Chop, hawala, hundi and other parallel banking
There is an argument for saying that parallel banking is defined not by activity but by whether the activities are conducted by a regulated business. Banks have three essential functions - warehousing savings, lending money and settling obligations between customers. Advisory services are, in essence, developments or broking of one of these three. Parallel bankers strip out the basics and perform only one or more of those three functions.
It follows, then, that when we use the term parallel banking, we are not talking about any business activity different from that which is done by your retail banker whose business is to take your money and keep it until you want it back (warehousing), to pool it with the money he receives from all his other customers and then to lend it to customers that will pay a fee for the use of it (lending) and to assess the risk attached to that lending decision (broking).
However, your retail banker is subject to a considerable body of rules and regulations that govern his relationship with you, his relationship with his customers, his relationship with the state that grants him a licence to operate as a bank, and supervises the conduct of his business. Where that system of regulation and supervision breaks down - or is ill formed in the first place - fraud is simple and bank collapses are frequent.
The parallel banking industry works outside that system of regulation and supervision. In countries where a licence is required for a particular activity, and the conduct of the activity without a licence is a crime, parallel bankers are by definition criminals. But that does not make them fraudsters. There are many, many money transmitters who operate out of sight of the law, even where required to licence. They operate, often, within a close knit community, often using lines of communication built up all over the world over a period of decades - or in some cases millennia.
Some of the money transfer mechanisms (the chop, hawala, etc.) which form the basis of parallel banking were developed to enable the movement of value without the movement of money. This was so that banditry could be avoided.
Now, with the use of technology, the principles of moving value without money are available to all.