Home Banking What Are The Pros and Cons of Online Banking System

What Are The Pros and Cons of Online Banking System

by Ryan North
Pros and Cons of Online Banking System

What is Online Banking System?


Online banking is also known as web-banking or Internet banking. It also includes mobile banking. It is an electronic payment system that allows the customers of financial institutions or banks to carry out online transactions. However, an important requirement to carry out these transactions is access to internet services.

Online Banking System

The banking transactions can be financial or non-financial viz., checking the account balance, checking mortgages or loans, booking tickets online, investing in fixed deposits, making fund transfers, recharging for mobile/TV/DTH services, viewing bank statements, payment of credit card bills, electricity bills, investing in mutual funds, opening Demat accounts, etc.

Nowadays, even checks can be deposited online by simply entering the amount and taking a photo of the front and back of the check to complete the deposit.

Online banking services are available to individuals who have access to the following:

  • An active bank account at a bank or financial institution.
  • Individuals have to register while opening a bank account to opt for online banking.
  • A device (mobile/PC/laptop/tablet) with a stable internet connection.
  • Most banks or financial institutions these days have their websites and own mobile banking applications that can be downloaded on your phones and other devices.
  • Once the bank account is active, the customers need not visit the bank branch every time they want to make a simple banking transaction.
  • Apart from being convenient, it is also a secure way of transacting, since internet banking transactions are secured through unique ID and password.
  • Also, the banks invest millions every year to encrypt their data and secure their servers from unwanted cyber-attacks.

Although the basic banking services are offered by all banks alike, some of the customized services and charges may differ according to the banks’ policies. Moreover, online banking services do not permit bank drafts, some wire transfers, or credit requests like mortgages. One needs to visit a bank’s branch to avail of these services.

What is the Electronic Banking System?

Electronic Banking System

Electronic Banking System, also known as E-Banking System includes a wide range of banking services provided to the customers by electronic means.

In E-banking, funds are transferred through an exchange of electronic signals rather than through cash, checks, or other types of paper documents. E-Banking is a broad spectrum that internet banking is a part of.

E-banking services include buying and selling securities, requesting or checking bank account statements, credits, overdrafts, deposits, checking securities portfolio, currency rates, transferring money, etc., and much more.

For banks, the benefits of E-banking are a good customer base, efficiency, and improving its brand image.

Whereas for customers, online banking makes their life easier. It gives them control over their accounts through mobile banking apps or internet banking, and it is just a click away.

Advantages of Online Banking System

1. Saves Time

Standing in long queues is time-consuming, especially for availing of basic services like funds transfer or making utility payments. Hence, online banking eliminates the need for customers to visit banks and offers them banking services that are just a click away, and that too from the comfort of their homes or offices.

2. No Geographical Boundaries

A customer can make payments from anywhere in the world to anyone they wish to without the restriction of time or place. Earlier one needed to travel to the bank, stand in long queues and waiting for their number to be announced. Now there’s no such boundary.

3. Convenient

If an individual has registered for web banking services, they can pay bills, check their account balances, recharge their mobile phones, internet, or DTH connections, or even invest in or withdraw from their fixed deposits at their convenient time and place. Financial transactions have become easier and secure.

4. 24×7 Availability

24×7 Availability

Internet banking, unlike usual banking hours, is not time-bound. It is available 24×7. Most of the services online are not time-restricted except for fund transfers, that too IMPS service (for funds transfer) is not time-bound for most of the banks.

5. Record of Transactions

Physical acknowledgment slips provided by the bank after transactions have a possibility of getting misplaced. Moreover, it is also a waste of paper, which is harmful to the environment. However, transactions and fund transfers made online are organized in the ‘Transaction History’ section along with every detail. And, an e-receipt is also generated which can be saved on any device locally for future records.

Under the go-green campaigns to save paper, banks now email credit card bills, bank statements, portfolio statements, etc. to their customers, instead of sending physical statements.

6. Security and Speed

Net banking users can transfer funds and make payments swiftly via National Electronic Transfer Fund (NEFT), Real Time Gross Settlement (RTGS), Electronic Clearing System (ECS), or Immediate Payment Service (IMPS). These transactions are encrypted, secure, and efficient. It takes only a few seconds to carry out such transactions.

7. Non-financial Transactions

Internet banking allows the users to avail non-financial services such as checking the bank balance, generating account statements, applying for a new checkbook, changing the address, mobile number or email, etc.

Disadvantages of Online Banking System

1. Cyberattacks and Fraud

Cyberattacks and Fraud

Despite all the security and encryption, there’s a possibility of a cyberattack on banks’ servers and databases. Moreover, semi-literate or illiterate customers fall prey to people posing as bank representatives and may disclose their confidential information. This may lead to customers losing their money or their accounts being hacked.

2. Tech Savvy

Internet banking requires customers to be literate and have a good working knowledge of the web and mobile banking apps to perform banking transactions. It might be a hassle if the customers are illiterate or are unaware of the use of the internet and the latest technologies.

3. Internet Connection

If the internet connection at your home is unstable or if the bank’s server is slow, the speed of transactions will either be slow or they will fail. This can be avoided when you’re physically present at the bank.


Like every system, online banking also has its advantages and disadvantages. But it is noteworthy that the advantages surpass the disadvantages.

For example, due to the COVID-19 pandemic, it is a high risk for people to physically visit the bank branches. Online banking is a safe and secure way of completing the transactions for customers without leaving their houses or compromising their health.

Moreover, banks now run customer awareness campaigns to educate their customers about phishing, cyberattacks, and how to use their accounts and cards. Banks have also started investing more in securing their servers and database with the latest software using cutting-edge technologies. The necessity of a good internet connection is probably the only major disadvantage. Hence, online banking is a very useful tool for getting your job done safely and efficiently.

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