Online Banking
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Definition
A system allowing individuals to perform banking activities at home, via the internet. Some online banks are traditional banks which also offer online banking, while others are online only and have no physical presence. Online banking through traditional banks enable customers to perform all routine transactions, such as account transfers, balance inquiries, bill payments, and stop-payment requests, and some even offer online loan and credit card applications. [1]
History
The idea of online banking was first experimented with as early as the 1980’s, but it was not until 1995 when it was first announced for regular client use. President Savings Bank first developed the idea and it quickly caught on to companies such as Wells Fargo, Chase Manhattan and Security First Network Bank. Today nearly all banks operate using the internet and some even operate solely through the internet.
Soon after the idea of online banking became mainstream, many inventors predicted that it would only be a matter of time until it completely replaced conventional methods. Time has proven this hypothesis to be untrue as a result of many customers still not trusting the idea. Some have been haunted by the idea after hearing first-hand stories of online fraud, or even experiencing it themselves.
Regardless of skeptical customers, online banking is truly the way of the future. It is estimated that by the year 2010 nearly 55 million families in the United States will be active online banking users. This is probable due to the number of customers within the online banking industry increasing at such an exponential rate. [2]
Significance
Online banking is often most appealing as a result of its availability. Anything from paying bills to checking credit card balances to making account transfers can be done online easily through most banks. Each of the top ten largest banks in the United States supports the use of online banking to their customers including: 1.) Citigroup 2.) Bank of America Corp. 3.) J. P. Morgan Chase & Company 4.) Wachovia Corp. 5.) Taunus Corp. 6.) Wells Fargo & Company 7.) HSBC North America Inc. 8.) U.S. Bancorp 9.) Bank of the New York Mellon Corp. 10.) Suntrust, Inc. [3]
Simply having an internet connection can enable a customer to take advantage of online banking opportunities. This means availability 24 hours a day, 7 days a week and from nearly anywhere imaginable. Many customers have made banking a mobile activity through the use of smartphones[[4]]. Viewing account balances and making transactions was typically done over a phone line but has now been simplified to the form of online banking. Online banking equates to simplicity in regards to the management of personal finances. [5]
Advantages
Online banking comes with an array of advantages which often times give it an upper hand over conventional banking including: convenience, speed, and productivity. Biggest advantages of banking online include:
1.) Downloading Banking Transactions: One can download their banking transactions directly into computer financial software as pleased. This is very helpful for someone using an ATM/ Debit card and having the ability to keep balances current and up to date with financial software.
2.) Downloading Credit Card Transactions: One can download credit card transactions directly onto financial software. Entering credit card charges by hand is truly a waste of time when downloading them is an alternative. This is a large advantage of online banking because entering credit card transactions by hand is typically very tedious and time consuming.
3.) Paying Bills Online: Online bill payer is easier than conventional bill paying as well as quicker and less expensive. Paying bills online saves the cost of envelopes and postage stamps. Paying bills online means that checks are generated and mailed by the bank after the user gives authorization. This also means that vendor names are recorded automatically as well as the check numbers.
4.) Quick Verification of Bank Balances: The use of online banking services dramatically increases one’s ability to easily and quickly check the balance of an active account. This truly eliminates the need to wait for a bank statement or calling the bank to get a balance. An up to date balance can be recorded by taking the available bank’s balance and subtracting any outstanding checks as well as recording any outstanding deposits.
5.) Eliminate Bill Paying: Each banking vendor offers an “auto-debit” or “auto-charge” feature. This means that the bill is automatically paid through ones bank or credit card account. This results in no longer needing to manually pay bills. [6]
Disadvantages
Though there are many benefits of online banking, there can also be several drawbacks. In order to begin online banking an account is needed with an internet service provider (ISP) and this means a monthly bill. There are also many security concerns regarding banking online. This means that a “hacker” has the potential of accessing bank accounts as well as other personal information. The original set-up for online bill paying can be time consuming, yet the end result is typically a time-saver. It has also been noticed that switching banks online can be more tedious than doing so in person. Some aspects of banking online can be made overly-complicated. Another drawback of online banking is that the customer must have basic computer skills as well as basic internet knowledge. This means that it is often not practical for the elderly or those with little computer experience. Some people enjoy conventional banking because it gives reassurance of a face to face interaction/transaction. Many banks also associate hidden fees with banking online. It is important to read the details for a particular bank before getting involved. [7]
References
1.) http://www.investorwords.com/3420/online_banking.html Investor Words (Online Banking Definition)
2.) http://ezinearticles.com/?History-of-Online-Banking&id=270075 Ezine Articles (History of Online Banking)
3.) http://www.infoplease.com/ipa/A0763206.html Infoplease (United States Largest Banks)
4.) http://wiki.wsu.edu/wsuwiki/Smartphones WSU Wiki (Smartphones)
5.) http://www.ehow.com/facts_5036400_history-online-banking.html Ehow (History of Online Banking)
6.) http://ezinearticles.com/?Online-Banking:-Advantages-and-Disadvantages&id=445102 Ezine Articles (Online Banking: Advantages and Disadvantages )
7.) http://www.msmoney.com/mm/banking/onlinebk/bank_disadv.htm MSMONEY ( Disadvantages of Online Banking)
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