Types of electronic banking, services and benefits in 2022

Types of electronic banking, services and benefits

Electronic banking is a form of banking that uses the Internet, computers and electronic signals to carry out banking transactions

With e-banking, people can do banking from home rather than going to a physical/traditional bank. 

In this article, we will cover everything you need to know about e-banking. In addition, we will see the history, importance, and types of e-banking services.

What is banking?

Banking is an industry that handles cash, credit, and other financial transactions for both individual consumers and businesses.

Banking provides the liquidity families and businesses need to invest in the future and is one of the key engines of the US economy.

You can use the products and services offered by a bank or credit union to protect your money, borrow more, and save.

Banking means you don’t have to save money before going to college or buying a house. Companies can use the loans to start hiring immediately to build for future demand and expansion.

In short, banking provides the means for further financial growth.

Types of banking

Banking includes many activities that can be carried out through several financial institutions that accept deposits from individuals and other organizations, and then use this money to provide loans, as well as for investment and profit.

Banks can be placed in certain categories depending on the type of business they are doing. Commercial banks provide services to individuals and businesses.

Retail banking services provide loans, deposits and money management for individuals and families. 

1. Public banking

Public banks are smaller than commercial banks. They concentrate on the local market. They provide a more personalized service and build relationships with their customers. 

2. Internet banking

Internet banking provides these services through the World Wide Web. This sector is also referred to as e-banking, online banking and net banking. Most other banks now offer online service s.

There are many online banks. Because they don’t have branches, they can cut costs for the consumer.

3. Savings and credit operations

Savings and loan institutions are specialized banking institutions designed to promote affordable housing. Often, these banks offer higher interest rates to savers as they raise money to lend mortgages.

4. Credit unions

Credit unions are financial institutions that operate in much the same way as standard banks, but with a different structure. Clients own their own  credit unions .

This ownership structure allows them to provide low cost and more personalized services. You must be a member of their membership area to join.

These may be employees of companies or schools, or residents of a geographic area. 

5. Investment banking

Investment banking finds funding for corporations through initial public offerings of stocks or bonds. They also facilitate mergers and acquisitions.

The largest US investment banks include Bank of America , Citigroup, Goldman Sachs, JP Morgan Chase , Wells Fargo , Charles Schwab , and Morgan Stanley.

After the collapse of Lehman Brothers in September 2008, which marked the beginning of the global development of the late 2000s, investment banks became commercial banks. 

This allowed them to receive government assistance. In return, they must now adhere to the  Dodd-Frank Wall Street reform and Consumer Protection Act  regulations.

6. Merchant banking

Commercial banking provides similar services for small businesses. They provide mezzanine finance, bridging finance and corporate loan products.

7. Sharia banking

Sharia banking complies with the Islamic prohibition on interest rates. Also, Islamic banks do not lend to alcohol and gambling business. 

Borrowers share the profits with the lender instead of paying interest. Because of this, Islamic banks shunned the risky asset classes responsible for the 2008 financial crisis.

What is e-banking?

Internet banking, also known as Internet banking or online banking, is an electronic payment system that allows a customer of a bank or financial institution to make financial or non-financial transactions online via the Internet.

This service provides online access to virtually all banking services traditionally available through a local branch, including money transfers, deposits, and online customer bill payments. 

After registering in the online banking system, the client does not need to visit the bank every time he wants to use the banking service. It is not only convenient, but also a safe method of banking operations.

Unique user/customer IDs and passwords secure online banking portals.

Features of electronic banking

Here are some of the best e-banking features:

  1. Provides access to financial as well as non-financial banking services
  2. Possibility to check the bank balance at any time
  3. Pay bills and transfer funds to other accounts
  4. Keep a check for mortgages, loans, savings linked to a bank account
  5. Safe and secure way of banking
  6. Protected by a unique ID and password
  7. Customers can apply for a checkbook
  8. Buy general insurance
  9. Set up or cancel automatic recurring payments and standing orders
  10. Keep track of investments linked to a bank account

History of electronic banking

For decades, financial institutions have used powerful computer networks to automate millions of daily transactions.

In the 1950s, Bank of America was one of the first institutions to develop the idea that electronic computers could take over the banking tasks of processing checks and balancing accounts, which were extremely labor intensive at the time.

Other institutions have gradually joined the effort and moved from using paper checks to fully electronic banking.

The first electronic banking machines could keep a record of each customer’s deposits and withdrawals, instantly provide account balance information, track overdrafts, stop payments, and hold funds.

The machines that do this job today are as accurate and reliable as the banking industry demands.

The Importance of Electronic Banking

We will look at the importance of e-banking for banks, individuals and businesses separately.

Banks

  1. Lower Transaction Costs – Electronic transactions are the cheapest means of transactions.
  2. Reduced chance of human error – Since they transmit information electronically, there is no room for human error.
  3. Less paperwork – digital records reduce paperwork and simplify the process. In addition, it is environmentally friendly.
  4. Reduced Fixed Costs – Less need for branches, resulting in lower fixed costs.
  5. More loyal customers – Since e-banking services are customer-friendly, banks get higher loyalty from their customers.

Clients

  1. Convenience – The client can access their account and make transactions from anywhere 24x7x365.
  2. Lower transaction cost – since the customer does not need to visit the branch for each transaction, this saves him time and money.
  3. No geographic barriers. In traditional banking systems, geographic distances can hinder certain banking operations. However, with e-banking, geographic barriers are decreasing.

Companies

  1. Checking accounts. Business owners and designated employees can quickly access accounts using the online banking interface. This allows them to view account activity as well as keep the account running smoothly.
  2. Productivity increase. Electronic banking increases productivity. This allows you to automate recurring monthly payments and a host of other features to improve business productivity.
  3. Lower costs. Typically, costs in a banking relationship are based on the resources used. If a certain business requires additional assistance with bank transfers, deposits, etc., the bank charges them higher fees. With online banking, they minimize these costs.
  4. Smaller errors. E-banking helps reduce errors in regular banking transactions. Bad handwriting, misinformation, etc. can lead to costly errors. In addition, simply viewing account activity improves the accuracy of financial transactions.
  5. Reducing fraud. E-banking provides a digital footprint for all employees who have the power to change banking activities. In this way, businesses have a better view of their transactions, which makes it harder for scammers to play a cruel joke.

Electronic banking services

Simply put, e-banking refers to a banking agreement by which a customer can carry out various transactions over the Internet, which is fully encrypted, that is, completely safe and secure.

E-banking facilitates paperless/cashless transactions. It also comes with a number of rights, obligations and fees. Range of services covered by e-banking:

1. Internet banking

Customers are provided with a banking service through which customers can perform several monetary and non-monetary transactions using the Internet, website or application of the bank.

2. Mobile banking

Almost all banks have developed their own mobile applications with which you can make transactions at your fingertips.

This requires four things: a smartphone, the internet, a mobile app, and a mobile banking service included in your bank account.

3. ATM

Automated teller machine, commonly known as ATM, is one of the most common and original services provided within electronic banking.

Not only is it a machine that you can use to withdraw cash as needed, but it also allows you to check your account status, transfer funds, deposit funds, change your mobile phone number, change your debit card PIN, i.e. personal identification number.

4. Debit card

Debit cards are used in our daily lives to complete a finite number of transactions.

However, debit cards are linked to the customer’s bank account, so the customer only needs to swipe the card to pay at points of sale (POS), make online purchases, withdraw money from an ATM.

Thus, the amount is debited from the client’s account directly.

5. Credit Card

Just like a debit card, a credit card is also a payment card that a bank issues to customers upon their request, after checking their credit score and history.

This allows the cardholder to borrow up to a pre-approved limit and make payments. The banks that issued the card provide a limit.

The cardholder promises to pay the amount within the agreed time, with some fees for using the credit card.

6. Point of sale (POS)

Point of sale system – a point, date, time and place (point of sale) where the buyer pays with a plastic card for a purchase or service received.

7. Electronic Data Interchange (EDI)

EDI is a new way for businesses to exchange information electronically using a standardized format traditionally used on paper.

8. Electronic Funds Transfer (EFT)

When money is transferred electronically from one bank to another, it is called an electronic funds transfer. It covers direct debit, direct deposits, wire transfers, OIL, RTGS, IMPS, etc.

e-banking levels

Banks offer various types of services through electronic banking platforms. These are the three levels of service:

1. This is the basic level of service that banks offer through their websites.

Through this service, the bank offers customers information about its products and services. In addition, some banks may also receive and respond to e-mail inquiries.

2. At this level, banks allow their customers to submit instructions or applications for various services, check their account balance, etc.

However, banks do not allow their customers to make any financial transactions on their accounts.

3. At the third level, banks allow their customers to manage their accounts for transferring funds, paying bills, buying and redeeming securities, etc.

Most traditional banks offer e-banking services as an additional method of providing services. In addition, many new banks provide banking services primarily through the Internet or other electronic delivery channels.

In addition, some banks operate only on the Internet and do not have a physical branch in the country.

Benefits of e-banking

  1. This allows for digital payments, which promotes transparency.
  2. It provides 24/7 access to your bank account.
  3. Notifications, alerts and updates
  4. This reduces transaction costs for banks.
  5. Convenient and easy

6. Better rates, lower fees

The lack of significant infrastructure and overheads allow banks to directly pay higher interest or annual percentage yield (APY) on savings.

The most generous ones offer 1-2% more than what you earn from traditional bank accounts, a gap that can really add up with a high balance.

While some direct banks with particularly generous APY only offer savings accounts, most offer other options including high-yielding savings accounts,  certificates of deposit  (CDs), and CDs with no early withdrawal penalty.

7. Better online experience

Traditional banks are investing heavily in improving their virtual presence and service, including launching applications and updating websites. But overall, direct banks seem to retain the edge when it comes to the online banking experience.

A 2018 survey of retail customers by Bain and Company found that traditional banks lag behind direct banks in the areas most important to customers, including quality of banking, speed and ease of transactions.

In short, any type of banking transaction performed electronically is referred to as electronic banking.

It is a safe, fast and convenient electronic banking tool that allows customers to use online banking services anytime during the day and anywhere via the Internet, for which customers used to visit banks.

Cons of Internet banking

Banking with an online institution also comes with its fair share of downsides and inconveniences.

1. No personal relationships

A traditional bank provides an opportunity to get to know the staff of the local branch.

This can be an advantage if and when you need additional financial services, such as a loan, or when you need to make changes to your banking arrangements.

The bank manager generally has the discretion to change the terms of your account if your personal circumstances change or to waive a mandatory or service fee.

2. Less flexibility with transactions

Personal contact with a bank employee is not only getting to know you and your finances. For some transactions and problems, it is invaluable to go to a bank branch.

Take, for example, depositing funds, the simplest banking operation. Depositing a Check  This is possible with Direct Banking, using its banking application to capture both the front and back of a check.

However, depositing cash at many online banks is downright cumbersome.

So it’s worth checking the bank’s policy if you plan on doing this often. International transactions can also be more difficult or even impossible with some direct banks.

3. Lack of own ATMs

Since they do not have their own banking machines, online banks rely on customers using one or more ATM networks such as AllPoint and Cirrus.

While these systems offer access to tens of thousands of cars across the country – even around the world – it’s worth checking out the available cars near where you live and work.

Also check for any fees you may incur for using an ATM. While many direct banks offer free access to online ATMs or refund any monthly fees you incur, there are sometimes limits on the number of free ATM transactions you can make in a given month.

4. More limited services

Some direct banks may not offer all the comprehensive financial services offered by traditional banks, such as insurance and brokerage accounts.

Traditional banks sometimes offer special services to regular customers, such as preferential rates and investment advice at no extra charge.

In addition, regular services such as notarization and bank signature guarantee are not available online.

Types of money transfers using electronic banking

OIL

National Electronic Funds Transfer (NEFT) is a payment system that allows one-to-one money transfers. 

  1. Using OIL, individuals and legal entities can make electronic transfers of funds from any branch of the bank to any individual or legal entity with an account in any other branch of the country’s bank.
  2. The NEFT service is available 24×7 in Internet banking. But this is a time-limited service at a bank branch.
  3. Usually, the OIL transfer is successfully completed within 30 minutes. However, the time can stretch up to 2-3 hours, and can be completed in as little as 10 minutes.

RTGS

Real-time gross settlement (RTGS) is a continuous settlement of funds individually in order. 

  1. This payment system ensures that funds are credited to the recipient’s account almost immediately, and not after a certain time, as is the case with other payment methods, such as OIL.
  2. RBI tracks RTGS transactions so successful transfers are irreversible. They mainly used this method for large transfers.
  3. The minimum amount to transfer via RTGS is 2 lakhs. The maximum transfer amount via RTGS is not limited.
  4. Like OIL, RTGS is also available online 24×7

IMPS

Immediate Payment System (IMPS) is another payment method that transfers funds in real time. 

  1. IMPS is used to transfer funds instantly within banks.
  2. IMPS is an inexpensive way to transfer funds. Other funds transfer vehicles such as OIL and RTGS charge significantly higher fees than IMPS.
  3. It does not require details such as account number, IFSC code, etc. The recipient’s phone number is sufficient. 

FAQ

1. How can I use internet banking?

To use Internet banking, you must have a valid account with any bank or financial institution. You need to register for online banking at the bank to get a unique ID and password.

To do this, you can download the internet banking application form from your bank’s internet banking website or visit the bank and fill out the form.

2. Can I change my internet banking password?

After the first login to the Internet banking portal, all users must change the password issued by the bank.

In addition, you must change your password at least once every two months.

3. Precautions for internet banking

When using internet banking, you need to make sure of a few things:

  1. Avoid using public Wi-Fi or use a VPN software.
  2. Use Genuine Antivirus Software
  3. Update your smartphone OS
  4. Change your login password at least once every two months
  5. Avoid entering the Internet banking portal through email programs.
  6. Do not use public computers to log into the Internet Banking Portal.

4. What is User ID in Net-Banking?

Most banks provide an internet banking ID and password when applying for a new account.

If you have not received your user ID and password, you need to apply for internet banking at the bank by completing and submitting the application form.

After verification, you will receive a unique user ID and password to enter Internet banking.

5. Are e-banking and Internet banking the same thing?

No. Electronic banking is a broad term or category that includes various forms of banking services and transactions carried out by electronic means such as internet banking, mobile banking, telebanking, ATMs, debit cards and credit cards.

Internet banking is one of the latest additions to electronic banking . Thus, Internet banking is part of electronic banking.

In conclusion, any type of banking transaction performed electronically falls under the category of electronic banking.

It is a secure, fast and convenient e-banking tool that allows customers to use online banking services anytime during the day and anywhere via the Internet. 

If this was helpful, please share with your family and friends, and leave your feedback in the comments below. 

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