DIGITAL Banking is a BUZZ word in the market. I have a doubt whether this is new.
Now with all of the talk these days about Digital Banking, it's important to note that banks have been using Digital technology since the early days of the commercial use of the computer.
Consider that when someone opens a checking account, he/she is provided with an account number. This number, along with the customer's personal information, and the amount of money deposited into the account is stored on the bank’s computer.
Every time a deposit or a withdrawal is made, either a deposit slip or check with MICR encoding (Magnetic Ink Character Recognition) is "read" by a computer to record the transaction and update the customer's account balance.
Banks have long used high-speed Digital check processing equipment that can process tens of thousands of checks per hour to update customers' account balances.
In checking account transactions where a check is deposited into a different bank than where the checking account is housed, the settlement of this item becomes a Digital transaction because no physical cash is actually moved from one bank to the other. Instead, the banks electronically exchange bulk Digital files of all transactions via ACH (automated clearinghouse) to reconcile banks’ customers' account balances.
A similar process happens for loans, lines of credit, and credit cards. There is no physical cash that moves between a seller and a purchaser. Rather, loan balances are maintained on computers that record customers' use of the loan proceeds to make purchases and then reconcile the transactions against the customer's account balances.
In the old days, when customers presented credit cards to make purchases, merchants used paper receipts to imprint the credit card number, and then they had to call the card issuer for approval of the transaction. The paper receipts were then sent to banks to be digitized so the transactions could be recorded against the cardholders’ account balances.
Then when the credit card companies began to use Digital technology that allowed Digital credit card terminals to communicate with over telephone lines (remember the modem) directly with the card issuers’ computers, the payment transaction became even more efficient.
ATM and Debit Card issuers also utilized this Digital communication technology to streamline the access to funds in customers’ checking accounts by allowing merchants to immediately verify whether sufficient funds are available for purchases and then place holds against the balances for the amount of the purchase.
Now with all of the talk these days about Digital Banking, it's important to note that banks have been using Digital technology since the early days of the commercial use of the computer.
Consider that when someone opens a checking account, he/she is provided with an account number. This number, along with the customer's personal information, and the amount of money deposited into the account is stored on the bank’s computer.
Every time a deposit or a withdrawal is made, either a deposit slip or check with MICR encoding (Magnetic Ink Character Recognition) is "read" by a computer to record the transaction and update the customer's account balance.
Banks have long used high-speed Digital check processing equipment that can process tens of thousands of checks per hour to update customers' account balances.
In checking account transactions where a check is deposited into a different bank than where the checking account is housed, the settlement of this item becomes a Digital transaction because no physical cash is actually moved from one bank to the other. Instead, the banks electronically exchange bulk Digital files of all transactions via ACH (automated clearinghouse) to reconcile banks’ customers' account balances.
A similar process happens for loans, lines of credit, and credit cards. There is no physical cash that moves between a seller and a purchaser. Rather, loan balances are maintained on computers that record customers' use of the loan proceeds to make purchases and then reconcile the transactions against the customer's account balances.
In the old days, when customers presented credit cards to make purchases, merchants used paper receipts to imprint the credit card number, and then they had to call the card issuer for approval of the transaction. The paper receipts were then sent to banks to be digitized so the transactions could be recorded against the cardholders’ account balances.
Then when the credit card companies began to use Digital technology that allowed Digital credit card terminals to communicate with over telephone lines (remember the modem) directly with the card issuers’ computers, the payment transaction became even more efficient.
ATM and Debit Card issuers also utilized this Digital communication technology to streamline the access to funds in customers’ checking accounts by allowing merchants to immediately verify whether sufficient funds are available for purchases and then place holds against the balances for the amount of the purchase.
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