The Concept of Electronic Banking. Science has made the world more dynamic and progressive. It has brought changes in economy, politics, culture, society and the people themselves. In the finance and banking sector, this change is more tremendous. Because the use of computers in banking ensured mathematical accuracy and promptness. It has made banking transactions more speedy, easy and comfortable. Today, the client needs not carry a checkbook or cash money rather it is enough for him just to carry a plastic card. But the spread of electronic banking in our country is very limited.
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The Concept of Electronic Banking – Generally speaking, electronic banking systems are electronic systems where the transactions and relationships between the bank and clients grow through electronic devices instead of paper documents. In other words, E-banking means that kind of banking in which the bank uses electronic or satellite-based computerized devices for ensuring promptness and accuracy in banking transactions.
The Concept of Electronic Banking
So, E-banking makes the bank and its clients enable –
- To deposit and withdraw money automatically;
- To transfer money electronically from one bank to another promptly;
- To open L/C electronically, pay bills without going to the bank; and
- To operate internal banking transactions electronically.
Objectives of Electronic Banking.
The objectives of Electronic Banking have to be discussed from two perspectives.
- A. Objectives from the perspectives of the bank;
- B. Objectives from the perspectives of clients
However, the objectives may be presented in the diagram also.
From bank From the clients
|From the clients|
|1. Providing retail services and reducing costs through bank networks.
2. Reducing administrative costs by reducing
3. Increasing income through fees.
4. Expanding services.
1. Acquiring data and information in time.
2. Lessening time and cost in transactions.
3. Security of account.the number of workers.
Basic components of E-Banking.
The system of E-Banking contains the following four components :
1. Banking system software –
Which is settled up in the computer for providing the clients with a different type of transaction facilities.
2. Communication network –
Both dial-up telephone and radio link are being used as a communication network.
3. Delivery channel –
Banksy, Euroclear, SWIFT, etc. are being used in corporate banking, small business banking and even in individual and family banking.
4. switching system –
The switching system is being used for transferring banking transactions in the right place through the computer.
Kinds of E-banking.
Primarily, E-banking is of two kinds –
- Retail electronic banking services.
Wholesale electronic banking.
These two types contain some other system which is shown in the following diagram-
|Retail electronic banking||Wholesale electronic banking|
Point of sale
Retail Automated Clearing House (ACH)
Corporate Automated Clearing House (ACH)
The problem of E-Banking.
There are some problems of E-banking as –
Firstly, Trickery and improper uses are the main issues of E-banking today. In spite of the guarantee of security. clients always remain anxious if anybody brings changes in his account through improper use. However, the use of SET (Secured Electronic Transaction) and cryptographic devices has lessened the fear of insecurity.
Secondly, It is said that the use of computers in banking many intricate the very problem of employment. especially in developing countries.
Thirdly, the Conservativeness of the clients as well as their inability to use electronic devices is important: barriers in the way of E-banking.
Fourthly, Limitations of banks in introducing E-banking in another problem in the application of electronic banking.
In a nutshell –
The Concept of Electronic Banking has transformed the very process of banking from the manual to the electronic one. It made the banking transactions more easy, speedy and comfortable. However, there are some risks in E-Banking which sometimes make the clients anxious about the security of his account. So new devices and techniques are being introduced to make it more secure and reliable.