[Essay] Evolution and Impact of Electronic Banking

Introduction

For the past years, the banking industry is a way that people usually save their money to invest in their future. It is a good habit to save money and lend for the future expenditures. According to the economists, the save and spend are key player in the cycle of money. They are the basic practices on how to keep and spend money in a wise way. The breadwinner of a family must save at least 20% of his income for the future expenses. And the main domain of the banks comes in.

The banking procedures are not that hard to understand and it became an ideal part of one’s livelihood securities. As time evolves and many technologies are introduced, the banking industry became updated in terms of the banking process. The banks let the technology stayed in their system and became part of it. The technology benefited both the bank and their clients.

Evolution of Banking Industry

The first electronic banking product was money transferred via telegraph in the mid 1800’s. To answer various questions about the securities and interest of the clients, the banks lend funds to purchase the ideas of innovation of banking industry. The first process in saving money is through the use of passbooks. But the new generation wants a new system that will help them access to their fund in an ease, and at the same time with security. For the busy people, they find it very time consuming to wait in the line just to withdraw or deposit your cash in the teller of the bank. And some of them became so irritated when they were in the last of the long line and they are in hurry.

But the clients don’t have to worry no more because the era for the banking procedure already absorbed the fast life cycle of every individual. The introduction of the ATM (Automated Teller Machine) Card is just like you have a full amount of money in a thin plastic. It is ideal to carry anywhere, anytime. The features of it make the clients live at peace for it also have a security pin to make the card only available to the one who owns it. Plus, there are called Electronic Card or often named Credit or Debit Card which automatically charges the purchased product.

But still there are many unconvinced clients that are daring the bank to take more advantageous in the time where all the people need convenience. So the start for the Online banking (or Internet banking) came. This allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank, credit union or building society.¹

Advances in microprocessors led to the development of the personal computer which could retrieve both summary and detail bank account information. The personal computer also allowed the user to move funds, which provided greater control of cash.²

The demand for the kind of obscuring and only few people can access to this kind of banking preferences. Although it is very efficient in those people who spend most of their time facing their expensive computer and locked in a same room. It is also applicable for those who stay at home as long as they have a connection in the internet. And it is called Home Banking procedures, for at the same time, a client can track the transactions via phone or internet services. The purpose of the electronic banking is to let the bank go for you, if you cannot go for it.

Impact of Electronic Banking

For most customers, it is a convenience that they have grown accustomed to the electronic banking. And for the large commercial customer, processing thousands or even millions of payments and/or sales a day – it would be impossible to live without the attachment on it.³

The following can be the impact in the Banking Industry as well as with the consumers.⁴

The banks can become technology providers by spinning off technology resources to start up new business streams, they can become content providers for information regarding products, indices etc, they can become context providers for setting-up e-market spaces, and also enablers by providing back bone systems to support multiple payment system alternatives.

The online channel enables banks to offer low-cost, high value-added financial services and also benefit from the promotional opportunity to cross-sell products such as credit cards and loans.

The online transaction costs can be as low as 1% of an equivalent off-line transaction, rapidly increasing the popularity of the online option with consumers, as well as banks. In saving time and money for users, banks offer online banking as a less expensive alternative to branch banking. In addition, on-line banking enables banks to acquire information on consumer habits and preferences, for later marketing purposes. An expanding customer base and transaction cost savings are major benefits for banks.

Although there is an awesome acceptance coming from the consumers, there are findings that sometimes, the electronic banking doesn’t work all the time.⁵

1) The banks have showed that they completed the technological infrastructure for electronic banking services, internet and intranet in particular and the development of banks web sites. (Additional to this, the microwave signal cannot reach some bank sites, and that’s inconvenient for those people who use to travel).

2) People prefer to provide electronic banking services through the internet but not converting the bank to be a total electronic bank.

3) The environment is no completely ready for electronic banking services and there is no strategy to have electronic banks on the internet.

4) The high cost of electronic banking services on the short run due to the training of employees, and the costs of the electronic infrastructure. This means, that in the short run electronic banking service will have a negative effect on the bank’s profitability.

With respect to the above findings, the bank that offers electronic banking services can realize benefits as well as the following:

1. Electronic Banking services have a positive effect on banks profitability.

2. There is a direct relation between increment of clients needs for banking services and bank’s distinction in providing electronic business.

3. The operation of providing electronic banking services is influenced by bank readiness and availability of electronic software and qualified man power.

4. Confidentiality and privacy have clear impact on protecting clients and bank from risks, and consequently the framework has an impact on banks information systems and its management upon providing banking services though Internet.

Conclusions

The evolution of electronic banking products has made day to day banking operations faster and more efficient. The increased productivity gained through the use of electronic banking products has allowed businesses to do more with less. Businesses that do not use some form of electronic banking products will not grow. With research, cost benefit analysis and appropriate security controls, practically any business can benefit form electronic banking products.

The growth of electronic banking has not been limited to advances in information reporting. Electronic payments have become a force majeure. With increased acceptance and advances in technology, the use of electronic banking products will continue to increase. For organizations to stay competitive and to grow, they must embrace electronic banking products.

The banks are using the Internet as a strategic weapon, leveraging it as a distribution channel to offer complex products at the same quality they can provide from their physical branches, at a lower cost, to more potential customers, without boundaries.

But Internet widespread has deepening the concept of electronic business and considering it as promotion, bank service marketing method and successful method to improve banks relation with clients, informing them with available banking abilities through Internet in spite of small size of Internet community in some certain areas, which is used mostly by youth group who have high income or more than the middle approximately, which will reduce the importance of Internet and number of users.

For most of the hours passed, the money that a person might have is starting to crawl toward his pocket. All the process that he must do is to save in whatever manner he wants to. Online banking is popular but like the others, it needs securities.

References:

1. Online Banking (Re-directed from Electronic Banking) [Online] Available at: http://en.wikipedia.org/wiki/Online_banking [Accessed 04 Aug 2009].

2. Electronic Banking [Online] Available at: http://www.gscpa.org/Content/Files/Pdfs/Conferences/SEAS08/B6-Electronic%20Banking.pdf [Accessed 04 Aug 2009].

3. Electronic Financial Services (n.d.). Principles of Bank Operation [Online] Available at: http://www.accd.edu/sac/business/bbeshea/bnkg1303/intro%20to%20banking%20-%20session%2013.htm [Accessed 04 Aug 2009].

4. Role of the Electronic Banking Services on the Profits of Jordanian Banks (2006) American Journal of Applied Sciences 3 ISSN 1546-9239 [Online] Available at: http://www.scipub.org/fulltext/ajas/ajas391999-2004.pdf [Accessed 04 Aug 2009].

5. Ibid.,