Alternate Delivery Channels & E-products

Hitherto, Branches were only the strategic outfits (Delivery Channels) and invariably the customers are required to visit the branches at the specified timings to complete their transactions. Extending service to the customers round the clock without presence of physical branch is called as “Alternate Delivery Channels”. Adoption of new delivery channels (ATM, Mobile and Internet Banking) has become order of the day for banks to survive in the competitive environment to meet the emergent expectations of the customers besides achieving the optimum utilization of scarce resources. At present, banks are issuing ATM/Debit cards to the customers on opening of the account itself. The convenience coupled with cost effectiveness has enabled the cardholders to use the card extensively for all their retail payments.

ATM/Debit Card will be issued to Account holder based on his request. ATM Card is used for withdrawal of cash from Automated Teller Machines. Debit Card is a payment card used to with draw cash from ATM, purchase of goods and payment for services automatically debiting to the card holder’s bank account instantly, to the extent the credit balance exists. In ATM / Debit card the customer can draw cash from ATM up to the balance available in his account subject to daily caps prescribed by Bank from time to time. While providing ATM / Debit card, a customer is provided a PIN number to facilitate withdrawal of amount. Debits to the account using ATM / Debit Card through PIN Number are treated as mandate for withdrawal of the cash by the customer from the account.

ATM is an electronic device, which acts as an independent banker without any human intervention. ATM provides round the clock service throughout the year (24X7X365) to the customers. ATMs extend services such as Cash Withdrawal, Balance Enquiry, Cash/Cheque Deposit, Funds Transfer, Bill Payments, Payment of Direct Taxes, Mobile Recharge, Mobile Banking Registration etc. Cardholder needs to enter password for each financial transaction on ATM.

In order to facilitate the cardholders RBI has issued guidelines to all banks not to levy service charges on ATM transactions of Savings Bank Cardholders. However, Other Bank Cardholders are allowed to withdraw cash on our ATMs up to Rs.10000/- per transaction and the maximum number of transactions allowed are 5 per month at free of charge. The number of free transactions shall be inclusive of all types of transactions, financial or non-financial. With this, the customer of a Bank has become customer of all Banks, which has paved the way for Any Bank Banking.

White Label ATMs are purely managed by third party service providers and have their label. These are branded non bank ATM machines. Cash handling, management and logistics are provided by third party. Debit cards of all banks can be operated through these machines. The role of the concerned bank is only limited to provide account information and back end money transfers to the third parties managing these ATM machines. This initiative will enable the excluded segments to avail ATM services as at present majority ATMs are confined to Urban/Metro areas only. However, service provider levy charges which are to be either bear by the Bank or the customer. RBI has allowed white label ATM’s in India to have more penetration of ATM machines. Tata Communications Payment Solutions has become the first company to launch this service in India under the brand name “Indicash”. It has a tie up with majority commercial banks and now you will soon see branded non bank third party white label ATM machines in your vicinity.

Brown Label ATM – We always think that the bank branded ATM machines operated by the bank concerned, but this is not the case. Banks only handle part of the process that is cash handling and back-end server connectivity. The ATM machine is owned by the third party service provider along with the physical infrastructure. This type ATM is called as “Brown Label ATM” and acts as intermediate between Bank owned ATM and White Label ATM.

Complaint Resolution: The revised guidelines has led to increased volume on ATM Network leading to deficiency in service on account of technology issues and the resolution is taking undue long time, which is causing concern to the customers and regulators. In the above backdrop, RBI issued the following directives to all banks:

  • ATM failed transactions are to be resolved within a maximum period of 7 working days from the date of receipt of the customer complaint.
  • In case of delay in resolution of the complaint within 7 working days, the bank shall pay compensation of Rs.100/- per day, to the aggrieved customer and shall be credited to the customer’s account automatically on the same day when the bank affords the credit for the failed ATM transaction.
  • However, the cardholder (customer) is entitled to receive such compensation for delay, only if a claim is lodged with the issuing bank within 30 days of the date of the transaction.

As per recent guidelines, Banks are advised to issue debit cards with photographs with a view to reducing the instances of misuse of lost / stolen cards. Further, banks are asked to ensure full security of the cards and any loss incurred by the cardholder on account of breach of security or the failure of the security mechanism would be borne by the banks. Through ATMs, Bank can penetrate into new areas without opening physical bank branches and provide value added service to its customers. It is most cost effective since the investment and operational cost are low when compared to traditional Branch Banking.

Internet Banking is leveraging the potential of Internet to facilitate customer access to his account from any place at any time. Apart from viewing the transactions in his account for any period, the customer is able to effect transfer of funds and request for various services. Internet is one of the cost effective channel for delivery of banking services.

Internet Banking is provided to Individual/Joint/Sole proprietary concerns, Corporate etc. at their request. The terms and conditions governing Internet banking are displayed on the Bank’s website. Any change in the terms and conditions of “Internet Banking” will be displayed on the website only and not by any means of communication directly to the user of internet banking. The opening and maintenance of the account is subject to rules and regulations introduced or amended from time to time by Reserve Bank of India. Bank can, at its sole discretion, withdraw any of the services / facilities given for the account either wholly or partially at any time without giving any notice. The services available through Internet banking are:

  • View account balances and download statements
  • Transfer of funds within Bank and across the Banks
  • Request for Cheque Book / Fixed Deposit
  • Payment of Utility bills viz., Electricity, Telephone, Income Tax etc.
  • Booking of Train/Bus/Airline tickets
  • Recharge of Moble / Online shopping
  • Online Equity Trading – Primary and Secondary market

Internet Banking system interfaces between the customer computer and the Bank’s Core Banking system (CBS). Customer access is controlled through “Customer ID” and “Password”. However, the customer is not allowed to access the CBS directly to ensure safety. It is protected with “firewalls” to prevent unauthorized access, hacking and virus infection. Advanced encryption technology is used to ensure that messages from/to the customers are not intercepted and misused by others. With regard to financial transactions, banks are providing another layer of security i.e. Online Transaction Password (OTP) to the customers on their mobile or through email. Though it is convenient and cost effective delivery channel for customers and banks, there is an imperative need on the part of the banks to educate the customers with the importance of “Password” to protect them from hacking/fishing.

Mobile Banking: The mobile-phone revolution that is transforming the world could also turn into a banking revolution. Banks have been exploring the feasibility of using mobile phones as an alternative channel of delivery of banking services. The swift growth in number of Mobile users and wider coverage of mobile phone networks has made this channel an important platform for extending banking services to customers. Today, the number of Mobiles in India crossed 1000 million of which 1/3rd mobiles are in Rural India alone. At present, Mobile Banking is providing the Bill payment and Funds Transfer facility besides information services to the customers. The recent guidelines issued by RBI on Mobile Banking are as under:

  • RBI approval is required to extend mobile banking services.
  • All the transactions/services should be in Indian currency only. Cross-border transfers through mobile banking are strictly prohibited and the operating banks have to be based, licensed and supervised in India.
  • Registered customers can only avail this facility from banks. For financial services one time registration should be done through a signed document.
  • Hitherto, RBI stipulated a transaction limit Rs.50000/- per customer per day(which includes purchase of goods and services). However, RBI has removed the cap and now banks may place per transaction limits based on their own risk perception with the approval of its Board.
  • Banks are allowed to provide cash-out through ATMs or BCs subject to cap of Rs.10000/- per transaction and maximum of Rs.25000/- per month per customer.
  • Banks may put in place end-to-end encryption of the mobile PIN number(mPIN) for better security.
  • Banks should file Suspected Transaction Report (STR) to Financial Intelligence Unit-India (FID-IND) for mobile banking transactions, similar to normal banking transactions.

The regulatory environment has helped mobile banking take off in India. In 2010, the National Payment Corporation of India (NCPI) launched the intermediate payment service i.e. Inter Bank Mobile Payment Service (IMPS), a 24/7 real-time electronic Interbank fund transfer on a Person-to-Person (P2P) or Person-to- Merchant (P2M) basis, which has boosted mobile banking. Mobile banking is very advantageous compared to other delivery channels as it is easy to use and affordable to customers besides providing real time information to customers. Mobile Banking gives the banks an opportunity to expand their customer base without incurring additional infrastructure costs. It would also help in financial inclusion as it would provide a large number of un-banked people access to banking services. Banks could save a huge amount of money on card issuance and merchant acquiring with zero point of sale cost. Mobile Banking is the hottest area of development in the banking sector and is expected to replace the credit/debit card system in future. The increased phase of mobile usage is going to place our country on the top in the Asia Pacific region in the ensuing years.