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THREATS TO THE RIGHTS OF CONSUMERS IN E- BANKING IN INDIA: AN OVERVIEW
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THREATS
TO THE RIGHTS OF CONSUMERS
IN E- BANKING IN INDIA: AN OVERVIEW
AUTHORED BY - MS. SAYALEE S. KULKARNI
(Roll no-07)
LL.M 2nd Year-Sem IV
Subject- Banking Law And Negotiable Instrument
Act Of Modern Law College,
Abstract:
Internet banking has attracted
the attention of banks, securities trading firms, brokerage
houses, insurance companies, regulators and lawmakers in
developing nations since the late 1990s. With the rapid and significant growth in electronic commerce,
it is obvious that electronic (Internet) banking and payments are likely to advance. Researches show
that impact of Internet banking on cost savings, revenue growth and increased customer satisfaction on
Industry is tremendous and can be a potential tool for building a sound strategy. However, it has raised
many public policy issues before the banking regulators and government agencies. Interestingly,
reliable and systematic information on the scope of Internet banking in Indian context is still not sufficient, particularly what it means to the consumers
and the bankers.
The need and importance of the
consumer protection is expanding at a rate of knots especially in the Indian banking sector. We have encountered
many incidents in the banking sector where the consumers are misled due to the failure of bank's operational capacities
leading to the financial insecurity amongst the
innocent customers. The recent example is the Punjab and Maharashtra
Co-operative bank issue, wherein, the
Reserve Bank of India ("RBI") under Section 35(A) of Banking
Regulation Act, 1949 imposed the
regulatory restrictions and withdrawal restrictions upon the said bank due to
its irregularities disclosed to the RBI, which in turn has affected the faultless
customers.
The Banking industry is one of the
oldest in the world. The Indian Banking Industry has not remained totally passive spectator of Information
Technology revolution that has taken place around the world. Banking industry in India has undergone
radical changes under the umbrella term „web Revolution?. In the modern computer world, all the
activities of the banking transactions are made through computers and electronic medium. The banks have put themselves in the World Wide Web to take advantage
of the
internet?s power and reach,
to cope with the accelerating pace of change of business
environment. Electronic Banking
is popularly known as „PC banking?, „online
banking?, „Internet banking?,
„Telephone-banking? or „mobile banking?.
E-banking may be understood as term that covers all these ways of banking
business electronically.
Keywords: E-Commerce, E-Banking, Threats in E-Banking, Opportunities, Threats, Safe banking, Risk Factor, ATMs, ECS, National
Electronic Funds Transfer (NEFT), RTGS, CAGR
Introduction:
A healthy banking system is very much needed for
any economy striving to achieve good growth in an
increasingly global business environment. The banking sector has undergone an
intense transformation since the
early 1990s. The modified operative atmosphere for the industry, underpinned by banking, liberation, and
advances in data technology, has resulted in intense competitive pressure. Banks have more experienced this challenge
by diversifying through change data
Technology and modernization of the existing system. E-banking could be a revolution of the banking sector by data
technology. Electronic Banking or E-banking refers to the utilization of technology that permits customers to access
banking services electronically whether or not it?s to pay bills, transfer
funds, read accounts, or to get data and devices.
Electronic
banking offers a lot of benefits to individual customers, businesses, and
banks. However, one should not ignore
the risks associated with virtual banking either. The rapidly increased use of the World Wide Web,
Internet, Intranet and Extranets, e-business, e-commerce and mobile commerce has changed the manner in which business is
conducted. The advent of digital era accompanied with technological innovations and globalization is constantly propelling the businesses organization to redefine their business
operations in terms of value chain reengineering
and restructuring business models. Likely, the economic sector is
metamorphosing under the impact
of competitive, regulatory and technological forces.[1]
The
„e-Revolution? has placed virtually the entire trading universe in cyberspace
and this new trading universe in the
lap of cyberspace is known as „Digital Economy?. The digital economy Digital economy refers to an economy that
is based on digital technologies including digital communication networks (the Internet, Intranet and Private Value
Added Networks or VANs), Computers,
Software and other related Information Technologies. The term Digital
Technology also refers
to the convergence of
computing and communication technologies on the Internet
and other Networks, and the resulting flow of information and technology
that is stimulating e- commerce and
vast organizational change.[2]
Meaning Of E-Banking
The term electronic banking means an electronic fund transfer by simple
using the electronic means from one
account to another account rather than by cheque or cash.[3] As
the name electronic banking also
provides some advantages over the traditional banking methods. E- banking can also be defined as delivery of
banking services to a customer at his office or home using electronic technology. The term electronic banking is a
general term. It includes internet banking,
telephone banking and mobile banking. The concept of e-banking is evolving day
by day. Electronic banking services
allow a bank customer and stakeholders to interact and transact with the bank seamlessly through a
variety of channels such as internet, wireless devices, ATM, online
banking etc.
History of E-Banking:
The concept of e-banking
is evolved with the development of the World Wide Web.
Some person while working on
the banking databases came up with the idea of online banking transaction in 1980s. Online
shopping, a credit card also promotes the concept of online
banking.
In
India e-banking is a new concept. The traditional banking system in India runs
through the branch banking system. In
the year of 1990 the non-branch banking system started.[4]The
new concept of e-banking system gain
popularity over the old traditional manual branch banking system.
The credit of launching the new
technology in banking system goes
to the private bank like
ICICI bank. Citibank and HDFC
bank who introduces the internet banking in 1999.
Role of E-Commerce in Indian Banking
Sector:
Electronic commerce is the use of a telecommunications network to share
business information, maintain
business contacts, and make commercial transactions. Massive advancements in information technology have transformed
the globe into a global village, resulting in
unparalleled upheaval in the banking business. Banks presently operate
in a highly globalised, liberalised, privatised, and competitive environment. Banks
must employ technology to thrive in this
climate. IT has ushered in a new commercial age.In terms of enhancing services,
it is becoming more significant in
the banking industry. Due to broad improvements in information technology, the Indian banking
industry has seen remarkable
growth.Banking has revolutionised the banking business
as well as the services provided by banks to their consumers.
'Anywhere banking' became known as a way to provide
distinctive and competitive services. Apart
from traditional branch banking, click-and-order methods such as online
banking, ATMs, Tele-banking, and mobile
banking are becoming
popular. Customers may access their
accounts, obtain account
statements, transfer cash, and acquire draughts
with only a few keystrokes.
Customers are increasingly required to visit
branch locations due to the large
number of people
of ATMs and plastic cards. Smart Cards, which have an integrated
microprocessor chip, have ushered in
a revolution. Another invention that has had an influence on the banking
industry is electronic data
exchange (EDI). Transaction costs have decreased, productivity has increased dramatically, and new financial products and services have been introduced to the market.
Benfits Of E-Banking:
Computers are capable of storing, analyzing, aggregating, finding, and
displaying data according to user needs with a great deal of speed and precision, therefore
E-Banking helps us overcome the shortcomings of manual systems. With
the advancement of E-Banking, a slew of benefits flow to numerous
parties.
To the Banks
·
E-Banking Service helps in
increasing the profits
·
E-banking gives you a leg up on the competition. a border with fewer connections to the banks
·
E-Banking carries when it comes to business,
less is more when it comes to paper money
and plastic money
·
Websites that provide
e-banking services might be useful
in revenue earner through
its promotional activities.
·
Customers may use the e-banking service from anywhere,
reducing the need to spend additional
money on infrastructure.
·
Websites that provide
financial convergence for customers will result in a more engaged banking
consumer who will use the
banking websites more often.[5]
To the Customers
·
Access to
and use of banking services is less expensive.
·
Increased convenience and time savings – transactions
may be completed 24 hours a day, without the need for a physical visit to the bank.
·
Corporations will have quicker access to information
since they will be able to check on several accounts with a single click of a button.
·
E-banking services for better cash management shorten
the cash cycle and improve the efficiency
of company activities since Estonian
banks' websites offer a wide range of cash management
instruments.
·
Reduced fees- This refers to the fees associated with
obtaining and utilising different financial goods and services.
·
Convenience- All banking transactions may be completed
from the convenience of one's own home or
workplace, or from any location
the consumer desires.
·
Speed -
Because the medium responds
quickly, clients can literally
wait until the last minute to complete a financial transfer.
·
Funds management- Customers
may retrieve their account history
and do "what if" research on their own PC before completing
any online transaction. This will result in more efficient money management.[6]
Traders and Merchants:
·
It guarantees prompt payment
and settlement for the
dealers' varied transactions.
·
It offers a wide range of services
to businesspeople that are on par with international standards and have
minimal transaction costs.
·
Cost and risk problems involved
in handling cash which are very high in business
transactions are avoided.[7]
Today, E-Commerce is being seen as the single
largest business window
across the world. It has introduced a
paradigm shift in the dynamics of business and banking.[8]
The Indian Banking Industry has not
remained totally passive spectator of Information Technology revolution that has taken place around the world.[9]
Technology in the Banking has been used in four major ways12:
1.
To
handle a greatly expanded customer base
2.
To
reduce substantially the real cost of handling payments
3.
To
liberate the banks from the traditional constraints of time and place
4.
To
introduce new products and services
Threats of E-Banking In India
After the effect of demonetization, digital money has been
the weak point among the citizens of India.
Digital cash and online transactions in the current
market scenario have a
great impact on electronic
banking and digital banking. Electronic banking (electronic banking) or online banking means that any user with a
personal computer and a browser can connect to their bank through the bank's website to perform any
of the functions of virtual banking. All the services that the bank has authorized on the Internet are shown in the
menu. Any service can be selected and
other interactions are dictated by the nature of the service.[10]
Now, the demand for one-day financial
services is rapidly transmuting and the deportation of clients with respect to
these services is bound to transmute rapidly.
The history of computer crime is as old as the computer itself. Any new
technology or development can be used for
both constructive as well as destructive purposes. When most of the people are using computers for
constructive, ethical legal purpose, there are some who are using these for destructive, unethical or
illegal purpose. If a fraud is committed with the help of a computer, it can be called as “Computer
Crime”. Computer crimes are classified into three broad categories:[11]
(a) Data Related Crimes;
(b) Software Related Crimes; and (c) Physical Crimes.
The Internet environment provides an extremely easy landscape for conducting illegal activities on computer. These are known as cybercrimes, meaning crimes executed on the Internet.
Cybercrime has recently become a catchy term for a group of security
issues in cyberspace. Any activity,
which basically offends human sensibilities, can be included in the ambit of cybercrimes.[12] Hundreds
of different methods
and „tricks? are used by innovative criminals
to get money from innocent people, to buy without paying, to sell
without delivering, to abuse people and much more.
a)
Security Issues:
In E-Banking industry the financial crimes with the assistance of
Internet are increasing day by day.
Security is one of the most important issues required to be addressed before
implementing E-Banking. There is a
considerable threat of unauthorized access/loss or damage of data by hackers, loss and damage of Data by virus
and unauthorized access within the network.22 The risk of loss of security is present when an organization makes
use of Internet for online payment. Confidentiality,
Integrity, Authenticity, Reputability and Privacy are major concerns for the protection of rights of consumers.[13]
b)
Phishing:
Phishing is an Internet fraud, through which innocent persons are enticed
to divulge their personal information
like User Identity and Passwords, which are later on used by spammers in an unauthorized way. The most important
method of Phishing is sending e-mails claiming to be from consumers? Bank or other financial institutions which are dealing,
that already has consumer?s personal
information, and consumer
will be asked to confirm
the details by clicking a personal link (URL) provided in this
fake e-mail. This URL takes consumer to a fake website which will be similar to the genuine website, and the
information provided by consumer in the forms
provided in the fake website, will be gathered and used for committing fraud in
their accounts/ credit card or withdraw funds unauthorized
from their accounts.[14]
c)
Pharming:
Pharming is another Internet
fraud, whereby as many users
as possible are redirected
before they reach the legitimate online banking websites they intend to
visit and are lead to malicious ones. The
bogus sites, to which victims are redirected without their knowledge or
consent, will likely look the same as
a genuine site. But when users enter their login name and password, the information is captured by criminals.[15]
d)
Hacking
Hacker is the term often used to describe an outside person who
penetrates a computer system. There
are two types of hackers. White-Hat Hackers perform ethical hacking, doing test
on their clients? systems so find
the weak points, so that they can be fixed. Black-Hat Hackers also referred
to as crackers, are the criminals. A Cracker is a malicious
hacker, who may represent
a serious problem for a corporation.[16]
e)
Identity Theft
A growing cybercrime problem is Identity Theft, in which a criminal
(Identity thief) poses as someone
else. The thief steals social security numbers and credit card numbers, usually
obtained from Internet, to commit
fraud (e.g. to buy products or consume services) that the victim may be required to pay for. Any digital
identity theft definition includes a malicious actor that
illegally acquires personal information (date of birth,
social security number,
credit card details etc.) and uses it for
identity fraud (cloning
credit cards, applying for loans, extorting
the victim etc.)[17]
f)
Salami Slicing
A program designed to siphon off small amount of money from
a number of larger transactions, so the quantity
taken is not readily apparent.
g)
Trap Door
A computer trapdoor, also known as a back door, provides a secret -- or
at least undocumented -- method of
gaining access to an application, operating system or online service. Programmers write trapdoors into programs for a
variety of reasons. Left in place, trapdoors can facilitate a range of activities from benign troubleshooting to illegal access.[18]
h)
Spoofing
Fake e-mail address
or web page to trick
users to provide
information or send money. It?s main purpose
is to confuse the consumers in similar or fake
website.
i)
Password Cracker
Password cracking is the process of using an application program to
identify an unknown or forgotten password
to a computer or network
resource. It can also be used to help a threat actor
obtain unauthorized access to resources.[19]
j)
Cookies
Cookies are small text files placed on a user?s computer when a website
is accessed. They contain information
sent by the website server to the user?s browser. If desired, a web user can sometimes
view cookies in the source
code of the header of a web page. However, generally, the information collected is not displayed to the user, but is recorded, tracked, and stored by the user?s
computer and browser. If a user returns to the website, the user?s web browser
will send the previously stored information to the website. In this way, the
cookies can tell the
website that this is the same computer that was here
some time ago, this tracking the movements of users of particular computers.[20]
Conclusion:
E-Banking has become part and parcel of our modern life.[21]
However, the rights of consumers are
not safe. In order to pave the way for the development of e-commerce and
internationally acceptable level of legal uniformity and compatibility of rules
and practices, the United
Nations Commission on International
Trade Law (UNCITRAL) established by the United Nations General Assembly in 1996, adopted the Model Law of Electronic Commerce in 1996.
Time
changes, and with time we are. The old order has changed yielding place to new,
and we must have new need for the new
hour. To keep pace with the countries of the West, born and bred in traditions of scientific and
industrial progress, the underdeveloped countries must be themselves equipped with all the
facilities enjoyed by the West under the concept of „ONE WORLD?. While it is true that he, who runs, may find the
principle of survival of the fittest illustrated
right and left, it is equally true that he who runs alone may find himself in
the wilderness. A single weak link in
the body international, and off goes the chain. India, in turn, must fit in within the new pattern. This is particularly true of
the monetary mechanism, where a considerable Lee-way
has to be made up.[22]
In
today's modern world banking frauds have become a common phenomenon. The
general public deposit their money in banks
mainly for security purposes and not merely for the minimal
rate of interest provided by the banks, but whenever frauds occur at
banks, the trust of the general
public is broken. Nowadays, hardly a day passes when incidents of banks frauds
and forgeries are not reported in
newspaper and such frauds may range from theft, robbery, frauds relating to debit card and credit card and
frauds committed through internet especially in instances of internet
banking.
[1] Efraim
Turban, Dorothy Leinder, Ephraim Mclean and James Wetherbe, Information Technology for Management: Transforming Organizations in
the Digital Economy, John Wiley & Sons, Inc., Asia, NJ, p. iii.
[2] E. Brynolfson, et.al., “Consumer Surplus
in the Digital Economy: Estimating the Value of Increased Product
Variety at Online Book-sellers”, Management Science, 49 (11), 2003, p.15.
[3] https://www.legalserviceindia.com/legal/article-3322-e-banking-frauds-and-indian-legal-prospective.html Last
seen 2 May 2023
[5] Ayo,
Charles K. (2006). “The Prospects of e-Commerce Implementation in Nigeria,
Journal of Internet Banking and Commerce”, Vol. 11, No.3, pp.
68-75
[6] A. K. Sohani, (2009),
“Technology and Banking
Sector”, ICFAI University Press, pp. 1-39
[7] Brahm
Canzer, (2009) “E-Business and Commerce Strategic Thinking and Practice”,
Houghton Mifflin, pp. 114-312.
[8] S.
Ganesh, Electronic Commerce: Applications in Banking”, in S.B. Verma, S.K.
Gupta and M.K. Sharma (edited), p. 27.
[9] R. P.
Nainta, Banking System, Frauds and Legal
Control, Deep & Deep Publications Pvt. Ltd., New Delhi, 2005, p. 154.
[12] Definition by Advocate Pavan Duggal, Retrieved
from<http://www.pavanduggal.net/law.php>, visited
on 1
February, 2012.
[13] S.Ganesh, p. 31.
[14] S.C.Gupta, “Internet Banking-Changing Vistas of Delivery Chanel”,
in S.B. Verma, S.K. Gupta
and M.K.
Sharma (edited), p. 106.
[15] S.C. Gupta, p. 106.
[16] Efraim Turban,
et.al, Electronic Commerce, Prentice
Hall, Upper Saddle River, NJ, 2006, p. 118.
[17] https://www.bitdefender.com/cyberpedia/what-is-digital-identity-theft/ last visited on 3 May 23
[20] Lee Fen Yem, Cyber Space Law, Oxford
University Press, New Delhi, 2007,
p. 128.
[21] Retrieved from<https://www.unionbankonline.co.in/Disclaimer/TermsOfUse.pdf>, visited
on 1 February,
2012.
[22] M.L. Tannan, Banking Law and Practice in India, India
Law House, New Delhi,
1989, p. 2.
Article Information
THREATS TO THE RIGHTS OF CONSUMERS IN E- BANKING IN INDIA: AN OVERVIEW
Authors: MS. SAYALEE S. KULKARNI
- Journal IJLRA
- ISSN 2582-6433
- Published 2023/05/09
- Volume 2
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
- Access Open Access
- License CC 4.0
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