If you have a bank account, you are familiar with the need to do things with your account such as check the balance or transfer funds to another account. Given a choice of doing this yourself, or involving a bank employee, you might well choose to do it yourself. When you choose self service, you are almost always reducing the bank's costs. Thus, when Internet banking is supporting self service, it is good for both the customer and the bank.
You may have used a voice system to do banking transactions. This method has been around for a long time and works pretty well for simple transactions. If you are doing something like reconciling your checking account and you have lots of transactions, you have probably seen that a voice interface doesn't do this kind of thing very well.
Visual display systems were tried beginning in the early 1980s. A number of experimental devices and interfaces had some success, but widespread adoption of these systems never happened. It took the combination of widely available personal computers with access to the Internet, and the world wide web, to make this approach successful in the marketplace.
The vast majority of banks currently have a form of Internet banking. A number of banks are referred to as Internet banks because this is their primary customer interface. These systems almost always process inquiries, transfers of funds, and bill payment. There are many other functions that may also be present.
Customer inquiries at a minimum allow customers to check their account balances. In most cases they will also be able to see recent activity on their accounts. They may also be able to look at recent account statements. Some systems will allow them to view copies of recently cleared checks.
Bill payment systems at a minimum will allow customers to make payments on accounts domiciled with the bank that holds the account being accessed. In most cases they will also allow payments to be made to other banks and to businesses in general. They may or may not allow payments to individuals. In many cases repetitive payments may be established, so that, for example, a mortgage payment for a fixed amount could be automatically generated on the same day of every month. It is usually the practice to require that the linkage to the payee be established before any payment can be made.
Funds transfers move money between accounts. Some services are limited to accounts at the same bank, while others can involve accounts at other banks. Transfers can be limited to accounts with the same owners, but some systems do not enforce this.
Other transactions may be possible. The customer may be able to stop payment on a check. They may also be able to reorder checks. The basic principle is that for common, relatively simple transactions, it is much more economical to enable customers to do their own transactions than to require the customer to work with a bank employee to do them.
Security needs to be carefully worked out, as with any system that accesses customer money. Robust authentication of the customer is important. This may be based on a userid and password or some other reliable method. The system should keep a record of every significant transaction as a tool for investigating problems.
Internet banking is good for the bank and the customer. It provides better service at a lower cost. It is just one of many services that are facilitated by the universality of the Internet.
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