Tag: Digital Banking

New Technology in Banking refers to the innovative digital solutions transforming financial services. It includes Artificial Intelligence (AI), Blockchain, Cloud Computing, Biometric Authentication, and Internet of Things (IoT) to enhance security, efficiency, and customer experience. These technologies enable Faster transactions, Real-time analytics, Fraud prevention, and Automation. By integrating advanced digital tools, banks improve financial accessibility, reduce operational costs, and offer seamless banking services globally.

New Technology in Banking:

• Artificial Intelligence (AI) and Machine Learning (ML)

AI and ML are transforming banking by enhancing customer service, fraud detection, and risk assessment. Chatbots powered by AI provide 24/7 customer support, while ML algorithms analyze spending patterns to detect fraudulent transactions. AI also helps banks with loan approvals, credit scoring, and personalized financial recommendations. By automating processes, AI reduces operational costs and improves decision-making. Banks are increasingly investing in AI to enhance efficiency and provide data-driven insights for better financial management.

• Blockchain Technology

Blockchain offers secure, transparent, and decentralized banking transactions. It eliminates intermediaries, making cross-border payments faster and cheaper. Smart contracts enable automated and tamper-proof agreements, reducing fraud risks. Blockchain also enhances data security by preventing unauthorized access or alterations. Many banks are integrating blockchain for digital identity verification, trade finance, and secure lending. This technology is reshaping the financial sector by ensuring trust, transparency, and efficiency in banking transactions.

• Cloud Computing

Cloud technology enables banks to store and process vast amounts of data efficiently. It reduces the need for physical servers, cutting operational costs. Cloud-based banking solutions improve data accessibility, security, and scalability. Banks can deploy real-time analytics, AI-driven insights, and mobile banking services on the cloud. Cloud computing also supports disaster recovery plans, ensuring uninterrupted services. As digital banking grows, cloud adoption is becoming essential for cost-effective and secure banking solutions.

• Biometric Authentication

Biometric technology enhances banking security by using fingerprints, facial recognition, iris scans, and voice recognition for authentication. It eliminates the need for traditional passwords and PINs, reducing the risk of fraud. Many banks now use biometrics for ATM withdrawals, mobile banking logins, and customer verification. This technology ensures a seamless and secure banking experience while protecting customer data. With increasing cybersecurity threats, biometric authentication is becoming a standard feature in digital banking.

• Robotic Process Automation (RPA)

RPA automates repetitive banking tasks such as account opening, loan processing, and compliance reporting. It enhances efficiency, reduces errors, and minimizes costs. Banks use RPA for fraud detection, transaction monitoring, and customer service automation. By streamlining back-office operations, RPA allows human employees to focus on complex decision-making. This technology is improving productivity and operational accuracy, making banking services faster and more reliable.

• Internet of Things (IoT) in Banking

IoT connects physical devices to the internet, enabling smart banking solutions. Banks use IoT for smart ATMs, real-time asset tracking, and enhanced customer engagement. IoT-powered wearables, such as smartwatches and payment rings, allow seamless transactions without traditional banking cards. Banks also use IoT to analyze customer behavior and offer personalized banking services. By integrating IoT, financial institutions improve security, efficiency, and customer experience.

• Quantum Computing

Quantum computing has the potential to revolutionize banking security, risk management, and financial modeling. It can process complex data at incredible speeds, improving fraud detection and real-time market analysis. Banks are exploring quantum computing for portfolio optimization, cryptographic security, and advanced simulations. Though still in its early stages, quantum technology promises to reshape financial services with ultra-fast computing power and enhanced data encryption.

• 5G Technology in Banking

5G technology enhances mobile banking, digital payments, and real-time transaction processing. With ultra-fast internet speeds, customers can experience seamless banking services with minimal delays. 5G also enables enhanced cybersecurity by supporting advanced encryption and faster fraud detection. Banks can leverage 5G to provide immersive banking experiences through augmented reality (AR) and virtual reality (VR) applications. This technology is set to redefine banking convenience and security.

Online banking, also known as internet banking or web banking, is an electronic payment system that enables customers of a bank or other financial institution to conduct a range of financial transactions through the financial institution’s website. The online banking system will typically connect to or be part of the core banking system operated by a bank and is in contrast to branch banking which was the traditional way customers accessed banking services.

Some banks operate as a “direct bank” (or “virtual bank”), where they rely completely on internet banking.

Internet banking software provides personal and corporate banking services offering features such as viewing account balances, obtaining statements, checking recent transactions, transferring money between accounts, and making payments.

Internet banking is the system that provides the facility to the customer to conduct the financial and non-financial transactions from his net banking account. The user can transfer funds from his account to other accounts of the same bank/different bank using a website or an online application. The customer uses a resource and a medium to conduct financial transactions. The resource that a customer uses might be an electronic device like a computer, a laptop, or a mobile phone. The internet is the medium that makes the technology possible.

Features of Internet Banking:

The customer using this facility can conduct transactional and non-transactional tasks including:

• The customer can view account statements.
• The customer can check the history of the transactions for a given period by the concerned bank.
• Bank, statements, various types of forms, applications can be downloaded.
• The customer can transfer funds, pay any kind of bill, recharge mobiles, DTH connections, etc.
• The customer can buy and sell on e-commerce platforms.
• The customer can invest and conduct trade.
• The customer can book transport, travel packages, and medical packages.
• The list of benefits a user can enjoy using internet banking is too lengthy, to sum up.

Advantages of Internet Banking

• The customers get permanent access to his/her bank anytime and anywhere.
• Transactions are safe and highly secure.
• Immediate funds transfer helps the user in time of urgent need.
• It saves valuable time of the users.

Security of Internet Banking

The financial information of a customer is important. This is the reason a customer trusts financial institutions. The financial institutions keep it on a high priority that the security of customers’ accounts shouldn’t face a breach. The financial institutions are using two types of security methods to make internet banking safe and secure:

Use of PIN/TANs: Under this system, a PIN is used to login and TANs are used to conduct transactions. TANs are one time passwords. TAN is sent to the customer via SMS on registered mobile number that corresponds with the login user id. It is valid for a short time frame.

Internet banking is conducted using web browsers with SSL enabled websites, so encryption is not an important issue. It also uses signature verification as a base. Under this method, the transactions done by the customer are signed and encrypted digitally. The smart cards or any other memory storable medium can be used to store keys for signature generation and encryption.

E-Banking

The facility of e-banking provided by the banks to their customers uses the internet as a medium. The services under this facility include funds transfer, payment of bills, opening bank accounts online, and much more.

There are mainly two methods to deliver e-banking to the customers:

• Banks with physical presence offering electronic transaction
• Virtual banks offering transaction services

Most of the banks have a physical presence and offer banking facility online. But, there are some banks that don’t have any physical presence anywhere. They are virtual banks.

Features of e-Banking

1. ATMs

ATM is shot form of Automated Teller Machines. These machines are actually electronic terminals which provide the customers to bank anytime. The ATM machines take inputs from the ATM that the banks provide to its customers. To make use of ATM, the user must have a password. Banks charge a nominal fee from the customers on every transaction made after crossing the specified limit of free transactions, if the transaction is done from any other bank’s ATM machine.

2. Deposit and Withdraws (Direct)

This service under e-banking offers the customer a facility to approve paycheques regularly to the account. The customer can give the bank an authority to deduct funds from his/her account to pay bills, instalments of any kind, insurance payments, and many more.

3. Pay by Phone Systems

This service allows the customer to contact his/her bank to request them for any bill payment or to transfer funds to some other account.

4. Point-of-Sale Transfer Terminals

This service allows customers to pay for purchase through a debit/credit card instantly.

Forms of e-Banking

• Internet Banking: The customer uses electronic devices like computer or mobile to conduct transactions using the internet.
• ATM Machines: The customers can withdraw cash, deposit cash, transfer funds using ATMs.
• E-cheque: The customer can transfer money using PayPal or other e-service providers.

An Automated Teller Machine (ATM) remains an essential tool for financial transactions, enabling cash withdrawals, deposits, fund transfers, and more. In 2024, the landscape of ATM technology continues to evolve, driven by consumer needs and advancements in technology.

Types of ATMs:

ATMs are classified into several types based on their functionalities, location, and ownership. Below are the main types of ATMs:

1. On-Site ATMs

• Installed within or near bank premises.
• Allows banks to provide 24/7 service to customers.
• Accessible for cash withdrawals, deposits, and other banking activities.

2. Off-Site ATMs

• Located away from bank branches, in areas like malls, airports, or standalone kiosks.
• Offers convenience to customers in remote or high-traffic areas.

3. White-Label ATMs

• Owned and operated by non-banking entities authorized by the RBI in India.
• Do not display any bank logo but allow transactions from any bank account.

4. Brown-Label ATMs

• Owned by third-party service providers but branded and managed by banks.
• Banks handle cash management and transaction processing.

5. Green-Label ATMs

• Specifically used for agricultural transactions.
• Designed to cater to rural banking needs.

6. Orange-Label ATMs

• Dedicated to providing financial services for securities-related transactions.

7. Yellow-Label ATMs

• Designed for e-commerce transactions.
• Allows users to make payments for online purchases.

8. Pink-Label ATMs

• Dedicated for female users, ensuring a safe and secure environment.

9. Biometric ATMs

• Operated using biometric authentication such as fingerprints or iris scans.
• Ensures secure access, especially for illiterate or semi-literate users.

10. Mobile ATMs

• Vans equipped with ATM machines, serving rural or underserved areas.
• Deployed during emergencies or special events.

11. Cash Recycling Machines (CRMs)

• Allow both cash withdrawal and deposit.
• Recycle deposited cash for subsequent withdrawals, improving efficiency.

12. Mini ATMs

• Smaller versions used in rural areas with limited financial infrastructure.
• Often operated by Business Correspondents or Microfinance Institutions.

Components:

• Card reader:

This part reads the chip on the front of the card or the magnetic stripe on the back of the card.

• Keypad:

The keypad is used by the customer to input information, including personal identification number (PIN), the type of transaction required, and the amount of the transaction.

• Cash dispenser:

Bills are dispensed through a slot in the machine, which is connected to a safe at the bottom of the machine.

• Printer:

If required, consumers can request receipts that are printed here. The receipt records the type of transaction, the amount, and the account balance.

• Screen:

ATM issues prompts that guide the consumer through the process of executing the transaction. Information is also transmitted on the screen, such as account information and balances.

Future of ATM’s in India:

The future of ATMs in India is poised for transformation, aligning with the digital banking revolution while maintaining their role as a vital financial access point. With cash usage declining in urban areas due to the growth of digital payment systems like UPI, ATMs are adapting to remain relevant. Innovations such as biometric authentication, QR code-based withdrawals, and contactless transactions enhance security and convenience. Additionally, ATMs are evolving into multi-functional kiosks, offering bill payments, financial advice, and government service access alongside traditional banking.

In rural and semi-urban areas, ATMs will continue to be indispensable, bridging the financial inclusion gap where digital infrastructure is limited. Initiatives like white-label ATMs and mobile ATMs ensure access to banking services in underserved regions. Furthermore, cash recycling machines (CRMs) and green ATMs are being deployed to optimize cash management and promote eco-friendly banking practices.

Technological advancements, including AI-driven fraud detection and real-time monitoring, will address security concerns. As digital literacy improves, future ATMs are expected to integrate with omnichannel banking platforms, offering a seamless user experience across digital and physical channels. Although digital payments are growing, ATMs in India will remain a hybrid solution, adapting to the evolving needs of both tech-savvy and cash-dependent populations.

Real-time gross settlement (RTGS) systems are specialist funds transfer systems where the transfer of money or securities takes place from one bank to any other bank on a “real-time” and on a “gross” basis. Settlement in “real time” means a payment transaction is not subjected to any waiting period, with transactions being settled as soon as they are processed. “Gross settlement” means the transaction is settled on a one-to-one basis, without bundling or netting with any other transaction. “Settlement” means that once processed, payments are final and irrevocable.

RTGS or the full form Real Time Gross Settlement is a fund transfer method which is done on a real-time basis and without any delays. This wire transfer method allows the money sent by the remitter to immediately reach the beneficiary/payee as and when the request is received. The full form of RTGS includes Gross Settlement which means transactions are carried out on an individual basis and not in a batch-wise system.

It is one of the fastest interbank money transfer method available through banking channels in India. RTGS transactions require the beneficiary bank to credit the recipient’s account within 30 minutes of receiving the funds’ transfer message.

When money is transferred using RTGS, one needs the following information:

• The amount that needs to be transferred
• Name of the beneficiary/payee
• Name of the bank of the beneficiary/payee
• IFSC code of the payee/beneficiary
• Account number of the payee/beneficiary

The RTGS payment method is maintained by the Reserve Bank of India and is, therefore, one of the popular and secure methods of transferring funds.

How to do RTGS? – Step-wise guide to RTGS Process

In order to transfer money through RTGS, you must first add a beneficiary. Thereafter, you can make a funds transfer.

The steps to add a beneficiary to your account are:

Step1: Log into your respective bank’s netbanking account by entering the username and password.

Step2: Go to Funds Transfer tab.

Step3: Select “Add a beneficiary” and then click on “Select Beneficiary Type” to select “Transfer to Another Bank”.

Step4: Enter the beneficiary account details including name, bank name, IFSC code and account number.

Step5: Enter the beneficiary account details including name, bank name, IFSC code and account number.

Step6: Click on “Add” and confirm.

Step7: Wait for the confirmation message.

Once you add the beneficiary, follow these simple steps to transfer money using RTGS.

Step-1: Go to the Funds Transfer tab after logging to your Netbanking account.

Step-2: Select RTGS option and then choose the beneficiary/payee you wish to send the money.

Step-3: Add the amount that is to be transferred.

Step-4: Review all the documents before submission of the request. The funds will be credited within 30 minutes of the request.

Benefits of RTGS

RTGS is a popular fund transfer method in India and comes with a host of benefits. The benefits of using RTGS as your method of transferring funds are:

• Safe and secure: As RTGS is maintained by the Reserve Bank of India, it is a risk-free method of funds.
• Speed: Since transactions are carried out on a real-time basis, there is no room for delay.
• Wider boundaries: There are no geographical limitations in India to use RTGS.
• Convenient: Transfer of funds from your home or office.

RTGS systems are usually operated by a country’s central bank as it is seen as a critical infrastructure for a country’s economy. Economists believe that an efficient national payment system reduces the cost of exchanging goods and services, and is indispensable to the functioning of the interbank, money, and capital markets. A weak payment system may severely drag on the stability and developmental capacity of a national economy; its failures can result in inefficient use of financial resources, inequitable risk-sharing among agents, actual losses for participants, and loss of confidence in the financial system and in the very use of money.

RTGS system does not require any physical exchange of money; the central bank makes adjustments in the electronic accounts of Bank A and Bank B, reducing the balance in Bank A’s account by the amount in question and increasing the balance of Bank B’s account by the same amount. The RTGS system is suited for low-volume, high-value transactions. It lowers settlement risk, besides giving an accurate picture of an institution’s account at any point of time. The objective of RTGS systems by central banks throughout the world is to minimize risk in high-value electronic payment settlement systems. In an RTGS system, transactions are settled across accounts held at a central bank on a continuous gross basis. The settlement is immediate, final, and irrevocable. Credit risks due to settlement lags are eliminated. The best RTGS national payment system cover up to 95% of high-value transactions within the national monetary market.

RTGS systems are an alternative to systems of settling transactions at the end of the day, also known as the net settlement system, such as the BACS system in the United Kingdom. In a net settlement system, all the inter-institution transactions during the day are accumulated, and at the end of the day, the central bank adjusts the accounts of the institutions by the net amounts of these transactions.

World Bank has been paying increasing attention to payment system development as a key component of the financial infrastructure of a country, and has provided various forms of assistance to over 100 countries. Most of the RTGS systems in place are secure and have been designed around international standards and best practices.

There are several reasons for central banks to adopt RTGS. First, a decision to adopt is influenced by competitive pressure from the global financial markets. Second, it is more beneficial to adopt an RTGS system for central bank when this allows access to a broad system of other countries’ RTGS systems. Third, it is very likely that the knowledge acquired through experiences with RTGS systems spills over to other central banks and helps them make their adoption decision. Fourth, central banks do not necessarily have to install and develop RTGS themselves. The possibility of sharing development with providers that have built RTGS systems in more than one country (CGI of UK holding the IP, CMA Small System of Sweden, JV Perago of South Africa, SIA S.p.A. of Italy and Montran of USA) has presumably lowered the cost and hence made it feasible for many countries to adopt.

National Electronic Funds Transfer (NEFT) is a nationwide payment system enabling the electronic transfer of funds from one bank account to another. It is a secure, efficient, and widely-used platform managed by the Reserve Bank of India (RBI). NEFT functions on a batch processing system, allowing individuals and businesses to transfer funds in near-real-time. Transfers can be initiated online via internet banking, mobile apps, or physically at bank branches. Transactions are settled on an hourly basis during operational hours, ensuring reliability and speed. NEFT supports a wide range of payments, including interbank transfers, credit to loan accounts, and inward remittances.

Origin of NEFT in India:

Introduced by the Reserve Bank of India in 2005, NEFT replaced the earlier Special Electronic Funds Transfer (SEFT) system, providing a more accessible and robust alternative. Its design aimed to promote a cashless economy and strengthen interbank fund transfers across urban and rural regions. Over time, NEFT has undergone significant upgrades, including 24×7 availability since December 2019, reflecting the RBI’s push towards digital financial inclusivity. This milestone allowed real-time fund transfers at any time, contributing to its widespread adoption across individuals, businesses, and government organizations. NEFT has become a cornerstone in India’s move towards a digitally empowered financial system.

NEFT Process:

NEFT (National Electronic Funds Transfer) process facilitates the transfer of funds electronically between banks in India.

1. Initiation of Transaction:

The sender provides details such as the beneficiary’s name, account number, bank name, branch, and IFSC (Indian Financial System Code). Transactions can be initiated via online banking, mobile banking apps, or at a bank branch.

2. Sender’s Bank Processing:

The sender’s bank verifies the details and forwards the transaction request to its NEFT Service Centre.

3. Central Processing by RBI:

NEFT Service Centre bundles multiple transactions into batches and forwards them to the Reserve Bank of India (RBI), the clearing and settlement authority. RBI processes the transactions in hourly settlement batches during operational hours.

4. Clearing and Settlement:

The RBI routes the payment instructions to the beneficiary’s bank. Settlements are carried out in real-time gross settlement mode within the hourly batch.

5. Beneficiary Bank’s Role:

The beneficiary’s bank credits the funds to the recipient’s account upon receiving instructions from the RBI.

6. Confirmation:

Both the sender and beneficiary are notified of the transaction’s success or failure through SMS, email, or banking alerts.

NEFT Timings:

NEFT works on a deferred settlement basis which means the transactions are carried out in batches. Earlier, NEFT transactions were available from 8:00 AM to 6:30 PM from Monday to Friday only. However, RBI has regularised that NEFT transactions will be available 24*7 on all days of the year, including holidays.

Also, after usual banking hours, NEFT transactions are expected to be automated transactions initiated using ‘Straight Through Processing (STP)’ modes by the banks.

How to Transfer Funds through NEFT?

Online Transfer through Internet or Mobile Banking

• Login to Your Bank Account:

Access your account using the bank’s internet or mobile banking platform.

• Add Beneficiary:

Go to the “Add Beneficiary” or “Payee” section. Provide the beneficiary’s details such as name, account number, bank name, branch, and IFSC code.

• Beneficiary Approval:

Once added, the bank may take a few minutes to several hours to verify and approve the beneficiary.

• Initiate Transfer:

Navigate to the fund transfer section and select NEFT. Choose the beneficiary and enter the transfer amount and any remarks if required.

• Review and Authenticate:

Review the entered details carefully. Authenticate the transaction using the provided OTP or transaction password.

• Receive Confirmation:

Post successful transfer, a confirmation message will be displayed or sent via SMS/email.

Offline Transfer at Bank Branch

• Visit the Bank Branch:

Go to your bank branch and request an NEFT application form.

• Fill the Form:

Provide the beneficiary details such as name, account number, bank name, branch, IFSC, and the amount to be transferred.

• Submit the Form:

Hand over the form along with the transfer amount if not debiting directly from your account.

• Processing by the Bank:

The bank will process the NEFT request and initiate the transfer in the next available batch.

• Confirmation:

Collect the receipt and check for updates regarding the transfer’s success.

Charges applicable to NEFT:

1. Online NEFT Transactions (via Internet or Mobile Banking):

• No Charges:

As per the Reserve Bank of India (RBI) directive issued in January 2020, there are no charges for NEFT transactions made through internet banking or mobile banking platforms.

2. Offline NEFT Transactions (at Bank Branches):

Banks may levy charges for NEFT requests processed in physical mode (at branches). These charges are set within the limits prescribed by the RBI and vary slightly across banks.
Below is an indicative structure:

• Up to ₹10,000: ₹2.50 + GST.
• ₹10,001 to ₹1 Lakh: ₹5.00 + GST.
• ₹1,00,001 to ₹2 Lakhs: ₹15.00 + GST.
• Above ₹2 Lakhs: ₹25.00 + GST.

Special Cases:

• Priority Customers: Premium account holders may enjoy fee waivers, depending on the bank’s policy.
• Government Mandates: Certain beneficiary payments, such as those linked to government schemes, are NEFT-free.

Benefits of using NEFT:

1. Convenient and Accessible:

NEFT allows seamless transfer of funds from one bank account to another across India. It can be accessed both online (via internet or mobile banking) and offline (at bank branches), making it suitable for a wide range of users, including those without internet access.

2. Secure and Reliable:

NEFT transactions are regulated by the Reserve Bank of India (RBI), ensuring a high level of security. Each transaction is processed in encrypted batches, reducing risks and ensuring reliability.

3. Cost-Effective:

NEFT is economical, especially for online transactions where banks levy no charges. Even offline transactions at branches are affordable, making it an attractive choice for individuals and businesses alike.

4. No Transaction Limit:

While individual banks may impose their own restrictions, NEFT has no minimum or maximum transaction limit set by the RBI, making it ideal for both small and large fund transfers.

5. Nationwide Coverage:

NEFT is widely supported across India by most banks and branches. This vast network ensures easy fund transfers, regardless of geographic location.

6. Scheduled and Recurring Payments:

With NEFT, users can schedule future payments or set up standing instructions for recurring transactions, such as EMI payments, making financial planning simpler and hassle-free.