3.1 Business and employment
Banking and Finance
Banking Applications
Banks were one of the first business organisations to use computers
and are usually at the cutting edge of new technology. Information
Technology is used extensively in the Banking Sector where computer
systems are used for Electronic Funds Transfer (EFT), Credit and Debit
Cards, Cash Machines (ATM Cards), Cheque Clearance and Home
Banking.
Banks make use of a variety of different systems such as:
• MICR (Magnetic Ink Character Recognition)
• EFTPOS (Electronic funds transfer at point of sale)
• EDI (Electronic data interchange)
• EFT (Electronic fund transfer)
• Credit Cards
• Smart Cards
• Cheque Clearing
• BACS (Banker’s Automated Clearing Services)
• ATM (Automated Teller Machines)
MICR
MICR
MICR
Magnetic Ink Characters use ink that contains iron
and may be magnetised. The characters can then be
read using special machines called Magnetic Ink
Character Readers. When a cheque is printed the
account number, branch code, and cheque number
are all printed in magnetic ink. When cheques are
cashed at a bank the bank also adds the amount
onto the cheque using magnetic ink – The cheque
can then be processed. Using magnetic ink protects
the cheques from being changed and helps to
prevent fraud.
Electronic Funds Transfer
EFT is a system that allows money transfer instructions to
be sent directly to a bank’s computer system. Upon
receiving one of these instructions, the computer system
automatically transfers the specified amount from one
account to another.
Transfer instructions can come from other banks or from
businesses.
A very common use of EFT is when a large business pays
its employees’ salaries. On pay day, the businesses tells
the bank to move money from the business account to
the employees’ bank accounts.
EFTPOS
When you use a bank card to pay for a purchase
in a store, the payment is made using a system
called Electronic Fund Transfer at Point-of-Sale
(EFTPOS).
1 Customer gives the bank card to the
cashier
2 The cashier runs the card through a card
reader (the customer may have to enter a
PIN). The cashier enters the value of the
purchase
3 The store’s system then connects to the bank
computer and sends a message
4 The bank computer uses the account
number to access the customer’s record and
checks the balance
5 The bank computer sends back a
confirmation or rejection message to the
store’s system
6 The cashier now confirms the purchase and
an EFT message is sent to the bank
7 The bank computer subtracts $100 from the
customer’s account and adds $100 to the
store’s account
8 The cashier gives the card back to the
customer along with a receipt
ATM
ATM
Cash dispensers situated in banks, shopping centres
etc. Some things that you can do using an ATM:
• Get cash out
• Find your account balance
• Change your PIN number
• Make deposits
• Obtain a mini statement listing recent
transactions
ATM
Benefits of ATM’s to Banks
• Staff freed from routine work, so can concentrate on sales.
• Fewer staff needed.
• Can provide 24 hour service – therefore happier customers.
• Customers cannot withdraw funds unless they have money in their
accounts.
Benefits of ATM’s to Customers
• Some customers prefer the anonymous nature of the machine.
• 24 hour service – ideal for those that cannot visit the bank during
the day.
• Ease of access to cash dispensers
• Fewer queues as transactions performed by the ATM are fast.
Using an ATM
A customer identifies him/herself and their bank account by using a bank
card. The card is inserted into the ATM where it is read by a magnetic strip
reader or a smart card reader. The customer also types a secret PIN into the
ATM's numeric keypad to confirm that they are the real owner of the card.
ATMs can be used by customers of other banks as the ATM can use EFT.
If a customer of Bank A uses her debit card to withdraw cash from an ATM
belonging to Bank B:
• Bank B gives her the cash
• Bank B now is owed money by Bank A
• Bank B sends an EFT instruction to Bank A asking for money to be
transferred from the customer’s account to Bank B.
• Bank B has now been paid back
Internet Banking
Today it is quite common to use communications links and the Internet for
banking. This enables customers to log in securely to their bank. This on-line
or e-banking service allows customers to access information about their
account, transfer funds, pay bills, etc using a computer or telephone link from
their home or office to the bank's system.
Advantages of Home Banking
• Convenience – Available 24/7 anywhere in the World.
• Speed – Transactions are fast
• Inexpensive
Disdvantages of Home Banking
• Risk of security breach/fraud
• Impersonal – You don’t normally deal with bank staff
• Requires you to have a computer
HTTPS
Customers use a computer and connect to the
bank’s secure (encrypted) website where they
login (usually with a username and a password)
HTTPS
The main idea of HTTPS is to create a secure channel over an insecure network. This
ensures reasonable protection from eavesdroppers and man-in-the-middle attacks,
provided that adequate cipher suites are used and that the server certificate is verified
and trusted.
The trust inherent in HTTPS is based on major certificate authorities that come preinstalled in browser software (this is equivalent to saying "I trust certificate authority
(e.g. VeriSign/Microsoft/etc.) to tell me whom I should trust"). Therefore an HTTPS
connection to a website can be trusted if and only if all of the following are true:
1. The user trusts that their browser software correctly implements HTTPS with
correctly pre-installed certificate authorities.
2. The user trusts the certificate authority to vouch only for legitimate websites
without misleading names.
3. The website provides a valid certificate, which means it was signed by a trusted
authority. (an invalid certificate shows a warning in most browsers)
4. The certificate correctly identifies the website (e.g. visiting https://example and
receiving a certificate for "Example Inc." and not anything else [see above]).
5. Either the intervening hops on the Internet are trustworthy, or the user trusts the
protocol's encryption layer (TLS or SSL) is unbreakable by an eavesdropper.
Chip and PIN
PIN stands for Personal
Identification Number.
A PIN is usually a four digit secret
code used to confirm a person’s
identity (e.g. when withdrawing
cash from an ATM)
Note: You should not say ‘PIN
number’ since that would mean
‘Personal ID Number number’!
'Chip & PIN' Payment System
Most bankcards no longer rely on a magnetic strip to store customer account details.
Instead the cards are smart cards. The cards contain a small amount of computer
memory with the account information stored inside.
Smart cards are more secure (since the data is encrypted) and more reliable than
magnetic strip cards.
When a customer wishes to pay for goods in a store, the customer inserts the
bankcard into a smart card reader, and then types in a PIN to confirm that they are
the true owner of the card. Once the PIN is verified, the customer can remove the
card.
One of the reasons this system has proven popular is the extra level of security it
provides for users: At no time does the bankcard need to be handled by anyone other
than the card owner, so with this system there is less chance of the card being stolen
or copied.
The nickname for the tiny memory device inside the bankcard is a ‘chip’, and the
system uses a PIN as identity proof, so the system is nicknamed ‘Chip and PIN’ in the
UK
3.1 Business and employment