CU-BBA-SEM-III-Banking- Second Draft-converted

UNIT 11: ONLINE BANKING Structure 11.0 Learning Objectives 11.1 Introduction 11.2 Meaning 11.3 Importance of Online Banking 11.4 Importance of Payment Banking 11.5 Advantages of Online Banking 11.6 Disadvantages of Online Banking 11.7 Advantages of Payment banks 11.8 Disadvantages of Payment banks 11.9 Types of Online Banking 11.10 E-Banking in India 11.11 Issues in the Online Banking 11.12 Challenges that break the Payment Banks 11.13 Summary 11.14 Keywords 11.15 Learning Activity 11.16 Unit End Questions 11.17 References 11.0 LEARNING OBJECTIVES After studying this unit students will be able to: • Explain about online banking and payment banking • Discuss the importance of online banking and payment banking • Identify the issues and challenges of online banking and payment banking • Explain the advantages and disadvantages of online banking and payment banking • Interpret the types of online banking 11.1 INTRODUCTION The Internet Banking System is a tool that was created to assist clients with their day-to-day transactions. Clients can now bank at their convenience from the comfort of their own homes 201 CU IDOL SELF LEARNING MATERIAL (SLM)

thanks to Internet banking systems. The framework, which is also known as online banking, has both transactional and non-transactional functionality. Internet banking is a system that allows bank customers to access their accounts as well as general information on bank products and services through a computer or other intelligent device. Customers may perform financial transactions on a secure website run by a retail or virtual bank using online banking or internet banking. Account balances, lists of recent transactions, electronic bill payments, and funds transfers between a customer's and another's accounts are some of the financial transactions that a customer can conduct through online banking. Most banks also allow customers to download copies of their bank statements, which they can print at home (some banks charge a fee for mailing hardcopies of bank statements). Customers can also download transactions directly through their accounting software for certain banks. The Reserve Bank of India conceptualized a payments bank as a new type of bank in India (RBI). These banks will accept a restricted deposit, which is currently capped at $200,000 per customer but may be raised in the future. These banks are unable to provide loans or credit cards. Banks of this kind can handle both current and savings accounts. Payments banks can include online and mobile banking as well as ATM and debit cards. India's first payments bank was founded by Bharti Airtel. 11.2 ONLINE BANKING & PAYMENT BANKING - MEANING Online banking refers to the ability to make financial transactions over the Internet. Online banking is sometimes referred to as web banking or Internet banking. Customers can use online banking to access virtually all of the services that are available in a physical branch, such as deposits, transfers, and online bill payments. Almost every banking institution offers some type of online banking, which is accessible through desktop and mobile apps. A payments bank is similar to a regular bank, but it operates on a smaller scale and does not take on any credit risk. To put it another way, it may perform most banking functions but not advance loans or issue credit cards. It accepts demand deposits up to Rs 1 lakh, as well as remittances, mobile payments/transfers/purchases, and other banking facilities such as ATM/debit cards, net banking, and third-party fund transfers. 11.3 IMPORTANCE OF ONLINE BANKING The value of electronic banking for banks, individual customers, and companies will be discussed separately. Banks 1. Lower transaction costs – electronic transactions are the most cost-effective form of exchange. 202 CU IDOL SELF LEARNING MATERIAL (SLM)

2. A smaller margin for human error – since the data is transmitted electronically, there is no space for human error. 3. Less paperwork – digital documents eliminate paperwork and streamline the operation. It is also environmentally friendly. 4. Lower operating costs – There is less of a need for branches, resulting in lower fixed costs. 5. More loyal customers – Since e-banking services are user-friendly, banks enjoy higher consumer loyalty. Customers 1. Convenience – a customer can access his account and transact from anywhere at any time, 24 hours a day, seven days a week. 2. Lower transaction costs – the customer saves both time and money by not having to visit the branch for any transaction. 3. No geographical barriers – In conventional banking systems, distances between locations could stymie some banking transactions. Geographical barriers, on the other hand, are minimized with e-banking. Businesses 1. Account feedback – Using an online banking interface, business owners and designated staff members can easily access their accounts. This helps them to review account behavior to ensure that the account runs smoothly. 2. Increased productivity – Electronic banking boosts performance. It enables the automation of daily monthly payments as well as a slew of other features to boost the company's productivity. 3. Lower costs – In most banking partnerships, costs are determined by the services used. If a company needs further help with wire transfers, deposits, and other services, the bank will charge it a higher fee. These costs are reduced when you use online banking. 4. Less errors – In daily banking transactions, electronic banking helps to minimize errors. Errors can be costly due to poor handwriting, incorrect knowledge, and other factors. In addition, having a simple way to review account behavior improves the accuracy of financial transactions. 5. Fraud reduction – Electronic banking creates a digital presence for all workers with the authority to change banking activities. As a result, the company has a stronger understanding of its purchases, making it more difficult for fraudsters to cause havoc. 203 CU IDOL SELF LEARNING MATERIAL (SLM)

11.4 IMPORTANCE OF PAYMENT BANKING Payment banks exist solely for the purpose of serving the banking needs of India's under banked. Traditional banks don't go where payment banks do. In India, many conventional banks do not open branches in remote rural areas. Many of our country's deprived people have been denied access to banking services in India. Payment banks should fill the void, ensuring that banking services reach every Indian citizen's doorstep and promoting financial inclusion in the region. 1. Payment banks help the poor in India Poor migrant workers and people of low-income households may use payment banks to access banking services in the country. All of these people will soon be drawn into India's formal banking system through payment banks. Other poor people move to large cities in search of work and a better way of life. 2. Payment banks reach citizens where traditional banks cant Many conventional banks may not have locations in impoverished communities. It simply does not make financial sense. Unfortunately, this means that poor people are unable to use financial facilities. Mobile phones are an easy way for payment banks to access these citizens. They don't need to set up shop in these towns. Your Aadhar number is used for e- KYC and your mobile number is used as an account number by payment banks. 11.5 ADVANTAGES OF ONLINE BANKING Some of the benefits of online banking are inherent to being online; others are competitive advantages offered by online banks exploiting their cost structure. The following are some of the most notable advantages of online banking: • 24/7 account and service access • Speed and efficiency • Online bill payment • Low overhead can mean low fees • Low overhead can mean high interest rates on deposit accounts 24/7 account and service access As long as you have an internet connection, you can access online banks at any time. Some online banks, such as Ally Bank, go even further by providing you with 24/7 phone access to a live customer service representative. If you don't have access to the internet or believe you 204 CU IDOL SELF LEARNING MATERIAL (SLM)

need the support of a human brain rather than a machine algorithm, this can be incredibly useful. Speed and Efficiency You'll have to wait in line at a brick-and-mortar bank if you need to move money, apply for a new loan, or conduct virtually every other banking transaction. There is no need to wait with an online bank. You can access your accounts, request a new credit card, or make almost any banking transaction you want without having to drive down to a bank or wait in line as long as you can log in. Online Bill Payment Online bill pay is one of the many benefits of online banking. Rather than writing checks or filling out forms to pay bills, once you've set up your accounts at your online bank, all it takes is a single click or even less, as most bill payments can be automated. It's simple to monitor your accounts from a single location and track payments in and out of your account with online bill pay. Low overhead can mean low fees Since they don't have to pay for items like gas, janitorial services, landscaping, or rent, online banks can pass those savings on to their customers. This usually translates to online banks being able to charge lower rates than conventional banks. Many online banks, for example, have a free online checking account with no minimum deposit, as well as other no-fee bank accounts such as IRAs. There are a range of online banks that offer free checking and no minimum balance requirements; if you're concerned about applying for a bank account with bad credit, you may be able to open one for free without a credit check, but there might be ongoing fees. Low overhead can mean high interest rates on deposit accounts Online banks, in addition to having low fees, also have the highest interest rates, whether you're searching for a certificate of deposit, a high yield checking account, or high-interest deposit accounts like a money market account. While rates fluctuate, you'll typically find that online banks pay the best interest rates if you look at a current list of best CD rates or best free online checking account rates. 11.6 DISADVANTAGES OF ONLINE BANKING There is no such thing as the best bank for anything. Despite their many benefits, there are several disadvantages of using online banks. The following are some of the drawbacks of dealing with an online bank: • Technology issues • Security issues 205 CU IDOL SELF LEARNING MATERIAL (SLM)

• Inefficient at complex transactions • No relationship with personal banker • Inconvenient to make deposits Technology issues An online bank is just as good as your or their internet link in several respects. You may not be able to access your account if there is a power outage or if the servers go down. Although some banks have a customer service phone number, it may be overburdened if online access is unavailable. You will still find someone to talk to in a real bank branch. Security Issues Although many online banks are reputable and well-established, it can be difficult to trust a bank that does not have a physical presence, particularly when dealing with large amounts of money. What happens if a website goes out of business unexpectedly? If anyone gains unauthorized access to your account through a hacked or stolen password or log-in credentials, you run the risk of identity fraud or actual theft. Inefficient at Complex Transactions You might be able to move money between accounts or pay bills using an online bank, but if you have complicated transactions, you might choose to use an international, bricks-and- mortar bank. Business-oriented banks, such as Chase, have global transaction features that online banks can lack, such as the ability to transfer payments to more than 35 different currencies around the world. Many online banks can't even provide the services of a notary public, which require an in-person visit and are needed for the most significant financial transactions like buying a home, since they don't have a physical presence. No Relationship with Personal Banker If you visit a traditional brick-and-mortar spot, you will establish a relationship with a personal banker over time. When dealing with an online bank, on the other hand, you'll usually be transferred to an anonymous customer service representative who won't recognize you from the next customer. If you're in a financial bind, having a relationship with someone who can assist you and knows you well can be a significant benefit over purely online banking. Inconvenient to Make Deposits 206 CU IDOL SELF LEARNING MATERIAL (SLM)

It may seem counterintuitive that a bank whose goal is to attract assets makes it difficult for customers to deposit money, but this is the case with some online banks. You can't just drop off cash or a check at a local branch of an online bank. Some online banks, such as Ally Bank, also refuse to accept cash deposits. To make a deposit at Ally Bank, for example, you can mail a check, transfer money from another bank or account, or use the bank's e-check deposit service. 11.7 ADVANTAGES OF PAYMENT BANK Payments Bank has a significant benefit over other payment methods in that it allows a customer to pay with only one click from his mobile phone. This does not necessitate any complicated procedures, making it simple for users to pay. 11.8 DISADVANTAGES OF PAYMENT BANK The fact that the payments bank is not a conventional bank is both an asset and a drawback. We can't use credit cards or get a loan from this bank, which is a disadvantage. We can only send and receive digital money, so it's mostly used to move funds from one wallet to another. 11.9 TYPES OF ONLINE BANKING Banks use electronic banking systems to provide a variety of services. There are three styles of these: Fig 11.1 Online banking 207 CU IDOL SELF LEARNING MATERIAL (SLM)

Level 1 – This is the most basic level of service provided by banks on their websites. Customers can get details about the bank's products and services through this service. Furthermore, some banks can receive and respond to inquiries via e-mail. Level 2 – Customers may send instructions or applications for various services, check their account balance, and so on at this level. Banks, on the other hand, do not allow their customers to conduct any fund-related transactions on their accounts. Level 3 – At this level, banks allow their customers to use their accounts for things like money transfers, bill payments, and the purchasing and redemption of shares, among other things. E-banking is a service provided by most conventional banks as an alternative means of delivering service. Furthermore, many new banks primarily provide banking services via the internet or other electronic delivery channels. Furthermore, some banks operate solely via the internet, with no physical branches in the world. As a result, there are two types of banking websites: 1. Informational Websites – These pages provide consumers with general information about the bank, its goods, and services. 2. Transactional Websites – Consumers can make transactions on the bank's website using these websites. Furthermore, these transfers can range from a simple check of a customer's account balance to a massive business-to-business funds transfer. Banks and financial institutions provide a variety of retail and wholesale e-banking services, as seen in the table below. 11.10 E-BANKING IN INDIA In India, most new-generation banks have provided internet banking services to their customers since 1997, when the ICICI Bank was the first to do so. In reality, all of the major banks offer e-banking to their customers. India's most common e-banking services • ATMs (Automated Teller Machines) • Telephone Banking • Electronic Clearing Cards • Smart Cards • EFT (Electronic Funds Transfer) System • ECS (Electronic Clearing Services) • Mobile Banking 208 CU IDOL SELF LEARNING MATERIAL (SLM)

• Internet Banking • Telebanking • Door-step Banking In addition, the following services are available in India under Internet banking: 1. Bill payment – Every bank in the country has a relationship with various utilities firms, service providers, insurance companies, and other businesses. These partnerships enable banks to offer bill payment through the internet (electricity, telephone, mobile phone, etc.). In addition, most banks levy a one-time registration fee for this facility. In addition, the consumer should set up a standing instruction to automatically pay recurring bills every month. 2. Funds transfer – A customer may transfer funds from one bank account to another within the same bank or even to another bank in India. He must log into his account and enter the payee's name, account number, bank, and branch, as well as the sum to be transferred. The transition takes about a day to complete. 3. Investing – A customer can open a fixed deposit with the bank electronically via funds transfer using electronic banking. A customer can also buy or sell shares online if he has a demat account, a related bank account, and a trading account. Furthermore, some banks allow customers to buy and sell mutual fund units through their online platforms. 4. Shopping – A customer may use an e-banking programme to buy products or services online and pay for them with his account. He has everything he needs at his fingertips. 11.11 ISSUES IN THE ONLINE BANKING The following are some of the most important issues in the online banking field that marketers should be aware of: 1. Traditional Banking Habits Despite the advantages of online banking, only 49% of adults in the United States use it. This is due to the fact that many people are used to conventional banking and it can take time for them to break their habits. As a result, online banking advertisers should concentrate on ways to persuade conventional banking customers to switch to online banking. The various advantages of online banking should be highlighted in these marketing campaigns. They must demonstrate how online banking can more effectively address conventional banking issues (having to actually go to bank branches, higher fees, etc.) 2. Security One of the most significant challenges facing online banking marketers is security. This is because, in the past, a thief would have to break into a bank vault and make a risky escape with the money if he or she wanted to steal a person's bank savings. This was a daunting task 209 CU IDOL SELF LEARNING MATERIAL (SLM)

that entailed a great deal of danger and risk. When it comes to online banking, cyber criminals only need a few pieces of personal information to gain access to a person's account and steal their funds. It can be carried out secretly and with much less physical risk than in the past. In reality, fraud stole roughly 130 million British pounds from online bank accounts in the United Kingdom in 2015. As a result, security remains a major concern for both online banks and their customers. To address this challenge, online banking marketing professionals should concentrate on illustrating and explaining the security of online banks. 3. Transaction Difficulty Depositing and withdrawing money from an online bank can be much more complex and time consuming. Not only do online banks typically have less ATMs than their conventional counterparts, but transactions can also take longer to process and deposit into a bank account. PayPal, one of the largest online banks, for example, takes between 3-5 days for deposits to appear in accounts. This is a problem that online banking advertisers will have to deal with before online banks improve their transaction times. 4. Technical Issues Since online banks depend so heavily on their online platforms, they risk suffering significant losses if their systems crash or if their code contains bugs. A single technical problem that shuts down a bank for a day could result in millions of dollars in losses. It may also cause havoc for bank customers, who may be unable to make payments or complete transactions when the platform is unavailable. A mobile banking service is now used by 54 percent of customers. As a result, it is important for banks to have not only their online channels but also their mobile applications running smoothly. A loss of funds or data as a result of a crash can be extremely concerning for bank customers. As a result, advertisers should make it a priority to allay this fear by demonstrating how account funds would not be wasted if technological difficulties arise. 5. Small Budgets Before they can scale up, many startups must run on a shoestring marketing budget. Obviously, this is a significant challenge. If your marketing budget is limited, you can concentrate on the most important expenses. Building a search engine friendly website, creating profiles on all of the major social media networks (Facebook, LinkedIn, Twitter, and so on), and launching a blog are all inbound marketing tactics that should be prioritized. 11.12 CHALLENGES THAT BREAK THE PAYMENT BANKS Payment banks in India have a lot of promise, but they also have a lot of obstacles to overcome: 210 CU IDOL SELF LEARNING MATERIAL (SLM)

• Given that the internet is these banks' only mode of service, it is safe to conclude that India struggles with internet latency, with speeds that are significantly lower than international standards. According to one of Akamai's studies, the average internet speed in 2016 was 5.6 megabits per second. As a result, such a slow pace is posing a problem for payment banks in India. • Payment banks are more geared towards the more tech-savvy residents because they are entirely technology-based with no significant physical presence. • Both consumers and agents are unfamiliar with the idea of payment banking and its applications. • Aside from technical problems, there are also behavioral issues to consider, which is the primary explanation for consumers embracing all of the digital challenges they face. • Finding the agents needed to execute these technological changes with consumers is extremely difficult, as they must be financially and technically driven in order to achieve the goal of digital payments. 11.13 SUMMARY • Customers may apply instructions or applications for various services, verify their account balance, and so on at this level 2. Banks, on the other hand, do not allow their customers to conduct any fund-related transactions on their accounts. • Informational Websites provide consumers with general knowledge about the bank, its goods, and services. • Depositing and withdrawing money from an online bank can be much more complex and time consuming. • Not only do online banks frequently have less ATMs than their conventional counterparts, but transactions can often take longer to process and deposit into a bank account. • Given that the internet is these banks' only mode of service, it is safe to conclude that India struggles with internet speed, with speeds that are significantly lower than international standards. 11.14 KEYWORDS • ECS - Electronic Clearing Service • EFT- Electronic Fund Transfer • ATMs - Automated Teller Machines • ECC-Electronic Clearing Cards • ICICI - Industrial Credit and Investment Corporation of India 211 CU IDOL SELF LEARNING MATERIAL (SLM)

11.15 LEARNING ACTIVITY 1. Create class lists of deposits or withdrawals to your students account (for example salaries, rent, etc) view monthly account statements. Use an ATM for banking transactions. Write a check from your checking account. ___________________________________________________________________________ ___________________________________________________________________________ 11.16 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. What is meant by online banking? 2. State the meaning of Payment banks. 3. List the different types of Online Banking 4. Discuss the advantages and disadvantages of payment banking 5. Discuss the challenges that break the Payment Banks Long Questions 1. Explain in detail about importance of Online Banking? 2. Explain the significance of Payment banks. 3. Describe the advantages and disadvantages of online banking 4. Discuss the issues faced in the online banking 5. Elaborate about E banking in India and various services offered. B. Multiple Choice Questions 1.____________ was the First bank which offered Internet Banking in India a. SBI b. HDFC c. ICICI d. Indian Bank 212 CU IDOL SELF LEARNING MATERIAL (SLM)

2._________________ Websites offer general information about Bank and its products & Services. a. Informational Website b. Transactional Website c. Both a & b d. None of these 3._______________ websites allow customers to conduct transactions on Bank’s Website. a. Informational Website b. Transactional Website c. Both a & b d. None of these 4. As the E-Banking provides a digital footprint for all employees who have right to modify banking Activities, it helps in ___________ a. Lowering Cost b. Lower Errors c. Reduced Fraud d. None of these 5.________________ is the use of Telecommunication network for delivering various Banking Products and services a. Electronic Banking b. Virtual Banking c. Online Banking d. All of the above Answers: 1-c, 2-a,3-b.4-c,5-d 11.17 REFERENCES Text Books • T1, J.N. Jain & R.K. Jain, Modern Banking and Insurance: Principles and Techniques, Regal Publications, New Delhi, 2016 213 CU IDOL SELF LEARNING MATERIAL (SLM)

• T2, A. Ranga Reddy, C. Rangarajan: Rural Banking and Overdues Management, Mittal Publication Reference Books • R1, Muraleedharan, D, Modern Banking: Theory and Practice, PHI Learning, New Delhi, 2009. • R2,https://www.toppr.com/guides/business-economics-cs/money-and-banking/e banking/ 214 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 12: LATEST TECHNOLOGY IN BANKING Structure 12.0 Learning Objectives 12.1 Introduction 12.2 Banking Innovation 12.3 Benefits of E banking 12.4 Technological Developments in Indian Banks 12.5 Future of Banking Technology 12.6 Future of Banking in India 12.7 Summary 12.8 Keywords 12.9 Learning activity 12.10 Unit End Questions 12.11 References 12.0 LEARNING OBJECTIVES After studying this unit students will be able to • Identify the innovations contributed to the development of Indian banking. • Explain the benefits of E Banking. • Discuss about the future of banking technology • Explain the future of banking in India • Discuss the technological developments in Indian banks 12.1 INTRODUCTION Banking in India has had a long and winding path. The Indian banking sector has undergone a number of transformations. In India's banking sector in the 1990s, there was a greater focus on technology and innovation. Banks started to employ technology in order to deliver higher- quality services at a faster pace. Customers could do their banking from a variety of locations thanks to internet banking and mobile banking. All banks have adopted the multi-channel model, which includes ATMs, credit cards, debit cards, telephone/mobile banking, internet banking, call centres, and so on. Banking's function has been redefined from that of a simple financial intermediary to that of a service provider of a variety of financial services under one roof, similar to a financial supermarket. The definition of the entire banking system has been 215 CU IDOL SELF LEARNING MATERIAL (SLM)

redefined as a result of intense competition among banks. Banks are looking for new ways to draw and retain clients, as well as gain a competitive edge over their rivals. 12.2 BANKING INNOVATIONS The banking sector in India has undergone a variety of transformations over the years. Most banks have started to take a creative approach to banking in order to provide more value to their customers. In the banking and finance sectors, information technology has prompted new product design and distribution technologies. Technology allows banks to create innovative systems that meet a broad variety of consumer needs, including those that are currently unimaginable. Financial innovation, combined with technological change, has completely altered banking theory, which has been fine-tuned by the banking industry's competitiveness. The banking system's challenging business climate encourages more product, method, and market innovation. We now have an electronic payment system in addition to currency notes. The financial sector is moving toward a scenario in which new instruments, as well as liquidity and protection, are available. Important events in the evolution of new age payment systems in India: • Arrival of card-based payments (debit card, credit card) in the late 1980s and early 1990s, which marked a turning point in the development of new age payment systems in India. • Electronic Clearing Service (ECS) was introduced in the late 1990s, and Electronic Funds Transfer/Special EFT was introduced in the early 2000s. • RTGS (Real-Time Gross Settlement) was introduced in March 2004; NEFT (National Electronic Funds Transfer) was introduced in 2005/06; and CTS (Cheque Truncation System) was introduced in 2008. 12.3 E-BANKING BENEFITS E-banking is a significant advancement in the banking industry. E-banking refers to banks directly providing banking products and services to customers through electronic distribution channels. Benefits of E-Banking 1. E-banking improves a bank's brand value. 2. With e-banking, there is more space to deliver exclusive services. 3. Banking's maintenance costs will be reduced. 4. Customers should take advantage of low-cost banking services. 5. Customers would have faster, simpler, and more consistent access to knowledge. 216 CU IDOL SELF LEARNING MATERIAL (SLM)

6. Allows for pre-authorized direct withdrawals for bill payment marking. 7. It makes electronic fund transfers easier. (Electronic Fund Transfer) 8. E-online banking's buying of goods and services, as well as online payment for the same, is a blessing to customers. 12.4 TECHNOLOGICAL DEVELOPMENTS IN INDIAN BANKS The technological developments in Indian banks are: Debit Card: A debit card is a credit card that can be used as a substitute for cash when making transactions. It functions similarly to an electronic check in that funds are deducted directly from either the bank account or the card's remaining balance. Credit Card: A credit card is a type of payment system that is named after the small plastic card that users are given. It is a card that entitles the holder to purchase goods and services based on the holder's pledge to pay for them. The card issuer provides the borrower (or the customer) with a line of credit on which the user can borrow money to pay a dealer or get a cash advance. Internet Banking: Internet Banking is a service offered by banks that allows customers to access information about their bank accounts, pay bills, and other services through the Internet. Instead of going to a bank and dealing with a teller, you can use Internet Banking to conduct bank transactions. It is the use of electronic means to transfer funds directly from one account to another, rather than by cheque or cash, in a broad sense. Automated Teller Machines (ATMs): ATMs are commonly used electronic banking channels. It is regulated by a plastic card with unique features. It is a computer-controlled system that allows customers to make deposits and check their balance without having to deal with anyone. Interior (i.e., within the branch) or exterior (i.e., outside the branch) ATMs are available (located anywhere outside the branch premises) Real Time Gross Settlement (RTGS): is an automated method of fund transfer that occurs in real time. • The term 'Real Time' refers to the phase of orders being followed at the time they are obtained, rather than at a later time. • \"Gross Settlement,\" on the other hand, refers to the individual settlement of funds transfer instructions (on an instruction by instruction basis). Since the settlement of funds takes place in the RBI's accounts, the payments are deemed final and irreversible. The advantage of RTGS is that payee banks and their customers obtain funds on the same day, with assurance and finality, allowing them to use the funds immediately without risk. Since each payment is settled individually as soon as it is approved, the RTGS system does not generate credit risk for the receiving participant. 217 CU IDOL SELF LEARNING MATERIAL (SLM)

However, liquidity risks exist, as well as the likelihood of risks being transferred outside the system. National Electronic Funds Transfer (NEFT): NEFT (National Electronic Funds Transfer) is an Indian electronic money transfer system that allows you to send money from one bank or bank branch to another. Individuals, companies, and corporations may use NEFT to electronically move funds from any bank branch to any other individual, company, or corporation in the country that participates in the scheme. Individuals, companies, and corporations with accounts at a bank branch may use NEFT to move funds. Individuals who do not have a bank account can deposit cash at NEFT-enabled branches with instructions to use NEFT to move funds. Customers who come in unannounced must have complete information, such as their full name, address, and phone number. As a result, NEFT will assist in the transfer of funds even though you do not have a bank account. This is a straightforward, safe, quick, and cost-effective method of transferring funds, especially for retail remittances. Electronic Clearing Service (ECS): Electronic Clearing Service (ECS) is a retail payment system that can be used to make bulk payments/receipts of a similar nature, especially where each individual payment is of a repetitive nature and of a relatively small amount. Rather than individual funds transactions, this facility is designed for businesses and government agencies to make/receive large amounts of payments. Systemically important payment systems (SIPS): SIPS (systemically significant payment systems) are payment systems with the property that their failure could jeopardize the entire economy's operation. In general, these are individual countries' main payment clearing systems or real-time gross settlement systems, but in Europe, there are a few pan-European payment systems. Due to their transaction volume, market share, and cross-border importance, systemically relevant payment systems (SIPS) are European large-value payment systems that are considered important for financial stability. Currently, there are four SIPS that are regulated and monitored by the European Central Bank (ECB). Magnetic ink character recognition code (MICR): The magnetic ink character recognition code (MICR) is a character recognition technology that is primarily used in the banking industry to speed up the processing and clearance of checks and other documents. The document-type symbol, bank code, bank account number, cheque number, cheque amount (usually inserted after a cheque is presented for payment), and a control indicator are all found on the MICR line at the bottom of cheques and other vouchers. The bank code and bank account number are formatted differently depending on the region. MICR readers can search and read information directly into a data collection system using this technology. MICR characters, unlike barcodes and similar technologies, are easily read by humans. Documents that are MICR encoded can be processed much faster and more reliably than documents that are OCR encoded. 218 CU IDOL SELF LEARNING MATERIAL (SLM)

12.5 FUTURE OF BANKING TECHNOLOGY The future of financial technology in India is intertwined with the future of Indian banking. 1. Machine Learning (ML) is a term that refers to customers' needs can be predicted using data science, and personalized products tailored to their needs can be provided. 2. Artificial Intelligence: Fig 12.1 Future of Banking Technology There will be improvements to banking processes as AI makes inroads in India's digital banking. As backend processes are automated, we should expect smarter operations. 3. Personalized Service: Customers' screens can be customized based on their user history thanks to digital banking. It will also allow for the automated filling out of certain fields on online forms. This would result in a significantly improved user experience. 4. Security: 219 CU IDOL SELF LEARNING MATERIAL (SLM)

We should expect advanced biometric authentication, voice recognition, and facial recognition in the near future, in addition to passwords and OTPs. Contactless ATMs will be available, and mobile phones will be used to run them. 5. Blockchain Technology: More banks will implement blockchain technology, which ensures that a customer's account information will be stored in real-time across banks, reducing the possibility of illegal hacking. Financial transactions are divided into encrypted blocks and attached to an encrypted chain, similar to an email chain. 12.6 FUTURE OF BANKING IN INDIA India's banking sector is at a fork in the track. They're under a lot of pressure to embrace and adapt to digitization. Their very survival is in jeopardy. They must take a comprehensive approach to digitization. It's not just a customer service tool, and it's not just a way to speed up a banking transaction. It is revolutionizing the banking industry as a whole. The new buzzword is product innovation and production tailored to the needs of individual consumers. Banks in India have shown their ability to adapt over the last few decades, indicating that they will continue to do so. The Indian banking sector will continue to expand, as will digitization. Banking can play a significant role in economic development. E-banking, also known as digital banking, is the way of the future of banking technology. As the banking industry's digitization matures, we can envision a situation similar to what we see today with the World Wide Web. Banks will lose their distinct identities because they will all be integrated and offer all of their services online to their customers. There will be no more physical bank trips, no more bank counters, and so on. Instead, consumers can use the internet to access all banking facilities and conduct all banking transactions from the convenience of their homes or offices. The Indian banking sector has a bright future because it has embraced technology, innovated its application, and improved customer support through digitization. Recent developments in the banking sector offer us hope for India's banking sector's future growth. 12.7 SUMMARY • Banks can deliver a wide variety of services to customers thanks to technology. Financial innovation, combined with the introduction of technology, has completely transformed the banking industry. • E-banking improves customer service, lowers operating costs, and makes fund transfers and online purchases easier. • Plastic cards are used to run ATMs, allowing money to be withdrawn and balances to be checked without the need for human intervention. 220 CU IDOL SELF LEARNING MATERIAL (SLM)

• RTGS stands for real-time gross settlement, which means that transactions are executed as soon as they are received rather than later. RTGS is used for fund transfers of more than 2 lacs. • NEFT stands for National Electronic Fund Transfer, and it allows you to send money up to Rs.2 lakh from one individual to another. It's an easy, convenient, safe, and quick way to send money to friends and family. • Machine learning, artificial intelligence, and blockchain technologies would have an impact on the future of financial technology. 12.8 KEYWORDS • RTGS – Real Time Gross Settlement • NEFT – National Electronic Fund Transfer • ATM – Automated Teller machine • ECS – Electronic Clearing Service • AI – Artificial Intelligence 12.9 LEARNING ACTIVITY 1. “Sweden goes cashless”. Learn how technology has impacted the way banks have run today. ___________________________________________________________________________ ___________________________________________________________________________ 12.10 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. List the various benefits of E-banking 2. Write a short note about RTGS 3. Write short note on NEFT 4. Explain about internet banking 5. Write short note on ATMs. Long Questions 1. Explain in detail about various services offered by banks through E-Banking. 2. Future of banking industry is highly influenced by technology. Comment 3. Discuss in detail about electronic fund transfer. 4. Explain the future of banking in India. 221 CU IDOL SELF LEARNING MATERIAL (SLM)

B. Multiple Choice Questions 1. ATM means______ a. Any time money b. Automated teller machine c. All-time money d. None of these 2. Threshold limit for executing RTGS is______ a. up to 2 lacs b. More than 2 lacs c. Above 5 lacs d. Less than 5 lacs 3. __________ can be used to predict the needs of customers and provide them with customized products that suit their needs. a. Data science b. Business analytics c. Digital marketing d. None of these 4. ______ provides better customer services, brings down operation cost, facilitates fund transfer, online purchase of goods. a. E-Banking b. Payment Banking c. Future Banking d. None of these 5. ______will help customize the screens for customers based on their usage history. a. Future Banking b. Payment Banking c. Digital Banking d. All of these Answers 1-b, 2- b, 3- a, 4- a, 5- c 222 CU IDOL SELF LEARNING MATERIAL (SLM)

12.11 REFERENCES Text Books • T1, J.N. Jain & R.K. Jain, Modern Banking and Insurance: Principles and Techniques, Regal Publications, New Delhi, 2016 • T2, A. Ranga Reddy, C. Rangarajan: Rural Banking and Overdues Management, Mittal Publication Reference Books • R1, Muraleedharan, D, Modern Banking: Theory and Practice, PHI Learning, New Delhi, 2009. • R2, https://www.ijser.in/archives/v4i5/IJSER15790.pdf 223 CU IDOL SELF LEARNING MATERIAL (SLM)