Banking System Methods of Payment

Study Notes

Banks facilitate transactions by channelling funds from surplus to deficit economic units, often using direct or indirect methods.
Indirect methods, involving intermediaries like banks, are common and allow for efficient, yet profitable, fund transfer.
Banking services include vehicle safekeeping, cheque accounts (demand deposits), trust services, savings deposits, discounts of commercial notes, business and corporate loans, currency exchange, consumer loans, and equipment leasing.
Financial advising, venture capital loans, and cash management services are also essential banking functions.
Laws govern payment systems, such as the Bank Secrecy Act (BSA), which mandates reporting of suspicious transactions (over $1 million daily).

Learners should understand bank regulations for payment systems.
Students should be able to differentiate payment methods available to banks.
Students should be able to define in-clearing capture, statement rendering, examination, and filing.

Cash is a widely used payment method in Nigeria.
Currency is printed and distributed through a central bank system and then returned to the central bank for destruction before re-circulation.
This process circulates only new, high quality notes.

Cheques are a widely used payment instrument.
They are considered a reliable method of transferring large sums of money with just one document.
The cheque payment process involves three key parties: drawer, drawee (bank), and payee.

The process begins with the drawer writing the cheque.
Once presented to the drawee, the cheque is verified and cleared.
The funds are transferred from the drawer's account to the payee's account if the transaction is valid.

EFT procedures safeguard customer and bank transactions.
Regulations outline appropriate disclosures for EFT transactions and procedures for resolving disputes.
Limits on liability for unauthorized transactions exist; 50$ if a bank is notified within 2 days of loss/theft.

Regulations like the Electronic Fund Transfer Act protect customers and banks
There are stipulations about the amount that can be transferred as well as when and to whom.
Regulations address procedures for resolving disputed or erroneous electronic transactions.
Regulations include provisions for stop payment requests.

The process involves sorting cheques based on date, number, and other characteristics.
Cheques are then organised and bundled.
Account numbers & automated signature verification are used when creating reports.
The process may involve separating cheques into individual accounts, in terms of the financial statements produced.