Electronic Banking

Md Sajib Hossain, Lecturer, Department of

Finance,DU

Electronic Banking
Electronic Banking is transforming the financial services industry through various impossible innovations. Electronic banking allow banks to expand their markets for traditional deposit taking and credit extension activities, and to offer new products and services or strengthen their competitive position in offering existing payment services. It is about performing banking through electronic means. Doing all the activities of a bank with itself and providing banking services through electronic or digital method like internet, mobile phone, ATM , telecommunication network , SMS banking etc.

Basic Features of E-Banking

All branches connected with central server for 24 hours a day and 365 days in a year. Customers can perform banking transactions from any branch located at any place. Customers gets banking services through electronic delivery channels on the basis of 24 X 365 hours.

Scope of Existing Electronic Banking in Bangladesh

Internet Banking Automated Teller Machine Mobile Banking Electronic Fund Transfer like BEFTN SWIFT Tele banking SMS banking Banking Kiosks Point of Sale ( POS) Terminal Others

Benefits of Electronic Banking

24 hours access Fast transactions Paperless transactions Convenience Worldwide access Allow transaction from any delivery channel Allow plastic money /E-cash /Digital cash

Infrastructure requirement for Ebanking

Computer network and data communication Integrated Core banking software/ solution Hardware platform Proper manpower with ICT knowledge and skills

Additional Infrastructure requirements ACHS National Payment Gateway ICT act or Cyber law E- business

Internet banking
In Internet banking , a channel of e-banking, customer is given a specific user ID and a confidential/secret or secured password so that they can access to their own account. Bank offers e-banking in two main ways: First an existing bank with physical offices can establish a Web site and offers its customers internet banking in addition to its tradition banking Second bank can be established as virtual or internet bank only

Internet banking
Internet banking offerings provided by banks can broadly be grouped in three groups with distinct risks profile:
Information Communicative Transactional

Different Delivery channel of online banking and current status in Bangladesh

Type Informational Basic Electronic Brochure, Contract us Open account Intermediary Search Engine, report download Advanced Discussion group

Transactional

Balance statement, Non branch bank bill payment

Customer relationship

E-mail

Calculation, Videoconferencing software download

Source :BIBM Survey ,2011

Security with Internet banking

Providing internet banking requires high level of security. For example DBBL data center is equipped with worlds no networking equipment from CISCO such as switch , router and PIX firewall. Any customers requiring internet banking services must pass throw two firewalls such as Check Point Firewalls and CISCO firewalls. Log in ID is mapped with User ID along with setting the transaction limit

Internet banking services in bangladesh

Accounts summary Accounts Details Account activity Transfer of funds Third party Transfer Pay Bills Standing instructions Open/Modify term deposits Loan repayments Statement request Open FDR Cheque book request

Internet banking services in bangladesh

Stop payment cheque Interest rate and Foreign exchange rate inquiry Re-fill prepaid card Change password L/C and BG

Automated Teller Machines:

ATM
An automatic teller machine or automated teller machine (ATM) is an electronic device which allows a bank's customers to make cash withdrawals and check their account balances at any time without the need for a human teller. Many ATMs also allow people to deposit cash or cheques, transfer money between their bank accounts or even buy postage stamps.

ATM
When an individual withdraw cash from your ATM, this information goes to the host processor through a dedicated telephone line, which then routes the transaction request to the cardholder's bank or the institution that issued the card. The host processor causes an electronic funds transfer to take place from the customer's bank account to the host processor's account. Once the funds are transferred to the host processor's bank account, the processor sends an approval code to the ATM authorizing the ATM machine to dispense the cash requested. The processor then ACHs the cardholder's funds into the merchant's bank account, usually within 12 to 24 hours.

How Do ATMs Work?

An ATM is simply a data terminal with two input and four output devices. the ATM has to connect to, and communicate through, a host processor. ATMs connect to the host processor through a normal phone line. The host processor may be owned by a bank or financial institution, or it may be owned by an independent service provider.

Parts of an ATM

Card reader - The card reader captures the account information stored on the magnetic stripe on the back of an ATM/debit or credit card. The host processor uses this information to route the transaction to the cardholder's bank.

Keypad - The keypad lets the cardholder tell the bank what kind of transaction is required (cash withdrawal, balance inquiry, etc.) and for what amount. Also, the bank requires the cardholder's personal identification number (PIN) for verification.

Parts of an ATM

An ATM has four output devices:

Speaker - The speaker provides the cardholder with auditory feedback when a key is pressed.
Display screen - The display screen prompts the cardholder through each step of the transaction process. Receipt printer - The receipt printer provides the cardholder with a paper receipt of the transaction. Cash dispenser - The heart of an ATM is the safe and cash-dispensing mechanism. The entire bottom portion of most small ATMs is a safe that contains the cash.

An example of the front of a typical debit card: 1. Issuing bank logo 2. EMV chip 3. Hologram 4. Card number 5. Card brand logo 6. Expiration date 7. Cardholder's name

An example of the reverse side of a typical debit card:

1. Magnetic stripe 2. Signature strip 3. Card Security code

Point of Sale ( POS)

Usually the banks distribute the POS terminals to big hotels , departmental shops where the customers frequently visits. This is small electronic device connected with the banks' database through switching software. Both merchants and the customers should have a account in the bank. The bank may charge a fee to both customers and the merchants forthis type of service.

Benefits of POS
To a merchant POS can provide
1. 2. 3. 4. 5. 6. 7. 1. 2. 3. 4. manage inventory Manage markdowns or promotions Track promotions Reduce paper work Faster transaction Accuracy Analysis Connection reliability Web-based POS fee POS software up gradation Hardware could cause problems

Disadvantages of POS