E-banking
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Contents |
What is E-Banking?
Definition: E-Banking, or electronic banking, is defined as banking transactions, conducted through computerized systems via the internet, intended to speed up the banking process and reduce costs.(4).
Historical Information
History of E-Banking
Itwas established on October 6, 1995 by Presidential Savings Bank. The idea of e-banking floated around in the mid 1980’s, but never poked through until the mid 1990’s. Right after Presidential Savings Bank published their idea of e-banking to consumers, other banks took to the popular idea. Citibank, Bank of America, and JP Morgan Chase are some of the banks that took e-banking for their customers’ use.
Technological Information
How Does E-Banking Work?
The concept of E-Banking was created in order to give customers an easier and faster way to do their banking. Therefore the process of E-Banking is in some ways very similar to regular banking, while using the Internet to service customers. E-Banking is a step out of the traditional banking realm by the use of electronic bills, electronic payment, transferring funds, opening accounts, viewing account information and transactions, while allowing customers to do all of this through the Internet.(1) Since the concept is to make banking easier, the internet plays a major role in the transactions that occur. A bank can set up web servers, database management systems, and web application programs, that customers can access when they need to. The e-banking services are then made available to customers through the use of Hypertext Markup Language (HTML). The bank keeps all their customers’ information in a database, which is usually a special software program that can manage and process large amounts of information. This database allows customers to view their account information online. When a customer wants to make a transaction, it can do so thanks to software applications like Java or C, which develop programs to process customer requests, interact with databases, and generate responses. Therefore a customer can go online and enter their information and the bank’s online program is able to provide them with all the details of their account, just like a regular bank can. The risk in this process is mainly security, especially with modern day advances in hacker technology, fraudulent E-Banking can occur. Most banks take three main steps in preventing any type of security infractions. First is identification and authentication; bank sites will require a user name and password in order for customers to access their account. Second is encryption; a process that encrypts the messages and transactions made over the internet so that hackers cannot read them. The most popular type of encryption program is Secure Socket Layer because it is usually built in the web program so that users do not need to take any extra steps in order to use it. This way the web server just translates the messages for you so that the customer can understand it. The third step towards preventing infractions is using firewall. These are software and hardware barriers that separate the corporate network and the external internet. In other words, it allows only secured users in to their network. (10).
Leading E-Banking Providers
Almost all banks today offer online banking to their customers. Customers can usually receive the benefits of e-banking at no extra cost. They provide a website with many features, such as bill payment, transfer of funds from personal accounts, transfer of funds to another bank customer’s account, view and access statements and balance information, investment activities, calculation of a personal financial portfolio etc. Features and benefits can be offered by a current existing bank, with physical offices, that has decided to offer e-banking to its customers. Citibank is the current leader of e-banking, allowing customers to have both face-to-face banking, as well as the ability the simply go online to complete their transactions and/or view their accounts. Another way customers can gain access to e-banking is through e-banks. These “virtual” banks, such as NetBank, are internet-only banks, and have no physical locations, like Citibank.(1) E-Banking allows each customer to control their finances on a daily and even hourly basis. As a whole, e-Banking provides better financial management without the hassle of rushing to the bank before it closes. E-Banking providers in most cases do not have a fee for online banking; it is complimentary with an open bank account. “The United States predicts the number of e-bankers will rise from 56 per cent of households in 2006 to 76 per cent in 2011.”(7).
Citibank
Citibank provides customers with easy access to all of their bank information by a click of the mouse or cell phone. Customers are very satisfied with the features and convenience of this bank. Citibank stated that “more than 70% of corporate customers conduct online operations.”(8). Citibank serves many more countries than just the United States. It provides corporations, customers, and organizations in about a hundred countries with financial opportunities and information and personal banking information. Financial opportunities including “consumer banking and credit, corporate and investment banking, insurance, securities brokerage and asset management” (8) are provided to every Citibank consumer.
Bank of America
Bank of America has been making big strides to lead the banking industry in online banking; their customers are able to securely access all of their accounts online. Over the last few years, the customers using Bank of America online has almost double. They offer online bill payment and bank statements. Each customer has their own account with many features, such as a view of their financial portfolio without a fee. According to a study, ““Bank of America, which has the industry's highest satisfaction with online bill payment, also has the industry's highest use of online bill payment and the greatest percentage of customers accepting online statements. More than 70 percent of Bank of America customers participating in the study reported using the bank’s online bill pay services, and 30 percent reported accepting online statements.”(9). Bank of America encourages customers with checking accounts to use their online banking to keep updated on their balances and statements. They are one of the leading e-banking providers with 53% of checking accounts holders banking online. Consumers at Bank of America feel that online banking has helped their relationship with the bank grow and would consider Bank of America for other products.
Advantages and Disadvantages of E-Banking
E-banking is both, convenient and easy to use for customers. They are given more choice in regards to handling their finances, greater competition and better value for money, more information about transactions and accounts, better tools to manage and compare information, and much faster service. Firms share in the advantages as well. E-banking offers different and arguably lower barriers to entry, opportunities for significant cost reduction, the capacity to rapidly re-engineer business processes, and greater opportunities to sell cross border.(2) For example, the previously mentioned NetBank cuts operating costs by not having physical branches. This, in turn, allows them to offer higher deposit rates to customers and cut many fees that physical branches usually have to charge their customers. For e-banks, like NetBank, deposits and withdrawal of funds is done through the use of ATM’s.(1)
Unfortunately, however, there are also many disadvantages of e-banking for both customers and firms. For customers, a main concern is security. To combat this, e-banks offer: identification and authentication tools, encryption, and firewalls.(1) Still, sometimes security breaches do still occur. These breaches usually are caused by serious criminal intelligence, casual hackers, and flaws in the system and/or security systems design. For firms, starting an e-bank, whether it has a physical branch or not, is expensive. If the e-bank has no physical branch, establishing brand loyalty is very difficult and very expensive. The firm must do significant advertising and purchase much expensive technology to get their e-bank started.(2)
Future of E-Banking
When e-banking was invented the creators said that it would completely take over the old way of banking. (Going to the bank on their time, and completing all your transactions at the bank itself.) This was an aggressive prediction and turned out to be a false one. Although E-Banking has changed banking tremendously, it has not taken over the whole banking system. It is estimated though, by the year 2010 that 55 million families in America will be using electronic banking.The future of E-Banking is a very promising one. Thanks to advances in internet security, customers now feel safer banking online. Since it’s a quicker way to bank, E-Banking will most likely attract more and more customers once the majority of people understand the fundamentals of E-Banking. There are even some banks that are trying to introduce electronic money and checks that are stored in what are called “smart cards”. Furthermore, banks want to offer customers more options over the internet, such as mortgage, insurance, and financial planning. These additions will only add to the already growing popularity of E-Banking.(6,10).
Works Cited
1. http://english.peopledaily.com.cn/200511/24/eng20051124_223678.html
2. http://www.fsa.gov.uk/Pages/Library/Communication/Speeches/2000/SP46.shtml
3. http://www.i-onlinebanking.com/
4. http://www.webdomaindesignhosting.com/e-banking.html
5. http://ezinearticles.com/?History-of-Online-Banking&id=270075
6. http://ebanking365.com/2008/03/history-of-internet-banking.html
7. http://www.business24-7.ae/cs/article_show_mainh1_story.aspx?HeadlineID=2354
8. https://www.citigroupgcib.com/data/documents/press08-30-00.shtml
9.http://www.thefreelibrary.com/Bank+of+America+and+Washington+Mutual+Reign+in+Online+Banking+Study,...-a0136400235
10. http://www.bookrags.com/research/e-banking-csci-04/
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