MOBILE BANKING

CH. 1 : INTRODUCTION

MOBILE BANKING (also known as M- banking, 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 is most often
performed via SMS or the Mobile Internet but can also use special programs
called clients downloaded to the mobile device. Mobile banking is a way for the
customer to perform banking actions on his or her cell phone or other mobile
device. It is also known as M-Banking or SMS Banking. Mobile banking allows
the user to log into his or her account from a cell phone, and then use the phone
to make payments, check balances, transfer money between accounts, notify the
bank of a lost or stolen credit card, stop payment on a check, receive a new PIN,
or view a monthly statement, among other transactions. This type of banking is
meant to be more convenient for the consumer than having to physically go into
a bank, log on from their home computer, or make a phone call. While all of
this is true, some are concerned about the security of mobile banking.

ORIGIN

Mobile banking probably had its origin in November 1946.In India, the first
bank on wheel was launched by the bank of Patiala in 1950. Internet banking
helped give the customer's anytime access to their banks. Customers could
check out their account details, get their bank statements, perform transactions
like transferring money to other accounts and pay their bills sitting in the
comfort of their homes and offices. However the biggest limitation of Internet
banking is the requirement of a PC with an Internet connection, not a big
obstacle if we look at the US and the European Mobile banking – The Future
White Paper Overview Abstract This paper describes the basic concepts,

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services offered, market survey and technology which enables Mobile banking.
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. 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 traveling,
receiving online updates of stock price or even performing stock trading
while being stuck in traffic. Mobile devices, especially smart-phones, 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,
with high rate of penetration and potential to grow. Document Audience This
document is primarily intended for Marketing, Sales, Product Support, Internet
Services Group, Project Engineering and anyone who is interested in Mobile
banking. Mobile banking addresses this fundamental limitation of Internet
banking, as it reduces the customer requirement to just a mobile phone. Mobile
usage has seen an explosive growth in most of the Asian economies like India,
China and Korea. The main reason that Mobile banking scores over Internet
banking is that it enables ‘Anywhere Anytime banking'. Customers don't need
access to a computer terminal to access their bank accounts, now the can do so
on-the-go while waiting for the bus to work, traveling or when they are waiting
for their orders to come through in a restaurant. The scale at which Mobile
banking has the potential to grow can be gauged by looking at the pace users are
getting mobile in these big Asian economies. According to the Cellular
Operators' Association of India (COAI) the mobile subscriber base in India hit
40.6 million in the August 2004. In September 2004 it added about 1.85million
more. The explosion as most analysts say, is yet to come as India has about one
of the biggest untapped markets. China, which already witnessed the mobile
boom, is expected to have about 300 million mobile users by the end of 2004.
All of these countries have seen gradual roll-out of mobile banking services, the

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most aggressive being Korea which is now witnessing the roll-out of some of
the most advanced services like using mobile phones to pay bills in shops and
restaurants.

Definition of Mobile Banking:

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."

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CH. 2. Mobile Banking Conceptual Model

According to this model Mobile Banking can be said to consist of three

interrelated 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 independent module. Mobile phone banking may also be used
to help in business situations.

Trends in mobile banking

The advent of the Internet has enabled new ways to conduct banking business,
resulting in the creation of new institutions, such as online banks, online brokers
and wealth managers. Such institutions 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 nowexceeds 2.5 billion
(of which more than 2 billion are GSM).

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With mobile technology, banks can offer 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. Smartphones and
3G connectivity provide some capabilities that older text message-only phones
do not.
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. Another study from 2010 by Berg Insight
forecasts that the number of mobile banking users in the US will grow from 12
million in 2009 to 86 million in 2015. The same study also predicts that the
European market will grow from 7 million mobile banking users in 2009 to 115
million users in 2015.
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.

Mobile banking business models

A wide spectrum of Mobile/branchless banking models is evolving. 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 Nonbank /Telecommunication Company (Telco). Another difference lies in
the nature of agency agreement between bank and the Non- bank. Models of

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branchless banking can be classified into three broad categories - bank Focused,
bank –Led and Non-bank -Led.

I. Bank -focused model:

The bank -focused model emerges when a traditional bank uses non-traditional
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
bank’s’ customers. This model is additive in nature and may be seen as a
modest extension of conventional branch-based banking.

II. 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 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/nonbank.
In this model customer account relationship rests with the n bank 3 Nonbank
-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.

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Mobile Banking Services

Mobile banking can offer services such as the following:

I. Account Information
1. Mini-statements and checking of account history
2. Alerts on account activity or passing of set thresholds
3. Monitoring of term deposits
4. Access to loan statements
5. Access to card statements
6. Mutual funds / equity statements
7. Insurance policy management
8. Pension plan management
9. Status on cheque, stop payment on cheque

II. Payments & Transfers

1. Domestic and international fund transfers
2. Micro-payment handling
3. Mobile recharging
4. Commercial payment processing
5. Bill payment processing
6. Peer to Peer payments

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

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IV. 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

V. 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:

I. Interoperability:
There is a lack of common technology standards for mobile banking. Many
protocols are being used for mobile banking – HTML, WAP, SOAP, XML to
name a few. It would be a wise idea for the vendor to develop a mobile banking

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application that can connect multiple banks. It would require either the
application to support multiple protocols or use of a common and widely
acceptable set of protocols for data exchange.
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.
Overcoming 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.

II. Scalability & Reliability:

Another challenge for the CIO’s 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 bank’s 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. Bank’s unable to meet the performance and reliability expectations
may lose customer confidence.

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III. Application distribution:

Due to the nature of the connectivity between bank and its customers, it would
be impractical to expect customers to regularly visit bank s 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.

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

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CH. 3. Mobile banking in the world

Mobile banking has come in handy in many parts of the world with little or no
Infrastructure development, especially in remote and rural areas. This part of the
mobile commerceis also very popular in countries where most of their
population is unbanked. In most of these places banks can only be found in big
cities and customers have to travel hundreds of miles to the nearest
bank.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 Iran banks like Parsian, Tejarat, Mellat, Saderat,
Sepah, edbi and bankmelli offer this service. Guatemala has the support of
Banco industrial. 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.

Technologies Behind Mobile Banking

Technically speaking most of these services can be deployed using more than
one channel. Presently, Mobile Banking is being deployed using mobile
applications developed on one of the following four channels.
1. IVR (Interactive Voice Response)
2. SMS (Short Messaging Service)
3. WAP (Wireless Access Protocol)
4. Standalone Mobile Application Clients

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I. IVR- Interactive Voice Response:

IVR or Interactive Voice Response service operates through pre-specified

numbers that banks advertise to their customers. Customer's make a call at the
IVR number and are usually greeted by a stored electronic message followed by
a menu of different options. Customers can choose options by pressing the
corresponding number in their keypads, and are then read out the corresponding
information, mostly using a text to speech program.
Mobile banking based on IVR has some major limitations that they can be used
only for Enquiry based services. Also, IVR is more expensive as compared to
other channels as it involves making a voice call which is generally more
expensive than sending an SMS or making data transfer (as in WAP or
Standalone clients).
One way to enable IVR is by deploying a PBX system that can host IVR dial
plans.Banks looking to go the low cost way should consider evaluating
Asterisk, which is an open source Linux PBX system.

II. SMS – Short Messaging Service:

SMS uses the popular text-messaging standard to enable mobile application

based banking. The way this works is that the customer requests for information
by sending an SMS containing a service command to a pre-specified number.
The bank responds with a reply SMS containing the specific information.
For example, customers of the HDFC Bank in India can get their account
balance details by sending the keyword ‘HDFCBAL' and receive their balance
information again by SMS.

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However there have been few instances where even transaction-based services
have been made available to customer using SMS. For instance, customers of
the Centurion Bank of Punjab can make fund transfer by sending the SMS
‘TRN (A/c No) (PIN No) (Amount)'.
One of the major reasons that transaction based services have not taken of on
SMS is because of concerns about security. The main advantage of deploying
mobile applications over SMS is that almost all mobile phones are SMS
enabled.
An SMS based service is hosted on a SMS gateway that further connects to the
Mobile service providers SMS Centre. There are a couple of hosted IP based
SMS gateways available in the market and also some open source ones like
Kannel.

SMS NETWORK ARCHITECTURE

III.WAP – Wireless Access Protocol:

WAP uses a concept similar to that used in Internet banking. Banks maintain
WAP sites which customer's access using a WAP compatible browser on their
mobile phones. WAP sites offer the familiar form based interface and can also
implement security quite effectively.

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Bank of America offers a WAP based service channel to its customers in Hong
Kong. The banks customers can now have an anytime, anywhere access to a
secure reliable service that allows them to access all enquiry and transaction
based services and also more complex transaction like trade in securities
through their phone A WAP based service requires hosting a WAP gateway.
Mobile Application users access the bank's site through the WAP gateway to
carry out transactions, much like internet users access a web portal for accessing
the banks services.
The following figure demonstrates the framework for enabling mobile
applications over WAP. The actually forms that go into a mobile application are
stored on a WAP server, and served on demand. The WAP Gateway forms an
access point to the internet from the mobile network.

WAP Network Architecture for Mobile Applications

IV. Standalone Mobile Application Clients:

Standalone mobile applications are the ones that hold out the most promise as
they are most suitable to implement complex banking transactions like trading
insecurities. They can be easily customized according to the user interface
complexity supported by the mobile. In addition, mobile applications enable the
implementation of a very secure and reliable channel of communication.
One requirement of mobile applications clients is that they require to be

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downloaded on the client device before they can be used, which further requires
the mobile device to support one of the many development environments like
J2ME or Qualcomm's BREW. J2ME is fast becoming an industry standard to
deploy mobile applications and requires the mobile phone to support Java. The
major disadvantage of mobile application clients is that the applications needs
to be customized to each mobile phone on which it might finally run.

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CH. 4. Advantage & Disadvantage of Mobile

Banking

Advantages:

1. The biggest advantage that mobile banking offers to bank s is that it

drastically cuts down the costs of providing service to the customers. For
example an average teller or phone transaction costs about $2.36 each, whereas
an electronic transaction costs only about $0.10 each.

2. Additionally, this new channel gives the bank ability to cross-sell up-sell their
other complex banking products and services such as vehicle loans, credit cards
etc.

3. For service providers, Mobile banking offers the next surest way to achieve
growth. Countries like Korea where mobile penetration is nearing saturation,
mobile banking is helping service providers increase revenues from the now
static subscribers use. Service providers are increasingly using the complexity
of their supported mobile banking services to attract new customers and retain
old ones.

4. A very effective way of improving customer service could be to inform

customers better. Credit card fraud is one such area.

5. A bank could, through the use of mobile technology, inform owners each
time purchases above a certain value have been made on their card. This way
the owner is always informed when their card is used, and how much money
was taken for each transaction. Similarly, the bank could remind customers of

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outstanding loan repayment dates for the payment of monthly installments or

simply tell them that a bill has been presented and is up for payment. The
customers can then check their balance on the phone and authorize the required
amounts for payment.

6. The customers can also request for additional information. They can
automatically view deposits and withdrawals as they occur and also pre-
schedule payments to be made or cheques to be issued.

7. Similarly, one could also request for services like stop cheque or issue of a
cheque book over one’s mobile phone.

8. There are number of reasons that should persuade bank s in favor of mobile
phones.

9. They are set to become a crucial part of the total banking services experience
for the customers.

10. Also, they have the potential to bring down costs for the bank itself.
Through mobile messaging and other such interfaces, bank s provides value
added services to the customer at marginal costs.

11. Such messages also bear the virtue of being targeted and personal making
the services offered more effective. They will also carry better results on
account of better customer profiling.

12. Yet another benefit is the anywhere/anytime characteristics of mobile

services. A mobile is almost always with the customer. As such it can be used
over a vast geographical area. The customer does not have to visit the bank

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ATM or a branch to avail of the bank’s services. Research indicates that the
number of footfalls at a bank’s branch has fallen down drastically after the
installation of ATMs.

13. As such with mobile services, a bank will need to hire even less employees
as people will no longer need to visit bank branches apart from certain
occasions.

14. With Indian telecom operators working on offering services like money
transaction. Over a mobile, it may soon be possible for a bank to offer phone-
based credit systems.

15. This will make credit cards redundant and also aid in checking credit card.
Fraud apart from offering enhanced customer convenience. The use of mobile
Technologies is thus a win-win proposition for both the bank s and the bank’s
Customers.

16. The banks add to this personalized communication through the process of
Automation. For instance, if the customer asks for his account or card balance
after conducting a transaction, the installed software can send him an automated
reply informing of the same. These automated replies thus save the bank the
need to hire Additional employees for servicing customer needs.

17. Use banking facilities anywhere, even far away from a bank .Easy operation
– access accounts from a cell phone. Lower operational costs (for bank s) than
setting up ATM machines.

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Disadvantage:

1. Back in days when Internet was introduced, it was a boon to the financial
industry as it reduced all volumes by opening another self-service channel for
servicing customers.

2. With mobile that advantage is not there as already investments are made to
reduce call volumes using Internet and Internet is one of the technologies that is
ever spreading in customer community.

3. Almost 80% of the people in US already have internet connection. Mobile

banking would be another value added service that can be provided by financial
institutions, it may only bring good will.

4. Depending on the technological direction for enabling Mobile companies

either has to spend enormous amount of money in matching customer’s
expectation or maintaining another stream of technology applications.
Technology still has security issues and software distribution issues.
Uses
1) Pay bills
2) Transfer funds
3) Take mini-statements, conduct balance enquiries
4) Set alerts for movement in accounts – change in balance, payments of bills
set on auto payment mode etc.
5) Purchase items – e.g. ABNAmro’s Mpower enables you to shop Although
advanced/high-end transactions can be conducted using cell phones,
most mobile banking customers use it for basic activities like balance enquiry,
making payments of regular bills etc.

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CH. 5. SMS Banking

When people are hard pressed for time, the need for "anytime anywhere” is
banking gains utmost importance. Bearing this in mind, bank s provides a novel
service which gives retail customers account information and real-time
transaction capabilities from their cell phones. With SMS banking the following
services can be obtained:
· Get account balance details
· Request a cheque book
· Request last three transaction details
· Pay bills for electricity, mobile, insurance etc.

SMS banking Overview:

In order to avail the services mentioned above, a user subscribing to a wireless

carrier sends an SMS with a predefined code to the bulk service provider’s
number. The service provider forwards this message to the bank’s mobile
banking applications. The mobile banking applications interface with the core
banking servers (that contain the user account information) that service the
request made by the user. The response is then sent by the mobile banking
applications to the bulk service provider who in turn forward it to the valid user
via SMS. Which is very well explaining in the following diagram?

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There are two ways in which a bank can communicate with a customer using
SMS:

1. In the first method the bank proactively sends data to customers in response
to certain transactions. For e.g. account to account transfer, salary credit and
some promotional messages. This data can be sent to the customer in two ways

a. E-mail to mobile (E2M):

In this method, the bank sends an email to the mobile banking application
through a specific email address. This email may consist of the message content
together with the mobile numbers of the customer. The mobile banking

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application in turn sends this message in a specific format (for e.g. XML tags
are part of a HTTP GET message query string) to the service provider’s
application server. From here on the information from the XML tags is
extracted and sent as a SMS to the wireless carrier which in turn forwards this
message to the customer.

b. Database to mobile (D2M):

Here a mobile banking application continuously polls the bank s database server
and whenever a relevant event happens, for e.g. an account to account transfer,
it forwards the specific message to the service provider’s application server. The
message format may be the same as the one used in the E2M case. This message
is then forwarded to the wireless carrier which in turn forwards this message to
the customer.
In the second method the bank sends data in response to specific customer
query such as account balance details. The customer first sends a pre-defined
request code via SMS to the Bulk SMS service provider’s registered mobile
number.
Depending on the message code, the bulk SMS provider forwards the SMS to a
PULL application in the mobile banking server. The PULL application receives
the request and forwards it to the core banking application for further
processing. The core banking server then processes this message and sends the
reply to the PULL application which in turn forwards in to the customer via the
service provider. As in the above cases the request and the response for the
PULL application may be a HTTP GET message with tags in the query string.

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Marketing strategy used by bank via mobile banking

SMS banking services are operated using both Push and Pull messages. Push
messages are those that the bank chooses to send out to a customer's mobile
phone, without the customer initiating a request for the information. Typically
push messages could be either Mobile Marketing messages or messages alerting
an event which happens in the customer's bank account, such as a large
withdrawal of funds from the ATM or a large payment using the customer's
credit card, etc.
Another type of push message is One-time password (OTPs). OTPs are the
latest tool used by financial and banking service providers in the fight against
cyber fraud. Instead of relying on traditional memorized passwords, OTPs are
requested by consumers each time they want to perform transactions using the
online or mobile banking interface. When the request is received the password
is sent to the consumer’s phone via SMS. The password is expired once it has
been used or once its scheduled life-cycle has expired.
Pull messages are those that are initiated by the customer, using a mobile phone,
for obtaining information or performing a transaction in the bank account.
Examples of pull messages for information include an account balance inquiry,
or requests for current information like currency exchange rates and deposit
interest rates, as published and updated by the bank .
The bank’s customer is empowered with the capability to select the list of
activities (or alerts) that he/she needs to be informed. This functionality to
choose activities can be done either by integrating to the Internet banking
channel or through the bank’s customer service call centre.

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Typical Push & Pull Services offered under SMS banking

Depending on the selected extent of SMS banking transactions offered by the

bank, a customer can be authorized to carry out either non-financial
transactions, or both and financial and non-financial transactions. SMS banking
solutions offer customers a range of functionality, classified by Push and Pull
services as outlined below.

Typical Push Services would include:

 Periodic account balance reporting (say at the end of month)

 Reporting of salary and other credits to the bank account
 Successful or unsuccessful execution of a standing order
 Successful payment of a cheque issued on the account;
 Insufficient funds
 Large value withdrawals on an account
 Large value withdrawals on the ATM or on a debit card
 Large value payment on a credit card or out of country activity on a credit
card.
 One-time password and authentication

Typical Pull Services would include:

 Account balance inquiry

 Mini statement request
 Electronic bill payment
 Transfers between customer's own accounts, like moving money from a
savings account to a current account to fund a cheque.

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 Stop payment instruction on a cheque

 Requesting for an ATM card or credit card to be suspended
 De-activating a credit or debit card when it is lost or the PIN is known to be
Compromised.
 Foreign currency exchange rates inquiry
 Fixed deposit interest rate inquiry

Concerns & Skepticism about SMS Banking

Many banks would have some concerns when the prospects of introducing SMS
banking are discussed. Most of these concerns could revolve around security
and operational controls around SMS banking. However supporters of SMS
claim that while SMS banking is not as secure as other conventional banking
channels, like the ATM and Internet banking, the SMS banking channel is not
intended to be used for very high-risk transactions.

The Convenience Factor

The convenience of executing simple transactions and sending out information

or alerting a customer on the mobile phone is often the overriding factor that
dominates over the skeptics who tend to be overly bitten by security concerns.
As a personalized end-user communication instrument, today mobile phones are
perhaps the easiest channel on which customers can be reached on the spot, as
they carry the mobile phone all the time no matter where they are. Besides, the
operation of SMS banking functionality over phone key instructions makes its
use very simple. This is quite different to Internet banking which can offer
broader functionality, but has the limitation of use only when the customer has
access to a computer and the Internet. Also, urgent warning messages, such as

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SMS alerts, are received by the customer instantaneously; unlike other channels
such as the post, email, Internet, telephone banking, etc. on which a bank 's
notifications to the customer involves the risk of delayed delivery and response.
The SMS banking channel also acts as the bank’s means of alerting its
customers, especially in an emergency situation; e.g. when there is an ATM
fraud happening in the region, the bank can push a mass alert (although not
subscribed by all customers) or automatically alert on an individual basis when
a predefined ‘abnormal’ transaction happens on a customer’s account using the
ATM or credit card. This capability mitigates the risk of fraud going unnoticed
for a long time and increases customer confidence in the bank’s information
systems.

Compensating controls for lack of Encryption

The lack of encryption on SMS messages is an area of concern that is often

discussed. This concern sometimes arises within the group of the bank’s
technology personnel, due their familiarity and past experience with encryption
on the ATM and other payment channels. The lack of encryption is inherent to
the SMS banking channel and several bank s that use it have overcome their
fears by introducing compensating controls and limiting the scope of the SMS
banking application to where it offers an advantage over other channels.
Suppliers of SMS banking software solutions have found reliable means by
which the security concerns can be addressed. Typically the methods employed
are by pre-registration and using security tokens where the transaction risk is
perceived to be high.
Sometimes ATM type PINs are also employed but the usage of PINs in SMS
banking makes the customer's task more cumbersome.

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Technologies Employed for SMS Banking

Most SMS banking solutions are add-on products and work with the bank’s
existing host systems deployed in its computer and communications
environment. As most bank s have multiple backend hosts, the more advanced
SMS banking systems are built to be able to work in a multi-host banking
environment; and to have open interfaces which allow for messaging between
existing banking host systems using industry or de-facto standards.
Well developed and mature SMS banking software solutions normally provide a
robust control environment and a flexible and scalable operating environment.
These solutions are able to connect seamlessly to multiple operators in the
countryof operation. Depending on the volume of messages that are require to
be pushed; means to connect to the SMS could be different, such as using
simple modems or connecting over leased line using low level communication
protocols. Advanced SMS banking solutions also cater to providing failover
mechanisms and least-cost routing options.

The Possible Future for Mobile Banking

Payment on approval by SMS

This feature allows for joint accounts or business account to have a pre-
determined limit to prompt for either supervisor or joint account holder
approval. A payment request is made from the account to another pre-
nominated account; a message is then send to either the supervisor or joint
account holder to also approve the payment.

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Two-stage confirmed payment

This payment process is similar to a letter of credit, when the end user sends a
payment instruction for goods or services, the amount of the payment will be
transferred to a specific account. The beneficiary will be notified that the
amount is guaranteed. Once the goods or services are delivered the end
user/payee will be able to accept or reject the goods/services and make payment
accordingly by approving or denying the payment process.

Mobile Payment in Retail Outlets

Using nothing but their own mobile handset, consumers will be able to make
purchased at a wide variety of retail outlets. Let's use the supermarket as a
common example: the consumer needs to make a purchase from a supermarket,
he/she goes to the cashier and sends a payment request along with his/her
password and the specific POS machine number. The system will then send
back a Digital Money Sequence Number (DMSN) to the buyer. When asking to
pay for the goods, the cashier will use his/her special banking card, and when
the buyer is asked for a password all they need to do is enter the DMSN. As
long as the transaction is within the daily limit of the account the transaction
will take place instantly.

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CH. 6. E- Banking

Introduction of E- banking

The acceleration in technology has produced an extraordinary effect upon our

economy in general has had a particularly profound impact in expanding the
scope and utility of financial products over the last ten years. Information
technology has made possible the creation, valuation, and exchange of complex
financial products on a global basis and even that just in recent years.
Derivatives are obviously the most evident of the many products that
technology has inspired, but the substantial increase in our calculation has
permitted a variety of other products and, most beneficially, new ways to
unbundled risk.
What is really quite extraordinary is that there is no sign that this process of
acceleration in financial technology is approaching an end. We are moving at an
exceptionally rapid pace, fueled not only by the enhanced mathematical
applications produced by our ever rising computing capabilities but also by our
expanding telecommunications capabilities and the associated substantial
broadening of our markets.

Functions of E-banking
At present, the personal e- bank system provides the following services: -

1. Inquiry about the information of account:

The client inquires about the details of his own account information such as the
cards / account’s balance and the detailed historical records of the account and
downloads the report list.

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2. Card accounts’ transfer:

The client can achieve the fund to another person’s Credit Card in the same city.

3. Bank -securities accounts transfer:

The client can achieve the fund transfer between his own bank savings accounts
of his own Credit Card account and his own capital account in the Securities
Company. Moreover, the client can inquire about the present balance at real
time.

4. The transaction of foreign exchange:

The client can trade the foreign exchange, cancel orders and inquire about the
information of the transaction of foreign exchange according to the exchange
rate given by our bank on net.

5. The B2C disbursement on net:

The client can do the real-time transfer and get the feedback information about
payment from our bank when the client does shopping in the appointed web-
site.

6. Client service:
The client can modify the login password, information of the Credit Card and
the client information in e- bank on net.

7. Account management:
The client can modify his own limits of right and state of the registered account
in the personal e- bank, such as modifying his own login password, freezing or
deleting some cards and so on.

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8. Reporting the loss if the account:

The client can report the loss in the local area (not nationwide) when the client’s
Credit Card or passbook is missing or stolen.

Types of E- banking

1. Deposits, withdrawals, inter-account transfer and payment of linked accounts

at an ATM;

2. Buying and paying for goods and services using debit cards or smart cards
without having to carry cash or a cheques book.

3. Using a telephone to perform direct banking- make a balance enquiry, intera

Account transfers and pay linked accounts;

4. Using a computer to perform direct banking- make a balance enquiry,

interaccount transfers and pay linked

Advantages of E-Banking

1. Account Information: Real time balance information and summary of day’s

transaction.

2. Fund Transfer: Manage your Supply-Chain network, effectively by using our

online hand transfer mechanism. We can affect fund transfer on a real time basis
across the bank locations.

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3. Request: Make a banking request online.

4. Account information: The complete database that the bank has about our
company is available to us at our terminal. It provides us:
 Current balance in our account on real-time basis.
 Day’s transactions in the account.
 Details of cash credit limit, drawing power, amount utilized, etc.

5. The real life situation of user-wise limits and multilevel signatories can be
mapped in the net-based fund transfer module too. We can specify user-wise
cap for fund transfer and the number of approvals needed for each fund transfer.
The fund transfer will not take place unless the required number of signatories
has approved it.

6. With a power of Attorney from our dealers, we can link the dealer’s accounts
to our account in order to have an online fund transfer, saving us time and
money involved with cheques collections systems. Alternatively, the dealer can
credit our account through this channel. Similarly, we could also affect vendor
and other payments online.

7. Customers can also submit the following requests online: Registration for
account statements by e-mail daily / weekly / fortnightly / monthly basis.
 Stop payment or cheques
 Cheque book replenishment
 Demand Draft / Pay-order
 Opening of fixed deposit account
 Opening of Letter of credit

8. The company does not have to spend anything extra to avail such facilities.
All it requires is Internet connectivity. The product enables the company to pro-

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actively manage its cash flows, ease reconciliation efforts as all the MIS is
available at the click of the mouse.

9. Bill Payment through Electronic banking: Internet has thus ushered the
concept of anytime and anywhere banking. To the individual the onerous task of
visiting several places to settle his service bills like telephone, water, electricity,
etc., can be overcome through the electronic Bill Pay service provided by the
bank. He can pay his regular monthly bills (telephone, electricity, mobile phone,
insurance, etc.) right from his desktop. No more missed deadlines, no more loss
of interest. He can schedule his bills in advance, and thus avoid missing the bill
deadlines as well as earn extra interest on his money.

10. Other benefits: The e- banking provides some other benefits also.
They are:
 Convenience.
 Speed of concluding transactions.
 Safety- banking from own home.
 Economy- banking without visiting your bank.
 Cheaper service fees.
 Seamless Integration with existing environment (IDM-Intelligent Data
Module).
 Highly Saleable.
 Easy Customization.
 Lower Costs of both Installation and Maintenance.

Limitation of E- banking:
1. Safety situations around ATMs.
2. Abuse of bank cards by fraudsters at ATMs.
3. Danger of giving your card number when buying on-line.

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CH. 7. I.T in Banks

The reforms in the 1990s, which led to expansion, consolidation and

liberalization of the banking and financial sector in India, brought in many
changes and challenges. A number of private and foreign players entered the
Indian market with superior technologies that helped them service their
customers efficiently through multiple channels such as ATMs and Online
banking. Indian bank s on the other hand has been using IT more out of
compulsion and primarily for transaction processing. They now need to adopt
IT to reposition bank s into the integrated financial services market.
The need for providing improved customer service, reducing transaction costs
and increasing productivity, shall be the main drivers for banking sector to
adopt IT.
These considerations are particularly important for public sector bank s in India,
who are facing immense competition from private and foreign bank s. IT can
help them move from the present scenario where they are working as isolated
islands to providing a centralized banking experience. There is a need today for
IT and the financial community to come together and develop customized IT
solution to make the Indian banking sector globally competitive.
IT adoption in the banking sector will provide real time availability of
transaction processing through multiple channels. It would enhance a bank’s
ability to cross sell products, ensure better management and security and safety
of funds and increase efficiently through integration of systems across various
locations. It would also ensure efficient management of Non Performing Assets
(NPAs), minimize transactions costs, enhance ability to conduct in-depth
financial analysis and gather business intelligence. Enhanced use of IT would
also encourage the use of Internet to provide access for online bill payments,

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fund transfers and estatements in addition to encouraging wireless mobile

banking and e-commerce.

With growing competition faced by foreign bank s and financial institutions, the
public sectors bank s in co-operation with the Indian IT industry would need to
equip themselves for the next phase of introducing the benefits of IT to their
customers by providing a centralized banking solution.
Opportunity for Indian banking sector in branch computerization
1. IT Networking
2. System Relationship Management
3. Customer Relationship Management (CRM) Applications
4. Back Office processing and Call Centers
5. Data warehousing/Data mining
6. Mobile banking and e- banking.

Different uses of Information Technology:

a) Tele Banking
b) Any Time Banking
c) Automated Teller machine
d) Shared Payment Network System
e) Customer Service
f) Mobile banking
g) Home Banking
h) Electronic Fund Transfer
i) Plastic Cards as Media for Payment
1. Credit Card
2. Debit Card
3. Smart Card
4. ATM Card

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SURVEY & FINDINGS

From the survey conducted on the Mobile banking from Customers

1. Do you know about the mobile banking facility provided by

banks?

30

25

20

15 YES
NO
10

This graph represents the amount of customers who are aware of the mobile
banking facility.
From this graph we can see that Indians are well aware of the services such as
mobile banking which are provided by bank s to them. A service such as mobile
banking is definitely not a new concept to the Indian people.
They are responsive and are appreciative of the bank efforts to lighten the load
on branches and subsidiaries.

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2. Are you aware whether your bank provides the mobile banking
facility?

18

16

14

12

10 Yes, it does
No, it doesn’t
8 I don’t know
6

This graph represents the amount of customers who prefer to bank using mobile
banking services or traditional banking methods.
From this graph it is quite clear that people are still wary about mobile banking.
They still prefer to bank using traditional methods of banking because they have
full confidence is such methods. The main reason for the fall of mobile banking
graph is that people believe that banking through mobile phone is risky and that
it can lead to information falling into the wrong hands. However with new and
improved security measures like encryption, and password protected services all
the risks and worries can be wiped away.

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3. Is mobile banking one of the criteria you are looking for in a

bank ?

16.5

16

15.5

15
Yes
14.5 No

14

13.5

13

This graph represents the amount of people that require mobile banking services
and bank with only those that provides such a facility.
This shows that the Indian people are constantly on the move and require some
method to bank while on the move. Therefore mobile banking is definitely
demanded by them so that they can opt for it whenever they require. Even
though they may prefer the traditional method of banking to the mobile banking
facility, the people want to keep their options open at the time of need, and
hence prefer a bank that provides mobile banking from one that does not.

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4. Do you have confidence in the mobile banking facility?

16.5

16

15.5

15
Yes
14.5 No

14

13.5

13

This graph represents the amount of customers who have confidence in mobile
banking.
This graph shows us that the Indian people are still unsure and are not
confident enough to venture into banking using mobile phones. They believe
that threading on unknown territory can be harmful and can lead to huge losses
due to fraud or theft.
To get over this notion the Indian public needs some evidence to prove
that mobile banking is safe and secure and the only evidence are the people who
constantly use such a facility.

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5. Would you recommend such a facility to others?

25

20

15
Yes
No
10

This graph represents the amount of customers that would vouch and
recommend the mobile banking facility to others. If a customer, who has used
the mobile banking facility in the past, recommends such a facility to others it
means that it has had a good impact on him, otherwise he would not be doing
so. Moreover, it works out well for mobile banking because word of mouth
publicity is the best publicity ever.
A point to be noted is that even though the Indian people are not fully confident
about mobile banking, they are willing to experiment with new ideas and
innovations but at a slow and cautious pace, which is a good turnover for
mobile banking.

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6. Why do you feel mobile banking is beneficial to society?

16

14

12

10 Cost effective for banks

Saves customers time and
8 energy
reduces dependancy on bank
branches
6
ALL OF THE ABOVE
4

The graph represents why mobile banking is beneficial to the society.

As it can be clearly seen, a major segment of the survey graph points out that
mobile banking saves time and energy of the customers as well as is beneficial
in all three ways, that is, cost effective for banks, saves customers time and
energy and reduces dependency on bank branches.
This shows that mobile banking is not only beneficial to the customer but also
to the bank that provides them as the bank can reduce its cost by hiring fewer
personnel to take post in various bank branches, it can reduce crowding in bank
branches because transactions can be taken care off or dealt with without having
to enter a bank branch.

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Survey Reports

The first and foremost reason for conducting a survey is to better understand the
basic functionality of mobile banking. The working of the mobile banking
software in a banking environment, the procedure involved in adopting this
service and the type, class and amount of people that it caters to, can best be
expressed and understood by conducting a survey on the bank s that provide
them.

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Conclusion

With the rapid development of transport and communication, people and

services are coming together as if they were just around the corner. If this is the
case for many services, then why should the banking industry lag behind?
Internet banking, phone banking, e-banking and now mobile banking all
enable the bank to be better connected with the customer and vice versa. A
customer who is provided with a variety of additional services feels appreciated
and is more likely to be loyal to that bank, which is always a good sign for a
bank.
In the end mobile banking not only helps a bank to reduce costs but also
helps it to retain its valuable customers. And as far as customers are concerned,
this facility enables the customer to bank anywhere, at anytime and in any
condition, definitely a boon if a customer is stuck in the middle of nowhere and
requires banking services as soon as possible.
Thus mobile banking helps both, the customer as well as the bank, to
lighten the burden of today’s world and to save time, money and energy which
is greatly required and appreciated. In a competitive world where everyone is
waiting to outdo the other, a helping hand, in whatever forms and from
whatever source, is definitely god sent and should not go unrecognized.

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Bibliography

Websites:

1. www.wikipedia.com
2. www.googleimages.com
3. www.google.com

Books:

1. Environment of financial services, O.P.Agarwal.

2. Banking Service & Information Technology, R.K.Uppal.

Survey sources:

CUSTOMERS OF NANDED.

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