- Digital banking refers to the digital technologies that now banks are providing instead of traditional banking. The objective of digital banking is to provide a standard as well as comfortable online and mobile banking services by integrating their digital technologies. Now, for services like balance update, fund transfer, to deposit or withdraw cash, passbook update, you need not visit your branch.
- For each query, there is a machine-like CDM (Cash deposit machine), Passbook machine, ATM etc. Digital banking is not only for customers but also for bankers, they are using CSM (cash sorting machine) for cash-counting, Digital lamps for cheque verification, enhanced software’s for calculations and data storage, they use different software’s to update their all inventories of bank-like cheque books, account-opening kit, debit-credit cards, locker details etc.
- Internet Banking, Mobile Banking, Wallet Banking, Customer Service, Digital Cash, ATM, SMS Services and IVR calling are some of the examples of digital banking that we use in day to day life.
Some of the key advantages of Digital Banking are as follows–
1. Less time consuming: It provides the ability for users to access financial data through desktops, mobile devices and ATM machines and hence it is saving time. Now a customer can give a request for account opening as well from the web.
For e.g. -ICICI bank is using tabs for account opening. It is taking less time for a big process as well.
2. Permanent access to the account: Now customers need not to visit the branch from 10 am-5 pm. They can access their account anytime and from anywhere with digital banking.
3. Safe and Cashless: Now banks provide digital statements, virtual cards and people prefer to swipe their card or online transactions because it is safe. People avoid carrying huge amount and prefer cards like debit, credit or travel cards. Although digital banking is safe, "a coin has two sides". So, accounts can be hacked and banks are enhancing their digital security system.
A. Internet Banking
When you do your banking activities through the internet with the help of a laptop or personal computer without visiting a bank branch. You can avail any type of banking services like – Fund transfer, Bill payment, Check account balance, etc.
B. Mobile Banking
It is just similar to internet banking. Without the help of a laptop and computer, a customer can perform all banking activities through a mobile phone. With the help of a mobile app of a particular bank and internet, you can either transfer fund or pay your bills, etc.
C. Core Banking System (CBS)
It is a centralized system developed by a bank which allows its customers to conduct banking activities from anywhere and any branch of the bank. A customer can avail banking services from any branch of the bank which is on CBS network irrespective of a branch you have opened your account.
For e.g.- If you have an account in SBI Bank of Noida Sector 19 branch and you are currently staying in Lucknow. If you wish to transfer money to someone then you can visit any SBI Bank branch of the city (Lucknow) and can easily transfer the money.
D. National Electronic Fund Transfer (NEFT)
It is a payment system which facilitates one-to-one funds transfer. Under this facility, any customer can electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country.
Transaction Limit: There is no minimum & maximum limit of amount.
E. Real-Time Gross Settlement (RTGS)
Under this facility, the transfer of funds is done individually on an order by order basis (without any delay). The RTGS system is primarily meant for large value transactions.
‘Real-time’ means – The processing of instructions at the time they are received rather than at some later time; 'Gross Settlement' means the settlement of funds transfer instructions occurs individually (on an instruction by instruction basis.
F. Indian Financial System Code (IFSC)
It is an 11-digit alpha-numeric code which identifies a bank-branch participating in the NEFT & RTGS system. IFSC is used by the NEFT system to identify the originating / destination banks/branches and also to route the messages appropriately to the concerned banks/branches.
Note: IFSC code represent –
- First 4 alpha characters indicate – bank name
- Fifth characters is - 0
- Last 6 characters indicate – bank branch.
For e.g.- SBIN0000125 – Here – SBIN indicates – State Bank of India. 0125 represent the Lucknow Main Br. name.
National Payments Corporation of India (NPCI) is an umbrella organization for all retail payments system in India. It aims to allow Indian citizens to have unrestricted access to ‘e-payment’ services. It was set up with the guidance and support of the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA). Its headquarter located in Mumbai, Maharashtra.
The organization is owned by a consortium of major banks and has been promoted by the country’s central bank, the Reserve Bank of India (RBI). Its recent work of developing Unified Payments Interface (UPI) aims to move India to a cashless society with only digital transactions.
H. Unified Payments Interface (UPI)
It is an instant payment system to transfer money between two parties bank accounts. It is similar to NEFT or RTGS transfers in that way. It is developed by the National Payments Corporation of India (NPCI).
The different channels for transferring funds using UPI are:
- Transfer through Virtual ID
- Account Number + IFSC
- Mobile Number + MMID
- Aadhaar Number
- Collect / Pull money basis Virtual ID
The topic will be continued in the next article Study Notes on Digital Payments for UGC NET Part-2.