Internet Banking

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Internet Banking

• April 21st, 2009

Tori Lord 47413 Marcin Lukasiewicz 39896 Lukasz
Kanownik 43391 Grzegorz Bonski 39392
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Agenda

• Explanation of Four Stages of Development
• Social Lending and P2P Lending
• E-Commerce Developments and Comparison
• EBPP/EIPP Systems
• Accounts Aggregation Systems
• Technical Security of e-Banking
• Conclusion

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Internet banking development

• Phase I - The Internet as a form of promotion
• Phase II - the introduction of passive
  interaction with the customer
• Phase III - full range of active transactions
• Phase IV - a bank as an open Internet platform of
  banking and non-banking services

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1st phase of Internet Banking development
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1st Phase - the Internet means promotion

• information about shareholders, executive, the
  capital structure and deposit protection
• general information about services provided
• standard forms (doc or pdf)
• map of ATMs
• the list of branches
• e-mail
• support card payment, call center

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Conditions for success of Phase 1

• Well-designed, convenient website
• Intuitive page organization
• Domain name easy to remember
• Human factor
• Breadcrumb navigation- keeping track of visitor
  location

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2nd phase of Internet Banking development
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2nd Phase Introduction of Interactivity

• still no individual Internet accounts
• reduction in paper documentation as interactive
  applications were enabled
• added value - client support by service
  personalization
• no connection with back office systems
• no security problems
• Internet as a service sales channel

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Conditions for efficiency

• comprehensive and factual information
• competitions and promotions
• quick and easy forms

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Content- the most common mistakes

• presenting incomplete information
• putting separate products in a single menu
• hiding a part of an offer
• main page too long
• page overloaded with ads and graphic elements
• user cannot search for an e-form

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CONTACT FORM performance

• form must be intuitive
• form must be compatible with all browser and
  operating systems
• focus on needed data
• golden mean between needs for sale, validation
  and support effort

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3rd phase of Internet Banking development
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Development of personalized services

• Electronic bill presentment and payment allows
  customers to perform transactions remotely
• Funds transfer between a customer's own checking
  and savings accounts, or to another customer's
  account
• Investment purchase or sale
• Loan applications and transactions, such as
  repayments

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Development barriers

• Security
• Trust
• Accessibility
• Knowledge
• Paper mediums
• Quality

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Reaching widest possible group of clients

• intensive marketing campaign
• sampling
• Very good functionality of remote communication
  to compensate lack of branch offices.
• access and manage all of your bank accounts,
  including IRAs, CDs, even securities, from one
  secure site.

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Exposure of the customer to the bank

• Every day low price
• Attractive intrests on deposits
• Small transaction fees
• The aim is to get costumer accustomed to the
  bank.

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One to one marketing

• contact only via internet/phone
• development of data storage
• individualization of range and form of service

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Long term targets

• Value of the client measured in 5-10 years time
• Making profit on complex products
• Low operation costs allows bank to take a risk
  but avoid some fees
• short term outcome is not so important

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Operating risk

• internal fraud
• external fraud
• personel
• assets damage
• connection and software interference
• Transactions delay

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Forms of online payment

• Credit Card
• Pay by mail
• Virtual Card
• Pay by link
• Pay by net

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4th phase of Internet Banking development
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Fourth Phase of Bank 2.0

• eCRM individual analysis of relation with
  customer
• Rising bank services personalized to customer
  interactivity, flexibility, multimedia finance
  services in Web 2.0
• Advanced cross selling and up selling of services
  and financial products
• Virtualization of services advantages of scale

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Development of Online Services in Stage IV
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Transformation from Stage III to IV
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Transformation from Stage III to IV
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Example of a Forum
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Multimedia and Interactivity

• Multimedia interface (avatar) - communicating
  with bank through virtual consultants
• Customization of online bank accounts
• Fast access to full transaction information
• Cash management system automatic moving of
  money between accounts by defined customized
  criteria
• Examples chatterbot, searchbot, shoppingbot,
  updatabot, infobot.

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Chatterbot

• Virtual person A.I. offering different
  functions
• An application of a group of algorithms of
  conversing with the customer
• Uses its own database it can search for
  information online
• Conversing with many customers at one time

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Chatterbot Functions

• converses with many customers up to 1800 people
  per day
• Knows actual exchange rates and stock prices
• Remembers the individual customers
• Understands orders expressed in words as well as
  mathematical signs

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Chatterbot Example
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Social Lending Platforms and Peer to Peer (P2P)
Payment Systems
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Examples of Social Lending
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Example of P2P service
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Strategies of Risk Management in P2P

• Credit scoring (ex. Equifax for Zopa)
• Permit to blog money on account
• Unsuccessful payment fee
• Diversifying your credit
• Sharing the risk
• Verification by social groups
• Setting the maximum credit amount

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Risk Management Strategy in P2P
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P2P Classification

• P2P lending ex. Prosper, Zopa, Lending Club,
  Smava, Frobble
• P2P charity Kiva, MicroPlace, MyC4, FINCA
• P2P start up SellaBand promoting music bands,
  MyFootbalClub, StartUps and evalutating of
  business plans

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P2P Advantages

• Safety safe process of payments in online
  shopping
• Comfort payments between e-mail accounts
• Speed receiving and making of payments in real
  time
• Cost lower than in banking sector
• Globalization making payments in different
  currencies

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E-Commerce Developments and Comparison
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E-Commerce Developments

• Intermediary Online Systems
• PayPal
• Began in 1998 in 2002, PayPal is excepted by
  eBay
• MoneyBookers
• Began in 2001, now with 2.5 million accounts in
  35 countries

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Functions of PayPal

• Filling a personal account for free
• Transferring money for free
• Withdrawing money in Poland for free under 500 zl
  and above 5 zl
• Exchange rate 2.5 higher than official (gains
  money from exchange currencies)

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Functions of Moneybookers

• Transfer costs is for free
• Cheques for .50Euro
• Exchange rates .95 1.3
• Sending money 1, max .50Euro

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Example of PayPal
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Comparison of Payment Methods
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EBPP/EIPP Systems
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EBPP/EIPP Systems

• Electronic Bill Presentment and Payment
• The biller-direct model
• The consolidation model
• Electronic Invoice Presentment and Payment

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The Biller-Direct model

• No third-party
• Thin client model - is a client computer or
  client software in client-server architecture
  networks which depends primarily on the central
  server
• Thick client model computer in client-server
  architecture networks which typically provides
  rich functionality independently of the central
  server.

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Advantages of the Biller-Direct model

• Improves the quality of services
• Lowers costs
• Better control of vindication
• Decreased call center burden
• Intensification of direct relations with customer
  through cross-selling and up-selling

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Disadvantages of Biller-Direct model

• Customer have to visit many websites to
  familiarize with accounts and make payments
• Accounts are presented in different ways
  payments are made with distinct methods
• Necessity of remembering numerous passwords
• Drawers bear high costs of planning, creating and
  managing their systems

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Consolidated EBPP model

• Cooperation between account drawer and
  institution which combines accounts
• Presenting all accounts in one, transparent
  method
• Reducing drawers costs
• Faster and more comfortable

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Example of EBPP
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Account Aggregating Systems
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Aggregation

• Allows to integrate many different services and
  financial products
• Current account
• Mortgage
• Credit card account
• Broker agencies
• Insurance

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Multiports Polish Aggregator

• Allowed to merge data from 9 institutions
  mBank, Multibank, PKO BP, BZWBK, Citibank, Lukas
  Bank, Nordea, BGZ, Pekao
• Data from mBank and Multibank were collected by
  Java applet using screen scraping.
• Allowed to add e-mail accounts

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Screen scraping

• First and most popular aggregation method
• Customer provides access to his account to
  aggregating company
• Data is stored in secured databases
• Aggregator connects with certain domains and
  gets, transforms and presents data in neat way

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Direct feed

• Agreements between sides participating in
  aggregation considering data exchange and
  security issues
• Most popular standard OFX (Open Finance
  Exchange) based on XML.
• Not so popular as screen scraping

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Advantages of Accounts Aggregation

• Comfortable for customer
• Transparent data
• Non-financial services
• Additional facilities (alerts, avatars)
• High security (Firewalls, coding)

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Non-bank aggregators
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Custodial services
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Service passages
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Virtual mobile operator
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Technical Security
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Password Authentication

• Two different security methods
• PIN/TAN System
• Signature based online banking

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Attacks on e-Banking

• Phishing
• Attempting to gain sensitive information from
  users by impersonating as a true entity online
• Pharming
• A hacker redirecting the traffic of a website to
  another, fake website

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Countermeasures

• Data Identity certificates
• Uses a digital signature and public key
  encryptions to ensure that public information is
  not released without a matching private
  indivudual key

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Conclusion

• E-Banking has evolved over four phases
• Fourth phase is most innovative and practical for
  todays financial sector
• Developments such as P2P and aggregation systems
  provide online banking with an improved source of
  business
• There are several security measures that still
  need to be taken against hackers

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Thank you for your attention!