Information technology has introduced completely new ways of doing business. Business is being done at the speed of thought. Concerns over security of transactions between consumers and retailers (B2C), between companies (B2B), have deterred many potential players. A paradigm shift has taken place with the advent of e-commerce in areas such as banking, finance, governance etc.
Banking has been revolutionized and the effects of this are now being felt in the nations which can’t be regarded as major players in e-commerce. E-banking law preceded the first rudimentary forms of electronic funds transfer which appeared in 1977 with CHAPS system of same day credit . The utility of e-banking caught on and by 1995 a host of companies were developing their own forms of electronic money know as ‘e cash’. Such a move was feared for the reason that introduction of e-cash would dilute control of central banks over flow of money, weakening government’s ability to monitor and tax. Authorities also expressed concern in regards money laundering being carried one undetected because e-money being in intangible form. Nonetheless, Barclays bank introduced e-money in 1997.
Cross-border e-banking is not merely about funds transfer. Banks and other financial institutions have discovered that the data which they amass, about their customers, has substantial value to their business. Data may pertain to a large number of contracts maintained with a large number of customers. But activites have become so complex that banks have been compelled to outsource activites to third parties. Thus the banks cannot retain this information solely within their own computer networks, let alone within a single jurisdiction. Data flows through many hands hence the impact of data protection legislation on banking activities is substantial.
The potential threats to personal privacy which arise from these activities has led to the introduction of data protection laws, which not only place constraints on the storage and use of customer information but also limit a bank’s ability to transfer that information to third parties and in particular across national boundaries. Traditionally, data security has been seen as an exclusively technical process. Data users protect their information assets thorough a range of physical, logical and operational measures designed to insulate their systems against threats arising from deliberate interference by persons or from natural/accidental events . In India, there exists no law on data protection leave alone a specific area such as protection of data in electronic banking. In the beginning the computers only aided one portion of the Banks branch operations like that of the ledger posting operations. Introduction of local area network automated the branches in preparation of general ledger and cashbook. The further advancement of the information technology in connecting one branch with another through telephone lines and satellite connection has made the information technology the enabler of the business instead of just a tool. The central aim of this paper is to cast light on the rationale and limits of data protection laws affecting e-banking. The bounds of this paper have been confined to consumer electronic banking. Information security in e-banking presents two main areas of risk:
prevent unauthorized transactions
maintaining integrity of customers transactions.
Data protection falls in the latter area. Illumination of these matters is sought to be done in the following manner:
Surveying the substance of legal instruments on data protection, both international and domestic with the objective of fleshing out a short description of data protection laws.
Examining consumer e-banking technologies and mechanisms
Highlighting and exploring areas of risk and liability of banks
Examining the legal framework on information security in India
DATA PROTECTION - A GLOBAL...
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