Modern Banking Services: E-Banking, Mobile Banking, ATM, Credit Card [Finance Notes for AHSEC Class 12 2024 Exam]

Finance Notes for AHSEC Class 12 2024 Exam

Unit 4: Modern Banking Services

Q.1. What are various modern banking services provided by banks?

Ans: Modern Services Provided by Bank through Internet Banking

1.       Centralized Banking Solution (CBS) = CBS, an inter-branch networking and data-sharing platform helps the customers to operate their account from any city in India having CBS networked branches, changing the status of customer from ‘Customer of the Branch’ to ‘Customer of the Bank’.

2.       Online Tax Payment = Banks provide the facility of online payment of service tax, excise duty, DGFT, Custom duty and all charges under MCA 21 through internet banking.

3.       Corporate Internet Banking = Online funds transfer, trade finance management, fund management, global access with unmatched benefits through banks’ corporate internet banking.

4.       Online Shopping = This service facilitates the customers to book hotels, buy gifts, send flowers, buy books and lot of activities by making payments online.

5.       Retail Internet Banking = Internet Banking assists the customers to have an online access to bank account anytime and anywhere.

6.       Foreign Exchange = Banks have several branches authorized for handling foreign exchange business and these branches.

7.       E-Money India = Internet banking helps the customer in sending money to their loved ones in India through PNB’s e-Money India service.

8.       Online Railway Reservation = Say goodbye to long queues. Banks offer the customers online booking and information through IRCTC payment gateway. Just click and travel comfortably.

9.       Depository Service = Banks Depository service provides the facility of having shares and securities in Demat form and executes transactions of sales and purchase hassle free electronically to the customers through internet banking.

10.   Electronic Clearing Service and Electronic Funds Transfer (EFT) = Internet banking assists the customers in electronic clearing service for quick movement of funds in a paperless mode and EFT to ensure an expeditious transfer of funds by using electronic media.

11.   Online Bill Payment = No more queues to pay customers’ bills. Now the customers can pay their telephone, mobile, electricity, insurance and several other bills 24 hours, 365 days, from the desktop of customer.

12.   Online Air Ticket Booking = Banks provide facility of online airline ticket booking of domestic as well as international airlines to their customers through internet banking.

13.   Online Trading = Banks provide online trading facilities to customers having account with bank and trading account with approved brokers.

14.   Customer Care Facility = Banks present 24 hours’ customer care facility for all customer’s quarries and problems.

15.   Online Insta Remit-RTGS Service = Instant remittance by customer himself now made possible, from one bank to another bank at different centres on the same day with the help of Online Real Time Gross Settlement (RTGS)/National Electronic Fund Transfer (NEFT) at modest charges.

Q.2. What is E-Banking? What are its utilities? What are its advantages and disadvantages?

Ans: Online banking also known as internet banking, e-banking, or virtual banking, is an electronic payment system that enables customers of a bank or other financial institution to conduct a range of financial transactions through the financial institution's website. Internet banking is a term used to describe the process whereby a client executes banking transactions via electronic means. This type of banking uses the internet as the chief medium of delivery by which banking activities are executed. The activities clients are able to carry out are can be classified to as transactional and non-transactional.

Advantages of E-banking or Internet banking

1)      Convenience: Banks that offer internet banking are open for business transactions anywhere a client might be as long as there is internet connection. Apart from periods of website maintenance, services are available 24 hours a day and 365 days round the year. In a scenario where internet connection is unavailable, customer services are provided round the clock via telephone.

2)      Low cost banking service: E-banking helps in reducing the operational costs of banking services. Better quality services can be ensured at low cost.

3)      Higher interest rate: Lower operating cost results in higher interest rates on savings and lower rates on mortgages and loans offers from the banks. Some banks offer high yield certificate of deposits and don’t penalize withdrawals on certificate of deposits, opening of accounts without minimum deposits and no minimum balance.

4)      Transfer services: Online banking allows automatic funding of accounts from long established bank accounts via electronic funds transfers.

5)      Ease of monitoring: A client can monitor his/her spending via a virtual wallet through certain banks and applications and enable payments.

6)      Ease of transaction: The speed of transaction is faster relative to use of ATM’s or customary banking.

7)      Any time cash facility: The customer can obtain funds at any time from ATM machines.

Disadvantages of E-banking Internet banking

1)      High start-up cost: E-banking requires high initial startup cost. It includes internet installation cost, cost of advanced hardware and software, modem, computers and cost of maintenance of all computers.

2)      Security Concerns: One of the biggest disadvantages of doing e-banking is the question of security. People worry that their bank accounts can be hacked and accessed without their knowledge or that the funds they transfer may not reach the intended recipients.

3)      Training and Maintenance: E-banking requires 24 hours’ supportive environment, support of qualified staff. Bank has to spend a lot on training to its employees. Shortage of trained and qualified staff is a major obstacle in e-banking activities.

4)      Transaction problems: Face to face meeting is better in handling complex transactions and problems. Banks may call for meetings and seek expert advice to solve issues.

5)      Lack of personal contact between customer and banker: Customary banking allows creation of a personal touch between a bank and its clients. A personal touch with a bank manager can enable the manager to change terms in our account since he/she has some discretion in case of any personal circumstantial change.

Q.3. What is mobile or telephone banking? What are its advantages and disadvantages?

Ans: Telephone banking

Telephone banking is a service provided by a bank or other financial institution that enables customers to perform a range of financial transactions over the telephone, without the need to visit a bank branch or automated teller machine. Telephone banking times are usually longer than branch opening times, and some financial institutions offer the service on a 24-hour basis. Most financial institutions have restrictions on which accounts may be accessed through telephone banking, as well as a limit on the amount that can be transacted.

The types of financial transactions which a customer may transact through telephone banking include obtaining account balances and list of latest transactions, electronic bill payments, and funds transfers between a customer's or another's accounts.

Advantages of Telephone/Mobile Banking

a)       Mobile Banking uses the network of service provider and it doesn't need internet connection. In a developing country like India where their is no internet connection in the interiors, there is the presence of mobile connectivity.

b)      Mobile Banking is available round the clock 24/7/365 and is easy and Convenient mode for many Mobile users in the rural areas.

c)       Mobile Banking is said to be more secured and risk free than online/internet Banking.

d)      With the help of Mobile Banking you can pay your bills, transfer funds, check account balance, review your recent transaction, block your ATM card etc.

e)      Mobile Banking is cost effective and Banks offer this service at very low cost to the customers.

Disadvantages of Telephone/Mobile Banking

a)       Though the security threat is less than Internet Banking, Mobile Banking has to security issues. One of the great threat to Mobile Banking is "Smishing" which is similar to "phishing” ...In "Smishing" users receives fake message asking for their Bank details. Many users have fallen to this trap.

b)      Mobile Banking is not available on all mobile phone. Some time it requires you to install apps on your phone to use the Mobile Banking feature which is available on high end smartphone. If you don't have a smartphone than the use of Mobile Banking becomes limited. Transaction like transfer of funds are only available on high end phones.

c)       Regular use of Mobile Banking may lead to extra charges levied by the bank for providing the services.

d)      Mobile phones are limited in processing speeds, screen size and battery life. This act as a barrier in Mobile Banking.

Q.4. What is ATM and ATM card? How we can Avail ATM Facility?

Ans: ATM: An automated teller machine or automatic teller machine (ATM), is a Computerized telecommunications device that provides the clients of a financial Institution with access to financial transactions in a public space without the need for a cashier, human clerk or bank teller.

ATM Card: ATM cards are the most convenient form of withdrawing money. It is a magnetic card having a secret PIN (Personal Identification Number) which is kept to be confidential by the user to prevent it from misuse. One can easily get money withdrawal by simply inserting ATM cards into ATM with confidential pin code. These cards are also known as ATM- CUM DEBIT card. Nowadays ATM is serving more than just withdrawing machines. A minimum balance of Rs.1000 is compulsory to withdraw. ATM card of any bank can be access in any bank’s ATM

How to Avail ATM Facility?

1. This facility is for everyone who has Savings, Current or Cash Credit account.

2. To get ATM Facility on your account you have to fill up form provided by bank.

3. ATM card holder has to maintain minimum balance of Rs.1000/-

4. No any additional charges for this facility

Q.5. What are the functions and uses of ATMs?

Ans: Functions and Uses of ATMs:

a) 24-hour access to cash

b) Ability to view Account Balances & Mini-statements

c) Order a Cheque Book / Account Statement

d) Transfer Funds between accounts

e) Refill Prepaid card or prepaid phone accounts

f) Payment of utility bills like Electricity bills, post-paid mobile bills

g) Deposit of cash or cheques

h) User can Change ATM PIN number

i) Uses can Learn about other products

Q.6. What are various advantages of ATM?

Ans: Advantages of ATM:

1. ATM provides 24 hours’ service: ATMs provide service round the clock. The customer can withdraw cash upto a certain limit during any time of the day or night.

2. ATM gives convenience to Bank’s customers: ATMs provide convenience to the customers. Now-a-days, ATMs are located at convenient places such as at the airports, railway stations, etc.

3. ATM reduces the workload of Bank’s staff: ATMs reduce the work pressure on bank’s staff and avoid queues in bank premises.

4. ATM provides service without any error: ATMs provide service without any error. The customer can obtain exact amount. There is no human error as far as ATMs are concerned.

5. ATM is very beneficial for travellers: ATMs are of great help to travellers. They need not carry large amount of cash with them. They can withdraw cash from any city or state, across the country and even from outside the country with the help of ATM.

5. ATM may give customers new currency notes: The customer also gets brand new currency notes from ATMs. In other words, customers do not get solid notes from ATMs.

Q.7. What is credit card and debit card? Distinguish between credit card and debit card?

Ans: Credit Card: A credit card is a system of payment named after the small plastic issued to users of the system. A credit card is different from a debit card in that it does not remove money from the user’s account after every transaction. In the case of credit cards, the issuer lends money to the customer (or the user). It is also different from a charge card (through this name is sometimes used by the public to describe credit cards), which requires the balance to be paid in full each month. In contrast, a credit card allows the consumer to ‘revolve’ their balance, at the cost of having interest charged. Most credit cards are the same shape and size, as specified by the ISO 7810 Standard.

Debit Card: Debit card is a plastic card which provides an alternative payment method to cash when making purchases. Functionally, it can be called an electronic check, as the funds are withdrawn directly from either the bank account, or from the remaining balance on the card. In some cases, the cards are designed exclusively for use on the Internet and so there is no physical card. Debit cards are similar to credit cards, except debit cards pull money out of your checking or brokerage account. Debit cards do not create or increase a loan like credit cards do.

Differences between Credit and Debit cards:

Basis	Credit card	Debit card
1. Use	Borrowing money from a bank or financial institution.	Funds are debited to the money that you have in your Bank account.
2. Bank account	Need not be connected to any bank account.	Needs a bank account
3. Interest	Pay additional interest drawn on the amount borrowed.	No interest is to be paid.
4. Limit	Credit limit is provided by the lenders to the card holders.	Withdrawal limit is upto balance in bank account.