E-Banking

ByEid Ramadan

Agenda

Technology Commencement in BankingProduct Based BankingCustomer Based BankingData WarehouseCRMAlternative Delivery ChannelsBanks Position in the New Economy

Technology Commencement in Banking

In 70’s, banks started to establish centralized data processing centers.

Essentially the roles of these data processing centers are: collect the handwritten documents from branches compile the documents manual data entry by the operators generate reports for the bank staff and the central

bank execute some banking transactions

Branch Automation

In 80’s, banks started technology investments for the branches.

The first step is offline branches. Terminals connected to local branch computer Second step is online branches connected

centrally. Most of the transactions started to be performed in the central mainframe.

Product Based Banking

In the mid-1980s, banks accepted product based banking and competed with their products.

Banks developed new products for their customers. Credit card Credit deposit account (Super Account) Debit cards

Beside branch, banks brought new channels to give better service to their customers. ATM POS IVR

Plastic Cards

The plastic card usage grown enormously in last 2 decade.

Plastic card became the main media for bank customers.

Number of credit card in Turkey:

data collected from BKM

Credit Card Type National Cards International Cards TotalVisa 1.200.704 7.043.834 8.244.538

MasterCard 488.881 4.820.965 5.309.846Other 13.599 36.884 50.483total 1.703.184 11.901.683 13.604.867

Plastic Cards

Number of debit card in Turkey:

data collected from BKM

Debit Card Type Debit card

Electron (Visa) 6.230.782

Plus (Visa) 68.304

Electron ve Plus (Visa)

2.881.126

Cirrus ve Maestro (MasterCard)

14.225.245

Private Label card 6.893.479

Total 30.298.936

ATM In the mid-1980s, that cash dispensers truly became a

worldwide phenomenon. It took 16 years for the first 100,000 cash dispensers

to be installed, but only four years more for the next 100,000.

Now,ATM became the electronic face of banking for most customers.

Beside cash withdrawal, there exist various transaction options from transfer to fund buying/selling.

Now there are 12.174 ATM installed in Turkey (Ref: BKM)

Point Of Sale

New habits in shoppingIncreased the use of plastic cardsNow there are 313.140 POS installed in

Turkey (Ref: BKM)

ATM and POS Application Architecture

Credit Card Authorization

Debit Card Authorization

Switch System

IVR

Interactive Voice Response (IVR) is a software application that accepts a combination of voice telephone input and touch-tone keypad selection and provides appropriate responses in the form of voice

IVR has come into our life at the beginnings of 90’s. First step in Telephone Banking Peak transaction volume in salary payment days for

balance inquiry Integrated with ATM system

Customer Based Banking

• Customer introduction on different systems• Difficulty in creating new products• Different user interfaces for different environments• Product based Customer - Bank relation

•One customer informationfile

•Product factory

•Standard graphical user interface

•Consolidated customer data

Product Based Customer Based

Banking Application Architecture

Loans&Credits

FX Import / Export

Deposit (TD,DD)

FBS Securities PromissoryNotes

MerchantChequesNBS EFT

DAL

Batch Operations

ATM

POS

Teletel

Telerom

Teller (Branch)

Internet Banking

Phone Banking

Internet Shopping

PCMCampaign

ManagementCredit Risk

ManagementProductivity

CIF Product Factory PortfolioManagement

INFO

CENTER

Sales SupportSystem YKB HRPaymentsCMS Treasury

Relationship Management

De

liv

ery

Se

rvic

es

Management & Control

Reporting

Info

rma

tio

n D

eli

ve

ry

Settlement

GL / Accounting

Corporate Tables

Data Warehouse

Electronic repositories of summarized historical data The main idea behind data warehouse is get all

company data working together so users can see more,learn more, and make the organization work better

Data Warehouse helps users to identify trends, find answers to business questions and derive meaning from historical and operational data.

Data access is easier and less costly Decision support solutions run faster and are more

accurate.

Data Warehouse Process

Design Transform Extract Deliver

Transaction Data Extraction

Data Scrubbing and Cleansing

Load, index and Aggregate

Publish and Subscribe

Data Mapping

Data Replication

Data Histories and Summaries

Data Access Tools

Integrated Data Warehouse Infrastructure

Partial Solutions

Life Cycle

Complete Integrated Solution

CRM

CRM is an integrated sales, marketing and service strategy

CRM goals are : Use existing relationships to grow revenue Use integrated information for excellent

service Introduce more repeatable sales processes

and procedures Create new value and loyalty Implement a more proactive solution strategy

The Three Phases of CRM

Acquire New

Customer

Retain Profitable Customer

Enhance The Profitability of Existing Customer

Adaptibility

•Listening

•New products

Differentiation

•Innovation

•Convenience

Bundling

•Reduce Cost

•Customer service

Integrated CRM Applications

Sales Force Automation

Integrated CRM Applications

Partial Functional Solutions

Life Cycle

Complete Integrated Solution

Acquire Enhance Retain

Direct Marketing

Cross Sell and Up Sell

Proactive Service

Customer Support

Alternative Delivery Channels

Anytime, anywhere banking– Telephone Banking– Internet Banking– Mobile Banking– Television banking– Next ???

Telephone Banking

7x24 banking through the phone Main components

Switch IVR CTI(Computer Telephony Integration)

Manage each call using the computerPop up the user information while transferring the

call Agent Desktop Application

Win32,ActiveX, HTML Host Application

Telephone Banking Infrastructure

Telecom

IVR CTI HOST

Internet Banking

Sample Internet Banking Architecture

• More and more banks are coming to realize that internet is a part of banks' alternative delivery channel strategies activities concentrated in the business-to-consumer segment, focused on retaining clients

• In Internet banking, security is a primary concern. Security concerns have been addressed from every angle within the architecture of the Internet banking application.

Mobile Banking

Current Mobile Banking Applications: SMS Banking WAP Banking STK (Sim Toolkit) Banking

SMS Banking

Basic banking inquiry transactions(balance inquiry, funds, exchange rate inquiry…) are performed by the cooperation of bank and the GSM operator

Security is the main problem

Bank SMS Gateway

Bank SMS DB

Leased lineGSM Operator

Application Server

GSM Operator SMS DB

GSM Network

Bank Host

WAP Banking

Wireless application protocol (WAP) is an application environment and set of communication protocols for wireless devices designed to enable manufacturer-, vendor-, and technology-independent access to the Internet and advanced telephony services.

WAP is a global standard and is not controlled by any single company

Various banking transactions offered in WAP environment by banks.

Similar architecture with SMS banking

SIM Toolkit

SIM card enables to keep and load different applications.

SIM Application Toolkit has been agreed as a GSM standard

SIM Application Toolkit is independent of phone manufacturers and designs.

SIM Application Toolkit allows the flexibility to update the SIM to alter the services and download new services over the air

SIM Application Toolkit is designed as a client-server application. On the server side, SimCard platform and the client side, phone that supports the SIM Application Toolkit

In the near future, banks will start to offer banking transactions in this platform.

Television Banking

Digital television (DTV) is the transmission of television signals using digital rather than conventional analog methods.

Advantages of DTV over analog TV include:

Superior image resolution (detail) for a given bandwidth

Smaller bandwidth for a given image resolution

Compatibility with computers and the Internet

Interactivity

Superior audio quality

Consistency of reception over varying distances

Banks offer their banking transaction in this new environment

T-commerce in the near future.

What is the Next channel

Microwave Banking

???

Channel Costs

0

0,5

1

1,5

2

Web ATM Call Center Branch

Channel Integration Evolution Channel Integration evolution

Reuse Efficiencies of Scale

Reduction of Redundancies

The Role of Banks in the New Economy

Internet and mobile devices have brought new rules to economy and shaped the way to do business

Banks has also evolved according to the new economy and took their places in this new world to add value to their customer

The new ways to do business are :

e-commerce (B2C) m-commerce B2B

E-commerce - B2C

E-commerce is the buying and selling of goods and services on the Internet.

Main feature of e-commerce

24-hour availability

a global reach

the ability to interact

provide custom information and ordering

and multimedia prospects,

The Web is rapidly becoming a multibillion dollar source of

revenue for the world's businesses. Banks provide secure payments infrastructure - virtual POS

M-commerce

Mobile commerce applications involve using a mobile phone to carry out financial transactions- this usually means making a payment for goods or transferring funds electronically.

As content delivery over wireless devices becomes faster, more secure, and scalable, there is wide speculation that m-commerce will surpass wireline e-commerce as the method of choice for

digital commerce transactions.

B2B

A housands of companies that sell products to other companies have discovered that the Web provides not only a 24-hour-a-day showcase for their products but a quick way to reach the right people in a company for more information.

In the B2B, the bank role is to provide a reliable payment infrastructure that add value to corporate business

This infrastructure should cover: Bill presentment Bill payment Different payment types(credit card, deposit account,

loan) Information after payment

E-Security

To improve the e-business, all the users should feel secure to perform the transaction this environment

The main concepts in e-security are: PKI (public key infrastructure) enables users of a basically unsecure

public network such as the Internet to securely and privately exchange data and money through the use of a public and a private cryptographic key pair that is obtained and shared through a trusted authority.

Public key is a value provided by some designated authority as a key that, combined with a private key derived from the public key, can be used to effectively encryption messages and digital signature.

Private or secret key is an encryption/decryption key known only to the party or parties that exchange secret messages. Public key is used together with a private key

E-Security - continued

Digital certificate is an electronic "credit card" that establishes your credentials when doing business or other transactions on the Web. It is issued by a certification authority (CA).

CA (certificate authority) is an authority in a network that issues and manages security credentials and public key for message encryption. As part of a public key infrastructure, a CA checks with a registration authority to verify information provided by the requestor of a digital certificate

An RA (registration authority) is an authority in a network that verifies user requests for a digital certificate and tells the certificate authority to issue it.

Smart Cards

About the size of a credit card, a smart card is a plastic card with an embedded microchip that can be loaded with data, used for telephone calling, electronic cash payments, and other applications, and then periodically

"recharged" for additional use. smart card contains more information than a magnetic stripe card and it can

be programmed for different applications. Some cards can contain programming and data to support multiple applications and some can be updated to add new applications after they are issued

Benefit of smart cards:

enhanced security

off line transaction

programmable card

loyalty

customer information

Related Links

www.ykb.com www.teleweb.com.tr www.bkm.com.tr www.visa.com www.europay.com www.banktech.com www.bai.org www.mobilesimtoolkit.com www.itworld.com