e-banking is the result of the internet and e-commerce. e-Banking is a service provided by the banks, in which a customer is allowed to conduct transactions using the internet. It is an electronic payment system that allows users(customers) of any financial institutions(banks, insurance companies, brokerage firms, etc.) to perform financial transactions using the internet.
Usually, this service is offered by banks which gives their customers the facilities of online banking through which they can have access to their accounts within a few seconds and click. Online Banking includes the facilities such as Account Statements, Fund transfers, Account Opening, Financial Product Information, etc. There is no need for any human operator to respond to the customers. The banks have a centralized database and everything is automated. It lowers the banking cost and strengthens the banking relationship by adding value to the service. It provides banking services via the internet and it is end-to-end encrypted, which means it is completely safe and secure. It also promotes paperless/cashless financial transactions.
Given below are a few common e-banking services:
- Electronic Fund Transfer (EFT): When a fund(money) is transferred from one bank to another bank electronically, it is called an electronic fund transfer. For example- Direct deposit/debit, Wire transfer, NEFT, RTGS, IMPS, etc.
- POS – Point Of Sale: As the name suggests, Point Of Sale usually refers to a POINT(Retail Outlet) in terms of date, time, and place where a customer can make payment using plastic cards for the purchase of goods & services.
- Credit Card: Credit cards are used for online and POS outlet payments, and it is issued by the banks to their customer at their request, after checking their credit scores. This provides the customers to borrow funds to a certain limit and make transactions. The cardholders are required to pay their debt within a time period with some charges.
- ATM: ATM stands for Automated Teller Machine. It is one of the oldest and most common e-banking services. They provide 24×7 banking at all major locations. ATMs are not only used to withdraw cash whenever required, they can also be used to check your account statements, fund transfers, PIN and mobile number, etc.
- Electronic Data Interchange (EDI): EDI is used in the banking industry to improve operational efficiency and reduce the cost of banking services. It also helps in efficient and faster process management.
Benefits of e-banking:
e-banking is beneficial for both customers and banks. The benefits of e-banking are as follows:
Benefits of e-Banking to customers
- e-banking covers digital payments, which have transparency.
- It usually supports 24×7 access to banking services. So customers can avail services as per their time.
- It is a very convenient and easy to use service for customers as they do not have to visit the bank branches every time.
- It provides the best features, such as notification services which inform customers of anything and everything happening with their banking services.
- Financial discipline is inculcated as each and every transaction is recorded.
Benefits of e-Banking to banks
- It reduces banks’ transaction costs. Operation cost per unit service decreases.
- It is completely electronically managed, which reduces the chance of mistakes in the transaction.
- Banks can easily attract customers for various offers via phone calls, emails and apps, as the customer doesn’t have to visit the branches anymore for any product specific information.
- Banks have to hire less people and also it will reduce the branch size and area, which helps in overall revenue growth.
- It provides a competitive advantage to the banks.
- With the help of e-banking, banks have a wider coverage area as banks are now not limited to the number of branches.
- Loads of branches are reduced as a centralized database is present.