what is internet banking

what is internet banking

Internet banking, sometimes called online banking, is an outgrowth of PC banking. Internet banking uses the Internet as the delivery channel by which to conduct banking activity, for example, transferring funds, paying bills, viewing checking and savings account balances, paying mortgages, and purchasing financial instruments and certificates of deposit. An Internet banking customer accesses his or her accounts from a browser¡ª software that runs Internet banking programs resident on the bank¡¯s World Wide Web server, not on the user¡¯s PC. NetBanker defines a ¡° true Internet bank¡± as one that provides account balances and some transactional capabilities to retail customers over the World Wide Web. Internet banks are also known as virtual, cyber, net, interactive, or web banks.

To date, more banks have established an advertising presence on the Internet¡ª primarily in the form of informational or interactive web sites¡ªthan have created transactional web sites. However, a number of Banks that do not yet offer transactional Internet banking services have indicated on their web sites that they will offer such banking activities in the future.

Although Internet banks offer many of the same services as do traditional brick-and-mortar Banks, analysts view Internet banking as a means of retaining increasingly sophisticated customers, of developing a new customer base, and of capturing a greater share of depositor assets. A typical Internet bank site specifies the types of transactions offered and provides information about account security.

Because Internet banks generally have lower operational and transactional costs than do traditional brick-and-mortar banks, they are often able to offer low-cost checking and high-yield Certificates of deposit. Internet banking is not limited to a physical site; some Internet banks exist without physical branches, for example, Telebank (Arlington, Virginia) and Banknet (UK). Further, in some cases, web banks are not restricted to conducting transactions within national borders and have the ability to make transactions involving large amounts of assets instantaneously. According to industry analysts, electronic banking provides a variety of attractive possibilities for remote account access, including:

1. Availability of inquiry and transaction services around the clock;
2. worldwide connectivity;
3. Easy access to transaction data, both recent and historical; and
4. ¡° Direct customer control of international movement of funds without intermediation of financial institutions in customer¡¯s jurisdiction.¡±

OPENING AN ACCOUNT There are several ways to open and fund an electronic banking account in the United States. Customers who have existing accounts at brick-and-mortar banks and want to begin using electronic banking services may simply ask their institution for the software needed for PC banking or obtain a password for Internet banking. Either approach requires minimal paperwork. Once they have joined the system, customers have electronic access to all of their accounts at the bank. New customers can establish an account either by completing a PC banking application form and mailing it to an institution offering such a service or by accessing a bank¡¯s web site and applying online for Internet banking. In either instance, the customer can fund the new online account with a check, wire transfer, or other form of remittance. No physical interface between the customer and the institution is required.