Banking innovations

SERVICES TO CUSTOMERS

By Jeffrey Joseph

BANKING INNOVATIONS

BANKING INNOVATION

Stands for making something new in banking operations by using electronic devices & internet.

to strengthen the operations by putting the services faster, easy, cheaper and accurate.

these are rightly called as Electronic

Banking.

ADVANTAGES OF ELECTRONIC BANKING1. Faster & convenient transactions2. No longer required to wait in long

queues3. Opening of a/c simple & easy4. Larger customer coverage5. Promoting banking services & products

internationally6. Increase customer satisfaction 7. Abolishing the use of paper in

transactions8. Fund transfer become faster

&convenient

DISADVANTAGES /LIMITATIONS1) Lack of customer knowledge & skill on

computers & browsing.2) Security risk. a) increased no. of fraudulent bank

website b) fake emails c) use of Trojan horse programmes

to capture user ID & passwords3) Viruses & worms.

NEW BANKING /ELECTRONIC BANKING SERVICES INTERNET BANKING MOBILE BANKING DEBIT & CREDIT CARDS AUTOMATED TELLERMACHINE(ATM)

BANKING ELECTRONIC FUND TRANSFER MAGNETIC INK CHARACTER READER

(MICR) TECHONOLOGY REAL TIME GROSS SETTLEMENT

SYSTEM(RTGC) DE-MATERIALIAZED

ACCOUNT(DEMAT) SERVICES

INTERNET BANKING/ E-BANKING/ WEB BANKING Definition “The performance of banking

activities via the internet. online banking also known as ‘internet banking’ or ‘web banking’.

COMMON FEATURES NON-TRASATION TASK

TRANSACTIONAL BANKING TASK

INTERNET

BANKING

ADVANTAGES & NEED

convenience banking for customers

24/7*365 low cost, unlimited access customer –banker relationship wider reach to public competitive edge an effective marketing tool for

promotion

MOBILE BANKING

DEFINITION: Is a system that allows

customers of a financial institution to conduct a no. Of financial transactions through a mobile device such as mobile phone or personal digital assistant.

SERVICES OFFERED

1. mini statements &checking of a/c history

2. alerts on a/c activity or passing of thresholds

3. access to loan statement4. insurance policy management5. pension plan management6. blocking of cards7. balance checking in the a/c8. mobile recharging

ADVANTAGESA. Mobile connectivityB. User friendlyC. Cost effectiveD. Reduces the risk of

fraudE. Improves customer

services

LIMITATIONS

Smart mobile users- less than 20%. Mobile banking not possible in basic model. So, they have to depend on SMS.

One mobile banking a/c for one customer(says RBI)

CONNET ME

1. BANKING – STAER – MOBILE –CONNECT-(BOI)

2. SBI- LINE- ON – MOBILE-(SBI)

3. BANKING- BANK- MOBILE- HDFC (HDFC)

BOI-: STAR CONNECT MOBILE BANKINGSBI-: MOBILE ONLINE SBIHDFC-: HDFC BANK MOBILE BANKING

DEBIT CARDSDEFINITION: An electronic card issued by a bank which allows bank clients, access to their a/c to withdraw cash or pay for goods and services

TYPESa) ONLINE DEBT CARDSb) OFFLINE DEBIT CARDSc) ELECTRONIC PURSE

CARDS d) PREPAID DEBIT CADRDS

ADVANTGES 24 hours access to cash per day50,000 upto2L

View a/c balances &mini statements

Transfer funds between a/c’s Refill your prepaid mobile Request a cheque book & a/c statement

CREDIT CARDS

Credit card is a

plastic card issued by a financial company giving the holder an option to borrow funds, usually at point of sale.

Credit card charges interest & are primarily used in short tem financing.

ADVANTAGES

1. make purchase on credit

2. accurate record keeping3. cheaper for short term borrowing

4. additional benefits

DISADVANTAGES

1. Impulsive buyer2. relatively expensive

3. lost or stolen cards

ATM BANKING ATM banking is a banking

operation through a machine at a bank branch or other location which enables a customer to perform basic banking activities (checking balance, withdrawing or transferring funds) even when the bank is closed.

BENEFITS Benefits to customers Benefits to banks Benefits to others

Electronic Fund transfer(EFT) “Moving funds between different account in the same

or different bank ,through the use of wire transfer, automatic teller machines, or computers but without the use of paper documents.”

For ex. When you use your debit cards to make a purchase at a store or online the transaction is processed using an EFT system. The transaction is very similar to an ATM withdrawal ,with near instantaneous payment to the merchant and deduction from your checking account.

Direct deposit is another form of an electronic funds transfer .In this case ,funds from your employer’s bank account are transferred electronically to your bank account ,with no need for paper based payment systems.

Benefits of EFT Its payment solution that involves directly exchanging

funds between 2 banks a/c. It is sometimes referred to as e-cheque or e-chequing .

EFT is faster mode of transfer of funds which facilitate transference of funds within 24 hrs.

They system is customer- savvy as no paper work is involved .

There is absolutely no requirement for the beneficiary to go to the bank since the beneficiary account is credited automatically

In –built security system ensure safer mode of transferee of funds.

Q. What looks like half apple ?

ANS: The other half. (UPSC – IAS Topper )

MAGNETIC INK CHARACTER READER (MICR) TECHONOLOGY

It’s a character recognition technology used primarily by the banking industry to facilitate the processing and clearance of cheques and other documents.

The MICR encoding called the MICR line is located at the bottom of the cheque or other vochurer.

The technology allows MICR reader to scan and read the information directly into a data collection device. Unlike barcodes or similar technologies ,MICR characters can be easily read by humans.

Reasons why MICR is deemed important in Banking:

•Can quickly identify the banks that issued them. It also eliminates the need to manually verify or validate the checks.

•Even if the MICR is covered with signature or cancellation marks, still it can be read.

•Before MICR system was used ,it took weeks for banks to clear cheques, but now this technology rapidly process high volume of cheques per day

/EFT

Q. What happened when wheel was invented? 

ANS: It caused a revolution.

Dematerialized account(Demat ) service Demat account is which

electronically maintained by the bank or is provided by broker agencies where you can keep money for transaction in share,mutual funds purchase of gold etc.

It has to be tagged with your saving account from where the money will be paid if you purchase a share etc and receive money when you sell a share etc.

DEPOSITORY •A depository holds securities of investors in electronic form.

•Depository is any place where something is deposited for storage or security purposes.

•This system is also known as scrip less trading system.

Refers to a company, bank, institution that holds and facilitates the exchange of securities

Intermediaries ( Depositories Participants) perform their actions in variety of securities at depository on behalf of their client.

Depository Participants:

Is an agent of depository and functions as the interacting medium between the depository and investor.

• DP should be registered with SEBI.• Should maintain investors securities a/c with the

depository .

• He is linked to a broker who trades on behalf of investors,• To avail the service an a/c similar to bank a/c has to be

opened with the DP.

• As per SEBI regulation ,financial institution ,banks, stock brokers can be DP.

• Investors can choose their DP or can have more than one at a time.

Q.What will you do if I run away with your sister?  

ANS: The candidate who was selected answered ” I will not get a better match for my sister than you sir”

Demat a/c opening procedure

It takes 15 mins and one has to sign on a few doted lines and has to deposit identification proofs which may range from passport ,pancard, ration card ,voters card etc.

Its simple as opening a bank account:

1st – fill up the account opening form, which is avaiable with the DP.

2nd -Sign the DP-client agreement, which defines the rights and duties of DP and the person wishing to open the account.

3rd-Receice your client account number (client id) .This client id along with your DP id gives you unique identification in the depository system.

Basis of differentiation

Bank a/c Demat a/c

Form of holding Funds SecuritiesUsed for Safekeeping of money Safekeeping of sharesFacilities Transfer of money Transfer of sharesWhere to open A bank of choice A DP is of choiceRequirement of PAN no

Not mandatory Mandatory

Interest accrual on holding

Interest income is subject to the applicable rate of interest

No interest accruals on securities held on demat a/c

Minimum bal requirement

Maintenance is specified for certain Bank a/c

No such requirement

Either or survivor facility

Available Not Available

Q.If you throw a red stone into the blue sea what it will become?

ANS: It will become Wet or Sink as simple as that. (UPSC IAS Rank 2)

Q. How can a man go eight days without sleep?

ANS: No Problem , He sleeps at night. (UPSC IAS Rank 98)

Q. If it took eight men ten hours to build a wall, how long would it take four men to build it?

ANS: No time at all it is already built. (UPSC 23 Rank Opted for IFS)

REMITTANCE OF FUNDS

Remittance of funds Apart from accepting deposits and lending

money, Banks also carry out, on behalf of their customers the act of transfer of money - both domestic and foreign.- from one place to another. This activity is known as "remittance business" .

• Banks issue Demand Drafts, Banker's Cheques, Money Orders etc. for transferring the

money.

Banks also have the facility of quick transfer of money also know as Telegraphic Transfer or Tele Cash Orders.

Bank A -BLR

Place A

In Remittance business, Bank 'A' at a place 'a' accepts money from customer 'C' and makes arrangement for payment of the same amount of money to either the customer 'C' or his "order" i.e. a person or entity, designated by 'C' as the recipient, through either a Branch of Bank 'A' or any other entity at place 'b'.

In return for having rendered this service, the Banks charge a pre-decided sum known as exchange or commission or service charge. This sum can differ from bank to bank. This also differs depending upon the mode of transfer and the time available for effecting the transfer of money. Faster the mode of transfer, higher the charges.

Bank A-kochin

Bank B-Kochin

Place B

1. Demand Draft

A demand draft or "DD" is an instrument most banks in India use for effecting transfer of money. It is a Negotiable Instrument.

A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, with the payer named on the document.

More specifically, it is a document contemplated by or consisting of a contract, which promises the payment of money without condition, which may be paid either on demand or at a future date.

Type of instrument needed Name of the recipient Name of the sender Amount to be transferred Place where the transferred money is to

be paid Mode in which money is to be paid i.e. in

cash or through a Bank Account Mode in which you will pay money to the

Bank i.e. in cash or by debit to your account

To buy a "DD" from a Bank, you are required to fill an application form which asks the following information :

2.Mail Transfers or Mail Orders

This is the mode used when you wish to transfer money from your account in Center 'A' to either your own account in Center 'B' or to somebody else's account.

In this mode of transfer, you are required to fill in an application form similar to the one for DD, sign a charge slip or give a cheque for the amount to be transferred plus exchange and collect a receipt.

The Bank will, on its own, send an order to its branch at center 'B' to deposit the said amount in the account number designated by you.

This is, however, a dying product and many banks like State Bank of India have since withdrawn this. 

3.Telegraphic Transfers or Tele Orders

This is similar to the Mail Transfer except that the message is sent to center 'B' by way of a telegram and the money is deposited the next day.

The mode of instructions nowadays is increasingly the fax. 

4. Safety Locker

Locker Annual Rentals (In Rs.)

Branch Category/Size

Small Medium Large Extra Large

Metro/Urban 3000 6000 10000 12000

Semi-Urban 1700 2500 5500 11000

Rural 1500 2200 5000 10000

Check for additional charges and penalties.

You may have to pay more on the basis of usage.

Some banks may charge extra if you operate the locker more than a certain number of times, say more than 15 times a year, or for letting you access the locker during extended banking hours. If you lose the key, which should be immediately reported, charges for opening the locker or replacing the lost key and for changing the lock will have to be borne by you. While some banks include the cost in the initial security deposit, some charge it later.

5.Gift Cheque Presenting Gifts to your

loved ones during festive season or on special occasions is an integral and unique culture in India. Traditionally, gifts have been given in the form of cash or other kind.

6.Travelers' Cheque A tried and tested way of carrying foreign exchange

overseas.

American Express Traveler's cheques are widely accepted globally as a mode of payment in many parts of the world. It is always worthwhile taking some of your foreign exchange in travelers' cheques as it is a great backup to cash and cards.

The beauty of Travelers' Cheques is that they can be replaced if they are lost or stolen.

It always helps if you keep a record of your travelers' cheque numbers in a safe place, preferably a copy with you (but not with your cheques) and another copy at home (or somewhere where someone can fax them to you if you need to make a claim for lost cheques).

Travelers Cheque

Features of Travelers Cheque

Convenience : Easy to use. Secured to protect your money when on the move.

Choice : Available in United States Dollars (USD), Great Britain Pounds (GBP), EURO, Japanese Yen (JPY), Australian Dollars (AUD) and Canadian dollars (CAD).

Acceptance : Accepted worldwide in over 400,000 locations spread across 200 countries. TCs can be encashed or used at Exchange bureaus, Banks, Hotels Shops, Restaurants and other establishments.

Security : Signature based security. If your cheques are lost or stolen, the 24 hour Call Centre is just a phone call away. Replacement of lost TCs is attended to on priority across the world.

Buy-Back : When you return back to India, you can encash any unused TCs .

Expiry : Valid forever! You can save any unused Travelers Cheques for future trips.

THANKYOU