Technology based distribution channels / networks in financial industry

BIT 1208 Information Technology for Financial ServicesEvening ‘Group C’ Presentation: Slide 1/45
GROUP C COURSE WORK PRESENTATION:
Technology Based distribution channels /
Networks in Financial Industry
Group C Members: Mukalele Rogers - 13/U/21067/EVE
Ssemujju Bernard - 13/U/21338/EVE
Makerere
University

Presentation Introduction and Outline
Introduction
 The Financial Industry is
increasingly using Technology-
Based channels and computer
Networks to distribute financial
services to people.
 In this presentation, we look at
some of these technologies as
listed in the following outline.
Outline
a) Phone Banking/ Call Center
b) Mobile banking
c) Internet banking
d) ATM
e) POS
f) CDM – Cash Deposit
Machines
g) Email / SMS notifications

a)Phone Banking/ Call Center
Definition:
 A service provided by a bank, that enables customers to perform
financial transactions over the phone, without the need
to visit a bank branch or automated teller machine.
Mode of Operation:
 A customer must first register with the institution for the service, and
set up some passwords for customer verification.
 To access telephone banking, the customer would call a special
phone number set up by the financial institution.
 Services which a customer may access through phone banking
include: obtaining account balances, mini statements, electronic bill
payments, customer care and financial information services.

a)Phone Banking/ Call Center cont’d
 The service can be provided using an automated system,
using speech recognition and DTMF technology or by
live customer service representatives.

Phone Banking/ Call Center cont’d
Examples of banks with call centres which offer
phone banking services include:
Bank Call Center Number
Hong Kong Bank 03-76268899
KasiKorn Bank 02-8888888
Bangkok Bank 1333
Oman Arab Bank 24754444
Al Rajhi Bank +966920003344

a)Phone Banking/ Call Center cont’d
Advantages:
 Customers can access and
manage their accounts
conveniently.
 Phone banking times can be
longer than branch opening
times, and some banks offer
the service on a 24 hour basis.
 Phone banking reduces the
cost of handling transactions.
 Phone banking reduces the
need for customers to visit a
bank branch.
Disadvantages:
• Few banking services can be
handled using phone banking.
• Volumes of calls can increase to
the extent that the call centre
personnel can not respond to all
in time.
• DTMF technology usually caters
for a few languages.
• Banks have restrictions on which
accounts may be accessed via
telephone banking.

 With the introduction of smart
phones with WAP support enabling
the use of the mobile web in 1999,
the first European banks started to
offer mobile banking on this platform
to their customers.
b) Mobile banking
 Mobile banking is a
system that allows
customers of a financial
institution to conduct a
number of financial
transactions through a
mobile device such as a
mobile phone or personal
digital assistant.
 The earliest mobile
banking services were
offered over SMS, a
service known as SMS
banking.

b) Mobile banking
Benefits
• Saves time - Simply use a mobile device to check account
balances, schedule and manage payments, top up your
credit card, transfer money between accounts and open
more accounts, etc.
• Convenience - offers everyday banking, anytime,
anywhere.
• Offers facilities to conduct bank and stock market
transactions
• Enables a customer to administer accounts and to access
customised information.

b) Mobile banking : Illustrative Video
mFoundry video about the changing trends and benefits of mobile banking.
Click on graphic to play.

Challenges of mobile banking
1. Handset operability
Due to various types of mobile phone devices, it is a big
challenge for banks to offer mobile banking solution on every
type of device like devices supporting Java ME , SIM
Application Toolkit, a WAP browser, or only SMS.
2.Security
Secure transmission of financial information, is the most
complicated challenge that needs to be addressed jointly by
mobile application developers, and the banks' IT
departments.

Challenges of mobile banking cont’d
3. Reliability
• With mobile banking, the customer may be
sitting in any part of the world) and hence
banks need to ensure that the systems are
up and running in a true 24 x 7 fashion.
• As customers will find mobile banking
more and more useful, their expectations
from the solution will increase.
• Banks unable to meet the performance
and reliability expectations may lose
customer confidence.
4. Scalability
Another challenge is
to scale-up the
mobile banking
infrastructure to
handle exponential
growth of the
customer base.

Challenges of mobile banking cont’d
5. Application distribution
• Some banks have developed apps installed
on mobile devices through which customers
access mobile banking services.
• Customers are expected to regularly visit
banks or connect to a web site for regular
upgrade of their mobile banking application.
• However, there could be many issues to
implement this approach such as upgrade /
synchronization of other dependent
components.

Solutions to the above Challenges
• Overcoming Handset Operability Challenges: Initial inter operability
issues have been localised. In India, for example, portal like R-World
are been used to enable the limitations of low-end Java based
phones. In South Africa, USSD has been utilised as a basis of
communication achievable with any mobile device.
• Overcoming Mobile Banking Security Issues: Authentication of the
device being used should be done to ensure that unauthorised
devices are not connected to perform financial transactions.
• Overcoming Reliability Challenges: Cloud Computing Technologies
should be embedded into the mobile banking systems to ensure 24/7
availability.
• Overcoming App Upgrade Challenges: Banks should develop a
mobile application that checks the upgrades and updates and
downloads necessary patches by itself.

Sample Examples of banks offering mobile banking
Region Banks
Uganda Stanbic Bank UBA Bank
Iran  -Parsian Bank
 -Tejarat Bank
 -Pasargad Bank
 -Mellat Bank
Mexico  -Omni Life Bank  -Bancomer Bank
India  -State Bank of India
 -Echo India Finacial Services
UK  Barclays Bank service called Barclays Pingit

c) Internet banking
 Definition: Internet banking is a term used to describe the
process whereby a client executes banking transactions
using an internet browser.
 This kind of banking eradicates the necessity of physical
movement to financial positions.
 This type of banking uses the internet as the chief medium
of delivery by which banking activities are executed.
The activities clients are able to
carry out are can be classified to as
transactional and non transactional.

c) Internet banking
Non transactional activities
• Account balance viewing
• Viewing of previous bank
transactions
• Bank statement downloading
• Check book ordering
• Viewing of images of paid
cheques
• M banking and E banking
applications downloading
• Provision of account/ bank
statements
Transactional activities
• Electronic funds transfer
• Bill payments and wire
transfers
• Loan application and
repayments
• Buying investment
products
• Internet banking has its
advantages and
disadvantages.

Advantages of Internet Banking
 Effectiveness: – At the touch of a button, actual time account
balances and information are availed. This hastens the banking
processes hence increasing their efficiency and effectiveness.
 Friendlier rates and free services: – Self Care and Lack of
overhead support costs results to banks offering higher interest
rates on savings and charge lower rates on mortgages and
loans, plus free services such as free checking of statements.
 Transfer services: – Internet banking allows automatic
funding of accounts from long established bank accounts via
electronic funds transfers.
 Ease of monitoring: – A client can monitor his/her spending
via a virtual wallet through certain banks and applications and
enable payments.

Advantages of Internet Banking cont’d
 Ease of transaction: – the speed of transaction is faster
relative to use of ATM’s or customary banking.
 Convenience: – Banks that offer internet banking are open for
business transactions anywhere a client might be as long as
there is internet connection. Apart from periods of website
maintenance, services are available 24 hours a day and 365
days round the year.
 Real Time Systems: –Detailed information can be offered via
internet banking in real time. For example one can be able to
see transactions which have taken place in the past hour,
compared to branch banking which might require 24 hours to
update the information.

Disadvantages of Internet banking
 Poor Banking relationship: – Customary banking allows
creation of a personal touch between a bank and its clients,
unlike Internet banking.
 Ignorance about use: – Banks with complicated sites can be
cumbersome to navigate and may require one to read through
tutorials to use the service.
 Not suitable for complex transactions : – face to face
meetings are better in handling complex transactions and
problems, which can not be easily resolved through internet
banking.
 Security matters: – Complex encryption software is used to
protect account information. However, there are no perfect
systems. Accounts are prone to hacking attacks, phishing,
malware and illegal activities.

How to offer secure environment for financial
transactions
1. User ID / Password authentication of bank’s customer.
2. Encryption of the data being transmitted over the internet.
3. Encryption of the data that will be stored in device for later / off-line
analysis by the customer.
4. One-time password (OTPs) can be used to fight against cyber fraud.
OTPs are requested by consumers each time they want to perform
online transactions using the website banking interface. The
password is sent to the consumer’s phone via SMS. The password
expires once it has been used or once its scheduled life-cycle has
expired.
5. Physical security: If the bank is offering smart-card based security,
the physical security of the device is very important.
6. Use of a secure protocol such as HTTPS instead of HTTP.

Internet Banking - Online Security Case Study:
Al Rajhi Bank
Click on graphic to play video.

d) ATM
• An Automated
Teller Machine is
an electronic
telecommunicatio
ns device that
enables
the clients of
a financial
institution to
perform financial
transactions witho
ut the need for a
cashier, human
clerk or bank teller.
It is also known as an automated
banking machine (ABM), cash
machine, cashpoint, cashline or hole
in the wall.

d) ATM cont’d
Common ATM Services
• Cash withdrawals,
• Debit card cash advances,
• Check their account balances as well as get mini statements
• Purchase pre-paid mobile phone credit.
• If the currency being withdrawn from the ATM is different from that
which the bank account is denominated in (e.g.: Withdrawing US
dollars yet the bank account is in Uganda Shillings), the money will be
converted at an official wholesale exchange rate.
• Thus, ATMs often provide one of the best possible official exchange
rates for foreign travellers, and are also widely used for this purpose.

d) ATM
Mode of Operation:
• The customer is usually identified by inserting a plastic ATM
card with a magnetic stripe or a plastic smart card with
a chip that contains a unique card number and some
security information such as an expiration date
or CVVC (CVV).
• Authentication is provided by the customer entering
a personal identification number (PIN).

d) ATM cont’d
Mode of Operation cont’d:
• Today the vast majority of ATMs
worldwide use a Microsoft
Windows operating system,
primarily Windows XP
Professional or Windows XP
Embedded.
• Linux is also finding some
reception in the ATM
marketplace. An example of this
is Banrisul, the largest bank in the
south of Brazil, which has
replaced the MS-DOS operating
systems in its ATMs with Linux.
DeLaRue Bank ATM
running Microsoft Windows that
has crashed due to a peripheral
component failure.

Advantages of ATM
• Reduces congestion and long
queues in the bank branch.
• Provides round the clock
services 24/7 including
public holidays.
• Banks are able to expand
their services to any corner
of the world.
• Reduction in cost of
operation as a result of less
employees.
• Can be easily connected to
inter switch ATM
networks, enabling people
to withdraw cash from
ATMS of other banks.
• No need to carry large
sums of cash during
shopping and travel.
• ATMs reduce the workload
of bank staff.
• ATMS provide privacy to
customers during banking.

Disadvantages of ATM
• Theft Risk: Personal safety is a risk
with ATMs in empty parking lots,
poorly lighted places, or behind bank
buildings.
• ATM Fraud: There are thieves who
clone ATM cards use hidden cameras
to capture PIN code in order to steal
money.
• Limitation of Cash Withdraws: ATMs
do not allow users to withdraw money
exceeding a certain set amount.
• Illiteracy: Many bank customers do
not know how to operate Automated
Teller Machines.
• High Fees: You will also be charged high
fees for using Inter-switch ATMs not
owned by your bank or those in foreign
countries.
• Inefficient Deposits: Cash deposit facility
is risky and normally takes a longer
period of time before the deposited
money is credited on the account.
• Card Retention: ATMS commonly
malfunction and retain customer ATM
cards
• Few Denominations: Most ATMS give
out money using notes in particular
denominations, denying users the choice
of withdrawing other denominations.

ATM Dos and Don'ts
Dos• DO protect/hide your PIN when you’re entering it.
• DO choose a PIN that’s difficult to guess but easy to remember.
• DO change your PIN from time to time.
• DO monitor your account regularly.
• DO report it immediately if your card is lost or stolen.
• DO be aware of your surroundings while at an ATM
• DO sign on your card’s authorized signature panel with a
ballpoint pen the moment you receive it.
• DO protect the card’s magnetic stripe from scratches.
• DO look for fraudulent devices attached to ATM’s Card
Reader. If the machine appears to have any attachments or
alterations, do not use it and report the problem immediately
using the helpline numbers provided.
• DO Remember to take your card back from ATM/Merchant after
completing your transactions.
• DO Try and memorize the PIN instead of noting it down
somewhere.
Don'ts• DON’T tell anyone your PIN.
• DON’T let anyone else use your card.
• Never carry your Card along with PIN in your
Wallet or Purse.
• DON’T give card information over Phone or
Internet. This includes your 16-digits card
number and PIN.
• DON’T use your mobile while using the ATM.
• DON’T allow others to stand inside the ATM
cabin when you do a transaction.
• Do not use poorly lit ATM locations
• DON’T fold your card
• DON’T expose card to magnetic devices.
• DON’T ask for ATM assistance from a
stranger.
• Do Not Use Helmets, Cap Etc While Entering
The ATM Room.

e) POS
• Point of sale (also called POS or checkout)is the point at which a
customer makes a payment to the merchant in exchange for goods or
services.
• At the POS, the retailer would calculate the amount owed by the
customer and provide options for the customer to make payment.
The merchant will also normally issue a receipt for the transaction.
• The POS in various retail industries uses customized hardware and
software as per their requirements.

e) POS cont’d
Mode of Operation.
• Retailers may utilize weighing scales, scanners, electronic and manual
cash registers, EFTPOS terminals, touch screens and any other wide
variety of hardware and software available for use with POS.
For example, a
grocery or candy store
uses a scale at the
point of sale, while
bars and restaurants
use software to
customize the item or
service sold when a
customer has a
special meal or drink
request.

Features of a POS system
• Ease of use. Most POS systems are designed with a user-friendly
graphical interface.
• Entry of sales information. Most systems allow you to enter
inventory codes either manually or automatically via a bar-code
scanner. Once the inventory code is entered, the systems call up the
standard or sales price, compute the price at multiple quantities and
provide a running total. Many systems make it easy to enter sales
manually when needed by letting you search for inventory codes
based on a partial merchandise number, description, manufacturing
code or vendor.
• Pricing. POS systems generally offer a variety of ways to keep track of
pricing, including add-on amounts, percentage of cost, margin
percentage and discounts.

Features of a POS system cont’d
• Updating product information. Once a sale is entered, these systems
automatically update inventory and accounts receivable records.
• Sales tracking options. If you sell expensive goods and allow
instalment purchases, you might appreciate a loan calculator that
tabulates monthly payments. And if you offer rent-to-own items,
you'll want a system that can handle rentals as well as sales.
• Security. In retail, it's important to keep tight control over cash
receipts to prevent theft. Most of these systems provide audit trails
so you can trace any problems.
• Taxes. Many POS systems can support numerous tax rates-useful if
you run a mail order business and need to deal with taxes for more
than one state.

Types of POS terminals
1. Retail POS. These are POS terminals used in retail shops and
supermarkets.
• A retail point of sale system typically includes a cash register
comprising of: A computer, cash drawer, receipt printer, customer
display, barcode scanner and a debit/credit card reader.
• It can also include a conveyor belt, weight scale, integrated credit
card processing system, a signature capture device and a customer
pin pad device.
• Some POS monitors use touch-screen technology for ease of use and
a computer is built into the monitor chassis for what is referred to as
an all-in-one unit.
• The POS system software can handle customer based functions such
as sales, returns, exchanges, customer loyalty programs, promotions,
discounts, foreign currency handling, multiple payment types, etc.

A customer using a debit/credit card reader
to make payments a POS.
INSET LEFT: A barcode scanner in use.

Types of POS terminals cont’d
• 2. Hospitality POS. Hospitality point of sales systems are
computerized systems incorporating registers, computers and
peripheral equipment, usually on a computer network to be used in
restaurant, hair salons or hotels.
• Like other point of sale systems, these systems keep track of sales,
labor and payroll, and can generate records used in accounting and
book keeping.
• Typical restaurant POS software is able to create and print guest
checks, print orders to kitchens and bars for preparation,
process credit cards and other payment cards, and run reports.
• In addition, some systems implement wireless pagers and electronic
signature capture devices.

Types of POS terminals cont’d
Pros of Cloud Based POS Cons of Cloud Based POS
 Independent from platform and operating system limitations
 Created to be compatible with a wide range of hardware.
 Cloud-based POS also helped expand POS systems to mobile
devices such as iPads
 Database are easily backed up because user, sales and
inventory data, is not stored locally, but on a remote server.
 The POS system is also not run locally, so there is no
installation required.
 Instant centralization of data (important especially to chain
stores)
 Ability to access data from anywhere there is internet
connection
 Lower start-up costs.
 Subscription fees to cloud
computing service
provider increase costs of
running.
 Weakness of having to
depend upon
intermediary
communication services
provided by insecure web
browsers
 Disruptive effects of
incidental loss of internet
connection
3. Cloud-based POS: Cloud computing gave birth to the possibility of
POS systems to be deployed as Software as a service, which can be
accessed directly from the Internet, using any internet browser.

f) Cash Deposit Machines (CDM)
• Cash Deposit Machines (CDM) are computerised
Equipment setup by banks primarily to enable people to
deposit money in cash form to bank accounts without
visiting a teller at a bank branch.
• However, There’s much more to Cash Depository Machines
(CDM) than simply putting money into bank accounts.

Comparison of ATM and CDM features
Facilities ATM CDM
Cash Withdrawals  
Balance Enquiry  
Mini Statement  
Cash Deposit  
Cheque Deposit  
Utility Bill Payment  
Mobile Airtime Top-up  
Credit Card Payments  
Cheque Book Request  
Debit Card Pin Change  

g) Email / SMS notifications
• SMS and Email notifications enable you to actively monitor your
accounts. When you set up SMS/Email alerts you can:
– Do SMS Banking (Request specific information on account
balances, deposits and withdrawals to be sent to you
automatically via SMS).
– Be notified of suspicious activity in real time via SMS or Email.
– Easily set up notifications to control what information you receive
and when
– Set alerts to tell you when a deposit has cleared, your credit card
has reached a particular limit and more.
• SMS banking is a type of mobile banking, a technology-enabled
service offering from banks to its customers, permitting them to
operate selected banking services over their mobile
phones using SMS messaging.

g) Email / SMS notifications cont’d
SMS BANKING FEATURES:
• Balance inquiry
• Funds transfer
• Airtime purchase
• Bill payments
• Pay Utility bills
( e.g Electricity, and Water)
• Monitor and check your
account balance
• Purchase airtime
• Request for mini-statements

Case Study: Cente mobile
CenteMobile is a 24/7 full banking service that allows customers to
access their accounts using their mobile phones anytime and anywhere.
HOW TO SIGN UP:
– Fill in a CenteMobile application from any Centenary Bank branch .
– Submit to the branch together with a photocopy of your ID i.e Driver's License, passport
or voter's card
– Upon branch approval, you will receive an SMS with your PIN and recreate key to start
transacting
BASIC REQUIREMENTS:
• An account in
Centenary Bank
• Valid ID
• A personal
mobile phone

Centenary SMS Banking Benefits
• Usually Free of charge: This is a free of charge service; you
are only subject to the standard SMS usage fees by your
telecom service provider.
• Secure and private: You will receive automated SMS
notifications for certain transactions or events on your
mobile phone as chosen by you during your service set up.
• Fast and convenient: Save time and enjoy the convenience
of instant banking while you’re on the go.
• Transactions review: You can view your last transactions
from the convenience of your mobile phone.
• 24/7 accessibility: You can conduct your banking transactions
anytime and anywhere from your mobile phone.

Conclusion
• In this presentation, we have expounded over detailed content on
Technology Based distribution channels used in the Financial
Industry.
• We have covered the mode of operation, benefits, examples,
advantages and disadvantages of technologies such as:
a) Phone Banking/ Call Center
b) Mobile banking
c) Internet banking
d) ATM
e) POS
f) CDM – Cash Deposit Machines
g) Email / SMS notifications.
Any Questions?

Possible Examination Questions
1 (a) Briefly describe any four Technology Based distribution channels used in the Financial
Industry. (08 marks)
(b) What are the major challenges regarding usage of the above technologies? (12 marks)
2 (a) Differentiate between Phone Banking and SMS Banking. (04 marks)
(b) Outline the various advantages and disadvantages of using phone banking. (16 marks)
3 (a) Compare and Contrast the features of Mobile Banking and Internet Banking.
(10 marks)
(b) What measures can banks use to ensure effectiveness and efficiency of mobile banking?
(10 marks)
4. (a) Describe the nature of Automated Teller Machines (ATM) operation. (08 marks)
(b) Kizito Alex, a BIT student, has just obtained an ATM Card from his bank. Educate him
about the essential ATM Etiquette. (12 marks)
5. (a) What is meant by the term Electronic Point of Sale? (02 marks)
(b) Explain any three types of POS terminals in common use today. (06 marks)
(c) Give any six factors to consider before acquiring a POS system for your business.
(12 marks)
•

End of Presentation
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Makerere
University
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DTMF =
Dual Tone
Multi
Frequency
BACK
Acrnomym
Master’s
Dictonary

USSD =
Unstructured
Supplementary
Service Data
[a protocol used by the Global
System for Mobile (GSM)
communications cellular telephones
to communicate with service
providers’ computers.]
BACK
Acrnomym
Master’s
Dictonary

CVV=
Card Validation Code
[for Master Cards.]
CVVC=
Card Verification
Value Code
[for VISA Cards.]
BACK
Acrnomym
Master’s
Dictonary

EFTPOS=
Electronic Funds
Transfer at Point
Of Sale
BACK
Acrnomym
Master’s
Dictonary

Technology based distribution channels / networks in financial industry

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