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PREFACE
Technology
and Finance Sector
Banking sector is in
the cruel competitive atmosphere because of
the policies targeting profitability, customer care, new products &
services and reducing of costs. Today, company time of the banks have to be 24
hours in a day, 365 days in a year. If the convenient selection is made,
information systems are the powerful assistants of race against time.
Information systems easily convey you to resources to get critical decisions in
financial management, superimpose upon reducing the cost of
transactions. A convenient system should
provide the possibility to be amortized of the existing investments on
information processing, reduce the costs and be an assistant for determining the
needs of customers. Because of easy
reaching opportunity to them without time restricting, and
low costs of banking services implementing on Internet, “virtual
branches” are come up to front. In some countries, there are more Internet
banking branches than conventional branches. Today, the real-time
data is an unavoidable necessity. On such occasions the Internet, providing an
area for data sharing and transferring, is creating possibility for applying
critical decisions to be taken instantly. Even the Internet can be seen as an
area for data collecting and evaluating area by Web analysts, as it can be used for institutional needs.
Because of this, institutions need secure sharing of financial data on Internet. Experts say that
“Strive for preserving the perfection brings stability. The thing that brings
the development is determination to
set up an harmony with inevitable changes.” Ahmet
Hamamcıoğlu CYBER CRIME’S LOOMING
THREAD
Little Internet-related
harm has beset financial institutions to date. But robust defensive measures are
needed to keep the wolf at bay. Financial services are proliferating on the
Internet, so can cyber-crime be far behind? The question looms
ever larger as banks and other financial intermediaries embrace the Internet.
About 3,000 banks and thrifts now host their own Web sites. The overall e-commerce
market, now valued at $43 billion of annual sales, is expected to grow to $1
trillion by the year 2000. With so much money
and sensitive customer information sloshing through computer networks, many
experts worry about the potential for expensive breaches in security. For the
sake of their industry, banks need to keep cyber-crooks at bay, since major
fraud incidents could shake consumer confidence in the entire financial system.
To preserve that consumer trust, security experts recommend that banks continue
making full use of 128-bit encryption technology, which is considered nearly
impossible to penetrate. Trying to break 128-bit code would be like sifting
through data “the size of the Pacific Ocean,” a task that would take even
the most brilliant hacker about 1,000 years. Other technologies
that may help reinforce on-line security include voice and iris recognition
machines and fingerprint readers. Much damage can be done internally by
employees through sabotage, theft of information, unauthorized access and
wasting valuable company time by using Internet for personal purposes. Also,
e-mail increasingly is used as a formal means of handling customer inquiries and
complaints, delivering certain types of service, and exchanging sensitive
information. The 1999 CSI survey
of 521 organizations, including corporations, financial institutions,
universities and government agencies, found system penetration by outsiders
increasing. The 163 institutions able to quantify the damage reported $124
million in total losses. The most serious thread was deemed to be “theft of
proprietary information,” accounting for about $42.5 million in losses to 23
businesses and organizations. Old fashioned check fraud cost selected U.S.
commercial banks $512 million in 1997, according to the ABA’s most recent
survey. Clearly, the familiar crimes of check forgery and credit card theft
remain the major fraud concerns for banks. The FBI, which has
about 10,000 agents nationwide, has been adding staff to computer crime
divisions over last five years. But is that enough? In the world of cyberspace,
people can disguise themselves with whatever names they choose. Other concerns
involve the ease with which international borders are breached and the fact that
break-ins can occur through telephone lines. Operating out of an apartment in St
Petersburg, Russia, with a laptop computer and aided by confederates in other
countries, 24-year-old Vladimir Levin hacked his way into Citicorp’s cash
management system. Fake banks have also
been using the Internet to dupe unwary customers. The Freeman militia in
Arizona, for example, put up a web site under the name Star National Bank and
offered to pay interest rate on deposits up to 30%. To combat these phony Web
sites, ABAecom offers a “SiteCertain” seal that can be placed on legitimate
bank sites to assure consumers. While it’s difficult to control what happens
in the vast reaches of cyberspace, banks are able to protect communications to
and from their own Web sites through the use of 128-bit encryption programs.
Another protection is the simple fact that most banks provide a limited number
of services over the Internet. Other new technologies, such as electronic bill
presentment, which involves the viewing and paying of bills by computer, may
actually enhance security. The reason is that eliminating check float eliminates
the uncertainty of payment. While the on-line
threats posed by outsiders are easy to visualize and interesting to discuss,
managers also should be wary of the enemy within. Remember when Kenneth
Starr’s report, containing salacious details about President Clinton and
Monika Levinsky. According to the estimations the incident cost American
companies $ 500 million in the form of lost productivity as millions of workers
downloaded the report on company time. CSI recommends that
organizations establish comprehensive information protection programs. Such
programs should include “a well-trained staff, an all-encompassing body of
policies and procedures, a creative and engaging security awareness program, and
overarching information security architecture.” DEVELOPMENT
OF SMART CARDS Continued from previous issue United Kingdom
The UK is the most
mature plastic card market in Europe. Like France prepaid card applications have
proliferated in an uncoordinated manner and until recently have largely been
ignored by the banking sector. Mondex
Mondex is an
electronic cash payment service that incorporates elements of an electronic
purse but extends the functionality to the point of being a total cash
replacement. It has been announced as a joint venture in the UK between NatWest
Bank, Midland Bank and British Telecom. Mondex’s intentions are to reduce to
reduce bank costs for handling cash, reach the unbanked segment by making the
card easy to use and provide an inexpensive alternative for welfare payments. In
addition to being a true cash replacement, Mondex is the first system to offer: §
Twenty-four-hour banking and
access to “Mondex cash” by telephone – either public payphone or a home
smart phone. §
Multi-currency purses
capable of holding up to five different currencies. §
An electronic wallet to
which value can be transferred for safekeeping and to enable payments to be made
from one card to another. §
A PIN that can be used to
lock the card, preventing value in the card from being used. §
A personal key for card
reader to check the balance on the card and review the last ten transactions. British
Gas (Utilities) From late 1991 to
Spring 1992 British Gas carried out trials of Smart card payment and control
system called Quantum. The system was developed in response to two requirements: §
Firstly, British Gas needed
to upgrade the existing prepaid meters (800,000) which use plastic keys. §
Secondly, OFGAS, the
industry watch-dog, imposed conditions upon British Gas not to withdraw the
service from those customers who had difficulties in making payments -
disconnection only as a last resort. The new Smart Card
meter installations are mostly on large housing estates were customers tend to
use prepayment as their preferred method of payment. In August 1992, following
the trials, British Gas began to roll-out Quantum system nationwide with a
network of 6,000 chargers. Greater
Manchester Passenger Transport Executive (GMPTE) There are now more
than dozen Smart card-based public transportation systems operational in the UK
alone, with others planned, the best known, and most ambitious of which is the
development of the Greater Manchester Passenger Executive (GMPTE) application.
Plans include card sales and distribution network of 800 outlets to support the
system. It is expected that all half million regular public transport users in
the Great Manchester region will carry a GMPTE Smart Card. JerseyCard – Multi-functional Town
Card
Jersey is a self-governing
duty free island, which has a population of some 80,000 inhabitants, over 25% of
which now hold a Smart Card. The cards are issued free and the service providers
pay JerseyCard a rental for taking space on their “chip”. BMS (Barclays
Merchant Services) handles the acquiring and transaction processing for
JerseyCard and as a direct result of this relationship Barclays has been able to
substantially increase market share on the island. Africa
The security
attributes of the Smart card lend itself well to the African sub-continent where
there are poor telecommunications infrastructures. Republic of South Africa
Three of the four
major banking groups in South Africa had run trials or developed systems: §
The Trust Bank, now part of
the ABSA Banking Group (the largest banking group in South Africa) installed a
prepaid Smart Card system at Rand Park Golf Club near Johannesburg in 1990. §
The First National Bank of
South Africa (FNB), in conjunction with The Foundation for African Business and
Consumer Services, run a prepaid Smart Card trial during the last half of 1992. §
The Nector Group have
developed an open system electronic purse application – Megalink (also known
as UEPS – Universal Electronic Payment System) These banking groups
have formed an interbank group with the other major commercial banking group,
the Standard Bank, to produce a national electronic purse standard. The focus of
the Interbank Electronic Purse is different – it will cover both small and
large value transactions, as well as specific industry applications such as
transport and medical. South East Asia
Indonesia – In April 1992 BankExim, the Indonesian State-owned bank, launched a
Smart Card program Eximsmart targeted at high net worth individuals. Indonesia,
as a country, is a collection of 13,000 islands and has a population of 180
million. Telecommunications are poor, so there is a demand for secure off-line
money transmission systems. Singapore – Similar in concept to the Portuguese Multibanco approach, seven
Singaporean banks operating as NETS (Network for Electronic Transfers Pte Ltd)
announced plans in September 1992 to implement a national electronic purse
system – CashCard. Taiwan – is a country the size of Belgium with a population of 20 million
people. In October 1992, FISC (Financial Information System Centre), the non-profit
making Finance Ministry Authority, launched an open system electronic purse
application in Taipei. United States
CoreStates Financial
Corp. in Philadelphia, announced the launch of a new electronic purse system
over 900 participating financial institutions, 30 million cardholders, 14,000
ATMs, and 120,000 POS terminals in 28 States. Market research shows that
consumers are interested in using an electronic purse at a variety of acceptance
locations. Locations most desired are supermarkets, gasoline stations,
convenience stores, postage machines and telephones. Consumers prefer to reload
their cards at home or at an ATM. Card Associations
The finance sector
requirements for a Card Authentication Method (CAM) to address the growth in the
magnetic striped card fraud problem has led to investigations by the card
associations to review existing and emerging card technologies to help secure
the card and establish that card’s authenticity at the point-of-sale. Several
card technologies have been evaluated and the Smart Card was selected as the
best and most cost effective available today. This has led to several
initiatives by the card associations including the work referenced earlier on an
industry specification – the EMV (Europay, MasterCard, Visa) specifications. FUJIBANK- Past and Present
Chronologically
1864
Mr.Zenjiro Yasuda opens a
combination dry goods and money exchange business, "Yasudaya," in
Norimonocho on Nihombashi's Ningyocho Street. 1865
"Yasudaya," moves to Kobunacho and changes its name to "Yasuda
Shoten," a money exchange shop. 1880
"Yasuda Shoten" becomes Yasuda Bank, and thereby founds the
original Fuji Bank with a capital of 200,000 yen, thirty-one employees, and
three branches. 1912
Yasuda Bank becomes incorporated, with a capital of 10 million yen, 14
branches, and eight sub-branches. 1923
On November 1, a new Yasuda Bank is created by merging 11 related banks.
With a capital of 150 million yen, 159 branches, 52 sub-branches, including its
deposit and loan balances, Yasuda Bank becomes the biggest bank in Japan. The
Head Office moves to its current site in Otemachi. 1945
At the end of September, Yasuda Bank's deposit balance reaches 13.9
billion yen and becomes Japan's top bank in deposits. 1948
On October 1, Yasuda Bank changes its name to Fuji Bank. With capital
amounting to 1.350 billion yen, Fuji Bank is the largest in Japan. It has 7,899
employees, 185 branches, and four sub-branches. Ever since this time, Fuji Bank
has been the peoples' bank, a bank suitable for modern times. 1952
Fuji Bank opens its first overseas branch office in London. 1963
Overall deposits exceed one trillion yen (by the end of March, 1.040
trillion yen). 1966
The new Head Office of the current Fuji Bank is completed. 1972
Fuji Bank's Seoul Branch and Los Angeles Agency are opened and Fuji Bank
(Schweiz) AG is established in Switzerland, as the expansion of Fuji Bank's
network of 17 overseas offices continues. 1979
Fuji Bank starts to domestically handle certificates of deposit (CD) on
May 16. Overall deposits exceed 10 trillion yen (by the end of September, 10.179
trillion yen). 1980
Centennial of the founding of Fuji Bank (November 1). 1984
The U.S. financial corporation, Walter
E. Heller and Company, and Walter E.
Heller Overseas Corporation (currently, Heller Financial, Inc. and Heller
International Group, Inc.) are acquired by Fuji Bank on January 26. 1987
On September 18, Fuji Bank becomes the first Japanese bank to be listed
on the London Stock Exchange. 1988
Establishment of Fuji Research
Institute Corporation on October 1. On November 30, Fuji Bank is listed on
the Paris Stock Exchange. 1991
In March, Fuji Bank establishes its "European
Advisory Board." 1993
The J League passbook and
ATM card make their debut on July 26. Fuji Investment Trust Management Co., Ltd. is established on
September 27. 1994
Fuji
Securities Co., Ltd. is
established on October 19. 1995
Fuji
Investment Management Co., Ltd.
and Fuji Investment Trust Management Co.,
Ltd. are merged. 1996
The
Fuji Trust and Banking Co., Ltd.
is established on June 11. Fujibank’s paid-in-capital
is 529,087 million yen, it has 290 domestic offices with 14,275 employees, 47
overseas offices with 2,023 employees, as of March 31, 1998. JAPAN YEN
The yen was
established as the unit of monetary account in Japan by the enactment of the
Shinka Jörei (New Currency Regulation) of 1871. The newly established Meiji
government introduced a decimal system of currency (one-hundredth of a yen
was called a sen, and one-tenth of a sen
was called a rin) to replace the
complex system of currency. The new currency regulation adopted a gold standard,
which pegged the yen parity of 1.5 grams (0.05 oz) of gold, the equivalent of
one Mexican dollar (the standard unit for East Asian trade at the time). A central bank, the
Bank of Japan was established in 1882 and the following year issued its first
bank notes convertible to silver. Japan returned to the gold standard through
enactment of new currency law in 1897. The new law also provided for the
withdrawal from circulation of bank notes issued both by the government and by
the national banks and reserved the issue of new bank notes as the sole right of
the Bank of Japan. The value of the yen was set at 0.75 grams (0.03 oz) of gold. During the World War
I, Japan dropped the gold standard and prohibited the export of gold. Because of
serious economic crises and the Tokyo earthquake of 1923, Japan was unable to
return to the gold standard. Japan reintroduced the gold standard in 1930 but
the timing was unfortunate, since it coincided with the onset of the worldwide
depression. In 1931, Japan abandoned the gold standard and prohibited the export
of gold. In 1942, a new Bank of Japan law was enacted authorizing the government
to determine the maximum number of bank notes to be issued irrespective of the
amount of gold held in reserve by the Bank. In 1949, a unified
exchange rate of 360 yen to one US dollar was adopted. The yen regained its
status as an international currency in May 1953 when this exchange rate was
officially recognized by the IMF and the yen’s parity established at
approximately 2.5 milligrams (0.0088 oz) of gold. Japan signed the GATT in 1955
and joined the UN in 1956. In 1964, Japan agreed to article 8 of the IMF charter,
obliging the country to lift restrictions on foreign exchange transactions. From 1973 to the end
of the 1970s Japan’s export performance was a major influence on the value of
the yen. In the first half of the 1980s, the US government’s efforts to
control inflation through high interests, attracted massive capital investments
from overseas and kept the dollar high against the yen, however, the high dollar
contributed to erosion of the international competitiveness of US industry. To
address this problem, the United States called a meeting of the finance
ministers of the five leading industrialized countries in September 1985. This
meeting produced the Plaza Accord, in which members agreed to intervene
collectively in the currency markets to reduce the value of the dollar. As a
result the value of the yen rose from 239 yen to one US dollar in 1985 to high
of 128 yen to one US dollar in 1988. In line with
Japan’s growing presence in world financial markets and its role as a major
creditor nation, in the 1990s increasing utilization of the yen is expected for
world trade, capital transactions, and foreign currency reserves.
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