ROLE OF
DIGITISATION IN
BANKING SECTOR

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

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.

 Eco-Friendly
 Advanced Bank
websites
 Easy Banking
 Time Saving
 Mobility of Services
 Increased efficiency and
accuracy
 High interest rates

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.

 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.

 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.

Evolving Trends in India :Rapid Growth of Electronic
Payments

India to have the second-largest Internet user base after
China

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.

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.

 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

Drawback of Digitisation
 Higher risk of identity theft
 Losing phone.
 Difficult for tech-unsavyy.
 Overspending

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.

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.

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.

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.

 SBI was first Indian Public sector banks to set up Investment
Banking division in 1972.

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.

 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.

Various Payment Mechanisms
Digital
Wallets
Aadhar enabled
payment system
(AEPS)
Aadhar enabled
payment system
(AEPS)
National
electronic fund
transfer (NEFT).

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

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.

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.

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.

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.

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.

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.

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.

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

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

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

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

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

RTGS / NEFT Minimum-Maximum Amount
Type Minimum Maximum
RTGS Rs. 2 Lakh No Limit
NEFT
No Limit
No Limit

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

*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

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

Transfer Funds to another Bank Account

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

Key Steps for AEPS Transaction

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

UPI Registration Process

Registering on UPI

Sending Money on UPI

Sending Money on UPI

Point of Sale (PoS)

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

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.

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

HIMANSHU AGARWAL
hope.himanshu@gmail.com
09461210887
THANK YOUTHANK YOU