Introduction to Banking and E-Banking
Banking is one such activity that helps keep individuals afloat in terms of Money. With the help of the many financial institutions and their services, it is very convenient for many reasons. These are helpful to cover expenses, save money, make a profit, and much more.
While E-Banking or Electronic Banking means ‘Internet Banking’ or simply can be called ‘Net Banking’. This banking system works in the form of electronic transfer of money and other related banking transactions. In this article, we will understand the meaning of Banking and E-Banking, and we will also learn about the functions of Banking.
What is Banking?
Banking is essentially an activity that is opted to be performed by not only individuals but also countless entities. The Banks in a country, state, or city safeguard the Money from their customers and then lend it to others. This creates a balance within the economy and makes sure that one of the individuals benefits from it.
What is E-Banking?
E-Banking is Banking with the only difference being that all the transactions take place via electronic modes. With many innovations in terms of technology, it is safe to say that this has made life pretty convenient for people. The reason is very simple straightforward. With the help of E-Banking, one can easily do several transactions at any time of the day.
Functions of Banking
Banking plays a very crucial role in our lives. And it is due to that one can take advantage of a few of the functions.
Here is a list of the functions of Banking that are made possible with the help of Banking:
They accept the deposits from their numerous customers and help them save, pay, etc. from the various types of accounts that are available. They have to pay interest to their customers every quarter.
They grant loans to their customers after checking their eligibility. They have to charge interest from their customers and ensure that the loan amount is paid in full in due time.
They offer their customers various types of offers which can make them use the services of the Bank even more. This way the customers also get many advantages like offers, discounts, cashback, etc. after they use the Bank’s cards.
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Students now know what is meant by Banking and what is meant by E-banking. If you want to know more about Commerce related topics, enrol with us now!
Apart from this, I hope this content was helpful for the students to understand the banking system and the functions related to banking, further check out the frequently asked questions related to this topic in order to have a better understanding.
FAQs on Banking vs. E-Banking: Key Differences
1. What is the fundamental difference between traditional banking and e-banking?
The fundamental difference lies in the mode of operation and accessibility. Traditional banking requires a customer's physical presence at a bank branch during fixed working hours to perform transactions like deposits, withdrawals, or loan applications. In contrast, e-banking (Electronic Banking) allows customers to access banking services and perform financial transactions remotely, 24/7, using electronic devices like computers or smartphones connected to the internet.
2. What are the key advantages of using e-banking services for a student or a small business owner?
E-banking offers several significant advantages that are particularly useful for students and small business owners:
- Convenience: Transactions can be made anytime, anywhere, eliminating the need to visit a bank branch. This saves valuable time.
- Cost-Effectiveness: It reduces travel costs and often involves lower transaction fees compared to traditional banking methods.
- Speed: Fund transfers, bill payments, and account inquiries are processed instantly.
- Enhanced Monitoring: Provides easy access to account statements and transaction history, allowing for better financial management and tracking.
- Accessibility: Services like NEFT, RTGS, and IMPS enable quick and secure fund transfers across different banks.
3. Is there a difference between E-banking, Internet Banking, and Mobile Banking?
Yes, while often used interchangeably, there are subtle differences. E-banking is the broad umbrella term for all banking transactions conducted electronically. Internet Banking is a specific type of e-banking that is performed using a web browser on a computer. Mobile Banking is another specific type of e-banking that uses a dedicated application (app) on a smartphone or tablet. Essentially, internet and mobile banking are the two main channels through which e-banking is delivered.
4. Why is e-banking considered crucial in the modern business environment as per the Commerce syllabus?
E-banking is crucial in the modern business environment because it facilitates global commerce and increases operational efficiency. It allows businesses to conduct financial transactions with partners and customers irrespective of geographical location. For companies, this means faster payments, improved cash flow management, reduced paperwork, and lower administrative costs. It enables a cashless economy and supports the rapid growth of e-commerce, a key topic in business studies.
5. What are some common examples of e-banking services offered by banks in India?
Banks in India offer a wide range of e-banking services to cater to different customer needs. Some of the most common examples include:
- Automated Teller Machines (ATMs): For cash withdrawal, deposits, and account inquiries.
- Electronic Funds Transfer (EFT): Systems like NEFT (National Electronic Funds Transfer) and RTGS (Real-Time Gross Settlement).
- Internet and Mobile Banking: For bill payments, fund transfers, and managing accounts.
- Debit and Credit Cards: For point-of-sale (POS) payments and online purchases.
- Telebanking: Performing basic banking functions over the telephone.
6. Despite the rise of e-banking, why do many people still prefer or need traditional banking?
Many individuals still rely on traditional banking for several important reasons. Firstly, complex transactions like applying for large loans (e.g., home or business loans) often benefit from face-to-face interaction and personalised advice from a banking professional. Secondly, a segment of the population, particularly in rural areas or among the elderly, may lack the necessary digital literacy or reliable internet access. Lastly, for security reasons and fear of online fraud, some people feel more secure handling significant transactions in person at a physical branch.
7. How has the nature of customer relationships changed with the shift from traditional to e-banking?
The shift has transformed customer relationships from being personal and direct to being more transactional and automated. In traditional banking, relationships were built through regular interactions with specific bank employees, fostering trust and loyalty. In e-banking, the primary interface is digital. While this is highly efficient, it can feel impersonal. Banks now focus on improving the user experience (UX) of their apps and websites and use data analytics to offer personalised digital services, which represents a new form of customer relationship management.
8. What are the major security challenges associated with e-banking that a user must be aware of?
While e-banking platforms are generally secure, users must be aware of potential risks. The primary challenges include phishing (fraudulent attempts to obtain sensitive information like usernames and passwords), malware/spyware that can capture keystrokes, and hacking of accounts. To mitigate these risks, it is crucial to use strong, unique passwords, enable two-factor authentication (2FA), avoid using public Wi-Fi for transactions, and never share account details or OTPs with anyone.
