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E-Banking System Benefits and Issues

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DOI: 10.9734/bpi/ieam/v11/9085D

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 Chapter 4
Print ISBN: 978-93-91215-18-7, eBook ISBN: 978-93-91215-19-4

E-Banking System Benefits and Issues

Hajera Fatima Khan1*
DOI: 10.9734/bpi/ieam/v11/9085D

ABSTRACT

E-Banking has become an important factor in the future development of banking industry. Electronic
banking or online banking is a service provide by many banks that allow handling of all types of
banking business, primarily over the internet by using the information technology and communication.
In many developed countries E- banking plays a very vital role due to the fact that it’s the cheapest
way of providing banking services. Beside this it also facilitated swift movement of funds domestically
and across borders. It is a border less entity permitting anytime, anywhere and anyhow banking to its
customers. E-Banking is one of the most successful on-line businesses, which save the time and
money of customers and companies. It is easily accessible anywhere to a PC, PDA, mobile device,
with an internet connection. It also enables the customer to conduct financial transactions on the
website of the institution, such as virtual bank, retail bank, a credit union etc. Despite of many benefits
of E-Banking, there are some factors which affect its usage. This research paper will introduce you to
e-banking, giving the meaning, functions, types, advantages and issues. In short e-banking is anytime
and anywhere banking.

Keywords: E-banking; E-commerce; information technology; customer satisfaction; etc.

1. INTRODUCTION
1.1 Background of the Study
Over decades, IT sector have significantly affected the banking industry all over the world. Banks and
other financial institutions worldwide have improved their functions as financial establishments
through embrace various information technologies. Advancements in IT have empower a lot of
commercial banks globally to adopt electronic banking to remain a significant player in this
technological generation. In order to improve the quality of customer service delivery and reduce
transaction cost, banks have invested to a great extent in ICT and have adopted ICT networks for
delivering a wide range of banking products and services. Banks all over the world have embraced
innovative banking technologies and e-banking services in recent years [1,2,3]. Presently, the banking
industry is using new online communication platforms to offer its customers value added services. E-
banking is such idea. Most of banks are using the Internet as a new distribution channel [4,5]. Many
organizations in the banking industry have implemented internet proficiencies, and are making use of
technology as a worthwhile opportunity for interface between financial service firms and their clients
[6-8]. Applications of computerized networks has reduced the cost of transactions and increased the
speed of service delivery substantially [9,10]. The nature of financial intermediaries made banks to
improve their production technology by focusing on distribution of products [11-14]. In other words, the
evolution of banking technology has been mainly driven by changes in distribution channels as we
see evidence from over-the counter (OTC), automated-teller-machine (ATM), telephone-banking, and
most recently internet banking (IB).

2. ELECTRONIC BANKING
The term “Electronic Banking” or “Internet banking” is defined as a remote banking services provided
by the authorized banks, or their representatives through devices operated either under the bank’s
_____________________________________________________________________________________________________
1
Accounting Department, College of Business Administration, University of Hail, Hail, Kingdom of Saudi Arabia.
*Corresponding author: E-mail: hajeratameem48@gmail.com;
 Insights into Economics and Management Vol. 11
E-Banking System Benefits and Issues

direct control or management or under the outsourcing agreement. In other words, e-banking is an
umbrella term for the process by which a customer may perform banking transactions electronically
without visiting a branch and also includes the systems that enable customers of banks, 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 [15,16].

The terms which are used to describe the various forms of e-banking are, personal computer (PC)
banking; Internet banking; virtual banking; online banking; home banking and remote electronic-
banking. E-banking also involves phone banking and the use of automated teller machines (ATMs).

E- banking is a process in which accounts can be accessed and manipulated to perform transactions
via internet by using personal computers, mobile devices and other web-based applications. These
banking helps bank customers to manage their transactions online without been physically present in
the banking hall or premises [17-19].

Online Banking services are a 24 hours link to an account information with view of all customer’s
banking transactions that enables him/her to access details regarding current, saving, overdraft
accounts, loan particulars, Letter of 2 Credit, check book status, exchange rate value of foreign
currencies and many other relevant details.

In addition to it, by using the online Banking Services customers can make local, National and
International remittances. These services also enable them to access and print a bank statement free
of cost without visiting the bank. Information technology extend a huge benefit to banks and financial
institutions to provide these services by exploiting an extensive public network infrastructure.

Fig. 1. E-commerce services

2.1 E- Banking Features

A. A bank customer can perform non transactional task through online banking by :

a. Viewing account balances.

b. Viewing last transactions.

c. Downloading bank statement.

d. Viewing images of cheques paid.
e. Requesting for the issuance of new cheque book.
f. Downloading periodic account statements.
g. Downloading applications for mobile banking, electronic banking etc.

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 Insights into Economics and Management Vol. 11
E-Banking System Benefits and Issues

B. Bank customers can perform banking task through online banking by:

a. Transferring funds between the customers linked account, national transfers and
international transfers.
b. Purchasing and selling of investments.
c. Loan applications and transactions, such as repayments of enrolments.
d. Credit card transactions.
e. Registering and payments of utilities bills.

C. Beside the above banking task a bank customer can also perform other task such as:

a. Financial institution administration.

b. Management of multiple users having varying levels at authority.

Fig. 2. Online shopping system

2.2 E-banking Objectives Rules and Services

2.2.1 Objectives

The main objectives of the “E-Banking Rules” are as under:

A. The main objective of e-banking rule is to provide guidance to banks on implementation of

security controls in their e-banking products, services and effective management of risks
associated.
B. The e-banking rules are not aimed to discouraging banks from innovation and creativity
.It mainly ensures on customer’s facilitation.

2.2.2 Rules

The main “E-Banking Rules” are as under:

In order to enable banks to protect customers’ information, reduce fraud incidents, and manage e-
banking related risks as also to minimize the number of complaints from the e-banking users, SAMA

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 Insights into Economics and Management Vol. 11
E-Banking System Benefits and Issues

(Saudi Arabian Monetary Agency) has decided to issue new “E-Banking Rules”. These Rules will
replace the “Internet Banking Security Guidelines” issued in the year 2001.

The new E-Banking Rules are risk-based and set out SAMA’s prudential regulatory approach to the
supervision of e-banking services. They provided guidance to banks on risk management in electronic
banking and emphasized on:

A. Board of directors and senior management accountability.

B. Customer protection and education.
C. Customer privacy.
D. Minimum security standards consistent with best international standards.
E. Proper incident management and reporting to SAMA.
F. Proper availability management.
G. Capacity building and business continuity planning.

Banks are expected to review and, if required, to modify their existing risk management policies and
processes to bring their e-banking activities in line with these Rules.

2.2.3Services

“E-Banking” offers various services to its customers the most common services are as under:

A Transactional Activities like transfer of funds, payment of bills, loan applications and other
transactions.
B No transactional activities like request for issuing of cheque book stop or make payments,
online statements, updating the contact information of a customer.

3. RESEARCH METHODOLOGY

The primary source of the information in this research study is the secondary data. The available
information on internet regarding the E: Banking has been extensively used to complete this paper.
Beside this the study also completed by making the use of various sources related to the subject of
study like research articles, scientific journals, websites, and some banking and e-banking books.

3.1 Objectives of the Study

The key intention of this paper is to evaluate those factors to manipulate the nature of customer
towards E- banking and there growing tendency towards the online financial institutions.

A. To get full acquaintance of E- banking and its prospects.

B. To get full acquaintance of E-Banking Objectives, Rules and Services.
C. To find benefits of E-banking and issues of E-banking.
D. To make suggestions on the basis of findings.

3.2 Significance of the Study

The findings of this study would be useful to bank’s management as it gives a clear insight of the
characteristics of the internet banking adoption problems. This study would also assist bank’s
management and stakeholders in the banking industry to identify and formulate strategies that will
promote internet banking service. In addition, the study would be of significance to further studies
since the findings obtained would provide ready reference that would be used as literature for other
researchers conducting studies on internet banking.

3.3 Benefits of Internet Banking

The benefits discussed below are from the bank’s customer’s point of view. By the use of e-banking
services a customer can save its significant time and money. These kinds of services also bring
efficiency in customer relationship management (CRM).

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E-Banking System Benefits and Issues

3.4 Services

Technology has made it extremely convenient for the bank and for the customer to access easily by
simply logging in on the banks website. e-services include vast services such as financial planning
capabilities, functional budgeting and forecasting tools, loan calculators, investment analysis tools and
equity trading platforms. Beside this most banks also provide the facility of online tax forms and tax
preparation.

3.5 Convenience

This is the single most important benefits that outweigh any shortcoming of internet banking. Making
transactions and payments right from the comfort of home or office at the click of a button without
even having to step out is a facility none would like to forego. Keeping a track of accounts through the
internet is much faster and convenient as compared to going to the bank for the same. Even non
transactional facilities like ordering check books online; updating accounts, enquiring about interest
rates of various financial products etc is much simpler by it.

3.6 Better Rates

This means that a portion of savings accrued by the bank can be passed on to the customers in by
paying them higher rates on deposits and charging lower rates on loans. To encourage e- banking
among customers most banks offer minimum or no deposit accounts and also charges lower penalties
on early withdrawal of Fixed Deposits. This type of banking implies lesser physical efforts and higher
benefits. The need to acquire larger spaces for offices and employee more staff to deal with the
customers is significantly reduced making it financially beneficial to the banks.

3.7 Mobility

E- banking has a step further in the last few years in the form of mobile internet banking which
accords unlimited mobility to the customer who can now handle financial transactions even while on
the move.

3.8 Increased Comfort and Timesaving

E-Banking transactions can be made 24*7, without requiring the physical interaction with the bank.

3.9 Quick and Continuous Access to Information

Corporations will have easier access to information as, they can check on multiple accounts at the
click of a button.

3.10 Better Cash Management

E-banking facilities speed up cash cycle and increases efficiency of business processes as large
variety of cash management instruments are available on Internet sites of Estonian banks.

3.11 Speed

The response of this medium of transaction is very fast; therefore customers can actually wait till the
last minute before transferring the funds.

3.12 Funds Management

Customers can download their transactions history of different accounts and do a “what-if” analysis on
their own, before affecting any transaction on the web. This leads to better funds management.

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E-Banking System Benefits and Issues

Beside the above benefits discussed E-banking also helps to view and print balance enquiry, view
transaction history, transfer of funds, payment of online utility bills, online purchases etc. With the use
of E-banking customer can also apply for various types of auto, mortgage, home, equity, students or
personal loans.

3.13 Issues of E- Banking

Besides providing enormous benefits to its customers in terms of the ease of cost transactions, e-
banking also possess certain issues in regulating, supervising, designing and implementing the
macroeconomic policies by creating problems for bank management, regulatory and supervisory
authorities. They originate not only for potential or cross border transactions but also for domestic
transactions which are based upon technology applications which causes many security related
issues.

3.14 Relationships

Online transactions take a toll on the relationship with the banker which the traditional visit to the
branch office used to foster. Personal relationship with the staff at the banks helps a customer when
requesting for faster loan approval or any special service which may not be available easily to the
public. Additionally by personal contact a banker would provide essential financial advices which are
beneficial to the customer.

3.15 Complex Transactions

Certain services such as notarization and bank’s signature cannot be accomplished online. Solving
specific issues and complaints requires physical visit to the bank and cannot be achieved through the
internet.

3.16 Security

This is the biggest pitfall of the internet banking scheme which needs to be guarded against by the
common customer. Despite the host of sophisticated encryption software is designed to protect your
account there is always a scope of hacking by smart elements in the cyber world. Hacker attacks,
phishing, malware and other unauthorized activity are common on the net.

3.17 The Ability to Adopt Global Technology to Local Requirements

An adequate level of infrastructure and human capacity building are required before developing
countries can adopt the global technology for their local requirements.

3.18 The Ability to Strengthen Public Support for E-Finance

Historically, most e-finance initiatives in developing countries have been the result of cooperative
efforts between the private and public sectors.

4. CONCLUSION

The present Study concludes that e-banking has fundamentally changed the business of banking by
providing immense opportunities to its customers. It has fundamentally changed the business of
banking by scaling borders and bringing about new opportunities. Globally, it has strongly impacted
the strategic business considerations for banks by significantly cutting down costs of delivery and
transactions. One of the benefits that banks experience when using e banking is increased customer
satisfaction. This due to that customers may access their accounts whenever, from anywhere, and
they get involved more, this creating relationships with banks.

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 Insights into Economics and Management Vol. 11
E-Banking System Benefits and Issues

In the present scenario majority of the customers are accepting online banking transactions because
of its many favorable factors. It is a border less entity permitting anytime, anywhere and
anyhow banking to its customers. On the other hand, it also aggravates the use of traditional banking
risk. There is a significant relationship between e- banking and customer satisfaction. The
customers are committed to using the service, as well as banks is able to retain the major interest of
its users.

Beside the enormous benefits e-banking is a difficult business and face a lot of challenges like
usefulness, security and privacy. Many customers think that it is not easy to use online banking
system as people want their money to be safe and secure. To overcome with the issues, the banks
should provide more facilities and convenience to the customers by taking all steps and measures to
make online transactions safer and secure for the customers. But e-banking is a difficult business and
banks face a lot of challenges.

The study also recommends that the bank should provide proper and continuous training for its
employees, create deep awareness about internet banking technology to the community; the
government should also enforce different policies that supports installation of better ICT infrastructure
in the banks. In addition, the bank should increase security to gain trust from customers on internet
banking usage.

COMPETING INTERESTS

Author has declared that no competing interests exist.

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E-Banking System Benefits and Issues

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E-Banking System Benefits and Issues

Biography of author(s)

Hajera Fatima Khan

Accounting Department, College of Business Administration, University of Hail, Hail, Kingdom of Saudi Arabia.

Research and Academic Experience: 17 years.

Research Area: Accounting.

Number of Published Papers: 12.

Any Other Remarkable Point(s): She is a M.Com. B.ed. M.Phil. and holds a doctorate in Accounting and has been a senior
lecture in teaching of institutions of higher learning.
_________________________________________________________________________________
© Copyright (2021): Author(s). The licensee is the publisher (B P International).

DISCLAIMER
This chapter is an extended version of the article published by the same author(s) in the following journal.
American Research Journal of Business and Management, 3(1); 1-7, 2017.

48

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