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Banking and Information Technology Group 1 – DeKalb Lori Wonser Henry Fischer Greg Johnson Aaron Boehm Mia Hannon Check Clearing Lori Wonser Checks Next to cash, checks are the most frequently used method of payment in the U.S. Account for about 70 % of the total number of payments

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Banking and information technology l.jpg

Banking and Information Technology

Group 1 – DeKalb

Lori Wonser

Henry Fischer

Greg Johnson

Aaron Boehm

Mia Hannon


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Check Clearing

Lori Wonser


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Checks

  • Next to cash, checks are the most frequently used method of payment in the U.S.

  • Account for about 70 % of the total number of payments


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“Clearing” checks is a two part process

  • Clearance

  • Settlement


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Federal Reserve System process

  • Commonly called the "Fed"

  • Created by Congress in 1913 to serve as central bank of the U.S.

  • Made up of 12 regional Reserve Banks and the Board of Governors in Washington D.C.

  • One of the major reasons for creating the Federal Reserve was to ensure that the nation had a safe and efficient means for transferring funds within the banking system


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Technology Changes Over Time process

  • Manual operation - all paper records and courier service

  • Check encoding, machine readable

  • Small banks to larger banks

  • Larger banks to Fed

  • Proofing machines & Mag-card readers

  • PC's and software for sending electronic files.

  • Imaging machines

  • MICR standardization


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Fed's Check Modernization Initiative Four Key Points process

  • A standard item-processing platform

  • A standard image platform with a national archive

  • A streamlined adjustments process using a national adjustments system

  • Nationally delivered Check Services via FedLine for the Web


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Electronic Check Conversion process

  • Intermediate Step

  • EFT Processed through ACH (Automated Clearing House)


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Automated Clearing House process

  • Transfers funds electronically without the paper trail

  • Almost 8 billion payments through ACH in 2001

  • Amount expected to double by 2006



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E-Banking process

Mia Hannon


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Electronic Banking process

  • Provides enormous benefits

  • Has been around for a long time as ATMs and telephone transactions

  • Transformed by the Internet

  • Internet services are cost-efficient

  • Customers can compare banks’ services

  • Allows banks to expand geographical reach


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Internet Banking process

  • Concentrated in the largest U.S. banks

  • Mid-2001, 44% of national banks maintained transactional websites

  • In 2001 only 6 percent of U.S. consumers that had internet bank services used them


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PC Banking process

  • Computer hardware, software and telecommunication systems needed to access bank information through a personal computer

  • Telecommunication links may include:

    • Private networks

    • Public networks

  • Handles many bank transactions:

    • View account balance

    • Request transfer between accounts

    • Pay bills electronically


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ATM, Automated Teller Machine process

  • Simple data terminal communicating through a host processor

  • Can be connected through:

    • a dedicated telephone line

    • dail-up modem

    • Internet service provider


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ATM, Automated Teller Machine process

  • Money moves electronically from user’s account to host account to merchant’s account.

  • New innovations: machines that verbally prompt


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Credit Cards process

  • 3 ways credit card purchases are conducted:

    • merchant uses voice authentication

    • or electronic data capture/magstripe-card swipe terminals

    • or virtual terminals on the Internet


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Smart Cards process

  • Contains an embedded microprocessor

  • Microprocessor enforces access to the data on the card

    • Identity of card user must be confirmed for each transaction

    • Card and card reader verify that each is legitimate

    • Then transaction is carried out in an encrypted format


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Smart Cards Cont. process

  • Most common smart card applications are:

    • Credit cards

    • Electronic cash

    • Computer security systems

    • Wireless communication

    • Loyalty systems (frequent flyers points)

    • Banking

    • Satellite TV

    • Government identification


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Other Forms of Electronic Banking process

  • Direct Deposit

  • Pay-by-Phone

  • Electronic Bill Payment

  • Debit Cards

  • Electronic Check Conversion

  • eChecks

  • Cash Value Stored



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Loan and Credit Processing is Labor Intensive process

  • Because they both rely heavily on the:

    • Gathering of Information

    • Processing of Information

    • Analyzing of Information


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A Challenge for Financial Institutions process

  • Streamline and Standardize the Loan Origination and Credit Approval Process


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How can this be done? process

  • The Use of Technology to automate the workflow of the Loan Process

  • Technology to shorten the length of the Credit Approval Process


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  • Automating The Loan Process process

  • Workflow Management Systems Application Software allows Loan Officers and the Loan Team to:

    • Manage

    • Prioritize

    • Measure

  • New Mortgages and Loans


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Credit Processing process

  • Successful financial institutions must be able to make rapid, accurate, and successful credit decisions

  • To do this financial institutions must embrace technology


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The ever-increasing emergence of E-commerce, demands that financial institutions be more efficient and better meet customers’ needs

To do this

There are several web-based applications available to lenders and financial institutions to assist in credit decisions


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  • Web-based applications allow loan processing teams to be more competitive by:

    • Offering flexible, real-time credit decisions systems

    • Customizable lender guidelines

    • Generation of instant loan pre-qualification

    • Connectivity to third-party providers

    • Response time within minutes, 24/7


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Physical Security more competitive by:

Aaron Boehm


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Introduction more competitive by:

  • Physical security in the bank goes beyond the traditional armed security guards.

  • Physical security devices are as important inside a bank as protection software is to e-banking.


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Physical Security Devices more competitive by:

  • Non-traditional

    • Micro-Branch systems

    • Drive-up Pneumatic systems

  • Traditional

    • Vaults

    • Safes

    • Bullet-resistive products


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Security guard duties/training more competitive by:

  • The oldest form of security in banks is the security guard.

  • Security guard duties include: the protection of people and property from harm, theft, or unlawful activity, deterring, detecting, observing, and reporting unlawful or unauthorized activity, and responding to security alarm systems.

  • Security guards must pass a 47-hour firearm training course in order to have the authorization to carry a firearm while on duty.

  • Guards undergo training in camera systems and alarm systems.

  • While the security guard is the oldest form of bank security but they are still proven to be effective.


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Electronic Security more competitive by:

Greg Johnson


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Understanding the Risks more competitive by:

  • Unauthorized Access

  • Data Alteration

  • Monitoring

  • Spoofing

  • Service Denial

  • Repudiation


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Suggested Items more competitive by:

  • Smart Cards

  • Encryption

  • Behavior Software

  • Informing Employees

  • Removing Instant Messengers

    • Subvert Antivirus Wear

    • File Swapping

    • Piggy Backing/Access


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Conclusion more competitive by:

From all of this, we have learned that information technology has spurred competition from nonbanks, encouraged financial innovations that have allowed firms to directly access financial markets, and empowered customers and businesses with information needed to make better investment decisions. At the same time, IT is allowing banks to offer new products, operate more efficiently, raise productivity, expand geographically and compete globally. A more efficient, productive banking industry is providing services of greater quality and value.


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