Online banking, also known as internet banking, e-banking, or virtual banking, refers to carrying out banking operations on the Internet. For example, it may include paying bills, transferring money, or checking one’s balance online. It also refers to setting up regular payments online.
‘Online,’ in this context, means ‘on the Internet.’ We refer to this type of banking and other innovations in the world of finance as part of fintech, which stands for financial technology.
Virtually every bank today offers the service. Customers can conduct their financial affairs through the Internet rather than having to come into the branch.
You can conduct online banking from your computer, tablet, or smartphone. According to banks and most customers, the main advantages online banking offers are permanent access to one’s account. It is also much cheaper and accessible from almost anywhere.
If you do not currently have an internet banking facility and want it, talk to your bank. Most financial institutions will give you the choice of having a telephoning or internet banking service. In fact, you can have both.
They will give you a password and username. Some banks let you choose them. In some cases, they may change regularly. In fact, with some accounts, the customer has to enter a different code each time.
Finance Glad has the following definition of online banking:
“1. The process of managing one’s bank account over the Internet. Customers conduct their transactions electronically (online). 2. The activity or process of operating as a bank over the Internet.”
History of online banking
Online banking has been around for much longer than most people realize. In fact, since the early 1980s. At the time, it was very different to what we have today.
In the early 1980s, online banking referred to the use of a terminal, keyboard, and monitor. People accessed their bank accounts via a landline telephone.
In the United States, online banking started in New York City in 1981. Citibank, Chase Manhattan, Manufacturers Hanover, and Chemical Bank started offering the service. However, it did not catch on.
In the UK, Bank of Scotland set up a home online banking service called ‘Homelink’ in 1983. It used the British Prestel ‘Viewlink’ system.
Initial resistance to online banking
The first bank in the US to offer internet banking to all its customers was Stanford Federal Credit Union in 1994. Other banks soon followed its lead.
At first, there was a great deal of resistance from customers. Some wondered how secure it was, while others were put off by how long it took to start up.
Since the turn of the millennium, online banking has expanded dramatically. First, it took off in the advanced economies, and then across the whole planet.
Online banking fraud
Banks tell us that banking online is super safe. However, according to Financial Fraud Action (FFA) UK, in the first half of 2014, online banking fraud in Britain reached ₤29.3 million ($47.6 million). This was a 71% increase on the previous year. Furthermore, this was only detected bank fraud.
The report authors suggested that despite more secure log-in processes, Internet fraudsters were gaining. In other words, British banks and their customers appear to be becoming more vulnerable to online fraud.
Banks are continuously trying to be at least one step ahead of cyber criminals. In September 2014, Barclays Bank introduced a biometric reader. This reader uses finger-vein authentication technology. This means that customers can access their online bank accounts with no need for codes or passwords.
Banking online forms part of E-Commerce. E-Commerce stands for Electronic Commerce.
Video – Online banking safety tips
John Ahlberg, Communications Director for eBanking at software company Gemalto, gives some tips on how you can protect yourself online.