Internet Banking (E-Banking) - Essay Example

? Internet Banking Internet Banking This paper will analyze the concept of E-banking. More specifically, it will try to provide answers to the following questions in relation to E-banking. What is E-banking? What are the advantages and Disadvantages of E-banking? How are people accepting and using E–banking? How are banks benefiting from E-banking? , and lastly, what is the future of-banking? Thus, this paper will review the ideas of various sources to elaborate on the subjects of the topics of study. Definition of Internet Banking Internet banking is another concept of web based banking. The deployment of whole sale or retail banking services can also be referred to as E-banking. It involves individuals, and corporate customers. E-banking involves payments and settlements, bank transfer, household lending, documentary collection and credits and card businesses. E-banking services and products are accessed by customers who own accounts with E-banks. Customers make a request for information and conduct most of their retail banking transactions through computer, television and cell phones (Sarlak and Asghar, 2010). E-banking also describes the electronic connection between customers and bank so as to help in preparing, managing and controlling financial transactions. From a broader perspective, electronic banking is the provision of banking services through other means rather than the physical bank branches. E-Banking provides financial services to customers through various means. These means include home banking, telephone banking, Internet banking, mobile banking and Automated teller machines (Sarlak and Asghar, 2010). The driving force behind the adoption of E-banking by banks is to provide high interest rates and reduce service charges on the customers’ saving accounts. E-banks help to eliminate costs associated with virtual banks branches. This increases competitive advantage of e-banking with other banks (Sarlak and Asghar, 2010). Advantages and of E-banking Internet banking has numerous advantages as discussed below. More efficient bank rates The absence and reduction of virtual branches to serve customers has reduced overhead costs. This allows banks to pay higher rates of interest on customer savings and consequently, reduces charges on the loan rate on the mortgage and loans. Some banks have resorted to offering a high yield certificate of deposit (CDs), high yielding checking accounts and even non-penalty certificate of deposit (CDs) for making an early withdrawal. Additionally, minimum deposits are required to open bank accounts. The bank accounts do not carry any minimum balance or service charges (Koskosas, 2012). Customer Convenience E-banks operate full time at various locations provided internet connections are available. Electronic banks operate 24 hours in a day, 365 days a year if internet services are available. Mobile phones are used by customers to access services. The real-time accounts information and balances are readily available through the internet. Banking transaction services are made easier, faster, and more efficient. The changing of mailing address by a customer on his or her account facilitates the updating and maintaining of a direct account. Through account update, the request of market interest rates and ordering of additional checks is made easy (Koskosas, 2012). Services E-banks have more websites that provide more feature than the website of physical banks. These features are forecasting and budgeting tools, financial planning capabilities, loan calculators, investment analysis tools and equity trading platforms- banks website also offer online tax forms, tax preparation and free online bill payments (Koskosas, 2012). Mobility Internet banking services are mobile. This means one can access them even when traveling. The designing of new applications, smart phones and other mobile accessories has improved mobility of E-banking services (Koskosas, 2012). Transfers Money can easily be transferred from the physical banks account in various branches automatically through electronic money transfer. Most E-banks provide unlimited transfer of funds at no charges, especially transactions targeting other financial institutions. E-banks accept withdrawals and direct deposits authorized by customers such as automatic bill payment and pay roll deposits (Koskosas, 2012). Easiness in usage The setting up E-banks is easy as it only requires information from virtual bank account branches. Most E-banks provide an option to customers concerning the inputting of data online or the filling of forms and mailing them to the e-banks (Koskosas, 2012). Environmental friendliness Electronic banking is user friendly and also environmental friendly. Internet banking reduces pollution and vehicle traffics of people going to banks. E-banking requires no paper work. It also eliminates the need for office equipments and buildings (Koskosas, 2012). Disadvantages of E-banking Despite of all the advantage discussed, Internet banking has numerous disadvantages that customers need to be aware of before adopting its services. Some of the common challenges associated with e-banking are discussed below. Relationship between a Customer and the bank Most virtual bank branches have personalized relationships with their respective customers. These relationships are crucial when a customer requires accessing a loan or mortgage that is not offered to the public. If a customer wants to review their account or revise a non-deserving fee, the customer can be assisted easily. A customer by having a business account can easily get a loan to expand his or her business and financial advice concerning the establishing of a new business enterprise. This is only possible if a customer has personalized relationships with the virtual banks. All these benefits are absent in E-banking (Koskosas, 2012). Transaction issues International transactions are difficult or impossible with Internet banking. Also, face to face encounters with bank officials are needed to complete complex funds transactions and address problems that are complicated. Incase of problems with customer accounts, virtual banks can convine meetings and resolve such issues. However, this lacks in E-banking (Koskosas, 2012). Services issues Some of the E-banks do not provide comprehensive financial services such as brokerage and insurance that are offered by virtual banks. Virtual banks at times provide specialized services to their loyal customers such as investment advice and preferred rate at no extra charges. The internet banking lacks routine services such as bank signature guarantee and notarization, which are essential. These services are a requirement for most legal and financial transactions (Kondabagil & Kondabagil, 2007). Security Issues E-banking is regulated by regulations and laws. Customers account information is protected by Sophiscated encryption software. However, no system is perfect. Customers’ accounts are at times hacked, attacked by malware, phished by unauthorized individuals. As a result, most banks scan copies of cleared cheques and avail the online. This helps to avoid and regulate cheque fraud by enabling the verification that all cheques are signed by the customer. It also ensures that money in the account is not changed. Any discrepancies in customers’ accounts can be discovered timely and investigate immediately (Kondabagil & Kondabagil, 2007). How are people accepting E-banking? According to Mughal et al. (2012), the use of Internet by consumers is influenced by customers’ attitudes towards the use of an effective information system. The perceived easiness in usage and usefulness are the main contributors towards the use of new technology such as E-banking. The technology acceptance model can be adopted to explain the acceptance of e-banking. In the present days, individuals want easiness and comfort. Internet banking is viewed as easy to use. This makes it is acceptable by many users globally. The two basic aspects of information systems are acceptance, perceived ease for the user and perceived usefulness. How do people use internet banking? Mobile devices are used to access e-banking services by people. This helps them to make payments, budget, deposit money on e-banks and even prepare individual budgets. A study conducted on online banking showed that people use cello phones to make financial decisions and access financial services. The use of online banking has a direct relationship with education level of individuals. Individuals with higher levels of education prefer to use online banking (Kondabagil & Kondabagil, 2007). How is E-banking helping the banks? According to Pathak (2007), e-banking has replaced queue (virtual banking) banking with click banking (e-banking). E-banking as a form of technology is helping banks to survive and thrive. Internet banking has also made banking business be efficient and expand to international level. E-banking has also facilitated the fulfilling of customers’ demands. E-banking has enabled banks to provide efficient services at reduced charges and expand globally. It has made banking more customized and personalized. It has enabled banks to provide general information to customer through banks websites and electronic information transfer via passwords. Banks also make use of electronic transactional system to allow a two way transaction between customers and online banks. The electronic payments are carrying out payments electronically such as e-cheque, electronic funds transfer and card based payments. The emergence of internet banking has increased the competitiveness of E-banks with virtual banks. What is the future of E-banking? The success of e-banking is determined by the ability of e-banks to secure their financial data. Banks also are required to protect the data of the customers’ account from potential security risks. To achieve this, e-banks need to be flexible and responsive to Information Survey Group (ITSG) processes. These processes recognize, address and manage the risks of e-banking in a cautious manner. This depends on an e-bank service challenges. E-banks also need to be customized. This call for a proper framework to govern Information Security (IS) in an e- banking system. However, the Information Security (IS) has shortcomings and benefits. The implementation of ITSG approach will depend on financial strengths, culture, size, core competence and general strategy the E-banks adopts in line with its business objectives (Sarlak and Asghar, 2010). References Koskosas, L. (2012). The Pros and Cons of Internet Banking: A Short Review. Retrieved From: http:/ beman.ase.ro/no11/4.pdf Kondabagil, J., & Kondabagil, J. (2007). Risk management in electronic banking: Concepts and best practices. Singapore: John Wiley & Sons Asia. Mughal, M. M. et. al. (2012). Accepting of E-banking among Banking Customers of Pakistan. Retrieved From: www.ifrnd.org/IMBR/Vol%204/4(6)%20Jun%202012/4.pdf Pathak, H. (2007). The Indian Financial System: Markets, Institutions And Services, Edition 2. India: Pearson Education. Sarlak, M. A. and Asghar, A. H. (2010). E-Banking and Emerging Multidisciplinary Processes: Social, Economical and Organizational Models. New York: Taylor & Francis. Read More