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2010

RESEARCH PAPER ON

E-SCM PRACTICES

THROUGH E-COMMERCE

IN BANKING



Abstract

Over the last decade India has been one of the fastest adopters of informationtechnology, particularly because of its capability to provide software solutions toorganizations around the world. This capability has provided a tremendous impetus tothe domestic banking industry in India to deploy the latest in technology, particularly inthe internet banking and e-commerce arenas.

This article discusses the overall impact on banking in deploying internet banking ande-commerce in India. Strategic alignment of business and IT strategies, planning andimplementation of e-banking initiatives and management of benefits are captured, alongwith key contributions to development.

Latest developments in information technologies have propelled the e-SCM concept tonewer dimensions. In the past, neither markets nor products changed much over time,enterprises that gained initial superiority could leverage on, considerable resources andprocess knowledge, mature distribution channels, advertising and marketing clout, andthe newest technologies, to maintain that lead.

Today, It is evident that there is no such thing as sustainable competitive advantageand also that all advantages are temporary. The cause for the rapid acceleration in theerosion of competitive advantage in almost all the businesses can be traced back to therapidly developing newer technologies. Still more deadly is the sudden growth of newer

business models that have been quick in challenging the present leaders by leveragingon special competencies which permit them to invade the market and conquer thetargeted customer segments better.

This paper conducts an extensive literature review to identify the latest trends in e-SCM.It also attempts to study some of the issues associated with e-SCM along with their solutions and practices.

Key Words : E-Supply Chain, E-Commerce, Payment Gate Way, E-Governance



E-BANKING ± AN INTRODUCTION

Banks have traditionally been in the forefront of harnessing technology to improve their

products, services and efficiency. They have, over a long time, been using electronicand telecommunication networks for delivering a wide range of value added productsand services. The delivery channels include direct dial ± up connections, privatenetworks, public networks etc and the devices include telephone, Personal Computersincluding the Automated Teller Machines, etc. With the popularity of PCs, easy accessto Internet and World Wide Web (WWW), Internet is increasingly used by banks as achannel for receiving instructions and delivering their products and services to their customers. This form of banking is generally referred to as Internet Banking, althoughthe range of products and services offered by different banks vary widely both in their content and sophistication.

From the perspective of banking products and services being offered through Internet,Internet banking is nothing more than traditional banking services delivered through anelectronic communication backbone, viz, Internet. But, in the process it has thrown openissues which have ramifications beyond what a new delivery channel would normallyenvisage and, hence, has compelled regulators world over to take note of this emergingchannel. Some of the distinctive features of i-banking are:

1. It removes the traditional geographical barriers as it could reach out to customers of different countries / legal jurisdiction. This has raised the question of jurisdiction of law /supervisory system to which such transactions should be subjected.

2. It has added a new dimension to different kinds of risks traditionally associated withbanking, heightening some of them and throwing new risk control challenges,

3. Security of banking transactions, validity of electronic contract, customers¶ privacy,etc., which have all along been concerns of both bankers and supervisors haveassumed different dimensions given that Internet is a public domain, not subject tocontrol by any single authority or group of users,

4. It poses a strategic risk of loss of business to those banks who do not respond intime, to this new technology, being the efficient and cost effective delivery mechanismof banking services,

5. A new form of competition has emerged both from the existing players and newplayers of the market who are not strictly banks.



STRATEGIC MODEL OF E-SCM IN BANKING SECTOR

OBJECTIVES

Deliver value service

Optimum resource utilization

Cost reduction

Speed service delivery

Customer convenience

Reduce paper usage

Fraud Protection

TOOLS

ERP

WAP

SONET

VPN

Internet Payment Gateway

IMPLEMENTATION

ATM

24X7 Network

International Access

Any Branch Banking

Credit / Debit Cards

Smart Cards

RTGS (Real-time Gross Settlement)

Mobile Banking

E-Banking

SPNS (Shared Payment NetworkSystems)

OUTCOME

24x7 account access

Secured Online transactions

Attract New Customers

Credit Cards with low rates

Customer Satisfaction

IMPACT ON BANKING SECTOR

Quality Customer Service with personalattention

Attract New Customers

Low cost operations

Increased Operational efficiency



E-Commerce:

Even though started as network primarily for use by researchers in defence andscientific community, with the introduction of WWW in early 1990s, use of Internet for commerce has grown tremendously. E-commerce involves individuals and business

organizations exchanging business information and instructions over electronic mediausing computers, telephones and other telecommunication equipments. Such form of doing business has been in existence ever since electronic mode of data / informationexchange was developed, but its scope was limited only as a medium of exchange of information between entities with a pre-established contractual relationship. However,Internet has changed the approach to e-commerce; it is no longer the same businesswith an additional channel for information exchange, but one with new strategy andmodels.

There are two types of e-commerce ventures in operation: the old brick and mortar companies, who have adopted electronic medium, particularly Internet, to enhance their

existing products and services, and / or to offer new products and services and the puree-ventures who have no visible physical presence. This difference has wider ramifications than mere visibility when it comes to issues like customer¶s trust, brandequity, ability to service the customers, adopting new business culture and cost. Theseaspects of e-commerce will be touched upon in the following discussions.

Internet Banking is a product of e-commerce in the field of banking and financialservices. In what can be described as B2C domain for banking industry, InternetBanking offers different online services like balance enquiry, requests for cheque books,recording stop-payment instructions, balance transfer instructions, account opening andother forms of traditional banking services. Mostly, these are traditional services offeredthrough Internet as a new delivery channel. Banks are also offering payment serviceson behalf of their customers who shop in different e-shops, emalls etc. Further, differentbanks have different levels of such services offered, starting from level-1 where onlyinformation is disseminated through Internet to level-3 where online transactions are putthrough.

Banks¶ strategies in B2B market are responses to different business models emergingin e-commerce. A recent study by Arthur Andersen shows that banks and financialservice institutions generally adopt one of three business models to respond to e-business challenges. In the first place, they treat it as an extension of existing businesswithout any significant changes other than procedural and what technology demands.The second strategy takes the same approach as the first but introduces structuralchanges to the underlying business. In the third approach banks launch e-businessplatform as a different business from the existing core business and as a different brandof product. There is no definite answer as to which approach is appropriate. Perhaps itdepends on the type of market the bank is operating, its existing competencies and thelegal and regulatory environment. It is, however, sure that e-banking is evolving beyondthe traditional limits of banking and many new products / services are likely to emergeas ecommerce matures.



EVOLUTION OF MODERN BANKING

The evolution of modern banking technology began with the use of Advanced Ledger Posting Machines (ALPM) in the 1980s. The Reserve bank of India which is a regulatorycentral body under whom various public sector banks, financial institutions, NBFCs etc

work in India had then advised all banks to go in for massive computerization at thebranch level [9]. Two options were put forth i.e. either to automate the front office or back office. Many banks opted for automating the front office ALPM in the first phase.Banks like State Bank of India, which is a public sector commercial bank, concentratedon the back office automation at the branch level. The Rangarajan committee report of 1985 ensured that banks had to get computerized.

CURRENT STATE OF BANKING

The opening up of the Indian banking sector to private players acted as 'the tippingpoint' for the transformation. The deregulatory efforts prompted many financialinstitutions (like HDFC and ICICI) and non-financial institutions enter the banking arena.With the entry of private players into retail banking and with multi-nationals focusing onthe individual consumer in a big way, the banking system underwent a phenomenalchange. Multi-channel banking gained prominence. For the first time consumers got thechoice of conducting transactions either the traditional way (through the bank branch),through ATMs, the telephone or through the Net. Technology played a key role inproviding this multi-service platform. The entry of private players combined with newRBI guidelines forced nationalized banks to redefine their core banking strategy. Andtechnology was central to this change.



INTERNET BANKING IN INDIA: A GLIMPSE OF ITS ADOPTION ANDIMPLEMENTATION IN INDIA.

The second wave of development called for Total Bank Automation (TBA) in late 1980s.This automated both the front-end and back-end operations within the same branch.TBA comprised of total automation of a particular branch with its own database. In thethird wave, the new private sector banks entered the field. These banks opted for adifferent model of having a single centralized database instead of having multipledatabases for all their branches. This was possible due to the availability of goodnetwork infrastructure. In the beginning of the 1990s, leased line costs were comingdown. The DoT was expanding its capacity and new technologies were beingimplemented.Earlier, banks were not confident of running the whole operation through a

single data center. However, when a couple of private sector banks implemented itefficiently, other banks began to show an interest, and they also began consolidatingtheir databases into a single database [8]. Banks followed up on this move by choosingsuitable application software that would support centralized operations. The fourth wavestarted with the evolution of the ATM delivery channel.

This was the first stage of empowerment of the customer for his own transactions. Thesecond stage was the Suvidha experiment in Bangalore city of India. This showed thepower of technology and how the reach can be increased phenomenally at a greatpace. Seeing these, all the banks started revamping their retail delivery channels. Their core focus became the number of customers they can service at lower cost. The mainchannels for these were channels such as Internet Banking and mobile banking. After this came alliances for payment through various gateways. The third importantdevelopment happening now is the real-time gross settlement system of the RBI. Oncethis is in place, transactions between banks can be done through the settlement system,online, electronically. So the collections will become very fast. Five years from now,majority of the transactional services will be provided by way of Internet. Net-basedbanking comes at only 10 percent of the operating costs of conventional bankingpractices and services. As banks are going to play akey role in IT enabled publicservices involving electronic money transactions we feel that cooperative banks shouldconsider NET-Banking in a big way. A cost comparison study done by IBM globalservices consulting group clearly shows the advantage of using Internet as medium for banking services over other traditional mediums



Role of IT in this phenomenal technology change

IT is central to banking. This is one of the major reasons why new private and multi-

national banks have been able to survive, thrive, and adapt in an increasinglycompetitive space. These banks were able to leverage onlow-cost channels such as ATMs and Net banking to the optimum levels contributing to reduced operating costs.Banks have realized that shifting customer access to lower cost channels can help bringdown operating costs. But this does not mean that branch banking is obsolete. Rather,banks are reinventing their business models to offer new financial services through itsbranches. Banks are looking at newer ways to make a customer's banking experiencemore convenient, efficient, and effective. They are using new technology tools andtechniques to identify customer needs and are offering tailor-made products to matchthem. Centralized operations and process automation using core banking applicationsand IP-based networks improve efficiency and productivity levels tremendously. Core

banking applications help a bank to shift from 'branch banking' to 'bank banking.' Thisbasically means that a customer will be treated as a bank's customer than just thecustomer of a particular branch, which was the case earlier. Also, IP-based networks leta bank offer multiple services over the same network, resulting in costs savings. CRMsolutions, if implemented and integrated correctly, can help significantly in improvingcustomer satisfaction levels. Data warehousing helps in providing better transactionexperiences for customers over different transaction channels. This is made possiblebecause data warehousing helps bring all the transactions coming from differentchannels under a common roof. Data mining helps banks analyze and measurecustomer transaction patterns and behavior. This can help a lot in improving servicelevels and finding new business opportunities.

Risk Assessment is another area where technology plays a major role. The core issuesfaced by banks today are on the fronts of customer's service expectations, cuttingoperational costs, and managing competition. Technology c helps banks in meetingthese objectives. A data warehouse can help the bank get a single view of its dataacross disparate systems. This comes in handy since most banks have data spreadover several disparate, sometimes legacy systems. If the data is spread across differentsystems, a transaction done o n one system will not bereflected in the other. This is nota very desirable situation when it comes to multi-channel banking. Data warehousingsolves these by integrating all the data into a common warehouse (usually an RDBMS).The multiple data coming in from different systems is converted into a common formatusing the ETL (Extraction, Transformation, Loading) process. This provides a singlerepository from which banks can view or use information when required. So they havethe information in place with the warehouse but how do they make sense out of it? Thisis where data mining steps in. Data mining can help you recognize patterns in the datayou have. For example, how many of the customers have a two wheeler and earn morethan Rs 15,000 a month? The answer to this question will give you a list of prospectivecustomers to whom you can offer a car loan. Just give the query to the data-mining tooland the answer is there in a jiffy.



The Indian Financial Network (Infinet)

The Indian Financial Network, a VSAT-based communication back-bone for the national

payment system, was equipped with a full transponder on the INSAT-3B satellite to

carry out its operations. This was spearheaded by the Institute for Development and

Research in Banking Technology (IDRBT), a Hyderabad-based research institutepromoted by the Reserve Bank of India, is currently undergoing major changes. INFINET can be used for both intra and inter bank applications. Banks can develop and

port intra bank applications on their own. Inter bank applications are being developed

together by the Reserve Bank of India, IDRBT and member banks. The INFINET is a

Closed User Group (CUG) Network and uses a blend of communication technologies

such as VSATs and Terrestrial Leased Lines. The network consists of over 700 VSATs

located in 127 cities of the country and utilizes one full transponder on INSAT 3B.

Applications such as Real Time Gross Settlement, Central Funds Management System,

Security Settlement System, Electronic Clearing System and Electronic Funds Transfer,being developed by the RBI will be ported on the INFINET and in a true sense, the

INFINET will become the backbone for the National Payment Systems. These

applications will use the SFMS platform. Some of the applications, which the members

are using on the network are Any Branch Banking (Multi Branch Banking), Fast

Collection of Cheques, Cash Management Products, ATM Network, Interbank

reconciliation, Corporate E-mails etc. The INFINET is the most secure platform that technology can provide. Here are its

salient features:

INFINET being a CUG, it provides a high level of security against intruders.Outsiders cannot enter or penetrate the network. In the case of VSAT Network,the IP Addresses for IDUs at the remote VSAT locations are allotted andmaintained by the Hub and cannot be changed by the endusers. This takes careof the network integrity and security.

In the space segment, the data transmission, even in broadcast mode, isencrypted using proprietary standards and the packets cannot be opened at anyVSAT location except the one specified as the destination VSAT.

In the case of Leased Line Network (LLN) IPSEC 56 will be used to providestate-of-the-art encryption and security.

Apart from the above layers of network security, there will be a host of in-builtsecurity mechanisms in each application that is deployed on the INFINET - likepassword, access control, encryption, digital signatures and certification and insome applications there will be smart card and/or bio-metric authentication aswell.

Application level Security at par with international standards is provided throughSymmetric Key and Public Key Cryptography and IDRBT will act as theCertification Authority for the Banking and Financial Sector.



Internet Banking (E-Banking)

Internet banking (or E-banking) means any user with a personal computer and a

browser can get connected to his bank -s website to perform any of the virtual bankingfunctions. In internet banking system the bank has a centralized database that is web-

enabled. All the services that the bank has permitted on the internet are displayed in

menu. Any service can be selected and further interaction is dictated by the nature of

service. The traditional branch model of bank is now giving place to an alternative

delivery channels with ATM network. Once the branch offices of bank are

interconnected through terrestrial or satellite links, there would be no physical identity

for any branch.

It would a borderless entity permitting anytime, anywhere and anyhow banking.

The network which connects the various locations and gives connectivity to the centraloffice within the organization is called intranet. These networks are limited to

organizations for which they are set up. SWIFT is a live example of intranet application.

Internet banking in India

The Reserve Bank of India constituted a working group on Internet Banking. The group

divided the internet banking products in India into 3 types based on the levels of access

granted. They are:

Information Only System: General purpose information like interest rates, branchlocation, bank products and their features, loan and deposit calculations areprovided in the banks website. There exist facilities for downloading varioustypes of application forms. The communication is normally done through e-mail.There is no interaction between the customer and bank's application system. Noidentification of the customer is done. In this system, there is no possibility of anyunauthorized person getting into production systems of the bank throughinternet.

Electronic Information Transfer System: The system provides customer- specificinformation in the form of account balances, transaction details, and statement of accounts. The information is still largely of the 'read only' format. Identificationand authentication of the customer is through password. The information isfetched from the bank's application system either in batch mode or off-line. Theapplication systems cannot directly access through the internet.



Fully Electronic Transactional System: This system allows bi-directionalcapabilities. Transactions can be submitted by the customer for online update.This system requires high degree of security and control. In this environment,web server and application systems are linked over secure infrastructure. Itcomprises technology covering computerization, networking and security, inter-

bank payment gateway and legal infrastructure.

Automated Teller Machine (ATM): ATM is designed to perform the mostimportant function of bank. It is operated by plastic card with its special features.The plastic card is replacing cheque, personal attendance of the customer,banking hours restrictions and paper based verification. There are debit cards.

ATMs used as spring board for Electronic Fund Transfer. ATM itself can provideinformation about customers account and also receive instructions fromcustomers - ATM cardholders. An ATM is an Electronic Fund Transfer terminalcapable of handling cash deposits, transfer between accounts, balanceenquiries, cash withdrawals and pay bills. It may be on-line or 0ff-line. The on-line ATM enables the customer to avail banking facilities from anywhere. In off-line the facilities are confined to that particular ATM assigned. Any customer possessing ATM card issued by the Shared Payment Network System can go toany ATM linked to Shared Payment Networks and perform his transactions.

Credit Cards/Debit Cards: The Credit Card holder is empowered to spendwherever and whenever he wants with his Credit Card within the limits fixed byhis bank. Credit Card is a post paid card. Debit Card, on the other hand, is aprepaid card with some stored value. Every time a person uses this card, theInternet Banking house gets money transferred to its account from the bank of

the buyer. The buyers account is debited with the exact amount of purchases. Anindividual has to open an account with the issuing bank which gives debit cardwith a Personal Identification Number (PIN). When he makes a purchase, heenters his PIN on shops PIN pad. When the card is slurped through theelectronic terminal, it dials the acquiring bank system - either Master Card or VISA that validates the PIN and finds out from the issuing bank whether toaccept or decline the transactions. The customer can never overspend becausethe system rejects any transaction which exceeds the balance in his account.The bank never faces a default because the amount spent is debited immediatelyfrom the customers account.

Smart Card: Banks are adding chips to their current magnetic stripe cards toenhance security and offer new service, called Smart Cards. Smart Cards allowthousands of times of information storable on magnetic stripe cards. In addition,these cards are highly secure, more reliable and perform multiple functions. Theyhold a large amount of personal information, from medical and health history topersonal banking and personal preferences.



Core Banking Solutions

Core Banking Solutions is new jargon frequently used in banking circles. The

advancement in technology especially internet and information technology has led tonew way of doing business in banking. The technologies have cut down time, working

simultaneously on different issues and increased efficiency. The platform where

communication technology and information technology are merged to suit core needs of

banking is known as Core Banking Solutions. Here computer software is developed to

perform core operations of banking like recording of transactions, passbook

maintenance, interest calculations on loans and deposits, customer records, balance of

payments and withdrawal are done. This software is installed at different branches of

bank and then interconnected by means of communication lines like telephones,

satellite, internet etc. It allows the user (customers) to operate accounts from any

branch if it has installed core banking solutions. This new platform has changed the waybanks are working. Now many advanced features like regulatory requirements and

other specialised services like share (stock) trading are being provided.

Real Time Gross Settlement (RTGS)

RTGS is an electronic settlement system of Reserve Bank of India without involvementof papers. To facilitate an Efficient, Secure, Economical, Reliable and ExpeditiousSystem of Fund transfer and clearing in the Banking sector throughout India. Real time

gross settlement systems (RTGS) are a funds transfer mechanism where transfer of money takes place from one bank to another on a "real time" and on "gross" basis.Settlement in "real time" means payment transaction is not subjected to any waitingperiod. The transactions are settled as soon as they are processed. "Gross settlement"means the transaction is settled on one to one basis without bunching with any other transaction. Once processed, payments are final and irrevocable.

Electronic Clearing Service

Electronic Clearing Service is another technology enhancement happened in thebanking industry. The customer willing to use this facility are required to fill in the

mandate form from the corporate/any utility service institution for ECS mode of credit

and debit. The customer needs to prepare the payment date and submit it to the

³sponsor Bank´ and after that every thing happened electronically.so customer can

there by make payments as well as receive all incomes electonically.



Mobile banking

Mobile banking (also known as M-Banking, mbanking, SMS Banking etc.) is a term

used for performing balance checks, account transactions, payments etc. via a mobiledevice such as a mobile phone. Mobile banking today (2007) is most often performedvia SMS or the Mobile Internet but can also use special programs called clientsdownloaded to the mobile device. Mobile Banking Services:

y Account Information

y Payments, Deposits, Withdrawals, and Transfers

y Investments (Portfolio management services, Real-time stock quotes,personalized alerts and notifications on security prices)

CASE STUDY

Bank of Baroda, Powering International Operations with the Technology Advantage

Bank Profile

Bank of Baroda (BOB), India¶s fifth largest bank and prominent among the global top200, has a century¶s financial experience backing it. With assets in excess of USD 32billion, the bank has a network of over 2800 branches and offices, and about 700 ATMs.Bank of Baroda offers a wide range of banking products and financial services to 29million global corporate and retail customers, through various delivery channels, itsspecialized subsidiaries and affiliates in the areas of investment banking, credit cardsand asset management. Today, Bank of Baroda has international presence across 5continents, with a network of 71 offices in 25 countries, including branches of the bank,

its subsidiaries and the representative offices. The bank also has a joint venture inZambia with 9 branches. The bank's international operations today contribute around20% to its global business and well as over 30% to its net profits. Growing its presenceacross new geographies and strengthening its equity in existing markets, Bank of Baroda is on the path to establish itself µround the clock around the globe¶.



The bank is exploring out-of-the-box means to identify novel ways to tailor its growingrepertoire of products and services to meet segment-specific requirements acrossgeographies. Automation-led process and cost optimization, orchestration of the officesnetwork and greater attention to compliance with global regulations are aggressivelybeing focused on to help the bank achieve its ambitious goals. Bank of Baroda, gearing

to leverage the opportunities that the flat world presents and nimbly skirting its threats,is charting a coherent strategy to not just cope but break path and emerge with thewinning edge, in the changing global business scenario.

Key Business Drivers

Seize the opportunity to globalize

The mid-eighties marked the beginning of the shift to a buyers` market in the banking

space, and Bank of Baroda, was among the first to grasp this pressing imperative. Thebank orchestrated its business strategies around the centrality of the customer. Itdiversified rapidly into the areas of merchant banking, housing finance, credit cards andmutual funds. The strategy also entailed the sustained development of a string of segment - specific branches entrenching operations in profitable markets, the worldover. The drive was to revamp overseas operations and intensify structural changesacross geographies to provide services across segments with focus on the IndianDiaspora. The bank sought to take to market a vast array of international banking andservices catering to the needs of exporters and importers in India and abroad.

The bank also decided to capitalize on international markets to arrange for funds for the

Indian corporate sector by way of syndicated loans, bonds, floating rate notes, foreigncurrency convertible bonds and credit-linked notes with UK operations playing a major role in this emphasis. The bank's Global Syndication Centre at London sought tointensify focus on loan syndications and investments in the international markets.

With growing opportunities in the Asia-Pacific and Middle East region, the bank alsoplanned to set up Regional Syndication Centers in Dubai and Hong Kong. A crucialfacet of this plan was the technology-led re-engineering of the operational efficiencies of its global offices. The bank was clear that along with this business orchestration, itwould need a technology rejuvenation, to deliver an improved and homogenouscustomer experience across the global divide, ease governance and MIS with a unified

view of its international operations and improve its risk and cost managementstrategies.



The Search for a Solution

After a grueling partner-identification process, that saw the participation and evaluation

of several leading solution vendors, Bank of Baroda announced its decision to journeythrough the global technology-focused business transformation program, ably partneredby Finacle universal banking solution. A centralized and cohesive technology platform tosupport rapid product introduction, orchestrated operations, increased scalability andtrue flexibility across international operations, driving down costs and governancehassles, was key to the bank¶s transformation strategy and Finacle assured Bank of Baroda of all this and more.

Solution Overview

One solution, One strategy, Global Roll-out

The implementation focused on enabling Bank of Baroda with a consolidated,centralized technology platform, to fuel its growth engine across geographic divides, inthe flattening world. The scenario at that juncture was that Bank of Baroda¶s foreignoffices across 25 nations, deployed various technology platforms and at least 8 differentsolutions, to drive its operations. Replacing these disparate systems dotting the Bank of Baroda chain, worldwide, with Finacle¶s robust unified technology platform, was the firstgoal that the implementation team sought to achieve. UK was the most complex, with ahost of operations and complicated areas of functioning in both core banking as well astreasury domains. The isolated SWIFT systems, each operating independently across

Bank of Baroda¶s global offices, was a focus area for the bank, as the businessdemanded the efficiencies of Straight Through Processing (STP) and unhinderedtransactions. This was one of the major requirements at the UK territory which had amajor volume in correspondent bank operations and acted as the gateway for GBPtransactions for Bank of Baroda.

The implementation strategy

A cost effective yet efficient strategy was evidently needed for execution of the project.The key driver that catalyzed the journey to success was the process that was set after

drawing upon the huge expertise of implementation experts. The process that was usedfor implementation was a set of exercises defined with clear cut objectives. The entryand exit criteria were defined, with each individual aware of one¶s role and the expecteddeliverables. This helped in deriving the maximum out of every activity, and to augmentthis, a common Business Process Definition (BPD) strategy was used to further savetime and effort, while minimizing the life span of the implementation cycle. A commonBPD was created in general for all the International territories, which was a set of common parameters that came out after multiple rounds of discussions with the key



individuals involved. This common BPD would later serve as a base / starting point for the implementation of individual territories. The focus of the implementation teams wasto cater to the specific needs of the territory instead of them having to worry about theabsolute effort needed from scratch. The common BPD would then be improved uponby the BPD team as per the requirements of the specific countries. This process

transformation could be compared to a relay race, with just the last leg of the racehanded over to the territory teams, having finished the initial leg for all the territoriestogether in one go. Thus, allowing complete focus on specific needs of the territory, andthe implementation throughput limited only by the number of territories planned to betransformed or the complexity of the territory involved. This was a true processtransformation by which implementation at five territories was managed simultaneously.

From disparity to unification with Finacle

Bank of Baroda began its transformation journey by migrating to Finacle core bankingand e-Banking solutions that replaced 8 other disparate legacy systems across its

branches in 18 countries. The bank¶s µOne solution. One strategy¶ stance was astrategic move to deter vendor-dependence that hampered the bank¶s business userswhen they designed new products and updated business rules. This strategy wasdevised to address the escalating costs of solution maintenance as well. As the systemswere not connected, the bank was losing out on huge business opportunities that couldbe netted with a set of improved and efficient service that could be provided had thesystems existed on a common platform. With the advent of Finacle¶s centralizedsolution on the Bank of Baroda scenario, the entire solution framework drew supportfrom the bank¶s centralized data center at Mumbai, India. There ceased to be the needfor 60 IT supervisors posted at all the 25 geographies, and the locally recruited supportteams they led. This had a direct impact on the bank¶s bottom line, driving a reduction infull time employees (FTE) for technology management. Business users were alsoenabled to be free of technical challenges and the need for vendor intervention whileextending the product range, by leveraged Finacle¶s rich and user-friendly product-factory. In spite of one integrated solution driving all the international operations, eachcountry-specific implementation was tailored to specifically support easy compliancewith the local governance framework, regulations and norms. Bank of Baroda, in itsquest for a viable ERM strategy, is all geared to leverage the IT environment thatFinacle provides to take the first self-assured steps in that direction. A move typical of abank aggressively minimizing costs and risks, to gain a winning edge.

Hardware necessities at branches slashed to a healthy minimum

IT infrastructure needs at each branch, for each of the disparate systems, across thevarious geographies was eating into the bank¶s bottom line. On deployment of Finacle,the solution¶s SoA based architecture has enabled Bank of Baroda to transitionprocessing from the branch, to its common processing facility, eliminating the mandatefor back-up infrastructure at branch level data centers. Today, the central processingcenter services the needs of the entire business. This has a clear positive cost



implication for the bank¶s multi-country new branch openings, as it looks at the world, tomap its presence rapidly and profitably.

Expediting branch-to-corporate reporting

Manual MIS reporting and the ensuing delays at Bank of Baroda¶s branches, wasincreasingly being viewed as a deterrent for agile senior management response. Thebank, leveraged Finacle¶s common application network, to ensure branch-to-head officeMIS reporting, in real time. An activity that consumed weeks is now complete withinminutes, arming business decision-makers with timely data ammunition, from across itstranscontinental locations, to drive the bank towards greater success. Finacle reportinginfrastructure also ensures that uniformity and consistency in reporting logic ismaintained across the bank¶s branches. A forward thinking flat world-ready bank will notlose an opportunity to harness technology to orchestrate its processes and enhance its

agility. Bank of Baroda is exemplary in its strategy and operational tactics.

Facilitating cross-country product introduction

Bank of Baroda had a rich repository of offerings that it constantly innovates within a bidto engage customers and grow market share. In a decentralized solution environment,these product offerings, driven by a branch - specific solution, were limited in scope tothe country where they were first generated, and porting them to other countries posedseveral challenges. Bank of Baroda effectively deployed the unified solutionenvironment that Finacle offered to migrate products from one country to another, easilyand profitably. Bank of Baroda leveraged the flexibility and agility that Finacle promisedto port µready-to-deploy¶ products from one country. Today, Finacle implementation hasplayed a pivotal role in the rapid introduction of an exhaustive product lines and robustretail portfolios for Bank of Baroda in several geographies like UK, Hong Kong,Singapore and Johannesburg. This has helped Bank of Baroda respond to newopportunities presented by rapidly evolving customer segments, globally, and createentirely new customer experiences too.

Direct India remittance to delight customers

With its expanding global presence, Bank of Baroda leveraged its international networkto service the remittance needs of NRIs the world over. Disparate solutions acrossgeographies often translated into seemingly unavoidable delays in remittance. The bankcapitalized on the advantage that Finacle¶s common technology platform offered tostreamline and speed its domestic payments channels for direct remittance to India. TheSTP from various countries to domestic Bank of Baroda branches in India, has reducedthe time of an average India remittance to just a few hours, today. The Rapid Fundstransfer services ensure an overseas customer¶s reach to the remotest part of the home



country. The proud provider of one of the fastest India remittances system, the bank hastaken another crucial step towards offering increased value to its customers.

Bank of Baroda UK - The Challenge

Bank of Baroda UK is the flagship territory among the international territories, with 10branches and the treasury hub for the Europe region. The operations, qualityexpectation, regulatory requirements, business scenarios, all presented a daunting setof milestones that were to be covered to bring home the µUK advantage¶ and then gear itup for further technology leverage. Correspondent Banking Operations on Swift was amajor requirement that was to require minimal manual intervention. A straight throughprocessing (STP) module was implemented, which was specifically worked upon for

UK. The territory is a major treasury hub also for the bank. For treasury, a third-partysolution ³Reuter¶s Kondor+´ went live along with Finacle. Interface between FinacleCore and Reuters was another major challenge. Interface for STB, the regulatoryreporting partner with Finacle and Treasury to take care of the stringent reportingrequirements, added to the complexity of the entire implementation. The UK operationswent live on 12th Nov 2007 on Finacle Core and Reuters Kondor+, with each step of theglobal implementation methodology playing a pivotal role in further enhancing the levelof IT capability available to the operations. With IT operations shifting to the DataCenter, the local host system was done away with, bringing UK µin the loop¶ of the onesolution advantage. The never before µvisibility¶ into the UK operations sitting from homepresents the bank with the base to get all the pieces on board and be ready for the nextlevel of banking transformation in the Europe region, or to take the Europe advantageinto any of its international operations.

Bank of Bahrain - Straight out of the box

Bank of Baroda is charting a path of extensive global expansion for itself. The bankrealized early on, that it had to leverage technology effectively to cut the risks, costs andtime investment associated with initiating new branches. With the centralized ready-to-deploy Finacle solution rolled out across countries, technology infrastructuremanagement was simplified. No additional hardware was required for Finacledeployment at a new branch. All parameters were easily based on the businessrequirements of the branch, taking into account country-specific mandates.Parameterization of the solution was completed offshore. The entire implementationoperation was anchored by offshore staff, in Mumbai, India. Bank of Baroda in Bahrainis a vivid showcase of this implementation strategy. A fully operational bank, poweredby Finacle, was up and running in 19 days flat.



Reaping The Benefits

A centralized robust technology platform, with a rich palette of features and provenscalability is a non-negotiable pre-requisite for a bank to thrive in the flattening world.

Banks with the vision to harness their technology strategy to drive their business goalswill be the ones with the prowess and agility to respond to changing business dynamicsin the flat world. Finacle has provided Bank of Baroda, the positioning, to effectivelyleverage technology, to speed its transition towards the flat world readiness.

CONCLUSION

As the group's final conclusion, e-banking has its own advantages and disadvantages.The main advantage of implementing e-banking is an increase in customer satisfaction.This is because customers do not have to go to the branches in order to access their accounts, make withdrawals and deposits. They can also check it anytime of the day, afeature that physical branches do not offer thus creating a good relationship with thebank and the customer. E-banking is also advantageous not only for customer but alsofor the bank because it reduces costs in setting up a branch and the resources toprocess transactions. They can also service more people than ever before. All thesebenefits are the reasons why many banks are already investing in e-banking.

The main disadvantage of e-banking is the security problems that surround it. It's a factthat making transactions online poses a much bigger risk compared to makingtransactions in a physical branch. This is due to the hacking problems and identity theft.

Addition to these risks, technical difficulties could also arise. Sometimes the bank'swebsite goes down, and if this happens it will be a hassle for the customer becausehe/she has to go to a branch or make phone calls- which is usually busy due to other customers also making a call. Another case that has happened was an unpredicted risein customer that the servers of the bank were not able to cope with. A customer mayalso run into a bad service. Sometimes you might wait a while for your checks to clear and you certainly can't do anything about it if it is online.



REFERERENCES

1)www.rbi.org

2) www.bankofbaroda.com 3) www.cognizant.com 4) www.infosys.com 5) Research paper on internet banking in india by prof. Sonal chawla6) Article on Electronic Payment by Visa International

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