The Origins of Modern Banking

GOLDSMITHS
In the old days gold was minted into coins and those coins, along with silver coins,
formed the nation's currency. Goldsmiths had strongboxes and vaults in which to
securely store the precious metal with which they worked. It was natural enough
then that other people took to asking the goldsmith to store their gold and gold
coins in his vault and to pay the goldsmith for the service. A merchant (for
example) would entrust to the goldsmith £20 worth of his own gold for
safekeeping. When he handed over his gold, the goldsmith would provide him with
a receipt or note promising to hand back the gold (pay the bearer on demand)
whenever the depositor returned and presented the note. The receipt held by the
depositor was in fact as good as gold because he could exchange it for his £20
worth of gold any time he chose. But the note was easier to carry around than
heavy and bulky amounts of gold and easier to conceal, so the depositor was often
content to leave his gold in the goldsmith's safekeeping for long periods. In fact
when the time came to pay for some commodity with his £20 of gold, instead of
returning to the goldsmith, exchanging the receipt for the gold and then using the
gold to pay for his purchase, it was more convenient for him simply to hand over
his receipt to the seller. The seller was happy to accept the receipt in lieu of actual
gold because it was more convenient to carry around and he knew that should he
present it to the goldsmith, £20 of gold would be handed over to him. 

Thus those gold receipts began to circulate and became the first paper money.
People were happy to exchange them back and forth rather than the cumbersome
gold they represented. The receipts had value because people were confident that
in the goldsmith's vault lay the gold, which they could redeem at any time. 

Eventually the goldsmiths noticed that the gold left by depositors remained in their
vaults for longer and longer periods. People turned up wishing to exchange their
receipts for gold less and less often, and that the receipts they had issued to
depositors circulated in its stead. It seemed a shame to have that gold just sitting
there doing nothing. Why not lend some of it out for a while? If it just sat there for
year after year the owner, the holder of the receipt, was not going to miss it if it
were loaned to someone else for a period. 

As long as there was enough gold in the vaults to satisfy anyone who did turn up
with a receipt, then no-one would be any the wiser. So depositor Joe would leave
£20 of gold with the goldsmith for safekeeping and depart with his receipt which
he would then use as money in lieu of the gold and it would circulate. It might be
years before anyone turned up with that £20 note asking for £20 of gold.
Meanwhile Tom would turn up at the goldsmith's asking to borrow £20 of gold and
the goldsmith would lend it to him, demanding that it be paid back after a certain
period at a certain amount of interest. But instead of lending Tom actual gold, the
goldsmith would draw up a £20 receipt, just like the one depositor Joe had been
given. Tom was happy to take the receipt in lieu of the gold because it was more
convenient to carry around and people were happy to accept such receipts in
payment for things. 

So Tom went off with his £20 note, content that through it he was now in
temporary possession of £20 of gold. But unbeknownst to Tom, Joe also has a
receipt representing that gold. In other words there are now two notes in circulation
representing the same £20 of gold! Clearly the goldsmith's issuance of two receipts
for the same amount of gold is fraudulent - particularly when Tom repays the gold
he believes he has borrowed in real gold. As each receipt promises to hand over the
same £20 of gold on demand, the goldsmith is making a promise he knows he
cannot keep. 

Several things are clear at the moment the second receipt was issued and entered
circulation: new money has been created out of thin air; that new money has been
loaned into existence; as the loan has interest charged upon it, then a debt has been
created out of nothing that is greater than the amount of new money created. 

And another thing: Tom will eventually return to the goldsmith and repay his £20
loan, say at 10% interest. He will therefore hand the goldsmith, £22 in real gold. In
other words, the goldsmith, in creating that bogus receipt and lending it to Tom, is
creating for himself, albeit after a delay, real debt-free gold worth more than the
new money he loaned into existence! It gets worse. 

After a while the goldsmith, seeing that his fraud is working pretty well, thinks that
if he can issue two £20 receipts against the same £20 of gold, then why not two,
three or even four? 

So Joe deposits £20 of gold and the goldsmith gives him his receipt. In time four
other people turn up at his shop wanting to borrow that £20 of gold. The goldsmith
obligingly lends it to each of them at interest, giving each a receipt purporting to
represent that £20 of gold. There are now five receipts in circulation representing
the same deposit of gold, one for the original depositor and one for each of the four
borrowers. For that deposit of £20, £80 (4x £20) of new money is created merely
by writing on a fancy piece of paper. 

If(say) £2 of interest (10%) is charged on each loan, at the same time that £80 of
new money is created out of thin air, a debt of £88 is also created out of thin air. 

Property is held as security against these loans so if the borrower fails to repay
with real gold the fraudulent piece of paper he borrowed, the goldsmith takes his
property. 

Each time the goldsmith lends £20 of bogus gold he charges 10% interest on the
loan. By lending out £20 four times over and charging £2 interest on each loan, the
goldsmith makes a whopping 40% (four times £2) in interest on the £20 "reserves"
that were not even his to begin with! The goldsmith cannot lose and soon begins to
amass a fortune from his fraud. It is the greatest get-rich-quick scheme ever
invented. And it is, in essence, the basis of the modern banking system. 

The goldsmiths of yesteryear became the bankers of today and although paper
money and latterly electronic money took over from gold, essentially the same
fraud is being run. 

BANKERS
The business of lending pieces of paper pretending to be gold made the
goldsmiths very wealthy and very influential men. Their easy wealth enabled them
to move to upmarket premises. They became pillars of the community and some
even became international financiers, lending money to kings and governments. 

In the seventeenth century conflict between the bankers of the day and the Stuarts
led the bankers to act in concert with bankers in Europe. They joined forces with
those in the Netherlands to finance the invasion of England by William of Orange.
William overthrew the Stuart Kings in 1688 and became King William III. 

By the end of the 1600s England was in financial ruin, gold and silver supplies
were running low and a costly civil war followed by costly wars with France and
Holland, all in a fifty year period, had left her heavily in debt. 
Government officials met with the financiers to negotiate the loans they needed.
King William was £20 million in debt and he could not pay his army. Apparently it
did not occur to William or anyone that if William needed to pay his army or get
the economy going, all he had to do was have the government print its own money
and use that to pay the troops -something that Abraham Lincoln would do
successfully during the American Civil war nearly two hundred years later! 

King William's "friends", the bankers, were willing to loan him the money he
needed but the price they wanted for their "help" was high. They wanted a
government-sanctioned but privately owned central bank that could; through
fractional reserve lending, create money out of nothing and loan it to the
government. 

They got their way. In 1694 the world's first privately owned central bank was
created. It was to be called the Bank of England. The Bank's charter included the
following immortal words: "The bank hath benefit on the interest on all monies
which it creates out of nothing." 

Instead of exercising its right to create money and spend it into the economy, the
government had the bank create it, then lend it to the government so that the
government could spend it into the economy, then pay the loans back later at
interest. That completely unnecessary complication was to have devastating
consequences for the futures of the English people. 

As well as delivering extraordinary power over the nation into the hands of a
privately owned business corporation, it began the National Debt, a debt that
would go on increasing remorselessly over the ensuing years until it had reached
around £380 billion in 1996, costs us around £30 billion a year in interest payments
and is still climbing. 

By the end of the 17th century, the goldsmiths' scam had become respectable
banking. The role of the banks in issuing money through lending to individuals and
businesses had already become widely accepted. Thus there came to be established
two routes by which money was borrowed into the economy: private and
commercial borrowing on the one hand and government borrowing on the other.
That combined debt in the present day has now soared to well over one trillion
pounds. 

In 1704, just ten years after the creation of the Bank of England, the banks'
promissory notes, on the recommendation of the bankers and financiers who
advised the government, were declared legal tender. 

Although the new central bank was an entirely privately owned corporation, the
name chosen for it led generations of Englishmen to believe that it was part of their
government, when it most certainly was not. Like any other privately owned
corporation the new central bank sold shares to create its initial capital. Its
investors - whose identities were never disclosed - were supposed to put up a total
of £1 ¼ million in gold coin to purchase their shares. Only three quarters of a
million was ever received. 

Nevertheless, despite that minor technicality, the bank was chartered in 1694 and
began the business of lending out several times the money it supposedly had in its
reserves. 

In exchange for this unique and immensely profitable privilege, the bank would
very kindly lend the English, and later British, government as much money as it
wanted, at interest, provided the debt was secured by direct taxation of the people. 

The Modern Banking System  (Where does money come from?)

"If the debt which the

banking companies
owe be a blessing to
anybody, it is to
themselves alone, who
are realizing a solid
interest of eight or ten
per cent on it. As to
the public, these
companies have
banished all our gold
and silver medium,
which, before their
institution, we had
without interest,
which never could
have perished in our
hands, and would have been our salvation now in the hour of war; instead of
which they have given us two hundred million of froth and bubble, on which we
are to pay them heavy interest, until it shall vanish into air... We are warranted,
then, in affirming that this parody on the principle of 'a public debt being a
public blessing,' and its mutation into the blessing of private instead of public
debts, is as ridiculous as the original principle itself. In both cases, the truth is,
that capital may be produced by industry, and accumulated by economy; but
jugglers only will propose to create it by legerdemain tricks with paper."
- Thomas Jefferson to John W. Eppes, 1813. ME 13:423

Fractional-reserve banking
From Wikipedia, the free encyclopedia.
In economics, particularly in financial economics, fractional-reserve banking is
the near-universal practice of banks of retaining only a fraction of their deposits to
satisfy demands for withdrawals, lending the remainder at interest to obtain income
that can be used to pay interest to depositors and provide profits for the banks'
owners. Fractional-reserve banking allows for the possibility of a bank run in
which the depositors collectively attempt to withdraw more money than is in the
possession of the bank, leading to bankruptcy. It also increases the money
supply through a mechanism called the deposit creation multiplier, explained
below, which can lead to inflation if reserves are too low. Most governments
impose strictly-enforced reserve requirements on banks, with the exact fraction
of deposits that must be kept in reserve generally set by a central bank.

"The modern banking system manufactures money out of nothing. The

process is perhaps the most astounding piece of sleight of hand that was ever
invented. Banking was conceived in iniquity and born in sin. Bankers own the
Earth. Take it away from them, but leave them the power to create money, and
with the flick of the pen they will create enough money to buy it back
again...Take this great power away from them and all great fortunes like mine
will disappear, and they ought to disappear, for then this would be a better and
happier world to live in. But if you want to continue to be slaves of the banks
and pay the cost of your own slavery, then let bankers continue to create money
and control credit'."
- Sir Josiah Stamp, The Bank of England

Computer technology

rapid development of computer technology, to produce a tremendous impact on

many industries, banking is one of them. In today's highly advanced electronic,
traditional banking is undergoing a historic transformation to electronic banking as
the main features of modern banks are gradually entering people's lives. Modern
Bank is banking business and the product of high degree of integration of modern
technology, it has many features common to both, also have two shared risk.

1, bank business development Change

with the development of human history, monetary forms of commodity money -

from the role of the general equivalent of precious metal currency being transferred
to national legislation to determine, and can represent a certain value of legal
tender - coins or paper money, to the late 20th century, a reliance on computer and
network technology, through the formation of high-tech means of electronic
currency into circulation in the field has been quietly and gradually began to
replace notes and coins in the implementation of the currency of the payment
functions , financial instruments in the traditional currency, securities, bonds and
deposits based on the emergence of electronic money. The emergence of electronic
money, many banks invisible currency clearing settlement Cheng Wei; trading
transactions in the traditional manual based on, there was electronic trading, online
trading and other new trading a large number of physical currency Zheng Zhu Bu
withdrawn from circulation. Electronic currency being recognized more and more
customers, while being gradually occupied an important position in the banking
business.

stimulated the rapid progress of technology, the development of electronic

payment, payment methods and payment of ****, to banking business has also
brought a profound impact. In the traditional banking business can not do things,
the use of technology in the modern banking model has become easy to do; in the
traditional manner requires a lot of money banks can work, under way in the
modern banking was not difficult conduct; in the traditional banking work hard to
implement the banking business, in the modern banking conditions have been very
easy to implement. Collected and remitted to the conduct of business, agent
distribution, agent insurance, valet financial and economic consulting services to
the middle, and fundamentally changed the traditional banking business to banks
the content, scope of business has changed dramatically. It also makes a profit in
the way banking has changed, the business of innovation, the introduction of
electronic means to make banking a risk factor is also changing.

2, the traditional banking business and the characteristics of modern banking

article refers to the traditional banking business mainly as currency notes and
coins were based on the bank payment and settlement operations ; modern banking
business refers to the electronic money as the main form of currency in circulation,
bank payment and settlement business. As the notes or coins in circulation
settlement, the need to deal face to face for both inventory turnover, even with a
bank check, money order and other settlement means there are also some form of
contact with the parties, therefore, the traditional banking business due to physical
currency the form of circulation ****, by geographical radiating effect by labor
intensity and volume of business the impact of uneven spatial and temporal
distribution of its business lines, services, service delivery must be restricted. To
carry out traditional banking business, the establishment of foreign service office is
a prerequisite, either deposits or loans to carry out various types of business must
have a physical bank branches to achieve, and this office will be subject to
radiation side constraints ,**** the further expansion of business volume. Were
limited because the labor intensity, if a bank to take 24 hours, will bring high-cost
labor expenses; banks at night, business is relatively small, therefore, the
traditional banking business Qi night mode input-output ratio of the banks are
extremely unfavorable, and thus very few traditional form of bank open for
business all night long.

view from the conduct of business, deposits, loans, savings and loan spreads
through the profit is mainly depend on the survival of traditional banks. In the
traditional banking model, the evaluation of the target banks have many good and
bad, of which several important indicators of a bank's capital adequacy, asset
quality, liquidity, bank losses and so win.
 in the modern banking business, through the service profit, charging through the
intermediary business, in the proportion of bank revenue increasing, this is
obvious. Modern banking and information technology are closely related, ATM,
POS application that allows people to remove the inconvenience of carrying large
amounts of cash, telephone banking, online banking as Bank opened on the
Internet a virtual bank counter, make people more convenient and personal
finance , business, money transfer. As an extension of the network, without bank
officers on duty, so that banking services from the space and time have been the
greatest extension of the 24-hour service has become feasible and practical. With
digitization and the development of electronic networks, telephone banking,
Internet banking introduction of new banking model, thousands of families into the
bank in the past, is gradually becoming a bank into thousands of households, 3A
(Anywhere, Anytime, Anyway) type The full range of financial services has
become the new bank to meet customer requirements for financial Target Mode.
Modern information technology allows banks as the treasury building in the
computer, the existence of the database notes to the computer network of financial
flows. It has brought us is a new service model and operation mode.

E-commerce in the world with the rapid development of Internet-based financial

services have emerged, online banking, online brokerage business by the financial
sector have launched to provide information to customers via the Internet inquiry,
reconciliation, online payment, funds transfer, credit, investment banking and other
financial services to the users great convenience to the aid of technical means to
realize the Internet banking services. At the same time, the banks through which
technological innovations to reduce operating costs, without the establishment of
branch offices, customers can extend geographical, breaking the geographical
limitations of traditional financial sector, to a greater extent and scale management,
and according to the customer demand custom personalized products, traditional
business models break the bank, without time and geographical ****, customers
get access to the Internet banking services. Banking provides electronic payment
settlement, electronic data exchange and electronic funds transfer, and other
electronic banking services, not only provides our customers a full range of
financial services, greatly facilitates the customer, but also saves the transaction
costs and improve the economy of the Yin Xing benefits. Generally speaking, the
modern banking services with electronic virtual way, the business operating
environment and opening up, blurred the boundaries between time and space
operations, real-time transaction processing, transaction costs associated with the
physical characteristics of non-place, modern banking business innovation and
technology innovation in the financial result of combining . Modern banking
business virtualization, service personalization, management is the general trend
has been mixed.

3, the traditional banking business and the risk characteristics of modern banking

traditional banking business because of its historical origins, their risks and
characteristics of deeper, longer. For the traditional banking business, we often say
that there are risks, credit risk, market risk, interest rate risk, liquidity risk,
operational risk, legal risk and reputation risk. The main manifestations are: the
borrower defaults or investment counterparties do not do delivery, a higher
proportion of bad loans, companies, etc. due to increased interest rates caused by
credit risk; foreign exchange market exchange rate fluctuations and financial
institutions in the investment sale of movable and immovable property when due
fluctuations in market prices caused by market risk; unfavorable fluctuations in
interest rates when the interest rate risk; bank capital shortage, inability to reduce
debt or equity financing to increase the liquidity risk; in the daily operations for a
variety of human errors , fraud and natural disasters, accidents caused by
operational risk; because of inadequate laws or laws may not resolve the legal
issues with the bank's legal risks and other factors; so that banks could have
adverse effects on the reputation of the reputation risk and so on.

risk of modern banking, one bank because of its inherent characteristics,

traditional banking business has continued down the risk remains. Second, because
closely related with information technology, technical risks were taken into
banking business, increased bank risk management and internal management more
difficult. Such as online banking, because the links between banks and their
customers connected through the network did not meet each other so there is the
issue of identification; information on the Internet transmission, the confidentiality
and integrity needs to be guaranteed; hackers stealing and the occurrence of
computer viruses need to guard against; online confirmation of orders and
undeniable need to be assured; customer funds security, privacy need to be
protected. These technical risks prevalent in bank products and services, the
prevalence of the various decision-making part of the bank, trading links, links and
management aspects of running. Third, the relevant laws in our country as
imperfect and delayed, the conduct of modern banking services, financial
innovation of Jin Xing, Yin existing laws Faguibuneng Wanquanjiejue Suo legal
problems, Yi Xie banking business of the law 有效 protection upon legal disputes
arise, it is difficult safeguard the interests of banks. Fourth, because the high
mobility of electronic money and hidden, making more difficult to monitor the
circulation of money, while the blurring of the distinction between the monetary
level, a number of electronic money issuance mechanism, so that monetary policy
has increased the difficulty. The central bank regulation, and how effective modern
banking regulation, it also brings a series of challenges.

4, on the modern banking risk prevention of

lag is a modern banking law to carry out a major problem exists. At present, the
modern banking system and to develop a lack of legal protection, therefore, should
revise and improve incompatible with modern banking laws and regulations, so
that financial innovation in business under the protection of the law the healthy
development, China's financial sector development and growth as soon as possible
and provide the necessary conditions with international standards.

As mentioned earlier, information technology, modern banking business is closely

integrated with traditional banking product, in addition to its traditional banking
business has existed in the process of credit risk, liquidity risk, market risks and
interest rate risks , but also because of its specificity and the existence of risk-based
information technology systems and varieties of financial services based on virtual
forms of business risk. Therefore, the risk prevention, we must consider the
characteristics of the traditional banking risks, but also consider the technical level
of risk.

risk prevention in the technology, the computer network security measures is one
of the primary consideration. Modern banking transaction information between the
client and the bank transfer is mainly carried out through computer networks, such
a tiny transfer process will bring the millions of tampering with the loss of funds
and lead to the confusion of modern banking operations; network precautions
slightly negligent It will also generate significant risks of modern banking. How to
ensure security of transactions, to avoid the loss of the banks themselves and for
client confidentiality, the modern bank survival and the development of the most
important issue. Second, the modern bank information system and the
completeness of their own security audit system is also worth noting that one of the
issues. Because modern banking business is through the implementation and
realization of computer systems, systematic rigor, integrity, ease, fault tolerance,
the direct impact of closure of the living space of modern banks, perhaps a small
system error customer or the bank will bring great economic losses, loss of
customer confidence in the modern banking; If the system design and system in
use during the development of a set of strict safety audit system, discover and find
all kinds of potential security vulnerabilities can improve the information system to
resist risks. Third, compound the lack of senior financial management personnel
and modern equipment of domestic banks is low, is also of concern. The quality of
personnel issues is the core of the work, have no outstanding talents, they can not
make outstanding achievements. Modern banking is the traditional banking
business and the combination of modern electronic technology products of high-
level, high-tech financial products, its management personnel and the quality of
managerial talent in demanding, and in our country who are proficient in financial
information system development, but also familiar with complex financial business
is a lack of talent, which makes our country to carry out banking business in the
modern and the modern bank risk prevention is far behind western countries. In
addition, due to the current financial electronic hardware and software platforms
are a number of core technology imported from abroad, this core technology, the
situation of heavy dependence on imports is a major hidden financial security.

for modern banks, in the prevention of technical risks the same time, its business
risk is also deserves our close attention to. First of all, both because modern
banking transactions can be completed in an instant the transfer huge amounts of
money, such a large number of sudden transfer of funds must not increase the
stability of the banking business, but also increased the trading session due to
disruption caused by a sudden payment and settlement risks, and increase the
bank's liquidity risk, reduce the chance error or errors occurred leeway to increase
the bank's remedial costs, the event of a sudden the payment difficulties, such as
attacks by hackers or computer viruses erosion, the system will be chaotic, so the
risk of spreading rapidly through the network and expand, leading to rapid
fluctuations in financial markets. Second, the modern banking operations,
"virtualization" to the banking industry has a strong geographical expansion and
profit potential off-site, but due to economic, legal and cultural traditions of
different objects the transaction has become difficult to determine the transaction
pre-qualification examination and supervision of implementation of the transaction
more difficult, or even possible cross-border network of financial services
transactions, jurisdiction, legal fitness, service and trading issues such as the
legality of contracts, resulting in increased credit risk managers . Again, because of
modern banking in China is still in its infancy, the development of modern banking
requires a lot of upfront investment, while China's current level of information is
not high, consumer and business awareness of modern banks, confidence quite
different, therefore, After carrying out modern banking to the uncertainty of
profitability in the domestic development of modern banking operational risk lurks
great. In addition, commercial banks also need to establish and perfect the modern
financial enterprise system, strengthen its risk prevention capacity of the financial
sector, improve the corporate governance system, in accordance with prudent
accounting principles sound modern financial accounting system continue to make
efforts to ensure that within the commercial banking system effective control.
While maintaining the traditional banking business risk prevention in the
successful, effective internal control system, the characteristics for information
technology, from project design, hardware management, software monitoring,
advanced security technology on the banking computer systems for security
precautions The establishment and implementation of management systems,
business continuity, security and other assets to strengthen management. In the
employment context, improve internal management of the constraint mechanism
and incentive mechanism, a large number who are proficient in financial services,
but also familiar with computer technology, high-quality management personnel to
ensure that modern banking business fast and healthy development.

From the regulatory point of view, because modern banking is a new product and
fast development, regulatory management measures are often delayed, or even the
lack of forward-looking, combined with breakthroughs in modern bank-specific
time and space * ***, regulatory means and methods behind the Administration,
therefore, the current regulatory model is difficult to object to the implementation
of a comprehensive monitoring, real-time, continuous and effective monitoring. To
this end, the regulatory authorities in its regulatory work, the commercial banking
system should strengthen the electronic level of development, application
technology of maturity, reliability and security, technology risk management of
Shuipingjiqi technical risk of the development trend and to assessment of the
commercial banking system to enhance risk control, operations security clearance
from the information system, regular safety inspections evaluation key for effective
risk control. According to the modern bank's development situation, amendments
to those based on traditional banking model Zhiding of Wufayanshen to data and
networks in the economy rules and formulate new regulatory rules and standards,
as far as possible to resolve network lag Lifa, ensure regulatory system to adapt to
Jinrongtiji due to technological development and changes that have occurred. This
is a modern banking rapid and healthy development of the important guarantee. At
the same time, the regulatory body personnel, foster a group of progressive thinker
Banking and monitored, the monitoring team are familiar with computer
knowledge, more attention to talent introduction, in order to better achieve the
business of modern bank supervision.

ATM
Global use

There are no hard international or government-compiled numbers totaling the complete

number of ATMs in use worldwide. Estimates developed by ATMIA place the number of
ATMs in use currently at over 1.8 million.[18]

For the purpose of analyzing ATM usage around the world, financial institutions
generally divide the world into seven regions, due to the penetration rates, usage
statistics, and features deployed. Four regions (USA, Canada, Europe, and Japan) have
high numbers of ATMs per million people.[19] and generally slowing growth rates.
[20]
 Despite the large number of ATMs, there is additional demand for machines in the
Asia/Pacific area as well as in Latin America.[21][22] ATMs have yet to reach high numbers
in the Near East/Africa.[23]

While ATMs are ubiquitous on modern cruise ships, ATMs can also be found on
some US Navy ships.[29]

Uses

Although ATMs were originally developed as just cash dispensers, they have evolved to
include many other bank-related functions. In some countries, especially those which
benefit from a fully integrated cross-bank ATM network (e.g.: Multibanco in Portugal),
ATMs include many functions which are not directly related to the management of one's
own bank account, such as:

 Deposit currency recognition, acceptance, and recycling [60][61]

 Paying routine bills, fees, and taxes (utilities, phone bills, social security, legal
fees, taxes, etc.)
 Printing bank statements
 Updating passbooks
 Loading monetary value into stored value cards
 Purchasing
 Postage stamps.
 Lottery tickets
 Train tickets
  Concert tickets
 Movie tickets
 Shopping mall gift certificates.
 Games and promotional features[62]
 Donating to charities[63]
 Cheque Processing Module
 Adding pre-paid cell phone / mobile phone credit.
 Paying (in full or partially) the credit balance on a card linked to a specific current
account.
Increasingly banks are seeking to use the ATM as a sales device to deliver pre
approved loans and targeted advertising using products such as ITM (the Intelligent
Teller Machine) from CR2 or Aptra Relate from NCR. ATMs can also act as an
advertising channel for companies to advertise their own products or third-party
products and services.[

customer security

Customer security

Dunbar Armored ATM Techs watching over ATMs that have been installed in a van.

In some countries, multiple security cameras and security guards are a common

feature.[50] In the United States, The New York State Comptroller's Office has criticized
the New York State Department of Banking for not following through on safety
inspections of ATMs in high crime areas.[51]
Critics of ATM operators assert that the issue of customer security appears to have
been abandoned by the banking industry;[52] it has been suggested that efforts are now
more concentrated on deterrent legislation than on solving the problem of forced
withdrawals.[53]

At least as far back as July 30, 1986, critics of the industry have called for the adoption
of an emergency PIN system for ATMs, where the user is able to send a silent alarm in
response to a threat.[54] Legislative efforts to require an emergency PIN system have
appeared in Illinois,[55]Kansas[56] and Georgia,[57] but none have succeeded as of yet. In
January 2009, Senate Bill 1355 was proposed in the Illinois Senate that revisits the
issue of the reverse emergency PIN system.[58] The bill is again resisted by the banking
lobby and supported by the police.[59] In 1998 three towns outside of Cleveland Ohio, in
response to an ATM crime wave, adopted ATM Consumer Security Legislation requiring
that a 9-1-1 switch be installed at all outside ATMs within their jurisdiction. Since the
passing of these laws 11 years ago, there have been no repeat crimes. In the wake of
an ATM Murder in Sharon Hill, Pennsylvania, The City Council of Sharon Hill passed an
ATM Consumer Security Bill as well, with the same result. As of July 2009, ATM
Consumer Security Legislation is currently pending in New York, New Jersey, and
Washington D.C. In China, many efforts to promote security have been made. On-
premises ATMs are often located inside the bank's lobby which may be accessible 24
hours a day. These lobbies have extensive CCTV coverage, an emergency telephone
and a security guard on the premises. Bank lobbies that aren't guarded 24 hours a day
may also have secure doors that can only be opened from outside by swiping your bank
card against a wall-mounted scanner, allowing the bank to identify who enters the
building. Most ATMs will also display on-screen safety warnings and may also be fitted
with convex mirrors above the display allowing the user to see what is happening
behind them.

Cards

credit card

A credit card is a small plastic card issued to users as a system of payment. It allows

its holder to buy goods and services based on the holder's promise to pay for these
goods and services.[1] The issuer of the card creates a revolving account and grants
a line of credit to the consumer (or the user) from which the user can borrow money for
payment to a merchant or as a cash advance to the user.
A credit card is different from a charge card: a charge card requires the balance to be
paid in full each month. In contrast, credit cards allow the consumers a continuing
balance of debt, subject to interest being charged. Most credit cards are issued
by banks or credit unions

Benefits to customers
The main benefit to each customer is convenience. Compared to debit cards and
cheques, a credit card allows small short-term loans to be quickly made to a customer
who need not calculate a balance remaining before every transaction, provided the total
charges do not exceed the maximum credit line for the card. Credit cards also provide
more fraud protection than debit cards. In the UK for example, the bank is jointly liable
with the merchant for purchases of defective products over £100. [4]

Many credit cards offer rewards and benefits packages, such as offering enhanced
product warranties at no cost, free loss/damage coverage on new purchases, and
points which may be redeemed for cash, products, or airline tickets. Additionally,
carrying a credit card may be a convenience to some customers as it eliminates the
need to carry any cash for most purposes.
Detriments to customers
1= High interest and bankruptcy
2= Inflated pricing for all consumers
3= Grace period----( A credit card's grace period is the time the customer has to
pay the balance before interest is assessed on the outstanding balance. Grace
periods vary, but usually range from 20 to 50 days depending on the type of
credit card and the issuing bank.)

ATM cards

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 check and, 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 the ATM 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 and Disadvantages

Debit and check cards, as they have become widespread, have revealed numerous
advantages and disadvantages to the consumer and retailer alike.

The following allegations seem to be based only on the current situation within the
U.S.A. Please read with caution as they may not apply to any other countries.

Advantages are as follows:

 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.
The Debit card has many disadvantages as opposed to cash or credit:
 Use of a debit card is not usually limited to the existing funds in the account to
which it is linked, most banks allow a certain threshold over the available bank
balance which can cause overdraft fees if the customer does not depend on their
own records of spending.
 Many banks are now charging over-limit fees or non-sufficient funds fees based
upon pre-authorizations, and even attempted but refused transactions by the
merchant (some of which may not even be known by the client).
 Many merchants mistakenly believe that amounts owed can be "taken" from a
customer's account after a debit card (or number) has been presented, without
agreement as to date, payee name, amount and currency, thus causing penalty fees
for overdrafts, over-the-limit, amounts not available causing further rejections or
overdrafts, and rejected transactions by some banks.
 In some countries debit cards offer lower levels of security protection than credit
cards[9]. Theft of the users PIN using skimming devices can be accomplished much
easier with a PIN input than with a signature-based credit transaction. However, theft
of users' PIN codes using skimming devices can be equally easily accomplished with
a debit transaction PIN input, as with a credit transaction PIN input, and theft using a
signature-based credit transaction is equally easy as theft using a signature-based
debit transaction.
 In many places, laws protect the consumer from fraud much less than with a
credit card. While the holder of a credit card is legally responsible for only a minimal
amount of a fraudulent transaction made with a credit card, which is often waived by
the bank, the consumer may be held liable for hundreds of dollars, or even the entire
value of fraudulent debit transactions. The consumer also has a shorter time (usually
just two days) to report such fraud to the bank in order to be eligible for such a
waiver with a debit card[9], whereas with a credit card, this time may be up to 60
days. A thief who obtains or clones a debit card along with its PIN may be able to
clean out the consumer's bank account, and the consumer will have no recourse.

Cash cards
Due to their name, most people assume that the best method for
payment while traveling is a traveler’s cheque, but this is a
misleading idea. Based upon availability, speed, acceptance, and
risk, the smartest solution for paying while traveling is actually a
cash card. However, as is with all forms of payment, cash cards do
have a certain risk factor to them, but it is negligible compared to
many others. For example, when you carry a true debit or credit card
around, the card is digitally connected to your account, so if you lose
it or it gets stolen, there is a very significant risk that the person
who finds it could use it to illegally withdraw funds from your
account. On the other hand, cash cards carry no connection to a
personal banking account so there is no risk of funds being
withdrawn, but if lost or stolen, the person who finds them could
still use the pre-loaded value of the card. In terms of risk, that is
what makes the cash card so much better.  If a 50 dollar prepaid
cash card is stolen, all the owner loses is his/her $50, and not even
that if they report it quickly, but if a debit or credit card is lost, the
owner could lose thousands and thousands of dollars, up the total
sum of his/her accounts, often times even if the card has been
reported stolen.
Although security is a large issue with any form of payment, the safety of
the cash card isn’t what truly makes it so great for travelers, it’s acceptance
does. Although a significant portion of travelers still use traveler’s cheques,
many stores and resale locations refuse to accept them these days, usually
because of the extra work they require to process. Prepaid cash cards
however are usually accepted anywhere a regular debit card would be
accepted, which is the majority of retail locations. Many cash cards even
allow for ATM withdrawals, so if the retail location you are visiting does not
accept electronic forms of payment, you can always find a nearby ATM and
get some cash! Furthermore, because prepaid cash cards work on an almost
identical system to that of credit and debit cards, all  your transactions are
logged and can be privately viewed by you at any time – a great way of
monitoring your funds, and a method that traveler’s cheques do not provide.
One of the major issues that traveler’s experience when using a credit or
debit card instead of a prepaid cash card is overdraft fees. Usually this is a
result of travelers not being able to check their spending and funds because
they can’t find a branch of their bank while traveling and can’t get to a
computer, which can cause a situation in which they think they have much
more money in their account than they actually do. Many times upon
returning home, travelers have been greeted by shock when they see how
much they actually spent while on vacation and many end up not being able
to pay the amount off quickly enough, resulting in overdraft fees and/ or
interest charges. Prepaid cash cards prevent this common misfortune,
because even if you don’t know how much you have left in your account or
how much you have spent so far, you are at no risk of overdrawing with a
prepaid cash card since it will never let you spend more than the value of
the card. Prepaid cash cards are obviously also already paid for, so there are
also no hidden fees or penalties waiting for you when you return home from
a relaxing vacation.
It seems so odd that a large portion of travelers still use debit or credit cards
while away from their home, but hopefully you will know better than to join
their ranks now that you have read about the security, ease, and simplicity
of prepaid cash cards.
Cash cards advantage
Prepaid cash cards are often thought of as only useful for gifts, but they can
in fact be a viable alternative to debit or credit cards. There are several
advantages that come with a prepaid cash card and due to their simplistic
nature, very few disadvantages. This article will discuss the often neglected
benefits of using a prepaid cash card, as well as when one should be used,
how they can be used, and tips for avoiding any misuses. This is important,
because although prepaid cash cards are rather simple in how they function,
knowing when is the best time to choose one over a debit or credit card
might not be as obvious.
There are numerous advantages to using a prepaid cash card as opposed to
a debit or credit card, but the primary one is the way in which they prevent
an individual from spending more than they have. Prepaid cash cards can
prevent an individual from buying more than they can afford because they
are not attached to any sort of bank account, and they can only be used to
pay for items up to the amount that the card was purchased for. For
example, if you were to buy a $300 prepaid cash card and attempt to use it
to purchase an item that cost $500, your order would simply be declined,
whereas with a credit card, the transaction would go through regardless and
you would end up owing $200 that you don’t have. This makes prepaid cash
cards practically lifesavers for those with poor impulse control or those that
cannot properly keep track of their money.
The second biggest advantage to prepaid cash cards is their availability.
Debit and credit cards can often involve a lengthy application process and
review by a bank with many times the end result being rejection due to a
low credit score. However, prepaid cash cards require no credit score
whatsoever, can be activated almost instantly and be ready for usage, and
are available at a myriad of locations, even at many drugstores. For
someone with bad credit, problems dealing with banks, or just someone
short on time, a prepaid cash card is often the easiest method of payment
that doesn’t require carrying large sums of cash or dealing with banks and
overdraft fees.
Just like every form of payment though, prepaid cash cards do have at least
one disadvantage. More often than not, prepaid cash cards will  have an
activation fee, a charge that one must pay in order to start using the card.
However, as opposed to the outrageously large fees associated with credit
cards, the activation fee is actually very miniscule. Also, some prepaid cash
cards might have a small monthly fee, but again, it is practically nothing
when compared to the overdraft, maintenance, and interest fees that come
with any non-prepaid payment card.
Overall, if you want to avoid the hassles of dealing with a bank, the hidden
fees that often come with a credit or debit card, over-drafting and huge
associated penalties, or you just want to have a system that ensures the
most proficient, efficient, and easiest method for paying, a prepaid cash card
is the way to go!

E- banking
Internet Banking, Mobile Banking or Home Banking are modern banking instruments, intended
to the banks’
customers, natural or legal juristic persons, for the payment of bills, accomplishment of transfers,
money transfer
from an account to an another and so on.[[7]].
The Internet-banking can be used from any computer connected to Internet, no matter where it is.
Practically, in the
most of cases, the user of this service doesn’t need to have his own computer, an I-Cafe being
useful for him. There
are the same operations as for E-banking: transmission of payment orders, transfers, exchange,
view of the
accounts’ situation etc. Banks started to jump over the primary stage of E-banking, directly to
Internet Banking.
The E-banking services subsist from more than 20 years, and in Romania, beside ING Barings
and ABN Amro,
they are the founders of this kind of services. The operations that can accomplish by E-banking
are starting from
the view of companies’ account balances, arriving to payments, transfers and exchange, creating
term deposits etc.
The Electronic-banking or E-banking is the first of these banking services that really economize
time, because it
allows to the user to accomplish from behind the computer many operations in the bank account,
without being
necessary to go to the bank, to wait at the office, to complete forms, to sign it, to stamp it, to
allow it to the clerk,
all these needing many time.
To exemplify, we will refer to the order ticket, that is a payment instrument and credit title, under
private signature,
by which a person, named under-writer or issuer, in quality of debtor, must pay to a person
named beneficiary, in
quality of creditor, a sum of money, in a certain term or at presentation.
The obligation of the under-writer (the issuer) of a ticket at order is identical with that of the
acceptant draw of a
bill, because it must absolutely pay at term the sum inscribed on the title, so the order ticket must
contain the
following obligatory mentions:
a) the name of order ticket. The absence of the name of order ticket attracts the nullity of the
title;
b) the unconditional promise to pay a determined sum (sum that must be mentioned in ciphers
and letters). The
issuer (the under-writer) must absolutely pay a sum of money. Any conditions, limitations or
anti-performances
that add to the promises to pay the order ticket attract the nullity of the title;
c) the name of the person for which or at the order of which the payment must be accomplished
(the beneficiary).
The banks only accept order tickets where the name of the person for which or at the order of
which the payment
must be accomplished- the beneficiary of the order ticket- is indicated very clear.
d) the date of issuance. The date of issuance must be unique, possible and certain.
The order tickets will wear clear mentions respecting the day, the month and the year of the
issuance, to admit:
the estimation of the date of payment on a certain period after the issuance;
the finding of the legal capability of subscribers at the moment of signing on the title;
the determination of the subscribers’ rights for the bill action against the bill obligators (protest,
regress
etc.)
e) the signature of the issuer (under-writer), and, for legal juristic persons, the stamp.
The comparison between the necessary time for the manually complement and the time
necessary for the electronic
complement is not necessary, because, in fact, there is many time economised: time with the
complement, time to
go to the bank, time to waiting at the pay office and time necessary to the office operator.
The services offered by E-banking are the following:
payment orders in lei;
scheduled payment in lei;
global payment orders used for the employees salaries;
intra-banking transfers between the own accounts of card and/or current;
intern or extern currency payments;
exchanges;
1094
the visualisation in any moment of the account balances opened
information about different appreciations
possibility to visualise and to print the statements
definition of the beneficiary of the payments, directly by the client.
The banking transfers, the payment orders, the banking changes and the operations’ historical
consultation can be
applied directly from the mobile phone. Demirbank has introduced, for the first time in Romania,
the service
Mobile-banking. The bank doesn’t collect any tax for this service, and the client need only a
mobile phone with
WAP (Wireless Application Protocol) and a subscription for this service. To use Mobile-
banking, a client of the
bank must sign a contract with the bank. He receives a “user-name” and a password, and after
this he can use his
mobile phone for baking operations. There is only one constraint- the money from the account
can be transferred
over a predefined list of companies. In the case in which the mobile phone is lost and,
hypothetically, the person
who found it would know the “user name” and the password, he could transfer the money only
over a company
from the predefined list.
A successfully system is that system that evolve, that adapts the faster to the needs of every
customer, so the
customer must analyse the hard and the poor points at the banks’ offers and to choose what
corresponds to his demands

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 or Personal Digital Assistant (PDA). 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 Services

Mobile banking can offer services such as the following:

[edit]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 cheque 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
[edit]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

A specific sequence of SMS messages will enable the system to verify if the client has
sufficient funds in his or her wallet and authorize a deposit or withdrawal transaction at
the agent. When depositing money, the merchant receives cash and the system credits
the client's bank account or mobile wallet. In the same way the client can also withdraw
money at the merchant: through exchanging sms to provide authorization, the merchant
hands the client cash and debits the merchant's account.
[edit]Investments

1. Portfolio management services

2. Real-time stock quotes
3. Personalized alerts and notifications on security prices
4. mobile banking

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
[edit]Content Services

1. General information such as weather updates, news

2. Loyalty-related offers
3. Location-based services

Based on a survey conducted by Forrester, mobile banking will be attractive mainly to

the younger, more "tech-savvy" customer segment. A third of mobile phone users say
that they may consider performing some kind of financial transaction through their
mobile phone. But most of the users are interested in performing basic transactions
such as querying for account balance and making bill payment.

Security
Security of financial transactions, being executed from some remote location and
transmission of financial information over the air, are the most complicated challenges
that need to be addressed jointly by mobile application developers, wireless network
service providers and the banks' IT departments.

The following aspects need to be addressed to offer a secure infrastructure for financial
transaction over wireless network :

1. Physical part of the hand-held device. If the bank is offering smart-card based
security, the physical security of the device is more important.
2. Security of any thick-client application running on the device. In case the device
is stolen, the hacker should require at least an ID/Password to access the
application.
3. Authentication of the device with service provider before initiating a transaction.
This would ensure that unauthorized devices are not connected to perform
financial transactions.
4. User ID / Password authentication of bank’s customer.
5. Encryption of the data being transmitted over the air.
6. Encryption of the data that will be stored in device for later / off-line analysis by
the customer.
One-time password (OTPs) are the latest tool used by financial and banking service
providers in the fight against cyber fraud [5]. Instead of relying on traditional memorized
passwords, OTPs are requested by consumers each time they want to perform
transactions using the online or mobile banking interface. When the request is received
the password is sent to the consumer’s phone via SMS. The password is expired once it
has been used or once its scheduled life-cycle has expired.

Because of the concerns made explicit above, it is extremely important that SMS

gateway providers can provide a decent quality of service for banks and financial
institutions in regards to SMS services. Therefore, the provision of service level
agreements (SLAs) is a requirement for this industry; it is necessary to give the bank
customer delivery guarantees of all messages, as well as measurements on the speed
of delivery, throughput, etc. SLAs give the service parameters in which a messaging
solution is guaranteed to perform.
[edit]Scalability & Reliability
Another challenge for the CIOs and CTOs of the banks is to scale-up the mobile
banking infrastructure to handle exponential growth of the customer base. With mobile
banking, the customer may be sitting in any part of the world (true anytime, anywhere
banking) and hence banks need to ensure that the systems are up and running in a true
24 x 7 fashion. As customers will find mobile banking more and more useful, their
expectations from the solution will increase. Banks unable to meet the performance and
reliability expectations may lose customer confidence. There are systems such
as Mobile Transaction Platform which allow quick and secure mobile enabling of various
banking services. Recently in India there has been a phenomenal growth in the use of
Mobile Banking applications, with leading banks adopting Mobile Transaction Platform
and the Central Bank publishing guidelines for mobile banking operations.

THE MODERN INCARNATION OF FRAUD

What happens when you or I, or for that matter the government, borrow money from the
bank? Prepare yourself for a surprise. 

Let's say we want to borrow a £100,000 mortgage on a house. The bank or building
society does what the goldsmith did and creates £100,000 out of thin air. Instead of
handing us a paper certificate, it simply credits our bank account with the £100,000 and
registers that £100,000 as a debt, with (say) a further £100,000 interest over 25 years.
The money is simply penned into our account without any account anywhere being
debited the loaned money. New money is therefore created. Alongside it a debt (in this
case £100,000 plus the roughly £100,000 of interest) is created. When we repay the
debt, the interest is accounted as income for the bank. The £100,000 we originally
borrowed is withdrawn from circulation and is accounted as collateral for further lending,
loaned back into circulation when someone else borrows. 

Our house is held as security so if we fail to keep up our repayments, the creditor takes
possession of it. The repayments themselves can vary through no fault of our own,
according to interest rates set by the banking industry. 

After 25 years of blood sweat and tears we finally pay back the last installment of the
£200,000 capital-plus-interest we owed and the house in finally ours. It is not ours until
that point. 

The lender, who loaned us money which did not exist until the moment he created it out
of nothing, winds up with £100,000 of interest on the loan: that is real, spendable
income that comes courtesy of our real work and real wealth creation. The numbers
have been simplified to highlight the nature of the fraud and in practise the process is
hidden under a great deal of complexity but this in essence is the process of money
creation. 

Each time the banks create money they create a debt that is greater than the spending
power they create. One can see too that each time they are creating a debt for the
borrower, they are ultimately creating debt free money for themselves. 

Before the goldsmiths' scam began, the money in circulation was hard currency -
usually gold or silver minted into coins which then circulated as the tokens used to
represent goods and services. That minting and circulation of coinage was usually
administered by the government or king. 

However as soon as the goldsmiths' certificates became used in lieu of gold, paper
money had made an appearance. As soon as the goldsmiths began issuing paper notes
for gold they did not actually have, the goldsmiths were themselves creating new money
and lending it into circulation. 

One can see that this establishes debt as the basis of our currency. Where once, long
ago, the British pound represented something -so much gold or silver - it now
represents so much debt, which is not only nothing it is less than nothing.

Extracted from: Your Business Under Siege…and the reasons why. Published by the
BAMR, email: BAMR@bamr.fsnet.co.uk Tel: 01342410962 (UK) 

“Whoever controls the volume of money in any country is absolute master of all industry
and commerce. And when we realize that the entire system is very easily controlled,
one way or another, by a few very powerful men at the top, you will not have to be told
how periods of inflation and depression originate.” 
U.S. President James Garfield. A few weeks after making this statement, he was
assassinated on July 12, 1818.
 Online banking

Online banking (or Internet banking) allows customers to conduct financial transactions
on a secure website operated by their retail or virtual bank, credit union or building
society.

Features

Online banking solutions have many features and capabilities in common, but
traditionally also have some that are application specific.

The common features fall broadly into several categories

* Transactional (e.g., performing a financial transaction such as an account to

account transfer, paying a bill, wire transfer... and applications... apply for a loan, new
account, etc.)
o Electronic bill presentment and payment - EBPP
o Funds transfer between a customer's own checking and savings accounts, or to
another customer's account
o Investment purchase or sale
o Loan applications and transactions, such as repayments

* Non-transactional (e.g., online statements, check links, cobrowsing, chat)

o Bank statements
* Financial Institution Administration -
* Support of multiple users having varying levels of authority
* Transaction approval process
* Wire transfer

Features commonly unique to Internet banking include

* Personal financial management support, such as importing data into personal

accounting software. Some online banking platforms support account aggregation to
allow the customers to monitor all of their accounts in one place whether they are with
their main bank or with other institutions.

History

The precursor for the modern home online banking services were the distance banking
services over electronic media from the early '80s. The term online became popular in
the late '80s and referred to the use of a terminal, keyboard and TV (or monitor) to
access the banking system using a phone line. ‘Home banking’ can also refer to the use
of a numeric keypad to send tones down a phone line with instructions to the bank.
Online services started in New York in 1981 when four of the city’s major banks
(Citibank, Chase Manhattan, Chemical and Manufacturers Hanover) offered home
banking services[1] using the videotex system. Because of the commercial failure of
videotex these banking services never became popular except in France where the use
of videotex (Minitel) was subsidised by the telecom provider and the UK, where the
Prestel system was used.

The UK’s first home online banking services[2] was set up by the Nottingham Building
Society (NBS) in 1983 ("History of the Nottingham".
http://www.thenottingham.com/main.asp?p=1710. Retrieved 2007-12-14. ). The system
used was based on the UK's Prestel system and used a computer, such as the BBC
Micro, or keyboard (Tandata Td1400) connected to the telephone system and television
set. The system (known as 'Homelink') allowed on-line viewing of statements, bank
transfers and bill payments. In order to make bank transfers and bill payments, a written
instruction giving details of the intended recipient had to be sent to the NBS who set the
details up on the Homelink system. Typical recipients were gas, electricity and
telephone companies and accounts with other banks. Details of payments to be made
were input into the NBS system by the account holder via Prestel. A cheque was then
sent by NBS to the payee and an advice giving details of the payment was sent to the
account holder. BACS was later used to transfer the payment directly.

Stanford Federal Credit Union was the first financial institution to offer online internet
banking services to all of its members in Oct, 1994.

Security

Protection through single password authentication, as is the case in most secure

Internet shopping sites, is not considered secure enough for personal online banking
applications in some countries. Basically there exist two different security methods for
online banking.

* The PIN/TAN system where the PIN represents a password, used for the login and
TANs representing one-time passwords to authenticate transactions. TANs can be
distributed in different ways, the most popular one is to send a list of TANs to the online
banking user by postal letter. The most secure way of using TANs is to generate them
by need using a security token. These token generated TANs depend on the time and a
unique secret, stored in the security token (this is called two-factor authentication or
2FA). Usually online banking with PIN/TAN is done via a web browser using SSL
secured connections, so that there is no additional encryption needed.
* Signature based online banking where all transactions are signed and encrypted
digitally. The Keys for the signature generation and encryption can be stored on
smartcards or any memory medium, depending on the concrete implementation.

Attacks

Most of the attacks on online banking used today are based on deceiving the user to
steal login data and valid TANs. Two well known examples for those attacks are
phishing and pharming. Cross-site scripting and keylogger/Trojan horses can also be
used to steal login information.

A method to attack signature based online banking methods is to manipulate the used
software in a way, that correct transactions are shown on the screen and faked
transactions are signed in the background.

A recent FDIC Technology Incident Report, compiled from suspicious activity reports
banks file quarterly, lists 536 cases of computer intrusion, with an average loss per
incident of $30,000. That adds up to a nearly $16-million loss in the second quarter of
2007. Computer intrusions increased by 150 percent between the first quarter of 2007
and the second. In 80 percent of the cases, the source of the intrusion is unknown but it
occurred during online banking, the report states.[4]

The most recent kind of attack is the so-called Man in the Browser attack, where a
Trojan horses permits a remote attacker to modify the destination account number and
also the amount.

Countermeasures

There exist several countermeasures which try to avoid attacks. Digital certificates are
used against phishing and pharming, the use of class-3 card readers is a measure to
avoid manipulation of transactions by the software in signature based online banking
variants. To protect their systems against Trojan horses, users should use virus
scanners and be careful with downloaded software or e-mail attachments.

In 2001 the FFIEC issued guidance for multifactor authentication (MFA) and then
required to be in place by the end of 2006.

THE FUTURE OF BANKS

One could imagine that all these changes strengthened banks by making them faster,
smarter, broader, and more global. But this is not so. Even though banks have become
bigger, they have been weakened. One of the major reasons is that the new
technologies have accelerated the entry of rival institutions that were more adept in
utilizing them. Today, American banks' share in borrowing has dropped from 36% in
1974 to less than 20%. For thrift institutions, it dropped from 21% in 1976 to less than
8% in 2004. Commercial banks' share of total financial intermediary assets dropped
from a steady 40% in the 60s through 80s to below 30% in the latter half of the 1990s,
the first time that deposits in non-banks were greater than in banks.
One major reason for the decline was the growth of alternative sources of funds.
Information technology enabled investors to evaluate securities and to be reached
directly by borrowers. Thus, commercial paper outstanding as a percentage of business
loans rose from around 5% in the 1970s to above 35% in the 2000s. Computers could
be used to evaluate credit risk by using various quantitative methods, and this made it
possible for non-banks to transform loans into marketable securities. This technique of
securitization by non-banks is now also moving to small business loans.
In response, banks increased non-lending activities. The share of their non-interest
income rose, their commercial real estate loans; as a percentage of assets doubled.
And they began to be heavily active in financial derivatives. Widespread derivatives
markets were not possible without information technology; their complexity makes
controls difficult, and this increased riskiness. It helped bring down the Baring and
Daiwa banks, demonstrating the global nature of the problem. In non-lending activities,
too, banks fell behind institutions without banking charters but with superior operational
or technological ability. In credit card processing, banks lost all but 20% of the market to
non-banks. Banks were slow in offering Electronic Data Interchange (EDI) services that
standardized invoicing and payments for transactions. When EDI emerged outside of
banks it reduced the need for bank intermediaries.
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ATMs, too, proved a mixed blessing. The linkage of ATMs to banks declined: physically,
over 45% of American ATMs are not located at banks anymore. As this reduction in
physical presence continued, the banks' advantage of proximity declined. Customers
deal with machines that are now interlinked by vast ATM networks, and care little about
who is behind them -- a bank, a near-bank, a non-bank, or a distant bank. Institutionally,
over 20,000 ATMs are operated by non-banks, and their share is increasing. ATMs led
to a reduction in branches.
This retreat from brick-and-mortar has long-term effects on banks as organizations. In
the past, the work process was organized such that the employees would come to the
place where the information relevant to the business was present, physically or in the
knowledge of their co-workers, and the customers would come to the employees. But
this flow is being reversed as it is becoming much cheaper to move information than
people. Therefore, data is moving to the employees, wherever they are; customers, too,
are now everywhere. In the process, banks are gradually become virtual organizations
-- networks of specialists sharing information, decentralized boutique operations
interacting, and customers distributed around the globe, often equally virtual as the
banks. Many employees are working at home or at far-away locations. Indeed, the
concept of stable employment itself is changing to ad-hoc arrangements and to
independent contractors working for multiple employers. For many tasks, these
employees are now located at the lowest cost locations -- not Tokyo and New York but
Manila and Bangalore.
By focusing on ATMs as teller-less branches, banks lost sight that these were merely
one electronic form of customer interface, and a fairly inconvenient one at that. Thus,
banks were unprepared for the emergence of terminals and network relations outside
their control, as the Internet emerged as a locus of commercial activity in which vast
numbers of customers are connected to a vast number of businesses, transacting with
each other in increasingly secure and authenticated ways.
THE NEXT GENERATION OF MONEY
Even more radical will be the change in the nature of money, the banks' life-blood.
Technology is leading to new types of money -- e-money, digital cash, cyber-dollars.
Money has metamorphosed from store of value like a gold coin, to a physical token like
a bank note, to a variety of payment vehicles, to a string of digital signals that are
recognized as valid claims. Now, "smart" stored-value cards can receive, contain, and
dispense these signals easily and securely, using one of several systems for encryption
and authentication. These cards would be replenishable electronically from distance,
even by wireless communication. They would create, in effect, a mobile, shirt pocket
ATM. Old-fashioned money will still be around. But soon, "digital wallets" will become
prevalent that permit electronic money, as well as specialized money -- cash that earns
interest, cash that is conditional, i.e., usable only on certain items or in certain locations,
or "closed cash" that functions only within certain institutions. Who would dispense e-
cash, and in what currencies? Various financial institutions are likely to issue their own
money or near-money. Some of these currencies would be pegged to real resources
such as oil, while others might be fixed to some official currency, and still others would
be based on the issuers' reputation. In such a fashion, parallel private currencies would
emerge.
Private e-money raises many questions.
 • Is e-money a "natural" monopoly? Or will there be competing monies? Should
governments issue e-money? Will it license issuers and/or standardize the terms
of e-cash?

• How can one deal with the tax fraud, money laundering, and criminal activities that
are facilitated by untraceable and ubiquitous e-cash? Even in legitimate
transactions, to who are taxes owed?

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 • How does one protect individual accounts (and indeed the entire system) against
attack, loss, crash, intrusion, counterfeiting, unauthorized use, or default ? Could
or should risky users be excluded? What is the nature of liability?

• How does the emergence of private e-money affect the stability of the monetary
system? If it creates "open money" of stateless currencies that may be accepted
around the globe but are responsible to no one, governments could lose control
over the money supply and monetary policy. Even where some countries set
rules, such as by licensing who could issue e-money, there would be incentives
for others to become e-money havens.

• Similarly, how would one deal with inflation? Or, more accurately, with the multiple
inflation rates of the various monies? Most likely, different people could pick the
particular currency that best reflects their preferred inflation rate.

Perhaps the main question for banks is: Who will supply electronic money and
authenticate it to its recipients? Will it be banks or non-banks? Would they be licensed
and regulated? So far, a variety of entrants into electronic money have emerged
proposing various techniques. One first observation is that many of the companies
involved are not banks. Banks taking an initiative are less than a handful of big banks,
from among the thousands of American banks, or they are the banking industry's credit-
card organizations, whose interests may well not be to make cash transactions
convenient relative to the profitable credit-card operations.
Still more critical for banks' long term role is an important fact: with e-cash one can
bypass banks. Individuals and firms can pay directly into each others' e-money wallets
or stored-value smart cards. Such transactions would be like handing over cash among
individuals. Why then have a middleman, the bank, for such transactions? And, why
have transfer intermediaries among banks, such as correspondent banks, and clearing
networks such as SWIFT, or central banks?
Banks have no obvious advantages in the e-money business over other providers, such
as network operators or over computer network platforms. It was for related reasons
that Citicorp furiously dropped AT&T as a telephone service provider when it entered
the credit card business, and that many banks strongly opposed the planned acquisition
by Microsoft, of Intuit, whose Quicken software could have helped divert transactions to
Microsoft's new MSN network.
The latter example shows that banks are beginning to appeal to government to protect them by
evoking various public interest, consumer protection, and competitive equity rationales to
exclude non-bank competition in electronic money, or to control it tightly. But in a dynamic
global economy with distance-insensitive communications, protective regulation is not
sustainable in the long-run.