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205 fmbounit 5b

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Concepts in Banking and Accounting of transactions: Accounting in banks, Electronic Banking, RTGS, ATM, MICR,
OCR, OMR, and DATANET, Petty Cash, Electronic Clearing Service (ECS), National Electronic Funds Transfer (NEFT) System,
Real Time Gross Settlement (RTGS) System, IMPS.

Concepts in Banking and Accounting of transactions: Accounting in banks, Electronic Banking, RTGS, ATM, MICR,
OCR, OMR, and DATANET, Petty Cash, Electronic Clearing Service (ECS), National Electronic Funds Transfer (NEFT) System,
Real Time Gross Settlement (RTGS) System, IMPS.

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205 fmbounit 5b

  1. 1. UNIT-5 Concepts in Banking and Accounting of transactions
  2. 2. Concepts in Banking and Accounting of transactions: Accounting in banks, Electronic Banking, RTGS, ATM, MICR, OCR, OMR, and DATANET, Petty Cash, Electronic Clearing Service (ECS), National Electronic Funds Transfer (NEFT) System, Real Time Gross Settlement (RTGS) System, IMPS.
  3. 3. History of ATM ATMs arose after out-of-hours cash distribution developed from bankers' needs in Japan, Sweden, the United Kingdom, and the United States. Japan invented the Computer Loan Machine which supplied cash. And after a few years, Britain deployed the world’s first cash dispensing machine in London in 1967. The machine was put in use by Barclays Bank in Enfield Town, North London. The machine was invented by John Shepherd-Barron and the firm De La Rue.
  4. 4. History of ATM ATMs were introduced to the Indians in the early 1990s aided by foreign banks. As most of the banks were suffering from a serious handicap at that time due to lack of a strong branch network, ATMs appeared to be the best antidote for the problem. Since then, innovations in ATM technology have come a long way and customer receptiveness has also increased by leaps and bounds.
  5. 5. ATM An ATM, which stands for automated teller machine, is a specialized computer that makes it convenient to manage a bank account holder’s funds. It allows a person to check account balances, withdraw or deposit money, print a statement of account activities or transactions, and even purchase stamps.
  6. 6. ATMs can be on-premise or off-premise. On- premise ATMs are located in financial institutions. Clients enjoy more choice, convenience and availability, while banks can boost their revenue from transactions, lessen operational costs and maximize staff resources. Off-premise ATMs are typically found in places such as airports, grocery and convenience stores and shopping centers where there is a simple need for cash.
  7. 7. ATMs are simple data terminals with four output and two input devices. They have to connect to a host processor and communicate through it. The host processor works like an Internet Service Provider (ISP), a portal through which all the various networks of ATMs become accessible to the bank account holder with either a credit card or debit card.
  8. 8. Different types of ATMs in India are: On-site ATM - ATM Machines which exist within the premises of the bank. Off-site ATM - Off-site ATMs means the machine which operates outside the bank premises. Worksite ATM - Those ATMs which are located within the premises of a company and is usually meant only for that company’s employees. Cash Dispenser - ATM that allow only cash withdrawals, balance enquiry and mini statement.
  9. 9. Different types of ATMs in India are: Mobile ATM - This type of ATM is a machine that moves in different areas for the users. COVID 19 has led to a surge in the number of Mobile ATMs. White Label ATM - White Label ATM means the automated teller machine which Non-Banking Financial Companies provide. Green Label ATM - Green label ATMs are provided for Agricultural Transaction. Orange Label ATM - Orange label ATMs are the machines which are provided for share transactions.
  10. 10. Yellow Label ATM - Yellow label ATM Machine means the ATM which is provided for online purchase. Pink label ATM- These are the ATMs machines that are provided for women. Brown label ATM - Brown label Automated Teller Machines are those ATMs where hardware and the ATM machine’s lease are owned by a service provider. However, cash management and connectivity to banking networks is offered by the sponsor bank
  11. 11. Banks provide ATM cards without any charge at the time of opening of the bank account. However, banks charge for using the ATMs. There is no cost for the initial few transactions but after a cap level cost is charged in every additional transaction. The charges of the top banks are as follow: Bank Per month Free Transactions Cost after free Transactions SBI 5 transactions at SBI ATMs and 3 at Other ATMs Rs. 25 per transaction ICICI Bank Free transaction at all ICICI ATMs Rs. 25 per transaction at all non-ICICI ATMs HDFC Bank First 4 transactions Rs. 150 per transaction
  12. 12. Automated teller machines (ATM) have been changing over time and the machine’s technology is becoming more sophisticated to provide the best experience to the user and make the transactions safer and secure. Some of the vital changes are: – Multipurpose nature of ATM Machine: Unlike in the past, ATM Machines are not merely providing the facility of dispensing cash, but today they provide facilities of depositing the cash, fund transfer, payments of bills and generating PIN and mini statements. These are just a few services, and the banks provide many other sophisticated services.
  13. 13. – Easy to use: The modern ATM Machines are designed so that it becomes easier to use for everyone, including illiterate individuals and specially-abled people. Technology like biometric identification scanners makes it convenient to use for almost everyone. – No language barrier: India is a country with infinite culture and language. The use of one language in ATMs becomes a roadblock for many users. Multilingual or use of many languages in the ATMs acts as an antidote to this problem. Modern ATMs are equipped with multiple languages and the user can choose the language of his choice, which makes it easier for him to use the machine.
  14. 14. The benefits of an ATM card are as follows: – ATM Machines are conveniently located at multiple locations. Customers visit the ATM of any bank to perform any transaction. – It helps in withdrawing the cash in a matter of minutes and thus saves time. – The process of getting an ATM card is hassle-free, and no documentation is required for an ATM card. Almost all banks provide ATM cards at the time of account opening. – It helps in getting the details of the transactions, total balance and mini statement. – Some ATM Machines also provide the facility of depositing cash and fund transfer.
  15. 15. The benefits of an ATM card are as follows: – ATM is also used in paying utility bills and several other bills and payments. – ATM Machine is available 24*7, 365 days a year. – ATM is safe and secure as the use of an ATM is restricted only to the person who knows the PIN. Thus, if the customers keep the PIN confidential, no one other than the customer can use the ATM. – ATM Machines are self-service and thus reduces the workload of the bank staff. – ATM reduces the requirement for carrying cash as individuals can withdraw at any ATMs, which acts as a cashpoint.
  16. 16. Withdraw Cash without touching the ATM In the times of COVID, the MasterCard has now partnered with AGS Transact Technologies to provide contactless cash withdrawal service to the people. To withdraw cash, the user needs to scan the Quick Response Code on the ATM using the mobile application of your bank. Finally, enter the amount to be withdrawn and PIN of your ATM Card. ATM will then process the money. The daily cash withdrawal limits of banks vary from each bank. Currently, SBI offers Rs. 1 Lakh, HDFC Bank offers Rs. 1 Lakh, and PNB offers Rs. 1 Lakh daily cash withdrawal limit.
  17. 17. Personal Identification Number (PIN) is a 4-digit number that allows you to access your account information and perform other activities using an Automated Teller Machine (ATM). You can generate your ATM PIN by any of the below-mentioned ways: – Visiting the nearest ATM – Via Internet Banking. – Calling customer care – Sending an SMS to the customer care
  18. 18. MICR (magnetic ink character recognition) MICR (magnetic ink character recognition) is a technology used to verify the legitimacy or originality of paper documents, especially checks. Special ink, which is sensitive to magnetic fields, is used in the printing of certain characters on the original documents. Information can be encoded in the magnetic characters.
  19. 19. The use of MICR can enhance security and minimize the losses caused by some types of crime. If a document has been forged - for example, a counterfeit check produced using a color photocopying machine, the magnetic-ink line will either not respond to magnetic fields, or will produce an incorrect code when scanned using a device designed to recover the information in the magnetic characters. Even a legitimate check can be rejected if the MICR reader indicates that the owner of the account has a history of writing bad checks. Retailers commonly use MICR readers to minimize their exposure to check fraud. Corporations and government agencies also use the technology to speed up the sorting of documents.
  20. 20. MICR is an acronym for Magnetic Ink Character Recognition. Primarily, this innovative technology authenticates the legality and credibility of paper-based document(s) in the banking database. It can be found on cheques. MICR is at par with IFSC as far as the security of a fund transfer is concerned. MICR code is a product of highly advanced Character Recognition Technology (CRT) used by banks to verify cheques for clearance. MICR technology is used for other bank documents as well. A MICR code is placed at the bottom of a cheque.
  21. 21. It includes details such the bank code, account details, amount, and cheque number, alongside a control indicator. The biggest advantage of MICR technology is that it stands out among similar concepts, such as barcodes, as MICR can be read and distinguished by humans very easily.
  22. 22. It is a 9-digit code that identifies the bank branches that are taking part in an ECS (Electronic Clearing System). MICR code is especially needed if you are filling up different financial forms such as SIP forms, etc. as it helps in faster clearance of cheques. The starting 3 digits of the code signify the city code, the next 3 digits (the middle ones) stand for the bank code and the last 3 digits represent the code of the branch. You can easily find the MICR number at the bottom of your cheque leaf, printed adjacent the cheque number (on the right-hand side).
  23. 23. IFSC Code (Indian Financial System Code) MICR Code (Magnetic Ink Character Recognition) Swift Code It is used to facilitate electronic money transfer between the banks in India. MICR code is initiated to make cheque processing simpler and faster. This code is used to provide the facility of international fund transfer between 2 banks. IFSC is an 11-digit alpha-numeric code MICR is a 9-digit code Swift code has 8 to 11 characters. The first four characters indicate the name of the bank. The first three digits represents the city code where the bank branch is located. The first four characters of this code represent the bank code. Last 6 digits represent the bank location. Last three digits indicate the bank branch code. The last three characters are optional and represent the branch code. This code is developed by the RBI (Reserve Bank of India). This code is also developed by RBI (Reserve Bank of India). This code is approved by ISO (International Organization for Standardization).
  24. 24. OCR Financial institutions like banks are continuously engaged in the process of creating new records for clients or doing new deals, which generate numerous paper records. These ever increasing piles of documents could prove to be a major concern for banks. Converting all this crucial data into digital format with the help of data entry services is a perfect solution for this concern. Digitized documents ensure safety, easy storage, and quick retrieval of data.
  25. 25. OCR In order to reduce the time taken to process payments as well as ensure better customer service, banking institutions need to streamline their organizational processes and organize their work. Optical Character Recognition (OCR) is a unique technology that banks utilize as part of high-volume information extraction. With OCR, banks are able to process, monitor and evaluate data including vast amounts of client data such as personal and security information. This helps to improve overall performance and profitability.
  26. 26. In simple terms, optical character recognition (OCR) is a technology that can extract all the text from images, PDF documents or scanned files. A scanned file is usually stored as an image if not converted into a text-searchable file with the help of OCR technology. With automated and smart document processing, the technology can effortlessly accelerate customer on-boarding and reduce the need for manual input. In addition, OCR allows banks to minimize human errors, save time, and effort while upgrading customer experience.
  27. 27. Some top OCR and machine learning features that can help optimize the banking industry – Hasten Customer On-Boarding – Easy and remote on- boarding is one common challenge that most banks face. Banks need to validate customers’ identities (IDs) properly for routine or large banking transactions, cash withdrawals, account openings and other related functions. Some challenger banks choose to do this using manual remote validation wherein a picture in the passport or a signature gets verified within a timeframe of 24 hours. Though this may seem efficient, it actually has some major downsides. First of all, it is not real-time, so customers don’t get the real experience. It is also relatively expensive and risky due to sensitive data transfers and hence this is not the best solution in terms of privacy.
  28. 28. Hasten Customer On-Boarding However, with OCR and machine learning tools, banks can instantly capture and extract customer data from machine-readable zones on passports or other ID documents and quickly identify customers before money transfers and opening bank accounts. OCR technology provides a fully automated on-boarding “Software development kit (SDK)” that includes identity document scanning, OCR data extraction (for instance, MRZ, dates of birth, gender, pictures, signatures and more), data identification, and data validation. SDK can verify if a signature matches the signature on the identity document and if an image matches the passport photo. The software technology is real-time, safe and cost-effective and gives about ten times accuracy than manual verification.
  29. 29. Integrate Scan-to-Pay Functionality – Manually entering names, amounts, bank account numbers and references for a single bank transfer can be time consuming and error prone. In fact, human or manual process errors account for 20-30 percent of revenue loss. However, the latest mobile OCR and scanners that can be easily integrated with iOS, Android, and web platforms help remove human errors from processes and ensure high accuracy of scans. OCR also provides instant scan results as scanning time is less than half a second and gives banking staff more time to focus on other facets of their work. A scan-to-pay feature uses OCR, which instantly captures invoice data. In order to make payments, a camera on a Smartphone is all that is needed. In addition, the bank card recognition module can scan the cardholder’s name, the card number, and expiry date, in any position and light, which ensures your bank transfer or payment remains error-free.
  30. 30. Data Entry and Invoice Scanning – As mentioned above, banking transactions involve huge amount of data entry related to bank statements and other day-to-day transactions. OCR technology can help maintain workflow efficiently with high text- recognition accuracy. For using the scan- to-pay feature, a camera on a Smartphone is enough to capture invoice data and to make payments.
  31. 31. Speed Up Loan and Mortgage Application Processing – Banks have been moving to challenging areas of activities like – stock trading, smart lending and even mortgage applications – which involve a lot of document processing. Even a single mortgage application requires processing of various documents like – the letter of intent from the employer to an employment contract or multiple salary slips and a passport. On the other hand, if the mortgage is paid by two people, the amount of documents that need to be processed doubles in size. Checking the validity of documents, comparing data between different documents and processing data from the documents into case management systems consumes lot of time. With OCR technology, automating the data extraction, comparison of documents can be done in an efficient manner. OCR and machine learning tools can speed up loan and mortgage application processing by up to 70 percent. This in turn lowers the processing cost, enables the existing teams to process more applications and reduces manual data entry, which leads to happy and loyal customers.
  32. 32. Financial organizations like banks can analyze and streamline large-volume data with the help of OCR technology and draw valuable business insights. Incorporating correct OCR technology can standardize documents by turning scanned documents into searchable PDFs or into any other file type. Partnering with a reliable document scanning company is the best way to ease the documentation burden faced by banks and improve efficiency in the long run.

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