Bonfring International Journal of Industrial Engineering and Management Science, Vol. 9, No.
1, March 2019 1
Novelties and Best Practices of On-line Banking
Sector by Using Mobile Apps for Potential
Customer to Avoid Risk Factors
E. Kalaivani and Dr.A. Lakshmi
Abstract--- Online banking (Internet banking) has arises
as one of the most profitable e-commerce applications over
the last decade. This paper mainly focused the implementation
of innovational internet banking and also it focused the risk
which involved while using the internet banking. In this paper
we discussed the types of risk involved, its various uses and its
implementations. Banking sectors to identify that they have to
persistently to make the innovate and update the datasets to
retain their demanding and sensitive customers and to provide
convenient, reliable, and beneficial services. It also faces the
risk involved in innovative internet banking services. On-line
banking system has always been extremely statistics data with
rigorous activity that trusts on Information and
Communication Technology (ICT) to acquire, process, and
deliver the information to all relevant users. The emergence of
Internet banking which helps the customer’s needs & demand
in banking services.
Keywords--- Internet Banking Services, Innovation
Practices, Type of Services, Risk Factors.
I. INTRODUCTION TO INTERNET BANKING
I NTERNET banking plays a vital role in electronic payment
system, it can be called by various terms such as online
banking, e-banking or virtual banking that enables bank
customers and various financial institution to conduct a range
of financial transactions through the financial institution's
website. There are different types of online financial
transactions are:
a) National Electronic Fund Transfer (NEFT) - is a
nation-wide payment system facilitating one-to-one
funds transfer. By using this Scheme,
public/individuals and firms/ corporate can transfer
funds from any bank branch to any individual
electronically, if corporate having an account with any
other bank branch in the country also participating in
the Scheme.
b) Real Time Gross Settlement (RTGS) - defined as
the continuous (real-time) settlement of funds
transfers individually on an order by order basis
(without netting).
E. Kalaivani, Assistant Professor, Department of Management Studies,
K.S. Rangasamy College of Technology, Tiruchengode, Tamilnadu, India.
E-mail: Kalaielango651@gmail.com
Dr.A. Lakshmi, Director, Department of Management Studies, K.S.
Rangasamy College of Technology, Tiruchengode, Tamilnadu, India.
E-mail: hodmba@ksrct.ac.in
DOI:10.9756/BIJIEMS.9024
ISSN 2277-5056 | © 2019 Bonfring
c) Electronic Clearing System (ECS) – Individuals or
corporate can easily make payments from their
occupying place to various purpose like telephone
bills, electricity bills, insurance premier, credit card
payments and loan repayments, etc.
d) Immediate Payment Service (IMPS) - it offers
interbank electronic fund transfer service through
mobile phones. IMPS is an tool to transfer money
quickly within banks across India through mobile,
internet and ATM which is not only safe but save time
& money both in financial and non-financial
perspectives.
In order to face the competitive world, many banks might
rethink their IT strategies through the emergence of Internet
banking which helps the customers needs & demand in
banking services.
For business, many opportunities and threats arises by
rapid growth of the Internet.
Internet is the best path to become a full-fledged delivery
and distribution channel among the consumer-oriented
applications riding at the forefront of this evolution are
electronic financial products and services.
Fast growing expectations of customers & business
customers today demand payment methods that are as follows:
• Conform to the highest standards
• Don’t have identification methods.
• Are complexed within hours.
• Use devices that exist for other reasons.
• Are 100% accurate & reliasble.
• Are widely accepted by businesses.
• Are globally usable.
• Are value of money.
• Use data to enhance the bank’s offer, but not intrude.
II. INNOVATIONS IN BANKING
The term ‘Innovation’ means to make something new,
following is types of innovative online banking. Table 1.1
shows the Innovating of banking Sector.
Bonfring International Journal of Industrial Engineering and Management Science, Vol. 9, No. 1, March 2019 2

Table 1.1: Type of Innovations in Banking Sectors

S.No. Types of online Description Uses Example
banking
Also known as virtual banking It provides all functions which are provided at
& web banking. It allows its a local bank such as deposit of money , bill
1. user to execute transactions payment. ICICI BANK
Internet with the help of internet. ( first bank to introduce it.
banking

It is a system that allows Bill payment, Utility bill payment , ATM

customers to perform a number
2. of transactions through mobile
Mobile device.
banking
Banking institution executes
transactions directly with
3 Retail banking customers rather than corporate
or other banks.
4 It conducting banking business
with industrial & business
Wholesale entities
banking
It is a combination of
commercial banking,
investment banking, insurance
Universal & many other financial
5 banking activities.
location , Interbank Mobile Payment Service.
ICICI BANK
Services it includes – saving & checking
accounts , personal loans, Debit cards, Credit
cards BANK OF AMERICA
Corporates , Trading houses , Multi-national Cash management, Wire
companies & domestic companies. Fund and transfer, ACH
Non-fund based services, Value added services (Automated clearing
& Internet banking services. house),Bill presentment ,
payment.
It offers many financial services such as
Merchant Banking, Mutual Funds, Factoring,
Credit cards, Housing Finance, Auto loans, ICICI BANK
Retail loans, Insurance service and commercial
banking service.

It involves mobilizing largest It helps to reduce NPA’s in banks. Government securities.

6 Narrow part of deposits in risk free
banking assets.
It describes banking activities Offshore financial institutions can also be used ICICI BANK at Special
in currencies other than for illicit purposes such as money laundering Economic Zone , Mumbai ,
currency of the country in and tax evasion Aug 9,2003 Banks in Andorra,
Offshore which bank accounts are Luxembourg, Switzerland
7 banking shield.
Multinational Operated in more than one International operations through network of Indian bank – 1st bank open
banking country. It is called as branches, Unity of control , Professional branch in outside India.In
international bank. management overseas , maximum position
occupied by
8 Bank Of Baroda.
internet facilities and their services with mobile banking.
III. INNOVATIONS IN INTERNET AND MOBILE BANKING
The following table 1.2 shows the various innovations of
Table 1.2: Innovations in Internet and Mobile Banking
Services Types of services Examples Example of innovation

Store monetary value Starbucks, Apple Stored-value card

Savings PayPal Personal finance tools apps
Withdrawal Common Bank Mobile technologies
Services related to deposits Payments Apple pay, Alipay, Stripe and Square, Touch ID, NFC, and
Transferwise, Forex, Kantox Bluetooth technologies and
cross border transactions
Account Information Gem alto, foundry Mobile technologies
Intermediation Supplier pay initiative, Alibaba Small Loans, Online platform
Services related to loans Lending club, On-Deck, Funding-Circle
a) Risks associated to the transformation activity, and
IV. TYPES OF RISKS INVOLVED IN INTERNET BANKING b) Risks occurring at the transaction level for payments
Risks arises mainly during transaction level can provide or loans.
banks with incentives to invest in security standards. Risk is Risk associated with innovation payment services – (credit
classified into two broad categories: risk, settlement risk, liquidity risk, and operational
risk),Innovations offered by entrants - banks’ liquidity risk,

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Bonfring International Journal of Industrial Engineering and Management Science, Vol. 9, No. 1, March 2019
operational risks are related to internal or external events that
result in monetary losses (Example :Data security risks, fraud
risks, risk of counterfeit, human error...)
• Operational risk
• Security risk
• System architecture & design risk
• Reputational risk
• Legal risks
• Money laundering risk
• Strategic risk
• Other risk
1. Operational Risk
This type of risk occur mainly due to fraud, processing
errors, system disruptions, or other unanticipated events
resulting in the institution’s inability to deliver products or
services. In banking operations , certain risk may occur. They
are
a) Volume forecasts
b) Management Information System
c) Outsourcing
2. Security Risk
On account of unauthorized access to a banks critical
information databases like accounting system, risk
management system, portfolio management system, etc this
security risk arises. System hackers operating through the
Internet could access, retrieve and use confidential customer
information.
3. System Architecture and Design Risk
An important factor in managing various kinds of
operational and security risks are appropriate system
architecture and control . If systems are not well designed or
implemented , bank faces the risk . The risk of an interruption
or slow-down of its existing systems occur if the electronic
banking or electronic money system it chooses is not
compatible with user requirements. Internet service providers
and external experts to implement, operate, and support
portions of their electronic money and electronic banking
activities but service providers may not have the requisite
expertise to deliver services expected by the bank, or may fail
to update their technology in time. So, his operations could be
interrupted due to system breakdowns or financial difficulties.
4. Reputational Risk
This risk may cause major loss to public confident and it
creates a negative public opinion .The main reasons for this
risk may be system or product not working to the expectations
of the customers, significant system deficiencies, significant
security breach, inadequate information to customers about
product.
5. Legal / Compliance Risk
This type of risk is the risk of non-compliance with legal
or regulatory requirements. It directly related to the electronic
banking due to high usage .Each country puts its own rules
into effect and it is difficult for a bank to constantly adapt its
services. The other legal risk is related with the protection of
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3
the customer’s personal data. RBI issue the notification on
14th June, 2001 regarging legal requirements and regulatory
guidance that frequently used to e-banking products and
services , which were the findings of a working group on
Internet Banking.
6. Money Laundering Risk
Banks find some difficulties in applying traditional
method for detecting and preventing undesirable criminal
activities through Internet banking transactions. Money
laundering rules may also be inappropriate for some forms of
electronic payments so banks expose themselves to the money
laundering risk. The source of illegally obtained funds is
obscured through a succession of transfers and deals in order
that those same funds can eventually be made to appear as
legitimate income.
7. Strategic Risk
The poor service of e-banking planning and investment
decisions can increase a financial institution’s strategic risk. E-
banking services act as innovators who anticipate the needs of
their customers, but may do so by incurring higher costs and
increased complexity in their operations. It occurs due to lack
of understanding among senior management about its potential
and implications.
8. Other Risks
Various risks such as credit risk, liquidity risk, interest rate
risk, and market risk may also arise from electronic banking
and electronic money activities, though their practical
consequences than operational, reputational, and legal risks.
This may be realistics for banks engaged in a variety of
banking activities, as compared to banks or bank subsidiaries
that specialize in electronic medium.
Credit Risk: Credit risk is the risk that a counter party will
not settle an obligation for full value, either due or at any time
thereafter. Banks electronic activities may extend credit via
non-traditional channels, and expand their market beyond
traditional geographic boundaries. The procedures is not
sufficient to determine the credit worthiness of borrowers
applying for credit via remote banking procedures could
heighten credit risk for banks. Banks may face credit risk if a
third party intermediary fails to carry out its obligations with
respect to payment.
Liquidity Risks: This type of risk is the risk arising from a
bank’s inability to meet its obligations when they come due,
without incurring unacceptable losses, although the bank may
ultimately be able to meet its obligations.
Interest Rate Risk: It arises when there is an adverse
movements in interest rates. Banks specializing in the
provision of electronic money may face significant interest
rate risk to the extent adverse movements in interest rates
decrease the value of assets relative to electronic money
liabilities outstanding.
Market Risk: This type of risk arises from movements in
market prices, it is the risk of losses in on- and off-balance
sheet positions arising, including foreign exchange rates. For
payments banks may accepts foreign currencies electronic
money are subject to this type of risk.
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Business Risks: It arises when it find difficult to predict based on technology that by its very nature is designed to
customer volumes and the stickiness of e-deposits , it could be extend the geographic reach of banks and customers is shown
very difficult to manage liquidity. in table 1.3 Expansion of market can extend beyond national
borders, highlighting certain risks.
V. CROSS BORDER ISSUES
Electronic banking and electronic money activities are
Table 1.3: Internet Vs Mail Surveys
S.No Characteristics Internet Survey Mail Survey
1. Manpower Design Web page and write JavaScript. Insert survey into envelopes, paste stamps or frank
Envelopes.
2. Cost Rental/maintenance of server space to host Web page. Envelopes, stamps, photocopying of
questionnaires.
3. Sampling frame Restricted to people with access to the Internet. Restricted to sample that Received the
questionnaire.
4. Time frame Responses can usually be collected within two weeks. Responses can usually takes about a month for
surveys to be returned.
5. Quality of data General Internet user population is adequate if the target Dependent on whether target
respondent is potential for systematic bias if only people Respondents, e.g., CIO, respond to questionnaire.
with certain characteristics respond. With the use of random sample, systematic bias is
reduced by obtaining a high response rate.
6. Generalizability of It is very difficult to determine since there may be a Results generalizable to target
results systematic bias in terms of who actually responds to the population if response rate is
questionnaire. Adequate.
7. People/companies involved in survey with Internet access Must be able to identify potential
Suitability or who are users of the Internet. Respondents. Can reach out to
the general public regardless of
Computer access.
8. Problems Unable to control who responds. Screening of data for Costly and slow.
unsuitable respondents (e.g., responses from children or
other Countries).
9. Response rate Cannot be computed. Major percentage of respondents is Can be computed. Major percentage
dependent on publicity of the survey as well as follow-up of respondents is dependent on
reminders via e-mails to potential respondents. Follow-up mailings.
Factors that influencing internet banking services shows provided by the banks and lot of development by innovation
the value of mean and standard deviation is shown in table 1.4. methods by developers. Literature survey support for
identifying the various methods and new ideas are emerged
Table 1.4: Mean, Standard Deviation of Internet Banking
internet banking concepts though authors citied their
Services
references has been presented in this article. It is concluded
Internet Banking Service Mean* Standard that for proper use of internet services a bank and mobile
Deviation banking should provide a attractive and easy to use interface.
Proper security concerns should be provided by the banks to
Account information and balance 6.54 0.96 the customers so that customers can easily use the internet
enquiry services provided by the innovation internet banks.
Electronic bill payments 6.13 1.30
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