Role of Electronic Banking in Financial Institutions

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Internet has been a huge part of our daily lives, as we Google almost everything that we need and look up every fact and information that we don't know. With the economy undergoing many changes that leads it directly to the digital world many banking institutions has also started to realize the possible roles that the Internet could play in terms of how they would cater their customers.
And electronic banking may probably the newest delivery channel of many banking institutions. So let's take a look at what electronic banking is and its role in developing the different financial institutions that we know today.

What is Electronic Banking?

By definition electronic banking or e-banking refers to different services that allows consumers to request information and carry out most of the retail banking services through the use of a mobile phone, television and the Internet. There are different types of transactions that a customer and even banking institutions can do via electronic banking, that are divided into different categories:

1. Non-transactional task

• viewing of account balances and recent transactions
• acquiring copies of their bank statements and periodic bank statements
• ordering new cheque books
• downloading different mobile applications to access their accounts, such as M-banking, E-banking, etc.

2. Transactional task

• fund transfers and wire transfers
• investment purchase or sale
• loan applications and transactions
• paying third party service providers

3. Managing multiple user accounts that has different levels of authority
4. Transaction approval process
5. Financial administration

Impact of Electronic Banking to Bank Security

Due to the importance of providing security to the customer's financial information, many bank institutions have also taken their initiatives in setting up different security processes in order to reduce any risks of an unauthorized access to their customer's accounts. Banking institutions have utilized different methods to ensure their customer's security and this includes that following:

1. Secure online website that bank customers can access at all times.
2. PIN/TAN system which requires the customer's to key-in their password to authenticate their transactions.
3. Signature based online banking in which all of the transactions made by the customer are all signed and encrypted digitally.

With the recent issues with the phishing and pharming attacks banks institutions has also enforced digital certificates to their systems that uses a class 3 card readers to prevent any manipulation of any transaction.

Import Role of Electronic Banking to Financial Institutions

With the continual innovations in electronic banking, we can be assured that it can still improve a bank's efficiency and competitiveness in terms of providing their existing and any of their potential customers with services that can provide them with a great deal of convenience.

Although electronic banking has also cause some issues and concerns to different financial institutions, they should still have to realize that most of these problems are can be attributed to the lax credit standards from borrowers and their counterparties and poor risk management.