Electronic banking is a form of banking in which funds are transferred through an exchange of electronic signals rather than through an exchange of cash, checks, or other types of paper documents. Transfers of funds occur between financial institutions such as banks and credit unions. They also occur between financial institutions and commercial institutions such as stores. Whenever someone withdraws cash from an automated teller machine (ATM) or pays for groceries using a debit card (which draws the amount owed to the store from a savings or checking account), the funds are transferred via electronic banking.
Electronic banking relies on intricate computer systems that communicate using telephone lines. These computer systems record transfers and ownership of funds, and they control the methods customers and commercial institutions use to access funds. A common method of access (or identification) is by access code, such as a personal identification number (PIN) that one might use to withdraw cash from an ATM machine.
There are various electronic banking systems, and they range in size. An example of a small system is an ATM network, a set of interconnected automated teller machines that are linked to a centralized financial institution and its computer system. An example of a large electronic banking system is the Federal Reserve Wire Network, called Fedwire. This system allows participants to handle large, time-sensitive payments, such as those required to settle real estate transactions (Encyclopedia).
(Banking Diploma Examination, June 2015, MFS).
