Technology in Banking

Services
Soumitra Chakraborty

Information
Why Do People Need
Information?
Individuals - Entertainment and
enlightenment
Businesses - Decision making,
problem solving and control
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Data
Data is nothing but the facts and
figures that record meaningful
events occurring in an Organization.
It is a raw material which can be
anything like alphabets, numerals,
symbols, audio, video or collection of
all
It can be defined as a facts related to
people, events or things

Information
Information can be defined as
processed data.
It is a end product which can be
obtained after the
manipulation/processing of data
Data can be processed using
various Instructions
Instruction specifies what must be
done with data.

Data vs. Information

Data
A given, or fact; a number, a statement, or
a picture
Represents something in the real world
The raw materials in the production of
information

Information
Data that have meaning within a context
Data in relationships
Data after manipulation

 Data Manipulation
Example: customer survey
Reading through data collected from a
customer survey with questions in various
categories would be time-consuming and not
very helpful.
When manipulated, the surveys may provide
useful information.

Characteristics of
Information

Information Economics
Information economics talks about
the cost of information i.e.
How much should an organization
spend forInformation?
Cost of Information depends upon:
Hardware
System Design and Implementation
Cost
Operational cost

Dimensions of Information
Time Dimension
Timeliness
Frequency
Time Period
Content Dimension
Accuracy
Relevance
Completeness
Scope

Form Dimension

Clarity
Detail
Order
Presentation
Media

Generating Information
Information can be generated using
Information Systems

10

What Is a System?
System: A set of components that work
together to achieve a common goal
Subsystem: One part of a system where
the products of more than one system
are combined to reach an ultimate goal
Closed system: Stand-alone system that
has no contact with other systems
Open system: System that interfaces
with other systems

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What Is an Information
System?
Information System can be defined as the
interaction of man and machine which
gather data and process it to produce
information

It may be referred as Interrelated

components that manage information to:
Support decision making and control
Help with analysis, visualization, and
product creation

Data, Information,and Systems

Figure 1.3 Several subsystems make up this corporate accounting system.

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Who Uses Information

Systems?
Executive managers:
Strategic decisions
Middle managers:
Tactical decisions
Operational managers:
Operational decisions
geared toward meeting
short-term objectives
Nonmanagement
workers: On-the-job
decisions
External users:
Customers, suppliers,
other partners
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Activities of Information
System?
Activities in an information system that
produce information:
Input
Processing
Output
Feedback

Data and Information

Raw data from a supermarket checkout counter can be processed and organized to produce meaningful information, such
as the total unit sales of dish detergent or the total sales revenue from dish detergent for a specific store or sales
territory.

The Role of Information

Systems in Business
Today
Businesses invest in IT to achieve six
important business objectives
1. Operational excellence
2. New products, services, and business models
3. Customer and supplier intimacy
4. Improved decision making
5. Competitive advantage
6. Survival

Dimensions of Information
Systems

Three dimensions of
information systems
Organizations
People
Technology

Dimensions of Information
Organizations Systems
Coordinate work through structured
hierarchy and business processes
Business processes: Related tasks and
behaviors for accomplishing work
E.g. Fulfilling an order
May be informal or include formal rules

Dimensions of Information
Systems

People
Information systems require skilled people to
build, maintain, use them
Employee attitudes affect ability to use
systems productively
Role of managers
Perceive business challenges
Set organizational strategy
Allocate human and financial resources
Creative work: New products, services

Dimensions of Information
Systems
Technology
IT Infrastructure: Foundation or
platform that information systems built
on
Computer hardware
Computer software
Data management technology
Networking and telecommunications
technology
Internet and Web, extranets, intranets
Voice, video communications

Types of Information System

Transaction Processing System (TPS)
Management Information System
(MIS)
Decision support System (DSS)
Office Automation System (OAS)
Expert System

Office Automation System

Office system: A system in which office
automation hardware, software, and other
resources are used to facilitate
communications and enhance productivity
Document processing systems: Create,
distribute, store, and manage documents
Document management systems (DMSs):
Store, organize, and retrieve documents once
they are created in or converted to an
electronic format
Content management systems (CMS): DMSs
that can include images, multimedia files,
other content in addition to conventional
documents
Communications systems: E-mail, messaging,
online conference, workgroup computing, etc.
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Transaction Processing System

Transaction processing system:
Processes and records data created
by an organizations business
transactions
Usually processed in
real time
Specialty systems used
in law enforcement,
the military, etc.

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Types of TPS
Order entry systems
E-commerce systems
Point-of-sale (POS) systems

Payroll systems
Accounting systems
Accounts receivable
systems
Accounts payable
systems
General ledger
systems
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Management information
system
A system that provides decision
makers with preselected information
Usually provides information in the form
of computer-generated reports
Detailed, summary, exception

Much of the time, this information is

generated from data obtained from
transaction processing
Most frequently used to make
moderately structured, middlemanagement decisions
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Systems

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Decision support system (DSS):

An interactive system that gathers and
presents data in a form designed to
help people organize and analyze
information when making decisions
Useful to anyone who requires
unstructured or unpredictable information
Usually tailored to help with specific types
of decisions (sales, transportation, etc.)
Incorporates internal and external data
Executive information system: A DSS
targeted directly to upper management

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Decision Support Systems

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(GIS):
Combines geographical information
with other types of data to provide
a better understanding of
relationships among the data
Commonly used to make decisions
about locations (e.g. new facility
locations, disaster risk, geographical
crime patterns)
Also used in disaster relief systems
(after hurricane, etc.) to create search
and rescue maps, maps of where
electrical power is restored, etc.
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Geographic Information
Systems

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Integrated enterprise
systems

Systems designed to work together

throughout an enterprise
Electronic data interchange (EDI):
Transfers data between different
companies using the Internet or another
network
Often used to automate reordering materials
and products

Enterprise resource planning (ERP):

Large integrated system that ties
together all of a businesss activities
Enterprise application integration (EAI):
Exchanging information from an ERP or other
internal system among different applications
and organizations
33

 Customer relationship
management (CRM): Designed
to build and manage good
relationships with customers
Often implemented via the Web
today (eCRM)

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Supply chain management

(SCM):
The oversight of materials, information,
and finances as they move from the
original supplier to the consumer
Product flow, information flow, financial
flow
Just-in-time (JIT) systems: Resources are
limited to the right amount at the right
time to fill orders
Inventory management systems: Track and
manage inventory
Warehouse management systems (WMS):
Inventory management that acts as a
complete distribution system
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System

36

management (PLM):
Organizes and correlates all
information about a product to
help companies improve products
and better track costs and profits
Manages the product as it moves
from design to retirement
Helps companies:

37

Improve products
Create and manage production
Get more products on the market more
quickly
Increase profits

systems
Use computers to automate the
design or manufacturing process
Computer-aided design (CAD)
Computer-aided manufacturing (CAM)

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system
A system in which a computer
performs in ways that would be
considered intelligent if
observed in humans
Initial advances in AI made through
chess-playing programs

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Systems
Expert system: Provides the type of advice
that would be expected from a human expert
Knowledge base: Database containing facts
provided by human experts and rules the system
should use to make decisions based on those facts
Inference engine: Program that applies the rules
to the data stored in the knowledge base, in order
to reach decisions
Is only as good as the knowledge base and
inference engine; also needs honest, correct
information from the user in order to work
correctly

40

Artificial Intelligence Systems

41

Artificial Intelligence Systems

Neural network: A system in which the
human brains pattern-recognition process
is emulated by the computer system
Used in:

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Handwriting, speech, and image recognition

Geographical mapping
Medical imaging
Crime analysis
Biometric identification
Vision systems (quality
checks in manufacturing,
recognizing postage
stamps, etc.)

Artificial Intelligence Systems

Robotics: The study of robot technology
Robot: A device, controlled by a human
operator or a computer, that can move and
react to sensory input
Robots are used in situations:
That are dangerous or impossible for people to
perform
Defusing bombs, mining, ocean exploration, etc.

Where immense precision is needed

Robot-assisted surgery

To perform monotonous tasks

Welding, riveting, painting, etc.

To assist individuals
Personal robots, exoskeleton suit, etc.

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Robots

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Technology in Banking

Technology in Banking

Information
systems
are
now
exposed to a number of technology
products like :

46

 Net Banking

Mobile Banking

47

 Shopping

Ticket booking

48

 Bill Payment

Fund Transfer

49

 Automated
Teller Machines
(ATMs)

50

Technology Commencement in
Banking
In 70s, banks started to establish centralized data
processing centers.
Essentially the roles of these data processing
centers are:
collect the handwritten documents from
branches
compile the documents
manual data entry by the operators
generate reports for the bank staff and the
central bank
execute some banking transactions

Branch Automation
In 80s, banks started technology
investments for the branches.
The first step is offline branches.
Terminals connected to local branch
computer
Second step is online branches connected
centrally. Most of the transactions started
to be performed in the central mainframe.

Product Based Banking

In the mid-1980s, banks accepted product based
banking and competed with their products.
Banks developed new products for their customers.
Credit card
Credit deposit account (Super Account)
Debit cards
Beside branch, banks brought new channels to give
better service to their customers.
ATM
POS
IVR

Plastic Cards
The plastic card usage grown enormously in last 2
decade.
Plastic card became the main media for bank
customers.

ATM
In the mid-1980s, that cash dispensers truly
became a worldwide phenomenon.
Now, ATM became the electronic face of
banking for most customers.
Beside cash withdrawal, there exist various
transaction options from transfer to fund
buying/selling.

Point Of Sale
New habits in shopping
Increased the use of plastic cards

ATM and POS Application Architecture

Debit Card
Authorization

Switch
System

Credit Card
Authorization

IVR
Interactive Voice Response (IVR) is a software
application that accepts a combination of voice
telephone input and touch-tone keypad selection
and provides appropriate responses in the form of
voice
IVR has come into our life at the beginnings of 90s.
First step in Telephone Banking
Peak transaction volume in salary payment days
for balance inquiry
Integrated with ATM system

Banking Application Architecture

Relationship Management

Product Factory

Delivery Services

ATM

Portfolio
Management

POS

Deposit
(TD,DD)

FBS

Securities

Promissory
Notes

FX
Import / Export

Teletel

Loans&Credits

NBS

EFT

Cheques

Merchant

Telerom

Sales Support
System

CMS

Treasury

Payments

YKB HR

Teller (Branch)

I
N
F
O
C
E
N
T
E
R

Corporate Tables
DAL

Internet Banking

GL / Accounting
Settlement

Phone Banking

Reporting

Batch Operations

Internet Shopping
PCM

Campaign
Management

Credit Risk
Management

Management & Control

Productivity

Information Delivery

CIF

Data Warehouse
Electronic repositories of summarized historical data
The main idea behind data warehouse is get all
company data working together so users can see
more,learn more, and make the organization work
better
Data Warehouse helps users to identify trends, find
answers to business questions and derive meaning
from historical and operational data.
Data access is easier and less costly
Decision support solutions run faster and are more
accurate.

Data Warehouse Process

Life
Cycle

Partial
Solution
s

Complete
Integrate
d
Solution

Design
Transaction
Data
Extraction

Data
Mapping

Transform

Extract

Data
Scrubbing and
Cleansing

Data
Replication

Load,
index and
Aggregate

Data Histories
and
Summaries

Integrated Data Warehouse Infrastructure

Deliver

Publish
and
Subscribe

Data
Access
Tools

CRM
CRM is an integrated sales, marketing and service
strategy
CRM goals are :
Use existing relationships to grow revenue
Use integrated information for excellent service
Introduce more repeatable sales processes and
procedures
Create new value and loyalty
Implement a more proactive solution strategy

The Three Phases of CRM

Acquire
New
Customer
Differentiatio
n
Innovation
Convenience

Enhance
Bundling
The
Reduce Cost
Profitability
Customer
of Existing service
Customer

Adaptibility
Listening
New products

Retain
Profitable
Customer

Integrated CRM Applications

Life
Cycle

Acquire

Enhance

Direct
Marketing

Partial
Function
al
Solutions
Complete
Integrate
d
Solution

Cross Sell
and Up
Sell

Sales Force
Automation

Retain

Proactive
Service

Customer Support

Integrated CRM Applications

Alternative Delivery
Channels
Anytime, anywhere banking

Telephone Banking
Internet Banking
Mobile Banking
Television banking
Next ???

Telephone Banking

7x24 banking through the phone

Main components
Switch
IVR
CTI(Computer Telephony Integration)
Manage each call using the computer
Pop up the user information while transferring the call
Agent Desktop Application
Win32,ActiveX, HTML
Host Application

Telephone Banking
Infrastructure

Teleco
m

IVR

CTI

HOST

Internet Banking
More and more banks are coming to realize that internet is a part of banks'
alternative delivery channel strategies activities concentrated in the businessto-consumer segment, focused on retaining clients
In Internet banking, security is a primary concern. Security concerns have
been addressed from every angle within the architecture of the Internet
banking application.
Sample Internet Banking Architecture

Mobile Banking
Current Mobile Banking Applications:
SMS Banking
WAP Banking
STK (Sim Toolkit) Banking

SMS Banking

Basic banking inquiry transactions(balance inquiry, funds,

exchange rate inquiry) are performed by the cooperation
of bank and the GSM operator
Security is the main problem

GSM
Network

GSM
Operator
Application
Server
GSM
Operator
SMS DB

Leased line

Bank SMS
Gateway

Bank
SMS
DB

Bank
Host

WAP Banking
Wireless application protocol (WAP) is an
application environment and set of
communication protocols for wireless devices
designed to enable manufacturer-, vendor-, and
technology-independent access to the Internet
and advanced telephony services.
WAP is a global standard and is not controlled by
any single company
Various banking transactions offered in WAP
environment by banks.
Similar architecture with SMS banking

SIM Toolkit
SIM card enables to keep and load different applications.
SIM Application Toolkit has been agreed as a GSM standard
SIM Application Toolkit is independent of phone
manufacturers and designs.
SIM Application Toolkit allows the flexibility to update the SIM to alter
the services and download new services over the air
SIM Application Toolkit is designed as a client-server
application. On the server side, SimCard platform and the
client side, phone that supports the SIM Application Toolkit
In the near future, banks will start to offer banking transactions in
this platform.

Television Banking

Digital television (DTV) is the transmission of television signals

using digital rather than conventional analog methods.

Advantages of DTV over analog TV include:

Superior image resolution (detail) for a given bandwidth
Smaller bandwidth for a given image resolution
Compatibility with computers and the Internet
Interactivity
Superior audio quality
Consistency of reception over varying distances

Banks offer their banking transaction in this new environment

T-commerce in the near future.

What is the Next channel

Microwave
Banking
???

Channel Costs

Channel Integration Evolution

Channel Integration evolution

Reuse
Efficiencies of Scale
Reduction of Redundancies

The Role of Banks in the New Economy

Internet and mobile devices have brought new
rules to economy and shaped the way to do
business
Banks has also evolved according to the new
economy and took their places in this new world
to add value to their customer
The new ways to do business are :

e-commerce (B2C)
m-commerce
B2B

E-commerce - B2C

E-commerce is the buying and selling of goods and services

on the Internet.

Main feature of e-commerce

24-hour availability
a global reach
the ability to interact
provide custom information and ordering
and multimedia prospects,

The Web is rapidly becoming a multibillion dollar source of

revenue for the world's businesses.

Banks provide secure payments infrastructure - virtual POS

M-commerce
Mobile commerce applications involve using a
mobile phone to carry out financial transactionsthis usually means making a payment for goods
or transferring funds electronically.
As content delivery over wireless devices
becomes faster, more secure, and scalable, there
is wide speculation that m-commerce will surpass
wireline e-commerce as the method of choice for
digital commerce transactions.

B2B
A housands of companies that sell products to other
companies have discovered that the Web provides not only
a 24-hour-a-day showcase for their products but a quick way
to reach the right people in a company for more
information.
In the B2B, the bank role is to provide a reliable payment
infrastructure that add value to corporate business
This infrastructure should cover:
Bill presentment
Bill payment
Different payment types(credit card, deposit account,
loan)
Information after payment

E-Security

To improve the e-business, all the users should feel secure to

perform the transaction this environment
The main concepts in e-security are:
PKI (public key infrastructure) enables users of a basically unsecure
public network such as the Internet to securely and privately exchange
data and money through the use of a public and a private
cryptographic key pair that is obtained and shared through a trusted
authority.
Public key is a value provided by some designated authority as a key
that, combined with a private key derived from the public key, can be
used to effectively encryption messages and digital signature.
Private or secret key is an encryption/decryption key known only to the
party or parties that exchange secret messages. Public key is used
together with a private key

E-Security - continued
Digital certificate is an electronic "credit card" that establishes your
credentials when doing business or other transactions on the Web. It is
issued by a certification authority (CA).

CA (certificate authority) is an authority in a network that issues and

manages security credentials and public key for message encryption.
As part of a public key infrastructure, a CA checks with a registration
authority to verify information provided by the requestor of a digital
certificate

An RA (registration authority) is an authority in a network that verifies

user requests for a digital certificate and tells the certificate authority
to issue it.

Smart Cards

About the size of a credit card, a smart card is a plastic card with an
embedded microchip that can be loaded with data, used for telephone
calling, electronic cash payments, and other applications, and then
periodically "recharged" for additional use.

smart card contains more information than a magnetic stripe card and
it can be programmed for different applications. Some cards can
contain programming and data to support multiple applications and
some can be updated to add new applications after they are issued

Benefit of smart cards:

enhanced security
off line transaction
programmable card
loyalty
customer information