Category: Banking

Tips for safe Internet Banking

How safe is internet banking?
Experts view on Internet banking right now is that it’s not safe. To get to a reasonable level of security you need a good knowledge of computers. If you don’t have that knowledge, you’re probably better off waiting until the banks get their acts together. The way forward is for them to supply their own software that you install on your own machine and use for accessing your account. Only then will Internet banking be relatively safe for people without computer expertise.
Internet Banking is becoming popular with people because we feel it is the easy way to deal with
money and one can make his PC a live bank, doing all the things a bank can do without actually
visiting a bank. But very few of us are able to protect our accounts from fraud. So if you have a
bank account with any bank and use the Internet to make transactions, money transfer or credit card
payments, here are some general ‘safe-banking’ tips that you might do well to follow:
Never use unprotected PCs at cyber-cafes for Internet banking.
Never keep your PIN and credit/debit card(s) together.
Never leave the PC unattended when on Internet banking in a public place.
Never reply to e-mails asking for your password or PIN.
Visit banks’ website by typing the URL in to the address bar, and not by clicking a link in
an e-mail arrived in your inbox.
Before using Internet banking, verify the domain name displayed to avoid spoof websites.
Log off and close your browser when you have finished using Internet banking.
Never let a stranger assist you at the ATM. Protect your ATM card PIN.
Count the cash and put it in your wallet before leaving the ATM.
Check your monthly credit/debit card statement for unusual activity.
Always draw a line through unused space on the cheque.
Never leave your cheque book unattended.

Never sign blank cheques.
Never keep pre-signed cheques anywhere.
Never hand over to unknown persons any signed blank cheques towards pre-EMI/EMI amount, for
opening of saving account or opening of any other accounts.
Remember to cross your cheque whenever applicable.
Count the number of cheque leaves whenever you receive a new cheque book.

There seem to be few that the average person can read and understand. With a little investigation at your local bookstore and online, you can find some fairly recent books that have something to say to the average consumer about internet banking.

Scams and Swindles: Phishing, Spoofing, ID Theft, Nigerian Advance Schemes Investment Frauds. There are many how-to books with instructions about knowing when you are being taken for a ride.

If you read this book, you will get information from crooks who have scammed, people who have been scammed, and cops who have investigated scams. You will be given worksheets and detailed reports on recognizing internet banking fraud. It is a must-have book for anyone who wants to understand how frauds work.

In some books, the author discusses how internet banking services can be used to create wealth. The usual financial concepts are discussed. Understanding net worth and how to accumulate cash are important ones. Different types of investment vehicles are also mentioned.

The difference in some books is that it is all related to internet banking. It is all designed to make it easier to run your finances from your home computer. This not only includes your internet banking savings accounts. It includes stocks and bonds, as well. It is well worth the investment.

Some books shed light on how internet banking may become more popular in developing countries. They explain that mobile devices are much preferable to installed devices in such countries.

This is because, for anything that involves installation, like a satellite or cable service for internet, people have to wait quite awhile. The early users of the internet in developing countries will be those who have wireless internet. It stands to reason that these people will use their computers for internet banking as well.
Some books give a studious report on banking issues that affect the world. They include discussions of internet banking.

You can also order articles to download from the internet. One article discusses the implications of internet banking on mortgage lending. Another article claims that internet banking has forever changed mortgage banking.

It takes diligence to find pertinent information on internet banking. Much of the information is too outdated to be of any usefulness. A lot of it is written in complex banker’s language and words only an internet guru would love. However, there are some books that are interesting to read about the subject of internet banking.

One of the most challenging aspects of selling a software company is coming up with a business valuation. Sometimes the valuations provided by the market (translation – a completed transaction) defy all logic. In other industry segments there are some pretty handy rules of thumb for valuation metrics. In one industry it may be 1 X Revenue, in another it could be 7.5 X EBITDA.

Since it is critical to our business to help our information technology clients maximize their business selling price, I have given this considerable thought. Why are some of these software company valuations so high? It is because of the profitability leverage of technology?

A simple example is what is Microsoft’s incremental cost to produce the next copy of Office Professional? It is probably $1.20 for three CD’s and 80 cents for packaging. Let’s say the license cost is $400. The gross margin is north of 99%. That does not happen in manufacturing or services or retail or most other industries.

One problem in selling a small technology company is that they do not have any of the brand name, distribution, or standards leverage that the big companies possess. So, on their own, they cannot create this profitability leverage. The acquiring company, however, does not want to compensate the small seller for the post acquisition results that are directly attributable to the buyer’s market presence. This is what we refer to as the valuation gap.

What we attempt to do is to help the buyer justify paying a much higher price than a pre-acquisition financial valuation of the target company. In other words, we want to get strategic value for our seller. Below are the factors that we use in our analysis:

1. Cost for the buyer to write the code internally – Many years ago, Barry Boehm, in his book, Software Engineering Economics, developed a constructive cost model for projecting the programming costs for writing computer code. He called it the COCOMO model. It was quite detailed and complex, but I have boiled it down and simplified it for our purposes.

We have the advantage of estimating the projects retrospectively because we already know the number of lines of code comprising our client’s products. In general terms he projected that it takes 3.6 person months to write one thousand SLOC (source lines of code). So if you looked at a senior software engineer at a $70,000 fully loaded compensation package writing a program with 15,000 SLOC, your calculation is as follows – 15 X 3.6 = 54 person months X $5,800 per month = $313,200 divided by 15,000 = $20.88/SLOC.

Before you guys with 1,000,000 million lines of code get too excited about your $20.88 million business value, there are several caveats. Unfortunately the market does not care and will not pay for what it cost you to develop your product.

Secondly, this information is designed to help us understand what it might cost the buyer to develop it internally so that he starts his own build versus buy analysis. Thirdly, we have to apply discounts to this analysis if the software is three generations old legacy code, for example. In that case, it is discounted by 90%. You are no longer a technology sale with high profitability leverage. They are essentially acquiring your customer base and the valuation will not be that exciting.

If, however, your application is a brand new application that has legs, start sizing your yacht. Examples of this might be a click fraud application, Pay Pal, or Internet Telephony. The second high value platform would be where your software technology “leap frogs” a popular legacy application.

An example of this is when we sold a company that had completely rewritten their legacy distribution management platform for a new vertical market in Microsoft’s latest platform. They leap frogged the dominant player in that space that was supporting multiple green screen solutions. Our client became a compelling strategic acquisition. Fast forward one year and I hear the acquirer is selling one of these $100,000 systems per week. Now that’s leverage!

2. Most acquirers could write the code themselves, but we suggest they analyze the cost of their time to market delay. Believe me, with first mover advantage from a competitor or, worse, customer defections, there is a very real cost of not having your product today.

We were able to convince one buyer that they would be able to justify our seller’s entire purchase price based on the number of client defections their acquisition would prevent. As it turned out, the buyer had a huge install base and through multiple prior acquisitions was maintaining six disparate software platforms to deliver essentially the same functionality.

This was very expensive to maintain and they passed those costs on to their disgruntled install base. The buyer had been promising upgrades for a few years, but nothing was delivered. Customers were beginning to sign on with their major competitor.

Our pitch to the buyer was to make this acquisition, demonstrate to your client base that you are really providing an upgrade path and give notice of support withdrawal for 4 or 5 of the other platforms. The acquisition was completed and, even though their customers that were contemplating leaving did not immediately upgrade, they did not defect either. Apparently the devil that you know is better than the devil you don’t in the world of information technology.

3. Another arrow in our valuation driving quiver for our sellers is we restate historical financials using the pricing power of the brand name acquirer. We had one client that was a small IT company that had developed a fine piece of software that compared favorably with a large, publicly traded company’s solution. Our product had the same functionality, ease of use, and open systems platform, but there was one very important difference.

The end-user customer’s perception of risk was far greater with the little IT company that could be “out of business tomorrow.” We were literally able to double the financial performance of our client on paper and present a compelling argument to the big company buyer that those economics would be immediately available to him post acquisition. It certainly was not GAP Accounting, but it was effective as a tool to drive transaction value.

4. Financials are important so we have to acknowledge this aspect of buyer valuation as well. We generally like to build in a baseline value (before we start adding the strategic value components) of 2 X contractually recurring revenue during the current year.

So, for example, if the company has monthly maintenance contracts of $100,000 times 12 months = $1.2 million X 2 = $2.4 million as a baseline company value component. Another component we add is for any contracts that extend beyond one year. We take an estimate of the gross margin produced in the firm contract years beyond year one and assign a 5 X multiple to that and discount it to present value.

Let’s use an example where they had 4 years remaining on a services contract and the last 3 years were $200,000 per year in revenue with approximately 50% gross margin. We would take the final tree years of $100,000 annual gross margin and present value it at a 5% discount rate resulting in $265,616. This would be added to the earlier 2 X recurring year 1 revenue from above. Again, this financial analysis is to establish a baseline, before we pile on the strategic value components.

5. We try to assign values for miscellaneous assets that the seller is providing to the buyer. Don’t overlook the strategic value of Blue Chip Accounts. Those accounts become a platform for the buyer’s entire product suite being sold post acquisition into an installed account. It is far easier to sell add-on applications and products into an existing account than it is to open up that new account. These strategic accounts can have huge value to a buyer.

6. Finally, we use a customer acquisition cost model to drive value in the eyes of a potential buyer. Let’s say that your sales person at 100% of Quota earns total salary and commissions of $125,000 and sells 5 net new accounts. That would mean that your base customer acquisition cost per account was $25,000. Add a 20% company overhead for the 85 accounts, for example, and the company value, using this methodology would be $2,550,000.

After reading this you may be saying to yourself, come on, this is a little far fetched. These components do have real value, but that value is open to a broad interpretation by the marketplace. We are attempting to assign metrics to a very subjective set of components. The buyers are smart, and experienced in the M&A process and quite frankly, they try to deflect these artistic approaches to driving up their financial outlay.

The best leverage point we have is that those buyers know that we are presenting the same analysis to their competitors and they don’t know which component or components of value that we have presented will resonate with their competition. In the final analysis, we are just trying to provide the buyers some reasonable explanation for their board of directors to justify paying 8 X revenues for an acquisition.

For all those who have relied on banks may use the services and for those who have not an account should be encouraged to create a new account and take advantage of this service. It is indeed a technology that will allow customers that dependence on the banks will decrease.

Mobile banking can be accessed by mobile and people can use to their advantage and they do not have to be physically present in the banks to check the account balance. Mobile banking has made life much easier and it is a program that is used by the younger generation much more, but if you’re Middle-aged or senior person, you can definitely benefit because it is really easy.

On all banks which are available in India, we see that SBI is a bank that has always taken care of its customers. It offers easy to use models and methods that have helped attract people to the bank. If you are thinking what is the new offer from the bank to the client, you’ll be pleased to know that mobile banking SBI is now a reality. People can now access their accounts through SBI their cell phones. But before that they need to subscribe to the process and then the whole issue will be supported. This is a special application which must be activated by the same banks and if you can do then you will be able to access your account from your cell phone. SBI mobile banking system has been introduced to help people access their bank accounts via their cell phones, and if you look at the records, we see that among the number of people using this technology are the highest youth.

With the advent of time, we see that there are various gradations of latest technology and life has become much easier. The banking sector has benefited immensely from the technology of mobile banking. This is a new technology that has been done to make life easier for people and make work easier and faster official. The tech freak people can now breathe easy as it has made life much easier for people. Mobile banking technology allows a person to work with his cell phone and can also be very checking account balance. The official work can be done by the Internet itself and there is absolutely no need to be present at the bank for all official proceedings. The Internet banking has made life a lot easier than it helps people to access bank account sitting at home.

If you look at the number of people using the Internet in today’s world, we see that the number is indeed massive and people use it either for their personal use or for personal gain. The Internet has now given new impetus to life and helped improve people’s lives. In banking Internet has had a huge impact and people are using the environment to ensure that the entire transaction process is completed very quickly. Mobile banking is the new age technology that allows a person with a bank account to access the account from mobile phones. Mobile Banking Software is used by people to access the account. This has indeed helped the people by a huge margin, because they can now have access to telephones as early as possible.

Latest Information about Mobile Banking

For efficient business strategy and to improve performance, many financial institutions, such as banks, utilize banking performance metrics. These metrics help in measuring the profitability of the business units, to manage the risks that come with the allocation of capital, and to evaluate performance of each business unit.

The increasing prevalence of technology and the complexity of the market drive many institutions to improve their performance. In a world filled with competition, survival is an objective of many businesses, both the new ones and even progressive ones, while those at the top also have the aspiration to sustain their glory.

Success in a competitive environment has then become a challenge among businesses. To possibly attain this, businesses, such as banks, must measure their performance to be able to come up with solutions once the result of the measure seems unfavourable. Banking performance metrics can be used to aid managers in coming up with complex decisions.

Among the performance metrics used by many banks and other businesses in coming up with financial information for decision-making and evaluation are economic value added and risk-adjusted return of capital or RAROC.

Economic value added, simply known to its acronym version, is an estimate of real economic profit of an entity after performing corrective adjustments to generally-accepted accounting principles or GAAP accounting including the deduction of the equity capital’s opportunity cost. Based on estimates, the utilization of GAAP in corporations ignores a certain worth in shareholder opportunity costs.

The EVA of a business can be measured by deducting the money cost of capital to the Net Operating Profit After Taxes. The money cost of capital in EVA refers to the amount of money instead of the cost of capital in proportional rate.

Stern Stewart & Co. develops its registered trademark, Economic Value Added performance metrics.

Meanwhile, the RAROC or risk adjusted return of capital, is used to analyse the risk-adjusted financial performance of an enterprise and to provide a view of profitability. It is a risk-based framework to measure profitability.

A ratio of risk-adjusted return to economic capital, RAROC is used to determine the economic profit of an enterprise. This system is used to allocate capital for risk management and performance evaluation.

The risk-adjusted return of capital is utilized by banks and other financial institutions. As a risk management tool, RAROC is used to determine the optimal capital structure of the bank through the allocation of capital to individual business units.

Moreover, RAROC is used as a banking performance metric to let banks assign capital to companies and business units, as determined on the economic value added or EVA of each unit. The utilization of capital as determined on risk enhances the capital allocation of banks. The capital that is placed at risk is expected to provide return beyond the risk-free.

EVA and RAROC are among the banking performance metrics used by banking business units to determine profitability in economic sense. The economic value added is utilized in corporate finance to determine the value being created beyond the required return. On the other hand, the risk-adjusted return of capital is determined for the allocation of capital for risk management and performance evaluation purposes.