INTERNET BANKING

BACHELOR OF COMMERCE BANKING & INSURANCE SEMESTER V SUBMITTED BY SONALI DAMODAR KHANDE ROLL NO: TYB&I-21 ACADEMIC YEAR 2012-2013 UNDER THE GUIDANCE OF PROF. AMIN MOMEN [MANISHA EDUCATION TRUST] SMT. JANKIBAI RAMA SALVI DEGREE COLLEGE OF ARTS, COMMERECE & SCIENCE MANISHA NAGAR, KALWA (W), THANE AN ISO 9001:2008 CERTIFIED COLLEGE

INTERNET BANKING
BACHELOR OF COMMERCE BANKING & INSURANCE SEMESTER V SUBMITTED BY SONALI DAMODAR KHANDE ROLL NO: TYB&I-21 ACADEMIC YEAR 2012-2013 UNDER THE GUIDANCE OF PROF. AMIN MOMEN [MANISHA EDUCATION TRUST] SMT. JANKIBAI RAMA SALVI DEGREE COLLEGE OF ARTS, COMMERECE & SCIENCE MANISHA NAGAR, KALWA (W), THANE AN ISO 9001:2008 CERTIFIED COLLEGE

ACKNOWLEDGEMENT

During the perseverance of this project, was supported By different people, whose name if mot mentioned would be inconsiderate on my part. I would like to extend my sincere gratitude and appreciation to PROF. MR. AMIN MOMEN Who initiated into the study of INTERNET BANKING If has indeed been a greater experience working under his/her during the course of the project for the his/her invaluable advice and guidance provided through out this project. I also owe my sincere gratitude to DR. RAJKUMAR KOLHE principal of our college. I would also like to thank the following people who through their experience have Intighted the practical aspect of this subject without who the study would not have been carried out successfully. I would also like to give may sincere gratitude to all my college librarian staff because of whom I am able to complete my project.

DECLARATION

Full Name SONALI DAMODAR KHANDE Roll. NO. TYBBI-21 a students of TY BANKING AND INSURANCE OF
COURSE

BANKING AND INSURANCE . Humbly submit that I have completed

from time to time project work has described in this report by may own skill study and between the period from to as per the instruction guidance of MR. AMIN MOMEN And that, I have not copied the report or its any appreciable part from any other literature in contravention on the academic ethics.

Date:6/9/2012

signature of students

INDEX

CHAPTER NAME

TOPIC NAME

PAGE NO.

CHAPTER NO.1
1. INTRODUCTION OF INTERNET BANKING

2. BENEFITS OF INTERNET BANKING 3. ADVANTAGES OF INTERNET BANKING 4. DISADVANTAGES OF INTERNET BANKING 4. RBI GUIDELINES ON INTERNET BANKING 5. TYPES OF INTERNET BANKING 6. INTERNET BANKING RISK 7. HOW TO USE INTERNET BANKING SAFELY 8. INDIAN POSITION IN INTERNET BANKING 9. INTERNET BANKING-A NEW MEDIUM

INTERNET BANKING

INTRODUCTION
Internet banking means any user with a personal computer and a browser can get connected to his banks website to perform any of the virtual banking functions. In internet banking system the bank has a centralized database that is web-enabled. All the services that the bank has permitted on the internet are displayed in menu. Any service can be selected and further interaction is dictated by the nature of service. The traditional branch model of bank is now giving place to an alternative delivery channels with ATM network. Once the branch offices of bank are interconnected through terrestrial or satellite links, there would be no physical identity for any branch. It would a borderless entity permitting anytime, anywhere and anyhow banking. he network which connects the various locations and gives connectivity to the central office within the organization is called intranet. These networks are limited to organizations for which they are set up. SWIFT is a live example of intranet application. Internet banking is the easiest way to carry out banking transactions in today's hectic schedule. Let's learn what is Internet banking all about... Internet banking is used widely by masses, and has numerous benefits to offer. Nowadays, all banks provide online banking facility to their customers as an added advantage. Gone are the days, when one had to transact with a bank which was only in his local limits. Online banking has opened the doors for all customers, to operate beyond boundaries. Nowadays, people are so busy in their work lives, that they don't even have time to go to the bank for conducting their banking transactions. Internet banking enable people to carry out most of their banking transactions using a safe website, which is operated by their respective banks. It provides many features and functions to their customers, and enables them to view their account balance, transfer money from their account to another account (be it in their respective bank or any other bank), view their account summary, etc. Internet Banking refers to the banking services provided by the banks over the internet. Some of these services include paying of bills, funds transfer, viewing account statement, etc. Banks also deliver their latest products and services over the internet. Internet banking is performed through a computer system or similar devices that can connect to the banking site via the internet. Nowadays, you can also use internet banking on your mobile phones using a Wi-Fi or 3G connection . In this procedure, many financial transactions can be carried out by simply utilizing a computer with an Internet connection. The necessary things that a person needs for using online banking are, an active bank account with balance in it for transactions, debit or a credit card number, customer's user ID, bank account number, the Internet banking PIN number, and a PC with access to the web. People using Internet banking are certainly benefited by the online services their respective

banks are providing them with. The primary reason why it is so famous and mostly used is that, customers are allowed to bank at non-working hours. Banks create their banking interfaces and websites in a viewable and userfriendly manner, which enable customers to conduct their financial transactions with ease. If they are stuck in any process while performing their online transactions, banks have another helpful facility that is 'phone banking', wherein customers can call the bank's toll-free number and get assistance in completing their transactions. Electronic bill payment, viewing and downloading financial records, and money transfers are some of the general transactions which the customers generally carry out. All online banking services, provided by some banks, are free of cost. When a customer views the bank's website, there are many options available, but to execute those transactions, he would obligatorily need to log into his virtual account. Without logging in, he won't be allowed to carry out any kind of the transactions. Initially, when he opens an account with the bank, the bank gives a welcome kit which contains important documents that include the checkbook; a document on which the customer's user ID, online banking password, phone banking password, and account number is embedded. The kit also contains some other confidential data, the credit or debit card, and the card details. The website will prompt the user to enter the necessary details like the Internet banking password and account number, and then will display his account information. In this stage, he can carry out all functions that are available on the website. With regards to the password authentication and encryption, high security is maintained, as there is a chance of hackers getting unauthorized access to the customer's account and performing malpractices. However, banks keep their online security systems up-to-date to prevent such scenarios. Moreover, banks also suggest their customers to keep on changing passwords periodically. They also implement some security measures like using unique login IDs, transaction codes, using two passwords, security tokens which generate automatically changing passwords, etc. The Internet banking facilities provided by banks differ from bank to bank, and country to country. To know all online banking services and processes, one has to thoroughly refer to the guides which were made available in the welcome kit. Moreover, proper care has to be taken regarding the confidential documents as, Internet banking frauds are on an increase. Banking is now no more limited in going and visiting the bank in person for various purposes like depositing and withdrawing money, requesting for account statement, stop a payment, etc. You can do all these tasks and many more using the internet banking services offered by the banks. You can also keep a track of your

account transactions and balance all the time. Now getting passbooks updated to know the total account balance is a matter of past.

BENEFITS OF INTERNET BANKING

1. Its greatest advantage perhaps lies in the fact that customers are no longer required to wait in those long and wearisome lines of the banks to request a

financial transaction or statement. It has made the opening of an account quite simple and easy and without much paperwork. The same flexibility can be observed even while closing an account. You can also apply for bank loans without personally visiting any local branch of your bank. 2. Conventional banking has always been slow and time-consuming, so much so that sometimes you need to wait several hours to process a simple transaction like clearing a check. But, Internet banking has tremendously reduced the time required to process banking transactions, thereby making banking faster and convenient. For the bankers this system is cost-effective, as it has considerably reduced the administrative costs and paperwork related to the transactions. Besides, banks can also cater to the needs of thousands of customers at the same time. All these factors have significantly increased the profit margins of commercial banks by lowering their operating costs. This has enabled them to offer acceptable interest rates on savings account and credit cards. 3. With the help of Internet banking, you can access any information regarding your account and transactions, any time of the day. This means that you no longer have to depend on the office hours of your bank to obtain information. Therefore, you can regularly monitor your account as well as keep track of financial transactions, which can be of immense help in detecting any fraudulent transaction. In addition to this, fund transfers, both national and international, have also become faster and convenient with Internet banking. Nowadays, you can transfer funds from one account to another within a few minutes. You can easily carry out stock trading, exchanging bonds and other investments with the help of this facility. All these features have made Internet banking ideal for people who make a number of financial transactions each day. 4. In addition to availing banking facilities for 24 hours a day, you can also receive other important information regarding banking policies, rates of interest offered on different types of bank accounts and formalities required in executing various transactions. With such information you can compare the services of different banks and opt for the one that satisfies your individual needs and requirements. 5. Security of your bank account is the most important factor in online banking. So while availing the facilities of Internet banking, you have to be very careful to ensure the security of your computer and personal information like the password, user name and pin number of your bank account. Otherwise, you may become a victim of computer hacking, which can lead to unauthorized use of your account by computer hackers. Though banks have come up with several security measures, the

customers are also required to be a bit careful to ensure security and safety of Internet banking.

ADVANTAGES OF INTERNET BANKING

Internet Banking has provided several outstanding advantages by making banking transactions faster and more convenient. To find out these benefits, read

on. 1. Internet banking or banking via the Internet can be considered a remarkable development in the banking sector. The ability to carry out banking transactions through the Internet has empowered customers to execute their financial transactions within the comfort of their homes. Besides this, the benefits of Internet banking is not limited to a particular group of people, as it benefits both bankers and customers alike. 2. Internet Banking has several advantages over traditional banking which makes operating a bank account simple and convenient. Internet banking allows you to conduct various transactions using the bank's website and offers several advantages. Some of the advantages of internet banking are: 3. Internet banking account is simple to open and easy to operate. Internet banking is quite convenient as you can easily pay your bills, can transfer funds between accounts, etc. Now you do not have to stand in a queue to pay off your bills; also you do not have to keep receipts of all the bills as you can now easily view your transactions. 4. Internet banking is available all the time, i.e. 24x7. You can perform your tasks from anywhere and at any time; even in night when the bank is closed or on holidays. The only thing you need to have is an internet connection. Internet banking is fast and efficient. Funds get transferred from one account to the other very fast. You can also manage several accounts easily through internet banking. 5. Through Internet banking, you can keep an eye on your transactions and account balance all the time. This facility also keeps your account safe. This means that by the ease of monitoring your account at anytime, you can get to know about any fraudulent activity or threat to your account before it can pose your account to severe damage.

DISADVANTAGES OF INTERNET BANKING

Though there are many advantages of internet banking, but nothing comes without disadvantages and everything has its pros and cons; same is with internet

banking. It also has some disadvantages which must be taken care of. The disadvantages of internet banking include the following: 1.Understanding the usage of internet banking might be difficult for a beginner at the first go. Though there are some sites which offer a demo on how to use internet banking, but all does not offer this facility. So, a person who is new to internet baking might face some difficulty. 2.You cannot have access to internet banking if you dont have an internet connection; thus without the availability of internet access, internet banking may not be useful. 3.Security of transactions is a big issue. Your account information might get hacked by unauthorized people over the internet. 4.Password security is a must. After getting your net banking password, do change it and memorize it otherwise your account may be misused by someone who gets to know your password inadvertently. 5.You cannot use internet banking, in case, the banks server is down. Another issue is that sometimes it becomes difficult to note whether your transaction was successful or not. It may be due to the loss of internet connectivity in between, or due to a slow connection, or the banks server is down. 6.Internet Banking has definitely made the life easy for users by providing online access to various banking services.

RBI GUIDELINES ON INTERNET BANKING

1. June 2001 banks were advised to seek prior approval of Reserve Bank of India before offering transactional services on the Internet. The position has since been reviewed and RBI has advised on 20th July 2005 that while the offering of Internet Banking services will continue to be governed by the provisions of the above

circular, no prior approval of the Reserve Bank of India will be required by banks for offering Internet Banking services. 2.Banks should, however, ensure compliance with the following conditions: i. The Internet Banking policy has been approved by the Bank's Board. ii. The policy fits into the banks overall Information Technology and Information Security policy and ensures confidentiality of records and security systems. iii. The policy takes into account operational risk. iv. The policy clearly lays down the procedure to be followed in respect of" Know Your Customer" requirements, and v. The policy broadly meets the parameters laid down in the earlier circular.

TYPES OF INTERNET BANKING

Financial institution Internet offerings can be broadly classified into three groups with distinct risk profiles:

INTERNET INTERNET BANKING BANKING

INFORMATIONAL INFORMATIONAL

COMMUNICATIVE COMMUNICATIVE

TRANSACTIONAL T TRANSACTIONAL

1. InformationalOffers information about the bank's products and services ("brochure ware") and is low risk 2. CommunicativeOffers account-related information and possibly offers updates to static data (such as addresses). Since access is permitted to the bank's main systems, the risk is material. 3. TransactionalAllows customers to execute financial transactions and carries the highest risk. Some transactional models carry higher risks, for example, if the customer has never visited a branch throughout his entire relationship and prefers to carry out all his transactions remotely (this commonly happens with some online share trading sites).

INTERNET BANKING RISK

Internet banking does not open up new risk categories, but rather accentuates the risks that any financial institution faces. The board and senior management must be cognizant of these risks and deal with them appropriately. These risks, which often overlap, are briefly described below:

stratergy 1

1. Strategic risk This is the current and prospective risk to earnings and capital arising from adverse business decisions or improper implementation of business decisions. Many senior managers do not fully understand the strategic and technical aspects of Internet banking. Spurred by competitive and peer pressures, banks may seek to introduce or expand Internet banking without an adequate cost-benefit analysis. 2. Transaction risk This is the current and prospective risk to earnings and capital arising from fraud, error, negligence and the inability to maintain expected service levels. reputation, actual monetary losses and reduced business opportunities. Banks need to carefully understand and interpret existing laws as they apply to Internet banking and ensure consistency with other channels such as branch banking.. 3. Compliance risk This is the risk to earnings or capital arising from violations of, or nonconformance with, laws, regulations and ethical standards. Compliance risk may lead to diminished. 4. Reputation risk This is the current and prospective risk to earnings and capital arising from negative public opinion. A bank's reputation can be damaged by Internet banking services that are poorly executed (e.g., limited availability, buggy software, poor response). Customers are less forgiving of any problems and thus there are more stringent performance expectations from the Internet channel. 5. Information security risk This is the risk to earnings and capital arising out of lax information security

processes, thus exposing the institution to malicious hacker or insider attacks, viruses, denial-of-service attacks, data theft, data destruction and fraud. 6. Credit risk This is the risk to earnings or capital from a customer's failure to meet his financial obligations. Internet banking enables customers to apply for credit from anywhere in the world. Banks will find it extremely difficult to verify the identity of the customer, if they intend to offer instant credit through the Internet. 7.Interest rate risk This is the risk to earnings or capital arising from movements in interest rates (e.g., interest rate differentials between assets and liabilities and how these are impacted by interest rate changes). Internet banking can attract loans and deposits from a larger pool of customers. 8.Liquidity risk This is the risk to earnings or capital arising from a bank's inability to meet its obligations. Internet banking can increase deposit and asset volatility, especially from customers who maintain accounts solely because they are getting a better rate. 9.Price risk This is the risk to earnings or capital arising from changes in the value of traded portfolios or financial instruments. Banks may be exposed to price risk, if they create or expand deposit brokering, loan sales or securitization programs as a result of Internet banking activities. 10.Foreign exchange risks This arises when assets in one currency are funded by liabilities in another. Internet banking may encourage residents of other countries to transact in their domestic currencies. Due to the ease and lower cost of transacting, it may also lead customers to take speculative positions in various currencies.

SECURITY CONTROLS
Security controls need special attention because of the open nature of the Internet and the pace of technological change. Specific focus areas include: 1. AuthenticationThis means ensuring customers are verified and their identities established before conducting business over the Internet. Passwords, biometric methods, challenge-response systems, public key infrastructure are some of the ways of strengthening authentication. There is a growing trend towards single-signon applications, where the customer needs only a single ID to access his entire relationship. These increase the risk of compromise. 2. NonrepudiationBanks should make certain that customers who transact on the Internet cannot later deny having originated the transactions. Using techniques like PKI (digital certificates), strong nonrepudiation can be achieved. However, legal enforceability in many countries is still suspect. 3. Segregation of dutiesAs in any traditional process, segregation of duties is vital to prevent perpetration of fraud by any one individual. Banks should ensure that there are appropriate measures to protect the data integrity of e-banking transactions, records and information. All e-banking transactions should generate clear audit trails, which should be archived. It is also vital to generate and protect records of customer instructions in a legally acceptable format. Banks should strengthen information security controls to preserve the confidentiality and integrity of customer data. Firewalls, ethical hacking tests, physical and logical access controls are some of the methods available. Legal and reputational risk management can be broken down into the following: 4.PrivacyBanks should articulate a privacy policy and should communicate this to customers. Customers must be allowed opt-out options, and great care must be exercised before sharing customer information with outside entities. If customers are from a different jurisdiction, then the strongest privacy law may apply.

5.AvailabilityBanks should have business continuity and contingency planning processes to help ensure continuous availability of Internet banking services. This is challenging because of the potential for high transaction volume and the demand for 24-hour, seven-day-a-week availability. 6.Incident responseBanks should formulate appropriate incident response plans to detect, manage, contain and minimize problems arising from internal and external attacks. There should be clear escalation paths, a communication strategy for customers and the press and a documented chain of command. Finally, there should be a process for collecting and preserving forensic evidence after an adverse event. The risks arising from Internet banking are not restricted to information security areas, but span across all the traditional banking areas. Risk management for Internet banking should be directed by senior management and incorporated within existing risk management disciplines in the organization. Control procedures need to keep pace with rapid changes in technology.

HOW TO USE INTERNET BANKING SAFELY

With technology available to safeguard the private information of online banking customers, it is not only convenient but safe to complete banking online. As long as the proper precautions are taken, banking online is safe and the information which is viewed through your personal computer is secured. One of the most obvious safeguards that consumers can ensure is to look for the secured symbol when signing on to the online banking website. This symbol is often in the form of a locked padlock and means that the website is safe and protected through various protective measures. Banking online can be safe when you ensure that the following stipulations are met before signing in; keep your password and sign in information personal. It should not be stored within the computer, even if the computer is not shared. Should anything threaten the safety of the computer, as a customer, you want to be sure that your banking information is safe. Many scams have come about that create replica websites which allow the customer to sign in, while the information is recorded by the wrong people. Now, these people have access to your personal sign in information, even account numbers and passwords. Once you log-in, the information is available to anyone who has created the replica website. How do we stop this problem? Before you sign on to your bank account through the internet, ensure that the website is secure and that the bank is legitimate. Use your own personal computer. Using a public computer puts your information at risk to be discovered by the public. Avoid using a public or shared computer to perform online banking tasks, instead, wait until you return home on a personal computer that has adequate protection from viruses that may oversee information that is being inputted into the computer. Choosing a password that contains a random variation of numbers, letters and uppercase as well as lowercase letters can safeguard your online banking experience. Be sure to choose a password that no one is able to guess and be sure to avoid password hints that are available through some programs. Take extra precautions. When signing into online banking, many lenders allow the customer to choose security questions that must be answered each time the client logs into the online banking website. Be sure to enable this feature, as it can protect your identity, your banking information as well as your funds.

INDIAN POSITION
The Indian banks record in Internet banking is nothing much to write about. The ICICI Bank kicked off online banking in 1996, followed by a host of other banks. But even for the Internet as a whole, 1996 to 1998 marked the adoption phase, while usage increased only in 1999, owing to lower ISP online charges, increased PC penetration and a tech-friendly atmosphere. On the other hand, the Public Sector Banks (PSUs) lagged in the race for adopting Internet banking practices. While, among the PSUs, the State Bank of India took the lead, others are yet to catch up on Internet banking services. Some banks blame it on the lack of regulations and procedures to go online. But, not many are willing to buy the argument. More than a lack of regulatory framework, it is a lack of zeal and a mindset attuned towards resisting any new technology that is holding back the nationalized banks. Internet banking is an extension of traditional banking services. However, there are several instances, which contradict the legal framework for internet banking in India: Banking Regulations Act, 1949, the Reserve Bank of India Act, 1934 and the Foreign Exchange Management Act, 1999. The Information Technology Act 2000 attempted to address a number of ecommerce regulatory issues. Many feel that grey areas still exist, which have neither been spelt out properly nor any workable modes of implementation suggested by Constitutional institutions. The IT Act of 2000 did address the need for banks to go online and have laid out security measures to be adopted. However, one cannot say the aspirations of the industry have been satisfactorily looked into. The Reserve Bank of India has taken several initiatives in setting guidelines for internet banking, and reviews them at periodic intervals. Most important, RBI approval was made mandatory for all banks before offering any transactional services over the Internet. This was however shelved, giving banks more autonomy on the online space, though ensuring at the same time, that it would be strictly under the provisions of the RBI. Earlier, the RBI had adopted the recommendations of the Working Group on Internet Banking, which examined three thrust areas such as Technology and security issues, legal issues and regulatory and supervisory issue.

INTERNET BANKING- A NEW MEDIUM

The Internet has revolutionized the computer and communications world like nothing before. The invention of the telegraph, telephone, radio, and computer set the stage for this unprecedented integration of capabilities. The Internet is at once a world-wide broadcasting capability, a mechanism for information dissemination, and a medium for collaboration and interaction between individuals and their computers without regard for geographic location. The Internet represents one of the most successful examples of the benefits of sustained investment and commitment to research and development of information infrastructure. Beginning with the early research in packet switching, the government, industry and academia have been partners in evolving and deploying this exciting new technology. Internet is a vast network of individual computers and computer networks connected to and communicate with each other using the same communication protocol TCP/IP (Transmission Control Protocol / Internet Protocol). When two or more computers are connected a network is created; connecting two or more networks create inter-network or Internet. The Internet, as commonly understood, is the largest example of such a system. Internet is often and aptly described as Information Superhighway, a means to reach innumerable potential destinations. The destination can be any one of the connected networks and host computers. In 1973, the U.S. Defense Advanced Research Projects Agency (DARPA) initiated a research program to investigate techniques and technologies for interlinking packet networks of various kinds. The objective was to develop communication protocols which would allow networked computers to communicate transparently across multiple, linked packet networks. This was called the Internet ting project and the system of networks which emerged from the research was known as the "Internet." The system of protocols which was developed over the course of this research effort became known as the TCP/IP Protocol Suite, after the two initial protocols developed: Transmission Control Protocol (TCP) and Internet Protocol (IP). Though it began in the 1980s, it was only in the mid nineties that internet banking really caught on. What attracts customers to internet banking is the round the clock availability and ease of transactions. Studies estimate that internet banking still has a long way to go. There are several banks that have customers who prefer banking in the traditional ways. Statistics released by the FDIC show that only 40% of the banks in the U.S. offer internet banking facilities worth mentioning. All the others may have an online presence but do not have enough online transactions to justify their presence on the internet.

ADVANTAGES
According to the Internet in India Report 2007 published jointly by the Internet and Mobile Association of India and IMRB International, the number of internet users in India in the ever user or claimed user category has touched 46 million in September from 32.2 million in September 2006. During the same period, the number of active internet users has reached 32 million. Through Internet banking, we can check our transactions at any time of the day, and as many times as we want to. Where in a traditional method, we get quarterly statements from the bank. If the fund transfer has to be made outstation, where the bank does not have a branch, the bank would demand outstation charges. Whereas with the help of online banking, it will be absolutely free. Form the perspective of banking products and services being offered through Internet, Internet banking is nothing more than traditional banking services delivered through an electronic communication backbone, viz, Internet. But, in the process it has thrown open issues which have ramifications beyond what a new delivery channel would normally envisage and, hence, has compelled regulators world over to take note of this emerging channel. Some of the distinctive features of i-banking are: It removes the traditional geographical barriers as it could reach out to customers of different countries / legal jurisdiction. This has raised the question of jurisdiction of law / supervisory system to which such transactions should be subjected, It has added a new dimension to different kinds of risks traditionally associated with banking, heightening some of them and throwing new risk control challenges, SIt poses a strategic risk of loss of business to those banks who do not respond in time, to this new technology, being the efficient and cost effective delivery mechanism of banking services, A new form of competition has emerged both from the existing players and new players of the market who are not strictly banks. Another advantage of Internet banking is that it is cost-effective. Thousands of customers can be dealt with at once. There is no need to have too many clerks and cashiers. The administrative work gets reduced drastically with Internet banking. Expenditures on paper slips, forms and even bank stationery have gone down, which helps raise the profit margin of the bank by a surprisingly large number. Rough estimates assume teller cost at Re.1 per transaction, ATM transaction cost at 45 paise, phone banking at 35 paise, debit cards at 20 paise and Internet banking at 10 paise per transaction. Fully computerized banks, with better management of

their customer base are in a stronger position to cross-sell their products through this channel. As far as customers are concerned, their account information is available round the clock, regardless of their location. They can reschedule their future payments from their bank account while sitting thousands of miles away. They can electronically transfer money from their bank accounts or receive money in their bank accounts within seconds.

BILL PAYMENT SERVICE

One can facilitate payment of electricity and telephone bills, mobile phone, credit card and insurance premium bills as each bank has tie-ups with various utility companies, service providers and insurance companies, across the country. To pay bills, all one need to do is complete a simple one-time registration for each biller. One can also set up standing instructions online to pay his recurring bills, automatically. Generally, the bank does not charge customers for online bill payment.

FUND TRANSFER
One can transfer any amount from one account to another of the same or any another bank. Customers can send money anywhere in India. Once one login to his account, he need to mention the payees's account number, his bank and the branch. The transfer will take place in a day or so, whereas in a traditional method, it takes about three working days.

CREDIT CARD CUSTOMERS

With Internet banking, customers can not only pay their credit card bills online but also get a loan on their cards. If one loses his credit card, he can report lost card online.

INVESTING THROUGH INTERNET BANKING

One can now open an FD online through funds transfer. Now investors with interlinked demat account and bank account can easily trade in the stock market

and the amount will be automatically debited from their respective bank accounts and the shares will be credited in their demat account. Moreover, some banks even give one the facility to purchase mutual funds directly from the online banking system. Nowadays, most leading banks offer both online banking and demat account. However if one has his demat account with independent share brokers, then he need to sign a special form, which will link his two accounts.

SHOPPING
With a range of all kind of products, one can shop online and the payment is also made conveniently through ones account. One can also buy railway and air tickets through Internet banking.

RISKS
One of the biggest attractions of Internet as an electronic medium is its openness and freedom. It is a public domain and there is no restriction on who can use it as long as one adheres to its technical parameters. Internet is not an unmixed blessing to the banking sector. Along with reduction in cost of transactions, it has also brought about a new orientation to risks and even new forms of risks to which banks conducting i-banking expose themselves. Regulators and supervisors all over the world are concerned that while banks should remain efficient and cost effective, they must be conscious of different types of risks this form of banking entails and have systems in place to manage the same. An important and distinctive feature is that technology plays a significant part both as source and tool for control of risks. Because of rapid changes in information technology, there is no finality either in the types of risks or their control measures. Both evolve continuously. Operational risk, also referred to as transactional risk is the most common form of risk associated with i-banking. It takes the form of inaccurate processing of transactions, non enforceability of contracts, compromises in data integrity, data privacy and confidentiality, unauthorized access / intrusion to banks systems and transactions etc. Such risks can arise out of weaknesses in design, implementation and monitoring of banks information system. Besides inadequacies in technology, human factors like negligence by customers and employees, fraudulent activity of employees and crackers / hackers etc. can become potential source of operational risk. Often there is thin line of difference between operational risk and security risk and both terminologies are used interchangeably. Security risk arises on account of unauthorized access to a banks critical

information stores like accounting system, risk management system, portfolio management system, etc. A breach of security could result in direct financial loss to the bank. For example, hackers operating via the Internet, could access, retrieve and use confidential customer information and also can implant virus. This may result in loss of data, theft of or tampering with customer information, disabling of a significant portion of banks internal computer system thus denying service, cost of repairing these etc. Other related risks are loss of reputation, infringing customers privacy and its legal implications etc. Thus, access control is of paramount importance. Controlling access to banks system has become more complex in the Internet environment which is a public domain and attempts at unauthorized access could emanate from any source and from anywhere in the world with or without criminal intent. Attackers could be hackers, unscrupulous vendors, disgruntled employees or even pure thrill seekers. Also, in a networked environment the security is limited to its weakest link. It is therefore, necessary that banks critically assess all interrelated systems and have access control measures in place in each of them. As Internet banking transactions are conducted remotely banks may find it difficult to apply traditional method for detecting and preventing undesirable criminal activities. Application of money laundering rules may also be inappropriate for some forms of electronic payments. Thus banks expose themselves to the money laundering risk. This may result in legal sanctions for non-compliance with 'know your customer' laws.

INTERNET BANKING LEGAL ISSUES

Banking over the Internet has attracted increasing attention from bankers and other financial services industry participants, the business press, regulators, and law makers. Among the reasons for Internet bankings audience are the notion that electronic banking and payments will grow rapidly, more or less in tandem with proliferating electronic commerce; industry projections that Internet banking will cut banks costs, increase banks revenue growth, and make banking more convenient for customers; and some vexing public policy issues. Despite this attention, there is a dearth of systematic information on the nature and scope of Internet banking. Bankers and public policymakers alike have had to plan using largely anecdotal evidence and conjecture. Banks offer Internet banking in two main ways. An existing bank with physical offices can establish a Web site and offer Internet banking to its customers as an addition to its traditional delivery channels. A second alternative is to establish a virtual, branchless, or Internet-only bank. The computer server that lies at the heart of a virtual bank may be housed in an office that serves as the legal address of such a bank, or at some other location. Virtual banks may offer their customers the ability to make deposits and withdraw funds via ATMs or other remote delivery channels owned by other institutions.

Broadly, the levels of banking services offered through INTERNET can be categorized in to three types: (i) The Basic Level Service is the banks websites which disseminate information on different products and services offered to customers and members of public in general. It may receive and reply to customers queries through e-mail, (ii) In the next level are Simple Transactional Websites which allow customers to submit their instructions, applications for different services, queries on their account balances, etc, but do not permit any fund-based transactions on their accounts, (iii) The third level of Internet banking services are offered by Fully Transactional Websites which allow the customers to operate on their accounts for transfer of funds, payment of different bills, subscribing to other products of the bank and to transact purchase and sale of securities, etc. The above forms of Internet banking services are offered by traditional banks, as an additional method of serving the customer or by new banks, who deliver banking services primarily through Internet or other electronic delivery channels as the value added services. Some of these banks are known as virtual banks or

Internet-only banks and may not have any physical presence in a country despite offering different banking services. There is no denying the fact that information technology has been the most rapidly changing industry in India, and the marriage of technology and banking has to occur for India to keep pace with changes in the global scenario. Looking back, the Narasimham Committee deserves mention in that it was instrumental in forcing Indian banks to become competitive. Fleet footed private sector banks, forced the public sector banks to embrace technology and improve their level of customer service. Next, the Khan Committee was highly important in that it recommended the setting up of universal banks. Preference was given to financial institutions, which could provide a whole range of corporate financial solutions under one roof. But most importantly, the Verma Committee recommended the need for greater use of IT even in the weak Public sector banks. Actually, the nationalization of banks back in the 80s is proving to be a major obstacle in bringing about the required technological changes. Nationalization of the banking sector has led to occurrences of pseudo developmental activities for nurturing vote banks, loss of accent on performance and profitability, creation of unions etc to name a few.

Questions about Internet Banking Answers to your questions about BNZ Internet Banking.
1.GeneralWhat is Internet Banking? -Internet Banking provides access to your BNZ accounts via the Internet. You can do your banking from the convenience of your own home or office without visiting a store or ATM. You can:

View account balances and transaction history View account details from your everyday accounts, e.g., Ready Money, savings accounts, credit cards, term deposits, term loans, etc. Transfer funds between accounts Make payments Update your personal details held with BNZ Register for, and receive Online Statements for transaction and savings accounts Setup and manage email and text Alerts for your savings and transaction accounts Send secure email messages to request services from us Export transactional information to financial management software, e.g., Microsoft Money, Quicken, QuickBooks etc. 2.Who can use Internet Banking? -If you hold an account that requires only one signature to operate that account you can register for Internet Banking. Registering for Internet Banking is quick and easy, just choose the option that works best for you: If you are a Telephone Banking customer and know your 5-digit PIN Number, you can register online. Call us on 0800 ASK BNZ (0800 275 269) or + 64 4 924 2424 from overseas. Or, visit your nearest store. 3.How much does Internet Banking cost? -There is no registration or monthly usage fees, however, standard account fees and service fees apply. 4.How is an automatic payment different from a bill payment? -Automatic payments are useful when you want to set up a reoccurring payment to another account (savings), another entity (rent) or to your CC account. Simply set and forget. A bill payment is suitable for when you want to initiate payments on an irregular basis, or for a variable amount, such as paying for your power or rates. 5.Is there a simple way to make a payment to Inland Revenue? -Yes. By using the Make a Tax Payment option in Internet Banking, you can make a payment to Inland Revenue. Simply enter the details from your payment notice. The code and reference details will be automatically entered for you and can be

confirmed online. All payments will be reconciled and processed by Inland Revenue on receipt. You can make a wide variety of payments such as Income Tax, GST, Child Support, and Student Loan repayments. 6.How long does it take to register for Internet Banking? -Registering for Internet Banking is quick and easy: Online Access to Internet Banking will be available immediately after you've successfully finished the registration process. It will only take a few minutes to register, depending on the speed of you browser and internet connection By phone or in a store It will only take a few minutes for our staff to confirm your identity and then register you for Internet Banking. You'll be given a temporary password so you can login to Internet Banking straight away. On your first login you will be asked accept the Internet Banking terms and conditions and to change your password. I'm having trouble registering online - what should I do? First, you should check that the information you have entered is correct. The entries you make must meet the following criteria. Access number 9 digits numbers only (no letters or special characters except you may enter two dashes e.g. 123-456-789) found on the back of your 24 Hour banking card must already be registered for Telephone Banking Telephone Banking PIN (Personal Identification Number) 5 digits numbers only (no letters or special characters) this is the PIN that you use after entering your access number in Telephone Banking this number is confidential to you New Internet Banking password you make up this number during the Internet Banking registration process 6-8 characters numbers and letters (it must contain at least one number and one letter), no special characters

Re-enter your new Internet Banking password this must be identical to the password you have just entered in the New Internet Banking Password field the purpose of this is to confirm the password you have just chosen above Surname this is your surname as stored by the BNZ i.e. as it appears on your statement. Please check the spelling is correct. If not, please phone BNZ on 0800 24 00 00 and press *, then 1, to speak to a Customer Solutions Adviser. is not case sensitive, so can be entered in upper or lower case or a combination of both 7.How did you hear about Internet Banking? -Select the option which most closely reflects the way that you found out about BNZ Internet Banking Email address You may want to provide us with an email address The email address you enter in this field may override a previous email address which you have given us Please keep me informed via email about BNZ's products and services Ensure the tick box is checked if you would like to be notified by email about BNZ's products and services in the future Secondly, you should check that you've met all of the minimum requirements for Internet Banking. If you're not sure, check the Technical Requirements section. If you're still unable to register for Internet Banking, you should contact Internet Banking Support on 0800 WWW BNZ (0800 999 269). If overseas, phone +64 4 494 7153 (international toll charges apply). 8.Logging in What do I do if I forget my password? -When you log into Internet Banking, you have four attempts to enter your Internet Banking password correctly. If you get it wrong four times in a row you'll need to get your Internet Banking password reset. This will identify it's really you and let you choose a new password. You won't lose your Internet Banking settings or bill payee list.

To regain access to Internet Banking: If you're registered for Telephone Banking and know your 5-digit Telephone Banking PIN, you can reset your password online. If you can't remember your Telephone Banking 5-digit PIN, or are not registered for Telephone Banking, please call us on 0800 999 269 or +64 4 494 7153 from overseas, or visit your nearest BNZ store. I'm having trouble logging in with my temporary Internet Banking password. What should I do? Please check that you're entering your access number and password details in the correct format: Spaces can't be used to split your access number. Your access number needs to be entered either as a continuous string of numbers (e.g. 123456789) or separated by dashes (e.g. 123-456-789). Your temporary Internet Banking password is case sensitive. Check that you have not accidentally turned on your caps lock. If it's more than 72 hours (3 days) since you registered for Internet Banking, your temporary Internet Banking password will have expired for security reasons. For assistance, please call us on 0800 WWW BNZ (0800 999 269) or +64 4 494 7153 from overseas. I am having trouble logging in to Internet Banking. What should I do? Check that you are entering your access number and password details in the correct format: Spaces cannot be used to split your access number. Your access number needs to be entered either as a continuous string of numbers (e.g. 123456789) or separated by dashes (e.g. 123-456-789). Your password is case sensitive. Check that you have not accidentally turned on your caps lock. You should also check that you have met all of the minimum requirements for Internet Banking. If you are not sure, check the Technical Requirements section, below. You may wish to re-register for Internet Banking. This process will guide you through entering your information correctly. To register with Internet Banking again you will need to use your 5-digit Telephone Banking PIN. This is because your Internet Banking password cannot be reset or reactivated as no-one knows it but you. If you cannot re-register because you're not registered for

Telephone Banking or have forgotten your Telephone Banking PIN, please call us on 0800 WWW BNZ (0800 999 269) or +64 4 494 7153 from overseas. 9.How can I make sure that only I can access my accounts? -Our Net Guard service provides an extra layer of security for Internet Banking. It's a free service that works with your existing Internet Banking access number and password to make sure that you, and only you, can access your account details online. Find out more about Net Guard. You must enter your own access number and confidential Internet Banking password every time you access the system. Make sure your password is known ONLY to you. You should change your password regularly, and make sure it's a combination of letters and numbers, and difficult for people to guess. 10.What can I do to maximize security? -Read our security section and terms and conditions and adhere to recommendations set out in the technical requirements, below Always visit our website and Internet Banking by typing www.bnz.co.nz into the address bar Never leave your computer unattended while logged on to Internet Banking Always log out of Internet Banking when you have finished your banking session, and ensure you click OK to confirm you wish to exit Internet Banking Never disclose or copy your access ID password, or Net Guard card details Don't use your date of birth, telephone number, address, your name or the name of a friend, relative or pet in your password Use a combination of letters and numbers in your password, and make sure that it's difficult for people to guess Change your password regularly we recommend at least once every two months Don't use a password you use for anything else (eg. your email account) Ensure that you use virus detection software to protect your computer from Trojan viruses Install anti-virus software on your computer, and update the software's virus definitions frequently Install a personal firewall on your computer If using a family computer at home, make sure that anyone who uses the computer regularly keeps the anti-virus software up to date, and do not act on any suspicious looking emails Be cautious when using a computer in public places such as Internet cafes. Check that their anti-virus software and firewalls are up to date. Do not leave the screen idle for long periods or leave the computer unattended at any time

Net Guard Can I still log in to Internet Banking, while I'm waiting for my Net Guard card to arrive? You can still login to Internet Banking, by clicking the 'bypass activation' link on the Net Guard screen. For security reasons, this link will only be available for a limited period; the date is shown on the Net Guard screen. The 'bypass activation' link will no longer be available when that date is reached, or if you have activated your Net Guard card. 11.My Net Guard card has arrived how do I activate it and log in to Internet Banking? -To activate your Net Guard card: Log in to Internet Banking using your access number and password Enter the three Net Guard values from the reverse of the card that match the coordinates displayed on the screen. Select the Activate button Your Net Guard is now activated. Your Net Guard card will be needed each time you login to Internet Banking in the future. My Net Guard card has not arrived, what should I do? If your card has not arrived within 5 business days of applying, please call us on 0800 WWW BNZ ( 0800 999 269) or +64 4 494 7153 from overseas. 12.Technical What are the minimum technical requirements? -View our minimum technical requirements for Internet Banking What type of software packages can I export information to? Most financial software packages will accept your transaction details from Internet Banking. You can export account and transaction information into any software package that accepts Comma Separated Value (CSV) or Quicken Interface Format (QIF) files, such as Excel spreadsheets, and financial management packages such as Microsoft Money, Quicken and QuickBooks. It is also possible to export your transaction details in the GIFTS format which is a New Zealand banking standard. 13.Do I need Adobe Reader to print using Internet Banking? -To get the most out of Internet Banking's printing capabilities, you'll need to have Adobe Reader installed on your computer. You can still print your information directly using your Browser's print facility, however, it will not be formatted as a report. If you do not have Adobe Reader installed on your computer, you can download it for free. Need some help? Enquire online Find a store

0800 999 269