Bonfring International Journal of Industrial Engineering and Management Science, Vol. 9, No. 1, March 2019
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Novelties and Best Practices of On-line Banking
Sector by Using Mobile Apps for Potential
Customer to Avoid Risk Factors
E. Kalaivani and Dr.A. Lakshmi
Abstract--- Online banking (Internet banking) has arises
as one of the most profitable e-commerce applications over
the last decade. This paper mainly focused the implementation
of innovational internet banking and also it focused the risk
which involved while using the internet banking. In this paper
we discussed the types of risk involved, its various uses and its
implementations. Banking sectors to identify that they have to
persistently to make the innovate and update the datasets to
retain their demanding and sensitive customers and to provide
convenient, reliable, and beneficial services. It also faces the
risk involved in innovative internet banking services. On-line
banking system has always been extremely statistics data with
rigorous activity that trusts on Information and
Communication Technology (ICT) to acquire, process, and
deliver the information to all relevant users. The emergence of
Internet banking which helps the customer’s needs & demand
in banking services.
Keywords--- Internet Banking Services,
Practices, Type of Services, Risk Factors.
I.
Innovation
INTRODUCTION TO INTERNET BANKING
I
NTERNET banking plays a vital role in electronic payment
system, it can be called by various terms such as online
banking, e-banking or virtual banking that enables bank
customers and various financial institution to conduct a range
of financial transactions through the financial institution's
website. There are different types of online financial
transactions are:
a) National Electronic Fund Transfer (NEFT) - is a
nation-wide payment system facilitating one-to-one
funds
transfer.
By
using
this
Scheme,
public/individuals and firms/ corporate can transfer
funds from any bank branch to any individual
electronically, if corporate having an account with any
other bank branch in the country also participating in
the Scheme.
b) Real Time Gross Settlement (RTGS) - defined as
the continuous (real-time) settlement of funds
transfers individually on an order by order basis
(without netting).
Electronic Clearing System (ECS) – Individuals or
corporate can easily make payments from their
occupying place to various purpose like telephone
bills, electricity bills, insurance premier, credit card
payments and loan repayments, etc.
d) Immediate Payment Service (IMPS) - it offers
interbank electronic fund transfer service through
mobile phones. IMPS is an tool to transfer money
quickly within banks across India through mobile,
internet and ATM which is not only safe but save time
& money both in financial and non-financial
perspectives.
In order to face the competitive world, many banks might
rethink their IT strategies through the emergence of Internet
banking which helps the customers needs & demand in
banking services.
c)
For business, many opportunities and threats arises by
rapid growth of the Internet.
Internet is the best path to become a full-fledged delivery
and distribution channel among the consumer-oriented
applications riding at the forefront of this evolution are
electronic financial products and services.
Fast growing expectations of customers & business
customers today demand payment methods that are as follows:
•
•
•
•
•
•
•
•
•
Conform to the highest standards
Don’t have identification methods.
Are complexed within hours.
Use devices that exist for other reasons.
Are 100% accurate & reliasble.
Are widely accepted by businesses.
Are globally usable.
Are value of money.
Use data to enhance the bank’s offer, but not intrude.
II.
INNOVATIONS IN BANKING
The term ‘Innovation’ means to make something new,
following is types of innovative online banking. Table 1.1
shows the Innovating of banking Sector.
E. Kalaivani, Assistant Professor, Department of Management Studies,
K.S. Rangasamy College of Technology, Tiruchengode, Tamilnadu, India.
E-mail: Kalaielango651@gmail.com
Dr.A. Lakshmi, Director, Department of Management Studies, K.S.
Rangasamy College of Technology, Tiruchengode, Tamilnadu, India.
E-mail: hodmba@ksrct.ac.in
DOI:10.9756/BIJIEMS.9024
ISSN 2277-5056 | © 2019 Bonfring
Bonfring International Journal of Industrial Engineering and Management Science, Vol. 9, No. 1, March 2019
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Table 1.1: Type of Innovations in Banking Sectors
S.No.
Types of online
banking
1.
Internet
banking
2.
Mobile
banking
3
Retail banking
4
Wholesale
banking
Universal
banking
5
6
Narrow
banking
Offshore
banking
Multinational
banking
7
Description
Uses
Also known as virtual banking
& web banking. It allows its
user to execute transactions
with the help of internet.
It provides all functions which are provided at
a local bank such as deposit of money , bill
payment.
It is a system that allows
customers to perform a number
of transactions through mobile
device.
Bill payment, Utility bill payment , ATM
location , Interbank Mobile Payment Service.
Banking institution executes
transactions directly with
customers rather than corporate
or other banks.
It conducting banking business
with industrial & business
entities
Services it includes – saving & checking
accounts , personal loans, Debit cards, Credit
cards
ICICI BANK
( first bank to introduce it.
ICICI BANK
Corporates , Trading houses , Multi-national
companies & domestic companies. Fund and
Non-fund based services, Value added services
& Internet banking services.
BANK OF AMERICA
Cash management, Wire
transfer, ACH
(Automated clearing
house),Bill presentment ,
payment.
It is a combination of
commercial banking,
investment banking, insurance
& many other financial
activities.
It offers many financial services such as
Merchant Banking, Mutual Funds, Factoring,
Credit cards, Housing Finance, Auto loans,
Retail loans, Insurance service and commercial
banking service.
ICICI BANK
It involves mobilizing largest
part of deposits in risk free
assets.
It describes banking activities
in currencies other than
currency of the country in
which bank accounts are
shield.
Operated in more than one
country. It is called as
international bank.
It helps to reduce NPA’s in banks.
Government securities.
Offshore financial institutions can also be used
for illicit purposes such as money laundering
and tax evasion
ICICI BANK at Special
Economic Zone , Mumbai ,
Aug 9,2003 Banks in Andorra,
Luxembourg, Switzerland
International operations through network of
branches, Unity of control , Professional
management
Indian bank – 1st bank open
branch in outside India.In
overseas , maximum position
occupied by
Bank Of Baroda.
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III.
Example
INNOVATIONS IN INTERNET AND MOBILE BANKING
internet facilities and their services with mobile banking.
The following table 1.2 shows the various innovations of
Table 1.2: Innovations in Internet and Mobile Banking
Services
Types of services
Services related to deposits
Store monetary value
Savings
Withdrawal
Payments
Starbucks, Apple
PayPal
Common Bank
Apple pay, Alipay, Stripe and Square,
Transferwise, Forex, Kantox
Account Information
Intermediation
Gem alto, foundry
Supplier pay initiative, Alibaba Small Loans,
Lending club, On-Deck, Funding-Circle
Services related to loans
IV.
Examples
TYPES OF RISKS INVOLVED IN INTERNET BANKING
Risks arises mainly during transaction level can provide
banks with incentives to invest in security standards. Risk is
classified into two broad categories:
Example of innovation
Stored-value card
Personal finance tools apps
Mobile technologies
Touch ID, NFC, and
Bluetooth technologies and
cross border transactions
Mobile technologies
Online platform
a) Risks associated to the transformation activity, and
b) Risks occurring at the transaction level for payments
or loans.
Risk associated with innovation payment services – (credit
risk, settlement risk, liquidity risk, and operational
risk),Innovations offered by entrants - banks’ liquidity risk,
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Bonfring International Journal of Industrial Engineering and Management Science, Vol. 9, No. 1, March 2019
operational risks are related to internal or external events that
result in monetary losses (Example :Data security risks, fraud
risks, risk of counterfeit, human error...)
•
•
•
•
•
•
•
•
Operational risk
Security risk
System architecture & design risk
Reputational risk
Legal risks
Money laundering risk
Strategic risk
Other risk
the customer’s personal data. RBI issue the notification on
14th June, 2001 regarging legal requirements and regulatory
guidance that frequently used to e-banking products and
services , which were the findings of a working group on
Internet Banking.
6.
1.
Operational Risk
This type of risk occur mainly due to fraud, processing
errors, system disruptions, or other unanticipated events
resulting in the institution’s inability to deliver products or
services. In banking operations , certain risk may occur. They
are
a) Volume forecasts
b) Management Information System
c) Outsourcing
2.
Security Risk
On account of unauthorized access to a banks critical
information databases like accounting system, risk
management system, portfolio management system, etc this
security risk arises. System hackers operating through the
Internet could access, retrieve and use confidential customer
information.
3.
System Architecture and Design Risk
An important factor in managing various kinds of
operational and security risks are appropriate system
architecture and control . If systems are not well designed or
implemented , bank faces the risk . The risk of an interruption
or slow-down of its existing systems occur if the electronic
banking or electronic money system it chooses is not
compatible with user requirements. Internet service providers
and external experts to implement, operate, and support
portions of their electronic money and electronic banking
activities but service providers may not have the requisite
expertise to deliver services expected by the bank, or may fail
to update their technology in time. So, his operations could be
interrupted due to system breakdowns or financial difficulties.
4.
Reputational Risk
This risk may cause major loss to public confident and it
creates a negative public opinion .The main reasons for this
risk may be system or product not working to the expectations
of the customers, significant system deficiencies, significant
security breach, inadequate information to customers about
product.
5.
3
Legal / Compliance Risk
This type of risk is the risk of non-compliance with legal
or regulatory requirements. It directly related to the electronic
banking due to high usage .Each country puts its own rules
into effect and it is difficult for a bank to constantly adapt its
services. The other legal risk is related with the protection of
Money Laundering Risk
Banks find some difficulties in applying traditional
method for detecting and preventing undesirable criminal
activities through Internet banking transactions. Money
laundering rules may also be inappropriate for some forms of
electronic payments so banks expose themselves to the money
laundering risk. The source of illegally obtained funds is
obscured through a succession of transfers and deals in order
that those same funds can eventually be made to appear as
legitimate income.
7.
Strategic Risk
The poor service of e-banking planning and investment
decisions can increase a financial institution’s strategic risk. Ebanking services act as innovators who anticipate the needs of
their customers, but may do so by incurring higher costs and
increased complexity in their operations. It occurs due to lack
of understanding among senior management about its potential
and implications.
8.
Other Risks
Various risks such as credit risk, liquidity risk, interest rate
risk, and market risk may also arise from electronic banking
and electronic money activities, though their practical
consequences than operational, reputational, and legal risks.
This may be realistics for banks engaged in a variety of
banking activities, as compared to banks or bank subsidiaries
that specialize in electronic medium.
Credit Risk: Credit risk is the risk that a counter party will
not settle an obligation for full value, either due or at any time
thereafter. Banks electronic activities may extend credit via
non-traditional channels, and expand their market beyond
traditional geographic boundaries. The procedures is not
sufficient to determine the credit worthiness of borrowers
applying for credit via remote banking procedures could
heighten credit risk for banks. Banks may face credit risk if a
third party intermediary fails to carry out its obligations with
respect to payment.
Liquidity Risks: This type of risk is the risk arising from a
bank’s inability to meet its obligations when they come due,
without incurring unacceptable losses, although the bank may
ultimately be able to meet its obligations.
Interest Rate Risk: It arises when there is an adverse
movements in interest rates. Banks specializing in the
provision of electronic money may face significant interest
rate risk to the extent adverse movements in interest rates
decrease the value of assets relative to electronic money
liabilities outstanding.
Market Risk: This type of risk arises from movements in
market prices, it is the risk of losses in on- and off-balance
sheet positions arising, including foreign exchange rates. For
payments banks may accepts foreign currencies electronic
money are subject to this type of risk.
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Bonfring International Journal of Industrial Engineering and Management Science, Vol. 9, No. 1, March 2019
Business Risks: It arises when it find difficult to predict
customer volumes and the stickiness of e-deposits , it could be
very difficult to manage liquidity.
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based on technology that by its very nature is designed to
extend the geographic reach of banks and customers is shown
in table 1.3 Expansion of market can extend beyond national
borders, highlighting certain risks.
CROSS BORDER ISSUES
V.
Electronic banking and electronic money activities are
Table 1.3: Internet Vs Mail Surveys
S.No
1.
Characteristics
Manpower
Internet Survey
Design Web page and write JavaScript.
2.
Cost
Rental/maintenance of server space to host Web page.
3.
Sampling frame
Restricted to people with access to the Internet.
4.
Time frame
Responses can usually be collected within two weeks.
5.
Quality of data
General Internet user population is adequate if the target
respondent is potential for systematic bias if only people
with certain characteristics respond.
6.
Generalizability of
results
It is very difficult to determine since there may be a
systematic bias in terms of who actually responds to the
questionnaire.
People/companies involved in survey with Internet access
or who are users of the Internet.
7.
Suitability
8.
Problems
9.
Response rate
Unable to control who responds. Screening of data for
unsuitable respondents (e.g., responses from children or
other Countries).
Cannot be computed. Major percentage of respondents is
dependent on publicity of the survey as well as follow-up
reminders via e-mails to potential respondents.
Factors that influencing internet banking services shows
the value of mean and standard deviation is shown in table 1.4.
Table 1.4: Mean, Standard Deviation of Internet Banking
Services
Internet Banking Service
Mean*
Standard
Deviation
Account information and balance
enquiry
Electronic bill payments
Summary reports of transactions
Funds transfer
Check cancellation
Checkbook application
Financial planning and analysis
Loan application
Share margin trading account
VI.
6.54
0.96
6.13
5.78
5.63
5.59
5.41
4.48
4.38
4.06
1.30
1.51
1.60
1.65
1.65
1.80
1.92
2.0
Mail Survey
Insert survey into envelopes, paste stamps or frank
Envelopes.
Envelopes, stamps, photocopying of
questionnaires.
Restricted to sample that Received the
questionnaire.
Responses can usually takes about a month for
surveys to be returned.
Dependent on whether target
Respondents, e.g., CIO, respond to questionnaire.
With the use of random sample, systematic bias is
reduced by obtaining a high response rate.
Results generalizable to target
population if response rate is
Adequate.
Must be able to identify potential
Respondents. Can reach out to
the general public regardless of
Computer access.
Costly and slow.
Can be computed. Major percentage
of respondents is dependent on
Follow-up mailings.
provided by the banks and lot of development by innovation
methods by developers. Literature survey support for
identifying the various methods and new ideas are emerged
internet banking concepts though authors citied their
references has been presented in this article. It is concluded
that for proper use of internet services a bank and mobile
banking should provide a attractive and easy to use interface.
Proper security concerns should be provided by the banks to
the customers so that customers can easily use the internet
services provided by the innovation internet banks.
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banking to their customers needs and satificatation. In this
research paper, to have provided the various internet services
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