OBM182-Chapter 3

OBM182:
CHAPTER 3: BANKING SERVICES
OBM182/Chapter 3/Feb-July 2020 Refer manual provided by faculty

CHAPTER 3: BANKING SERVICES
2
Course Outcome 2:
•Identify the procedures for safeguarding banking services.
Chapter Outcomes:
•Describe types of bank.
•Describe electronic banking and its function.
•Describe types of account bank.
•Describe types of cheque.
•Describe credit cards.
•Describe internet banking.
•Describe the procedures for safeguarding banking services.
OBM182/Chapter 3/Feb-July 2020

Topics to be cover:
3
3.1 Types of Bank 3.4 Cheque

• Commercial Bank • Types of Cheque
• Retail Bank  Open Cheque
• Central Bank
 Crossed Cheque
 Bearer Cheque
3.2 Electronic Bank  Order Cheque
3.3 Types of Accounts • Part of Cheque
• Saving Account • Elements of Cheque
• Current Account • Do and Don’t When Using Cheque
• Returned Cheque
3.5 Credit Cards
3.6 Internet Banking
3.1 Types of Bank
4
Definition:
• A bank to be a business that safeguard, transfer, exchange
and lend money.
• Banks provide a multitude of financial services:
• Holding deposit
• Lend money
• Types of bank:
• Commercial Bank
• Retail Banks
• Central Banks

Types of Bank
5
Commercial Bank
• Commercial Banks do about 60% of the deposit and loan
and provide familiar services such as a checking, saving
accounts, credit cards, investment services, and others.
• Example of commercial bank:
Retail Banks
• Other institutions, such as mutual saving banks, saving and
loans, and credit unions developed to help individuals not
served by commercial banks save money, acquire loan, and
invest.
• Example of retail bank:

Types of Bank
6
Central Banks
• Central Banks are government banks that manage, regulate
and protect both the money supply and the banks
themselves.
• Central bank serve as the government’s banker.
• Central banks issue currency and conduct monetary policy.

3.2 Electronic Banking
7
The Electronic Funds Transfer Systems (EFTS)

• EFTS is probably the most important technology in retail
banking.
• EFTS enables funds to be transferred from one account or
place to another.
• The transactions are done electronically.
• The account holder:
• Does not need to go to the bank’s office.
• No filling of forms.
• Needs to use a plastic card and press the relevant buttons.

8
The Automatic Teller Machine (ATM)

• A large number of bank customers prefer to use the ATM
as it save costs, time, convenient and offers longer service
hours.
•Most ATMs enable the customers to:
• Check the balance of accounts.
• Withdraw cash.
• Transfer funds to other accounts.
• Request for statement of accounts.
• Pay in deposits.
• Request for cheque books.

9

10
• How to Protect your ATM card:

• Keep your ATM in a safe place.
• Do not leave your ATM card around where others can see.
• Never write down your PIN anywhere.
• Never reveal your PIN to anyone.
• Do not respond to any request allegedly from banking
institution for your PIN. Never give any information about
your ATM card or PIN over the phone.
• Notify your banking institution immediately if your card is
missing or stolen.

11
The Electronic Funds Transfer at Point of

Sales Systems (EFTPOS)
• EFTPOS is a system which enables funds to be transfer from one
account to another, like the ATM, but at the point of sales.
• Widely used through debit card.
• On transacting a sale, the buyer surrenders his debit card to the
seller. Through the electronic networks, the buyer’s account is
identified and the account balance ascertained. The total payment
for that sale is the directly deducted from the account and
transferred immediately to the seller’s account.
• With this service, the public need not hold much cash. As long as the
customer has a credit balance in his account, he/she can go shopping
around without having to carry much cash.

3.3 Types of Accounts
12
• Saving accounts
• Current Accounts

Types of Account: Saving Account
13
• Enable you to save or deposit your money into an account

and received certain interest with no stated maturity.
• Interest earned on your balance.
• The minimum deposit to open an account varies from one
bank to another and can be as low as RM1.
• You can apply ATM card with a specific PIN number.
• You can choose to have passbook or statement.
• You will need to use your passbook for over the counter
transaction. Some banking institution allow over the
counter transactions with only your ATM card and identity
card.
Types of Account: (Saving Account)
14
• Some of the common transaction you can

perform as an account holders are:
• Withdraw money, either over the counter or from ATMs.
• Deposit money.
• Make account enquiries.
• Transfer funds within the same banking institution.
• Bill payments.
• Inter-bank transfers (GIRO).
• Online banking for banking institution that has this features.

Types of account: (Saving Account)
15
• As account holder, you are responsible to:

• Always keep your account numbers and PINs that have
been issued to you confidentially.
• Always keep your statements, passbook and ATMs card
in a safe and secure place.
• Immediately inform your banking institution of any of
the following:
• Any change of address or telephone number.
• Loss of ATM card or passbook.
• Any discrepancy in your bank statement.

Types of Account: Current Account
16
• Can be use for personal or business purposes.

• Allowed to use cheque as a way to make payment.
• Different banking institutions have different requirements
for opening a current account.
• It is advisable that you seek and compare what each bank
has to offer before opening up a current account.

Types of Account: (Current Account)
17
• Who can open a current account?

• Different banks have different criteria.
• Bank will consider the application if the applicant is:
• 18 years old and above.
• Not a bankrupt.
• Of sound mind and has the mental ad physical capacity to
operate the account properly.
• For business owners and professional entities, they must
ensure that they are properly registered with the relevant
authority.

18
• Requirements to open a current account:

• You must be physically present at the bank.
• You need an introducer acceptable to the bank.
• You need to provide certain identification documents
such as identity card.
• You need to put an initial deposit as specified by your
bank.

19
• As a Current account holder among others, you

will be able to make:
• Cheque payment.
• Cheque and cash deposit.
• Account enquiries.
• Withdraw.
• Funds transfer within the same banking institution.
• Bill payments.
• Inter-bank transfer (GIRO).
• You will receive free monthly statements delivered to you.
This will you keep records of all deposits and withdraws
that you’ve made.
20
Your Responsible as an Account Holder:

• Always keep your account numbers and PINs that
have been issued to you confidentially.
• Always keep your account statements in a safe place.
• Always destroy or shred cancelled cheques.
• Immediately inform your banking of any of the
following:
 Any change of address or telephone number.
 Lost of cheque or cheque book.
 Any discrepancy in your bank statement.

21
Types of Current Account:

As individual, you can open the following current
accounts:
 Personal current account under your name, or
 Joint current account which is operated by you jointly with
others, e.g. Any one of the accountholders to operate the
account (e.g., for an account open by A and B, either A or B
is required to sign).
 All accountholders are need to operate the account (e.g., for
an account opened by A or B, both A and B are required to
sign).
 For Business/company, the current account will be in the
name of the business and it operated by nominated
signatory/ies.
22
• Usage of a Current Account:

• Can start using once it is approved.
• Withdraw from you account (subject balance in the account)
can be made either through cheques or ATM cards (issued to
individual accountholders only) or by electronic means.
• No need to maintain the initial deposit amount, i.e. the
minimum amount required to open the account once your
account is in operation.
• Do not earn interest on the balance.
• However, for a hybrid account, that is, an account that
combines the features of both a current and saving account,
you may earn interest for the saving portion of the account.

23
Signatories and Changes of Signatories:

• Individual:
 Bank will require your specimen signature.
 The bank will compare your signature on the cheque issued by
you against this specimen signature.
 If different, the bank will refuse to pay the cheque and return
the cheque.
• Business/company:
 Specimen signature(s) of person(s) authorized to sign cheque
on behalf of the business/company
 Any changes must be conveyed to the bank immediately in
writing by the accountholder. Together with the effective date
of change and must be certified by the company secretary and
signed by the quorum of directors.
3.4 Cheque
24
• A Cheque is a bill of exchange drawn on a specific banker

and not expressed to be payable otherwise than on demand.
• Parties of cheque:
• Drawer - The maker of the cheque (the person who issue the cheque).
• Drawee - The banker of the drawer.
• Payee - The person named in the instrument (to be paid)
Drawee
Payee
Drawer

Cheque (cont…)
25
• A cheque must be in writing and duly signed by the drawer.

• It contains an unconditional order.
• It is issued on a specified banker only.
• The amount specified is always certain and must be clear.
mentioned both in figures and words.
• The payee is always certain.
• It is always payable on demand.
• The cheque must bear a date otherwise it is invalid and
shall not be honored by the bank.

Types of Cheque:
26
• Open cheque
• Crossed cheque
• Bearer cheque
• Order cheque

Cheque: Open Cheque
27
• A cheque is called open when it is possible to get
cash over the counter at the bank.
• The holder of an open cheque can do the following:
• Received its payment over the counter at the bank.
• Deposit the cheque in his own account
• Pass it to someone else by signing on the back of a cheque.

Cheque: Crossed Cheque
28
• The payment of such cheque is not made over the counter at

the bank.
• It is only credited to the bank account of the payee.
• A cheque can be crossed by drawing two transverse parallel
lines across the cheque, with or without the writing “account
payee” or “Not negotiable”.
• Lines usually drawn on the left-hand top corner of the
cheque.

Example of Cross Cheque
29

Cheque: Bearer Cheque
30
• A cheque which is payable to any person who presents it

for payment at the bank counter.
• A bearer cheque can be transferred by mere delivery and
requires no endorsement.

Cheque: Order Cheque
31
• An order cheque is one which is payable to a particular

person.
• In such a cheque, the word “bearer” may be cut out or
cancelled and the word “order” may be writen.
• The payee can transfer an order cheque to someone else
by signing his or her name behind the cheque.

Cheque: Parts of Cheque
32
• A cheque shall contain:

• Place of issue
• Cheque number
• Account number MICR
• Date of issue
• Payee
• Amount of currency
• Signature of the drawer
• NOTE: a cheque is generally valid for six month after the

date of issue unless otherwise indicated.
Cheque : Elements of a Cheque
33

Cheque : Elements of A Cheque
34
1. Name of banking institution which is also called the “drawee bank” or

paying bank.
2. “Account payee only” crossing is a directive to the collecting banking
institution to pay into the account of the payee.
3. Payee is the person to whom the cheque is to be made. Ensure that
the name of the person is correctly spelt and written closed to the
words “pay to”. Draw a line on the space after the payee’s name to
avoid alteration.
4. Date of the cheque.
5. The person who holds and presents the cheque at the bank
institution.
6. The payment amount written in words. Make sure the amount in
words and figures tally, otherwise the bank will return the cheque.

Cheque : Elements of a Cheque
35
7. Name of the account holder which is also called the “drawer name”.
8. Your signature as the drawer of the cheque.
9. Cheque ID.
10. Serial number of the cheque.
11. Bank code*
12. Branch code*
13. Your current account number.
14. Transaction code.
15. Amount field.
 Some banking institutions may print the bank and branch code at
the top right corner above the date box.

Cheque - (The Do and Don’t)
36
Do:
• Do write clearly and always use permanent ink pens such as a ball pen.
• Do make sure your account has sufficient funds before issuing a
cheque.
• Do make sure there are no amendments on the face of the cheque as
banks will reject them.
• Do always end with you word “only” after writing the amount payable
on the cheque.
• Do ensure that no cheque is removed without your knowledge and
spoiled cheques are completely disposed of.
• Do keep your cheque in a safe place and never leave signed or unsigned
cheque unguarded.
• Do regularly take stock of unused cheques and conduct reconciliation
of cheques paid with your bank statement.
• Do immediately report the case to your bank, if there are missing
cheques in your cheque book.
Cheque - (Do and Don’t)
37
Don’t:
• Don’t sign any blank cheque or issue a blank cheque as payment.
• Don’t fold, pin or staple written cheques.
• Don’t use laser printer, felt tip pen, erasable pen, or pencil or other
printing techniques that can be easily erased and written over, to write
your cheque details.
• Don’t write below the MICR (Magnetic Ink Character Recognition) field
of the cheque. This will affect clearing of your cheque if you do so.
• Don’t issue payments in foreign currency using RM denominated
cheques.

Cheque: Returned Cheque
38
• Bank will decline to pay a cheque which you have issued due to the following
reasons:
• Insufficient funds in your account for clearance.
• Missing signature(s).
• Signature(s) differ from specimen signature.
• Post-dated.
• Stale cheque (date 6 month ago).
• Amount in words and figures differ.
• Alteration on the cheque.
• Issuance of a stop payment instruction.
• Account closed or “legally blocked” account.
• Cheques which have been dishonored will be returned to the accountholder.
• The issuer of the cheque will be charged a fee by his bank to recover part of
the administrative cost incurred.

Cheque Clearing
39
• When deposit the cheque into your account, your bank which
is the collecting bank will send it to specific clearing centers to
be sorted and dispatched to the drawee bank for payment.
• The time taken will depend on the number of days required to
clear the cheque.
• GENERALLY, house cheque do not go through the clearing
process – we receive money the next day.
• Local and outstation cheque however, need to go through the
clearing process.
• Local cheque would be clear within 2-3 working days.
• Outstation cheques may take 3-8 working days.

Cheque Clearing
40
House Outstation
Local Cheques
Cheques Cheques
• Belonging to • Drawn and • Drawn on
the drawee deposited banks outside
bank of the within the the local
same branch. clearing zone. clearing zone.
• Receive • Receive • Receive
amount cleared amount cleared amount cleared
next day but depends on the depends on the
depending on branch and branch and
the bank zone; 2 – 3 zone; 3 – 8
institution. working days. working days.

3.5 Credit Card
41
• A credit card is a convenient payment mode as it can be readily

used for making purchases at merchant outlets.
• It is a payment instrument that enable you to make
purchases of goods and payment for services instead of
using cash.
• When you use credit card, the credit card issuer will pay the
merchant on your behalf first and bill you later.
• A credit card can also be used for cash advances at ATMs (advance
fee will be charged).
• The credit card issuer will send you a monthly credit card
statement with detail of purchase, the total outstanding, the
minimum payment amount and the payment due date.

Applying For A Credit card
42
Step 1: Requirements
Step 2: Submission
Step 3: Terms and Conditions
Step 4: Personal identification Number (PIN)

43
Step 1: Requirements
• Age 21 years old or above.
• Income minimum RM18,000.00 per year.
• Comply with any other requirements set by the credit
card issuer.
• To support your application, submit the following;
• A photocopy of your identity card (IC).
• Job appointment letter.
• Latest income tax statement (Form J).
• Bank statements.
• Previous months pay slips.

44
Step 2: Submission
• Once you’ve submitted your application, the card issuer
will need to carry out a credit assessment on you based on
the information you’ve provided.
• Time taken to process your application varies from card
issuer to card issuer.
• If successful, you will receive your credit card through
registered mail or be requested to collect the card at the
card issuer’s head office or branch.

45
Step 3: Terms and Conditions

•When you receive your credit card and the related
documents, remember to carefully read and understand all
the terms and conditions specified as it is a binding
document between you and the credit card issuer.
•Also important to understand various charges involved
prior to using your credit card as this will help you minimize
unnecessary charges imposed on you.

46
Step 4: Personal Identification Number (PIN)

• You will be given a PIN separately from your credit card
for security purposes.
• This PIN will allow you to make cash advances with your
credit card at the ATMs.

Factors to Consider When Getting
a Credit Card:
47
• Does the card meet your lifestyle needs?

• Have you understood the terms and conditions relating to the
introductory offers.
• When seeking ‘free for life’ cards, i.e. no annual fee charges, seek
clarification whether the waiver is subject to conditions such as
minimal monthly usage/charge.
• In considering a new card under a ‘balance transfer scheme’
understand how the lower interest rate works and the conditions in
which they apply.
• Read the fine print as it may contain certain important information
that may affect your decision.
• Have you compared the carrying cost (annual fee) of the card against
the promotion gift that is offered?
• Can you pay your credit card bill conveniently? E.g. 24 hours banking
facilities, via internet banking.
• Does the banking institution offer quality service in terms of efficiency
and reliability?

Application Process:
48
• Similar to loan application and the length of time taken to

process the application would depend on the credit card
issuer internal procedures.
• You will be notified whether your application is approved
or rejected.

Understanding The Charge Applicable:
49
 Joining Fee
 Credit card issuers sometimes impose a one time joining fee for credit
cards.
 Annual Fee
 Flat fee which is payable annually once you accept the credit card.
 Finance Charges (Interest Charges)
 Charges imposed by credit card issuer on the outstanding balance which
you have not settled with them after the payment due date.
 Cash Advance Fee
 This is a fee charged for each cash advance transaction – range 3% - 5%
of the total cash advanced.
 Late Payment Charge
 Charge imposed when you fail to pay at least the minimum monthly
payment by the due date – charge both the finance charges(interest on
outstanding balance) and late payment charges for the minimum
monthly repayment amount due.
Tips On How To Minimize Your
Credit Card Charges:
50
• Shop around for the best deal. Some credit card issuers do not
charge any annual fees and joining fees, at least for the first year.
• Use your ATM card to make ash withdraws. Taking cash advances
using your credit card should be done only as a last resort.
• Avoid unnecessary credit card costs. Make your payment before the
due date stated in your credit card statement.
• Paying only the minimum monthly payment will extend your
repayment period and the interest you have to pay/settle
outstanding balance in full to avoid paying interest.
• Limit the number of credit cards based on your needs and payment
capability.
• Be alert of the changes in policies and rates.

Preventing Credit Card Fraud:
Safeguard Your Credit Card:
51
• Sign on your credit card immediately after you receive it.
• Keep your credit card in the same place in your wallet so that you.
will notice immediately if it is lost or stolen.
• Do not lend your credit card to anyone.
• Do not provide your credit card details (card number & expiration
date) to an unknown party as the may use it to make purchases via
telephone, mail or internet.
• Memories your PIN number and do not write down on the back or
the credit card or disclose to anyone.
• Keep the telephone number of your credit card issuer so that you
can immediately report lost/stolen cards, unauthorized
transactions or disclosure of PIN to a third party.
• Make sure you cut your expired credit card into two when you get
the new one.
Preventing Credit Card Fraud:
Check your Credit Card Transactions:
52
• Checks all details on the charge slip before signing or

confirming the transaction.
• Keep all your charge slips and check it against your credit
card statement as soon as you received it.
• Notify your credit card issuer immediately of any error.
• Destroy all your slips before you throw them away.

Summary of Credit Card
53

3.6 Internet Banking
54
• Internet banking allows us to manage our finances from

home, work or from just about anywhere in the world.
• Internet banking provides a fast and convenient way of
performing common banking transactions on the internet.
• Must have a computer with internet access, a web browser
and a registered account for internet banking from your
banking institution.
• To apply to be an Internet Banking User, we can apply if we
have an account with a banking institution that offer
Internet banking services.

55

Internet Banking:
Banking Services Available Online
56
• Check your balance and statements online.

• Submit applications for new accounts, credit cards or
loans online.
• Place fixed deposit.
• Transfer funds between accounts (own and third party).
• Pay bills, credit cards, loans and insurance premiums.
• Create, charge ad cancel standing orders.
• Request for cheque book and statements.
• Check the status of your cheque.
• Request for stop cheque payments.
• Apply for Bank Drafts and Telegraphic Transfer.
Internet Banking:
Is Internet Banking Safe?
57
Actions taken by Banking Institution to Ensure Safety:

• Regular test of the system to ensure its reliability.
• Provision of Internet security arrangements to ensure a
secure infrastructure.
• Usage of a number of security technologies such as
encryption, firewalls etc.
• Installation of a system to detect and disable attacks from
hackers.
• Undertake a periodic review every 6 months to assess
possible risk and detect possible weaknesses in the banking
institution’s risk management system.

Internet Banking:
Is Internet Banking Safe?
58
Actions taken by Customer to Ensure Safety:

•Do not reveal your login ID and Password or PIN.
•Check for the right and secure website.
•Protect your personal computer from hackers, viruses and malicious
programs.
•Be careful when downloading software.
•Do not leave your computer unattended when logged in.
•Always remember to log-off.
•Don’t sent any personal information particularly your password or Pin via
ordinary e-mail.
•Do not have other browser windows open while you are banking online.
•Avoid shared or public personal computers to conduct your internet
banking transactions.
•You are also advise to disable the “file and printer sharing” feature on
your operating system.

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OBM182:

CHAPTER 3: BANKING SERVICES

OBM182/Chapter 3/Feb-July 2020 Refer manual provided by faculty

OBM182/Chapter 3/Feb-July 2020

3.1 Types of Bank 3.4 Cheque

OBM182/Chapter 3/Feb-July 2020

OBM182/Chapter 3/Feb-July 2020

OBM182/Chapter 3/Feb-July 2020

The Electronic Funds Transfer Systems (EFTS)

OBM182/Chapter 3/Feb-July 2020

The Automatic Teller Machine (ATM)

OBM182/Chapter 3/Feb-July 2020

OBM182/Chapter 3/Feb-July 2020

• How to Protect your ATM card:

OBM182/Chapter 3/Feb-July 2020

The Electronic Funds Transfer at Point of

OBM182/Chapter 3/Feb-July 2020

OBM182/Chapter 3/Feb-July 2020

• Enable you to save or deposit your money into an account

• Some of the common transaction you can

OBM182/Chapter 3/Feb-July 2020

• As account holder, you are responsible to:

OBM182/Chapter 3/Feb-July 2020

• Can be use for personal or business purposes.

OBM182/Chapter 3/Feb-July 2020

• Who can open a current account?

OBM182/Chapter 3/Feb-July 2020

• Requirements to open a current account:

OBM182/Chapter 3/Feb-July 2020

• As a Current account holder among others, you

Your Responsible as an Account Holder:

 Any discrepancy in your bank statement.

OBM182/Chapter 3/Feb-July 2020

Types of Current Account:

• Usage of a Current Account:

OBM182/Chapter 3/Feb-July 2020

Signatories and Changes of Signatories:

• A Cheque is a bill of exchange drawn on a specific banker

OBM182/Chapter 3/Feb-July 2020

• A cheque must be in writing and duly signed by the drawer.

OBM182/Chapter 3/Feb-July 2020

OBM182/Chapter 3/Feb-July 2020

OBM182/Chapter 3/Feb-July 2020

• The payment of such cheque is not made over the counter at

OBM182/Chapter 3/Feb-July 2020

OBM182/Chapter 3/Feb-July 2020

• A cheque which is payable to any person who presents it

OBM182/Chapter 3/Feb-July 2020

• An order cheque is one which is payable to a particular

OBM182/Chapter 3/Feb-July 2020

• A cheque shall contain:

• NOTE: a cheque is generally valid for six month after the

OBM182/Chapter 3/Feb-July 2020

1. Name of banking institution which is also called the “drawee bank” or

OBM182/Chapter 3/Feb-July 2020

OBM182/Chapter 3/Feb-July 2020

OBM182/Chapter 3/Feb-July 2020

OBM182/Chapter 3/Feb-July 2020

OBM182/Chapter 3/Feb-July 2020

OBM182/Chapter 3/Feb-July 2020

• A credit card is a convenient payment mode as it can be readily

OBM182/Chapter 3/Feb-July 2020

OBM182/Chapter 3/Feb-July 2020