Virtual money ATM cards are also beneficial because they do not require a name on the card. They use a PIN code for security. They can be easily replaced if they are lost or stolen. One of the greatest benefits of these cards is that they do not require a bank account and can be used to access any currency from any location. Finally the card is beneficial because it can be used anywhere in the world, is reload able and accepted by merchants around the world (Burton, 2004). Virtual money ATM card carry many risks. Any deficiencies in systems can cause significant operational risks.
Security is a paramount issue because external and internal threats to bank systems and products can cause serious disruption or damage. Flaws in electronic banking and money systems can also cause serious operational risks. Customer misuse is another form of operational risk associated with Virtual money ATM cards. Accounting and risk management systems of banks are vulnerable to security breaches and risks. Information which is communicated between people or organizations in the case of Virtual money ATM cards can also carry security risks.
The huge distance of access points and expanded computer capabilities is a formidable task for banks to m monitor. Any security breach in the case of virtual money ATM cards can create liabilities for the bank. Unauthorized access would result in heavy losses to customers. Flaws in online banking systems are also another form of risk for banks that deal in Virtual money ATM cards. Any interruption could result from the incompatibility of systems with the users. Systems can become obsolete due to the rapid change in technology.
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Staff may not be aware of operating any new technology or system which might cause operational problems (Burton, 2004). Another risk of Virtual money ATM cards is customer misuse in which a bank might not inform the customer about security precautions. Customers could for instance repudiate transactions which were previously authorized. Personal information could be stolen in a non secure electronic channel. This would allow potential criminals to track and steal information thus causing losses for the bank and customer.
Virtual money ATM cards might generate a negative public opinion if there is a negative public opinion. This may result from loss of funding or customers. External and internal attacks on a bank may result in a loss of reputation for the financial institution. Mistakes and fraud can expose a bank to reputation risk. There are also legal risks which may occur due to violations or non conformance of local laws. The rights and obligations of parties are uncertain in many countries.
Virtual money ATM card schemes may be attractive for criminals if the systems provide liberal balance and transaction limits (Bloomfield, 2005). Conventional banks face many risks. They may also arise from Virtual money ATM cards. However their consequences may be different for banks and customers. For instance banks that are engaged in electronic banking may provide credit for customers beyond traditional geographical locations. The lack of defined procedures to determine the credit worthiness of borrowers could create credit risk for banks.
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