DEFINITION: E-BANKING

Electronic banking is an umbrella term for the process by which a customer may
perform banking transactions electronically without visiting a brick-and-mortar
institution. E-banking is defined as the automated delivery of new and traditional banking
products and services directly to customers through electronic, interactive communication
channels. E-banking includes the systems that enable financial institution customers,
individuals or businesses, to access accounts, transact business, or obtain information on
financial products and services through a public or private network, including the
Internet.
The following terms all refer to one form or another of electronic banking: personal
computer (PC) banking, Internet banking, virtual banking, online banking, home banking,
remote electronic banking, and phone banking. PC banking and Internet or online
banking is the most frequently used designations. It should be noted, however, that the
terms used to describe the various types of electronic banking are often used
interchangeably.
Definition: PC Banking
PC banking is a form of online banking that enables customers to execute bank
transactions from a PC via a modem. In most PC banking ventures, the bank offers the
customer a proprietary financial software program that allows the customer to perform
financial transactions from his or her home computer. The customer then dials into the
bank with his or her modem, downloads data, and runs the programs that are resident on
the customers computer. In our country there are no banks that offer PC banking systems
which allow customers to obtain account balances and credit card statements, pay bills,
and transfer funds between accounts.
Definition: Internet Banking
Internet banking, sometimes called online banking, is an outgrowth of PC banking.
Internet banking uses the Internet as the delivery channel by which to conduct banking
activity, for example, transferring funds, paying bills, viewing checking and savings
account balances, paying mortgages, and purchasing financial instruments and
certificates of deposit. An Internet banking customer accesses his or her accounts from a
browser software that runs Internet banking programs resident on the banks World
Wide Web server, not on the users PC. NetBanker defines a true Internet bank as one
that provides account balances and some transactional capabilities to retail customers
over the World Wide Web. Internet banks are also known as virtual, cyber, net,
interactive, or web banks.
Objectives of E-Banking
Objectives of E-banking can be discussed under the following two broad headings:
A. From the Banks point of view:

1. Reducing the cost of banking services through expanding branch network.

2. Reducing the administrative cost of the bank by way of lowering the number of
employees involved in the banking business.
3. Reducing paper-based banking transactions.
4. Increasing earnings of the bank by charging different fees to its clients for the use of
ATM, debit & credit cards and electronic funds transfer facilities.
5. Strengthen the position of the bank in the competitive banking environment.
6. Expanding the services of the bank across the country and all over the world.
B. From the Clients Point of View:
1. To get different information (i.e. bank statement, account balance & list of
transactions) quickly and on time when it is required.
2. To deposit and withdraw money with maximum convenience.
3. To pay the price for the purchased product in most convenient way & with minimum
costs.
4. To get the facility making investment on-line, opening L/C at home or at office and
also to get the fund transfer facility.
5. To maintain high confidentiality regarding the clients business transactions.
6. To provide protection of the clients bank account.
Different Types of Internet Websites
A. Informational websites: It provides customers access to general information about the
financial institution and its products or services. There is certain risk issues involved in
informational websites that should be taken serious consideration. These are:
1. Potential liability and consumer violations for inaccurate or incomplete information
about products, services, and pricing presented on the website;
2. Potential access to confidential financial institution or customer information if the
website is not properly isolated from the financial institutions internal network;
3. Potential liability for spreading viruses and other malicious code to computers
communicating with the institutions website; and
4. Negative public perception if the institutions on-line services are disrupted or if its
website is defaced or otherwise presents inappropriate or offensive material.
B. Transactional Websites:
Transactional websites provide customers with the ability to conduct transactions through
the financial institutions website by initiating banking transactions or buying products
and services. Banking transactions can range from something as basic as a retail account
balance inquiry to a large business-to-business funds transfer. E-banking services, like
those delivered through other delivery channels, are typically classified based on the type
of customer they support. The following table lists some of the common retail and
wholesale e-banking services offered by financial institutions.

Common E-Banking Services

Retail Services

Wholesale Services

Account management

Account management

Bill payment and presentment

Cash management

New account opening

Consumer wire transfers

Small business loan applications, approvals, or

advances

Investment/Brokerage services

Commercial wire transfers

Loan application and approval

Business-to-business payments

Account aggregation

Employee benefits/pension administration

Risk Associated with Informational Websites

1. Security controls for safeguarding customer information;
2. Authentication processes necessary to initially verify the identity of new customers and
authenticate existing customers who access e-banking services;
3. Liability for unauthorized transactions;
4. Losses from fraud if the institution fails to verify the identity of individuals or
businesses applying for new accounts or credit on-line;
5. Possible violations of laws or regulations pertaining to consumer privacy, anti-money
laundering, anti-terrorism, or the content, timing, or delivery of required consumer
disclosures; and
6. Negative public perception, customer dissatisfaction, and potential liability resulting
from failure to process third-party payments as directed or within specified time frames,
lack of availability of on-line services, or unauthorized access to confidential customer
information during transmission or storage.
Some Frequently Used Terminologies in Electronic Banking
1. Automated Teller Machine (ATM)
An ATM card is a plastic card that looks like a credit card. It is a new concept in modern
banking, has already been introduced in Bangladesh to facilitate subscribers 24 hour cash
access through a plastic card. We can get cash, deposit money, check account balances,
and receive a copy of our statement--all electronically--by using ATM card and the

password to our account, which is called your Personal Identification Number, or PIN.
The objectives of using ATM are accelerating profit through gradually reducing internal
or operational costs, expanding the market for the concerned bank, providing world class
banking services to its customers and finally ensuring error free banking services.
2. Debit Card
A debit card, or check card is an ATM card plus. It can do all an ATM card can do and
more. Having all other benefits of ATM card, it can also be used to buys things anywhere
credit cards are accepted. The amount we can spend is limited by the amount in our bank
account. When we use it to buy something, the store contacts our bank electronically and
automatically deducts the purchase amount from our account. Debit cards are accepted
everywhere that credit cards are accepted, which makes them much more convenient than
regular ATM cards. The benefits of having debit card are it can be used as an ATM, can
be used to buy things, possible to avoid extra charges, and finally it is safer than cash as
well as a credit card.
3. Credit Card
The concept of credit cards revolves around deferred payments - the ability to purchase
products and services today and actually pay for it at a later time or over a period of time.
4. Home Banking
Home banking frees customers from visiting branches. Under Home banking, most
transactions are automated to enable them to check their account activities, transfer fund
and to open Letter of Credit (L/C) sitting their own desk with the help of a PC and a
telephone. Nowadays customers of some of the foreign banks are getting the facilities of
Home banking.
5. Tele Banking
Tele Banking allows customers to get access to their respective banking information 24
hours a day. Subscribers can update themselves by making a phone call. They can
transfer any amount of deposit to other accounts irrespective of location either from home
or office.
6. SWIFT
SWIFT is a bank owned non-profit co-operative servicing the financial community
worldwide. SWIFT is a highly secured messaging network that enables banks to send and
receive Fund Transfer, L/C related matter and other free format messages to and from any
banks active in the network. Having SWIFT facility, Commercial Banks in Bangladesh
are able to serve its customers more profitably by providing L/C, Payment and other
messages efficiently and with utmost security. In particular, it provides a great help for
the bank clients dealing with Imports, Exports and Remittances etc.