Banking, financial services.

Methods of payment

Varga Erika
Assistant professor
Department of Foreign Languages
Károly Róbert College, Gyöngyös
 ë
LINE
ï Glossary
ï
he financial institutions (definition, types)
ï
he two-tier banking system
ï Central banks and their functions
ï Financial services (definitions)
ï Application for a loan
ï Methods of payment (cash and cashless)
method of payment pension fund
term insurance company
two-tier credit union
apply, application deposit
loan corporate client
credit cater for
fund mortgage
commercial bank current account
merchant bank accumulate
building society dividend
securities lender of last resort
share interest rate
subordinate exchange rate
formulate conduct transfer
banknote issue
coin savings account
reserve deposit account
gold bullion/ingot current account
handle money order
cater for standing order
overdraft card holder
hire purchase at regular intervals
instalment arrangement
counselling hand in
L/C= letter of credit security/collateral
merger and guarantor
acquisition (M&A) assessment
withdraw approval
overdraw clear a cheque
advanced notice banker¶s draft
supplier
denomination
A
M /cashpoint
debit
bill of exchange
(B/E)
drawn at sight
revocable
irrevocable
balance
scheme

he banking system
1. r
÷
à 





à
Although they differ, they have one thing in common:
-collect funds from the public and
-loan them out in different forms
2. r
 à 





à
Commercial (clearing) banks
Merchant banks (issuing or accepting houses)
Building societies (US: thrifts)
Pension (superannuation) funds
Insurance companies
Credit unions (US)

2





à

-
à

 issue deposits, make loans and
provide services both to the members of the public and to
the corporate clients while
-
  only cater for the corporate clients
with the same services.
-

à



 take mortgage loans and deposits by
offering current accounts to members
-

à earn interests and dividends from the
accumulated funds and sometimes part of banks or
-
à 

loan out funds and invest in
government securities or shares
-



à co-operately owned by members who are
given loans, chequebooks, life assurance etc.

he above-mentioned institutions are part of a two-tier

banking system.

3. r




àà 


     
A hierarchical, subordinate relationship when the
Ê

 occupies the first tier and the above-
mentioned ones are on the second tier. (In Hungary: since
1987!)
Œ. r
 
àà 


‰ control and formulate monetary and fiscal policy

‰ issue banknotes and coins (sole right)
‰ store reserves (e.g. gold bullion or gold ingot)
‰ handle government borrowing
‰ act as the other banks¶ bank (lender of last resort)
‰ set and control interest and exchange rates
‰ do business with international institutions (e.g. IMF)
‰ conduct money transfer to other countries

he names of the central banks:

ÿ in Hungary: the National Bank of Hungary

ÿ in GB: Bank of England
( second-tier banks = 
  Lloyds, Barclays,
National Westminster (Nat West), Midland)
ÿ in the SA: Fed (Federal Reserve System)
- 12 federal reserve districts with one bank per each
- 1 Federal Reserve Board in Washington D.C.
Financial services
Banks on the second tier perform the following services:
v 
 issue savings and deposit accounts, trade with
government securities and pension schemes
 
issue current accounts, travellers' cheques,
arrange e-transfer, money and standing orders
 

 give loans, credits (issue credit cards), mortgage,
overdrafts, hire purchase (instalment system)
 

 insurance, safe, foreign exchange, counselling,
issuing L/C, factoring, leasing, status reports, advice on
markets, investment, mergers and takeovers etc.
Some useful definitions:


à: an arrangement which allows the

customer to pay in and withdraw money ¢
 


Ê 

à: an account for personal savings with a
higher interest.
2
à
à: pays high interest but upon withdrawal,
the bank needs advanced warning.



: a plastic card issued by the bank to allow the

card holder to borrow money and pay for the goods later

à
: giving right to the bank to pay a certain
amount to another account at regular intervals (e.g.the
bills)
Bank loans
à: an arrangement about lending money when
the customer agrees to pay the money back after a certain
period of time with some interest.

r
 à
à  
 à à

1. hand in the application
2. provide collateral /security/ and guarantors
3. get a positive assessment, approval from the bank
Œ. take out the loan
5. repay it in instalments
 Methods of payment
v 
  usually for small amounts in private life
 
 
 

 



CWë (cash with order) = credit
 

  


/open account



a slow procedure since it has to be cleared
 
  the bank sends the draft to the supplier¶s
bank who is given immediate credit
 r



 the fastest and the most expensive
one, an inter-bank communication via cable/Internet
(e.g.Western nion)
 

àà
à
 may be purchased from the
bank in different denominations and posted to the supplier
 
 safe (PIN code), but not all the time!
Sub-types: a) ÷ issued to withdraw money
from an A
M /automated teller machine/ (cash point)
b)  ÷÷ allows the holder to overdraw
the limit
c) ÷ ÷ the card is immediately debited
through the EPëS (electronic point of sale) system
 2à

à 
 
a demand for
payment from the supplier on a printed form. It can be
drawn at sight or be payable after a certain number of
days.


à 

 
 the most commonly used form.
It is an inter-bank communication.


1.
he importer and the exporter agree on a sales contract and terms
2.
he importer asks his bank (
 

) to open an L/C in the
exporter¶s favour
3.
he issuing bank sends it to the exporter¶s bank ( 

)
Œ.
he exporter presents the shipping documents to the advising bank
5.
he advising bank forwards them to the issuing bank and the importer

r
revocable (can be cancelled) and irrevocable (cannot be

modified)
 

Nowadays financial transactions (transferring money,
checking the balance, selling shares, getting advice and
financial analysis etc.) can be performed through the
Internet.

O
  flexibility, personalised offer, lower charges

 
 no human contact, Internet access and

computer skills are necessary,operations can be delayed
 REVISIëN

ï
he financial institutions (definition, types)

ï
he two-tier banking system
ï Central banks and their functions
ï Financial services (definitions)
ï Application for a loan
ï Methods of payment (cash and cashless)

hank you for your attention.