100 Marks Project Dhaval banking and insurance project

7/27/2019 100 Marks Project Dhaval banking and insurance project

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Information Technology has basically been used under two different

avenues in Banking. One is Communication and Connectivity and other is

Business Process Reengineering. Information technology enables

sophisticated product development, better market infrastructure,

implementation of reliable techniques for control of risks and helps thefinancial intermediaries to reach geographically distant and diversified

markets.

In view of this, technology has changed the contours of three major

functions performed by banks, i.e., access to liquidity, transformation of

assets and monitoring of risks. Further, Information technology and the

communication networking systems have a crucial bearing on the efficiency

of money, capital and foreign exchange markets. .

The Software Packages for Banking Applications in India had their

beginnings in the middle of 80s, when the Banks started computerising the

branches in a limited manner. The early 90s saw the plummeting hardware

prices and advent of cheap and inexpensive but high-powered PCs and

servers and banks went in for what was called Total Branch Automation

(TBA) Packages. The middle and late 90s witnessed the tornado of

financial reforms, deregulation, globalisation etc coupled with rapid

revolution in communication technologies and evolution of novel concept of

'convergence' of computer and communication technologies, like Internet,

mobile / cell phones etc.


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Initiatives of: reserve bank of india

RBI's Monetary and Credit Policy 2003-04, provides an insight into thecurrent developments & future of technology upgradation in the IndianFinancial sector, including banks. .

The Reserve Bank has assigned priority to the upgradation of technologicalinfrastructure in the financial system. Substantial progress has been madefor developing a modern, efficient, integrated and secure payment andsettlement system for the financial services sectors. Modernisation ofclearing and settlement through MICR based cheque clearing, popularisingelectronic clearing services (ECS) and integration of RBI-EFT scheme withfunds transfer schemes of banks, introduction of centralised funds

management system (CFMS) are significant milestones in this regard

Implementation of Centralised Funds Management System .

The centralised funds management system (CFMS) provides for acentralised viewing of balance positions of the account holders acrossdifferent accounts maintained at various locations of RBI. While the firstphase of the system covering the centralised funds enquiry system (CFES)has been made available to the users, the second phase comprising thecentralised funds transfer system (CFTS) would be made available by themiddle of 2003. So far, 54 banks have implemented the system at theirtreasuries/funds management branches.

Certification and Digital Signatures .

The mid-term Review of October 2002 indicated the need for informationsecurity on the network and the use of public key infrastructure (PKI) bybanks. The Controller of Certifying Authorities, Government of India, haveapproved the Institute for Development and Research in Banking

Technology (IDRBT) as a Certification Authority (CA) for digital signatures.Consequently, the process of setting up of registration authorities (RA)under the CA has commenced at various banks. In addition to thenegotiated dealing system (NDS), the electronic clearing service (ECS) andelectronic funds transfer (EFT) are also being enhanced in terms of securityby means of implementation of PKI and digital signatures using the facilitiesoffered by the CA. .


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Committee on Payment Systems .

In order to examine the entire gamut of the process of reforms in paymentand settlement systems which would be culminating with the real timegross settlement (RTGS) system, a Committee on Payment Systems(Chairman: Dr. R.H. Patil) was set up in 2002. The Committee, afterexamining the various aspects relating to payment and settlement systems,submitted its report in September 2002 along with a draft PaymentSystems Bill. The draft Bill provides, inter alia, a legal basis for netting,apart from empowering RBI to have regulatory and oversight powers over

payment and settlement systems of the country. The report of theCommittee was put on the RBI website for wider dissemination. The draftBill has been forwarded to the Government. .

Multi-application Smart Cards .

Recognising the need for technology based payment products and thegrowing importance of smart card based payment flows, a pilot project formulti-application smart cards in conjunction with a few banks and vendors,under the aegis of the Ministry of Communications and InformationTechnology, Government of India, has been initiated. The project is aimedat the formulation of standards for multi-application smart cards on thebasis of inter-operable systems and technological components of the entiresystem.


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Special Electronic Funds Transfer .

As indicated in the mid-term Review of October 2002, national EFT (NEFT)is being introduced using the backbone of the structured financialmessaging system (SFMS) of the IDRBT. NEFT would provide formovement of electronic transfer of funds in a safe, secure and quickmanner across branches of any bank to any other bank through a centralgateway of each bank, with the inter-bank settlement being effected in thebooks of account of banks maintained at RBI. Since this scheme requiresconnectivity across a large number of branches at many cities, a special

EFT (SEFT) was introduced in April 2003 covering about 3000 branches in500 cities. This has facilitated same day transfer of funds across accountsof constituents at all these branches. .

National Settlement System (NSS) .

The clearing and settlement activities are dispersed through 1,047 clearinghouses managed by RBI, the State Bank of India and its associates, publicsector banks and other institutions. In order to facilitate banks to havebetter control over their funds, it is proposed to introduce nationalsettlement system (NSS) in a phased manner.

Real Time Gross Settlement System (RTGS) .

As indicated in the mid-term Review of October 2002, development of the

various software modules for the RTGS system is in progress. The initialset of modules is expected to be delivered by June 2003 for members toconduct tests and familiarisation exercises. The live run of RTGS isscheduled towards the end of 2003. .


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Reporting of Call/Notice Money Market Transactions on NDS Platform

Negotiated dealing system (NDS), which has become operational sinceFebruary 2002, enables on-line dealing and dissemination of tradeinformation relating to instruments in money, government securities andforeign exchange markets. Membership in NDS is open to all institutionswhich are members of INFINET and are maintaining subsidiary generalledger (SGL) Account with RBI. These include banks, financial institutions(FIs), primary dealers (PDs), insurance companies, mutual funds and anyother institution as admitted by RBI. At present, all deals in governmentsecurities, call/notice/term money, CDs and CP executed among NDSmembers have to be reported automatically through NDS, if the deal isdone on NDS and within 15 minutes of concluding the deal, if done outsideNDS. However, it has been observed that a very sizeable proportion of

daily call/notice money market deals is not reported by members on NDSas stipulated. With a view to improving transparency and strengtheningefficiency in the market, it is proposed that: :

1. From the fortnight beginning May 3, 2003, it would be mandatory for allNDS members to report all their call/notice money market deals on NDS.Deals done outside NDS should be reported within 15 minutes on NDS,irrespective of the size of the deal or whether the counterparty is a memberof the NDS or not. .

2. Full compliance with the reporting requirement to NDS will be reviewedin September 2003. In case there is repeated non-reporting of deals by anNDS member, it will be considered whether non-reported deals by thatmember should be treated as invalid with effect from a future date.


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Perspectives of: CTOs of Banks in India

Banknet India invited CTO's (Chief Technology Officers) of various MajorIndian Banks to share their perceptions on IT in Banking, with specialreference to the Reserve Bank of Indias intitiatives in promotingcomputerisation in the Financial Sector. .

The participants include:

V Chandrasekhar, General Manager & ChiefTechnology Officer, Bank of Baroda; Mrs S A Panse, Deputy GeneralManager (Information Technology), Bank of Maharastra; C.N. Ram, ChiefTechnology Officer, HDFC Bank; Pravir Vohra, Chief Technology Officer,ICICI Bank; Neeraj B Bhai, Chief Technology Officer, IDBI Bank; Ravikiran

Mankikar, Chief of Information Technology, Shamrao Vithal Co-OperativeBank; V.K. Ramani, President (Information Technology), UTI Bank. AlsoProf. S. Sanyal, Tata Institute of Fundamental Research was invited toprovide with the 'Other Perspective'.

Areas, which will get the emphasis in IT plans/Strategy of banks...

Mrs S A Panse, Deputy General Manager (Information Technology), Bankof Maharastra is of view that as Asset-Liability management and Riskmanagement have gained importance after liberalization and globalization,getting the data updated on real time basis for the organization is of primeimportance. Establishing a WAN for connecting all the branches andmoving towards Core Banking Solution is the prime business need.Further, in view of RBI's initiative for implementing various payment andsettlement systems such as- NDS-PDO, CFMS, SMFS and RTGS,connectivity intrabank as well as interbank is also the basic necessity forevery bank. .

With RTGS being implemented by Jan.2004, every bank would have to notonly computerize the entire functioning of the Treasury department but alsowould have to consolidate the treasury function and move towardsintegrated treasury for better funds management. In order to achieve this,IT would be playing a major role. This has gained more importance afterthe establishment of the CCIL. .


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Mr C.N. Ram, Chief Technology Officer, HDFC Bank feels that Connectivityof banks, Risk Management, Asset Liability Management systems and corebanking will rank high in plans of Banks.According to Mr Pravir Vohra,Chief Technology Officer, ICICI Bank, Networking of branches, ALM & Riskmanagement are going to be areas of top priority in IT plans/Strategy ofbanks.

According to Mr Neeraj B Bhai, Chief Technology Officer, IDBI Bank, inview of RBI's policy this year, Inter-bank payment systems are poised tomove to a much higher degree of advancement during the year. WIthimpending arrival of RTGS, all banks will have to gear up for it. While Multi-application smart card pilot has been indicated in the policy, its activeusage is still quite some time away. The earlier Smart Card project of RBI

had met with a limited success. National Settlement System will enhancethe efficiency of funds management, which can now be centralised in amuch better way. .

Mr V.K. Ramani, President (Information Technology), UTI Bank is confidentthat the Policy announcements on the payment systems will pave the wayfor the establishment of the legal framework, for electronic settlements. Thetechnology initiative taken by the RBI for setting up RTGS will have farreaching impact As follow up to the electronic clearing ECS, the move foran RTGS is logical extension. .

According to Mr Ramani, the standards for inter operability of smart cardswill enable multiple applications on a single chip. Currently smart cards areused for select applications. The technology for integrated applications isavailable but unless the volume of transactions is large, it is not anattractive proposition. .

Mr Ravikiran Mankikar, Chief of Information Technology, Shamrao VithalCo-Operative Bank feels that RBI's initiatives and encouragement to the

Banks to implement payment and settlement systems in a securedenvironment is surely the first logical steps towards the introduction of theelectronic funds transfer mechanism in a big way. Banks that are notgeared up for the networking should fear to be left behind. Implementationof the Core Banking solutions are to be planned by Banks as part of theirstrategy to align with the RBI initiative. .


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Mr V Chandrasekhar, General Manager & Chief Technology Officer, Bankof Baroda summarises the key areas, which will get the emphasis in ITplans/Strategy of banks- .

a. Networking of branches .

b. Secure Messaging for launching funds transfer products .

c. Integrated Treasury Management System .

d. Focus on technology based initiatives for Intra-day liquidity Management

e. Core Banking Solution implementation

Approach of RBI towards IT in Banking .

Mr Neeraj B Bhai, Chief Technology Officer, IDBI Bank feels that as suchthere is no major shift on IT front in this year's RBI policy. What we seetoday is the culmination of the initiatives that were started a few years back.These were in the areas of moving towards automating interbank paymentand settlement systems. Mr C.N. Ram, Chief Technology Officer, HDFCBank, agrees that RBI is continuing with the policy initiatives in asystematic manner. .

Mr Pravir Vohra, Chief Technology Officer, ICICI Bank is also of view thatRBI has continued it's efforts for developing a modern and efficient,integrated payment and settlement system for the banking sector. Initiativetaken by the RBI for setting up RTGS will have far reaching impact. .

According to Mr V Chandrasekhar, General Manager & Chief TechnologyOfficer, Bank of Baroda, Technology initiatives started of with introductionof PDO-NDS during early 2002. This was followed by introduction of CFMS

Phase I. Roll out of RTGS is expected before the year-end. The chain ofincidents indicates that the technology focus of RBI is to bring in technologyto minimize systemic risk. He points out that Bank of Baroda was the firstbank to put in place a world class an Integrated State of the Art TreasurySystem covering front, middle and back office environment.


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How RBI's initiatives for Payment and Settlement system will impactcustomer service & efficiency of Banks? .

According to Mr V Chandrasekhar, General Manager & Chief TechnologyOfficer, Bank of Baroda, RTGS / SEFT will addresses the requirement ofthe customers for moving funds across bank branches at almost the samecost they pay for the normal remittance facility. .

The Real Time Gross Settlement (RTGS) project would create a majorupheaval in the banking sector. The real time payment across Banks &regions would revolutionise the payment mechanism in India, according toMr Ravikiran Mankikar, Chief of Information Technology, Shamrao VithalCo-Operative Bank. .

Mr C.N. Ram, Chief Technology Officer, HDFC Bank, is of view thatReserve Bank of India initiatives on RTGS, which have been introduced ina systematic manner, will lead to technological upgradation in banks. Nowbanks will have to put proper Information Technology systems in place toparticipate in RTGS and provide the benefits of improved payment systemsto their customers. If they lag in this area they will loose their customer toother banks. .

Mr Pravir Vohra, Chief Technology Officer, ICICI Bank feels that though infuture the customers will have faster and cheaper instruments of movementof funds across the country as well as quicker realisation of cheques, butbanks will be left with lower levels of float funds. Mr Neeraj B Bhai, ChiefTechnology Officer, IDBI Bank, is also of view that for customers it willmean availability of faster and cheaper instruments of movement of fundsacross the country as well as quicker realisation of cheques (oncetruncation comes in - but that is some time away). For the Banks theincreased efficiency of funds movement and settlement will mean shrinkingof available floats and partial/ significant cannibalization of some of theexisting products (e.g. Cash Management Services). .

Mr Neeraj Bhai, however feels Banks will be able to ride the availableinfrastructure to introduce their own funds transfer products. They will haveto price these products appropriately. In due course one will see this pricingalso getting subjected to competitive pressures. .


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Mrs S A Panse, Deputy General Manager (Information Technology), Bankof Maharastra also feels that NSS, coupled with connecting the servicebranches of the banks and Treasury with RTGS for settlement of all thetransactions on real time basis, would have an impact on the FLOAT funds.With connectivity established across the banking industry, there would notbe much availability of floats and this would have a major impact on thecosting of various services being offered by the banks. Thus it would beimperative on each bank's part to establish a full-fledged Costingdepartment (If not done already), and rework the service charges structure.

Mr V.K. Ramani, President (Information Technology), UTI Bank. is of viewthat the Special electronic funds transfer (SEFT) opens up a significantbusiness opportunity Large trading and distribution firms can effectivelyimplement e- procurement systems with settlement of transactions across

the banking system taking place under the SEFT. Large public sectorBanks and the new generation private sector banks who have madesubstantial investments in the IT infrastructure have an opportunity to offera wider range of services through multichannel delivery systems backed bythe RTGS and SEFT for funds settlement.

Roadmap of banks to strengthen the existing financial infrastructure...

Roadmap of banks according to Mr V Chandrasekhar, General Manager &Chief Technology Officer, Bank of Baroda should comprise of- .

a. Introduction of Core Banking system within the next 12 to 24 months.b. As an interim solution, networking of branches in the identifiedcommercially important centres immediately and start funds transferproducts.c. Immediate Establishment of RA office for issue of Digital certificates foruse in these funds transfer products. .

d. Establishment of an Integrated Treasury branch or in the interim properreporting arrangements from major centres for effective management andmaintenance of intra-day liquidity. .e. Development of an interface with the RBI applications and the Corebanking systems to enable STP. .


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According to Mrs S A Panse, Deputy General Manager (InformationTechnology), Bank of Maharastra, it is necessary that each public sectorbank take following steps- -

1. Establish a WAN connecting all the major branches. .

2. Introduce all the delivery channels in addition to the branch network.

3. Move towards Core Banking Solution. .

4. Introduce data warehousing and data mining. .

5. Introduce Customer relationship Management. .

6. Move towards Integrated treasury management. .

7. Go in for Business Process Re-engineering. .

8. Have an aggressive HRD policy for retraining in IT skills. .

9. Take up restructuring/ reorganization for the entire bank. .


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Mr Ravikiran Mankikar, Chief of Information Technology, Shamrao VithalCo-Operative Bank feels that the Banks are today aware for the need to bepart of a networked system. The emerging role of technologicalemployment by the Private Sector Banks and the leading Public SectorBanks is also motivating the Banks in the Co-Operative Sector to put theiract together. The implementation of ATMs on a massive scale by some ofthe Banks is also spurring the other Banks to have an ATM installed baseof their own. .

According to Mr Neeraj B Bhai, Chief Technology Officer, IDBI Bank,Roadmap has already been defined by RBI in great detail. What is neededis its efficient execution. To be able to launch one's own products, theBanks will have to enhance this roadmap to include integration with theirexisting applications so that end-to-end straight-through-processing

becomes possible. Here the fully computerised banks will have the edge.There is no reason why such products can not be made available on self-service channels like Internet, mobiles and ATMs.

Other Perspective

Prof. S. Sanyal, School of Technology & Computer Science, TIFR

The credit policy, recently announced by RBI will have severe implicationsin the world of technology and the way banks look at it. From theconsumer's perspective, one feels that if everything works out as planned,nothing could be better. Instant clearing of checks, electronic fundstransfer, digital certificates ... what more could the consumer ask for? .

But looking at it from the banker's point of view, it might mean burning

midnight oil and implementation of state of art encryption techniques. Thenetwork has to be extremely secure to be able to handle what the RBIproposes in its credit policy. Banks might need to invest additional amountsin employing ethical hackers to find loopholes in the network and correctthem. More importantly, any solution provided should be scalable to coverlarge areas so as to reach all corners of India. .


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In the new policy, the RBI has also proposed implementation of negotiateddealing system (NDS), electronic clearing service (ECS) and electronicfunds transfer (EFT). This would mean enhancing banking networks interms of security by means of use of Public Key Infrastructure (PKI) andDigital Signatures. Though the Government had been promoting the usageof technology in our day-to-day lives for a long time, things are taking aconcrete shape finally. The identification of certifying authorities, formationof a separate IT ministry, all are forward moving steps in this regard.

The banks should gear up in the manner they did before the Y2K crisis.Everyone in the Government, including top officials were after variousfinancial institutions in the country to make their systems Y2K compliant.Regular statistics were being published in the media. And, it worked. Wecould move over to the new century without any major problem. With the

new paradigm shift towards electronic age banking, a similar approachneeds to be adopted. Then only we can succeed in implementing the latestpolicy.

Another important but less thought-of area is that of upgrading theknowledge level of the Senior and Middle level staff of various banks.Young bankers will learn, as they are growing with the changes, not so forthe older lot. So, banks will have to make special provision for educatingtheir staff and also to be progressive in a pragmatic manner. And one morepoint, which is emerging, is Electronics and Computerised staff is to assisthuman beings (Bankers and Bank Users both). Sometimes, in the haste oftotal computerisation, one looses the focus that Banks should havepossibly more human interaction than earlier. People simply cannot keeptalking to machines or keep punching numbers to get a solution, wherethey could have achieved the same in a shorter time with human help. Iapplaud the right directional movement by RBI but would like to stress thathuman element should not be abolished. Then only we will achieve a totalsolution, be it in Banking, or in any other field.


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Perspectives of: CEO's of Banking Software Co's

Mr Manoj Kunkalienkar, Executive Director & President, ICICI InfotechLtd

Manoj Kunkalienkar, Executive Director & President, ICICI Infotech, is ofview that the banks will increasingly focus their attention on putting in placerobust risk consolidation, analytics and reporting mechanism, building anappropriate systems infrastructure, better data-warehousing and datamining techniques and upgrading the risk control capabilities in corebanking and treasury systems.

The Basel-II proposal, drafted by the Basel Committee on BankingSupervision, provides for a new and improved framework for risk basedcapital reserve requirements of a bank. .

The proposal provides for approaches that are intrinsically simple andgraduate to advanced methodologies. The framework provides banks withthe flexibility, subject to supervisory review, to adopt approaches, whichbest match their level of sophistication and risk profile. The framework alsodeliberately builds in rewards for those institutions with stronger capitalstructures and more accurate risk measurement procedures. .

Some of the key aspects of the new accord are Shifting away from a singlemodel focus of capital adequacy to the one based on three mutuallyreinforcing pillars i.e.i) minimum capital requirement

ii) supervisory review processes andiii) market discipline through greater transparency and disclosures.

Recognition and incorporation of measurement and reporting mechanism

for operational risks, for the first time, in the capital reserve requirement.One of the main sources of operational risk is the information systems andinfrastructure existing in a bank. .


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Although initially a limited set of banks from the BIS countries will embracethe new policies, it is expected that, over time, other banks and othercountries will adopt Basel-II. .

The imperative of putting in place an appropriate risk measurementmechanism will not just be on account of meeting regulatory requirements;there will now be a greater competitive compulsion due to the directcorrelation of the level of operational and other risks with the capitalrequirements. Banks that remain unaware and are unable to adopt Basel-IImodel will run the risk of a drastic increase in their capital reserverequirements, making them less competitive. .

Some of the areas that the banks will increasingly focus their attention willinclude putting in place robust risk consolidation, analytics and reporting

mechanism, building an appropriate systems infrastructure, better data-warehousing and data mining techniques and upgrading the risk controlcapabilities in core banking and treasury systems. .

ICICI Infotech has been tracking the developments in this new Baselparadigm and has solutions comprising risk management products andservices, which can help banks and financial institutions in adopting Basel-II framework.

Mr Vishnu R Dusad, Managing Director, Nucleus Software Exports Ltd

According to Vishnu R Dusad, Managing Director, Nucleus Software,Developments and changes in Indian economy during the last decade havecreated an entirely new set of challenges. The application areas for thenewer technology in banks can be by and large divided in two categoriesnamely Customer centered (Technology) applications and High End(Functionality) applications

Innovation in technology and the global explosion in information andcommunication technology (ICT) have emerged as prime sources ofproductivity growth. In the banking sector, IT can reduce costs, increasevolumes, and facilitate customised products; similarly, IT requires bankingand financial services to facilitate its growth. .


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Banks have realized that in todays age of fast-paced competition, thedeployment and effective use of IT often is the differentiator between theleader and the followers. Internet / Mobile banking, multiple customertouch-points, varied and quick-to-market banking products, corporatebanking services, cash management, cross-domain products, integrateddelivery channels and superior customer service are the buzzwords formodern banks. .

Though today the developments are concentrated within corporate banksand urban areas for reasons varying from poor connectivity to sheernumber of branches and their remote locations to the need for extensiveuser training both in terms of technology as well as work habits, this trendtoo is shifting facilitated by the forward looking policies of the RBI.

IT is increasingly moving from a back office function to a prime assistant inincreasing the value of a bank over time. IT does so by maximizing thebenefits of pro-active measures such as strengthening and standardizingbanks infrastructure in respect of security, communication and networking,achieving inter-branch connectivity, moving towards Electronic FundsTransfer (EFT); Real Time Gross Settlement (RTGS) environments,improve the effectiveness of asset-liability management, enhancing theforecasting of liquidity by building real time databases, use of Magnetic InkCharacter Recognition (MICR) and Imaging technology for cheque clearingto name a few. .

Proposed new accords such as Basel II, when implemented, are likely tohave significant implications for IT in banking systems as a whole requiringthe development of efficient and comprehensive internal systems forassessment and management of risks, setting up and adhering to adequateinternal exposure limits and improving general internal control. .

To summarize, IT in todays Banks is more of a holistic approach towardsdesigning and development of modern, robust, efficient, secure and

integrated systems.


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Mr V. M. Uchil, Chairman, Nextstep Infotech Pvt Ltd

V. M. Uchil, Chairman, Nextstep Infotech, regards, Innovation in technologyand the global explosion in information and communication technology(ICT) as prime sources of productivity growth. In the banking sector, IT canreduce costs, increase volumes, and facilitate customised products;similarly, IT requires banking and financial services to facilitate its growth.

The Indian Banking industry has come a long way from those early days.The journey ahead, promises to be exciting and eventful .

Developments and changes in Indian economy during the last decade have

created an entirely new set of challenges. The application areas for thenewer technology in banks can be by and large divided in two categoriesnamely Customer centered (Technology) applications and High End(Functionality) applications. Customer centered application includes thesolutions like Internet Banking, Anywhere branch banking, Mobile Banking,Core Banking Solutions, whereas high end technology encompasses RiskManagement solutions, Straight Through Processing (STP), creditmonitoring systems for the data collections etc. .

During the last decade, all the banks have computerized their branchesindividually through ALPMs, PBMs and TBAs etc. This was taking care ofthe individual branch requirements. During the last 2 years, banks haverealized the importance of core banking and are in the process ofconverting this from TBA atmosphere to centralize banking systems, theMIS can be qualitative and interpretation of various segments of data canbe crystallized. Risk management also plays a vital role in the bondmarkets.

Today Internet banking has become a buzzword in the banking industry. So

far these applications are limited to metros. Still a large majority of Indiancustomers are out of the purview this modernization. The Morgan StanleyDean Witter Internet research has emphasized that Web is more importantfor retail financial services than for many other industries. .


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Connectivity is leading to globalization of banking operations. Thecompetitive environment has made risk management extremely critical andindispensable. Credit risk continues to be the main risk for bankingbusiness, besides this Risk Management is now being directed to marketand liquidity risk. The Indian software industry needs to be ready to copewith these challenges.

Mr Suheim Sheikh, Managing Director, SDG Software Technologies

Suheim Sheikh, Managing Director, SDG Software feels that Money

Laundering and Fraud is increasingly becoming a matter of concern forfinancial institutions including banks and investment houses all over theworld, given the severe penalties imposed by the regulatory authorities fornon-compliance of Anti-Money Laundering (AML) reporting requirements.

Money Laundering and Fraud is increasingly becoming a matter of concernfor financial institutions including banks and investment houses all over theworld, given the severe penalties imposed by the regulatory authorities fornon-compliance of Anti-Money Laundering (AML) reporting requirements.

With several co-operative banks and financial institutions collapsing due tomismanagement and fraudulent activities, a solution is needed that canserve as an early warning system which will help initiate the necessarypreventative steps and ensure that a mechanism is in place to addressthese issues. .

SDG Software Technologies, a world-leader in surveillance and frauddetection software for capital markets, has introduced Bankalert, a

Compliance, Transaction Monitoring, AML and Business Intelligencesoftware for Banks and Financial Institutions (FI). It offers a transparentbanking system and helps them detect money laundering cases andtransactional frauds at a nascent stage. .


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Bankalert helps banks comply with the most stringent regulatory reportingand fraud detection requirements by monitoring the daily transactions oftheir customers. It also complies with the Know Your Customer (KYC)norms, which are incorporated in many institutions in India and abroad.This includes all reports and forms prescribed by the regulatory authority inknowing the customer, and stores voluminous information formultidimensional analyses of their accounts. .

Alert Management System, the heart of the software, enables analysts toeffectively manage alerts and apply experience and knowledge to screentransactions. Sophisticated techniques in statistical analysis help inidentifying various unusual transactions in an account. .

Bankalert has been built on an industry standard platform and has the

capacity to handle very large databases with ease. At, 600 plustransactions per second, it is the natural choice for real-time and missioncritical applications. .

Widely known and appreciated by its clients for the quality of software andsupport, SDG has years of hands-on experience in dealing with variousingenious frauds. It has now inculcated this experience in building one ofthe most reliable and efficient fraud detection systems in the world -Bankalert.


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Core banking

Core banking is a general term used to describe the services provided by

a group of networked bank branches. Bank customers may access theirfunds and other simple transactions from any of the member branchoffices. Core Banking is normally defined as the business conducted by abanking institution with its retail and small business customers. Many bankstreat the retail customers as their core banking customers, and have aseparate line of business to manage small businesses. Larger businessesare managed via the Corporate Banking division of the institution. Corebanking basically is depositing and lending of money.

Normal core banking functions will include deposit accounts, loans,

mortgages and payments. Banks make these services available acrossmultiple channels like ATMs, Internet banking, and branches.

Core Banking solutions are banking applications on a platform enabling aphased, strategic approach that lets people improve operations, reducecosts, and prepare for growth. Implementing a modular, component-basedenterprise solution ensures strong integration with your existingtechnologies. An overall service-oriented-architecture (SOA) helps banksreduce the risk that can result from multiple data entries and out-of-dateinformation, increase management approval, and avoid the potential

disruption to business caused by replacing entire systems.

Core Banking Solutions

Core Banking Solutions is new jargon frequently used in banking circles.The advancement in technology, especially internet and informationtechnology has led to new ways of doing business in banking. Thesetechnologies have cut down time, working simultaneously on differentissues and increasing efficiency. The platform where communicationtechnology and information technology are merged to suit core needs ofbanking is known as Core Banking Solutions. Here computer software isdeveloped to perform core operations of banking like recording of
http://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/Internet_bankinghttp://en.wikipedia.org/wiki/Internet_bankinghttp://en.wikipedia.org/wiki/Automated_teller_machine


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transactions, passbook maintenance, interest calculations on loans anddeposits, customer records, balance of payments and withdrawal are done.This software is installed at different branches of bank and theninterconnected by means of communication lines like telephones,satellite,internet etc. It allows the user (customers) to operate accounts from anybranch if it has installed core banking solutions. This new platform haschanged the way banks are working.

Core banking

Core banking is all about knowing customers' needs. Provide them with theright products at the right time through the right channels 24 hours a day, 7

days a week using technology aspects like Internet, Mobile ATM.

Select Core banking application package vendors (ISVs)

While many Banks implement custom (bespoke) applications for corebanking, others implement/customize commercial ISV packages. Here area few prominent ones, in alphabetical order (but sortable)...
http://en.wikipedia.org/wiki/Passbookhttp://en.wikipedia.org/wiki/Passbookhttp://en.wikipedia.org/wiki/Loanshttp://en.wikipedia.org/wiki/Loanshttp://en.wikipedia.org/wiki/Depositshttp://en.wikipedia.org/wiki/Depositshttp://en.wikipedia.org/wiki/Telephoneshttp://en.wikipedia.org/wiki/Telephoneshttp://en.wikipedia.org/wiki/Satellitehttp://en.wikipedia.org/wiki/Satellitehttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Satellitehttp://en.wikipedia.org/wiki/Telephoneshttp://en.wikipedia.org/wiki/Depositshttp://en.wikipedia.org/wiki/Loanshttp://en.wikipedia.org/wiki/Passbook


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Mobile banking

Mobile banking (also known as M-Banking, mbanking, SMS Banking etc.)is a term used for performing balance checks, account transactions,payments etc. via a mobile device such as amobile phone. Mobile bankingtoday (2007) is most often performed via SMS or the Mobile Internet butcan also use special programs called clients downloaded to the mobiledevice.

A mobile banking conceptual model

In one academic model,[1]mobile banking is defined as:

"Mobile Banking refers to provision and availment of banking- and financialservices with the help of mobile telecommunication devices.The scope ofoffered services may include facilities to conduct bank and stock markettransactions, to administer accounts and to access customisedinformation."

According to this model 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 designatedAccounting and Brokerage aretransaction-based. The non-transaction-based services of an informationalnature are however essential for conducting transactions - for instance,balance inquiries might be needed before committing a money remittance.

The accounting and brokerage services are therefore offered invariably incombination with information services. Information services, on the otherhand, may be offered as an independent module.
http://en.wikipedia.org/wiki/Mobile_phonehttp://en.wikipedia.org/wiki/Mobile_phonehttp://en.wikipedia.org/wiki/Mobile_phonehttp://en.wikipedia.org/wiki/SMShttp://en.wikipedia.org/wiki/SMShttp://en.wikipedia.org/wiki/Mobile_Internethttp://en.wikipedia.org/wiki/Mobile_Internethttp://c/Documents%20and%20Settings/sonu/Desktop/desktop/PRO/Mobile_banking.htm%23cite_note-0http://c/Documents%20and%20Settings/sonu/Desktop/desktop/PRO/Mobile_banking.htm%23cite_note-0http://c/Documents%20and%20Settings/sonu/Desktop/desktop/PRO/Mobile_banking.htm%23cite_note-0http://en.wikipedia.org/w/index.php?title=Mobile_Accounting&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Mobile_Brokerage&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Mobile_Financial_Information_Services&action=edit&redlink=1http://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Brokeragehttp://en.wikipedia.org/wiki/Brokeragehttp://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/w/index.php?title=Mobile_Financial_Information_Services&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Mobile_Brokerage&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Mobile_Accounting&action=edit&redlink=1http://c/Documents%20and%20Settings/sonu/Desktop/desktop/PRO/Mobile_banking.htm%23cite_note-0http://en.wikipedia.org/wiki/Mobile_Internethttp://en.wikipedia.org/wiki/SMShttp://en.wikipedia.org/wiki/Mobile_phone


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Trends in mobile banking

The advent of the Internet has revolutionized the way the financial servicesindustry conducts business, empowering organizations with new businessmodels and new ways to offer 24x7 accessibility to their customers.

The ability to offer financial transactions online has also created newplayers in the financial services industry, such as online banks, onlinebrokers and wealth managers who offer personalized services, althoughsuch players still account for a tiny percentage of the industry.

Over the last few years, the mobile and wireless market has been one ofthe fastest growing markets in the world and it is still growing at a rapidpace. According to the GSM Association and Ovum, the number of mobile

subscribers exceeded 2 billion in September 2005, and now exceeds 2.5billion (of which more than 2 billion are GSM).

According to a study by financial consultancy Celent, 35% of onlinebanking households will be using mobile banking by 2010, up from lessthan 1% today. Upwards of 70% of bank center call volume is projected tocome from mobile phones. Mobile banking will eventually allow users tomake payments at the physical point of sale. "Mobile contactlesspayments will make up 10% of the contactless market by 2010.[2]

Many believe that mobile users have just started to fully utilize the datacapabilities in their mobile phones. In Asian countries like India, China,Bangladesh, Indonesia and Philippines, where mobile infrastructure iscomparatively better than the fixed-line infrastructure, and in Europeancountries, where mobile phone penetration is very high (at least 80% ofconsumers use a mobile phone), mobile banking is likely to appeal evenmore.

This opens up huge markets for financial institutions interested in offeringvalue added services. With mobile technology, banks can offer a wide

range of services to their customers such as doing funds transfer whiletravelling, receiving online updates of stock price or even performing stocktrading while being stuck in traffic. According to the German mobileoperator Mobilcom, mobile banking will be the "killer application" for thenext generation of mobile technology.
http://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Financial_transactionhttp://en.wikipedia.org/wiki/GSM_Associationhttp://en.wikipedia.org/wiki/Ovumhttp://en.wikipedia.org/wiki/GSMhttp://en.wikipedia.org/w/index.php?title=Celent&action=edit&redlink=1http://en.wikipedia.org/wiki/Online_bankinghttp://en.wikipedia.org/wiki/Online_bankinghttp://en.wikipedia.org/wiki/Point_of_salehttp://en.wikipedia.org/wiki/Contactless_paymenthttp://en.wikipedia.org/wiki/Contactless_paymenthttp://en.wikipedia.org/wiki/Contactless_paymenthttp://c/Documents%20and%20Settings/sonu/Desktop/desktop/PRO/Mobile_banking.htm%23cite_note-Celent-1http://c/Documents%20and%20Settings/sonu/Desktop/desktop/PRO/Mobile_banking.htm%23cite_note-Celent-1http://c/Documents%20and%20Settings/sonu/Desktop/desktop/PRO/Mobile_banking.htm%23cite_note-Celent-1http://en.wikipedia.org/wiki/Mobile_phonehttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Bangladeshhttp://en.wikipedia.org/wiki/Indonesiahttp://en.wikipedia.org/wiki/Philippineshttp://en.wikipedia.org/wiki/Europehttp://en.wikipedia.org/wiki/Stock_tradinghttp://en.wikipedia.org/wiki/Stock_tradinghttp://en.wikipedia.org/wiki/Stock_tradinghttp://en.wikipedia.org/wiki/Stock_tradinghttp://en.wikipedia.org/wiki/Europehttp://en.wikipedia.org/wiki/Philippineshttp://en.wikipedia.org/wiki/Indonesiahttp://en.wikipedia.org/wiki/Bangladeshhttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Mobile_phonehttp://c/Documents%20and%20Settings/sonu/Desktop/desktop/PRO/Mobile_banking.htm%23cite_note-Celent-1http://en.wikipedia.org/wiki/Contactless_paymenthttp://en.wikipedia.org/wiki/Contactless_paymenthttp://en.wikipedia.org/wiki/Point_of_salehttp://en.wikipedia.org/wiki/Online_bankinghttp://en.wikipedia.org/wiki/Online_bankinghttp://en.wikipedia.org/wiki/Online_bankinghttp://en.wikipedia.org/w/index.php?title=Celent&action=edit&redlink=1http://en.wikipedia.org/wiki/GSMhttp://en.wikipedia.org/wiki/Ovumhttp://en.wikipedia.org/wiki/GSM_Associationhttp://en.wikipedia.org/wiki/Financial_transactionhttp://en.wikipedia.org/wiki/Internet


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Mobile banking business models

A wide spectrum of Mobile/branchless banking models is evolving.However, no matter what business model, if mobile banking is being usedto attract low-income populations in often rural locations, the businessmodel will depend on banking agents, i.e., retail or postal outlets thatprocess financial transactions on behalf telcos or banks. Thebanking agentis an important part of the mobile banking business model since customercare, service quality, and cash management will depend on them. Manytelcos will work through their local airtime resellers. However, banks inColombia, Brazil, Peru, and other markets use pharmacies, bakeries, etc.

These models differ primarily on the question that who will establish therelationship (account opening, deposit taking, lending etc.) to the end

customer, the Bank or the Non-Bank/Telecommunication Company (Telco).Another difference lies in the nature of agency agreement between bankand the Non-Bank. Models of branchless banking can be classified intothree broad categories - Bank Focused, Bank-Led and Nonbank-Led.

Bank-focused model

The bank-focused model emerges when a traditional bank uses non-traditional low-cost delivery channels to provide banking services to itsexisting customers. Examples range from use ofautomatic teller machines(ATMs) to internet banking or mobile phone banking to provide certainlimited banking services to banks customers. This model is additive innature and may be seen as a modest extension of conventional branch-based banking.

Bank-led model

The bank-led model offers a distinct alternative to conventional branch-based banking in that customer conducts financial transactions at a wholerange of retail agents (or through mobile phone) instead of at bankbranches or through bank employees. This model promises the potential tosubstantially increase the financial services outreach by using a different
http://en.wikipedia.org/wiki/Banking_agenthttp://en.wikipedia.org/wiki/Banking_agenthttp://en.wikipedia.org/wiki/Banking_agenthttp://en.wikipedia.org/wiki/Banking_agenthttp://en.wikipedia.org/wiki/Banking_agenthttp://en.wikipedia.org/wiki/Automatic_teller_machinehttp://en.wikipedia.org/wiki/Automatic_teller_machinehttp://en.wikipedia.org/wiki/Banking_agenthttp://en.wikipedia.org/wiki/Banking_agent


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delivery channel (retailers/ mobile phones), a different trade partner (telco /chain store) having experience and target market distinct from traditionalbanks, and may be significantly cheaper than the bank-based alternatives.The bank-led model may be implemented by either using correspondentarrangements or by creating a JV between Bank and Telco/non-bank. Inthis model customer account relationship rests with the bank

Non-bank-led model

The non-bank-led model is where a bank does not come into the picture(except possibly as a safe-keeper of surplus funds) and the non-bank (e.g.telco) performs all the functions.

Mobile Banking Services

Mobile banking can offer services such as the following:

Account Information

Mini-statements and checking of account history

Alerts on account activity or passing of set thresholds

Monitoring of term deposits

Access to loan statements


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Access to card statements

Mutual funds / equity statements

Insurance policy management

Pension plan management

Status on cheque, stop payment on cheque

Ordering check books .

Balance checking in the account

Recent transactions

Due date of payment (functionality for stop, change anddeleting of payments)

PIN provision, Change of PIN and reminder over the Internet

Blocking of (lost, stolen) cards
http://en.wikipedia.org/wiki/Mutual_fundhttp://en.wikipedia.org/wiki/Mutual_fund


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Support

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

2. Check (cheque) book and card requests3. Exchange of data messages and email, including complaint

submission and tracking4. ATM Location

Content Services

1. General information such as weather updates, news2. Loyalty-related offers3. Location-based services

Based on a survey conducted by Forrester, mobile banking will beattractive mainly to the younger, more "tech-savvy" customer segment. Athird of mobile phone users say that they may consider performing somekind of financial transaction through their mobile phone. But most of theusers are interested in performing basic transactions such as querying foraccount balance and making bill payment.

Challenges for a Mobile Banking Solution

Key challenges in developing a sophisticated mobile banking applicationare :


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Handset operability

There are a large number of different mobile phone devices and it is a big

challenge for banks to offer mobile banking solution on any type of device.Some of these devices support J2ME and others support WAP browser oronly SMS.

Initial interoperability issues however have been localized, with countrieslike India using portals like R-World to enable the limitations of low end javabased phones, while focus on areas such as South Africa have defaulted tothe USSD as a basis of communication achievable with any phone.

The desire for interoperability is largely dependent on the banksthemselves, where installed applications(Java based or native) providebetter security, are easier to use and allow development of more complexcapabilities similar to those of internet banking while SMS can provide thebasics but becomes difficult to operate with more complex transactions.

There is a myth that there is a challenge of interoperability between mobilebanking applications due to perceived lack of common technologystandards for mobile banking. In practice it is too early in the servicelifecycle for interoperability to be addressed within an individual country, as

very few countries have more than one mobile banking service provider. Inpractice, banking interfaces are well defined and money movementsbetween banks follow the IS0-8583 standard. As mobile banking matures,money movements between service providers will naturally adopt the samestandards as in the banking world.
http://en.wikipedia.org/wiki/SMShttp://en.wikipedia.org/wiki/SMS


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Security

Security of financial transactions, being executed from some remotelocation and transmission of financial information over the air, are the mostcomplicated challenges that need to be addressed jointly by mobileapplication developers, wireless network service providers and the banks'IT departments.

The following aspects need to be addressed to offer a secure infrastructurefor financial transaction over wireless network :

1. Physical part of the hand-held device. If the bank is offering smart-card based security, the physical security of the device is moreimportant.

2. Security of any thick-client application running on the device. In casethe device is stolen, the hacker should require at least anID/Password to access the application.

3. Authentication of the device with service provider before initiating atransaction. This would ensure that unauthorized devices are notconnected to perform financial transactions.

4. User ID / Password authentication of banks customer.5. Encryption of the data being transmitted over the air.6. Encryption of the data that will be stored in device for later / off-line

analysis by the customer.
http://en.wikipedia.org/wiki/Authenticationhttp://en.wikipedia.org/wiki/Authenticationhttp://en.wikipedia.org/wiki/Encryptionhttp://en.wikipedia.org/wiki/Encryptionhttp://en.wikipedia.org/wiki/Encryptionhttp://en.wikipedia.org/wiki/Encryptionhttp://en.wikipedia.org/wiki/Authenticationhttp://en.wikipedia.org/wiki/Authentication


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Scalability & Reliability

Another challenge for the CIOs and CTOs of the banks is to scale-up themobile banking infrastructure to handle exponential growth of the customerbase. With mobile banking, the customer may be sitting in any part of theworld (true anytime, anywhere banking) and hence banks need to ensurethat the systems are up and running in a true 24 x 7 fashion. As customerswill find mobile banking more and more useful, their expectations from thesolution will increase. Banks unable to meet the performance and reliabilityexpectations may lose customer confidence. There are systems such asMobile Transaction Platform which allow quick and secure mobile enablingof various banking services. Recently in India there has been aphenomenal growth in the use of Mobile Banking applications, with leadingbanks adopting Mobile Transaction Platform and the Central Bankpublishing guidelines for mobile banking operations.

Application distribution

Due to the nature of the connectivity between bank and its customers, itwould be impractical to expect customers to regularly visit banks or connectto a web site for regular upgrade of their mobile banking application. It willbe expected that the mobile application itself check the upgrades andupdates and download necessary patches (so called "Over The Air"updates). However, there could be many issues to implement this approachsuch as upgrade / synchronization of other dependent components.
http://en.wikipedia.org/wiki/Chief_information_officerhttp://en.wikipedia.org/wiki/Chief_technical_officerhttp://en.wikipedia.org/w/index.php?title=Mobile_Transaction_Platform&action=edit&redlink=1http://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/w/index.php?title=Mobile_Transaction_Platform&action=edit&redlink=1http://en.wikipedia.org/wiki/Chief_technical_officerhttp://en.wikipedia.org/wiki/Chief_information_officer


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Personalization

It would be expected from the mobile application to support personalizationsuch as :

1. Preferred Language2. Date / Time format3. Amount format4. Default transactions5. Standard Beneficiary list6. Alerts

Mobile Banking in the world

This part of the mobile commerce is very popular in countries where mostof their population is unbanked. .Countries like Sudan, Ghana and South Africa received this new commercevery well. .

In Latin America countries like Uruguay, Paraguay, Argentina, Brazil,Venezuela, Colombia, Guatemala and recently Mexico started with a hugesuccess.

In Colombia was released with Redeban. .

In Iran banks like Parsian, Tejarat, Mellat, Saderat, Sepah, edbi andbankmelli offer this service. Guatemala have the support of Bancoindustrial.
http://en.wikipedia.org/wiki/Mobile_commercehttp://en.wikipedia.org/wiki/Mobile_commerce


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Mexico released the mobile commerce with Omnilife,Bancomer and aprivate company(MPower Ventures). Kenya's Safaricom (Part of theVodafone Group) has had the very popularM-Pesa Service - mainly usedto transfer limited amounts of money, but has been increasingly used topay utility bills. Zain in 2009 launched their own mobile money transferbusiness known as ZAP in Kenya and other African countries.
http://en.wikipedia.org/wiki/Mexicohttp://en.wikipedia.org/wiki/Bancomerhttp://en.wikipedia.org/wiki/Kenyahttp://en.wikipedia.org/wiki/M-Pesahttp://en.wikipedia.org/wiki/M-Pesahttp://en.wikipedia.org/wiki/Kenyahttp://en.wikipedia.org/wiki/Bancomerhttp://en.wikipedia.org/wiki/Mexico

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