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Digitisation in Banking sector

  2. CONTENTS  Introduction.  Significance.  Digitisation of Financial Services.  Evolving Trends in India.  Economic Benefits to Banks and Customers.  Relationship of Digitisation to Digital India.  Impact Of Digitisation on Customer Services  Drawback of Digitisation.  Innovation and Opportunities.  Investment Banking.  One Time Password(OTP).  Various Payment Mechanisms.  Digitisation - Demonetization  Conclusion
  3. INTRODUCTION The Financial services industry is going through dramatic changes as a consequence of changing customer behavior, increasing expectations, innovative use and adoption of new technologies and the Digitisation of business and society in general. Cost Reductions, increasing topline revenue and mitigating risk remain the key drivers, also in Retail Banking.
  4.  Eco-Friendly  Advanced Bank websites  Easy Banking  Time Saving  Mobility of Services  Increased efficiency and accuracy  High interest rates
  5. Digitisation of Financial Services  When you hear the word “digital,” you may think of consumer product companies like Apple and Amazon, or social media channels like Facebook and Twitter. But digital is extremely important within financial services institutions as well.  Digitisation, especially in respect to banks and impact is quite transformative. A very immediate result of the Digitisation in financial services is enabling people to open bank account in real time. Digitisation is the key to India’s competitiveness.  Digitized trend have reaped benefits in greater customer insight and reach.
  6.  The savings got easier with financial inclusion which further enables accumulation and diversification of assets, boosting economic activity in the process  E-KYC service is offered by Unique Identification Authority of India (UIDAI) with the main objective of verification of his/her credentials digitally.  The list of potential benefits from Digitisation of public services will be a long one. What one cannot dispute is the sheer potential to transform the lives of citizens and positively impact the society and environment.
  7.  Digitisation, is the power of connecting people and change the way we work and how governments serve its citizens.  A report by the Columbia University has identified that Digitisation has a larger contribution to GDP than stand-alone technologies. It states that a 10 point increase in Digitisation yields a 0.74% increase in per capita GDP.  The financial services industry has been a front-runner when it comes to technology. Two key factors have influenced this shift, namely the development of the Internet and a dramatic reduction in the cost of technology.
  8. Evolving Trends in India :Rapid Growth of Electronic Payments
  9. India to have the second-largest Internet user base after China
  10. Economic Benefits to Banks and Customers  Digitisation accelerates economic growth and creates jobs, it allows Banks to save costs and generate revenue. Indeed, digitizing information-intensive processes can cut costs by up to 90%.  Software also allows collection of data that helps them understand complete banking pattern which enables proactive addressing of problems. Relationship of Digitisation to Digital India  Digitize India calls for your participation  The Digital India programme is a flagship programme of the Government of India with a vision to transform India into a digitally empowered society and knowledge economy.
  11. Impact Of Digitisation on Customer Services  In today’s digital world, the rules of customer engagement are changing. To continue acquiring and retaining customers, banks need to recognize this and adapt to these new dynamics.  GO DIGITAL GET DISCOUNTS Service tax : Waiver of service tax of 15% on digital transactions upto2,000. Fuel : 0.75% discount on digital purchase of fuel through credit/debit cards, e-wallets or mobile wallets. Rail tickets : 0.5% discount on monthly and seasonal suburban railway tickets from 1 January 2017. Online rail ticket buyers get up to `10 lakh free accident insurance too.
  12.  Rail catering : 5% discount on digital payments for railway catering, accommodation, retiring rooms, etc.  Highway toll : 10% discount on NH toll payment via RFID or fast-tags in 2016-17.  Insurance : 10% discount by government general insurers on premium paid online via their portals. 8% discount on new LIC policies bought online via its site. POS: Rs 100 a month is the maximum rent that PSU banks can charge for PoS
  13. Drawback of Digitisation  Higher risk of identity theft  Losing phone.  Difficult for tech-unsavyy.  Overspending
  14. Innovation and Opportunities  Greater Changes, Greater Opportunities  Advancements in digital banking provide some of the most exciting opportunities in a generation of financial services.  The digital transformation has changed how we live and work – and how we bank. Moving money in real time and paying bills on a smartphone were unheard of not that long ago, yet are now commonplace (and expected). We are likely just on the edge of an era of rapid change.  Although 86 percent of Millennials already use mobile banking, 71% of this generation believe mobile banking will continue to transform their banking experience.  Great changes are happening in digital banking – innovations that will likely take shape in ways we may not expect or be able to plan for.
  15. There are endless opportunities for youth and few apps are being developed as follows: 1.Paytm – 50 Million downloads. 2.MobiKwik- 10 Million downloads. 3.BHIM- 10 Million downloads.
  16. Investment Banking Definition: Investment banking is a special segment of banking operation that helps individuals or organizations raise capital and provide financial consultancy services to them. They act as intermediaries between security issuers and investors and help new firms to go public. They either buy all the available shares at a price estimated by their experts and resell them to public or sell shares on behalf of the issuer and take commission on each share.
  17. Investment banking is among the most complex financial mechanisms in the world. They serve many different purposes and business entities. Bank of America, Barclays Capital, Citigroup Investment Banking, Deutsche Bank, and JP Morgan are some of the largest investment banks in India.
  18.  SBI was first Indian Public sector banks to set up Investment Banking division in 1972.
  19. One Time Password(OTP)  A one-time password (OTP) is a password that is valid for only one login session or transaction, on a computer system or other digital device.  OTPs avoid a number of shortcomings that are associated with traditional (static) password-based authentication; a number of implementations also incorporate two factor authentication by ensuring that the one-time password requires access to something a person has (such as a small keyring fob device with the OTP calculator built into it, or a smartcard or specific cellphone) as well as something a person knows (such as a PIN).  The most important advantage that is addressed by OTPs is that, in contrast to static passwords, they are not vulnerable to replay attacks.
  20.  This means that a potential intruder who manages to record an OTP that was already used to log in to a service or to conduct a transaction will not be able to abuse it, since it will no longer be valid.  A second major advantage is that a user who uses the same (or similar) password for multiple systems, is not made vulnerable on all of them, if the password for one of these is gained by an attacker.  A number of OTP systems also aim to ensure that a session cannot easily be intercepted or impersonated without knowledge of unpredictable data created during the previous session, thus reducing the attack surface further.  OTPs have been discussed as a possible replacement for, as well as enhancer to, traditional passwords. On the downside, OTPs are difficult for human beings to memorize. Therefore, they require additional technology to work.
  21. Various Payment Mechanisms Digital Wallets Aadhar enabled payment system (AEPS) Aadhar enabled payment system (AEPS) National electronic fund transfer (NEFT).
  22. ATM Cards ATM cards can be used only at ATM machines to withdraw cash. You will require a Personal Identification Number(PIN) to carry out a transaction. An ATM card is linked to your current account or savings account maintained in the bank. The card does not offer credits and hence money is deducted on a real-time basis. ATM withdrawals charge you a fees if the transaction is being carried out in an ATM machine of a different bank
  23. Debit cards Debit cards come with almost every feature of a credit card even though it doesn’t allow credits. Just like an ATM card you will require a four digit Personal Identification Number to complete your purchases. In addition to ATM machines, your debit card can be used at stores or restaurants and can also be used for online payments. Much like ATM cards, the debit card allows you to use the money from your savings account. It is different from a credit card as the customer does not have to pay interests or make a repayment schedule. PIN-system security and change your PIN at any Merchants Bank branch.
  24. Types of Debit Cards in India Visa Debit Cards : These debit cards are issued with the bank’s tie-up with VISA payment services providing the Verified by Visa (VbV) platform for online transactions. Visa Electron Debit Cards : Visa Electron debit cards are very similar to Visa debit cards but these cards do not provide the overdraft feature. MasterCard Debit Cards : A MasterCard Cirrus Card or a MasterCard Maestro Card gives customers access to their funds worldwide and they can perform online transactions using their bank accounts on the MasterCard Secure Code platform.
  25. Contactless Debit Cards: Customers can make payments with just a tap or wave of their contactless debit cards near PoS terminals, with the cards working on Near Field Technology (NFC) thereby making electronic payments safer. RuPay Debit Cards: Introduced as a domestic card scheme by the NPCI, RuPay debit cards facilitate online purchases and transactions on the Discover network and ATM transactions under the National Financial Switch network.
  26. Maestro Debit Card: Founded in 1992, Maestro from MasterCard is a premier, international debit card service that has been popularly adopted at over 13 million locations spread across 100+ countries around the world. Maestro, as easily identified by the signature logo on all partner cards, helps the customer gain immediate access to his/her money through a robust, international network of compatible ATMs, POS outlets and online resources.
  27. Transaction charges on debit card payments In a survey conducted in 2015, it was revealed that there were around 61.5 crore debit card users and 2.3 crore credit card users in the country. Generally, customers pay a transaction cost on debit card payments which is also known as merchant discount rate (MDR). In a move to increase cashless transactions post demonetization, the government had notified banks to not charge customers for debit card transactions till December 31.
  28. BASIS FOR COMPARISON ATM CARD DEBIT CARD Meaning ATM card is issued by a bank to allow a customer to withdraw money from his account through the Automated Teller Machine (ATM) any time he wants. Debit card is issued by a bank to allow its customers to purchase goods and services by making the payment through a card with the help of a swiping machine. Functions ATM card has less function as compared to a Debit card. Debit card has many functions. Deduction from account Whenever you withdraw money from the ATM, the amount gets deducted from the related account. Whenever you make a payment for the goods and services through a card, the amount is deducted from the account linked to the card. Uses Balance statement, deposits, withdrawals, transfer of funds, can be done. Balance statement, deposits, online payment and purchases can be done. Logo ATM card usually has Maestro or Cirrus or Plus logo. Debit card usually has Master or Visa logo.
  29. CREDIT CARD  Though credit cards facilitate ATM withdrawals, it is mostly used like a loan option and is issued by the bank after reviewing your creditworthiness  Your credit score impacts your credit card application. Too many credit card applications may have a negative effect on your overall score  It allows you to purchase any product that is within your spending limit and make payments later  It offers attractive discounts on certain brands and services.  Besides standard and premium versions, there are many variants in credit cards which offer a wide range of activities, right from shopping and dining to booking an air ticket.
  30. Feature ATM Card Debit Card Credit Card Funds connected to bank account: Yes Yes No Use anywhere cards are accepted: No Yes Yes Receive a bill and pay later: No No Yes Charges interest: No No Yes Affects credit score: No No Yes
  31. Real-time gross settlement (RTGS)  The acronym 'RTGS' stands for Real Time Gross Settlement.  RTGS system is a funds transfer mechanism where transfer of money takes place from one bank to another on a 'real time' and on 'gross' basis.  This is the fastest possible money transfer system through the banking channel.  Settlement in 'real time' means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed.  'Gross settlement' means the transaction is settled on one to one basis without bunching with any other transaction.  Considering that money transfer takes place in the books of the Reserve Bank of India, the payment is taken as final and irrevocable
  32. National Electronic Funds Transfer (NEFT) • The acronym “NEFT” stands for National Electronic Funds Transfer. • Funds are transferred to the credit account with the other participating Bank using RBI's NEFT service. • RBI acts as the service provider and transfers the credit to the other bank's account. • NEFT operate on a deferred net settlement (DNS) basis which settles transactions in batches. • In DNS, the settlement takes place at a particular point of time. All transactions are held up till that time
  33. Why RTGS / NEFT  Lower cost of transaction of RTGS/NEFT as compared to cost of transaction and remmitance through draft .  Draft Issue to Payment – long process, cancellation, duplicate draft issue, revalidation, IOR issues, frauds, Staff accountability  Customer Benefit – Immediate credit  Low transaction time, no printing, shorten the queues  Drafts will be phased out in the coming years
  34. RTGS / NEFT Durations RTGS transactions will be sent to RBI based on the following schedule: Day Start Time End Time Monday to Friday 9:00 hrs 16:00 hrs Saturday 9:00 hrs 13:30 hrs NEFT transactions will be sent to RBI based on the following schedule: Day Start Time End Time Monday to Friday 8:00 hrs 16:00 hrs Saturday 8:00 hrs 11:30 hrs
  35. RTGS / NEFT Minimum-Maximum Amount Type Minimum Maximum RTGS Rs. 2 Lakh No Limit NEFT No Limit No Limit
  36. RTGS / NEFT Processing Charges/Service Charges Amount Service Charge RTGS From Rs.2 lakh upto Rs.5 lakh Not exceeding Rs 30/- Rs. 5 lakh & above Not exceeding Rs 55/- NEFT Upto Rs.1 lakh Rs.5/- Rs.1 lakh & 2 lakh and above 2 lakh Rs.15/- maximum Rs 25/- maximum Inward transactions charges for RTGS/NEFT– Free, no charge to be levied
  37. *99# - National Unified USSD Platform (NUUP) Required for Activation 1.ACCOUNT IN A BANK 2.ANY MOBILE PHONE ON GSM NETWORK Can be used for payments upto Rs 5000/- per day per customer Unstructured Supplementary Service Data (USSD) based Mobile Banking
  38. Registration Step 1. Visit your branch to link mobile number and bank account (Can be done at ATM or online also). Step 2. You will get your Mobile Money Identifier (MMID) and Mobile PIN (MPIN) upon registration . Step 3. Remember your MMID and MPIN
  39. Transfer Funds to another Bank Account
  40. Aadhar enabled payment system (AEPS)  AEPS allows bank-to-bank transaction at PoS (MicroATM) with the help of BC.  Aadhar enabled Services –Balance Enquiry – Cash Withdrawal – Cash Deposit – Aadhaar to Aadhaar Funds Transfer You can do – Account balance – Aadhar to Aadhar fund transfer – Cash withdrawal – Cash deposit – Purchase at Fair Price Shops with AEPS
  41. Key Steps for AEPS Transaction
  42. Unified Payment Interface(UPI) Requirements for registration on UPI 1.Smartphone with internet facility 2.Bank Account details (only for registration) Available Apps (28 BANK APPS) SBI app, PNB UPI, UPI Collect (ICICI), Axis Pay, Canara Bank UPI, UCO UPI, Union Bank UPI, OBC UPI and 20 other bank
  43. UPI Registration Process
  44. Registering on UPI
  45. Sending Money on UPI
  46. Sending Money on UPI
  47. Point of Sale (PoS)
  48. DIGITAL WALLETS  It securely stores a consumer’s payment information as well as credentials for numerous other payment gateways can be termed as a digital wallet.  Wallets such as Paytm, PayPal, Google Wallet, etc. offer the functionality of storing cash electronically
  49. Digitisation - Demonetization  Demonetization to benefit economy in long run, more and more people are going for digital payment.  "Financial intermediation has increased after deposits in bank accounts. This means the capital which was privately invested will now be invested through financial institutions. This will have good impact (on the economy). It will increase our efficiency of transactions as we move towards digitised transactions. This will also be a positive thing.“  The recent demonetization reforms in INDIA acted as the perfect initiator for citizens to shift towards a widespread use of digital wallets instead of utilizing cash as a medium of payment.  This, in turn has been highly successful in driving INDIA towards being a digital economy and eradicating black money transactions from the market to a large extent.
  50. In order to minimize and control the effects of demonetization, we are adopting modern approach of digital money with the aim of constructing cashless society. INDIA being the 2nd largest Internet consumer is witnessing such a condition and we are stepping towards digital money with the main motive of transparency and accountability through banks and ensuring the safety or security of people’s hard earned money. The benefits are endless and with the recent introduction of demonetization , this has gained much more popularity and the economy is developing by means of recognition internationally , education at all fronts, favorable government policies and at the same time ensuring sustainable development of natural resources by saving on paper, fuel etc. “Let us join this biggest revolution and mark a change to society” Conclusion