Introduction

Electronic banking is accessing bank accounts and withdrawing/ depositing money and issuing instructions without the intervention of a bank employee. Electronic banking involves many different types of transactions. These include:

1. Bank teller machines;
2. Automated teller machines;
3. Internet banking;
4. Telephone banking;
5. Cards – charge, credit, debit, smart and electronic purse;
6. Digital cash; Digital checks

Bank teller machines

1. These are installed at fully automated bank premises.
2. Unlike ATMs they require the presence of an employee of the bank to operate.

Automated teller machines

1. Automated teller machines or 24-hour tellers are electronic terminals that allow a person to bank almost any time.
2. There are two types – interior and exterior. Interior are those in banking premises whereas exterior are in malls/ shopping centres and other locations.
3. Automated teller machines (ATMs) facilitate the withdrawal of money at times when banks are not open (outside banking hours) and are primarily used for performing some of the banking functions such as withdrawal of cash or deposit of cash/cheque etc. by using an ATM card.
4. Each customer is provided with an ATM card with a unique personal identification number (PIN). Whenever a customer performs a transaction, the person has to key in the PIN which is validated by the ATM, before the machine permits any transaction. The PIN has to be kept secret by the customer, to prevent any misuse or fraudulent transactions in the event of loss of the card.
5. Stand-alone ATMs made their appearance in India, in the early 1990s. These were mostly installed by foreign banks in their branch premises, as per the then existing policy. Easing of restrictions on the location of ATMs has led to their being installed at convenient places such as airports, central business districts, hospitals etc.
6. Most commercial banks have their own ATMs. In the case of smaller banks they piggyback, at times, on the ATMs of larger banks to allow their customers access to money outside banking hours.
7. Shared payment network arrangements allow participating banks to issue universal cards that can be used on the electronic banking services used by the different banks.
8. Some banks charge a fee if you use another bank ATM (to which they are connected or have an arrangement with).

Internet banking

• Internet banking permits an account holder to access his account by a computer from home or other remote location and issue instructions.
• The account is accessed by the account holder stating a unique identification customer number and a password.
• Customers can:

1. 1. Ascertain their account balance;
   2. Transfer amounts from one account to another;
   3. Arrange for the issuance of a cheque;
   4. Instruct payments to be made;
   5. Request for a cheque book;
   6. Request for a statement of their account;
   7. Make a fixed deposit.
   8. There is a confidentiality issue as hackers could get vital numbers and then withdraw amounts.
   9. The integrity of the system is extremely important.
   10. Once the transaction instructions are issued, it is very difficult to repudiate them.

Telephone banking

1. Telephone banking is a facility offered to customers whereby they can, by dialing a number, issue instructions or seek information.
2. The customer when he makes a call is answered by an operator in a call centre. This person has access to the customer’s account. To ensure that it is indeed an authorized person who is seeking information, the customer would be required to state an identifying number (personal identification number), date of birth, billing address or any other unique information. On being satisfied that it is indeed the customer, the transaction required is carried out. These may include:

• • Transfers to a fixed deposit;
  • Balance enquiry;
  • Request for a cheque book;
  • Request for a statement;
  • Payment of a bill.
  • There is one concern. In many instances the information required is in the public domain and therefore it is possible for a person not properly authorized to access sensitive information.

Cards

There are several cards issued to customers to facilitate banking activities. These cards are in plastic and usually about 8.5 cm by 5.5 cm in size. The name of the holder is embossed as is the number of the card. It also has an expiry date. These are the forms that are used worldwide.

1. Charge card
   • In these cards transactions are accumulated over a period of time (generally a month) and then the total is debited to the account. The card holder is given 25 to 50 days to pay. These are called charge cards as the transactions are accumulated and not debited to the account immediately. The amount on a charge card is payable in full and no credit is given.
   • American Express and Diners Cards are the major charge cards in circulation. These are also called T & E cards.

2. Credit card
   • Credit cards are similar to charge cards. At the end of a month details of all amounts purchased are sent to the card holder who is required to pay a minimum amount (if he does not wish to pay the entire amount). He is then given credit for the balance not paid and charged interest on the balance (varies between 2–3% per month).
   • The major credit card issuers are Mastercard and Visa and most banks offer either Mastercard or Visa linked cards. This is for acceptability at vendor establishments.
3. Debit card
   • Debit cards are dissimilar to charge and credit cards as the holder receives no credit. As soon as a transaction is undertaken, the customer’s account is debited with the amount of the purchase. If the customer does not have sufficient balance the transaction is rejected.
   • These are issued by banks and are linked to the account of the holder. The great benefit is that individuals cannot buy more than they have funds for.
   • Debit cards are similar to ATM cards and have a unique number.
   • Bank customers may use this to withdraw money from ATMs by punching in their personal identification number or they may pay for goods and services.
   • When paying for goods/ services the vendor swipes the card through a point of sale terminal. The customer’s account is checked and if there is adequate balance, the account is debited and the vendor’s account is credited.
   • The great benefit is that the customer will not, by using these, create huge outstandings.
   • The flaw is that customers cannot avail of credit (as they can with a credit card).
4. Smart card
   • A smart card is like any other credit card. It however has an integrated circuit (IC) chip installed in it. The chip contains memory, may contain a processor and communicates through contacts on the surface of the card.
   • As these are difficult to copy there is a move to make credit cards and other cards smart cards.
   • Smart cards are sometimes called stored-value cards. These sometimes have a specific amount of credit embedded electronically in the card. For example, a Rs.1000 smart card that has been purchased in advance can be used to cover expenses such as pay phone charges, bridge or expressway tolls, parking fees or internet purchases. These cards make the transaction fast, easy and convenient
   • Smart card technology is in a period of rapid change. Ultimately consumers should be able to customize their smart cards to suit their financial needs with access from their personal computer or cellular phone.
   • The computer chip within the card will contain both financial and personal information. Privacy and security issues could be a problem.

Digital cash

1. Digital cash is designed to allow the consumer to pay cash rather than use a credit card to purchase products on the internet.
2. One type of digital cash allows consumers to transfer money from a financial institution or a credit card into an "electronic purse". The cash is held in a special bank account that is linked to the computer.
3. Another type of digital cash converts money into digital coins that can be placed on the computer's hard drive.

Digital checks

1. Digital checks allow consumers to use their personal computers to pay recurring bills. Consumers can use computer software provided by a bank, or they can use personal finance software packages such as Quicken or Microsoft Money and subscribe to an electronic bill-paying service.This is currently not available in India.
2. The technology of paying bills electronically by home computers is advancing rapidly, but relatively few businesses currently can accept payments made directly by computers. Digital checking is expensive. Fees generally run from $5 to $10 a month for 20 transactions. Privacy and security issues are major consumer concerns. Encryption technology may lessen privacy concerns in the future.