Ebanking , popularly known as the short form of Electronic banking is an umbrella term for the process by which a customer may perform banking transactions electronically without visiting the physical premises of the financial institution ,if we exclude the ATM hub established in the roadside from the definition of physical premises .If we see the definition of electronic devices it is known as the "using valves, transistors, or silicon chips: relating to devices, systems, or circuits that employ components such as vacuum tubes, integrated circuits, or transistors in their design ".(source:Microsoft® Encarta® Reference Library 2004. ) According to this definition it is not surprising to know that in the Nepalese financial sector Ebanking is not the new concept and this aspect of modern banking already gripped the financial institutions as they decided to leave manual transaction and commenced theirs business with the use of computers. The following terms all refer to one form or another of electronic banking: personal computer (PC) banking, Internet banking, virtual banking, online banking, home banking, remote electronic banking, and phone-banking. PC banking and Internet or online banking are the most frequently used designations .But for the Nepalese financial market the institutions isn’t considered as involved in the EBANKING unless n until it has ATM machines as well as the availability of the services for the customers to query there deposit account statement through the use of cellular mobile phones.
Why E banking
For banks to attract new business and sustain the loyalty of existing customers, consumers must be able to reach financial institutions through multiple channels. With consumer interest that was historically focused on Branch Banking, currently fast changing towards Mobile & Internet banking - the level of popularity and numbers of possible services it carries has a great potential.
Through the use of wireless banking as a customer channel, as well as an internal tool within financial institutions, the combination of Mobile and wireless technologies with the wide variety of portable devices available today, enables new revenue opportunities for financial services organizations. This provides a new channel that can be used to refresh and expand the customer base, attract prime customers and enhance loyalty. The existing infrastructure in the financial services sector makes it possible to access financial services over multiple channels, such as traditional teller and ATM systems, telephone, point-of-sale (for credit/debit card use), or from the Web using a PC.
E-Banking in Nepal
Establishment of first Joint Venture Bank, Nepal Arab Bank Limited (now NABIL Bank), in 1984 was the first step towards e-banking in Nepal it introduced Credit Cards in Nepal in early 1990. Automated Teller Machine (ATM) was first introduced by another JV Bank, Himalayan Bank Ltd. in 1995. Himalayan Bank Limited was also the first bank to introduce Tele-Banking (Telephone Banking) in Nepal. Internet-Banking was first introduced by Kumari Bank Limited in 2002. Laxmi Bank Limited was the first bank to introduce SMS-Banking (or Mobile Banking) in Nepal in the year 2004. The channels in e-Banking available in Nepal are Automated Teller Machines (ATM), Point of Sales (PoS), Telephone Banking (Tele Banking), Internet Banking, Mobile Banking (SMS Banking). Currently Nepalese customer are enabled Cash Withdrawal, Balance Inquiry from in PoS Terminals customer can do financial transactions via Cards, Cash is debited from the client’s account(s), from Tele- banking customer can do the Account Status check, Balance Inquiry, similar to Tele-Banking SMS banking facilities is there , from Internet-Banking customer are having fund Transfer within accounts (within the bank),Get balance statement online and Pay bills online. All these type of facilities are available in cities but not in remote places. But unless and until Nepal's two giant banks which are under restructuring process, NBL and RBB, wont go for E banking large portion of banking customer will be out of the use of EBANKING facilities. As per NRB till July, 2006 total deposit of banking sector is 290427.6 million RS, out of those Nepal Bank Limited has 35295.4 million RS and RBB has 45446.2million As per this data nearly 30% of he total depositors are out of the use of EBANKING facilities directly. Recently RBB (Rastriya Banijya Bank ) declared it has started ATM and internet banking facilities which is indeed satisfactory news for the Nepalese financial market .Likewise NBL(Nepal Bank Limited)which is already computerized will also have to start this services sooner or later.
The benefits to a Bank on offering always-available E-Banking services are widespread. 1.Developing E-BANKING mass market will allow you to attract new, high-value customers and expand your reach to global markets.
2.The convenience of having personalized wireless access to critical financial information is an invaluable service for customers on the move.
3. Enabling the execution of time-sensitive financial transactions anywhere, anytime, provides the opportunity to strengthen relationships with existing customers and encouraging them to become loyal.
4 .Enhancement of the banks brand loyalty by Granting customers flexible access to financial information and accounts This also offers significant potential to grow your market awareness through word-of-mouth.
5.Reducing the unnecessary labor intensive service overheads as well as lessen the paper work
Though, the time demands for every finance institution to go for E-Banking but it is risky for customer and banks too.
1.Most popular frauds in e-Banking (worldwide) are Card duplication. In this, the information in the cards are copied to another card.
2.Password leakage through e-mails those are pretending to be from the bank asking to input the username and password to update the information. After submitting the information, the information passes to the false site where the information is captured.
3. Cyber Criminals are cooperating with one another and improving their techniques.like hacking kits which are difficult to counter since each is different.
4. Emails sent with a bank's valid URL in a link. The email goes through, the link is used, the site is valid and the customer has no idea this was a test. A second email is then sent. Since the first went through any user-enabled filters and scrutiny processes, the second should also, as it is now a trusted source. The second has a phony URL and when clicked, the customer falls victim to the fraud and provides confidential information.
5.The most common methods of infection were through (1) email and instant messaging, (2) malicious web sites (3) affiliate programs.i.e sites like adult and gambling.
In Nepal, no e-banking frauds have been found yet. Lack of understanding of internet technology may be the reason. E-banking is at its infancy right now; it means the system is not perfectly secure and precaution must be taken..E-banking users must consider these things while transacting electronically: never give your cards, account no. to anybody, update your antivirus program regularly, don’t use public computer for e-transactions, don’t give your information in the websites which you don’t know, before visiting any sites, check the certificate; and don’t continue unless you feel it is from trusted site, use passwords which are difficult to guess and regularly check your account status; if you feel something is wrong, then let this know to your bank.
Some of the duties that the banks must do to prevent e-banking frauds are information security controls, internal controls, dual control: one person can a mistake, other can find the error the possibility of two persons making the same mistake at the same time is negligible, control of suspicious activities: controlling the withdrawal up to some limit, if an account is dormant for years and the transaction is unexpected, the account holder must be informed.
Still the Nepalese financial market is in infancy if we consider the availability of the EBANKING service. It is limited only to the Kathmandu valley as well as some big cites like Pokhara Biratnagar, Birgunj.Still the approximately 90% of the total depositors are not using the facilities provided in the name of EBANKING .Likewise the services provided by the joint venture banks of Nepal are limited to the withdrawal of money from ATM and account balance query through the use of mobile banking. So it will be earlier to assess the risk of the EBANKING but being prudent will be no harm for the consumers as well as the banks . And simply assessing the risk it will be like resisting the change and to stop the pace of EBANKING.It is indeed the time to go "E" otherwise our financial institutions will lag far behind to cope with the challenges and competition that it will have to face by the end of the year 2010 as Nepal will have to open its market for the foreign banks fully in order to implement the WTO provisions.