Describe the requirements of traditional financial transaction systems.

Subject E-Commerce
NU Year Set: 3.(b) Marks: 5 Year: 2017

The basic metric of productivity in check processing is speed.  Every minute that the average check is in the settlement process is a minute of float lost by the depository bank.    Considering the gigantic volume of checks in the settlement process, depository bank have a desperate need for a speedy settlement.   On the other side of the equation, the depositor and the payor bank have a great need for accuracy of checks being settled.  The depository bank and settlement processor will generally be the ultimate losers if a check is incorrectly processed or is lost, stolen, or damaged.  On one hand, millions of checks must be processed at an incredibly rapid rate; on the other, the players open themselves up to almost unlimited liability if any of those checks are mis-processed.

 

Productivity Inputs

 

Number and dollar value of checks to be settled categorized by

-          Settlement Chain participant

-          Time of day/ settlement batch

-          Settlement chain process

-          Transportation and settlement function used

Variable Costs per check including

-          Labor cost

-          Individual transportation cost

-          Individual processing costs

Fixed System Costs

-          Overhead labor including management and administration

-          Overhead equipment, facilities, and transportation costs

-          Other overhead such as legal costs

 

Productivity Outputs

Number and dollar value of checks successfully processed categorized by:

-          Settlement Chain participant

-          Time of day/ settlement batch

-          Settlement chain process

-          Transportation and settlement function used

Average Time of processing checks broken into

-          Time from entrance into the Federal Reserve or Private Clearinghouse settlement function to the successful completion of the transaction

Time to process check categorized by:

-          Time of Day/ Check batch

-          Originator and Destination Banks

-          Settlement method used

-          Clearinghouse Facility used

 

Quality Inputs

Number of checks entering the settlement system

 

Quality Outputs

Number and dollar value of checks successfully cleared

Number and dollar value of misrouted checks

Number and dollar value of delayed checks

Number and dollar value of lost checks

Number and dollar value of damaged checks

Float Cost of checks in the settlement system

 

 

A financial institution is an establishment that conducts financial transactions such as investments, loans and deposits. Almost everyone deals with financial institutions on a regular basis. Everything from depositing money to taking out loans and exchanging currencies must be done through financial institutions. Here is an overview of some of the major categories of financial institutions and their roles in the financial system.


The United States Federal Reserve System was created by the Federal Reserve Act of 1913 to provide the nation with a safer, more flexible and stable monetary and financial system – in essence, it acts as the central bank for the United States. It is responsible for:

·         Formulating and executing monetary policy
·         Supervising and regulating depository institutions
·         Providing an elastic currency
·         Assisting the federal government’s financing operations
·         Operating the nation's payments systems
·         Protecting consumers' rights in their dealings with banks and
·         Promoting community development and reinvestment.


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