Bonfring International Journal of Industrial Engineering and Management Science, Vol. 9, No. 1, March 2019 1 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 2 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. 8 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, ISSN 2277-5056 | © 2019 Bonfring 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. ISSN 2277-5056 | © 2019 Bonfring 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. 4 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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