What is Online Banking?
Online banking allows a user to execute financial transactions via the internet. Online banking is also known as "internet banking" or "web banking." An online bank offers customers just about every service traditionally available through a local branch, including deposits—these are done online, using ATMs or through the mail—and online bill payment.
How Online Banking Works
Online banks do not provide direct ATM access, but they make provisions for consumers to use ATMs at other banks and retail stores, and they may reimburse consumers for some of the ATM fees charged by other financial institutions. The reduced overhead costs associated with not having physical branches typically allow online banks to offer consumers significant savings on banking fees; they also offer higher interest rates on accounts.
Online banks handle customer service by phone, email, or online chat. Online banking is frequently performed on mobile devices now that Wi-Fi and 4G networks have become widely available. In the United States, prominent online banks include Ally Bank, Bank5 Connect, Discover Bank, GE Capital Bank, and Synchrony Bank.
Advantages of Online Banking
Convenience is a major advantage of online banking. Basic banking transactions, such as paying bills and transferring funds between accounts, can easily be performed at times convenient to consumers. In effect, consumers can perform banking transactions 24 hours a day, seven days a week.
Online banking is fast and efficient. Funds can be transferred between accounts almost instantly, especially if the two accounts are held at the same banking institution. Banking accounts can be monitored more closely, thanks to online banking. This allows consumers to keep their accounts safe.
Around-the-clock access to banking information provides early detection of fraudulent activity, thereby acting as a guardrail against financial damage or loss. Online banking allows for the opening and closing of fixed deposit and recurring deposit accounts that typically offer higher rates of interest.
Disadvantages of Online Banking
For a novice online banking customer, using systems for the first time may present challenges that prevent transactions from being processed.
Although online banking security is continually improving, such accounts are still vulnerable when it comes to hacking. Consumers are advised to use their own data plans, rather than public Wi-Fi networks when using online banking, to prevent unauthorized access. Additionally, online banking is dependent on a reliable internet connection. Connectivity issues from time to time may make it difficult to determine if banking transactions have been successfully processed. On occasion, consumers may prefer face-to-face interactions for more complex banking issues.