The Definition of eBanking
E-banking, or electronic banking, refers to all types of banking transactions performed electronically, without visiting a brick-and-mortar bank. Terms such as PC banking, Internet banking or online banking are sometimes used instead. For customers, this means performing actions such as paying bills, checking balances on their accounts, transferring funds and purchasing financial instruments remotely, using a personal computer.
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Two Types of E-Banking
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All you need is a computer. Most high-street banks today offer some e-banking services while still retaining physical offices. Their clients usually open an account at a physical branch and then use online banking for regular transactions. However, there are also Internet-only banks, which do not have any branches customers can go to. In some cases, such banks offer their services across national borders.
History
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It all started back in the '80s. According to "Banking and Finance on the Internet," a book edited by Mary J. Cronnin, online banking was first introduced in the early 1980s when four New York banks--Citibank, Chase Manhattan, Chemical and Manufacturers Hanover--offered home banking services. The systems were quite difficult to use and did not prove to be very popular. In the U.K., it was Nottingham Building Society that in 1983 offered the first electronic home banking system.
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How it Works
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You need a login and password. In order to use e-banking, customers need access to a personal computer and Internet connection. When they register for e-banking, they are asked to provide a login name and password. Additionally, each time they want to access their account they might be required to answer a security question, which minimizes the risk of someone else accessing their account.
Advantages of E-Banking
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You can do your banking from home. For customers, convenience is probably the main advantage, because it allows them to access their accounts whenever they want, and perform transactions from the comfort of their home. Almost equally important is ubiquity, because e-banking is available from any internet-connected computer anywhere in the world. For banks, e-banking means lower operating costs, because they need fewer branches and staff. It also means improved or sustained competitive position, since e-banking is today seen as an integral part of service banks offer. Last but not least, it means new revenue opportunities, because e-banking attracts new, usually higher-income clients.
Disadvantages of E-Banking
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Security on the Internet remains a big worry. For customers, it takes time to learn how to use e-banking facilities and, more importantly, to trust their bank's website and stop worrying about security issues. For banks, it means investing more in equipment and highly trained staff to run the website and necessary software.
Popularity
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Internet banking is becoming more popular. In June 2009, Cnet News published the results of a survey by Gartner Group, according to which 47 percent of Americans now bank online. In the U.K., it is 30 percent. In the same survey, Gartner found that in both countries, e-banking is more popular among higher-income households.
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References
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