DEVELOPMENT IN

BANKING
TECHNOLOGY
Unit 3
Learning Points

Payment system in India – paper based – e payment –electronic

banking –plastic money – e-money –forecasting of cash demand at
ATM’s –The Information Technology Act, 2000 in India – RBI’s Financial
Sector Technology vision document – security threats in e-banking &
RBI’s Initiative.
Payment System

“a set of rules, procedures, and instruments

that allow people, businesses, and organizations

to move money from one place to another”

Payment systems includes…

• Payment instruments: Cash, cards, cheques, and electronic funds transfers

• Institutions: Financial institutions are part of a payment system

• People: People are part of a payment system

• Rules, procedures, and standards: funds are moved between accounts

• Technologies: used to facilitate the exchange of money

Paper Based Payments

“a type of payment system that uses

physical documents, like cheques or demand drafts,

to transfer money between accounts”

 Cheque

“a document you can issue to

your bank, directing it to pay the
specified sum mentioned in digits
as well as words to the person
whose name is borne on the
cheque”
Demand Draft

“a financial tool that

allows a bank to transfer
money from one account
to another and
guarantee payment to a
specific recipient”
Payment Orders

“an instruction of a sender to a receiving bank, transmitted orally,

electronically, or in writing, to pay, or to cause another bank to pay, a
fixed or determinable amount of money to a beneficiary”
Electronic Payment (E-Payment)

“a way to pay for services using electronic or online means”

Benefits of E-Payments

• Convenience: Quick and hassle-free

• Payment flexibility: Customers can choose from a variety of payment options

• Security: Use encryption and tokenization

• Loyalty programs: Customers earn rewards or cashback

Types of E-Payment

• Real Time Gross Settlement(RTGS) • Mobile Wallets

• Net Electronic Fund Transfer(NEFT) • Debit Cards

• Immediate Payment System(IMPS) • Credit Cards
• Unified Payments Interface(UPI)
• E-Wallets
• Aadhar Enabled Payment
Service(AEPS)
REAL TIME GROSS SETTLEMENT
(RTGS)
• Transfer of money from one bank to another bank instantly without
any delay and may take around 30 minutes from receiving the request
for remittance of funds on one to one basis.

• 2 lakhs – 10 lakhs
NATIONAL ELECTRONIC FUND
TRANSFER (NEFT)
• A one-to-one payment across various public and private sector banks.

• As per NEFT, one can transfer funds to another individual with an account in
a different bank.

• To enable this facility, the concerned bank accounts must be NEFT-enabled.

• Processed and settled in half-hourly batches.

• The transaction Amount limit should be Rs.50000/-

IMMEDIATE PAYMENT SERVICE
(IMPS)
• It is like NEFT or RTGS.

• Is convenient since it is quick, paperless and does not require to have

a detailed information to transfer funds.

• Required to have the beneficiary’s mobile number linked to the bank

account and the MMID.
UNIFIED PAYMENTS INTERFACE (UPI)

• a system that powers multiple bank accounts (of participating banks),

several banking services like fund transfer and merchant payments in
a single mobile application.

• UPI is a single platform that merges various banking services and

features under one umbrella
AADHAR ENABLED PAYMENT
SYSTEM
• It is an Aadhar based digital payment
mode.

• Customers need only their Aadhar

number to pay to any merchant.

• It allows banks to bank transactions.

• Customers will need to link their Aadhaar

numbers to their bank accounts.
MOBILE WALLETS

• It is a Virtual wallet that stores payment card information on a Mobile

Device.

• They provide convenient ways to use Store-Payments.

E-WALLETS

• E-wallet/ mobile wallet is the digital version of physical wallet with

more functionality.

• User can keep his/her money in an e-wallet and use it when he needs.
DEBIT CARDS

• Small plastic card issued

by the bank for purchase
or goods /services.

• Buyer cash flow is

immediately affected.
CREDIT CARDS

• Plastic card issued by bank

to purchase the goods /
services

• Buyers cash flow is not

immediately affected
Electronic Clearing Services (ECS)
• a system that allows for bulk transfers of money between bank accounts. It's used by
banks, corporations, companies, and government departments to make payments
such as
• Interest payments

• Salary payments

• Pension payments

• Commission payments

• Dividend payments

• Refund payments
Types of ECS

• ECS Credit
• Used to provide credit to multiple beneficiaries by debiting a single
account. This can include payments such as salary, interest, or dividends

• ECS Debit
• Used to make payments such as EMIs for loans, mutual funds, or policy
premiums
Electronics Fund Transfer (EFT)

• the transfer of money from one bank account to another using a

computer or electronic system, without the need for a bank employee
to be involved.

• EFTs can be made between accounts at the same financial institution

or across different institutions
Types of EFT
• Direct deposit
• A company electronically transfers funds to an employee's account, usually for payroll

• Automated teller machine (ATM)

• A person can use an ATM to deposit, withdraw, or transfer money without entering a
bank

• Wire transfer
• A direct transfer between accounts, often facilitated by a network like SWIFT
• Electronic check
• A digital version of a traditional paper check that's processed by an automated
system

• Debit card transaction

• When a debit card is used to make a payment, funds are electronically transferred
from the cardholder's account to the merchant's account

• ACH payment
• An Automated Clearing House payment processed through the ACH network
• QR code payment
• A payment initiated by scanning a QR code from a digital wallet or POS
terminal

• Online payment
• A payment made through an online banking system
Electronic Banking (E-banking)
• a product designed for the purposes of online banking that enables you to have easy and
safe access to your bank account
• Check the account statement online.

• Open a fixed deposit account.

• Pay utility bills such as water bill and electricity bill.

• Make merchant payments.

• Transfer funds.

• Order for a cheque book.

• Buy general insurance.

• Recharge prepaid mobile/DTH.

E-Banking…..

Advantages Disadvantages

• Convenient • Time taking in startup

• No time bound • Learning curve

• Unlimited service • Trust aspect

• Easy to access

• Efficient & Effective

Plastic Money

“refers to any electronic form of currency, such as credit cards, debit

cards, and prepaid cards, which is not in the form of physical cash”
The term "plastic money" comes from the physical material used to
make the cards
Features of plastic money

• Eliminates carrying huge cash

• No paper work

• Reduction in loss of money/theft

• Anytime/Anywhere access

• Options to buy products

Types of
plastic money
E-Money

“an electronic store of monetary value on a technical device that

may be widely used for making payments”
• Security
• to protect the confidentiality and integrity of data, and to authenticate
transactions

• Convenience
• used for remote payments, not necessary to physically exchange it like cash
• Accessibility
• an accessible payment option for people who don't have traditional banking
services

• Medium of exchange
• used to pay for goods and services, similar to physical currency
Types of E-Money
• Hard • Debit cards
• e-money is used for irreversible
• Wire transfers
transactions, ones that are highly

securitized, and are more or less

• Credit cards

procedural in nature. ... • RTGS (Real Time Gross Settlement)

• Soft • ACH (Automated Clearing House)

• e-money is used for reversible or direct payments
flexible transactions.
Automated Teller Machine - ATM

“a computerized device that enables

individuals to conduct various
banking transactions without the
need for a human teller”
It provides a convenient way to access and
manage our bank accounts, even outside
the banking hours
Types of ATM’s

• On-site ATMs
• These are ATMs located within the bank premises.

• Off-site ATM
• These are ATMs located across various geographical areas outside bank
premises
Information Technology Act 2000 in
India

“a law in India that provides

a legal framework for electronic commerce and

cybercrime”
The IT Act was enacted to…

• Provide legal recognition

• The IT Act provides legal recognition to electronic records and transactions,
and to electronic communication. It also allows electronic contracts to be
legally binding, unless otherwise agreed

• Prevent cybercrime
• The IT Act prescribes penalties for cybercrime and fraud, and allows foreign
nationals to be charged for crimes involving computers or networks in India
• Amend other laws
• The IT Act amended the Indian Penal Code, the Indian Evidence Act, the
Banker's Books Evidence Act, and the Reserve Bank of India Act to make them
compliant with new digital technologies

• Enable e-governance
• The IT Act facilitates electronic filing of documents with government agencies
Features of IT Act 2000
• Digital signature replaced with electronic signature to make it a more technology neutral act.

• It elaborates on offenses, penalties, and breaches.

• It outlines the Justice Dispensation Systems for cyber-crimes.

• It provides for the constitution of the Cyber Regulations Advisory Committee.

• The Information Technology Act is based on The Indian Penal Code, 1860, The Indian Evidence
Act, 1872, The Bankers’ Books Evidence Act, 1891, The Reserve Bank of India Act, 1934, etc.

• It adds a provision to Section 81, which states that the provisions of the Act shall have
overriding effect.
Objectives of IT 2000 Act..

“to grant a legitimate concession to all monetary

deals that are completed across the e-platform”
The purpose of section 43 of the IT Act is to punish the law breacher’s
who attempt to destroy the source code of any computer.
RBI financial sector Technology
Vision Document
“outlines the RBI's vision for

India's digital payment system”

The document's core theme is "4Es":

• E-payments for
• Everyone

• Everywhere

• Every time
• The goals and vision of the RBI, are categorized in the Payments
Vision 2025 documents into five anchor goalposts
• Integrity - sincerity

• Inclusion – add on

• Innovation – new concepts

• Institutionalisation – constitute Payment advisory committee

• Internationalisation – global outreach

Security Threats in E-Banking

• Phishing
• involves hackers sending well-designed emails to steal credentials and financial information

• Malware
• Malware can compromise devices like computers and smartphones, allowing cybercriminals
to access a bank's network and sensitive data

• Ransomware
• A major threat to banks, ransomware attacks can hold banking software hostage, often
through cryptocurrency transactions
• Supply chain attacks
• Supply chain attackers can perform a variety of malicious actions, including data theft and ransomware
infections

• Insider threats
• Insider threats can be one of the most common causes of database security breaches, often made possible by
too many employees having privileged access rights

• Spoofing
• Spoofing is when hackers impersonate a banking website's URL with a website that looks and functions exactly
the same

• Identity theft
• A common fraud scenario in banking, identity theft occurs when a scammer steals someone's personal
information, such as their name, address, email, or financial information
RBI’s initiative in Tackling security
threats
• Fixing a cap on mode of transaction

• Limiting beneficiary addition per day

• System alerts

• Restrict number of transactions

• Introducing special requests