essay about internet banking

Essay on Internet Banking

In this essay we will discuss about Internet Banking. After reading this essay you will learn about: 1. Meaning of Internet Banking 2. Objectives and Drivers of Internet Banking 3. Trends in India 4. Facilities Available 5. Emerging Challenges 6. Main Concerns 7. Strategies to be Adopted by Indian Banks.

Essay on the Strategies to be Adopted by Indian Banks for Introducing Internet Banking

Essay # 1. Meaning of Internet Banking :

With the growth of internet and wireless communication technologies, telecommunications etc. in recent years, the structure and nature of banking and financial services have gone for a sea change. Internet banking or e-banking is the latest in this series of technological wonders in the recent past which involves use of internet for delivery of banking products and services.

Even the Morgan Stanley Dean Witter Internet Research emphasised that web is more important for retail financial services than that for many other industries. Internet banking or e-banking is changing the banking and its structure and is having major effects on banking relationships.

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Banking activity is now no longer confined to the branches where a customer has to approach the branch in person, for withdrawing cash or deposit a cheque or request for a statement of Accounts.

In accessing a true internet banking, any inquiry or transaction is processed online without any reference to the branch (anywhere banking) at any time. Thus providing Internet banking is gradually becoming a “need to have” than a “nice to have” service.

The net banking is, therefore, more of a norm rather than an exception in many developed countries because it is the cheapest way of providing banking services. Under this system, online banking is possible where every bank customer is provided with a personal identification number (PIN) for making online transactions with the bank through internet connections.

Internet banking or e-banking falls into four main categories, from Level 1—minimum functionality sites that offer only access to deposit account data—to level 4 sites highly sophisticated offering, enabling integrated sales of additional products and access to other financial services—such as investment and insurance.

In other works, a successful internet banking solution offers:

1. Exceptional rates on savings, CDs and IRAs.

2. Checking Account with no monthly fee, free bill payment and rebates on ATM surcharges.

3. Credit card facilities with low rates.

4. Easy online applications for all accounts including personal loans and mortgages.

5. 24-hour account access.

6. Quality customary service with personal attention.

Essay # 2. Objectives and Drivers of Internet Banking :

The internet has developed level playing field and thereby afforded open access to customers in the global market-place. Internet banking is a cost-effective delivery channel for the modernized financial institutions.

In this system, consumers are embracing many benefits of e-banking. To have access to one’s accounts at any time and from any location through world wide web (www) is a convenient practice, which was unknown a short time ago.

Thus, a bank’s internet presence transforms from ‘brochure/ware’ status to ‘internet banking’ status once the bank goes through a technology integration effort so as to enable its customer to access information about his or her specific account details.

Following are the six primary objectives or drivers of internet banking:

1. To improve customer access.

2. To facilitate the offering of more services.

3. To increase customer loyalty.

4. To attract large number of customers.

5. To provide cost-effective services offered by competitors.

6. To reduce customer attrition.

Keeping objectives in mind, the internet banking facilities has been progressing at a rapid pace throughout the world.

Essay # 3. Trends of Internet Banking in India :

In India, initially a beginning was made in internet banking only in some big cities which was just in rudimentary stage. After getting initial success, the internet banking facility is gradually being expanded in all cities and towns to make the system popular.

The banking industry in India is also facing unprecedented competition from non-traditional banking institutions which are now a day’s offering banking and financial services over the Internet. The deregulation of the banking industry along with emergence of new technologies are enabling the new competitors in the banking sector to enter the financial services market quite efficiently and quickly.

Core or Anywhere Banking:

In order to support internet banking facilities another new concept of banking i.e., core or anywhere banking is introduced. Initially introduced by the foreign banks, the same concept in new increasingly adopted by public sector banks and also the private sector banks.

Under this concept of banking, bank customers who have an account with any select branch can easily operate his account from different designated branches on the bank spread throughout the country.

Under this system, a customer can avail cash withdrawal, cash deposit, transfer of funds, inter-city and intra-city transactions, collection of draft and cheques etc. facilities from any of such designated branches conveniently irrespective of its locations.

Core banking concept has improved the standard of the banking services with the help of modern technology. In present times, most of the public sector banks have already adopted this concept and started extending these facilities to its customers gradually by including more and more of its important branches under this category.

Progress of Internet Banking:

In India, internet banking is gradually being developed throughout the country.

As per the recent study it is observed that:

(a) A number of banks have already adopted internet banking and are offering varied kind of services through it,

(b) These internet sites generally offer only most of the basic services. Only 50 per cent are known as ‘entry level’ sites offering little more than company information’s and basic marketing materials and 10 per cent are offering ‘advanced transactions’ such as online funds transfer, transactions and cash management services etc.; and

(c) Most of the foreign and private banks in India are much advanced in terms of the number of sites and their level of development in terms of rendering advanced technology linked services to its customers. Recently, an authority of ICICI Bank observed, “Our Internet banking base has been growing at an exponential pace over the last few years. Currently around 78 per cent of the bank’s customer base is registered for Internet banking.”

Security Precautions :

In order to make their bank account safe, one should follow certain security precautions. Customer should never share personal information like PIN number, passwords etc. with anyone, including employees of the bank. It is important that documents that contain confidential information are safeguarded. PIN or password should be changed immediately and memorized before destroying the mailers.

Customers are also advised not to provide sensitive account-related information over unsecured e-mails or over the phone. He must take simple precautions like changing the ATM, PIN and online login and transaction passwords on a regular basis. It is also important to ensure that the logged in session is properly signed out.

Essay # 4. Facilities Available Under Internet Banking in India:

Following facilities are made available for customers under internet banking in India:

(i) Bill Payment Service:

Bill payment service is a utility service of internet banking. Accordingly, each bank has tie-ups with various utility companies, service providers, insurance companies across the country. Such tie-ups can facilitate online payment of bills of electricity, telephone, mobile phone, credit card, insurance premium bills etc.

In order to make online payment of bills, a simple one-time registration for each bills has to be made and a standing instruction has to be made to make online payment of recurring bills automatically. Most interestingly, the bank usually does not charge customers for such online bill payment.

(ii) Fund Transfer:

Internet banking has made provision for transfer of any amount of fund from one account to another of the same or any other bank. Accordingly, customers can send money anywhere in India. Once a customer logs in his account, he needs to mention the payee’s account number, his bank and the branch. The transfer will take place in a day or so, whereas in a traditional method it takes about three to four working days. ICICI Bank recently reported that its online bill payment and fund transfer facility have been most popular online services.

(iii) Credit Card Customers:

Internet banking provides the facility of credit card to its customers. With internet banking, customers can not only pay their credit card bills online but also gets a loan on their cards. Not just this, they can also apply for an additional card, request a credit line increase and in case the card is lost, one can report lost card online.

(iv) Railway Pass and Online Booking:

Through Internet banking facility to issue Railway pass is also available. Indian Railways has tied up with ICICI bank for this purpose and one can now make railway pass for local trains online. The pass can be delivered to the customer at his doorstep. Initially, the facility was limited to Mumbai, Thane, Nashik, Surat and Pune. The bank would just charge Rs 10 + 12.24 per cent of service tax. Moreover, online booking of e-tickets of Railways, Airlines etc. can also be made with some arrangement with banks through Internet banking.

(v) Investing through Internet Banking:

Through Internet banking, opening a fixed deposit account has become easier. A customer can now open an FD account online through funds transfer. Online banking can also be a great friend for lazy investors. Moreover, investors with interlinked de-mat account and bank account can easily trade in the stock market and the amount will be automatically debited from their respective bank accounts and the shares will be credited in their de-mat account.

Besides, some banks provide its customers the facility to purchase mutual funds directly from the online banking system. Nowadays, most leading banks offer both online banking and de-mat account facilities. However, if a customer is having his de-mat account with independent share brokers, then he needs to sign a special form, which will link his two accounts.

(vi) Recharging Prepaid Phone:

Through Internet banking, recharging of prepaid phone has also become possible. It is no longer needed to rush to the vendor to recharge prepaid phones as and when talk time runs out. Here the customer just tops-up his prepaid mobile cards by logging in to Internet banking. By just selecting operator’s name, entering mobile number and the amount of recharge, the prepared phone of the customer is again back in action within few minutes.

(vii) Shopping at Fingertips:

Internet banking provides facility of shopping at fingertips. Leading banks have tied-up with various shopping websites. With a range of all kind of products. One can shop online and the payment is also made conveniently through his account. One can also buy railway and air tickets through Internet banking.

Essay # 5. Emerging Challenges of Internet Banking in India :

In India, a large sophisticated and highly competitive Internet Banking Market is gradually being developed with market pressure and is subjected to the following emerging challenges:

1. Demand side pressure due to increasing access to low cost electronic services.

2. Emergence of open standards for banking functionally.

3. Growing customer awareness and need for transparency.

4. Global players in the fray.

5. Close integration of bank services with web based E-commerce or even disintermediation of service through direct electronic payments (E-cash).

6. More convenient international transactions due to the fact that the Internet along the general deregulation trends, eliminate geographic boundaries.

7. Move from one stop shopping to ‘Banking Portfolio’, i.e., unbundled product purchases.

The Internet and its underlying technologies have been changing and transforming not just banking but all aspects of finance and commerce. It usually represents much more than a new distribution opportunity. Internet banking will also enable nimble players to leverage their traditional brick and mortar presence for improving customer satisfaction and gain share.

Essay # 6. Main Concerns in Internet Banking :

Internet banking in India has its areas of concern. In the mean time, a number of cases related to fraud and cheating of banks and customers by unscrupulous persons have already been lodged in India with this type of banking facilities. Irrespective of that attempts have been made by the RBI and the banking authorities for promoting safety and soundness of online and e-banking facilities in the country by issuing necessary guidelines.

In a recent survey conducted by the Online Banking Association, member institutions rated security as the most important issue of online banking. Thus there is a dual requirement to protect customers privacy and product against fraud.

Banking Securely:

Online Banking provides an overview of Internet Commerce and how one company can handle secure banking practices for its financial institution clients and their customers. Moreover, some basic information on the transmission of confidential data is presented in Security and Encryption on the web. In this respect, PC Magazine Online also offers a primer as to how encryption works.

Besides, a multi-layered security architecture comprising firewalls, filtering routers, encryption and digital certification ensures that customers account information is protected fully from un-authorised access in the following manner:

(i) Firewalls and filtering routers ensure that only the legitimate Internet users are usually allowed to access the system.

(ii) Encryption techniques used by the bank (including the sophisticated public key encryption) would ensure that privacy of data flowing between the browser and the Infinity system is protected.

(iii) Digital certification procedures provide the assurance that the data a customer receive is from the infinity system.

Essay # 7. Strategies to be Adopted by Indian Banks for Introducing Internet Banking :

In present times, Internet banking has no alternatives. Indian banking is gradually getting more and more access of Internet banking. Thus, Internet banking would drive us into an age of creative destruction due to non-physical exchange; complete transparency is also giving rise to perfectly electronic market place and customer supremacy.

At this moment, the question may be asked “what the Indian Banks should do under the present circumstances?” Whatever is the strategy chosen and options adopted, certain key parameters would largely determine the success of banks on web.

In order to attain long term success, in respect of Internet banking, a bank may follow:

(i) Adopting a webs mindset.

(ii) Catching on the first mover’s advantage.

(iii) Recognising the core competencies.

(iv) Enabling handling multiplicity with simplicity.

(v) Initiating senior management to transform the organisation from inward to outward looking.

(vi) Aligning roles and value propositions with customers segments.

(vii) Redesigning optimal channel port-folio.

(viii) Acquiring new capabilities through strategic alliances.

However, the above mentioned steps can be implemented by following four steps mentioned below:

(i) In the first phase, the customer be familiarized to new environment by demo version of software on banks, website. This will enable users to give suggestions for improvements, which can be incorporated in its later versions wherever possible.

(ii) The second phase provides various services such as account information and balances, statement of account, transaction tracking, mail box, check book issue, stop payment, financial and customized information.

(iii) The third phase may include additional multi-utility services like fund transfers, DD issue, standing instructions, opening fixed deposits and intimation of loss of ATM cards.

(iv) The final phase should include advanced corporate banking services like third party payments, utility bill payments, establishment of L/Cs, Cash Management Services etc. Enhanced plan for the customers in future may include requests for demand drafts and pay orders and many more to bring in the ultimate in banking convenience.

Thus by following the above mentioned strategies, it will help banks to translate their traditional business model into a Internet banking one, falling into the following three main categories:

(i) One-stop shop.

(ii) Virtual one stop shop.

(iii) Best of Breed Supplier.

Thus by following the above steps, the Indian bankers can pave the way for the successful introduction and popularizing the new concept of Internet banking on a large scale.

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Traditional Bank vs. Online Bank

Online Banking: A Quick History

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Personal Finance

Internet Banks: Pros and Cons

How Online-Only Banks Stack up Against Traditional Institutions

Figuring out where to bank starts with a decision about the type of institution you want. Do you prefer a bank with brick-and-mortar branches and its own automated teller machines (ATMs) or an online-only alternative that maximizes the mobile banking experience?

There are advantages to online banking:

You may get a significantly better interest rate for your savings
Some online banks have lower fees and fewer of them
Most online banks demand low or no minimum deposits to open accounts

Brick-and-mortar branches also have advantages:

Accountholders have access to personal service on demand at convenient storefront branches
Depositing cash is much easier
Brick-and-mortar banks have apps as well, and they're getting better

Key Takeaways

Before choosing an online bank, it's important to decide what features are most important to you.
The lack of overhead gives internet banks advantages over traditional banks, including fewer or lower fees and accounts with higher APYs.
Internet banks lack personal relationships, no proprietary ATMs, and more limited services.

Traditional Bank vs. Online Bank: What's the Difference?

Traditional and online banks—also known as direct banks—both offer you access to your account online, and the ability to transfer money or perform other tasks with a few clicks of your cursor or taps on your phone screen. They're both subject to the same laws and regulations—online-only accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) just like the accounts held at traditional banks. Security is the same overall, with both types employing such measures as encryption to protect your funds and identity.

But even if both types have become close cousins in some ways, important distinctions remain. Direct banks leverage their lower costs to offer better interest rates and, often, lower fees. Brick-and-mortar institutions offer a convenient array of options for deposits and other transactions including offering the option for face-to-face service at a bank branch when you need it. If you're on the fence about internet banks, this article may help you. It outlines the main pros and cons of this part of the banking industry.

As the commercialization of the internet evolved in the early 1990s, traditional brick-and-mortar banks began looking for ways to deliver online services to their customers. Though limited at first, the success of these early efforts led many banks to expand their internet presence through improved websites featuring the ability to open new accounts , download forms, and process loan applications .

This led to the birth and rise of internet-only banks. These institutions offer online banking and other financial services without a network of branch offices. The first fully-functional direct bank insured by the FDIC was the Security First Network Bank, which began operations on Oct. 18, 1995. Security First and those that followed were able to offer higher interest rates on deposit accounts and reduced service fees all because of the lower costs due to a lack of overhead .

As the choice in virtual banks grew, so did customers' enthusiasm for banking online. More than 60% of account holders do at least some of their banking on the internet, according to the latest report on banking behavior from the FDIC .

Investopedia / Jake Shi

Pros of Internet Banks

Despite the rising virtual presence of traditional banks, online-only competitors still offer some clear advantages for consumers.

Better Rates, Lower Fees

The lack of significant infrastructure and overhead costs allow direct banks to pay higher interest rates or annual percentage yields (APYs) on savings. The most generous of them offer as much as 1% to 2% more than you'll earn on accounts at a traditional bank—a gap that can really add up with a high balance. While some direct banks with especially generous APYs offer only savings accounts, most of them offer other options including high-yield savings accounts, certificates of deposit (CDs), and no-penalty CDs for early withdrawal .

You're less likely to be dinged with a wide range of fees at a direct bank including those associated with keeping an account open with a low balance, making direct deposits, or paying by check or debit card. Accounts at direct banks are more likely to carry no minimum balance or service fees .

Better Online Experiences

Traditional banks are investing heavily in improving their virtual presence and service, including launching apps and upgrading websites. But overall, direct banks appear to retain an edge when it comes to the online banking experience.

A 2018 Bain and Company survey of retail banking customers found traditional banks lagged behind direct banks in the areas that mattered most to customers, including the quality of the banking experience and the speed and simplicity of transactions.

The gap between the interest rates earned by accounts in traditional banks and internet-only banks.

Cons of Internet Banks

Banking with an online institution also has its share of drawbacks and inconveniences.

No Personal Relationships

A traditional bank provides the opportunity to get to know the staff at your local branch. That can be an advantage if and when you need additional financial services, such as a loan, or when you have to make changes to your banking arrangements. A bank manager usually has some discretion in changing the terms of your account if your personal circumstances change, or in reversing a mandatory fee or service charge .

Less Flexibility With Transactions

In-person contact with a banking staffer isn't only about getting to know you and your finances. For some transactions and problems, it's invaluable to head to a bank branch .

Take, for example, depositing funds—the most basic of banking transactions. Depositing a check is possible with a direct bank by using its banking app to capture both the front and back of the check. However, depositing cash is downright cumbersome at many online banks. So it's worth checking the bank’s policy if this is something you plan to do frequently. International transactions may also be more difficult, or even impossible, with some direct banks.

The Absence of Their Own ATMs

Since they lack their own banking machines, online banks rely on having customers use one or more ATM networks such as those from AllPoint and Cirrus. While these systems offer access to tens of thousands of machines across the country—even around the world—it's worth checking the available machines near where you live and work.

Check, too, for any fees you may rack up for ATM use. While many direct banks offer free access to network ATMs or will refund any monthly charges you incur, there are sometimes limits on the number of free ATM transactions you can make in a given month.

More Limited Services

Some direct banks may not offer all the comprehensive financial services that traditional banks offer, such as insurance and brokerage accounts . Traditional banks sometimes offer special services to loyal customers, such as preferred rates and investment advice at no extra charge.

In addition, routine services such as notarization and bank signature guarantee are not available online. These services are required for many financial and legal transactions.

Traditional and online-only banks both have their advantages. Basically, you have to decide whether a brick-and-mortar institution's services and personal touch outweigh the often higher costs, in terms of lower interest rates and more numerous fees, of banking there.

It's also worth considering dividing your business between one of each. True, this arrangement may not be practical for you, and the fees for holding multiple accounts may be an issue. But having accounts at both a traditional bank and an online bank can facilitate the best of both worlds—higher interest rates, along with access to in-person help with transactions and problems when you need it.

Federal Deposit Insurance Corporation. “ Deposit Insurance .”

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Online Banks Vs. Traditional Banks: Which Are Better?

Fact Checked

Published: Aug 24, 2023, 9:10am

Online Banks Vs. Traditional Banks: Which Are Better?

Online banking lets you manage your money from anywhere at any time, and it’s outpacing in-person banking. More than three in four Americans say they’d rather bank via a mobile app or website than go into a local branch.

While most financial institutions offer digital banking, online banks operate fully online and often have more robust, user-friendly websites and mobile apps than traditional banks. Often, these digital banks also tout lower fees and more competitive interest rates. But for some people, traditional banks may win out.

What Is Online Banking?

Online banking is banking that takes place digitally through a computer or smartphone. Most financial institutions now allow customers to access their accounts online through a website or mobile app and complete basic actions like balance inquiries, electronic transfers and bill payments.

There are also online banks , which are financial institutions that operate mostly or fully online—like Ally Bank , Vio Bank and Axos Bank . Online banks don’t typically have physical branches, although some hybrid banks like Capital One 360 operate a handful of brick-and-mortar locations. Like traditional banks, online banks are usually chartered and insured by the FDIC to keep your deposits safe.

With online banks, you can take care of all your banking needs electronically, including:

Opening a new account
Depositing checks
Transferring funds
Paying your bills
Tracking expenses
Saving money

Many online banks operate ATM networks where you can deposit and withdraw cash, often without fees. Others may offer ATM fee reimbursements for using out-of-network ATMs.

What Are the Advantages of Using Online Banks?

Because online banks are completely digital, they tend to have lower overhead costs and focus more on building user-friendly, feature-rich mobile apps and websites. This allows them to offer the following perks:

No or low fees. Most online banks don’t charge monthly maintenance fees. And others, like Discover Bank , go even further by eliminating all common banking fees , including overdraft fees or out-of-network ATM fees. Almost all of the best no-fee checking accounts and best no-fee savings accounts are available with online banks.
Competitive interest rates. Online banks tend to offer the highest annual percentage yields (APYs) on deposit accounts. Online banks also have many of the best high-yield savings accounts and high-yield checking accounts . If you’re looking for the best CD rates , credit unions and online banks usually come out on top.
Low or no minimum deposit requirements. Unlike some traditional banks, most online banks don’t require you to maintain a minimum balance. They also tend to have low or no minimum deposit requirements to open an account.
Early paychecks. If you get direct deposits from an employer, some online banks, like Capital One and SoFi , will let you get paid up to two days early.
Automated bill payments. Online banks make it easy to schedule automatic bill payments electronically so you can avoid missing payments and track when money will be withdrawn from your account.
Mobile check deposits. Most online banks let you deposit checks electronically by snapping a photo of your check and uploading it to the mobile app.
Free ATM withdrawals. Some online banks operate fee-free ATM networks that are just as, if not more, expansive than those offered by traditional banks. Others, like Charles Schwab Bank , don’t have ATM networks but offer ATM fee reimbursements.
Additional perks. Many online banks entice customers with benefits like cash-back debit cards , generous bank account sign-up bonuses and in-app saving and budgeting tools.

What Are the Drawbacks of Online Banks?

While online banks excel in many areas, there are some drawbacks to keep in mind:

Cash deposits and withdrawals may be limited. While some online banks let you use an ATM to deposit cash, others don’t accept cash deposits at all. Some online banks that only offer savings products might not offer ATMs or allow you to withdraw cash. Instead, you’ll have to withdraw funds by transferring them to an external account.
Most don’t have physical branches. Unless it’s a hybrid bank like Capital One, online banks don’t have branches you can visit, so you won’t be able to access in-person financial services.
The range of account offerings may be limited. Most online banks offer fewer financial services than you’d find at a full-service traditional bank. An online bank may only offer a checking account, a savings account and a CD account, while big national banks like Chase and Bank of America offer a full range of lending and investment products in addition to bank accounts.

Are Online Banks Better Than Traditional Banks?

Online banks are better than traditional banks when it comes to minimizing fees and securing the most competitive rates. These banks also tend to offer superior websites and mobile apps with more features.

When it comes to finding a full range of financial services all in one place, traditional banks tend to win out. Plus, if you like banking in person or need to deposit cash, traditional banks may be better for you.

To reap the best of both worlds, consider having traditional bank accounts for in-person service and online accounts for low fees, high APYs and other perks.

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Essays on Online Banking

11 pages•Date: February 21, 2024 and

This research paper explores the dynamic evolution of internet banking, tracing its journey from its inception to its current state and beyond. By examining the challenges faced, opportunities seized, and future directions envisioned, this study provides insights into the transformative impact of internet banking on the financial services industry. The paper begins by tracing the historical development of internet banking, highlighting key milestones and technological advancements that have shaped its evolution. It explores how internet banking has revolutionized traditional banking practices, empowering customers with greater convenience, accessibility, and control over their finances.

: , ,

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Online Banking: Definition and Features

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Published: Jan 29, 2019

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The Impact of the Internet on Banking

Introduction, factors of growth, disadvantages, works cited.

The advent of the Internet has provided some major breakthroughs. VoIP and visio-conferences eliminate the limitations businesses encounter due to geographical boundaries largely. These provide opportunities for various business houses to advertise, share information with their collaborators, receive feedbacks on their products, equipping them with the cutting edge technologies needed to grow. Thus, to be successful in this highly competitive global business environment, enterprises increasingly adopt flexible, distributed working practices. When the first computer took its shape, nobody could imagine that it might take the form of today. And the most influenced part is the banking sector once there was the introduction of internet in banking. Thus, this study would evaluate the influence of internet on the banking industry.

There was a time when people had to stand in long queue for hours to accomplish any banking function. Again those long hours of waiting, chances of human errors etc were there. Everything is now computerized, error free and lightning fast. Withdrawing money is so simple because of ATMs; depositing money is also is an affair of minutes. The most advanced form of banking is e – banking. There is no need of visiting your bank at all. With only a click of mouse you can deal in loans, insurance, mutual funds etc. Trading is nothing harder than a click of mouse now. It was in 1980s that changed the banking outlook and that was introducing technology as compulsory usage as a precondition for renewing or getting a new license. Secondly, opening an institute solely dedicated to researching and developing technology in the banking field. This brought in technology-savvy banks and they would offer innovative products to its customers from credit/Debit/Smart cards, Tele-Banking and Internet Banking, Anytime and Anywhere Banking and ATMs and PC-Banking were some of the few. According to Lee (2009), “ Online banking has recently come to be considered as one of the most effective banking transaction methods because it possesses many advantages which offline banking channels can not offer. Thus, online banking managers aim to utilize these advantages to increase the online banking adoption rate ” (Lee 132).

An economy based on digital factors is digital economy (or internet or new economy). Digital computer networks, internet, intranets, VAN, computers, software are very important in this business. For example, “Thaigem” is a gem company based in Thailand, who very effectively used the EC to grow their business.Web-based business enhances competitiveness and create strategic advantages for a company and this is really helpful for any company, how large or small it may be. The E-Commerce is doing wonders for all the parties from supplying goods that has be the ordered and transportation involved. Now one can go shopping and will not have to wait in the long queue to pay the bill rather present a blank cheque where the amount will automatically be debited. Moreover one can shop hop in internet where he will have thousands of stores and choices to choose from and the product will be shipped in his doorstep. These improvements have made business thousand times simpler, also affordable and hassle free for the customers (Turban, Leidner, McLean and Wetherbe 56). However, interconnectivity, the most significant aspect of the modern digital economy, is a significant drawback and it has the potential to start a ‘domino effect’ once a part of it is affected. Nevertheless, baring this fact, it is obvious that, as seen in the case, internet banking enhances a business manifold and thus is the evident banking form in the future.

One of the most important aspects of modern banking is digital economy with the help of internet. Information Technology has thoroughly revolutionized the business process. Many multinational giants are changing their business tactics, like Siemens. Fierce global competitions have forced the companies to reduce costs and increase productivity and e-business is a good solution of this problem. E-commerce mainly happens with the help of internet and other electronic networks. The basic infrastructure of E-commerce requires a network of interconnected computers, which helps users to access and share information from a number of sources and collect and collaborate with others (Turban, Leidner, McLean and Wetherbe 38).

There are fundamentally five major advantages of internet banking that became so influential in the recent times. According to Lassar, Manolis and Lassar (2005) they are “ viewing of account and transaction history, paying bills, transferring funds between accounts, requesting credit card advances and ordering checks ” (Lassar, Manolis and Lassar 177).

It is now a know fact that internet and Information Technology is the facilitating factor in driving business toady and especially in the banking sector from transactions and analytical processing to end user interface. Customer service has come a long way and is getting better. They give a hand in the CBS (core banking system) which revolutionized the face of Indian banks. The latest trend which shook the market was Technology in the mobile banking, ATM (automated teller machine) and the locally shared services between banks.

Internet enables banks to service it customer 10 times faster than a few years ago and brought down its operation cost to one third. We now have immediate transfer, access to multiple service providers dealing in communication. (IBM) International Business Machine Corporation, Microsoft, Patni are one of the companies on the forefront in providing Technology that would run the banking industries. Projects like multi Application smart cards have proved to perform well and have been included into the financial sectors and open its uses throughout the country and the world. There will never be a stop to the advancement of internet technology in the world of banking and business banking will have the biggest change. Creating deposits is what banks were in their traditional form and the surplus money was let out in the form of lending. But in this present time they now offer wide range of services to financial needs to its customers in the form of business , personal , travel and celebrations loans to name a few. The services are to its entire customers who can prove their stability in repaying the loan.

There were several factors in looking at the banking growth and it was the changing face of banking services. Before the internet and computerization, manually deposit and withdrawals were all banks did and the service standards were far below standards but after the internet and computerization the banking sectors have become a consumer oriented market. Information technology is creating a revolutionizing effect and rippling through all sectors including the capital market and after the introduction of internet it has brought its relationships with banking closer and the internet is become an important support for banks financial services.

There are a lot of services which have become customized and Retail banking is maturing after each passing year and one clear example is the housing loan sectors by bringing down their operations cost, the banks are able to pass it benefits to the customers. One of the most innovating banking products that technology has brought in is Plastic money with the new age of people spending more then they use to before many years ago carrying large sums of money was getting trouble some and Plastic money was introduced which came in many forms. Credit card is a system of payments after a Plastic is introduced to the user who can use it multiple times as cash transactions. Then we have the debit card and can be use in ATM and purchase goods, the only difference is that it’s on the user cash and is not credit given by the bank. The banks over time and over the years have changed and evolved into international standards and are showing innovative approach in creating value for their customers.

The banks are hugely influenced by internet and computerization with basic introduction of Internet, ATM has minimized bank offering its core delivery services and with alternative now available due to new development of technology which has not creating duplication of network and need to work on a backup plan. However, Banks need to focus more on technology concerning (WAN) and VSAT, (WAN) which is a wide area satellite based network and VSAT (Very Small Aperture Terminals) to push ahead of the foreign competitors. However, there is one more aspect where banks could benefit greatly and take the load of their manual operations is introducing better payments system in the rural areas.one of those applications is called NDS (Negotiated Dealing System) and the (Centralized Funds Management System) but this in not introduced to all banks in the rural areas of many underdeveloped or developing countries and still see medieval operation on the banking sectors. The Negotiated dealing system (NDS) which is a platform for trading and RTGS (Real Time Gross Settlement system) is used for transferring real time funds from one bank to another. The age of internet benefits have only been tapped in the urban areas and rural area have not even smelt its benefits and its only when banks that have their branches in rural area releasing its benefits can the common man reap its benefits, where issues of money transfer can be tapped throughout the world. There is a huge resentment among customers in the rural areas is customer’s service and banks are facing costs on providing these services. The issue lies is trying to cut operations cost and having to deal with their competition. Here is where internet could play its role and meeting the banks objectives.

One of the most disturbing aspects of internet banking is the issue of privacy. Simpson (2002) noted that “ The difficulty is that online banks have been counting on the ability to use detailed customer information for targeted marketing offers while the evolution of e-commerce depends on intra-industry alliances and the sharing of data. Privacy concerns may slow the evolution of e-banking ” (Simpson 317).

Similarly, Identity theft is not at all a new crime. It has merely mutated itself by including new technologies like ATMs and online banking. Nowadays it is even easier for the identity thieves to use stolen information due to the advent of the Internet since transactions can be made online eliminating personal interactions. Due to the computerization of the banking and other financial dealings and credit cards it has become much easier for the pretenders to pilfer other’s personal details and thus can camouflage as the victim. Credit cards are often used for verifying people’s identities and thus, an impersonator can pretend to be someone else by using their credit card. This also enables them to steal money. Thus, all the impersonator really has to do is obtain a succession of appropriate numbers for completing the crime. The victim of identity theft can suffer serious consequences if held responsible in place of the imposter. The various activities that are undertaken by the impersonators may even cause the victims to loose their jobs. Medical identity thefts can even cause us to loose our lives or the lives of our near and dear ones. Many nations have precise and explicit laws in opposition to using other’s personal uniqueness and details for ones private gains.

In order to avoid identity theft we regularly verify our credit scores with the credit bureaus, destroy any unwanted credit applications, confirm with our creditors if our bills are not on time and protect ourselves by not broadcasting our personal information in unknown e-mails. Identity theft can also be used for smooth progress of offenses like counter nation surveillance, unlawful migration, and blackmail and terror campaigns.

The 21st century business empires had realized that IT is no longer a support function but become the main driving force to better operations in terms of cost cutting and customer service. Internet and computerization will be the deciding factor in banking and financial sectors in making or breaking a company. The banking sector must realize that the should focus on three areas to survive customer’s expectations it is this core value that will sustain them from losing their customers to competitors , the second is cost cutting to operate efficiently with minimum cost and finally handle their never ending competition. To do this they must look for new products and cutting edge service technology. They say a process or a business can only be successful if it runs on an auto – pilot mode and that include over all operations. It can be done by having their total data base and day to day operations through a centralized network, using new banking applications. This way banks can service their customers 24x7x365 with less man power and cut cost.

Some of the areas where expects still feel more needs to me done are on IT is

Connecting all branches through a secured network
Having a message system which is secured on funds transfer products
The Integrated Treasury Management
Looking into technology initiatives on liquidity Management and the Core Banking Solution
Management on Customer relationship
Re-engineering Business Process
Retraining IT skills
Restructuring/ reorganization

There is a feeling among the IT professional that banks need to be part of a network and it shows by having technological employment by the banking sectors, with ATM machines been put on a huge scale and is forcing other banks to start with the same. The age of IT technology is future but in their eagerness to achieve its objective they should not forget the personal touch that every banks has towards their customer and must have it always, they must remember that not every one is tech savvy, and human interactions must be there always for future banking.

The internet and Information Technology has given banks their core objective and that is services towards their customers and at the moment it is bringing forth more valued added products. Some of the product like mobile banking is working well in the emerging market and most banks introduced mobile banking which helps customer in getting updates like SMS services and it more beneficial for people who travelling frequently and would like to keep updated on their accounts. This is a huge influence on the banking sector and it continues to grow for a more effective future of digital economy based on internet.

Lassar, Walfried., Manolis, Chris., & Sharon S Lassar. “The relationship between consumer innovativeness, personal characteristics”. The International Journal of Bank Marketing , 23.2-3, (2005): 176-199.

Lee, Ming-Chi. “Factors influencing the adoption of internet banking: An integration of TAM and TPB with perceived risk and perceived benefit”. Electronic Commerce Research and Applications 8.5, (2009): 130–141.

Simpson, John. “The impact of the Internet in banking: observations and evidence from developed and emerging markets”. Telematics and Informatics 19.7, (2002): 315–330.

Turban, Efraim., Dorothy Leidner, Ephraim McLean, and James Wetherbe. Information Technology For Management: Transforming Organizations In The Digital Economy. 4Th Ed. Delhi: Wiley-India, 2007.

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Online Banking and Online Purchases Report

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Introduction

Online banking, online shopping, implications of online transactions, reference list.

Today the internet is largely used in facilitating many business transactions. The development in information technology has enabled the digitization of many operations and therefore, many transactions are conducted online. Among them are online shopping and online banking.

This has led to the elimination of the need for human interaction in conducting service transactions. Although the internet has greatly enhanced business processes and made them more efficient, it has serious implications and cannot be fully trusted in conducting business transactions. This paper explores the social, ethical, cultural and legal implications of online banking and online shopping.

Online banking involves conducting of financial transactions by customers via the internet. This enables them to avoid the time-consuming and costly processes of interacting with tellers and conducting paper transactions. A customer opens an account that is managed online and can be accessed through a username and a password. The account holder can conduct all the normal banking transactions from home such as paying bills and money transfer, provided he/she has access to the internet (Tucci 2011).

Many large companies are coming up with online banks mostly because they have low costs compared to traditional banks. This is because unlike traditional banks, online banks do not incur the costs of hiring tellers, renting premises, and the costs that arise as a result of the daily running of the bank.

As a result of this, online banks may offer higher interest rates or free conducting of transactions such as checking the account balance, and such benefits may attract many customers. Online banking has various other benefits. It is convenient since the banking websites are available all the time, for 24 hours each day, and conducting the transactions is very fast.

The customers do not have to make long queues as they wait to conduct their transactions as in traditional banks. Instead, they just log into the account and perform the transactions quickly. Moreover, the online banks can be accessed from anywhere in the world. In addition, one website can be used to manage all the customers’ bank accounts (Tucci 2011).

Nevertheless, online banking has several shortcomings. The customers must have ICT skills and it may take time to learn how to use the banking sites. In addition, these online banks do not have automated teller machines and withdrawing the money from the ATMs of other banks can cost a lot of money.

Moreover, when the internet is down, it is not possible to access the bank account. In addition, many people find it hard to trust online banking because of security and privacy concerns. People are afraid that they might lose their money to hackers who might get hold of the account details such as the username and the password. They are also concerned that their personal information may be recorded and used for other purposes (Fraser, Fraser and McDonald 2000).

Online shopping is the purchase of goods or services via the internet. The customers mostly make payments through credit cards or debit cards. The goods or services are then delivered through shipping, downloading or printing out. The customers log into online shopping websites and view the pictures and read descriptions of the products. Once they identify the goods that they want to purchase, they order for them (Horrigan 2008).

Online shopping has several advantages. Firstly, it is convenient since it can be done at any time and place, and all one needs is access to the internet. Traditional shopping requires one to travel long distances to reach the shop and also the customers can only access the stores during business hours. Online shopping sites also provide all the details and features of the products or services and other information such as instructions for use and customer reviews.

Therefore, the customer is able to make an informed choice for the product or service. Online shopping also allows customers to easily compare the prices and features of the goods or services from various stores and therefore choose the most suitable for them. They can also get to choose sites that offer certain benefits such as free shipping of goods (Haugtvedt, Machleit and Yalch 2005).

However, online shopping has disadvantages. The consumers face the risk of fraud, getting faulty products or services and other security concerns such as identity theft and phishing, among others. Phishing involves the soliciting of personal information such as credit card information, username or password by a spam mail.

In identity theft, an individual steals another person’s personal information and uses it to buy goods or obtain credit. It is also not easy to differentiate between fraud websites and genuine ones. Fraud websites receive money and fail to deliver the products and may even disappear, and it is hard to track them. Most online shopping sites also do not disclose the total cost of the transaction including the cost of shipping, sales tax and duties, among others.

Therefore, the customer is forced to pay additional costs which he/she knew nothing about. In online shopping, the customer does not get to see and test the product before purchasing it but relies on the pictures and description given on the website.

Therefore, there is no guarantee of the quality of the product because the actual product may be different from the description given on the website. Another disadvantage of online shopping is that the merchants may use the personal information of the customers for other purposes like telemarketing. Therefore, customer privacy is not guaranteed (Fraser, Fraser and McDonald 2000).

Online transactions have become very popular with customers and a lot of money is transferred every day through the internet. As money is transferred, there are many swindlers hanging around trying to get an opportunity to steal it. Both online banking and online shopping involve conducting of transactions via the internet.

Despite the numerous benefits of online transactions, they cannot be fully trusted. The greatest concern for the consumers is online transaction security. Online transactions encourage the use of credit cards to make payments. The customers are not comfortable releasing sensitive information such as credit card details on the internet.

Their concerns are justified since internet crime is on the rise and without proper security measures, they can lose their money. Customers can ensure the security of their transactions through using passwords that combine both small and capital letters, numbers and symbols, and also changing the passwords regularly to make it difficult for hackers to decipher them.

Consumers should also ensure that they use secure websites to transact their businesses. However, even with these precautions, online transactions cannot be fully trusted as the hackers are always devising new ways to access the private information of customers (Bradley 2006).

Online shopping and online banking have various legal, ethical, social and cultural implications. Online banking services are governed by the Electronic Funds Transfer Act of 1978 in order to protect online bankers. One of the legal challenges of electronic transactions is determining their validity.

One cannot be absolutely sure that the electronic signatures are reliable. Moreover, some websites do not make the terms and conditions of the transaction known to the users and therefore, they enter into an agreement without full knowledge about the risks involved and whether the website is in compliance with the current law (Caudill and Murphy 2000).

Consumer privacy right is a legal requirement that should be respected. During online transactions, customers are required to give their personal information and are concerned about the security and privacy of such information. Purchasing products using credit cards can avail personal information to telemarketers, market researchers and direct-mail companies, therefore leading to the invasion of privacy.

Customers should be made to understand the privacy procedures and policies in place to ensure that their personal information is not disclosed to unauthorized parties or used for other purposes. Some traders use the customers’ personal information for telemarketing or sell it to other agencies. The Data Protection Act of 1998 ensures that the personal information of customers is kept secure (Chung 2007).

There are also ethical issues that arise in the conduct of online transactions. Though online transactions are convenient and fast, the internet has created an environment for the advancement of unethical behaviour. The ethical implications of online banking and online shopping include the privacy of consumer information, the reliability of the transactions, and security. Information that is sent over the internet passes through very many computer systems and these computers may monitor, capture, and store such information.

The activities of online shoppers can be monitored without their knowledge or consent. When online shoppers register for the purchase of certain products or services, their identities and personal information can be captured and used for other purposes. It is unethical for the personal information of customers to be used for other purposes or divulged to other parties (Sembok 2003).

Commercial sites can get information that consumers give to a shopping site and use it to market their products and services. These companies then start sending emails to the consumers without their consent. Internet cookies also gather customer information secretly. Cookies are files that identify the web browser software of the user and tracks down his/ her visits to that site. Marketers are also using Web bugs to monitor the online activities of users. This is absolutely unethical (Nardal and Sahin 2011).

Another ethical concern is reliability of the online transactions. Deceptive practices such as fraud are unethical and reduce the customers’ trust in online shopping and banking. Consumers are also concerned about the security of the transactions. They need to know that their payments are safe and that their banking information is not stolen, leaked or given to any other party (Caudill and Murphy 2000).

Online shopping and online banking also have social implications. Conducting transactions online has greatly changed the social behaviour of consumers as people can do it in the comfort of their homes. Therefore, people no longer go out as often as they used to. Consequently, they do not get to interact with others. Face-to-face communication has reduced and people communicate through the internet.

Online shopping can also lead to buying addictions, impulse buying, and compulsive buying. Impulse buying is purchasing products that were unplanned for. Compulsive buying takes over the lives of the shoppers and preoccupies them completely. Online shopping is only a click away and therefore people may be unable to control their shopping habits. With the access to the internet to almost everyone for 24hours each day, these habits can develop and cause problems like overspending, bankruptcy, and broken families (LaRose 2001).

Online banking and online purchasing also have cultural implications. They have changed people’s way of life. Most transactions can now be conducted online without having to visit banks or shopping malls. Individuals’ lives have been made easier and more convenient due to the development in information technology. However, people are spending a lot of time accessing the internet. Physical interactions have reduced and people mostly relate over the internet (Chung 2007).

From the above discussion, it is evident that the development in information technology has had a significant impact on the business processes of many organizations. Many operations have been digitized and banking and shopping can be done online. However, online transactions have many shortcomings and cannot be trusted.

Therefore, even though information technology has helped to streamline most business operations and made them more effective, the risks that come with it are too many and cannot be ignored. The traditional way of conducting transactions is more reliable and customers need to be extremely cautious when conducting online transactions. Consumers need to weigh both the benefits and risks involved before conducting online transactions.

Bradley, T., 2006. Essential Computer Security: Everyone’s Guide to E-Mail, Internet, And Wireless Security . New York, Syngress.

Caudill, E. M. and Murphy, P. E., 2000. Consumer Online Privacy: Legal and Ethical Issues. Journal of Public Policy and Marketing. Vol.19 , No. 1.

Chung, I., 2007. Roles and Impacts of IT on new Social Norms, Ethical Values and Legal Frameworks in Shaping a Future Digital Society . Web.

Fraser, J., Fraser, N. and McDonald, F., 2000. The Strategic Challenge of Electronic Commerce. Supply Chain Management: An International Journal, Vol. 5, No.1, pp.7-14.

Haugtvedt, C.P., Machleit, K.A. and Yalch, R., 2005. Online Consumer Psychology: Understanding and Influencing Consumer Behaviour in the Virtual World . USA, Routledge.

Horrigan, J. B., 2008. Online Shopping: Convenient But Risky . Web.

LaRose, R., 2001. On The Negative Effects of E-Commerce: A Socio-Cognitive Exploration of Unregulated On-Line Buying . Web.

Nardal, S. and Sahin, A., 2011. Ethical Issues in E-Commerce on the Basis Of Online Retailing. Journal of Social Sciences. Vol. 7 No. 2, pp. 190-198.

Sembok, T. M., 2003. Ethics of Information Communication Technology (ICT). Web.

Tucci, P.A., 2011. The Handy Personal Finance Answer Book . USA, Visible Ink Press.

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Internet Banking Essay

Is Internet banking the way forward?

Introduction.

In recent years the various forces that are shaping the global economy, in particular processes of globalization , innovation and technological development, international money forms have had a critical bearing and role in the development of capital and securities market that have expanded rapidly as a result (Garrett, 1995). For example, compared with the 1980s today’s mergers and acquisitions continue to break all records the value of these being in 1997 placed at $1 trillion and the current trend for this pace makes it look set to continually and rapidly expand (Gugler, 2001). In relation to these processes then banks play a vital role. They are a key element of global economic activity and thus the trends driving changes in banking are in and of themselves reflective of these global trends. Adaptation and evolution are the key indicators and determinants of continued success and expansion for banks and the transformative technology associated with the rise of the Internet represents both a challenge and a response to challenges for banks. In considering the future role of the Internet in banking it is worthwhile examining the historical development and delineation of the functions of banks

The emergence of models of banking familiar to us is associated with the rise of Italian merchant banks during the Renaissance. Both historically and currently then banks have been associated with developments in accounting procedures, systems dealing with the transfer of payments, new forms of services rendered and the application of technological developments. Additionally to these banks have thus played an important role in the development of the global economy (Hughes & MacDonald, 2002). The emergence of these types, forms and functions of banks can be argued to correspond historically to the emergence of global trade systems in the 16 th and 17 th centuries which eventually resulted in the ‘commercial revolution’ across the European continent. It is also then not surprising to note that continued processes of globalization are at the heart of trends in banking in the 21 st century.

At the heart of banks role within trade was the need for a way for participants in trade to do so safely and conveniently. From this the system of credit was first used and this had a bearing on the acceleration of the development of international trade, a fact which holds true today even if forms are varied. The expansion of banking thus can be seen as a process of developing financial systems which were closely linked to trade and in particular free trade. This fact is reflected in developments subsequent to World War II when the largest growth of the U.S. economy occurred in tandem with the creation of a new order in the international monetary world within the framework of the Bretton Woods agreement and one in which banks became major financial intermediaries.

By the end of 1990s it became apparent that new technologies were driving the financial markets to be truly global in the midst of intense competition. It saw the rise of non-bank financial institutions which sought to provide alternative financial services at both personal and commercial levels. For example, General Electric Capital the financial services subsidiary of General Electric Corporation, supplies credit card facilities to department stores and is the largest insurer of homes in the US (Heffernan, 2002). Similar developments in the UK have seen Marks and Spencer, Tescos and other department stores enter the market offering financial services to their customers. Consequently the globalization of capital markets can be to seen to have pushed banks to seek to develop themselves and differentiate their services utilising new means in both technological applications and service provision to adapt to an ever increasing competitive environment.

As such it is readily acknowledged that for modern banks the strategic use of technology is now a key factor both in terms of restructuring banking systems and as a method of creating new demands for financial services (Heffernan, 2002). Thus considering the dynamic growth and expansion of the Internet at the close of the 20 th century it is not surprising to note that the phenomenon of internet banking has expanded dramatically. Indeed this expansion has been accompanied with increased attention on whether this form of banking will become the dominant form of banking in the future. The use of which it is argued will allow banks to keep abreast of trends of globalization and increased competition allowing them to capitalise on continued technological developments associated with internet technologies that break down geographical as well as functional barriers. However, the survival of a banking form depends on whether it is able to adapt to providing the most effective and efficient intermediary and payment service for its customers. Therefore in order to maintain competitive advantage in financial markets banks have to keep pace with the changing nature of what constitutes the roles and functions of being such an intermediary (Bryan, 1991).

According to Heffernan (2002), the existence of traditional banks is due to two main reasons: the necessity of intermediary and payment functions. The role of banks as financial intermediaries is one which sees them as providing a whole range of deposit and loan products but the nature of this role may vary in different ways. The traditional function is one of taking deposits and then lending a percentage of the deposit and according making profits from interest charges. Additionally because of the high cost of generating useful information for lenders in order for them to find the most appropriate borrowers the role of banks in providing such information has become an essential one. Although modern banks operate on international and global scales dealing oftentimes now with truly global customers as well the basic model and functions of banking has not changed even if forms are varied. Yet numerous risks for banks and banking structures have emerged due to this wave of globalization and developments in technology.

Examples of these can be seen in the processes of deregulation which have led to the disappearance of old banking regulations (Mayer, 1993). As a result the range of new products and services which banks must adapt in offering with increased global competition has led them to face new risks as well as new competitors outside the banking system, such as business corporations who have become eager to provide debit services as well. In general then we can surmise that these risks have emanated from increasing competition, product innovation, the movement of capital markets, increased market unpredictability and the removal of old barriers to the provision of financial services (Bessis, 1998). Accordingly because of the significant pressures on banks to minimize risks and the requirement of maintaining capital capability, many banks have made the strategic decision to focus on two stable fee-based profit areas, namely retail banking and private banking.

Retail banking refers to the provision of banking services for individuals, including deposit taking, consumer lending for house, car, credit card services and so on (Hughes & MacDonald, 2002). However retail banking is a challenging and tough area due to the amounts of product differentiation between services offered and provided which gives rise large amounts of competition between new entrants and established bank branches. In tandem with retail banking private bankers offer services which include deposit-related activities, credit extension and personal lending, and corporate lending (Hughes & MacDonald, 2002). Because they more likely focus on providing services for more well-off individuals, the service demands of these consumers are more sophisticated and professional ones. For example, private bankers may offer complicated financial analysis systems to help clients manage their investment or stock portfolios. Moreover an increasing phenomenon related to clients of banks today are their demands for new money types represented for example by e-cash developments and better profits from their investments all of which contribute to increased pressures for banks.

It is expected an suggested that internet banking may help to solve the problems existing in both these kinds of traditional banking as well as responding in and of themselves for the continued growth of demand for banking online due to customer preferences and needs. First of all internet banking has been suggested as being able to offer economies of scale and low transaction costs. Additionally due to the new target markets which have emerged as a result of internet banking which research suggest seems to be more educated and affluent the advantages of convenience and lower costs are attractive for online banking users. Furthermore the continued emergence and use of e-cash it has been argued may cause an evolution (or revolution) in the traditional banking world lead to increased values and returns in the field of private investment.

However, online banking has its risks some of which may be seen as especially problematic for competing banks. An example of these risks is the networked and online nature of internet banking which increases the risks of security problems from hackers as well as scam artists, ‘phishing’, or the collection of private and personal information from online activities is a growing and prevalent concern. Banks thus must not only compete in terms of the services which they offer but also as to the relative security of their services in comparison with others. It must also be noted that the first investment towards creating an online banking network requires huge capital investment and due to the levels of competition within the sector may in itself led to new entrants failing to make a profit and return on their initial investments. With these factors in mind then we can summate that online banking forms should correspond to the main trends in financial markets as well as display characteristics of a sound organizational risk management system which helps protect customers and is able to contribute to minimizing existing risks for banks and maximise returns on investment for banks.

New Trends in Banking Industry

To understand the future of banking, it is essential to first appreciate the major trends and changes that have a bearing upon banks in terms of how they operate. As such as has been noted one of the most important changes in the financial service sector is due to the process of globalization (Harper & Chan, 2003). This refers to the fact that the geographical location of financial markets operations is no longer important. Examples of this can be seen in the rapid increase of cross-border capital flows and international cooperation in financial regulations and frameworks. Globalization is neither a new phenomenon nor a coincidental one it is inextricably linked with the forms and functions of banks and the provisions and overall structures of financial services provision (Kofman & Youngs, 1996). Thus information based services such as financial services because of the emergence of these world wide informational networks have enabled electronic channels to form which coordinate and manage information relevant to the business of banking (Holland, Lockett & Blackman, 1998).

As a result the demands of global customers have pushed banks to adapt and evolve their organizational structures and the way in which bank products are offered. This has both provided opportunities and new challenges for banks concerned with delivering the most appropriate and effective way of dealing with international/multinational customers. For example while the growth of financial credit markets has bee dramatic and profitable recently it has been rocked by a series of scandals global in their proportions in the UK, US after a brief recovery in international systems as a result of the Asian economic slump (Strange, 1998). Additionally, from a political and social functional perspective of globalization there is an increased awareness of problems focused on the weak points in the traditional financial system. For instance this can be seen in the fact that people are more engaged in financial markets, that this market is more volatile and less workable regulatory frameworks exist arising from national frameworks inability to globally regulate (Eatwell & Taylor, 2000). Consequently customers demand that bank minimize the failure of investment by using sophisticated financial instruments and effective services. It is necessary to ask whether there are possible changes that might be made in the traditional financial system as a result of these trends.

In recent decades, the relationship between financial institutions and regulatory organizations has changed because of the acceleration of globalisation. Historically since the 1930s the financial industry was significantly related to governmental operations (Jordan & Majnoni, 2003). Both in theory and practice, political considerations on the economy and the pressures on and from banks were linked (Aronson, 1977). In this aspect banks have been able to put pressure on governments in order to force governmental changes in policies to improve efficiency and productivity. Thus one of the main reasons for regulating banking activities then as well was in order to enhance the ability of governments in raising revenues. However the emergence of a globalised economy has led to a significant re-conceptualisation of this factor, (Spong, 2002).

As such this analysis presents the reasons for regulating banks today as being related to issues of taxation, of maintaining money supply controls, of protecting some financial suppliers from competition, and the protection of depositors and bank solvency (Benston, 1992). In addition, due to globalization banks have expanded their business to include foreign trade finance lending in different countries which can be called international banking or multinational forms of banking. Unsurprisingly international banks have suffered the stresses of increased government influence and controls over the ways in which they invest and what types of business they undertake. As a result of this it is argued that the process of selection of the most effective banking form is less through competition as opposed to being through the actions of politicians and regulators (Jones, 1990). Research has been carried out in the USA, UK, Japan and European Union which has demonstrated that there is still a large deficit in the coordination of international bank supervision (Canals, 1997). Although it is said the governments have gradually reduced the importance of their roles in banking innovation within the relationship between banking activities and the supervision of government is a key element for the growth quality financial products and services in the global economy (Avgerou and La Rovere, 2003).

The banking industry is also highly affected by the evolution of technology. In this area some of the most dramatic changes in banking business have occurred and are occurring. Compared to past perspectives in which banks were afraid of the uncertainties in relation to making heavy investments in technology, today for those who seek a competitive edge investing heavily in the development of technology is a major factor of their respective strategic operations (Meric & Meric, 2001). This is not surprising when it is considered that technology has enabled the banking industry to innovate in terms of new ranges of financial products, distribution channels for these services and better customer relationship management systems. For example, the computerization of the standard transaction model has reduced the need for paper records and checks. In addition, taking Egypt as an example there have been many changes in banking such as the way of delivering financial services by using the internet and electronic cash a feature then we can say that is being replicated both in developed and developing countries (Kamel & Hassan, 2003).

However, these changes present both opportunities and threats. The developments taking place in information and communication technology have increased the levels of competition for financial institutions. For new players entering the market they even it can be stated have an advantage in its ‘legacy system’ compared with traditional banks and the ease of access to technological implementations has attracted many new entrants to the sector. Therefore the usage of technology in order to create competitive advantages is essential for banks particularly for those involved in retail banking (Harper, Randall & Rouncefield, 2000).

Powerful forces then have shaped the banking industry including it must be noted changing customer needs and their choices of financial services. By the middle of the 1990s internet based services had rapidly emerged in usage and coverage, such as for example E-mail and these non-financial usages have led to their application and deployment in creating a new way of banking (Wiggins, 1995). Furthermore, there has been a trend for individuals to invest their savings such as their retirement money rather than saving it in traditional deposit accounts in banks so as to seek higher return rates on their money which reflects these changing customer needs. While traditional banking systems offered high level of commercial risks a growing emerging feature has been the alternative of non-banking sectors, including for example mutual funds.

One of the end results of these trends is that because global customers’ needs have changed, their preferences in turn have become more complicated and sophisticated in outlook towards the financial services they have a preference for. They are more aware and indulge more in financial analysis and the possible options available to them for increasing the value of their monetary assets, thus traditional banking systems appear to be less attractive to these sets of customers than they were in the past. This makes banks develop or seek to develop ways of meeting this challenge and be responsive to the key trends related to effectively operating in the banking sector. Customers it seems are enthusiastic in relation to these development with research for example from Canada showing a majority declaring their willingness in dealing with all of their bank bills or investments via the Internet by 2003 (Hien, 2000).

What Do Banks do?

To consider modern banking in the context of a traditional model, banking activities in industrialized economies can be seen as being a function of their role as financial intermediaries between depositors and borrowers as well as being instruments of payments. In regards to the former the intermediary and payment instrument have been identified thus it is necessary to address the organisational structure of banks which are most successful in carrying out these identifiable functions. According to Kovacevich (2000), winners in this industry will be those who can master the management of information and use it to give their customers what they want as well as when and where they want it, or in other words those who can assimilate knowledge in such a manner as to be responsive to dynamically changing customer needs and preferences. Therefore effective banking structures are those that are able to support the interactions of information and financial services.

Such a structure is also efficient, according to Williamson (1981), it is argued to those who are able to ‘economise’ on the costs of banking services. In other words banking activities that can be divided into four levels are closely related to profitability. Namely treasury and banking transactions, intermediation, financial assets, and long run activities including fixed assets and equity plus long term debt management and financing are major sections of banking operations. However the relative weight accorded to these functions will depend on the different kinds of banks involved (Beaver & Parker, 1995). For example, many banks are engaged in international or multinational business for a short time due to globalization, their presence in which does not contrary to the basic banking model, but makes them pay more attention to the needs of their global customers and which requires links to global targets matching with their business decisions.

New challenges can be created during the process of internationalisation as a result of the major trends in banking analyzed previously (Classens and Jansen, 2000). Nonetheless, a recent view on traditional banking model holds that the contribution of physical banks to the growth of the global economy has been diminishing significantly over time; new financial instruments and technologies such as online banking will not be then be seen as a one component of a new strategy but in effect the new strategy for banks to maintain their traditional functions in the face of external competition (Baker, 2002). Therefore there is a multiplicity of arguments concerning the new form of banking model yet a recurring emphasis on the dominance of the internet to the future form of this model. Furst and Nolle (2000) defined the term of electronic banking as meaning a distant delivery channel which is used for banking services. Thus with the increased competition, increased costs, changing customer needs and preferences along with the rapidly changing global context in which banks operate one of the key questions to be asked is that along with the electronic provisions of services will there be a reduction in the actual physical presence of banks and thus an end as such to the physical bank to be replaced by an online electronic one.

The Future of Banking

E-banking is a global phenomenon yet the newness of technologies associated with it should not be taken to mean that electronic banking itself is new. We can see developments in electronic banking as far back as 1871, when the West Union Telegraph Company headquartered in New York began to offer a nationwide money-transfer service (Ridgway, 2000). Similarly in 1951, the first credit card was issued by Franklin National Bank and the first ATM machines came into operation at City National Bank of Columbus in America (Gup, 2003). . It is estimated that by 2000 there were about 285000 ATMs in operation in the US (Spong, 2000) with similar large network coverage of such across the EU, the UK and globally increasing also (McDonald and Keasey, 2002). The internet exploded onto the international scene in the 1980s and 1990s and the rapid evolution of the technology and the possible applications led to many surmising and trialling the offering of banking services making use of the medium, yet such efforts were viewed as being risky as well as generating only minimal profits.

This may be the main reason for low levels of popularity towards banking online historically and to a degree presently. Because of the low percentage of customers who have access to such services and the huge cost of setting up internet banking web sites, it is unlikely that at present internet banking is having a major influence on the profitability of most institutions. Yet the continued roll-out of internet technologies such as always-on broadband connections may it can be hypothesised dramatically alter this situation over the coming period. Those banks that rely primarily at present then on internet banking must be able to afford the huge costs involved in setting up their operations as well as run the risks feared by smaller institutions that has led to their closure related to making such a large investment and risking it on future profits. Therefore with the exception of the largest institutions most efforts towards performing banking online failed or did not have a detectable strong influence on the banking model in smaller banks (Furst & Nolle, 2000). However the usage of ATM machines has spread rapidly because of driving forces in the economic situation at that time. Analysts such as Moore (1984) believe that rising inflation and interest rates are key contributors to the strategy made by banks towards attracting customers through using ATMs.

On the one hand customers require cheaper and more convenient ways to withdraw and access their money; on the other hand banks are able to afford the investment of installation of ATMs to maintain consumer loyalty through charges levied on the use of such systems. By the 1980s another factor which had a major bearing on the usage of ATMs was that the construction and operational cost for traditional bank branches increased significantly, including the cost for human resources and other fixed costs associated with the construction and maintenance of physical branches (Cobas, Mote & Wilcox, 2001). ATMs were seen to be a vehicle to help banks compete with other financial sectors world wide at a much lower level of cost than through the opening of physical bank branches. In addition customers were more likely to accept this form of dealing with their banking business including the payment of bills and withdrawing of money. As a result, banks required less of a physical presence. This trend of reducing a banks physical presence can be seen in the ever increasing exhortation towards internet and online banking which occurred. In 2000, using West Union as an example again, which is now owned by First Data Corporation started to offer its services over the Internet (Ridgway, 2000).

The rapid development of internet and its growth of usage among not only companies but also individuals has accelerated the development of internet banking. At first financial institutions only offered web sites that provided information about services which they offered rather than actually offering to perform the services themselves. Such trends are common in relation to the internet and replicated in other industries, such as the travel industry. However banks and other financial intermediaries gradually realized that one of the emerging characteristics of their industry was the in provision of financial information which required they provide services and financial products that enable them to have closer and better relationships with customers. It thus came to be held that the internet makes such a function possible.

Customers are encouraged to use a computer in order to access banks by using banking software installed on their personal computer while they may use internet service providers in order to access banks through their websites. Importantly research among internet banking users has found that high net worth customers preferred a combination of internet based tools as well as a close relationship with a personal banker (Labate, 2001). As such there is a dual trend both for reducing physical presence but increasing the ‘personal touch’, a difficult balancing act for many banks to maintain. Additionally a leading online broker has reported that about 70 percent of its new accounts are opened at branch offices rather than online ones (Bekier, Flur and Sinham, 2000). The most successful e-banking institutions therefore are likely only to be those with strong brand identity and which are able to balance the competing and often contradictory needs of its customers. Therefore before make a conclusion as to the future direction of banking it is vital to have a clear understanding of the role of electronic banking in the context of the global financial industry.

Internet banking it is claimed is faster, better and cheaper for all concerned than traditional forms and methods of banking. Convenience, which refers to an overall reduction in the capital, labor, time and other resources that are needed and expended in order to make transactions is one of the key advantages for both customers and banks (Hunter and Timme, 2001). For example, customers are able to control their finances by easily accessing their online account for where they can perform a variety of financial functions without the need for a cashier. The services of reviewing bills, initiating payments and so on online are provided by most banks now. The reduction of costs of time and money expense is ranked as one of the most important considerations by consumers who prefer use of electronic bill paying services. In addition online banking services also benefit the business to business sector in the financial industry. According to Mester (2001), by 1998, 86 percent of households used some form of e-payment system with ATMs and direct deposit being the most widely used, and the growth of retail e-payment is being driven by the increased use of credit cards, which is the second most popular means of non-cash payments. Although it is assumed that the bank’s leading role in the home mortgage market will be reduced over time due to increased competition from non-banking institutions some insurance products however such as term insurance and long-term care insurance are expected to do well online and represent new areas of activities for traditional banks (Barta, 2001).

Secondly traditional banking risks are defined as credit risks, liquidity risks, interest rate risks, market risks, foreign exchange risks and solvency risks (Schroeck, 2002). Internet banking may be viewed as having certain definitive advantages compared with traditional banking models in managing, controlling as well as minimizing these risks. For example the Identrus Global Trust Service helps banks and their customers carry out secure payments online and deal with other risk management systems (www.identrus.com). The role of information and impacts of adverse selection have been examined extensively in connection with lending money, and today, a substantial amount of lending is done over the internet with forecasts all suggesting that this is set to increase and replace the traditional model of a customer meeting in person with a loan advisor (E-banking Strategies in Europe, 2003).

Although internet banks can provide a wide range of financial services the incidence of specific risks which include operational, security, and legal risks, affect both the users and providers of such services. First of all the efficient flow of information to and regarding customers is at the heart of the industry but the ease of gathering customers’ personal information in an online environment creates security risks which are a factor in customer decisions on which bank to bank with. Measures such as privacy notices contain the type of information that can not be collected and how it may be used (Gup, 2003) and are often backed by national and supranational regulation, such as EU directives on freedom and use of information. However, financial service providers argue that the cost of restricting the use of consumer information and the costs of extensively securing this information will reduce the services that can be offered to customers, such as slower responses to loan applications.

Secondly, as mentioned before the extensive use of ATMs offer a response to demands of convenience in making deposits and withdrawing cash which can be seen as competing with online banking. Additionally, research has revealed that cheques continue to be seen as an important transactional tool for customers and will not be replaced due to its perceived higher level of security over other methods (Munir, 2004). Therefore e-banking can be seen as part of complex set of arrangements emerging in response to dynamic customer needs and specifically related to a younger demographic element making use of extended banking services. Therefore it is unsurprising to note that most e-banking users seem to be younger, more affluent and more educated. It is fair to say that greater convenience may increase security risks, and greater complexity may reduce convenience resulting in a difficult task for banks to blend and balance all of these elements.

Thus in summation it can be suggested that while internet banking has been foreseen as the way forward the reality of its uptake leads to the conclusion that it has become one part of the way forward, leading in particular to increased differentiation among banking products and access to these products to a wider set of customers (Clemons and Hitt, 2000). However the existence of online transaction channels alone may not be sufficient for many customers in that while some services are demanded and preferred online other services still are seen as requiring both a human and physical element in conducting the transaction (McDonald & Keasey, 2002). As while the use of internet banking is growing there is still a strong demand and it is likely to continue to be a demand for the foreseeable future for physical banks.

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The latest trend which shook the market was Technology in the mobile banking, ATM (automated teller machine) and the locally shared services between banks. Internet enables banks to service it customer 10 times faster than a few years ago and brought down its operation cost to one third.
Essay On Internet Banking
939 Words4 Pages. Internet banking is an electronic payment system that enables customers of banks to conduct transactions on a website operated by the them, such as a retail bank, virtual bank, credit union etc. Internet banking is also referred as online banking, e-banking, virtual banking and by other terms.
(PDF) Internet Banking: A Review (2002-2016)
This study reviewed research articles on internet banking published during. a span of 15 years (2002 to 2016). The review adopted a multidisciplinary. approach, examining literature on internet ...
(Pdf) a Study on Cyber Security Issues Affecting Online Banking and
a study on cyber security issues affecting online banking ...
350 Banking Essay Topic Ideas & Examples
JPMorgan Chase Bank: Ratio Analysis. The ratios are debt-to-equity, the interest coverage ratio, the equity ratio, and the debt-to-asset ratio. For the years 2017, 2018, 2019, and 2020, JPM had a fixed turnover ratio of 7. The 2008 Banking Crisis in the Documentary "Inside Job".
Online Banking Essay
Online Banking System. 1. Introduction Online banking is an internet based account management service that allows to view our account balances and transaction transfer funds between authorized accounts, initiate loan payments, request stop payments on checks, order personal checks, download transaction information into your computer communicate ...
Online Banking and Online Purchases Report
Both online banking and online shopping involve conducting of transactions via the internet. Despite the numerous benefits of online transactions, they cannot be fully trusted. The greatest concern for the consumers is online transaction security. Online transactions encourage the use of credit cards to make payments.
Essay: Internet Banking Essay
Therefore there is a multiplicity of arguments concerning the new form of banking model yet a recurring emphasis on the dominance of the internet to the future form of this model. Furst and Nolle (2000) defined the term of electronic banking as meaning a distant delivery channel which is used for banking services.
Internet Banking essay topics
Free Essays, Internet Banking. Electronic banking has been in regular use in the USA for years now, through many facilities like Automated Teller Machines, Debit cards and Direct Debits. ATMs and Debit cards have been particularly successful; 65 % of American households possessing at least one ATM card in 2005. (Anguelov, Hilgert, and Hogarth ...
Online Banking Essays (Examples)
The popularity of online banking is soaring with more than fifty million adults banking online in the United States as of November, 2004, an increase of forty-seven percent during the past two years (Sullivan, 2005). It is the fastest-growing Internet activity.
Internet Banking
This essay will argue that there exist risks in online banking which can lead to criminal behavior, and a number of reasonable solutions have been developed to reduce the risk for customers such as improving online banking system, raise citizens' internet knowledge and workers' professionalism to a new and higher level.
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Get unlimited access to thousands of high quality academic sample essays with Essay bank - the original and largest essay database on the Internet. Login; Home. Resources; Testimonials; FAQs; ... Select your subject from the list below to generate a list of available essays in that subject. Anthropology (70) Art (482) Art and Music (30 ...