Internet Banking also known as Online Banking, e-Banking, or Virtual Banking, is an electronic payment system that enables customers of a Financial Institution to conduct a range of financial transactions through the Bank’s / Financial Institution’s website. The Internet Banking system typically connects to or is part of the Core Banking System(CBS) operated by a Bank and is in contrast to Branch Banking i.e., the traditional way customers access banking services.
With the proliferation of internet banking it is / will be difficult – even for those who are old enough – to remember a time when offline banking was all there was. Sending and receiving paper cheques, making trips to the Bank to make a deposit or a withdrawal, working around the Bank’s hours of operation in order to check or confirm your balance, and on and on it went. But the things are changing very fast and number of Internet Banking users has been growing rapidly.
It is not very far when Internet Banking will become so main stream that the thought of ever having to go back to the offline days will become wince-inducing, because of the convenience and ease the Internet Banking provides.
How it Works: To access a Financial Institution’s online banking facility, a customer with internet access would need to register with the institution for the service, and set up a Password and other credentials for customer verification. The credentials for online banking is normally not the same as for telephone or mobile banking. Financial Institutions now routinely allocate customers’ numbers (IDs), whether or not customers have indicated an intention to access their online banking facility. Customers’ IDs are normally not the same as account numbers, because a number of customer accounts can be linked to the one customer ID. The customer ID can be linked to any account that the customer controls, such as Current, Savings, Loan, Credit Card and other accounts.
The customer visits the Financial Institution’s secure website, and enters the online banking facility using the customer ID, Password and other credentials previously set up. The types of financial transactions which a customer may transact through online banking usually includes obtaining account balances and list of latest transactions, electronic bill payments, and funds transfers between a customer’s or another’s accounts. Most Financial Institutions also enable a customer to download copies of statements, which can be printed at the customer’s premises. Some Financial Institutions also enable customers to download transactions directly into the customer’s accounting software. The facility may also enable the customer to order Cheque Books, Statements, Report loss of Debit / Credit Cards, Stop payment on a cheque, Advise change of address, and do other routine transactions.
It is no denying the fact that Internet Banking is a hugely advantageous tool that fits handsomely into the fast-paced world in which we live. The convenience is undeniable. But while the pros of Internet Banking certainly outweigh the cons, there are a few drawbacks. Let’s look at both the advantages and the disadvantages of Internet Banking.
Advantages of Internet Banking
Internet Banking has several advantages over traditional one which makes operating an account simple and convenient. It allows you to conduct various transactions using the bank’s website and offers several advantages. Some of the advantages of Internet Banking are:
- Online account is simple to open and easy to operate.
- It is quite convenientas you can easily pay your bills, can transfer funds between accounts, etc. Now you do not have to stand in a queue to pay off your bills; also you do not have to keep receipts of all the bills as you can now easily view your transactions.
- It is available all the time, i.e. 24×7. You can perform your tasks from anywhere and at any time; even in night when the bank is closed or on holidays. The only thing you need to have is an active internet connection.
- It is fast and efficient. Funds get transferred from one account to the other very fast. You can also manage several accounts easily through internet banking.
- Through Internet banking, you can keep an eye on your transactions and account balance all the time. This facility also keeps your account safe. This means that by the ease of monitoring your account at any time, you can get to know about any fraudulent activity or threat to your account before it can pose your account to severe damage.
- It also acts as a great medium for the banks to endorse their products and services. The services include loans, investment options, and many others.
Disadvantages of Internet Banking
Admittedly there are many advantages of Internet Banking, but nothing comes without disadvantages and everything has its pros and cons; same is true with Internet Banking. It also has some disadvantages which must be taken care of. The disadvantages of online banking include the following:
- Securityis arguably the most significant drawback to online banking. The new millennium is the age of the computer hacker and identity theft is one of the most widespread social diseases around the world. As such, despite every Financial Institution’s best effort to keep its website secure, unfortunately nothing is fool proof and there is always at least a slight risk that someone somewhere will hack into your account and gain access to sensitive information.
- Password security is a must. After receiving your password, do change it and memorise it otherwise your account may be misused by someone who gets to know your password inadvertently.
- You cannot have access to online banking if you don’t have an internet connection; thus without the availability of internet access, it may not be useful. Similarly, you cannot use it if the Bank’s server is down.
- Even though online banking is far more convenient than its traditional counterpart, there are just certain aspects of banking that need to be done in person rather than from behind a computer or cell phone monitor. Depositing cash, making certain types of international transactions, and other service issues can be challenging to address via email or even real-time customer service chat capability. With some service issues, the customers have to make a trip to the bank and get their needs met face-to-face.
- Another issue is that sometimes it becomes difficult to note whether your transaction was successful or not. It may be due to the loss of net connectivity in between, or due to a slow connection, or the bank’s server is down.
I joined SBI as a Probationary Officer in 1981. Since then, I have worked in various capacities as Branch Manager, Regional Manager and Deputy General Manager at different places. My specialised areas are Credit and General Banking.
I also was Chairperson of Reserve Bank of India Working Group on Evaluation of Feasibility of Aadhaar based Biometric Authentication as Additional factor of Authentication for card present transactions and related issues.
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