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E-Banking

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| E – COMMERCE STRATEGY–CMH520 | GROUP WORK | JENNIFER KIUGUEVANS ODERO 1009983E-Banking"Discuss E-banking". |
Table of Contents 1. INTRODUCTION 2 2. History of E-Banking 3 3. Forms of e-banking 4 i. Automated Teller Machines (ATM): 4 ii. Mobile/SMS Banking: 4 iii. Smart Card/Debit Card: 5 iv. Internet Banking/ Online Banking: 5 v. Self Service PC Banking: 6 4. Why the drive towards e-banking 7 REFERENCES 11

1. INTRODUCTION

E-banking is defined as a fully automatic service for traditionally banking customer’s products based on information technology platforms. E-banking services provide customer access to accounts, the ability to move their money between different accounts or making payments via e-channels. The advantages generated by this services have determined an accelerate developing of this industry over the entire world.
E-banking relies heavily on information and communication technology (ICT) to achieve its promise for 24 hours availability, low error rates and quicker delivery of financial services Initially, e-banking was limited to phone banking operations and remote banking, but the range of services has increased thanks to the technological advances, the spread of online banking has coincided with the spread of high-speed broad and connections and the increasing maturation of the internet user population. 'Electronic Banking is the use of a computer to retrieve and process banking data and to initiate transactions directly with bank via a telecommunications network' Lipis et al, 1986
'Electronic banking is actually a repackaging, delivery and processing of traditional banking financial services such as cash withdrawals, fund transfers, placement of deposits through an electronic online medium as compared to customary paper based, offline system' Tan Min Ching, 1993. 2. History of E-Banking
The e-banking business model started back in the 1980’s, and it evolved through three main phases that can be summarized as follows:
The Eighties: The early beginning Modern e-banking first appeared in New York in the early 1980’s, where it was offered by major banks in that city, such as Citibank and Chase Manhattan. The United Kingdom banks started to adopt the concept in 1983 where the Bank of Scotland was the first to introduce it. Back then it required a computer terminal, a monitor, and a telephone line. It was also offered through a numeric keypad on a telephone enabling sending messages to the bank. The early services were very basic ones such as viewing your bank statements and paying your bills online. It was not a full transaction banking service; however, it paved the way for the more comprehensive and sophisticated e-banking services that we see today.
The Nineties: Modern Internet Banking In the 1990’s, the use of internet evolved when more people owned computers and were connected to the dial-up home internet. The first bank to offer the most comprehensive e- Banking services was the Stanford Federal Credit Union bank in 1994. This technological evolution and the spread of home internet usage meant customers enjoyed 24/7 e- Banking services. On the other hand, many customers during the 1990’s didn’t trust the concept enough to make serious and substantial monetary transactions and did not think the internet banking is safe enough. This triggered a massive effort and investment by the offering banks to develop more security features for their online banking services and promoting them in the market.

3. Forms of e-banking
While e-banking can be described as the “umbrella” term, it is used interchangeably when people refer to one or more forms or components of e-banking such as: Virtual banking, on-line banking, cyber-banking, net-banking, interactive-banking, web-banking, phone-banking, PC-banking, and remote electronic banking. In this subheading the main types of e-banking will be reviewed in more detail. i. Automated Teller Machines (ATM):
In 1969, the first ATM was offered in the public dispensing cash to customers at Chemical Bank in Rockville Center, New York. It revolutionized the banking industry by eliminating the need to visit a bank to conduct basic financial transactions. In the 1980’s the machines provided many banking transactions and became widely acceptable and even popular amongst the clients. They provided many services provided by bank tellers on 24/7 basis, such as: deposits, withdrawals, transfer, account balances inquiries, requests for cheque books, account statements, etc. Using an ATM requires an ATM card and a personal identification number (PIN). ii. Mobile/SMS Banking:
MOBILE BANKING services can be described as the newest services in electronic banking. They are performed using mobile phones or other mobile devices. Mobile banking services are provided through a convention of connection to these services. Access to the database is made through a password and a customer code. Customers can check their balance and make adjustments between accounts. The potential for providing mobile banking services may be far greater than services through typical desktop access, as there are several times more mobile phone users than online PC users. Initially there were two main types of technology available for use in mobile banking: WAP (Wireless Application Protocol) and WIG (Wireless Internet Gateway). The first one is an application environment and set of communication protocols for wireless devices build to enable manufacturer, vendor and platform independent access to the internet and advanced telephony services. Lately mobile banking services are also available through the following channels; * Mobile applications also known as mobile apps, these include applications on Android, IOs and Windows among others. * USSD (Unstructured Supplementary Service Data) – This involves the use of a short code through a mobile network operator or through a universal code accessible anywhere on the globe. * IVR (Interactive Voice Response) – this involves accessing banking services through voice responses from the bank side. iii. Smart Card/Debit Card:
A smart card usually contains an embedded 8-bit microprocessor (a kind of computer chip). The microprocessor is under a contact pad on one side of the card. Think of the microprocessor as replacing the usual magnetic stripe present on a credit card or debit card. Since it contains customer data, it is used for customer identification and authentication making banking paperless.
Debit cards are also known as check cards. Debit cards look like credit cards or ATM (automated teller machine) cards, but operate like cash or a personal check. While a credit card is a way to "pay later," a debit card is away to "pay now." When you use a debit card, your money is quickly deducted from your checking or savings account iv. Internet Banking/ Online Banking:
INTERNET BANKING services allow customers to access their accounts online. Customers connect to a bank portal and thus can check their accounts and do bank transfers from any computer connected to the Internet. For authentication, a customer code and a password are provided.
Internet banking is a service which concerns individual and companies who are customers of a certain bank and have access to the Internet. This service allows them to access their bank accounts through a web browser connected to the site of the bank. As there is no need for special software, the only costs customers pay are the Internet connection and the fees.
In order to insure a high level of security, this service is developed on an infrastructure complying with the international information security standards. From the moment the authorized client is connected, any data exchange takes place under a secured protocol, SSL3, which uses a128 bytes encryption key (the most powerful available for the time being) and a DES algorithm.
Moreover, as this service can be provided and guaranteed by VeriSign, clients can easily recognize and check the authenticity of the site. Currently, there are many Internet banking solutions on the market. They have been usually developed by specialized software companies or in house, duet o the specificity for the data security. This service is provided to individuals, physical persons, and small and medium enterprises. v. Self Service PC Banking:
Allows access to the bank accounts through a software module which is installed on the customer’s PC and accesses the server connected to the bank’s database. Access is possible thanks to a customer code, a password only known by the customer and an electronic signature. There are several security levels (customers’ access to the application, access to the server and access to payments). Customers can check their accounts, do bank transfers, and obtain financial and banking information (exchange rates, interest rates, etc.). PC banking is powerful software located in one or more computers at the customers’ headquarters. As authorized users, customers access a multi cash server connected to the bank’s databases
Other forms of E-banking include Electronic funds transfers (EFT), Direct debits, phone banking and call centers.

4. Why the drive towards e-banking
Several core variables have brought about the materialization of e-banking services. First variable is the accelerated pace of developments in the Information Communication Technology industry and the internet revolution have played a major role in providing the technical infrastructure needed to bring in innovations within banking services.
While the second and critical variable contributing to the evolution of e-banking services business models is the changing lifestyles of banking clients in the western world and to a lesser extent in the developing countries due to trends in urbanization and globalization. More and more, banking clients seek to conduct their financial transactions in the least amount of time, most convenient locations and with the lowest cost possible. The points below summarize this push for e-banking services; * Rapidly changing customers’ needs and preferences * Competitive forces and product differentiation strategies * Enhancement of Customer Relationship Management * Pressure to reduce transactional and operation costs and pass the benefits to customers.
The Table below illustrates the cost aspect in relation to the various alternative channels.

5. Benefits of E-banking
For Banks
Price- In the long run a bank can save on money by not paying for tellers or for managing branches. Plus, it's cheaper to make transactions over the Internet.
Customer Base- the Internet allows banks to reach a whole new market- and a well off one too, because there are no geographic boundaries with the Internet. The Internet also provides a level playing field for small banks who want to add to their customer base
Efficiency- Banks can become more efficient than they already are by providing Internet access for their customers. The Internet provides the bank with an almost paper less system.
Customer Service and Satisfaction- Banking on the Internet not only allow the customer to have a full range of services available to them but it also allows them some services not offered at any of the branches. The person does not have to go to a branch where that service may or may not be offer. A person can print of information, forms, and applications via the Internet and be able to search for information efficiently instead of waiting in line and asking a teller. With more better and faster options a bank will surely be able to create better customer relations and satisfaction.
Image- A bank seems more state of the art to a customer if they offer Internet access. A person may not want to use Internet banking but having the service available gives a person the feeling that their bank is on the cutting image.
For Customers
Cost – It is less costly to transact on the e-channels as compared to the branch. One also saves on time, transport costs and security cost of carrying cash.
Loyalty Programs – Credit and debit cards enable customers obtain discounts from retail outlets.

6. Advantages and Disadvantages of e-banking Advantages | Disadvantages | Very convenient, comfortable, and easy way to do whatever monetary transaction you wish to do with your bank | Poorly delivered e-banking services can be slow & time consuming | Provides 24/7 services as the e-bank never closes and has no cutoff time | Some identity authentication requirements can be annoying & overwhelming for clients | Speed and easiness of conducting the digital transactions compared to paper-based dealings with walk-in customers. | Can be difficult for clients to get familiarized with the bank’s website & e-banking channel – each bank has its own unique website & methods! | | Some clients still prefer human interaction & personalized attention |

7. Constraints for growth of e-banking
The implementation of e-banking services is far from being well known and is encountering a numerous difficulties and barriers. The Internet as the unique channel for services delivery is totally different from the classic branches network or telephone banking. That’s way it brings up its own challenges that require unique and innovative solutions. The most common problematic issues in e-banking implementation and management include: * Traditional structures that are unable to respond to the agility required for the e-banking * Human face: According some analysts, customers still value personalized and responsive services from their bankers. * Computer illiteracy among majority of the population is still significantly high especially in Africa. * Security: Majority of the customer shy away from E-Banking services due to security concerns. * Poor and/or lack of technological infrastructure and reliable power supply. * Preference to paper money, as opposed to “virtual” cash in transactions. 8. E-banking challenges * Balance between convenience and security. * Designing products that offer a balance between competitive pricing and functionality. * Keeping abreast with dynamism of customer needs & innovation * Lack of proper legislative framework to support the growth of e-banking. 9. Conclusion

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