MODULE 6:

Latest Trends in Banking

Topics to be covered in this Module
Phone banking- call centers- Internet banking-mobile
banking
Payment gateways-card technologies-MICR electronic
clearing
Total branch computerization-centralized
banking-electronic fund transfer-RTGSS-NEFT
Electronic money E- cheques. Green and Sustainable
Banking.
 Phone Banking

Meaning : Telephone banking is a service provided by a bank or other

financial institution, that enables customers to perform financial
transactions over the telephone, without the need to visit a bank branch
or automated teller machine.
Services under Tele-banking : The customers get the following services
under tele-banking.
a) Online balance enquiry
b) Request for service
c) Last few transactions
d) Transactions of a recent date
e) Details of transactions
f) Request for cheque book
g) Request for a statement of account
Advantages of Telephone Banking:
• It is convenient because you can pay your bills on time and do not have to go to the
utility company during the business hours.
• It saves time as it eliminates waiting in line at the utility company.
• It is safer because you do not have to walk around with cash to pay your utility bills.
• It is cheaper since the transaction cost is less than transportation cost to and from the
utility company.
Disadvantages of Telephone Banking:
• First time users may find the system slightly difficult to use.
• Instead of a receipt you will receive a transaction reference number as proof that the
payment was made.
CALL CENTERS
DEFINITION : A central location where all customer telephone calls of
an organization such as banks' are directed, where trained
professionals handle the customer calls and provide answers to their
queries.
• Customer interactions can be categorized as any of the following
activities:
• Customer queries
• Customer complaints
• Customer help desks like banking accounts
• Direct sales via telephone/e-mails
• Online customer transactions via websites
• Cross-selling to customers who use the organization’s other products or services
• Providing 24x7 customer service to the company's patrons for a range of
requirements;
• Cross-selling and up-selling the portfolio of products and services for revenue
generation;
• Capitalizing on marketing opportunities outside of traditional geographic markets;
• Offering targeted promotions for different audiences; and more.
• Keep the lines of communication with valued customers open all through the year
and maximize their satisfaction with your business.
• With the latest technology and experienced professionals, the multi-channel contact
centre provides robust and cost-effective support for inbound and outbound
communication with customers through voice support, live chat support, email
management, IVR (self-service) and mobile SMS / text
 Internet Banking
• 24/7 service
• Neft/rtgs
• No visit to the branch
• PIN/ password
• Host of services
•
Advantages of Net Banking :
• Information about products
• Elimination of manual processing of data
• Sale of products
• Increase in customer satisfaction
• Cost
Disadvantages:
a) Technical problems on the net might delay the services
b) Not all the geographical areas have internet availability
c) Security threat like hacking is more prevalent in net
banking
d) Not all customers are tech savvy to use internet
Mobile Banking
• Mobile banking is a system that allows customers of a financial institution to conduct a
number of financial transactions through a mobile device such as a mobile phone
• Differs from mobile payments
• Wireless application protocol (WAP)
Advantages of mobile banking
• Always on 24 x 7 accesses
• Advanced penetration of mobile networks
• Personalization
• WAP Wireless Application Protocol (WAP)

• Faster data processing speed

• Security
• Mobile payment
Disadvantages of Mobile Banking
• Restricted Plans
• Technical Problems
• High cost
• High Charges
Payment gateways
• A payment gateway refers to the front-end technology
that reads payment cards and sends customer
information to the merchant bank for processing.
Example of payment Gateway:
PayPal Payment Gateway , Citrus Payment Gateway
, InstaMojo Payment Gateway, EBS Payment Gateway:, Fone
1. Customer selects the products, adds them to cart, proceeds for payment and
enters the credit/debit card details on merchant website
2. Merchant’s website securely encrypts the card and other payment related
information and sends it to the Payment Gateway
3. Payment Gateway sends this information to acquiring bank processor or Payment
Processor. Acquiring bank is a bank or financial institution that processes
payments on behalf of a merchant.
4. Payment Processor forwards these card details to the card network. For eg:
Paytm Payments Bank Rupay Debit Card transaction will be forwarded to Rupay
in this step
5. Card network clears the payment and requests authorization from the issuing
bank or customer’s bank. For eg: Paytm Payments Bank Rupay Debit Card
transaction will be forwarded to Paytm Payments Bank in this step
6. Issuing bank approves or declines the transaction and passes the
transaction results back to card network. For a successful transaction,
the customer is charged and the amount is transferred to acquiring the
bank.
7. Card Network sends this information back to the Payment Processor
8. Payment Processor sends authorization results back to the Payment
Gateway
9. Payment Gateway sends this information to the merchant application
and based on the successful response, merchant fulfills the order.
10. At the end of the day, a process called Settling takes place and the
Payment Gateway sends all amount to the merchant’s bank account.
Card technologies

•Embossing
•Magnetic stripe
•Smart card
•Contactless card
 Electronic payment Systems
Paying for goods and services through an electronic medium without
the use of checks or cash
• Credit Card
• Debit Card
• Smart Card
• E-Money
• Electronic Fund Transfer (EFT)/NEFT (National Electronic Fund
Transfer)
• RTGS (Real-Time Gross Settlement)
• Echeques
• Point of sale- place where a retail transaction is
completed
• E-Money- Electronic money refers to money that exists
in banking computer systems that may be used to
facilitate transfer
• Electronic transactions- regulated by the RBI under
Payment and Settlement System Act (PPS Act) 2007.
• NACH (National Automated Clearing House) is a funds
clearing platform set up by NPCI (National Payments
Corporation of India) similar to the existing ECS of RBI
Indian Financial System Code (IFSC)
• IFSC is an alpha-numeric code that identifies a bank-branch
participating in the RTGS/NEFT system.
• IFSC has 11 digit code and the first four alpha characters represents
the bank, the 5th code is 0 (zero), which is reserved for future use and
the last six digits are numeric characters represents the branch.
• Correct IFSC code is essential for identifying the beneficiary’s branch
and bank as destination for funds transfers.
• E.g. Syndicate Bank Cuffe Parade Branch, Mumbai- SYNB0005087
 E-Cheques
• An electronic cheque is an electronic copy (scanned image) of a
real cheque, which is then transferred by email. The transfer must be
digitally signed using the sender's private key to authenticate the
transfer.
• Security features provided by electronic cheque include
authentication, digital signatures and encryption among others.
Process of making payment via E- Cheque
• The payer writes an e-Cheque by structuring an electronic document
with the information legally required to be in a cheque and digitally
signs it.
• The payee receives the e-Cheque over email or web, verifies the
payer's digital signature, writes out a deposit and digitally signs it.
• The payee's bank verifies the payer's and payee's digital signatures,
and then forwards the cheque for clearing and settlement
• The payer's bank verifies the payer's digital signature and debits the
payer's account
• PAYER PROCESS - e-cheque channel established
• PAYEE PROCESS - decrypts
MICR electronic clearing
• MICR (magnetic ink character recognition) is a technology used to
verify the legitimacy or originality of paper documents, especially
cheques.
• Special ink, which is sensitive to magnetic fields, is used in the
printing of certain characters on the original documents.
• Example- a counterfeit check produced using a color photocopying
machine, the magnetic-ink line will not respond to magnetic fields
• MICR code is a code printed on cheques using MICR
• An MICR code is a 9-digit code .It comprises of 3 parts: first three
digits-City Code, next 3 -Bank Code and last 3 digits -Branch Code
How does MICR electronic clearing works ?
• The User intending to effect payments through ECS Credit has to
submit details of the beneficiaries(name , MICR code etc) in a
specified format through its sponsor bank to one of the ECS Centres
where it is registered as a User.
• The bank managing the ECS Centre then debits the account of the
sponsor bank on the scheduled settlement day and credits the
accounts of the destination banks, for onward credit to the accounts
of the ultimate beneficiaries with the destination bank branches.
Image-based Clearing System (ICS) / Cheque Truncation System (CTS)

• MICR data and cheque images are transmitted by the collecting bank
to the drawee bank.
• The CTS stops the flow of physical cheques between the collecting
branch and the drawee branch.
• eliminated the need to move physical instruments between branches,
• Reduces time and cost associated with physically moving instruments
between branches.
 Process of Cheque Truncation
• The presenting bank captures images and data pertaining to the cheque on a
capturing system.
• The presenting bank will then transmit the captured data duly signed and
encrypted to the clearing housing for further transmission to the paying bank.
• For the purpose of providing a secure line of communication the presenting bank
and the paying bank are provided with an interface called the Clearing House
Interface (CHI), this interface allows both banks to transmit data to the Clearing
House in a secure manner.
• To arrive at a settlement figure the Clearing House processes the data it has
received and routes the data and images to the paying bank. This process is
Presentation Clearing.
• Through the CHI the paying bank receives the data from the Clearing House to
initiate the processing of the payment. The paying bank’s CHI also generates the
return file for unpaid instruments.
Total Branch computerization

• Computerisation at the branch level can be used to:

(a) Provide better and speedy customer service
(b) record maintenance, book keeping
(c) Analyse the branch-level data for decision making
(d) Generation of various reports
• LAN is generally used for the computerization of branch
Centralized banking / CORE Banking (Centralised
Online Real time Electronic Banking)
• Core banking is a centralised system that provides accounting,
customer information management and transaction processing
functions.
• It provides a central operational database to bank’s assets and
liabilities, a transaction processing engine and a system for the
financial management of the bank.
• Advantages to Customers
• Benefits to banks
• Disadvantages of CBS