The acceleration in technology has produced an extraordinary effect upon our economy and, in general, has had a particularly profound impact on expanding the scope and utility of financial products over the last ten years. Information technology has made possible the creation, valuation, and exchange of complex financial products on a global basis and even that just in recent years. Derivatives are obviously the most evident of the many products that technology has inspired, but the substantial increase in our calculation has permitted a variety of other products and most beneficial new ways to avoid risks.
What is really quite extraordinary is that there is no sign that this process of acceleration in financial technology is approaching an end. We are moving at an exceptionally rapid pace, fueled not only by the enhanced mathematical applications produced by our ever rising computing capabilities but also by our expanding telecommunications capabilities and the associated substantial broadening of our markets.
All the new financial products that have been created in recent years contribute economic value by ‘unbundling' risks and reallocating them in a highly calibrated manner. The rising share of finance in the business output a few countries are a measure of the economic value added by the ability of these new instruments and techniques to enhance the process of wealth creation. The reason of course, is that information is critical to the evaluation of risk. The less that is known about the current state of a market or a venture, the less the ability to project future outcomes and, hence, the more those potential outcomes will be discontinued.
[...] New Risks: - Internet banking poses risks that are different from those that bank supervisors customarily dealt with in assessing credit, market, or interest rate risk. First, banks must manage the unprecedented speed of technological change, and assess how it relates to their technology investments and their ability to provide consistently high-quality customer service. Second, bank are increasingly dependent on third parties to provide the necessary information technology. Security is another area of significant risk. So far, relatively few financial institutions have reported being victimized by online security violations The Basel Committee's Electronic banking Group: - o The Basel Committee on Banking Supervision has taken the lead in this area through the creation of its Electronic Banking Group (EBG) in late 1999 a group whose members represent 17 Central banks and bank supervisory agencies. [...]
[...] Under such a situation the customer should have PC Modem Telephone line A compatible software for the home PC The home banking service can be broadly classified under two groups, one without using the information technology and another using information technology. When customer contacts the bank o the phone no specific technology is involved and the service of telebanking are provided to him. Electronic Fund Transfer - o In case of Telegraphic Transfer again the Department of Telecommunication was the sole provider of Telephone, Telex and Telegram facilities. [...]
[...] The market is emerging in the country and it will be a boom time in the next year Banking in the Cyberworld: - Internet Purchases without Payment Gateway: - The dangers are three-fold Since a manual process requires human intervention, risk of information leakage exists. No exchange of Digital ID, so no authentication of the merchant risk of bogus merchant. No exchange of Digital Certificate to authenticate card holder risk of repudiation of transaction by the card holder. The benefits which the user would get by using the Internet payment gateway are Card details travel encrypted on the Net (if encryption facility available on the gateway). [...]
[...] We can effect fund transfer on a real time basis across the bank locations Request: Make a banking request online Account information: The complete database that the banks has about our company is available to us at our terminal. It provides us: Current balance in our account on real-time basis. Day's transactions in the account. Details of cash credit limit, drawing power, amount utilized, etc Downloading of account statements as an excel file or text file. The statements can be integrated with your ERP systems for auto- reconciliation Fund Transfers: Manage our Supply-Chain network, effectively by using our online fund transfer mechanism. [...]
[...] Some of these banks are known as ‘Virtual' banks or ‘Internet only' banks and may not have physical presence in a country despite offering different banking services. The Future Scenario: - o Various security options like line encryption, branch connection encryption, firewalls, digital certificates, automatic sign-offs, random pop-ups and disaster recovery sites are is in place or are being looked at. o The communication bandwidth available today is also not enough to meet the needs of high priority services like online banking and trading. [...]
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