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A REPORT

ON

BANKING – CHANGING RULES OF

THE GAME THROUGH

TECHNOLOGY

Submitted to:Prof. Suryanarayana Mohapatra

By

Bachan Das

IBS, Hyderabad

10BSPHH010895

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TABLE OF CONTENTS

PURPOSE AND OBJECTIVE OF THE PROJECT……………………………...…………03 

METHODOLOGY AND SOURCES OF DATA……..………………….………………….04 

INTRODUCTION …………………………………………………………………………...05 

BANKING – BEFORE & AFTER TECHNOLOGY………………………..………………06

TECHNOLOGY AND BANKS TRANSFORMATION………………………..…………..07

CHANNELS AND PRODUCTS OF BANKING EVOLVED THROUGH

TECHNOLOGY………………………………………………………...……………………10

THE INDIAN SCENARIO…………………………………………………………………..19 

CONVERGENCE OF TELECOM AND BANKING INDUSTRY……..………………….23

EMERGING AREAS OF TECHNOLOGY IN BANKING INDUSTRY………………….25 

CONCLUSION…………………………………………………………………………….....27 

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PURPOSE OF THE PROJECT

Technology adoption has changed the face of the Banking industry. Think of any large bank 

these days and much of it is done online or with automated teller machines. Check images are

being photographed, deposits no longer need deposit slips, and balances are calculated in real

time.

What started as a mere automation of some routine work processes in banks has moved on to

become business process re-engineering which has resulted in making banking services

branchless, anytime and anywhere; facilitated new product development and enabled near real

time service delivery. Technology has helped banks to reach the doorsteps of the customer by

overcoming the limitations on geographical/physical reach in branch banking and easing the

resource and volume constraints posed by the brick and mortar model. All the stake holders have

benefitted from the expansion of delivery channels, product innovation and efficiency

enhancement which have been facilitated by technology adoption.

It is imperative to trace how the benefits of technology has percolated and is continuing to do so

in terms of its increased reach of banking services to a larger section of the population. This

project titled “Banking –  changing rules of the game through technology”  aims to bring out

the impact technology has had over the banking industry as a differentiator in enhancing

customer experience in terms facilitating cheaper, faster and easier transactions and also its

benefits will also percolate to the un-banked population.

OBJECTIVES OF THE PROJECT

1.  Analyzing the Banking industry before and after technology.

2.  Assessing the various forms, branches and products of Banking evolved through

technology.

3.  Assessing the emerging areas of technology and convergence of Telecom and Banking

industry.

4.  Identifying the necessary innovations in technology required to expand the frontiers of 

banking.

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METHODOLOGY

1.  Analysis and study of technology in the banking industry, its impact, emerging trends etc.

through secondary sources.

2.  Recommendations based on analysis.

3.  Conclusion.

SOURCES OF DATA

Secondary sources:

Databases/cases/articles/journals

Websites

  BANKING TECHNOLOGY

  BANKNETINDIA.COM

  WIKIPEDIA

  RBI

  PUBLIC AND PRIVATE SECTOR BANKS

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INTRODUCTION

The usage of technology, broadly referring to computers and peripheral equipment, has seen

tremendous growth in service industries in the recent past. The most obvious example is perhaps

the banking industry, where through the introduction of information technology (IT) relatedproducts in internet banking, electronic payments, security investments, information exchanges,

banks now can provide more diverse services to customers with less manpower. Seeing this

pattern of growth, it seems obvious that IT can bring about equivalent contribution to profits.

In general, existing studies have concluded two positive effects regarding the relation between IT

and banks‘ performance. First, IT can reduce banks‘ operational costs (the cost advantage). For 

example, internet helps banks to conduct standardized, low value-added transactions (e.g. bill

payments, balance inquiries, account transfer) through the online channel, while focusing their

resources into specialized, high-value added transactions (e.g.small business lending, personal

trust services, investment banking) through branches. Second, IT can facilitate transactions

among customers within the same network. Let us consider the case of automated teller

machines (ATMs) by banks. If ATMs are largely available over geographically dispersed areas,

the benefit from using an ATM will increase since customers will be able to access their bank 

accounts from any geographic location they want. This would imply that the value of an ATM

network increases with the number of available ATM locations, and the value of a bank‘s

network to a customer will be determined in part by the final network size of the bank.

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BANKING - BEFORE AND AFTER TECHNOLOGY

If you're a people person, you may prefer to walk into a bank or ride through the drive-through

to conduct your financial transactions face to face. This is particularly appealing in smaller

towns and communities where tellers tend to recognize regular customers and greet them by

name. However, if time is one of your most precious commodities, online banking, when and

wherever it's convenient for you, might just be the ticket.

In 1980s, the banking industry consisted of a large number of relatively small firms operating in

geographically distinct local markets. Products and services  —  primarily taking deposits and

making loans  — were delivered via the branch and the calling officer, which emphasized face-

to-face contact with customers. These customers were, for the most part, relatively

unsophisticated and trusted their bankers to act in their best interest. Twenty years later, with

dramatic advancements in IT, banking customers have become increasingly savvy, making use

of multiple distribution channels and demanding an ever-increasing variety of complex products.

And competition has emerged from nontraditional quarters to take advantage of new technology

and challenge old certainties.

What banks deliver and how they deliver it have changed dramatically. And these changes are

likely not over yet. This explosion of technology has changed the banking industry from paper

and branch banks to digitized and networked banking services. It has already changed the

internal accounting and management systems of banks. It is now fundamentally changing the

delivery systems banks use to interact with their customers. It is clear that new technology is

changing the banking industry forever. Banks with the ability to invest and integrate information

technology will become dominate in the highly competitive global market. Bankers are

convinced that investing in IT is critical. Its potential and consequences on the banking industry

future is enormous.

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Technology and Banks Transformation 

In the world of banking and finance nothing stands still. The biggest change of all is in the, scope

of the business of banking. Banking in its traditional from is concerned with the acceptance of 

deposits from the customers, the lending of surplus of deposited money to suitable customers

who wish to borrow and transmission of funds. Apart from traditional business, banks now a

days provide a wide range of services to satisfy the financial and non financial needs of all types

of customers from the smallest account holder to the largest company and in some cases of non

customers. The range of services offered differs from bank to bank depending mainly on the type

and size of the bank.

Computers are getting more sophisticated. They have given banks a potential they could only

dream about and have given bank customers high expectations. The changes that new

technologies have brought to banking are enormous in their impact on officers, employees, and

customers of banks. Advances in technology are allowing for delivery of banking products and

services more conveniently and effectively than ever before - thus creating new bases of 

competition. Rapid access to critical information and the ability to act quickly and effectively

will distinguish the successful banks of the future. The bank gains a vital competitive advantage

by having a direct marketing and accountable customer service environment and new,

streamlined business processes. Consistent management and decision support systems providethe bank that competitive edge to forge ahead in the banking marketplace.

Major applications: The advantages accruing from computerization are three-directional - to

the customer, to the bank and to the employee.

For the customer 

Banks are aware of customer's need for new services and plan to make them available. IThas increased the level of competition and forced them to integrate the new technologies

in order to satisfy their customers. They have already developed and implemented a

certain number of solutions among them:

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  Self-inquiry facility: Facility for logging into specified self-inquiry terminals at the

branch to inquire and view the transactions in the account.

   Remote banking: Remote terminals at the customer site connected to the respective

branch through a modem, enabling the customer to make inquiries regarding his

accounts, on-line, without having to move from his office.

   Anytime banking-Anywhere banking: Installation of ATMs which offer non-stop cash

withdrawal, remittances and inquiry facilities. Networking of computerized branches

inter-city and intra-city, will permit customers of these branches, when interconnected, to

transact from any of these branches.

  Telebanking: A 24-hour service through which inquiries regarding balances and

transactions in the account can be made over the phone.

   Electronic Banking: This enables the bank to provide corporate or high value customers

with a Graphical User Interface (GUI) software on a PC, to inquire about their financial

transactions and accounts, cash transfers, check book issue and inquiry on rates without

visiting the bank. Moreover, LC text and details on bills can be sent by the customer, and

the bank can download the same. The technology used to provide this service is called

electronic data interchange (EDI). It is used to transmit business transactions in

computer-readable form between organizations and individuals in a standard format.

  As information is centralized and updates are available simultaneously at all places,

single-window service becomes possible, leading to effective reduction in waiting time.

For the bank 

During the last decade, banks applied IT to a wide range of back and front office tasks in

addition to a great number of new products. The major advantages for the bank to

implement IT are:

  Availability of a wide range of inquiry facilities, assisting the bank in business

development and follow-up.

  Immediate replies to customer queries without reference to ledger-keeper as terminals are

provided to Managers and Chief Managers.

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  Automatic and prompt carrying out of standing instructions on due date and generation of 

reports.

  Generation of various MIS reports and periodical returns on due dates.

  Fast and up-to-date information transfer enabling speedier decisions, by interconnecting

computerized branches and controlling offices.

For the employees 

IT has increased their productivity through the followings:

  Accurate computing of cumbersome and time-consuming jobs such as balancing and

interest calculations on due dates.

  Automatic printing of covering schedules, deposit receipts, pass book / pass sheet, freeing

the staff from performing these time-consuming jobs, and enabling them to give more

attention to the needs of the customer.

  Signature retrieval facility, assisting in verification of transactions, sitting at their own

terminal.

  Avoidance of duplication of entries due to existence of single-point data entry.

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CHANNELS AND PRODUCTS OF BANKING EVOLVED THROUGH

TECHNOLOGY

CHANNELS

AUTOMATED TELLER MACHINE(ATM): An automated teller machine (ATM), alsoknown as a Cash Point or Cash Machine is a computerized telecommunications device that

provides the clients of a financial institution with access to financial transactions in a public

space without the need for a cashier, human clerk or bank teller. ATMs are known by various

other names including ATM Machine, automatic banking machine, and various regional variants

derived from trademarks on ATM systems held by particular banks.

Invented by IBM, the first ATM was introduced in December 1972 at Lloyds Bank in the UK.

On most modern ATMs, the customer is identified by inserting a plastic ATM card with

a magnetic stripe or a plastic smart card with a chip, that contains a unique card number and

some security information such as an expiration date or CVVC (CVV). Authentication isprovided by the customer entering a personal identification number (PIN).

Using an ATM, customers can access their bank accounts in order to

make cash withdrawals, credit card cash advances, and check their account balances as well as

purchase prepaid cell phone credit. If the currency being withdrawn from the ATM is different

from that which the bank account is denominated in (e.g.: Withdrawing Japanese Yen from a

bank account containing US Dollars), the money will be converted at a wholesale exchange rate. 

Thus, ATMs often provide the best possible exchange rate for foreign travelers and are heavily

used for this purpose as well.

Although ATMs were originally developed as just cash dispensers, they have evolved to include

many other bank-related functions. In some countries, especially those which benefit from a fully

integrated cross-bank ATM network, ATMs include many functions which are not directly

related to the management of one's own bank account, such as:

  Deposit currency recognition, acceptance, and recycling

  Paying routine bills, fees, and taxes (utilities, phone bills, social security, legal fees, taxes,

etc.)  Printing bank statements

  Updating passbooks

  Loading monetary value into stored value cards

  Purchasing

  Postage stamps. 

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  Lottery tickets

  Train tickets

  Concert tickets

  Movie tickets

  Shopping mall gift certificates. 

  Games and promotional features

  Fastloans

  CRM at the ATM

  Donating to charities

  Cheque Processing Module

  Adding pre-paid cell phone / mobile phone credit.

  Paying (in full or partially) the credit balance on a card linked to a specific current account. 

  Transferring money between linked accounts (such as transferring between checking and

savings accounts)

MOBILE BANKING: Also known as M-Banking, mbanking, SMS Banking, Mobile

banking is a term used for performing balance checks, account transactions, payments, credit

applications and other banking transactions through a mobile device such as a mobile phone or

Personal Digital Assistant (PDA). The earliest mobile banking services were offered over SMS. 

With the introduction of the first primitive smart phones with WAP support enabling the use of 

the mobile web in 1999, the first European banks started to offer mobile banking on this platform

to their customers[1]

. 

Mobile banking has until recently most often been performed via SMS or the Mobile

Web. Apple's initial success with iPhone and the rapid growth of phones based

on Google's Android (operating system) have led to increasing use of special client programs,

called apps, downloaded to the mobile device.

Mobile Banking can be said to consist of three inter-related concepts:

  Mobile Accounting

  Mobile Brokerage

  Mobile Financial Information Services

Most services in the categories designated  Accounting and  Brokerage are transaction-based.

The non-transaction-based services of an informational nature are however essential for

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conducting transactions - for instance, balance inquiries might be needed before committing

a money remittance.

Over the last few years, the mobile and wireless market has been one of the fastest growing

markets in the world and it is still growing at a rapid pace.

Mobile banking can offer services such as the following:

Account Information

1.  Mini-statements and checking of account history

2.  Alerts on account activity or passing of set thresholds

3.  Monitoring of term deposits

4. 

Access to loan statements5.  Access to card statements

6.  Mutual funds / equity statements

7.  Insurance policy management

8.  Pension plan management

9.  Status on check, stop payment on check 

10. Ordering check books

11. Balance checking in the account

12. Recent transactions13. Due date of payment (functionality for stop, change and deleting of payments)

14. PIN provision, Change of PIN and reminder over the Internet

15. Blocking of (lost, stolen) cards

Payments, Deposits, Withdrawals, and Transfers

1.  Domestic and international fund transfers

2.  Micro-payment handling

3.  Mobile recharging

4.  Commercial payment processing

5.  Bill payment processing

6.  Peer to Peer payments

7.  Withdrawal at banking agent

8.  Deposit at banking agent

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Investments

1.  Portfolio management services

2.  Real-time stock quotes

3.  Personalized alerts and notifications on security prices

Support

1.  Status of requests for credit, including mortgage approval, and insurance coverage

2.  Check (cheque) book and card requests

3.  Exchange of data messages and email, including complaint submission and tracking

4.  ATM Location

Content Services

1.  General information such as weather updates, news

2.  Loyalty-related offers

3.  Location-based services

ONLINE BANKING: Online banking (or Internet banking) allows customers to conduct

financial transactions on a secure website operated by their retail or virtual bank, credit union or

building society. 

Online 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, apply for a loan, new account, etc.)

  Payments to third parties, including bill payments and telegraphic/wire transfers

  Funds transfers between a customer's own transactional account and savings accounts

  Investment purchase or sale

  Loan applications and transactions, such as repayments of enrollments

  Non-transactional (e.g., online statements, cheque links, cobrowsing, chat)

  Viewing recent transactions

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  Downloading bank statements, for example in PDF format

  Viewing images of paid cheques

  Financial Institution Administration

  Management of multiple users having varying levels of authority

  Transaction approval process

Features commonly unique to Internet banking include

  Personal financial management support, such as importing data into personal accounting

software. Some 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.

TELEPHONE BANKING: Telephone banking is a service provided by a financial institution, 

which allows its customers to perform transactions over the telephone.

Most telephone banking services use an automated phone answering system with phone keypad

response or voice recognition capability. To guarantee security, the customer must

first authenticate through a numeric or verbal password or through security questions asked by a

live representative (see below). With the obvious exception of cash withdrawals and deposits, it

offers virtually all the features of an automated teller machine: account balance information and

list of latest transactions, electronic bill payments, funds transfers between a customer's accounts, etc.

Usually, customers can also speak to a live representative located in a call centre or a branch, 

although this feature is not always guaranteed to be offered 24/7. In addition to the self-service

transactions listed earlier, telephone banking representatives are usually trained to do what was

traditionally available only at the branch: loan applications, investment purchases and

redemptions,chequebook orders, debit card replacements, change of address, etc.

Banks which operate mostly or exclusively by telephone are known as phone banks. They also

help modernise the user by using special technology.

CALL CENTRE: Most banking institutions use call centers nowadays to interact with their

customers. A call centre or call center is a centralized office used for the purpose of receiving

and transmitting a large volume of requests by telephone. A call centre is operated by

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a company to administer incoming product support or information inquiries from consumers.

Outgoing calls for telemarketing, clientele, product services, and debt collection are also made.

In addition to a call centre, collective handling of letters, faxes, live chat, and e-mails at one

location is known as a contact centre.

VIDEO BANKING: Video banking is a term used for performing banking transactions or

professional banking consultations via a remote video connection. Video banking can be

performed via purpose built banking transaction machines (similar to an Automated teller

machine), or via a videoconference enabled bank branch. Video banking can be conducted in a

traditional banking branch. This form of video banking replaces or partially displaces the

traditional banking tellers to a location outside of the main banking branch area. Via the video

and audio link, the tellers are able to service the banking customer. The customer in the branch

uses a purpose built machine to process viable medias such as cheques, cash, or coins.

Video banking can also provide professional banking services to bank customers during

nontraditional banking hours at convenient times such as in after hours banking branch

vestibules that could be open up to 24 hours a day. This gives bank customers the benefit of 

personal teller service during hours when bank branches are not typically open. 

VIDEO BANKING SERVICES:

Depending on the type of video banking solution deployed there are numerous types of services

that can be offered. In conjunction with transaction hardware video banking can include all of the

following types of services

  Customer authentication

  Cash Deposits

 Check Deposits

  Cash Withdrawal

  Coin Withdrawals

  Check Print

  Account Transfers

  Bill Payments

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  Account inquiries

  Process New Accounts

With all types of video banking the following services are enabled:

  Process New Loans

  Consult with banking professionals

  Process New Accounts

  Inquire about banking services

PRODUCTS & SERVICES

ELECTRONIC FUNDS TRANSFER: Electronic funds transfer or EFT is the electronic

exchange or transfer of money from one account to another, either within a single financial

institution or across multiple institutions, through computer-based systems.

The term covers a number of different concepts:

  Cardholder-initiated transactions, where a cardholder makes use of a payment card

  Direct deposit payroll payments for a business to its employees, possibly via a payroll

service bureau

  Direct debit payments, sometimes called electronic checks, for which a business debits the

consumer's bank accounts for payment for goods or services

  Electronic bill payment in online banking, which may be delivered by EFT or paper check 

  Wire transfer via an international banking network (carries a higher fee in North America)

  Electronic Benefit Transfer

DIRECT DEPOSIT: Direct deposit is simply the process of your employer's bank 

communicating directly with your bank, so your paycheck gets deposited automatically instead

of being passed around at your company until--hopefully--it finally reaches you. No more long

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lines, wasted lunch hours, or trying to write up a deposit slip against the steering wheel at a

drive-through ATM.

Here's how the process works:

  You authorize the transfer of funds directly into your bank account(s) by providing your

employer with a voided blank check or deposit slip for your bank account.

  Typically, you may specify how much of your paycheck you want into each of your

accounts.

  The appropriate wages--minus taxes, deductions, 401(k) salary deferrals, etc.--are

automatically deposited into your bank account(s) each pay period.

  On payday, you'll receive a voucher that confirms the amount deposited into your

account.

DIRECT DEBIT: A direct debit or direct withdrawal is an instruction that a bank 

account holder gives to his or her bank to collect an amount directly from another account. It is

similar to a direct deposit but initiated by the beneficiary. It is also called pre-authorized debit

(PAD) or pre-authorized payment (PAP).

It is typical to use these pulled collections to make recurring payments for credit card or utility

bills. Unlike standing orders, which require the amounts to be fixed, direct debits can be used for

varying amounts, and are more similar to direct deposits, which are initiated by the payer. With

direct debits, the payee can simply indicate a different amount each time. However, in countries

where setting up authorization for direct debit is easy enough, it can also be used for one-time

payments in the mail order business or even at a point of sale. 

ELECTRONIC BILL PRESENTMENT AND PAYMENT (EBPP): It is a fairly new

technique that allows consumers to view and pay bills electronically. There are a significant

number of bills that consumers pay on a regular basis, which include: power bills, water, oil,

internet, phone service, mortgages, car payments etc. EBPP systems send bills from service

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providers to individual consumers via the internet. The systems also enable payments to be made

by consumers, given that the amount appearing on the e-bill is correct.

The biggest difference between EBPP systems and the traditional method of bill payment, is that

of technology. Rather than receiving a bill through the mail, writing out and sending a cheque,

consumers receive their bills in an email, or are prompted to visit a website to view and pay their

bills.

REMOTE DEPOSIT: Remote deposit refers to the ability to deposit a check into a bank 

account from a remote location, such as an office or home, without having to physically deliver

the check to the bank. This is typically accomplished by scanning a digital image of a check into

a computer, then transmitting that image to the bank, a practice that became legal in the United

States in 2004 when the Check Clearing for the 21st Century Act (or Check 21 Act) took effect.

This service is typically used by businesses, though a remote deposit application for consumers

has been developed and has begun to be implemented by a handful of banks. It should not be

confused with Direct deposit and Online deposit. 

SMS BANKING:  SMS banking is a technology-enabled service offering from banks to its

customers, permitting them to operate selected banking services over their mobilephones

using SMS messaging. SMS banking services are operated using both push and pull messages.

Push messages are those that the bank chooses to send out to a customer's mobile phone,

without the customer initiating a request for the information. Typically push messages could be

either Mobile marketing messages or messages alerting an event which happens in the customer's

bank account, such as a large withdrawal of funds from the ATM or a large payment using the

customer's credit card, etc.

Pull messages are those that are initiated by the customer, using a mobile phone, for obtaining

information or performing a transaction in the bank account. Examples of pull messages for

information include an account balance enquiry, or requests for current information like

currency exchange rates and deposit interest rates, as published and updated by the bank.

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SMART CARDS: A Smartcard is similar to a credit card; however it contains an embedded 8-

 bit microprocessor and uses electronic cash which transfers from the consumers‘ card to the

sellers‘ device. A popular smartcard initiative is the VISA Smartcard. Using the VISA Smartcard

you can transfer electronic cash to your card from your bank account, and you can then use your

card at various retailers and on the internet.

The above are few of the technologies adopted and integrated by the banks in their daily

operations.

THE INDIAN SCENARIO

RBI’s EARLY INITIATIVES 

As a central bank in a developing country, the Reserve Bank of India (RBI) has adopted

development of the banking and financial market as one of its prime objectives. "Institutional

development" was the hallmark of this approach from 1950s to 1970s. In the 1980s, the Reserve

Bank focused on "improvements in the productivity" of the banking sector. Being convinced that

technology is the key for improving in productivity, the Reserve Bank took several initiatives to

popularize the usage of technology by banks in India.

Periodically, almost once in five years since the early 1980s, the Reserve Bank appointed

committees and working Groups to deliberate on and recommend the appropriate use of 

technology by banks give the circumstances and the need. These committees were:

  Rangarajan committee – I in early 1980s

  Rangarajan committee – II in late 1980s

  Saraf working committee in early 1990s

  Vasudevan working group in late 1990s

  Barman working group in early 2000s

Based on the recommendations of these committees and working groups, the Reserve Bank 

issued suitable guidelines for the banks. In the 1980s, usage of technology for the back office

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operations of the banks predominated the scene. It was in the form of accounting of transactions

and collection of MIS. In the inter-bank payment systems, it was in the form of clearing and

settlement using MICR technology.

Two momentous decisions of the Reserve Bank in the 1990s changed the scenario for ever there

are:

a) The prescription of compulsory usage of technology in full measure by the new private sector

banks as a precondition of the license and

b) The establishment of an exclusive banking research technology institute for development of 

technology in banking

As the new private sector banks came on the scene as technology-savvy banks and offered

several innovative products at the front office for the customers based on technology, the

demonstration effect caught on the reset of the banks. Multi channel offerings like machine

based (ATMs and pc-Banking), card based (credit/Debit/Smart cards), Communication based

(Tele-Banking and Internet Banking) ushered in Anytime and Anywhere Banking by the banks

in India. The IDRBT has been instrumental in establishing a safe and secure, state of the art

communication backbone in the from of the Indian Financial NETwork (INFINET) as a closed

user group exclusively for the banking and financial sector in India.

CHANGING FACE OF BANKING SERVICES

Liberalization brought several changes to Indian service industry. Probably Indian banking

industry learnt a tremendous lesson. Pre-liberalization, all we did at a bank was deposit and

withdraw money. Service standards were pathetic, but all we could do was grin and bear it. Post-

liberalization, the tables have turned. It's a consumer oriented market there.

Technology is revolutionizing every field of human endeavor and activity. One of them is

introduction of information technology into capital market. The internet banking is changing the

banking industry and is having the major effects on banking relationship. Web is more important

for retail financial services than for many other industries.

Retail banking in India is maturing with time, several products, which further could be

customized. Most happening sector is housing loan, which is witnessing a cut-throat competition.

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The home loans are very popular as they help you to realize your most cherished dream. Interest

rates are coming down and market has seen some innovative products as well. Other retail

banking products are personal loan, education loan and vehicles loan. Almost every bank and

financial institution is offering these products, but it is essential to understand the different

aspects of these loan products, which are not mentioned in their colored advertisements.

PLASTIC MONEY 

Plastic money was a delicious gift to Indian market. Giving respite from carrying too much cash.

Now several new features added to plastic money to make it more attractive. It works on formula

purchase now repay later. There are different facts of plastic money credit card is synonyms of 

all.

Credit card is a financial instrument, which can be used more than once to borrow money or

buy products and services on credit. Banks, retail stores and other businesses generally issue

these. On the basis of their credit limit, they are of different kinds like classic, gold or silver.

Charged cards - these too carry almost same features as credit cards. The fundamental

difference is you can not defer payments charged generally have higher credit limits or some

times no credit limits.

Debit cards - this card is may be characterized as accountholder's mobile ATM, for this you

have to have account with any bank offering credit card.

Over the years, the banking sector in India has seen a no. of changes. Most of the banks have

begun to take an innovative approach towards banking with the objective of creating more value

for customers and consequently, the banks. Some of the significant changes in the banking sector

are discussed below.

MOBILE BANKING 

Taking advantages of the booming market for mobile phones and cellular services, several banks

have introduced mobile banking which allows customers to perform banking transactions using

their mobile phones. For instances HDFC has introduced SMS services. Mobile banking has

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been especially targeted at people who travel frequently and to keep track of their banking

transaction.

RURAL BANKING 

One of the innovative scheme to be launched in rural banking was the KISAN CREDIT CARD

(KCC) SCHMME started in fiscal 1998-1999 by NABARD. KCC mode it easier for framers to

purchase important agricultural inputs. In addition to regular agricultural loans, banks to offer

several other products geared to the needs of the rural people.

Private sector Banks also realized the potential in rural market. In the early 2000's ICICI bank 

began setting up internet kiosks in rural Tamil Nadu along with ATM machines.

NRI SERVICES 

With a substantial number of Indians having relatives abroad, banks have begun to offer service

that allows expatriate Indians to send money more conveniently to relatives India which is one of 

the major improvements in money transfer.

E-BANKING 

E-Banking is becoming increasingly popular among retail banking customers. E-Banking helps

in cutting costs by providing cheaper and faster ways of delivering products to customers. It also

helps the customer to choose the time, place and method by which he wants to use the services

and gives effect to multichannel delivery of service by the bank. This E-Banking is driven by

twin engine of "customer-pull and Bank-push".

Information and communication technology is the major advent in the field of technology which

is used for access, process, storage and dissemination of information electronically. Banking

industry is fast growing with the use of technology in the form of ATMs, on-line banking,

Telephone banking, Mobile banking etc., plastic card is one of the banking products that cater to

the needs of retail segment has seen its number grow in geometric progression in recent years.

This growth has been strongly supported by the development of in the field of technology,

without which this could not have been possible of course it will change our lifestyle in coming

years.

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Convergence of Telecom and Banking Industry

NEED:

1.  M-commerce would enable microfinance institutions (MFIs) to offer more competitive loan rates

to their users, as there is a reduced cost of dealing in cash

2.  The interactivity to perform transactions on the spot saves the customer a lot of time and ease to

perform transactions

3.  Banking – mobile communications product is a way for wireless telecoms to move beyond

commodity voice services and differentiate their products to improve customer retention in a

business with a notoriously high churn rate.

OFFERINGS:

1.  I mode in Japan by NTT docomo

2.  Idea Cellular Signs Up As Banking Correspondent For Axis Bank - Idea and Axis bank will run

a pilot project to enable mobile remittance between Mumbai‗s Dharavi –  one of the largest

slums in the world – and Allahabad in Uttar Pradesh. Customers will be able to transfer money

3.  Union Bank of India is planning to launch Union Bank Money, a mobile payments service,

in partnership with Nokia and (Nokia funded) Obopay. The service allows customers to store

money, transfer money and make payments: it is, by the looks of it, a wallet service. Nokia

plans to preinstall the application in Nokia mobile devices. The rollout is expected to be

complete in 12-18 months

4.  Obopay has launched bill payments services for government owned telecom operator BSNL, in

the West Zone, including in Gujarat, Maharashtra, Madhya Pradesh, Chhatisgarh.

5.  Nokia has also partnered with Yes Bank to launch similar service for mobile payments6.  Competitor Paymate has partnered with Essar‗s retail chain MobileStore to offer mobile

payment services across its 1,300 stores in over 200 cities

7.  Movilpago, a joint-venture subsidiary of Telefonica Moviles, the cellular unit of Spanish

telecom Telefonica SA, and Spain‗s largest bank, Banco Bilbao Vizcaya Argentaria SA

(BBVA), will provide a wireless payment system over Telefonica‗s cellular network.

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8.  Mannesmann, the German subsidiary of the U.K.‗s Vodafone Group PLC, has a joint venture

with Deutsche Bank. Telecom Italia has one with Banco di Roma.

TRENDS:

1. MChek has clocked more than a million users with Airtel since its commercial launch in June

2008.

2. M-Pesa by Safaricom in Kenya was first introduced in March 2007. By mid-quarter of 2010, the

application had over 2.3 million registered users with over 18 Billion (about $230 million)

Kenyan Shilling (Ksh) moved through the system, via person-to- person transfers.‗ The service

has now been transitioned to be operationally run by IBM Global Services on behalf of 

Vodafone; the initial three markets (Kenya, Tanzania and Afghanistan) are hosted MTN and

Western Union have formed an alliance that is bound to ignite the biggest international mobile

remittance services or mobile money transfer, if you like, on the continent by Rackspace.

3. With new forecasts from ABI Research indicating that in 2015 about 244 million people

worldwide will carry out financial transactions using their mobile phones

CHALLENGES:

1. Regulation, not keeping up pace with technology.

2. No clear-cut approach to addressing the challenge and there is still no defined predictability as

to what level of changes could occur with adoption of MobileMoney in a big mobile market

3. Telecoms need certain capabilities in order to provide wireless finance services. Those they do

not already possess, they can acquire relatively cheaply by allying themselves with banks.

4. Security issues concerning wireless transfer of money using third party applications.

5. Privacy of customer and account information to be securely transferred.

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RECOMMENDATIONS:

1. Regulators must encourage such alliances to sustain the relevance of the different segment

players otherwise nothing stops a mega Telco from becoming a mega-multi services provider

offering all services in one converged pipe

2. No-KYC Prepaid Instruments should not be encouraged by the operators.

3. Transparency to the customer and all the other parties involved.

4. Interoperability: by making all mobile payment offerings inter-operable it would allow pre- paid

instrument issuers to connect networks and reduce the cost of establishing a business-

correspondent/retail network.

Emerging areas of Technology in Banking and necessary

innovations required to expand the frontiers of banking.

The "beep" of the automated teller machine may soon follow. Even the silent swipe of a card

with a magnetic strip is destined to disappear. In their place, you‘ll wave a plastic card or a key

chain fob over a receiver to complete a "contactless" purchase. You‘ll deposit checks and cash

without using an envelope and walk away with a more detailed receipt and nearly immediate

access to those funds.

New technologies are being rolled out on a grand scale by banks to introduce their customers to

the latest, coolest payment methods, hoping to build brand loyalty and save users time while

waiting in line.

Contactless Credit Cards

In addition to the magnetic strip on the back of your credit card, there soon may be an embedded

radio chip that will change the way you pay at the point of sale. Instead of swiping, you‘ll wave

your card over a receiver to complete a purchase. Or at least that‘s what many banks, credit card

issuers and merchants hope. Big banks like Bank of America, Chase, Citibank, and Wells Fargo

are running pilot programs in major metropolitan areas like New York, Washington, Atlanta and

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San Francisco. Even though contactless cards are still officially in testing phase, users already

number in the millions. Users can wave these cards around today at more than 30,000 shopping

establishments, from local caf es to national chains like McDonald‘s and Arby‘s. Some

contactless systems are connected to credit cards, adding purchases to account balances. Others

work like gift cards, with specific amounts loaded into each card or key fob. Some are

reloadable, carrying a value that can be replenished as it is used up.

No-envelope ATMs

Banks are also introducing advanced ATMs with no-envelope deposits. The benefits: Your

receipt shows a copy of your deposited check and the numbers and denominations of deposited

cash bills. Plus, you get faster access to deposited funds. The new ATM technology is expanding

rapidly because of the new Federal regulation popularly known as ―Check 21‖, which allows the

image of a check to be as legally valid as the check itself. Now when consumers deposit a check,

the check image can be electronically transferred to the issuing bank, which will clear the funds

in much faster time.

With the new technology, you don‘t need to key in an amount. Just insert your money into a slot

and the machine sorts, counts and verifies it. The scanned check images and your total deposit

amount appear on the ATM screen. You must confirm whether the amount is correct. If not, you

can cancel your transaction, and the machine quickly spits out your cash. If you experience a

mechanical failure or another problem while making a deposit, the ATM logs a record of your

information as well as the machine malfunction.

Radio frequency identification (RFID) technology 

For most people, visiting their High Street bank is at worst, a frustrating and occasionally

exasperating experience and the service often leaves something to be desired. But how much

more rewarding would it be if you were personally greeted on arrival, rarely had to queue and the

cashier immediately grasped what you needed and how to help you? This might seem fanciful.

However, new technology currently being trialed by a handful of banks around the world is

designed to change all that.

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At the heart of this potential revolution is the use of radio frequency identification (RFID)

technology.

These are tiny chips holding a unique ID number which emit radio waves and can be tracked

and scanned. These "radio barcodes" are well established in the US, with retailers putting them

on packaging and products to monitor stock levels. But the technology is being rapidly

developing, being adopted by credit card companies and even some mobile phone providers.

Simply put, RFID chips embedded into credit cards or special loyalty cards would enable banks

to identify customers the moment they walk through the door. From that point on, what

customers do in-store will automatically transmit information to staff. For instance, when a

customer picks up a brochure about car insurance, relevant information would flash up on a

plasma screen and alert staff to a customer's interest in the product.

By collecting information at an early stage - combined with new systems speeding up data

processing - cashiers would be better informed, able to offer a more productive, quicker service.

Other technologies are on the horizon which could potentially reduce customers' headaches.

Biometric tools such as fingerprint recognition could soon be used to verify IDs, while some

firms are already using specialist cameras to track customer behavior in their branches and

monitor how long queues are. Digital pens, which are designed to remove the need for staff to

key in all customer information themselves, could make many administrative errors a thing of 

the past.

CONCLUSION

The epicenter for a transformation of consumer banking has been the convergence of banking

and telecommunications players, as well as Internet service providers and Web portals. The

conventional intra-industry consolidation that has preoccupied the telecom and banking sectors

for the past few years has run its course, and as it does so, atypical communications and financial

services partnerships, aimed at creating new forms of competition, has accelerated.