🚀 ICT Applications: Banking Systems – Study Notes (0417)

Hello IGCSE ICT students! This chapter is all about how computers and technology help banks manage our money every day. From taking cash out of a machine to paying for things online, ICT makes the world of finance possible. Understanding these systems is crucial not only for your exam but also for understanding the modern world! Let's dive in!

Remember: We need to know the features, uses, advantages, and disadvantages of these ICT banking applications.

1. Automatic Teller Machines (ATMs)

What is an ATM?

An Automatic Teller Machine (ATM) is a computerised machine that allows bank customers to complete simple transactions without needing to interact with a bank teller (a human clerk). Think of it as a 24/7 mini-bank in a box!

Key Characteristics and Uses of ATMs

To use an ATM, you insert your card (which has a magnetic stripe or chip and PIN technology) and enter your PIN (Personal Identification Number).

The main functions or uses of an ATM include:
– Withdrawing cash: The most common use.
– Depositing cash or cheques: Inserting physical money or cheques into the machine.
– Checking account balance: Viewing how much money is currently in the account.
– Mini statements: Printing a short list of recent transactions.
– Bill paying: Paying utility bills or other services directly.
– Money transfers: Moving funds between accounts (e.g., from savings to current).

Advantages and Disadvantages of ATMs

| Advantages (The Good Stuff) | Disadvantages (The Challenges) |
|---|---|
| Convenience: Available 24 hours a day, 7 days a week. | Security Risks: Prone to theft, ‘skimming’ (copying card data), or mugging. |
| Location: Available in many places, not just inside banks. | System Failure: If the network goes down or the machine runs out of cash, it is unusable. |
| Reduced Wait Times: Reduces queues inside the actual bank branch. | High Costs: Banks must pay for installation, maintenance, and security. |
| Speed: Transactions are immediate. | Transaction Fees: Using an ATM not belonging to your bank often incurs a charge. |

Quick Takeaway: ATMs provide flexibility and convenience, but they come with significant physical and digital security risks that users must be aware of.

2. Electronic Funds Transfer (EFT)

What is Electronic Funds Transfer (EFT)?

Electronic Funds Transfer (EFT) is a system that moves money from one account to another using computer networks, eliminating the need for physical cash or paper checks. This is the backbone of almost all modern financial transactions.

EFT Systems in Detail

2.1 Credit and Debit Card Transactions

This is one of the most common forms of EFT. When you use a card at a shop, you are performing an Electronic Funds Transfer at Point of Sale (EFTPOS).

How a card transaction works (simplified):
1. The customer presents a debit card (money comes directly from their bank account) or a credit card (money is borrowed from the bank).
2. The card is read by a terminal (POS terminal) using a chip or NFC (Near Field Communication) technology.
3. The terminal sends a request through the network to the customer's bank to check if the card is valid and if funds are available.
4. The bank verifies the details (including the Chip and PIN or contactless payment authentication) and approves or declines the transaction.
5. The funds are instantaneously transferred from the customer’s bank to the retailer’s bank.

Advantages and Disadvantages of Credit/Debit Card Transactions

| Advantages | Disadvantages |
|---|---|
| No Cash Needed: Very convenient, especially for large purchases. | Card Fraud: Risk of card cloning, skimming, or data theft. |
| Global Acceptance: Can be used almost anywhere in the world. | Impulse Buying: Makes spending money too easy. |
| Traceable: All transactions are recorded, making budgeting and tracking easier. | Reliance on Power/Network: If the shop loses electricity or internet connection, the terminal cannot work. |

2.2 Cheques (As a Contrast)

While cheques are a traditional form of payment, ICT is still involved in processing them. Cheques involve a physical piece of paper and are much slower than EFT.
Did you know? Modern banks often use Optical Character Recognition (OCR) to quickly process the account numbers and amounts printed on cheques, speeding up the process, although EFT is still much faster.

Quick Takeaway: EFT makes commerce fast and global. Card transactions rely on immediate network communication between the POS terminal, the retailer’s bank, and the customer’s bank.

3. Internet Banking (Online Banking)

What is Internet Banking?

Internet banking (or online banking) allows customers to access their accounts and perform financial transactions through a bank's secure website or mobile application, usually using a web browser or a dedicated app.

Uses and Functions of Internet Banking

Internet banking allows you to perform complex actions without visiting a branch. Key uses include:
– Checking Balances and Statements: Viewing current balances and downloading full statements.
– Setting up Standing Orders and Direct Debits: Automating recurring payments.
– Money Transfers: Moving money between your own accounts or to third parties (often requiring Two-Factor Authentication).
– Applying for Loans or Mortgages: Completing application forms digitally.
– Managing Investments: Buying or selling stocks and shares.

Advantages of Internet Banking

1. Ultimate Convenience: Access your finances 24/7 from anywhere in the world, often through a mobile phone or tablet.
2. Low Cost for Banks: Reduces the need for physical branches and staff, which can lead to lower operating costs.
3. Speed and Efficiency: Transfers are typically processed quickly.
4. Better Record Keeping: Easy access to years of digital transaction history.

Disadvantages and Security Issues in Internet Banking

Security is the biggest concern here. You must protect your User ID and Password, and be aware of common threats:

– Hacking and Malware: If your personal device is infected with malware (like a key logger), hackers can steal your login details.
– Phishing/Vishing: Fraudsters try to trick you into giving away your details through fake emails (phishing) or phone calls (vishing).
– Connectivity: Requires a reliable internet connection to function.
– Digital Divide: People without access to the internet or who are not digitally literate are excluded from these services.

Safety Tip: Always check that the bank's website address starts with HTTPS and look for the padlock icon before entering login information. This confirms you are using a Secure Socket Layer (SSL) connection.

📚 Key Takeaways Review

Banking applications rely heavily on ICT for speed, security, and convenience.

ATM: Provides 24/7 physical access to basic cash services.
EFT/EFTPOS: Allows immediate payment via cards, reducing the use of paper money and cheques.
Internet Banking: Provides full account management remotely, but requires strong security measures like passwords and Two-Factor Authentication to combat threats like phishing and hacking.

Keep these distinctions clear, and you will ace the exam section on banking applications! Good luck!