CEL: Computers in Banking and Retail

1. CEL:Computers in Banking and Retail Part 1: Electronic Fund Transfer Name: _____________________ Class: ____________ Part 1 [Sec 2-4]

2. Objectives • Understand what is meant by electronic funds transfer • Give examples of situations where electronic funds transfer can take place • Understand that computers in different locations are linked together and centrally controlled to enable electronic funds transfers

3. What is Electronic Fund Transfer [EFT]? Video on Computers in Banking and Retail

4. 1.1 Electronic Fund Transfer • Electronic Fund transfer refers to any transfer of fund [money] by electronic means [such as electronic terminal, computer, ATM and etc]

5. How does Electronic Fund Transfer [EFT] work?

6. For EFT to work, Computers in the bank have to be Centrally controlled Be linked together / networked (via telephone line) Data and information are organised for ease of storage and for retrieval and processing. Data and information are stored in the centralcomputer and these data can be shared amongst the computers networked in different locations Funds then can be transferred from one account to another 1.1 The Bank Network

7. 1.1 Electronic Fund Transfer For EFT to work, • The computers: • Central • Networked • Data and information is organised for ease of • storage • processing • retrieval

8. 1.1 Electronic Fund Transfer Computer at Merchant Central computers Computer at Customer Networked

9. 1.1 Electronic Fund Transfer • Is depositing coins and dollar notes in the bank an example of Electronic Fund transfer ? • No • Is coins or dollar notes countering machine an example of Electronic Fund Transfer? • No

10. 1.1 Electronic Fund Transfer • Is clearing cheques using the Magnetic Ink Character Reader an example of Electronic Fund transfer? • No

11. 1.1 Electronic Fund Transfer • Is transferring your salary from your company’s bank account to your bank account an example of Electronic Fund Transfer? • Yes • Why?

12. Some examples of Electronic Fund Transfer [EFT]

13. 1.2 Buying Things the Traditional Way

14. Disadvantages of the traditional way Potential theft Accounting cost Interest lost 1.2 Buying Things the Traditional Way

15. 1.2 Buying Things the EFT Way

16. 1.2 Examples of Electronic Funds Transfers What is this system known as? Example 1: NETS (Network for Electronic Transfers) When you pay by NETs, the computer transfers money directly from your bank account into the shop’s account.

17. What is NETs?[Network for Electronic Transfers]How does it work?

18. It is a special arrangement between shops and banks. When you pay by NETs, the amount of money is automatically transferred (debited) from your bank account to the shop's bank account. Your bankcard works like a debit card. Every time you use it, the amount spent will be debited from your bank. NETS[Network for Electronic Transfers]

19. Each time you perform such a transfer, you must enter your Personal Identification Number (PIN) in order to authorise the transaction. The computer will check (authenticate) whether your PIN is valid and correct with the central data bank before transferring your money to the shop’s bank account. NETS[Network for Electronic Transfers]

20. This way you do not have to carry a lot of cash around. You can use your card to pay for purchases at retail shops, supermarkets etc. NETS[Network for Electronic Transfers] Do we need to carry cash for buying things? NO

21. 1.2 Examples of Electronic Funds Transfers Example 2: Giro A method of transferring money by instructing a bank to directly transfer funds from one bank account to another without the use of cash. Some situations where Giro could be used: (To pay school fees, PUB bills, Singtel bills)

22. 1.2 Examples of Electronic Funds Transfers • How does the Giro work? • You can authorise your bank to pay bills (eg. School fees, PUB bill, telephone bill) as to the date, amount and which account to pay to. • On that date, the bank will automatically transfer the amount from your bank account into the bank account you are paying to [eg. MOE]. • To stop the service, you must write to the bank to cancel the service.

23. 1.2 Examples of Electronic Funds Transfers • How does the Giro work? • Do you need to remind the bank to pay every month ? • 2. Do you need to enter your PIN for each transfer? • 3. Could money be transferred from one bank to the same bank? • 4. Could money be transferred from one bank to a different bank? No No Yes Yes

24. 1.2 Other Examples of Electronic Funds Transfers transportation Ez-link card Example: use computers to collect bus fares instead of bus conductors

25. 1.2 Other Examples of Electronic Funds Transfers transportation Cash card

26. 1.2 Other Examples of Electronic Funds Transfers

27. What are the characteristics of Electronic Fund Transfer [EFT]?

28. 1.3 Electronic Fund Transfer • Characteristic of EFT are: • No cash is involved • Computers are used • Money is in digital stored value

29. 1.4 Electronic Fund Transfer • Became popular only with secure electronic communication

30. Do not need to carry much cash around. Faster speed as we save time as there is no need to count money. Save travelling time as there is no need to travel to transfer money/ do banking 1.5 Advantages of Electronic Funds Transfers

31. Unreliability of technology – once the bank network is down all transactions cannot be carried out. Loss of human interaction Fraud Hackers can hack into our accounts and steal our money 1.5 Disadvantages of EFT

32. Digital Cash

33. Digital cash Forms of money (media of exchange) that are not physical in nature and exists “digitally” A new form of cash No physical form Cannot hold it in your hands, can only use it electronically 1.6 Digital Cash

34. Your bank account balance is digital cash 1.6 Digital Cash

35. 1.6 Electronic Fund Transfer Q&A 1. What is electronic fund transfer? • Electronic Fund transfer is the transfer of money from one account to another through computer network.

36. 1.7 Summary • EFT: Transfer money electronically • No cash • Use of Computers • - NETS: Network Electronic Transfers System • Transfer money automatically from my bank account to the merchant account • GIRO • Give instruction to my bank to transfer money automatically from my bank account to another account