High street (or retail) banks are usually regarded as providers of a range of banking services to individuals and businesses. This includes operation of cheque or current account services, along with a range of savings and loan account services. Banks are normally subject to strict regulation by government, including authorisation to operate and regular monitoring and supervision to minimise the risk of bank failure or inappropriate conduct. In recent years, the distinction between the services offered by high street banks and other banking institutions has become less marked. However, it is still useful to consider the services traditionally offered by retails banks and other banking institutions.
The range of services provided by banks normally includes the following:
Most banks now offer personal and business bank accounts that allow telephone and online banking, with some bank accounts based solely upon telephone and internet activity, rather than using the traditional bank branch network to transact business. Such accounts enable the account holder to make regular or ad hoc payments to others provided that they have the bank account details of the intended recipient. Similarly, third parties can make direct payments into another bank account without the need to write and post cheques or visit a bank branch.
Additionally, businesses are now more willing to disclose their bank account details to customers so that they can make direct payment into a nominated bank account following the supply of goods and services. Some businesses also have the facility to integrate the bank account with their accounting systems so that accounting records are automatically updated to reflect payments received from customers. Note that the ACCA FA1 syllabus and exam assumes that the bank account is not integrated with accounting systems.
Note that telephone and internet banking is simply another way for account holders to initiate or authorise a range of payments (such as direct payments and standing orders) or to access bank services (such as ordering foreign currency).
Confidentiality and security of data is clearly an important issue for the operation of such accounts. Typically, controls focus upon ensuring that only the account holder can gain access to the bank account details, including the ability to review transactions and statements and entering into new transactions. Although the detail of which controls are applied and operated by an individual bank may differ, they normally have common features.
For example, there may be a multiple-stage access process applying controls such as passwords, pin numbers, personal security questions and account history questions.
To minimise the risk of an account holder making an incorrect payment, there are usually standard template documents to complete to provide the account details of the intended recipient. As the documents are completed, there will normally be a logic checks applied by the bank to ensure that the information appears to be complete. such as checking that the six-digit bank sort code has been provided and falls within accepted number ranges. The account holder is usually asked to check and confirm that the details submitted are correct and complete before the payment request is accepted by the bank. Finally, the bank may also contact the account holder, perhaps using their mobile phone, to send an automated voice or text message stating that a new payment authorisation has been set up and to contact the bank immediately if they have not initiated this account activity.
In addition to high street banks, there are other banking institutions involved in banking activities to a greater or lesser extent. These institutions often focus upon a specialised range of banking activity, rather than providing the broad range of services offered by high street banks. The range of services provided by banking institutions may include the following: