Retail Banking

Topic 3: Products & Services

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Learning Objectives
Explain the different categories of retail services, the key processes and systems used by banks to support retail banking;

Describe the services provided by banks to consumers;

Identify the actors for the retail banking services; Describe the processes and systems involved in deposit taking, cheque services and lending;

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Retail Banking
Relates to financial services provided to individual consumers and is usually small scale in nature and driven by the mass market
Retail Banking is also known as Personal Banking Consumer Banking To provide low-cost banking services in line with customers' needs by offering standardized products and simplifying sales processes
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Main objective of Retail Banking

4 basic roles of a retail bank:

A method of exchange A means of preserving and accumulating wealth A way to increase purchasing power Assurance of security and safety

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Deposit services include

Savings account Current account Time deposit account

Banks accepts different types of deposits Coins and notes deposits Cheque deposits Electronic fund transfers

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Savings Account provides

safety of savings easy availability of funds when needed interest which is expected to cover the value

loss due to inflation

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Current Account
is used for payments usually offers low or zero interest rate

Current Account is also known as Chequeing account (British) Checking account (American)

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Time Deposit Account

is a Savings account that exists for a specified period of time
It involves depositing funds for a set period of time usually at a pre-determined rate of interest The main consideration of the depositor is the fixed and assured interest rate

Time Deposit Account is also known as Fixed Deposit Account

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Deposit Services In a nutshell

Features / Charges Savings Account Current Account Time Deposit

Lock-In period

Fall Below Fee

Monthly service charge

ATM

Cheque Book

Interest

Internet / Phone Banking

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Payment services

Automated Teller Machines Cheque writing

Electronic Fund Transfer

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Automated Teller Machines

allows consumers can get cash, perform fund transfers, make bill payments are less expensive than human tellers are available 24 hours a day

ATMs allows consumers to perform many other services besides payment services. These include Check account balances Perform cash deposit Perform cheque deposit

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Cheque Writing

Cheque (British) Check (American)

A cheque is a negotiable instrument instructing a financial institution to pay a specific amount of a specific currency from a specific account held in the makers name with that institution
Cheque clearing: 1. Next working day if deposited before cut-off time 2. 2 working days if deposited after cut-off time 3. 5-day clearing week
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Cheque Writing

Q. When will be a cheque be cleared? a. Deposited on Tue before 3 pm:

b. Deposited on Thurs after 3 pm:

c. Deposited on Friday after 3 pm:
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Cheque Processing

2. Payee

1. Payer 3. Presenting Bank a. credit payees a/c (on hold) 4. Singapore Automated Clearing House (SACH)

SGD / USD Cheque Clearing System

b. capture cheque image and information & send to SACH

5. Paying Bank a. Debit Payers account

determines net settlement amount for each bank initiates fund transfer between banks sends cheque image and information to Paying Bank

6. Release hold

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Electronic Fund Transfer (EFT)

is the transfer of funds from one bank account to another that is initiated by electronic means, such as an electronic terminal, telephone, computer or ATM Examples EFT payment systems are: NETS (also known as EFTPOS) Interbank GIRO (IBG) Phone Banking Internet Banking

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Interbank GIRO
(a) Credit Transfer:

Credit a/c

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Interbank GIRO

(b) Debit Transfer:

2. Amount? 1. Instruct

3. Debit a/c

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Retail Banking
Loan Services
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Credit Facilities
Amortizing loans /

Overdraft

Secured / unsecured

loans

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Amortizing loans
Periodic payment of principal + interest. Loan will be fully-paid off at end of loan tenure. Loan disbursement is one-off.

Eg. David takes up a loan of $300 with $30 interest. The loan is to be repaid over 3 months. How much is the monthly installment?

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Overdraft
a loan facility where banks allows withdrawals to

exceed deposits in a deposit account borrower draws against a credit line approved interest is charged on funds utilized borrower pays interest and principal partially monthly revolving in nature

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Unsecured Loans
one in which a loan is backed only by the reputation and credit-worthiness of the borrower

Personal Loan
a loan which can be used for any purpose the amount is usually up to 2 times the monthly salary

Line of Credit
a type of personal loan borrowings of any amount when the need arises up

to an agreed-upon limit

MAS NOTICE 635

Annual Income >= $30,000 Credit Line <= 2 times monthly income
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Secured Loans

one in which some item of value or collateral backs the loan in case the borrower defaults on the loan

For most loans, the collateral is the purchased item For Housing loan, the collateral is the house For Car loan, the collateral is the car The collateral will go to the lender if the borrower fails to make the payment

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Card Services
Credit Card Store Card

Debit Card
Charge Card Store Value Card

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Credit Cards
Bank allows customers to make purchases on credit

up to a pre-arranged credit limit

Customers make purchases and pay later Bank allows customers to pay all or part of their bills

to the bank each month and finance (rollover) the unpaid balance

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Store Cards

Same features as a credit

card

Tie-up

with respective merchants to enjoy discounts / rebates.

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Debit Cards

A debit card allows customers

to make payment from their bank account to the account of the merchant

Funds are withdrawn directly

from the cardholders bank account

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Charge Card

A charge card is similar to a

credit card, except that the charges made to it must be paid-off each month in full

No roll over is allowed

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Stored Value Card

Incorporates a microprocessor

Use the embedded logic to change values and record transactions

Can be used as electronic purse/wallet

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Cash Advance

a loan facility where banks allow consumers to obtain (borrow) cash through the credit card account

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Retail Services Delivery Channels

Branches ATM EFTPOS Phone Banking Internet Banking Mobile Banking

EFTPOS Electronic Fund Transfer at Point of Sale

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Credit Facilities In a nutshell

Features / Charges

Mortgage Loan

Credit Card

Personal Loan

Overdraft / Line of Credit

Auto Loan

Golf Club Membership Loan

Debit Card

Amortizing

Revolving

Secured

Unsecured

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