Networked Banks

Road Bumps Ahead

Originally, banks had a proprietary network, with point to point leased line links or closed user groups like the INFINET. But those were the good old days. What a bank essentially does when it centralizes its database and opts for diverse delivery channels, is putting all its eggs into one basket This raises serious security concerns. This is truer when a bank offers it’s products and services on the web. In Internet banking, the core technology being used now is encryption, 128-bits to be precise. Private sector banks like HDFC and ICICI have security policies on their web sites, elaborately describing the security measures taken by the bank. All these banks which offer Internet banking use a combination of filters, routers and digital signatures using a technology called security socket layer (SSL). Here, conspicuous by its absence is the deployment of Public Key Infrastructure (PKI). Though banks like HDFC offer smart card based PKI security to its 300-plus corporate customers, we are yet to see a large-scale deployment of PKI in the country. "It is a wrong notion that SSL is good enough to secure your network. PKI is a must-have to ensure and protect your business, along with proper intrusion detection and security management systems," says Hanif of HCL Comnet.

A Novel Experience

A voluntary organization of 176-members, comprising public and private sector banks, MNC banks with Indian operations, urban co-operative banks, merchant banks, the Indian Banks’ Association (IBA) was founded in 1946 to promote progressive banking principles and practices. This association pioneered and implemented the concept of a shared payment network system (SPNS) a.k.a. SWADHAN in the banking sector when banking networks were proprietary in nature. SPNS, as envisaged by the IBA, is a large network of ATMs originally spread over the city of Mumbai, Vashi and Thane, connected to a central host. Today, the network has expanded to connect ATMs all over India.

The objective behind forming the shared payment network system is to provide 24-hour, 365-day electronic banking service to customers anywhere in the country, through an electronic fund transfer system to be shared by different participating banks. This project is the first of its kind in the country and went live in 1997, with four ATMs of four banks. Currently, there are 350-ATMs of 36-banks connected to the network.

Any customer possessing an ATM card issued by the SPNS can go to any ATM-linked SPNS and transact some basic banking business. Under this system, a member can enjoy the benefit of maximum ATMs, with minimum investment. And this can rightly be called the first step towards anytime, anywhere banking.

There are three options by which a bank can participate in the project:

Standard Interchange Service: The service allows a member bank to connect its own ATM network to the SWADHAN switch. The host system can process transactions delivered to it from the SPNS switch i.e. transactions from its’ customers acquired at other member ATMs and also route the transactions acquired through their own ATMs to the SPNS switch.

Direct Connect Service: In the case of direct connect ATMs, the switch maintains a database of cards, accounts, etc., relating to the cardholders on behalf of the member banks.

Host Interface Service: The member banks connect their ATMs and branch network directly to the switch. Transactions acquired for these members are routed by the switch to the member host systems for authorization.
(For more details, log on to www.iba.org.in)

However, there are other areas, which need urgent attention: Authentication of payment systems, the legal framework for payment systems, lack of standardization and intra-bank connectivity. This would be followed by the need for robust management information systems, data warehousing and data mining at individual bank levels. Life would be easier for these banks if the DoT permits encryption of data files over its communication channel, which would result in easier access of remotely located branches to the RBI’s backbone network. So far, computerization efforts in our banks have been in the direction of accounting and related activities with little thrust on management information systems and customer service. Perhaps, customer relationship management is a foreign concept for these behemoths, which are buckling under their own weight or size. The question on everybody’s lips seems to be the public sector character and bureaucratic mindset of the nationalized banks.

For years, these banks have been impregnable forts. One does not really want to close the account he/she has had with a public sector banks for ages. There is no denial of the fact that PSU banks enjoy a psychological advantage over its technology-savvy counterparts. But the million-dollar question is whether they would be able to cash in on this good will and surge ahead or fall out of the race? Literally, the Indian banking sector is at a crossroads. And it is a kind of Hobson’s choice. You can either prosper or perish.

MT Jeevan