Chapter 3.

Most Revolutionary Banking Technologies

Debit Cards A debit card (also known as a bank card or check card) is a plastic card that 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 Functionally, it can be called an electronic check, as the funds are withdrawn directly from either the bank account, or from the remaining balance on the card.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.[1][2] In many countries the use of debit cards has become so widespread that their volume of use has overtaken or entirely replaced the checkand, in some instances, cash transactions. Like credit cards, debit cards are used widely for telephone and Internet purchases and, unlike credit cards, the funds are transferred immediately from the bearer's bank account instead of having the bearer pay back the money at a later date. Debit cards may also allow for instant withdrawal of cash, acting as theATM card for withdrawing cash and as a check guarantee card. Merchants may also offer cashback facilities to customers, where a customer can withdraw cash along with their purchase. Advantages A consumer who is not credit worthy and may find it difficult or impossible to obtain a credit card can more easily obtain a debit card, allowing him/her to make plastic transactions.

For most transactions, a check card can be used to avoid check writing altogether. Check cards debit funds from the user's account on the spot, thereby finalizing the transaction at the time of purchase, and bypassing the requirement to pay a credit card bill at a later date, or to write an insecure check containing the account holder's personal information.

Like credit cards, debit cards are accepted by merchants with less identification and scrutiny than personal checks, thereby making transactions quicker and less intrusive. Unlike personal checks, merchants generally do not believe that a payment via a debit card may be later dishonored.

Unlike a credit card, which charges higher fees and interest rates when a cash advance is obtained, a debit card may be used to obtain cash from an ATM or a PIN-based transaction at no extra charge, other than a foreign ATM fee.

ATM (Automated Teller Machines) An Automated Teller Machine (ATM), also known as automated banking machine (ABM) or Cash Machine and by several other names (see below), is a computerized telecommunications device that provides the clients of a financial with access to financial transactions in a public space without the need for a cashier, human clerk or bank teller. On most modern ATMs, the customer is identified by inserting a plastic ATM card with a magnetic stripe or a plastic smart card with a chip, that contains a unique card number and some security information. Authentication is provided by the customer entering a personal identification number (PIN). Using an ATM, customers can access their bank accounts in order to make cash withdrawals, credit card cash advances, and check their account balances as well as purchase prepaid cell phone credit. ATMs started as a substitute to a bank to allow its customers to withdraw cash at anytime and to provide services where it would not be viable to open another physical branch. The ATM is the most visited delivery channel in retail banking, with more than 40 billion transactions annually worldwide. In fact, the delivery channel revolution is said to have begun with the ATM. It was indeed a pleasant change for customers to be in charge of their transaction, as no longer would they need to depend on an indifferent bank employee. ATMs have made banks realize that they could divert the huge branch traffic to the ATM. The benefits hence were mutual. Once banks realized the convenience of ATMs, new services started to be added. History of ATMs in India The first Automated Teller Machine (ATM) was introduced in the year 1967 by Barclays Bank in Enfield Town in North London. At that time a few would have anticipated excess in ATMs. Then for many years after, the aim was to shift people off the teller lines thus lowering a banks distribution costs and increase efficiency. But in the 1980s, it was noticed that people continued to visit branches, though not as frequently, so that with the added costs of ATMs, overall distribution costs were actually rising. Then, in the mid-1990s, came surcharges, which fuelled the proliferation of off-premises ATMs, which led in turn to the current overcapacity. There was a slowdown in ATM transactions, partially because of the consumers reaction to the imposition of surcharges. Also by the advent of surcharging there was a massive growth in the number of ATMs as it offered ATM owners revenues making it economical to install ATMs where they might not have been placed otherwise. More people are now moving towards using the automated teller machines (ATM) for their banking needs. According to a survey by Banknet India, 95% people now prefer this modern channel to traditional mode of banking. Almost 60% people use an ATM at least once a week. Increased ATM usage is also helped by the fact that customers have now the flexibility of using ATMs of other banks, as most of the banks are part of major interbank networks like National Financial Switch (NFS), Mitr, BANCS, Cashtree and Cashnet. The interbank networks have brought together ATMs of several banks so that consumers would gain access to any of the participating banks ATMs. Banks find it cheaper to pay membership fees to these networks as against setting up additional units in expensiveto-deploy areas. ATMs are now seen to be more than mere cash dispensing machines. Customers use ATMs to recharge their mobile phone pre-paid connections, pay their utility bills, even mutual fund transactions making them at par with flexibility given in internet banking only more secure. Of the value-added services provided at ATMs, bill-payment is the most used service, followed by prepaid mobile talk-time recharges. However, still about one third of the respondents do not use any value added services at ATMs.

The ATM market in India is not yet saturated. Though the concentration of ATMs is greater in metros, the demand is increasing for other cities and even rural areas. ATM's per million people approximately is 33 units is very low. Experts forecast that the growth rate (CAGR) is expected to grow 18 percent up by 2013. Banks going into a self service model can have huge saving potential for banks and may also increase the convenience for the customers.

Telephone Banking Telephone banking is a service provided by a financial institution, which allows its customers to perform transactions over the telephone. Most telephone banking services use an automated phone answering system with phone keypad response or voice recognition capability. To guarantee security, the customer must first authenticatethrough a numeric or verbal password or through security questions asked by a live representative (see below). With the obvious exception of cash withdrawals and deposits, it offers virtually all the features of an automated teller machine: account balance information and list of latest transactions, electronic bill payments, funds transfers between a customer's accounts, etc. Usually, customers can also speak to a live representative located in a call centre or a branch, although this feature is not always guaranteed to be offered 24/7. In addition to the self-service transactions listed earlier, telephone banking representatives are usually trained to do what was traditionally available only at the branch: loan applications, investment purchases and redemptions,chequebook orders, debit card replacements, change of address, etc. Banks which operate mostly or exclusively by telephone are known as phone banks. They also help modernise the user by using special technology. This makes it possible for a customer of the bank to know account related information over a telephone. TeleBanker is a state-of-the-art interactive voice response system (IVRS) that facilitates 24-hours-a-day, 365-days-a-year banking from a plain Telephone instrument! Unique Features of Tele Banking : Data input by voice/keypad Encryption of input/output data Data output by voice/fax/e-mail Customer authentication by password/PIN Services Available Balance enquiry Issue cheque book/DD Enquiry on last few transactions Fund transfer Inward/outward cheque status Telephone/electricity/credit card bill payment