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Internet Banking

With internet access increasing to everyone, Internet banking (also referred as e banking) has emerged to be the is the latest wonder for delivery of banking products & services. Internet banking has changed the banking industry and is having the major effects on banking relationships. Banking is now no longer confined to the were one has to approach the branch in person, to withdraw cash or deposit a cheque or request a statement of accounts. In true Internet banking, any inquiry or transaction is processed online without any reference to the branch (anywhere banking) at any time. Providing Internet banking has become a "need to have" than a "nice to have" service. The net banking, thus, now is more of a norm rather than an exception in many developing countries due to the fact that it is the cheapest way of providing banking services. The precursor for the modern home online banking services were the distance banking services over electronic media from the early 1980s. The term online became popular in the late '80s and referred to the use of a terminal, keyboard and TV (or monitor) to access the banking system using a phone line. Home banking can also refer to the use of a numeric

keypad to send tones down a phone line with instructions to the bank. Online services started in New York in 1981 when four of the citys major banks (Citibank, Chase Manhattan, Chemical and Manufacturers Hanover) offered home banking services[1] using the videotex system. Because of the commercial failure of videotex these banking services never became popular except in France where the use of videotex (Minitel) was subsidised by the telecom provider and the UK, where the Prestel system was used. The UK's first home online banking services[2] was set up by Bank of Scotland for customers of the Nottingham Building Society (NBS) in 1983.[3] The system used was based on the UK's Prestel system and used a computer, such as the BBC Micro, or keyboard (Tandata Td1400) connected to the telephone system and television set. The system (known as 'Homelink') allowed on-line viewing of statements, bank transfers and bill payments. In order to make bank transfers and bill payments, a written instruction giving details of the intended recipient had to be sent to the NBS who set the details up on the Homelink system. Typical recipients were gas, electricity and telephone companies and accounts with other banks. Details of payments to be made were input into the NBS system by the account holder via Prestel.


There are several different types of banks within the industry, such as: Retail banks (Bank of America, Wachovia/Wells Fargo), Internet-only banks (ING, E*Trade), Brokerage (Merrill Lynch/BofA), Discount brokers (Charles Schwab, TD Ameritrade), and Investment banks (Goldman Sachs, Morgan Stanley). We are focusing on Retail Banking (Wachovia, Bank of America) and Internet-only Banking (ING, E*Trade) This section examines the impact that the internet has had on both the structure and competition within the banking industry.

Economics of participants

The internet has had a huge impact on banking over the past decade. Many people are switching from branch banking/retail banking to the seemingly more convenient online banking. This trend is growing and we are observing more and more changes within this relatively new industry everyday. The internet originally lead to the creation of online banks which were previously retail banks. With the success in online banking came the creation of virtual banks which have no branches and are solely online (ING and E*Trade) Since the start some companies that have become true internet banks have seen considerable success over ones that started out as a Retail bank.

Business models

Individuals, Businesses, and Government are the customersfor bank industry in general, however internet-only bank has only online banking subscriber as a customer.
Online Banking provides certain conveniences. (24/7 and accessible from anywhere) and there are banking functions that can be better serviced through Internet(balance checking, bill payment, and money transfer) Internet-only bank(virtual-bank) is a new trend and it provides a extended banking functionalities with minimum operating cost. But the success of internet-only banks depends on how many and how much people willingness to do banking through Internet. Traditional bank will stay since there are people who prefer face-to-face communication, and sometime it may be necessary.

Competitive strategy

Much like retail banks for the internet most of the same strategy to make your bank successful is required to do well. The Competition today is different then before now there is more that people are looking for the environment is different. People work from home and more small business exist now that need banking services. The internet brings another step to the table for a Bank with more access to the options that you have to offer or more that you can add.