mn30067 electronicbanking

Electronic Banking

Electronic BankingElectronic Balance and Transaction

Reporting (EBR)

• Usually provided by relationship bank(s)• May be used to access accounts with single or

multiple banks• MT940 used for end of day balances - assist reconciliation to provide daily cash

position - may provide anticipated cleared balance

information• Some banks are able to provide intra day

reporting via MT942

Electronic BankingElectronic Funds Transfer (EFT)

• Offline batch or Browser based• Interface with TMS avoids re-keying• Templates - pre defined beneficiaries - sort code, IBANs etc• Will allow a wide range of different payment

types - primary payment types are MT102 (mass

payments) and 103 (single customer credit transfer)

- MT101 Multi-bank payments

Electronic BankingE-Commerce: Portals and Exchanges

Companies may use single bank dealing portal because

• Independent verification of the rates• May be incentive to deal on-line (rate)• Small exposures may be hedged

automatically if linked to TMS

Simplify the audit trail

Electronic BankingMulti-bank Portal

Co A

Co B

Co C

Hub

Bank A

Bank B

Bank C


• Input deal, dates- currencies- amounts• Banks to be approached• Bid transmitted• Banks ‘auto bid’ direct from their system• Dealer has short time to accept• Deal accepted and other bids discarded• If linked, TMS produces confirmation


Advantages to:• Corporate

– Well documented competitive quotes– Transparency or ‘price discovery’– Can spread business– If well integrated leads to STP


• Bank– High volume, low margin business may be

done more cost effectively– Greater chance of winning some business– Access to a wider range of customers– Small value, exotics

• Exchanges• A messaging service

Electronic BankingExchanges

• A messaging service• Different types of financial messages• Expands services available

Electronic BankingE-Commerce: Working Capital

• Invoicing or einvoicing ‘the substitution of inbound/outbound paper invoices with an electronic file’– EBPP, Electronic Bill Presentment and

Payment– EIPP, Electronic Invoice P & P– ERS, Evaluated Receipts Settlement– POP, Paid on ProductionNB in EU directive 2001/115/EC, into effect in

2004, member states must accept einvoices.


• Desktop capture• Letters of Credit• Reconciliation • Interest apportionment


• Why is Security important?• Fraud• Theft• Contamination• Data security• Error• Non repudiation

Electronic BankingSecurity

So how do we attain security and have a system that works?

• Authorisation for payments/deals• Segregation of duties (back office/dealer)• Physical security

– Dedicated computers for payments– Separate room– Password protected


• Different levels of authorisation/activity– Input– Second input– Verification– Authorisation and release

• Free format• Pre-format


• Encryption or cyphertext– Private key or symmetric– Public key or asymmetric (public key

infrastructure, PKI) not only ensures confidentiality but also

provides authentication of the sender thus preventing repudiation

– SSL, Secure Sockets Layer– HTTPS, Hypertext Transfer Protocol, Secure


• Digital Signature• Uses the asymetric method to perform two

functions– Authentication– Integrity

public key encryption does not identify the sender. Digital signatures fill this gap.

• Digital certificates

Electronic BankingIntegration and Standards

• Extensible Mark-up Language, XML• Some standards groups:

– Rosettanet– TWIST or Treasury Workstation Integration

Standards Team

mn30067 electronicbanking

Economy & Finance