Advantages and disadvantages of online banking

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Online banking has become an accepted standard of monetary transactions for millions of people in India over the past decade. The ease with which a customer can verify their account, make payments online and transfer money between accounts has made this mode of banking extremely popular among Indians who perpetually lack the time to physically travel to the bank. Online banking also offers a host of non-transactional features that are very convenient for the customer. However, with the world of conveniences, this banking method has some inherent pitfalls that need to be understood in order to protect your money and avoid complications later on.

A generic image of a woman working in an office sitting at her desk typing on a computer. REUTERS/Catherine Benson/Files

Key Benefits of Internet Banking

Banks offer many advantages to customers who adopt Internet banking services rather than physically going to the nearest branch.

Convenience: These are the most important advantages that outweigh the disadvantages of internet banking. Carrying out transactions and payments from the comfort of home or office in one click without even having to go out is a facility that no one would want to give up. Keeping track of accounts via the Internet is much faster and more convenient than going to the bank for the same. Even non-transactional facilities like ordering checkbooks online, updating accounts, inquires about interest rates of various financial products, etc. become much simpler on the Internet.

Better rates: Banks stand to gain from using Internet banking services, as it involves less physical effort on their part. The need to acquire larger office space and employ more staff to deal with customers is greatly reduced, which is financially advantageous for banks. This means that some of the accumulated savings can be passed on to clients in terms of higher rates on deposits and lower rates on loans. To encourage Internet banking, most banks offer minimum or zero deposit accounts for online banking and lower penalties for early withdrawal of fixed deposits.

Services: Technology has made it extremely convenient for the bank as well as the customer to access a host of wonderful services by simply logging on. These services include financial planning capabilities, functional budgeting and forecasting tools, loan calculators, investment and equity analysis tools. trading platforms which are available as simple applications on the bank’s website. Additionally, most banks also offer the ability to fill out tax forms online and prepare tax returns.

Mobility: Internet banking has taken a step further in recent years in the form of mobile internet banking which grants unlimited mobility to the customer who can now handle financial transactions even on the move.

Another important advantage of the online banking concept is that it is good for the environment as it reduces the use of paper, reduces pollution as people do not have to travel physically and also does not add of emissions.

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Disadvantages of internet banking

However, the current trend of exclusively using the online mode to carry out all kinds of transactions has some pitfalls that can prove costly in the long run unless warned from the outset.

Relationships: Online transactions alter the relationship with the banker that the traditional visit to the branch fostered. A personal relationship with bank staff is helpful when requesting faster loan approval or a special service that may not be available to the public. The manager has many discretionary powers such as the waiver of penalty interest or service charges, which he has often taken advantage of thanks to a better knowledge of the staff. Moreover, the personal contact also meant that the banker would provide essential financial advice and information beneficial to the client.

Complex transactions: There are many complex transactions that can only be resolved if there is a face-to-face discussion with the manager, which is not possible through internet banking. Resolving specific issues and complaints requires a physical visit to the bank and cannot be done via the internet. Online communication is not clear or accurate in helping resolve many complex service issues. Certain services such as notarization and bank signature guarantee cannot be completed online.

Security: This is the biggest pitfall of the online banking system against which the common client must protect themselves. Although the host of sophisticated encryption software is designed to protect your account, there is still a possibility of hacking by clever elements in the cyber world. Hacker attacks, phishing, malware and other unauthorized activities are not uncommon on the net. Identity theft is yet another area of ​​serious concern for those who rely exclusively on internet banking. Most banks have made it mandatory to post scanned copies of cleared checks online to prevent identity theft. It is essential to check the security policies and protections of the bank when opening an account and starting to use online banking services.

Online banking is certainly an important step in the right direction in terms of convenience for the customer as well as the banker, but it should be applied with due care to avoid falling prey to unscrupulous elements poaching the internet.

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