What is Online Banking?
Online banking is a service that lets banks’ customers carry out their financial transactions over the internet. This is referred to as net banking or web banking. All the regular bank activities (like paying bills, deposits, and so on) and transactions can be completed online with this feature. This means that the customers can carry out these service requests and transactions at their own convenience, from anywhere, without having to visit a bank’s branch.
Basic requirements to use internet banking services are; a bank account (savings or current, etc.), a device such as a smartphone or a computer, a stable internet connection. First, the users need to register themselves for internet banking and create an id and password for online banking. Then using this id and password, they can transact, i.e., transfer funds, invest in mutual funds or insurance, or use other non-financial banking services.
Although the major part of online services provided by banks is similar, some services may differ as per the norms set by a bank. Most banks offer common services such as bill payments, fund transfer, investing in insurance, mutual funds, investing in FDs, and other such transactions..
However, some banks also offer other services such as allowing new users to open accounts through their portals, changing the user’s registered address, ordering cheques, and so on. Now, even Cheques can be deposited online when the user enters the required funds and uploads the front and backside photo of the cheque to complete the deposit procedure.
However, some procedures such as mortgage credit application, purchase of traveler’s cheques, some transfers, bank drafts, and so on still need to be carried out in person at local bank branches and cannot be completed online.
What Are Some Challenges Faced By The Online Banking Industry?
- The most common challenge faced by the banks while offering online services is that traditional banking services still used by many people. While a good section of adults has adapted to online banking methods, there are still many who prefer the traditional method of visiting the bank’s branch to carry out their transactions and deposit their cheques. These customers are hesitant mainly because of one of two factors – first, a lack of faith in the online system, and second, the lack of knowledge on how to operate on an online platform.
- Another challenge faced by the banking industry is instances of security breaches, and fraudulent transactions. Some hackers have, in various instances, successfully breached the bank’s robust security and firewalls to steal confidential customer data. The theft of such sensitive customer information available online and the misuse of such data by fraudsters has proved to be a major challenge for the flourishing business of e-commerce and internet banking.
- Cross-border transactions are one of the game-changers of global trade and are also a highly successful feature of online banking. However, they have proved expensive, slow, and even ineffective sometimes; because many banks still use traditional methods of banking. This has resulted in software platforms mixing up and confusing cross-border transactions. While many banks have implemented the features such as blockchain to ensure the smooth functioning of cross-border transactions, this still remains a challenge to online banking for some developing countries.
What Are Some Benefits Of Online Banking?
- The biggest advantage of opting for online banking services is arguably the convenience factor. Transaction of funds and payment of bills can be efficiently and effortlessly managed at any time and in any place, as long as there is access to the internet. The customers’ need to visit the bank’s branch is eliminated and so the customers can spend their time in carrying out other important tasks.
- Another factor is that online banking has almost no time lag, and things can be done instantaneously, eliminating the waiting period that is usually needed when waiting for one’s turn at a bank. Transactions between accounts are also rapid, and different accounts can be opened and closed online at a very fast rate. All of these activities would take much longer when traditional banking methods are followed.
- An added benefit is that with online banking, users can keep a close watch on their accounts and monitor the details regularly or whenever they please, without having to travel to do so. This helps in the early detection of any theft or fraud and provides easy evidence against any financial loss.
- There are even some online banks that work purely over the internet and do not have any physical branches. While these may not provide direct access to ATMs, they lead to cutting down of extra bank fees for customers.
While online banking has changed the face of global trade as a whole and made transactions and bank-related procedures easier and more accessible to all the customers, it does encounter many obstacles along the way. However, with new technology and awareness campaigns being run by banks on various social media platforms, these obstacles can be easily overcome.