Electronic Banking and its impact on Banking System

Electronic banking/ or online banking is based on information technology. As compared to traditional banking, e-banking is fast paced, paper-free banking.

Different forms of Electronic Banking

  1. Online banking- Online banking presents an avenue to the customer to access his account/ records from any branch of the bank, unlike traditional banking system.
  2. Electronic Fund Transfer (EFTs) – EFTs enables both, the creditor and the one who debits, to transfer the amount from one account to the other within no time. The payments for the purchase of petrol, CNG, etc. from petrol pumps can also be made using Electronic fund transfer.
  3. Credit Card- Also known as ‘Plastic Money’. Allows an individual to make a purchase even when he is not carrying cash.
  4. Debit Card- Also known as ‘Plastic Card’. With the use of this card one can make a purchase and the money is automatically debited out of the individual’s account.
  5. Smart Card- Another form of credit card, where online shopping can be done with the help of EFTs. Smart card carries a magnetic memory chip for storing cash value and other information. They are more secure than credit or debit cards.
  6. Automated Transaction Machines (ATMs) – It is an electronic cash machine used to withdraw cash along with other information on individual accounts operating 24 hours a day.

Advantages of Electronic Banking

  1. It operates 24 hours a day.
  2. In e-banking customers’ accounts can be easily operated. Thus, less wait time.
  3. The services offered are efficient and modern.
  4. As it utilises information technology as its base, and is paper-free banking, the cost involved is bare minimum.
  5. Reduces workload on the bank as customer’s details including transaction summary, posting, checking etc. are eliminated.
  6. The shopping experience is made easy.
  7. Works best for Government, as they can easily track the banking accounts of retailers, wholesalers, exporters, importers and industrialists and thus helps them design tax to be imposed on such customers.
  8. Acts as a convenient resource and offers quality service to customers and thus better employment opportunities.

Disadvantages of Electronic Banking

  1. The e-banking facility is secured by a secret code number available to customers, which also faces a risk of getting stolen and thus a threat to customer’s accounts.
  2. No provision of receipt available with Electronic Fund Transfers.
  3. Recently the fraudulent activity by hackers has increased the risk of a computer fraud threatening account falsification and manipulation.
  4. Any computer problem arising due to hardware or software malfunction can also create hindrance in account access.
  5. Virus attack is also one of the reasons that may stop one’s access to regular online banking activity.

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