The banking system in the UK Learning objectives After you have studied this chapter you should be able to Describe the changes that have occurred in the UK since the late 1960s in the ways payments can be ID: 237726
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Slide1
Chapter 12
The banking
system
in
the UKSlide2
Learning objectives
After you have studied this chapter, you should be able to:
Describe the changes that have occurred in the UK since the late 1960s in the ways payments can be
made
Describe the many alternatives to cheques and cash that currently
exist
Describe the credit card payment
systemSlide3
Learning objectives
(Continued
)
Describe the cheque clearing
system
Write a
cheque
Explain the effect of various kinds of crossings on
cheques
Explain how to endorse a cheque over to someone
else
Complete bank pay-in
slips
Explain the timing differences between entries in a cash book and those on a bank
statementSlide4
How has banking changed?
Withdrawing money – previously this was done in a branch using a cheque.
Now
a debit card can be used at virtually any cash
machine.
Cash machines (ATMs) – previously supplied cash in exchange for a token, and then used the PIN system to offer £10 at a time, but now offers the option to complete tasks via the
screen.
Direct debits – offer a non-cash payment
option.Slide5
Forms of payment
Cheque
Debit car
d
Credit card
Online banking
Automated paymentSlide6
Cheques
The use of cheques has dropped significantly in recent years, mainly because other methods are more
popular.
The UK Domestic Cheque Guarantee Card Scheme ended in June 2011 meaning
that anyone
in receipt of a cheque bears their own
risk.
Cheques are not expected to be a payment option by
2019.
Requires the clearing service which takes three
days.Slide7
The features of a chequeSlide8
The features of a cheque
(Continued
)
Cheque number
–
that identifies the cheque, in this case
914234.
Sort code – that identifies the branch, in this case
09-07-99.
Account number – that identifies the account with the bank, in this case
058899.
The counterfoil – on the left, filled in and retained in the cheque book for
reference.
The signature of the drawer – the person who is paying the money
out.
The name of the payee – to whom the cheque is
paid.Slide9
Cheque crossings
A cheque can be further safeguarded using a specific crossing as shown
.
This ensures that the cheque can only be paid into the name of the payee
given.Slide10
Cheque endorsements
If a cheque has no
crossing,
it can be endorsed – transferred over to someone else and paid into their
bank.
To endorse a cheque, the current owner would write the words ‘Pay (name of the recipient) or order’ on the reverse of the cheque and sign beneath
this.Slide11
Clearing a cheque
The transmission and settlement of a cheque requires the clearing service, which can take three days:
Day 1 – Cheques are processed by the bank into which they were paid and information is sent electronically to the clearing
centre.
Day 2 – The cheque is delivered to an Exchange
Centre.
Day 3 – Bank staff review the cheque and decide whether to authorise
payment.Slide12
Debit cards
Introduced in
1987.
Generally have an ATM function, cheque guarantee facility and act as a debit
card.
Can allow the holder to get cash back at a
checkout.
Accounts for 70% of all inter-bank remote banking
payments.Slide13
Credit cards
Introduced in
1966.
Can allow up to 30 days of
interest-free credit.
Use of debit cards now vastly exceeds the use of credit
cards.
Like cheques, credit card use is likely to decline but will remain an option for
payment.Slide14
Online banking
A
twenty-first-century phenomenon.
Offers a 24/7 facility for:
Balances to be
checked.
Standing orders or direct debits to be
created.
Funds to be
transferred.Slide15
Automated payments
Introduced in
1967.
Originally called
BACS.
Now the most common type of automated payments are either:
Direct
debits – where the amount is
specified
by the
payee
and
can change.
Standing
orders – where the amount is
specified
by the payer and is
fixed.Slide16
Types of account
Current account:
Used for regular payments in and out
Comes with a cheque book, pay-in
book
and ATM/debit/cheque
guarantee card
Earns little
interest.
Deposit
account:
Generally earn more interest
Not intended for accessing money on a regular
basis.Slide17
Pay-in slips
To pay money into an account, a pay-in slip is
used.
When the payment is into an account held in a different bank, the form is called a bank giro
credit.
Full details of the cash and/or cheques being paid in are given and the slip is handed in at the bank
counter.Slide18
Pay-in slips
(Continued
)Slide19
Learning outcomes
You should
now have learnt:
That the banking sector has been revolutionised by the developments in computers and information technology over the last 40
years
That where previously payments could usually only be made by cash or cheque, there is now a wide range of alternatives, ranging from plastic cards to direct debits and direct transfers into bank
accountsSlide20
Learning outcomes
(Continued
)
That the use of cheques is falling but that they are still a very common form of payment in
business
How the credit card payment system
operates
That cheque clearing is the way in which a cheque goes through the banking system and is credited to its rightful owner and charged against the drawer’s bank
accountSlide21
Learning outcomes
(Continued
)
That it usually takes three days for a cheque payment to reach the account of the
payee
That a debit card payment will reach the account of the payee
immediately
That cash is still the most common form of medium for
payments
That holders of a current account will normally be issued with a cheque book and a multiple use plastic card incorporating a cheque guarantee card, debit card and ATM
cardSlide22
Learning outcomes
(Continued
)
How
to write a
cheque
That
crossings on cheques indicate
that they must
be banked before cash can
be collected for them
That
special crossings on cheques act as
instructions to the banker, and are usually used
to ensure that the cheque cannot be
used
by anyone other than its
rightful ownerSlide23
Learning outcomes
(Continued
)
That
cheque endorsements enable the
rightful
owner of the cheque to give it to
someone else
How
to complete
a
bank pay-in
slip
How
to complete a bank giro
credit