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withdraw money from their accounts. They can also be used to obtain cash and other information when used through automated teller machines (ATMs).

Cheque guarantee cards were first introduced because of retailers' reluctance to accept personal cheques. Typically, when paying by cheque further identification of the payer is provided by presentation of the cheque guarantee card and details from the card will be written on the cheque in order to guarantee payment. Most of these types of cards also act as debit cards.

Travel and entertainment cards (or charge cards) provide payment facilities and allow repayment to be deferred until the end of the month, but they do not provide interest-free credit. Unlike credit cards, all bills have to be repaid at the end of the month and no rollover is allowed. Typically, unpaid balances are charged at a higher interest rate than for credit cards, to discourage late payment. The most widely used charge cards include American Express and Diners Club.

Smart, memory or chip cards are cards that incorporate a microprocessor or a memory chip. The microprocessor cards can add, delete and otherwise manipulate information on the card and can undertake a variety of functions and store a range of information. Memory-chip cards (for example, pre-paid phone cards) can only undertake a pre-defined operation. There are over 20 million smart cards issued by banks in Europe that perform various functions although the main characteristic of the microprocessor technology is that it provides extra security features for card payment, although various schemes offer store value cards for small transactions.

Note that the importance of different types of cashless payments varies from country to country. For example in the European Union cheques are more widely used in Britain and France compared with elsewhere. (Also remember that businesses as well as consumers use these payment services.). Cheque guarantee cards are widely used in the UK and Switzerland and notes that smart cards (listed as cards with e-money functions) are relatively commonplace in Belgium, the Netherlands, Singapore and Switzerland.

2.4.2Deposit and lending services

In addition to payment services personal banking includes the offer of a broad range of deposit and lending services. These are summarised as follows:

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Current or checking accounts that typically pay no (or low) rates of interest and are used mainly for payments. Banks offer a broad range of current accounts tailored to various market segments and with various other services attached.

Time or savings deposits that involve depositing funds for a set period of time for a pre-determined or variable rate of interest. Banks offer an extensive range of such savings products, from standard fixed term and fixed deposit rate to variable term with variable rates. All banks offer deposit facilities that have features that are a combination of time and current accounts whereby customers can withdraw their funds instantly or at short notice. Typically deposits that can be withdrawn on demand pay lower rates than those deposited in the bank for a set period.

Consumer loans and mortgages are commonly offered by banks to their retail customers. Consumer loans can be unsecured (that is no collateral is requested; such loans are usually up to a certain amount of money and for a short to medium time period: for example, in the UK unsecured loans are up to £25,000 and repaid over five years) or secured on property (typically from £20,000 to £100,000 and repaid over ten years in the UK) and interest rates are mainly variable (but can be fixed). In addition bank's of course offer an extensive array of mortgage products for the purchase of property. The main types of UK mortgages (that typically extend for 20-25 years) include: variable rate (interest payments vary relative to a benchmark rate such as the bank's standard lending rate or those determined by outside bodies such as the Bank of England's base rate or LIBOR); fixed rate (rates \ are fixed for a set period, usually 2-5 years, and then revert to variable rate); capped (rates vary but a cap is placed on the maximum rate paid over a specified period); discount mortgages (where rates vary but are discounted at a few percentages below a benchmark rate over a period - e.g., 1 per cent discount to the base rate over the first two years); and cashback mortgages (where those taking out the mortgage receive a single lump sum or cashback generally based on the value of the loan). Mortgages can also be obtained in foreign currency, for the purchase of overseas properties, and also for 'buy-to-let' property.

In addition to deposit and lending services many banks have diversified into a broader range of areas offering a 'one-stop' facility to meet all retail customer financial needs. This includes the offer of an extensive array of investment products, pensions, insurance and other services.

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2.4.З Investment, pensions and insurance services

Investment products offered to retail customers include various securitiesrelate products including mutual funds (known as unit trusts in the UK), investments in company stocks and various other securities-related products (such as savings bonds). In reality there is a strong overlap between savings and investments products and many banks advertise these services together.

Pensions and insurance services are nowadays widely offered by many banks. Pension services provide retirement income (in the form of annuities) to those contributing to pension plans. Contributions paid into the pension fund are invested in long-term investments with the individual making contributions receiving a pension on retirement. The pension services offered via banks are known as private pensions to distinguish them from public pensions offered by the state. Usually there are tax advantages associated with pensions contributions as most governments wish to encourage individuals to save for their retirement. Insurance products protect individuals (policyholders) from various adverse events. Policyholders pay regular premiums and the insurer promises compensation if the specific insured event occurs. There are two main types оf insurance - life insurance and general (or property and casualty) insurance. The latter is insurance that does not involve death as the main risk. It includes home, travel, medical, auto and various other types of insurance. Banks offer both life and nonlife insurance products with the latter mainly being travel, property, mortgage repayment and other types of protection. In the UK, there has also been substantial growth in income protection insurance (insurance that replaces earnings if individuals are unable to work) and critical illness insurance (that covers medical costs and/or income).

Other services offered to retail customers include financial advisory services, safekeeping facilities and foreign exchange services.

2.4.4 E-banking

A number of innovative financial products have been developed in recent years, taking advantage of rapid technological progress and financial market development. Transactions made using these innovative products are accounting for an increasing proportion of the volume and value of domestic and cross-border retail payments. Mainly, we can refer to two categories of payment products:

E-money includes reloadable electronic money instruments in the form of stored value cards and electronic tokens stored in computer memory.

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Remote payments are payment instruments that allow (remote) access to a customer's account.

E-banking is now regarded as part of an overall distribution strategy particularly in retail banking, and it is offered by all major banks. Overall, banks' involvement in remote banking can be summarised as follows:

•Major institutions offer 'traditional' remote banking services (ATMs and telephone banking) and have started to offer a growing number of on-line PC banking and internet banking services.

•Some small-sized specialised banks operate without branches exclusively via remote banking channels. In most cases these banks are subsidiaries of existing banking groups (for example in the UK the virtual bank 'First Direct' is part of the HSBC group and the bank 'Smile' is part of the Co-operative Bank).

•Innovative new institutions are setting up business on the internet, also cover ing traditional banking activities. This activity is often promoted by large to mediumsized banks (see Box 2.2).

The intensity with which banks have promoted various remote banking 'models' differs significantly from one country to another. Table 2.6 shows the type of banking services currently offered via traditional branches and remote channels. However, it is necessary to keep in mind that the specific services may vary considerably from one country to another.

Even though electronic banking, in the form of ATMs and telephone banking, is not a new phenomenon, it is only with the increased usage of the internet that the number of banks offering services and customers using online banking services has increased substantially. However, as highlighted in Table 2.6, online banking is still predominantly used for rather simple and standardised retail products and services. Although most internet strategies have been developed especially for the retail segment, some banks have also developed services to target the corporate segment as well. Box 2.2 illustrates an example of online banking and financial services for large companies.

As with the foreign exchange market, it seems likely that multinational companies (MNCs) and other international firms will make increasing use of such internet services to manage their finances. Finally, despite the growing trend towards more and more banking and financial services being offered online, some researchers have cast doubts on the overall profitability of internet banking (see Box 2.3).