There are many advantages of online banking. It is convenient, it isn't bound by operational timings, there are no geographical barriers and the services can be offered at a miniscule cost."

Security Precautions

Customers should never share personal information like PIN numbers, passwords etc with anyone, including employees of the bank. It is important that documents that contain confidential information are safeguarded. PIN or password mailers should not be stored, the PIN and/or passwords should be changed immediately and memorised before destroying the mailers.

Customers are advised not to provide sensitive account-related information over unsecured e-mails or over the phone. Take simple precautions like changing the ATM PIN and online login and transaction passwords on a regular basis. Also ensure that the logged in session is properly signed out.

E-BANKING STRATEGIES: E-banking offers vast opportunities, yet even less than one in threebanks have an E-banking strategy in place. According to a study, less than 15 percent of banks with transactional websites will realizeprofits directly attributable to those sites. Hence, banks mustr ec ogn i ze t he s e r i ou snes s o f t he cha l l enge ahead and deve lop a strategy that will enable them to leverage the opportunities presentedby the Internet.No single E-banking strategy is right for every banking company.But whether they adopt an offensive or a defensive posture, theymus t cons t a n t l y r e - eva lua t e t he i r s t r a t e gy . I n t he f a s t -p aced e - e c o n o m y , b a n k s h a v e t o k e e p u p w i t h t h e c o n s t a n t l y e v o l v i n g business models and technology innovations of the Internet space.Early e-business adopter like Wells Fargo not only entered the E-banking industry first but also showed flexibility to change as themarket developed. Not many banks have been as e-business-savvy.But the pressure is now building for all banks to develop sound e-business strategies that will attract and retain increasinglydiscriminating customers.The ma jo r p rob l em wi th t he banks , wh ich have a l r e ady i nves t ed huge amounts in their online initiatives, is that their online offeringsr em a in unp ro f i t ab l e . Thou gh banks have en ro l l ed som e ex i s t i ng customers in their online programs, they are not getting customers inlarge numbers. This has made banks wonder whether there is anyva l ue i n t he on l i ne chan ne l . Ju s t en r o l l i ng cus tom er s fo r on l i ne bank ing may no t be su f f i c i en t un t i l and un l e s s t hey u se t he s i t e actively. Banks must make efforts to increase their site usage bycustomers and effectively co-ordinate the online channel withb ranches and ca l l c en t e r s . Then on ly t hey w i l l be ab l e t o de r i ve maximum value that includes cost reduction, cross-sellingopportunities, and higher customer retention.Customers have some rational reasons for staying offline. Some of these reasons include usability features of the site, concerns aboutsecurity and frequent complaints that signing up is complicated andtime-consuming. Banks can solve these problems by refocusinginvestment on improving the site's basic functionality and user-friendliness, and avoiding advanced features that most customersneither understand nor value. Developing advanced features thatappeal to a relatively small numbers of customers, creates far lessvalue than strengthening core capabilities and getting customers touse them. Banks must make efforts to familiarize customers withtheir sites

and show them how easy and efficient the online channelis to use.Integrating the online channel with the rest of the bank is another important issue that banks must focus upon. This is importantbecause nearly all the value of the online channel is realized offline_ in cross sales completed in other channels and in cost reductions.An actively used online channel should also serve as a medium tosell banking services for the branch staff, the call center, and therelationship manager. Integrated channels working together are far more effective than a group of channels working without anycoordination.To facilitate this integration, banks must formulate paths that peoplein various customer segments are likely to take among the channels.The interactions in each channel can then be worked around thesepaths. For example, a call center representative must work out whichchannel(s) the customer used before coming to her, and whichchannel(s) the customer is likely to visit next. Each channel musthave entry and exit points that must welcome customers and then31  send to other channels. Hence, the overall goal of banks is to createa seamless multichannel experience.On the other hand, those banks that are planning to build their onlinebusinesses will have to understand several strategic issues like dothey have the right business model for E-banking? How should theyprice their E-banking products and services? Bankers planning tomove into E-banking have to explore different options, makeinvestments and have to develop a variety of partnerships. Theyhave to put their time and efforts to identify the best opportunities.In the case of traditional banks, if they are too aggressive in usingprice incentives to build their e-business, they risk the profitabilityof their traditional business. However, if they do not offer sufficientprice incentives for customers to bank online, their efforts to build asound e- banking business may not fructify.Banks have to be creative in rethinking organizational structures andmanagement processes. Traditional banks that are conservative innature may find it difficult to attract and retain online talent.Moreover, getting people in the traditional business to help build ane-enterprise would not be an easy task. To make all this happen,requires a major revision of incentive systems, planning andbudgeting processes, and management roles. Banks can exploit theopportunities provided by the Internet if they demonstrate courage,use their imagination, and take decisive action.While most of the banks have started focusing on E-bankingactivities, a new challenge in the form of mobile banking hasemerged. M-Banking is both an additional opportunity for banks tooffer their online services and an additional channel from which toaccess new customers and cross-sell to existing customers. Rapidlychanging lifestyles of customers and their demand for more speedand convenience has subdued the role of branch banking to a certainextent. With the proliferation of new technologies, disintermediation32  of traditional channels is being witnessed. Banks can go beyondtheir traditional role as a channel for banking/financial services andcan become providers of personalized information. They cansuccessfully leverage m-banking to:•Provide personalized products and services to specificcustomers and thus increase customer loyalty.

•Exploit additional sources of revenue from subscriptions,transactions and third-party referrals.M-Banking gives banks the opportunity to significantly expand their customer relationships provided they position themselveseffectively. To leverage these opportunities, they must formstructured alliances with service affiliates, and acquire competitiveadvantage in collecting, processing and deploying customer information.

INTERNET BANKING STRATEGIESInternet banking strategy can be generally very challenging, but more challenging in an economic environment infested with high degree of corruption, insecurity, bad governance, poverty, and financial system instability. Due to its global nature, Internet banking, under such situation, is threatened by the easiness at which off-line crimes are transmitted into online businesses, and the difficulty in building trusts and confidence in online business relationships. Using the Nigerian case, this chapter aims at establishing some theoretical link between offline country image and Internet banking reputation. The chapter summarizes the structural and regulatory challenges in the Nigerian banking system. It represents and relates the country’s socioeconomic conditions with its Internet business reputation; and lays down past regulatory and global efforts to control the menace of the Nigerian version of Internet frauds. The last two sections of the chapter, respectively, suggest some future research direction and conclude the chapter.