Banking (e-nking)

1.1 Introduction of E-Banking

1.2 Meaning of E-Banking
1.3 Functions of E-Banking
1.4 Types of E-Banking
1. !d"antages of E-Banking
1.# $i%itations of E-Banking
1.1 Introduction of E-Banking
1
The acceleration in technology has produced an extraordinary effect upon our
economy in general has had a particularly profound impact in expanding the
scope and utility of financial products over the last ten years. Information
technology has made possible the creation, valuation, and exchange of complex
financial products on a global basis and even that just in recent years.
Derivatives are obviously the most evident of the many products that
technology has inspired, but the substantial increase in our calculation has
permitted a variety of other products and, most beneficially, new ways to
unbundled risk.
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$hat is really %uite extraordinary is that there is no sign that this
process of acceleration in financial technology is approaching an end. $e are
moving at an exceptionally rapid pace, fueled not only by the enhanced
mathematical applications produced by our ever rising computing capabilities
but also by our expanding telecommunications capabilities and the associated
substantial broadening of our markets.
&ll the new financial products that have been created in recent years contribute
economic value by unbundling risks and reallocating them in a highly calibrated
manner. The rising share of finance in the business output of India and other
countries is a measure of the economic value added by the ability of these new
instruments and techni%ues to enhance the process of wealth creation. The
reason of course, is that information is critical to the evaluation of risk. The less
that is known about the current state of a market or a venture, the less the ability
to project future outcomes and, hence, the more those potential outcomes will
be discontinued.
1.2 Meaning of E-Banking& -
'(bank is the electronic bank that provides the financial service for the
individual client by means of Internet.
1.3 Functions of E-Banking& -
&t present, the personal e(bank system provides the following services) (
1. In'uiry a(out t)e infor%ation of account& -
The client in%uires about the details of his own account information such as the
card*s + account*s balance and the detailed historical records of the account and
downloads the report list.
2. *ard accounts+ transfer& -
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The client can achieve the fund to another person*s -redit -ard in
the same city.
3. Bank-securities accounts transfer& -
The client can achieve the fund transfer between his own bank
savings accounts of his own -redit -ard account and his own capital account in
the securities company. .oreover, the client can in%uire about the present
balance at real time.
4. T)e transaction of foreign e,c)ange& -
The client can trade the foreign exchange, cancel orders and
in%uire about the information of the transaction of foreign exchange according
to the exchange rate given by our bank on net
. T)e B2* dis(urse%ent on net& -
The client can do the real(time transfer and get the feedback
information about payment from our bank when the client does shopping in the
appointed web(site.
#. *-ient ser"ice& -
The client can modify the login password, information of the
-redit -ard and the client information in e(bank on net.
.. !ccount %anage%ent& -
The client can modify his own limits of right and state of the
registered account in the personal e(bank, such as modifying his own login
password, free/ing or deleting some cards and so on.
/. 0eporting t)e -oss if t)e account& -
The client can report the loss in the local area 0not nationwide1
when the client*s -redit -ard or passbook is missing or stolen.
1.4 Types of E-Banking& -
!. Deposits, withdrawals, inter(account transfer and payment of linked
accounts at an &T.2
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,. 3uying and paying for goods and services using debit cards or smart
cards without having to carry cash or a che%ues book2
#. 4sing a telephone to perform direct banking( make a balance en%uiry,
inter(account transfers and pay linked accounts2
5. 4sing a computer to perform direct banking( make a balance en%uiry,
inter(account transfers and pay linked
1. !d"antages of E-Banking& -
!. &ccount Information) 6eal time balance information and summary of
day*s transaction.
,. 7und Transfer) .anage your 8upply(-hain network, effectively by using
our online hand transfer mechanism. $e can effect fund transfer on a real
time basis across the bank locations.
#. 6e%uest) .ake a banking re%uest online.
5. &ccount information) The complete database that the banks has about our
company is available to us at our terminal. It provides us)
-urrent balance in our account on real(time basis.
Day*s transactions in the account.
Details of cash credit limit, drawing power, amount utili/ed, etc.
9. Downloading of account statements as an excel file or text file. The
statements can be integrated with your '6 systems for auto(
reconciliation.
:. 7und Transfers) .anage our 8upply(-hain network, effectively by using
our online fund transfer mechanism. $e can effect fund transfer on a real
time basis across the bank locations. The product facilities.
0a1 ;ne(to(one fund transfer between two linked account.
0b1 3ulk fund transfers2 In bulk fund transfers, we upload a flat
file containing payment + collection information. ;ur
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systems take care of processing the entire file and once the
file is processed file to our '6 for auto reconciliation.
<. The real life situation of user(wise limits and multilevel signatories can
be mapped in the net(based fund transfer module too. $e can specify
user(wise cap for fund transfer and the number of approvals needed for
each fund transfer. The fund transfer will not take place unless the
re%uired number of signatories has approved it.
=. $ith a power of &ttorney from our dealers, we can link the dealer*s
accounts to our account in order to have an online fund transfer, saving us
time and money involved with che%ues collections systems. &lternatively,
the dealer can credit our account through this channel. 8imilarly, we
could also effect vendor and other payments online.
>. -ustomers can Integrate the 8ystem with his own '6) The customer can
download the account statements either as a text file or as an excel file.
The bank can help him in integrating the account statements and bulk
payments files with his '6 system. The bank may charge a nominal fee
depending upon the nature of work involved.
!?.3ill ayment through 'lectronic 3anking) Internet has thus ushered the
concept of anytime and anywhere banking. To the individual the onerous
task of visiting several places to settle his service bills like telephone,
water, electricity, etc., can be overcome through the electronic 3ill ay
service provided by the bank. @e can pay his regular monthly bills
0telephone, electricity, mobile phone, insurance, etc.1 right from his
desktop. Ao more missed deadlines, no more loss of interest. @e can
schedule his bills in advance, and thus avoid missing the bill deadlines as
well as earn extra interest on his money.
!!. The 'lectronic 8hopping .all) The customer can also make his shopping
payment through the 3ank*s secure website(so that he can shop online
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without any security worries, as the bank can provide online real time
shopping mail services through partner shopping sites
!,.'ffecting ersonal Investments through 'lectronic 3anking) The bank*s
website can also allow the customer to invest in shares, mutual funds and
other financial products.
!#.Investing in .utual funds) 'lectronic banking also brings the customer
the same convenience while investing in .utual funds( @assle free and
aperless Investing. @e can invest in mutual funds without the hassles of
filling application forms or any other paperwork. @e needs to provide no
signatures or proof of identify for investing. ;nce he places a re%uest for
investing in a particular fund, there are no manual processes involved.
@is bank funds are automatically debited or credited while
simultaneously crediting or debiting his unit holdings.
!5.Initial ublic ;ffers ;nline) The customer could also invest in initial
public offers online without going through the hassles of filling &AB
application form + paperwork. Cet in(depth analyses of new initial public
offers issues, which are about to hit the market and analysis on these.
Initial public offer calendar, recent initial public offers listings,
prospectus + offer documents, and initial public offer analysis are few of
the features, which help a customer to keep on top of the initial public
offers markets.
!9.;ther benefits) The e(banking provides some other benefits also.some of
them are) -onvenience, speed of concluding transactions, safety(banking
from own home, cheaper service fees, highly scaleable, easy
customi/ation, lower cost of both installation and maintenance,platform
independence.
1.# $i%itation of E-Banking&
!. 8afety situations around &T.s.
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,. &buse of bank cards by fraudsters at &T.s.
#. Danger of giving your card number when buying on(line.
The modern technology has influenced the financial sector to a large extent. It
increases the competitive efficiency of the firms and provides sophistication to
the end users. It makes everyone fittest to survive.
*)apter 2& - Internet Banking
2.1 Internet Banking
a) Introduction
() T)e Indian 1cenario
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c) 2roduct 3 1er"ice offered
2.2 0isk 3 0e4ards
a) 5perationa- 0isk
() 1ecurity 0isk
c) 1yste% arc)itecture 3 design
d) 0eputationa- 0isk
e) $ega- 0isk
f) Money $aundering 0isk
g) *ross Border 0isks
)) 1trategic 0isk
i) 5t)er 0isk
6) 0isk of unfair co%petion
2.1 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 $orld $ide $eb 0$$$1, 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
3anking, although the range of products and services offered by different banks
vary widely both in their content and sophistication.
() T)e Indian 1cenario& -
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The entry of India banks into Aet 3anking
Internet banking, both as a medium of delivery of banking services and as
a strategic tool for business development.
&t present, the total internet users in the country are estimated at > lakh.
@owever, this is expected to grow exponentially to >? lakh by ,??#. only
about ! percent of Internet users did banking online in !>>=. This is
increased to !:.< percent in .arch ,??? 0India 6esearch, .ay ,>, ,???,
Dotak 8ecurities1.
-ost of banking service through the Internet from a fraction of costs
through conventional methods. 6ough estimates assume teller cost at
6e.! per transaction, &T. transaction cost at 59 paise, phone banking at
#9 paise, debit cards at ,? paise and Internet banking at !? paise per
transaction.
d) 2roduct and 1er"ices 5ffered& -
3anks 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
mail account.
$ith 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 en%uiries and feedback.
Eijaya 3ank provides information on its website about its A6I and other
services. -ustomers are re%uired to fill in applications on the Aet and can
later receive loans or other products re%uested for at their local branch.
& few banks provide the customer to en%uire into his demat account
0security+shares1 holding details, transaction details and status of
instructions given by him. These web sites still do not allow online
transactions for their customers.
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8ome of the banks permit customers to interact with them and transact
electronically with them. 8uch services include re%uest for opening of
accounts, re%uisition for che%ue books, stop payment of che%ues, viewing
and printing statements of accounts, movement of funds between
accounts within the same bank, %uerying on status or re%uests,
instructions for opening of Fetter of -redit and 3ank Cuarantees, etc.
These services are being initiated by banks like I-I-I 3ank Ftd.,
-itibank, Clobal Trust 3ank Ftd., 4TI 3ank Ftd., 3ank of -itibank 3ank
of .adura Ftd., 7ederal 3ank Ftd., etc.
8ome of the more aggressive players in this area such as I-I-I 3ank Ftd.,
@D7- 3ank Ftd., 4TI 3ank Ftd., -itibank, Clobal Trust 3ank Ftd., and
3ank of unjab Ftd., offer the facility of receipt, review and payment of
bills online.
The GInfinity* service of I-I-I 3ank Ftd. &lso allows online real time
shopping all payments to be made by customers.
@D7- 3ank Ftd. @as made e(shopping online and real time with the
launch of its payment gateway.
3anks 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.
2.2 0isk 3 0e4ards& -
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a) 5perationa- 0isk& -
;perational risk, also referred to as transactional risk is the most common
form of risk associated with i(banking.
It takes the from of inaccurate processing of transactions, non(
enforceability of contracts, compromises in data integrity, data privacy
and confidentiality, unauthori/ed access + intrusion to bank*s systems and
transaction, etc.
8uch risks can arise out of weaknesses in design, implementation and
monitoring of banks information system.
3esides inade%uacies 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.
() 1ecurity 0isk& -
8ecurity risk arises on account of unauthori/ed access to a bank*s critical
information stores like accounting system, risk management system,
portfolio management system, etc.
;ther related risks are loss of reputation, infringing customers* privacy
and its legal implications, etc.
&ttackers 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. 'mployee being familiar with
different systems and their weaknesses become potential security threats
in a loosely controlled environment. They can manage to ac%uire the
authentication data in order to access the customer accounts causing
losses to the bank.
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4nless specifically protected, all data+ information transfer over the
internet can be monitored or read by unauthori/ed persons.
c) 1yste% arc)itecture and design& -
3anks face the risk of wrong choice of technology, improper system
design and inade%uate control processes.
Aumerous protocols are used for communication across internet. 'ach
protocol is designed for specific types of data transfer.
& system allowing communications with all protocols, say @TT 0@yper
Text Transfer rotocol1, 7T 07ile Transfer rotocol1, telnet, etc. is more
prone to attack than one designed to permit say, only @TT.
.any banks rely on outside service providers to implement, operate and
maintain their e(banking system
8ecurity related operational risk include access control, use of firewalls,
cryptographic techni%ues, public key encryption, digital signature, etc.
d) 0eputationa- 0isk&
6eputational risk is the risks of getting significant negative public
opinion, which may result in a critical loss of funding or customers. 8uch
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 party*s
action.
The main reasons for this risk may be system or product not working to
the expectations of the customers, significant security breach 0both due to
internal and external attack1, inade%uate information to customers about
product use and problem resolution procedures, significant problems with
communication networks that impair customers* access to their funds or
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account information especially if, there are, no alternative means of
account access.
e) $ega- 0isk& -
Fegal 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.
& customer, inade%uately 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 $aundering 0isk& -
o &s internet banking transactions are conducted remotely banks may find
it difficult to apply traditional method for detecting and preventing
undesirable criminal activities. &pplication 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 techni%ues, develop audit trails, conduct periodic compliance
reviews, frame policies in internet transactions.
g) *ross-Border 0isks& -
Internet banking is based on technology that, by its very nature, is
designed to extend the geographic reach of banks and customers. 8uch
market expansion can extend beyond national borders. This causes
various risks.
8uch considerations may expose banks to legal risks associated with non(
compliance of different national laws and regulations, including
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consumer protection laws, record keeping and reporting re%uirements,
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 fulfil their obligations due to economic, social or
political factors.
)) 1trategic 0isk& -
7or reducing such risk, banks need to conduct proper survey, consult
experts from various fields, establish achievable goals and monitor
performance.
&lso they need to analy/e the availability and cost of additional
resources, provision of ade%uate supporting staff, proper training of staff
and ade%uate insurance coverage.
i) 5t)er 0isk& -
Traditional banking risks such as credit risk, li%uidity 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
account of use of electronic channels as well as absence of geographical
limits.
-redit risk) Is the risk that a counterparty will not settle an obligation for
full value, either when due or at any time thereafter. 3anks may not be
able to properly evaluate the creditworthiness of the customer while
extending credit through remote banking procedures, which could
enhance the credit risk.
&nother 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
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the event of the issuer defaulting on its obligation to redeem electronic
money.
Fi%uidity risk) It is important for a bank engaged in electronic money
transfer activities that it ensures that funds are ade%uate to cover
redemption and settlement demands at any particular time. 7ailure to do
so, besides exposing the bank to li%uidity risk, may even give rise to legal
action and reputational risk.
6) 0isk of unfair co%petion& -
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. &ny leaks at network connection
or operating system, etc. may allow them to interfere in a rival bank*s
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.
*)apter 4& - 7)at do *o%puters do in Banks
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T)e different uses of Infor%ation Tec)no-ogy& -
a) 1ing-e 7indo4 1yste%
() !ny Ti%e Banking
c) !uto%ated Te--er %ac)ine
d) 1)ared 2ay%ent 8et4ork 1yste%
e) *usto%er 1er"ice
f) Te-e(anking
g) 9o%e Banking
)) E-ectronic Fund Transfer
i) 2-astic *ards as Media for 2ay%ent
1. *redit *ard
2. :e(it *ard
3. 1%art *ard
4. !TM *ard
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4.1 T)e different uses of Infor%ation Tec)no-ogy& -
a) 1ing-e 7indo4 1yste% (171)& -
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 customer*s account is debited and security form printer prints out
draft and clerk can hand over the same to customer duly signed.
() !ny Ti%e Banking& -
This refers to banking service available ,5 hours a day and #:9 days a
year.
8uch facility is made available to the customer through the &utomated
Teller machine.
3anking, being a service industry, is primarily driven by customers needs.
'ach customer is willing to pay a price for the services provided it is
made available to him when he wants and where he wants.
In the present day of server competion, 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 5 hours to
,5 hours.
This has been made possible through use of &T.s. 'ven under the
manual service, the banks have stated to extend the service from the
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traditional 5 hours to 9 hours and even up to !, hours say from = &. to =
..
8ome banks have introduced the practice of 8unday 3anking or @oliday
3anking.
c) !uto%ated Te--er Mac)ine (!TM)& -
&T. 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
can not be used in one machine.
d) 1)ared 2ay%ent 8et4ork 1yste% (1281)& -
The 8A8, named 8$&D@&A, has been sponsored by the Indian 3ank*s
&ssociation 0I3&1.
It is a network of &T.s, points of sale terminals and -ash Dispensers
with a view to pool the resources of the banks and underlines the spirit of
competition through cooperation.
It became operational in .umbai on !
st
7ebruary !>>< and in two years
about !9? &T.s were owned and installed by #= banks including foreign
banks, public and private sector Indian commercial banks as also
cooperative banks.
The biggest advantage of the network is that the &T. cards issued by
different banks can used at any member banks &T..
3anks can have as many &T. as they want and follow some standards
set by the 8A8 committee.
The heart of the network is the 8witch and its main components are)
Tandem .ainframe -omputer, 3&8' ,5 8oftware, .otorola networking
e%uipments and the leased lines.
e) *usto%er 1er"ices& -
The following customer services are offered through the system
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i. -ash withdrawal 0up to a specified limit1
ii. -he%ue+-ash deposit 0the receipt being only for the deposit of the
envelope containing cash but not for the amount therein1
iii. 'n%uiry about balances
iv. rinting of statement of accounts
v. 6e%uest for che%ue book and standing instructions.
vi. Transfer of funds
vii. IA change
f) Te-e(anking& -
7rom the conventional banking, where the services were provided
manually across the table, it has come to a stage where the customer is
not re%uired to visit the bank en%uiry of balance in the account, sending a
remittance, to get a statement of account, etc.
The concept has become so popular that in 48& customers do not visit
the bank for ><H of their transactions and these are done from either
customer*s residence or office using a telephone or a home -.
In telebanking the customer is re%uired to open the account with the bank
initially by visiting the bank.
Telebanking services are, generally, provided by the bank over the
telephone on a 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.
$here the system is automated, two types of technology are used.
g) 9o%e Banking& -
4nder home banking the customer is served at his residence and there is
no need for the customer to visit the bank*s premises for a number of
routine transactions.
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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 -.
The home banking service can be broadly classified under two
groups, one without using the information technology and another using
information technology.
$hen customer contacts the bank o the phone no specific
technology is involved and the service of telebanking are provided to
him.
)) E-ectronic Fund Transfer (EFT)& -
o In India the fund transfers are basically done through .ail Transfer, Draft
or Telegraphic Transfer.
o In case of Telegraphic Transfer 0TT1 again the Department of
Telecommunication was the sole provider of Telephone, Telex and
Telegram facilities.
o $ith the process of liberali/ation private operators have started providing
alternative voice communication channels through mobile phones and
vast communication as an alternative channels for data communication.
o It was normal for any TT to be credited to the beneficiary*s account after
delay of , to 5 days
o The different forms of '7T prevalent in the use are)
'7T through 'lectronic Data Interchange
3&ADA'T
63IA'T
ID63T E8&T Aetwork
'7T from oint of 8ales
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'lectronic -ash
8$I7T( Clobal 8ystem for 7unds Transfer
'lectronic -learing 8ettlement
i) 2-astic *ards as Media for 2ay%ent& -
There are four types of plastic cards being used ad media for making payments.
These are)
!. -redit -ard
,. Debit -ard
#. 8mart -ard
5. &T. -ard
1. *redit *ards& -
The credit card enables the cardholders to)
urchase any item like clothes, jewellery, railway+air tickets, etc.
ay bills for dining in a restaurant or boarding and lodging in a hotel
&vail of any service like car rental, etc
2. :e(it *ard& -
& 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 re%uired
amount.
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. 7or this reason, debit card are not as popular as credit cards.
3. 1%art *ards& -
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8mart -ards have a built(in microcomputer chip, which can be used for storing
and processing information. 7or example, a person can have a smart card from a
bank with the specified amount stored electronically on it. &s he goes on
making transactions with the help of the card, the balance keeps on reducing
electronically. $hen the specified amount is utili/ed by the customer, he can
approach the bank to get his card validated for a further specified amount. 8uch
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, .umbai, in collaboration with the 63I and 83I. The card is
being used as an experimental tool for promoting cashless society in and around
the IIT -ampus. The latest smart card being developed will combine all the
features of electronic purses, credit cards and &T. cards.
4. !TM *ards& -
The card contains a IA 0ersonal Identification Aumber1 which is selected by
the customer or conveyed to the customer and enables him to withdraw cash up
to the transaction limit for the day. @e can also deposit cash or che%ue.
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*)apter & *redit *ard Frauds

.1 *redit *ard Frauds
Meaning
:efrauder
!4are of *redit *ard
!d"antages of *redit *ard
*redit *ard Frauds
.2 T)e 2re"ention of Frauds
:up-icate *ard
7)ite p-astics
Banker+s 0o-e
*y(er $a4s
!-tering 1a-e ter%ina-s
Internet 0e-ays
Monitoring :eposit
0isk Manage%ent
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*entra- *redit *ard *-earing 9ouse
$oss of *redit *ards in Transit
Fraud *onsciousness
2)ysica- E"idence
*)eck t)e )and4riting
.1 *redit *ard Frauds& -
Meaning& -
& credit card is a money transaction device without using cash or fiduciary
documents.
:efrauder& -
The defrauder has been slow to exploit the credit card, for making a fast buck.
In 48&, he made !9 million dollars. through the cards, in !>=!. in !>=, his
earning through the card, rose to 9? million dollars. in !>=#, the fraudulent card
brought over !?? million dollars to its creators. The fraudulent card industry is
rising higher and higher to di//y height every year. Fike other countries if the
genuine credit card has come in India, the fraudulent credit card cannot be far
behind.
!4are of *redit *ard& -
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. -redit -ards, 3ob -ards, .aster
-ards, Eisa -ards, express -ards, 'uro -ards have wide circulation. 8ome of
them have wide circulation. 8ome of them have world(wide circulation..
*redit *ard Frauds& -
-redit card frauds manifest themselves in a number of ways)
!. Cenuine cards are manipulated.
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,. Cenuine cards are altered.
#. -ounterfeit cards are created.
5. 7raudulent telemarketing is done with credit cards.
9. Cenuine cards are obtained on fraudulent applications in the
names+addresses of other persons and used.
It is feared that with the expansion of '(-ommerce, .(-ommerce, 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.
.2 T)e 2re"ention of Frauds
:up-icate *ard& -
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.
7)ite 2-astic& -
The counterfeit credit cards known as Gwhite plastics* are imitations of credit
cards in general aspect.
Banker+s 0o-e& -
The credit card industry is one of the fastest growing activities of the banking
industry. The artist has to be there 0where the money is1. The banks have to
suffer losses.
*y(er $a4s& -
Information Technology .inistry be approached for stringent laws against
credit card crimes.
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!-tering 1a-es ter%ina-s& -
Internet '(.ail should be utili/ed on the pattern of @ot 3ox organi/ed about a
decade ago, suitably modified to benefit from the advances the information
technology has made since them.
Internet 0e-ays& -
-omputers should be pressed into service via internet connection by suitably
upgrading the Television 8ystem Eertical blanking Intervals for notifying the
fraudulent cards in the market.
Monitoring :eposit& -
.onitoring system can help locate the unscrupulous merchants who use or
allow the use of Gwhite plastics* and fraudulent cards, knowing fully well their
fraudulent nature for making a fast back.
0isk Manage%ent& -
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 scrutini/ed and the credit card number are checked against those
which have been declared fraudulent, stolen or lost.
*entra- credit *ard *-earing 9ouse& -
There should be a joint list of credit card holders on central basis with their
addresses and other details, if any. Aew 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, whenI $hy did he discontinueI
If he has applied to more than one credit card issuers
The new card holder*s business transactions should be watched for some
time.
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$oss of *redit 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 *onsciousness& -
The problem of credit card frauds must be brought to the notice of users as well
as of the servers at sale terminals.
roper 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.
2)ysica- E"idence&
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.
*)eck t)e 9and4riting& -
@andwriting 0in signatures1 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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*)apter #& - Banks *ontro- in 5n-ine Banking
#.1 7i-- Banks *ontro- 5n-ine Banking& -
Internet Banking in India
0ea- t)reats
5n-ine
#.2 1uggestions
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#.1 7i-- Banks *ontro- 5n-ine Banking& -
Internet Banking in India& -
;nline banking is expected to explode in the ext few years. $e 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. Crowth in online banking will be driven by the following
reasons)
Increasing access to low cost electronic services
'mergence of open standards in the banking industry
Improved customer awareness
'ntry of global majors in the market
Integration of banking services with e(commerce and emergence of e(
cash
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-onvenient international transactions as Internet eliminates geographic
boundaries
8hift from one(stop shopping to unbundled product purchases
0ea- T)reats& -
& majority of leading online brokers are beginning to offer banking
products and services as part of their overall offers.
They are actively seeking to capture excess" balances in existing
checking and saving accounts by offering better rates.
There are other threats to banks as well. 8everal leading system providers
have developed bank(in(a(box" solution J unbranded, electronic, full(
service, virtual(bank system J that can be bought, branded, and offered to
consumer by any authori/ed company that wishes to provide banking
service.
#.2 1uggestions& -
To prevent online banking from remaining an expensive additional
channel that does little to retain footloose customers, banks must act
%uickly.
The first and most obvious step they should take is to see to it that the
basic problem fueling dissatisfaction have been addressed.
&fter repairing this basic deficiency, banks must ensure that there
services is competitive.
;bviously, it should include checking, savings and brokerage services,
which anchor customers to the institution.
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In addition, to meet the challenge of online brokerage and other new
entrants, banks would need to add supermarkets" selling products such
as mortgage, mutual funds and insurance.
*onc-usion& -
Technology innovation and fierce competition among existing banks have
enable a wide array of banking products and services, being made available to
retail and wholesale customer through an electronic distribution channel,
collectively referred to as e(banking. The integration of e(banking application
with legacy system implies an integrated risk management approach for all
banking activities of a banking institution.
3anks have traditionally been in the forefront of harnessing technology to
improve product and efficiency. Technology is altering the relationships
between banks and its internal and external customers. Technology has also
eroded the entry barriers faced by many industries. $ith one time investment,
technology has brought about superior products and channel management with a
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special focus on customer relationship. The incremental costs incurred for
expansion and diversification are also more beneficial.
The major driving force behind the rapid spread of e(banking is its acceptance
as an extremely cost effective delivery channel. 3ut on the
flipside, it is associated with risks such as reputation risk, security risk, cross(
border risk and strategic risk, which are uni%ue to e(banking. 3anks need to
have an effective disaster recovery plan along with comprehensive risk
management tool is significant not only to the bank but also to the banking
system as a whole.
-oming home, India is on threshold of a major banking revolution with the
invasion of net banking. $ith the concept of payment gateway coming in, banks
are vying with one another for the lion*s share in the market.
BIB$I5;0!9<& -
;* 3rien Kames. &, .anagement Information 8ystem, Calgotia
ublication
.uedic L 6oss, .anagement Information 8ystem
Fucae, .anagement Information 8ystem
8en, .anagement Information 8ystem
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Indian 3anking, 8. Aatarahan and 6. arameswaran
3anking J In the Aew .illennium, I-7&I 4niversity
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