E-banking
Electronic banking (e-banking) is an umbrella term for the process by which customers perform banking transactions electronically without physically visiting an institution. The following terms all refer to one form or another of electronic banking:
• Personal computer (PC) banking
• Internet banking
• Virtual banking
• Online banking
• Home banking
• Remote electronic banking
• Phone banking
Personal computer banking, Internet, or online banking are the most frequently used designations. It should be noted, however, that the terms used to describe the various types of electronic banking are often used interchangeably.
This form of banking enables customers to execute transactions from a computer via a modem. The bank typically offers the customer a pro- prietary financial software program that allows the customer to perform financial transactions from his or her home computer. The customer then dials into the bank with his or her modem, downloads data, and runs the programs that are resident on the customer’s computer.
Currently, many banks offer banking systems that allow customers to obtain account balances and credit card statements, pay bills, and transfer funds between accounts.
The alternative method is often called Internet banking. You enter your personal account on the bank’s Web site with a coded personal identification number (PIN). Internet banking uses the Internet as the delivery channel by which, for example, we transfer funds, pay bills, view checking and savings account balances, pay mortgages, and pur- chase financial instruments and certificates of deposit. An Internet bank- ing customer accesses his or her accounts from a browser—software that runs Internet banking programs resident on the bank’s World Wide
Web server, not on the user’s PC. A true Internet bank is one that provides account balances and some transactional capabilities to retail customers over the World Wide Web. Internet banks are also known as virtual, cyber, Net, interactive, or Web banks.
Online currencies such as PayPal and Internetcash have increased e-commerce sales to just under $16 billion per quarter in 2006, from about $6 billion in 1999.
PayPal and Internetcash work like this: A consumer funds an account by providing his or her bank or credit card information. The consumer can then send funds to anyone with an e-mail address. Funds from PayPal or Internetcash can be withdrawn by check or transferred to a bank account.
Some Internet banks exist without physical branches. In some cases, Web banks are not restricted to conducting transactions within national borders and have the ability to conduct transactions involving large amounts of assets instantaneously. According to industry analysts, elec- tronic banking provides a variety of attractive possibilities for remote account access, including:
• Availability of inquiry and transaction services around the clock
• Worldwide connectivity
• Easy access to transaction data, both recent and historical
• Direct customer control of international movement of funds without intermediation of financial institutions in customer’s jurisdiction
Forms of Bank Financing
Loans for international trade fall into two categories: secured and unsecured.
Secured Financing
Banks are not high risk takers. To reduce their exposure to loss, they often ask for collateral. Financing against collateral is called secured
Shipping documents. Commercial invoices, bills of lading, insurance certificates, consular invoices, and related documents.
Draft. The same as a “bill of exchange.” A written order for a cer tain sum of money to be transferred on a cer tain date from the person who owes the money or agrees to make the payment financingand is the most common method of raising new money. Banks will advance funds against payment obligations, shipment documents, or storage documents. Most common of these is advancement of funds against payment obligations or documentary title. In this case, the trader pledges the goods for export or import as collateral for a loan to finance those goods. The bank maintains a secure position by accept- ing as collateral documents that convey title such as negotiable bills of lading, warehouse receipts, or trust receipts.
Another popular method of obtaining secured financing is the banker’s acceptance(BA). This is a time draft presented to a bank by an exporter. This differs from what is known as a trade acceptancebetween buyer and seller in which a bank is not involved. The bank stamps and signs the draft “accepted” on behalf of its client, the importer. By accepting the draft, the bank undertakes and recognizes the obligation to pay the draft at maturity and has placed its creditworthiness between the exporter (drawer) and the importer (drawee). Banker’s acceptances are negotiable instruments that can be sold in the money market. The BA rate is a discount rate generally two to three points below the prime rate. With the full creditworthiness of the bank behind the draft, eligible BAs attract the very best of market interest rates. The criteria for eligibility are:
1. The BA must be created within 30 days of the shipment of the goods.
2. The maximum tenor is 180 days after shipment.
3. It must be self-liquidating.
4. It cannot be used for working capital purposes.
5. The credit recipient must attest to no duplication.
(the drawee) to the creditor to whom the money is owed (the drawer of the draft). See glossar y for “date draft,” “documentar y draft,” “sight draft,” and “time draft.”
Unsecured Financing
In truth, unsecured financingis only for those who have a sound credit standing with their bank or have had long-term trading experience. It usually amounts to expanding already existing lines of working credit.
For the small importer/exporter unsecured financing will probably be limited to a personal line of credit.