The Effect of the Internet Banking on Local Banks

Internet banking is a recent phenomenon that allows customers to conduct some or all transactions with a computer using the Internet. This allows customers to bank in their spare time at home, work or school. The option to do banking entirely online has had several effects on local banks, some positive and some negative.

More Competition

As soon as the Internet became a fixture in most households, Internet banking became an option for almost every bank in the nation. Start-up banks took note, and many sprouted up as Internet-only banks, eliminating many of the costs that traditional banks have. With lower operating costs, Internet-based banks are able to pass those savings on to their customers in the form of higher interest rates, leading to increased competition for traditional banks.

Reduced Costs

Internet banking reduces costs for banks, as transactions can be done without paper and without any teller, reducing the need for employees.

24-Hour Availability

Internet banking has made it possible for customers to do their banking at any time of the day or night, and this has had several effects on banks. 24-hour availability has increased customer satisfaction in many instances, as they don't need to wait for the bank to open to conduct business. 24-hour online availability has also led to customers expecting 24-hour customer support to deal with any problems that arise at any hour.

Customer Support

The advent of the Internet has helped banks manage customer support by creating online FAQ databases as well as online chat support.

Increased Training Needs

The Internet has increased the need for training, as customers frequently come into the bank and ask tellers questions about online banking issues. While specialists can be reached by phone, it is important for all employees who meet with customers to have at least a topical knowledge about technical aspects.