Telephone banking is a service provided by a bank or other financial institution, that enables customers to perform over the telephone a range of financial transactions which do not involve cash or Financial instruments (such as cheques), without the need to visit a bank branch or ATM. Telephone banking times are usually longer than branch opening times, and some financial institutions offer the service on a 24-hour basis. However, some banks impose restrictions on which accounts may be accessed through telephone banking and usually limit the amounts that can be transacted.
The types of financial transactions which customers may transact through telephone banking include obtaining account balances and list of latest transactions, electronic bill payments, and funds transfers between a customer's or to another's accounts.
From the bank's point of view, telephone banking reduces the cost of handling transactions by reducing visits by customers to a bank branch for non-cash withdrawals and deposit transactions. However, the use of telephone banking services has been declining in favor of internet banking since internet banking became available in the early 2000s, and further eroded with the advent of mobile banking in the 2010s.
In 1972, Egyptian engineer Mohamed M. Atalla, the founder of Atalla Corporation, filed U.S. Patent 3,938,091 for a remote personal verification system which utilized encryption techniques to assure telephone link security while entering personal ID information, which would be transmitted as encrypted data over telecommunications networks to a remote location for verification. This was a precursor to telephone banking. The patent mentioned the system's application for the use of a credit card over a telephone call.
Telephone banking became commercially available in the 1980s, first introduced by Girobank in the United Kingdom, which establishing a dedicated telephone banking service in 1984. Telephone banking saw growth during the 1980s and early 1990s, and was heavily used by the first generation of direct banks. However, the development online banking in the early 2000s started a long term decline in the use of telephone banking in favor of internet banking. The advent of mobile banking further eroded the use of telephone banking in the 2010s.
To use a financial institution's telephone banking facility, a customer must first register with the institution for the service. They would be assigned a customer number (which is not the same as the account number) and they may be given or set up their own password (under various names) for customer verification.
Customers would call the special phone number set up by the bank and would authenticate their identity through the customer number and a numeric or verbal password or through security questions asked by a live representative. The service can be provided using an automated system, using voice recognition capability, DTMF technology or by live customer service representatives.
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- U.S. Patent 3,938,091
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