Fundamentals of IT Law

Legal Issues in Internet Banking

1.2 E-Banking Products and Services

E-banking has provided immense opportunities in offering goods and services to the customers. These products are totally changing the outlook of the banking sector. Now the industry is shifting towards a cashless society, where physical cash, notes, and coins have become a thing of the past, and digital cash and electronic purse have taken their place. There are many non-cash payment methods that are in use. These are as follows:

1.2.1 Automated Teller Machine

ATM is a cash rending teller machine. This is a machine that is frequently seen at banks and other locations, such as shopping centers and building societies. Customers can withdraw any sum up to a limited amount, can view the status of his account and order a new checkbook. There is a number called Personal Identification Number (PIN), which is key for carrying the desired transactions. On the other hand, we can say that it’s a machine which replaces the human aspect of providing cash and standing in a long queue. ATMs can be installed on the bank’s premises (onsite ATMs) for which no license is required from RBI. However, for ATMs to be installed at public places (offsite ATMs), banks have to obtain a license. These offsite ATMs are mainly installed at airports, railway stations, market places, petrol pumps, etc.

1.2.2 Mobile Banking

The traditional brick and mortar are done from fixed branch premises, where the customer has to go personally for carrying out business transactions. Through mobile banking, the customer can conduct a host of banking transactions and inquiries through the mobile. Mobile banking can also be carried through a mobile van with or without the computerized banking system. The mobile van moves from place to place on designated routes at designated hours and the customers can transact their banking business, such as deposit, withdrawal, cheque collection, draft issuance, passbook updates, etc. Mobile banking helps the customer to do his account management, electronically which was earlier possible through internet banking.

1.2.3 Society for Worldwide Inter-banking Financial Telecommunication (SWIFT)

It is a computerized message system that links banks around the world. In 1996, it was updated from a centralized system to a decentralized system. SWIFT is a co-operative organization formed by international banks and financial institutions. The member banks are shareholders of this society. It provides a guarantee to carry messages without any mutilation of the message. The network provides round the clock service to participating banks. It aims to improve the speed and service in order to prevent the individual bank from setting up its own computerized messaging system in opposition.

1.2.4 Electronic Data Interchange (EDI)

EDI is the exchange of documents in the standardized electronic form, between organizations, in automated manners, directly from a computer application in one organization to an application in another. EDI can be compared and contrasted with electronic mail. Email enables free-format textual messages to be electronically transmitted from one person to another. EDI, on the other hand, supports structured business messages (those which are expressed in hard copy, pre-printed forms or business documents) and transmits them electronically between computer applications rather than between people.

1.2.5 Electronic Fund Transfer (EFT)

In the present age of integrated technology consisting of computers and communication facilities, distances need no longer be a constraint in providing customer service. EFT system hosted and operated by the RBI permits the transfer of funds, from any account to any other account at any branch of any member bank in any other city (Jain, 2006). In other words, electronic fund transfer facilitates the quick movement of deposit money from one bank account of one customer to the bank account of another customer. In this system, the sender and the receiver may be located in different cities. As an important tool of customer services, the EFT system addresses the needs of individual customers to transfer money from one place to another within a day or two. Following are the participants of this scheme:

  • Individual customers through their banks/branches.
  • Service branches of the bank.
  • Reserve Bank of India (National Clearing Center and deposit account of RBI)

1.2.6 E-Wallet

E-commerce has been marked as a steady trend towards the growth of electronic mode of payments against paper-based instruments. European Central Bank (ECB) defined, “E-Money as an electronic store of monetary value on a technical device and used to making payments other than the issuer without the involvement of bank accounts in the transaction but acting as a prepaid bearing instrument”.

[1] Imola Driga, Claudia Isac, E-Banking Services – Features, Challenges and Benefits, 2014 at < > (accessed on 2nd June 2017)

[2] FFIEC IT Examination Handbook InfoBase, Definition of E-Banking available at <> (accessed on 2nd June 2017)

[3] Sonia Sharma, A detail comparative study on e- banking VS traditional banking, June 13, 2016 at (accessed on 2nd June 2017)

This article is first in the series which talks about legal issues around internet banking. Stay connected for the next article on the RBI Summary to enhance cybersecurity in internet banking.

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