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verification of signature (which is available on the card itself), the goods are delivered by the
seller to the card holder. The Merchant Establishment (ME) retains a copy of the charge slip
and one copy is sent to the concerned bank which has issued the card for getting the amount of
the bill reimbursed, which is done by any branch of the issuing bank deducting the appropriate
commission (2.5 to 4%). The both the seller and purchaser of goods get the respective
transaction complete with the involvement of credit card.
Benefits to issuer of Cards
(i)
(ii)
(iii)
(ii)
(iii)
(iv)
Availability of discounts and insurance cover to card holders starting from - one lakh
and above.
(v)
(vi)
The sales amount is promptly reimbursed by the issuing bank hence question of bad debts does not arise (unless there is mistake is verification of signatures)
(ii)
(ii)
Rate of interest, per annum, to be charged for late payment and other charges if
levied. Banks are charging exorbitant interest rate of 35% p.a. for late payment, while
the rate of interest charged in USA is 16%, Japan 13% and Thailand and Tiwan it is
19%.
(iii)
Interest free period, which is allowed by banks for credit card payments.
(iv)
Annual fees should be between Rs.200 to Rs.300. If it is Rs.1000 - 1500 then such
cards should not be taken. Some banks call their cards as free, but in fact it is not a
free availability.
(v)
When cheque is issued before due date, for payment, the late payment continues till
cheque is cleared by bank. For such intervening period, banks charge minimum lump
sum interest in between Rs.300 to Rs.600 towards interest amount. Some banks claim
discount on petrol filling cash memo. But it is possible if there is any tie-up with
those petrol pumps, otherwise you will have to pay surcharge of 2.5% on the total bill
amount.
Types of Cards
There are different types of Cards. Some of which, are discussed below:
(i)
Charge Cards: The transactions are accumulated over a period of time, generally a
month and the total amount charged i.e. debited to the account. The credit card
holder is given about 10 to 15 days time to credit his account in case there are
insufficient funds in his account at the time of debit. Since the transactions are only
accumulated, it is only charged i.e. not debited to the account immediately such
cards are called CHARGED Cards.
(ii)
Credit Cards: Under it the card holder gets credit limit on per day basis, upto
which limit he / she can avail credit and make purchases of goods and services. The
limit is set, on the worth of the card holder. Presently it is between Rs.20, 000 to
Rs.50,000 under various cards. This overdraft is available from 23 days to 37 days.
Payment of such overdraft is also possible in some credit cards, to pay in monthly
installments later. However, a service fee is charged on the overdraft amount
(iii)
Debit Cards: Under it the account of the card - holder is debited as soon as the
transaction is notified to the issuer. All merchants (sellers) are provided with
telephone type of equipment, known as point of sale Terminal. As soon as the sale is
affected, the seller connects the bank for connectivity to the card holder's account.
The transaction is complete immediately
(iv)
ATM - Cards: This card is similar to the debit card except for the fact that the card
is operated by the holder (not by the member establishment) for drawing cash from
his / her account. By drawing the amount, upto limit, the instant payment can be
made to any person. This facility is available, even on holidays / after banking
hours. The system is being now operated through Shared Payment Network Services
(SPNS) operated by IBA. All nationalised banks, foreign banks and many
cooperative banks have started this facility.
(v)
Smart Cards: Under this system, microprocessor and memory. chips are used (as
against magnetic strip used in other cards) which stores information about the holder
and the credit limit available. Through a modem provided to member establishment
(seller) is able to find out the details about the card holders and credit limit
available, hence misuse of card is prevented. This way smart card possesses features
of cash withdrawal, entering of deposits and debits for purchases in one card. This is
more secured as against ATM cards, credit cards debit cards etc. In smart card, it can
be known.
Advantages of Smart Card System :
The system can have "manual/ATMS", the terminal performs the card
processing and security functions, printing a slip which au tho rises the
cashier to make the payment manually ..
World Wide Web, that has growth beyond all expectations and even today growing at the rate
of one million new users every year. e-commerce offers enormous opportunities in every
sphere of business. It allows trade at low costs worldwide and offers enterprises and banks a
chance to enter global market at the right time. Time has come where the organization is either
in e-Com or is out of business. It is therefore, essential for bankers to understand about e-Com.
Electronic Banking
The banks first use of computers was strictly a back office affair, transferring the
accounting and record keeping activities from branch "ledgers on to centralized or
decentralized computer systems. With the rapid improvements in electronic technology and
availability of higher computer power and faster communication technology the demand for
more efficient banking system with efficient payment methods has grown, which has resulted
in more competition among banks. There is continuous increase in the use of electronic
technology to meet the ever increasing competition in banking which is virtually transforming
brick and mortar banking (banking at a fixed branch premises) to Electronic Banking.
Customers need not necessarily visit banks to carry out their banking transactions and can
meet their requirements through the means of electronic banking facility. With the
arrangements of Shared Payment Network System (SPNS), the services can be provided
across various banks.
Put in simple words, banking done electronically is electronic banking. Delivery of bank's
services to a customer at his office or home by using Electronic Technology can be termed as
Electronic banking. The quality, range and price of the electronic services decide bank's
competitive position in the industry.
computer. Let us take a look at the various ways in which it can be done.
3) Cash Dispensers
In the manual payment system, the actual cash counting and handing over of cash has to be
done by the teller himself. Since this is also a time-consuming activity, a cash dispenser was
designed to overcome the problem. The first generation cash dispenser was only designed to
perform a simple task based on the token inserted by the customer, it would release the prepacked packets of money. This type of cash dispenser was not actually able to count the cash,
the notes had to be counted by the staff and put into the machine. The customer was given a
token by the staff in advance, so that he could withdraw even at odd hours. The above
obviously did not save much teller time.
The latest generation Cash dispensers help cashiers dispense cash and basically are used in
Teller Machines. It contains 4 or more trays and each tray capable of holding one denomination
of currency notes. The cash dispenser is connected to the computer of the cashier and is
controlled by the cashier. Once the cashier authorizes the dispensing of cash, the computer
calculates the required denomination, finds out if they are available in the cash dispenser and if
so, ejects the required currency notes just like a toaster.
The cashier has only to pick up the cash from the tray and hand over to the customer. The
system completely eliminates the need for manual counting, thus speeding up the customer
service. The system operates at high speed and can significantly reduce the queues at peak
hours. Besides providing convenience, and accuracy, the cash dispenser provides one
additional level of physical security for the cash as well. The cash dispensers also offer
excellent security measures. For instance, if a bank robber is forcing the cashier to provide
cash at gunpoint, the cashier can insert a simple code along with request for cash. This code
will activate video cameras and also send an automatic message to the nearest police station,
while machine processes the cash demand and, if required, the process can be delayed too.
3.
4.
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through the transaction and allows the consumer to enter the data. The display unit is a
high-resolution monitor which displays messages/pictures. The display is visible only
for the consumer and not to the person nearby. Consumer keypad is recessed for privacy
and it has 10 numeric keys and a cancel key.
Card Reader: Motorized card reader is provided on the ATMs. The magnetic track on
the cards, as soon as inserted by the consumer, is read by the card reader. The consumer
can take back the card after completing the transactions. There is a retained card bin
provided inside the ATM, where the retained cards and the cards left behind by the
consumer by mistake are deposited.
Printers: There are two printers provided in the ATMs. One printer is for the consumer
and the other one is a journal printer. Both are not visible to the consumer. After the
transaction is over, the details of transactions carried out is printed and sent out through
a slot provided for the purpose and consumer picks it up. The journal printer provides
an audit trail of all completed transactions. The transaction data is also available in
electronic media.
Dispenser: The currency notes are stored in cassettes in the Dispenser. The dispenser
picks the currency and delivers the same to the consumer through slot provided in the
front panel. The currency dispensers uses either friction pick or vacuum pick technology
depending upon the technology available with the ATM. Earlier generation ATMs were
dispensing only currency. Now ATMs are available with Multi-Media Dispensers. The
Multi-Media Dispenser is based on the friction pick technology and can dispense other
media such as traveller cheques, demand drafts, tickets etc. Further, if a consumer
leaves behind the currency by mistake and walks out, the dispenser times out and
retrieves the currency back into the ATM and deposits into a separate bin.
Depositor: The depositor accepts envelopes with cash or other documents and provides
security for deposited material. The deposit is made through a separate slot provided for
the purpose and the details of deposit are entered by the consumer through the keypad.
The envelopes meant for the deposits are provided by ATM with the envelope
dispenser.
Security Aids
There are various security aids provided in ATMs. There are Access Locks which covers
the key pads, monitors etc. and will open only with the ATM Cards. There are also video
surveillance and recording systems as a precaution against ATM crimes.
Advantages of ATMs
TO the Customers
ATMs provide 24 hours, 7 day a week and 365 days a year service
Service is quick and efficient
Privacy in transaction
Free from errors
On networking, cardholder can access cash and service at any location regardless of
where he maintains account
Wider flexibility in withdrawals.
5) Anytime Banking
ATMs have surpassed the time limitations of only limited / fixed hours of customer
service, and offer a host of banking services, including deposits. withdrawals requisitions,
instructions and transfers. ATMs are currently becoming popular as these enable the customers
to withdraw their money 24 hours a day and 7 days a week. The customer need not be
concerned about security, as most ATM locations have guards, or alternately are located in
lobbies, access to which is electronically controlled by means or customer's ATM card.
Besides, access to the account is through a Personal identification Number (PIN), which is
strictly supposed to be only known to the cardholder.
6) Tele Banking
Telephonic Banking (Tele - banking) is another electronic banking product, which carries
the concepts of 24 hour banking to the customer's home or business place. Tele-banking
service function based on the voice processing facility available with the bank computers. The
caller generally, a customer of the bank will be able to call the bank anytime and inquire
balances or transaction history, and to transfer funds between accounts. In this system
computers at the bank end is connected to a telephone linked with modem. The voice
processing facility provided in the software identifies the caller, by keyword and provides him
services with suitable reply whenever necessary. Some banks use a telephone answering
machine, in which case the service is not really "Tele-banking" per se, but simply a telephone
answering system.
Apart from Tele-banking, another system, and simple and for limited service is also
available - known as voice mail facility. There are several foreign banks now offering very
advanced touch-tone telephone answering services which route the customer's call directly to
the department concerned of the bank. It also allows the customer to leave a message for the
concerned desk or department if the person is not available. In this system each service
representative has his or her "Voice-Mail" Postbox in which massages are stored and retrieved
on return of the desk's person.
7) Anywhere Banking
With the introduction of Automated Teller Machines (ATMs) and Tele-banking, financial
details can be accessed from remote locations and basic transactions can be effected even
outside the bank. Inter-station connectivity of ATMs has also facilitated withdrawals from other
stations, a service particularly useful for frequent travellers. The facility of using credit cards
on ATMs is also available and more recently, mutual arrangements between banks allow for the
use of ATM card on the other bank's ATMs as well, which is known as Shared Payment
Network System (SPNS). Setting up of ATMs at non-bank locations, such as airports, shopping
malls and office complexes, as is prevalent in other countries will revolutionize the banking in
Indian pretext. In some of the Indian public sector Banks remote banking is being further
extended to the customer's office and home.
banking services to the customers of these areas through the state-of-art electronic funds
transfer system shared by different participating banks. Any customer possessing the ATM card
issued by SPNS can go to any ATM linked to SPNS, whether situated in the same bank branch or another branch of another bank and transact some basic essential banking business
like cash withdrawal, deposit, balance enquiry etc.
Debit Clearing
Electronic Debit clearing covers the payment of bills to utility companies like telephone
and electricity bills etc. where consumers are large in numbers. These utility companies are
collecting their periodical bills from their customers. Under this facility, the customers on
receipt of the bill from the utility company and having satisfied himself of its correctness can
approach the banker and authorize the bank branch to debit his account for the amount of the
bill and transfer the amount to the bank account of the utility company. The bank in turn will
prepare a consolidated floppy file or all such transfers through a tabletop MICR reader and
tenders to the clearinghouse who would debit the individual bank. and credit to the account of
the sponsor bank of the utility company.
Benefits of e-Banking
To the Customer
Anywhere Banking - no matter wherever the customer is in the world, he can transact
business through e-Banking. Customers can make some of the permitted transactions
from his office or from his house or while travelling via mobile telephone. Generates
greater customer satisfaction by offering unlimited access to the bank, not limited by the
walls of the branch.
By connecting all the branches through Wide Area Network (WAN) anybranch banking
can be provided to the customers.
Anytime Banking - Managing funds in real time and most importantly, E-banking
provides 24 hours a day, 365 days a year services to the customers of the bank.
It inculcates a sense of financial discipline by recording each and every transaction.
Convenience acts as a tremendous psychological benefit all the time.
It makes utility payments easier.
Cash withdrawal from any branch/ATM brings down 'cost of banking' to the customer
over a period of time.
On-line purchase of goods and services including on-line payment for the same.
To the banks
Innovative, secured, addresses competition and presents the bank as technology driven
in the banking sector market. E-banking provides competitive advantage to the bank
and helps in establishing better customer relationship and retaining and attracting
customers.
E-banking provides unlimited network to the bank and is not limited to the number of
branches. Any PC connected to modem and telephone having Internet connection can
provide banking facility to the customer. Any ATM on the roadside can meet cash
withdrawal needs of the customer.
By connecting ATMs and Point of Sale terminals on-line, risk of overdrawal can be
eliminated in case of ATM; credit and debit cards. ATM can be better monitored and
planned by-establishing a centralized data warehouse and using latest data mining tools.
E-banking reduces customer visits to the branches and thereby human intervention and
the establishment costs for the bank.
Inter-branch reconciliation becomes easy reducing thereby the chances of frauds and
misappropriation.
On-line banking - an effective medium of promotion of various schemes of the bank and
acts as a marketing tool.
Load on branches can be considerably reduced by establishing centralized database and
by taking over some of the accounting, functions and beginning of the day and end of
the day operations jobs by the centralized database. Integrated customer data paves way
for individualized and customized services.
Scope and potential of better profitability increases.