E banking slides raf 2

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THE ROAD TO
PROFESSIONAL
COMPETENCE
IN FINANCE
19RAF1/BAPS © Rwanda Bank Association
E-COMMERCE AND
ELECTRONIC BANKING,
MANAGERIAL VIEWPOINTS
 Ruanda Academy for Finance
 QTR 1, 2021

19C04 © HOUSE OF TRAINING
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Mr. Hubert VAN DE VYVER
International Trainer who regularly provides seminars on e-
banking, electronic finance and multichannel banking within the
programs elaborated by BBA and RAF
o Professionally active in the marketing department and in the electronic
banking department of the BNP - Fortis Group in Luxemburg, after
some years in the Private Banking department of the Kredietbank
Group in Luxembourg.
o Also ebanking expert for the Belgian Bank Academy and Redcliffe
Training (UK), giving worldwide trainings about Management
Information Systems in Banking.
Your trainer
–2

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 World Wide Web
 Global village
 International products and services
 Unbanked clients
 Available anywhere
E-commerce and electronic banking

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 Local banking
 Human interface
 Cash transactions
 Special locations
 Personal advice

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Offered products
Electronic/mobile products and services
e.g. banking software, financial information,
mortgages
(simple products in a complex category)
 Physical products and services with
electronic/mobile support
e.g. Bond lending, bearable certificates of
deposit, credit cards

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E-commerce and electronic banking is:
 transactions 24 h a day, 7 days a week
 access through browser (no software) on
PC or mobile (or SMS)
 acceptable level of security
 new ways of banking and commerce
 elements of logistics / bricks

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Advantages for the shop/bank
 An outlet/branch at each (potential) customer with
computer or phone
Tailored products and services
Customers do more for themselves (satisfaction)
Fewer resources (shop/bank)
Cover local needs
Provide public relations and business benefits for
the shop/bank

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Pitfalls for the shop/bank
(1)
No human interface
Slow or unstable connections
Imprecise laws
Client’s acceptance
AML and terrorism financing

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Pitfalls for the shop/bank
(2)
Cost of development and maintenance of website,
mobile apps and transactional tools
Lower customer switching costs
Some products digitally non deliverable
High step in costs for starters (marketing,
promotion, computing)

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Pitfalls for the bank
(3)
Entry barriers
Reputation to attract clients
(higher rates)
Fund raising to pool risk

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Which products and services
need to be handled through a shop or
branch
will be treated by phone (mobile phone)
are offered through the Internet or by e-mail
could be handled using a Call Centre
?
Test

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19RAF2/BAPS © Rwanda Bank Association 12
– A lot of products and services are still handled
through physical shops and branches but most are
already offered through the Internet or over
mobile tools.
– New/existing product ranges (easy products in
complex product ranges) are coming up, like
 mortgages
 all types of insurances
 phone subscriptions
 ordering of goods
Test: conclusion

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Overview of the seminar
1. Introduction
2. Situation of e-commerce and e-banking
3. Strategic choices and new trends
4. E-money: new payment methods ?
5. Practical e-commerce and e-banking
6. Prudential approach in e-commerce and
electronic banking
7. The client and the marketplace
8. Hold back the invisible enemy

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9. Upcoming technology
10. Training
11. Operations
12. Corporate e-commerce and electronic banking
13. General summary

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Objective
Both E-commerce and electronic banking (e-banking) have
nowadays worldwide usual apps both for individuals and
corporate users. Buying Christmas presents, order a quick
meal and pay with Safari banking, sounds familiar? Even
money is turning out to be used more electronically, just
remember PayPal. Social media also develop payments
techniques. But let’s not forget about e-banking! A lot of
product developments will offer new technologies and broaden
the range electronic products and services.

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This can generate a lot of questions:
- What are the best practises and the strategic choices to
make?
- What are the risks of these new developments and how to
tackle them?
- What type of new legislation is created?
- Who are the clients in developing countries, in Europe and
worldwide?
– What are the commercial and technical challenges?
- What about the security of e-commerce and e-banking?

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 the characteristics of the traditional brick and mortar
(B&M) shopper contrast with those of the online shopper
 the similarities and differences between the virtual and the
real-world customer.
 what new communications techniques are uniquely
available in the world of e-commerce.
 Ecommerce From the Customer’s Point of View | Blog Diary Online
from Ernest Wolf (wordpress.com)
E-commerce : the customer’s viewpoint

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 Supply Chain and Logistics Process in E-commerce
Industry
 Optimized Inventory Management, a Must-have for Supply
Chain Management in E-commerce
 Supply Chain Management in E-commerce
 Importance of Supply Chain Management in E-commerce Industry
(oodles.io)
E-commerce: the system supplier’s viewpoint

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THE ULTIMATE ECOMMERCE CHECKLIST FOR
NEW STORE OWNERS
 Ecommerce Checklist for New Store Owners
 The Final Steps
 The Ultimate Ecommerce Checklist for New Store Owners
(oberlo.com)
E-commerce: the shop’s viewpoint

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1. E-banking
1. a Branch network
1. b Internet banking
1. c Mobile banking
1. d New channels

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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Internet
Phone
Branch
Frequency per channel
More than once a week
Once a week
Once a month
Once per trimester
Once per semester
Once a year
Never
1. Introduction
Source: Banking Technology
magazine

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o Branch network
• Branches
- Reduce and upgrade
- More equipment inside
- New services
• ATM’s
- Security and recognition
- Outside branches, new places
1. Introduction

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1. Introduction
ATM’s
Advantages
let the customer execute the time consuming and
low value added operations like cash management,
bill payments
reduce the mail cost of sending bank statements
promotional tool: useful to push products, advises
etc
Drawbacks (and problems)
huge investment in machinery, update of
programs, investment and transformation cost of
buildings (branches)
difficult for non-technological clients or technology
adverse ones

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o Internet Banking
• New generation of clients
• Bare necessity
• Huge success
• Towards ebanking 3.0
o Services offered
• Payment
• Credits
• Insurance etc.
1. Introduction

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• Mobile Banking - Specific services on the mobile
channel
• Payment via cellular phone
• Small transactions
• Alerts for orders
• SMS (payments/alerts)
1. Introduction

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o Mobile Banking – action in developing
countries
• Africa
- Hospital payment in Tanzania
- Five years ago hype, now significant sales
- Orange: 6 million in six African countries
- Vodafone: 13 million users in Kenya, 6 mio in
Tanzania
1. Introduction

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o Mobile Banking – action in developing
countries
• Latin America
- Telefonica: 55 million users (2009)
- 35 % bank accounts, 19 % bank cards, 90 % mobile
phone
• Asia
- Policemen payment in Afghanistan
- Starting in Philippines 2001 / sms payment
- Pakistan: 500.000 users
1. Introduction

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o Point of sale (POS)
• cards
• terminals
• network
1. Introduction

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1. Introduction

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1. Introduction

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Summary part one
Many different banking channels
and shop outlets
-Specialise each other
-Combine them all
-Correspond to the clients’ needs

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2. Situation of e-commerce and electronic banking
2. a Some figures
2. b Practical cases and examples

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2. a Some figures

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2. b Practical cases and examples
One of the best ways to learn how to grow your eCommerce
business is to model those who have done it.
The problem?
Without the right connections, it’s hard to get the insider
information on how these e-commerce sites became so
successful.
The Best Ecommerce Case Studies (63+ Success Examples)
(referralcandy.com)

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2. Situation of e-banking
Definition
e-banking or electronic banking is the use
of electronic methods to deliver traditional
banking services using any kind of
payment media.
Source: Six Puzzles in Electronic Money and Banking
Connel Fullenkamp and Saleh M Nsouli
International Monetary Fund (IMF)

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Why Consumers buy Financial Products Online
–Self-Direction Explains Which
Markets Lead Online Finance
–Some products are too complicated for even
the self-directed to buy online without any online
or off-line advice
Frequently purchased or simple products are
moving online: shares, savings accounts, credit
cards…..
…. But infrequent and complex products need
more than self-direction: mortgage, life
insurance, pension fund … most buyers are
unfamiliar and need to speak to someone before
buying or get online: their position, be able to
analyse it, get advice and tools to support
decision-making and transaction
Source: BGL Bnp Paribas

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Why Consumers buy Financial Products Online
Self-Directed Consumers account
for half of all online finance
buyers, despite being only one-
fith of all consumers
Online experience and confidence
in security drive WHEN they buy
The reason for the difference in behavior lies in
consumers’ attitude to finance, not technology.
Online financial buyers are confident both in
technology AND their own financial decision-making
Self-direction: motivation and confidence to research
and take financial decisions without the help of an
advisor
Financial Self-Direction determines who buys online
Source: BGL Bnp Paribas

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Summary of part two
Two topics discussed :
- Some figures
- Practical cases and examples

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Case study
What would you need to start a new e-
shop or an electronic bank from
scratch ?
 In terms of budget
 In terms of material
 In terms of legal actions
Choose
your case

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3. Strategic choices and challenges
3.a. Driving electronic and mobile banking to
profitability
3.b. Powering multibrand and multichannel
distribution
3.c. Banking and shopping for the poor
3.d. Why should banks organise electronic
banking?

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What are the reasons why not going into mobile banking in this moment
and what are the plans from your perception?
what is your understanding of mobile banking (getting information only
or transactions execution, investment found management, etc.)?
Which concept do you prefer (full inhouse solution, outsourced solution,
or combination with telco operator)?
Case study (1/2): Mobile banking
What population do you intent to target with mobile
banking (whole retail, VIP clients, unbanked clients,
...)?
Why is mobile banking important for the bank (new
revenue, new clients, competition...)?
How do you see business case, or even better, how do
you calculate ROI of a mobile banking project?

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What are the reasons why not going into e-commercein this moment and
what are the plans from your perception?
what is your understanding of e-commerce (from customer’s view, shop’s
owners’ view, supplier’s view, etc.)?
Which concept do you prefer (full inhouse solution, outsourced solution,
or combination with different operators)?
Case study (2/2): e-commerce
What population do you intent to target with e-
commerce (whole retail, VIP clients, poor clients, ...)?
Why are e-shops important for the shopkeepers (new
revenue, new clients, competition...)?
How do you see business case, or even better, how do
you calculate ROI of an e-shop project?

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3.a. Driving online banking to profitability
Stand alone vs. Web enabled
Huge promotion budget and other costs
Moderate returns
Requirements to retain clients
Get paid for services (normal pricing)

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3.b. Powering multi-brand and multi-channel
distribution
Multiple brands
Multiple consumer segments
Multichannel world
Changing customer ’s experience

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3.c. Banking and shopping for the poor
Iinclusion of unbanked and unshopped clients
–primarily using mobile money to send and receive
domestic remittances
–purchase airtime and make purchases remotely
–recommend mobile money to friends and family
–feel their money is safe in a mobile wallet.
–find it has value
–potential customers know about services, believe they
won’t be hard to use, and are already actively managing
their money.
–help combat customer churn (switching to other
providers).

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3.c. Banking for the poor
Untapped potential for shops and banks ?
Negative
– companies assume people with low incomes spend little
–Spending goes to basic needs
–Illiteracy, corruptions, lack of networks limit possibilities
–Positive
–Agregate buying power of the poor community is actualy
quite large e.g. Grameen Telecom ‘svillage phones
–Cheap to market and distribute to the poor
–Very big concentration of population and increase of
income over the years

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3.c. Banking for the poor
Microfinance and mobile banking
cost of the small transactions involved in
microfinance—savings accounts, money transfers,
and loans to the poor—
Cell phones can cut the cost of such transactions,
making widespread microfinance more efficient.
Mobile banking was potentially six times cheaper for
routine banking transactions. (CGAP study)

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Summary of part three
New services are driven by fast emerging industry
trends and accompanying customer pressures (e.g.
paper focus).
The quickly moving, demanding factors of these
initiatives contributed to banks’ and shopkeepers
ongoing extension of its application and platform
infrastructure with new developments, new answers
to clients’ requirements …

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Case study
The Rowe Cos and Merrill Lynch: The ROI Process in
Business/IT Planning
What is the business value of the ROI methodology required for project
planning by Merril Lynch?
Ebanking strategy
What happens, according to Randall Pearson, if a bank does
not offer the following services:
a. Portfolio Management
b. Mobile banking solutions
c. Mobile payments
Do you agree, why ? Do you disagree, why ?

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4. New payment methods
4 a. E-money offer
4 b. Situation
4 c. SMS payment
4 d. Peer to peer payment
4 e. Friend to family payment
4 f. Value chain of payments

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4a. E-money offer
Definition
Electronic money, or e-money, is any electronic
payment media – any material, device, or system
that conducts payment via the transfer of
electromagnetically stored information
Source: Six Puzzles in Electronic Money and Banking
Connel Fullenkamp and Saleh M Nsouli
International Monetary Fund

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Payment needs Electronic payment
instrument
1. Micro payments Card-based e-money
2. Retail POS payments Card-based e-money
at POS
3. Buddy Banking e-money, peer-to peer
4. Bill payments ATM, Internet banking,
e-money
5. Electronic commerce e-money
4a. E-money offer

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Pay Pal (Demo)
http://www.paypal.com/en_US/m/demo/demo_consumer
/demo_consumer.html
4a. E-money offer

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Pay Pal (Data)
– More than 65 million users
–Present in 45 countries
–6 different currencies (euro, yen, dollar, ..)
–Fraud rate of 0,26 % on international transactions
–Commissions of 2,2 % to 3,4 % (basis points) on
transactions
–Payment protection (till 500 usd, 250 gbp) for sale
on ebay
–More than 1500 employees at Paypal
Source: Pay Pal.com
4a. E-money offer

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o Paypal and Facebook credits
o http://www.facebook.com/credits/
4a. E-money offer

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E-money: slow take off
* Merchants * Regulatory framework
* Cost * Number of people
* Security * High investments
* Compatibility * Multifunctional
4b. Situation

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4b. Situation
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4b. Situation
Country Number
of
issuers
Number of
cards issued
Average value
of transaction
(USD)
Canada 1 77 358 1.50
France 11 1.110.000 3.70
Germany 3500 62 million 1.95
Russia 1 47 30.33
Hong
Kong
60 9.000.000 1

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o E-money in Ukraine
New electronic money regulations came into force on 5 August 2008
o only authorise banks to issue e-money. All other businesses issuing e-
money in Ukraine have one year to either cease their activities or enter
into an e-money distribution agreement with a bank.
o do not cover plastic card payment systems (such as Visa or
MasterCard) or online payment services (such as PayPal or
Portmone).
4b. Situation

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o E-money in Ukraine (continued)
o prohibit anyone other than banks (and businesses who have entered
into an e-money distribution agreement with a bank) from receiving e-
money in exchange for monetary and non-monetary funds.
o require all e-money to be in Ukraine's national currency (hryvnia),
except for money loaded onto pre-pay payment cards.
o include anti-money-laundering provisions limiting all e-money
transactions and amounts stored on electronic devices (such as a
plastic card or computer memory) to 5,000 hryvnias.
o require all banks issuing e-money to submit their rules governing e-
money systems to the National Bank of Ukraine for approval within 6
months.
4b. Situation

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o E-money in Ukraine
4b. Situation
http://www.mts.com.ua/eng/mob_pay_portmone.php

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when lost, the money
and credits can not
totally be recuperated
improve confidence of
use (one does not see
how much stands on his
electronic purse)
Advantages
reduce the use of coins
improvements with non
financial credits
integration in the
existing cards (credit,
debit, shops’ fidelity ...)
promotional support
request from younger
consumers
Electronic purse
4b. Situation

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Tunz (mobile payments)
Banking & payment services
– services to mobile operators and financial
institutions
–- a number of solutions for mobile payment services
under own brand name.
E-Money as a service
– created in 2007,
– approved e-money issuer
–subject to the control of the Belgian Authorities
–benefitting from the European Passport allowing to
operate within the European Union.
4c. SMS payment

68

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Luup Mobile payments
- Capitalize on the rapidly growing international money transfer market.
- Attract new segments such as the unbanked, migrant workers and the youth
market.
- Boost revenue per customer and increase transactions by providing a new
channel to existing customers.
- Separate brand from the competition by offering modern, customer-focused
services.
- Offers financial institutions expertise in developing, operating and marketing
mobile payment services.
- Global payment network with endless possibilities
- Customers pay, send and receive money from their mobile phone.
– Demo: http://www.luupdemo.com/getstarted.html
– Collaboration with Deutsche Bank :
http://www.db.com/presse/en/content/press_releases_2009_4396.htm
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4c. SMS payment

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4d. Peer to peer payment
Situation and definition
– p2p lending marketplaces
(e.g. Prosper, Zopa, Lending Club, Smava) –
participants driven mainly by economic motives
– social lending services enabling micro financing
(e.g. Kiva, MyC4) – participants driven mainly by
social motives
– other concepts (e.g. Virginmoney “We manage
loans between family and friends“)

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Fees:
– borrowers:1% of the funded loans
– lenders: 0.5% annual loan-servicing

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PROSPER - PAYMENT PROCESSING.
1. Borrowers and lenders
 get information on standard interest rates and default rates
associated with the various credit rating levels
 make judgments about reasonable payments and risk levels.
2. When the listing ends,
 bids with the lowest rates combined to produce a single loan
( repaid over three years).
 payments drawn from the borrower's bank account and sent
to the various lenders' accounts.
.
73

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Source:
P2P-
banking.com

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Virgin Money
 facilitator of friends and family p2p loans in the
US
 does not do the matchmaking between
borrowers and lenders,
 supports the process between persons that
already had offline relations
 number on loan volume generated was 390
million US$.
 acquired predecessor Circlelending in 2007
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4e. Family to friend payment

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Three objectives
◦ Mass
personalisation
◦ Dematerialisation of
cards and terminals
◦ Insure a good level
of security
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Process
◦ 1. products of the payments
chain
◦ 2. Roles in the payments
chain
◦ 3. Costs of the chain
◦ 4. Movements in the chain
Standards
Protocols
Actors
4f. The value chain of payments

77
Summary of part four
New payment methods:
How do you want to pay tomorrow from
person to person, on the POS, for e-
commerce etc ?
What are the challenges for the monetary
policy ?

78
Case study
Situation:
You are visited by Western Union which offers
you their international payment methods
through the classical cash and clearing system
You are also visited by PayPal which offers you
their national and international payment
methods through the Internet.
What will you suggest the Management Team
of your bank ? Why ?

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5. Practical e-commerce and electronic banking
How to set up?
How to improve and survive?
More ...

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Start a new channel
•Type of license
•Specialised
•Back Office
•Front Office
•Shop
•Technical development
•In house
•Outsourced
•Hotline, call centre
•general
•specialised

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Improve services and products
- Plan improvements (at least twice a year)
such as new products, other services, add-
ins
- Relooking of web/mobile site every 3 years
- Integrate offline product promotions
- Acquire new clients

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Survive on the market
- Promotion (on-line and off-line)
- New ways of collaboration and partnerships
- Look at what others and competitors do
- Improve the profitability (costs, commis-
sions …)

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 Eight secrets for successful e-service
1. Make sure your channels listen
2. Give customers what they want
3. Make response mechanisms easy to find and
use
4. The 80/20 rule
5. Get “pushy”
6. Respond fast
7. Track religiously
8. Automate, automate, automate

84
 Benefits of responsive service websites
1. Reduced cost of customer service
2. Faster customer service and increased satisfaction
3. Increased customer “bonding”
4. Increased traffic and page hits per visit
5. Increased mindshare
6. 24x7 response
7. Freeing up staff EQ - Quiz

85
Summary of part five
Practical e-commerce and electronic banking :
start a new channel
improve and survive
responsive service websites

86
Case study
Fidelity Investment and others: Evaluating usability in Website design.
Is a usability lab like Fidelity ’s necessary, or are there other alternatives for testing
usability in website design? Which is the better approach? Why?
Ebanking usability
a. What are the factors influencing usability according to
these experts ? Make a list
b. Do you agree, why ? Do you disagree, why ?
c. Which improvements would you apply to your ebanking
channel according to this usability discussion?

87
6. Risk, laws and legislation
6.a. Risk management
6.b. Fourteen principles for a sound risk
management
6.c. Cross border issues
6.d. Risk policy
6.e. Laws and legislation
6.f. International standards

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6.a. Risk Management
Trends and issues impacting
bank risk profiles :
e.g. new financial products,
speed in transactions,
expertise in technology

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Identification of risks
Cross Border issues
2 Basic principles
Beginning of E-banking standards ?
(Technology/ Security)

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Types of risk (1)
 Strategic and business risk
 Operational risk
 Technology Infrastructure
 Security
 Data integrity
 System availability
 Internal control / Audit
 Outsourcing

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Types of risk (2)
 Reputational risk
 Legal risk
 Other traditional risks
Credit
Liquidity
Market
Foreign exchange

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Credit
Liquidity
Source: BIS

93
6.b. Fourteen principles
A) Board and management oversight
Effective oversight of e-banking activities
Establishment of a comprehensive control
process
Comprehensive due diligence and
management oversight process for
outsourcing relationships and other third
party dependencies

94
B) Security controls
Autentication of e-banking customers
Non-repudiation and accountability for e-
banking transactions
Appropriate measures to ensure
segregation of duties

95
B) Security controls
Proper autorisation controls within e-
banking systems, databases and
applications
Data integrity of e-banking transactions
records and information
Establishment of clear audit trails for e-
banking transactions
Confidentiality of key bank information

96
C) Legal and Reputational risk
management
Appropriate disclosures for e-banking
services
Privacy of customer information
Capacity, business continuity and
contingency planning to ensure
availability of e-banking systems and
services
Incident response planning

97
Types of bank/customer E-Banking Relationships
Licensed Home Abroad
Type of
bank
Onshore Offshore Onshore Offshore
Brick and Click A B C D
Virtual E F G H
6.c. Cross border issues
Source: Bank for International Settlements

98
Technology expanding the virtual
geographical reach of banks and
customers
No need of physical expansion
Interconnected networks
-> countries not licensed or supervised
Banking and non-banking activities
Different jurisdictions

99
Existing regulation, laws, controls etc
apply to e-banking
Bank mostly refrain from cross border
activities in e-banking
-> Addition of e-banking to existing
Brick and Mortar

100
6.d. Risk Policy
Assess risks
Control risks
Monitor risks
Integrate in overall
risk management

101
6.e. Legislation
Introduction
 European directives
 American example
 Other countries (Lebanon, Hong Kong)

102
Europe
Directive on prospectuses
Dates: 2003 (Updates in 2004,2006 and 2007)
Refce: directive 2003/71/CE
Objectives:
create a single passport for issuers offering
securities to the public
available on the website or in electronic
format
6.e. Legislation

103
Europe
Personal Data protection Bill
Dates: 1995 (Updated in 2003)
Refce: Directive 95/46/EC
Objectives:
Free movement of personal data
Rules for the state, companies and
individuals
Appropriate level of protection
6.e. Legislation

104
Europe
Filing via electronic means
Dates: 1968 (Yearly Updates 2006 -> 2009)
Objectives:
 File acts via electronic means
 Useful for bank statements
6.e. Legislation

105
Europe
Directive on e-money institutions
Dates: 2000 (Updated in 2006 and 2009)
Objectives:
Promote consumer confidence in the use of
e-money
Establish regulatory framework for
electronic money institutions
6.e. Legislation

106
Europe
Electronic signature act
Dates: 1999 (Updated in 2007 and 2008)
Objective: Legal framework and technical
conditions for electronic signature
6.e. Legislation

107
Europe
Directive on traffic data retention
Dates: 2002 (No Updates)
Revision of Directive 97/66/EC
Allow traffic data retention for limited
time (billing purposes)
6.e. Legislation

108
Europe
Distance marketing of consumer financial
services
Dates: 2002 (Updates in 2005 and 2007)
Mutual recognition of the banking licence and
prudential supervision
6.e. Legislation

109
USA
E-sign act
Date: 1999
Issuer: SEC (Securities exchange
commission)
Objectives:
Retaining electronic records required by
regulation, statute or law
Rules of autentication, filing and timing
terms
6.e. Legislation

110
Lebanon
Electronic banking and financial
transactions
Circular n° 1810, 30th march 2000
Objective: modernize, regulate and
organize electronic banking sector
6.e. Legislation

111
Hong Kong
Authorization of virtual banks
Banking Ordinance, section 16(10)
Date : May 05, 2000
Objective: define, authorize and organize
virtual banks, in order to conduct banking
business in Hong Kong
6.e. Legislation

112
International
Convention on cybercrime
Date: 23th November of 2001
Objective:
International response and coordination to
challenge cybercrime and cyberterrorism
6.e. Legislation

113
Basel committee on banking supervision
www.bis.org
www.iosco.org / www.ias.org
Cobit 4.0
www.isaca.org
ISO 17799
www.iso.org
OCTAVE
www.cert.org
6.f. International standards

114
COSO – Enterprise Risk Management
www.coso.org
PCI Data Security Standard
www.mastercard.com
Financial Action Task Force
www.fatf-gafi.org
Corporate governance codes
www.ecgi.org
6.f. International standards

115
6.g. Balance between risk and userfriendliness
o Acceptable risk
• Legal protection improves
• Not 100% risk free
• Risks in e-bkg reduces, risk in m-bkg to be reduced
• Part of the risk identification process
• Sometimes according to governance-defined goals

116
6.g. Balance between risk and userfriendliness
o The Y generation
• Born with technology
• Some experience with small amounts
• New vision about shopping habits
• Easy technological switch (e-bkg, m-bkg)
• Lower risk perception

117
19RAF2/BAPS © Rwanda Bank Association –117

118
Summary of part six
•Risk management
•Fourteen principles
•Cross border issues
•Risk policy
•European directives, US and elsewhere
•International standards
•Acceptable risk and userfriendliness

120
7.a. Segmentation
7.b. Marketing and commercial trends
7.c. Action in developing countries
7.d. Convert members into clients
7.e. CRM in e-commerce and electronic
banking

121
7.f. New model of competition
7.g.Using SMS as promotional tools
7.h. The screens network as communication
channel
7.i. Buying life insurances on Internet
7.j. Free tracking tools

123
7b. Marketing and commercial trends
Europeans use
online banking to
quite different
degrees.
Source: Deutsche Bank

124
What we learn from the differences in
Europe
Europeans do not discriminate between online
banking and e-commerce.
Share of online bankers does not decrease with
age.
Education drives online-banking adoption.
Financial incentives can convince some to go
online.
Source: Deutsche Bank

125
125
Ebanking 3.0 - American examples
Mint.com (link: www.mint.com)
400.000 users
21 billion usd transactions
Demo: https://wwws.mint.com/
Xero.com
More accounting possibilities
Rudder.com
Email alerts with complete report

126

127
–connects to more than 8,000 US
financial institutions.
– account information updated
daily.
– automatically categorizes all
purchases, showing how much is
spent on gas, groceries, parking,
rent, restaurants, DVD rentals and
more, with amazing precision.
– automatically analyzes and
graphs investment performance,
– highlighting the fees paid in each
of the accounts.
–- advanced alerting system sends
you email or SMS messages (your
choice) on any unusual activity, low
balances, fees and upcoming bills
–constantly searches through
thousands of offers from hundreds
of providers to find the best deals on
everything from bank accounts to
credit cards; brokerage accounts;
and more
– suggestions are unique— as
they’re based on individual spending
patterns.
Mint.com - features

128
- A dashboard with real-time
view of business at a glance with a
snapshot of all transactions.
- Easy bank reconciliation
keeping accounts accurate and up
to date. Automatic bank feeds get
transactions into Xero without
effort.
- Manage the individuals and
organisations to do business with
and have them easily appear in
invoices and transactions.
128
– Single view of where the money is
coming from and when. Create,
send, receive and report on invoices
all from one place.
–View and manage how much
money is owde, what¹s overdue and
what's waiting payment.
– Easily enter and manage personal
expenditure.
– Generate and view interactive
reports in real-time, anytime.
Xero.com – features

129
129
Ebanking 3.0 European example
Optissima
France
Demo
http://www.optissima.com/caracteristiques
Different features

130
–My
budget
–My
expenses
–My
operations

131
–Optimisation
– Opti-list

132
132
Ebanking 3. 0 - Conclusion
For the Y generation
Challenges for the banking world
Improve advices and services for clients

133
Power to the user
Blog for feedback
Surveys on website
Inform on the web -> call client / visit
advisor (branch) -> confirm order by
phone (mobile/call center)
Web call back (bank phones client on
demand)

134
e-commerce and e-banking
Electronic bills
Electronic bank payment
Integration with electronic
shopping malls
Aggregators
Insurance / investments /
accounts
Fidelity cards (shops) / frequent
flyers

135
o Africa
o The immense potential in e-Banking in Africa warrants
serious attention from all industry stakeholders. Ethical and
legal issues should be factored in the development of any
related ICT strategy, which regulatory authorities (e.g.
Central banks), should be very familiar with so that the
landscape can be a condusive one to support sustainable
growth in all other socio-economic sectors.
The Future of e-Banking in Africa, CBA
7c. Action in developing countries

136
o Africa
• The United Bank for Africa (UBA) Ghana Limited has
taken electronic banking to another dimension by
launching, “Wise Alert” allowing customers to receive
SMS notifications on their mobile phones or through their
e-mail addresses, or both, when transactions occur on
their accounts.
• http://www.modernghana.com/news/133123/1/united-
bank-for-africa-steps-up-electronic-banking.html

137
o India
• Indian banks : the retail banking in a big way.
• Internet Banking in the nascent stage of development (only 50
banks are offering varied kind of Internet banking services).
• Internet sites offer only the most basic services. 55% are so called
'entry level' sites, offering little more than company information and
basic marketing materials.
• Only 8% offer 'advanced transactions' such as online funds transfer,
transactions & cash management services.
• Foreign & Private banks much advanced in terms of the number of
sites & level of development.
Study by Dr Mishra is Professor at IIM Lucknow.

138
o India:
o Most Popular Banking Service on Mobile
o Checking account balances most popular banking service used by
urban Indians (40 million users ) checking last three transactions, (28
million) and status of cheques (21 million users.)
Usage Unique Users (In millions)
Used mobile banking 43.70
Checking account balance 39.97
View last three transactions 28.15
Status of cheques 21.06
Payment reminders 20.92
Request a cheque book 19.11
Study mobile banking in india, by Vital Analytics

139
o Brazil
• Today, the majority of the top Brazilian banks offer advanced e-
banking services
• 25 million Internet banking users.(2008)
• Government actively supports electronic services - and security
• Common services :
- Real-time money transfer;
- Bill pay;
- Tax payment;
- Social security payments.
- ATM usage, (biometrical security as authentication method).

140
o Brazil
• Today, the majority of the top Brazilian banks are
offering online banking via mobile phones
• Mobile Payment and Authentication with M-CodeOne in
Brazil (vidéo)
http://www.youtube.com/watch?v=PFLvhzt81PU

141
7d. Convert members into clients
Visitors -> members -> clients
Online customer conversion rate
2.5 % in 2005
3.8 % in 2007
Average customer acquisition cost
20.45 Eur / client

142
Summary of part seven
Segmentation
Marketing and commercial trends
Profile of a client
Convert members into clients
New model of competition

143
Case study: Electronic statements
1. Which of the 11 arguments used in this article are relevant
to your bank? Why?
2. Which arguments in "Other opinions" are not relevant to
your bank? Why?
3. What arguments could one give in favour of paper
statements ?
Case study

144
8. How to hold back the invisible enemy
8.a. Threats
8.b. Attacks
8.c. Safeguards
8.d. Security policy
8.e. Anti-Money Laundering

145
8.a. Threats
Fundamental threats (1)
Disclosure
Tampering
Denial of service
Repudiation
Illegitimate use

146
8.a. Threats
Enabling threats (2)
Masquerade
Trojan Horse
Virus
Control bypass
Authorisation violation

147
8.a. Threats
Underlying threats (3)
Eavesdropping
Scavenging
Indiscretion
Admin. error

148
8.a. Threats
Phishing/ whaling
e-mail
website
trust/urgency
CNP transactions
stolen card
stolen card details
operate at distance
Others
Botnet Skimming
Malware Spoofing
Spyware Ransomware

149
8.a. Threats
Solutions directory on the antiphishing.org website listing the types of
anti-phishing solutions available today on the market.
Sponsor Solutions
Prevent cousin domains
Detect and analyze attacks
Takedown
Fraud analysis
Forensic services
Application gateways
Consumer toolbars
Email authentication
Email filtering
Web filtering
Hardware-based 2-factor
authentication
Software-based Strong
Authentication
Mutual authentication
Law enforcement enablement

150
8.b. Attacks
Threats into action
=
Attacks

151
8.c. Safeguards
Authentication
(two/three factors)
Access control
Confidentiality
Integrity
Accountability

152
8.c. Safeguards
Physical
Personnel
Media
Emanations
Administration
Lifecycle

153
8.d. Security policy
Why is security weak ?
Organizations unaware of risks
Organizations unprepared to act
Countless contacts to corporate networks
(ext. - int.)

154
Why is security weak ?
Too few experienced employees in security
technology
Lack of time to establish stronger security
Complexity of technology

155
New security features
 pictures on login page
 user tracks suspicious sites
 special questions for users

156
156
8.e. Anti-money laundering (AML)
Management needs to recognize electronic
banking as a potentially high-risk area and
develop adequate policies, procedures, and
processes for customer identification and
monitoring for specific areas of banking.
 Risk Factors
 Lack of face to face contact
 Cash withdrawals with no bank staff
 Distance opening of accounts
Source: http://www.ffiec.gov

157
157
 Risk Mitigation
 Evaluate
 Assess
 Transaction Testing
 Customer identification
 Credit reference agency search
 Personal rating agencies
 Controls and Audits on STP
Source: http://www.ffiec.gov

158
158
Tools
Manuals for AML risk management
http://bit.ly/b6ApzW (fifec)
http://bit.ly/bZLPLV (fatf)
GIFTS Software
 single source provider of anti-money
laundering solutions
KYC solutions
http://www.giftssoft.com

159
Summary of part eight
Security is a key issue for clients’
confidence, for banking operations
and for the future of electronic
banking

160
Case study
MTV networks and First Citizen Bank: Defending against Hacker and Virus
attacks.
1. What are the business benefits and limitations of an intrusion-detection system like that
installed at First Citizens ?
2. What security defenses should small business have to protect their websites and internal
systems? Explain your choices.
Ebanking Security
What recommendations do the experts give for:
• Data security
• Login/ password security
• Security to access applications
• Identity protection

161
9 a. E-mail centralisation
9 b. Controlled chat (direct talk)

162
E-mail centralisation
Advantages
better follow up of e-mails
less overlap of contacts
cost saving and improved efficiency
investment in equipment
resistance of users

163
–Addresses the operational problems introduced by the growing size of e-
mail and electronic messaging data (records management, legal discovery,
supervision and monitoring for non-compliance)
–Includes rules-based retention and retrieval mechanisms to assure that the
required e-mail is retained for the period specified by law
–Adds for fast retrieval of both specific e-mails and subject, timeframe
bound, or author-based batched queries
–Reduces storage costs with advanced compression technology and tiered
storage schematics
–Assists in the management of mailboxes, increases server performance,
enables faster backup and restore
–Assists in the automation of workflow steps and associated e-mail and
electronic messaging content to processes, cases and line-of-business
systems
FileNet Email Manager (IBM)

164
Controlled chat (direct talk)
Advantages
no physical meeting: that can be either more frequent, either
with both participants on a better time scheme
frequent contact: as soon as the client is connected and the
adviser is available, a contact can be established
promotional tool: useful to push products, advises etc
security to be improved: direct talk can use an unprotected
channel of communication
can be perceived as invasive: to be treated carefully by the
bank

165
165
Summary of part nine
New technologies are coming up,
sometimes from outside the
banking environment, but all will
change the way electronic and
mobile banking will look like in the
future

166
10. Training
10 a. Technical staff
10 b. Commercial staff
10 c. Staff in Auditing and Controlling
10 d. Back Office staff
10 e. The client

167
167
10. Training
Technical staff
From security experts to computing
professionals, the update and improvement of
their knowledge through training is very
essential, since the technological standards
change quite frequently, every month new
techniques are discovered, new security
breaches have to be covered.
Training with external experts about many
items have to be considered:
networks and internet
security (physical, networks, access codes)
programs and software

168
168
10. Training
Sales force and branch staff
Selling financial products (either non-physical or
physical, like credit cards) in electronic banking
is influenced by:
new legislation (distance selling, protection
of personal data etc)
new techniques of communication on the
marketplace
new relations between the client and the
(electronic) bank

169
169
10. Training
Staff in auditing and controlling
To reduce the risks and improve the prudential
approach in electronic banking, specific training for
auditing and controlling experts is required. The
content should integrate:
new legislation (distance selling, protection of
personal data etc)
new administrative methods and back office
procedures
new security techniques

170
170
10. Training
Back office staff
For the back office staff, the new techniques of
transactions (mainly the straight through processing)
changes a lot the job of the back office staff. The new
hours of operations (later at night for access to a lot of
stock exchanges) changes also.
Required trainings:
new methods of operations’ checking
new methods of financial operations
improved security
new electronic supports and documents

171
171
10. Training
The client
Even the client is an important participant to be
trained. It’s more a general approach to
electronic banking: advantages and pitfalls, how
to do simple operations like transfers or standing
orders, how to invest for private clients, how to
act as a electronic banking professional’s clients
(industry’s financial officers)...
e.g. WeProsper.org

172
172
Summary of part ten
Training is essential , in order to
 Maintain security
 Be up to date technically and
technologically
 Educate and acquire clients

174
11.Operations
11 a. Cost of operation
11 b. Front Office vs. Back Office
11 c. Brick & Click

175
11.Operations
Costs of operation
Human (branch) : 1 EUR
Paper transaction: 0.75 EUR
Self banking: 0,50 EUR
PC transaction: 0.25 EUR
Internet transaction: 0.10 EUR
Source: Gartner Group

176
11.Operations
Front Office vs. Back Office
Collaborate with “brick” back office
integrated back office (automation, on line
orders on stock exchanges)
Call centre < - > CRM

177
11.Operations
Brick and click
Click
virtual bank
Brick
Confidence
transaction during lunch time
human relation
image building
cash deposit
opening an account

178
Summary part eleven
Key elements to operate a sound
e-bank :
 Transactions
 Back Office
 Brick & Click

180
12. Corporate electronic banking
12.a. Foreign exchange
12.b. Corporate portals
12.c. BTB banking over the web
12.d. Marketplaces for industrial clients and
the electronic bank
12.e. Automatic clearing houses
12.f. Direct access to quotes and
Stock Exchanges
12.g. Direct access to financial information

181
o Basic services
• Web-based Cash Management platform
• Web Based Cash Management file transfer
• Foreign Exchange Spot/Forward and swap execution, an
FX Derivative pricing capability and access to extensive
proprietary research.
• Internet based trade services
o Additional online services
• Credit & Relative Value Analysis
• Corporate & Institutional account enquiries
Foreign exchange

182
Examples of corporate banking services :
ANZ
http://www.anz.com/corporate/productsservices/transactionservices
Nordea
https://www.nordea.com/en/our-services/banktobankbusiness/
Automatic clearing houses
http://www.depositaccounts.com/blog/how-ach-transfers-work.html
http://www.finweb.com/banking-credit/learn-the-basics-of-ach-debit-programs.html
e-marketplaces
http://www.epiqtech.com/e-marketplaces.htm
Fedline Web
https://www.frbservices.org/fedline-solutions/index.html
Foreign exchange

183
Corporate portals

184
o Services on corporate portals
• cash management,
• trade finance
• securities services functions
o Requirements and evolutions
• local regulations: resilience, security, data integrity and
adherence to local requirements
• evolved from direct host-to-host connections for single
purpose transactions to multi-functional internet portals
o E.g. Straight2Bank of Standard Chartered Bank
Corporate portals

185
o New needs (Corporate Portals 2.0)
• information sharing
• interoperability
• user-centered design and collaboration
• lack the visual, easy to use and customizable
dashboards
Corporate portals

186
Money can be transferred from one bank account to another,
without using a check or debit card. Large numbers of transactions
are processed
every day through the
Automated Clearing House
system. Every bank now uses
this system for a large number
of their transactions.
Automatic clearing houses

187
Services
• balance reporting
• payroll direct deposits
• vendor disbursements
• book transfers and wire transfers.
• ACH capabilities
• federal tax payments.
.
BTB banking over the web

188
Technology
• a way to speed up the time it takes corporate suppliers
and buyers to send and receive payments
• aims to help banks make better financing decisions by
giving them closer insight to their customers' business
relationships.
BTB banking over the web

189
1. European Central Bank (ECB)
No e-banking with commercial banks, only exchange of
information via Internet
2. U.S. Federal Reserve (FedLine Web®)
web technology to access critical payment services
Services offered
Account Services, Check Services, FedCash® Services,
FedACH®Services, Fedwire® Funds Service, Fedwire
Securities Service and National Settlement Service.
Central bank and commercial banks

190
o Location on the Internet where companies can obtain or
disseminate information, engage in transactions, or work
together in some way
o Two basic functions:
• 1) they allow companies to obtain new suppliers or
buyers for company products
• 2) developing streamlined trading networks that make
negotiating, settlement, and delivery more efficient.
e-marketplace

191
o Services
• forward or reverse auctions
• vendor catalogues
• fixed price ordering
• trading exchange functionality
• bulliten boards / wanted ads
• RFQ, RFI, or RFP capability.
• http://www.epiqtech.com/e-marketplaces.htm
e-marketplace

192
Summary of part twelve
Direct access to information, quotes,
investment advice and economical
data, « a click away ».

194
13. General Summary
13.a. Others and summary
13.b. More and questions
13 c. Topics handled in this seminar

195
13.a. Others and Summary
Significant work in evaluating trends in e-
finance from international Forums and
organisations
The World Bank: www.worldbank.org
FIBV: International stock exchange
federation ww.fibv.org
BIS: Bank of International Settlements
www.bis.org

196
13.a. Others and Summary
IAIS: International association of insurance
supervisors wwww.iaisweb.org
OECD: Organisation for economical cooperation
and development www.oecd.org
APEC: European finance ministers
www.apec.org
ENISA: European Network Information Security
Agency www.enisa.europa.eu

197
13.b. More and questions
Website:
http://ebanking2000.wordpress.com
E-mail address :
hubvv@outlook.com

198
13.c. Topics handled in the seminar
1. Introduction
2. Situation of e-commerce and e-banking
3. Strategic choices and new trends
4. E-money: new payment methods ?
5. Practical e-commerce and e-banking
6. Prudential approach in e-commerce and
electronic banking
8. Hold back the invisible enemy

199
13.c. Topics handled in the seminar
10. Training
11. Operations
12. Corporate e-commerce and electronic banking
13. General summary

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E banking slides raf 2

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E banking slides raf 2