e-Banking

The growth of the internet and e-commerce is turning the world into a digital global village, and the latest wave in information technology is internet banking — a part of virtual banking and another delivery channel for customers.

What e-banking is

• Any user with a PC and a browser can connect to the bank's website and perform virtual banking functions and avail of the bank's services — without a human operator.
• The bank keeps a centralised, web-enabled database; all permitted services appear on a menu, and the interaction that follows depends on the nature of the service chosen.
• e-banking lowers transaction cost, adds value to the banking relationship and empowers customers. In short, it is electronic banking — conducting transactions such as managing savings, checking accounts, applying for loans or paying bills over the internet using a personal computer, mobile telephone or handheld computer (PDA).

Range of e-banking services

• Automated Teller Machines (ATM) and Point of Sale (PoS)
• Electronic Data Interchange (EDI) and credit cards
• Electronic / digital cash and Electronic Fund Transfer (EFT) — done in two ways: NEFT (National Electronic Fund Transfer) and RTGS (Real Time Gross Settlement).

Benefits to customers

• Facilitates digital payments and promotes transparency in financial statements.
• Provides service 24 hours a day, 365 days a year.
• Permits some transactions from office, home or while travelling via mobile telephone.
• Instils financial discipline by recording every transaction.
• Gives greater satisfaction through unlimited access not bound by branch walls, with less risk and greater security because customers avoid travelling with cash.

Benefits to banks

• Provides a competitive advantage.
• Gives an unlimited network not limited to the number of branches — any PC with a modem and an internet connection can meet a customer's cash-withdrawal needs.
• Reduces the load on branches by using a centralised database and taking over some accounting functions.

Types of digital payments

Every transaction for goods and services is finally settled by a mode of payment, which is either cash or digital (non-cash). As covered in the CBSE Class 11 Business Studies syllabus, digital, non-cash payments fall into two broad families:

• Plastic cards — payment cards of two kinds: the debit card, which draws directly on the customer's own bank balance, and the credit card, which lets the customer spend against a bank-extended credit limit and settle the bill later.
• e-Banking channels — instruments that move money electronically without handling cash. The newer ones include:
  • USSD (Unstructured Supplementary Service Data) — banking on a basic mobile phone through a short code, needing neither the internet nor a smartphone.
  • Point of Sale (PoS) — paying by swiping, dipping or tapping a card at a merchant's terminal.
  • AEPS (Aadhaar Enabled Payment System) — paying or withdrawing money using an Aadhaar number with fingerprint authentication.
  • UPI (Unified Payments Interface) — instant, direct account-to-account transfer through a mobile app using a virtual payment address. …