Electronic Banking

What is Electronic-Banking
• E-banking is defined as the automated delivery of new and traditional banking products and services directly to customers through electronic, Interactive communication channels.
• E-banking includes systems that enable customers of financial institutions, individuals or businesses, to access accounts, transact business or obtain information on financial products and services through a public or private network, including the Internet
• In addition, e-banking is made up of a broad category of systems and devices, including one of its first and perhaps most common forms that include credit and debit cards
• E-banking provides clients with the capability to do business with the bank, even after working hours, and the clients can do it in places they deem comfortable to use the computer and the internet

Elements of EB

Elements of Electronic-Banking

Electronic Data Interchange (EDI):

 Electronic Data Interchange (EDI) refers to the structured transmission of data between organizations by electronic means
 It is used to transfer electronic documents from one computer system to another, i.e. from one trading partner to another trading partner

Automated Teller Machine (ATM)

 ATM is a device that allows customers who have an ATM Card to perform routine banking transactions without interacting with the human teller
 The ATM cardholder can do most of the banking transactions like withdrawals, deposits of cash and cheque, balance enquiry, etc.
 The origin of ATMs can be traced back to June 1967 when Barclays' Bank installed the first cash dispenser in the UK

POS (Point of Sales)

 A point-of-sale (PoS) terminal is an electronic device that is used for verifying and processing card transactions
 Point-of-Sale Transfers let one pay for purchases with a debit card
 The process is similar to using a credit card, with some important exceptions
 The process is fast and easy, a debit card purchase transfers money - fairly quickly - from one’s bank account to the store's account

Plastic Card Currency

 Plastic cards, also known as plastic currency, involving electronic devices in their functioning is gaining popular as a convenient mode of payment
 By using these plastic cards, financial exchanges take place on line between buyers and sellers
 There are different types of cards which include Credit Cards, Debit Cards, ATM Cards and Smart Cards

Credit Card

 Credit Card can be called as an equivalent of a loan sanctioned by the bank to its customers
 Credit card facilitates and makes it possible to "Use First and Pay Later"
 Before issuing the card, the bank likes to know and be sure of the identification, age, level and source of income and repayment capacity
 This card facilitates the cardholder to purchase goods and services from the merchant establishments and shops through the collaborating credit card companies like VISA, MasterCard, Maestro, and Cirrus.
 Interest is charged by the bank, on a monthly basis, for the credit provided through the card. Service charges are collected from the cardholder/merchant for the transaction and processing.

Debit Card

 A Debit Card allows online electronic payment from savings or current accounts of the cardholder for purchases or cash withdrawals
 This card is a deposit access product where cardholder uses his own money in his bank account through the debit card on the principle of "Pay First and Use Later".
 Debit card can be used to make purchase at retail shops and merchant establishments in the same way as the credit card is used.
 But in order to use the debit card, the cardholder must have sufficient balance in his/her account. Debit card contains the symbol or hologram of the collaborating company such as VISA, MasterCard, Maestro and Cirrus, etc.

E-Payments

Payment is generally understood as a transfer of fund from one person (payee). In E-Payments, funds are transferred through electronic mode. These are:

S.W.I.F.T

 The society for Worldwide Inter-Bank Financial Telecommunication (S.W.I.F.T.) provides reliable, secure and expeditious telecommunications facilities for exchange of financial messages across the world
 The banks are mostly the member of this International Financial Messages Communication Network. The banks can carry out foreign exchange business, safely, using this network.

Electronic Fund Transfer

Electronic Funds Transfer (EFT):

 EFT system permits transfer of funds from an account at any branch of a member bank in any city to any other account at any branch of any member bank in any other city
 This system utilizes the service branches of the member banks. It facilitates the transfer of funds from one place to another place within the country quickly and safely.

Tools of EFT

 Internet Banking
 Online banking (or Internet banking) allows customers to conduct financial transactions on a secure website operated by their retail banks. The common features fall broadly into several categories:
Forms of Internet Banking

Transactional

 Financial transactions, electronic bill presentment and payment
 Funds transfer between a customer's own checking and savings accounts, or to another customer's account
 Investment purchase or sale
 Loan applications and transactions, such as repayments

Non-transactional

 Viewing online statements, check links, chat
Remittance Services:
 Remittance houses worldwide provide remittance transfer services through various forms of E-Banking starting from basic PC based software to web based instant payment solutions
 Today’s fast changing electronic banking channels have massively improved the flow of remittance across the world:

• Western Union Money Transfer
• MoneyGram
• XPress Money

Mobile Banking

Mobile Based Banking:

 Mobile banking (also known as M-Banking, SMS Banking etc.) is a term used for performing balance checks, account transactions, payments, etc., via a mobile device such as a mobile phone

 Mobile banking today is most often performed via SMS or the Mobile Internet but can also use special programs called clients downloaded to the mobile device

Available Mobile Based Banking:

 Balance checking in the account
 Recent transactions
 Alerts on account activity
 Access to loan statements
 Access to card statements
 Due date of payment alerts

Upcoming Mobile Based Banking:
 Fund transfers
 Mobile recharging
 Withdrawal at banking agent
 Deposit at banking agent

Future of Mobile Based Banking:

 With introduction of full fledged Mobile based banking customers will be able to deposit and withdraw funds at banking agents, i.e., retail and postal outlets that turn cash into electronic funds and vice versa
 Bangladesh Bank has already allowed a few banks and mobile operators to initiate mobile based fund transfer services in the country
 Mobile operators collaborating with banking industry are eying a major change in the remittance payment procedure in the country in the coming years

BACH - Automated Clg House

Automated Clearing House

 Automated Clearing House provides paperless electronic image based cheque clearing solution, avoiding the need to make physical presentation of the cheques to drawee banks thereby greatly improving the clearing and settlement process
 Bangladesh Bank is going to introduce Bangladesh Automated Clearing House (BACH) from March 2010
 In the new system, a customer will deposit his cheque to the collecting bank, a digital image of the cheque will be generated and electronic information will be captured for the clearing process
 The cheque image will be presented to the drawee bank, electronically, via the Automated Clearing House located at Bangladesh Bank.
 Paper cheques will be retained by the collecting bank
 The interbank processing of Cheque Image and Truncation System (CITS) will be secure and reliable with no impact on the customers.

Electronic Banking

What is Electronic-Banking
• E-banking is defined as the automated delivery of new and traditional banking products and services directly to customers through electronic, Interactive communication channels.
• E-banking includes systems that enable customers of financial institutions, individuals or businesses, to access accounts, transact business or obtain information on financial products and services through a public or private network, including the Internet
• In addition, e-banking is made up of a broad category of systems and devices, including one of its first and perhaps most common forms that include credit and debit cards
• E-banking provides clients with the capability to do business with the bank, even after working hours, and the clients can do it in places they deem comfortable to use the computer and the internet

Elements of Electronic-Banking

Electronic Data Interchange (EDI):

 Electronic Data Interchange (EDI) refers to the structured transmission of data between organizations by electronic means
 It is used to transfer electronic documents from one computer system to another, i.e. from one trading partner to another trading partner

Automated Teller Machine (ATM)

 ATM is a device that allows customers who have an ATM Card to perform routine banking transactions without interacting with the human teller
 The ATM cardholder can do most of the banking transactions like withdrawals, deposits of cash and cheque, balance enquiry, etc.
 The origin of ATMs can be traced back to June 1967 when Barclays' Bank installed the first cash dispenser in the UK

POS (Point of Sales)

 A point-of-sale (PoS) terminal is an electronic device that is used for verifying and processing card transactions
 Point-of-Sale Transfers let one pay for purchases with a debit card
 The process is similar to using a credit card, with some important exceptions
 The process is fast and easy, a debit card purchase transfers money - fairly quickly - from one’s bank account to the store's account

Plastic Card Currency

 Plastic cards, also known as plastic currency, involving electronic devices in their functioning is gaining popular as a convenient mode of payment
 By using these plastic cards, financial exchanges take place on line between buyers and sellers
 There are different types of cards which include Credit Cards, Debit Cards, ATM Cards and Smart Cards

Credit Card

 Credit Card can be called as an equivalent of a loan sanctioned by the bank to its customers
 Credit card facilitates and makes it possible to "Use First and Pay Later"
 Before issuing the card, the bank likes to know and be sure of the identification, age, level and source of income and repayment capacity
 This card facilitates the cardholder to purchase goods and services from the merchant establishments and shops through the collaborating credit card companies like VISA, MasterCard, Maestro, and Cirrus.
 Interest is charged by the bank, on a monthly basis, for the credit provided through the card. Service charges are collected from the cardholder/merchant for the transaction and processing.

Debit Card

 A Debit Card allows online electronic payment from savings or current accounts of the cardholder for purchases or cash withdrawals
 This card is a deposit access product where cardholder uses his own money in his bank account through the debit card on the principle of "Pay First and Use Later".
 Debit card can be used to make purchase at retail shops and merchant establishments in the same way as the credit card is used.
 But in order to use the debit card, the cardholder must have sufficient balance in his/her account. Debit card contains the symbol or hologram of the collaborating company such as VISA, MasterCard, Maestro and Cirrus, etc.

E-Payments

Payment is generally understood as a transfer of fund from one person (payee). In E-Payments, funds are transferred through electronic mode. These are:

S.W.I.F.T

 The society for Worldwide Inter-Bank Financial Telecommunication (S.W.I.F.T.) provides reliable, secure and expeditious telecommunications facilities for exchange of financial messages across the world
 The banks are mostly the member of this International Financial Messages Communication Network. The banks can carry out foreign exchange business, safely, using this network.

Electronic Funds Transfer (EFT):

 EFT system permits transfer of funds from an account at any branch of a member bank in any city to any other account at any branch of any member bank in any other city
 This system utilizes the service branches of the member banks. It facilitates the transfer of funds from one place to another place within the country quickly and safely.

Tools of EFT

 Internet Banking
 Online banking (or Internet banking) allows customers to conduct financial transactions on a secure website operated by their retail banks. The common features fall broadly into several categories:
Forms of Internet Banking

Transactional

 Financial transactions, electronic bill presentment and payment
 Funds transfer between a customer's own checking and savings accounts, or to another customer's account
 Investment purchase or sale
 Loan applications and transactions, such as repayments

Non-transactional

 Viewing online statements, check links, chat
Remittance Services:
 Remittance houses worldwide provide remittance transfer services through various forms of E-Banking starting from basic PC based software to web based instant payment solutions
 Today’s fast changing electronic banking channels have massively improved the flow of remittance across the world:

• Western Union Money Transfer
• MoneyGram
• XPress Money


Mobile Based Banking:

 Mobile banking (also known as M-Banking, SMS Banking etc.) is a term used for performing balance checks, account transactions, payments, etc., via a mobile device such as a mobile phone

 Mobile banking today is most often performed via SMS or the Mobile Internet but can also use special programs called clients downloaded to the mobile device

Available Mobile Based Banking:
 Balance checking in the account
 Recent transactions
 Alerts on account activity
 Access to loan statements
 Access to card statements
 Due date of payment alerts

Upcoming Mobile Based Banking:
 Fund transfers
 Mobile recharging
 Withdrawal at banking agent
 Deposit at banking agent

Future of Mobile Based Banking:
 With introduction of full fledged Mobile based banking customers will be able to deposit and withdraw funds at banking agents, i.e., retail and postal outlets that turn cash into electronic funds and vice versa
 Bangladesh Bank has already allowed a few banks and mobile operators to initiate mobile based fund transfer services in the country
 Mobile operators collaborating with banking industry are eying a major change in the remittance payment procedure in the country in the coming years

Automated Clearing House
 Automated Clearing House provides paperless electronic image based cheque clearing solution, avoiding the need to make physical presentation of the cheques to drawee banks thereby greatly improving the clearing and settlement process
 Bangladesh Bank is going to introduce Bangladesh Automated Clearing House (BACH) from March 2010
 In the new system, a customer will deposit his cheque to the collecting bank, a digital image of the cheque will be generated and electronic information will be captured for the clearing process
 The cheque image will be presented to the drawee bank, electronically, via the Automated Clearing House located at Bangladesh Bank.
 Paper cheques will be retained by the collecting bank
 The interbank processing of Cheque Image and Truncation System (CITS) will be secure and reliable with no impact on the customers.

Benefits of E-Banking

From Customers’ Point of View

 The customer can transact in their account at any time and anywhere throughout the country or outside the country.
 There is no time and place restriction
 The customers need not visit the branch for transaction and no need to wait in the big queue, thus saving time.
 The customer can avail 24*7 access to the banking services from any where.
 With the help of e-banking, the easy access to the banks is another advantage to the customers.
 Customer can have better awareness of products & services
 Customer can have up-to-date information of his or her accounts

From Bank’s Point of View

 In this competitive world, E-banking helps banks attract more customers and face competition from other banks
 Banks can enhance customer satisfaction through rendering sophisticated services
 Banks can avoid fraudulent activities and reduce overall risk by having proper MIS and providing secured e-banking services
 Banks can save time and can increase the number of transactions and business with the help of E-banking
 Banks can improve service delivery and quality with introduction of E-banking
 Cross sell the complete suite of banking products and services
 Banks can save costs by sharing the electronic network with peer banks

Benifits of Electronic Banking

Benefits of E-Banking

From Customers’ Point of View

 The customer can transact in their account at any time and anywhere throughout the country or outside the country.
 There is no time and place restriction
 The customers need not visit the branch for transaction and no need to wait in the big queue, thus saving time.
 The customer can avail 24*7 access to the banking services from any where.
 With the help of e-banking, the easy access to the banks is another advantage to the customers.
 Customer can have better awareness of products & services
 Customer can have up-to-date information of his or her accounts

From Bank’s Point of View

 In this competitive world, E-banking helps banks attract more customers and face competition from other banks
 Banks can enhance customer satisfaction through rendering sophisticated services
 Banks can avoid fraudulent activities and reduce overall risk by having proper MIS and providing secured e-banking services
 Banks can save time and can increase the number of transactions and business with the help of E-banking
 Banks can improve service delivery and quality with introduction of E-banking
 Cross sell the complete suite of banking products and services
 Banks can save costs by sharing the electronic network with peer banks
Electronic Banking: Bangladesh Perspective

 In Bangladesh, foreign banks took the lead by introducing ATMs and credit cards in the mid 1990s, and domestic banks followed in the late 1990s
 Private commercial banks (PCBs) then took the lead to implement electronic banking in Bangladesh.
 PCBs were fortuitous to have commenced their banking services with PC based software
 The next challenge towards implementing E-Banking for these banks was to implement Any Branch Banking (ABB), popularly known as Online Banking although the term is generically used for Internet Banking
 Most of the PCBs are now providing ABB for its customers
 A PCB customer, having opened an account in a branch of a bank, can transact from any branch across the country of that same bank
 Later these banks embarked on introducing plastic currency in the form of Debit and Credit Cards
 VISA, MasterCard and American Express - world renowned brands - were launched in Bangladesh
 ATMs started to appear in the major city points either at the bank’s own initiative or with the help of consortium networks like ICTL (Q-Cash), ETN (E-Cash), BEPS, OMNIBUS
 Meanwhile, a number of banks started offering other E-banking services like Phone Banking, SMS banking and even Internet banking, although the latter has been legalized by Bangladesh Bank only recently
 Bangladeshi banks have developed relationships with many international financial agencies or intermediaries to increase the inflow of remittances into the country from the expatriates working in the foreign countries
 The Government of Bangladesh further promoted electronic banking with the promulgation of the Bangladesh Payment and Settlement Systems Regulations 2009
 They have also legalized E-Commerce initiative
 The central bank is going to introduce automated clearing house by March 2010
 Under the new system, payments will be settled using automated cheque clearing system and electronic funds transfer between 1,050 bank branches in Dhaka, initially
Electronic Banking: Bangladesh Perspective

 In Bangladesh, foreign banks took the lead by introducing ATMs and credit cards in the mid 1990s, and domestic banks followed in the late 1990s
 Private commercial banks (PCBs) then took the lead to implement electronic banking in Bangladesh.
 PCBs were fortuitous to have commenced their banking services with PC based software
 The next challenge towards implementing E-Banking for these banks was to implement Any Branch Banking (ABB), popularly known as Online Banking although the term is generically used for Internet Banking
 Most of the PCBs are now providing ABB for its customers
 A PCB customer, having opened an account in a branch of a bank, can transact from any branch across the country of that same bank
 Later these banks embarked on introducing plastic currency in the form of Debit and Credit Cards
 VISA, MasterCard and American Express - world renowned brands - were launched in Bangladesh
 ATMs started to appear in the major city points either at the bank’s own initiative or with the help of consortium networks like ICTL (Q-Cash), ETN (E-Cash), BEPS, OMNIBUS
 Meanwhile, a number of banks started offering other E-banking services like Phone Banking, SMS banking and even Internet banking, although the latter has been legalized by Bangladesh Bank only recently
 Bangladeshi banks have developed relationships with many international financial agencies or intermediaries to increase the inflow of remittances into the country from the expatriates working in the foreign countries
 The Government of Bangladesh further promoted electronic banking with the promulgation of the Bangladesh Payment and Settlement Systems Regulations 2009
 They have also legalized E-Commerce initiative
 The central bank is going to introduce automated clearing house by March 2010
 Under the new system, payments will be settled using automated cheque clearing system and electronic funds transfer between 1,050 bank branches in Dhaka, initially

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

Electronic banking continued

What is Electronic-Banking
• E-banking is defined as the automated delivery of new and traditional banking products and services directly to customers through electronic, Interactive communication channels.
• E-banking includes systems that enable customers of financial institutions, individuals or businesses, to access accounts, transact business or obtain information on financial products and services through a public or private network, including the Internet
• In addition, e-banking is made up of a broad category of systems and devices, including one of its first and perhaps most common forms that include credit and debit cards
• E-banking provides clients with the capability to do business with the bank, even after working hours, and the clients can do it in places they deem comfortable to use the computer and the internet

Elements of Electronic-Banking

Electronic Data Interchange (EDI):

 Electronic Data Interchange (EDI) refers to the structured transmission of data between organizations by electronic means
 It is used to transfer electronic documents from one computer system to another, i.e. from one trading partner to another trading partner

Automated Teller Machine (ATM)

 ATM is a device that allows customers who have an ATM Card to perform routine banking transactions without interacting with the human teller
 The ATM cardholder can do most of the banking transactions like withdrawals, deposits of cash and cheque, balance enquiry, etc.
 The origin of ATMs can be traced back to June 1967 when Barclays' Bank installed the first cash dispenser in the UK

POS (Point of Sales)

 A point-of-sale (PoS) terminal is an electronic device that is used for verifying and processing card transactions
 Point-of-Sale Transfers let one pay for purchases with a debit card
 The process is similar to using a credit card, with some important exceptions
 The process is fast and easy, a debit card purchase transfers money - fairly quickly - from one’s bank account to the store's account

Plastic Card Currency

 Plastic cards, also known as plastic currency, involving electronic devices in their functioning is gaining popular as a convenient mode of payment
 By using these plastic cards, financial exchanges take place on line between buyers and sellers
 There are different types of cards which include Credit Cards, Debit Cards, ATM Cards and Smart Cards

Credit Card

 Credit Card can be called as an equivalent of a loan sanctioned by the bank to its customers
 Credit card facilitates and makes it possible to "Use First and Pay Later"
 Before issuing the card, the bank likes to know and be sure of the identification, age, level and source of income and repayment capacity
 This card facilitates the cardholder to purchase goods and services from the merchant establishments and shops through the collaborating credit card companies like VISA, MasterCard, Maestro, and Cirrus.
 Interest is charged by the bank, on a monthly basis, for the credit provided through the card. Service charges are collected from the cardholder/merchant for the transaction and processing.

Debit Card

 A Debit Card allows online electronic payment from savings or current accounts of the cardholder for purchases or cash withdrawals
 This card is a deposit access product where cardholder uses his own money in his bank account through the debit card on the principle of "Pay First and Use Later".
 Debit card can be used to make purchase at retail shops and merchant establishments in the same way as the credit card is used.
 But in order to use the debit card, the cardholder must have sufficient balance in his/her account. Debit card contains the symbol or hologram of the collaborating company such as VISA, MasterCard, Maestro and Cirrus, etc.

E-Payments

Payment is generally understood as a transfer of fund from one person (payee). In E-Payments, funds are transferred through electronic mode. These are:

S.W.I.F.T

 The society for Worldwide Inter-Bank Financial Telecommunication (S.W.I.F.T.) provides reliable, secure and expeditious telecommunications facilities for exchange of financial messages across the world
 The banks are mostly the member of this International Financial Messages Communication Network. The banks can carry out foreign exchange business, safely, using this network.

Electronic Funds Transfer (EFT):

 EFT system permits transfer of funds from an account at any branch of a member bank in any city to any other account at any branch of any member bank in any other city
 This system utilizes the service branches of the member banks. It facilitates the transfer of funds from one place to another place within the country quickly and safely.

Tools of EFT

 Internet Banking
 Online banking (or Internet banking) allows customers to conduct financial transactions on a secure website operated by their retail banks. The common features fall broadly into several categories:
Forms of Internet Banking

Transactional

 Financial transactions, electronic bill presentment and payment
 Funds transfer between a customer's own checking and savings accounts, or to another customer's account
 Investment purchase or sale
 Loan applications and transactions, such as repayments

Non-transactional

 Viewing online statements, check links, chat
Remittance Services:
 Remittance houses worldwide provide remittance transfer services through various forms of E-Banking starting from basic PC based software to web based instant payment solutions
 Today’s fast changing electronic banking channels have massively improved the flow of remittance across the world:

• Western Union Money Transfer
• MoneyGram
• XPress Money


Mobile Based Banking:

 Mobile banking (also known as M-Banking, SMS Banking etc.) is a term used for performing balance checks, account transactions, payments, etc., via a mobile device such as a mobile phone

 Mobile banking today is most often performed via SMS or the Mobile Internet but can also use special programs called clients downloaded to the mobile device

Available Mobile Based Banking:
 Balance checking in the account
 Recent transactions
 Alerts on account activity
 Access to loan statements
 Access to card statements
 Due date of payment alerts

Upcoming Mobile Based Banking:
 Fund transfers
 Mobile recharging
 Withdrawal at banking agent
 Deposit at banking agent

Future of Mobile Based Banking:
 With introduction of full fledged Mobile based banking customers will be able to deposit and withdraw funds at banking agents, i.e., retail and postal outlets that turn cash into electronic funds and vice versa
 Bangladesh Bank has already allowed a few banks and mobile operators to initiate mobile based fund transfer services in the country
 Mobile operators collaborating with banking industry are eying a major change in the remittance payment procedure in the country in the coming years

Automated Clearing House
 Automated Clearing House provides paperless electronic image based cheque clearing solution, avoiding the need to make physical presentation of the cheques to drawee banks thereby greatly improving the clearing and settlement process
 Bangladesh Bank is going to introduce Bangladesh Automated Clearing House (BACH) from March 2010
 In the new system, a customer will deposit his cheque to the collecting bank, a digital image of the cheque will be generated and electronic information will be captured for the clearing process
 The cheque image will be presented to the drawee bank, electronically, via the Automated Clearing House located at Bangladesh Bank.
 Paper cheques will be retained by the collecting bank
 The interbank processing of Cheque Image and Truncation System (CITS) will be secure and reliable with no impact on the customers.

Benefits of E-Banking

From Customers’ Point of View

 The customer can transact in their account at any time and anywhere throughout the country or outside the country.
 There is no time and place restriction
 The customers need not visit the branch for transaction and no need to wait in the big queue, thus saving time.
 The customer can avail 24*7 access to the banking services from any where.
 With the help of e-banking, the easy access to the banks is another advantage to the customers.
 Customer can have better awareness of products & services
 Customer can have up-to-date information of his or her accounts

From Bank’s Point of View

 In this competitive world, E-banking helps banks attract more customers and face competition from other banks
 Banks can enhance customer satisfaction through rendering sophisticated services
 Banks can avoid fraudulent activities and reduce overall risk by having proper MIS and providing secured e-banking services
 Banks can save time and can increase the number of transactions and business with the help of E-banking
 Banks can improve service delivery and quality with introduction of E-banking
 Cross sell the complete suite of banking products and services
 Banks can save costs by sharing the electronic network with peer banks

Electronic Banking: Bangladesh Perspective

 In Bangladesh, foreign banks took the lead by introducing ATMs and credit cards in the mid 1990s, and domestic banks followed in the late 1990s
 Private commercial banks (PCBs) then took the lead to implement electronic banking in Bangladesh.
 PCBs were fortuitous to have commenced their banking services with PC based software
 The next challenge towards implementing E-Banking for these banks was to implement Any Branch Banking (ABB), popularly known as Online Banking although the term is generically used for Internet Banking
 Most of the PCBs are now providing ABB for its customers
 A PCB customer, having opened an account in a branch of a bank, can transact from any branch across the country of that same bank
 Later these banks embarked on introducing plastic currency in the form of Debit and Credit Cards
 VISA, MasterCard and American Express - world renowned brands - were launched in Bangladesh
 ATMs started to appear in the major city points either at the bank’s own initiative or with the help of consortium networks like ICTL (Q-Cash), ETN (E-Cash), BEPS, OMNIBUS
 Meanwhile, a number of banks started offering other E-banking services like Phone Banking, SMS banking and even Internet banking, although the latter has been legalized by Bangladesh Bank only recently
 Bangladeshi banks have developed relationships with many international financial agencies or intermediaries to increase the inflow of remittances into the country from the expatriates working in the foreign countries
 The Government of Bangladesh further promoted electronic banking with the promulgation of the Bangladesh Payment and Settlement Systems Regulations 2009
 They have also legalized E-Commerce initiative
 The central bank is going to introduce automated clearing house by March 2010
 Under the new system, payments will be settled using automated cheque clearing system and electronic funds transfer between 1,050 bank branches in Dhaka, initially

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

Legal Framework of E-Banking in Bangladesh

 E-commerce & E-banking have been primarily legalized via introduction of "ICT Law 2006"
 ICT Policy 2009 has just been introduced
 However, no comprehensive legal framework exists for E-commerce, in general, and E-banking, in particular
 Bangladesh Bank has passed “Payment and Settlement Systems Regulations 2009” to regulate and ensure a secure and efficient payment and settlement systems in the country
 There are certain shortcomings - such as e-signature, lack of significant penalties for frauds and other abuses and lack of adequate provision for E-banking, especially e-payments
 Bangladesh Bank has very recently permitted debit/credit transactions through website and third party fund transfer through Internet banking

Electronic banking continued

Legal Framework of E-Banking in Bangladesh

 E-commerce & E-banking have been primarily legalized via introduction of "ICT Law 2006"
 ICT Policy 2009 has just been introduced
 However, no comprehensive legal framework exists for E-commerce, in general, and E-banking, in particular
 Bangladesh Bank has passed “Payment and Settlement Systems Regulations 2009” to regulate and ensure a secure and efficient payment and settlement systems in the country
 There are certain shortcomings - such as e-signature, lack of significant penalties for frauds and other abuses and lack of adequate provision for E-banking, especially e-payments
 Bangladesh Bank has very recently permitted debit/credit transactions through website and third party fund transfer through Internet banking

Electronic Banking Continued

Absence of Digital Signature Authority

 A digital signature is an electronic signature that can be used to authenticate the identity of the sender of a message or the signatory of a document
 Digital signatures are easily transportable, cannot be imitated by someone else, and can be automatically time-stamped
 The ability to ensure that the original signed message arrived means that the sender cannot easily repudiate it later
 A certificate authority or certification authority (CA) is an entity that issues digital certificates for use by other parties
 CAs are characteristic of many public key infrastructure (PKI) schemes
 There are also several providers issuing digital certificates to the public at no cost. Institutions and governments may have their own CAs.
 Sadly, we are much behind and there is still no Digital Signature Authority here in Bangladesh