Electronic Banking BY Bahaa Abas Noor abo han

Definition * e-banking is defined as: …the automated delivery of new and traditional banking products and services directly to customers through electronic, interactive communication channels.

Definition This definition includes delivering services and products such as: *Account information *Access to funds *Business transactions and transfers

Electronic Delivery – How it can help ? Increases customer satisfaction and retention Increases customer satisfaction and retention Shift costs Shift costs Increases brand value Increases brand value Provides real time access (i.e. convenience) Provides real time access (i.e. convenience)

Shift Costs Source: PRINCETON SURVEY RESEARCH ASSOCIATES INTL. SEPTEMBER 2007

Specific Perspective Services and products delivered to customers Services and products delivered to customers Supporting technology. Supporting technology.

E-Banking Devices Personal computers (PCs) Personal computers (PCs) Personal digital assistants (PDAs) Personal digital assistants (PDAs) Automated teller machines (ATMs) Automated teller machines (ATMs) Touch tone telephones Touch tone telephones Cellular and smart phones Cellular and smart phones

Internet-Based Services Although there is risk in using any of these remote access devices (e.g. PCs, PDAs, mobile phones) for financial services, those that involve Internet access typically pose the greatest risk. This is because the Internet is such a widely accessible and public network

Internet Banking Primary Types :- 1. Informational General information about the financial institution General information about the financial institution Products or services offered Products or services offered 2. Transactional Initiating banking transactions Initiating banking transactions Buying products and services Buying products and services

Transactional Websites *Provide two separate types of services: 1. Retail services 2. Wholesale services

Retail Services Account management Account management Bill presentment and bill payment Bill presentment and bill payment New account initiation New account initiation Wire transfers Wire transfers Investment and brokerage services, Investment and brokerage services, Loan applications and approval Loan applications and approval Account aggregation for individual consumers Account aggregation for individual consumers

Wholesale Services Account management Account management Corporate cash management Corporate cash management Small business loan applications, approvals, and advances Small business loan applications, approvals, and advances Wire transfers Wire transfers Business-to-business payments Business-to-business payments Employee benefits and pension administration for business customers Employee benefits and pension administration for business customers

Issues Impacting E-Banking Informational Website: Potential liability and consumer violations Potential liability and consumer violations “The insider threat” if the website is not properly isolated “The insider threat” if the website is not properly isolated Avenue for spreading viruses and other malicious code Avenue for spreading viruses and other malicious code Reputational risk for service disruption and defacing Reputational risk for service disruption and defacing ……

Issues Impacting E-Banking Transactional websites: Safeguarding customer information Safeguarding customer information Authentication processes (e.g. ID theft) Authentication processes (e.g. ID theft) Liability for unauthorized transactions Liability for unauthorized transactions Losses from fraud Losses from fraud ……

E-Banking Risks Sectors 2008 Percentages 2007 Percentages Financial79%83% ISP8%7% Retail4%4% Insurance2%2% Internet community 2%2% Telecom2%<1% Computer hardware 1%1% Government1%1% Computer software <1%1% Transportation<1%1%

E-Banking Risks Data breachesIdentities exposed

E-Banking Risks *The types of e-banking risks include: Transaction or operations risk Transaction or operations risk Credit risk Credit risk Liquidity, interest rate, price, and market risks Liquidity, interest rate, price, and market risks Compliance or legal risk Compliance or legal risk Strategic risk Strategic risk

Operational (Technology) Risk Elements Technology Element Risks 1) Management processes Management oversight Management oversight Inadequate audit coverage Inadequate audit coverage New products process New products process 2) Architecture Poor development standards Poor development standards Mis-configuration of hardware/software Mis-configuration of hardware/software Datacenter burns Datacenter burns 3) Integrity Back officer mistake Back officer mistake Errors of judgment Errors of judgment 4) Security Inadequate password administration Inadequate password administration Breach of policy Breach of policy Viruses, malware, phishing, etc Viruses, malware, phishing, etc 5) Availability Natural disaster Natural disaster Failure to backup Failure to backup

Compliance and Legal Risks Uncertainty over legal jurisdictions Uncertainty over legal jurisdictions Delivery of credit and deposit- related disclosures/notices as required by law Delivery of credit and deposit- related disclosures/notices as required by law Establishment of legally binding electronic agreements Establishment of legally binding electronic agreements

Compliance and Legal Risks Solicitation, collection and reporting of government monitoring information on applications and loans (e.g. AML requirements) Solicitation, collection and reporting of government monitoring information on applications and loans (e.g. AML requirements) Delivery of privacy and opt-out notices Delivery of privacy and opt-out notices Record retention requirements Record retention requirements

Strategic Risk Risk management costs against the potential return on investment Risk management costs against the potential return on investment MIS to track e-banking costs, usage and profitability MIS to track e-banking costs, usage and profitability Generation of sufficient customer demand Generation of sufficient customer demand Adequacy of technical, operational, compliance or marketing support Adequacy of technical, operational, compliance or marketing support Competition Competition

E-Banking Configuration

E-Banking Trends Account aggregation Account aggregation Wireless Banking Wireless Banking