Core Banking Solution (CBS) is the foundation of computerization in banking which is a software system that banks use to manage their primary operations. It’s a centralized system that allows customers to access their accounts and banking services from any branch of the bank, regardless of where they opened their account.
Digital transformation has fundamentally transformed the banking sector, reshaping how financial institutions operate, interact with customers, and manage risks. The disruption of financial technology and blockchain technologies is a massive shift in the banking service, from traditional banking to neo-banks. Let’s see here how Information technology impacted banks over the period.
The world is rapidly changing to be more digitally focused, especially in the banking industry. Traditional banks are undergoing major digital transformations to meet the needs of new customers and existing customers seeking a more tailored and individualized banking experience through digital channels. Technology implementation aided banks in making their own web pages which customers can access through the web browsers from their homes/workplaces. Some of the important electronic delivery channels include ATMs, debit/credit cards, mobile banking, and tele-banking where banking facilities are available on a 24/7 basis across the world. The establishment of the INFINET in 1999 resulted in the introduction of the Real Time Gross Settlement (RTGS) system and National Electronic Funds Transfer (NEFT). The Internet has thus ushered in the concept of anytime-anywhere banking. It resulted in compliance with the core principles for systemically important payment systems of the Bank of International Settlements (BIS) and has also provided the way for risk-free, credit push-based fund transfers settled on a real-time basis. With the advent of online and mobile banking, customers now have access to a wide range of banking services from the convenience of their smartphones or computers. This digital transformation has not only improved the efficiency and speed of banking operations but has also enhanced the overall customer experience.
Computerization has significantly transformed the banking industry by automating various processes and enhancing operational efficiency. The scope and experiences of computerization in banking are extensive and have led to numerous benefits. Here’s a detailed overview of the scope and experiences of computerization in banking. With CBS, customers can:
Check their balance
Make deposits and withdrawals
Get cash
Get account statements and alerts
Transfer funds
Bills payments
Get demand drafts or banker’s checks
CBS can also help banks manage other account activities, such as loans and payments
Real-time updates ensure accurate and timely information for customers and bank personnel.
Customers can access their accounts, perform transactions, and manage finances through online and mobile platforms.
Other features of Computerisation in banking are;
- Point of Sale (POS) device
The debit card/credit card/smart card payments are accepted by railways, airlines, malls, hotels, major shops and business establishments. For accepting payments through cards the merchant establishments need a Point of Sale (POS) terminal. The sale transactions made through POS terminal is called Point of Sale (POS) business. Click here to Read full article..
- BHIM
BHIM (Bharat Interface for Money) is an Indian mobile payment App developed by the National Payments Corporation of India (NPCI), based on the Unified Payments Interface (UPI). BHIM is built over the Immediate Payment Service (IMPS) infrastructure and allows the user to instantly transfer money between the bank accounts of any two parties and encourage cashless transactions. Click here to Read full article
- Cheque Truncation System (CTS)
The Cheque Truncation System (CTS) is an online Image-based Clearing System (ICS). In this system of clearing, the collecting bank need not present the physical cheque to the drawee branch. The presenting bank captures the cheque images and Magnetic Ink Character Recognition (MICR) data from end-to-end precise scanners by using the Capture System. The electronic images of the cheques are then sent to the drawee branch through clearing house with the relevant information like the MICR fields, date of presentation, presenting bank, etc. The security, integrity, non-repudiation and authenticity of the data and image transmitted between the presenting bank and the paying bank are safeguarded by the Public. Click here to Read full article
- ECS
Electronic Clearing Service (ECS) in bank transactions is a simple, faster, and the cost-effective solution for repetitive bulk transactions. The system was first introduced by the Reserve Bank of India in April 1995 to facilitate speedier bulk inter-bank transactions. It is most useful to facilitate repetitive payment transactions such as salary, pension, interest, commission, dividend, etc.
- National Automated Clearing House (NACH):
National Automated Clearing House (NACH) is a form of Electronic Clearing Service (ECS) which is available with core-banking-enabled bank branches in India. NACH has primarily two variants viz. ECS Credit and ECS Debit. The facility is used by the bank customers for automatic debit to their account every month to pay certain bills like telephone bills, electricity bills, loan installments, insurance premiums, etc.
- Credit card
The credit cards are issued in the form of a revolving line of credit. That is the cardholder will be allowed to operate the card to the extent of the full credit limit sanctioned to him/her on clearing the previous bill outstanding.
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- Debit Card
The debit cards are akin to credit cards; the only difference is that the debit card holders do not enjoy credit facility against their card. The card transaction will be authorized for payment only after the debit transaction takes place in the cardholder’s bank account.
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- Electronic cards
The electronic card issued by the banks can be used only for domestic transactions and usage is restricted to facilitate online/ non-cash transactions. However, Cash transactions may be allowed to overdraft facility provided along with Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts. As per the RBI guidance, the validity period of the card shall not exceed the validity of the facility and shall also be subject to the usual rights of the banks as lenders.
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- Kisan Credit card (KCC)
Kisan Credit card (KCC) is a type of credit card specially designed for farmers as a form of credit for their cultivation and other needs. Banks may choose to issue EMV (Europay, MasterCard, and VISA) chips and RUPAY-compliant chip cards with magnetic stripes and pins with ISO IIN. The farmers can use their KCC to purchase agriculture inputs such as seeds, fertilizers, pesticides, etc
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- Smart cards:
Smart cards are available in two types i.e. contact smart cards and contactless smart cards. As the name itself explains a contact card requires contact with a card reader, and a contactless smart card utilizes radio frequencies or Near Field Communication (NFC) to send information through the airwaves wirelessly.
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- Tokenised card
Tokenisation is a process by which actual card details masks sensitive card details of your debit / credit / prepaid card with an alternate code. This process by which the primary details of a card are replaced with a surrogate value is called a token. Click here to Read the full article.
- Pre-paid cards/Virtual cards
Prepaid cards are also known as virtual cards. They are issued by the banks and non-bank entities against the value paid in advance by the cardholder. As per RBI’s circular dated May 19, 2021, it shall be mandatory for PPI issuers to give the holders of full-KYC PPIs (KYC-compliant PPIs) interoperability through authorised card networks (for PPIs in the form of cards) and UPI (for PPIs in the form of electronic wallets) which shall be enabled by March 31, 2022. Click here to Read full article
- RuPay Contactless card
National Payments Corporation of India (NPCI) said that it has introduced the RuPay Contactless (Offline) feature. The card comes with a reloadable wallet feature where customers can store money to ensure quick and hassle-free transactions compared to regular credit/debit card transactions. Rupay Contactless is a contactless payment technology that allows cardholders to wave their card in front of contactless payment terminals without the need to physically swipe or insert the card into a point-of-sale device. Click here to Read the full article:
- Rupay Card
International payment cards like VISA & Master cards have been charging heavily on card payment network services provided by them. With the introduction of RuPay cards, it has been able to provide transaction facilities to the extent of 40% cheaper than international networks. Thus, RuPay’s lower transaction cost helps Indian Banks to rapidly expand their card business to untouched markets of small towns and rural areas.
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- National Common Mobility Card:
National Common Mobility Card (NCMC) was launched in March 2019, with the tagline ‘One Nation One Card’. It is a single combo card offering a combination of a Debit / Credit with a prepaid card. A customer holding an NCMC card needs not to carry multiple cards with him for different purposes. The Debit / Credit component of NCMC would be used in the online environment whereas the prepaid component would be used in the offline environment, wherever offline payments are permitted. Customers may use these cards for payments across all segments including metro, bus, suburban railways, toll, parking, smart city, and retail. The service area feature of this card supports operator-specific applications like monthly passes season tickets etc. Click here to Read the full article:
- National Financial Switch or NFS:
With the operational functions and services with in-house capabilities, the NFS network is now at par with most of the global ATM networks. Apart from basic transactions like Cash Withdrawal, Balance Enquiry, PIN Change, and Mini Statement, NFS also offers the following Value Added Services (VAS) to the customers of the banks on ATMs/CDMs. Click here to Read full article:
- e-money
E-money is electronically stored in a domestic currency backed by the regulator. The Payment and Settlement Systems Act in India hold the issuers of e-money responsible for the liability of the amount issued by them. Click here to Read full article..
- e-wallet
The individuals who have registered for e-wallets have to link their multiple credit card and bank account numbers in the registered e-wallet. Click here to Read full article
- e-commerce
Buying and selling of goods including digital products* and services through electronic channels such as the internet are called e-commerce. We can identify e-commerce business into two different methods viz. (a) Inventory-based model of e-commerce and (b) Marketplace model of e-commerce. Click here to Read the full article
- Payment Gateways and Payment aggregators
Payments in the online space are facilitated by many intermediaries like payment gateways and payment aggregators. These intermediaries act as the conduit between merchant & customer who is willing to pay for the services availed or the goods purchased online. Click here to Read full article
- IMPS:
Mobile phone banking is a new revolution in banking system around the world. The mobile banking has several advantages; such as you can do internet banking, online shopping, and bills payment, or transfer of the amount to another account in a secure manner. With the advent of mobile phone banking, mobile phones are gradually replacing your wallets, Credit Cards, Debit cards, etc. at any place using your mobile phone buttons. Click here to Read the full article:
- NEFT and RTGS
RTGS& NEFT transactions are the fastest electronic funds transfer systems available in India. Under the above systems, funds can be transferred from a bank by its customer to their own account or third parties having their account with another bank across the country. The RTGS and NEFT transactions are distinguished by the processing time taken by them. In RTGS, the processing of instructions takes place instantly at the time they are received rather than at some later time. NEFT operates in batches on an hourly basis. Click here to Read full article
- Unified Payments Interface (UPI)
If there is one Indian innovation that has grabbed global headlines in recent years, it is undoubtedly the UPI (Unified Payments Interface) payment system. Today, more than 40% of all payments done in India are digital, with UPI having a lion’s share, used by over 30 crore individuals and over 5 crore merchants. (Source: PIB report). Unified Payments Interface (UPI) is a mobile-based, 365x24x7 ‘fast payment’ system. Through UPI, users can send and receive money instantly using a Virtual Payment Address (VPA) set by the users themselves. The unique feature of VPA-based transactions is the secure aspect of UPI architecture as it removes the need for sharing account or bank details with the remitter. Click here to Read the full article:
- *99# USSD
The state-of-the-art payment service *99# works on the Unstructured Supplementary Service Data (USSD) channel. This service allows mobile banking transactions using the basic feature of mobile phones, there is no need to have a mobile internet data facility for using USSD-based mobile banking. The above service is intended to take the banking services to every common man across the country. It is planned to provide financial deepening and inclusion of underbanked society in the mainstream banking services. Click here to read the full article
- National Electronic Toll Collection -FASTag:
The National Payments Corporation of India (NPCI) has developed the National Electronic Toll Collection (NETC) program to meet the electronic tolling requirements of the Indian market. It provides an electronic payment facility for customers to make the payments at national, state, and city toll plazas by identifying the vehicle uniquely through a FASTag. Click here to Read the full article:
- MTSS
Money Transfer Service Scheme (MTSS) is the most common channel to transfer personal remittances from abroad to beneficiaries in India up to a limit of USD 2500 on individual remittances for family maintenance. The remittances favouring foreign tourists visiting India are permissible under MTSS. A single individual beneficiary can receive a maximum of thirty remittances under the scheme during a calendar year. Click here to Read full article
- Rupee Drawing Arrangement (RDA)
Rupee Drawing Arrangement (RDA) is a way of transferring personal remittances from abroad (overseas jurisdiction) to beneficiaries in India. Under Rupee Drawing Arrangement, the Authorised Category I banks enter into tie-ups with the non-resident Exchange Houses in the FATF-compliant countries to open and maintain their Vostro Account. The non-resident Exchange Houses are the companies and financial institutions that are licensed and regulated by the competent authority in the sending country for sourcing the funds from the remitters. Click here to Read the full article.
- ATMs (Automated Teller Machines): ATMs enable customers to withdraw cash, deposit funds, and perform basic transactions outside banking hours. Click here to read the full article.
Experiences of Computerization in Banking:
Computerization has streamlined routine banking operations, reducing manual work and errors.
Faster processing of transactions, leading to improved customer service.
Customers can access banking services 24/7 through online, mobile, and ATM channels.
Reduced waiting times and improved access to services.
Reduced need for paper-based processes, manual record-keeping, and physical infrastructure.
Due to lower operational costs, computerization increased cost-effectiveness.
Online banking, mobile apps, and self-service options offer convenience and personalized experiences.
Computerisation provides quick and efficient resolution of customer queries and issues.
Computerized systems aid in identifying and managing risks associated with transactions and customer accounts.
With the inbuilt security system, fraud detection and prevention are easier compare to manual system of accounting.
Advanced reporting capabilities provide insights into financial performance, customer behavior, and market trends.
Computerized systems help banks adhere to timely regulatory requirements and reporting standards.
Computerization has paved the way for innovative banking products and services.
Banks can introduce new offerings to meet changing customer needs.
Computerization facilitates international transactions, cross-border payments, and foreign exchange operations.
