IT IN BANK An overview of: it in banking

Indian banking industry, today is in the midst of an IT revolution. A combination of regulatory and competitive reasons have led to increasing importance of total banking automation in the Indian Banking Industry. Information Technology has basically been used under two different avenues in Banking. One is Communication and Connectivity and other is Business Process Reengineering. Information technology enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets. In the five decades since independence, banking in India has evolved through four distinct phases. During Fourth phase, also called as Reform Phase, Recommendations of the Narasimham Committee (1991) paved the way for the reform phase in the banking. Important initiatives with regard to the reform of the banking system were taken in this phase. Important among these have been introduction of new accounting and prudential norms relating to income recognition, provisioning and capital adequacy, deregulation of interest rates & easing of norms for entry in the field of banking. . Entry of new banks resulted in a paradigm shift in the ways of banking in India. The growing competition, growing expectations led to increased awareness amongst banks on the role and importance of technology in banking. The arrival of foreign and private banks with their superior stateof-the-art technology-based services pushed Indian Banks also to follow suit by going in for the latest technologies so as to meet the threat of competition and retain their customer base . . Indian banking industry, today is in the midst of an IT revolution. A combination of regulatory and competitive reasons have led to increasing importance of total banking automation in the Indian Banking Industry.

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IT IN BANK Information Technology has basically been used under two different avenues in Banking. One is Communication and Connectivity and other is Business Process Reengineering. Information technology enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets. In view of this, technology has changed the contours of three major functions performed by banks, i.e., access to liquidity, transformation of assets and monitoring of risks. Further, Information technology and the communication networking systems have a crucial bearing on the efficiency of money, capital and foreign exchange markets. . The Software Packages for Banking Applications in India had their beginnings in the middle of 80s, when the Banks started computerising the branches in a limited manner. The early 90s saw the plummeting hardware prices and advent of cheap and inexpensive but high-powered PCs and servers and banks went in for what was called Total Branch Automation (TBA) Packages. The middle and late 90s witnessed the tornado of financial reforms, deregulation, globalisation etc coupled with rapid revolution in communication technologies and evolution of novel concept of 'convergence' of computer and communication technologies, like Internet, mobile / cell phones etc.

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Initiatives of: reserve bank of india RBI's Monetary and Credit Policy 2003-04, provides an insight into the current developments & future of technology upgradation in the Indian Financial sector, including banks. . The Reserve Bank has assigned priority to the upgradation of technological infrastructure in the financial system. Substantial progress has been made for developing a modern, efficient, integrated and secure payment and settlement system for the financial services sectors. Modernisation of clearing and settlement through MICR based cheque clearing, popularising electronic clearing services (ECS) and integration of RBI-EFT scheme with funds transfer schemes of banks, introduction of centralised funds management system (CFMS) are significant milestones in this regard Implementation of Centralised Funds Management System .

The centralised funds management system (CFMS) provides for a centralised viewing of balance positions of the account holders across different accounts maintained at various locations of RBI. While the first phase of the system covering the centralised funds enquiry system (CFES) has been made available to the users, the second phase comprising the centralised funds transfer system (CFTS) would be made available by the middle of 2003. So far, 54 banks have implemented the system at their treasuries/funds management branches. Certification and Digital Signatures .

The mid-term Review of October 2002 indicated the need for information security on the network and the use of public key infrastructure (PKI) by banks. The Controller of Certifying Authorities, Government of India, have approved the Institute for Development and Research in Banking Technology (IDRBT) as a Certification Authority (CA) for digital signatures. Consequently, the process of setting up of registration authorities (RA) under the CA has commenced at various banks. In addition to the negotiated dealing system (NDS), the electronic clearing service (ECS) and electronic funds transfer (EFT) are also being enhanced in terms of security by means of implementation of PKI and digital signatures using the facilities offered by the CA. .
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Committee on Payment Systems

In order to examine the entire gamut of the process of reforms in payment and settlement systems which would be culminating with the real time gross settlement (RTGS) system, a Committee on Payment Systems (Chairman: Dr. R.H. Patil) was set up in 2002. The Committee, after examining the various aspects relating to payment and settlement systems, submitted its report in September 2002 along with a draft Payment Systems Bill. The draft Bill provides, inter alia, a legal basis for netting, apart from empowering RBI to have regulatory and oversight powers over payment and settlement systems of the country. The report of the Committee was put on the RBI website for wider dissemination. The draft Bill has been forwarded to the Government. .

Multi-application Smart Cards

Recognising the need for technology based payment products and the growing importance of smart card based payment flows, a pilot project for multi-application smart cards in conjunction with a few banks and vendors, under the aegis of the Ministry of Communications and Information Technology, Government of India, has been initiated. The project is aimed at the formulation of standards for multi-application smart cards on the basis of inter-operable systems and technological components of the entire system.

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Special Electronic Funds Transfer

As indicated in the mid-term Review of October 2002, national EFT (NEFT) is being introduced using the backbone of the structured financial messaging system (SFMS) of the IDRBT. NEFT would provide for movement of electronic transfer of funds in a safe, secure and quick manner across branches of any bank to any other bank through a central gateway of each bank, with the inter-bank settlement being effected in the books of account of banks maintained at RBI. Since this scheme requires connectivity across a large number of branches at many cities, a special EFT (SEFT) was introduced in April 2003 covering about 3000 branches in 500 cities. This has facilitated same day transfer of funds across accounts of constituents at all these branches. .

National Settlement System (NSS)

The clearing and settlement activities are dispersed through 1,047 clearing houses managed by RBI, the State Bank of India and its associates, public sector banks and other institutions. In order to facilitate banks to have better control over their funds, it is proposed to introduce national settlement system (NSS) in a phased manner.

Real Time Gross Settlement System (RTGS)

As indicated in the mid-term Review of October 2002, development of the various software modules for the RTGS system is in progress. The initial set of modules is expected to be delivered by June 2003 for members to conduct tests and familiarisation exercises. The live run of RTGS is scheduled towards the end of 2003. .

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IT IN BANK Reporting of Call/Notice Money Market Transactions on NDS Platform Negotiated dealing system (NDS), which has become operational since February 2002, enables on-line dealing and dissemination of trade information relating to instruments in money, government securities and foreign exchange markets. Membership in NDS is open to all institutions which are members of INFINET and are maintaining subsidiary general ledger (SGL) Account with RBI. These include banks, financial institutions (FIs), primary dealers (PDs), insurance companies, mutual funds and any other institution as admitted by RBI. At present, all deals in government securities, call/notice/term money, CDs and CP executed among NDS members have to be reported automatically through NDS, if the deal is done on NDS and within 15 minutes of concluding the deal, if done outside NDS. However, it has been observed that a very sizeable proportion of daily call/notice money market deals is not reported by members on NDS as stipulated. With a view to improving transparency and strengthening efficiency in the market, it is proposed that: : 1. From the fortnight beginning May 3, 2003, it would be mandatory for all NDS members to report all their call/notice money market deals on NDS. Deals done outside NDS should be reported within 15 minutes on NDS, irrespective of the size of the deal or whether the counterparty is a member of the NDS or not. . 2. Full compliance with the reporting requirement to NDS will be reviewed in September 2003. In case there is repeated non-reporting of deals by an NDS member, it will be considered whether non-reported deals by that member should be treated as invalid with effect from a future date.

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IT IN BANK Perspectives of: CTOs of Banks in India Banknet India invited CTO's (Chief Technology Officers) of various Major Indian Banks to share their perceptions on IT in Banking, with special reference to the Reserve Bank of Indias intitiatives in promoting computerisation in the Financial Sector. . The participants include: V Chandrasekhar, General Manager & Chief Technology Officer, Bank of Baroda; Mrs S A Panse, Deputy General Manager (Information Technology), Bank of Maharastra; C.N. Ram, Chief Technology Officer, HDFC Bank; Pravir Vohra, Chief Technology Officer, ICICI Bank; Neeraj B Bhai, Chief Technology Officer, IDBI Bank; Ravikiran Mankikar, Chief of Information Technology, Shamrao Vithal Co-Operative Bank; V.K. Ramani, President (Information Technology), UTI Bank. Also Prof. S. Sanyal, Tata Institute of Fundamental Research was invited to provide with the 'Other Perspective'.

Areas, which will get the emphasis in IT plans/Strategy of banks... Mrs S A Panse, Deputy General Manager (Information Technology), Bank of Maharastra is of view that as Asset-Liability management and Risk management have gained importance after liberalization and globalization, getting the data updated on real time basis for the organization is of prime importance. Establishing a WAN for connecting all the branches and moving towards Core Banking Solution is the prime business need. Further, in view of RBI's initiative for implementing various payment and settlement systems such as- NDS-PDO, CFMS, SMFS and RTGS, connectivity intrabank as well as interbank is also the basic necessity for every bank. . With RTGS being implemented by Jan.2004, every bank would have to not only computerize the entire functioning of the Treasury department but also would have to consolidate the treasury function and move towards integrated treasury for better funds management. In order to achieve this, IT would be playing a major role. This has gained more importance after the establishment of the CCIL. .
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Mr C.N. Ram, Chief Technology Officer, HDFC Bank feels that Connectivity of banks, Risk Management, Asset Liability Management systems and core banking will rank high in plans of Banks.According to Mr Pravir Vohra, Chief Technology Officer, ICICI Bank, Networking of branches, ALM & Risk management are going to be areas of top priority in IT plans/Strategy of banks. According to Mr Neeraj B Bhai, Chief Technology Officer, IDBI Bank, in view of RBI's policy this year, Inter-bank payment systems are poised to move to a much higher degree of advancement during the year. WIth impending arrival of RTGS, all banks will have to gear up for it. While Multiapplication smart card pilot has been indicated in the policy, its active usage is still quite some time away. The earlier Smart Card project of RBI had met with a limited success. National Settlement System will enhance the efficiency of funds management, which can now be centralised in a much better way. . Mr V.K. Ramani, President (Information Technology), UTI Bank is confident that the Policy announcements on the payment systems will pave the way for the establishment of the legal framework, for electronic settlements. The technology initiative taken by the RBI for setting up RTGS will have far reaching impact As follow up to the electronic clearing ECS, the move for an RTGS is logical extension. . According to Mr Ramani, the standards for inter operability of smart cards will enable multiple applications on a single chip. Currently smart cards are used for select applications. The technology for integrated applications is available but unless the volume of transactions is large, it is not an attractive proposition. . Mr Ravikiran Mankikar, Chief of Information Technology, Shamrao Vithal Co-Operative Bank feels that RBI's initiatives and encouragement to the Banks to implement payment and settlement systems in a secured environment is surely the first logical steps towards the introduction of the electronic funds transfer mechanism in a big way. Banks that are not geared up for the networking should fear to be left behind. Implementation of the Core Banking solutions are to be planned by Banks as part of their strategy to align with the RBI initiative. .
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IT IN BANK Mr V Chandrasekhar, General Manager & Chief Technology Officer, Bank of Baroda summarises the key areas, which will get the emphasis in IT plans/Strategy of banks. a. Networking of branches b. Secure Messaging for launching funds transfer products c. Integrated Treasury Management System . . .

d. Focus on technology based initiatives for Intra-day liquidity Management e. Core Banking Solution implementation

Approach of RBI towards IT in Banking

Mr Neeraj B Bhai, Chief Technology Officer, IDBI Bank feels that as such there is no major shift on IT front in this year's RBI policy. What we see today is the culmination of the initiatives that were started a few years back. These were in the areas of moving towards automating interbank payment and settlement systems. Mr C.N. Ram, Chief Technology Officer, HDFC Bank, agrees that RBI is continuing with the policy initiatives in a systematic manner. . Mr Pravir Vohra, Chief Technology Officer, ICICI Bank is also of view that RBI has continued it's efforts for developing a modern and efficient, integrated payment and settlement system for the banking sector. Initiative taken by the RBI for setting up RTGS will have far reaching impact. . According to Mr V Chandrasekhar, General Manager & Chief Technology Officer, Bank of Baroda, Technology initiatives started of with introduction of PDO-NDS during early 2002. This was followed by introduction of CFMS Phase I. Roll out of RTGS is expected before the year-end. The chain of incidents indicates that the technology focus of RBI is to bring in technology to minimize systemic risk. He points out that Bank of Baroda was the first bank to put in place a world class an Integrated State of the Art Treasury System covering front, middle and back office environment.

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IT IN BANK How RBI's initiatives for Payment and Settlement system will impact customer service & efficiency of Banks? . According to Mr V Chandrasekhar, General Manager & Chief Technology Officer, Bank of Baroda, RTGS / SEFT will addresses the requirement of the customers for moving funds across bank branches at almost the same cost they pay for the normal remittance facility. . The Real Time Gross Settlement (RTGS) project would create a major upheaval in the banking sector. The real time payment across Banks & regions would revolutionise the payment mechanism in India, according to Mr Ravikiran Mankikar, Chief of Information Technology, Shamrao Vithal Co-Operative Bank. . Mr C.N. Ram, Chief Technology Officer, HDFC Bank, is of view that Reserve Bank of India initiatives on RTGS, which have been introduced in a systematic manner, will lead to technological upgradation in banks. Now banks will have to put proper Information Technology systems in place to participate in RTGS and provide the benefits of improved payment systems to their customers. If they lag in this area they will loose their customer to other banks. . Mr Pravir Vohra, Chief Technology Officer, ICICI Bank feels that though in future the customers will have faster and cheaper instruments of movement of funds across the country as well as quicker realisation of cheques, but banks will be left with lower levels of float funds. Mr Neeraj B Bhai, Chief Technology Officer, IDBI Bank, is also of view that for customers it will mean availability of faster and cheaper instruments of movement of funds across the country as well as quicker realisation of cheques (once truncation comes in - but that is some time away). For the Banks the increased efficiency of funds movement and settlement will mean shrinking of available floats and partial/ significant cannibalization of some of the existing products (e.g. Cash Management Services). . Mr Neeraj Bhai, however feels Banks will be able to ride the available infrastructure to introduce their own funds transfer products. They will have to price these products appropriately. In due course one will see this pricing also getting subjected to competitive pressures. .

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IT IN BANK Mrs S A Panse, Deputy General Manager (Information Technology), Bank of Maharastra also feels that NSS, coupled with connecting the service branches of the banks and Treasury with RTGS for settlement of all the transactions on real time basis, would have an impact on the FLOAT funds. With connectivity established across the banking industry, there would not be much availability of floats and this would have a major impact on the costing of various services being offered by the banks. Thus it would be imperative on each bank's part to establish a full-fledged Costing department (If not done already), and rework the service charges structure. Mr V.K. Ramani, President (Information Technology), UTI Bank. is of view that the Special electronic funds transfer (SEFT) opens up a significant business opportunity Large trading and distribution firms can effectively implement e- procurement systems with settlement of transactions across the banking system taking place under the SEFT. Large public sector Banks and the new generation private sector banks who have made substantial investments in the IT infrastructure have an opportunity to offer a wider range of services through multichannel delivery systems backed by the RTGS and SEFT for funds settlement.

Roadmap of banks to strengthen the existing financial infrastructure... Roadmap of banks according to Mr V Chandrasekhar, General Manager & Chief Technology Officer, Bank of Baroda should comprise of. a. Introduction of Core Banking system within the next 12 to 24 months. b. As an interim solution, networking of branches in the identified commercially important centres immediately and start funds transfer products. c. Immediate Establishment of RA office for issue of Digital certificates for use in these funds transfer products. . d. Establishment of an Integrated Treasury branch or in the interim proper reporting arrangements from major centres for effective management and maintenance of intra-day liquidity. . e. Development of an interface with the RBI applications and the Core banking systems to enable STP. .

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According to Mrs S A Panse, Deputy General Manager (Information Technology), Bank of Maharastra, it is necessary that each public sector bank take following steps1. Establish a WAN connecting all the major branches. .

2. Introduce all the delivery channels in addition to the branch network. 3. Move towards Core Banking Solution. 4. Introduce data warehousing and data mining. 5. Introduce Customer relationship Management. 6. Move towards Integrated treasury management. 7. Go in for Business Process Re-engineering. 8. Have an aggressive HRD policy for retraining in IT skills. 9. Take up restructuring/ reorganization for the entire bank. . . . . . . .

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IT IN BANK Mr Ravikiran Mankikar, Chief of Information Technology, Shamrao Vithal Co-Operative Bank feels that the Banks are today aware for the need to be part of a networked system. The emerging role of technological employment by the Private Sector Banks and the leading Public Sector Banks is also motivating the Banks in the Co-Operative Sector to put their act together. The implementation of ATMs on a massive scale by some of the Banks is also spurring the other Banks to have an ATM installed base of their own. . According to Mr Neeraj B Bhai, Chief Technology Officer, IDBI Bank, Roadmap has already been defined by RBI in great detail. What is needed is its efficient execution. To be able to launch one's own products, the Banks will have to enhance this roadmap to include integration with their existing applications so that end-to-end straight-through-processing becomes possible. Here the fully computerised banks will have the edge. There is no reason why such products can not be made available on selfservice channels like Internet, mobiles and ATMs.

Other Perspective

Prof. S. Sanyal, School of Technology & Computer Science, TIFR The credit policy, recently announced by RBI will have severe implications in the world of technology and the way banks look at it. From the consumer's perspective, one feels that if everything works out as planned, nothing could be better. Instant clearing of checks, electronic funds transfer, digital certificates ... what more could the consumer ask for? . But looking at it from the banker's point of view, it might mean burning midnight oil and implementation of state of art encryption techniques. The network has to be extremely secure to be able to handle what the RBI proposes in its credit policy. Banks might need to invest additional amounts in employing ethical hackers to find loopholes in the network and correct them. More importantly, any solution provided should be scalable to cover large areas so as to reach all corners of India. .
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IT IN BANK In the new policy, the RBI has also proposed implementation of negotiated dealing system (NDS), electronic clearing service (ECS) and electronic funds transfer (EFT). This would mean enhancing banking networks in terms of security by means of use of Public Key Infrastructure (PKI) and Digital Signatures. Though the Government had been promoting the usage of technology in our day-to-day lives for a long time, things are taking a concrete shape finally. The identification of certifying authorities, formation of a separate IT ministry, all are forward moving steps in this regard. The banks should gear up in the manner they did before the Y2K crisis. Everyone in the Government, including top officials were after various financial institutions in the country to make their systems Y2K compliant. Regular statistics were being published in the media. And, it worked. We could move over to the new century without any major problem. With the new paradigm shift towards electronic age banking, a similar approach needs to be adopted. Then only we can succeed in implementing the latest policy. Another important but less thought-of area is that of upgrading the knowledge level of the Senior and Middle level staff of various banks. Young bankers will learn, as they are growing with the changes, not so for the older lot. So, banks will have to make special provision for educating their staff and also to be progressive in a pragmatic manner. And one more point, which is emerging, is Electronics and Computerised staff is to assist human beings (Bankers and Bank Users both). Sometimes, in the haste of total computerisation, one looses the focus that Banks should have possibly more human interaction than earlier. People simply cannot keep talking to machines or keep punching numbers to get a solution, where they could have achieved the same in a shorter time with human help. I applaud the right directional movement by RBI but would like to stress that human element should not be abolished. Then only we will achieve a total solution, be it in Banking, or in any other field.

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IT IN BANK Perspectives of: CEO's of Banking Software Co's

Mr Manoj Kunkalienkar, Executive Director & President, ICICI Infotech Ltd Manoj Kunkalienkar, Executive Director & President, ICICI Infotech, is of view that the banks will increasingly focus their attention on putting in place robust risk consolidation, analytics and reporting mechanism, building an appropriate systems infrastructure, better data-warehousing and data mining techniques and upgrading the risk control capabilities in core banking and treasury systems. The Basel-II proposal, drafted by the Basel Committee on Banking Supervision, provides for a new and improved framework for risk based capital reserve requirements of a bank. . The proposal provides for approaches that are intrinsically simple and graduate to advanced methodologies. The framework provides banks with the flexibility, subject to supervisory review, to adopt approaches, which best match their level of sophistication and risk profile. The framework also deliberately builds in rewards for those institutions with stronger capital structures and more accurate risk measurement procedures. . Some of the key aspects of the new accord are Shifting away from a single model focus of capital adequacy to the one based on three mutually reinforcing pillars i.e. i) minimum capital requirement ii) supervisory review processes and iii) market discipline through greater transparency and disclosures. Recognition and incorporation of measurement and reporting mechanism for operational risks, for the first time, in the capital reserve requirement. One of the main sources of operational risk is the information systems and infrastructure existing in a bank. .

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IT IN BANK Although initially a limited set of banks from the BIS countries will embrace the new policies, it is expected that, over time, other banks and other countries will adopt Basel-II. . The imperative of putting in place an appropriate risk measurement mechanism will not just be on account of meeting regulatory requirements; there will now be a greater competitive compulsion due to the direct correlation of the level of operational and other risks with the capital requirements. Banks that remain unaware and are unable to adopt Basel-II model will run the risk of a drastic increase in their capital reserve requirements, making them less competitive. . Some of the areas that the banks will increasingly focus their attention will include putting in place robust risk consolidation, analytics and reporting mechanism, building an appropriate systems infrastructure, better datawarehousing and data mining techniques and upgrading the risk control capabilities in core banking and treasury systems. . ICICI Infotech has been tracking the developments in this new Basel paradigm and has solutions comprising risk management products and services, which can help banks and financial institutions in adopting BaselII framework.

Mr Vishnu R Dusad, Managing Director, Nucleus Software Exports Ltd According to Vishnu R Dusad, Managing Director, Nucleus Software, Developments and changes in Indian economy during the last decade have created an entirely new set of challenges. The application areas for the newer technology in banks can be by and large divided in two categories namely Customer centered (Technology) applications and High End (Functionality) applications Innovation in technology and the global explosion in information and communication technology (ICT) have emerged as prime sources of productivity growth. In the banking sector, IT can reduce costs, increase volumes, and facilitate customised products; similarly, IT requires banking and financial services to facilitate its growth. .

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IT IN BANK Banks have realized that in todays age of fast-paced competition, the deployment and effective use of IT often is the differentiator between the leader and the followers. Internet / Mobile banking, multiple customer touch-points, varied and quick-to-market banking products, corporate banking services, cash management, cross-domain products, integrated delivery channels and superior customer service are the buzzwords for modern banks. . Though today the developments are concentrated within corporate banks and urban areas for reasons varying from poor connectivity to sheer number of branches and their remote locations to the need for extensive user training both in terms of technology as well as work habits, this trend too is shifting facilitated by the forward looking policies of the RBI. IT is increasingly moving from a back office function to a prime assistant in increasing the value of a bank over time. IT does so by maximizing the benefits of pro-active measures such as strengthening and standardizing banks infrastructure in respect of security, communication and networking, achieving inter-branch connectivity, moving towards Electronic Funds Transfer (EFT); Real Time Gross Settlement (RTGS) environments, improve the effectiveness of asset-liability management, enhancing the forecasting of liquidity by building real time databases, use of Magnetic Ink Character Recognition (MICR) and Imaging technology for cheque clearing to name a few. . Proposed new accords such as Basel II, when implemented, are likely to have significant implications for IT in banking systems as a whole requiring the development of efficient and comprehensive internal systems for assessment and management of risks, setting up and adhering to adequate internal exposure limits and improving general internal control. . To summarize, IT in todays Banks is more of a holistic approach towards designing and development of modern, robust, efficient, secure and integrated systems.

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IT IN BANK Mr V. M. Uchil, Chairman, Nextstep Infotech Pvt Ltd

V. M. Uchil, Chairman, Nextstep Infotech, regards, Innovation in technology and the global explosion in information and communication technology (ICT) as prime sources of productivity growth. In the banking sector, IT can reduce costs, increase volumes, and facilitate customised products; similarly, IT requires banking and financial services to facilitate its growth.

The Indian Banking industry has come a long way from those early days. The journey ahead, promises to be exciting and eventful . Developments and changes in Indian economy during the last decade have created an entirely new set of challenges. The application areas for the newer technology in banks can be by and large divided in two categories namely Customer centered (Technology) applications and High End (Functionality) applications. Customer centered application includes the solutions like Internet Banking, Anywhere branch banking, Mobile Banking, Core Banking Solutions, whereas high end technology encompasses Risk Management solutions, Straight Through Processing (STP), credit monitoring systems for the data collections etc. . During the last decade, all the banks have computerized their branches individually through ALPMs, PBMs and TBAs etc. This was taking care of the individual branch requirements. During the last 2 years, banks have realized the importance of core banking and are in the process of converting this from TBA atmosphere to centralize banking systems, the MIS can be qualitative and interpretation of various segments of data can be crystallized. Risk management also plays a vital role in the bond markets. Today Internet banking has become a buzzword in the banking industry. So far these applications are limited to metros. Still a large majority of Indian customers are out of the purview this modernization. The Morgan Stanley Dean Witter Internet research has emphasized that Web is more important for retail financial services than for many other industries. .

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IT IN BANK Connectivity is leading to globalization of banking operations. The competitive environment has made risk management extremely critical and indispensable. Credit risk continues to be the main risk for banking business, besides this Risk Management is now being directed to market and liquidity risk. The Indian software industry needs to be ready to cope with these challenges.

Mr Suheim Sheikh, Managing Director, SDG Software Technologies

Suheim Sheikh, Managing Director, SDG Software feels that Money Laundering and Fraud is increasingly becoming a matter of concern for financial institutions including banks and investment houses all over the world, given the severe penalties imposed by the regulatory authorities for non-compliance of Anti-Money Laundering (AML) reporting requirements.

Money Laundering and Fraud is increasingly becoming a matter of concern for financial institutions including banks and investment houses all over the world, given the severe penalties imposed by the regulatory authorities for non-compliance of Anti-Money Laundering (AML) reporting requirements. With several co-operative banks and financial institutions collapsing due to mismanagement and fraudulent activities, a solution is needed that can serve as an early warning system which will help initiate the necessary preventative steps and ensure that a mechanism is in place to address these issues. . SDG Software Technologies, a world-leader in surveillance and fraud detection software for capital markets, has introduced Bankalert, a Compliance, Transaction Monitoring, AML and Business Intelligence software for Banks and Financial Institutions (FI). It offers a transparent banking system and helps them detect money laundering cases and transactional frauds at a nascent stage. .

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IT IN BANK Bankalert helps banks comply with the most stringent regulatory reporting and fraud detection requirements by monitoring the daily transactions of their customers. It also complies with the Know Your Customer (KYC) norms, which are incorporated in many institutions in India and abroad. This includes all reports and forms prescribed by the regulatory authority in knowing the customer, and stores voluminous information for multidimensional analyses of their accounts. . Alert Management System, the heart of the software, enables analysts to effectively manage alerts and apply experience and knowledge to screen transactions. Sophisticated techniques in statistical analysis help in identifying various unusual transactions in an account. . Bankalert has been built on an industry standard platform and has the capacity to handle very large databases with ease. At, 600 plus transactions per second, it is the natural choice for real-time and mission critical applications. . Widely known and appreciated by its clients for the quality of software and support, SDG has years of hands-on experience in dealing with various ingenious frauds. It has now inculcated this experience in building one of the most reliable and efficient fraud detection systems in the world Bankalert.

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IT IN BANK Core banking Core banking is a general term used to describe the services provided by a group of networked bank branches. Bank customers may access their funds and other simple transactions from any of the member branch offices. Core Banking is normally defined as the business conducted by a banking institution with its retail and small business customers. Many banks treat the retail customers as their core banking customers, and have a separate line of business to manage small businesses. Larger businesses are managed via the Corporate Banking division of the institution. Core banking basically is depositing and lending of money. Normal core banking functions will include deposit accounts, loans, mortgages and payments. Banks make these services available across multiple channels like ATMs, Internet banking, and branches. Core Banking solutions are banking applications on a platform enabling a phased, strategic approach that lets people improve operations, reduce costs, and prepare for growth. Implementing a modular, component-based enterprise solution ensures strong integration with your existing technologies. An overall service-oriented-architecture (SOA) helps banks reduce the risk that can result from multiple data entries and out-of-date information, increase management approval, and avoid the potential disruption to business caused by replacing entire systems.

Core Banking Solutions Core Banking Solutions is new jargon frequently used in banking circles. The advancement in technology, especially internet and information technology has led to new ways of doing business in banking. These technologies have cut down time, working simultaneously on different issues and increasing efficiency. The platform where communication technology and information technology are merged to suit core needs of banking is known as Core Banking Solutions. Here computer software is developed to perform core operations of banking like recording of
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IT IN BANK transactions, passbook maintenance, interest calculations on loans and deposits, customer records, balance of payments and withdrawal are done. This software is installed at different branches of bank and then interconnected by means of communication lines like telephones, satellite, internet etc. It allows the user (customers) to operate accounts from any branch if it has installed core banking solutions. This new platform has changed the way banks are working.

Core banking Core banking is all about knowing customers' needs. Provide them with the right products at the right time through the right channels 24 hours a day, 7 days a week using technology aspects like Internet, Mobile ATM. Select Core banking application package vendors (ISVs) While many Banks implement custom (bespoke) applications for core banking, others implement/customize commercial ISV packages. Here are a few prominent ones, in alphabetical order (but sortable)...

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IT IN BANK Overview of Core Banking Solutions and their providers Package Provider Comments Formerly Altamira, (variant) called Altair

Alnova Financial Accenture Solutions Alnova

Bancs

TCS MINDMILL SOFTWARE LTD merging with Fidelity National Financial

BANKMILL

Bankway

Metavante

Corebank

Fidelity National Financial SAP AG Infosys Oracle Financial Services Software CSC former package: MicroBanker, Finware; former company i-flex and others

Core Banking Finacle

FLEXCUBE

Hogan

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Intellect Core

Polaris software Labs Ltd With Offline Sanchez

OMNIEnterprise InfrasoftTech

Profile

Fidelity National formerly Financial Profile Fiserv

Signature

Systematics

Fidelity National formerly Systematics Financial Inc./ Alltel Temenos Group Laser Laser Panacea Soft

T24

While many Banks run core banking in-house, there are some which use outsourced service providers as well. There are several Systems integrators like IBM which implement these Core banking packages at Banks. Reverted edits by 59.92.64.31 The user from IP address 59.92.64.31 added some content about reasoning for Core Banking Software that made no sense at all -- then the user made another edit that added multiple periods to the end of the paragraph for no apparent reason. It seems as though the user wanted to further discuss the subject. If you are this user, please start discussions on this talk page. -- Emana 18:04, 2 March 2007 (UTC) SME What does SME mean in "Core banking solutions are very helpful to SME industries." I couldn't figure it out in the SME disambiguation page. Antoinebugleboy (talk) 00:23, 19 August 2008 (UTC)
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IT IN BANK Clarification QUOTE In countries such as India and Hong Kong that were a part of the British empire, it is only recently that core banking has caught on. UNQUOTE What timeframe does "recent" means? I remember banks in Hong Kong were already capable of performing interbranch transactions on current, savings and loans accounts back in the early 70's and ATM's were already introduced. Of course 35 years is very short in the history of banking. (Lee Siu Hoi )203.112.84.138 (talk) 01:10, 9 February 2009 (UTC) Marketing messages removed Please, no marketing messages with the listed products / companies! Removed some Oracle and Tenemos sales speak. --Hardyehr (talk) 13:06, 5 August 2009 (UTC)

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IT IN BANK Mobile banking

Mobile banking (also known as M-Banking, mbanking, SMS Banking etc.) is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone. Mobile banking today (2007) is most often performed via SMS or the Mobile Internet but can also use special programs called clients downloaded to the mobile device. A mobile banking conceptual model

In one academic model,[1] mobile banking is defined as: "Mobile Banking refers to provision and availment of banking- and financial services with the help of mobile telecommunication devices.The scope of offered services may include facilities to conduct bank and stock market transactions, to administer accounts and to access customised information." According to this model Mobile Banking can be said to consist of three inter-related concepts:

Mobile Accounting Mobile Brokerage Mobile Financial Information Services

Most services in the categories designated Accounting and Brokerage are transaction-based. The non-transaction-based services of an informational nature are however essential for conducting transactions - for instance, balance inquiries might be needed before committing a money remittance. The accounting and brokerage services are therefore offered invariably in combination with information services. Information services, on the other hand, may be offered as an independent module.

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IT IN BANK Trends in mobile banking The advent of the Internet has revolutionized the way the financial services industry conducts business, empowering organizations with new business models and new ways to offer 24x7 accessibility to their customers. The ability to offer financial transactions online has also created new players in the financial services industry, such as online banks, online brokers and wealth managers who offer personalized services, although such players still account for a tiny percentage of the industry. Over the last few years, the mobile and wireless market has been one of the fastest growing markets in the world and it is still growing at a rapid pace. According to the GSM Association and Ovum, the number of mobile subscribers exceeded 2 billion in September 2005, and now exceeds 2.5 billion (of which more than 2 billion are GSM). According to a study by financial consultancy Celent, 35% of online banking households will be using mobile banking by 2010, up from less than 1% today. Upwards of 70% of bank center call volume is projected to come from mobile phones. Mobile banking will eventually allow users to make payments at the physical point of sale. "Mobile contactless payments will make up 10% of the contactless market by 2010.[2] Many believe that mobile users have just started to fully utilize the data capabilities in their mobile phones. In Asian countries like India, China, Bangladesh, Indonesia and Philippines, where mobile infrastructure is comparatively better than the fixed-line infrastructure, and in European countries, where mobile phone penetration is very high (at least 80% of consumers use a mobile phone), mobile banking is likely to appeal even more. This opens up huge markets for financial institutions interested in offering value added services. With mobile technology, banks can offer a wide range of services to their customers such as doing funds transfer while travelling, receiving online updates of stock price or even performing stock trading while being stuck in traffic. According to the German mobile operator Mobilcom, mobile banking will be the "killer application" for the next generation of mobile technology.

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IT IN BANK Mobile devices, especially smartphones, are the most promising way to reach the masses and to create stickiness among current customers, due to their ability to provide services anytime, anywhere, high rate of penetration and potential to grow. According to Gartner, shipment of smartphones is growing fast, and should top 20 million units (of over 800 million sold) in 2006 alone. In the last 4 years, banks across the globe have invested billions of dollars to build sophisticated internet banking capabilities. As the trend is shifting to mobile banking, there is a challenge for CIOs and CTOs of these banks to decide on how to leverage their investment in internet banking and offer mobile banking, in the shortest possible time.[citation needed] The proliferation of the 3G (third generation of wireless) and widespread implementation expected for 20032007 will generate the development of more sophisticated services such as multimedia and links to m-commerce services.

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IT IN BANK Mobile banking business models A wide spectrum of Mobile/branchless banking models is evolving. However, no matter what business model, if mobile banking is being used to attract low-income populations in often rural locations, the business model will depend on banking agents, i.e., retail or postal outlets that process financial transactions on behalf telcos or banks. The banking agent is an important part of the mobile banking business model since customer care, service quality, and cash management will depend on them. Many telcos will work through their local airtime resellers. However, banks in Colombia, Brazil, Peru, and other markets use pharmacies, bakeries, etc. These models differ primarily on the question that who will establish the relationship (account opening, deposit taking, lending etc.) to the end customer, the Bank or the Non-Bank/Telecommunication Company (Telco). Another difference lies in the nature of agency agreement between bank and the Non-Bank. Models of branchless banking can be classified into three broad categories - Bank Focused, Bank-Led and Nonbank-Led.

Bank-focused model The bank-focused model emerges when a traditional bank uses nontraditional low-cost delivery channels to provide banking services to its existing customers. Examples range from use of automatic teller machines (ATMs) to internet banking or mobile phone banking to provide certain limited banking services to banks customers. This model is additive in nature and may be seen as a modest extension of conventional branchbased banking.

Bank-led model The bank-led model offers a distinct alternative to conventional branchbased banking in that customer conducts financial transactions at a whole range of retail agents (or through mobile phone) instead of at bank branches or through bank employees. This model promises the potential to substantially increase the financial services outreach by using a different
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IT IN BANK delivery channel (retailers/ mobile phones), a different trade partner (telco / chain store) having experience and target market distinct from traditional banks, and may be significantly cheaper than the bank-based alternatives. The bank-led model may be implemented by either using correspondent arrangements or by creating a JV between Bank and Telco/non-bank. In this model customer account relationship rests with the bank

Non-bank-led model The non-bank-led model is where a bank does not come into the picture (except possibly as a safe-keeper of surplus funds) and the non-bank (e.g. telco) performs all the functions.

Mobile Banking Services Mobile banking can offer services such as the following: Account Information

Mini-statements and checking of account history

Alerts on account activity or passing of set thresholds

Monitoring of term deposits

Access to loan statements

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IT IN BANK Access to card statements

Mutual funds / equity statements

Insurance policy management

Pension plan management

Status on cheque, stop payment on cheque

Ordering check books

Balance checking in the account

Recent transactions

Due date of payment deleting of payments)

(functionality

for

stop,

change

and

PIN provision, Change of PIN and reminder over the Internet

Blocking of (lost, stolen) cards

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IT IN BANK Payments, Deposits, Withdrawals, and Transfers 1. 2. 3. 4. 5. 6. 7. 8. Domestic and international fund transfers Micro-payment handling Mobile recharging Commercial payment processing Bill payment processing Peer to Peer payments Withdrawal at banking agent Deposit at banking agent

Especially for clients in remote locations, it will be important to help them deposit and withdraw funds at banking agents, i.e., retail and postal outlets that turn cash into electronic funds and vice versa. The feasibility of such banking agents depends on local regulation which enables retail outlets to take deposits or not. A specific sequence of SMS messages will enable the system to verify if the client has sufficient funds in his or her wallet and authorize a deposit or withdrawal transaction at the agent. When depositing money, the merchant receives cash and the system credits the client's bank account or mobile wallet. In the same way the client can also withdraw money at the merchant: through exchanging sms to provide authorization, the merchant hands the client cash and debits the merchant's account.

Investments 1. Portfolio management services 2. Real-time stock quotes 3. Personalized alerts and notifications on security prices

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Support 1. Status of requests for credit, including mortgage approval, and insurance coverage 2. Check (cheque) book and card requests 3. Exchange of data messages and email, including complaint submission and tracking 4. ATM Location

Content Services 1. General information such as weather updates, news 2. Loyalty-related offers 3. Location-based services Based on a survey conducted by Forrester, mobile banking will be attractive mainly to the younger, more "tech-savvy" customer segment. A third of mobile phone users say that they may consider performing some kind of financial transaction through their mobile phone. But most of the users are interested in performing basic transactions such as querying for account balance and making bill payment.

Challenges for a Mobile Banking Solution Key challenges in developing a sophisticated mobile banking application are :

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Handset operability There are a large number of different mobile phone devices and it is a big challenge for banks to offer mobile banking solution on any type of device. Some of these devices support J2ME and others support WAP browser or only SMS. Initial interoperability issues however have been localized, with countries like India using portals like R-World to enable the limitations of low end java based phones, while focus on areas such as South Africa have defaulted to the USSD as a basis of communication achievable with any phone. The desire for interoperability is largely dependent on the banks themselves, where installed applications(Java based or native) provide better security, are easier to use and allow development of more complex capabilities similar to those of internet banking while SMS can provide the basics but becomes difficult to operate with more complex transactions. There is a myth that there is a challenge of interoperability between mobile banking applications due to perceived lack of common technology standards for mobile banking. In practice it is too early in the service lifecycle for interoperability to be addressed within an individual country, as very few countries have more than one mobile banking service provider. In practice, banking interfaces are well defined and money movements between banks follow the IS0-8583 standard. As mobile banking matures, money movements between service providers will naturally adopt the same standards as in the banking world.

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Security Security of financial transactions, being executed from some remote location and transmission of financial information over the air, are the most complicated challenges that need to be addressed jointly by mobile application developers, wireless network service providers and the banks' IT departments. The following aspects need to be addressed to offer a secure infrastructure for financial transaction over wireless network : 1. Physical part of the hand-held device. If the bank is offering smartcard based security, the physical security of the device is more important. 2. Security of any thick-client application running on the device. In case the device is stolen, the hacker should require at least an ID/Password to access the application. 3. Authentication of the device with service provider before initiating a transaction. This would ensure that unauthorized devices are not connected to perform financial transactions. 4. User ID / Password authentication of banks customer. 5. Encryption of the data being transmitted over the air. 6. Encryption of the data that will be stored in device for later / off-line analysis by the customer.

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Scalability & Reliability Another challenge for the CIOs and CTOs of the banks is to scale-up the mobile banking infrastructure to handle exponential growth of the customer base. With mobile banking, the customer may be sitting in any part of the world (true anytime, anywhere banking) and hence banks need to ensure that the systems are up and running in a true 24 x 7 fashion. As customers will find mobile banking more and more useful, their expectations from the solution will increase. Banks unable to meet the performance and reliability expectations may lose customer confidence. There are systems such as Mobile Transaction Platform which allow quick and secure mobile enabling of various banking services. Recently in India there has been a phenomenal growth in the use of Mobile Banking applications, with leading banks adopting Mobile Transaction Platform and the Central Bank publishing guidelines for mobile banking operations.

Application distribution Due to the nature of the connectivity between bank and its customers, it would be impractical to expect customers to regularly visit banks or connect to a web site for regular upgrade of their mobile banking application. It will be expected that the mobile application itself check the upgrades and updates and download necessary patches (so called "Over The Air" updates). However, there could be many issues to implement this approach such as upgrade / synchronization of other dependent components.

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Personalization It would be expected from the mobile application to support personalization such as : 1. 2. 3. 4. 5. 6. Preferred Language Date / Time format Amount format Default transactions Standard Beneficiary list Alerts

Mobile Banking in the world This part of the mobile commerce is very popular in countries where most of their population is unbanked. . Countries like Sudan, Ghana and South Africa received this new commerce very well. . In Latin America countries like Uruguay, Paraguay, Argentina, Brazil, Venezuela, Colombia, Guatemala and recently Mexico started with a huge success. In Colombia was released with Redeban. .

In Iran banks like Parsian, Tejarat, Mellat, Saderat, Sepah, edbi and bankmelli offer this service. Guatemala have the support of Banco industrial.

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IT IN BANK Mexico released the mobile commerce with Omnilife,Bancomer and a private company(MPower Ventures). Kenya's Safaricom (Part of the Vodafone Group) has had the very popular M-Pesa Service - mainly used to transfer limited amounts of money, but has been increasingly used to pay utility bills. Zain in 2009 launched their own mobile money transfer business known as ZAP in Kenya and other African countries.

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