ACCOUNT KIT AND INTERNET BANKING

ACCOUNT KIT
Account kit means those kits or things that a bank usually gives to his new
customers after opening an account in their bank.
A really important function of the Account Kit is to set proper expectations
moving forward. When customers know what is what and how things work at
your bank upfront, they aren’t left to their own ideas which inevitably causes
problems in the relationship.

v What does the Welcome Kit comprise?

Savings Account Welcome Kit contents are as listed below:
a. Welcome letter
b. Debit Card (wherever applicable)
c. Cheque Book (wherever applicable)
d. Pass book
e. Code of Bank's commitment to Customers
f. Most Important Terms and Conditions of Debit Cards

• What Is a Debit Card?

ü A debit card is a payment card that deducts money directly from a
consumer’s checking account to pay for a purchase. Debit cards eliminate
the need to carry cash or physical checks to make purchases. In addition,
debit cards, also called check cards, offer the convenience of credit cards
and many of the same consumer protections when issued by major
payment processors like Visa or Mastercard.
ü Debit cards usually have daily purchase limits, meaning it may not be
possible to make an especially large purchase with a debit card.

v Key Takeaways
ü Debit cards eliminate the need to carry cash or physical checks to make
purchases, but these cards can also be used at ATMs to withdraw cash.
ü Debit cards usually have daily purchase limits, meaning it may not be
possible to make an especially large purchase with a debit card.
ü Debit card purchases can usually be made with or without a personal
identification number (PIN).
ü Debit card purchases are easy to monitor, and there's no way to lose track
of spending, unlike using a credit card, as the money comes directly out
of a checking account.
ü Some debit cards also offer reward programs, similar to credit card
reward programs, such as 1% back on all purchases



An example of the front of a typical debit card:

1. Issuing bank logo
2. EMV chip (optional and may depend on the issuing institution or bank)
3. Hologram (in some cards it's located at the back especially in most
MasterCard)
4. Card number (PAN) (may vary in length but mostly 16-digits with unique
last 4 digits. However in cases such as Discover, Diner's Club, UnionPay
& American Express it has a unique 15-digit card number)
5. Card brand logo
6. Expiration date
7. Cardholder's name

An example of the reverse side of a typical debit card:

1. Magnetic stripe
2. Signature strip panel
3. Card Security Code

v Types of Debit Cards

Each different type of debit card has its own benefits and drawbacks. Knowing
your financial goals and challenges will help you choose the type of debit card
that’s right for you.

v Check Card
A check card is a general term for a type of debit card that functions like writing
a check. This card withdraws money directly from your account to pay for a
purchase. Typically, a check card is backed by Visa or Mastercard and can be
used at most merchants.
 v Visa Debit Card
A Visa debit card is backed by Visa, a credit card processing network. When
you use a Visa debit card, the transaction can be processed in one of two ways.
One option is to use your PIN number to verify the purchase. In this case, the
request for payment is sent directly from a merchant to your bank.

v Mastercard Debit Card

Mastercard debit cards function the same as Visa debit cards with no practical
differences between the two. Visa and Mastercard are actually just payment
processing networks, which means they handle the transaction between the bank
and the merchant. Both Mastercard and Visa are widely accepted, both in the
U.S. and internationally.

v Maestro Debit Card

Maestro is a debit card service owned by Mastercard, more commonly seen in
Europe. Like a typical debit card, Maestro cards require a PIN to verify the
transaction.
If you’re a frequent international traveler, you can use your Maestro card at any
Mastercard-owned ATM. The Maestro debit card allows you to immediately
withdraw funds in the local currency.

v Prepaid Debit Card

A prepaid debit card offers some budgeting advantages over other cards.
In order to use a prepaid debit card, you first have to purchase one and load
funds onto the card before you can make purchases. You can load your prepaid
debit card via cash, check, or online transfer. This type of debit card isn’t linked
directly to your bank account.

v ATM Card
An ATM card is not associated with a credit card network like Visa or
Mastercard. You can use your PIN number to authenticate a transaction with
your ATM card, but the signature option isn’t available. The transaction will be
sent directly from the merchant to your bank rather than through the credit card
network.

v EMV Card
An EMV card is a debit card with an extra layer of security. EMV cards have an
embedded computer chip, which is much harder to copy than magnetic stripes.
The encrypted data in the computer chip must match the user’s PIN number.
These precautions make the EMV card less susceptible to fraud.

RISKS:-
 ü If the card provider offers an insecure website for letting you check the
card's balance, this could give an attacker access to the card information.
ü If you lose the card, and have not somehow registered it, you likely lose
the money.
ü If a provider has technical issues, the money might not be accessible
when you need it. Some companies' payment systems do not appear to
accept prepaid debit cards.
ü And there is a risk that prolific use of prepaid debit cards could lead data
provider companies to miscategorize you in unfortunate ways.

Definition of Cheque – What is a Cheque ?

As per negotiable instrument act 1881, A “cheque” is a bill of exchange drawn

on a specified banker and not expressed to be payable otherwise than on
demand.

There are three parties in Cheque Transaction – Drawer, Drawee and Payee.
1. Drawer (Maker of Cheque) – The person who issue the cheque or hold
the account with bank.
2. Drawee – The Person who is directed to make the payment against
cheque. In case of cheque, it is bank.
3. Payee – A person whose name is mentioned in the cheque or to whom the
drawee makes payment. If drawer has drawn the cheque in favour of self
then drawer is payee.
Payment by Cheque is safest way to conduct business transactions as it helps to
maintain record in account statement to whom the payment is made by whom
payment is received. So it becomes easier to track the transactions through bank
account statement.

Different Types of Cheque
There may be different types of Cheques depending on how the drawer has
issued the Cheque.
1. Open / Bearer Cheque
2. Order Cheque
3. Crossed Cheque
4. Anti Dated Cheque
5. Post Dated Cheque
6. Stale Cheque
7. Mutilated Cheque
 1. Open / Bearer Cheque
This type of Cheques are risky in nature for drawer. When the word “Bearer” on
the cheque is not crossed or cancelled, the cheque is called a bearer cheque.
Open / Bearer Cheques are payable to person specified in the instrument or any
person who posses it and present for payment over the counter. In case of
cheque is lost, person who find it can collect payment from the bank.

2. Order Cheque
When the word “Bearer” written on cheque is crossed or cancelled it becomes
an order cheque. An order Cheque is payable to a specified person named in the
cheque or any other to whom it is endorsed.

3. Crossed Cheque or Account Payee Cheque

The person who issue or write the cheque specify its as account payee by simply
making two parallel lines on top left or middle or right hand corner of the
cheque. This type of cheque can not be encashed over the counter. Considered
as safest type of cheque, it can only be credited to payee’s account whose name
is mentioned in the Cheque.

4. Anti Dated Cheque

Cheque bearing the date earlier than the date of presentation for payment is
known as anti dated cheque.

5. Post Dated Cheque

Cheque bearing the date which is yet to come in future is called Post Dated
Cheque. Cheque is honored only on or after the date (upto three months) written
on cheque.

6. Stale Cheque
A Cheque turns stale after three months of the date written on cheque. A Stale
Cheque can not be honored by the bank.

7. Mutilated Cheque
When cheque gets torn into two or more pieces and presented in bank for
payment. Such cheques are called mutilated cheque. Bank requires confirmation
by the drawer before honoring such cheques.
The Advantages of Cheques to a Business
Many businesses issue cheques from their accounts payable department in order
to meet financial obligations. These financial obligations include vendor
payments, interest payments to lenders or government tax liabilities. The
accounts payable department receives an invoice or a check request, which it
uses to back up the payment being made. Cheques offer several advantages to
businesses.

v Paper Trail
One advantage of using cheques involves the paper trail left by the check. Each
check creates a paper document that details who received the payment, what
day the payment was made and the dollar amount of the payment. The company
can review when the cheque cleared the bank along with information regarding
who signed the check. The paper trail created by the cheque allows the company
to maintain its record keeping. Some companies use duplicate cheques, keeping
a copy of the cheque for its own records. Employees at these companies can
refer back to earlier cheques when questions arise.

v Security
Paper cheques offer the advantage of added security for mailed payments. Only
the named recipient can present a paper cheque for payment. If the recipient
denies receiving the cheque, the company can contact the bank to verify who
presented the cheque. Any discrepancies can be resolved with the bank directly.
Also some small business owners might consider paying vendors or lenders
with cash. Cash provides no written proof that payment was made and leaves
the business owner open to be charged again for the amount.

v Control
Paper cheques provide the business with the ability to control the payments
made. Several control measures exist in the accounts payable department to
ensure that cheques are written to the proper recipient for the correct amount.
One employee might authorize a cheque to be written after reviewing the
backup documentation. Another employee actually prints the cheques. A senior
manager signs the checks. This provides three employees to participate in the
cheque payment process, minimizing the potential for errors or fraud.
Businesses also use pre-numbered cheques. Pre-numbered cheques allow the
company to identify missing cheques immediately and take action to prevent
those cheques from being cashed.
v Float
A final advantage to using cheques involves the float. Float refers to the time
which passes once the company prints the cheque until the money leaves the
company’s bank account. In many cases, the float only exists for a day.
However, the company earns interest for that extra day before the cheque is
presented for payment.

INTERNET BANKING
v Internet banking means any user with a personal computer and a browser
can get connected to his bank’s website to perform any of the virtual
banking function:
ü Balance enquire
ü Transfer of funds
ü Online payment of bills
ü Accrued interest, fees and taxes
ü Transaction details of each account
ü Accounts, credit card and home loans balances
ü Transfer of funds to third party
ü Open a deposit right from the terminal you are sitting at.

HISTORY IN INDIA
Ø ICICI was the first bank to initiate the internet banking revolution in India
as early as 1997 under the brand name INFINITY
Ø ICICI bank kicked off online banking way back in 1996. But even as a
whole, 1996-1998 marked the adoption phase, while usage increased only
in 1999 due to lower ISP online charges, increased PC penetration and a
Tech friendly atmosphere

HOW TO ACCESS INTERNET BANKING

ü Before you can access your account online, you’ll need to register with
your bank for internet banking
ü Your bank will give you login ID. You’ll also need a password (PIN).
Your internet password is different from the PIN you use with your debit
card
ü Once your bank has approved your registration, you’re able to access
your account online

STEP 1:-
ü Make sure your computer is connected to the internet

STEP 2:-
ü Go to your banks website
For security reasons, don’t click a link to your bank sent to you in an
email- emails to fake websites are a classic play of criminals trying to
steal your money
STEP 3:-
ü Once you’re on your banks website you’ll see a button or other icon
labelled “LOG ON TO INTERNET BANKING” or something similar
ü Click on this icon and it’ll take you on login page
STEP 4:-
ü Login to your internet account
It generally requires you to enter
registration number or login ID
You will also have to enter password.
STEP 5:-
ü Some banks have a two stage authentication process
-an additional security measure to protect customers accounts and
personal data
ü If a two stage process, you’ll then have to enter another code
The code maybe generated by a security token the bank gives you when
you register for internet banking, or it could be contained in an SMS
message the bank sends to your registered mobile phone number

STEP 6:-
ü If you’ve entered correct information at all these stages, you’ll gain
access to your accounts and be able to begin your internet banking.
Once you’ve finished your internet banking, make sure to logout from your
account
Most banks also have in place a ‘time-out’ feature, which means if you’re
inactive for a certain period in your internet banking session, you’ll
automatically be logged out.

MERITS:
• Convenience: Unlike your corner banks, online banking sites are never
closed; they are available 24x7, they’re only a mouse click away.
• Ubiquity: If you’re out of state or out of country when a money problem
arises, you can log on instantly to your online bank and take care of
business, 24x7
• Transaction speed: Online bank sites generally execute and confirm
transactions at or quicker than a ATM processing speed
• Efficiency: You can access and manage all of your bank accounts,
including IRAs, CDs, even securities from one secured site
DEMERITS:
• Start-up may take time: In order to register for your bank’s online
program, you will probably have to provide ID and sign a form a bank
branch. If you and your spouse wish to view and manage your assets
together online, one of you may have to sign a durable power of attorney
before the bank will display all of your holdings together
• Bank site changes: Banking sites can be difficult to navigate at first.
Plan to invest same time and/ or read the tutorials in order to become
comfortable in your virtual lobby
• The trust thing: For many people, the biggest hurdle to online banking is
learning to trust it.

SERVICES PROVIDED UNDER INTERNET BANKING
ü Online bill payment
ü Personal home page
ü Ticket booking
ü Prepaid mobile recharge
ü Market watch
ü Investment services
ü Online applications
ü Personal updates


SECURITY RISK OF INTERNET BANKING
Ø Increasing number of fraudulent bank websites
Ø Use of Trojan horse programs to capture user IDs and passwords
Ø Fake emails purporting to be sent from banks
Ø Hackers who hack into personal bank account and steal money

RBI AND E-BANKING

• The Reserve Bank of India constituted a working group on Internet
Banking.
• The group divided the internet banking in 3 types based on the levels of
access granted
• They are: 1) Information Only System 2) Electronic Information Transfer
System 3) Fully Electronic Transactional System
1. INFORMATION ONLY SYSTEM
Ø General purpose information like interest rates, branch address, bank
products and their features, loan and deposit calculations are provided in
the banks website
Ø There exists facilities for downloading various types of application forms
Ø The communication is normally done through e-mail
Ø There’s no interaction between the customer and bank’s application
system
Ø No identification of customer is done. In this system, there’s no
possibility of any unauthorised person getting into production systems of
the bank through internet

2. ELECTRONIC INFORMATION SYSTEM

Ø The system provides customer-specific information in the form of
account balance, transaction details, and statement of accounts
Ø The information is still largely of the read only format. Identification and
authentication of the customer is through password
Ø The information is fetched from the bank’s application system either in
the batch mode or off-line
Ø The application system can not directly access through the internet

3. FULLY ELECTRONIC TRANSACTIONAL SYSTEM

Ø This system allows bidirectional capabilities
Ø Transactions can be submitted by the customer for online update
Ø This system requires high degree of security and control. In this
environment web server and application systems are linked over secure
infrastructure
Ø It comprises technology covering computerisation, networking and
security, inter banking payment gateway and legal infrastructure

v BENEFITS FOR BANKS

ü Larger customers coverage reducing the cost of operations
ü Promoting their services and products internationally
ü Increasing the customer satisfaction and providing a personalised
relationship with customers

v BENEFITS FOR SMALL TO MEDIUM BUSINESSES

ü To run operations more effectively
ü Lower cost than traditional financial management mechanism
v BENEFITS FOR CUSTOMERS
ü Convenience 24 hours a day, seven days a week
ü Cost reducing transfer fees
ü Speed faster circulation of assets
ü Competitiveness- fostering competition in financial market
ü Communicate easily
ü Abolishing the use of paper work
ü Offering one-stop-shop solutions

v DISADVANTAGES OF INTERNET BANKING

Ø A need for customer skill to deal with computers and the browsers
Ø Many people who are not comfortable with computers and internet ,
often find it difficult to use internet banking
Ø For beginners, Internet banking is really time consuming
Ø In many instances, a simple mistake, like clicking a wrong button, may
create a big problem

v SECURITY RISK
• Increasing number of fraudulent bank websites
• For eg, A suspicious bank website www.sbionline.com
ORIGINAL website www.onlinesbi.com
• Fake emails purporting to be sent from banks
ü Emails sent from fraudulent bank
ü Verify the personal information
ü Guide customers enter the fraud link
ü Disclosing their ATM card numbers and their passwords

v PROSECUTIONS FOR BANK

Ø Should provide specific guidance to their customers
Ø Should take the adequate measures to ward off any problems related to
the security of internet banking
Ø Online banking tutorials should be provided to help familiarise people
with internet banking.

CONCLUSION
Ø Internet banking is changing the banking industry and is having a major
effects on banking relationships
Ø The net banking thus, ‘now is more of a norm rather than a exception in
many developed countries’ due to the fact that it is the economical way of
providing banking services
Ø Banking now is no longer confined to the traditional brick and mortar
branches, where one has to be at the branch in person, to withdraw cash
or deposit a cheque or request a statement of accounts
Ø Providing internet banking is increasingly becoming a “Need to have”
than a “Nice to Have” services.