Online Banking

In the early years before online banking, closed systems were used where the customer accessed through a dial-in phone number or cable TV system.  This required the customer to incur long distance charges on their phone bill, if they accessed out of the area, or had to have cable TV to access the bank.  As the internet emerged as the worldwide communication center, it became more practical to offer online banking to customers through their own personal computers. 

The growth in online banking has been rapid and banks have to evaluate continually the savings versus the costs and risks.  Cost effectiveness is paramount to the banks, as they can provide banking services on the internet at a fraction of the cost of the traditional way of banking.  Online banking also expands customer contact at a lower cost, making this a desirable way for the banks to do business exclusively over the internet.  The competition factor figures in, as banks can use online banking as a means to keep existing customers and gain new ones.  

Some banks have discontinued having offices and communicate with their customers solely through the internet.  They have found online technology is providing an ongoing relationship with their customers and are able to offer the customers a wide range of products and services.  Through this, banks hope to build loyalty with their customers and turn this into repeat business. 

While some bank customers continue to use the traditional method to conduct their banking business, by going to the bank and having personal contact, other customers have adopted the online banking system because of the convenience involved.  It is expected more and more customers will start to take advantage of this new technology as time goes on.  

Through online banking, the banks are able to market their products and services to everyone and this way of providing this information through the world wide internet will attract new customers.  

The risk involved with the communications between the customer and the system can be high.  For instance, electronic mail, account inquiry and loan applications, these servers have a path to the bank's internal networks, so proper controls have to be in place to prevent, check and alert management of any unauthorized attempt to access the internal network and system.  It is also imperative that virus controls are in place.  

In the area of processing transactions, this creates the highest risk of fraud, since the server and the bank's internal network are involved.  Processing transactions include customers accessing their accounts, paying bills, transferring funds and any other banking activity.  The controls have to be strong to assure no unwarranted access to any of these banking procedures.   

The challenge for banks is high concerning online banking, as a possible unauthorized activity on the bank's internal network could happen and result in catastrophic consequences.  There are those who are very computer savvy and are capable of hacking websites on the internet, so this presents a real problem for the bank to have the highest security in place.   

Customers expect banks to have the highest security controls, when doing their banking over the internet.  Errors made by the online banking system will not be tolerated by customers and neither will a website that is not easy to navigate.  Communications between banks and their customers are a prime concern.