Online Banking

What is Online Banking?

Online banking is an integrated system that provides their customers with a flexible, convenient and inexpensive platform with integrated services including online bank balance checking and savings accounts, money market accounts, certificates of deposit, credit cards, home equity loans, home a mortgage, insurance, investment services, portfolio management, and other related financial services.

To put it simply, Online banking is defined as the automated delivery of new and traditional banking products and services directly to customers through electronic, interactive communication channels, online banking includes systems that enable financial institution customers, individuals or businesses, to access accounts, transact business, or obtain information on financial products and services through a public or private network, including the Internet.

Definitions of Online Banking

  1. According to Bhattacherjee, Internet banking is an integrated system that provides their customers with a flexible, convenient and inexpensive platform with integrated services including online bank balance checking and savings accounts, money market accounts, certificates of deposit, credit cards, home equity loans, ho me a mortgage, insurance, investment services, portfolio management, and other related financial services.

  2. According to Siu and Mou, internet (electronic) banking is a prominent example of information technology in the service industry; it is convenient and time-saving in comparison to traditional banking. In traditional retail banking, one has to visit a branch to conduct banking activities like money transfer, to issue cheque book, DD etc. but with the use of internet in banking, user can conduct these activities from any part of the globe, it requires internet connection and computer only. Apart from these activities users can purchase/sell, pay bills etc. from any convenient place.

Advantages of Online Banking

Advantages of online banking include:

Better Rates:

Because online-only banks lack the overhead costs associated with brick-and-mortar banks, online banks are able to pass on the savings to customers in the form of better interest rates.

Ease of Use:

Customers can quickly and easily monitor balances, check on spending and be alerted to low balances.

Services and Tools

Resources such as online bill payment and online tax forms, loan calculators, budgeting tools and even investment analysis tools are often available — and usually free of charge.


Access to a bank account and up-to-date balance information is available to customers any time they have a device with an internet connection. Customers are able to access their accounts seamlessly from computers, tablets and smartphones.

Electronic Transfers

Transferring money between accounts and banks is as easy as signing in to an online banking account and clicking through a few steps.

Environmental Friendliness

Banking online can go hand in hand with paperless notifications. Customers are given the choice to opt-out of paper statements and mail. Instead, they can be reached via the message centre within their online bank account, by email or even by text message.

Security Alerts

With 24/7 access to their online banking accounts and balance information, customers can be alerted to unusual activity and security breaches almost immediately.

Disadvantages of Online Banking

Although the advantages of online banking are significant, some critical disadvantages of this modern means of banking do exist:

Diminished Relations Hips

Because banking is conducted mostly and sometimes completely online, there‘s a lack of face-to-face interaction and little opportunity to develop relationships between customers and bank representatives.

Lack of Comprehensive or Special Services

Brick-and-mortar banks are able to provide services such as notarizing financial documents, which can‘t be done by an online bank.

Transaction Issues

For clients who frequently deposit cash, online-only banks might not be as useful. Additionally, ATMs for some online-only banks can be hard to find.

Security Issues

As with any institution in possession of secure data and personal information, online banks are vulnerable to security risks. Hacking, phishing and viruses are some of the associated risks that banks try to provide protection against.

Online Banking Services

The Different online Banking services are:

Managing Accounts Online

When a customer signs up for online banking and designates which account he/she wishes to access online, then he/she will be issued a user ID and temporary password via regular mail, e-mail or both, with instructions on how to use them to assess the secure online banking portion of one‘s bank‘s site where one‘s account information is available 24/7.

Many banks require one to change one‘s password during one‘s initial visit for added security. This site ―keys‖ is the only way to access one‘s account online, so keep them in a safe place.

Once inside a private site, one will have access to all the accounts that one has registered for online banking. One can easily view current balances, recent deposits and payments, complete account history and transact on financial securities.

Transfer of Money

Electronic funds transfer (EFT) is the electronic transfer of money from one bank account to another, either within a single financial institution or across multiple institutions, via computer-based systems, without the direct intervention of bank staff.

Customers can transfer any amount from one account to another of the same or any other bank. Customers can send money anywhere in India. Once the customer login to his account, he needs to mention the payee‘s account number, his bank and the branch.

The transfer will take place in a day or so, whereas in a traditional method, it takes about three working days. A customer can now avail a bouquet of funds transfer services through Internet banking

  • Transfer funds within your own accounts
  • Transfer funds to third party account held in the same bank
  • Make an Inter bank funds transfer to any account held in any bank
  • Pay any VISA credit card bill
  • Transfer funds to religious and Charitable institutions
  • Record standing instructions to transfer a fixed amount at a scheduled frequency for a period not exceeding one year
  • Transfer funds to NRE PIS accounts to facilitate online trading


Real-Time Gross Settlement as the name suggests is a real-time funds transfer system that facilitates you to transfer funds from one bank to another in real-time or on a gross basis. The transaction isn‘t put on a waiting list and cleared out instantly.

RTGS payment gateway, maintained by the Reserve Bank of India makes transactions between banks electronically. The transferred amount is instantly deducted from the account of one bank and credited to the other bank‘s account. Users such as individuals, companies or firms can transfer large sums using the RTGS system.

The minimum value that can be transferred using RTGS is Rs. 2 Lakhs and above. However, there is no upper cap on the amount that can be transacted. The remitting customer needs to add the beneficiary and his bank account details prior to transacting funds via RTGS.


The National Electronic Funds Transfer is a nationwide money transfer system that allows customers with the facility to electronically transfer funds from their respective bank accounts to any other account of the same bank or of any other bank network.

Not just individuals but also firms and corporate organizations may use the NEFT system to transfer funds to and fro. Funds transfer through NEFT requires a transferring bank and a destination bank.

With the RBI organizing the records of all the bank branches at a centralized database, almost all the banks are enabled to carry out an N EFT transaction. Any sum of money can be transferred using the NEFT system with a maximum cap of Rs. 10, 00, 000.

Account Aggregation

Account aggregation is a service that gathers information from many websites, presents that information to the customer in a consolidated format, and, in some cases, may allow the customer to initiate activity on the aggregated accounts.

The information gathered or aggregated can range from publicly available information to personal account information (e.g., credit card, brokerage, and banking data). Aggregation services can improve customer convenience by avoiding multiple log-ins and providing access to tools that help customers analyze and manage their various account portfolios.

Some aggregators use the customer-provided user IDs and passwords to sign in as the customer. Once the customer’s account is accessed, the aggregator copies the personal account information from the website for representation on the aggregator’s site (i.e., “screen scraping”).

Other aggregators use direct data-feed arrangements with website operators or other firms to obtain the customer’s information. Generally, direct data feeds are thought to provide greater legal protection to the aggregator than does screen scraping.

Paying Bills Online

Online bill pay is defined as an electronic payment service that allows you to set up a secure online account to make one-time or recurring bill payments. This can be a convenient way to pay bills quickly and on time.

The source of funds for the payments is usually a checking account, but some bill pay services also work with credit cards. All bills and transactions are accessed on the bill pay website. Each bank has tie-ups with various utility companies, service providers and insurance companies, across the country.

Customers can facilitate payment of electricity and telephone bills, mobile phones, credit cards and insurance premium bills. To pay bills, all customers need to do is complete a simple one-time registration for each biller.

Customer can also set up standing instructions online to pay your recurring bills, automatically. One-time standing instruction will ensure that you don‘t miss out on your bill payments due to lack of time. Most interestingly, the bank does not charge customers for online bill payments.

Scheduling Payments

If the customer wants to pay a bill on a particular date (from today onwards till the due date of the bill), he can do so by scheduling the bill. His account will be debited and the bill will be paid on that particular date by the bank.

Tips for Safe Banking Over the Internet

Follow the tips mentioned below, one can minimize the risks to finances and bank safely online:

Choose an Account With Two Factor Authentication

Try to get a bank account that offers some form of two-factor authentication for online banking. These days many, but not all, banks offer a small device that can be used to generate a unique code each time a customer logs in. This code is only valid for a very short period of time and is required in addition to login credentials in order to gain access to an online account.

Create a Strong Password

If the bank requires a user-generated password in order to access online accounts make sure to choose one that is strong. The best way to achieve this is by making it long and a mix of upper and lower case letters, numbers, and special characters. Always avoid using any common words or phrases and never create a password that contains name, initials, or date of birth and also changes the password every few months.

Secure Computer and Keep It Up-to-date

Security software is essential these days, regardless of what customer uses a computer for. As a minimum, make sure the PC should have a firewall turned on and are running antivirus software. This will ensure that customer is protected from Trojans, keyloggers and other forms of malware that could be used to gain access to financial data. The customer should also keep the operating system and other software up-to-date to ensure that there are no security holes present.

Avoid Clicking Through Emails

No financial institution worth their salt will send an email asking to provide any login details. If a customer receives an email that appears to be from the bank that asks for such details then treat it with suspicion as it may well be a phishing attempt to trick into handing credentials over.

Likewise, the customer should be aware of links in emails that appear to be from his bank – this is a trick often employed by the bad guys to get onto a website that looks like a bank. When a customer logs in to his account, they will steal username and password and, ultimately, the customer‘s cash. It is always safer to access an online bank account by typing the address into the browser directly.

Access Accounts From a Secure Location

It‘s always best practice to connect to banks using computers and networks that the customer knows and trusts. But if the customer needs to access his bank online from remote locations he might want to set up a VPN (Virtual Private Network) so that he can establish an encrypted connection to his home or work network and access the bank from there.

Always Log Out When Transaction Has Been Finished

It is good practice to always log out of online banking sessions when the customer has finished his business. This will lessen the chances of falling prey to session hijacking and cross-site scripting exploits. The customer may also want to set up the extra precaution of private browsing on his computer or smartphone and set the browser to clear its cache at the end of each session.

Set Up Account Notifications (if Available)

Some banks offer a facility for customers to set up text or email notifications to alert them to certain activities on their accounts. For example, if a withdrawal matches or exceeds a specified amount or the account balance dips below a certain point then a message will be sent. Such alerts could give quick notice of suspicious activity on your account.

Monitor Accounts Regularly

It should go without saying that monitoring the bank statement each month is good practice as any unauthorized transactions will be sure to appear there. With online banking, you have access 24/7 so take advantage of that and check your account on a regular basis.

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