CHAPTER-1 INTRODUCTION

INTRODUCTION
Internet banking is a subject receiving great attention in the banking industry and the regulatory community. To some extent, the intense interest in Internet banking reflects a more general interest in the role of the Internet as a vehicle for commercial activity. However, interest in Internet banking may be particularly keen since a strong case can be made that banking, along with other financial services, provides a particularly fertile environment for the development of e commerce. !t its core, banking involves the collection, storage, transfer and processing of information assets, and the Internet is an incredibly powerful and efficient tool for handling these information processes. "ome analysts argue that Internet banking is revolutioni#ing the banking industry. $thers see the Internet as simply adding another delivery channel for remote banking to existing channels such as automated teller machines %!T&s' and telephone banking. !s with other areas of e commerce, discussions about Internet banking often proceed without reference to the actual state of market developments. (hile Internet banking is the subject of a large amount of industry discussion, it remains the case that only a small percentage of banking transactions are done online, and only about a third of all banks currently offer Internet banking. )evertheless, the adoption of Internet banking by banks has grown at a very rapid pace, and many banks, including some of the nation*s largest institutions, have made the development of services over the Internet a major component of their business and marketing strategy. Internet +anking is the use of a personal computer for making transactions in bank accounts over the Internet. The Internet is literally changing the world as we know it, into the (orld (ide (eb. The www is an ama#ing network that makes so many things possible that could only be dreamt of before. ,oing to the bank, for most of us, is time

consuming. .inding parking, rushing to the bank before closing time and then once inside, after completing all the necessary paperwork, waiting in line to be helped. !fter all this one only hopes to get service with a smile, which is all too often lacking. I salute the innovation of internet banking, its arrival is truly a miracle. +y registering for electronic banking one has to access various important services and facilities. It is possible to re/uest statements, to review the history of the account*s transactions, transfer funds from one account to another, pay water and electricity bills, or settle school fees. 0repaid cell phone accounts can be topped up and very important, is one can apply for an overdraft facility online. ABOUT ONLINE BANKING 1-2 H$34, 567 8!9 +!):I), .4$& 9$34 ;$&03T<4.= $nline +anking is a +ank service that lets you do your everyday banking -2 hours, 567 days from a computer at home or work. 9ou can>

Check the balances of your everyday and savings accounts, term deposits, credit cards, loans and managed funds

Transfer f n!s between your )ational +ank accounts Create ne" b#ll $a%ees by selecting from a list of 0re !uthorised organisations or setting up a "elf "elected 0arty %organisations or individuals not pre authorised'.

&ake re' lar b#ll $a%(ents to your bill payees

you can create up to 1? bill

payments at a time and set the payment date up to @? days in advance

&ake )ne-)ff $a%(ents to any other bank account in )ew Aealand &ake ta* $a%(ents to the Inland 4evenue 8epartment. "et your payment date up to @? days in advance

Create+ a(en!+ )r !elete %) r a t)(at#c $a%(ents online. 9ou can change details such as the amount, fre/uency, next payment date and your statement details

Use Onl#neC)!e for additional security while banking online ,#e" )r $r#nt ) t transact#)n s ((ar#es , or download them for use with software applications

;hoose to st)$ rece#-#n' $a$er state(ents on some accounts, and re start them at any time

Re. est t) )$en an everyday or savings account, or a new term deposit online 3pdate your c)ntact !eta#ls Use Bank &a#l to ask /uestions in a secure environment 4egister for and access $nline "hare Trading to buy and sell shares )nl#ne 3se your i0hone or i0od Touch with a wireless Internet connection to view account balances make bill payments and transfer funds plus view a summary of up to one month*s transactions. .ind out more information on )ational +ank i+ank or how to register.

1Internet banking= refers to systems that enable bank customers to access accounts and general information on bank products and services through a personal computer %0;' or other intelligent device. Internet banking products and services can include wholesale products for corporate customers as well as retail and fiduciary products for consumers. 3ltimately, the products and services obtained through Internet banking may mirror products and services offered through other bank delivery channels.

/)(e e*a($les )f "h)lesale $r)! cts an! ser-#ces #ncl !e0 ;ash management. (ire transfer. !utomated clearinghouse %!;H' transactions. +ill presentment and payment. E*a($les )f reta#l an! f#! c#ar% $r)! cts an! ser-#ces #ncl !e0 +alance in/uiry. .unds transfer. 8ownloading transaction information. +ill presentment and payment. Boan applications. Investment activity. $ther value added services. $ther Internet banking services may include providing Internet access as an Internet "ervice 0rovider %I"0'. The $;; has determined that a national bank subsidiary may provide home banking services through an Internet connection to the bank*s home banking system and, incidental to that service, may also provide Internet access to bank customers using that service. Historically, banks have used information systems technology to process checks %item processing', drive !T& machines %transaction processing', and produce reports %management information systems'. In the past, the computer systems that made the information systems operate were rarely noticed by customers. Today, (eb sites, electronic mail, and electronic bill presentment and payment systems are an important way for banks to reach their customers. )ational banks have experimented with various forms of online banking for many years. "ome of the early experiments involved closed systems where the customers accessed 7

banks through a dial in or cable TC connection. These systems limited a bank*s potential customer base because they re/uired out ofarea customers to either incur long distance charges on their phone bills or subscribe to a particular cable TC service to access the bank. (ith the widespread growth of the Internet, customers can use this technology anywhere in the world to access a bank*s network. The Internet, as an enabling technology, has made banking products and services available to more customers and eliminated geographic and proprietary systems barriers. (ith an expanded market, banks also may have opportunities to expand or change their product and service offerings.

GRO1TH IN INTERNET BANKING

)umerous factors D including competitive cost, customer service, and demographic considerations D are motivating banks to evaluate their technology and assess their electronic commerce and Internet banking strategies. &any researchers expect rapid growth in customers using online banking products and services. The challenge for national banks is to make sure the savings from Internet banking technology more than offset the costs and risks associated with conducting business in cyberspace. &arketing strategies will vary as national banks seek to expand their markets and employ lower cost delivery channels. <xaminers will need to understand the strategies used and technologies employed on a bank by bank basis to assess the risk. <valuating a bank s data on the use of their (eb sites, may help examiners determine the banks strategic objectives, how well the bank is meeting its Internet banking product plan, and whether the business is expected to be profitable. "ome of the market factors that may drive a banks strategy include the following>

C)($et#t#)n 2 "tudies show that competitive pressure is the chief driving force behind increasing use of Internet banking technology, ranking ahead of cost reduction and revenue enhancement, in second and third place respectively. +anks see Internet banking as a way to keep existing customers and attract new ones to the bank. C)st Eff#c#enc#es 2 )ational banks can deliver banking services on the Internet at transaction costs far lower than traditional brick and mortar branches. The actual costs to execute a transaction will vary depending on the delivery channel used. .or example, according to +oo#, !llen E Hamilton, as of mid 1@@@, the cost to deliver manual transactions at a branch was typically more than a dollar, !T& and call center transactions cost about -7 cents, and Internet transactions cost about a penny. These costs are expected to continue to decline. )ational banks have significant reasons to develop the technologies hat will help them deliver banking products and services by the most cost effective channels. &any bankers believe that shifting only a small portion of the estimated 1@ billion payments mailed annually in the 3.". to electronic delivery channels could save banks and other businesses substantial sums of money. However, national banks should use care in making product decisions. &anagement should include in their decision making the development and ongoing costs associated with a new product or service, including the technology, marketing, maintenance, and customer support functions. This will help management exercise due diligence, make more informed decisions, and measure the success of their business venture. Ge)'ra$h#cal Reach 2 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 D they do not have traditional banking offices

and only reach their customers online. $ther financial institutions are using the Internet as an alternative delivery channel to reach existing customers and attract new customers. Bran!#n' 2 4elationship building is a strategic priority for many national banks. Internet banking technology and products can provide a means for national banks to develop and maintain an ongoing relationship with their customers by offering easy access to a broad array of products and services. +y capitali#ing on brand identification and by providing a broad array of financial services, banks hope to build customer loyalty, cross sell, and enhance repeat business. C st)(er De()'ra$h#cs D Internet banking allows national banks to offer a wide array of options to their banking customers. "ome customers will rely on traditional branches to conduct their banking business. .or many, this is the most comfortable way for them to transact their banking business. Those customers place a premium on person to person contact. $ther customers are early adopters of new technologies that arrive in the marketplace. These customers were the first to obtain 0;s 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.

I&PACT O3 TECHNOLOG4
The major impact of technological revolution in banking can be stated in terms of> 0aradigm shift from traditional banking to customi#ed banking as the services can be delivered via computer and ;onvenient banking i.e. G!nytime, !nywhere bankingG. ! customer can check balance by logging into banks website through a user name and

password. In this way he can en/uire balance, status of che/ues, perform funds transfers, order drafts, re/uest issue of che/ue books etc. It has been observed that customers who adopt online banking are typically more profitable to the bank, stay with the bank longer and use more products strengthening the bank customer relationshipH. Information Technology and Internet banking has bridged the information gap, which was interestingly because of human involvement. +anks can make the information of products and services available on their site, which is, an advantageous proposition. 0rospective customer can gather all the information from the website and thus if he comes to the branch with /ueries it will be very specific and will take less time of employee. ;ustomer can visit these websites and can compare the services offered by a bank with that of another. ;ustomer can get all the information, by saving money and time. The trend thus emerging out is that of virtual corporate system where the human role is minimi#ed to maximum effect. The overall banking si#e and structure has increased considerably. It can also be accredited to the current market characteristics. &ore private players and multinational banks are establishing their base in India. <arlier nationali#ed bank dominated the scenario. )ow after deregulation private banks have emerged as a powerful force. .or example with over a million customer accounts, 6?? branches and a network of -,??? !T&s across country I;I;I bank leads the way1? in private bank category. !s a result, there is a fierce competition among these players for capturing the savings of individuals and current accounts of organisations. This has been spearheaded by the liberali#ation in the insurance industry. Insurance industry is giving fierce competition through their offerings on various policies. This sudden surge has necessitated the use of technology in

offering better services competitively. &ost of the banks have coupled IT with their offering to add value. "everal banks have been positioning themselves as a one stop shop financial service provider with a fairly exhaustive range of products, including deposit products, loans, credit cards, debit cards, depository %custody services', investment advice, bill payments and various transactional services. These apart, banks have also been entering into the business of selling third party products such as mutual funds and insurance to the retail customers. To provide their customers greater flexibility and convenience as well as to reduce servicing costs, banks have been investing to computeri#e their branches and in new delivery channels such as !T&s, phone banking, internet banking and mobile banking. INTERNET BANKING 3EATURE/ 5 BENE3IT/ 6CO&PLETE CONTROL O,ER ACCOUNT/7

Ciew your bank account I credit card balances and transactions at your convenience

Transfer funds online to accounts with H"+; and other banks in India ;reate and manage .ixed 8eposits "ay goodbye to /ueues and missed dates 0ay your credit card and utility bills and insurance premiums online

,et cashierJs orders and demand drafts free

1?

Char'es Char'es at Branches Onl#ne &inimum 4s. 7? for amount upto 4s. 1??,??? or Cash#er8s Or!er ?.1K of value for higher amounts De(an! Drafts

3REE ?.5K of draft value 3REE

4e/uest for < "tatements for your bank account and credit card &anage your investments buy, redeem and switch between mutual funds online 9ou can also stop che/ues, order new che/ue books, redeem bonus reward points and more using H"+;Js internet banking service

4egister for < "tatements on your bank accounts and credit card and view your statements online. 9ou can create an archive of your < "tatements and access them when you like. 9ou can also store these < "tatements for your records. 3EATURE/ 5 BENE3IT/

(ith instant access, view your latest accounts and credit card transactions anytime at your convenience

)o more worries about lost or delayed statementsL "tay updated on your card dues and payment dates

0articipate in environmental changeL reduce paper consumption when you opt for e statements

This service is available to you absolutely .4<< 11

9 Eas% /te$s T) Access 4) r E-/tate(ents /te$ 10 Bog on to H"+;Js Internet +anking /te$ :0 "et up a one time re/uest by clicking on the J4e/uest < "tatementsIe !dviceJ option in the &ain &enu. /te$ 90 (e will send you a secure mail informing you when your < "tatement is ready. The main purpose that banks have been serving since their inception is keeping our money safe for us. (hile keeping our money safe, they also let us earn a certain amount of interest on the money deposited with them. Traditional banks have been doing this, and internet banks continue the same function. The only difference is in the way the transactions are made. $nline banking has been around for /uite a few years. In fact, it was introduced in the 1@H?s and has come a long way since then. The last decade has seen a profuse growth in internet banking transactions. "everal pieces of legislation have also been introduced in this area. Though it began in the 1@H?s, it was only in the mid nineties that internet banking really caught on. (hat attracts customers to internet banking is the round the clock availability and ease of transactions. "tudies 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. "tatistics released by the .8I; show that only 2?K of the banks in the 3.". offer internet banking facilities worth mentioning. !ll the others may have an online presence but do not have enough online transactions to justify their presence on the internet. "ome 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 1-

some people. "ome customers turn to internet banking facilities for security reasons. This is mainly because of customers being assured of banksJ ability to keep transactions safe and secured. &ost online transactions are made using the Internet <xplorer interface. The Internet <xplorer has been around for more than ten years now. Security Overview Summary of security used to protect your data There are three main areas of security that are involved in Internet Banking:

Westpac Banking Corporation. (The Bank) The Internet Your Computer

The Bank To ensure your personal information is kept safe the Bank has connection et!een its uilt a secure

ank systems and the Internet. This connection is

secured y !hat is called a "ire!all.

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The Bank#s security team constantly monitors this system for suspicious activity and automatic alerts are generated if any a normal activities arise. The Bank also su scri es to services that regularly report on any potential vulnera ility so it can take action to ensure ne! security risks are not opened. The Internet When your account information is transmitted over the Internet$ it is protected from unauthorised access y a method called encryption. %ncryption is a

techni&ue of coding the information eing sent using random mathematical 'keys' so that only you and the Bank can readily unscram le the information. These keys are generated each time you sign into Internet Banking and are destroyed !hen your session is terminated. There is also a random token generated !hen signing in that your ro!ser must al!ays return to e a le to talk to the Bank#s system. Your Computer Your accounts are protected y your Customer (um er and pass!ord. We

encourage you to change your pass!ord fre&uently. If other people can access your computer !e recommend you set your ro!ser not to cache secure !e pages$ so !hen you close your ro!ser (or clear the memory cache) there !ill e no record of your account information left on your computer: In Netscape 4$ y default ))* pages are not cached to disk.

12

In In

Microsoft Microsoft

Internet Internet

E p!orer E p!orer

4 "

)elect )elect

+ie!$ Tools$

Internet Internet

,ptions... ,ptions...

17

)elect the -dvanced Ta and 'Check' the options '.o not save encrypted pages to disk' and '.elete saved pages !hen ro!ser is closed'.

#rotection of my persona! information $ow safe is my account information over the Internet% The Bank has implemented rigorous security mechanisms to ensure that your information and accounts are protected. The latest strong encryption technologies have een used to protect your data !hen eing sent over the Internet$ and the Internet Banking site uses

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/u lic0/rivate certificates to generate the security keys for your individual session. By doing this you can verify you are connected to the Westpac Internet Banking site. -ccess to your account information is controlled using your Customer (um er and /ass!ord and it is therefore very important for you to protect your pass!ord. The most likely !ay someone !ill use your account !ithout your permission is to steal or guess your pass!ord. -s information sent et!een your ro!ser and the Bank is encrypted$ it makes it very difficult for anyone to get your pass!ord off the Internet. It !ould e easier for someone to o tain your pass!ord y guessing an easy pass!ord (eg your irth date)$ or y stealing your pass!ord (if you had !ritten it do!n)$ or y

!atching you type in your pass!ord. We have implemented some pass!ord rules that help eliminate some easy pass!ords$ ut you should also choose one that cannot easily e associated !ith some of your kno!n personal information. (ever disclose your pass!ord to anyone (not even to someone reporting to e from the ank)$ and don#t !rite it do!n or store it on your computer. 1ost importantly change your pass!ord regularly. &hat do I do if I think someone is usin' my accounts% You !ill need to contact immediately. -s a precaution$ you should verify all transactions vie!ed in Internet Banking against paper2 ased statements issued on accounts. If necessary$ you can order an up2to2date statement from

1F

Telephone Banking on . This should assist you in spotting any suspicious transactions. &hat techno!o'ies are used to protect my data% The secure connection et!een your ro!ser and the Internet Banking system uses a technology called )ecure )ockets *ayer ())*). This is a !ell2respected technology developed y (etscape$ 1icrosoft and 3)- Inc that is supported y most ro!sers. The 4)- 5overnment allo!s financial institutions outside the 4)-$ such as the Bank$ to use the strongest level of this technology. In the changing !orld of technology$ the Bank understands that !hile this technology is suita le for today$ ne!er technologies may provide stronger security$ etter efficiency and greater convenience in the future. 6ence$ the Bank is constantly revie!ing ne!er technologies as they mature and ecome availa le.

(re some Browsers safer than others% The 4) 5overnment has restricted the length of key (strength of encryption) that can e used in ro!sers developed in the 4) and e7ported to the rest of the !orld to 892 its. -s a financial institution$ the Bank has o tained special permission to use stronger :;<2 it key encryption. %very ' it' roughly dou les the degree of encryption.

1H

-s the Bank places a high emphasis on security you !ill need to e using one of the latest ro!sers that supports :;<2 it key encryption (such as Internet

%7plorer =.9: or a ove or (etscape Communicator 8.>>) to access Internet Banking. The latest ro!sers used in -ustralia are capa le of supporting :;< it encryption if forced to 'step2up' to this stronger level of encryption !hen connecting to a site such as Internet Banking. The Bank#s special permission means the Bank#s server forces compati le encryption. Security Tips The follo!ing is a summary of checks you can make to ensure your data remains secure$ as detailed in this )ecurity "-?.

ro!sers to 'step up' to :;<

it

Check your ro!ser connects using :;< it encryption. +erify the fingerprint of the )ign In page you connect to. (ever disclose your pass!ord to anyone. .o not !rite it do!n or store it on your computer.

)elect a pass!ord that is difficult to guess and change it regularly. Check your transactions carefully. -l!ays )ign ,ut !hen you have finished your anking.

The importance of usin' a virus scanner) -s ne! computer viruses are eing detected all the time$ !e recommend that you should al!ays use the latest availa le virus scanners on your computer. )pecialised viruses could capture pass!ord keystrokes or other confidential

1@

information from your Internet sessions. To protect your computer against such viruses !e recommend that you are using a reputa le virus scanner and that you regularly o tain anti2virus upgrades as they ecome availa le. Cookies - cookie is a message sent to your ro!ser y a We server (in this case$ the Bank#s server). Your ro!ser stores the message in memory. This message is then sent ack to the We server each time your ro!ser re&uests a page. The Bank is using cookies in Internet Banking as part of the identification process to ensure that a secure session is commenced each time you sign into the service. %ach time you sign into Internet Banking a cookie !ill e sent to your ro!ser y the Bank#s !e server. This cookie !ill e used to determine that you are !ho you say you are and provide you !ith your confidential account information.

The myths a*out cookies The Bank is using cookies to offer increased security !hen accessing Internet Banking. You should note that despite common myths a out cookies$ any cookie that the Bank sends to your /C cannot read your hard drive$ o tain any information from your ro!ser$ command your computer to perform any action$

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e sent to any site other than the Bank or e retrieved y any site other than the Bank. TY#ES O+ COO,IES% There are t!o main types of cookies:

)ession Cookies 2 this type of cookie only lasts as long as your ro!ser session or until a re&uest is received from the !e connecting to. server you are

/ersistent Cookies 2 this type of cookie is stored on your hard disk until it e7pires. The e7piry date !ill e set y the !e server you are connecting to.

Internet Banking uses session cookies !hich !ill only e present !hilst you are connected to Internet Banking. The cookie !ill e sent from the Westpac Banking Corporation !e server !hen you sign into Internet Banking and !ill e reset

!hen you end your ro!ser session. 1ore information a out cookies is availa le from (etscape and 1icrosoft.

Important Messa'e for Netscape -sers (etscape has advised that your ro!ser has a vulnera ility !hich could allo!

secure data via an ))* connection to e intercepted. (etscape suggest that you upgrade your immediately. -1 ro!ser to the latest version

(etscape have advised that your ro!ser has a security component that is set to e7pire at the end of :@@@. /lease e a!are that this is not a Year ;999 issue or an issue !ith secure services offered on the Bank. (etscape suggests that you upgrade your immediately. To find out what browser version you are currently using, select the Help menu in your browser and then select the !bout option. 0lease note that this issue only effects customers using )etscape )avigator version 2.?7 and below. If you are using )etscape ;ommunicator 2.F5 you will retain access to Internet +anking and will not need to upgrade your browser. If you are using (etscape +ersion 8.9= and have not upgraded your ro!ser y A: .ecem er :@@@ you !ill receive an additional (etscape security dialog o7 !hen attempting to access Internet Banking. This !ill advise that your ro!ser certificate has e7pired. -fter clicking continue you !ill e redirected to a !arning page on the Bank. You !ill e a le to sign in from this page ho!ever you !ill continue to receive the (etscape security dialog o7 every ; minutes !hilst in a secure site. (etscape suggests that you upgrade your ro!ser immediately to avoid this issue. If you are using (etscape +ersion 8.98 or elo! and have not upgraded your ro!ser y A: .ecem er :@@@ you !ill e redirected to a page on the Bank ro!ser to the latest version

!e site advising that you !ill need to upgrade your ro!ser to access Internet Banking service.

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CHAPTER : /COPE AND I&PORTANCE

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/COPE AND I&PORTANCE

Though modern age banking in India has its roots in the +ritish legacy, its journey so far has been charted by sheer Indian prudence. 0ost independence, India saw new age nationali#ed banks emerging with an aim to reach out to the largely un banked population. Though slow and steady, the Indian banking industry did emerge from the doldrums of debt and instability to drive the countryJs financial revolution. (ith the IT revolution, the Indian banking and financial sector became the undisputed leader in adopting cutting edge technologies. !nd so began another phase of IndiaJs banking journey. The J@?s saw the banking industry embrace technology massively, led in particular by the private and multi national banks. !mong all technology innovations, Internet banking for retail customers was a concept that changed the way banking had been perceived over the past decades. )ot only did it generate a great deal of interest within the industry, it was adopted at a time when the Internet as a medium was slow to take off. "o, while technology uptake was gradually taking place, the Internet also came to be used by banks. !fter private and foreign banks had adopted this technology, the public sector banks also began to latch on to the bandwagon. (ith the core banking system %;+"' being adopted by all nationali#ed banks over the last 2 years, the transition to alternative banking channels such as the Internet, and now mobile has proved to be rather convenient and cost effective. &ost nationali#ed banks are going a step further, using the Internet to increase its customerJs convenience, and at the same time extend it as a medium by which the government can create financial inclusion.

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! couple of years ago, almost 1-percent of 5H.7 million Internet users in India were banking online and the figure is estimated to rise to 16 mn by -??@ end, This clearly indicates the rise in the number of Internet banking users and the growing popularity of the medium. )evertheless, we still have a long way to go, especially with the Internet penetration in the country being just over two percent, and limited to the metros and large cities. The number of customers who choose online banking as their preferred method of dealing with their finances is growing rapidly. The future looks bright with more people using the Internet on a daily basis for electronic banking amongst various other things.

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CHAPTER 9 LITERATURE RE,IE1

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LITERATURE RE,IE1
The concept of internet has been defined in many ways %e.g. 8aniel, 1@@@'. !ccording to :arjaluoto %-??-' electronic banking is a construct that consists of several distribution channels. 8aniel %1@@@' defines electronic banking as the delivery of banksJ information and services by banks to customers via different delivery platforms that can be used with different terminal devices such as a personal computer and a mobile phone with browser or desktop software, telephone or digital television. The different forms of electronic banking are summari#ed in Table 1. Table 1; D#fferent f)r(s )f bank#n' #n electr)n#c bank#n' <Dan#el 1===> 3)r( bank#n' 0; banking The customer installs banking software on his or her personal computer. The customer has access to his or her account with that specific software. Internet banking ;ustomer can access his or her bank account via the Internet using a 0; or mobile phone and web browser. TC based banking The use of satellite or cable to deliver account information to the TC screens of customers. )f Descr#$t#)n

Telephone based ;ustomers can access their bank and account via "&" and as well as banking by ordinary phone using services of interactive voice responses %IC4'.

It should be noted that electronic banking is a larger concept than banking via the Internet %:arjaluoto, -??-'. The Internet is a main delivery channel for electronic banking

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and its value to customers and banks is continuously increasing %:arjaluoto, -??-L &attila, -??1'. DI33ERENT BANKING CHANNEL/ 3OR CU/TO&ER/ Hadden E (halley %-??-' observe that customers often simultaneously used many banking channels. Hadden E (halley %-??-' point out that a challenge for banks is how to connect with customers and provide financial services to them through the right channels, at the right time and in the right way. The H;I related challenges in Internet banking are related to business interaction between the bank and customer. Hadden E (halley %-??-' stress that it is crucial that the banking interaction is suited the customerJs life situation. .rom this perspective it is important to give customers freedom to choose the most appropriate channel that best suits their preferences. In addition, the type of business affects customers* choice of channel. !ccording to Hiltunen, Baukka, E Buomala %-??-', customers* channel preferences vary between countries because of cultural differences, use habits and legislation. The business interaction between the bank and the customer takes place through different channels %Hiltunen et al., -??-'. !ccording to Hiltunen et al. %-??-' the interaction can be described as a continuum, which is described in .igure

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3#' re D#fferent bank#n' channels .igure 1 shows the different banking channels presented as a continuum where left side channels are limited by time and place and channels on the right side are more free from these constraints %Hiltunen, et al -??-'. The physical interaction between the bank and customer takes place in branch offices, which are limited in both time and location. +y contrast Internet banking and mobile banking are the most flexible banking channels that are more free from constraints such as time and place %Hiltunen et al., -??-'. It has been proposed that a branch office is the primary channel for purchasing many financial products because it offers the customer a secure physical location for the transaction of complex financial business with real people %Hadden et al., -??-' However, The .innish +ankerJs !ssociation %-??2b' concludes that .innish retail banking differs in many ways from typical retail banking in <urope. In .inland, the current trend is the movement from traditional branch banking to electronic banking, which provides many benefits, challenges, and opportunities for the whole banking sector %:arjaluoto, -??-'

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.rom the customerJs point of view, Internet banking offers new value to customer because it makes available a full range of services that are not offered in branch offices %:arjaluoto, -??-'. &odern Internet technology makes it possible to create customi#ed banking services for every individual customer %&attila, -??1'. !ccording to 8aniel %1@@@', customersJ value features in Internet banking such as convenience, increased choice of access to the bank, improved control over their banking activities and finances, ease of use, speed and security. .rom the banks perspective the main benefits of electronic banking are cost savings, reaching new segments of the population, efficiency, cross selling, third party integration, and customer satisfaction %Hiltunen et al., -??2L Moseph, 1@@@'. (ah %1@@@' remarks that the success of banks operating via the Internet depends on their ability to attract and keep customers. "heshunoff %-???' admits that banks implement Internet banking services in an attempt to create powerful barriers to customers exiting. In general, it has been reported that Internet banking saves time and money, provides convenience and accessibility, and has a positive impact on customer satisfaction %:arjaluoto, -??-L &attila, -??1'. To summari#e, Internet banking offers many benefits both to banks and their customers %:arjaluoto, -??-L &attila, -??1'. 8espite of these benefits Internet banking includes many challenges. H;I related challenge of Internet banking is how to satisfy new online customer segments. Hiltunen et al. %-??-' argue that a key factor in this competition for online customers is the /uality of customer service, which includes usable user interfaces of Internet banking. .rom this perspective the usability of Internet banking becomes an essential factor in the competition for online customers.

5?

DE3INITION/ O3 U/ABILIT4 The concept of usability has been defined in many ways in the academic literature %)ielsen, 1@@5L "hneiderman E 0laisant, -??7'. )ielsen %1@@5' stresses that usability is not a single, one dimensional property of a user interface, and argues that usability could be defined by using five attributes, which are learnability, efficiency, memorability, errors and satisfaction. ! formal and stricter definition of the term is derived from the I"$ @-21 11 %1@@H' standard, which defines usability as> The extent to which a product can be used by specified users to achieve specified goals with effectiveness, efficiency and satisfaction in a specified context of use. 3RA&E1ORK TO &EA/URE THE U/ER /ATI/3ACTION The concept of user satisfaction has been used since the early 1@H? %+ailey E 0earson, 1@H5L Ives, $lson, E +aroudi, 1@H5' and the end user computing satisfactions have been studied since the 1@H? %+ailey E 0earson, 1@H5L M. ;hin, 8iehl, E )orman, 1@HHL Ives et al., 1@H5L 4ivard E Huff, 1@HHL 4ushinek E 4ushinek, 1@H6'. +ailey et al. %1@H5' state that several factors affect the user satisfaction and it can be seen as a bi dimensional attitude. The user satisfaction can be seen sum of user*s feeling and attitudes toward several factors that affect the usage situation %+ailey et al., 1@H5'. 4ecently, there has been growing interest in user experience %Hiltunen et al., -??-L Bindgaard E 8udek, -??5L (ilson E "asse, -??2', which can be seen as much larger concept than user satisfaction. 3ser experience has become an important factor in e business because the end user often pays for the majority of new products and services, which indicates that new products characteristics such as perceived usability, usefulness,

51

appeal and value of money must be matched or exceeded with user expectations toward the product %(ilson E "asse, -??2'. .rom this perspective, assessing the user experience is essential for many technology products and services %(ilson E "asse, -??2'. Bindgaard E 8udek %-??5' state that user experience consists of some senses of GsatisfactionG. They define user satisfaction as a subjective sum of the interactive experience. 4ecently, Tractinsky, :at#, E Ikar %-???' show that perceived aesthetics and perceived usability correlated strongly with each other. They argue that GbeautyG or GappealG is linked to the perceived usability, and conse/uently what is seen as beautiful is also perceived as usable. However, Bindgaard E 8udek %-??5' argue that those business to consumer %+-;' web sites which got high appeal scores but low perceived usability score from users yielded very high satisfaction, but low perceived usability scores, suggesting that what is perceived as beautiful need not also be perceived to be usable. Bindgaard E 8udek %-??5' emphasi#e that aesthetics, emotion, expectation, likeability and usability all influence the interactive experience, but their significance depends on the current situation. .urthermore, they argue that usability is a important factor in experiencing interactive +-; sites, but it is not known is user interaction with +-; sites whether usability or satisfaction driven. Their results suggested that web designers should pay attention to both visual appeal and usability. +ailey et al., %1@H5' report that the H;I research needs a clear definition of user satisfaction, including a complete and valid set of factors and instrument that measures this phenomenon. Bindgaard E 8udek %-??5' add that H;I researchers should formulate a clear user experience notion, where the relationship between satisfaction, appeal, perceived and actual usability would be determined. 3ser satisfaction and usability measurements will be next clarified.

5-

In general, user interfaces can be evaluated in many ways %M. ;hin et al., 1@HH'. In addition, it has been stated that each component of usability such as effectiveness, efficiency and satisfaction can be examined by using either objective or subjective measures %)ielsen, 1@@5L I"$ @-21 11, 1@@H'. 3ser satisfaction has mainly been examined with subjective measurements such as a multiple item user /uestionnaire %M. ;hin et al., 1@HHL Bewis, -??-L Bindgaard E 8udek, -??5'. .urthermore, the subject satisfaction, which is measured in user test, has been also used as a indicator of user satisfaction, but results are contradictory %)otes E "wan, -??5'. 4ecently, other approaches such as the objective measurement of user experience have been introduced %(ilson E "asse, -??2'. (ilson E "asse %-??2' show that in some cases objective psychophysiological measures such as skin conductance, heart rate and blood volume pulse can reveal users* responses toward product which they are either not aware of, or cannot recall at subjective assessment session after the test. However, there are several problems in using physiological measures to analy#e user satisfaction and user experience. .or example, data analysis and learning to use the e/uipment are time consuming, and e/uipment and sensors are financial costly %(ilson E "asse, -??2'. .urthermore, interpretation of user*s mental process and experiences contain difficult problems even in studies where a clear cause and effect relationship has been revealed %(ard E &arsden, -??2'. +ecause of these problems of physiological measures, this research concentrated on examining how the user experience of Internet banking can be evaluated by using subjective measures. &any studies have concentrated on developing tools to measuring user satisfaction %M. ;hin et al., 1@HHL 4ivard E Huff, 1@HH', user information satisfaction %(. ;hin E Bee, -???L Ives et al., 1@H5' and usability %Bin, ;hoong, E "alvendy, 1@@F'. In general, the 55

user satisfaction measurements have been /uestionnaire scales for which either a Bikert or a semantic differential scale have been used.

CU/TO&ER /ATI/3ACTION0 THE 3ORCE DRI,ING INCREA/ED /HARE O3 1ALLET+ PRO3ITABILIT4+ RETENTION AND AC?UI/ITION ;ustomer satisfaction is a key metric for banks to assess how effectively the web furthers their objectives of customer ac/uisition, retention and increased share of wallet. To assess the role of the online channel in meeting the needs and exceeding the expectations of customers, .ore"ee 4esults teamed with .orbes.com to conduct a customer satisfaction survey focused on online banking and bill payment. The goal of this survey, the second of its kind, was to use the framework of customer satisfaction to understand and /uantify the role of online banking in a bank*s success. !s banks have aggressively pursued multi channel strategies, the online channel is growing in importance and adoption. !ccording to .orrester 4esearch, the number of 3.". households banking online has more than doubled since -???, totaling 6@.5 million households in -??2. (hile the channel is still in a growth mode, banks have a window of opportunity to figure out how to maximi#e the impact of their websites to increase loyalty and share of wallet among existing customers while reaching out to new ones. "ince our first survey in "ummer -??5, the overall customer satisfaction of online banking customers has increased by 7.7K, as reflected by the data collected for this survey in the fourth /uarter of -??2. This upswing in satisfaction is significant because satisfaction is highly correlated to the purchase of additional goods and services. The survey also found that customers who pay bills online are more satisfied than those who don*t, providing banks 52

an opportunity to increase satisfaction and loyalty by converting online bankers to online bill payers. !ccording to our survey, banks have been effective in increasing usage of online bill payment, which is up -6K among our survey respondents since the summer of -??5. This year, we delved deeper into the variances and similarities in customer satisfaction among online customers of three types of financial institutions> large banks, community banks and credit unions. (hile scores for all three are strong, credit unions outperform both types of banks in terms of satisfaction and usage of most online banking features. KE4 3INDING/ :ey findings from our measurement of customer satisfaction with the online bankingexperience include> N Onl#ne bank#n' sat#sfact#)n has s r$asse! sat#sfact#)n "#th the )-erall bank#n' e*$er#ence; The satisfaction score for people who bank online has increased 7.7K to FF, compared to the aggregate !;"I banking score of F7. This indicates online banking is beginning to fulfill its promise as a convenient and cost effective channel to serve customers while increasing customer satisfaction, loyalty and share of wallet. The increase in satisfaction corresponds with increases in customer behaviors tied to loyalty. @ H#'hl% sat#sf#e! )nl#ne bankers are nearl% 9=A ()re l#kel% t) $ rchase a!!#t#)nal $r)! cts an! ser-#ces fr)( the#r bank than are -er% !#ssat#sf#e! )nl#ne bank#n' c st)(ers; @ Pr)s$ects f)r )nl#ne bank#n' c#te the c)n-en#ence <B=A> an! ab#l#t% t) $a% b#lls )nl#ne <9CA> as ke% ()t#-at)rs t) s#'n $ f)r )nl#ne bank#n' ser-#ces; 9et concerns about privacy continue to hold them back, as 52K cited privacy as a key issue.

57

@ Use )f ()re )nl#ne feat res !r#-es sat#sfact#)n; $nline bankers who use six or more online features are 17K more satisfied and -5K more likely to purchase other products and services from the bank that those who use only one or two online features. @ C)n-ert#n' )nl#ne bankers t) )nl#ne b#ll $a%ers #s a h 'e )$$)rt n#t% f)r banks+ as c st)(ers "h) $a% b#lls )nl#ne c#te h#'her le-els )f sat#sfact#)n an! l)%alt%; $nline bill pay customers are 1FK more likely to purchase more products and services, increasing share of wallet, and 52K more likely to recommend their bank*s website, which fosters greater online banking and bill payment adoption. @ Cre!#t n#)ns ) t$erf)r( lar'e banks an! c)(( n#t% banks "hen #t c)(es t) sat#sf%#n' )nl#ne bankers; In a!!#t#)n+ cre!#t n#)ns ha-e h#'her le-els )f a!)$t#)n )f the#r #nst#t t#)nDs )nl#ne ser-#ces+ e*ce$t )nl#ne b#ll $a%(ent; !s financial institutions battle for greater share of wallet, credit unions find themselves well positioned to capitali#e on higher levels of satisfaction to increase adoption of online bill payment. @ Offl#ne bank channels are the lea!#n' s) rce )f #nf)r(at#)n ab) t )nl#ne bank#n'; @ T) reach )nl#ne c st)(ers an! $r)s$ects ) ts#!e )f bank channels+ )nl#ne ne"s s#tes are the $referre! s) rce )f b s#ness ne"s an! #nf)r(at#)n; THE AC/I0 PO1ER3UL+ PRECI/E AND PREDICTI,E &EA/URE&ENT O3 CU/TO&ER /ATI/3ACTION 8ata was gathered from .orbes.com newsletter subscribers, both those who are online banking customers, and those who are not. The data was analy#ed using the methodology of the !merican ;ustomer "atisfaction Index %!;"I', the most precise method of measuring customer satisfaction and /uantifying its impact on customer behavior. The !;"I has been a leading indicator of customer satisfaction with goods and services in the 3.". economy for more than a decade. .ore"ee 4esults applies the !;"I methodology to 56

the web to assess overall customer satisfaction, determine key drivers of satisfaction with the online experience and /uantify the link between satisfaction and customers* future behaviors tied to loyalty, such as referrals and purchases of other products and services. ONLINE BANKING CU/TO&ER/ &ORE /ATI/3IED THAN BANKING CU/TO&ER/ IN GENERAL In the latest measurement, customer satisfaction with online banking rose 7.7K to a score of FF, compared to F5 in -??5. This aggregate satisfaction score includes includes all 1online bankers=Dboth those who pay bills online and those who use the website for other reasons, such as to monitor account balances. In this year*s survey, customer satisfaction with online banking exceeded satisfaction with banking in general, which had an !;"I score of F7. "atisfaction with the online channel is driven by the convenience of utili#ing the web for banking tasks and the consistent /uality of service provided. In the past, the online banking satisfaction scores trailed the offline banking sector, a strong indicator that online banking was not fulfilling its promise. )ow the online banking channel is starting to live up to its expectations of providing a channel that meets the needs and exceeds the expectations of its customers better than traditional banking channels. The rise in both satisfaction and usage may also reflect the effectiveness of financial institutions at promoting the web channel as a convenient, effective and safe alternative to in person or telephone transactions and service assistance. /ATI/3ACTION 1ITH ONLINE BANKING DRI,E/ LO4ALT4 AND

INCREA/E/ /HARE O3 1ALLET !nalysis of customer satisfaction provides insights into the future behaviors of online banking customers, such as ongoing loyalty and increasing share of wallet. The cause andeffect methodology of the !;"I enables us to not only measure current levels of 5F

customer satisfaction, but to use this information to project the impact of satisfaction increases on how customers are likely to behave in the future. (e looked at satisfaction with several specific behaviors tied to loyalty> likelihood to recommend the banking website to others and likelihood to purchase more products and services. .or both of these key measures of loyalty, satisfaction increased from -??5. The likelihood of current online bankers to recommend the banking website to others increased 5K, from F5 to F7. !t the same time, the likelihood of online bankers to purchase additional products and services via other channels O an indicator of the financial institutions* success at garnering additional share of walletDrose from 7@ to 6?, a -K increase. However, this score is still relatively low and indicates that banks could do a better job at using the web to promote products and service available via other channels. !nother measure of loyalty is the number of online bankers surveyed who switched banks during the past 1- months. This percentage fell from 17K in the last survey to HK this time, partially due to higher satisfaction with the overall banking experience, including use of the website. "atisfaction yields considerable dividends in terms of cross selling as well. Cery satisfied online bankers are nearly 2?K more likely to purchase additional products and services than those who are highly dissatisfied. !dditionally, online bankers who are very satisfied are -1K more likely to purchase additional products and services than moderately satisfied customers. There is clearly a /uantifiable reward for banks to strive for high levels of satisfaction among online banking customers. NA,IGATION AND TA/K/ 5 TRAN/ACTION/ ARE KE4 DRI,ER/ CU/TO&ER /ATI/3ACTION 1ITH ONLINE BANKING $verall customer satisfaction with online banking is derived via measurement of a series of interrelated elements that are key drivers of the online experience. !s part of our 5H O3

analysis of the data using the !;"I methodology, we looked at specific elements, or drivers of satisfaction, with the online banking experience. <lements include general website features and functions such as navigation, tasksItransactions and content, as well as banking specific atisfaction drivers such as bill payment and bill payee set up. The list of elements measured is as follows> N +ill 0ayee "et 3p N +ill 0ayment N ;ontent N .unctionality N Book and .eel N )avigation N 0rivacy N 4etail "atisfaction N "ite 0erformance N Tasks E Transactions TOP I&PRO,E&ENT/0 NA,IGATION AND PRI,AC4 "ince our first study in summer -??5, we found that satisfaction with all elements has risen by three to five points, further evidence that online banking is hitting its stride. $ur last survey identified navigation as an area of top concern. This year, navigation is one of the most improved areas, with a score of FF, showing that people are more satisfied with their ability to make their way through the site. ;ustomer satisfaction with navigation rose FK from the last survey, although it remains a focus for continued improvement. 0rivacy scores also surged higher, with the score for this important element of customer satisfaction rising by FK to a score of H? %from a score of F7 in the last measurement' for people who bank 5@

online. This group does not feel they are re/uired to provide too much personal information, further evidence of their satisfaction with the way the bank protects their privacy. Interestingly, there is a large gap between the perception of privacy for people who are currently using online banking and those who aren*t. !mong prospective online banking respondents, privacy concerns were cited by 52K as a barrier to signing up for online banking, countering the attraction of convenience %cited by F@K' and bill payment %5@K' afforded by online banking. .or people who describe themselves as 1not at all interested in banking online,= privacy remains a key issue and is cited by 6HK of survey respondents as reason for not banking online. .inancial institutions should view this discrepancy as an opportunity for improvement. 0otential customers who are wary of online banking due to privacy concerns may be interested in knowing that current online bankers are satisfied with how their banks address privacy issues and handle sensitive information. 0otential customers 1perceive= that there are privacy concerns, yet current online banking customers do not. The solution is better education of potential customers on privacy issues and safeguards. Top Priority Elements: Navigation, Tasks & Transactions, Bill Payment 0eople using online banking report the highest levels of satisfaction with the elements of content and functionality, both of which they scored an H2. The lowest scoring element was set up for bill payment, with a score of F2. (hile satisfaction scores for particular elements contribute to overall customer satisfaction, they do not tell the whole story. 3sing the !merican ;ustomer "atisfaction Index %!;"I' methodology, we also identified the 1high priority= elements> those areas where improvements would result in the greatest gains in overall satisfaction, and influence on customer behavior in terms of loyalty and future purchases. &any times, the highest scoring element in terms of satisfaction is not necessarily the one that has the highest impact on satisfaction and desired future 2?

behaviors of online banking customers. .or all online bankers, navigation %FF' and tasks E transactions %H?' remained top priorities, despite the positive improvements in satisfaction that banks have taken in both areas. +y continuing to focus on and improve these areas, banks can further enhance the satisfaction and loyalty of existing online banking customers. The element of tasks E transactions showed the least improvement> 2K %from a score of FF to H?'. (hile financial institutions are doing a better job in this area, there is still room for them to improve the ease of completing and verifying online transactions and providing online help. .or online bill payers, bill payment %H-' was a third top priority item. $nline bill payment includes the value of the bill payment service relative to cost, the website*s bill payment scheduling features, the timeliness of account information updates as a result of bill payment and payment processing time. +ecause online bill payment is highly correlated with satisfaction, it is in the best interest of banks to focus on further enhancing the service in order to improve satisfaction, and subse/uently, gain more business and referrals from existing customers. U/E O3 &ORE ONLINE 3EATURE/ DRI,E/ /ATI/3ACTION The most popular online banking feature, as in last year*s survey, was 1view online statementIcheck,= which is used by @-K of survey respondents. This was followed by 1check deposit balances= with HHK usage. The third most popular online banking feature, online bill payment, saw a -6K increase in usage from last year> from 7HK to F5K. !nother online feature that gained in popularity from last year was self service %e.g., reordering checks', which climbed 17KDfrom usage of 55K in summer -??5 to 5HK in fourth /uarter -??2. Increases in usage are important because both satisfaction and the likelihood to purchase additional products and services are tied to the number of online features that a person uses

21

!s shown above, satisfaction for people using three or more online banking features is 17K higher than those who only use one to two. .urther, the likelihood to purchase additional services is 11K higher for purchase of three to five services as compared to one or two, and -5K higher when the number of services increases to six or more. 8espite the growing adoption of online banking, customers are still using multiple channels to conduct their banking business. "eventy two percent of online bankers in our survey also visited a bank branch in the past @? days, while 57K contacted their bank via phone in the same time period. (hile use of offline channels didn*t necessarily decrease, the benefit to banks that encourage online bankers to perform more functions online is a more satisfied, more loyal customer who will reward the bank with a greater share of wallet and recommend the bank*s website to others, which will increase adoption These numbers show that banking truly is a multi channel experience. ;ustomers use multiple channels to connect with the bank, but may develop a preferred channel for particular transactions. The challenge is for the bank to meet the product needs and service expectations of its customers across channels while encouraging customers to utili#e the most cost effective online channel where it makes sense to do so. "mart banks will also take advantage of opportunities to promote products and services across channels for greater visibility and brand reinforcement. ONLINE BILL PA4&ENT I/ CLO/EL4 TIED TO HIGHER LE,EL/ O3 .urther proof of the importance of online bill payment is the increase in satisfaction reali#ed as the number of bills paid online rises> Interestingly, F7K of people who pay bills online also pay bills through other providers. "ince number of bills paid correlates positively with increasing satisfaction scores, banks have a tremendous opportunity to increase satisfaction and loyalty by promoting the bank as the central source for all online bill payment. <ven non customers see the value of online bill 2-

payment> 5HK of prospective online bankers cite online bill payment as one of the reasons they*d consider online banking. However, banks need to overcome the common misperception held by non users that the online bill payment process is difficult and address privacy concerns. $f customers who don*t use their bank*s online bill payment feature but do pay bills online elsewhere, 6?K do so through the service provider %e.g., utility company', -2K with a thirdparty payment service and 16K with another financial institution. To encourage these people to pay all of their bills online through the bank, banks should assess the need for improvements to navigation, tasks E transactions and the site performance among their own online customers, which will influence their likelihood to recommend the online channel to others. !s 16K of people who don*t pay bills online with their bank have incomes of P1F7,??? or more, it is in their bank*s best interest to convert as many people as possible to online bill payers. !ccording to research firm Tower,roup, only -2K of !mericans used online bill payment in -??5, so banks have a significant opportunity to increase this part of their business, leading to more satisfied and loyal customers. 0eople who pay bills online also represent a prime audience for marketing. <ighty seven percent of customers who pay bills online visit the site at least once a week %compared to F@K for non online bill payers' and 21K visit their bank*s website daily. Their fre/uent visits to the site provide ample opportunity to reinforce the banking relationship and market new products and services through the web medium. "ignificant variations in overall satisfaction by type of financial institution used for online banking services. In addition to looking at overall satisfaction for online banking customers %both those who pay bills online and those who don*t' by institution, we analy#ed satisfaction with various elements for large banks, community banks and credit

25

unions. (e also looked at how using different online banking features, e.g., checking deposit balances, budget management, etc., varied by type of financial institution. ;ustomers of all three types of institutions are most satisfied with functionality and rated it the highest scoring element. 4egardless of where they do their online banking, customers rate their satisfaction with bill payee set up as the lowest of any of the measured elements. This is significant, considering the large gains in satisfaction and loyalty to be reali#ed by encouraging people to use online bill payment, which they will be more likely to do if they are happy with the process for setting it up. The most and least popular online banking features were consistent across financial institution type, perhaps reflective of industry trends in making specific features available and promoting their use. Ciewing online statementsIchecks was the most heavily used feature, with usage of @FK by online credit union customers, @-K by online customers of large banks and H@K of online community bankers. ;hecking deposit balances is a close second, with usage of @2K at credit unions, H@K at large banks and H2K at community banks. Credit Unions: Highly atis!ied and "vid Users o! #nline Banking ;redit union members report the highest level of satisfaction with the online banking experience with a score of H?. This isn*t surprising, considering that credit unions, unlike banks, are actually membership organi#ations and may therefore have more of a 1members first= mentality. "till, while we might have expected that large banks had more resources and expertise to offer online banking customers, we found that credit unions did a better job satisfying online banking customers, with a -.6K advantage over large banks* satisfaction score and a 7.5K advantage over community banks. "atisfaction with most of the specific elements of the online banking experience were higher for credit unions than for large and community banks. $ne exception was 1bill 22

payee set up,= where credit unions %F5' scored higher than community banks %F-', and scored lower than large banks %F7'. "atisfaction among credit union online bankers with content and functionality was especially highL these two elements garnered high scores of HF and H6, respectively. (hile credit unions are doing a good job of meeting the needs of their members, they could experience gains in satisfaction through conversion of more members to online bill payers. ;redit union members who pay bills online are @.-K more satisfied than members who don*t, with a score of H5 compared to F6. $pportunities to increase online bill payment are significant as 15K of people who currently don*t use online banking to pay bills came from credit unions. In almost all cases, credit union members included in our survey have been the most eager adopters of online banking features. 3sage by credit union members exceeded that of customers of both large and community banks in all areas, except for the critical area of online bill payment, where credit union usage %67K' lagged usage by large bank customers %F7K'. In all features included in our survey, usage by large bank customers seconded use by credit union members. <ven the lesser used features were more popular among credit union members. ;ustomers of all financial institutions named online loan application as one of the least used online features. However, nearly a /uarter of respondents from credit unions say they apply for loans online, compared to @K of large bank and 7K of community bank customers, which illustrates credit unions* relative success at leveraging the web channel to grow share of wallet and overcome the limits of the branch reach of credit unions. +udget management was an infre/uently used feature, perhaps due to the popularity of Quicken and other software based budget management tools. !gain, credit union customers are significantly more likely to manage their budgets online. Twenty seven

27

percent of surveyed credit union members use this web based feature, compared to 12K of large bank customers and only @K of community bank customers.

CO&&UNIT4 BANK/0 HIGHE/T LIKELIHOOD TO PURCHA/E ADDITIONAL PRODUCT/

;ommunity banks had the lowest aggregate satisfaction score, a F6. However, their likelihood to purchase additional services was the highest %67 compared to 61 for credit unions and 6? for large banks'. ;ustomers of community banks, which comprised the smallest segment of our survey %HK of total', did the best job of satisfying their customers with privacy, functionality and look and feel, which all scored H1. Bike credit unions, community banks have ample opportunity to increase usage of online bill payment, as 1-K of customers not using online bill payment came from the community banks. "cores for community banking customers who pay bills online are 11K higher than for those who don*t. ;ommunity bank members seem to be the least avid users of all online banking features. !s an example, only 6HK of community bank customers transferred funds online, compared to HHK of credit union members and FFK of large bank customers. In fact, large banks have made inroads in this area> F7K of people who bank online at large banks pay bills online via the bank, compared to 67K for credit unions and 65K for community banks. This could be due to the fact that larger banks were earlier adopters of online bill payment and have offered aggressive promotional programs to encourage adoption, such as offering online bill payment services for free.

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GRO1TH POTENTIAL 3OR ONLINE BANKING

(hile online banking is growing in popularity, it has only been adopted by about one in four banking customers, based on the Tower,roup statistic cited earlier. .or people who don*t bank online but would consider it, banks need to overcome the perception that help is not readily available. They also need to address concerns over privacy and the amount of personal information that customers need to submit. Twenty eight percent of people who don*t bank online pay bills elsewhere, making them prime candidates for online bill payment through their bank. $f people who claimed they were 1not at all interested= in online banking, 6HK cited privacy as a concern. .ifty one percent were satisfied with their existing channel, while 1-K had received a negative recommendation O a negative testament to the power of 1word of mouth.= (e also gathered input from a small group of former online bankers. This group defected because they didn*t feel online banking saved time, because of privacy and security concerns and because they didn*t feel that online banking features addressed their needs. &arketing and communications is one of the key driving forces of further adoption of online banking and to winning back defected customers. (hen asked where they learn more about online banking, F1K customers who already bank online cite the website as a source of information. (hile non online bankers are less likely to go to the bank*s website, they could be swayed by communications via their bank statement, which 52K of currently online bankers name as a source of information. <mail and the bank branch, named by 51K and -5K of current online bankers, respectively, could also be use to market the value and features of online banking to late adopters of this convenient service.

2F

ONLINE

PRE3ERENCE/

3OR

BU/INE//

NE1/

AND

IN3OR&ATION
The online banking customers expressed a strong preference for online channels of information when it comes to gathering information about business news and information. +anks that are looking to advertise for to new customers and prospective online bankers should look to online news sites. $nline news sites are strongly preferred by both those who are currently engaged in online banking and those who are considering getting started with online banking. $f the prospective online banking group, 5FK are highly likely to begin online banking in the next @? daysL 25K said they plan to begin using their bank*s online banking service in the next 1- months. This signals the immediacy of the opportunity to attract prospective bankers while they are actively in the research and selection stage. Inf)r(at#)n /) rce Onl#ne Bankers Pr)s$ect#-e Onl#ne Bankers $nline )ews "ites 5HK 2HK 0rint )ewspapers -7K 5?K 4adio +roadcasts 1FK ?K 0rint &aga#ines 11K 12K TC +roadcasts @K HK CONCLU/ION0 ONLINE BANKING2BOTH A CHALLENGE AND AN OPPORTUNIT4 Increasing satisfaction with, and usage of, online banking presents both an opportunity and a challenge for banks. The opportunity lies in driving more customers to the online channel to take advantage of the convenience and efficiency of the web channel while continuing to meet their needs and exceed their expectations. If banks continue to satisfy

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customers with the online experience while increasing usage, the end result should be a larger number of satisfied and loyal customers. This will help banks attract a higher share of wallet from existing customers and increase penetration thanks to stronger recommendations from existing online banking customers to prospects. In addition, increasing adoption of the online banking channel will reduce the cost re/uired to service customers. +anks will be able to provide a more satisfying experience by delivering service through a lower cost channel %online vs. offline'. This improves operational efficiency and reduces costs to banks. The challenge lies in changing customer behavior to embrace the online channel. There will always be holdouts for whom online banking is not viable channelDdue to perceived security risks, lack of comfort with computer technology and a host of other reasons. $nce prospective online customers try online banking, they may experience a lessening of security concerns and an increase of satisfaction resulting from the convenience and accessibility of banking services. +anks that figure out how to maximi#e the online channel will be rewarded with greater loyalty and financial success.

1E TIP/ 3OR /ECURE INTERNET BANKING

PA//1ORD AND PIN /ECURIT40 9ou should always be wary if you receive unsolicited emails or calls asking you to disclose any personal details or card numbers. This information should be kept secret at all times. +e cautious about disclosing personal information to individuals you do not know. 0lease remember that "tandard ;hartered +ank would never contact you directly to ask you to disclose your 0I) or all your password information.

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I3 IT /OUND/ TOO GOOD TO BE TRUE - IT PROBABL4 I/0 8onJt be conned by convincing emails offering you the chance to make some easy money. !s with most things if it looks too good to be true, it probably isR +e cautious of unsolicited emails from overseas organisations behind the emails. PC /ECURIT40 It is important to use up to date !nti virus software and a personal firewall. If your computer uses &icrosoft (indows operating system, it is important to keep it updated via the (indows 3pdate feature, e/ually if you use another 0; operating system or have an !pple &ac you should check regularly for updates. 9ou should be vigilant if you use Internet cafes or a computer that is not your own and over which you have no control. KEEP 4OUR IDENTIT4 PRI,ATE O33LINE0 9our identity can be as easily stolen offline as it can online. It is important that you comply with instructions about destroying new 0I) numbers and expired bank cards. 9ou should also consider using a crosscut shredder to destroy unneeded bank and other statements that may contain sensitive personal information. It is advisable to store retained documents in a suitable locked and fireproof container. CHECK 4OUR /TATE&ENT/0 It is important to check your statements regularlyL a /uick check will help identify any erroneous or criminal transactions that might have been performed on your account without your knowledge. it is much harder to prove legitimacy of the

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CHECK 4OUR BANKING /E//ION I/ /ECURE0 (hen undertaking any banking on the Internet, check that the session is secure. There are two simple indicators that will tell you if your session is secure. The first is the use of https>II in the 34B. "ome browsers such as &o#illa .irefox change the colour of the url window when you are in a secure session. The other indicator is the presence of a digital certificate represented by a padlock or key in the bottom right hand corner. If you double click on this icon it should provide you with information about the organisation with which you have entered in to a secure session . CHECK 3OR /P41ARE0 In addition to being protected by using up to date antivirus software you should also regularly use software to remove "pyware from you computer, as these programs record information about your Internet use and transmit it without your permission. In some circumstances this can compromise your 0; security. AL1A4/ CO&PLETEL4 LOG O33 3RO& 4OUR INTERNET BANKING /E//ION0 It is important to completely log off from your Internet banking sessionL simply closing the window you performed the transaction in may not close the banking session. If your computer is infected with a Trojan, you session may become hijacked by a criminal and financial transactions performed without your knowledge. It is also advisable to disconnect from the Internet if you are not planning to use it.

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/ECURIT4 "ecurity is of prime importance for providing banking services over the )et. Internet +anking is built using state of the art technologies that provide a high degree of security. The security infrastructure comprises of filtering routers, firewalls, intrusion detection systems %I8"', besides virus monitoring tools, etc. The security re/uirements adhere to 4+IJs recommendations for Internet +anking. The security has been implemented and audited by an international consulting firm, using internationally accepted standards and practices. Internet +anking uses 1-H bit digital certificate from Cerisign for encryption of the "ecure "ockets Bayer %""B' session. ""B is the industry standard for encrypted communication and ensures that customerJs interaction with the +ank over the Internet is secure. +esides technological solutions, "ecurity is also built into the process of registration and usage of Internet +anking.

.irst time passwords are automatically generated by the system and printed on to password mailers so that no one in the +ank is ever aware of the passwords

Two levels of passwords are provided. Transaction password is used for confirming financial I non financial transactions

The system enforces change of password on first time login The Internet +anking facility is locked in case of 7 consecutive wrong passwords .orced periodic change of passwords is implemented Internet +anking enforces use of minimum 6 character password, which should include alphabets %! A,a #' as well as numbers %? @'. "pecial characters like SPT K are also accepted as part of the password.

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$nline banking solutions have many features and capabilities in common, but traditionally also have some that are application specific. The common features fall broadly into several categories

Transactional %e.g., performing a financial transaction such as an account to account transfer, paying a bill, wire transfer... and applications... apply for a loan, new account, etc.'
o o

<lectronic bill presentment and payment <+00 .unds transfer between a customerJs own checking and savings accounts, or to another customerJs account

o o

Investment purchase or sale Boan applications and transactions, such as repayments

)on transactional %e.g., online statements, check links, cobrowsing, chat'

o

+ank statements

.inancial Institution !dministration features allowing the financial institution to manage the online experience of their end users

!"0IHosting !dministration

features allowing the hosting company to

administer the solution across financial institutions .eatures commonly uni/ue to business banking include

"upport of multiple users having varying levels of authority Transaction approval process (ire transfer

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.eatures commonly uni/ue to Internet banking include

0ersonal financial management support, such as importing data into a personal finance program such as Quicken, &icrosoft &oney or TurboTax. "ome online banking platforms support account aggregation to allow the customers to monitor all of their accounts in one place whether they are with their main bank or with other institutions...

T4PE/ O3 INTERNET BANKING 3nderstanding the various types of Internet banking products will help examiners assess the risks involved. ;urrently, the following three basic kinds of Internet banking are being employed in the marketplace> Informational D This is the basic level of Internet banking. Typically, the bank has marketing information about the banks 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. (hile the risk to a bank is relatively low, the server or (eb site may be vulnerable to alteration. !ppropriate controls therefore must be in place to prevent unauthori#ed alterations to the bank s server or (eb site. ;ommunicative D This type of Internet banking system allows some interaction between the banks systems and the customer. The interaction may be limited to electronic mail, account in/uiry, loan applications, or static file updates %name and address changes'. +ecause these servers may have a path to the bank s internal networks, the risk is higher with this configuration than with informational systems. !ppropriate controls need to be in place to prevent, monitor, and alert management of any unauthori#ed attempt to access

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the banks internal networks and computer systems. Cirus controls also become much more critical in this environment. Transactional D This level of Internet banking allows customers to execute transactions. "ince a path typically exists between the server and the bank s or outsourcers internal network, this is the highest risk architecture and must have the strongest controls. ;ustomer transactions can include accessing accounts, paying bills, ransferring funds, etc. INTERNET BANKING RI/K/ Internet banking creates new risk control challenges for national banks. .rom a supervisory perspective, risk is the potential that events, expected or unexpected, may have an adverse impact on the banks earnings o capital. The $;; has defined nine categories of risk for bank supervision purposes. The risks are credit, interest rate, li/uidity, price, foreign exchange, transaction, compliance, strategic, and reputation. These categories are not mutually exclusive and all of these risks are associated with Internet banking. Cre!#t R#sk ;redit risk is the risk to earnings or capital arising from an obligor s failure to meet the terms of any contract with the bank or otherwise to perform as agreed. ;redit risk is found in all activities where success depends on counterparty, issuer, or borrower performance. It arises any time bank funds are extended, committed, invested, or otherwise exposed through actual or implied contractual agreements, whether on or off the banks balance sheet. Internet banking provides the opportunity for banks to expand their geographic range. ;ustomers can reach a given institution from literally anywhere in the world. In dealing with customers over the Internet, absent any personal contact, it is

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challenging for institutions to verify the bonafides of their customers, which is an important element in making sound credit decisions. Cerifying collateral and perfecting security agreements also can be challenging with out of area borrowers. 3nless properly managed, Internet banking could lead to a concentration in out of area credits or credits within a single industry. &oreover, the /uestion of which state s or countrys laws control an Internet relationship is still developing. <ffective management of a portfolio of loans obtained through the Internet re/uires that the board and management understand and control the banks lending risk profile and credit culture. They must assure that effective policies, processes, and practices are in place to control the risk associated with such loans. ee the 1Boan 0ortfolio

&anagement,= booklet of the Comptrollers Hand$ook for a more complete discussion of credit risk. Interest Rate R#sk Interest rate risk is the risk to earnings or capital arising from movements in interest rates. .rom an economic perspective, a bank focuses on the sensitivity of the value of its assets, liabilities and revenues to changes in interest rates. Interest rate risk arises from differences between the timing of rate changes and the timing of cash flows %repricing risk'L from changing rate relationships among different yield curves affecting bank activities %basis risk'L from changing rate relationships across the spectrum of maturities %yield curve risk'L and from interest related options embedded in bank products %options risk'. <valuation of interest rate risk must consider the impact of complex, illi/uid hedging strategies or products, and also the potential impact that changes in interest rates will have on fee income. In those situations where trading is separately managed, this refers to structural positions and not trading portfolios. Internet banking can attract deposits, loans, and other relationships from a larger pool of possible customers than 76

other forms of marketing. ,reater access to customers who primarily seek the best rate or term reinforces the need for managers to maintain appropriate assetIliability management systems, including the ability to react /uickly to changing market conditions. L#. #!#t% R#sk Bi/uidity risk is the risk to earnings or capital arising from a bank s inability to meet its obligations when they come due, without incurring unacceptable losses. Bi/uidity risk includes the inability to manage unplanned changes in funding sources. Bi/uidity risk also arises from the failure to recogni#e or address changes in market conditions affecting the ability of the bank to li/uidate assets /uickly and with minimal loss in value. Internet banking can increase deposit volatility from customers who maintain accounts solely on the basis of rate or terms. !ssetIliability and loan portfolio management systems should be appropriate for products offered through Internet banking. Increased monitoring of li/uidity and changes in deposits and loans may be warranted depending on the volume and nature of Internet account activities. Pr#ce R#sk 0rice risk is the risk to earnings or capital arising from changes in the value of traded portfolios of financial instruments. This risk arises from market making, dealing, and position taking in interest rate, foreign exchange, e/uity, and commodities markets. +anks may be exposed to price risk if they create or expand deposit brokering, loan sales, or securiti#ation programs as a result of Internet banking activities. !ppropriate management systems should be maintained to monitor, measure, and manage price risk if assets are actively traded.

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3)re#'n E*chan'e R#sk .oreign exchange risk is present when a loan or portfolio of loans is denominated in a foreign currency or is funded by borrowings in another currency. In some cases, banks will enter into multi currency credit commitments that permit borrowers to select the currency they prefer to use in each rollover period. .oreign exchange risk can be intensified by political, social, or economic developments. The conse/uences can be unfavorable if one of the currencies involved becomes subject to stringent exchange controls or is subject to wide exchange rate fluctuations. .oreign exchange risk is discussed in more detail in the 1.oreign <xchange,= booklet of the +anks may be exposed to foreign exchange risk if they accept 8eposits from non 3.". residents or create accounts denominated in currencies other than 3.". dollars. !ppropriate systems should be developed if banks engage in these activities. Transact#)n R#sk Transaction risk is the current and prospective risk to earnings and capital arising from fraud, error, and the inability to deliver products or services, maintain a competitive position, and manage information. Transaction risk is evident in each product and service offered and encompasses product development and delivery, transaction processing, systems development, computing systems, complexity of products and services, and the internal control environment. ! high level of transaction risk may exist with Internet banking products, particularly if those lines of business are not ade/uately planned, implemented, and monitored. +anks that offer financial products and services through the Internet must be able to meet their customers expectations. +anks must also ensure they have the right product mix and capacity to deliver accurate, timely, and reliable services to develop a high level of confidence in their brand name. ;ustomers who do business over the Internet are likely to have little tolerance for errors or omissions from financial 7H

institutions that do not have sophisticated internal controls to manage their Internet banking business. Bikewise, customers will expect continuous availability of the product and (eb pages that are easy to navigate. "oftware to support various Internet banking functions is provided to the customer from a variety of sources. +anks may support customers using customer ac/uired or bank supplied browsers or personal financial manager %0.&' software. ,ood communications between banks and their customers will help manage expectations on the compatibility of various 0.& software products. !ttacks or intrusion attempts on banks computer and network systems are a major concern. "tudies show that systems are more vulnerable to internal attacks than external, because internal system users have knowledge of the system and access. +anks should have sound preventive and detective controls to protect their Internet banking systems from exploitation both internally and externally. ee $;; +ulletin @@ @, 1Infrastructure Threats from ;yber Terrorists= for additional information. ;ontingency and business resumption planning is necessary for banks to be sure that they can deliver products and services in the event of adverse circumstances. Internet banking products connected to a robust network may actually make this easier because back up capabilities can be spread over a wide geographic area. .or example, if the main server is inoperable, the network could automatically reroute traffic to a back up server in a different geographical location. "ecurity issues should be considered when the institution develops its contingency and business resumption plans. In such situations, security and internal controls at the back up location should be as sophisticated as those at the primary processing site. High levels of system availability will be a key expectation of customers and will likely differentiate success levels among financial institutions on the Internet. )ational banks that offer bill presentment and payment will need a process to settle transactions between the bank, its customers, and external parties. In addition to 7@

transaction risk, settlement failures could adversely affect reputation, li/uidity, and credit risk. C)($l#ance R#sk ;ompliance risk is the risk to earnings or capital arising from violations of, or nonconformance with, laws, rules, regulations, prescribed practices, or ethical standards. ;ompliance risk also arises in situations where the laws or rules governing certain bank products or activities of the banks clients may be ambiguous or untested. ;ompliance risk exposes the institution to fines, civil money penalties, payment of damages, and the voiding of contracts. ;ompliance risk can lead to a diminished reputation, reduced franchise value, limited business opportunities, reduced expansion potential, and lack of contract enforceability. &ost Internet banking customers will continue to use other bank delivery channels. !ccordingly, national banks will need to make certain that their disclosures on Internet banking channels, including (eb sites, remain synchroni#ed with other delivery channels to ensure the delivery of a consistent and accurate message to customers. .ederal consumer protection laws and regulations, including ;4! and .air Bending, are applicable to electronic financial services operations including Internet banking. &oreover, it is important for national banks to be familiar with the regulations that permit electronic delivery of disclosuresInotices versus those that re/uire traditional hard copy notification. )ational banks should carefully review and monitor all re/uirements applicable to electronic products and services and ensure they comply with evolving statutory and regulatory re/uirements. !dvertising and record keeping re/uirements also apply to banks (eb sites and to the products and services offered. !dvertisements should clearly and conspicuously display the .8I; insurance notice, where applicable, so customers can readily determine whether 6?

a product or service is insured. !pplication of +ank "ecrecy !ct %+"!' re/uirements to cyber banking products and services is critical. The anonymity of banking over the Internet poses a challenge in adhering to +"! standards. +anks planning to allow the establishment of new accounts over the Internet should have rigorous account opening standards. !lso, the bank should set up a control system to identify unusual or suspicious activities and, when appropriate, file suspicious activity reports %"!4s'. The +"! funds transfer rules also apply to funds transfers or transmittals performed over the Internet when transactions exceed P5,??? and do not meet one of the exceptions. The rules re/uire banks to ensure that customers provide all the re/uired information before accepting transfer instructions. The record keeping re/uirements imposed by the rules allow banks to retain written or electronic records of the information. The $ffice of .oreign !sset ;ontrol %$.!;' administers laws that impose economic sanctions against foreign nations and individuals. This includes blocking accounts and other assets and prohibiting financial transactions. Internet banking businesses must comply with $.!; re/uirements. ! bank needs to collect enough information to identify customers and determine whether a particular transaction is prohibited under $.!; rules. /trate'#c R#sk "trategic risk is the current and prospective impact on earnings or capital arising from adverse business decisions, improper implementation of decisions, or lack of responsiveness to industry changes. This risk is a function of the compatibility of an organi#ations strategic goals, the business strategies developed to achieve those goals, the resources deployed against these goals, and the /uality of implementation. The resources needed to carry out business strategies are both tangible and intangible. They include communication channels, operating systems, delivery networks, and managerial capacities and capabilities. The organi#ations internal characteristics must be evaluated 61

against the impact of economic, technological, competitive, regulatory, and other environmental changes. &anagement must understand the risks associated with Internet banking before they make a decision to develop a particular class of business. In some cases, banks may offer new products and services via the Internet. It is important that management understand the risks and ramifications of these decisions. "ufficient levels of technology and &I" are necessary to support such a business venture. +ecause many banks will compete with financial institutions beyond their existing trade area, those engaging in Internet banking must have a strong link between the technology employed and the bank s strategic planning process. +efore introducing a Internet banking product, management should consider whether the product and technology are consistent with tangible business objectives in the bank s strategic plan. The bank also should consider whether ade/uate expertise and resources are available to identify, monitor, and control risk in the Internet banking business. The planning and decision making process should focus on how a specific business need is met by the Internet banking product, rather than focusing on the product as an independent objective. The banks technology experts, along with its marketing and operational executives, should contribute to the decision making and planning process. They should ensure that the plan is consistent with the overall business objectives of the bank and is within the banks risk tolerance. )ew technologies, especially the Internet, could bring about rapid changes in competitive forces. !ccordingly, the strategic vision should determine the way the Internet banking product line is designed, implemented, and monitored.

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Re$ tat#)n R#sk 4eputation risk is the current and prospective impact on earnings and capital arising from negative public opinion. This affects the institution s ability to establish new relationships or services or continue servicing existing relationships. This risk may expose the institution to litigation, financial loss, or a decline in its customer base. 4eputation risk exposure is present throughout the organi#ation and includes the responsibility to exercise an abundance of caution in dealing with customers and the community. ! banks reputation can suffer if it fails to deliver on marketing claims or to provide accurate, timely services. This can include failing to ade/uately meet customer credit needs, providing unreliable or inefficient delivery systems, untimely responses to customer in/uiries, or violations of customer privacy expectations. ! banks reputation can be damaged by Internet banking services that are poorly executed or otherwise alienate customers and the public. (ell designed marketing, including disclosures, is one way to educate potential customers and help limit reputation risk. ;ustomers must understand what they can reasonably expect from a product or service and what special risks and benefits they incur when using the system. !s such, marketing concepts need to be coordinated closely with ade/uate disclosure statements. ! national bank should not market the banks Internet banking system based on features or attributes the system does not have. The marketing program must present the product fairly and accurately. )ational banks should carefully consider how connections to third parties are presented on their (eb sites. Hypertext links are often used to enable a customer to link to a third party. "uch links may reflect an endorsement of the third party s products or services in the eyes of the customer. It should be clear to the customer when they have left the banks (eb site so that there is no confusion about the provider of the specific products and 65

services offered or the security and privacy standards that apply. "imilarly, ade/uate disclosures must be made so that customers can distinguish between insured and noninsured products. )ational banks need to be sure that their business continuity plans include the Internet banking business. 4egular testing of the business continuity plan, including communications strategies with the press and public, will help the bank ensure it can respond effectively and promptly to any adverse customer or media reactions. RI/K &ANAGE&ENT .inancial institutions should have a technology risk management process to enable them to identify, measure, monitor, and control their technology risk exposure. 4isk management of new technologies has three essential elements> The planning process for the use of the technology. Implementation of the technology. The means to measure and monitor risk. The $;;s objective is to determine whether a bank is operating its Internet banking business in a safe and sound manner. The $;; expects banks to use a rigorous analytic process to identify, measure, monitor, and control risk. <xaminers will determine whether the level of risk is consistent with the banks overall risk tolerance and is within the banks ability to manage and control. The r#sk $lann#n' $r)cess is the responsibility of the board and senior management. They need to possess the knowledge and skills to manage the bank s use of Internet banking technology and technology related risks. The board should review, approve, and monitor Internet banking technology related projects that may have a significant impact on the banks risk profile. They should determine whether the technology and products are in line with the banks strategic goals and meet a need in their market. "enior 62

management should have the skills to evaluate the technology employed and risks assumed. 0eriodic independent evaluations of the Internet banking technology and products by auditors or consultants can help the board and senior management fulfill their responsibilities. I($le(ent#n' the techn)l)'% is the responsibility of management. &anagement should have the skills to effectively evaluate Internet banking technologies and products, select the right mix for the bank, and see that they are installed appropriately. If the bank does not have the expertise to fulfill this responsibility internally, it should consider contracting with a vendor who speciali#es in this type of business or engaging in an alliance with another provider with complementary technologies or expertise. &eas r#n' an! ()n#t)r#n' r#sk is the responsibility of management. &anagement should have the skills to effectively identify, measure, monitor, and control risks associated with Internet banking. The board should receive regular reports on the technologies employed, the risks assumed, and how those risks are managed. &onitoring system performance is a key success factor. !s part of the design process, a national bank should include effective /uality assurance and audit processes in its Internet banking system. The bank should periodically review the systems to determine whether they are meeting the performance standards. INTERNAL CONTROL/ Internal controls over Internet banking systems should be commensurate with an institutions level of risk. !s in any other banking area, management has the ultimate responsibility for developing and implementing a sound system of internal controls over the banks Internet banking technology and products. 4egular audits of the control

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systems will help ensure that the controls are appropriate and functioning properly. .or example, the control objectives for an individual banks Internet banking technology and products might focus on> ;onsistency of technology planning and strategic goals, including efficiency and economy of operations and compliance with corporate policies and legal re/uirements. 8ata availability, including business recovery planning. 8ata integrity, including providing for the safeguarding of assets, proper authori#ation of transactions, and reliability of the process and output. 8ata confidentiality and privacy safeguards. 4eliability of &I".

$nce control objectives are established, management has the responsibility to install the necessary internal controls to see that the objectives are met. &anagement also has the responsibility to evaluate the appropriateness of the controls on a cost benefit basis. That analysis may take into account the effectiveness of each control in a process, the dollar volume flowing through the process, and the cost of the controls. <xaminers will need to understand the banks operational environment to evaluate the proper mix of internal controls and their ade/uacy. !ccording to the Information "ystems !udit and ;ontrol !ssociation %I"!;!' the basic internal control components include> Internal accounting controls D 3sed to safeguard the assets and reliability of financial records. These would include transaction records and trial balances .

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$perational controls D 3sed to ensure that business objectives are being met. These would include operating plans and budgets to compare actual against planned performance.

!dministrative controls D 3sed to ensure operational efficiency and adherence to policies and procedures. These would include periodic internal and external audits. I"!;! separates internal controls into three general categories. The three control categories can be found in the basic internal controls discussed above.

0reventive ;ontrols D 0revent something %often an error or illegal act' from happening. !n example of this type of control is logical access control software that would allow only authori#ed persons to access a network using a combination of a user I8 and password.

8etective ;ontrols D Identify an action that has occurred. !n example would be intrusion detection software that triggers an alert or alarm.

;orrective ;ontrols D ;orrect a situation once it has been detected. !n example would be software backups that could be used to recover a corrupted file or database. +anks or service providers offering transaction based Internet banking products need to have a high level of controls to help manage the bank s transaction risk. <xamples of these controls could include>

&onitoring transaction activity to look for anomalies in transaction types, transaction volumes, transaction values, and time of day presentment.

&onitoring log on violations or attempts to identify patterns of suspect activity including unusual re/uests, unusual timing, or unusual formats.

3sing trap and trace techni/ues to identify the source of the re/uest and match these against known customers.

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4egular reporting and review of unusual transactions will help identify> Intrusions by unauthori#ed parties. ;ustomer input errors. $pportunities for customer education.

TECHNOLOG40 IN-HOU/E OR OUT/OURCEDF The different levels of complexity associated with certain areas involving security, operations, planning, and monitoring have caused many national banks to outsource all or parts of their Internet banking operations. +anks should periodically reassess their sources of technology support to determine whether a given solution continues to fit their business plan and is flexible enough to meet anticipated future needs. 4egardless of whether technology services are provided in house or through a third party servicer, national banks need to have a strong link between their technology provider and their strategic planning process. This will enable the bank to link new products and services with the existing technology and product mix. There are pros and cons to offering technology based products and services inhouse versus contracting with a vendor. Barger national banks with substantial resources may choose to purchase computer hardware and operating systems andIor develop the necessary application software in house. This option may provide the greatest flexibility to customi#e product offerings. $ther banks may choose to purchase a 1turnkey= system from a vendor. In this arrangement the vendor typically provides the hardware, operating systems, and applications software necessary to enable the bank to offer the particular product or service to its customers. The vendor will typically provide the service and maintenance for the turnkey system. ! variation is to outsource the service. 3sing this option, national banks contract with a vendor to operate their Internet banking (eb sites at the vendor s 6H

location. This option may be especially well suited for banks that do not have the technical expertise to develop this service in house. However, such banks need to place additional emphasis on their due diligence to ensure that security is not compromised. "everal companies are responding to the developing markets for (eb pages, Internet banking applications, and bill presentment and payment services. !lthough many companies in this market are prosperous and well managed, some are start up companies with unproven products, services, or track records. )ational banks need to perform due diligence before selecting a vendor to provide Internet banking services. They should have a formal service agreement with the vendor that clearly addresses the duties and responsibilities of the parties involved. )ational banks need to monitor their vendors operational performance, financial condition, and capability to stay current with evolving technologies. )ational banks typically fulfill their responsibility to assure their vendors have sound internal controls by obtaining internal or third party audit reports. (hatever the source of Internet banking technology, products, and services, it is important for the national bank to have personnel with an appropriate level of speciali#ed expertise, consistent with risk, to monitor and manage the business. I//UE/ IN INTERNET BANKING .inancial institutions, their card associations, and vendors are working to develop an Internet payment infrastructure to help make electronic commerce secure. &any in the banking industry expect significant growth in the use of the Internet for the purchase of goods and services and electronic data interchange. The banking industry also recogni#es

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that the Internet must be secure to achieve a high level of confidence with both consumers and businesses. "ound management of banking products and services, especially those provided over the Internet, is fundamental to maintaining a high level of public confidence not only in the individual bank and its brand name but also in the banking system as a whole. :ey components that will help maintain a high level of public confidence in an open network environment include> "ecurity !uthentication Trust )onrepudiation 0rivacy

A,AILABILIT4 /ec r#t% is an issue in Internet banking systems. The $;; expects national banks to provide a level of logical and physical security commensurate with the sensitivity of the information and the individual banks risk tolerance. "ome national banks allow for direct dial in access to their systems over a private network while others provide network access through the Internet. !lthough the publicly accessible Internet generally may be less secure, both types of connections are vulnerable to interception and alteration. .or example, hardware or software 1sniffers= can obtain passwords, account numbers, credit card numbers, etc. without regard to the means of access. )ational banks therefore must have a sound system of internal controls to protect against security breaches for all forms of electronic access. ! sound system of preventive, detective, and corrective controls will

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help assure the integrity of the network and the information it handles. .irewalls are fre/uently used on Internet banking systems as a security measure to protect internal systems and should be considered for any system connected to an outside network. .irewalls are a combination of hardware and software placed between two networks through which all traffic must pass, regardless of the direction of flow. They provide a gateway to guard against unauthori#ed individuals gaining access to the banks network. The mere presence of a firewall does not assure logical security and firewalls are not impenetrable> firewalls must be configured to meet a specific operating environment and they must be evaluated and maintained on a regular basis to assure their effectiveness and efficiency. Individuals who are technically competent must perform the installation, configuration, evaluation, and maintenance of firewalls. The specific risks involved may re/uire a broad range of security controls. !ppendix ! contains a more detailed discussion of firewalls and associated controls. A thent#cat#)n is another issue in a Internet banking system. Transactions on the Internet or any other telecommunication network must be secure to achieve a high level of public confidence. In cyberspace, as in the physical world, customers, banks, and merchants need assurances that they will receive the service as ordered or the merchandise as re/uested, and that they know the identity of the person they are dealing with. +anks typically use symmetric %private key' encryption technology to secure messages and asymmetric %publicIprivate key' cryptography to authenticate parties. !symmetric cryptography employs two keys D a public key and a private key. These two keys are mathematically tied but one key cannot be deduced from the other. .or example, to authenticate that a message came from the sender, the sender encrypts the message using their private key. $nly the sender knows the private key. +ut, once sent, the message can be read only using the sender s public F1

key. "ince the message can only be read using the sender s public key, the receiver knows the message came from the expected sender. Internet banking systems should employ a level of encryption that is appropriate to the level or risk present in the systems. $;; is aware that stronger levels of encryption may slow or degrade performance and, accordingly, management must balance security needs with performance and cost issues. Thus, a national bank should conduct a risk assessment in deciding upon its appropriate level of encryption. The $;; does not mandate a particular strength or type of encryption. 4ather, it expects management to evaluate security risks, review the cost and benefit of different encryption systems, and decide on an appropriate level of encryption as a business decision. &anagement should be able to explain the supporting analysis for their decision. ! common asymmetric cryptography system is 4"!, which uses key lengths up to 1,?-2 bits. +y using the two forms of cryptography together, symmetric to protect the message and asymmetric to authenticate the parties involved, banks can secure the message and have a high level of confidence in the identity of the parties involved. "ee appendix + of this handbook for examples of how this technology works. +iometric devices are an advanced form of authentication. These devices may take the form of a retina scan, finger or thumb print scan, facial scan, or voice print scan. 3se of biometrics is not yet considered mainstream, but may be used by some banks for authentication. <xaminers should evaluate biometric activities based on managements understanding of risks, internal or external reviews, and the overall performance of these devices. Tr st is another issue in Internet banking systems. !s noted in the previous discussion, public and private key cryptographic systems can be used to secure information and F-

authenticate parties in transactions in cyberspace. ! trusted third party is a necessary part of the process. That third party is the certi!icate a%thority. ! certificate authority is a trusted third party that verifies identities in cyberspace. "ome people think of the certificate authority functioning like an online notary. The basic concept is that a bank, or other third party, uses its good name to validate parties in transactions. This is similar to the historic role banks have played with letters of credit, where neither the buyer nor seller knew each other but both parties were known to the bank. Thus the bank uses its good name to facilitate the transaction. +anks also may need a way to validate themselves in cyberspace, as theft of identity has taken place. !ccording to ,!$ testimony %,!$IT 668 @@ 52', perpetrators have copied legitimate brokerage firm (eb sites, altered addresses for customers to contact %and send checks', then put the fraudulent (eb site back on the Internet. <xcept for the post office box and possibly the 34B, everything on the (eb site could appear legitimate. +anks will have to guard against a variety of frauds and scams as banking on the Internet becomes more prominent. ! proper mix of preventive, detective, and corrective controls can help protect national banks from these pitfalls. 8igital certificates may play an important role in authenticating parties and thus establishing trust in Internet banking systems. N)nre$ !#at#)n is the undeniable proof of participation by both the sender and receiver in a transaction. It is the reason public key encryption was developed, i.e., to authenticate electronic messages and prevent denial or repudiation by the sender or receiver. !lthough technology has provided an answer to nonrepudiation, state laws are not uniform in the treatment of electronic authentication and digital signatures.

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Pr#-ac% is a consumer issue of increasing importance. )ational banks that recogni#e and respond to privacy issues in a proactive way make this a positive attribute for the bank and a benefit for its customers. 0ublic concerns over the proper versus improper accumulation and use of personal information are likely to increase with the continued growth of electronic commerce and the Internet. 0roviders who are sensitive to these concerns have an advantage over those who do not. A-a#lab#l#t% is another component in maintaining a high level of public confidence in a network environment. !ll of the previous components are of little value if the network is not available and convenient to customers. 3sers of a network expect access to systems -2 hours per day, seven days a week. !mong the considerations associated with system availability are capacity, performance monitoring, redundance, and business resumption. )ational banks and their vendors who provide Internet banking products and services need to make certain they have the capacity in terms of hardware and software to consistently deliver a high level of service. In addition, performance monitoring techni/ues will provide management with information such as the volume of traffic, the duration of transactions, and the amount of time customers must wait for service. &onitoring capacity, downtime, and performance on a regular basis will help management assure a high level of availability for their Internet banking system. It is also important to evaluate network vulnerabilities to prevent outages due to component failures. !n entire network can become inoperable when single hardware component or software module malfunctions. $ften national banks and their vendors will employ redundant hardware in critical areas or have the ability to switch to alternate processing locations. The latter is often referred to as contingency planning.

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HI/TOR4 O3 ONLINE BANKING The precursor for the modern home online banking services were the distance banking services over electronic media from the early JH?s. The term online became popular in the late JH?s and referred to the use of a terminal, keyboard and TC %or monitor' to access the banking system using a phone line. UHome banking* can also refer to the use of a numeric keypad to send tones down a phone line with instructions to the bank. $nline services started in )ew 9ork in 1@H1 when four of the city*s major banks %;itibank, ;hase &anhattan, ;hemical and &anufacturers Hanover' offered home banking services using the videotex system. +ecause of the commercial failure of videotex these banking services never became popular except in .rance where the use of videotex %&initel' was subsidised by the telecom provider and the 3:, where the 0restel system was used. The 3:*s first home online banking services was set up by the )ottingham +uilding "ociety %)+"' in 1@H5 .The system used was based on the 3:Js 0restel system and used a computer, such as the ++; &icro, or keyboard %Tandata Td12??' connected to the telephone system and television set. The system %known as JHomelinkJ' allowed on line viewing of statements, bank transfers and bill payments. In order to make bank transfers and bill payments, a written instruction giving details of the intended recipient had to be sent to the )+" who set the details up on the Homelink system. Typical recipients were gas, electricity and telephone companies and accounts with other banks. 8etails of payments to be made were input into the )+" system by the account holder via 0restel. ! che/ue was then sent by )+" to the payee and an advice giving details of the payment was sent to the account holder. +!;" was later used to transfer the payment directly.

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"tanford .ederal ;redit 3nion was the first financial institution to offer online internet banking services to all of its members in $ct, 1@@2. /ECURIT4

0rotection 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. +asically there exist two different security methods for online banking.

The 0I)IT!) system where the 0I) represents a password, used for the login and T!)s representing one time passwords to authenticate transactions. T!)s can be distributed in different ways, the most popular one is to send a list of T!)s to the online banking user by postal letter. The most secure way of using T!)s is to generate them by need using a security token. These token generated T!)s depend on the time and a uni/ue secret, stored in the security token %this is called two factor authentication or -.!'. 3sually online banking with 0I)IT!) is done via a web browser using ""B secured connections, so that there is no additional encryption needed.

"ignature based online banking where all transactions are signed and encrypted digitally. The :eys for the signature generation and encryption can be stored on smartcards or any memory medium, depending on the concrete implementation.

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ATTACK/ &ost of the attacks on online banking used today are based on deceiving the user to steal login data and valid T!)s. Two well known examples for those attacks are phishing and pharming. ;ross site scripting and keyloggerITrojan horses can also be used to steal login information. ! method to attack signature based online banking methods is to manipulate the used software in a way, that correct transactions are shown on the screen and faked transactions are signed in the background. ! recent .8I; Technology Incident 4eport, compiled from suspicious activity reports banks file /uarterly, lists 756 cases of computer intrusion, with an average loss per incident of P5?,???. That adds up to a nearly P16 million loss in the second /uarter of -??F. ;omputer intrusions increased by 17? percent between the first /uarter of -??F and the second. In H? percent of the cases, the source of the intrusion is unknown but it occurred during online banking, the report states.

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CHAPTER-G RE/EARCH &ETHODOLOG4

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RE/EARCH &ETHODOLOG4
4esearch is common parlance refresh to a search for knowledge. $ne can also define research as a scientific and systematic search for pertinent information on a specific topic. In fact, research is an art of scientific investigation. The !dvanced Bearner*s dictionary of current <nglish lay down the meaning research as 1a careful investigation and in/uiry especially through search for new facts in any branch knowledge=.

4esearch is an academic activity and as such the term should be used in a technical sense. !ccording to ;lifford woody research comprises defining and redefining problems, formulating hypothesis or suggested solutionsL collecting, organi#ing and evaluating dataL making deductions and reaching conclusionL and at last carefully testing the conclusion to determine whether they fit the formulating hypothesis.

The systematic approach concerning generali#ation and the formulation of theory is also research. !s such the term 14esearch= refers to the systematic method consisting of enunciating the problem, formulating a hypothesis, collecting the facts of data, analy#ing the facts and reaching certain conclusion either in the form of solution towards the concerned problem or certain in certain generali#ation for some theoretical formulation.

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OBHECTI,E/ O3 THE /TUD4

The purpose of this study is to describe the current state of Internet banking and to discuss its implications for the banking industry and regulatory policy. The study provide information on Internet banking market developments. "tudy explores whether Internet banking has had a noticeable impact on bank performance. $ur regression analysis indicates that, so far, Internet banking has not had a significant impact on bank profitability.

T4PE/ O3 RE/EARCH
There are the following types of research, which are as follows. 1. Descr#$t#-e -s; Anal%t#cal0 8escriptive research includes surveys and fact finding en/uiries of different kinds. The majors* purpose of descriptive research is description the set of affairs it exists at present. In analytical research, on the other hand, the research has to use facts or information already available, and analy#e these to use fact or information already available, and analy#e these to make a critical evaluation of material. :; A$$l#e! -s; 3 n!a(ental0 4esearch can either be applied research or fundamental research. !pplied research aims at finding a solution for an immediate problem facing a society or and industrial I +usiness origination, (hereas .undamental research is mainly concern with generali#ation and with the formulation of a theory. 9; ? ant#tat#-e -s; ? al#tat#-e> Quantitative research is based on the

measurement of /uantity or amount. It is applicable to phenomena that can be expressed H?

in terms of /uantity. Qualitative research, on the other hand is concerned with Qualitative phenomenon, that is, phenomenon relating to or involving /uality or kind. G; C)nce$t al -s; E($#r#cal0 ;onceptual research is that related some abstract idea or theory. It is generally used by philosophers and thinkers to develop new concepts or to reinterpret existing ones. $n the other hand, <mpirical research reali#es on experience or observation alone, often without due regard for system and theory. It is a data based research.

RE/EARCH DE/IGN
1! research design is the arrangement of conditions for collection and analyses of data in a manner that aims to combined relevance to the research purpose with economy in procedure=. In fact, the research design is the conceptual structure within which research is conductedL it is constitute the blue print for the collection, measurement and analyses of data.

DATA /OURCE/
The task of data collection begins after a research problem has been defined and research designIplan chalked out. (hile deciding about the method of data collection to be used for study, the researcher should keep in mind two types of data. 1; Pr#(ar% !ata :; /ec)n!ar% !ata

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1; Pr#(ar% !ata0 These data are collected afresh E for the first time and thus happen to be original in character.

:; /ec)n!ar% !ata0 These data are already collected by someone else and which have already been passed through the statistical process. The researcher would have to decide which sort of data he would be using for his study and accordingly he will have to select one or other method of data collection.

COLLECTION O3 PRI&AR4 DATA

(e collect primary data during the course of doing experiments in an experimental research but in case we do research of the descriptive nature and perform surveys, whether sample survey or census surveys, then we can obtain primary datas either through observation or through personal interviews. This in other words means that there are several other methods of collecting data, particularly in surveys E descriptive researches. Important ones are> 1. $bservation method -. Interview method 5. Through /uestionnaire 2. Through schedules 7. $ther methods

COLLECTION O3 /ECONDAR4 DATA

"econdary data means data that are already available i.e.L they refer to data, which have already been collected and analy#ed by someone else. (hen the researcher utili#es

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secondary data, then he has to look into various sources from where he can obtain them. In this case he is certainly not confronted with the problems that are usually associated with the collection of original data. "econdary data may either be published data or unpublished data. 3sually published data are available in> Carious publications of central, state and local governments Carious publications of foreign governments or of international bodies and their subsidiary organi#ations Technical and trade journals +ooks, maga#ines and newspapers etc 4eports and publication of various associations connected with business and industry, banks, stock exchanges etc. 4eports prepared by research scholars, universities, economists etc 0ublic records and statistics, historical documents

$ur project is based on secondary data also which we have collected from various sources Annual reports Websites Journals

In this research project, secondary data were used. &aga#ines, journals, annual reports, statements and periodicals were consulted to fetch the information about Centure ;apital in India. 4esearch project is also based on the information collected from various websites and e links.

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CHAPTER-I 3INDING/ AND ANAL4/I/

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3INDING/ AND ANALU/I/

PRO/ O3 ONLINE BANKING The foremost advantage of online banking is that it is convenient for customers. 4ather than having to go to the bank lobby or drive thru during business hours, they can sign on to see their account at any time. $nce online, customers can see what deposits and withdrawals have been made as well as whether or not the transactions have been completed. It is easier to keep track of fees charged to accounts, especially those accumulated from using foreign !T&s. This constant visibility allows people to keep closer track of account balances, which saves them from overdrawing their account and incurring overdraft charges. &any services allow customers to view a copy of checks that have cleared simply by clicking on a link. .unds can be moved from one account to another instantaneously. If a person has signed up for +ill 0aying, they can approve the electronic transfer of funds from their bank account to the recipient*s. There is no need to buy stamps, lick envelopes, or wait for bills to be received through the mail. "ome banking sites are e/uipped with programs like Quicken that allow consumers to schedule all of their bill payments for the month at once. $nce authori#ed, all of these transactions happen more /uickly than they would through a conventional bank. To attract customers, some banks are beginning to offer additional services. There are online forms for ordering shipments of checks and occasionally loan applications. +ank customers eagerly take advantages of these offers, which solve the problem of calling or visiting a branch location. )ot only do most sites have up to date stock market information, but they may also give people the opportunity to manage

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investments. (ith all of these timesaving options, online banking is becoming so popular that many banks are closing physical stores completely. Those that maintain branches offer huge benefits for online members like higher interest returns on accounts and lower banking fees. This is because when banks transfer members to online status, they save money that would otherwise be spent paying tellers and printing paper records.

"ince they operate on cyber space, online banks don*t have to pay for tellers or office space rental. This make their overhead minimal that in turn will give their customers higher yields when it comes to savings.

These banks don*t just serve a particular countryL they serve anyone from all over the world. !s a result, they can offer money in different currencies that could help diversify holdings. 9ou can be assured that you can do banking transactions anywhere in the world as long as you have internet access.

3sually online banks offer the feature in which you can actually manage and pay your bills online. It can let you do automatic payments as well.

&ost online banks got resources where you can read the latest products in the market today. It can also let you see the newest kind of investment available.

9ou can actually access your bank account -2 hours a day. F days a week. "ome online banks offer financial tools that can help you when it comes to managing your money.

CON/ O3 ONLINE BANKING

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!lthough the benefits of online banking are undeniable, there are some inconveniences and concerns of which customers should be aware. &any people have difficulty relying on the security of online transactions, fearing the very real possibility of identity theft. If you have these concerns, obtain safety information and guarantees in writing before beginning an account. There may be a waiting period between signing up for online banking and receipt of the I8 and password necessary for account activation. &ake other arrangements in case you are temporarily denied access to you bank account. 4emember that it may take some time acclimate yourself to the bankJs website and set up account information. Have at least an hour available to complete the process. If you choose to pay bills online, make sure that recipients are capable of processing electronic payments. $therwise, it may take several days for the payment to be credited to your account, which could result in accumulated late charges. 9ou can also avoid this problem by making all payments several days in advance of the due date. .or these and any other online money transactions, remember to print out a hard copy. In the event of errors, this will be your only proof. $bviously, you will not be able to make deposits or withdraw cash from your account unless you go to a bank branch. !nother occasional problem with online banking occurs when the website is down, either for scheduled maintenance or because of technical problems. &ake sure that you are provided with a bank phone number in case you cannot access your account. ;learly, the choice of whether or not to bank online depends on many variables. <ven if a person can see the benefits, they may be unwilling if they do not trust or have much experience with the internet. $n the other hand, people may only sign up for limited services like account viewing. This will save them from safety concerns but will still give them daily access to account activity. If you decide that online banking HH

is right for you, be sure to review the offers of several banks. <ach has different fees and benefits that can make a big difference in how much online banking costs you. +y comparing deals and educating yourself, you will find an online banking service that suits your needs.

!lthough banks may seem to offer a lot of services sometimes it doesn*t have everything you need. This can vary from online bank to another.

"ecurity is one of the major issues when it comes to online banking. !s a result of this, you will be asked a lot of /uestions when you set up an account. .or some, this can be time consuming.

!nother negative thing about online banking is the fact that it doesn*t have human element to it. (hen there is a problem sometimes they don*t have a technical support team in which you can talk to.

It is often hard to get used to online banking process. It can take awhile for you to get accustomed with it.

&ake sure to check if the bank is insured under the .8I;. ;heck out the bank carefully because you don*t want your money gone.

.or security purpose banks need to ask you personal /uestions and can ask you to memori#e passwords. This can be a hassle for people who don*t have good memory.

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CHAPTER-J CONCLU/ION

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CONCLU/ION
Internet +anking enables you to manage your finances safely and conveniently. It gives you the freedom to attend to your personal andIor business banking -2 hours a day. 9ou do not know what youJre missing if you do not have Internet banking. IJm sure, that those who make use of online banking will all agree it*s worth every cent, because the benefits far outweigh the risks. Internet banking is changing the banking industry and is having the major effects on banking relationships. The net banking, thus, Gnow is more of a norm rather than an exception in many developed countriesG due to the fact that it is the economical way of providing banking services. +anking is now no longer confined to the traditional brick and mortar branches, where one has to be at the branch in person, to withdraw cash or deposit a che/ue or re/uest a statement of accounts. There is need to scan and analyse the market and respond to the needs of customers and to generate awareness regarding advantages of internet banking. In true Internet banking, any in/uiry or transaction is processed online without any reference to the branch %anywhere banking' at any time. 0roviding internet banking is increasingly becoming a Jneed to haveJ than a Jnice to haveJ services. In this study a new conceptual perspective on how to measure user experience in the Internet banking context was introduced. The user experience in Internet banking was a construct of three underlying dimensions> 1' "atisfaction, -' !ppearance, and 5' <ase of use. In addition, when markets of electronic services mature a good user experience of customer could be a competitive advantage, with which companies could differentiate

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their products and services. .rom this perspective, it could be argued that evaluation of user experience and different user experience scales will be likely needed in the future.

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CHAPTER-B /UGGE/TION/ AND RECO&&ENDATION

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/UGG/TION/ AND RECO&&ENDATION/

!s use of the Internet expands, more banks are using it to offer products and services to their consumers. However, despite (eb potential for safe and convenient new ways for financial services and banking business, the scary truth is that online banking fraud is on the rise and there are a number of ways it can be done. !lso, there are a number of ways how you can protect your credit card and bank account if you transact over the internet.

CHECK THE BANK .irst, you have to confirm that an online bank is legitimate and that your deposits are insured. 9ou will do that if you follow these steps> 1; Rea! ke% #nf)r(at#)n ab) t the bank $)ste! )n #ts 1eb s#te &ost +anks* (eb sites have an G!bout 3sG section that describes the institution. There can be found useful info about history of the bank, name and address of the bank*s head/uarters, insurance, etc. :; Pr)tect %) rself fr)( fra ! lent 1eb s#tes (atch out for copycat (eb sites that deliberately use a name or (eb address very similar to, but not the same as, that of a real financial institution. The intent is to lure you into clicking onto their (eb site and giving your personal information, such as your account number and password. !lways check to see that you have typed the correct (eb site address for your bank before conducting a transaction. !lso, fraud can be done through the spam emails you receive every day. !lthough, the link in those emails can be the same of your bank, always check the validity of the links. That means that fraudulent links will be different from the 1bank= links in the mail. that

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can be checked by simple looking at the bottom of your email client %,mail, 9ahoo, or $utlook if you use it' or using the 4ight ;lickI0roperties option on link itself. CHOO/E AND PROTECT ID AND PA//1ORD V !fter you chose your bank, you*ll have to create an account. for that you*ll need an I8 and a password. V :eep in mind that your security is our top priority, especially in this part which is the most vulnerable to attacks. V (hile I8 is static and can be change usually by the bank per re/uest, you can change your password yourself. V It*s been recommended that you should change your password fre/uently. HERE ARE /O&E ?UICK PA//1ORD TIP/0 8on*t use the same password for everything 8on*t use a predictable password O 8on*t use your birthday , your ""), your child*s birthday or pet*s name. 3se something that makes sense to you and that you will easily remember. If you must write down your passwords, store them in a safe place. )ever give your passwords to anyone

THREAT/ 3RO& OUT/IDE AND E33ICIENT PROTECTION !s a technology based platform, Internet banking comes with certain challenges in terms of management of technology risks, as shown by a number of Internet banking fraud cases reported all over the world. "ome of those cases come in the form of fake websites that seek to lure bank customers into divulging confidential personal information.

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$ther cases involve Trojan software or other infectious computer viruses and worms. To put that simple, Trojan software is a code that is planted in a computer by a fraudster in order to access the personal information of the computer user. The code may be planted in various ways. 3sually it*s when an unsuspecting user clicks on hyperlinks embedded in e mails or browses a website infected with malicious pop up advertisements. $nce planted in a computer, Trojan may be activated when the user accesses certain websites. Then it can capture keystrokes of the infected computer, which could lead to leakage of sensitive personal information such as user I8s and passwords.

THE/E ARE TIP/ THAT E,ER4 U/ER O3 ONLINE BANKING /HOULD KNO10 1. .irst, bank customers should never access their Internet banking accounts through hyperlinks embedded in e mails, suspicious pop up windows, or Internet search engines. -. "econd, as has been said above, users should be aware of opening unexpected e mails with attachments or click on suspicious links in the emails. 3sers should access their bank accounts by typing the website addresses at the address bar of the browser, or even better, by bookmarking the genuine website and using that function to access own accounts. 5. Thirdly, it*s a good idea to always have installed personal firewall software and anti virus and antispyware software, and regularly download the latest updates available. This software will be of great help in

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defending the users from the attempts by fraudsters to plant harmful viruses or worms in their personal computers. 3OR THE END+ THERE I/ A RE/U&E O3 THE TIP/ 3OR /A3E INTERNET BANKING0 :eep your computer secure and the access to itL 8onJt send credit card or account details by e mailL 4eject any email that asks you to follow a link to website and input account details for verification even if the website looks authentic, its probably a fake replicamake sure you log out of your online account when finished net cafes. 8eal only with established and reputable merchantsL $nly make payments to secure websites look for the padlock symbol in the bottom right of your browser and click for details If using a new site, do business first in a small wayL ;heck your accounts and report discrepancies immediatelyL Ignore the Gremember my password optionG on banking and shopping sites ;hange your password regularlyL ;ancel any card that has been used fraudulentlyL 4ead a companyJs privacy policy before buying online especially at work, libraries and

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&ORE IN3OR&ATION TAKE CARE 8elete without opening emails re/uesting personal details such as 0I)s or passwords O legitimate financial institutions and companies will not ask you to provide 0I)s or passwords. 8elete suspicious emails with attachments and never open the attachments. ;heck for a secure connection. %"ecure website addresses have https at the start. The Us* indicates secure. They will also have a Upadlock* icon on the bottom right corner. 8ouble clicking the icon will show who owns the certificate'. .ollow your own path to the site you choose O it is possible to create a link on a web page or in an email and make it look as if it is taking you to a bona fide website when it is sending you elsewhere. 9our safest course is to check that you have the correct address %34B' and then type it each time into your address bar. ;onsider whether the message you have received is a message that you would expect to receive O is it one you have received from your financial institution beforeW %Incorrect grammar or spelling is usually an immediate indicator of a suspect email or website'. !re there related announcements on the financial institution*s or company*s websiteW 4econcile your account%s' either on line or by statements fre/uently and regularly.

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CHAPTER-C LI&ITATION/

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LI&ITATION/
There have been a lot of valid concerns regarding the safety of internet banking. ;hange is difficult to accept, and takes time for people to adjust accordingly. "ecurity is a risk, but it is a calculated and managed risk. "ome customers avoid electronic banking as they %perhaps wrongly' perceive it as being too vulnerable to fraud. The security measures employed by most banks are never 1??K safe, but in practice the number of fraud victims due to online banking is very small. Internet banking user interfaces are secure sites %generally employing the https protocol' and traffic of all information including the

password is encrypted, making it next to impossible for a third party to obtain or modify information after it is sent. However, encryption alone does not rule out the possibility of hackers gaining access to a vulnerable home 0; and intercepting the password as it is typed in %key logging'. There is also the danger of password cracking and physical theft of passwords written down by careless users. &any electronic banking services therefore impose a second layer of security. "trategies vary, but a common method is the use of transaction numbers, or T!), which is essentially a single use password. !nother strategy is the use of two passwords, only random parts of which are entered at the start of every online banking session. This is however slightly less secure than the T!) alternative and more inconvenient for the user. ! third popular option is providing customers with chip card readers capable of generating single use passwords uni/ue to the customerJs chip card. !nother option is using digital certificates, which digitally sign or authenticate the transactions, by linking them to the physical device %e.g. computer, mobile phone, etc'.

1??