Next Gen Bank will not be free from risk

Indian Banking sector is about to step into the area of Next Gen technology which would take care of the customers' life cycle need right from his birth. Accordingly, the Next Gen bank will devise product - “Life Cycle product” keeping in view of the requirements of a person in every stage of his life from birth to death. An alternate delivery tool - the new TV banking to access banking products from home is also a coming thing. The Next Gen tech aims to cut banks' administrative expenses, percolates demographic dividends and deepens financial inclusion. Next Gen aims to develop business intelligence, improve human resources management and quicken delivery of any banking products at the click of the mouse. The question is how far the banking sector is going to serve its main purposes: to pay its present and future depositors in full when their claims accrue and serve the public interest.

Before making a transition into the Next Gen banking there is a need to make customers familiar with the present Information technology and let them know the various risks involved in the operation. As on 31 March 2013, there are 1,14,019 ATMs across the country out of which 11,564 are in rural areas 27,710 in semi urban area, 36,116 in urban areas and 79,327 are in metropolitan cities. The number of POS terminals has been doubled to 8,45,653 between 2008 and 2013. In June 2013, CRISIL prepared a financial inclusion index which identified three areas: branch penetration, deposit penetration and credit penetration. The World Bank Financial Access Survey observed in terms of bank branch density, ATM density, bank credit to GDP and bank deposit to GDP is quite low as compared to most developing countries in the world. The question is whether people are ready for the banks' penetration? An all encompassing financial inclusion programme can yield result if the Indian mass is educated, computer literate and have awareness about online safety measures.

Reports about ATM frauds are pouring in. Different electronic devices are fitted to ATM machines to steal ID and password without the knowledge of the customers. Hidden cameras spy on customers' pass word. Cloning machines are fitted to copy the ATM cards. ATM reconciliation becomes a big headache for banks. Crores of rupees are lying idle in ATM account due to non reconciliation. Many people write pass word on the back of the ATM cards due to lack of awareness. Many are not in a position to key password into the system and cannot withdraw money from the machines. Outside agencies are engaged for keeping cash in the machines which involves risk. Sometimes ATMs releases counterfeit notes. In case of robbery ATM does not give signal to near by police station. Thieves attack old customers at ATM booth. Some ATM machines are so light that two persons can easily carry it. Phishing mails are sent to lure customers. Hackers pretending as caring executives collect ID and password from gullible customers. Fraud committed through internet channels, ATMs and other alternate payment channels like credit, debit and other prepaid cards account for 65% of the total fraud cases. The online money transaction has increased the number of online frauds. The amount of fraud in banking sector has reportedly grown four times from Rs 2038 crore in 2009-10 to Rs 8646 crore in 2012-13. Attempts are made every day from foreign destinations to hack banks' main servers. The cost of safeguarding Core Banking environment has increased to above 5 % of the total administrative expenses. This may go up as the new technologies from the developed nations will be available at a premium. Oracle charges 22% of the cost the software as Annual Maintenance Charge. The Indian IT professionals are yet to develop its own software for the banking industry. In fact, fraud risk is mounting in CBS environment as manual checking has become a passe. Rapid growth of technology, cross border financial transactions, hybrid products and real time fund movement have made banking sector prone to frauds. A state of the art Information System Audit can safeguard banks' e-bay transaction route. The problem is that there are not many Certified Information System Auditors(CESA) in the banking sector. When BASEL III pushes Indian banking sector to integrate with the global financial sector, there is possibility of huge frauds along with big business opportunities which may require close monitoring and IS audit skill. Banks have to ensure that people posted at main data servers must go through rigorous integrity tests and the top management owns up the security lapse.