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Banks and financial institutions are the backbone of the economy of the country. Implementation of Information Technology and communication networking has brought revolution in the functioning of the banks and the financial institutions. For the sound implementation of Information Technology in banks and financial institutions, necessary legal support is a must. Legal issue relating to electronic transactions processing at banks is very much and there was a need to address them by amending some of the existing Acts and introduction to new act. Necessary legislative support is essential to protect the interests as much of the customers as of the banks in several areas relating to electronic banking and payment system. This is specially required to establish the credibility of Electronic Clearing System and Electronic Funds Transfer schemes based on the electronic massage transfer.


Financial Institutions and Banks are continuously searching for new ways to use technology to deliver increasing number of products and services to their customers on one hand, on the other putting technology in use for problem solving and decision support. Expert system represent in the major areas that have found promising and strategic role in majority of the banks and financial institutions. Banks in the USA and Canada are developing or investing expert system for commercial applications although there are few known expert system currently in use but the future will see emergence of expert system in to the computing environment of the corporate world. Expert system is a computer program designed to model the knowledge and experience of human experts. This expertise is the key ingredient used for solving complicated problems or assessing or evaluating a plan or proposal. Thus expert systems are well suited to services organizations. They can emulate the intricate through process of experts and make the expertise available to less performing the type of tasks of highly aid experts. Experts system does not replace people but assists them to be more effective typically they are advice giving or decision support systems. The finance domain can clearly benefit from the application of experts system technology. The benefits thus derived could be listed as follows:

Increase in speed of complex task accomplishment. System reduced a 3-hour system configuration task to 15 minutes. Increased quantity Reduced errors Decrease personnel required Canons Optex camera lens designed system has made scarce highly skilled lens designers, 12 times more productive. Reduced cost Reduced training time Improved decisions


Core banking solution is designed on a customer centric, completely web based paradigm. The multi-lingual, multi currency CRM-enabled core banking solution addresses the end-to-end requirements of banks. Based on open systems, this extensively parameter sable solution comes with comprehensive out-of-the-box features and packs several unique features like 24*7 operations, STP, workflow, multiple delivery channel support and the e-extensibility tool kit-all to deliver unparalleled value to banks. Core banking solution is fully multichannel alerts-enabled and facilities banks customers through their channel of choice. In a recent scalability audited by Ernst and young, core banking solution also emerged as one of the worlds most scalable core banking solution by achieving an unparallel performance of over 11,180 TPS (transaction per second) translating into 40 million transaction per hour.

Core banking solution offers comprehensive retail, corporate and trade finance features-all in a highly secure and reliable environment.


Core banking solution supports product management and account management for the full range of retail banking products such as savings, current/checking, overdraft, revolving overdraft, term deposits and all types of retail loans [personal loans, auto loans and mortgages].

Core banking solution provides comprehensive product management and account management for corporate banking products such as commercial loans, syndications [participation], securitization, term loans, demand loans, overdrafts, non performing asset management, limit management, debt consolidation through replacements, collateral management, interest rate management and loan modeling.

Core banking solution offers powerful trade finance features covering business areas like bills (foreign and inland), documentary credits/letter credit, pre-shipment credits, bank guarantees, forward contracts and foreign remittances among others.

Core banking solutions offers extensive common modules which include support for clearing (including electronic and RTGS), standing instructions, general ledger, signature display and management, document tracking, limits and collateral management, delinquency management and the whole range of day to day and year end reports. Core banking solution has the capability of interfacing with various payment gateways, anti money

laundering solutions, regulatory reporting systems, statements management and distribution systems and consolidation packages.


Financial institutions and banks are continuously searching for new ways to use technology to deliver increasing number of products and services to their customer on one hand, on the other putting technology in use for problem solving and decision support. Expert system represent in the major areas that have found promising and strategic role in majority of the banks and financial institutions. Banks in the USA and CANADA are actively developing or investing expert system for commercial applications although there are few known expert system currently in use but the future will see emergence of expert system in to the computing environment of the corporate world. Expert system is a computer program designed to model the knowledge and experience of human experts. This expertise is the key ingredient used for solving complicated problems or assessing or evaluating a plan or proposal. Thus expert systems are well suited to service organization. They can emulate the intricate through process of experts and make the expertise available to less performing the type of task of highly aid experts. Experts system does not replace people but assist them to be more effective typically they are advice giving or decision support system.


A Cheque is a signed paper document that orders the signers bank to pay an amount of money to a person specified in the cheque or a bearer from the signers account on or after a specified date. Cheque has the advantage that payers (drawer) and payees can be individuals, small businesses, brokerages, corporations, governments or almost any other type of organization. They pass directly from the payer to the payee, so that the timing and the purpose of the payment are clear to the payee. While cheques are usually very simple, business cheques can require multiple signatures and can be accompanied by list of invoices been paid. The payee can deposit a cheque in an account of his choice or cash it. Banks operate extensive facilities to accept cheque for deposit, process them initially and clear and settle between banks.

The electronic cheque, or e-cheque based on the idea that electronic documents can be substituted for paper and public key cryptographic signatures can be substituted for handwritten signatures. There fore the echeques can replace paper cheques without the need to create a new payment instrument, along with the commercial practice changes that a new payment instrument would imply. Instead the e-cheque is designed to fit into current cheque practices and systems with minimum impact on payers, payees, banks and the financial systems. The payer writes an e-cheque by structuring an electronic document with the information legally required to be in a cheque and cryptographically signs it. The payee receives the e-cheque, verifies the payers signature, writes out a deposit, and signs the deposit. The payees bank verifies the payers and payees signature, credits the payees account forward the cheque for clearing and settlement. This credit will not be a clear credit; it will be a float or temporary credit, to be confirmed only after it has been cleared by the paying bank, in the settlement process. The payers bank verifies the payers signature and debits the payers account. The advantage of e-cheque is that cryptographic signatures on every echeque can be verified at all points, while in paper cheques handwritten signatures are rarely verified. The electronic cheque is designed to perform the payment and other financial functions of paper cheques, by using cryptographic signatures and secure messaging over the Internet. The electronic cheque system is designed with message integrity, authentication and non-repudiation properties sufficient to prevent fraud against their banks and their customers. It is compatible with either interactive web transactions or with electronic mail. Since the electronic cheque does not depend on real-time interactions

or on third party authorizations, electronic cheques are better able to survive outages of network links and computing nodes. The result is highly efficient electronic payments system, with a technology base that is extensible to a variety of financial instruments and other high integrity document processing applications needed by the financial industry.


ATM is a device; that allows customers who have an ATM card to perform routine banking transactions without interacting with a human

teller. ATMs are currently becoming popular in India that enables the customer to withdraw their money 24 hours a day, 7 days in a week. The simplest ATM allows a customer to withdraw cash up to specified amount by operating the machine via a magnetic card to a host computer. Updating of operations can be either off-line or on-line. In addition to cash withdraws, ATMs can handle deposits and enquiries, arrange loans and insurance, arrange the buying and selling of stocks and customers on different savings and investment schemes. Terminals can be special task terminals such as cash deposit terminal or statement printer terminal or full function terminals which can perform all the tasks. An ATM is operated through the customers magnetic card. A personal identification code allotted to a customer is magnetically needed by the ATM. When this identity is established, he is allowed to carry out the operations. Generally 3 tracks are used for transaction processing: Track 1 for account code any bank code Track 2 for credit card (shop centers) Track 3 for debit cards purchaser/ATM card) In the case of cash deposits, ATMs can issue a receipt to the customer acknowledgement receipt of the cash. Cash withdraws can be made only in specified denominations. An ATM could handle as many 5000 cash transactions without needing replenishment of notes or journal paper.


ATMs also called 24-hours tellers are electronic terminals which gives consumer the opportunity to bank at almost any time, like withdraw cash, make deposits or transfer funds accounts, a personal identification

number. Some ATM charge a usage fee for these services, with a higher fee for consumer, who has an account at their institution. If a fee is charged, it must be revealed on the terminal screen or on a sign next to the screen. In addition to cash with drawls, ATMs can handle deposits and enquiries, arrange loans and insurance and arrange the buying and selling of stocks and advice customers on different savings and investment schemes. The invention of the Automated Teller Machines or ATMs have made banking more convenient as people would not have to go inside the bank and wait for tellers to help them. In addition to this, people can also access these ATMs all day long and they are located in various locations such as the mall or parks, which saves time since people would not have to go to the bank incase they run out of cash. However, using these machines has some risks. People who use them are not given the same security they would usually get when they are inside a bank. Fortunately, there are some steps people can take which can give them a certain level of security as they withdraw their hard earned money.

The growth of internet and e-commerce is dramatically changing everyday life with the world-wide-web and e-commerce transforming the world into a digital global village. Customers and users have become netizen, and these are people who expect every thing to happen at the click of the mouse. In this new digital marketplace banks and financial institutions are not lagging behind and have started providing service electronically over the Internet. These types of service provided by the banks on Internet, called e-banking, lower the transaction cost, add value to the banking relationship and empower customers. The study investigated the response of the bank customers regarding the working of e-banking as compared to manual banking system. Electronic Banking is an integrated Internet Banking that empowers the financial organization to extend the existing bouquet of services and

process in to the Internet age. E-Banking presents a single face to the customer by consolidating multiple services on to a common platform, thus doing away with the need to maintain diverse online applications. EBanking is the result of systematic analysis of the business and technology needs of financial institution and has evolved in to a truly global institutions in providing a secure online platform, capable of integrating with multiple back end process systems.

E-Banking utilizes a Single Platform Multiple-Components framework and comes packaged with a ready suite of web components for servicing banking needs across. Retail Banking Corporate Banking Private Banking Mutual Funds and Equities Trading


Net banking makes it easy to transfer ones money from one branch in a particular city to any other branch in other city. One can open a FD account via the net. One needs to provide data regarding the amount and term of the deposit and also the branch in which the account is to be opened. One can order for an issue of demand draft or a bankers cheque. However, the draft can be delivered only to the customers address and not to any other third party. One can inquire on the balance of ones savings, current and FD account and also on the tax deducted at source of ones FD account for the

current and previous financial year. One can give instructions over the net for stopping payment on cheques. You can request for a cheque book via the internet, which will take three days to come. One can view all the transactions completed on an account for a specified period and get a copy via e-mail. E-Banking has component based modular architecture and is built on open standards. The solution leverages industry standard protocols and methodologies to seamlessly interface with multiple back office systems and enable banks to offer single point access to various products and services.

E-Banking the Internet Banking solution empowers financial institutions to address complex challenges through a ready suite of web applications in various banking areas.

Corporate: International and domestic fund transfers, account transfers Trade finance; Documentary credits/Letters of credit, bank guarantees Cash management: single/bulk payments, collections, cash pooling Forex requests

Retail:Electronic bill presentment and payments (EBPP): Bill reception, Bill payments (online and scheduled)

Credit card payment

Loan: Application and status monitoring Account services: Cheque book request, card re-issue request

Trading: Online trading: Mutual funds, Equity, Bonds Portfolio Management

Information services: Customer statements Alerts News Reports These powerful business services are designed to meet the requirements of any virtual bank. E-Banking provides a comprehensive set of functionality that enables financial institutions to deliver to their customers, products and services that traditionally were only available by visiting the branch in person. E-Banking has been developed on point and

click Internet standard, which relieves the bank from the process of client training and frees the bank resources to do what they do best.

It is a standard plastic card, except that it contains a micro processor and a storage unit. It can hold a lot of information about the card holder, including digital certificates. It can be used in all banking transactions. It can also be used as an Electronic Purse in to which monetary value has been loaded. Bank of America [5] has recently launched a new security and encryption process for corporate clients who use WANDA electronic service to transfer funds, initiate payments and manage global accounts. The smart card given to WANDA users offers encryption and authentication

capabilities. Full range of cash management and foreign exchange services are available over the Net to corporate users through the use of smart cards. Smart Card sometimes called stored-value, have a specific amount of credit embedded electronically in the card. A credit card with a built in microprocessor and memory use for identification or financial transaction. When inserted into a reader, it transfers data to and from a central computer. It is more secure than a magnetic stripe card and can be programmed to selfdestruct if the wrong password is entered too many times. As a financial transaction card, it can be loaded with digital money and used like a travelers cheque, except that variable amounts of money can be spent until the balance is zero. These cards make the transaction fast, easy and convenient.


Credit is a privilege and a convenience. Credit lets you charge a meal on a credit card, pay for an appliance on an installment plan, and take out a loan to buy a house, or pay for schooling. Credit allows you to make a purchase without ready cash. A credit card enables you to buy things now and pay for them later. You get credit by promising to pay in the future for something you receive in the present. Credit usually costs something, and what is borrowed must be paid back. Credit can be defined as a small plastic card that allows its holder to buy goods and services on credit to pay at fixed intervals through the cards issuing agency. Carrying a lot of cash on you can be cumbersome, risky and sometimes, you run short of it, just when you most need it. Credit card is the smart solution to these problems. It is a convenient and safe alternative for cash. Besides, it says things about you. Most people associate a credit card with a prestige, which it most certainly bestows on you, but more importantly, it says that you have taken the onus of being responsible-to be extended credit! So During 1914, oil companies in the USA issued the first credit card to their customers to purchase gas, oil, accessories, etc at the gas stations. Thereafter, local department stores, airlines and railway companies also started issuing their own credit cards.


Convenient, hassle-free shopping:

When you use a credit

card to make a purchase, you dont have to carry a lot of cash, pay by check, or present additional identification. A credit card also simplifies and speeds up catalog ordering and currently is virtually the only way to make interest purchases.

Emergency help: Credit cards are the ultimate financial security

blanket. They can get you through nearly any emergency situation.

Easier budgeting:

With a credit card, you can make purchases

and pay them off on a schedule that fits your budget. Credit cards also allow you to take advantages of sales and special offers.

Security: if you lose cash, it can be used by anyone. If you lose a

credit card and report the loss to the cards issuer before it is used, the issuer cannot hold you responsible for any responsible for any unauthorized charges. If a thief uses your card before you report it missing, the most you will owe is $50.

Travel expenses: youll find that a credit card is almost essential

for renting a car, purchasing an airplane ticket, or booking a hotel room. Whether youre across town or on another continent, a credit card is the universal guarantee of your good financial standing. And if you need cash, you can get it at ATMs or bank around the World that accepts your credit card.


Greed: Just because you have credit being extended to you doesnt
mean that you should go on a rampage! Use your card with discretion and caution. Remember, it is an extremely expensive way to borrow money! View it as a convenient and safe way to carry cash, a timely help in an emergency or taking advantage of an opportunity that you would have otherwise lost out on, like an investment!

Tendency to overspend. Cardholder responsible for loss and misuse of his card till after 24 hours of reporting loss. Might lead to profligacy which ends up in huge debts.

A credit card which can be used to pay for products and services worldwide- a global card- makes travel abroad, whether on business or vacation, a pleasure. There is no need to carry travelers cheques or foreign currency any more. Guidelines recently introduced in India allow institutions to issue a single credit card that can be used to pay for products and services all over the world (over 200 countries at present) and to settle the accounts in Indian rupees. This is a vast improvement over the previous system which allowed a few select cardholders to repay the outstanding amount in dollars only,

while the regular credit cards were valid additionally only in NEPAL and BHUTAN. However, the use of global cards is still governed by RBI guidelines on Foreign Exchange permitted for official and personal trips. These rules remain the same irrespective of whether you choose to pay by travelers cheques, cash or the new global credit cards.


Debit cards are also known as check cards. Debit cards look like credit cards or ATM (automated teller machine) cards, but operate like cash or personal cheques. Debit cards are different from credit cards. While a credit card is a way to pay later, an debit card is a way to pay now. When you use a debit card, your money is quickly deducted from your checking or savings account. Debit cards are accepted at many locations, including grocery stores, retail stores, gasoline stations, and restaurants. You can use your card any where merchants display your cards brand name or logo. They offer an alternative to carrying a chequebook or cash.

How debit transactions work?


Debit card

Credit card

On-Line Debit Cards:

These cards usually are enhanced

ATM (automated teller machine) cards which work the same as they would in an ATM transaction. It is an immediate electronic transfer of money from your bank account to the merchants bank account. To access your account at a store terminal, you must punch in your personal identification number (PIN), as you would at an ATM. The system checks your account to see if it has enough money available to cover the transaction.

Off-Line Debit Cards:

these cards usually look like a credit

card and resemble a credit card transaction. The merchants terminal reads your card, identifies it as a debit rather than a credit card and creates a debit against your bank account. However, instead of debiting your account immediately, it stores the debit for processing laterusually within 2-3 days. Most, but not all, transactions are verified to see if there are adequate funds. Instead, of using a PIN number, the customer must sign a receipt, as he or she would be with a credit card.

The On-Line and Off-Line distinction may not matter to you unless: Your financial institution charges transactions or monthly fees. You prefer the security of a PIN required transaction. You prefer that both options not be on one card.


Its the difference between debit and credit. Debit means subtract. When you use a debit card, you are subtracting your money from your own bank account. Debit cards allow you to spend only what is in your bank account. It is a quick transaction between the merchant and your personal bank account. Credit is money made available to you by a bank or other financial institution, like a loan. The amount the issuer allows you to use is determined by your credit history, income, debts, and ability to pay. You may use the credit with the understanding that you will repay the amount, plus interest if you do not pay in full each month. You will receive a monthly statement detailing your charges and payment requirements.


With the growth of banking business on internet, new electronic payment methods are evolving. As the new payment methods are evolving quite rapidly, it is becoming highly difficult for the end user to manage his payment instruments. Internet wallet helps the user in managing his payment instruments. A number of electronic commerce applications allow end-users to purchase goods and services using electronic wallets. The importance of internet wallets is growing as buyers shift their purchases to the internet. Wallets benefit each participant of an online transaction. The core function is to enable consumers (business or individual) to pay online more

conveniently and accurately than is otherwise possible. This is done by storing the users payment instruments (typically e-cheques, credit or debit card, addresses, etc.) securely within the wallet for easy use. In addition, they can also provide transaction management for users. In response to the needs of the electronic commerce community, the Electronic Wallet (EW) has been developed to support nearly unlimited variety of payment mechanisms, protocols, and electronic commerce operations for secure online banking transactions. Once a user decides to make an online purchase, EW guides the user through the transactions by helping him to choose a payment method and hide the complexity of how the payment is executed. EW developed using the java programming language, and runs on any computer platform, realizing the java credo write once, run anywhere. EW is extensible, providing a framework into which new payment methods can be integrated easily. It provides an easy-to-use graphical user interface to add new payment methods. EW works with popular web browsers and holds payment card accounts and digital certificates. It is robust and easy to use, reducing support costs and increasing customer satisfaction. It makes web shopping more convenient for consumers and much more efficient for merchants and financial institutions.

Works with all popular web browsers (which support JAWA 2.0). Allows consumers to make purchases on the web quickly, conveniently, and with greater security. Features an easy-to-use graphical user interface. Supports multiple users with protected individual accounts. Supports multiple payment types and brands. Provides for easy installation of new payment protocols. Supports electronic commerce modeling language, a standard defined for maintaining user information such as his billing and shipping addresses.

Electronic commerce, commonly knows as e-commerce or ecommerce, consists of the buying and selling of products or services over electronic systems such as internet and other computer networks. The amount of trade conducted electronically has grown dramatically since the wide introduction of the internet. A wide variety of commerce is conducted in this way, including things such as electronic funds transfer, supply chain management; e-marketing, online transaction processing, electronic data interchange (EDI), automated inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web at least at some point in the transactions lifecycle, although it can encompass a wider range of technologies such as e-mail as well. A small percentage of electronic commerce is conducted entirely electronically for virtual items such as access to premium content on website, but most e-commerce eventually involves physical items and their transportation in at least some way.

E-commerce is generally considered to be the sales aspect of ebusiness.


The internet Merchant account is not at all like a bank account it is more like a credit line. When your customers order online from your Web Site, the Credit Card information provided will be used to process the transaction. When the approval is obtained you arte notified, through e mail confirmation and it will be posted to your Web-based administrative interface. Then, upon settlement, Merchant Bank is informed and funds will be transferred to business bank account, usually within a day. Without an internet Merchant account, you would have to wait for the cardholder to make their monthly payments to their credit card company, and then receive your sales proceeds of course this would be a night mare since you have to wait for the cardholder to pay, whether all in one go, or a little each month

Merchant Banks understand that this is just not sensible and merchant/business like your self cant wait indefinitely until they receive the proceeds from sales. Therefore banks (for a fee) take on the responsibility of collection and transfer of funds to your account. This is the function of an Internet Merchant Account.


The Banking industry in India is facing unprecedented competition from non trading Banking Institutions, which now offer Banking and Financial Services over the Internet. The deregulation of the Banking Industry coupled with the emergence of new Technologies, are enabling new competitors to enter the financial services market quickly and efficiently. Indian Banks are going for the Retail Banking in a big way. However, much is still to be achieved. This study which was conducted by students of IIML shows some interesting facts:

Through out the country, the internet banking is in the nascent stage of development (only 50 banks are offering varied kind of Internet Banking Services). In general, these Internet sites offer only the most basic services. 55% are so called entry level sites, offering little more then company information and basic Marketing materials. Only 8% offer advanced transactions such as online funds transfer, transactions and cash management services. Foreign and Private Banks are much advanced in terms of the number of sites and their level of development.


In a survey conducted by the online Banking association, member institutions rated security as the most important issue of online banking. There is a dual requirement to protect customers privacy and protect against fraud. Banking securely: Online Banking via the World Wide Web provides an overview of internet commerce and how one company handles secure Banking for its Financial Institution clients and their customers. A multi layered security architecture

comprising firewalls, filtering routers, encryption and digital certification ensures that your account information is protected from unauthorized access: Firewalls and filtering routers ensures that only the legitimate Internet users are allowed to access the system. Encryption techniques used by the Bank (including the sophisticated public key encryption) would ensure that privacy of data flowing between the browser and the infinity system is protected. Digital certification procedures provide the assurance that the data you receive is from the infinity system.

On the basis of the above survey we can conclude that as an Indian scenario on the basis of a sample of these 60 participants or members we can conclude that the Indian customers as compared to the western trend do not relay more on the innovative services through electronic medium or we can say services related to Banking and IT.

But the trend shows that as and when these kind of services are getting more and more popular, they are gradually being accepted by the Indian customers who otherwise do not prefer to use extra services with a myth of paying more or some say its hard getting adjusted with new changes so they prefer to go on with t e same trends for years but the coming generation is surely not going to accept the same trends. Now a day we see more and more teenagers using Debit Cards thus making them more popular as it is a kind of card which will offer services only till you have balance in your Bank account So finally I would like to conclude that in India, as a developing economy these kinds of innovative IT and Banking Services will be welcomed by more and more people, they get educated about the new products and their utilities. The IT and Banking products which are expected to hit the Indian market in the coming years, are like Advanced Core Banking Solutions, Centralized Data Monitoring System (partly existing), Storage Area Management, Innovative Software for Banking assistance and security, etc and as far as customers are concerned products like payments through mobile phones, any where and everywhere Banking, and other customer friendly services.