Online banking, also known as virtual, internet or e-banking, is an electronic payment system that enables customers of a bank or other financial institution to process a wide variety of financial transactions through the bank's website. Since online banking is heavily dependent on Internet access and its prevalence, the first e-banking services emerged in New York in the early 1980s when it was known as "home banking". Today, account management via online banking is in great demand. Statistics show that 81% of bank customers in the US have used online banking services at least once in the past 12 months. Most banks are able to offer any service traditionally offered at a local branch online, including checking account balances or lists of recent transactions, paying bills, or transferring funds to someone else.
While e-banking has been around for some time, mobile banking is a relatively new service from financial institutions. Due to the growing popularity of smartphones, more and more banks are developing their own mobile banking applications. In 2015, 90% of US bank customers had used mobile banking to check their account balance or recent transactions in the past 12 months.
Some banks are working hard to develop new tools in addition to the traditional bank account management services available through their smartphone apps. For example, some banks in the UK now allow you to withdraw money from an ATM using their mobile app instead of your credit or debit card. In the meantime, a significant number of bank customers do without mobile banking due to concerns about trust and security.
Benefits of online banking
Convenience is one of the great advantages of online banking. It enables you to conduct almost any banking transaction at any time, 24 hours a day, 7 days a week. In addition to taking care of your daily account management activities, you can also communicate with your account manager or open new accounts including savings accounts and pension funds. Another great benefit is that you can do all of this with lower or no transaction fees as it reduces overhead and other costs for the bank when there are fewer or no physical branches to maintain. Some banks have gone a step further and have declared themselves to be branchless or pure internet institutes.
Disadvantages of online banking
While online banking is considered the most convenient way of managing your bank account, there may be times when a customer may prefer to have a face-to-face meeting with a bank employee for advice on more complex banking matters. Not having this option can be a major disadvantage when considering opening an account with a branchless bank. Another disadvantage of online banking is that it is completely dependent on Internet access. Although internet connections are commonplace at home or at work these days, there may be times when you do not have internet access. This problem is even more serious with mobile banking. For example, when you go on vacation, you can choose not to pay for mobile internet and therefore the only internet connection available to you could be public WiFi. In addition, it is advisable not to log into your online banking when using a public Wi-Fi connection, as your smartphone or other device is more susceptible to hackers if it is connected to an unsecured network.
This leads us to another disadvantage of online and mobile banking. Security issues are considered to be the biggest disadvantage of online banking. Although financial institutions work hard to prevent any data loss as it can jeopardize their entire business, bank account information is considered one of the main targets for hackers and various computer viruses. Meanwhile, 48% of bank customers in the US choose not to use mobile banking for security reasons.
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