E-Banking

1. E-Banking ByEid Ramadan

2. Agenda • Technology Commencement in Banking • Product Based Banking • Customer Based Banking • Data Warehouse • CRM • Alternative Delivery Channels • Banks Position in the New Economy

3. Technology Commencement in Banking • In 70’s, banks started to establish centralized data processing centers. • Essentially the roles of these data processing centers are: • collect the handwritten documents from branches • compile the documents • manual data entry by the operators • generate reports for the bank staff and the central bank • execute some banking transactions

4. Branch Automation • In 80’s, banks started technology investments for the branches. • The first step is offline branches. • Terminals connected to local branch computer • Second step is online branches connected centrally. Most of the transactions started to be performed in the central mainframe.

5. Product Based Banking • In the mid-1980s, banks accepted product based banking and competed with their products. • Banks developed new products for their customers. • Credit card • Credit deposit account (Super Account) • Debit cards • Beside branch, banks brought new channels to give better service to their customers. • ATM • POS • IVR

6. Plastic Cards • The plastic card usage grown enormously in last 2 decade. • Plastic card became the main media for bank customers. • Number of credit card in Turkey: data collected from BKM

7. Plastic Cards • Number of debit card in Turkey: data collected from BKM

8. ATM • In the mid-1980s, that cash dispensers truly became a worldwide phenomenon. • It took 16 years for the first 100,000 cash dispensers to be installed, but only four years more for the next 100,000. • Now,ATM became the electronic face of banking for most customers. • Beside cash withdrawal, there exist various transaction options from transfer to fund buying/selling. • Now there are 12.174 ATM installed in Turkey (Ref: BKM)

9. Point Of Sale • New habits in shopping • Increased the use of plastic cards • Now there are 313.140 POS installed in Turkey (Ref: BKM)

10. ATM and POS Application Architecture Debit Card Authorization Switch System Credit Card Authorization

11. IVR • Interactive Voice Response (IVR) is a software application that accepts a combination of voice telephone input and touch-tone keypad selection and provides appropriate responses in the form of voice • IVR has come into our life at the beginnings of 90’s. • First step in Telephone Banking • Peak transaction volume in salary payment days for balance inquiry • Integrated with ATM system

12. Customer Based Banking Product Based Customer Based • One customer information • file • Product factory • Standard graphical user • interface • Consolidated customer data • Customer introduction on different systems • Difficulty in creating new products • Different user interfaces for different environments • Product based Customer - Bank relation

13. Relationship Management Portfolio CIF Product Factory Management ATM I N Deposit (TD,DD) FX Promissory F FBS Securities POS Import / Export Notes O C Loans&Credits NBS EFT Cheques Merchant Teletel E N T Sales Support E CMS Treasury Payments YKB HR Telerom System R Information Delivery Delivery Services Teller (Branch) Corporate Tables DAL Internet Banking GL / Accounting Settlement Reporting Phone Banking Batch Operations Internet Shopping Campaign Credit Risk PCM Productivity Management Management Management & Control Banking Application Architecture

14. Data Warehouse • Electronic repositories of summarized historical data • The main idea behind data warehouse is get all company data working together so users can see more,learn more, and make the organization work better • Data Warehouse helps users to identify trends, find answers to business questions and derive meaning from historical and operational data. • Data access is easier and less costly • Decision support solutions run faster and are more accurate.

15. Data Warehouse Process Life Cycle Design Transform Extract Deliver Transaction Data Extraction Data Scrubbing and Cleansing Load, index and Aggregate Publish and Subscribe Partial Solutions Data Access Tools Data Mapping Data Replication Data Histories and Summaries Complete Integrated Solution Integrated Data Warehouse Infrastructure

16. CRM • CRM is an integrated sales, marketing and service strategy • CRM goals are : • Use existing relationships to grow revenue • Use integrated information for excellent service • Introduce more repeatable sales processes and procedures • Create new value and loyalty • Implement a more proactive solution strategy

17. The Three Phases of CRM Acquire New Customer • Differentiation • Innovation • Convenience Retain Profitable Customer Enhance The Profitability of Existing Customer • Bundling • Reduce Cost • Customer service • Adaptibility • Listening • New products

18. Integrated CRM Applications Life Cycle Acquire Enhance Retain Direct Marketing Cross Sell and Up Sell Proactive Service Partial Functional Solutions Sales Force Automation Customer Support Complete Integrated Solution Integrated CRM Applications

19. Alternative Delivery Channels Anytime, anywhere banking • Telephone Banking • Internet Banking • Mobile Banking • Television banking • Next ???

20. Telephone Banking • 7x24 banking through the phone • Main components • Switch • IVR • CTI(Computer Telephony Integration) • Manage each call using the computer • Pop up the user information while transferring the call • Agent Desktop Application • Win32,ActiveX, HTML • Host Application

21. Telephone Banking Infrastructure Telecom IVR CTI HOST

22. Internet Banking • More and more banks are coming to realize that internet is a part of banks' alternative delivery channel strategies activities concentrated in the business-to-consumer segment, focused on retaining clients • In Internet banking, security is a primary concern. Security concerns have been addressed from every angle within the architecture of the Internet banking application. Sample Internet Banking Architecture

23. Mobile Banking • Current Mobile Banking Applications: • SMS Banking • WAP Banking • STK (Sim Toolkit) Banking

24. SMS Banking • Basic banking inquiry transactions(balance inquiry, funds, exchange rate inquiry…) are performed by the cooperation of bank and the GSM operator • Security is the main problem Leased line GSM Operator Application Server Bank SMS Gateway GSM Network GSM Operator SMS DB Bank SMS DB Bank Host

25. WAP Banking • Wireless application protocol (WAP) is an application environment and set of communication protocols for wireless devices designed to enable manufacturer-, vendor-, and technology-independent access to the Internet and advanced telephony services. • WAP is a global standard and is not controlled by any single company • Various banking transactions offered in WAP environment by banks. • Similar architecture with SMS banking

26. SIM Toolkit • SIM card enables to keep and load different applications. • SIM Application Toolkit has been agreed as a GSM standard • SIM Application Toolkit is independent of phone manufacturers and designs. • SIM Application Toolkit allows the flexibility to update the SIM to alter the services and download new services over the air • SIM Application Toolkit is designed as a client-server application. On the server side, SimCard platform and the client side, phone that supports the SIM Application Toolkit • In the near future, banks will start to offer banking transactions in this platform.

27. Television Banking • Digital television (DTV) is the transmission of television signals using digital rather than conventional analog methods. • Advantages of DTV over analog TV include: • Superior image resolution (detail) for a given bandwidth • Smaller bandwidth for a given image resolution • Compatibility with computers and the Internet • Interactivity • Superior audio quality • Consistency of reception over varying distances • Banks offer their banking transaction in this new environment • T-commerce in the near future.

28. What is the Next channel Microwave Banking ???

29. Channel Costs

30. Channel Integration Evolution • Channel Integration evolution • Reuse • Efficiencies of Scale • Reduction of Redundancies

31. The Role of Banks in the New Economy • Internet and mobile devices have brought new rules to economy and shaped the way to do business • Banks has also evolved according to the new economy and took their places in this new world to add value to their customer • The new ways to do business are : • e-commerce (B2C) • m-commerce • B2B

32. E-commerce - B2C • E-commerce is the buying and selling of goods and services on the Internet. • Main feature of e-commerce • 24-hour availability • a global reach • the ability to interact • provide custom information and ordering • and multimedia prospects, • The Web is rapidly becoming a multibillion dollar source of revenue for the world's businesses. • Banks provide secure payments infrastructure - virtual POS

33. M-commerce • Mobile commerce applications involve using a mobile phone to carry out financial transactions- this usually means making a payment for goods or transferring funds electronically. • As content delivery over wireless devices becomes faster, more secure, and scalable, there is wide speculation that m-commerce will surpass wireline e-commerce as the method of choice for digital commerce transactions.

34. B2B • A housands of companies that sell products to other companies have discovered that the Web provides not only a 24-hour-a-day showcase for their products but a quick way to reach the right people in a company for more information. • In the B2B, the bank role is to provide a reliable payment infrastructure that add value to corporate business • This infrastructure should cover: • Bill presentment • Bill payment • Different payment types(credit card, deposit account, loan) • Information after payment

35. E-Security • To improve the e-business, all the users should feel secure to perform the transaction this environment • The main concepts in e-security are: • PKI (public key infrastructure) enables users of a basically unsecure public network such as the Internet to securely and privately exchange data and money through the use of a public and a private cryptographic key pair that is obtained and shared through a trusted authority. • Public key is a value provided by some designated authority as a key that, combined with a private key derived from the public key, can be used to effectively encryption messages and digital signature. • Private or secret key is an encryption/decryption key known only to the party or parties that exchange secret messages. Public key is used together with a private key

36. E-Security - continued • Digital certificate is an electronic "credit card" that establishes your credentials when doing business or other transactions on the Web. It is issued by a certification authority (CA). • CA (certificate authority) is an authority in a network that issues and manages security credentials and public key for message encryption. As part of a public key infrastructure, a CA checks with a registration authority to verify information provided by the requestor of a digital certificate • An RA (registration authority) is an authority in a network that verifies user requests for a digital certificate and tells the certificate authority to issue it.

37. Smart Cards • About the size of a credit card, a smart card is a plastic card with an embedded microchip that can be loaded with data, used for telephone calling, electronic cash payments, and other applications, and then periodically "recharged" for additional use. • smart card contains more information than a magnetic stripe card and it can be programmed for different applications. Some cards can contain programming and data to support multiple applications and some can be updated to add new applications after they are issued • Benefit of smart cards: • enhanced security • off line transaction • programmable card • loyalty • customer information

38. Related Links • www.ykb.com • www.teleweb.com.tr • www.bkm.com.tr • www.visa.com • www.europay.com • www.banktech.com • www.bai.org • www.mobilesimtoolkit.com • www.itworld.com