The modern banking services
The concept and general characteristics of the banking system and its main elements of the claimant. Current trends and prospects of development of the banking system, methods of its realization, legal foundation. Modern banking services in Ukraine.
|Рубрика||Банковское, биржевое дело и страхование|
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The modern banking services
The banking system is one of the most important structures of a market economy. Banks as financial intermediaries raise capital of economic bodies, savings and other funds that are released in the business, give money to borrowers in temporary use, provide other services.
Banking service is financial, technological, and intellectual activities of the bank, which are provided to clients. Banking service accompanies and optimizes the execution of banking operations.
The current stage of banking development is characterized by a significant increase in retail banking services. To gain a stable position in the credit market, banks need to solve the problem of creating unique products, improve service and effective assessment of the creditworthiness of the borrower.
The topicality of this paper is to consider the impact of this problem for the economy as a whole. The novelty of this paper is that this problem is considered directly in Ukraine.
There are many economists who studies the same problem. For example, Sheludko V.M., Smolyanska O.Y., Korneev V.V., John Wiley and others.
The objectives of this work are:
· to consider the basic modern banking services;
· to uncover their manifestations in Ukraine.
This work consists of introduction, the first part called «Traditional banking services»; the second part called «The modern banking services», the third part called «Modern banking services in Ukraine», conclusion, references and summary. In first part there are a brief description of main types of traditional banking services. Second part is characterization of such types of modern banking services as Internet-banking, Mobile-banking, an automated teller machine and others. In last part there are consideration of banking services in Ukraine and their operation.
In conclusion it must be said that banks should improve their services and increase their variety.
1. Traditional banking services
banking service modern
Banks are the most important link in the world of money. This is because, first of all, banks nowadays perform the main part of the work of transferring money from a customer to a seller, by operating the system of payments in the economy. Almost everyone in the world uses or has used banking services. Families keep their savings there, and banks pay them interest rates on their deposits and give them loans to buy expensive goods. Companies conduct payments through them. Commercial organizations, which work at the market and in production, take loans for their needs and conduct all payments with buyers and sellers through them. Landowners and owners of real estate take loans from the banks to buy an estate or to make use of it and pay back loaned money.
As we can see, everything in the economy is controlled by money, and banks are a tool-kit for the economy - controlling the money circulation between firms, depositors and loaners, and offering services to make that circulation easier for them. Banking services also have a productive nature. Even such a simple operation as the receiving money on deposits from people and companies involves a huge productive force. A bank does not just collect money - it converts non-working, unused money resources, to working assets. This is also true of credits given to companies and firms for the development of their productive and financial activity. A healthy and stable economy of any country depends on healthy banking services.
All banking services can be divided into traditional and modern services. Traditional services include: 1) deposit operations; 2) credit operations; 3) payment operations; 4) cash operations
Deposit operations are the operations of placing clients' money into the bank on deposit. While keeping money for its clients, the bank pays them interest.
A deposit account is a current account, savings account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the bank, and represent the amount owed by the bank to the customer. Some banks charge a fee for this service, while others may pay the customer interest on the funds deposited.
Credit operations are the operations of giving loans to bank clients and receiving, in exchange interest rates on those loans. Credit operations are the main operations of a bank. Banks are the biggest center of credit. Credit operations form the main specific weight of any bank's assets because they give the biggest profit to the banks.
Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately (thereby generating a debt), but instead arranges either to repay or return those resources (or other materials of equal value) at a later date. The resources provided may be financial (e.g. granting a loan), or they may consist of goods or services (e.g. consumer credit). Credit encompasses any form of deferred payment. Credit is extended by a creditor, also known as a lender, to a debtor, also known as a borrower.
Payment operations by banks can be fulfilled in cash or in transfer payments. Banks can open different account numbers for their clients and can fulfill their payment orders related to buying or selling goods, paying wages, transferring tax payments and making all other important payments. In issuing payments the bank is acting as an intermediary between sellers and buyers, companies, tax agencies, citizens, and the budget.
These three types of bank operations are commonly called traditional bank operations. The term `traditional' is applied because all of these operations together establish what we call a bank.
Cash operations can also be regarded as traditional operations. They are the operations of giving out cash money to the clients from their accounts and cash exchanging cash currency. According to the law, these operations have not been included in the basic operations that form up a bank, but in their meaning they reflect the essence of the bank system. It is difficult to imagine a bank that has deposits, gives loans and conducts payments, but does not have cash operations.
Additional operations can be placed between traditional and nontraditional operations. They include currency operations, and operations with securities - with gold, precious metals and ingots. A bank does not have to include these operations in its activities. In 1994 the majority of banks did not have a currency license, and even nowadays most of banks are not allowed to make operations with gold, precious metals and ingots, yet they have not lost the right to be called banks.
2. Modern banking services
Internet Banking, Mobile Banking and an automated teller machine are modern banking instruments, intended to the banks' customers, natural or legal juristic persons, for the payment of bills, accomplishment of transfers, money transfer from an account to another, withdrawing money and so on.
The Internet-banking can be used from any computer connected to Internet, no matter where it is. Practically, in the most of cases, the user of this service doesn't need to have his own computer, an I-Cafe being useful for him. There are the same operations as for E-banking: transmission of payment orders, transfers, exchange, view of the accounts' situation etc. Banks started to jump over the primary stage of E-banking, directly to Internet Banking.
The E-banking services subsist from more than 20 years. The operations that can accomplish by E-banking are starting from the view of companies' account balances, arriving to payments, transfers and exchange, creating term deposits etc.
The Electronic-banking or E-banking is the first of these banking services that really economize time, because it allows to the user to accomplish from behind the computer many operations in the bank account, without being necessary to go to the bank, to wait at the office, to complete forms, to sign it, to stamp it, to allow it to the clerk, all these needing many time.
To exemplify, we will refer to the order ticket, that is a payment instrument and credit title, under private signature, by which a person, named under-writer or issuer, in quality of debtor, must pay to a person named beneficiary, in quality of creditor, a sum of money, in a certain term or at presentation.
The obligation of the under-writer (the issuer) of a ticket at order is identical with that of the acceptant draw of a bill, because it must absolutely pay at term the sum inscribed on the title, so the order ticket must contain the following obligatory mentions:
a) the name of order ticket. The absence of the name of order ticket attracts the nullity of the title;
b) the unconditional promise to pay a determined sum (sum that must be mentioned in ciphers and letters). The issuer (the under-writer) must absolutely pay a sum of money. Any conditions, limitations or anti-performances that add to the promises to pay the order ticket attract the nullity of the title;
c) the name of the person for which or at the order of which the payment must be accomplished (the beneficiary).
The banks only accept order tickets where the name of the person for which or at the order of which the payment must be accomplished - the beneficiary of the order ticket - is indicated very clear.
d) the date of issuance. The date of issuance must be unique, possible and certain.
The order tickets will wear clear mentions respecting the day, the month and the year of the issuance, to admit:
the estimation of the date of payment on a certain period after the issuance;
the finding of the legal capability of subscribers at the moment of signing on the title;
the determination of the subscribers' rights for the bill action against the bill obligators.
e) the signature of the issuer (under-writer), and, for legal juristic persons, the stamp.
The comparison between the necessary time for the manually complement and the time necessary for the electronic complement is not necessary, because, in fact, there is many time economised: time with the complement, time to go to the bank, time to waiting at the pay office and time necessary to the office operator.
The services offered by E-banking are the following:
· payment orders;
· scheduled payment;
· global payment orders used for the employees salaries;
· intra-banking transfers between the own accounts of card and/or current;
· current exchanges;
· the visualisation in any moment of the account balances opened
· information about different appreciations;
· possibility to visualise and to print the statements
· definition of the beneficiary of the payments, directly by the client.
The banking transfers, the payment orders, the banking changes and the operations' historical consultation can be applied directly from the mobile phone. The bank doesn't collect any tax for this service, and the client need only a mobile phone with WAP (Wireless Application Protocol) and a subscription for this service. To use Mobile-banking, a client of the bank must sign a contract with the bank. He receives a «user-name» and a password, and after this he can use his mobile phone for baking operations. There is only one constraint - the money from the account can be transferred over a predefined list of companies. In the case in which the mobile phone is lost and, hypothetically, the person who found it would know the «user name» and the password, he could transfer the money only over a company from the predefined list.
A successfully system is that system that evolve, that adapts the faster to the needs of every customer, so the customer must analyse the hard and the poor points at the banks' offers and to choose what corresponds to his demands.
2.3 An automated teller machine
An automated teller machine (ATM), also known as a Cashpoint (which is a trademark of Lloyds TSB), cash machine or sometimes a hole in the wall in British English, is a computerised telecommunications device that provides the clients of a financial institution with access to financial transactions in a public space without the need for a cashier, human clerk or bank teller. ATMs are known by various other names including ATM machine, automated banking machine, and various regional variants derived from trademarks on ATM systems held by particular banks.
Invented by John Shepherd-Barron, the first ATM was introduced in June 1967 at Barclays Bank in Enfield, UK. On most modern ATMs, the customer is identified by inserting a plastic ATM card with a magnetic stripe or a plastic smart card with a chip, that contains a unique card number and some security information such as an expiration date or CVVC (CVV). Authentication is provided by the customer entering a personal identification number (PIN).
Using an ATM, customers can access their bank accounts in order to make cash withdrawals, credit card cash advances, and check their account balances as well as purchase prepaid cellphone credit. If the currency being withdrawn from the ATM is different from that which the bank account is denominated in (e.g.: Withdrawing Japanese Yen from a bank account containing US Dollars), the money will be converted at a wholesale exchange rate. Thus, ATMs often provide the best possible exchange rate for foreign travelers and are heavily used for this purpose as well.
Although ATMs were originally developed as just cash dispensers, they have evolved to include many other bank-related functions. In some countries, especially those which benefit from a fully integrated cross-bank ATM network (e.g.: Multibanco in Portugal), ATMs include many functions which are not directly related to the management of one's own bank account, such as:
* Deposit currency recognition, acceptance, and recycling
* Paying routine bills, fees, and taxes (utilities, phone bills, social security, legal fees, taxes, etc.)
* Printing bank statements
* Updating passbooks
* Loading monetary value into stored value cards
* Postage stamps.
* Lottery tickets
* Train tickets
* Concert tickets
* Movie tickets
* Shopping mall gift certificates.
* Games and promotional features
* Fast loans
* CRM at the ATM
* Donating to charities
* Cheque Processing Module
* Adding pre-paid cell phone / mobile phone credit.
* Paying (in full or partially) the credit balance on a card linked to a specific current account.
* Transferring money between linked accounts (such as transferring between checking and savings accounts)
* Gold - «In London last week [in 2011] some smart businessmen launched the country's first gold ATM. Stick in your credit card or some cash, and the machine will swap your plastic or paper money for a small bar of the real stuff.»
Increasingly banks are seeking to use the ATM as a sales device to deliver pre approved loans and targeted advertising using products such as ITM (the Intelligent Teller Machine) from Aptra Relate from NCR. ATMs can also act as an advertising channel for companies to advertise their own products or third-party products and services.
In Canada, ATMs are called guichets automatiques in French and sometimes «Bank Machines» in English. The Interac shared cash network does not allow for the selling of goods from ATMs due to specific security requirements for PIN entry when buying goods. CIBC machines in Canada, are able to top-up the minutes on certain pay as you go phones.
3. Modern banking services in Ukraine
In Ukraine, people do not trust the banking system. This lack of trust has led to a shortage in the money supply to banks. This situation in the country creates a distrust of clients to banks, on one hand, and of banks to government policy on the other hand. The result is that the deposit operations have become less in value and shorter in terms.
In the situation of shortage, banks have had to decide how to raise their money supply. They have decided to do it in a real new style: if people do not want to give them their money, the banks will force them to do it. For instance, in our country signed an agreement with almost all factories and big companies about paying salaries to their workers through the bank credit cards. The same agreement was signed with all institutes and colleges. Now, students can withdraw their grants only by their cards. Before this, the owners of credit cards had been very rich people. Perhaps the bankers figured that new owners had to feel happy about receiving one of the privileges of the rich, but the people did not. They now must pay 20 $ every year for a credit card and 5% on every amount which they take in cash. In such a way banks have forced common workers to keep their money with banks.
Payment operations in Ukraine are not developed yet. There are almost no payment services for the private sector. First of all, this is because very small amount of shops accept credit cards. The second reason for this is because a private person is not allowed to make any transfer payments. Movements of money from a buyer to a seller in general take place only by cash.
Payment services for companies are also not very convenient for their users. Payment operations and all money transfers inside Ukraine are going through a special branch of the central bank in the city and everywhere where money stops it spends some time and is used. If you give an order to the bank to transfer the money in one day, you will be lucky if they do it two days after that, then when this special branch of the central bank gets the money it takes it 3-5 days to record the operation and just after that it will send the money to the next bank, and even the bank to which you have transferred the money will keep it for 2-3 days before they will tell you that they have already received it. This is only if that payment operation is inside your city. If you are transferring the money to another city then the special central bank branch of your city transfers the money to the same branch in the town you are transferring the money to and there the money is recorded again and after 3-5 days the bank receives it. The shortest time in which you can transfer money from one bank to another inside one city is 7 days, and between two cities about 10 days. According to the law it has to take only 3 days in local operations and 6 days in interurban operations - the time while the special branch of the central bank keeps the money. It is also not a very short period of time but better than 15 days - the period it takes to transfer money in reality. This has led to an increasing number of illegal cash payments between companies.
From additional operations banks commonly practice only currency operations, because they do not have licenses for other operations.
Non-traditional operations in Ukraine, except for use of ATMs, are underdeveloped. Or rather they are written down in regulations for the banks but the demand for these services in Ukraine is small. This is because no one trusts the banks and banks do not want to practice that activity either, because of small profit.
The Ukraine money institute is called a banking system, so it has to conform to the standards and try to approximate the generally accepted level. As we can see from the facts, however, Ukraine is yet far away from the accepted standards and the real practice of the Ukraine banking services is different from what it should be according to the Ukraine law and theory of the banking system. Of course, I do not presume to present a detailed analyses of all the problems involved. But even my personal research can show that the Ukraine banking system is far from ideal. First of all, all banks are using their superior position in the finance market, and all their activities are boiling down to making bigger profits with the minimum risk. Thus, banks are often breaking the law by not conducting operations in which they could lose their money, or operations with low profitability. The result is that not all operations are fulfilled as they should be, because of the prepossession of the banks to their clients. In the private sector this situation leads to the distrust of banks by clients and, as a result, banks receive less money for their operations. In the situation of time delays and other difficulties with money operations, companies are losing their money: with a healthy banking system a company can get a bigger profit. In the situation of unstable economy banks should be the instruments of the government and should help the industry to develop. But in Ukraine everything is different: the government issues impossible laws and banks demand impossible interest rates, delay the money and break the law. How can it help the Ukraine economy? In the end, clients are afraid of using banking services and this apprehension limits cash flows. This leads to less investment in industry, and undeveloped industry is the main problem of the government. On the other hand, companies are receiving fewer loans because of the unwillingness of banks to give any. This again leads to undeveloped industry. Therefore we may conclude that one reason for the recession in Ukraine is the deficiency of the banking system that leads to unhealthy money circulation. The government should review its banking laws if it really wants to see a stable economy in Ukraine.
Modern banking market implies raising funds of people in deposits, lending money, implementing settlement and cash services. Currently, there is a wide range of services to clients: currency deposits, plastic cards, checking accounts, travelers checks, loans, shares and notes of banks, investment advice, trust operations, Internet-banking, Mobile-banking and an automated teller machine.
Banking system has to conform to the standards and try to approximate the generally accepted level. As we can see from the facts, however, Ukraine is yet far away from the accepted standards and the real practice of the developed countries. The Ukrainian banking services is different from what it should be according to the Ukrainian law and theory of the banking system.
banking service modern
1. Brzezinski Z. Out of Control: Banking System - New York: Maxwell Macmillan Int., 1993. - 55p.
2. Castells M. The Information Age: Economy, Society and Culture - Moscow: GU VshE, 2000. - 104p.
3. Dolgov S.I. Banking - Moscow: Ekonomika Publishers, 1998. - 78p.
4. The Economist 8 February 2008. - 57p.
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