Instead of its branch office-zonal office-head office model, Indian banking system, with every passing day is becoming truly global and universal, not only in its operational reach but also in the operational efficiency. And in this surge, Information Technology has played and will play a strategic role of great importance. With more global exposure, it will become such a component which will determine the operational and managerial decision makings in banking and financial institutions. Today’s banking world thrives on e-commerce and brings many services to the doorstep of the customer that was unheard of before. It not only helps the individual in their everyday transactions but also supports the organizations in administration and business management.
During the last five decades, banking as an industry has passed through different phases. In each of them new changes, amendments, additions and alterations to the banking industry and its modus operandi has been done. In lieu with the financial reforms, deregulation and business globalization of different developing and developed economies, important changes were made to the banking system.
Entry of new foreign banks in different countries incorporated huge change, though forced, in the banking system of that country. Rapidly increasing competition, ever evolving and growing customer service quality made the banks thinking more about implementing information technology which would have enabled them to offer a better quality of service to the new generation and tech savvy customers. The newly arrived foreign banks with their updated technology and infrastructure also made the traditional banks lives tougher. The older banks had to incorporate information technology just to stay in the business and keep their old customers loyal so that they do not get diverted to these new banks.
Information Technology has conventionally used for two different broadly divided works in banking till now. One is Communication and Connectivity and other is Business Process Re-engineering. The works that can be done smoothly and without hitch with help of a good information technology system are: development of sophisticated products, secure market infrastructure, quality and risk controlling of different transactions and reaching out geographically dispersed customer base with fewer amounts of time, money and manpower. With respect to these jobs information technological prowess have changed three main aspects of the banking industry. These are: Availability of ready liquidity, transformation of assets and risk- monitoring. IT and the communication networking systems also impact the efficiency of different markets namely: money market, capital market and foreign exchange market.
Uses of different Software Packages for Banking Applications started in the middle of the 80’s decade. It is during that time, the management of different banks felt the need of bringing in computers for daily transactions and other fund related works in the branches of the banks. They started acting towards this during that time as well. During the early 90’s the banks started incorporating Total Branch Automation (TBA) Packages, which was initiated with availability of cheaper personal computers and readily usable hardware. During the middle and late 90s due to the evolution of communication systems and advent of concepts like ‘convergence’ of computer and communication technologies, like Internet, mobile / cell phones etc. the IT started playing a much more greater role in Global Banking System.
In 2003, Shri Vepa Kamesam, Chairman, IDRBT and Former Deputy Governor, Reserve Bank of India, said at the Centenary Celebrations of City Union Bank Ltd., “It is well recognized that technology holds the key to the future success of Indian Banks since it is Information technology which has brought in a sea change in the way banking is being conducted today – which is but an indication of the morrow. It would be beyond anybody’s imagination to even think about conducting banking business anywhere in the country or using a powerful yet simple medium such as the Internet even from roadside kiosks. But today this is the reality – which owes its credit to the rampant exploit of IT by banks. And concepts such as ‘Anywhere Banking’ or ‘Automated Teller Machines’ are but offshoots of technology implementation by banks, as also Internet Banking and Mobile Banking. Such innovations have had a positive impact on customer service – but the fundamental benefit that is derived by banks relates to reduced costs of operation – such as in handling cash and in servicing customers efficiently and accurately over the counters of branches.”
These day’s mobile phones have become a very important medium of communication tool for almost every person. The high penetration of mobile phones in developed economies has given different banks an impetus to set up an infrastructure where the customers can complete their banking activities from mobile phones. The recently invented mCommerce has elevated the Value Added Services of mobile phones and connections to a different plane altogether. These have added a lot of value to the telecommunication industry. Mobile banking is an integral part of this mCommerce. The mobile banking rapidly gained popularity amongst the mobile users. Since its inception, it has become preferred medium of banking for many customers. It helps in creating financial transactional channel which is new, convenient and fast. Especially it can be accessed from anytime, anywhere which adds a lot of benefits to the customers.
The activities which can be carried through mobile banking are: checking of account information, checking of available balance in the account, checking credit/debit card information, cheque status, setting alerts , payment reminders, locating ATMs and bank branches, accessing mini statement, accessing loan and equity statements, insurance policy management, placing orders for cheque books etc. With multiple access channels such as SMS, downloadable client, mobile Internet (WAP) mobile banking is encouraging mobile users more to explore the service. (Laudon and Laudon, 1991)
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With these comes the potential threat of security in mobile banking. The banks which want to implement a safe and secure mobile banking service should look at the following important aspects of an integrated Payments Systems:
These banks will aspire to have a network which is reliable and robust and has insignificant downtime. They have to depend also on the intrinsic reliability of the data received and transmitted. The security issues attached to this type of banking are persistent and not even strongest possible encryption which is used to send payment information can do away with all the security loopholes. Banks doing mobile banking business will be threatened by attacks generally of non network and non technological nature.
The aim of this research is to explore the various Information system security measures used by banks in today’s world and identifying the challenges and loopholes in these security measures. The research will enumerate the kind the security measures used by bank in preventing unauthorized access to sensitive information. Some of the topics covered by this research would be the evolution of mobile banking, functions and benefits of mobile information systems in banking, Information system structure, features and types of mobile information systems prevalent, Electronic Data Interchange. Adding to the research would be a discussion on how an information system should be ideally, the kind of features that it should incorporated for being effective.
In order to achieve these goals, the research methods followed would be 1. Exploratory research (this method helps the author to identify new problems which are related to security measures and also helps in framing the structure for the same) and 2. Constructive research (helps in developing solution to the problems attached with information system).
Further, Primary Research will be carried out which will investigate the customer perception towards the usage of Information Technology including mobile banking in Banking and its security measures. Primary data would be collected with the help of a duly made questionnaire and then those data would be analyzed with the help of statistical tools to come to a conclusion about the customer perception.
Explaining in further details, the purpose and objective of the research will be discussed first. Next, a literature review is presented to talk about how mobile banking originated, the importance, characteristics and benefits of mobile banking and the risks related to phone banking and the possible security solutions. Research objectives and questions are highlighted to specify the research objectives that the researcher seeks to attain. Apart from the primary research, research methodology followed is quantitative, and secondary data is assessed in the form of journals and books available online. The limitations that constrain the research will be mentioned, and the resources which are required to conduct the research will be enlisted. To ensure ethics in conducting this research, ethical issues will be built-in to the research.
2. Research rational and purpose
The banking sector has embraced new technology and adopted net banking, mobile banking and phone banking to enable its users to have easy reach to their money. Mobile banking has revolutionized the world and the various services offered by it have created time and place convenience for it. But this convenience comes at a cost. As these new technologies have evolved they have also raised concerns over security. If the information is viewed by the wrong sources it can have devastating impact for the user.
The purpose of this research is to document the evolution of mobile banking. The paper aims to evaluate the possible ways through which harm can be caused to the information system and the extent to which it can cause damage. There also exist a number of safety measures than have been put in place to ensure safe and secure mobile banking. This research will address all these issues.
The research will also look at and analyse customer perception of different Information Technology measures generally used in day to day banking. It will try to measure if the customers are satisfied with the kind of ease they are getting out of this technological infrastructure and what is their idea about the kind of security measures those are taken for these services.
3. Research Objectives & Questions
The primary aim of the research is to understand the role and security measures of mobile information system in banking sector and general customer perception about the same. The questions identified in order to help achieve the research objective are:
- How did mobile banking evolve?
- What is the importance of mobile information system in banking industry?
- What are the features and types of mobile information system, the functions and benefits of these systems in banking?
- What are the different types of risk associated with mobile banking?
- What are the security measures which are adopted by banking sector while using mobile information systems?
- What is the customer satisfaction level with the mobile information system and its security measures in banking industry?
Hypotheses are important elements in helping the researcher to examine them and link them to the objective. After conducting Primary Research, Statistical tools will be used to check if the following possible hypotheses for this research are true or false:
- For a bank to be truly modern and customer friendly it needs to adopt mobile banking.
The validation of the above hypothesis would help in knowing the expectations of a customer from his bank. This would sanctify the fact that today’s customer wants its bank to provide all kinds of benefits and services that are available with its competitors. Because of this reason old as well as new bank, all are trying to meet this requirement of the customer. None of the banks want to give their customer the impression that they are rustic and have not changed according to the need of the time. Thus it becomes important to understand as to if the facility of phone banking matters to the customer or not. This hypothesis will help in establishing the fact so that banks can know how much to invest in this function.
If not, then banks can invest their resources and energy in other functions and processes.
- The number of customers using mobile banking is significantly lower than what it ideally should be.
This hypothesis helps in knowing the percentage of customers are actively involved in using mobile banking. The kinds and numbers of transactions conducted by them through mobile banking can also be gauged to ascertain how important a role mobile banking plays in their lives.
In case this is not validated the banks will have to look at how to encourage usage of this feature by creating awareness amongst people.
- Majority of customers using mobile banking are also aware of the security risks associated with it.
The validation of this hypothesis would help in understanding the extent to which the customer is aware of the risks that he will possibly encounter while using mobile banking. If he is aware of the threats then he will use mobile banking judiciously and with precautions.
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Many banks around the world are employing mobile banking for generating additional revenues, reducing costs and for increasing customer satisfaction (Rajnish et al., 2006). Mobile banking as enables users to interact with their banks via mobile devices such as mobile phone, personal digital assistant (PDA), etc.
It has to be noted that this communication between the bank and its customers does not only involve basic transactions like checking balance through an SMS, it also envelopes more evolved transactions like payment of bill, transfer of money between accounts or stock exchange,. However, for a bank to be able to produce return on investment a great many numbers of customers should be using these services in (Lee and Chung, 2009). Therefore, some scholars hold the view that while internet banking services create enormous economic benefits for the banks, mobile services serve only as a way to offer customers value add.
Both emerging and developed markets use mobile phones. As consumers are becoming more and more comfortable with using mobile phones for their more personal business and Smartphone ownership increases, financial institutions and mobile operators are now introducing a broad portfolio of mobile services. Some of the benefits of mobile banking are enumerated below. (Diarmuid Mallon)
There are four primary objectives:
 Enables banks to deliver services via mobile phones so customers have access to their accounts, in other words their money anytime, anywhere. This removes time and geographical limitations
 Mobile banking is more economical when compared to relatively expensive channels such as call centers, branch personnel and ATMs
 It improves security as another layer of security is added (customers use the phone or a message as an alternative to One-Time-PIN generator/tokens)
 Enhances marketing opportunities by introducing a more immediate and personalized dialogue over mobile phones. The customer can be informed of latest schemes and offers.
Mobile banking is what separates a bank from its competitors in a crowded marketplace and enables it to create a niche for itself. As more customers use mobile phones not only for the basic purpose of communicating, but also to work and relax, mobile banking and managing personal finances is another valuable service that financial institutions can offer the savvy, mobility-craving consumer. Lately customer has been giving serious consideration to those financial institution that offer them the greater ease of accessing their bank account information by mobile phone—and now the customer has built up an expectation as per which mobile banking services should be an option in any service offering.
According to the June 2009 Yankee Group report “Mobile Banking Creates a Bright Spot within the Struggling Financial Industry”, the potential audience in the United States for mBanking is 260 million consumers. The higher income individuals have been the early adopters. Based on Yankee’s numbers, 62.5 percent of mobile banking users have incomes of more than $50,000. These affluent consumers, typically armed with a popular Smartphone, comprise an attractive market for banks.
As per Mallon introducing these new mobile banking services is not a herculean task as these are neither resource-intensive nor outrageously expensive. In fact, many financial institutions have been earning a return on investment (ROI) for their mobile banking programs.
Definition of Mobile Banking
The term Mobile Financial Services is generally used to refer to the services that are offered by utilizing mobile telecommunication technologies. Mobile financial services are inclusive of the services that are delivered through the medium of mobile handsets.
Mobile banking enables users to make inquiries about their balance or, in a more evolved circumstance, their payments (Datta 2001).
Since mobile banking is relatively new there is no one widely accepted definition of mobile banking. Different scholars have held different views on it due to the different backgrounds they come from.
Mari and Minna, (2004)
“Mobile banking is among the newest electronic delivery channels to be offered by banks”
Tuuli et al., (2005)
“Mobile banking is a sub-area of internet banking and mobile banking services that are used with a mobile device equipped with WAP (Wireless Application Protocol) or HTML (Hypertext Markup Language) browsers”
Rajnish et al. (2006)
“Mobile banking refers to provision and availability of bank-related financial services with the help of mobile telecommunication devices. The services provided by mobile banking can include facilities to conduct bank and stock market transactions, to administer accounts and to access customized information.”
Kalakota and Robinson (2001)
“M-banking allowing customers to check bank balance and transfer funds from anywhere and on any device”
Therefore, we can define mobile banking as the technology that offers anytime and anyplace convenience to bank customers for accessing the services of their bank through devices like cell phone, personal digital assistant (PDA), etc.
Benefits offered to customer:
As mentioned before by enabling time savings, location-free access, real-time information, and strong feelings of control, mobile banking creates value for its customers. Next, we will summarize the advantages that mobile banking offers its customers.
- Requesting their account balance
- Requesting the latest transactions of their accounts
- Transferring funds between accounts
- Making buy and sell orders on the stock exchange
- Receiving portfolio and price information
- Branch or ATM location information
- Bills payment
- Transaction verification
- Mortgage alerts
However, while internet banking innovation has been accepted readily in many nations and recent statistics have indicated high user satisfaction it seems that a number of consumers are not yet willing to adopt mobile banking services and turn into frequent users.
This could exist due to several reasons. Sheth (1989) has suggested two core reasons for this resistance– functional and psychological. He further categorizes three constituents’ usage barrier, risk barrier, and value barrier as the functional barriers, and two constructs, namely tradition barrier and image barrier among the psychological barriers.
One of the primary reasons why a customer might give mobile banking a skip is because of security concerns. As expected any person would be highly concerned about his money and anything which makes him feel insecure about his money would be avoided completely. Therefore, he is willing to let go of the convenience offered to him by mobile banking for the sake of security. Thus it becomes imperative for banks to ensure that the safety measures adopted by it instill the confidence in customers for using the mobile banking services unfazed.
Banks should enforce strict security for their mobile services or else they will encounter a plethora of problems similar to those faced by Internet banking services when it was in its nascent stage.
Banks should develop an understanding of the vulnerabilities that exist in mobile banking at every level of its infrastructure. To ensure the integrity and success of the mobile banking sector a strategy of “defense in depth” is essential.
Attacks may occur at many interfaces such as the mobile device, back-end banking and payments system or in the mobile network. The term Defend in depth implies preserving the ecosystem at the mobile device, at the bank’s gateway, in the network and at the back-end server – for example, by using techniques that can detect fraud and varying the security requirements as per the hazard of each transaction.”
Banks should cooperate with the device manufacturers and the network operators to confront the malware problem
Banks today are in dire need for strengthened security measures as attacks on mobile banking already exist and these attacks are getting more and more aggressive with time
Although companies can learn a lot from the lessons of Internet banking, there also needs to be an understanding on how mobile banking is different from the Web and how that affects security requirements.
The biggest concern for facing mobile banking today is poor authentication on the mobile device and the susceptibility of the device to theft.
A number of tactics could be invaluable for making the strategies of defending the mobile banking ecosystem successful.
Security methods should include the following measures
- Authentication of user
- Ensuring the mobile device is free from malware
- Encryption of all transmissions end-to-end
- Watchful monitoring of banking sessions
- Usage of out-of-band techniques to toughen authentication
- Blocking doubtful connections and application of fraud detection techniques to all transactions
In spite of these, a certain amount of vulnerability will still be inevitable.
But the point is to note no matter how hard we try for ensuring that no malware exists, it is impossible that all malware will be eradicated. Therefore we should plan to live with malware. However, the industry must try its level best to maintain the uprightness of the mobile ecosystem and learn from the mistakes of the early users of Internet to steer clear of repeating their mistakes.
As the mobile banking arena grows more diverse, more potent and intricate and more integrated with the IP world, there will be more ways discovered by hackers for attacking it and perpetrating fraud. The challenge is to understand how large can the problem be.
No matter what the security solutions are, efforts will be needed to coordinate across mobile and Web segments, because mobile banking services will be connected in a larger ecosystem.
There is a strong need for mobile and Internet banking security communities to work together. Although the ways of causing harm are related to specific channels, the business level threats are the same.
While it is important to ensure sound security, defense measures should operate seamlessly and invisibly, so that the mobile experience is not detracted. The designers for these security measures also have to ensure that mobile services still remain easy to use so that there is no compromise on their attractiveness and viability for the customer. Security must not make the customer turn away because of the challenge of usability. Security has to be embedded deeply both in the business logic of the use cases and in the technology for being effective.