Friday, August 15, 2008

More on E-shopping

No credit card? Go e-shopping anyway.


Credit cards account for 90 percent of online payments. Checkspace and Achex are taking aim at the other 10 percent with new tools that make it easier for consumers to pay online without using a credit card.

Some 100 million consumers don't have access to a credit card, according to a recent Nilson Report. And a good number of those who do have credit cards are leery of using them online.

Checkspace, which allows vendors and consumers to post electronic checks for online payment, will announce next month wireless pay-by-check services and a paper check service for vendors. Also in January, the company will announce a payment reminder service.

The company's payment method stores consumer financial information on its servers and does not send it out over the Web to merchants. Rather, it transfers cash from a consumer's bank account through the National Automated Clearing House network, or ACH, into a merchant account. ACH is run by the federal government and is used by financial institutions and others to transfer funds.

Separately, Seattle-based Achex, which uses the ACH network in the same way, announced this week that BlueLight.com, the online retailer backed by Kmart, had made the Achex service available on its site.

Part of Kmart's overall strategy with its middle- to lower-income consumers is to make the Internet more accessible, said Janet Ball, director of advertising for BlueLight.com.

"A lot of our customers don't have credit cards, and for some, they just don't want to put their credit cards on the Web. There is a lot of concern about security," said Ball.

In the same vein, Kmart last week took over the operations of Spinway.com, which had provided free Internet access to BlueLight.com customers but shut down because of revenue shortfalls. Kmart will operate Spinway as an independent unit at least through the holiday season.

Checkspace and Achex aren't alone. Others in the fieldââ,¬"like PayPal, which has 4.5 million consumers and 100,000 merchants signed on to its peer-to-peer payment systemââ,¬"are growing at a steady clip, according to Jim Van Dyke, a senior analyst with Jupiter Communications, in San Francisco.

Big boys have plans, too
Not to be left out in the cold, major financial institutions are working on their own alternative payment schemes. San Francisco-based Bank of America has inked a deal with CheckFree Holdings Corp. to develop new platforms for person-to-person and other Internet payments. Those platforms are due sometime in 2001, according to company officials.

Wells Fargo purchased an equity stake in VeriSign to develop online payments and bill presentment.

In the meantime, Wells Fargo is hoping to capture the holiday shopping crowd with its "WellsFargoEasyOrder" payment service that allows consumers to use an electronic wallet system to pre-populate online forms, eliminating the need to re-enter shipping and credit card information with every purchase.

E-Shoppimg Continues to Surge

The number of e-shoppers has reached its highest level yet and now stands at 16 million – around 1.3 million higher than May 2004.

This new peak, as measured by the internet monitor also probably reflects a renewed faith in the internet as a tool for conducting shopping – particularly for summer items such as holidays.

The average online spend amongst e-shoppers (in the last six months) has increased to £605 from £572 in May 2004. Total annual internet spend is now put at £19.4 billion – a ten per cent increase on August last year.

Among users of the internet who have not yet bought online, concern over credit card security is still the most cited reason, mentioned by 27 per cent. This is down from 31 per cent in May, reflecting a general improvement in confidence in the security of E-commerce. This improvement in confidence has been the long-term trend but there was a dip in confidence earlier this year.

Almost a fifth (18 per cent) of internet users who have yet to buy online say they still prefer the personal contact of going into a shop.

eBay maintains its position as the most visited e-commerce site in the last four weeks at 51 per cent of the online population, an increase of five percentage points since May. Amazon.co.uk has moved back up to number two with 37 per cent. Argos has also slightly improved its percentage of visitors in the last four weeks but has slipped back to third overall due to Amazon’s gains.

eBay also continues to enjoy the highest awareness of all the e-commerce sites measured (91 per cent – up from 78 per cent just one year ago).

Meanwhile, Tesco remains the most-visited supermarket site, visited by 23 per cent of internet users in the last four weeks, followed by Sainsbury’s (12 per cent), Asda (nine per cent), Iceland (six per cent), Safeway (five per cent), and Ocado (two per cent).

Consumers are increasingly going online this holiday season. Data from Nielsen//NetRatings's Holiday eShopping Index shows a 33 percent increase over last year.

Weekly shopping sessions at online retailers rose from 348.3 million over the holidays last year to 462.5 million in 2005. The increase is a 33 percent jump over the 2004 holiday season.

"Both new and experienced Internet buyers are not only researching products and comparing prices online before making a purchase, but they are also finding good holiday discounts online," said Heather Dougherty, senior retail analyst, Nielsen//NetRatings.

Week six of the 2005 holiday shopping season (December 4-10) experienced a 33 percent year-over-year gain over week six of last year (December 5-11).

Books, music, and video combined are the fastest growing category, with a 238 percent increase over last year. Dougherty attributes the growth to a vast selection of titles released during the holidays.

Toys and video games make the combined fastest-growing online retail category for the current holiday season, beginning October 30. Toy and video game buys online account for 149 percent growth from week one to week six. Flowers and gifts grew 117 percent; and consumer electronics grew 90 percent.

The Holiday eShopping Index looks at over 100 representative online retailers across 10 categories.

U.S. Home and Work Online Shopping Trips by Retail Category, 2004 and 2005
Category Week Ending 12/04/2005 Week Ending 12/05/2004 Growth (%)
Books/music/video 45,945 13,594 238
Apparel 17,186 12,498 38
Home and garden 12,325 9,592 28
Toys/video games 11,283 8,795 28
Retail 262,121 204,805 28
Consumer electronics 24,880 19,614 27
Computer hardware/software 27,129 22,228 22
Flowers and gifts 6,216 5,154 21
Shopping comparison/portals 53,078 49,277 8
Total 462,468 348,267 33
Source: Nielsen//NetRatings, December 2005

E-shopping

Online shopping is the process consumers go through to purchase products or services over the Internet. An online shop, eshop, e-store, internet shop, webshop, webstore, online store, or virtual store evokes the physical analogy of buying products or services at a bricks-and-mortar retailer or in a shopping mall.

The metaphor of an online catalog is also used, by analogy with mail order catalogs. All types of stores have retail web sites, including those that do and do not also have physical storefronts and paper catalogs.

Online shopping is a type of electronic commerce used for business-to-business (B2B) and business-to-consumer (B2C) transactions.

The term "Webshop" also refers to a place of business where web development, web hosting and other types of web related activities take place (Web refers to the World Wide Web and "shop" has a colloquial meaning used to describe the place where one's occupation is carried out).

Payment

Online shoppers commonly use credit card to make payments, however some systems enable users to create accounts and pay by alternative means, such as:

Some sites will not allow international credit cards and billing address and shipping address have to be in the same country in which site does its business. Other sites allow customers from anywhere to send gifts anywhere. The financial part of a transaction might be processed in real time (for example, letting the consumer know their credit card was declined before they log off), or might be done later as part of the fulfillment process.

While credit cards are currently the most popular means of paying for online goods and services, alternative online payments will account for 26% of e-commerce volume by 2009 according to Celent.[6]

[edit] Product delivery

Once a payment has been accepted the goods or services can be delivered in the following ways.

  • Download: This is the method often used for digital media products such as software, music, movies, or images.
  • Shipping: The product is shipped to the customer's address.
  • Drop shipping: The order is passed to the manufacturer or third-party distributor, who ships the item directly to the consumer, bypassing the retailer's physical location to save time, money, and space.
  • In-store pickup: The customer orders online, finds a local store using locator software and picks the product up at the closest store. This is the method often used in the bricks and clicks business model.
  • In the case of buying an admission ticket one may get a code, or a ticket that can be printed out. At the premises it is made sure that the same right of admission is not used twice.

[edit] Shopping cart systems

  • Simple systems allow the offline administration of products and categories. The shop is then generated as HTML files and graphics that can be uploaded to a webspace. These systems do not use an online database.
  • A high end solution can be bought or rented as a standalone program or as an addition to an enterprise resource planning program. It is usually installed on the company's own webserver and may integrate into the existing supply chain so that ordering, payment, delivery, accounting and warehousing can be automated to a large extent.
  • Other solutions allow the user to register and create an online shop on a portal that hosts multiple shops at the same time.
  • open source shopping cart packages include advanced platforms such as Interchange, and off the shelf solutions as osCommerce, Magento, Zen Cart and VirtueMart.
  • Commercial systems can also be tailored to ones needs so that the shop does not have to be created from scratch. By using a framework already existing, software modules for different functionalities required by a webshop can be adapted and combined.

Satisfactory:

  • Increased customization, e.g., “capability to treat customers as individuals”.
  • Convenience in purchasing “anytime, from anywhere, to anywhere”.
  • Responsiveness in product delivery, e.g., “instantaneous distribution of digital products and services”.
  • Cost savings through lower prices, e.g., “site aims at providing lower costs and latest information on music scene”.
  • Able to fulfill most shoppersneeds.Comparison shop several online stores at once.

[edit] Unsatisfactory (unsatisfactory experiences):

  • Security
  • Ease of use
  • Poor levels of service
  • Costs
  • Product delivered did not meet expectations.

Market share

E-commerce product sales totaled $146.4 billion in the United States in 2006, representing about 6% of retail product sales in the country. The $18.3 billion worth of clothes sold online represented about 10% of the domestic market.[17]

For developing countries and low-income households in developed countries, adoption of e-commerce in place of or in addition to conventional methods is limited by a lack of affordable Internet access.

Product suitability

Category U.S. online sales (2006)[22]
Apparel, accessories and footwear $18.3 billion
Computer hardware and software $17.2 billion
Autos and auto parts $16.7 billion
Home furnishings $10.0 billion
Total products sales (excluding travel) $146.4 billion
Travel $73.5 billion[23]

Many successful purely virtual companies deal with digital products, (including information storage, retrieval, and modification), music, movies, office supplies, education, communication, software, photography, and financial transactions. Examples of this type of company include: Google, eBay and Paypal. Other successful marketers use Drop shipping or affiliate marketing techniques to facilitate transactions of tangible goods without maintaining real inventory. Examples include numerous sellers on eBay.

Some non-digital products have been more successful than others for online stores. Profitable items often have a high value-to-weight ratio, they may involve embarrassing purchases, they may typically go to people in remote locations, and they may have shut-ins as their typical purchasers.[citation needed] Items which can fit through a standard letterbox — such as music CDs, DVDs and books — are particularly suitable for a virtual marketer, and indeed Amazon.com, one of the few enduring dot-com companies, has historically concentrated on this field.[citation needed]

Products such as spare parts, both for consumer items like washing machines and for industrial equipment like centrifugal pumps, also seem good candidates for selling online. Retailers often need to order spare parts specially, since they typically do not stock them at consumer outlets -- in such cases, e-commerce solutions in spares do not compete with retail stores, only with other ordering systems. A factor for success in this niche can consist of providing customers with exact, reliable information about which part number their particular version of a product needs, for example by providing parts lists keyed by serial number.[citation needed]

Products less suitable for e-commerce include products that have a low value-to-weight ratio, products that have a smell, taste, or touch component, products that need trial fittings — most notably clothing — and products where colour integrity appears important. Nonetheless, Tesco.com has had success delivering groceries in the UK, albeit that many of its goods are of a generic quality, and clothing sold through the internet is big business in the U.S. Also, the recycling program Cheapcycle sells goods over the internet, but avoids the low value-to-weight ratio problem by creating different groups for various regions, so that shipping costs remain low.[citation needed]

E-banking in India

Towards online banking

Banks and financial institutions in India are in the process of Web-enabling their services in order to offer Internet banking to its customers. The RBI has drafted certain Internet banking guidelines that have to be followed by banks about to venture into online banking. Here's what banking CIOs need to do. by Soutiman Das Gupta

It's the new generation of banking in India. Most private and MNC banks have already setup an elaborate Internet banking infrastructure. And this exercise has provided them numerous benefits like:

  • Greater reach to customers
  • Quicker time to market
  • Ability to introduce new products and services quickly and successfully
  • Ability to understand its customers needs
  • Customers are given access to information easily across any location
  • Greater customer loyalty

Multi-national and private sector banks in India have been very successful in setting up Internet banking services. This is mainly because these banks already had a robust automated banking environment on which they could build the Internet banking infrastructure. Most multi-national banks already have efficient Internet banking infrastructures running in other countries which could be emulated in India. And the private banks, which are relatively young, did not have to carry the burden of legacy systems. They merely invested in best-of-breed Internet banking solutions from the start.

In a fix
Unfortunately nationalized banks have been unable to evolve as fast as most private sector and MNC banks. As a result, in many organizations there may be a mix of automated systems and manual systems, with both systems running parallel, and using half-baked applications created by smaller vendors which run in certain departments. This creates a chaotic scenario. Network management is a nightmare, the legacy systems may buckle any moment, new users and locations keep coming up, and there are also issues of security and consolidation.

This is a typical situation at a usual nationalized bank:

  • A very large network of branches nationwide growing fast
  • Lack of connectivity in remote locations
  • A very large base of customers increasing fast
  • 75-80 percent automation in main branches with less automation in remote cities and smaller branches
  • Large amount of legacy equipment which doesn't integrate well with other systems
  • Inefficient and outdated applications in some departments which are not flexible and don't integrate well with other applications
  • Slow-to-change mentality of an Indian customer who is used to dealing with a human teller

Web-enabling banks with such infrastructure and number of branches nationwide at one go is a near-impossible task. However each of the challenges can be overcome with good planning, phased implementation, and lots of grit on the part of the CIOs.

The RBI steps in
The Reserve Bank of India (RBI) has created a comprehensive document which lays down number of security-related guidelines and strategies for banks to follow in order to offer Internet banking. The guidelines broadly talk about the types of risks associated with Internet banking, the technology and security standards, legal issues involved, and regulatory and supervisory concerns. Any bank that wants to offer Internet banking must follow these guidelines and adhere to them as a legal necessity.

Vaidyanathan Iyer, National Manager, eSecurity Business, Computer Associates provides solutions to banks which can help them go online. He says, "the guidelines have been created with a lot of thought regarding the banking scenario in India. It is at par with international banking standards and is very comprehensive."

Background
The document broadly categorizes levels of Internet banking services into three types:

  • The basic level service in which the banks' websites disseminate information on different products and services to customers. It may receive and reply to customers' queries through e-mail.
  • Simple transactional websites which allow customers to submit their instructions, applications for different services, and queries on their account balances. They do not permit any fund-based transactions on their accounts.
  • The third level of Internet banking services offered by fully-transactional websites which allow customers to operate on their accounts for transfer of funds, payment of different bills, subscribing to other products of the bank, and to transact purchase and sale of securities.

Internet banking
The document lays down some of the distinctive features of Internet banking. They are:

  • It removes the traditional geographical barriers as it could reach out to customers of different countries/legal jurisdiction. This has raised the question of jurisdiction of law/supervisory system to which such transactions should be subjected.
  • It has added a new dimension to different kinds of risks traditionally associated with banking, heightening some of them and throwing new risk control challenges.
  • Security of banking transactions, validity of electronic contract, customers' privacy, etc., which have all along been concerns of both bankers and supervisors have assumed different dimensions given that Internet is a public domain, not subject to control by any single authority or group of users.
  • It poses a strategic risk of loss of business to those banks who do not respond in time to this new technology, being the efficient and cost effective delivery.

Security—the key concern
It's evident from the document and from a general study of the business case of Internet banking, that security is perhaps the biggest concern. Connectivity issues to remote locations is also very important, but the need to be secure is far more pressing.

The document says that security issues include questions of adopting internationally accepted state-of-the-art minimum technology standards for access control, encryption/decryption (minimum key length), firewalls, verification of digital signature, and Public Key Infrastructure (PKI).

Concerns in Chapter 5 and 6
The concerns and guidelines about security are discussed in detail in Chapter 5 and Chapter 6 of the report. The key components of security concerns are

  • Authentication: The assurance of identity of the person in a deal
  • Authorization: A party doing a transaction is authorized to do so
  • Privacy: The confidentiality of data and information relating to any deal
  • Data integrity: Assurance that the data has not been altered
  • Non-repudiation: A party to the deal cannot deny that it originated the communication or data

If these areas are not addressed, the bank may suffer operational risk, reputational risk, legal risk, money laundering risk, and strategic risk.

Chapter 6 of the report talks about technology and security standards for Internet banking. It talks about TCP/IP, the OSI Layers, and application architectures. There are guidelines for backup and recovery, list of the different types of attacks and the ways in which they can compromise a system, like sniffer attacks, DoS, and e-mail bombs.

Authentication techniques like tokens, biometrics, and smart cards are described. The concepts of firewalls, proxy servers, cryptography, digital signatures, certification, SSL, and PKI are explained in detail. Security tools like scanners, sniffers, and IDSs are also described. Physical security is talked about and followed by guidelines of a security policy and a number of recommendations. The recommendations talk about access control, isolation of application servers, security logs (audit trails), penetration testing, backup and recovery practices, monitoring against threats, and education.

Comprehensiveness and Indian banks
The RBI guidelines are very exhaustive and extremely comprehensive. But are Indian banks following the guidelines accordingly? Experts at Global E-Secure Limited, a security solutions company say that none of the Indian banks which offer Internet banking facilities have an IT security policy as stipulated by the RBI. While banks have been asked to file monthly reports to show compliance to the guidelines, most of them have sought time to satisfy the security policy criterion.

The RBI is insisting on a written document, signed by the Board of Directors to make the banks aware that IT security is not just an IT concern, but something that could affect overall business as well.

The company also says that while these banks do have security measures, there is no clear-cut program which incorporates all the aspects of a comprehensive security policy. Also, some banks do not have straight-through processing. There is manual intervention, which poses a great security risk for the customer. In order to fill such gaps, the security policy guidelines clearly lay out the areas which should be looked into. To provide a further check, the RBI is also empowered to audit the compliance to the policy.

Rajeev Wadhwa, COO, Global E-Secure Limited says, "Following the release of its guideline, the RBI will also come out with a policy on similar lines. Hence, it's imperative that banks immediately act upon the same. The RBI has asked I-banking and e-trading banks to perform ethical hacking of their servers and submit their reports. Since there is no proper ethical hacking policy and methodology published in the IT-Act nor by the RBI, these banking organizations have to depend on only security specialists who have the Service Level Agreement (SLA) and a procedure in place."

A practical approach
IDBI Bank has successfully implemented a robust Internet banking architecture for its customers. Neeraj Bhai, the CTO of the bank says, "RBI guidelines are stringent, but not very difficult to implement if one goes about in a systematic fashion. The rule which stipulates that the bank must have a client-level certificate, is somewhat difficult and expensive to implement in a retail banking scenario. The guidelines also prescribe certain functions be authorized at the Board level. This provision has potential to introduce delays in deployment."

"It is not important to look at which policy is to be applied first. One has to take a holistic view. Certain prescriptions of the RBI, like having an information security policy, are general in nature and not specific to Internet banking. If an organization is alive to such issues even before launching Internet banking, things become simpler. It should be viewed as a cross-functional project and managed in a controlled fashion. Many banks make the mistake of believing that all their customers would be interested in Internet banking and therefore start enabling the service to all their customers. In reality most of such 'enabled' customers do not access the service and the banks end up loading their systems unnecessarily and spending big sums on sending PIN mailers."

"Like any other product or service, Internet banking is not a one-time activity. The bank has to persuade its customers to use the service to achieve cost advantage. Since many customers do not use Internet banking, the bank has to enrich its services by additional payment tie-ups so that customers have more options. In this case, data security needs to be very thorough."

IDBI Bank’s e-banking Infrastructure

IDBI Bank Limited uses the following equipment infrastructure to address its Internet banking needs:

Hardware

  • Web servers
  • Application servers
  • Database servers
  • Networking equipment

Software

  • Systems software
  • Application software

Services

  • Application integration with core banking
  • Scalability tests (desirable but optional)
  • Web designing
  • Server sizing

Security

  • Firewalls
  • Certification
  • Server level (mandatory)
  • Client level (Optional: we did not deploy this)
  • Intrusion Detection Systems
  • Subscribing to advisories

Networking

  • Isolation from the main network

Hosting Decision

  • In-house vs IDC

IDBI Bank did not undertake services of any systems integrator. Neeraj Bhai, CTO, IDBI Bank says, "These services are often offered by multiple divisions of a company, and these divisions do not have a good level of coordination among themselves. It is also advisable to have owners within the organization who drive the effort."

The BS7799 security standard

First published in February 1995, BS7799 is a comprehensive set of information security controls. It is intended to serve as a single reference point for identifying a range of controls needed for most situations where information systems are used. BS7799 was significantly revised, extended and improved in May 1999, before being republished as ISO 17799 in Dec 2000.

With BS7799 accreditation and certification schemes now firmly in place, BS7799 may ultimately become a benchmark against which all organizations will be measured. There have even been suggestions of mandatory inclusion of an organization's BS7799 status within its annual report.

It covers areas like business continuity plans, system access control, system development and maintenance, compliance, personnel security, asset control and classification, and physical and environmental security.

A time may soon come when the BS7799 standard will become a necessity for all financial institutions.

How e-banking can ease your life

Penalty due to non-payment of bill is not new to anyone of us. And quite obviously, who likes the long procedure of writing a cheque, standing in a long queue and then ensuring that the particular amount is available in your bank account? Similarly, Mr Sharma, who is on business tour for at least 25 days a month, finds it difficult to clear his dues on time because of his busy schedule.

He, like many of us, was possibly not aware of the online services, banks are offering these days. With just a click, all his dues would have been cleared long back. However, it's never too late to mend.

Indian banks are trying to make your life easier. Not just bill payment, you can make investments, shop or buy tickets and plan a holiday at your fingertips. In fact, sources from ICICI Bank [Get Quote] tell us, "Our Internet banking base has been growing at an exponential pace over the last few years. Currently around 78 per cent of the bank's customer base is registered for Internet banking."

To get started, all you need is a computer with a modem or other dial-up device, a checking account with a bank that offers online service and the patience to complete about a one-page application--which can usually be done online. You can avail the following services.

Bill payment service

Each bank has tie-ups with various utility companies, service providers and insurance companies, across the country. You can facilitate payment of electricity and telephone bills, mobile phone, credit card and insurance premium bills.

To pay your bills, all you need to do is complete a simple one-time registration for each biller. You can also set up standing instructions online to pay your recurring bills, automatically. One-time standing instruction will ensure that you don't miss out on your bill payments due to lack of time. Most interestingly, the bank does not charge customers for online bill payment.

Fund transfer

You can transfer any amount from one account to another of the same or any another bank. Customers can send money anywhere in India. Once you login to your account, you need to mention the payees's account number, his bank and the branch. The transfer will take place in a day or so, whereas in a traditional method, it takes about three working days. ICICI Bank says that online bill payment service and fund transfer facility have been their most popular online services.

Credit card customers

Credit card users have a lot in store. With Internet banking, customers can not only pay their credit card bills online but also get a loan on their cards. Not just this, they can also apply for an additional card, request a credit line increase and God forbid if you lose your credit card, you can report lost card online.

Railway pass

This is something that would interest all the aam janta. Indian Railways has tied up with ICICI bank and you can now make your railway pass for local trains online. The pass will be delivered to you at your doorstep. But the facility is limited to Mumbai, Thane, Nashik, Surat and Pune. The bank would just charge Rs 10 + 12.24 per cent of service tax.

Investing through Internet banking

Opening a fixed deposit account cannot get easier than this. You can now open an FD online through funds transfer. Online banking can also be a great friend for lazy investors.

Now investors with interlinked demat account and bank account can easily trade in the stock market and the amount will be automatically debited from their respective bank accounts and the shares will be credited in their demat account.

Moreover, some banks even give you the facility to purchase mutual funds directly from the online banking system.

So you need not worry about filling those big forms for mutual funds, they will now be just a few clicks away. Nowadays, most leading banks offer both online banking and demat account. However if you have your demat account with independent share brokers, then you need to sign a special form, which will link your two accounts.

Recharging your prepaid phone

Now you no longer need to rush to the vendor to recharge your prepaid phone, every time your talk time runs out. Just top-up your prepaid mobile cards by logging in to Internet banking. By just selecting your operator's name, entering your mobile number and the amount for recharge, your phone is again back in action within few minutes.

Shopping at your fingertips

Leading banks have tie ups with various shopping websites. With a range of all kind of products, you can shop online and the payment is also made conveniently through your account. You can also buy railway and air tickets through Internet banking.

Internet banking versus traditional method

Inspite of so many facilities that Internet banking offers us, we still seem to trust our traditional method of banking and is reluctant to use online banking. But here are few cases where Internet banking will turn out to be a better option in terms of saving your money.

'Stop payment' done through Internet banking will not cost any extra fees but when done through the branch, the bank may charge you Rs 50 per cheque plus the service tax.

Through Internet banking, you can check your transactions at any time of the day, and as many times as you want to.

On the other hand, in a traditional method, you get quarterly statements from the bank and if you request for a statement at your required time, it may turn out to be an expensive affair. The branch may charge you Rs 25 per page, which includes only 30 transactions. Moreover, the bank branch would take eight days to deliver it at your doorstep.

If the fund transfer has to be made outstation, where the bank does not have a branch, the bank would demand outstation charges. Whereas with the help of online banking, it will be absolutely free for you.

As per the Internet and Mobile Association of India's report on online banking 2006, "There are many advantages of online banking. It is convenient, it isn't bound by operational timings, there are no geographical barriers and the services can be offered at a miniscule cost."

Security Precautions

Customers should never share personal information like PIN numbers, passwords etc with anyone, including employees of the bank. It is important that documents that contain confidential information are safeguarded. PIN or password mailers should not be stored, the PIN and/or passwords should be changed immediately and memorised before destroying the mailers.

Customers are advised not to provide sensitive account-related information over unsecured e-mails or over the phone. Take simple precautions like changing the ATM PIN and online login and transaction passwords on a regular basis. Also ensure that the logged in session is properly signed out.

Advantages of online banking

  • Convenience: Unlike your corner bank, online banking sites never close; they're available 24 hours a day, seven days a week, and they're only a mouse click away.
  • Ubiquity: If you're out of state or even out of the country when a money problem arises, you can log on instantly to your online bank and take care of business, 24/7.
  • Transaction speed: Online bank sites generally execute and confirm transactions at or quicker than ATM processing speeds.
  • Efficiency: You can access and manage all of your bank accounts, including IRAs, CDs, even securities, from one secure site.
  • Effectiveness: Many online banking sites now offer sophisticated tools, including account aggregation, stock quotes, rate alerts and portfolio managing programs to help you manage all of your assets more effectively. Most are also compatible with money managing programs such as Quicken and Microsoft Money.

Disadvantages of online banking

  • Start-up may take time: In order to register for your bank's online program, you will probably have to provide ID and sign a form at a bank branch. If you and your spouse wish to view and manage your assets together online, one of you may have to sign a durable power of attorney before the bank will display all of your holdings together.
  • Learning curve: Banking sites can be difficult to navigate at first. Plan to invest some time and/or read the tutorials in order to become comfortable in your virtual lobby.
  • Bank site changes: Even the largest banks periodically upgrade their online programs, adding new features in unfamiliar places. In some cases, you may have to re-enter account information.
  • The trust thing: For many people, the biggest hurdle to online banking is learning to trust it. Did my transaction go through? Did I push the transfer button once or twice? Best bet: always print the transaction receipt and keep it with your bank records until it shows up on your personal site and/or your bank statement.

E-banking/Online Banking

What is online banking?

Online Banking BasicsIf you're like most people, you've heard a lot about online banking but probably haven't tried it yourself. You still pay your bills by mail and deposit checks at your bank branch, much the way your parents did. You might shop online for a loan, life insurance or a home mortgage, but when it comes time to commit, you feel more comfortable working with your banker or an agent you know and trust.

Online banking isn't out to change your money habits. Instead, it uses today's computer technology to give you the option of bypassing the time-consuming, paper-based aspects of traditional banking in order to manage your finances more quickly and efficiently.

Origin of online banking
The advent of the Internet and the popularity of personal computers presented both an opportunity and a challenge for the banking industry.

For years, financial institutions have used powerful computer networks to automate millions of daily transactions; today, often the only paper record is the customer's receipt at the point of sale. Now that its customers are connected to the Internet via personal computers, banks envision similar economic advantages by adapting those same internal electronic processes to home use.

Banks view online banking as a powerful "value added" tool to attract and retain new customers while helping to eliminate costly paper handling and teller interactions in an increasingly competitive banking environment.

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Brick-to-click banks
Today, most large national banks, many regional banks and even smaller banks and credit unions offer some form of online banking, variously known as PC banking, home banking, electronic banking or Internet banking. Those that do are sometimes referred to as "brick-to-click" banks, both to distinguish them from brick-and-mortar banks that have yet to offer online banking, as well as from online or "virtual" banks that have no physical branches or tellers whatsoever.

The challenge for the banking industry has been to design this new service channel in such a way that its customers will readily learn to use and trust it. After all, banks have spent generations earning our trust; they aren't about to risk that on a Web site that is frustrating, confusing or less than secure.

Most of the large banks now offer fully secure, fully functional online banking for free or for a small fee. Some smaller banks offer limited access or functionality; for instance, you may be able to view your account balance and history but not initiate transactions online. As more banks succeed online and more customers use their sites, fully functional online banking likely will become as commonplace as automated teller machines.

Virtual banks
If you don't mind foregoing the teller window, lobby cookie and kindly bank president, a "virtual" or e-bank, such as Virtual Bank or Giant Bank, may save you very real money. Virtual banks are banks without bricks; from the customer's perspective, they exist entirely on the Internet, where they offer pretty much the same range of services and adhere to the same federal regulations as your corner bank.

Virtual banks pass the money they save on overhead like buildings and tellers along to you in the form of higher yields, lower fees and more generous account thresholds.

The major disadvantage of virtual banks revolves around ATMs. Because they have no ATM machines, virtual banks typically charge the same surcharge that your brick-and-mortar bank would if you used another bank's automated teller. Likewise, many virtual banks won't accept deposits via ATM; you'll have to either deposit the check by mail or transfer money from another account.

Advantages and Disadvantages of Online Banking Services

With the popularity of the Internet increasing steadily, most of the industries are finding new and interesting ways to make use of this new and equally interesting medium so as to keep up with the constantly changing preferences of clients all over. Nowadays, you can do almost anything over the Internet – from shopping for groceries to making a free call to a friend in New Zealand through your computer! Yes, the Internet has seemingly endless possibilities and the banking industry in turn has decided that it won’t be left behind the rest of the pack.

While most of us have heard about online banking services, more than a majority of us have probably not even tried it out yet. It could possibly be because we are more comfortable working with real people; paper and money instead of its virtual counterpart, as performing transactions over the Internet can be very impersonal. Whatever may be the reason; there are a number of advantages and disadvantages to online banking services. This article will outline the good side as well as the bad side to online banking so that you can either feel that online banking is a safe way to manage your finances, or you could possibly be justified in your fears.

The Advantages of Online Banking

First lets start off with the advantages of online banking. First and foremost, online banking is very, very, very convenient. It will allow you to pay your bills and make transactions anytime during the day and the week. The bank will never close because you can access it through your laptop or computer. So, no matter in which country you are anywhere in the world, you can go online and handle your finances.

Secondly, online banking is very fast, effective and efficient. Over the Internet, you can make transactions that are typically executed and performed at a much faster pace than at ATM’s. Online banking services also give you the option of handling several different bank accounts from one site itself.

Most online banking sites are compatible with programs like Microsoft Money and Quicken, which makes management of assets more effective.

The Disadvantages of Online Banking

Just like with anything else, there are disadvantages to online banking services too! The biggest problem is that most people lack trust. How many times have you performed transactions online and wondered whether you did the right thing? Of course, you can overcome any uneasiness by printing the transaction receipt. This receipt will conform whether or not your transaction has gone through successfully.

Online banking can be difficult to learn for a beginner and a site could take time to start up. Some sites ask for photo identification, which can be very inconvenient.

However, most online banking sites provide tutorials for online banking. Some sites provide live online customer support to provide solutions for any problems. The number of cases of banking frauds is considerably low so you don’t have to worry about the safety of your money.

Clearly, the whole concept of online banking has its fair share of advantages as well as disadvantages. For some people, online banking simplifies life, while for the others it is intimidating and complex. Taking into consideration these perceptions, most banks have now started offering online banking services and a viable option to their clients.

Some people prefer talking personally to a person in case of a problem. They prefer the ‘personal touch’ aspect of customer service. If you are this kind of a person, then you’ll probably never feel comfortable with Internet banking. On the other hand, if unlimited access to your bank accounts and convenience is highest on your list of banking priorities, then nothing can beat online banking. What with the security of the FDIC standing like a fortress behind them, it is very clear that online banking is here to stay.

Top 10 e-banks





Rank/site

Score

Transfer funds to other banks

Receive bills online

Low-balance e-mail alert

Receive Web-only statements

Stop payment on a check

1. Wellsfargo.com

80


x

x

x

x

2. Citibank.com

79

x


x

x

x

3. Bankofamerica.com

77

x

x

x

x

x

4. Bankus.etrade.com

74

x


x

x


5. Huntington.com

69




x

x

6. Firstnational.com*

68



x

x


6. Hsbc.com

68

x



x

x

6. Usbank.com

68


x


x


9. Chase.com

67



x


x

9. Wachovia.com

67



x


x

Working of E-cash and E-cheque

eCash IN ACTION

eCash is based on cryptographic systems called Digital Signatures. This method involves a pair of numeric keys (very large integers or numbers) that work in tandem: one for locking (or encoding) and the other for unlocking (decoding). Messages encoded with one numeric key can only be decoded with the other numeric key and none other. The encoding key is kept private and the decoding key is made public.

By supplying all customers (buyers and sellers) with its public key, a bank enables customers to decode any message (or currency) encoded with the bank’s private key. If decoding by a customer yields a recognizable message, the customer can be fairly confident that only the bank could have encoded it. These digital signatures are as secure as the mathematics involved and have proved Over the past two decades to be more resistant to forgery than handwritten signatures.

Before eCash can be used to buy products or services, it must be procured from a Currency server.

PURCHASING eCash FROM CURRENCY SERVER

eCash can be purchased from an On – Line currency server in 2 steps namely, Establishing an account and maintaining enough money in the account to back the purchase.

How Actually eCash will work

  1. The user of eCash has to have an Account with a bank ready to offer eCash.
  2. The user will apply for eCash in the denomination and amount the he desires. In exchange of money debited from the customer’s account, the bank uses its private key to digitally sign the note for the amount requested and transmits the note back to the customer. The network currency server in effect is issuing a "bank note" with a serial number and a dollar amount.
  3. Since the bank is digitally signing it, the bank is committing itself.
  4. The user has the eCash available. He can sign the eCash and give it to anybody.
  5. When the eCash software generates a note, it masks the original number or "blinds" the note. The blinding carried out makes it impossible for anyone to link Payment to Payer.
  6. A central bank also maintains a database of Spent notes.

DISADVANTAGES AND LEGAL ISSUES OF eCash

  1. eCash cannot be broken into smaller denominations.
  2. The concept of maintaining a database of spent notes is very expensive.
  3. Accessing Database of spent notes is also very time consuming.
  4. Transaction based taxes account for a significant portion of state and local government revenue. If eCash becomes successful, then people will use it to buy things like cars and houses, which would not have been possible with actual cash. (One can’t physically carry so much of real cash)
  5. Currency fluctuation is another issue related to eCash.

Electronic Cheques

Electronic cheques are another form of Electronic tokens. They are designed to accommodate the many individuals and entities that might prefer to pay on credit or through some mechanism other than cash.

Once registered, a buyer can then contact sellers of goods and services. To complete a transaction, the buyer sends a check to the seller for a certain amount of money. These checks may be sent using Email or other Transport methods. When deposited, the cheque authorises the transfer of account balances from the account against which the cheque was drawn to the account to which the cheque was deposited.

This method has been deliberately designed to work in the manner conventional cheques work



Advantages of Electronic cheques
  1. Similar to traditional cheques. This eliminates the need for customer education
  2. Since Electronic cheques use conventional encryption than Public and private keys as in eCash, Electronic cheques are much faster.
  3. The risk is taken care of by the accounting server, which will guarantee that the cheque would be honoured.

E-cash

Electronic money (also known as e-gold, e-money, electronic cash, electronic currency, digital money, digital cash or digital currency) refers to money or scrip which is exchanged only electronically. Typically, this involves use of computer networks, the internet and digital stored value systems. Electronic Funds Transfer (EFT) and direct deposit are examples of electronic money. Also, it is a collective term for financial cryptography and technologies enabling it.

Some Ecash providers:

eCash Technologies
CyberCash
Mondex
Magex

While electronic money has been an interesting problem for cryptography (see for example the work of David Chaum and Markus Jakobsson), to date, use of digital cash has been relatively low-scale. One rare success has been Hong Kong's Octopus card system, which started as a transit payment system and has grown into a widely used electronic cash system. Singapore also has an electronic money implementation for its public transportation system (commuter trains, bus, etc), which is very similar to Hong Kong's Octopus card and based on the same type of card (FeliCa). A very successful implementation is in the Netherlands, known as Chipknip.

The total virtualisation of payments finds striking expression in digital money. These are bits of data, representing money, which are purchased for consideration from an issuer and stored on the computer's hard drive or in an electronic wallet. Legally, digital cash constitutes the issuer's obligation to convert it into legal tender when the electronic bits are returned to it.

Digital money can solve many of the drawbacks involved in credit cards as a means of payment over the Internet: the use of credit cards is awkward and requires numerous particulars to be input; they are not suitable for small payments called micro-payments; their charge dates are inflexible; the credit card customer's privacy is not maintained since the transaction data is divulged to the credit card company or bank; credit cards are essentially suitable for the purchase of products by individuals rather than contracts between commercial companies and they are "one-way", that is to say that only the card holder can pay the site, whilst the site cannot credit the holder with payment.

Set out below is a schematic description of the steps involved in the purchase and use of electronic currency.

  • The customer remits full payment in money to the currency issuer.
  • In consideration the issuer loads the customer's electronic wallet or appropriate computer program with the bits representing the digital value of the amount purchased. For example, if $ 100 is paid to the issuer, it will transfer 100 virtual dollars to the customer (or a similar amount, net of commission). At this stage the digital money can be given a unique number to identify it.
  • At the same time the issuer keeps the money that it has received from the customer in a suspense account until it needs to convert the bits which it has sold into legal tender.
  • The customer then makes payments with the digital money. Since it is a substitute for cash, he can purchase cheap products (e.g. a newspaper) or valuable services (e.g. an insurance policy).
  • The merchant which has received the cash can return it to the issuer and convert it into legal tender or it can in turn pay it to another trader which honours the same payment medium and so on until the bits find their way back to the issuer which will convert them into real money.
  • If the digital money has been given identification numbers, the issuer will now mark those numbers as used currency. Thenceforth, digital currency bearing the same numbers will not be redeemed. In this way the risk of forgery is reduced, although the possibility of identifying the money with its drawer is increased in such a way as might infringe the user's privacy. In order to overcome this problem "blind signature" techniques have been developed which enable the issuer to sign the digital currency through a virtual envelope in such a way that it does not know the drawer's identity.
  • At the time of conversion the issuer subtracts the consideration from the customer's suspense account. This is a possible source of profit for the issuer since it can invest the customer's money during the interval. Thus, issuers might not charge customers a purchase commission (see, e.g. Internet Dollar). Similarly, in some cases the electronic money might be lost (e.g. if the electronic wallet in which it is stored is destroyed or the computer's hard disk crashes) and the bits may never be redeemed.

Electronic cash projects are already in the early stages of implementation on the Internet (e.g. DigiCash or CyeberCash). Having regard to the size of the market and the power of the players, it is only a question of time until digital money becomes a dominant means of payment. It will be difficult for the law to keep up with the rapid pace of technological innovation. The legal arrangement will have to provide an answer to a range of technological possibilities and applications in respect of electronic money, both on-line and physically, by means of electronic wallets (smart cards which can be recharged with money). A flexible and open arrangement, which can be modified relatively easily is therefore necessary, otherwise at the end of protracted legislative proceedings it will be found that the law is irrelevant to the new commercial and technological reality.

Is digital money legal tender? The clearest indicator of legal tender is that it can be used for the payment of debts and the refusal to accept it is a criminal offence (section 489 of the Israeli Penal Law, 5737-1977). In Israel, the New Shekel Currency Law, 5745-1985 provides that the currency of the State is the shekel. Although digital money can represent an acknowledged currency, e.g. the US dollar or the Israeli shekel, it can also represent a completely new currency, created solely for Internet trade, like an Internet-dollar or E-cash. It is almost certain that this type of electronic money would not be deemed legal tender.