Electronic Banking Cont.

Hurdles in E-Banking

Security

 Security is the first and foremost requirement of E-banking as the internet is inherently unsecured
 Securing the process in E-banking involves authenticating both customer and banker transactions and protecting the information to be transmitted from interception
 Banks are to remain vigilant to protect customers from data tampering and hacking
 Software failures can also destroy networks and cause massive losses
 There are many ways in e-banking in which private information may be accessed by the hackers. And this information could be used to make fraudulent transactions that could lead to loss of money for the customer.

Standardization

 One of the major issues in E-banking is the standardization of software which is necessary to offer e-banking services
 Proven high quality software is a must for high-tech banking services. For sophisticated services, the standardization of operating systems, systems software and application software throughout the banking industry is a necessary prerequisite.

Legislative and Regulatory Issues

 National, regional and international laws, rules and regulations are important prerequisites for successful implementation of e-banking
 Legal or legislative support is essential for protecting the interests of customers and banks in various areas relating to e-banking and payment systems like:
a) Liability for loss in case of fraud
b) Allocation of loss in case of insolvency, cheque truncation, evidence and burden of proof, preservation of records, prevention of fraud, etc are to be made clear in the legislation

Infrastructure

 For effective deployment of e-banking services, it is necessary to have a reliable and cost effective infrastructure accessible to the major part of the population
 The base communication infrastructure for e-banking is a computer network with internet facility
 Automating banking services is another prerequisite for
E-banking
 Close financial links between banks and other financial institutions is necessary. These links are used for clearing and payment systems among these institutions.

Heavy Investment Cost

 Banks have to invest substantial amounts of money in order to offer e-banking services
 They also have to incur heavy maintenance costs
 This may not be the problem for well established banks. But in case of new and smaller banks, they have to face high costs at the initial stage.
 Banks in developed countries have already made large investments for e-banking services. This may create financial crisis for banks in developing and underdeveloped countries.

Socio Cultural Challenges

 In the normal case, customer confidence and trust in the traditional banking system may make customers less likely to adopt new technology
 New technology will not be successful until customers are satisfied with privacy and security aspects.
 It also requires some time to earn confidence of the customers though it is easier and cheaper than the traditional methods