Latest trends in banking:

Debit card:

What Is a Debit Card?

A debit card is a payment card that deducts money directly from a consumer’s savings account
to pay for a purchase. Debit cards eliminate the need to carry cash or physical checks to make
purchases. In addition, debit cards, also called check cards, offer the convenience of credit cards
and many of the same consumer protections when issued by major payment processors like Visa
or Mastercard.

Unlike credit cards, debit cards do not allow the user to go into debt, except perhaps for small
negative balances that might be incurred if the account holder has signed up for overdraft
protection.

[Important: Debit cards usually have daily purchase limits, meaning it may not be possible to
make an especially large purchase with a debit card.]

How a Debit Card Works

Debit cards serve a dual purpose: They allow the user to withdraw money from his or her savings
account through an ATM or through the cash-back function many merchants offer at the point of
sale. In addition, they also allow the user to make purchases.

ATM cards, by contrast, only allow the user to withdraw money from an ATM, while credit cards
only allow purchases unless the credit card holder has a PIN-enabled cash advance feature (and
the cash advance will incur interest, unlike withdrawing cash from a saving account).

Debit card purchases can usually be made with or without a personal identification number
(PIN). If the card has a major payment processor’s logo, it can be run as a credit card, and the
cardholder won’t need to take the risk of exposing their PIN number. The money will still come
directly out of the cardholder’s checking account, and there won’t be any finance charges when
the debit card is run as a credit card. Some debit cards also offer reward programs, similar to
credit card reward programs, such as 1% back on all purchases.

Tracking Payments with Debit Cards

Every transaction made with a debit or check card will appear on the account holder’s monthly
statement, making it easy to keep track of purchases. Consumers are effectively making their
purchases in cash—that is, with money they actually have, as opposed to money borrowed on
credit. But unlike cash purchases, there’s no way to lose track of amounts spent on a debit card.
And while lost or stolen cash is gone forever, a lost or stolen bank card can be reported to the
bank, which can deactivate the card, remove any fraudulent transactions from the cardholder’s
account and issue a new card.
Key Takeaways

Debit cards eliminate the need to carry cash or physical checks to make purchases, but these
cards can also be used at ATMs to withdraw cash.

Debit cards usually have daily purchase limits, meaning it may not be possible to make an
especially large purchase with a debit card.

Debit card purchases can usually be made with or without a personal identification number
(PIN).

Debit card purchases are easy to monitor, and there's no way to lose track of spending, unlike
using a credit card, as the money comes directly out of a checking account.

Some debit cards also offer reward programs, similar to credit card reward programs, such as 1%
back on all purchases.

Credit Card:

What Is a Credit Card?

A credit card is a thin rectangular slab of plastic issued by a financial company, that lets
cardholders borrow funds with which to pay for goods and services. Credit cards impose the
condition that cardholders pay back the borrowed money, plus interest, as well as any additional
agreed-upon charges.

The credit company provider may also grant a line of credit (LOC) to cardholders, enabling them
to borrow money in the form of cash advances. Issuers customarily pre-set borrowing limits,
based on an individual's credit rating. A vast majority of businesses let the customer make
purchases with credit cards, which remain one of today's most popular payment methodologies
for buying consumer goods and services.

Understanding Credit Cards

Credit cards feature higher annual percentage rates (APRs) than other forms of consumer loans.
Interest charges on the unpaid balance charged to the card are typically imposed one month
after a purchase is made.

[Important: Individuals with poor credit histories often seek secured credit cards, which require
cash deposits, that afford them commensurate lines of credit.]

Types of Credit Cards

Most major credit cards, which include Visa, MasterCard, Discover, and American Express, are
issued by banks, credit unions, or other financial institutions. Many credit cards attract
customers by offering incentives such as airline miles, hotel room rentals, gift certificates to
major retailers and cash back on purchases.
To generate customer loyalty, many retail establishments issue branded versions of major credit
cards, with the store's name emblazoned on the face of the cards. Although it's typically easier
for consumers to qualify for a store credit card than for a major credit card, store cards may only
be used to make purchases from the issuing retailers, which may offer cardholders perks such as
special discounts, promotional notices, or special sales.

Secured credit cards are a type of credit card where the cardholder secures the card with a
security deposit. Such cards offer limited lines of credit that are equal in value to the security
deposits, which are refunded after cardholders demonstrate repeated and responsible card
usage. Also known as "prepaid" and "semi-secured" credit cards, these cards are frequently
sought by individuals with poor credit histories.

Similar to a secured credit card, a prepaid debit card is a type of secured payment card, where
the available funds match the money someone already has parked in a linked bank account. By
contrast, unsecured credit cards do not require security deposits or collateral. These cards tend
to offer higher lines of credit and lower interest rates on unpaid balances.

Building Credit History with Secured Credit Cards

Secured cards can help consumers rebuilt damaged credit while providing a way to make online
purchases and eliminate the need to carry cash. But since secured cards report payments and
purchasing activity to the major credit agencies, cardholders who use their card responsibly may
be able to extend their lines of credit or upgrade to regular credit cards.

Automated Teller Machine (ATM):

What Is an Automated Teller Machine (ATM)?

An automated teller machine (ATM) is an electronic banking outlet that allows customers to
complete basic transactions without the aid of a branch representative or teller. Anyone with a
credit card or debit card can access most ATMs.

The first ATM appeared in London in 1967, and in less than 50 years, ATMs spread around the
globe, securing a presence in every major country and even tiny little island nations such as
Kiribati and the Federated States of Micronesia.

ATMs are convenient, allowing consumers to perform quick, self-serve transactions from
everyday banking like deposits and withdrawals to more complex transactions like bill payments
and transfers.

Understanding Automated Teller Machines (ATMs)

Since the first ATM appeared in 1967, the popularity of these machines has steadily been on the
rise. There are more than 3.5 million ATMs in use across the world. They are also known in
different parts of the world as automated bank machines (ABM) or bank machines.
There are two primary types of ATMs. Basic units only allow customers to withdraw cash and
receive updated account balances. The more complex machines accept deposits, facilitate line-
of-credit payments, transfers, and report account information. To access the advanced features
of the complex units, a user must be an account holder at the bank that operates the machine.

Analysts anticipate ATMs will become even more popular and forecast an increase in the number
of ATM withdrawals. ATMs of the future are likely to be full-service terminals instead of or in
addition to traditional bank tellers.

Parts of an ATM

Although the design of each ATM may be different, they all contain the same basic parts:

Card reader: This part reads the chip on the front or the magnetic stripe on the back of the card.

Keypad: The keypad allows the consumer to input information like the PIN, the type of
transaction he or she intends to do, and the amount of the transaction.

Cash dispenser: Bills are dispensed through a slot in the machine, which is connected to a safe at
the bottom of the machine.

Printer: If required, consumers can request receipts which are printed here. The receipt records
the type of transaction, the amount, and the account balance.

Screen: The ATM issues prompts that guide the consumer through the process of executing the
transaction. Information is also transmitted on the screen such as account information and
balances.

KEY TAKEAWAYS

Automated teller machines are electronic banking outlets that allow people to complete
transactions without the help of a bank representative or teller.

ATM transactions can be as simple as a deposit or balance inquiry, or more complex like a
balance transfer or bill payment.

In order to use an ATM, consumers need to have a debit or credit card, and a personal
identification number.

Many cards come with a chip, which transmits data from the card to the machine. These work in
the same fashion as a bar code that is scanned by a code reader.

ATM Fees

Account holders can use their bank's ATMs at no charge, but accessing funds through a unit
owned by a competing bank usually incurs a fee. Some banks may reimburse consumers the fee,
especially if there is no corresponding ATM available in the area.
Using ATMs Abroad

ATMs make it simple for travelers to access their checking or savings accounts from almost
anywhere in the world. When travelers use foreign ATMs, they receive a better exchange rate
than they would at most currency exchange offices. Additionally, using an ATM is easier than
cashing traveler's checks, and arguably, it makes travel safer, as the traveler doesn't have to carry
a lot of cash.

However, the account holder's bank may charge a transaction fee or a percentage of the amount
exchanged. Most ATMs do not list the exchange rate on the receipt, making it challenging to
track spending.

Mobile Banking

What Is Mobile Banking?

Mobile banking is the act of making financial transactions on a mobile device (cell phone, tablet,
etc.). This activity can be as simple as a bank sending fraud or usage activity to a client’s cell
phone or as complex as a client paying bills or sending money abroad. Advantages to mobile
banking include the ability to bank anywhere and at any time. Disadvantages include security
concerns and a limited range of capabilities when compared to banking in person or on a
computer.

Mobile Banking Explained

Mobile banking is very convenient in today’s digital age with many banks offering impressive
apps. The ability to deposit a check, to pay for merchandise, to transfer money to a friend or to
find an ATM instantly are reasons why people choose to use mobile banking. However,
establishing a secure connection before logging into a mobile banking app is important or else a
client might risk personal information being compromised.

Mobile Banking and Cybersecurity

Cybersecurity has become increasingly important in many mobile banking operations.

Three main types of cyber attacks can occur. These are:

Backdoor attacks, in which thieves exploit alternate methods of accessing a system that don't
require the usual means of authentication. Some systems have backdoors by design; others
result from error.

Denial-of-service attacks prevent the rightful user from accessing the system. For example,
thieves might enter a wrong password enough times that the account is locked.
Direct-access attack includes bugs and viruses, which gain access to a system and copy its
information and/or modify it.

Steps financial advisors can take to protect their clients against cyber attacks include:

Helping educate clients about the importance of strong, unique passwords (e.g, not reusing the
same one for every password-protected site), along with how a password manager like Valt or
LastPass can add an extra layer of security.

Never accessing client data from a public location, and being sure the connection is always
private and secure.

Bank Draf

What Is a Bank Draft?

A bank draft is a payment on behalf of a payer that is guaranteed by the issuing bank. Typically,
banks will review the bank draft requester's account to see if sufficient funds are available for
the check to clear. Once it has been confirmed that sufficient funds are available, the bank
effectively sets aside the funds from the person's account to be given out when the bank draft is
used. A draft ensures the payee a secure form of payment. And the payer's bank account
balance will be decreased by the money withdrawn from the account.

How a Bank Draft Works

Obtaining a bank draft requires that the payer has already deposited funds equal to the check
amount and applicable fees with the issuing bank. The bank creates a check to the payee drawn
on the bank’s own account. The name of the payer (also known as the remitter) is noted on the
check, but the bank is the entity making the payment. A bank cashier or officer signs the check.
A bank draft functions similarly to a cashier's check.

Because the money is drawn upon and issued by a bank, a bank draft guarantees the availability
of the underlying funds. Buyers or sellers make or require payments through bank drafts as a
secure method of payment.

[Important: Once a bank draft is arranged, it is usually not possible to cancel or stop payment on
it since it, in effect, represents a transaction that has already occurred.]However, if the draft has
been lost, stolen or destroyed, it can usually be canceled or replaced as long as the purchaser
has the required documentation.

RTGS AND NEFT

Different payment and settlement systems in India have made the task of transferring money
from one bank account to another easier and faster. Now account holders don’t have to wait for
days to receive money in their bank accounts. With the help of the latest digital payment
systems, money can be sent and received in an instant anytime from anywhere. A large number
of banks, private companies and government bodies along with others are adopting different
payment and settlement methods. This has helped in reducing the gap between the entities and
their customers and other concerned people. These methods are fast, convenient and useful for
documentation purposes. They also are superior in terms of reliability and cost involved.

Different Ways to Transfer Funds Online in India

India currently has various methods to transfer money online such as digital wallets, UPI, and
more. However, the most commonly used online fund transfer method has been:

1) National Electronic Funds Transfer (NEFT)

2) Real Time Gross Settlement (RTGS)

3) Immediate Mobile Payment Service (IMPS)

While NEFT and RTGS was introduced by RBI (Reserve Bank of India), IMPS was introduced by
National Payments Corporation of India (NPCI).

NEFT: National Electronic Funds Transfer (NEFT) is a payment system that facilitates one-to-one
funds transfer. Using NEFT, people can electronically transfer money from any bank branch to a
person holding an account with any other bank branch, which is participating in the payment
system. The NEFT transactions can be carried out in bulk and repetitively.

RTGS: Real Time Gross Settlement (RTGS) is another payment system in which the money is
credited in the beneficiary’s account in real time. This fund transfer method is typically used to
transfer enormous sum of money.

IMPS: IMPS is an abbreviation for Immediate Mobile Payment Services, which is an instant inter-
bank funds transfer system. This funds transfer method is more customer-centric than the other
two as it allows the remitter to transfer funds using their smartphones.

NEFT, RTGS and IMPS payment systems were introduced to offer convenience and flexibility to
the account holders. To use these online fund transfer services, remitter (person who wants to
transfer money) must have the basic bank account details of the beneficiary (person to whom
the money is to be transferred). The bank account details include the beneficiary’s name and
bank’s IFSC. Though all the three payment systems are used for funds transfer, they exhibit a few
difference.

Comparison Category NEFT RTGS

Settlement Type Hourly Batches One-on-one Settlement One-on-one

Minimum Transfer Limit Rs.1 Rs.2 lakh Rs.1

Funds Transfer Speed 2 hours Immediate

Service Timings Weekdays (12 batches) Weekdays 24/7

8:00 AM – 7:00 PM 9:00 AM – 4:30 PM

Saturdays (6 batches) Saturdays

8:00 AM – 1:00 PM 9:00 AM – 2:00 PM

(for settlement at RBI’s end)

Sunday and Bank Holidays Sunday and Bank Holidays

Unavailable unavailable

The timings that banks follow may vary.

Payment Options Online and Offline Online and Offline Online

NEFT:

Transaction Charges No charges for inward transactions (at destination bank branches for
credit to beneficiary accounts)

Outward transactions at originating bank branches – charges applicable for remitter for amount:

Up to Rs.10,000 is Rs.2.50

Rs.10,000 – Rs.1 lakh is Rs.5

Rs.1 lakh – Rs.2 lakh is Rs.15

Rs.2 lakh and above is Rs.25

GST is also applicable

RTGS:

No charges for inward transactions.

Rs.2 lakh – Rs.5 lakh is Rs.30

Rs.5 lakh – Rs.10 lakh is Rs.55

Also, an additional amount charged from Re.1 to Rs.5 if transaction is done after 12:30 PM.

GST is also applicable

IMPS:

Charges for remittance through IMPS are decided by the individual member banks and PPIs. The
taxes are included.

Core Banking

Core (centralized online real-time exchange) banking is a banking service provided by a group of
networked bank branches where customers may access their bank account and perform basic transactions
from any of the member branch offices.Core banking is often associated with retail banking and many
banks treat the retail customers as their core banking customers. Businesses are usually managed via the
corporate banking division of the institution. Core banking covers basic depositing and lending of money.
Core banking functions will include transaction accounts, loans, mortgages and payments. Banks make
these services available across multiple channels like automated teller machines, Internet banking, mobile
banking and branches. Banking software and network technology allow a bank to centralise its record
keeping and allow access from any location.

History

Core banking became possible with the advent of computer and telecommunication technology that
allowed information to be shared between bank branches quickly and efficiently.Before the 1970s it used
to take at least a day for a transaction to reflect in the real account because each branch had their local
servers, and the data from the server in each branch was sent in a batch to the servers in the data center
only at the end of the day (EOD). Over the following 30 years most banks moved to core banking
applications to support their operations creating a Centralized Online Real-time Exchange (or
Environment) (CORE[2]). This meant that all the bank's branches could access applications from
centralized data centers. Deposits made were reflected immediately on the bank's servers, and the
customer could withdraw the deposited money from any of the bank's branches.

Software

Advancements in Internet and information technology reduced manual work in banks and increasing
efficiency. Computer software is developed to perform core operations of banking like recording of
transactions, passbook maintenance, interest calculations on loans and deposits, customer records,
balance of payments and withdrawal. This software is installed at different branches of bank and then
interconnected by means of computer networks based on telephones, satellite and the Internet.
Gartner defines a core banking system as a back-end system that processes daily banking transactions, and
posts updates to accounts and other financial records.[1] Core banking systems typically include deposit,
loan and credit-processing capabilities, with interfaces to general ledger systems and reporting tools. Core
banking applications are often one of the largest single expense for banks and legacy software are a major
issue in terms of allocating resources. Spending on these systems is based on a combination of service-
oriented architecture and supporting technologies.

Many banks implement custom applications for core banking. Others implement or customize commercial
independent software vendor packages.[3] Systems integrators like Cognizant, EdgeVerve Systems Limited,
Capgemini, Accenture, IBM and Tata Consultancy Services implement these core banking packages at
banks. More recently, entrants such as Temenos (late 1990's) and Probanx (since 2000) have also provided
entry level CORE banking systems, focusing on neo-banks and electronic money institutions.

Choosing right core banking solution is again a tough task for banks[4] its not always that easy to select
right core banking solution. Open source Technology in core banking solution or software can help banks
to maintain their productivity and profitability at the same time.[5]