Unit-2 & 3

ELECTRONIC PAYMENT SYSTEM(EPS) An electronic payment system is used for the payment for getting information, goods and services offered through the internet like accessing copy based materials data based searches or as a convenient mode for paying for external goods and services bought from the normal market and also for paying for transactions related to interest dividends etc

 It helps in automating sales activities increasing the prospective number of cutomers and reducing the amount of paper work.

ELECTRONIC CLEARING SERVICE (DEBIT SCHEME)

It is a scheme which facilitates the payment of charges of utility services like telephone bill electricity insurance premium and loan instalments etc. by customers.

ELECTRONIC FUNDS TRANSFER (EFT)

It helps an account holder of a bank in transferring funds to another person having an account with any of the participating commercial banks, without any physical movement of instruments from one centre to another centre.

RISKS AND SECURITY PROBLEM

Stolen Dishonesty Dispute

TELLER MACHINES
This facility is available for quick withdrawal of cash from bank. As per this method account holders need not wait in long queues for receiving cash. Instead they can wait at a place in the bank and go to the counter for receiving cash when his or her number is displayed or announced.

CASH DISPENSERS
They are computerised telecommunications devices that offer the customers of a financial institution a secure method of receiving cash in a retail location without cashiers assistance. The customer using the PIN number would get the scrip printed which the customer should take to the sales clerk, who will exchange it for cash from the cash drawer of the cash register.

Automated teller machine(ATM)

It was first introduced in 1967 by Barclays Bank in Enfield Town in North London. The functions and use of ATMs are as follows 1. Cash withdrawal and balance enquiry 2. Bill payment 3. Sale of paper based products 4. Kiosks 5. Third party advertising 6. Money transfer

HOME BANKING
Home banking means getting the service of the bank sitting at home and there is no requirement to visit the bank for a number of routine transactions.

NET BANKING
Net banking means conducting ones banking or accessing ones bank account online through a computer and an internet connection. Services provided by Net banking 1. Check balance 2. Bank statement 3. Ask for a statement

 Ask for a cheque book FD TDS details TRANSACTIONS are Stop a cheque Pay bills Ask for a DD Shop online

PERSONAL IDENTIFICATION NUMBER (PIN)

A PIN is a secret numeric password that is shared between the user and the system that is used for authenticating the user to the system.

SIGNATURE STORAGE AND DISPLAY

A digital signature is a technique by which it is possible to secure electronic information in such a way that the originator of the information as well as the integrity of the information can be verified. Digital certificate- it is a technique that can be used for different authentication purposes mainly handwritten signatures. MICR Cheques-it facilitates automatic settling of interbank transaction at the clearing house of the RBI. They are issued by banks. Eg. Saving cheque, DD cheque Dividend warrant etc.

 INTERNET BANKING- also known as I-Banking. It is a platform for electronic delivery of banking services to customers. The customer of a bank can have access to his banks website and perform various banking functions. Internet banking provides 24 hour access to an account allowing payment of bills, electronic transfer of funds from one account to another, opening an online account, availing of bankers cheque and DD facilities account balance and statement enquiry and fixed deposit enquiry. Eg ICICI, SBI, Canara Bank

 24 hour banking and other services to customers. performing financial transactions electronically using computer based systems is known as electronic funds transfer. The transactions performed are: 1. Sale 2. Refund 3. Withdrawal 4. Deposit 5. Cash back 6. Inter account transfer 7. Payment 8. Enquiry 9. E top-up 10. Mini statement 11. Administrative

ELECTRONIC FUNDS TRANSFER SYSTEM

ELECTRONIC FUND TRANSFER AT POINT OF SALE(EFTPOS)

It allows users of the system to withdraw cash at the time of purchasing a product or servicing through the merchants EFTPOS terminal. The services of the electronic funds transfer system are Credit Authorisation (enough credit), Cheque Verification(enough balance in the account), Cheque Guarantee (bank will pay), File Look up(customers financial records).

PLAIN MESSAGES AND STRUCTURED MESSAGES

Messages are used for transferring funds as well as for communicating any other changes relating to the amount due date, bank charges etc. Plain messages also known as unstructured messages are prepared based on the purpose of the communicator according to his own convenience either in words or in the form of data or in both and communicated either by post or by a messager or by telex or even by e-mail.

 Structured messages-are more suitable in global trading particularly in the banking sector. They are text composed of paragraphs ordered in a particular sequence, with each paragraph characterized by an identifier and containing information in free forms. These are used as issue of LOC, issue of bank or guarantees transfer of funds etc.

SFMS (STRUCTURED FINANCIAL MESSAGES) IN INDIA

SFMS provides a solution for the communication of financial messages across the Indian Financial Network (INFINET) The system enables exchange of messages in a highly secured environment. With this the banks will carry out inter bank and intra bank transactions. It is a software application which works on the networking platform INFINET of IDBRT, (INSTITUTE FOR DEVELOPMENT AND RESEARCH IN BANKING TECHNOLOGY) Hyderabad. It is a measure of ensuring greater security while performing EFT. It provides security in various EFT services introduced by RBI such as clearing EFT and prevents unauthorized usage.

Correspondent bank accounts

Correspondent account is an account established by a domestic bank to receive deposits from or to make payments on behalf of or handle other foreign exchange financial transactions for a foreign financial institution or bank. Such arrangements with domestic banks or financial institutions allow foreign banks to conduct business and provide services to their clients without their physical presence. This system eliminates the need to have branches in various locations across the world. It is not possible for international banks to obtain permissions to have branches in all countries of the world.

Nostro account and vostro account

Accounts with correspondent banks are called nostro, vostro and loro accounts. Nostro account means our account with you Vostro account means your account with us Loro account refer to accounts of other banks which may be engaged in correspondent banking activities.( IF ANY OTHER BANK FOR THE PURPOSE OF A
TRANSACTION REFER TO AN ACCOUNT MAINTAINED BY YET ANOTHER BANK IN SOME OTHER COUNTRIES IT IS KNOWN AS LORO ACCOUNT)

ELECTRONIC DATA INTERCHANGE (EDI)

EDI is the computer to computer exchange of standard business documents or structured messages in an electronic format between two companies. There are two important elements in basic EDI. Electronic documents replaced by paper documents Documents containing messages are exchanged in a standardized format. This include ACH( AUTOMATED CLEARING HOUSE) system, CHAPS,CHIPS, FEDWIRE and SWIFT.

SWIFT (SOCIETY FOR WORLDWIDE INTERBANK FINANCIAL TELECOMMUNICATION)

SWIFT operates a global financial messaging network which exchanges messages between banks and other financial institutions. SWIFT also markets software and services to financial institutions much of it for use on the SWIFT Net network. ISO 9362 Bank Identifier Codes (BICs) are popularly known as SWIFT codes. SWIFT is an easy and fast way to transfer money from abroad. It is a direct bank to bank transaction.

CHIPS ( CLEARING HOUSE INTERBANK PAYMENT SYSTEM)

It is the main privately held clearing house for large value transactions in the US. Together with FEDWIRE, CHIPS forms the primary US network for large valued domestic and international USD payments. CHIPS is owned by financial institutions They are less expensive.

CHAPS (CLEARING HOUSE AUTOMATED PAYMENTS SYSTEM)

It is a British company established in London in 1984 which offers same day sterling and euro fund transfers. A CHAPS transfer is initiated by the sender to move money to the recipients account where the funds need to be available the same working day. CHAPS transfer are relatively expensive.

FEDWIRE (FEDERAL RESERVE WIRE NETWORK)

It is a high speed electronic communication network. it links the Federal Reserve Board of Governors, the US treasury Department, the twelve Federal Reserve Banks and their 24 branches and other federal agencies. It is operated by the Federal Reserve Banks and is a Real Time gross Settlement (RTGS) Funds Transfer System. It is owned and operated by the Reserve Banks.

REAL TIME GROSS SETTLEMENT SYSTEM (RTGS)

It is a mechanism of fund transfer where the transfer of money takes place in the real time and on gross basis from one bank to another. Real time settlement of payment means that there is no waiting time and the payment transaction is settled immediately as soon as the transaction is processed. Gross settlement means the payment transaction is not bunched with any other transaction and is settled on a one to one basis. Once the transaction is processed it is irrevocable and final.