Module No 4

Innovations in Banking
 Introduction
• To stay relevant and connected with customer
needs, banks must constantly evolve through
innovation. Customers expect highly
personalized experiences and real-time
transactions across multiple interactive devices.
This need for on-demand and bespoke service
drives banks to adapt new business models and
invest in the latest technology to stay engaged
with customer needs.
Meaning of Banking Innovations
The term Innovations means to make
something new. Banking Innovation stands for
making something new in banking operations
by using electronic devices, mobile
applications, software services, customer
friendly and easy applications etc.,.
 Need for Banking Innovations
• Advanced Self-Service Capabilities
• Instant Payments
• Cloud computing
• Biometric Technology
• Chat bots
 Core banking
Core refers to “Centralized Online Real-time
Electronic Banking’’.
Core banking is networking of bank branches,
which allows customers to manage their
accounts, and use various banking facilities
from any part of the world.
Advantages of Core banking to customers

• Transaction of business from any branch

• Less number of errors, therefore, higher
accuracy in transactions
• Better funds management due to immediate
availability of funds
• Banking facilities (transactions) 24*7
• It is time saving, convenient and efficient
• Fast payment processing through Internet
banking, mobile banking
 Advantages of core banking to banks
• Accuracy in transactions and minimization of errors
• Convenience in opening accounts, processing cash,
servicing loans, calculating interest, implementing
change in policies like changing interest rates etc.,
• Standardization of process in the bank
• Better customer service which leads to customer
retention and increased customer dealings
• Availability of exact and precise data and better
use of available resources.
 E-Banking
Refer notes
 Telebanking
Refer notes
 Advantages of Telebanking
• It is convenient because you can pay your bills on time and
do not have to go to the utility company during business
hours
• It saves time as it eliminates waiting in line at the utility
company
• It is safer because you do not have to walk around with
cash to pay your utility bills
• It is cheaper since the transaction cost is less than the
transportation cost to and from the utility company
• Receive information anytime and anywhere
• Fast, safest banking services, offered by the banks
 Disadvantages of Telebanking
• First-time users may find the system slightly
difficult to use
• Instead of a receipt, you will receive a
transaction reference number as proof that
the payment was made
• Telebanking is not active usually over bank
holidays
• All banks are not offering 24*7 Telebanking
 Internet banking
• Internet banking refers to a system allowing
individuals to perform banking activities at
home, via the internet. Internet banking
allows customers to conduct financial
transactions on a secure website operated by
their retail or virtual bank.
 Advantages of Internet Banking
• Convenience
• Availability
• Fast and efficient
• We keep an eye on our transactions and account balance all the time
• We can get to know about any fraudulent activity or threat to our
account before it can pose any severe damage
• It’s a great medium for the banks to endorse their products and
services
• Low cost, unlimited access
• Wider reach to public, competitive edge for banks, enhances image of
banks as technology driven bank
• An effective marketing tool for promotion of various schemes of bank.
Disadvantages of Internet Banking
• Internet requirement
• Server down
• Difficult for beginners
• Transaction security
• Securing password
• Inconvenient to make deposits
• Inefficient at complex transactions
• Bank servers and its operational capacity for
relatively larger transactions remain a big issue.
 Mobile Banking
• Mobile banking is a system that allows
customers of a financial Institution to conduct
a number of financial transactions through a
mobile device such as a mobile phone or
personal digital assistance.
 Advantages of Mobile Banking
• We can make transactions or pay bills
anytime. It saves a lot of time
• Mobile banking is cost effective
• Banking through mobile reduces the risk of
fraud
• Banks can also promote and sell their products
• We can transfer money instantly
 Disadvantages of Mobile Banking
• Fake SMS messages and scams
• Internet reliant
• Tech Knowledge
• Security Concerns
• Limited Features
• Dependence on Technology
 NEFT
• National Electronic Funds Transfer is an
electronic funds transfer system maintained
by the Reserve Bank of India. Started in
November 2005, the setup was established
and maintained by Institute for Development
and Research in Banking Technology.

NEFT: no Minimum, Maximum Rs. 10 Lakhs

 Benefits of NEFT
• NEFT offers many advantages over the other modes of
funds transfer
• the remitter need not send the physical cheque or Demand
Draft to the beneficiary
• The beneficiary need not to visit his/ her bank for
depositing the paper instruments
• Cost effective
• Credit confirmation of the remittances from his
home/place of work using the internet banking also
• Near real time transfer of the funds to the beneficiary
account in a secure manner.
 RTGS
• Real Time Gross Settlement The minimum
amount required to be transferred under RTGS
is Rs. 2 lakhs. The maximum amount that can
be transferred under this system can vary
across banks.
 Benefits of RTGS
• It is safe and secure system for fund transfer
• The system is available on all days when most
bank branches are functioning including Saturdays
• There is real time transfer of funds to the
beneficiary account
• The remitter need not use a physical cheque or a
demand draft
• The beneficiary need not visit a bank branch for
depositing the paper instruments
 EFT
• Electronic funds transfer is the electronic
transfer of money from one bank account to
another, either within a single financial
institution or across multiple institutions, via
computer-based systems, without the direct
intervention of bank staff.
 Advantages of EFT
• Speed of transactions
• Security
• Record keeping
• Convenience for customers
• More revenue
• Accuracy
 Disadvantages of EFT
• Customers need to have the funds available
immediately.
• If you lose money in a wire transfer, it may not be
recoverable.
• If the account holders enter the target account number
incorrectly, there is no way to reverse the transaction
since the bank would process the transaction under the
belief that the information is provided is accurate
• Once an amount is transferred, the bank cannot reverse
a transaction
 UPI
• A Unified Payment Interface (UPI) is a smart
phone application that allows users to
transfer money between bank accounts. It is a
single-window mobile payment system
developed by the National Payments
Corporation of India (NPCI)
 Advantages of UPI
• The service is available 24/7
• The biggest advantage of Unified Payment
Interface is that there are no or minimal
charges on the transactions done through UPI
• No need to spend time searching for IFSC,
typing username, password and other details
for adding the payee or for the transaction
• The payment is instant and secure
• Easy to use
 Disadvantages of UPI
• Transaction limit
• Requirement of Internet
• Requirement of Smartphone
• Difficult to convince the customers
• Delay in payments due to network or bank
server issues.
 IMPS
• The National Payments Corporation of India
(NPCI) introduced a pilot mobile payment
project also known as the Immediate Payment
service (IMPS). Before IMPS system, the
transactions could be done either by NEFT or
by RTGS.
 Benefits of IMPS
• Instant
• Available 24*7 (functional even on holidays)
• Safe and secure, easily accessible and cost
effective
• Channel independent can be initiated from
mobile/ internet/ ATM channels
• Debit and credit confirmation by SMS
• Fund transfer and remittances
 ATM
• A machine that dispenses cash or performs
other banking services when an account
holder inserts a bank card
 ATM card
• An ATM card is a card used to withdraw
money or check the balance at an automated
teller machine
 Advantages of ATM
• Convenience to Customers
• Offer 24×7 Service
• Reduce Bank Workload
• Access from anywhere
• Minimizes transaction cost
 Disadvantages of ATM
• Charges fees
• limitation on cash withdrawal
• Possibility of frauds
• Non-reachable in rural areas
• Difficulty to operate for illiterate person
 Debit card
• A debit card is an electronic card issued by a
bank which allows bank clients access to their
account to withdraw cash or pay for goods
and services
 Advantages of Debit card
• Convenience to Customers
• Offer 24×7 Service
• Reduce Bank Workload
• Access from anywhere
• Minimizes transaction cost
 Disadvantages of Debit card
• Charges fees
• limitation on cash withdrawal
• Possibility of frauds
• Non-reachable in rural areas
• Difficulty to operate for illiterate person
 Credit card
• Credit cards offer you a line of credit that can
be used to make purchases, balance transfers
and/or cash advances and requiring that you
pay back the loan amount in the future
 Advantages of Credit card
• Easy access to credit
• Building a line of credit
• Incentives and offers
• Flexible credit
• Record of expenses
 Disadvantages of Credit card
• Hidden costs
• High interest rate
• Overspending
• Limited Cash Withdrawal
• Credit card fees
 Truncated Cheques
• Cheque truncation is a mode of clearing
cheques electronically. It involves settlement
and clearing of cheques between banks
without the physical exchange of any
paperwork or the instrument itself.
 MICR
• Magnetic ink character recognition code,
known in short as MICR code, is a character
recognition technology used mainly by the
banking industry to streamline the processing
and clearance of cheques and other
documents
 Crypto currency
• Crypto currency, sometimes called crypto-
currency or crypto, is any form of currency
that exists digitally or virtually and uses
cryptography to secure transactions.
• Crypto currency is digital money that doesn't
require a bank or financial institution to verify
transactions and can be used for purchases or
as an investment.
The current value of 1 BTC
is ₹2,133,246.74 INR.
 Central Bank Digital Currency
• Central bank digital currencies (CBDCs) are a form
of digital currency issued by a country's central
bank. The current Union Budget Finance
Minister, Nirmala Sitharaman announced the
introduction of Central Bank Digital Currency which
is popularly known as “CBDC”.
• A central bank controls a CBDC, whereas
cryptocurrencies are almost always decentralized,
meaning they can't be regulated by a single
authority, such as a bank.
 SWIFT
• Society for Worldwide Interbank Financial
Telecommunications
• SWIFT (Society for Worldwide Interbank Financial
Telecommunications) is a global member-owned
cooperative that functions as a huge messaging
system. Members (banks and other financial
institutions) use it to quickly, accurately, and
securely send and receive information, primarily
money transfer instructions.