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Banking Applications Overview and Analysis

Chapter 10 discusses various banking applications, including electronic fund transfers (EFT), card transactions, contactless payments, and internet banking. It covers the processes involved in these transactions, their advantages and disadvantages, and the technology behind them. The chapter also addresses automated systems in retail and the implications of these technologies for customers and banks.

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0% found this document useful (0 votes)

12 views15 pages

Banking Applications Overview and Analysis

Uploaded by

yotubeautomation23

We take content rights seriously. If you suspect this is your content, claim it here.

Available Formats

Download as PDF, TXT or read online on Scribd

Chapter 10

Banking Applications

Chapter 10
Subtopic Questions
EFT 1,
Card Transaction 2,3
Cards 4,
Contactless 5,
NFC 6,
ATMs 7,8,9
Cheques 10,
Automatic Re-ordering 11,12
Internet Banking 13,14,15
Ch.10: Banking Applications Theory Classified

Banking Applications
1 Electronic fund transfer is a system that allows money transfer instructions to be sent
directly to a bank’s computer system.
(a) Explain what is meant by EFT

.......................................................................................................................................

. ............................................................................................................................................... [2]

(b) Describe the advantages and disadvantages of using EFT technology.

.......................................................................................................................................

. ............................................................................................................................................... [4]
2 Many customers now use contactless payment and internet banking.
Describe the computer processing involved in using contactless bank cards to pay for
purchases.

.............................................................................................................................................

. ...................................................................................................................................................... [4]

Eng. Omar El Safty 281 Eng. Mustafa El-Komy

Ch.10: Banking Applications Theory Classified

3 Ahmed had a meal in restaurant and decided to pay for it using his credit card.

(a) Describe the process of transaction of Ahmed’s money from his account to the
restaurant account assuming he is using a chip and pin card.

.......................................................................................................................................

. ............................................................................................................................................... [6]

Eng. Omar El Safty 282 Eng. Mustafa El-Komy

Ch.10: Banking Applications Theory Classified

(b) Describe the advantages and disadvantages of using chip and pin card.

.......................................................................................................................................

. ............................................................................................................................................... [4]

4 A headteacher is considering setting up a card system for students to buy food in the school
canteen.

The headteacher is trying to decide whether to install a system that uses magnetic stripe card
readers or one that uses chip and PIN card readers.

Compare the use of magnetic stripe card readers with the use of chip and PIN card readers. Your
answer must include similarities and differences.

..................................................................................................................................................

.............................................................................................................................................................. [6]

Eng. Omar El Safty 283 Eng. Mustafa El-Komy

Ch.10: Banking Applications Theory Classified

5 A school is planning to introduce a contactless card system for pupils to pay for school
meals. Each card contains an amount of money which is topped up by parents. Parents
transfer amounts of money into the school system and pupils place the card close to a
reader to upload the money onto the card.

(a) Discuss the benefits and drawbacks, to the pupils, of using a contactless card system
rather than paying by cash.

.......................................................................................................................................

. ............................................................................................................................................... [6]

Eng. Omar El Safty 284 Eng. Mustafa El-Komy

Ch.10: Banking Applications Theory Classified

(b) The terminals in the school use electronic funds transfer at point of sale (EFTPOS).

Describe the computer processing that takes place to pay for a meal at the EFTPOS
terminal using the card

.......................................................................................................................................

. ............................................................................................................................................... [6]

Eng. Omar El Safty 285 Eng. Mustafa El-Komy

Ch.10: Banking Applications Theory Classified

6 Pam entered a self-checkout supermarket where you pay for the products you want by
yourself. One of the payment options was NFC payment using smartphone.
The total price of all items is calculated and entered automatically at the terminal.

(a) Explain what is meant by NFC.

.......................................................................................................................................

. ............................................................................................................................................... [2]

(b) Explain how the smartphone can be used to make payments.

.......................................................................................................................................

. ............................................................................................................................................... [4]

(c) Describe the advantages of using NFC technology.

.......................................................................................................................................

. ............................................................................................................................................... [3]

Eng. Omar El Safty 286 Eng. Mustafa El-Komy

Ch.10: Banking Applications Theory Classified

7 Ted was shopping at a mall and he found out he is out of cash. He decided to withdraw
cash from an ATM.

(a) Describe the steps of withdrawing cash from an ATM.

.......................................................................................................................................

. ............................................................................................................................................... [6]

(b) State three other uses of ATMs

1.....................................................................................................................................

2.....................................................................................................................................

3 .............................................................................................................................................. [3]

Eng. Omar El Safty 287 Eng. Mustafa El-Komy

Ch.10: Banking Applications Theory Classified

(c) Discuss the advantages and disadvantages of using ATMs.

..................................................................................................................................................

.............................................................................................................................................................. [4]

8 Many Automatic Teller Machines (ATM) allow customers to print out mini statements of
their bank accounts.

Describe the inputs and processing involved in printing out a mini statement.

..................................................................................................................................................

................................................................................................................................................................[6]

Eng. Omar El Safty 288 Eng. Mustafa El-Komy

Ch.10: Banking Applications Theory Classified

9 Contactless debit cards are replacing standard debit cards. Some countries are
introducing contactless debit card transactions at ATM machines.

Discuss the advantages and disadvantages to the bank of using these cards at an ATM.

.............................................................................................................................................

. ...................................................................................................................................................... [6]

10 Bank cheques are sometimes used to pay bills.

(a) Name four pieces of information that the bank’s computer may read from the bank
cheque.

1. ....................................................................................................................................

2. ....................................................................................................................................

3. ....................................................................................................................................

4 .............................................................................................................................................. [4]

Eng. Omar El Safty 289 Eng. Mustafa El-Komy

Ch.10: Banking Applications Theory Classified

(b) Discuss the advantages and disadvantages of using bank cheques to pay money to
someone.

.......................................................................................................................................

. ............................................................................................................................................... [4]

11 Modern supermarkets have automated stock control systems, which use data from the
checkouts.
Describe how food items can be ordered by an automated stock control system so they
are delivered before the stock in the supermarket runs out.

.............................................................................................................................................

. ...................................................................................................................................................... [4]

Eng. Omar El Safty 290 Eng. Mustafa El-Komy

Ch.10: Banking Applications Theory Classified

12 The retail industry uses point of sale (POS) systems.

(a) Discuss the benefits of using POS in the retail industry.

.............................................................................................................................................

....................................................................................................................................................... [4]

(b) Describe the steps involved in automatic stock control when an item is sold at a
POS terminal.

.............................................................................................................................................

. ...................................................................................................................................................... [6]

Eng. Omar El Safty 291 Eng. Mustafa El-Komy

Ch.10: Banking Applications Theory Classified

13 A customer is booking a seat on a theatre’s online booking system. The customer

reserves seats using the theatre’s website and a debit card. The website displays the
seats that are available and a database stores the customer details, the payment details
and the seat details.
When the customer enters their debit card details for a seat, the theatre’s computer
communicates with the bank’s computer.

Describe four checks that the bank’s computer will make on the customer’s bank
account.
1 ........................................................................................................................................

...........................................................................................................................................

2 ........................................................................................................................................

...........................................................................................................................................

3 ........................................................................................................................................

...........................................................................................................................................

4 ........................................................................................................................................

...........................................................................................................................................

[4]

Eng. Omar El Safty 292 Eng. Mustafa El-Komy

Ch.10: Banking Applications Theory Classified

14 Internet banking is changing how we carry out banking transactions.

Discuss the advantages and disadvantages to the customers of the introduction of

internet banking.

.............................................................................................................................................

. ...................................................................................................................................................... [6]

Eng. Omar El Safty 293 Eng. Mustafa El-Komy

Ch.10: Banking Applications Theory Classified

15 Many customers now use contactless payment and internet banking.

Fewer and fewer customers now use high street banks, preferring to bank online using
the internet.

Discuss the advantages and disadvantages of internet banking to the bank.

.............................................................................................................................................

. ...................................................................................................................................................... [6]

Eng. Omar El Safty 294 Eng. Mustafa El-Komy

Common questions

At an EFTPOS terminal, a customer pays by placing their contactless card near the reader. The terminal then verifies the card's validity by communicating with the bank's system to confirm if the card is active and if the funds are available . Upon verification, the transaction is approved, and the amount is deducted from the cardholder's account and credited to the merchant's account .

When a smartphone is used for NFC payment, the phone communicates wirelessly with the payment terminal using NFC technology. The phone securely transmits payment information, typically through a digital wallet or payment app, which interacts with the merchant's payment system . The terminal then authorizes the transaction by communicating with the bank, verifying account details, and deducting the payment amount from the user's account while generating a receipt for the transaction .

Advantages for customers include convenience, as banking transactions can be completed from anywhere at any time without visiting a branch. Online banking often provides access to real-time information and enhanced features such as transaction alerts . However, disadvantages include security concerns like phishing and malware attacks, and the potential difficulty for less tech-savvy users to adapt to online interfaces . Additionally, reduced face-to-face interaction could impact customer service experiences for some users .

Automatic stock control systems track inventory levels in real-time using data from POS systems. When an item's stock reaches a predefined threshold, the system automatically generates an order with suppliers to replenish inventory. This reduces the risk of stockouts and ensures that products are delivered before the current stock is depleted . The systems can also predict demand based on historical sales data to optimize stock levels and ordering frequencies .

Chip and PIN card systems enhance security by using a microchip that performs cryptographic functions, making it more difficult for fraudsters to clone the card compared to magnetic stripe cards which store static data that can be easily copied . The requirement of a PIN adds an additional security layer, reducing the likelihood of unauthorized use if a card is lost or stolen . This two-factor authentication process makes it more secure than the single-factor authentication of a signature on a magnetic stripe card .

Contactless payment technology processes transactions without physical contact between the card and terminal by using RFID or NFC technology, which allows the card to be read when it is held close to a reader . Unlike magnetic stripe cards which require swiping and direct contact to read card data, contactless cards transmit data wirelessly, leading to quicker transaction times . Moreover, contactless systems often include additional security layers like transaction limits to minimize fraud risk .

Contactless card systems offer faster transaction processing by allowing users to simply tap their cards near a terminal without entering a PIN, thus enhancing consumer convenience and reducing queue times . However, this ease of use comes with security risks, as lost or stolen cards can be used without authorization up to a preset transaction limit . In contrast, chip and PIN systems require inserting the card and entering a PIN, providing an extra security layer that reduces unauthorized usage risks, albeit at the cost of added transaction time and complexity .

Replacing standard debit cards with contactless debit cards at ATMs could streamline the transaction process, reducing queue times and enhancing customer satisfaction due to faster service . However, it also presents challenges such as increased initial setup and infrastructure costs, and potential security concerns regarding unauthorized transactions if a card is lost or comes too close to an unauthorized reader . Banks need to balance these factors while considering customer convenience and security in implementing contactless options .

The primary benefits of EFT include faster transactions, reduced processing costs, and improved convenience for customers, as transactions can be conducted from anywhere with internet access . However, drawbacks include potential security risks, such as hacking and identity theft, and dependency on electronic systems which can lead to problems if there are technical failures .

Point of sale (POS) systems benefit the retail industry by streamlining the checkout process, improving accuracy in sales transactions, and reducing paperwork through digital receipts and records . They also provide valuable data insights on sales patterns and customer preferences, allowing for better inventory management and targeted marketing strategies . Furthermore, POS systems often integrate with loyalty programs, enhancing customer engagement and repeat business .

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Banking Applications Overview and Analysis

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Banking Applications Overview and Analysis

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Chapter 10

(b) Describe the advantages and disadvantages of using EFT technology.

Eng. Omar El Safty 281 Eng. Mustafa El-Komy

Eng. Omar El Safty 282 Eng. Mustafa El-Komy

Eng. Omar El Safty 283 Eng. Mustafa El-Komy

Eng. Omar El Safty 284 Eng. Mustafa El-Komy

Eng. Omar El Safty 285 Eng. Mustafa El-Komy

(a) Explain what is meant by NFC.

(b) Explain how the smartphone can be used to make payments.

(c) Describe the advantages of using NFC technology.

Eng. Omar El Safty 286 Eng. Mustafa El-Komy

(a) Describe the steps of withdrawing cash from an ATM.

(b) State three other uses of ATMs

Eng. Omar El Safty 287 Eng. Mustafa El-Komy

(c) Discuss the advantages and disadvantages of using ATMs.

Eng. Omar El Safty 288 Eng. Mustafa El-Komy

10 Bank cheques are sometimes used to pay bills.

Eng. Omar El Safty 289 Eng. Mustafa El-Komy

Eng. Omar El Safty 290 Eng. Mustafa El-Komy

12 The retail industry uses point of sale (POS) systems.

Eng. Omar El Safty 291 Eng. Mustafa El-Komy

13 A customer is booking a seat on a theatre’s online booking system. The customer

Eng. Omar El Safty 292 Eng. Mustafa El-Komy

14 Internet banking is changing how we carry out banking transactions.

Discuss the advantages and disadvantages to the customers of the introduction of

Eng. Omar El Safty 293 Eng. Mustafa El-Komy

15 Many customers now use contactless payment and internet banking.

Discuss the advantages and disadvantages of internet banking to the bank.

Eng. Omar El Safty 294 Eng. Mustafa El-Komy

Common questions

What are the steps involved in paying for a meal with a contactless card at an EFTPOS terminal?

What are the steps involved in paying for a meal with a contactless card at an EFTPOS terminal?

What computer processing occurs when a smartphone is used to make an NFC payment in a supermarket self-checkout?

What computer processing occurs when a smartphone is used to make an NFC payment in a supermarket self-checkout?

Evaluate the advantages and disadvantages from customers' perspectives on the shift from high street banking to online banking.

Evaluate the advantages and disadvantages from customers' perspectives on the shift from high street banking to online banking.

How do automatic stock control systems in supermarkets ensure that food items are ordered and delivered before stocks run out?

How do automatic stock control systems in supermarkets ensure that food items are ordered and delivered before stocks run out?

In what ways can chip and PIN card systems provide enhanced security over magnetic stripe cards?

In what ways can chip and PIN card systems provide enhanced security over magnetic stripe cards?

How does contactless payment technology using bank cards differ in processing from traditional magnetic stripe cards?

How does contactless payment technology using bank cards differ in processing from traditional magnetic stripe cards?

Compare the processing and security implications of using contactless versus chip and PIN card systems for transactions.

Compare the processing and security implications of using contactless versus chip and PIN card systems for transactions.

Discuss the potential impacts on banks of replacing standard debit cards with contactless debit cards at ATMs.

Discuss the potential impacts on banks of replacing standard debit cards with contactless debit cards at ATMs.

What are the primary benefits and drawbacks of electronic fund transfer (EFT) technology in banking applications?

What are the primary benefits and drawbacks of electronic fund transfer (EFT) technology in banking applications?

In what ways do point of sale (POS) systems benefit the retail industry?

In what ways do point of sale (POS) systems benefit the retail industry?

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