online banking thesis
TRANSCRIPT
Final Project (Thesis)Online Banking & Role of I.T. in Online Banking“Online banking is the practice of making bank transactions or paying bills via the Internet. It aims to provide bank customers online access to their bank accounts”.
2010
Abdul Mannan & M. WaqasOnline Banking & Role of I.T. in online Banking
2/5/2010
Online Banking & Role of I.T in Online Banking
(Project Documentation)
Session 2007-2009
Submitted To
Sir Mateen
Submitted ByAbdul Mannan MIT (9102)M Waqas Nawaz Gillani MIT (8202)
Project:Online Banking
And
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Role of I.T in Online Banking
ACKNOWLEDGEMENT
First of all I am very great full to Almighty ALLAH, the most Beneficent, and the most Merciful, who gives me the talent to complete this task successfully. I am also grateful to Allah also for goodness to the right path, and also for that make me courage to fulfilment for project.
I have chosen this topic (Online Banking System) for the
Thesis/Project individually. My Thesis/Project supervisor Abdul Mateen is very kind person and corporative always. He has to encourage his students dramatically to work hard. He has made available his support in a number of ways so that we have to complete this task. He helped us in proposal writing and gave us a lot helping material and suggestion. His specific comments, corrections, evaluate and praise was the most.
I owe my deepest gratitude to Sir Shahzad Jamil who is program manager of evening session. He is always available to help student of any kind.
I am very grateful to very grateful to my parents whose prayers and for their support. Also at this occasion we can’t forget our parents for their guidance at the crucial moments of our life.
I would like to show my gratitude to my elder brother Syed Jawad Nawaz who’s the senior network administrator of PUCIT. This thesis would not have been possible unless his corporation. And also my group fellow makes also effort to complete this task.
Lastly, I offer my regards and blessings to all of those who supported me in any respect during the completion of the project.
Especially the Chief Manager Mr. Rohail MCB EFU Branch Lahore, Pakistan.
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Abdul Mannan M. Waqas Nawaz Gillani
Index1. Abstract2. Introduction
a. What is Online Banking?
b. Definition of Online Banking
c. Online Transaction Processing
d. History
e. Origin of Online Banking
f. Features i. No Feeii. Good Web Tooliii. Fund Transfersiv. Account Aggregationv. E-Mail Alerts and Remindervi. Budgeting
3. Types of Online Banking
a. Informal
b. Communicative
c. Transactional4. How to Open an Online Banking account
a. Instructions5. Top 10 Online Banks6. We can Use Online Banking through
a. Automated Teller Machinei. Security
1. Physical2. Transactional Secrecy and Integrity3. Customer Identity Integrity4. Customer Security
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5. Device Operation Integrityii. Alternate Uses of atmiii. Fraud
1. Card fraud
b. Credit Cardsi. Types of Credit Cardsii. Some widely used forms of Credit Card
1. Standard Credit Cards2. Speciality Credit Cards3. Credit Cards for Bad Credits4. Credit Cards with Reward Program
iii. Name of common used Credit Card1. Standard Credit Cards
2. Business Credit Cards
3. Prepaid Credit Cards
4. Student Credit Cards
5. Bad Credit Credit Cards
6. Secured Credit Cards
7. Questions on Secured Credit Cards
8. Union Plus Secured Credit Cards
9. Secured Visa Credit Card
10. New Millennium Bank Secured Credit Cards
11. Unsecured Credit Cards
12. Virtual Credit Cards
13. Instant Credit Card
14. Airline Credit Cards
15. Miles by Discover Card
16. JetBlue Card
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17. Gold Delta SkyMiles Credit Card
18. Citi PremierPass Card
19. American Airlines Credit Card
iv. How credit Card works?
v. Transaction steps
1. Authorization
2. Batching
3. Clearing and Settlement
4. Funding
5. Charge Backs
vi. Secured Credit Card
vii. Prepaid Credit Card
viii. Credit Cards in ATMs
ix. Frauds
c. Debit Cardsi. What’s a Debit Card?ii. How Does a Debit Card Work?iii. Making a travel Budget with a Debit Card.iv. How to get a Debit Card?v. What happens if there is not enough money in your
account?vi. Using a Debit Card over Phonevii. Benefits of Debit Card
d. Mobilei. Mobile Bankingii. Trends in Mobile bankingiii. Mobile Banking Business model
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1. Bank focused model2. Bank Led model3. Non bank led model
iv. Mobile Banking services1. Account Information2. Payments, Deposits, Withdrawal and Transfers3. Investments4. Support5. Content Services
v. Challenges for Mobile Banking Solutions1. Headset Operability2. Security3. Scalability and Reliability4. Application Distribution5. Personalization
vi. Mobile Banking VS Online Banking forecastvii. Advantages and Disadvantages
e. Telephone
f. SMS Bankingi. Push and Pull messagesii. Typical Push & Pull Services afforded under SMS
Bankingiii. Concerns and Scepticisms about SMS bankingiv. Quality Services in SMS bankingv. The Convenience Factorvi. Compensation Control for lack of encryption vii. Technologies Employed for SMS Banking
g. Electronic Fund Transfer (EFT)i. EFTPOSii. Card Based EFTiii. Transaction Typesiv. Authorization
1. Dual Message Authorization/Clearing2. Single Message Authorization/Clearing
v. Authentication7. Internet/Online Banking Frauds
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a. Schemes Used in Internet Banking Fraudsi. Over the shoulder Looking schemeii. Phishing Schemeiii. Trojan Horse Scheme
b. Financial Services Information Security news
c. How can a Bank Prevent Online Banking fraudsi. Online banking schemesii. One Time Passwordsiii. Hardware Tokens Transaction Specific OPTsiv. OTP by SMSv. Smart Cards and USB Tokensvi. Transaction Monitoringvii. Comparisonviii. Risk Shield fraud Prevention
8. 5 Simple Tips to make Your Online Transaction Safe9. Security Issues in Online Banking
a. What a Customer can do for its Security of Online Bankingi. Introductionii. Typical Dangers faced when using the internetiii. What can customer do?
b. Security rulesi. Rule 1 (Install Security Software)ii. Rule 2 (Protect sensitive Data When sending it over open
network)iii. Rule 3 (Be Sure You Know who You are Dealing With)iv. Rule 4 (Be Careful with Sensitive Data and access media)v. Rule 5 (Choose a secure Password)vi. Rule 6 (Only Use programs from a trust worthy Source)vii. Rule 7 (Use up-to-date programs version)viii. Rule 8 (Run a security check on your PC)ix. Rule 9 (active the Browser’s Security settings)x. Rule 10 (Don’t make your current account available for
fraudulent financial transactions)xi. Glossaryxii. Emergency Check list
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xiii. General Tips of security on Internet
c. Role of information technology in banking industryi. Products Supported By I.T
10. Online Banking in Pakistan
a. Pakistan’s ICT Back Ground
b. I.T sector in Pakistan
c. Internet/Online banking in Pakistan
d. Current Systemi. Rising Trend of Online banking in Pakistanii. 45% Growth in Online Banking in Pakistaniii. Competitioniv. Co efficienciesv. Geographical Reachvi. Brandingvii. Customer Demographics
11. Tips for safe Online banking
a. Review your bank’s information about its online privacy policies and practices
b. Before setting up any online bill payment, check the privacy policy of the company or service you will be sending payment to.
c. For security purposes, choose an online personal identification number (PIN) that is unique and hard to guess.
d. Install anti-virus, firewall, and anti-spyware programs on your computer and keep them up to date.
e. Regularly check your online account balance for unauthorized activity.
f. Use a credit card to pay for online goods and services.
g. Avoid situations where personal information can be intercepted, retrieved, or viewed by unauthorized individuals.
h. If you receive email correspondence about a financial account,
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verify its authenticity by contacting your bank or financial institution.
i. If you have disclosed financial information to a fraudulent web site, file reports with the following organizations:
12. Advantages of Online Banking
a. Revenue Growth13. Disadvantages14. Conclusion
a. Problem Area
b. Research Problem & Research Questions15. Few Screen Shots of Silk Bank Online Banking through
Website
a. Login Page
b. My Account List page
c. Balance Inquiry page
d. Account Balance Page
e. Mini statement Page
f. Account Statement Page
g. Cheque Book Request Page
h. Bill Payment Page
i. Bill Payment History
j. Logout Page16. References
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Abstract
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Introduction
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What is Online Banking:
If you're like most people, you've heard a lot about online banking but probably haven't tried it yourself. You still pay your bills by mail and deposit checks at your bank branch, much the way your parents did. You might shop online for a loan, life insurance or a home mortgage, but when it comes time to commit, you feel more comfortable working with your banker or an agent you know and trust.
Online banking isn't out to change your money habits. Instead, it uses today's computer technology to give you the option of bypassing the time-consuming, paper-based aspects of traditional banking in order to manage your finances more quickly and efficiently.
Definitions of Online Banking:Online banking (or Internet banking) allows customers to conduct
financial transactions on a secure website operated by their retail or virtual bank, credit union or building society.
A system allowing individuals to perform banking activities at home, via the internet. Some online banks are traditional banks which also offer online banking, while others are online only and have no physical presence. Online banking through traditional banks enable customers to perform all routine transactions, such as:
Account transfers Balance inquiries Bill payments and Stop-payment requests
And some even offer online loan and credit card applications. Account information can be accessed anytime, day or night, and can be done from anywhere. A few online banks update information in real-time, while others do it daily. Once information has been entered, it doesn't need to be re-entered for similar subsequent checks, and future payments can be scheduled to occur automatically. Many banks allow for file transfer between their program and popular accounting software packages, to simplify record keeping. Despite the advantages, there are a few drawbacks. It does take some time to set up and get used to an online account. Also, some banks only offer online banking in a limited area. In addition, when an account holder pays online, he/she may have to put in a check request as much as two weeks before the payment is due, but the bank may withdraw the money from the account the day that request is received, meaning the person has lost up to two weeks of interest on that payment. Online-only banks have a few additional drawbacks: an account holder has to mail in deposits (other than direct deposits), and some services that traditional banks offer are difficult or impossible for online-only banks to offer, such as traveler's checks and cashier's checks.
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Online Transaction Processing
Computer system where time-sensitive, transaction-related data is processed immediately and is always kept current. Used mainly in online banking, inventory control, manufacturing scheduling, and ticket reservations, OLTP must possess ACID qualities to maintain data integrity and to ensure that transactions are correctly executed.
History:
The concept of online banking as we know it today dates back to the early 1980s, when it was first envisioned and experimented with. However, it was only in 1995 (on October 6, to be exact) that Presidential Savings Bank first announced the facility for regular client use. The idea was quickly snapped up by other banks like Wells Fargo, Chase Manhattan and Security First Network Bank. Today, quite a few banks operate solely via the Internet and have no ‘four-walls’ entity at all.
In the beginning, its inventors had predicted that it would be only a matter of time before online banking completely replaced the conventional kind. Facts now prove that this was an overoptimistic assessment - many customers still harbor an inherent distrust in the process. Others have opted not to use many of the offered facilities because of bitter experience with online frauds, and inability to use online banking services.
Be that as it may, it is estimated that a total of 55 million families in America will be active users of online banking by the year 2010. Despite the fact that many American banks still do not offer this facility to customers, this may turn out to be an accurate prediction. The number of online banking customers has been increasing at an exponential rate.
Initially, the main attraction is the elimination of tiresome bureaucratic red tape in registering for an account, and the endless paperwork involved in regular banking. The speed with which this process happens online, as well as the other services possible by these means, has translated into a literal boom in the banking industry over the last five years. Nor are there any signs of the boom letting up - in historical terms, online banking has just begun.
Some customers have been known to turn to internet banking due to dissatisfaction with standard procedures and practices. The total absence of human interaction appeals to some people. Some customers turn to internet banking facilities for security reasons. This is mainly because of customers being assured of banks' ability to keep transactions safe and secured.
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Origin of Online banking:
The advent of the Internet and the popularity of personal computers presented both an opportunity and a challenge for the banking industry.
For years, financial institutions have used powerful computer networks to automate millions of daily transactions; today, often the only paper record is the customer's receipt at the point of sale. Now that its customers are connected to the Internet via personal computers, banks envision similar economic advantages by adapting those same internal electronic processes to home use.
Banks view online banking as a powerful "value added” tool to attract and retain new customers while helping to eliminate costly paper handling and teller interactions in an increasingly competitive banking environment.
Features:
Online banking is evolving rapidly. To make sure you get a top performer, look for the following features:
No fees:
About 80% of online bill-pay accounts in the U.S. are free, according to Online Banking Report's Bruene, and "about half" of those are customers of Bank of America. Many banks offer free bill pay only in limited cases. Wells Fargo, for example, charges $7 per month if your average monthly account balance falls below $5,000. And after three months of inactivity, NetBank levies a $5 monthly fee on accounts of less than $3,000. EverBank charges $5 per month if your monthly balance is less than $1,500. First Internet Bank customers with free checking pay $4.95 a month for online bill pay, but customers with interest checking accounts (who pay $10 a month) get it free, as long as their balance stays above $500.
Good Web tools:
Online banking should be simple and quick. A bank's site should be a snap to learn and easy to navigate, and should provide essential features, such as images of your cashed checks and tools for budgeting. Bank sites have come a long way in recent years, and you don't have to pick a big bank to get a good online experience. The best
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sites also provide recent transaction reports (including payments, transfers and deposits), and warn you of potential security threats, such as e-mails from phishers.
A good bank site provides scanned images -- both the front and back sides -- of your canceled checks. Most major banks offer this service, including every bank on the top-10 list.
Why are check images important? Let's say you forget to record check #1454 in your register. You go to your bank's site and read your account summary, which lists only the check number and the amount. Who's the payee? To find out, view the check's image.
And a good site also archives several months' worth of account statements and check images. Archives vary considerably. For instance, Bank of America archives 18 months of statements but only 60 business days (about three months) of check images. Ever Bank, on the other hand, provides 15 months of statements and 13 months of images.
Fund transfers:
Transferring money to your accounts at other banks and brokerages is a big convenience. Some banks let you set up automatic deductions to make regular payments to, say, an IRA at a mutual fund company.
Account aggregation:
This is the ability to manage multiple accounts, including those from other banks, at your bank's Web site. Of the top 10 online banks, only Citibank and Wells Fargo have this feature.
E-mail alerts and reminders:
You'll want to be notified if there's excessive activity on your credit card, if someone tries to access your account with an incorrect password or even when you're low on checks.
Budgeting:
Wells Fargo's "My Spending Report" organizes your expenditures into categories, including groceries, restaurants and lodging. It's a great way to see how and where you spend your money. Citibank and Bank of America have similar features.
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Types of Online Banking
Currently, the following three basic kinds of Internet banking are being employed in the marketplace:
Informational:
This is the basic level of Internet banking. Typically, the bank has marketing information about the bank’s products and services on a stand-alone server. The risk is relatively low, as informational systems typically have no path between the server and the bank’s internal network. This level of Internet banking can be provided by the bank or outsourced. While the risk to a bank is relatively low, the server or Web site may be vulnerable to alteration. Appropriate controls therefore must be in place to prevent unauthorized alterations to the bank’s server or Web site.
Communicative:
This type of Internet banking system allows some interaction between the bank’s systems and the customer. The interaction may be limited to electronic mail, account inquiry, loan applications, or static file updates (name and address changes). Because these servers may have a path to the bank’s internal networks, the risk is higher with this configuration than with informational systems.Appropriate controls need to be in place to prevent, monitor, and alert management of any unauthorized attempt to access the bank’s internal networks and computer systems. Virus controls also become much more critical in this environment.
Transactional:
This level of Internet banking allows customers to execute transactions. Since a path typically exists between the server and the bank’s or outsourcer’s internal network, this is the highest risk architecture and must have the strongest controls. Customer transactions can include accessing accounts, paying bills, transferring funds, etc.
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How to Open an Online Banking Account
Instructions:
1. Step 1
Decide where you want to open an online bank accounts. If you already have a bank account and simply want to access it online, this is an easy decision. If not, look for banks that have low fees for the type of banking that you plan to do. For example, some banks will waive the fees if you maintain a certain balance.
2. Step 2
Visit the bank's website. Click on the link to open on online banking account.
3. Step 3
Click the type of account you want. You'll be able to choose between the different accounts that the bank offers. If you already have an account, you can skip this step.
4. Step 4
Fill out your personal details. This will include identifying information, such as your social security number. If you are opening an online account through your regular bank, they may ask for your account numbers. You will need to create a password in order to access your account. Banking sites have security measures in place to ensure that your data is safe.
5. Step 5
Wait for approval. You should receive an approval notice within a few minutes. However, you may also have to print, sign and mail a document into the bank before they will officially approve your account.
6. Step 6
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Deposit money into your account. You'll likely need to make a money transfer to yourself in order to get the money into your account.
Top 10 Online Banks
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We Can Use Online Banking Through
a) Automated Teller Machine (ATM)b) Credit Cardc) Debit Cardsd) Bank’s Web sitee) Mobilef) Telephone
Automated Teller Machine
A automated teller machine (ATM) or the automatic banking machine (ABM) is a computerized telecommunications device that provides the clients of a financial institution with access to financial transactions in a public space without the need for a cashier, human clerk or bank teller. On most modern ATMs, the customer is identified by inserting a plastic ATM card with a magnetic stripe or a plastic smartcard with a chip, that contains a unique card number and some security information such as an expiration date or CVVC (CVV). Authentication is provided by the customer entering a personal identification number (PIN).
Using an ATM, customers can access their bank accounts in order to make cash withdrawals (or credit card cash advances) and check their account balances as well as purchase cell phone prepaid credit. If the currency being withdrawn from the ATM is different from that which the bank account is denominated in (eg: Withdrawing Japanese Yen from a bank account containing US Dollars), the money will be converted at a wholesale exchange rate. Thus, ATMs often provide the best possible exchange rate for foreign travelers [1] and are heavily used for this purpose as well.
ATMs are known by various other names including Automated Transaction Machine,[2] automated banking machine, cash point (in Britain), money machine, bank machine, cash machine, hole-in-the-wall, Bancomat (in various countries in Europe and Russia), Multibanco (after a registered trade mark, in Portugal), and Any Time Money (in India).
Security Features of ATM:
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Security, as it relates to ATMs, has several dimensions. ATMs also provide a practical demonstration of a number of security systems and concepts operating together and how various security concerns are dealt with.
Physical:
Early ATM security focused on making the ATMs invulnerable to physical attack; they were effectively safes with dispenser mechanisms. A number of attacks on ATMs resulted, with thieves attempting to steal entire ATMs by ram-raiding. Since late 1990s, criminal groups operating in Japan improved ram-raiding by stealing and using a truck loaded with a heavy construction machinery to effectively demolish or uproot an entire ATM and any housing to steal its cash.
Another attack method, plofkraak, is to seal all openings of the ATM with silicone and fill the vault with a combustible gas or to place an explosive inside, attached, or near the ATM. This gas or explosive is ignited and the vault is opened or distorted by the force of the resulting explosion and the criminals can break in.
Modern ATM physical security, per other modern money-handling security, concentrates on denying the use of the money inside the machine to a thief, by means of techniques such as dye markers and smoke canisters.
A common method is to simply rob the staff filling the machine with money. To avoid this, the schedule for filling them is kept secret, varying and random. The money is often kept in cassettes, which will dye the money if incorrectly opened.
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Transactional secrecy and integrity:
The security of ATM transactions relies mostly on the integrity of the secure crypto processor: the ATM often uses commodity components that are not considered to be "trusted systems".
Encryption of personal information, required by law in many jurisdictions, is used to prevent fraud. Sensitive data in ATM transactions are usually encrypted with DES, but transaction processors now usually require the use of Triple DES. Remote Key Loading techniques may be used to ensure the secrecy of the initialization of the encryption keys in the ATM. Message Authentication Code (MAC) or Partial MAC may also be used to ensure messages have not been tampered with while in transit between the ATM and the financial network.
Customer identity integrity:
A BTMU ATM with a palm scanner (to the right of the screen)
There have also been a number of incidents of fraud by Man-in-the-middle attacks, where criminals have attached fake keypads or card readers to existing machines. These have then been used to record customers' PINs and bank card information in order to gain unauthorized access to their accounts. Various ATM manufacturers have put in place countermeasures to protect the equipment they manufacture from these threats.
Alternate methods to verify cardholder identities have been tested and deployed in some countries, such as finger and palm vein patterns, iris, and facial recognition technologies. However, recently, cheaper mass production equipment has been developed and being installed in machines globally that detect the presence of foreign objects on the front of ATMs, current tests have shown 99% detection success for all types of skimming devices.
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Customer security:
Dunbar Armored ATM Techs watching over ATMs that have been installed in a van.
In some countries, multiple security cameras and security guards are a common feature. In the United States, The NY State Comptroller's Office has criticized the NY State Department of Banking for not following through on safety inspections of ATMs in high crime areas.
Critics of ATM operators assert that the issue of customer security appears to have been abandoned by the banking industry;[48] it has been suggested that efforts are now more concentrated on deterrent legislation than on solving the problem of forced withdrawals.
At least as far back as July 30, 1986, critics of the industry have called for the adoption of an emergency PIN system for ATMs, where the user is able to send a silent alarm in response to a threat. Legislative efforts to require an emergency PIN system have appeared in Illinois, Kansas and Georgia, but none have succeeded as of yet. In January 2009, Senate Bill 1355 was proposed in the Illinois Senate that revisits the issue of the reverse emergency PIN system. The bill is again resisted by the banking lobby and supported by the police. In 1998 three towns outside of Cleveland Ohio, in response to an ATM crime wave, adopted ATM Consumer Security Legislation requiring that a 9-1-1 switch be installed at all outside ATMs within their jurisdiction. Since the passing of these laws 11 years ago, there have been no repeat crimes. In the wake of an ATM Murder in Sharon Hill, Pennsylvania, The City Council of Sharon Hill passed an ATM Consumer Security Bill as well, with the same result. As of July 2009, ATM Consumer Security Legislation is currently pending in New York, New Jersey, and Washington D.C. In China, many efforts to promote security have been made. On-premises ATMs are often located inside the bank's lobby which may be accessible 24 hours a day. These lobbies have extensive CCTV coverage, an emergency telephone and a security guard on the premises. Bank lobbies that aren't guarded 24 hours a day may also have secure doors that can only be opened from outside by swiping your bank card against a wall-mounted scanner, allowing the bank to identify who enters the building. Most ATMs will also display on-screen safety warnings and may also be fitted with convex mirrors above the display allowing the user to see what is happening behind them.
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Device operation integrity:
ATMs that are exposed to the outside must be vandal and weather resistant.
Openings on the customer-side of ATMs are often covered by mechanical shutters to prevent tampering with the mechanisms when they are not in use. Alarm sensors are placed inside the ATM and in ATM servicing areas to alert their operators when doors have been opened by unauthorized personnel.
Rules are usually set by the government or ATM operating body that dictate what happens when integrity systems fail. Depending on the jurisdiction, a bank may or may not be liable when an attempt is made to dispense a customer's money from an ATM and the money either gets outside of the ATM's vault, or was exposed in a non-secure fashion, or they are unable to determine the state of the money after a failed transaction. Bank customers often complain that banks have made it difficult to recover money lost in this way, but this is often complicated by the bank's own internal policies regarding suspicious activities typical of the criminal element.
Alternative uses:
Two NCR Personas 84 ATMs at a bank in Jersey dispensing two types of pound sterling banknotes: Bank of England notes, and States of Jersey notes
Although ATMs were originally developed as just cash dispensers, they have evolved to include many other bank-related functions. In some countries, especially those which benefit from a fully integrated cross-bank ATM network (e.g.: Multibanco in Portugal), ATMs include many functions which are not directly related to the management of one's own bank account, such as:
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Deposit currency recognition, acceptance, and recycling Paying routine bills, fees, and taxes (utilities, phone bills, social security, legal
fees, taxes, etc.) Printing bank statements Updating passbooks Loading monetary value into stored value cards Purchasing
o Postage stamps.o Lottery ticketso Train ticketso Concert ticketso Movie ticketso Shopping mall gift certificates.
Games and promotional features Donating to charities Cheque Processing Module Adding pre-paid cell phone credit.
Increasingly banks are seeking to use the ATM as a sales device to deliver pre approved loans and targeted advertising using products such as ITM (the Intelligent Teller Machine) from CR2 or Aptra Relate from NCR. ATMs can also act as an advertising channel for companies to advertise their own products or third-party products and services.
In Canada, ATMs are called guichets automatiques in French and sometimes "Bank Machines" in English. The Interac shared cash network does not allow for the selling of goods from ATMs due to specific security requirements for PIN entry when buying goods. CIBC machines in Canada, are able to top-up the minutes on certain pay as you go phones.
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A South Korean ATM with mobile bank port and bar code reader
Manufacturers have demonstrated and have deployed several different technologies on ATMs that have not yet reached worldwide acceptance, such as:
Biometrics, where authorization of transactions is based on the scanning of a customer's fingerprint, iris, face, etc. Biometrics on ATMs can be found in Asia.
Cheque/Cash Acceptance, where the ATM accepts and recognise cheques and/or currency without using envelopes Expected to grow in importance in the US through Check 21 legislation.
Bar code scanning On-demand printing of "items of value" (such as movie tickets, traveler's
cheques, etc.) Dispensing additional media (such as phone cards) Co-ordination of ATMs with mobile phones Customer-specific advertising Integration with non-banking equipment.
Fraud:
As with any device containing objects of value, ATMs and the systems they depend on to function are the targets of fraud. Fraud against ATMs and people's attempts to use them takes several forms.
The first known instance of a fake ATM was installed at a shopping mall in Manchester, Connecticut in 1993. By modifying the inner workings of a Fujitsu model 7020 ATM, a criminal gang known as The Buckland’s Boys was able to steal information from cards inserted into the machine by customers.
In some cases, bank fraud could occur at ATMs whereby the bank accidentally stocks the ATM with bills in the wrong denomination, therefore giving the customer more money than should be dispensed. The result of receiving too much money may be influenced on the card holder agreement in place between the customer and the bank.
In a variation of this, WAVY-TV reported an incident in Virginia Beach of September 2006 where a hacker who had probably obtained a factory-default admin password for a gas station's white label ATM caused the unit to assume it was loaded with $5 USD bills instead of $20s, enabling himself—and many subsequent customers—to walk away with four times the money they said they wanted to withdraw. This type of scam was featured on the TV series The Real Hustle.
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ATM behavior can change during what is called "stand-in" time, where the bank's cash dispensing network is unable to access databases that contain account information (possibly for database maintenance). In order to give customers access to cash, customers may be allowed to withdraw cash up to a certain amount that may be less than their usual daily withdrawal limit, but may still exceed the amount of available money in their account, which could result in fraud.
Card fraud:
ATM line up
The big queue at an ATM in Masalli, Azerbaijan.
In an attempt to prevent criminals from shoulder surfing the customer's PINs, some banks draw privacy areas on the floor.
For a low-tech form of fraud, the easiest is to simply steal a customer's card. A later variant of this approach is to trap the card inside of the ATM's card reader with a device often referred to as a Lebanese loop. When the customer gets frustrated by not getting the card back and walks away from the machine, the criminal is able to remove the card and withdraw cash from the customer's account.
Another simple form of fraud involves attempting to get the customer's bank to issue a new card and stealing it from their mail.
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Some ATMs may put up warning messages to customers to not use them when it detects possible tampering
The concept and various methods of copying the contents of an ATM card's magnetic stripe on to a duplicate card to access other people's financial information was well known in the hacking communities by late 1990.
In 1996 Andrew Stone, a computer security consultant from Hampshire in the UK, was convicted of stealing more than £1 million (at the time equivalent to US$1.6 million) by pointing high definition video cameras at ATMs from a considerable distance, and by recording the card numbers, expiry dates, etc. from the embossed detail on the ATM cards along with video footage of the PINs being entered. After getting all the information from the videotapes, he was able to produce clone cards which not only allowed him to withdraw the full daily limit for each account, but also allowed him to sidestep withdrawal limits by using multiple copied cards. In court, it was shown that he could withdraw as much as £10,000 per hour by using this method. Stone was sentenced to five years and six months in prison.
By contrast, a newer high-tech modus operandi sometimes called card skimming or card cloning involves the installation of a magnetic card reader over the real ATM's card slot and the use of a wireless surveillance camera or a modified digital camera to observe the user's PIN. Card data is then cloned onto a second card and the criminal attempts a standard cash withdrawal. The availability of low-cost commodity wireless cameras and card readers has made it a relatively simple form of fraud, with comparatively low risk to the fraudsters.
In an attempt to stop these practices, countermeasures against card cloning have been developed by the banking industry, in particular by the use of smart cards which cannot easily be copied or spoofed by unauthenticated devices, and by attempting to make the outside of their ATMs tamper evident. Older chip-card security systems include the
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French Carte Bleue, Visa Cash, Mondex, Blue from American Express and EMV '96 or EMV 3.11. The most actively developed form of smart card security in the industry today is known as EMV 2000 or EMV 4.x.
EMV is widely used in the UK (Chip and PIN) and other parts of Europe, but when it is not available in a specific area, ATMs must fallback to using the easy to copy magnetic stripe to perform transactions. This fallback behaviour can be exploited. However the fallback option has been removed by several UK banks, meaning if the chip is not read, the transaction will be declined.
In February 2009, a group of criminals used counterfeit ATM cards to steal $9 million from 130 ATMs in 49 cities around the world all within a time period of 30 minutes.
Card cloning and skimming can be detected by the implementation of magnetic card reader heads and firmware that can read a signature embedded in all magnetic stripes during the card production process. This signature known as a "Magne Print" or "BluPrint" can be used in conjunction with common two factor authentication schemes utilized in ATM, debit/retail point-of-sale and prepaid card applications.
Credit Cards:
A credit card is a small plastic card with some numbers embossed on it and which helps to purchase the things with no requirement of cash in pocket. It is 3-1/8 inches by 2-1/8 inches in size and has identification information for example a signature or picture.
It permits the person named on it to charge purchases or services to his account charges for which he will be billed periodically. This information is checked where we use it for example by automated teller machines (ATMs), store readers, Internet computers and banks.
Types of Credit Card:
Credit cards have become an important part of the financial life of modern society. Consumers can choose from a variety of credit cards available on the market. Credit cards provide easy access to a number of services. At the same time, the cardholder can get instant cash, within a pre-determined limit, whenever they need it. They then return the money back to the financial institution in easy installments. For all these services, the card issuing companies charge a certain amount as their annual fee. The cardholders also pay a definite rate of interest for the borrowed amount.
With the growing popularity of credit cards, a huge number of financial institutions have come up with their own customized credit cards. The needs of the customers design the features of these cards.
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Some of the widely used forms of credit cards are as follows:
Standard Credit Cards:
They are the most common version of cards available on the market. These cards have different features such as low interest, balance transfer, and so on. The interest rates charged on these cards are quite affordable and they help reduce credit card debt.
Specialty Credit Cards:
These cards are for some specialized purpose like enabling students to finance their educational expenditures. Some services are for providing financial assistance to the business sector at affordable rates. Business credit cards and student credit cards are some of the specialized cards that are available.
Credit Cards for Bad Credit:
The credit card companies also offer their services to the customers with adverse credit histories. These services come with some conditions. In spite of that, the credit cards are helpful for the customers. Secured debit cards and prepaid credit cards are in this category.
Credit Cards with Rewards Programs:
This category includes cards that have cash back options, airline miles bonuses, and so on.
Types of Credit cards:
Standard Credit Cards
Business Credit Cards
Prepaid Credit Cards
Student Credit Cards
Bad Credit Credit Cards
Secured Credit Cards
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Questions on Secured Credit Cards
Union Plus Secured Credit Cards
Secured Visa Credit Card
New Millennium Bank Secured Credit Cards
Unsecured Credit Cards
Virtual Credit Cards
Instant Credit Card
Airline Credit Cards
Miles by Discover Card
JetBlue Card
Gold Delta SkyMiles Credit Card
Citi PremierPass Card
American Airlines Credit Card
How credit cards work:
Credit cards are issued after an account has been approved by the credit provider, after which cardholders can use it to make purchases at merchants accepting that card.
When a purchase is made, the credit card user agrees to pay the card issuer. The cardholder indicates consent to pay by signing a receipt with a record of the card details and indicating the amount to be paid or by entering a personal identification number (PIN). Also, many merchants now accept verbal authorizations via telephone and electronic authorization using the Internet, known as a 'Card/Cardholder Not Present' (CNP) transaction.
Electronic verification systems allow merchants to verify that the card is valid and the credit card customer has sufficient credit to cover the purchase in a few seconds, allowing the verification to happen at time of purchase. The verification is performed using a credit card payment terminal or Point of Sale (POS) system with a communications link to the merchant's acquiring bank. Data from the card is obtained
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from a magnetic stripe or chip on the card; the latter system is in the United Kingdom and Ireland commonly known as Chip and PIN, but is more technically an EMV card.
Other variations of verification systems are used by eCommerce merchants to determine if the user's account is valid and able to accept the charge. These will typically involve the cardholder providing additional information, such as the security code printed on the back of the card, or the address of the cardholder.
Each month, the credit card user is sent a statement indicating the purchases undertaken with the card, any outstanding fees, and the total amount owed. After receiving the statement, the cardholder may dispute any charges that he or she thinks are incorrect (see Fair Credit Billing Act for details of the US regulations). Otherwise, the cardholder must pay a defined minimum proportion of the bill by a due date, or may choose to pay a higher amount up to the entire amount owed. The credit issuer charges interest on the amount owed if the balance is not paid in full (typically at a much higher rate than most other forms of debt). Some financial institutions can arrange for automatic payments to be deducted from the user's bank accounts, thus avoiding late payment altogether as long as the cardholder has sufficient funds.
Benefits to customers:
The main benefit to each customer is convenience. Compared to debit cards and checks, a credit card allows small short-term loans to be quickly made to a customer who need not calculate a balance remaining before every transaction, provided the total charges do not exceed the maximum credit line for the card. Credit cards also provide more fraud protection than debit cards. In the UK for example, the bank is jointly liable with the merchant for purchases of defective products over £100.
Additionally, carrying a credit card may be a convenience to some customers, as it eliminates the need to carry any cash for most purposes.
Transaction steps: Authorization:
The cardholder pays for the purchase and the merchant submits the transaction to the acquirer (acquiring bank). The acquirer verifies the credit card number, the transaction type and the amount with the issuer (Card-issuing bank) and reserves that amount of the cardholder's credit limit for the merchant. An authorization will generate an approval code, which the merchant stores with the transaction.
Batching:
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Authorized transactions are stored in "batches", which are sent to the acquirer. Batches are typically submitted once per day at the end of the business day. If a transaction is not submitted in the batch, the authorization will stay valid for a period determined by the issuer, after which the held amount will be returned back to the cardholder's available credit (see authorization hold). Some transactions may be submitted in the batch without prior authorizations; these are either transactions falling under the merchant's floor limit or ones where the authorization was unsuccessful but the merchant still attempts to force the transaction through. (Such may be the case when the cardholder is not present but owes the merchant additional money, such as extending a hotel stay or car rental.)
Clearing and Settlement:
The acquirer sends the batch transactions through the credit card association, which debits the issuers for payment and credits the acquirer. Essentially, the issuer pays the acquirer for the transaction.
Funding:
Once the acquirer has been paid, the acquirer pays the merchant. The merchant receives the amount totalling the funds in the batch minus either the "discount rate," "mid-qualified rate", or "non-qualified rate" which are tiers of fees the merchant pays the acquirer for processing the transactions.
Charge backs:
A chargeback is an event in which money in a merchant account is held due to a dispute relating to the transaction. Charge backs are typically initiated by the cardholder. In the event of a charge back, the issuer returns the transaction to the acquirer for resolution. The acquirer then forwards the chargeback to the merchant, who must either accept the chargeback or contest it. A merchant is responsible for the chargeback only if she has violated the card acceptance procedures as per the merchant agreement with card acquirers.
Secured credit cards:
A secured credit card is a type of credit card secured by a deposit account owned by the cardholder. Typically, the cardholder must deposit between 100% and 200% of the total amount of credit desired. Thus if the cardholder puts down $1000,
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they will be given credit in the range of $500–$1000. In some cases, credit card issuers will offer incentives even on their secured card portfolios. In these cases, the deposit required may be significantly less than the required credit limit, and can be as low as 10% of the desired credit limit. This deposit is held in a special savings account. Credit card issuers offer this because they have noticed that delinquencies were notably reduced when the customer perceives something to lose if the balance is not repaid.
The cardholder of a secured credit card is still expected to make regular payments, as with a regular credit card, but should they default on a payment, the card issuer has the option of recovering the cost of the purchases paid to the merchants out of the deposit. The advantage of the secured card for an individual with negative or no credit history is that most companies report regularly to the major credit bureaus. This allows for building of positive credit history.
Although the deposit is in the hands of the credit card issuer as security in the event of default by the consumer, the deposit will not be debited simply for missing one or two payments. Usually the deposit is only used as an offset when the account is closed, either at the request of the customer or due to severe delinquency (150 to 180 days). This means that an account which is less than 150 days delinquent will continue to accrue interest and fees, and could result in a balance which is much higher than the actual credit limit on the card. In these cases the total debt may far exceed the original deposit and the cardholder not only forfeits their deposit but is left with an additional debt.
Most of these conditions are usually described in a cardholder agreement which the cardholder signs when their account is opened.
Secured credit cards are an option to allow a person with a poor credit history or no credit history to have a credit card which might not otherwise be available. They are often offered as a means of rebuilding one's credit. Secured credit cards are available with both Visa and MasterCard logos on them. Fees and service charges for secured credit cards often exceed those charged for ordinary non-secured credit cards, however, for people in certain situations, (for example, after charging off on other credit cards, or people with a long history of delinquency on various forms of debt), secured cards can often be less expensive in total cost than unsecured credit cards, even including the security deposit.
Sometimes a credit card will be secured by the equity in the borrower's home.
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Prepaid "credit" cards:
A prepaid credit card is not a credit card, since no credit is offered by the card issuer: the card-holder spends money which has been "stored" via a prior deposit by the card-holder or someone else, such as a parent or employer. However, it carries a credit-card brand (Visa, MasterCard, American Express or Discover) and can be used in similar ways just as though it were a regular credit card.
After purchasing the card, the cardholder loads the account with any amount of money, up to the predetermined card limit and then uses the card to make purchases the same way as a typical credit card. Prepaid cards can be issued to minors (above 13) since there is no credit line involved. The main advantage over secured credit cards (see above section) is that you are not required to come up with $500 or more to open an account. With prepaid credit cards you are not charged any interest but you are often charged a purchasing fee plus monthly fees after an arbitrary time period. Many other fees also usually apply to a prepaid card.
Prepaid credit cards are sometimes marketed to teenagers for shopping online without having their parents complete the transaction.
Because of the many fees that apply to obtaining and using credit-card-branded prepaid cards, the Financial Consumer Agency of Canada describes them as "an expensive way to spend your own money".[10] The agency publishes a booklet, "Pre-paid cards", which explains the advantages and disadvantages of this type of prepaid card.
Credit cards in ATMs:
Many credit cards can also be used in an ATM to withdraw money against the credit limit extended to the card, but many card issuers charge interest on cash advances before they do so on purchases. The interest on cash advances is commonly charged from the date the withdrawal is made, rather than the monthly billing date. Many card issuers levy a commission for cash withdrawals, even if the ATM belongs to the same bank as the card issuer. Merchants do not offer cash back on credit card transactions because they would pay a percentage commission of the additional cash amount to their bank or merchant services provider, thereby making it uneconomical.
Many credit card companies will also, when applying payments to a card, do so at the end of a billing cycle, and apply those payments to everything before cash advances. For this reason, many consumers have large cash balances, which have no grace period and incur interest at a rate that is (usually) higher than the purchase rate, and will carry those balance for years, even if they pay off their statement balance each month.
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Fraud:
In relative numbers the values lost in bank card fraud are minor, calculated in 2006 at 7 cents per 100 dollars worth of transactions (7 basis points). In 2004 in the UK, the cost of fraud was over £500 million. When a card is stolen, or an unauthorized duplicate made, most card issuers will refund some or all of the charges that the customer has received for things they did not buy. These refunds will, in some cases, be at the expense of the merchant, especially in mail order cases where the merchant cannot claim sight of the card. In several countries, merchants will lose the money if no ID card was asked for, therefore merchants usually require ID card in these countries. Credit card companies generally guarantee the merchant will be paid on legitimate transactions regardless of whether the consumer pays their credit card bill. Most banking services have their own credit card services that handle fraud cases and monitor for any possible attempt at fraud. Employees that are specialized in doing fraud monitoring and investigation are often placed in Risk Management, Fraud and Authorization, or Cards and Unsecured Business. Fraud monitoring emphasizes minimizing fraud losses while making an attempt to track down those responsible and contain the situation. Credit card fraud is a major white collar crime that has been around for many decades, even with the advent of the chip based card (EMV) that was put into practice in some countries to prevent cases such as these. Even with the implementation of such measures, credit card fraud continues to be a problem.
Debit Cards:
What's a Debit Card?
A debit card differs from a credit card in that a debit card is tied directly to your checking account and the amount of money you can spend with it is limited to the amount of money you have in the bank.
How Does a Debit Card Work?
When you use a debit card, the transaction debits (withdraws) the amount of the transaction from your checking account, usually on the same day. You can use a debit card to get cash from ATM machines or have it swiped like a credit card at shops or restaurants or swipe it through a pay phone to make a call.
How Does a Debit Card Work?
When you use a debit card, the transaction debits (withdraws) the amount of the transaction from your checking account, usually on the same day. You can use a
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debit card to get cash from ATM machines or have it swiped like a credit card at shops or restaurants or swipe it through a pay phone to make a call.
Making a Travel Budget With a Debit Card:
Naturally, you can't rely on your debit card for all your international transactions - imagine haggling with a street vendor, getting the price right and then trying to give him/her plastic! Remote hostels and many restaurants in third world countries don't accept credit cards (which is how debit cards are viewed in the business world). Thus, you'll need to make budget plans before you leave home so that you have traveler's checks and cash and some money in your checking account for use on your debit card.
Let's assume you have a budget of $2000 for your trip. Decide how you're comfortable splitting that into the way you'll use it; $500 in traveler's checks (although travelers' checks are dead as disco, because carrying them is a pain on several levels -- we've had banks in other countries refuse to cash them, we've lost them, etc. and so on), $500 in cash and $1000 left in your checking account, for example -- that's $1000 on your debit card.
If that $2000 represents your entire cash portfolio, consider setting up emergency precautions before you leave home. If someone, like Dad, is willing to loan you money, leave deposit slips with him so that if you lose all your money abroad, you can dial for dollars (using your debit card) and he can get some money into your account. If your debit card (your checking account) is almost empty, ask him to tell the bank to "memo post" the deposit so that the cash is immediately available and your debit card is quickly back in business.
How to Get a Debit Card:
Chances are you were automatically offered a debit card when you opened your checking account. If you don't have a checking account, go open one now. Look for a bank that doesn't charge checking account fees, and ask for a debit card.
It takes a few days to two weeks to get a debit card after you order it. When the card arrives, sign the back; have photo id with your signature handy when you use the card - merchants may want to compare your face and your signatures to protect themselves from fraud.
What happens if there's not enough money in your account?
This will depend on the type of debit card you have:
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if you have a ‘Solo’ or ‘Electron’ debit card the balance in your account is checked before each transaction – if there’s not enough money you won’t be able pay or withdraw cash with the debit card without prior agreement if you have ‘Switch’, ‘Visa’ or ‘Delta’ card your account balance won’t necessarily be checked and the payment may still go through
If you go overdrawn the charges you’ll pay will depend on whether or not you have an authorised overdraft arrangement with your bank. If you do, you’ll pay the agreed amount of interest at the end of each month. This is usually much lower than interest charged on credit cards.
If you don’t have an overdraft agreement, or you exceed the agreed limit, your bank may allow the payment to go through but you’ll usually pay much higher fees than if you had an agreed overdraft.
Using a debt card over the phone or internet:
Debit cards can be used to make payments by phone or over the internet. In this case you'll need to provide certain details that are printed on your card. Find out more and view an example debit card on the Financial Services Authority (FSA) website.
Exclusive features Debit Card:
Global Acceptability:
Debit Cards can be used at 24 million establishments across the globe in 210 countries including 10,000 in Pakistan displaying the Debit Cards logo.
Cash Advance Facility:
You can withdraw cash up to 30% of your available Debit limit at any VISA/MasterCard ATM across the globe. Cash can also be withdrawn ‘Over-the-Counter’ at financial institutions worldwide or at any of the Bank branches and all other VISA/MasterCard member banks.
Supplementary Cards:
Gift your family members, friends, employees or absolutely anyone, with
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exclusive Debit or VISA/MasterCard Supplementary Cards and let them enjoy the privileges these Cards have to offer. You can have up to 5 Supplementary Cards made for anyone who is more than 18 years of age.
Foreign Transactions:
When you use your Debit Card abroad, the transaction amount will be converted from the transaction currency to US Dollars, based on the international exchange rate prevailing on that date. In order to assist Card members, all transactions will be converted into yours country currency for payment.
Debit Cards vs. Credit Cards: Similarities and Differences:
The same financial institutions offer both debit cards and credit cards. Both cards offer special rewards, such as points and cash back on purchases made through the card. Debit cards and credit cards can be used to make online payments with the help of the Pin number assigned to them. They can be used to withdraw money from ATMs, depending on the cash limit available on these cards.
Debit cards and credit cards differ in some significant ways. In the case of a credit card, the issuer offers credit and overdraft facilities. This facility is not available with a debit card, which will only debit payments from existing and available funds within the cardholders account. A credit cardholder therefore has a monthly bill to pay in every month that the card is used. If they don’t pay that bill, high interest charges are applied. A debit card holder is free from the hassle of paying those bills, and from the risk of building up large debts to credit card companies.
Debit Cards: Benefits:
Debit cards offer the following benefits:
They help people to be disciplined financially, since one cannot splurge with the limited amount of funds deposited for the card.
A person with poor credit can obtain a debit card without too much trouble. Debit cards can be used to make online purchases and payments. They provide freedom from carrying cash and checks while travelling, thereby
offering more safety. Debit cards do not charge high interest rates or fees on card transactions.
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Disadvantages of Debit Cards:
Debit cards, however, do entail certain limitations, such as:
Debit cards come with lesser fraud protection facilities than credit cards. Some transactions cannot be carried out with a debit card, such as renting a car
in a foreign country. You can only use as many funds as you have available. Therefore, in case of an
emergencies where credit is urgently needed beyond your account balance, a debit card will not be enough to meet your needs.
Use of Online Banking through Mobile:
Mobile banking:
Mobile banking (also known as M-Banking, m-banking, SMS Banking etc.) is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone. Mobile banking today is most often performed via SMS or the Mobile Internet but can also use special programs called clients downloaded to the mobile device.
Trends in mobile banking:
The advent of the Internet has enabled new ways to conduct banking business, resulting in the creation of new institutions, such as online banks, online brokers and wealth managers. Such institutions still account for a tiny percentage of the industry.
Over the last few years, the mobile and wireless market has been one of the fastest growing markets in the world and it is still growing at a rapid pace. According to the GSM Association and Ovum, the number of mobile subscribers exceeded 2 billion in September 2005, and now exceeds 2.5 billion (of which more than 2 billion are GSM).
With mobile technology, banks can offer services to their customers such as doing funds transfer while travelling, receiving online updates of stock price or even performing stock trading while being stuck in traffic. Smart phones and 3G connectivity provide some capabilities that older text message-only phones do not.
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According to a study by financial consultancy Celent, 35% of online banking households will be using mobile banking by 2010, up from less than 1% today. Upwards of 70% of bank center call volume is projected to come from mobile phones. Mobile banking will eventually allow users to make payments at the physical point of sale. "Mobile contactless payments” will make up 10% of the contactless market by 2010.
Many believe that mobile users have just started to fully utilize the data capabilities in their mobile phones. In Asian countries like India, China, Bangladesh, Indonesia and Philippines, where mobile infrastructure is comparatively better than the fixed-line infrastructure, and in European countries, where mobile phone penetration is very high (at least 80% of consumers use a mobile phone), mobile banking is likely to appeal even more.
Mobile banking business models:
A wide spectrum of Mobile/branchless banking models is evolving. However, no matter what business model, if mobile banking is being used to attract low-income populations in often rural locations, the business model will depend on banking agents, i.e., retail or postal outlets that process financial transactions on behalf telcos or banks. The banking agent is an important part of the mobile banking business model since customer care, service quality, and cash management will depend on them. Many telcos will work through their local airtime resellers. However, banks in Colombia, Brazil, Peru, and other markets use pharmacies, bakeries, etc.
These models differ primarily on the question that who will establish the relationship (account opening, deposit taking, lending etc.) to the end customer, the Bank or the Non-Bank/Telecommunication Company (Telco). Another difference lies in the nature of agency agreement between bank and the Non-Bank. Models of branchless banking can be classified into three broad categories - Bank Focused, Bank-Led and Nonbank-Led.
Bank-focused model:
The bank-focused model emerges when a traditional bank uses non-traditional low-cost delivery channels to provide banking services to its existing customers. Examples range from use of automatic teller machines (ATMs) to internet banking or mobile phone banking to provide certain limited banking services to banks’ customers. This model is additive in nature and may be seen as a modest extension of conventional branch-based banking.
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Bank-led model:
The bank-led model offers a distinct alternative to conventional branch-based banking in that customer conducts financial transactions at a whole range of retail agents (or through mobile phone) instead of at bank branches or through bank employees. This model promises the potential to substantially increase the financial services outreach by using a different delivery channel (retailers/ mobile phones), a different trade partner (telco / chain store) having experience and target market distinct from traditional banks, and may be significantly cheaper than the bank-based alternatives. The bank-led model may be implemented by either using correspondent arrangements or by creating a JV between Bank and Telco/non-bank. In this model customer account relationship rests with the bank
Non-bank-led model:
The non-bank-led model is where a bank does not come into the picture (except possibly as a safe-keeper of surplus funds) and the non-bank (e.g. telco) performs all the functions.
Mobile Banking Services:
Mobile banking can offer services such as the following:
Account Information
1. Mini-statements and checking of account history2. Alerts on account activity or passing of set thresholds3. Monitoring of term deposits4. Access to loan statements5. Access to card statements6. Mutual funds / equity statements7. Insurance policy management8. Pension plan management9. Status on cheque, stop payment on cheque10.Ordering check books11.Balance checking in the account12.Recent transactions13.Due date of payment (functionality for stop, change and deleting of payments)14.PIN provision, Change of PIN and reminder over the Internet15.Blocking of (lost, stolen) cards
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Payments, Deposits, Withdrawals, and Transfers:1. Domestic and international fund transfers2. Micro-payment handling3. Mobile recharging4. Commercial payment processing5. Bill payment processing6. Peer to Peer payments7. Withdrawal at banking agent8. Deposit at banking agent
Especially for clients in remote locations, it will be important to help them deposit and withdraw funds at banking agents, i.e., retail and postal outlets that turn cash into electronic funds and vice versa. The feasibility of such banking agents depends on local regulation which enables retail outlets to take deposits or not.
A specific sequence of SMS messages will enable the system to verify if the client has sufficient funds in his or her wallet and authorize a deposit or withdrawal transaction at the agent. When depositing money, the merchant receives cash and the system credits the client's bank account or mobile wallet. In the same way the client can also withdraw money at the merchant: through exchanging SMS to provide authorization, the merchant hands the client cash and debits the merchant's account.
Investments:1. Portfolio management services2. Real-time stock quotes3. Personalized alerts and notifications on security prices4. mobile banking
Support:1. Status of requests for credit, including mortgage approval, and insurance
coverage2. Check (cheque) book and card requests3. Exchange of data messages and email, including complaint submission and
tracking4. ATM Location
Content Services:1. General information such as weather updates, news2. Loyalty-related offers3. Location-based services
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Based on a survey conducted by Forrester, mobile banking will be attractive mainly to the younger, more "tech-savvy" customer segment. A third of mobile phone users say that they may consider performing some kind of financial transaction through their mobile phone. But most of the users are interested in performing basic transactions such as querying for account balance and making bill payment.
Challenges for a Mobile Banking Solution:
Key challenges in developing a sophisticated mobile banking application are:
Handset operability:
There are a large number of different mobile phone devices and it is a big challenge for banks to offer mobile banking solution on any type of device. Some of these devices support J2ME and others support SIM Application Toolkit, a WAP browser, or only SMS.
Initial interoperability issues however have been localized, with countries like India using portals like R-World to enable the limitations of low end java based phones, while focus on areas such as South Africa have defaulted to the USSD as a basis of communication achievable with any phone.
The desire for interoperability is largely dependent on the banks themselves, where installed applications(Java based or native) provide better security, are easier to use and allow development of more complex capabilities similar to those of internet banking while SMS can provide the basics but becomes difficult to operate with more complex transactions.
There is a myth that there is a challenge of interoperability between mobile banking applications due to perceived lack of common technology standards for mobile banking. In practice it is too early in the service lifecycle for interoperability to be addressed within an individual country, as very few countries have more than one mobile banking service provider. In practice, banking interfaces are well defined and money movements between banks follow the IS0-8583 standard. As mobile banking matures, money movements between service providers will naturally adopt the same standards as in the banking world.
Security:
Security of financial transactions, being executed from some remote location and transmission of financial information over the air, are the most complicated
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challenges that need to be addressed jointly by mobile application developers, wireless network service providers and the banks' IT departments.
The following aspects need to be addressed to offer a secure infrastructure for financial transaction over wireless network:
1. Physical part of the hand-held device. If the bank is offering smart-card based security, the physical security of the device is more important.
2. Security of any thick-client application running on the device. In case the device is stolen, the hacker should require at least an ID/Password to access the application.
3. Authentication of the device with service provider before initiating a transaction. This would ensure that unauthorized devices are not connected to perform financial transactions.
4. User ID / Password authentication of bank’s customer.5. Encryption of the data being transmitted over the air.6. Encryption of the data that will be stored in device for later / off-line analysis by
the customer.
Scalability & Reliability:
Another challenge for the CIOs and CTOs of the banks is to scale-up the mobile banking infrastructure to handle exponential growth of the customer base. With mobile banking, the customer may be sitting in any part of the world (true anytime, anywhere banking) and hence banks need to ensure that the systems are up and running in a true 24 x 7 fashion. As customers will find mobile banking more and more useful, their expectations from the solution will increase. Banks unable to meet the performance and reliability expectations may lose customer confidence. There are systems such as Mobile Transaction Platform which allow quick and secure mobile enabling of various banking services. Recently in India there has been a phenomenal growth in the use of Mobile Banking applications, with leading banks adopting Mobile Transaction Platform and the Central Bank publishing guidelines for mobile banking operations.
Application distribution
Due to the nature of the connectivity between bank and its customers, it would be impractical to expect customers to regularly visit banks or connect to a web site for regular upgrade of their mobile banking application. It will be expected that the mobile application itself check the upgrades and updates and download necessary patches (so called "Over The Air" updates). However, there could be many issues to
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implement this approach such as upgrade / synchronization of other dependent components.
Personalization
It would be expected from the mobile application to support personalization such as:
1. Preferred Language2. Date / Time format3. Amount format4. Default transactions5. Standard Beneficiary list6. Alerts
Mobile banking in the world:
Mobile banking has come in handy in many parts of the world with little or no Infrastructure development, especially in remote and rural areas. This part of the mobile commerce is also very popular in countries where most of their population is unbanked. In most of these places banks can only be found in big cities and customers have to travel hundreds of miles to the nearest bank.
Countries like Sudan, Ghana and South Africa received this new commerce very well. In Latin America countries like Uruguay, Paraguay, Argentina, Brazil, Venezuela, Colombia, Guatemala and recently Mexico started with a huge success.In Colombia was released with Redeban.
In Iran banks like Parsian, Tejarat, Mellat, Saderat, Sepah, edbi and bankmelli offer this service. Guatemala have the support of Banco industrial.
Mexico released the mobile commerce with Omnilife,Bancomer and a private company(MPower Ventures). Kenya's Safaricom (Part of the Vodafone Group) has had the very popular M-Pesa Service - mainly used to transfer limited amounts of money, but has been increasingly used to pay utility bills. Zain in 2009 launched their own mobile money transfer business known as ZAP in Kenya and other African countries.
Mobile Banking VS Online Banking forecast:
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Telephonic Online Banking:
Telephone banking is a service provided by a financial institution which allows its customers to perform transactions over the telephone.
Most telephone banking use an automated phone answering system with phone keypad response or voice recognition capability. To guarantee security, the customer must first authenticate through a numeric or verbal password or through security questions asked by a live representative (see below). With the obvious exception of cash withdrawals and deposits, it offers virtually all the features of an automated teller machine: account balance information and list of latest transactions, electronic bill payments, funds transfers between a customer's accounts, etc.
Usually, customers can also speak to a live representative located in a call centre or a branch, although this feature is not guaranteed to be offered 24/7. In addition to the self-service transactions listed earlier, telephone banking representatives are usually trained to do what was traditionally available only at the branch: loan applications, investment purchases and redemptions, chequebook orders, debit card replacements, change of address, etc.
Banks which operate mostly or exclusively by telephone are known as phone banks.
SMS Banking:
SMS banking is a technology-enabled service offering from banks to its customers, permitting them to operate selected banking services over their mobile phones using SMS messaging.
Push and pull messages
SMS banking services are operated using both push and pull messages. Push messages are those that the bank chooses to send out to a customer's mobile phone, without the customer initiating a request for the information. Typically push messages could be either Mobile marketing messages or messages alerting an event which happens in the customer's bank account, such as a large withdrawal of funds from the ATM or a large payment using the customer's credit card, etc. (see section below on Typical Push and Pull messages).
Another type of push message is One-time password (OTPs). OTPs are the latest tool used by financial and banking service providers in the fight against cyber fraud. Instead of relying on traditional memorized passwords, OTPs are requested by consumers each
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time they want to perform transactions using the online or mobile banking interface. When the request is received the password is sent to the consumer’s phone via SMS. The password is expired once it has been used or once its scheduled life-cycle has expired.
Pull messages are those that are initiated by the customer, using a mobile phone, for obtaining information or performing a transaction in the bank account. Examples of pull messages for information include an account balance enquiry, or requests for current information like currency exchange rates and deposit interest rates, as published and updated by the bank.
The bank’s customer is empowered with the capability to select the list of activities (or alerts) that he/she needs to be informed. This functionality to choose activities can be done either by integrating to the internet banking channel or through the bank’s customer service call centre.
Typical push and pull services offered under SMS banking:
Depending on the selected extent of SMS banking transactions offered by the bank, a customer can be authorized to carry out either non-financial transactions, or both and financial and non-financial transactions. SMS banking solutions offer customers a range of functionality, classified by push and pull services as outlined below.
Typical push services would include:
Periodic account balance reporting (say at the end of month); Reporting of salary and other credits to the bank account; Successful or un-successful execution of a standing order; Successful payment of a cheque issued on the account; Insufficient funds; Large value withdrawals on an account; Large value withdrawals on the ATM or EFTPOS on a debit card; Large value payment on a credit card or out of country activity on a credit card. One-time password and authentication
Typical pull services would include:
Account balance enquiry; Mini statement request; Electronic bill payment; Transfers between customer's own accounts, like moving money from a savings
account to a current account to fund a cheque; Stop payment instruction on a cheque;
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Requesting for an ATM card or credit card to be suspended; De-activating a credit or debit card when it is lost or the PIN is known to be
compromised; Foreign currency exchange rates enquiry; Fixed deposit interest rates enquiry.
Concerns and scepticism about SMS banking:
Many banks would have some concerns when the prospects of introducing SMS banking are discussed. Most of these concerns could revolve around security and operational controls around SMS Banking. However supporters of SMS claim that while SMS banking is not as secure as other conventional banking channels, like the ATM and internet banking, the SMS banking channel is not intended to be used for very high-risk transactions.
Quality of service in SMS banking:
Because of the concerns made explicit above, it is extremely important that SMS gateway providers can provide a decent quality of service for banks and financial institutions in regards to SMS services. Therefore, the provision of Service Level Agreement (SLA) is a requirement for this industry; it is necessary to give the bank customer delivery guarantees of all messages, as well as measurements on the speed of delivery, throughput, etc. SLAs give the service parameters in which a messaging solution is guaranteed to perform.
The convenience factor:
The convenience of executing simple transactions and sending out information or alerting a customer on the mobile phone is often the overriding factor that dominates over the skeptics who tend to be overly bitten by security concerns.
As a personalized end-user communication instrument, today mobile phones are perhaps the easiest channel on which customers can be reached on the spot, as they carry the mobile phone all the time no matter where they are. Besides, the operation of SMS banking functionality over phone key instructions makes its use very simple. This is quite different from internet banking which can offer broader functionality, but has the limitation of use only when the customer has access to a computer and the Internet. Also, urgent warning messages, such as SMS alerts, are received by the customer instantaneously; unlike other channels such as the post, email, Internet, telephone banking, etc. on which a bank's notifications to the customer involves the risk of delayed delivery and response.
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The SMS banking channel also acts as the bank’s means of alerting its customers, especially in an emergency situation; e.g. when there is an ATM fraud happening in the region, the bank can push a mass alert (although not subscribed by all customers) or automatically alert on an individual basis when a predefined ‘abnormal’ transaction happens on a customer’s account using the ATM or credit card. This capability mitigates the risk of fraud going unnoticed for a long time and increases customer confidence in the bank’s information systems.
Compensating controls for lack of encryption:
The lack of encryption on SMS messages is an area of concern that is often discussed. This concern sometimes arises within the group of the bank’s technology personnel, due to their familiarity and past experience with encryption on the ATM and other payment channels. The lack of encryption is inherent to the SMS banking channel and several banks that use it have overcome their fears by introducing compensating controls and limiting the scope of the SMS banking application to where it offers an advantage over other channels.
Suppliers of SMS banking software solutions have found reliable means by which the security concerns can be addressed. Typically the methods employed are by pre-registration and using security tokens where the transaction risk is perceived to be high. Sometimes ATM type PINs are also employed, but the usage of PINs in SMS banking makes the customer's task more cumbersome.
Technologies employed for SMS banking:
Most SMS banking solutions are add-on products and work with the bank’s existing host systems deployed in its computer and communications environment. As most banks have multiple backend hosts, the more advanced SMS banking systems are built to be able to work in a multi-host banking environment; and to have open interfaces which allow for messaging between existing banking host systems using industry or de-facto standards.
Well developed and mature SMS banking software solutions normally provide a robust control environment and a flexible and scalable operating environment. These solutions are able to connect seamlessly to multiple SMSC operators in the country of operation. Depending on the volume of messages that are require to be pushed, means to connect to the SMSC could be different, such as using simple modems or connecting over leased line using low level communication protocols (like SMPP, UCP etc.). Advanced SMS banking solutions also cater to providing failover mechanisms and least-cost routing options.
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Electronic funds transfer:
Electronic funds transfer or EFT refers to the computer-based systems used to perform financial transactions electronically.
The term is used for a number of different concepts:
Cardholder-initiated transactions, where a cardholder makes use of a payment card Direct deposit payroll payments for a business to its employees, possibly via a payroll services company Direct debit payments from customer to business, where the transaction is initiated by the business with customer permission Electronic bill payment in online banking, which may be delivered by EFT or paper check Transactions involving stored value of electronic money, possibly in a private currency Wire transfer via an international banking network (generally carries a higher fee) Electronic Benefit Transfer
EFTPOS:
EFTPOS (short for Electronic Funds Transfer at Point of Sale) is an Australian and New Zealand electronic processing system for credit cards, debit cards and charge cards.[1]
European banks and card companies also sometimes reference "EFTPOS" as the system used for processing card transactions through terminals on points of sale, though the system is not the trademarked Australian/New Zealand variant.
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Card-based EFT:
Credit cards
EFT may be initiated by a cardholder when a payment card such as a credit card or debit card is used. This may take place at an automated teller machine (ATM) or point of sale (POS), or when the card is not present, which covers cards used for mail order, telephone order and internet purchases.
Card-based EFT transactions are often covered by the ISO 8583 standard.
Transaction types:
A number of transaction types may be performed, including the following:
Sale: where the cardholder pays for goods or service Refund: where a merchant refunds an earlier payment made by a cardholder Withdrawal: the cardholder withdraws funds from their account, e.g. from an
ATM. The term Cash Advance may also be used, typically when the funds are advanced by a merchant rather than at an ATM
Deposit: where a cardholder deposits funds to their own account (typically at an ATM)
Cashback: where a cardholder withdraws funds from their own account at the same time as making a purchase
Inter-account transfer: transferring funds between linked accounts belonging to the same cardholder
Payment: transferring funds to a third party account Enquiry: a transaction without financial impact, for instance balance enquiry,
available funds enquiry, linked accounts enquiry, or request for a statement of recent transactions on the account
E top-up: where a cardholder can use a device (typically POS or ATM) to add funds (top-up) their pre-pay mobile phone
Mini-statement: where a cardholder uses a device (typically an ATM) to obtain details of recent transactions on their account
Administrative: this covers a variety of non-financial transactions including PIN change
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The transaction types offered depend on the terminal. An ATM would offer different transactions from a POS terminal, for instance.
Authorization:
EFT transactions require communication between a number of parties. When a card is used at a merchant or ATM, the transaction is first routed to an acquirer, then through a number of networks to the issuer where the cardholder's account is held.
A transaction may be authorized offline by any of these entities through a stand-in agreement. Stand-in authorization may be used when a communication link is not available, or simply to save communication cost or time. Stand-in is subject to the transaction amount being below agreed limits, known as floor limits. These limits are calculated based on the risk of authorizing a transaction offline, and thus vary between merchants and card types. Offline transactions may be subject to other security checks such as checking the card number against a 'hot card' (stolen card) list, velocity checks (limiting the number of offline transactions allowed by a cardholder) and random online authorization.
Before online authorization was standard practice and credit cards were processed using manual vouchers, each merchant would agree a limit ("floor limit) with his bank above which he must telephone for an authorization code. If this was not carried out and the transaction subsequently was refused by the issuer ("bounced"), the merchant would not be entitled to a refund.
Dual Message Authorization/Clearing:
Depending on the business rules of the issuer, a "hold" may be placed on the funds authorized. This hold reserves that amount of money for a defined period. If a transaction is not cleared within the defined period then the "hold" will be removed and the funds made available again.
Example - Purchase for £10 on Day 2 never completes so hold removed on Day 4:
Cleared Balance Available Balance
Day 1 £100 £100
Day 2 £100 £90 (Hold for a purchase of £10)
Day 3 £100 £90
Day 4 £100 £100 (Hold for £10 purchase removed)
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Example - Purchase for £10 on Day 2 completes on Day 4:
Cleared Balance
Available Balance
Day 1 £100 £100
Day 2 £100 £90 (Hold for a purchase of £10)
Day 3 £100 £90
Day 4 £90£90 (Transaction completes. Hold removed. Both balances updated with purchase amount)
An offline process, driven by the networks' clearing systems, generates clearing files which are sent to the card issuers on a daily basis. These files contain the completions messages to the on-line authorizations.
In addition, not all transactions in a dual-message environment require authorisation. Depending on the type of card used, and the floor-limit of the merchant, it may be that there are transactions in the clearing files which have not been authorised on-line. This is a financial exposure for banks as they have to honour the clearing records regardless of the balance on the cardholder's account.
Example - Purchase for £30 on Day 2 for a transaction not requiring authorization:
Cleared Balance Available Balance
Day 1 £10 £10
Day 2 -£20 -£20 (Offline purchase of £30)
This transaction has to be applied even if the cardholder does not have sufficient funds or an overdraft.
Single Message Authorization/Clearing:
Some financial networks operate a single message solution, in which a transaction is authorized and cleared via the same message.
A transaction will be authorized via a pre-authorization step, where the merchant requests the issuer to reserve an amount on the cardholder's account for a specific time, followed by completion, where the merchant requests an amount blocked earlier with a pre-authorization. This transaction flow in two steps is often used in businesses such as hotels and car rental where the final amount is not known, and the pre-authorization is made based on an estimated amount. Completion may form part of a settlement process, typically performed at the end of the day when the day's
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completed transactions are submitted. All these messages will be sent "on-line" from the merchant acquirer to the issuing bank.
Authentication:
EFT transactions may be accompanied by methods to authenticate the card and the card holder. The merchant may manually verify the card holder's signature, or the card holder's Personal identification number (PIN) may be sent online in an encrypted form for validation by the card issuer. Other information may be included in the transaction, some of which is not visible to the card holder (for instance magnetic stripe data), and some of which may be requested from the card holder (for instance the card holder's address or the CVV2 value printed on the card).
EMV cards are smartcard-based payment cards, where the smartcard technology allows for a number of enhanced authentication measures.
Internet/Online Banking Frauds:
Convenience is the key reason of why millions of people are opting out of traditional banking for online banking. Nearly 45 percent of the 141 million adults in America pay their bills online (according to the Garter 2004 Survey). Banks also enjoy providing the option of online banking because they can save on operating costs. However, during the popularization of online banking, nearly 2 million Americans suffered from fraudulent bank activity in 2004. Consumers reported an average loss of $1, 200 per bank fraud. Most market researchers attributed the increase in the number of bank frauds to online banking.
Schemes Used In Internet Banking Fraud:
Most internet banking fraud occurs in a two-step process. First, the offender must get their hands on the customer's account information, like their username and password. Second, the offender will use that information to move his victim's money to another account or withdraw it to make fraudulent purchases. For the first step, offenders often employ one of the many popular fraud schemes to obtain personal information. These fraud schemes include, but are not limited to:
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"Over the shoulder looking" scheme:
"Over the shoulder looking" scheme involves the offender observing his potential victim making financial transactions and recording the personal information used in the transaction.
"Phishing" scheme:
"Phishing" scheme stems from the two words "password" and "fishing." It entails sending email scams and mail supposedly from the consumer's bank as a way to obtain the consumer's personal information, social insurance number, and in this case their online banking username and password.
"Trojan Horse" scheme:
"Trojan Horse" scheme unfolds when malicious software (malware) embeds to a consumer's computer without the consumer being aware of it. Trojans often come in links or as attachments from unknown email senders. After installation the software detects when a person accesses online banking sites and records the username and password to transmit to the offender. People using public computers, in places like Internet cafes, are often susceptible to Trojans like malware or spyware. They also are higher at risk of falling victim of identity theft.
The FBI estimates that 1 million PCs in America are being compromised in a similar fashion to conduct fraud. Although, analysts note that the use of Trojan schemes has jumped in the recent years, phishing remains the most popular scheme. According to the 2004 study by the market research Gartner, 1.8 million Americans responded to phishing emails with their personal information.
Financial Services Information Security News (02 Feb 2010):
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Customers risk online banking fraud by reusing bank credentials
Many online banking customers reuse their banking login credentials to access other websites, putting themselves at risk of account hijacking and online banking fraud, according to a study by Trusteer Inc.
The New York-based online security vendor found that 73% of bank customers use their Internet banking password to access non-financial -- and less secure -- websites. Forty-seven percent use both their online banking user ID and password on other websites.
The practice puts online banking customers at risk because criminals are using a variety of methods -- including database hacks, brute forcing and phishing -- to harvest login credentials from non-financial websites, such as social networking sites and Web-based email services, according to Trusteer. Thieves can then test the credentials on financial-services sites to hijack accounts and commit online banking fraud.
The research was based on data collected over 12 months from more than 4 million users of Trusteer's Rapport browser security service.
The Rapport browser plug-in has a feature that warns users when they type their banking credentials into another website in order to block potential phishing attacks that try to trick users into using their credentials on phony banking websites. The feature also is intended to alert users about the risks associated with using online banking credentials on other websites.
Trusteer's study also found that when a bank allows users to create their own user ID, 65% of those customers share the ID with nonfinancial sites. When banks assign IDs to customers, the number that use the ID on other sites dropped to 42%.
In addition to using banking credentials across the Web, users also put themselves at risk by creating easy-to-guess passwords. A report released last month by Imperva Inc. showed that many users choose simple, short passwords that make them susceptible to brute force attacks. The database security vendor based the report on an analysis of 32 million passwords exposed in a breach late last year of Rockyou.com, a social networking application site.
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Almost 50% of users had simple passwords made up of names, dictionary words, consecutive digits and adjacent keyboard keys, Imperva's analysis showed. The most common password is "123456," and other favorites include "password," "princess" and "abc123."
BITS, a division of the Financial Services Roundtable and the Identity Theft Assistance Center, an affiliate of the Financial Services Roundtable, issued an advisory last week about the need to boost password security.
"Virtually all financial websites rely on customers' passwords as a critical layer of protection for their personal and financial information," Paul Smocer, vice president for security at BITS said in a prepared statement. "We need to remember how critical it is to protect our online information, and unfortunately, to understand that there are those who want access to our information or funds."
How can a Bank prevent Online Banking Fraud?
While online banking has been around for many years, virtually no cases of fraud have been reported until recently. Since the beginning of the year 2004, reports of fraud cases nearly explode and banks are looking for ways to protect their online
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banking channel. This paper discusses the pros and cons of the different fraud prevention approaches used throughout the world.
Online Banking Fraud Schemes:
Most online banking fraud schemes involve two steps. First, the criminal obtains the customer's account access data, i.e. logon name and password. Second, the criminal uses this information to transfer money to other accounts and withdrawals the funds. For the first step, criminals have employed different schemes in the past:
The "over the shoulder looking" scheme occurs when a customer performs financial transactions while being observed by a criminal. A fair number of cases have been reported where customer's account access data was obtained by the criminal just by observing customers at a public Internet access point.
The "phishing" scheme involves using fake emails and/or fake websites. The word "phishing" stems from combining the words "password" and "fishing". Criminals send emails that appear to be from the customer's bank that direct customers to a fake website. This website impersonates the bank's website and prompts customers for their account access data. Over the past months, most banks have executed customer education programs, thereby reducing the effectiveness of this scheme. It will, however, take awhile before all customers are smart enough to extinct phishing.
The "Trojan horse" scheme is based on embedding a computer virus type software program onto the customer's PC. Trojans often tie themselves into the keyboard driver and record keystrokes. Once a Trojan detects that the customer opens an online banking website, it captures login name and password, and sends it to the criminal.
In the year 2003, phishing was the dominant fraud scheme. In the year 2004, banks experienced a sharp rise in Trojan fraud scheme attacks.
One Time Passwords:
To improve security, some banks use "one time passwords", also called OTP. Upon activation of the customer's account for online banking, the bank mails a list of OTPs to the customer. Each time the customer perform a transaction, he enters one
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OTP for verification. Once used, the OTP becomes invalid. If the customer runs out of OTPs, he is sent a new list.
While this approach effectively prevents "over the shoulder looking", it generally fails to prevent other fraud schemes. Phishing emails also ask for OTPs, and a customer naive enough to give out his logon name and password will likely also provide OTPs.
Trojans simply also capture the OTP once entered. At the same time, they falsify the customer's input in the browser software (e.g. by adding an invisible character) or cause the browser software to crash. This causes the customer's transaction to be intercepted and the OTP to still be valid. The criminal can then use this valid OTP to perform a fraudulent transaction.
Hardware Tokens:
The high-tech alternative to paper OTP lists are "hardware tokens". These devices have the form factor of a key chain attachment, featuring a crypto processor and a display. A hardware token displays a new OTP every 60 seconds. Because each OTP is only valid for a limited period of time, they provide significant protection against "over the shoulder looking" and phishing schemes.
Hardware tokens can, however, not protect the customer against Trojans. The fact that the OTP is only valid for a short time just reduces the amount of time the criminal has to exploit the data obtained by the Trojan. Because many criminals already use automated scripts on their servers to perform fraudulent transactions once the access data is received from the Trojan, the time limit proves no significant barrier to the criminal.
In addition, some banks have discovered Trojans that perform the fraudulent transaction right from the customer's PC. As this involves next to no delay, the hardware token approach fails to prevent Trojan fraud schemes.
Transaction Specific OTPs:
The shortcoming of both paper OTP lists and hardware tokens lies in the fact that each OTP is not transaction specific. That is, the same OTP can be used to verify either a genuine or a fraudulent transaction. One possible way to come by this
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flaw is to use a "key generator" device that generates an OTP based on primary transaction parameters.
A key generator looks similar to a pocket calculator. It has a keypad that lets the customer enter the source account, target account, transaction amount, and a PIN. Based on these parameters, the key generator generates a transaction specific OTP. The customer now enters the transaction parameters into the online banking application including the generated OTP. When the online transaction is received by the bank's server, it performs the same calculations as the key generator and thus verifies the OTP.
If a criminal captures such an OTP, he cannot use it for a fraudulent transaction, since this OTP can only be used to verify a transaction with the same parameters as entered on the key generator. Because the key generator is a separate hardware device with no connection to the Internet, it is immune to getting attacked by malicious software.
For these reasons, key generators can be considered a highly effective fraud prevention measure for online banking capable of preventing all known fraud schemes. The disadvantages of key generators are, however, the cost of the device, the fact that the device must be physically present to perform online banking, and the fact that the customer basically has to enter each transaction two times.
OTP by SMS:
Some of the disadvantages of using key generators are avoided by sending OTPs to the customer using SMS. With this approach, the customer first sends the complete transaction to the bank's server. The bank's server then creates a random number as OTP and sends it to the customer's mobile phone as text message. The customer now enters this transaction specific OTP into the online banking application, and sends it also to the bank's server. If the generated OTP matches the one transmitted by the customer, the transaction is verified.
Because the OTP transmitted can only be used to verify the transaction that is already received by the bank's server and cannot be altered from the outside, this OTP is of no use to a criminal. In theory, sending OTPs by SMS should hence be as effective a fraud prevention measure as a key generator. In reality, banks have experienced that the weak point is the mobile phone identification. Effective fraud prevention is only provided if any change of mobile phone number is performed only after thorough identity checking.
Another disadvantage of this approach is that banks need to tie in their infrastructure with the infrastructure of a wireless operator. Wireless operators all over
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the world are investigating ways to leverage their existing infrastructure into new sources of profit. Most operators hence look into providing financial transaction services of various kinds. Banks hence may soon find themselves in a situation, where wireless operators offer their customers financial transactions using just the mobile phone and nothing else. The bank's offering would involve using first an Internet browser, than wait for an SMS, read it, go back to the Internet browser, type in the OTP and erase the SMS. For a customer, the bank's offering appeals to be a lot more complex than the wireless operator's offering.
Smart Cards and USB Tokens:
Smart cards and USB tokens implement a different approach to authentication. Smart cards contain crypto processors without a display. They must be electrically connected to the customer's PC using a card reader device. USB tokens are essentially the same, only that they render card readers unnecessary by plugging directly into the customer PC's USB port.
By exchanging crypto keys with the bank's server, the bank's server can be sufficiently sure that the online transactions secured with this approach stem from the genuine customer. While smart cards have been hacked in the past, the latest generation smart cards will likely provide a high level of fraud protection for many years.
The disadvantages of the smart card approach lies in its need to by electrically connected to the customer's PC. This connection requires the installation and configuration of specific hardware drivers. In many pilot rollouts of smart cards, this turned out to be a frequent source of customer support needs.
The other disadvantage is that the need for the electrical connection limits the use of online banking. Many customers perform online banking from their office. Installing card reader hardware and drivers is often not possible for managed office PCs. Also, recent electronic organizers and smart phones provide Internet browsers that are well capable to perform online banking, but offer no capabilities to connect a smart card reader or an USB token.
Transaction Monitoring:
A completely different approach to secure online banking comes from the adaptation of fraud prevention systems used with credit and debit card processing. In payment card processing, fraud is a known phenomenon since many years. Technical security measures introduced to payment cards, such as magnetic stripes or chips, have only provided temporary relief from fraud losses.
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The only measure that has proved to limit fraud losses permanently was the deployment of transaction monitoring software. This has become the de-facto standard for fraud prevention with payment card processing worldwide.
Transaction monitoring occurs in the bank's data centre. For each transaction, the transaction monitoring software scrutinizes the current transaction's parameters, and compares it with the previous transaction of both the customer and the counterparty of the transaction histories. By comparing the current transaction pattern to stored known fraud patterns, the software can flag suspicious transactions "on the fly". Such transactions are then referred to a call centre for manual verification.
There are multiple advantages to this approach when compared to the others discussed before. There is no new device to be used by the customer, no dependency on mobile phones and no customer support problem with hardware driver installation. There are also no one-time costs per customer for a card reader or an USB token, and no per-transaction cost for sending SMS.
Comparison:
But what are the disadvantages of transaction monitoring? One problem arises when a new fraud pattern emerges, which is not stored in the transaction monitoring software. Another problem arises when by accident the current genuine transaction patterns resemble a known fraud pattern so much that the transaction monitoring system refers the genuine transaction to the call centre.
The first problem exists with any fraud prevention measure. Once criminals find a way to circumvent the measure, the door to fraud is open. The question becomes what can be done in this case. If the fraud prevention measure involves devices that are distributed to the customers, fixing the security problem becomes difficult. When the French credit card chip system was hacked, retrofitting point of sales terminals to patch up security was estimated to cost 5 billion U.S. dollars. Transaction monitoring provides a significant advantage in this case because it is centralized. By adding the new fraud pattern to the fraud detection logic in the bank's data centre, the entire system becomes instantly "immunized".
The second problem also occurs with any fraud prevention measure. Any measure will impose a certain customer disturbance. Smart cards and USB tokens may cause trouble when their hardware driver becomes incompatible with any change of the customer's PC. And like hardware tokens and key generators, all extra electronic devices have certain likelihood to fail or get lost. OTPs send by SMS may get lost or delayed, in particular with International roaming. Transaction monitoring software will
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inevitable generate a certain rate of false alarms. Banks must carefully determine which level of customer disturbance they consider acceptable for the security level needed.
Risk Shield Fraud Prevention:
One of the most commonly used transaction monitoring software product used for fraud prevention with card based payment systems is Risk Shield® of Inform Software Corp. Since its introduction in the year 2001, Risk Shield has won fraud prevention for 122 million cards in Europe, spread over 7 different portfolios. Banks have verified that Risk Shield provides a total of US$ 223 million fraud savings each year.
Inform Software Corp has recently introduced a special version of Risk Shield for online banking. This product is currently in rollout with online banking operations of 3 major European banks.
Risk Shield is delivered with countermeasures against all known online banking fraud patterns. A fraud pattern for example can be an unusually high frequency of payments going into one target account from different source account. If none of the source accounts have ever transferred funds to this target account before, and the transactions have all been originated from IP address ranges belonging to certain Internet service providers never used before by the source account holders, Risk Shield will conclude that this is part of a fraud scheme and will refer transactions to the call centre. At the moment, Risk Shield's prevention logic contains about 80 different online banking fraud patterns plus variants.
In addition, Risk Shield looks out for "unusual" transaction patterns because they could be emerging fraud patterns. Once Risk Shield administrators are alerted, they use the Risk Shield analysis and simulation environment to isolate potentially new fraud patterns, and simulate the effectiveness of the developed countermeasures.
Risk Shield also uses transaction data from other payment channels to refine its detection of certain fraud patterns, if such data is available. The transaction sequences are automatically merged by Risk Shield into "transaction fingerprints". Also, non-monetary transactions, such as password changes, address changes or claims of lost cards are used by Risk Shield to detect specific fraud patterns.
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5 Tips to Make Your Online Banking Transaction Safe:
Banking is more sensitive business than the other. The online banking makes it more sensitive because all the information and financial transactions take place online.
Despite of SSL security and other security measures there are many frauds reported due to fault at the customer end by disclosing the personal details via e-mail or on the website so security of database or personal & banking details are most important. If you have opened an online account than you must have to see the bank website thoroughly because there will be a chances to have similar types of website. Please make sure that the website get secured with SSL security certification symbol. There are some points for the customer to perform the safer transaction in online banking.
1. Once you open an online banking account either personal or current business account than you must get the details by mail like your account number, customer identification number, online access username and password as well as ATM card PIN number etc. You can get all the details in sealed enveloped by post so you must keep all the details in the safer place. Please do not disclosed to anybody
2. Online banking business is based on SSL security and Java Script. All transaction you made or all information you feed online will convert into an encryption so there are nil chances to get an access on the customer information.
3. Another most important consideration is do not disclose a your login details and password. It is most important to change your password every time. Please also make sure that un-tick login details and password remember request from the computer. If you are not able to perform such task on other PC than there may be a chances for someone to access your account.
4. You must have to monitor your online banking account carefully. If you find any unknown transaction to other account than you can immediately call to the customer care department for further scrutiny.
5. It is most important for you to put the login details at a safer place.The online banking is safe till you can’t disclosed or make sure to share your personal details to other or through e-mail or online. Once customer get smarter to manage online account, it makes all online banking transaction safer.
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What a Customer can do for its Security of Online Banking?
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Emergency Check List:
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ROLE OF INFORMATION TECHNOLOGY IN BANKING INDUSTRY:
INTRODUCTION I.T. in Banking:
1). Technology has opened up new markets, new products, new services and efficient delivery channels for the banking industry. Online electronics banking, mobile banking and internet banking are just a few examples. 2). Information Technology has also provided banking industry with the wherewithal to deal with the challenges the new economy poses. Information technology has been the cornerstone of recent financial sector reforms aimed at increasing the speed and reliability of financial operations and of initiatives to strengthen the banking sector.
3). The IT revolution has set the stage for unprecedented increase in financial activity across the globe. The progress of technology and the development of world wide networks have significantly reduced the cost of global funds transfer.
4). It is information technology which enables banks in meeting such high expectations of the customers who are more demanding and are also more techno-savvy compared to their counterparts of the yester years. They demand instant, anytime and anywhere banking facilities.
5). IT has been providing solutions to banks to take care of their accounting and back office requirements. This has, however, now given way to large scale usage in services aimed at the customer of the banks.
IT also facilitates the introduction of new delivery channels - in the form of Automated Teller Machines, Net Banking, Mobile Banking and the like. Further, IT deployment has assumed such high levels that it is no longer possible for banks to manage their IT implementations on a standalone basis with IT revolution, banks are increasingly interconnecting their computer systems not only across branches in a city but also to other geographic locations with high-speed network infrastructure, and setting up local area and wide area networks and connecting them to the Internet.
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Products supported by I.T.:
As a result, information systems and networks are now exposed to a growing number. Technology Products:
(1). Net Banking (2). Credit Card Online(3). One View (4). Instant Alerts (5). Mobile Banking (6). Net Safe(7). e-Monies Electronic Fund Transfer (8). Online Payment of Excise & Service Tax(9). Phone Banking (10). Bill Payment (11). Shopping(12). Ticket Booking (13). Railway Ticket Booking through SMS(14). Prepaid Mobile Recharge (15). Smart Money Order(16). Card to Card Funds Transfer (17). Funds Transfer (eCheques)(18). Anywhere Banking (19). Internet Banking (20). Mobile Banking(21). Bank@Home
(i) Express Delivery (22). Cash on Tap:
(ii) Normal Delivery
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Online Banking In Pakistan :
Pakistan’s ICT Back Ground :
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I.T. Sector in Pakistan:
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Internet Banking in Pakistan:
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Current System:
In previous regime, I mean Musharraf’s era, lots of new products evolved; like credit cards, ATMs, E- banking, small loans for common people and what not. We used to receive multiple calls a day from banks offering one or the other product. Tele sale representatives used make hundreds of calls daily to meet their targets. In short we had eight years of boom in banking sector with higher foreign reserves and stronger economy every month.
Instead of discussing rights and wrongs of that time, we need to focus on results. Interest rates were as low as 9 or 10 % during that time. Even the Central Directorate of National Savings (CDNS) had come down to its lowest mark up of 11%; earlier on which was 18%. People withdrew their heavy amounts from banks and CDNS and invested millions in the property sectors; resultantly real estate industry touched new height of success, created plenty of jobs. We know that real estate industry boosts at least 10 other allied sectors. So during that era Bahria Town, Giga Mall, Emaar Pakistan and many other builders and developers were on the rise.
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However, the situation has dramatically changed, as now banks are again hungry for funds. In the last few months or so, we have seen a new trend of advance profit in the banking sector. ABL, the Bank of Punjab, Atlas Bank have already announced the best possible advance profit for the customers who have money more than Rs. 50,000/- and want handsome profit immediately.
It seems that we are forced to just put our money in the banks and enjoy the interest. There is no need to work or taking risk to invest money in any type of business. This will also lead to more foreign trade debit, which is already worsening and crossing US$ 10 billion. Remember that this gap was 1 billion US dollar in 1994 and at that time US $ had a price value of Rs. 36.
According to the sources, this race of advance profit will be intensified in the near future and more banks will offer higher and advance profit like MCB, Bank -al-Falah, National Bank.
Let’s pray for our country, our economy and our future be in safe and secure with one and only dream of prosperity.
Rising Trend of Online-Banking in Pakistan:
Online-Banking and branchless banking transactions continued to show growth momentum as both the volume and value of these transactions displayed a rising trend in the country during the last quarter of the monetary year (FY2008-09).
According to the Fourth Quarterly Report on “Online-Banking the’’ volume and value of online banking transactions in the country reached at 13.7 million and Rs 3.7 trillion respectively showing a growth of 10.8 percent in numbers and 7.4 percent increase in value as compared to 14.8 percent increase in numbers and 11.7 percent increase in value in the previous quarter.
It said that total quantity of cards (debit / credit /ATM only) in circulation during fourth quarter of FY09 reached at 8.9 million which shows an increase of 6.6 percent as compared to 3.1 percent decline in the previous quarter. The quantity of credit cards has decreased by 0.6 percent as compared to 6.2 percent decrease in the previous quarter. The quantity of debit cards has increased by 9.6 percent as compared to 2.5 percent decline in previous quarter and stood at 6.4 million, it added.
It said that during the last six quarters the transition from manual (paper-based) banking to Online-Banking has been gradual, yet consistent, in terms of both volume and value of transactions. The composition (in percentage) of electronic transactions increased to 34.2 percent of the total number of transactions as compared to 32.9 percent recorded last quarter. In terms of value, the same increased by 10.5 percent as compared to 9.3 percent rise recorded last quarter.
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45% growth in online banking in Pakistan:
The commercial banks have registered a growth of 45 percent in opening new online branches in the second quarter of the current fiscal year, State Bank of Pakistan data said on Monday.
During this quarter retail payment transaction (paper based and electronic) registered a growth of 5.05 percent in numbers, whereas the value of transactions increased by 4.91 percent over the first quarter of 2005-06.
Quarterly growth on the basis of previous quarter showed growth at the rate of 5.45 percent and growth in value of transactions by 2.98 percent, whereas the growth rate was 23.46 percent and 12.20 percent in case of number of transactions and amount, respectively, in the previous quarter.Electronic banking: The central bank data said electronic transactions have posted a growth of 3.05 percent in the number of transactions and the amount showed a growth of 66.20 percent during the current quarter. The main contributor to growth in the value is real time online funds transfer by online bank branches that posted a 73 percent increase.During the last six quarters the transactions from paper-based banking to e-banking has increased in terms of number of transactions. However, the value has achieved a remarkable growth, which has been driven by B2B through online branch network.
Online Branch Network and Automated Teller Machines (ATMs): Online branch network is expanding to meet the funds movement needs of customers. This quarter witnessed the addition of 235 new branches in the online network. The coverage of online branches as a percentage of total branches has also increased from 41 percent in the previous quarter to 45 percent in the current quarter. As such, the total number of online branches reached 3,265 out of total branch network of 7,245 reported by banks.Similarly, during the second quarter of fiscal year 2005-06 banks have added 75 new ATMs in their network, bringing the total to 1,217, registering a growth of 6.6 percent as compared with 11 percent in the last quarter.
Some of the market factors that describe Growths in Online banking include the following:
Competition:
Studies show that competitive pressure is the chief driving force behind increasing use of Internet banking technology, ranking ahead of cost reduction and revenue enhancement, in second and third place respectively. Banks see Online banking as a way to keep existing customers and attract new ones to the bank.
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Cost Efficiencies:
MCB banks can deliver banking services on the Internet at transaction costs far lower than traditional brick-and-mortar branches. The actual costs to execute a transaction will vary depending on the delivery channel used.
MCB banks have significant reasons to develop the technologies that will help them deliver banking products and services by the most cost-effective channels. Management should include in their decision making the development and ongoing costs associated with a new product or service, including the technology, marketing, maintenance, and customer support functions. This will help management exercise due diligence, make more informed decisions.
Geographical Reach:
Internet banking allows expanded customer contact through increased geographical reach and lower cost delivery channels. In fact some banks are doing business exclusively via the Internet they do not have traditional banking offices and only reach their customers online.
Other financial institutions are using the Internet as an alternative delivery channel to reach existing customers and attract new customers.
Branding:
Relationship building is a strategic priority for bank. Online banking technology and products can provide a means for bank to develop and maintain an ongoing relationship with their customers by offering easy access to a broad array of products and services. By capitalizing on brand identification and by providing a broad array of financial services, banks hope to build customer loyalty, cross-sell, and enhance repeat business.
Customer Demographics:
Online banking allows banks to offer a wide array of options to their banking customers. Some customers will rely on traditional branches to conduct their banking business. For many, this is the most comfortable way for them to transact their banking business. Those customers place a premium on person-to-person contact. Other customers are early adopters of new technologies that arrive in the marketplace. These customers were the first to obtain PCs and the first to employ them in conducting their banking business. The demographics of banking customers will continue to change. The challenge to national banks is to understand their customer base and find the right mix of delivery channels to deliver products and services profitably to their various market segments.
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Tips for Safe Online Banking:
When it comes to online banking, there is no way to absolutely guarantee our safety. However, good practices do exist that can reduce the risks posed to your online accounts. The following sections describe these practices.
Review your bank’s information about its online privacy policies and practices:
By law, banks are required to send you a copy of their privacy policies and practices annually; you may also request a copy of this information (see Electronic Code of Federal Regulations, Title 16: Commercial practices, Part 313.9 – Delivering Privacy and Opt Out Notices for more information). Bank web sites should also have this information. As you read this information, pay particular attention to any mention of the methods used for encrypting transactions and authenticating user information. Also, check the information to see if the bank requires additional security information before authorizing a payment to a business or individual that as never received a payment before.
Before setting up any online bill payment, check the privacy policy of the company or service you will be sending payment to:
You have the right to limit the information an online bank shares with both its parent organization and any other financial institutions (see “Protecting Your Privacy” and “How Anonymous Are You?” for more information). Be aware that some online banks may have separate procedures for handling each of these requests. You may also want to use a service such as the Better Business Bureau to view any existing history of outstanding consumer complaints about privacy violations.
For security purposes, choose an online personal identification number (PIN) that is unique and hard to guess:
Be sure to change your PIN regularly. Do not choose a PIN that contains personal information such as your birthday or Social Security number; an attacker might be able to guess these. Regardless of the circumstances, never give someone access to your current PIN number (see “Choosing and Protecting Passwords” for more information).
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Online Banking & Role of I.T in Online Banking
Install anti-virus, firewall, and anti-spyware programs on your computer and keep them up to date:
Installing and updating this software protects your computer and its contents against unauthorized access. You should turn on automatic updates for these programs or, if prompted, always agree to download system updates as soon as they are available
Regularly check your online account balance for unauthorized activity:
Timing is a factor in your response to unauthorized electronic fund transactions. If you receive a paper account balance, make sure that you reconcile it with your online balance.
Use a credit card to pay for online goods and services:
Credit cards usually have stronger protection against personal liability claims than debit cards. Some credit cards limit personal liability for unauthorized transactions to $50. Personal liability for debit cards can be higher. According to the Federal Reserve’s Regulation E, if you report an electronic fund transaction problem involving debit cards to a bank or financial institution in the first two days, you are only liable for $50. Reporting that same incident between 3 and 60 days increases your personal liability to $500. After 60 days, there are no financial restrictions placed on your personal liability (see Electronic Code of Federal Regulations, Title 12: Banks and Banking, Part 205 – Electronic Fund Transfers (Regulation E) for more information).
Avoid situations where personal information can be intercepted, retrieved, or viewed by unauthorized individuals:
You should conduct online bank transactions in locations that are not subject to public monitoring. When you are entering login information, you should avoid using unsecured or public network connections (for example, at a coffee shop or library). As a general rule, you should avoid using any computer that other people can freely access; the end result could be unauthorized access of your financial information. Remember, it is possible for your account information to be stored in the web browser’s temporary memory
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Online Banking & Role of I.T in Online Banking
If you receive email correspondence about a financial account, verify its authenticity by contacting your bank or financial institution:
You should not reply to any email requests for security information, warnings of an account suspension, opportunities to make easy money, overseas requests for financial assistance, and so forth. Also, links found in these suspicious emails should not be clicked. Forward a copy of the suspicious email to the Federal Trade Commission at [email protected] and then delete the mail from your mailbox.
If you have disclosed financial information to a fraudulent web site, file reports with the following organizations:
Your bank The local police The Federal Trade Commission The Internet Crime Complaint Centre
Advantages of online banking:
For the online banking customer, the convenience factor rates high. No longer does a person have to wait for the bank statement to arrive in the mail to check account balances. One can check the balance every day just by logging onto one's account. In addition to checking balances and transactions, one can catch discrepancies in the account right away and deal with them swiftly. The best part is that this can be done anywhere! As long as one has Internet access, one can practice online banking.
Since bills are paid online, the necessity of writing checks, affixing postage and posting the payment in the mail is eliminated. Once the amount is entered and the payee is checked off, the funds are automatically deducted from the payer's choice of account. Since the cost to the bank is minimal, the cost to the consumer, in many cases, is also minimal. While there is usually a fee for online banking, it can be extremely low. Those who partake in online banking all agree it's worth every penny. Not having to spend all Saturday morning standing in a crowded bank line is justification for most. It can even pay for itself since costs like postage and ATM fees are reduced. Online banking also eliminates paper waste, which is a plus not only for those who have to handle all the paper work, but also for the environment.
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Revenue Growth:
The ability to combine services increases flexibility, which facilitates innovation and speeds new products to market. Your bank will benefit from the following:
Accelerated integration with business partners Greater automation through improved straight-through processing Improved customer service through wider choice, better information, and easy-to-
use self-services In addition, ESA’s discrete services and service-area migration allow your bank
to exploit the economies of scale and synergy.
Of course, there are also Disadvantages:
Security is always an issue with Internet transactions. Although information is encrypted, and the chances of your account being hacked are slim, it happens. Banks pay big bucks to install high tech firewalls. Chances are your money is in good hands. You're also missing the personal service. No smiling teller or representative hands you a receipt. Instead, except for what's printed into your account, all the paperwork is up to you. Always print copies of important transactions.
If you have to deposit cash or checks, you'll still have to spend time at the ATM. Unless a payment to you is directly deposited, this is one thing you'll always have to handle manually.
Still, the benefits far outweigh the risks. The convenience of online banking is a advantage well worth the cost.
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Conclusion:Online banking involves certain risks. It is important to educate yourself
about these risks, how unauthorized access to your financial information occurs, and the steps you can take to protect your financial information. Learning about your rights and responsibilities as an online banking consumer can make a difference to your financial well-being by changing the age-old saying “A penny saved is a penny earned” to “A penny saved is a penny kept.”
Protection through single password authentication, as is the case in most secure Internet shopping sites, is not considered secure enough for personal online banking applications in some countries. Basically there exist two different security methods for online banking.
The PIN /TAN system where the PIN represents a password, used for the login and TANs representing one-time passwords to authenticate transactions. TANs can be distributed in different ways; the most popular one is to send a list of TANs to the online banking user by postal letter. The most secure way of using TANs is to generate them by need using a security token. These token generated TANs depend on the time and a unique secret, stored in the security token (this is called two-factor authentication or 2FA). Usually online banking with PIN/TAN is done via a web browser using SSL secured connections, so that there is no additional encryption needed.
Signature based online banking where all transactions are signed and encrypted digitally. The Keys for the signature generation and encryption can be stored on smartcards or any memory medium, depending on the concrete implementation.
Problem Area:
The industry sector is one of the most important service sectors for the whole national economy. Modern, highly industrialized and technology driven economies are threatened by higher risks than ever, and individual need to protect themselves against private risk. From the banks’ viewpoint, use of Internet banking is expected to lead to cost reductions and improved competitiveness. This service delivery channel is seen as powerful because it can retain current Web-based customers who continue using banking services from any location. Moreover, Internet banking provides opportunities for the bank to develop its market by attracting a new customer base from existing Internet users (Suganthi et al., 2001; Dannenberg and Keller, 1998; Zineldin, 1995).
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In the last five years financial analysts have assessed financial services websites as laggards behind other industries in overall innovation (Bruno-Britz, 2006). This trend is confirmed by the Internet Standards Assessment Report which shows that Internet banking sites currently score low in the categories of innovation and use of technology (ISAR, 2006) compared to other retail websites. Current financial analysis indicates that bank customers “are most satisfied if they themselves are allowed to state where, when, and how they do their banking” (Silva,2005). Survey results and industry research that concludes that banks need to spend time and increase investments in improving connections with customers and differentiating the customer experience is getting the attention of many banks (Eckenrode, 2006). Financial analysts suggest “banks can learn a thing or two from many non-bank industries that are exhibiting innovation in the way that they deal with self-service options for their customers” (Silva, 2005).
Internet technology have the potential to enable the banks to enhance their Internet offerings with features that will improve customer service interactions and allow them with options for increasing control of their Internet banking experience. However, due to the strong fact that financial transactions involve the transmission of highly sensitive personal data, a major factor influencing consumer use of Internet banking websites is trust (Suh & Han, 2002). Continuing instances of Internet banking security violation and reports “degrades customer trust in the bank and in online banking in general” by (Fox, 2005), and thus, issues related to adoption of internet banking must be factored in to any plans for adding customer satisfaction and security control features.
Research Problem and Research Question
A full consideration of future internet banking in Pakistan would demand investigation in different areas. This research has addressed the adoption issues of Internet banking in Pakistan. Prior studies frequently focus only on positive aspects of Internet banking, e.g. benefits (Suganthi et al., 2001), trust (Suh and Han, 2002), innovations (Gerrard and Cunningham, 2003). Internet banking technology in Asian countries especially in Pakistan is less developed as compared to Western world. The purpose of this research, aims to identify the issues that preventing Pakistani community (individual & firms) from adopting Internet banking services.
Common services provided by local banks via internet.
Balance Transfer Facility Global Acceptability Cash Advance Facility Revolving Credit Supplementary Cards
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Card Expiry Period 24-Hours Phone Banking Service Zero Loss Liability All Billing in Pak Rupees Comprehensive Travel Protection Statement of Account Fortunes Acceptance at 1Link ATMs Instant SBS Monthly Instalment Plan Utility bill Payments Call and Pay Facility Prepaid Mobiles Top ups Credit on Phone Credit Card bill Payment through Hilal Card Special Offer on Warid post paid connection Step By Step Plan
Few Screen Shots of Silk Bank Online Banking through Website:
Login Page:
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Online Banking & Role of I.T in Online Banking
Main account list page:
Balance Inquiry Page:
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Account Balance Page:
Mini Statement Page:
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Account Statement Page:
Cheque Book Request Page:
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Bill Payment Page:
Bill Payment History:
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Logout Page:
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References
http://en.wikipedia.org/wiki/Online_banking http://ezinearticles.com/?A-Brief-History-of-Internet-
Banking&id=353450 http://ezinearticles.com/?History-of-Online-Banking&id=270075 http://www.google.com.pk/url?
sa=t&source=web&ct=res&cd=2&ved=0CA0QFjAB&url=http%3A%2F%2Fwww.occ.treas.gov%2Fhandbook%2Fintbank.pdf&ei=GKlqS7SjG4ze7AP7zdj1BQ&usg=AFQjCNFGc5tKCxI41uD9JUo4Dv0O3ior8g
http://www.ehow.com/how_5886920_open-online-banking-account.html http://www.bankrate.com/brm/olbstep2.asp http://articles.moneycentral.msn.com/Banking/BetterBanking/
TheTop10OnlineBanks.aspx http://en.wikipedia.org/wiki/Automated_teller_machine http://www.typesofcreditcards.com/ http://en.wikipedia.org/wiki/Credit_card http://studenttravel.about.com/od/mattersofmoney/qt/atmcard.htm http://www.economywatch.com/debit-card/ http://en.wikipedia.org/wiki/Mobile_banking\ http://www.google.com.pk/url?
sa=t&source=web&ct=res&cd=6&ved=0CBQQFjAF&url=http%3A%2F%2Fwww.mmaglobal.com%2Fmbankingoverview.pdf&ei=EkFrS5TjEYzW7AOqp6X2BQ&usg=AFQjCNFUqV8HH-PgzF_x3JscAGIEH7pbTw
http://en.wikipedia.org/wiki/Telephone_banking http://en.wikipedia.org/wiki/SMS_Banking http://en.wikipedia.org/wiki/Guide_to_E-payments http://www.spamlaws.com/onlinebanking-fraud.html http://searchfinancialsecurity.techtarget.com/news/article/
0,289142,sid185_gci1380406,00.html http://internetbankingfraud.com/
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http://www.google.com.pk/url? sa=t&source=web&ct=res&cd=2&ved=0CAwQFjAB&url=http%3A%2F%2Fwww.postbank.com%2FDatei%2F0711online-banking-security_en_Internetfassung%2C0.pdf&ei=kPprS6efOorY7APN5rCABg&usg=AFQjCNEjH6uMrgI0i-9J9njg-m3FfP1xdA
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