How internets provide necessary information for E-commerce?
Today business can easily deliver information to employee, customer, partner and the public at large, regardless of locations. Many servers point to the web as the catalyst for this change.
From a physical stand point, the internet is networks of 1000 of inter connected networks included among the inter connected networks are:
- The inter connected backbones are that have international reach.
- A multitude of access or delivery sub networks.
- 1000 of private and institutional networks connecting various organizational and containing much of the information of the interest
The backbones are run by Network Service Provider (NSPs), including companies like MCI, Sprint, PSI Net etc. Each backbone can handle over 300 terabytes per month. The delivery sub networks are provided by the local and regional Internet Service Provider (ISP’s)
The ISP Exchange data with the NSP’s at the network access point. The following figure shows a high level view of the inter connections among the ISP, NSP’s and the backbone
INTERNET NETWORK ARCHITECTURE:
When a user a request from his computer, the request will travels an ISP networks, more over one or more of the back bones, and across the another ISP to the computers containing the information’s of interest. The response to the request will follow similar short of path.
Internet protocol: A protocol is a set of rules that determines how two computers communicate with one another over a network.
TCP/IP: A protocol that solves the global inter-networking problem is the transmission control protocol by internet protocol (TCP/IP). This means any computer or system connected to the internet runs TCP/IP. This is the only thing, these computers and systems, share in common.
Internet client/server application: End users interact with the internet through one of several clients by server applications. As the name suggests in a client or server application there are two major classes of software.
a) Client software: Usually residing on end users desktop and providing navigation and display.
b) Server software: usually residing on a work station or server-class (mission) and providing back end data access services.
UNIT-3
HOME BANKING
Toady banking business are more affluent and technologically sophisticated then ever before. With the adoption of electronic systems and the connectivity between customers and the banks computer by means of telecommunications and modems it has become possible for a customer to interact with the bank round the clock, without coming to the bank personally or physically. Such facilities provided by the bank are known as tele-banking or remote banking facility. Home banking is becoming popular in India both in personal and corporate banking sector.
a) Corporate Banking: Corporate treasurers require a great deal of information about their various bank a/c’s about the current balances in each account, history of recent transaction etc. This problem becomes compounded when three or four banks or even more with whom they have to deal. They have to keep the track of balances in each of the accounts, with each of the banks and thus manage their money. This demand of corporate treasurers has to be met by the banks themselves. The banks thus needed an electronic cash management system, which they could sell to their corporate clients.
Banks link is one such system developed by Chemical Banking Corporation, which links networks of various branches to corporate treasurers to provide various offers like balance reporting, previous and current day balances etc. for which banks should have license to operate it and corporate treasurers should have sub-license with the bank to link up with the system.
Indian Scenario: In India, a couple of banks have introduced corporate banking, which enables the customers to get updated information on their accounts. 1998 Rangarajan committee suggested to expand the communication network which will able to provide this facility to large customers and enables banks to keep pace with the demands of modern business.
b) Personal Banking: By using the tele-banking facility, customers can dial up the branch designated telephone number, which is connected to the computer and he or she by dialing his/her identification number, will be able to get the connectivity to the branches designated computer. Through which a customer can access to his balances and can also place order for statement of account, cheque books and a few selected services through tele-banking.
c) Telephone Banking: The first step in home banking was to offer clients a simple service i.e. telephone banking, to this service they can enquire about various financial transactions but no other services such as payment of cash etc was provided. These services are provided in three types.
- Manual approach: In this type answers for queries are provided by human operator who answers the telephone calls, thus the operator have to be specially trained so as to make the telephone conversation pleasant one to the customers. They also should be able to put in especially if the bank wishes to offer the services even beyond working hours.
- Computerized Voice Response in Telephone Banking: Instead of human operators, a machine answers the customer queries. For this purpose, sophisticated voice response systems are being developed. Introduction of such systems obiates the need for having skilled operators for answering various questions.
- Touch Tone Telephone Banking: In this system the customers, has to keep data using the dialing buttons which can be recognized by the computer, and answers are provided electronically for simple questions such as balance enquiry etc and the answers are in manual for typical problem such as reasons for dishonoring a cheque.
d) Online banking: ATM’s which are interactive with the host computers of the branches on every transaction are known as online computers. Those which are not provided with the above service it is known as off line mode.
e) Batch updates:
1) Online updates: When the transaction is entered by the user the computer acknowledges it and updates the related files which are affected by the particular transaction, before the next transaction is produced then it is called online updates.
2) Batch updates: The transactions done by a user at the end of the day, by the back office staff then it is known as batch updates.
ELECTRONIC FUNDS TRANSFER
Introduction
Processing and execution of payment instructions is one of the statutory obligations of the banks. The use of computers and communications has now changed the whole mechanism of funds transfer and settlement process into fast and automated EFT systems.
Evolution of EFT systems
Till about three decades ago, the entire payment system in banking the world over was paper based requiring human interventions at all stages of the payment mechanism. However, the explosive advancements in the computers and communication facilities and their application to banking have brought about a sea change in the funds transfer system.
During this period, banking has shown remarkable growth in the volume of payment instructions passing through its traditional funds transfer system. As payment volumes increased, the procedures and the accompanying paperwork and physical burden became overwhelming. An additional problem complicating the flow of funds was that books of account were closed at a fixed hour each afternoon, and banks could not be sure of some receipts until nearly closing t9ime. Thus the banks made their credit decisions as late as possible before dispatching a check to the final payment clearing house. This delay crowded an inordinate number of payments into the final clearing and slowed the entire payment process.
All these were crucial factors for the banks to look for alternative methods of processing payment instructions requiring speedier cheque sorting and processing techniques. The use of Magnetic Ink Character Recognition Technology (MICR) for processing of cheques was the first step towards mechanization if the cheque clearing system which later paved the way for introduction of EFT systems, pioneered first in USA . MICR technology was introduced in USA as per recommendations of the committee on mechanization of check handling constituted by the American Bankers Association in the year 1954.
MICR technology involves magnetically encoding the requisite information like the unique code of the paying branch, instrument number, instrument type, and amount etc. on a specially designed strip on the face of the instrument. The encoded information is machine readable and is captured on the computers using Reader-Sorters which also sort the cheques bank-wise/branch-wise etc.
In 1968 the special committee on Paperless Entries (SCOPE), set up in USA examined the concept of an automated clearing house. It was in 1972 that the first Automated Clearing House (ACH) started in San Francisco , USA
Another significant development during this period was the emergence of SWIFT, the society for worldwide inter-bank financial telecommunications, setup in the year 1973. The banks started making use of the networked systems and Automated Teller Machines (ATM’s) started as becoming quite popular form of consumer EFTS during 1976 onwards. The final development in the EFT system has been the private card systems like the Visa Card which employs EFT as an alternative payment system.
Role of SWIFT in EFT:
The aim of EFT is to see that cash payments are reduced to some means with respect to banks. Quick communication facilities are needed to transfer the information to its destination earlier. If this has been delayed interbank reconciliation would be difficult. Telex or fax machine were used to transmit information which was very costly affair.
SWIFT: Global system for funds transfer.
It handles transmission on an international basis through several tele-communication switches, which is not a costly affair, when compared to telex or fax.
India is the 74thcountry to become a user member of SWIFT in December 1991, RBI and 49 other commercial banks initially become members of SWIFT. Right now there are 4600 members from 133 countries in SWIFT. On an average about 2.2 million messages are handled by SWIFT per day.
Organization:
SWIFT is organized as a co-operative society for the collective benefits of its members. Its headquarters is in in Belgium, share ownership is allocated in proportion to traffic volume sent on the system and is periodically reviewed to reflect actual system usage country or group of countries accounting for over 1.5% of total system traffic is entitled to nominate a board member.
Relevance:
The international financial services industry is witnessing increasing competition, growing volumes and challenging customer demands for faster and more economic services. SWIFT has proven over the years that in building a common service design for and with its member banks, the cost, for them can be brought down to extremely low levels while maintaining highest degree of security. SWIFT’s objective is to provide users with opportunities to reduce risks and costs through standardization of methods and procedure services:
ü Customer transfer
ü Funds transfer from one bank to another
ü Preparation of credit or debit advices
ü Preparation of statement of accounts
ü Confirmation in respect of foreign exchange and money market.
ü Inter banks securities trading.
ü Reporting of balances.
ü Payment systems.
SWIFT provides services and more importantly, procedures that are understandable to banking staff throughout the world by the use of standard message formats that communicate information in a manner which is recognized and accepted.
These message formats are developed by group of specialists from member banks. SWIFT standards can achieve client satisfaction through
ü Faster customer service
ü Reduced transaction errors and misunderstandings
ü Lower transmission costs
ü Greater efficiency in transaction preparing and handling.
ü Better statistics.
The combined advantages of reduced cost, higher speed and rigid control are of special interest to all banks.
Benefits:
· SWIFT services are available to all its member banks, 24 hrs a day.
· Reduced operating costs, through greater staff productivity.
· It helps to provide better service to customers.
· The system has built in security measures for authentication of messages.
· This can be used as a cost-effective means of communication for globalizing operations of banks.
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