Chapter 5 – Bank Services, Electronic & Digital Banking

A comprehensive set of 70 question-and-answer flashcards covering remittance methods, retail payment systems, digital banking channels, payment instruments, fintech trends, and key Malaysian regulations and examples. Suitable for FIN370 exam revision.

What is the definition of remittance in banking?

The process of sending money to remove or pay an obligation, often via electronic transfer, domestically or overseas.

Which two instruments are used for local cheque-like payments, Cashier’s Order or Demand Draft?

Cashier’s Order is for local payments; Demand Draft can be used domestically or abroad outside the local clearing area.

Why are Cashier’s Orders pre-printed with the crossing “NOT NEGOTIABLE”?

To ensure the cheque cannot be endorsed or transferred, enhancing security for the payee.

Give one situation when a customer might choose a Cashier’s Order instead of a personal cheque.

When the customer has no current account or when a personal cheque is unacceptable to the payee.

In which currency are Cashier’s Orders in Malaysia issued?

Malaysian Ringgit only.

Name two main categories of Demand Drafts.

Local Demand Draft (RM) and Foreign Demand Draft (foreign currency).

What is the maturity period of a Local Demand Draft in Malaysia?

Six months.

Which remittance method is considered the fastest for urgent payments?

Telegraphic Transfer (TT).

What supporting documents are required for resident-to-resident foreign currency transfers via TT?

Documents in accordance with Foreign Exchange Administration (FEA) rules.

Rentas is associated with which remittance service?

Local Telegraphic Transfers (Real-Time Electronic Transfer of Funds and Securities).

What basic technology requirement differentiates Online Transfers from other remittances?

An internet connection and registration on the bank’s website for first-time users.

Define a standing instruction (standing order).

A customer’s authorization for the bank to perform recurring transactions automatically at fixed intervals.

State two benefits of standing instructions.

1) Convenience—automates regular payments; 2) Improved financial management—avoids missed or late payments.

What does SWIFT stand for?

Society for Worldwide Interbank Financial Telecommunication.

Does SWIFT move money across borders?

No, it transmits secure payment messages; actual fund settlement occurs via corresponding accounts.

Describe the basic four-step SWIFT flow when Person A sends money overseas.

1) Person A provides recipient account & SWIFT code; 2) Originating bank sends SWIFT message; 3) Recipient bank receives message; 4) Funds credited to recipient’s account.

What is eSPICK and one advantage it offers?

National Electronic Cheque Information Clearing System; enables next-business-day funds with reduced physical cheque handling.

Name two shared ATM networks in Malaysia.

MEPS SAN and HOUSe.

List one advantage and one disadvantage of using ATMs.

Advantage: 24/7 cash withdrawal. Disadvantage: Risk of robbery or system downtime.

What device allows self-service cash deposits in Malaysia?

Cash Deposit Machine (CDM).

State two benefits of using a CDM.

Instant account credit and no need to fill cash deposit slips or queue at the counter.

What does EFTPOS stand for and what does it do?

Electronic Funds Transfer at Point of Sale; enables debit/credit card payments directly from customer bank accounts at merchants.

Why are EFTPOS fees usually lower than credit-card fees for merchants?

Because funds are drawn directly from bank accounts, reducing intermediary costs.

What is Direct Debit best suited for?

Recurring, automated collections such as utility bills or subscriptions.

Explain the role of a Direct Debit Agent.

Acts as middle party referring potential billers to the bank and may prepare e-mandates or collection files.

What is FPX in Malaysia?

Financial Process Exchange – the national online payment gateway for real-time internet banking payments.

During an FPX transaction, what encrypts the customer data between browser and merchant server?

SSL (Secure Socket Layer) encryption.

How long does a typical FPX authorization-to-settlement cycle take?

About two days (though the initial authorization response is within 2-3 seconds).

What identifier can Malaysians use for instant DuitNow transfers besides account numbers?

Mobile number, NRIC (MyKad) number, or business registration number.

What is DuitNow QR?

An interoperable QR standard enabling payments to any participating bank or e-wallet using a single QR code.

Describe the ‘DuitNow Request’ service in one sentence.

Allows payees to send digital payment requests 24/7 to payers who approve and transfer funds instantly.

List three retail payment instruments covered in the chapter.

Debit cards, credit cards, charge cards (also biometrics, digital signature, e-money/tokens).

How is a debit card fundamentally different from a credit card?

Debit card draws funds directly from the bank account at purchase; credit card provides a revolving credit line payable later.

Name the maximum annual interest rates for Malaysian credit card tiers 1, 2, and 3.

15%, 17%, and 18% per annum respectively.

What happens if someone scratches off the signature panel on a credit card?

The word “VOID” appears to indicate tampering.

Why have charge cards declined in popularity in Malaysia?

Higher fees and the requirement to settle the full balance monthly despite offering prestige benefits.

Give two advantages of biometric authentication in banking.

Higher security (harder to fake) and faster authentication with improved user experience.

What is a digital signature’s primary security standard?

Public Key Infrastructure (PKI).

How does a digital signature become invalidated?

If the signed document is altered after signing, the signature hash no longer matches.

Define a digital token.

A digital representation of value or rights issued on a blockchain, usable as medium of exchange or for platform access.

List three retail payment channels under digital banking.

Mobile banking, online banking, ATM/CDM, POS, Payment Gateway, Mobile payment.

Provide a concise definition of digital banking.

End-to-end digitization of traditional banking activities delivered through online and mobile technology.

According to Drexelius & Herzig (2001), what is mobile banking?

The ability to conduct bank transactions via a mobile terminal.

State one major advantage and one disadvantage of mobile banking.

Advantage: 24/7 convenient access anywhere. Disadvantage: Exposure to scams if phone is lost or fake SMS received.

Which banking mode generally offers more functions: online banking (desktop) or mobile banking (handset)?

Online banking typically offers more comprehensive functions.

CIMB Clicks, Maybank2u and allianceonline are examples of what?

Mobile banking apps offered by Malaysian banks.

Touch ‘n Go eWallet belongs to which parent company venture?

TNG Digital, a joint venture between Touch ‘n Go and Ant Financial (Alibaba).

Define fintech in one sentence.

The integration of technology into financial services to improve delivery and efficiency for consumers.

Name four fintech areas or trends highlighted in the lecture.

Cryptocurrency, BNPL/lending, digital wallets, robo-advisors (plus Islamic fintech, regtech/KYC, insure-tech, etc.).

Which payment channel is rapidly surpassing internet banking in transaction value across ASEAN’s six largest countries?

Mobile banking.

What percentage of Malaysia’s fintech ventures operate in the payment segment, according to Fintech News Malaysia?

19% of fintech ventures.

What legislative act is Malaysia preparing to cover BNPL schemes?

Consumer Credit Act, developed by BNM with MoF and Securities Commission.

How many digital banking licences did Bank Negara Malaysia award, and to whom does the Boost-RHB consortium cater?

Five licences; Boost-RHB targets underserved MSMEs and gig-economy customers.

Why is Malaysia positioned as a leader in Islamic fintech?

Largest market maturity, RM2.3 trillion Islamic Capital Market size and supportive government initiatives.

Give an example of a Shariah-compliant P2P platform in Malaysia.

microLEAP (or CapBay, Ethis – any one accepted).

What is PayHalal’s role in Islamic fintech?

A Shariah-compliant payment gateway that processes CASA, e-money, debit and credit payments online and in-store.

How many e-money issuer licences has Bank Negara Malaysia granted?

53 licences (47 non-banks and 6 banks).

Differentiate mobile payment from mobile banking in one key point.

Mobile payment is typically a wallet service permitting transactions via an app; mobile banking covers broader banking functions managed by a bank.

State two popular e-wallets in Malaysia besides Touch ‘n Go.

Boost and GrabPay (others acceptable: ShopeePay, etc.).

What is the MEPS SAN core service for ATM users?

Interbank cash withdrawal and funds transfer across participating banks’ ATMs.

List two non-transactional mobile banking services.

Viewing account balances/history, downloading statements, requesting cheque books or debit cards.

Explain the primary purpose of the magnetic stripe on a credit card.

To store encoded account information, including a unique three-digit code to help detect counterfeit cards.

What is the function of encryption in biometric or digital banking authentication?

Secures transmission and storage of sensitive biometric or transactional data to prevent unauthorized access.

How does an e-Mandate enhance Direct Debit?

Enables same-day online authorization, suitable for bulk payment collections.

Describe the security benefit of biometric authentication over password-based systems.

Biometric traits are harder to steal or replicate compared to passwords or PINs, reducing identity fraud.

Which system processes instant credit card or debit card transactions at retail stores?

POS/EFTPOS terminals connected to banking networks.

Why is encryption critical in payment gateways?

It protects sensitive information like card numbers during transmission between customer, merchant, and processor.

What does RPP stand for in the DuitNow roadmap?

Real-time Retail Payments Platform.

Which two key identifiers appear on the front of most cards below the account number?

Bank Identification Number (first 4 digits) and expiration date.

In digital signatures, what is the ‘hash’ used for?

A unique fixed-length representation of the signed document used to verify integrity; mismatch invalidates the signature.

Identify one limitation of mobile banking compared to desktop internet banking.

Some complex functions may be unavailable or harder to navigate due to smaller screen and simplified app design.

What does ‘BNM’ stand for and what is its role in digital banking?

Bank Negara Malaysia; central bank that licenses and regulates digital banks, e-money issuers, and fintech activities.

Name one risk associated with ATM usage mentioned in the lecture.

Possible robbery or theft at ATM locations.

What rule requires supporting documents for resident foreign currency transfers?

Foreign Exchange Administration (FEA) rule.

Why are standing instructions useful for loan repayments?

They ensure automatic, timely payments, preventing late fees or penalties.

Which network does DuitNow operate under?

PayNet’s national real-time payments network.

What core feature makes digital banking ‘end-to-end’?

All processes—from initiation to settlement—are completed digitally without visiting a physical branch.