V Semester BBA

BANKING LAW & PRACTICES

---------------------------------------------------------------------------------------------------------
MODULE-5
SECTION A

a) What is Internet or Online Banking or Net Banking or e-banking?

 Net-banking, also known as internet banking is an electronic system managed by
banks which enables customers to access financial as well as non-financial banking
products online.
 E-banking or Electronic Banking refers to all the forms of banking services and
transactions performed through electronic means.

b) Expand a) ATM b) ECS c) MICR d) RTGS

 ATM: An Automated Teller Machine (ATM) is an electronic telecommunications
device that enables customers of financial institutions to perform financial
transactions, such as cash withdrawals, deposits, funds transfers, balance inquiries
or account information inquiries, at any time and without the need for direct
interaction with bank staff.
 ECS: Electronic Clearing Service (ECS) is a mode of electronic funds transfer from
one bank account to another bank account using the services of a Clearing House.
 MICR: The Magnetic Ink Character Recognition (MICR) line is the strip of characters
on a check that identifies the account, routing, and check number.
 RTGS: Real-Time Gross Settlement is the continuous process of settling payments on
an individual order basis without netting debits with credits.

c) Expand a) NEFT b) DEMAT c) IMPS d) AEPS

 NEFT: National Electronic Fund Transfer (NEFT) is an inter-bank/inter-branch online
fund transfer within India.
 DEMAT: A Dematerialized (DEMAT) is an electronic account used to hold and
manage investments like Stocks, Bonds, and Mutual Funds in a digital format.
 IMPS: Immediate Payment Service (IMPS) is an instant interbank electronic fund
transfer service through mobile phones
 AEPS: Aadhaar Enabled Payment System (AEPS) is a payment service that allows a
bank customer to use Aadhaar as his/her identity to access his/her Aadhaar enabled
bank account and perform basic banking transactions.

d) What is USSD?
 Unstructured Supplementary Service Data is a Global System for Mobile
Communications (GSM) protocol that is used to send text messages.
e) State the meaning of E-Wallet.
 Electronic wallets a type of electronic card which is used for transactions made
online through a computer or a smartphone. Google Pay, Apple Pay etc.

SECTION-B & SECTION-C

1. What are the Innovations or Technological Advancements in Banking or Trends?
 Banking Technology refers to the use of sophisticated information and communication
technologies together with computer science to enable banks to offer better services to
its customers in a secure, reliable and affordable manner and sustain competitive
advantage over other banks.
BANKING TECHNOLOGIES OR TRENDS IN BANKING
 Open Banking: Open banking is the system of allowing access and control of consumer
banking and financial accounts through third-party applications. Fintech businesses and
banks work together to make it easier for clients to make quick and easy payments using
mobile apps. Online payments for buying meals from Zomato or reserving an Uber with
an online payment are just a few examples of this type of transaction.
 Block chain: A block chain is a distributed database or ledger shared among a computer
network's nodes. When numerous parties need access to the same data at the same
time, they can use block chain technology to ensure the integrity and immutability of the
data are preserved. Banks are increasingly relying on block chain technology to keep
their critical information safe from hackers.
 Biometrics: Biometrics is a type of digital security used to prevent data breaches by
making use of individual characteristics such as fingerprints. If you’ve ever wanted to
make a quick payment by scanning your fingerprint or using faces recognition
technology, biometric payments are for you. It’s becoming increasingly popular as more
and more people want to avoid carrying around cash. WhatsApp and Google are among
the firms that have already developed these kinds of solutions.
 Cloud Banking: For many banks, cloud banking is transforming their cost-efficiency and
allowing them to create new experiences for their clients while maintaining the
traditional model in place. In the cloud, banks are able to synchronize the enterprise and
break down operational and data silos across customer care, finance, risk, and other
areas of the business.
 Artificial Intelligence and Machine Learning: These days, AI and ML don’t require an
introduction, and banks are quickly adopting them in order to provide consumers with
just-in-time, personalized service. They automate banking operations to improve
customer care and credit services as well as prevent fraud.
 Chatbots: Speech-based engagements are becoming increasingly popular with clients.
Therefore chatbots rely on a voice interface. Financial chatbots have been shown to save
banks over four minutes each transaction and allow them to gather client feedback
more quickly and cost-effectively.
 ‘Zero Trust’ Security Model: The zero-trust security concept is utilized to prevent cyber
fraud to the greatest extent feasible. Secures the company by taking away implicit trust
and requiring the user to authenticate their identity and their device’s identification in a
stringent manner throughout the whole network.
 Wearables: Increasingly popular among customers, wearable gadgets such as smart
watches are transforming digital payment methods and creating a more engaging
shopping experience.

2. Discuss the various E-services in Indian Banking Sector.

 Net-banking, also known as internet banking is an electronic system managed by banks
which enables customers to access financial as well as non-financial banking products
online.
 E-banking or Electronic Banking refers to all the forms of banking services and
transactions performed through electronic means.
 Digital payments are transactions that take place via digital or online modes, with no
physical exchange of money involved. This means that both parties, the payer and the
payee, use electronic mediums to exchange money.
BANKING E-SERVICES IN INDIA
1. BANKING CARDS
2. Credit Card
3. Debit Card
4. USSD
5. AADHAAR ENABLED PAYMENT SYSTEM (AEPS)
6. UPI
7. MOBILE WALLETS
8. BANK PRE-PAID CARDS
9. POINT OF SALE (POS)
10. INTERNET BANKING
11. MOBILE BANKING
12. BHARAT INTERFACE FOR MONEY (BHIM) APP
 Banking Cards: Indians widely use Banking cards, or debit/credit cards, or prepaid cards,
as an alternative to cash payments. Andhra Bank launched the first credit card in India in
1981. Cards are preferred because of multiple reasons, including, but not limited to,
convenience, portability, safety, and security. This is the only mode of digital payment
that is popular in online transactions and physical transactions alike. Nowadays, many
apps are being launched with the sole purpose of managing card transactions like Cred,
Square, etc.
 Credit Card: A Credit Card is a plastic card that allows the customer to purchase goods
and services on credit, up to the specified limit. Here, the card issuer makes payment on
the customer's behalf.
 Debit Card: Debit Card is a plastic card, through which the customer can spend money
by drawing funds that are deposited in his/her bank account.
 Unstructured Supplementary Service Data (USSD): USSD was launched for those
sections of India’s population which don’t have access to proper banking and internet
facilities. Under USSD, mobile banking transactions are possible without an internet
connection by simply dialling *99# on any essential feature phone. This number is
operational across all Telecom Service Providers (TSPs) and allows customers to avail of
services including interbank account to account fund transfer, balance inquiry, and
availing mini statements. Around 51 leading banks offer USSD service in 12 different
languages, including Hindi & English.
 Aadhaar Enabled Payment System (AEPS): AEPS is a bank-led model for digital
payments that was initiated to leverage the presence and reach of Aadhar. Under this
system, customers can use their Aadhaar-linked accounts to transfer money between
two Aadhaar linked Bank Accounts. As of February 2020, AEPS had crossed more than
205 million as per NPCI data. AEPS doesn’t require any physical activity like visiting a
branch, using debit or credit cards or making a signature on a document. This bank-led
model allows digital payments at PoS (Point of Sale / Micro ATM) via a Business
Correspondent (also known as Bank Mitra) using Aadhaar authentication. The AePS fees
for Cash withdrawal at BC Points are around Rs.15.
 Unified Payments Interface (UPI): UPI is a payment system that culminates numerous
bank accounts into a single application, allowing the transfer of money easily between
any two parties. As compared to NEFT, RTGS, and IMPS, UPI is far more well-defined and
standardized across banks. You can use UPI to initiate a bank transfer from anywhere in
just a few clicks. The benefit of using UPI is that it allows you to pay directly from your
bank account, without the need to type in the card or bank details. This method has
become one of the most popular digital payment modes in 2020, with October
witnessing over 2 billion transactions.
 Mobile Wallets: Mobile Wallets, as the name suggests, are a type of wallet in which you
can carry cash but in a digital format. Often customers link their bank accounts or
banking cards to the wallet to facilitate secure digital transactions. Another way to use
wallets is to add money to the Mobile Wallet and use the said balance to transfer
money. Nowadays, many banks have launched their wallets. Additionally, notable
private companies have also established their presence in the Mobile Wallet space.
Some popularly used ones include Paytm, Free charge, Mobikwik, mRupee, Vodafone M-
Pesa, Airtel Money, Jio Money, SBI Buddy, Vodafone M-Pesa, Axis Bank Lime, ICICI
Pockets, etc.
 Bank Prepaid Cards: A bank prepaid card is a pre-loaded debit card issued by a bank,
usually single-use or reloadable for multiple uses. It is different from a standard debit
 card because the latter is always linked with your bank account and can be used
numerous times. This may or may not apply to a prepaid bank card. A prepaid card can
be created by any customer who has a KYC-complied account by merely visiting the
bank’s website. Corporate gifts, reward cards, or single-use cards for gifting purposes
are the most common uses of these cards.
 PoS Terminals: PoS(Point of Sale) is known as the location or segment where a sale
happens. For a long time, PoS terminals were considered to be the checkout counters in
malls and stores where the payment was made. The most common type of PoS machine
is for Debit and Credit cards, where customers can make payment by simply swiping the
card and entering the PIN. With digitization and the increasing popularity of other online
payment methods, new PoS methods have come into the picture. First is the contactless
reader of a PoS machine, which can debit any amount up to Rs. 2000 by auto-
authenticating it, without the need of a Card PIN.
 Internet Banking: Internet Banking, also known as e-banking or online banking, allows
the customers of a particular bank to make transactions and conduct other financial
activities via the bank’s website. E-banking requires a steady internet connection to
make or receive payments and access a bank’s website, which is called Internet Banking.
Today, most Indian banks have launched their internet banking services. It has become
one of the most popular means of online transactions. Every payment gateway in
India has a virtual banking option available. NEFT, RTGS, or IMPS are some of the top
ways to make transactions via internet banking.
 Mobile Banking: Mobile banking refers to the act of conducting transactions and other
banking activities via mobile devices, typically through the bank’s mobile app. Today,
most banks have their mobile banking apps that can be used on handheld devices like
mobile phones and tablets and sometimes on computers. Mobile banking is known as
the future of banking, thanks to its ease, convenience, and speed. Digital payment
methods, such as IMPS, NEFT, RTGS, IMPS, investments, bank statements, bill payments,
etc., are available on a single platform in mobile banking apps. Banks themselves
encourage customers to go digital as it makes processes easier for them too.
 Micro ATMs: Micro ATM is a device for Business Correspondents (BC) to deliver
essential banking services to customers. These Correspondents, who could even be a
local store owner, will serve as a ‘micro-ATM’ to conduct instant transactions. They will
use a device that will let you transfer money via your Aadhaar linked bank account by
merely authenticating your fingerprint.

3. Write short notes on internet Banking.

 Internet banking, also known as online banking or e-banking or Net Banking is a facility
offered by banks and financial institutions that allow customers to use banking services
over the internet.
 Net banking, also known as internet banking, is a service offered by banks that allows
customers to access various banking services and perform financial transactions online.
 FEATURES OF INTERNET BANKING
 Account Management: Users can view their account balances, transaction history, and
account details online. They can also manage multiple accounts, such as current
accounts, savings accounts, credit card accounts and loans from a single online platform.
 Fund Transfers: Another significant advantage of using Internet banking is online fund
transfers. Internet banking allows users to transfer funds through different modes like
NEFT, RTGS, IMPS or UPI. Funds can be transferred between their own accounts as well
as to other accounts within the same bank or to accounts in different banks. Fund
transfers can be done in real-time depending upon the mode of transaction selected.
 Bill Payment: Users can pay their bills online using internet banking. These include utility
bills, credit card bills or even loan repayments. They can also recharge prepaid mobile
phones, purchase gift cards and make other online payments.
 Online Statements and Alerts: Internet banking provides users with access to their
account statements online. This eliminates the need for paper statements or updating
passbooks. Users can also set up alerts and notifications to receive updates on their
account activities. Online statements are also one of the key benefits of online banking
for banks as it helps them avoid unnecessary queues.
 Provides 24×7 Service: It is the most significant aspect of internet banking. Online
banking allows customers to access their accounts at any time. Customers can easily
access their accounts from anywhere and anytime without any limitations. This feature
provides loads of convenience to users.
 Lowers Transaction Cost: Financial transactions can be performed via Internet Banking
at a lower cost. This is referred to as the cheapest method of transacting. Manpower
requirements have been reduced due to the reduction in workload as now more and
more transactions are conducted online. As all transactions are recorded digitally, it has
also reduced paperwork in organizations. As Records no longer need to be entered and
stored manually.
ADVANTAGES OF INTERNET BANKING
 Transferring Funds: Internet banking allows users to transfer funds quickly. Funds can be
seamlessly transferred between own accounts or to other accounts, including accounts
in different banks, in just a few clicks. This eliminates the need for physical visits to the
bank and provides greater convenience and efficiency in undertaking banking
transactions.
 Availability: One of the key benefits of internet banking is that it is available 24x7. This
allows users to access their accounts and perform transactions at their convenience
anytime, anywhere. This provides flexibility and accessibility, especially for users who
may not have easy access to physical bank branches.
 Easy to Operate: Another benefit of net banking is that internet banking platforms are
designed to be user-friendly. The intuitive interfaces make it easy for users to navigate
through the platform and perform transactions. Most platforms also provide tutorials
and customer support to assist users in using the service effectively.
 Convenience: Internet banking eliminates the need for physical visits to the bank. This
saves significant user time and effort. Users can perform transactions from the comfort
of their home or office.
 Activity Tracking: Net banking features provide users with the ability to track their
account activities on a real-time basis. Users can view their transaction history, account
balances and other account details on-the-go. This provides them with greater visibility
and control over their finances.
DISADVANTAGES OF INTERNET/ONLINE BANKING
 Internet Requirement: An uninterrupted internet connection is a foremost requirement
to use internet banking services. If you do not have access to the internet, you cannot
make use of any facilities offered online. Similarly, if the bank servers are down due to
any technical issues on their part, you cannot access net banking services.
 Transaction Security: No matter how many precautions banks take to provide a secure
network, online banking transactions are still susceptible to hackers. Irrespective of the
advanced encryption methods used to keep user data safe, there have been cases where
the transaction data is compromised. This may cause a major threat such as using the
data illegally for the hacker’s benefit.
 Difficult for Beginners: There are people in India who have been living lives far away
from the web of the internet. It might seem a whole new deal for them to understand
how internet banking works. Worse still, if there is nobody who can explain them on
how internet banking works and the process flow of how to go about it. It will be very
difficult for inexperienced beginners to figure it out for themselves.
 Securing Password: Every internet banking account requires the password to be entered
in order to access the services. Therefore, the password plays a key role in maintaining
integrity. If the password is revealed to others, they may utilize the information to
devise some fraud. Also, the chosen password must comply with the rules stated by the
banks. Individuals must change the password frequently to avoid password theft which
can be a hassle to remember by the account holder himself.
 Complex Transactions: While the functions of internet banking offer convenience and
efficiency, there are certain complexities associated with it. This can include setting up
beneficiaries, providing additional identification documents or signing physical forms to
access internet banking service

4. Discuss about ATM

 ATM stands for Automated Teller Machine which is a self-service banking outlet. You can
withdraw money, check your balance, or even transfer funds at an ATM.
 An automated teller machine (ATM) is an electronic banking outlet that allows
customers to complete basic transactions without the aid of a branch representative or
teller.
 ATM DESIGN ELEMENTS
 Card reader: This part reads the chip on the front of your card or the magnetic stripe on
the back.
 Keypad: The keypad is used to input information, including your 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, you can request receipts that are printed out of the ATM. The
receipt records the type of transaction, the amount, and the current account balance.
 Screen: The ATM issues prompts that guide you through the process of executing the
transaction. Information about accounts and their balances is also transmitted on the
screen.
TYPES OF AUTOMATED TELLER MACHINES (ATMS)
 One is a simple basic unit that allows you to withdraw cash, check your balance, change
the PIN, get mini statements and receive account updates.
 The more complex units provide facilities for cash or cheque deposits and line of credit
& bill payments.
 Green Label ATMs- Used for agricultural purposes
 Yellow Label ATMs- Used for e-commerce transactions
 Orange Label ATMs- Used for share transactions
 Pink Label ATMs- Specifically for females to help avoid the long queues and waiting time
 White Label ATMs – Introduced by the TATA group, white label ATMs are not owned by
a particular bank but by entities other than the bank
 Brown Label Banks- Operated by a third party other than a bank
USES OF ATM’s

5. Discuss DEMAT.
 Dematerialization (DEMAT) is the move from physical certificates to electronic
bookkeeping.
 A DEMAT Account or Dematerialized Account provides the facility of holding shares and
securities in an electronic format.
 Dematerialization is the process of converting the physical share certificates into
electronic form, which is a lot easier to maintain and is accessible from anywhere
throughout the world. An investor who wants to trade online needs to open a Demat
with a Depository Participant (DP). The purpose of is to eliminate the need for the
investor to hold physical share certificates and facilitating a seamless tracking and
monitoring of holdings.
TYPES OF DEMAT ACCOUNT
 Regular Demat account: Regular Demat account is for resident Indian investors who
want to trade in shares alone and need a storing for securities. The stocks get debited
from your Demat account when you sell and credited when you purchase during trading.
If you are trading in F&O, you don't need a Demat account because these contracts
don't need storage.
 Basic Services Demat Account: It is a new type of Demat account introduced by the
SEBI. These accounts don't have maintenance changes if the holding value is less than Rs
50,000. Between Rs 50,000 and 2 lakh, the changes are Rs 100. The new type of account
targets new investors who are yet to open a Demat account.
 Repatriable Demat Account: Non-resident Indian investors open a repatriable account
to transfer their earnings from the Indian market abroad. If you want to open a
repatriable account, you'll have to close your regular Demat account in India and open a
non-resident external account to receive payments.
 Non-repatriable account: This account is also for non-resident Indians, but it doesn't
allow fund transfer to foreign locations.
FEATURES OF A DEMAT ACCOUNT
Easy Share Transfers: When buying or selling shares, investors can transfer their
holdings quickly using an electronic Delivery Instruction Slip (e-DIS). Users are able to
include all the information necessary for a transaction to go smoothly on these slips.
Freezing Demat Accounts: Owners of Demat accounts have the option, if necessary, to
temporarily freeze their accounts. If one wants to stop unauthorized debits or credits
from being made to a Demat account, this option may be helpful. The option to freeze
securities held in the account up to a certain amount is also accessible.
Pledging Facility To Avail Loan: A number of brokers offer loans secured by securities
that the borrowers have in their Demat accounts. The account holders utilize these
holdings as security when applying for loans.
SPEED E-Facility: Users can send instruction slips electronically through the National
Securities Depository Limited rather than handing them in to the DP. As a result, the
process is quicker and more convenient.
Multiple Accessing Options: Demat accounts can be accessed in a variety of ways
because they are managed electronically. Using a computer, smartphone, or other smart
device connected to the Internet, you can access these accounts.
Corporate Benefits & Actions: The owners of Demat accounts are automatically eligible
for any dividends, credits, or interest that the corporations offer to their investors.
 Additionally, all shareholders' Demat accounts are automatically updated with
information regarding company actions such as bonus issuance, right shares, or stock
splits.
BENEFITS OF DEMAT ACCOUNT
 Easy Holding: Physical share certificate maintenance is a laborious task. Additionally,
monitoring their performance is an additional duty. Holders of Demat accounts often
find it easier to hold and manage all of their investments in a single account.
 Lower Risks: Due to losses, thefts or damages, trading physical certificates is dangerous.
Additional dangers include phone securities and faulty deliveries. By establishing a
Demat account, holders have the option of keeping all of their investments in electronic
form, eliminating these dangers.
 Reduced Costs: Physical certificates came with a number of extra expenditures,
including stamp duty, handling fees and other such charges. These extra charges are
nullified with a Demat account.
 Odd Lots: Prior to Dematerialization , buying and selling of only fixed quantities was
allowed. This presented a problem of odd lots. Demat accounts have resolved this
problem.
 Reduced Time: The time needed to complete a transaction has decreased as a result of
the absence of documentation. The account holder can buy and sell securities more
quickly and effectively thanks to Demat accounts.
 Ease of Carrying out Transactions: An investor doesn't have to visit the physical office or
a company to buy and sell shares. Instead, a Demat account will make their transactions
processed at a single click of the mouse. If an investor is looking to purchase shares, they
can easily place an order, and the shares will be reflected in their Demat account within
two business days.
To open a Demat account you will need to submit the below documents
a) Pan card
b) Passport size photo
c) A copy of your signature
d) Proof of Identity – Your PAN card will serve as the proof of identity
e) Proof of address – Any of these documents can be submitted- Aadhar card, Voter ID,
Passport, Driving
f) License, and/ or utility bill (not more than 3 months old)
g) Bank statement or copy of the account passbook as proof of having a bank account
h) Cancelled cheque
i) IT return or pays lip if you are interested in currency or derivative market
HOW TO OPEN DEMAT ACCOUNT ONLINE
 Select a depository participant (DP): Most financial institutions and brokerage service
firms are referred to as Depository Participants.
 Fill an account opening form: You need to fill an account opening form to open a Demat
account. This includes basic contact information.
  Submit documents for verification: You need to submit a copy of your income proof,
identity proof, address proof, active bank account proof and one passport-sized
photograph for verification. All copies of documents need to be duly attested.
 Sign a standardized agreement with the DP: A standardized agreement will contain the
rules and regulations, charges you will incur and the terms and conditions of the
agreement between you and the depository participant.
 Verification of documents: A staff member from the DP will verify all the documents
that you have submitted in your application.
 Demat account number and ID are generated: Once all your documents have been
verified, your Demat account number and ID will be generated. You can use this
information to access your online Demat account.

6. Differentiate between debit and credit card.

BASIS FOR
CREDIT CARD DEBIT CARD
COMPARISON
A Credit Card is a plastic card that allows the Debit Card is a plastic card,
customer to purchase goods and services on through which the customer can
Meaning credit, up to the specified limit. Here, the spend money by drawing funds
card issuer makes payment on the that are deposited in his/her bank
customer's behalf. account.
Banks and a few non-banks, and it can also Banks and are linked to the bank
Issued by
be issued by various approved enterprises. account.
Immediate debit to customer's
Payment terms Deferred
account
Implies Pay later Pay now
Generally 45 days, and it is normally
Credit Period No credit, instant debit
structured as revolving credit.
It helps in creating good credit and improve
Credit score No impact on the credit score
credit score
It offers rewards, on the basis of spending
No or Minimum rewards or
Rewards like cash back, vouchers, reward points, etc.
incentives for spending.
which are redeemable.
Specific eligibility criteria, which must be
Eligibility criteria No eligibility criteria
fulfilled
Less than the balance lying on the
Maximum Determined on the basis of credit score,
credit of your savings or current
Withdrawal existing debt, and credit history of the
account, to which the card is
Limit customer.
linked.
Source of money Credit extended by the card issuer Concerned bank account
 BASIS FOR
CREDIT CARD DEBIT CARD
COMPARISON
Spending Spend more than what you have Spend only what you have
You get a monthly credit statement or bill You do not get any bill or
Bill that reflects all the transactions that took statement at the end of the
place during the period. month.
Interest is charged on the outstanding
Interest balance when payment is not made to the No interest is charged.
bank within a specified time period.
Penalty for
High Not applicable
default

7. Discuss the Role of artificial intelligence in banks

 Artificial intelligence is the simulation of human intelligence processes by machines,
especially computer systems.
 Here is a real-world example of banking institutions utilizing AI to their full
advantage. : JPMorgan Chase: Researchers at JPMorgan Chase have developed an early
warning system using AI and deep learning techniques to detect malware, Trojans, and
phishing campaigns. Researchers say it takes around 101 days for a Trojan to
compromise company networks. The early warning system provides ample warning
before the attack occurs. It also sends alerts to the bank’s cyber security team as hackers
prepare to send malicious emails to employees to infect the network.

THE ROLE OF ARTIFICIAL INTELLIGENCE IN BANKS

Cyber security and Fraud Detection: Several digital transactions occur daily as users pay
bills, withdraw money, deposit checks, and do much more via apps or online accounts.
Thus, there is an increasing need for the banking sector to ramp up its fraud detection
efforts. This is when artificial intelligence in banking comes to play. AI and machine
learning helps banks identify fraudulent activities, track loopholes in their systems,
minimize risks, and improve the overall security of online finance. The AI-based fraud
detection system also automated a lot of crucial decisions while routing some cases to
human analysts for further inspection. AI can also help banks to manage cyber threats.
In 2019 the financial sector accounted for 29% of all cyber-attacks, making it the most-
targeted industry. With the continuous monitoring capabilities of artificial intelligence in
financial services, banks can respond to potential cyber-attacks before they affect
employees, customers, or internal systems.
Chatbots: Chatbots are one of the best examples of practical applications of artificial
intelligence in banking. Once deployed, they work 24*7, unlike humans with fixed
working hours. Additionally, they keep learning about a particular customer’s usage
pattern. It helps them understand the requirements of a user efficiently. By integrating
chatbots into banking apps, banks can ensure they are available for their customers
around the clock. Moreover, by understanding customer behavior, chatbots can offer
personalized customer support reduce workload on emailing and other channels, and
recommend suitable financial services and products.
Loan and Credit Decisions: Banks have started incorporating AI-based systems to make
more informed, safer, and profitable loan and credit decisions. Currently, many banks
are still too confined to the use of credit history, credit scores, and customer references
to determine the creditworthiness of an individual or company. However, one cannot
deny that these credit reporting systems are often riddled with errors, missing real-
world transaction history, and misclassifying creditors. An AI-based loan and credit
system can look into the behavior and patterns of customers with limited credit history
to determine their creditworthiness. Also, the system sends warnings to banks about
specific behaviors that may increase the chances of default. In short, such technologies
are playing a key role in changing the future of consumer lending.
Tracking Market Trends: AI-ML in financial services helps banks to process large
volumes of data and predict the latest market trends. Advanced machine learning
techniques help evaluate market sentiments and suggest investment options. AI
solutions for banking also suggest the best time to invest in stocks and warn when there
is a potential risk. Due to its high data processing capacity, this emerging technology also
helps speed up decision-making and makes trading convenient for banks and their
clients.
Data Collection and Analysis: Banking and finance institutions record millions of
transactions every single day. Since the volume of information generated is enormous,
its collection and registration become overwhelming for employees. Structuring and
recording such a huge amount of data without any error becomes impossible. Innovative
 AI and banking software Development Company help in efficient data collection and
analysis in such scenarios. This, in turn, improves the overall user experience. The
information can also be used for detecting fraud or making credit decisions.
Customer Experience: Customers are constantly looking for better experiences and
higher convenience. For example, ATMs were a success because customers could avail
of essential services of depositing and withdrawing money even during the non-working
hours of banks. This level of convenience has only inspired more innovation. Customers
can now open bank accounts from the comfort of their homes using their smartphones.
Risk Management: External global factors such as currency fluctuations, natural
disasters, or political unrest seriously impact the banking and financial industries. During
such volatile times, taking business decisions extra cautiously is crucial. Generative AI
services in banking offers analytics that gives a reasonably clear picture of what is to
come and helps you stay prepared and make timely decisions. AI for banking also helps
find risky applications by evaluating the probability of a client failing to repay a loan. It
predicts this future behavior by analyzing past behavioral patterns and smartphone
data. Read the given blog to learn how technology is shaping the future of digital
lending.
Regulatory Compliance: Banking is one of the highly regulated sectors of the economy
worldwide. Governments use their regulatory authority to ensure that banking
customers are not using banks to perpetrate financial crimes and that banks have
acceptable risk profiles to avoid large-scale defaults.
Predictive Analytics: One of the most common use cases of AI in the banking industry
includes general-purpose semantic and natural language applications and broadly
applied predictive analytics. AI can detect specific patterns and correlations in the data,
which traditional technology could not previously detect. These patterns could indicate
untapped sales opportunities, cross-sell opportunities, or even metrics around
operational data, leading to a direct revenue impact.
Process Automation: Robotic process automation (RPA) algorithms increase operational
efficiency and accuracy and reduce costs by automating time-consuming, repetitive
tasks. This also allows users to focus on more complex processes requiring human
involvement. As of today, banking institutions successfully leverage RPA to boost
transaction speed and increase efficiency. For example, JPMorgan Chase’s Coin
technology reviews documents and derives data from them much faster than humans
can. Read the linked blog to learn how RPA is transforming the insurance sector.
Real-World Examples of AI in Banking: As highlighted above, few big banks have already
started leveraging artificial intelligence technologies to improve their quality of service,
detect fraud and cyber security threats, and enhance customer experience.

8. What is Plastic Money or Plastic Card?

Plastic money refers to a payment mechanism that replaces physical currency
transactions with plastic cards.
 These pocket-sized cards are typically made from materials like plastic or a combination
of plastic and metal, earning the moniker of plastic money.
The cards facilitate electronic transactions by storing your financial information securely
on the plastic/metal card and you can use them to access your financial accounts on the
go.
Different Types of Plastic Money
 ATM-cum-Debit Cards: A Debit Card is a type of plastic money instrument that is directly
linked to your bank account. You can use this card to withdraw money from your linked
bank account, make payments at retail stores and purchase products and services
online. When you swipe, tap or use Debit Cards, money is instantly debited or deducted
from your linked bank account. Essentially, you can enjoy the benefits of a liquid bank
account with this type of plastic money.
 Credit Cards: A banking product that enables you to make purchases now and pay for
them later, Credit Cards are also referred to as plastic money. Each Credit Card comes
with a pre-approved limit. When you buy something, your creditor pays the money
upfront to the retailer and sends you a detailed bill on a later date. You need to repay
the bill by the applicable pay-by-date. With Credit Cards, you can enjoy revolving credit
benefits, which means your creditor resets the credit limit each month.
 Prepaid Cards: If you prefer to set a specific budget for your expenses and spend money
only up to a specific limit, you can consider getting a Prepaid Card. This type of plastic
money helps you ensure that you do not overspend. All you have to do is load this card
with the amount you intend to use. Once the money runs out on this card, you can
reload it. You can load funds on your Prepaid Card online by linking your bank account
and visiting the card provider’s website.
 Forex Card: Known as the plastic money for overseas travellers, a Forex Card is
essentially a type of plastic card on which foreign currencies are loaded. You can load
more than one forex currency on a Forex Card. Thus, instead of exchanging physical
domestic currency for a foreign currency, you can load forex on this card. Forex Cards
safeguard you from currency rate fluctuations as the forex rate is locked in as of the day
of purchase. Plus, these cards come validity periods lasting up to 5 years.
Benefits of Plastic Money
 Convenience: One of the foremost advantages of plastic money is the convenience it
offers. With just a swipe or a tap, you can conduct transactions swiftly, eliminating the
need to carry wads of cash. This convenience has led to a significant reduction in time
spent on traditional payment methods.
 Security: Plastic money reduces the risks of carrying cash. Lost or stolen cards can be
easily reported and blocked, preventing unauthorized access to funds. Plus, card issuers
employ advanced security features like PINs, EMV chips and two-factor authentication
to safeguard transactions.
 Record Keeping: When you conduct a transaction using plastic money, the issuing entity
makes an electronic record, which you can access online. This feature simplifies tracking
 and budgeting, as it allows you to review your spending patterns and identify areas
where adjustments are necessary.
 Global Acceptance: Plastic money has transcended geographical boundaries, making it
widely accepted across the globe. This has greatly facilitated international travel and
online shopping, as it empowers users to make transactions in foreign currencies with
ease.
 Emergency Access to Funds: With plastic money, you can easily make payments during
emergencies as the daily transaction limits on these cards are significantly high. All you
have to do is swipe/tap your plastic card. You do not have to depend on banking hours
to withdraw money for urgent payments.
 Rewards and Benefits: Most plastic money products come loaded with excellent
benefits and exclusive deals including reward points on every swipe, cash back
incentives, discounts on purchases, etc. These perks provide users with additional value
on their spends and contribute to the overall appeal of plastic money.

9. Discuss Block Chain in banking

Block chain technology is a decentralized, distributed ledger system that allows for
secure and transparent transactions between two parties without the need for a trusted
intermediary.
Block chain acts as a decentralized ledger that keeps a track of the transactions
transparently and publicly.
FEATURES OF BLOCK CHAIN

Immutable: Immutability means that the block chain is a permanent and unalterable
network. Block chain technology functions through a collection of nodes. Once a
transaction is recorded on the block chain, it cannot be modified or deleted. This makes
the block chain an immutable and tamper-proof ledger that provides a high degree of
security and trust.
Distributed: All network participants have a copy of the ledger for complete
transparency. A public ledger will provide complete information about all the
participants on the network and transactions. The distributed computational power
across the computers ensures a better outcome.
Decentralized: Block chain technology is a decentralized system, which means that there
is no central authority controlling the network. Instead, the network is made up of a
large number of nodes that work together to verify and validate transactions. Each and
every node in the block chain network will have the same copy of the ledger.
Secure: All the records in the block chain are individually encrypted. Using encryption
adds another layer of security to the entire process on the block chain network. Since
there is no central authority, it does not mean that one can simply add, update or delete
data on the network. Every information on the block chain is hashed cryptographically
which means that every piece of data has a unique identity on the network. All the
blocks contain a unique hash of their own and the hash of the previous block. Due to this
property, the blocks are cryptographically linked with each other.
Consensus: Every block chain has a consensus to help the network to make quick and
unbiased decisions. Consensus is a decision-making algorithm for the group of nodes
active on the network to reach an agreement quickly and faster and for the smooth
functioning of the system. Nodes might not trust each other but they can trust the
algorithm that runs at the core of the network to make decisions. There are many
consensus algorithms available each with its pros and cons.
Unanimous: All the network participants agree to the validity of the records before they
can be added to the network. When a node wants to add a block to the network then it
must get majority voting otherwise the block cannot be added to the network. A node
cannot simply add, update, or delete information from the network. Every record is
updated simultaneously and the updating propagate quickly in the network. So it is not
possible to make any change without consent from the majority of nodes in the
network.
Faster Settlement: Traditional banking systems are prone to many reasons for fallout
like taking days to process a transaction after finalizing all settlements, which can be
corrupted easily. On the other hand, block chain offers a faster settlement compared to
traditional banking systems. This block chain feature helps make life easier. Block chain
technology is increasing and improving day by day and has a really bright future in the
upcoming years. The transparency, trust, and temper proof characteristics have led to
many applications of it like bit coin, Ethereum, etc. It is a pillar in making the business
and governmental procedures more secure, efficient, and effective.