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Electronic Banking

This research reviews the trends in electronic banking. Debit cards, so-called "smart cards" (such as Mondex), and other trends in the application of information technology are reviewed.

Debit cards were first introduced in Britain; however, the use of these cards is growing in the United States. Debit cards provide no credit. In a debit card system that is not on-line, charge slips are deducted directly from the card holder's account when the charge slip is received by the issuing bank. In an on-line system, the amount of the charge is deducted from the card holder's account at the time of purchase.

An advantage of debit cards for issuing banks is that some banks impose a monthly fee of as much as $1.25 or charge the card holder up to $1 each time the card is used. Issuing banks also allow debit card holders to sign up for overdraft protection. The issuing banks charge interest for such protection, with rates as high as 18 percent, at Norwest Bank in Minneapolis as an example (Nance-Nash 44-45).

Canadians are using debit cards in record numbers. According to The Interac Association of Toronto, consumers used their debit cards, which automatically deduct the amount of a purchase from their bank accounts, 390 million times in 1995-an increase of 111 per cent over the previous year. All signs point to continued acceptance by consumers ("Debit" 42).

The so-called smart cardsùthe fourth and fifth generation credit cardsùmay be the wave of the future. These cards have computer chips that contain a vast array of information about the cardholder and her or his finances. The drawback to these cards is acquisition cost for the issuer. The major "smart card" technology is the Mondex card in the United Kingdom.

Drexler Technology Corp. unveiled a new data storage productùa multi-function chip/optical smart cardùin Paris in 1994 ("Drexler" 11020043). The multi-function, combined-technology card features a standard in...

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Electronic Banking. (1969, December 31). In LotsofEssays.com. Retrieved 13:54, March 28, 2024, from https://www.lotsofessays.com/viewpaper/1693417.html