Comparison between traditional and electronic banking allows to be derived the following eight key indicators:
The first indicator – a place for banking. The performance of banking operations and customer support in e-banking is not in the banking office through direct contact with live staff of the bank (as in traditional banking), but immediately established or in the client resident (house, shop, street , etc.).
The second indicator – access to banking. Electronic banking enables bank transactions to be carried out practically any time of day and all the days of the week, not just when the bank is open during working hours of its employees (as in traditional banking).
The third indicator – time banking. In Electronic Banking operations are carried out and confirmed practically instantaneously in online banking unlike conventional banking operations. The latter is performed offline and the client is obliged to wait indefinitely depending on the complexity of surgery and the presence of other bank customers who require performance by the staff of the same or another transaction.
The fourth indicator – the scope of banking. Range of banking operations, the customer can meet online, on the one hand, is limited by the parameters of the electronic media and the possibilities inherent in the software of electronic networks, unlike conventional banking, in which the client has access to all banking operations. On the other hand, these same tools and electronic networks provide electronic banking opportunity for diversification of banking operations. It is important to emphasize that e-banking can provide the implementation of such operations are not at all accessible to customers with traditional banking from the office. It is that online banking customers of the banks have the opportunity to manage in their finances online, and in accordance with the changed situation in the financial markets react instantaneously to these changes and thus to avoid losses or vice versa – do not miss the moment to gain more profit from their investments in deposits, securities or profitable to buy (sell) a particular currency.
The fifth indicator – the cost of banking. To provide banking services in online banking to make investments for the purchase of the electronic and software products in traditional banking would not do. The same applies to customers in the use of this service. Moreover, calls for a comparison of current costs in the performance of online and offline banking operations from both the banks and from customers.
The sixth indicator – security of banking. One factor that becomes important in particular for electronic banking, is the danger of a breach of security of electronic banking operations and their protection from unauthorized external influences. For example, in 2000 announced release of the possibility of unauthorized access to bank accounts onlaynovite using known software company Fiserv AIS (Fiserv Advanced Insurance Solutions – Insurance Software & Technology). Shock in financial circles was very great, as worldwide using the software of Fiserv AIS managed 200 million online bank accounts worth more than $ 15 billion here actually get to the specific risk of computer crime. Furthermore, using the electronic online transactions much easier can be washed so-called “dirty” money, which is conditioned by the absence of direct contact “face” between bank employees and customers.
The seventh indicator – the legality of banking. Electronic banking opens the way to true globalization of banking. In on-lain banking operations is typical discrepancy between the location of the bank and its customers stay because they can be found not only in different countries, but even in different parts of the world. In this situation it is imperative solving a real-life problem for the international legalization of electronic banking. There is a need for coordination of the law of electronic banking at international level – a problem that stands so strongly on traditional banking. One objective is to avoid the creation of zones of impunity for criminal acts in the field of banking.
The eighth indicator – payment system of banking. Electronic banking is based entirely on electronic payment systems and electronic money. It represents the development of systems for cashless payments in traditional banking. It should be noted that in developed countries cash payments for the bulk of the circulation. Electronic banking is based entirely on electronic media and networks, which in some cases generate special electronic money.
During the 5000 study surveyed major global companies in the financial services sector, high technology, automotive and energy industries, including corporations, Produces products for the consumer market and healthcare services located in Europe (London and Frankfurt), America (New York) and Asia (Hong Kong). About 93% of the managers of these companies have responded positively to questions about whether their companies will use and put money in Internet Banking. For details of this study in Western Europe, 45% of all customers of banks, during the period from 2000 to 2002 (some 50 million customers) have used the services of Internet Banking (most are in the UK – 76 1% and Germany – 39%). According to Datamonitor forecasts a year (i.e. at the end of 2007) nearly 70% of potential customers in Western Europe will benefit from these services.
Why smart cards ?
Lower-costs – because the authorization is in offline mode, telecommunication costs include retailers and acceptance of electronic payments of small value becomes profitable for them.Data stored on them are protected by complex mechanisms.
Speed - protected perform off-line transactions in fractions of seconds, while on-line takes several seconds. There are also smart cards based on RFID technology so that the card simply to get close to the device, rather than be placed in it, which further increases speed.
Larger capacity – they can store larger amounts of data. This determines the wider application – debit / credit ticket for public transport, phone cards, etc.
Flexibility – used not only for the execution of transactions from ATM and POS terminals
but also through the Internet, public pay telephones, pay TV channels, mobile phones.
Regarding perspectives for development namely Internet Banking data are indicative of a survey conducted in 2002 by company Datamonitor1.
The important distinction here is that it excludes “paper” document, including and shape and signing contracts.
Six step process in the creation and maintenance of financial products
Pricing, valuation, trading and hedging of structured products
1. Determination of investor demand.
Structured products are offered by various types of organization and investment firms and companies. Although investment companies raised free cash capital from individual investors, the investment portfolios are managed by investment firms, which are awarded and securitie transactions primarily in the secondary capital market. This does not exclude investment firms, to execute transactions on the primary issue of securities at the primary capital market.
Except for the securities transactions on organized stock market, investment mediation also applies to the sale of whole companies, independent parts, packages of shares in the OTC market. In this case the functions of investment firms can be implemented by banks, insurance companies, consulting firms, brokerage houses, marketing agencies and others, as entities carrying out intermediation activities with investments in general, is not necessarily made exclusively this activity. On the contrary, experience shows, that they carry out other basic activities (banking, insurance, consulting), but at the same time and investment intermediary activities.
Obviously, the above mentioned entities should know the investment market, investors’ interests, characteristics and attractiveness of the investment itself, the way of market research, how to negotiate, how the pricing of investment schemes and financial guarantees of performance of transactions and more.
In this respect it is essential the selected firm to be a partner and to act on behalf of his principal within the delegated rights.
At the same time he is obliged to provide truthful and accurate information to the prospective investors about the condition and prospects of investment for the economic benefit that will pay its future owners, and the risks that will take them.
Pricing, valuation, trading, hedging and risk management.
Financial institutions use the money market in order to better manage risk and liquidity. Typically issue securities, when institutions suffer from shortage and require cash flow, to cover short-term needs. Cash mutual funds (money mutual funds) are institutional investors who keep their portfolio in short-term financial instruments. Investment pools (short-term investment pools) are associations of investment funds, banks and public institutions. Municipal investment funds are also one of the leading players in the money market. The interest rate varies between countries and the difference in interest rates is the basis for the inflow and outflow of capital. Money markets in terms of financial globalization are integrated and many cc use to manage currency risk and prevent depreciation of the currency in which securities are denominated.
The risk of financial instruments, excluding treasury bills, is the possibility of issuer insolvency or business failure and not fulfill its obligation to the investor.
The acquisition of cash resources within the financial markets can be done by issuing debt instrument or its sale on the secondary market.
Debt securities express transferable claims predetermined or determinable income against the issuer of the securities arising from a loan granted to him in cash or other property rights.
In essence, the bonds are securities with fixed income. In countries with developed capital markets bonds as a means of financing are popular. Their popularity is due to: 1) the price limitation and long (additional profit generated by the purchase and sale on the secondary market), 2) liquid and low risk tools, 3) flexibility of the company’s capital structure in case of an obligation to repurchase; 4) relatively low maintenance costs of the bonds.
Trading of a structured products on capital markets is done through brokers and investment dealers. The use of interest rate swaps is profitable for the issuer, because they are improving knowledge and facilitate the coverage of debt obligations. Trading of bonds is carried out electronically.It is remote.