Short Notes

Automatic or Automated Teller Machines (ATMs) are computerized machines that are designed to perform functions of a bank teller. You can carry out a range of financial transactions sans any time restraint. An ATM facilitates comfortable and convenient banking 24 hours a day, 7 days a week - not necessarily from the premises of your bank. You can put your ATM card to use for buying as it directly pays from your checking or savings account. Banks too benefit as they save on operation cost by reducing the number of visitors to their premises. ATM plastic card ATM cards enable you to carry financial transactions from your savings, current account or credit card accounts. To access an ATM, you need to insert your plastic card into the Automatic teller machine. The machine reads the magnetic strip at the back of the ATM card, which contains cardholder account details. To confirm access by genuine cardholder, you will be requested to key in a personal identification number (PIN). This number (usually four-digit) is a system-generated number that will be provided at the time of opening the account. You can opt to change the PIN number by requesting for a change either by contacting the bank or by using the ATM machine. Once the right PIN number is typed, the ATM recognizes the cardholder details and account details. Other details that you may find embossed on ATM cards are: In the front: •

Name of issuing financial institution/Bank

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Card number

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Period of validity

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Name of card holder

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Specific logos

On the back: •

Magnetic strip

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Space for cardholder's authorized signature

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Card issuer contact details

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Terms and conditions of usage

Functions of ATMs Automated teller machines ATMs are not merely restricted to withdrawal of cash. You can perform a wide range of activities : •

Cash withdrawal and deposit

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Cheque deposit

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Money transfer

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Balance enquiry

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Statement request

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Cheque book request

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PIN request

Preventing ATM Fraud Bank ATM cards are used to withdraw money, find balance in account and transfer moeny. Credit cards are also used at ATMs to avail cash advance facility or to make payments towards credit card transactions. These plastic cards provide access to ATMs, connect to your account (Savings, Current or Credit card account) and facilitate carrying out desired financial transactions. Generally individuals are exposed to ATM frauds when the card is lost, the ATM card is handed over to someone else or when the confidentiality of PIN is not adhered to. Easy tips to protect from possible ATM frauds: 1) Keep ATM card in your possession. 2) Maintain PIN Confidentiality. 3) Retain Transaction slips. 4) Destroy unwanted slips. 5) Never trust strangers. 6) Don't rush. 7) Maintain distance: Make sure that the person standing behind you cannot read your transactions while operating the ATM. Some thieves resort to this 'shoulder surfing' to retrieve sensitive ATM card information. 8) Retrieve card: After completing your transactions wait for the ATM to push out your card. Never leave the ATM location without your card. 9) Destroy old cards. 10) Report to bank: If your card is misplaced, do report immediately to the bank and request for a replacement. You can call up the 24-hour service or toll-free numbers and deal with the emergency at once.

CARDS What is a credit card?

A credit card is plastic money that is used to pay for products and services at over 20 million locations around the world. All you need to do is produce the card and sign a charge slip to pay for your purchases. The institution which issues the card makes the payment to the outlet on your behalf; you will pay this 'loan' back to the institution at a later date. What is a debit card? Debit cards are substitutes for cash or check payments, much the same way that credit cards are. However, banks only issue them to you if you hold an account with them. When a debit card is used to make a payment, the total amount charged is instantly reduced from your bank balance. •

Don't borrow on your credit card! Here's why

A debit card is only accepted at outlets with electronic swipe-machines that can check and deduct amounts from your bank balance online. What is a charge card? A charge card carries all the features of credit cards. However, after using a charge card you will have to pay off the entire amount billed, by the due date. If you fail to do so, you are likely to be considered a defaulter and will usually have to pay up a steep late payment charge. When you use a credit card you are not declared a defaulter even if you miss your due date. A 2.95 per cent late payment fees (this differs from one bank to another) is levied in your next billing statement. What is an Amex card? Amex stands for American Express and is one of the well-known charge cards. This card has its own merchant establishment tie-ups and does not depend on the network of MasterCard or Visa. •

Credit cards: Remember these dos and don'ts

This card is typically meant for high-income group categories and companies and may not be acceptable at many outlets. There are a wide variety of special privileges offered to Amex cardholders. What are MasterCard and Visa? MasterCard and Visa are global non-profit organisations dedicated to promote the growth of the card business across the world. They have built a vast network of merchant establishments so that customers world-wide may use their respective credit cards to make various purchases. What is a smart card? A smart card contains an electronic chip which is used to store cash. This is most useful when you have to pay for small purchases, for example bus fares and coffee. No identification, signature or payment authorisation is required for using this card. The exact amount of purchase is deducted from the smart card during payment and is collected by smart card reading machines. No change is given. Currently this product is

available only in very developed countries like the United States and is being used only sporadically in India. What is the Diners Club card? Diners Club is a branded charge card. There are a wide variety of special privileges offered to the Diners Club cardholder. For instance, as a cardholder you can set your own spending limit. Besides, the card has its own merchant establishment tie-ups and does not depend on the network of MasterCard or Visa. However, since this card is typically meant for high-income group categories, it may not be acceptable at many outlets. It would be a good idea to check whether a member establishment does accept the card or not in advance. What is a photo card? If your photograph is imprinted on a card, then you have what is known as a photo card. Doing this helps identify the user of the credit card and is therefore considered safer. Besides, in many cases, your photo card can function as your identity card as well. What is a global card? Global cards allow you the flexibility and convenience of using a credit card rather than cash or travellers checks while travelling abroad for either business or personal reasons. What is a co-branded card? Co-branded cards are credit cards issued by card companies that have tied up with a popular brand for the purpose of offering certain exclusive benefits to the consumer. •

A debit card with a difference

For example, the Citi-Times card gives you all the benefits of a Citibank credit card along with a special discount on Times Music cassettes, free entry to Times Music events, etc. What is an affinity card? The card issuer ties up with popular organisations/ institutions which are often non-profit organisations (Citi-WWF card or the Stanchart-Cricket cards) to offer an affinity card. When the card is used, a certain percentage is contributed to the organisation /institution by the card issuer. What is an add-on card? An add-on card allows you to apply for an additional credit card within the overall credit limit. You can apply for this card in the name of family members like your father/ mother/ spouse/ brother/ sister/ all children above 18 years of age. Your billing statement would reflect the details of purchases made using the add-on card. You are liable to make good all the payments for the purchases made using the add-on card(s). How many add-on cards can a customer get? Normally an issuing bank permits two add-on cards per credit card. Is it possible to control the spending limit on add-on cards? Yes. Some credit card issuing companies do set a limit for each transaction, as well as for the total value of transactions allowed on a particular add-on card every month.

Internet Banking in India-Part I - Dr A. K. Mishra [Dr Mishra is Professor at IIM Lucknow. In his Two part feature, Dr Mishra covers emerging challenges, main concerns in Internet banking and strategies that need to be adopted by Indian banks.] INTRODUCTION The Internet banking is changing the banking industry and is having the major effects on banking relationships. Internet banking involves use of Internet for delivery of banking products & services. It falls into four main categories, from Level 1 - minimum functionality sites that offer only access to deposit account data - to Level 4 sites highly sophisticated offerings enabling integrated sales of additional products and access to other financial services- such as investment and insurance. In other words a successful Internet banking solution offers · Exceptional rates on Savings, CDs, and IRAs · Checking with no monthly fee, free bill payment and rebates on ATM surcharges · Credit cards with low rates · Easy online applications for all accounts, including personal loans and mortgages · 24 hour account access · Quality customer service with personal attention DRIVERS OF CHANGE Advantages previously held by large financial institutions have shrunk considerably. The Internet has leveled the playing field and afforded open access to customers in the global marketplace. Internet banking is a cost-effective delivery channel for financial institutions. Consumers are embracing the many benefits of Internet banking. Access to one's accounts at anytime and from any location via the World Wide Web is a convenience unknown a short time ago. Thus, a bank's Internet presence transforms from 'brouchreware' status to 'Internet banking' status once the bank goes through a technology integration effort to enable the customer to access information about his or her specific account relationship. The six primary drivers of Internet banking includes, in order of primacy are: · Improve customer access · Facilitate the offering of more services · Increase customer loyalty · Attract new customers · Provide services offered by competitors · Reduce customer attrition INDIAN BANKS ON WEB Indian banks are going for the retail banking in a big way. However, much is still to be achieved. This study which was conducted by students of IIML shows some interesting facts: · Throughout the country, the Internet Banking is in the nascent stage of development (only 50 banks are offering varied kind of Internet banking services). · In general, these Internet sites offer only the most basic services. 55% are so called

'entry level' sites, offering little more than company information and basic marketing materials. Only 8% offer 'advanced transactions' such as online funds transfer, transactions & cash management services. · Foreign & Private banks are much advanced in terms of the number of sites & their level of development. EMERGING CHALLENGES By the year of 2002, a large sophisticated and highly competitive Internet Banking Market will develop which will be driven by · Demand side pressure due to increasing access to low cost electronic services. · Emergence of open standards for banking functionality. · Growing customer awareness and need of transparency. · Global players in the fray · Close integration of bank services with web based E-commerce or even disintermediation of services through direct electronic payments (E- Cash). · More convenient international transactions due to the fact that the Internet along with general deregulation trends, eliminate geographic boundaries. · Move from one stop shopping to 'Banking Portfolio' i.e. unbundled product purchases.

Mobile banking Mobile banking (also known as M-Banking, mbanking, SMS Banking etc.) is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone. Mobile banking today (2007) is most often performed via SMS or the Mobile Internet but can also use special programs called clients downloaded to the mobile device. Mobile banking can offer services such as the following:

Account Information 1. Mini-statements and checking of account history 2. Alerts on account activity or passing of set thresholds 3. Monitoring of term deposits 4. Access to loan statements 5. Access to card statements 6. Mutual funds / equity statements

7. Insurance policy management 8. Pension plan management 9. Status on cheque, stop payment on cheque

10.Ordering check books 11.Balance checking in the account 12.Recent transactions

13.Due date of payment (functionality for stop, change and deleting of payments) 14.PIN provision, Change of PIN and reminder over the Internet 15.Blocking of (lost, stolen) cards Payments, Deposits, Withdrawals, and Transfers 1. Domestic and international fund transfers 2. Micro-payment handling 3. Mobile recharging 4. Commercial payment processing 5. Bill payment processing 6. Peer to Peer payments 7. Withdrawal at banking agent 8. Deposit at banking agent

Investments 1. Portfolio management services 2. Real-time stock quotes 3. Personalized alerts and notifications on security prices Support 1. Status of requests for credit, including mortgage approval, and insurance coverage 2. Check (cheque) book and card requests

3. Exchange of data messages and email, including complaint submission and tracking 4. ATM Location Content Services 1. General information such as weather updates, news 2. Loyalty-related offers 3. Location-based services

Demat account In India, a demat account, the abbreviation for dematerialised account, is a type of banking account which dematerializes paper-based physical stock shares. The dematerialised account is used to avoid holding physical shares: the shares are bought and sold through a stock broker.

Procedure 1. Fill demat request form (DRF) (obtained from a depository participant or DP with whom your depository account is opened). 2. Deface the share certificate(s) you want to dematerialise by writing across Surrendered for dematerialisation. 3. Submit the DRF & share certificate(s) to DP. DP would forward them to the issuer / their R&T Agent . 4. After dematerialisation, your depository account with your DP, would be credited with the dematerialised securities. The Benefits - A safe and convenient way to hold securities; - Immediate transfer of securities; - No stamp duty on transfer of securities; - Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc.; - Reduction in paperwork involved in transfer of securities; - Reduction in transaction cost; - No odd lot problem, even one share can be sold; - Nomination facility; - Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately; - Transmission of securities is done by DP eliminating correspondence with companies; - Automatic credit into demat account of shares, arising out of bonus/split/consolidation/merger etc. - Holding investments in equity and debt instruments in a single account.