ICT in Banking.

ICT in Banking

Banks have been around for hundreds of years, but it is only recently (in the 1950’s) that computers have begun to change the ways that banks operate. Today all major high street banks, such as Abbey National, Barclays and HSBC, use ICT in a variety of ways, to help them compete with each other and make their businesses more successful.

Banks store all their customers account details on computers. This allows them to easily find out account information on their customers, and make changes to their account balance easily, for things such as when money is put in and withdrawn from the bank.

One of the oldest forms of transferring money from one account to another is by a cheque. A customer who holds a bank account can write out a cheque, telling their bank to pay the amount specified to the person specified. Each cheque has on it the following –

A Sort Code - which identifies the bank and its branch.

An Account Number – which is a unique identification for the customer.

A Cheque Number – which identifies the transaction/payment being made. A computer can read all of these numbers so that the cheques can be processed much quicker than by hand. The numbers are printed using magnetic ink, which is easily read by a computer. The computer reads the numbers using an MICR (Magnetic Ink Character Recognition). When cheques are sent to be processed the amount of the cheque is printed in magnetic ink so that it can also be read by a computer and deducted automatically from the customer’s account.

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Banks also use Credit Cards, Debit Cards and Cash Cards. Information is stored on a magnetic strip on the back of the card, which can be read by banks and shops using a magnetic swipe card reader. Usually, the account number is magnetically stored on the back along with the bank sort code. Customers can use their cash cards at ATM’s (Automatic Teller Machines). In order to gain access to their money they must enter a code called a PIN (Personal Identification Number). This is usually 4 digits that only the customer knows, allowing only them to access their money. When the customer puts their card into the ATM the machine will read the account number from the magnetic strip and then ask the customer for their PIN. When the customer enters their PIN, the ATM will instruct the computer to search in its database for the account number and check that the PIN is correct. If the PIN is correct for the account number then the customer will be allowed access to their money.

Internet banking is now used worldwide and allows people to control their money over the internet. It allows customers view their balance, transfer money to other accounts, pay bills and order new cheque books. Internet banking is both an advantage to the bank and the customer. It is more convenient for the customer as they can have more control over their money more easily from home, and at any time of the day. It is an advantage to the bank as it allows them to do business 24 hours a day with less money spent on bank employees, who are unnecessary as there are less customers to deal with directly. With a lot of money being involved internet banking has to be made very secure. Before money can be accessed for transaction to be made customers have to type in their details, their pin-number and their password. This helps prevent unauthorized people from being able to access other peoples money, to transfer to their own account. To prevent hackers from being able to find out your pin-number easily some on-line banks have a number pad, which comes up on screen. Users put in their pin number by clicking on the numbers on the number pad using the mouse. The number pad moves its position on screen every day. On-line banks use this for security, as it is harder for a hacker to identify where a mouse is clicked on screen than what keys are being pressed on a keyboard.

To go with the internet banking web sites are also set up. Customers of the bank can use these web sites to find out information on the bank. The web sites can also be used to help advertise the bank to a wider range of people, and make it easier for people to find out about the bank.

E-mail is also now used commonly in banks, as it allows them to send and receive messages to clients and other businesses containing things such as account information and details on interest rates.

In recent years, Smart Cards have been used by banks as a form of cash or for credit / debit cards. Information is stored on a microchip which is not read only - in other words, it is possible to write information onto the chip as well as read from it. In Swindon, a trial was run (called Mondex) which allowed people to use a Smart Card instead of cash. They could pay for goods from shops and the amount would be deducted from their card by writing the new amount to the microchip. If a customer wanted more cash on their card then they could go to the bank or use a special phone. This is a possible method in the future of withdrawing cash at home - withdrawing it onto a smart card.

Smart cards can be used for other things as well. Today, smart cards are used as telephone cards where credits can be added to / deducted from the chip. They are also used for mobile phones to store information about the customer’s phone number and account and their own personal telephone directory of about 100 names and numbers - the card could be used in somebody else’s phone. In the future, Smart Cards could be used to store all sorts of information, like a person’s medical details in case of emergency (eg allergies, medication taken) and a person’s address etc. People are concerned however that this could mean they lose a lot of their privacy / confidentiality and are also concerned about what would happen if the card was lost.