MODULE NO.

5: TECHNOLOGY IN
BANKING

New technology in Banking – E-services – Core Banking- plastic cards. Internet

Banking, ATM based services, ECS, MICR, RTGS, NEFT, DEMAT, IMPS UPI , AADHAR
enabled payment System, USSD, E-Wallet and application-based payment systems,
Role of artificial intelligence in banks, Block Chain – Meaning and features.
 INTRODUCTION:

• Technology has revolutionized the banking sector

by providing faster, safer, and more customer-
friendly services. Traditional banking has shifted
toward digital banking, where most services are
available through electronic platforms.
 E-SERVICES IN BANKING

•Definition: Electronic services provided by banks through

digital platforms like mobile, internet, ATMs, and apps.
•Benefits: 24/7 availability, convenience, speed, paperless
transactions, reduced human errors.
 CORE BANKING SOLUTIONS (CBS)

• Meaning: Core Banking is the backbone of a bank's operations. It is a

centralized system where a bank's branches are interconnected, allowing
customers to manage their accounts and conduct basic transactions from any
branch of the bank, not just the one where they opened their account.
Features:
•Any branch banking
•Real-time transactions
•Centralized database
•Improved customer service
 PLASTIC CARDS

•Types:
•Debit Cards – linked directly to savings/current account.
•Credit Cards – allow purchases on credit.
•Prepaid Cards – loaded with money in advance.
•Smart Cards – embedded chip for secure transactions.
•Uses: Cash withdrawal, POS payments, online shopping.
 INTERNET BANKING

•Definition: Online access to banking services via web portal.

•Services: Fund transfers, bill payments, account statements, loan applications,
investment options.
•Advantages: Easy access, cost-effective, global reach.

• Services Offered:
• Fund transfers (NEFT, RTGS, IMPS).
• Bill payments (electricity, water, credit card).
• Account statement generation.
• Fixed Deposit (FD) and Recurring Deposit (RD) opening.
• Loan applications and credit card bill payments.
• Investment in mutual funds and insurance.
 ATM-BASED SERVICES

• Meaning: An Automated Teller Machine (ATM) is an electronic

telecommunications device that enables customers to perform basic
financial transactions without the aid of a bank teller.
• Services Offered:
• Cash withdrawal.
• Cash and cheque deposit.
• Fund transfers between linked accounts.
• Balance inquiry and mini-statement generation.
• PIN change.
 ECS (ELECTRONIC CLEARING
SERVICE)

• Meaning: ECS is an electronic mode of fund transfer used for bulk, repetitive
transactions. It is of two types:
• ECS Credit: Used for crediting a large number of beneficiaries (e.g., salary
payments, dividend distributions).
• ECS Debit: Used for debiting accounts for recurring payments (e.g., utility bills,
loan EMIs, insurance premiums).
 MICR (MAGNETIC INK CHARACTER
RECOGNITION)

• Meaning: MICR is a technology used to verify the legitimacy of paper-based

documents, primarily cheques. A special ink and unique font are used to print
characters at the bottom of a cheque.
• Details:
• The MICR code contains information like the cheque number, bank code, and
branch code.
• It enables high-speed, automated processing and clearing of cheques, reducing
errors and fraud.
 RTGS (REAL TIME GROSS
SETTLEMENT)

• Meaning: RTGS is a funds transfer system where money is moved from one bank
to another in real-time and on a gross (individual) basis.
• Features:
• Real-Time: Transaction is processed as soon as it is initiated.
• Gross Settlement: Transactions are settled one-by-one, not bunched with other
transactions.
• Minimum Amount: Primarily for high-value transactions (typically ₹2 lakhs and
above in India).
• Irrevocable: Once processed, the transaction cannot be reversed.
 NEFT (NATIONAL ELECTRONIC
FUNDS TRANSFER)

• Meaning: NEFT is a nationwide system that facilitates one-to-one funds transfer

in a deferred net settlement basis.
• Features:
• Batch Processing: Transactions are processed in half-hourly batches.
• No Minimum Limit: Can be used for transferring any amount, even ₹1.
• Suitable for: Low and medium-value transactions.
• Settlement Cycle: Operates in multiple time slots on all working days.
 The maximum transaction charges that
benefi ciary banks can levy are :

up to `10,000 Not exceeding `2.50 (+ Applicable GST)

above `10,000 upto `1 lakh Not exceeding `5 (+ Applicable GST)

above `1 lakh and upto `2 lakh Not exceeding `15 (+ Applicable GST)

above `2 lakh Not exceeding `25 (+ Applicable GST)

 DEMAT ACCOUNT

 Meaning: A DEMAT (Dematerialized) account is used to hold

financial securities (like shares, bonds, mutual funds) in electronic
format, eliminating the need for physical share certificates.
 Purpose: It makes trading and holding securities safe,
convenient, and efficient by preventing theft, loss, or damage of
physical documents.
 I M P S ( I M M E D I AT E PAY M E N T S E R V I C E )

Meaning: IMPS is an instant, 24x7, interbank electronic funds

transfer service in India. It is faster than NEFT as it works in real-
time.
Features:
24/7/365 Service: Available 24 hours, all year round.
Instant Transfer: Money is credited to the beneficiary's account
in seconds.
Uses MMID: Can be done using Mobile Money Identifier
(MMID) and mobile number, besides IFSC code and account
number.
 U P I ( U N I F I E D PAY M E N T S I N T E R FA C E )

Meaning: UPI is a revolutionary real-time payment system developed

by NPCI that facilitates inter-bank transactions through a single mobile
application.
Features:
Single Platform: Merges multiple bank accounts into one mobile
app.
Virtual Payment Address (VPA): Allows users to send/receive
money using a unique ID (e.g., name@paymentservice) instead of
bank details.
Instant Money Transfer: 24x7 real-time payments.
QR Code Based Payments: Simplifies merchant payments.
 A A D H A R E N A B L E D PAY M E N T S Y S T E M ( A E P S )

Meaning: AEPS is a bank-led model that allows online interoperable financial

transactions at PoS (MicroATM) through the Business Correspondent (Bank
Mitra) using the Aadhaar authentication.
Services Offered:
Cash Withdrawal
Cash Deposit
Balance Inquiry
Aadhaar to Aadhaar Fund Transfer
It enables financial inclusion by allowing people without smartphones or
debit cards to access banking services using only their Aadhaar number and
biometrics (fingerprint/iris).
 U SS D ( U N S T R U C T U R E D S U P P L E M E N TA RY S E R V I C E D ATA )

Meaning: USSD, or *99# service, is a mobile banking technology that allows

users without a smartphone or internet connection to perform banking
transactions by dialing a code on their basic feature phone.
Features:
No Internet Required: Works on all GSM mobile phones.
Menu-Based Service: Users interact with a simple text menu.
Services: Balance inquiry, mini-statement, fund transfer using MMID.
 E - W A L L E T A N D A P P L I C AT I O N - B A S E D PAY M E N T S Y S T E M S

Meaning: These are digital platforms that store users' payment information (like
bank account, card details) securely and facilitate transactions for goods,
services, and transfers.
Types:
Closed Wallets: Specific to a merchant (e.g., Amazon Pay).
Semi-Closed Wallets: Can be used at multiple listed merchants and online
platforms (e.g., Paytm, PhonePe).
Open Wallets: Issued by banks, can be used for all transactions a
debit/credit card can, including ATM withdrawals (e.g., Vodafone M-Pesa).
 R O L E O F A RT I F I C I A L I N T E L L I G E N C E I N B A N K S

AI is revolutionizing banking by automating processes, enhancing customer

experience, and improving security.
Chatbots and Virtual Assistants: Provide 24/7 customer support and handle
routine queries.
Fraud Detection: Analyses transaction patterns in real-time to identify and flag
suspicious activities.
Credit Scoring: Uses alternative data and machine learning to assess the
creditworthiness of customers more accurately.
Personalized Banking: Offers tailored product recommendations and financial
advice.
Process Automation (RPA): Automates back-office tasks like data entry and
compliance checks, reducing errors and costs.
 B LO C K C H A I N – M E A N I N G A N D F E AT U R E S

Meaning: Blockchain is a decentralized, distributed digital ledger that records

transactions across many computers in such a way that the registered
transactions cannot be altered retroactively.
Key Features:
Decentralization: No single central authority controls the data; it is shared
across a network.
Immutability: Once a transaction is recorded, it is extremely difficult to
change or tamper with.
Transparency: All participants in the network can view the transactions,
ensuring trust.
Enhanced Security: Uses advanced cryptography to secure data.
 A P P L I C AT I O N I N B A N K I N G :

Cross-Border Payments: Faster, cheaper, and more transparent

international transfers.
Trade Finance: Streamlines and secures the complex documentation
process.
KYC (Know Your Customer): Creates a single, secure, and verified
digital identity for customers that can be used by multiple banks.