What are the benefits and advantages of online banking? Online banking is execution of financial transactions on internet. Almost all the banks and financial institutions have opted for online transaction processing for their account holders around the world. The term online banking is also synonymously used as E-banking, internet banking, web banking, mobile banking, electronic banking, virtual banking and home banking. Online banking in United States is governed by Electronic Funds Transfer Act 1978. Most of the banks offer following benefits and facilities of e banking to their customers:
- Check and live update about account balance and recent transactions
- Online money transfer (inter bank and intra bank)
- Bill payments (utility bills, mobile bills, education and other bills)
- Access to bank statements
- Ordering cheque books, debit and credit cards
- Report loss of financial instruments and credit / debit cards
- Management of credit and debit cards
- ATM and bank locator
Many banks all over the world have developed mobile applications for the ease of operations of bank accounts by their account holders. These apps make it simple for the account holders to execute financial transactions through mobile phones.
One can also make payments from his / her account through the website of the bank where the account is being maintained. Online banking is different from traditional banking where depositors / account holders used to visit the bank for depositing funds and vice versa. So far, we have pretty much explained the question that what is online banking? Now let’s discuss different aspects and benefits.
Different Types of Online Banking
Online banking is mainly classified into three different types i.e. informational, communicational and transactional. This is further divided into different types and streams including:
- Internet banking: Accessing bank account via bank's website on laptop or mobile
- Mobile banking: Accessing online banking through mobile application or SMS
Advantages of online banking
Following are the broad advantages and conveniences of online banking:
- Transactions take place in the nick of time
- No need to visit bank branch physically
- More secured and safe to transact online
- Time saving as well as cost avoiding with respect to travelling and fuel consumption
- No need to be lined up in a queue
- Transactions can be done any time during 24/7
- Quick confirmation of receipt of funds by the recipient
- Bank statement is available online
- People can apply for other services from the bank online
- Paperless environment makes it more environment friendly
- Historical data is available in soft form over the extended period of time
- Online banking avoids human intervention which is prone to undue delays, errors and slow processing
- Execution of transactions from anywhere in the world
There is no denial from the fact that these benefits of online banking have made lives easier for bank clients.
Disadvantages of online banking
Following are the disadvantages of online banking:
- Lack of trust on online banking by the account holders
- Transactions can’t be done if online banking system is down due to any reason
- Fear of loss of transaction trail due to absence of hard evidence of the transactions
- Implementation of excessive password controls and loss/theft of passwords
- Loss of funds due to stolen login ID and password
- Risk of alteration of transactional details by the bank staff in the database of the bank
- Limitation on the amount of transaction & imposition of transactional fee
- Potential of over spending by the account holders due to ease of banking
- Absence of physical interaction with the bankers/relationship manager therefore a sense of social isolation among the users of online banking facility
- Risk of provision of data to regulatory bodies by the bank or hacking of personal data
- Visit to ATM for the withdrawal of cash which is not handled through online banking system
Security tips for online banking
- Regular change of passwords should be done to avoid loss or theft of funds.
- Maintenance of multiple accounts in a bank where one can keep his/her funds in one account and link other account with online banking app.
- Login and passwords should be kept at safe place not accessible by others.
- People should also maintain record of hard copy/evidence of transactions executed online.
- Never share login, passwords and other personal details with anyone
- Always get the service of alerts being offered by banks to its account holders.
- Quickly block your ATM card and report to bank for any transaction that is not done by you.
- Record phone call to the banker on helpline as an evidence of your report/complaint to bank.
- If you receive any alert of unauthorized transaction in your account, do report it to bank as quickly as possible and advise bank to block further transactions and monitor unauthorized transaction right after your lodgment of complaint.
- Always use online banking with the bank that has a good reputation in terms of security protocols and timely resolution of complaints.