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Traditional banks offer many services to their customers, including accepting customer money deposits, providing various banking services to customers, and making loans to individuals and companies. Compared with traditional channels of offering banking services through physical branches, e-banking uses the Internet to deliver traditional banking services to their customers, such as opening accounts, transferring funds, and electronic bill payment.

E-banking can be offered in two main ways. First, an existing bank with physical offices can also establish an online site and offer e-banking services to its customers in addition to the regular channel. For example, Citibank is a leader in e-banking, offering walk-in, face-to-face banking at its branches throughout many parts of the world as well as e-banking services through the World Wide Web. Citibank customers can access their bank accounts through the Internet, and in addition to the core e-banking services such as account balance inquiry, funds transfer, and electronic bill payment, Citibank also provides premium services including financial calculators, online stock quotes, brokerage services, and insurance.

E-banking from banks like Citibank complements those banks' physical presence. Generally, e-banking is provided without extra cost to customers. Customers are attracted by the convenience of e-banking through the Internet, and in turn, banks can operate more efficiently when customers perform transactions by themselves rather than going to a branch and dealing with a branch representative.

In addition to traditional banks that have both a physical and online presence, there are several e-banks that exist only on the Internet, allowing users to work with a "virtual" bank. NetBank is such an Internet-only bank. Without physical branches, NetBank can cut operating costs and can potentially offer higher deposit rates to its customers and waive many fees normally charged by a bank with a large network of physical branches. The challenge for Internet-only banks is to provide quality customer services without physical offices. One way in which NetBank is dealing with this issue is via an agreement with the MAC ATM Network (automated teller machine network), thus providing its customers access to nearly 18,000 ATMs across the United States. NetBank customers can deposit and withdraw funds from their NetBank accounts through these ATMs, and in addition, customers can also deposit and receive funds through wire transfer.

E-banking services are delivered to customers through the Internet and the web using Hypertext Markup Language (HTML) . In order to use e-banking services, customers need Internet access and web browser software. Multimedia information in HTML format from online banks can be displayed in web browsers. The heart of the e-banking application is the computer system, which includes web servers, database management systems, and web application programs that can generate dynamic HTML pages.

Bank customers' account and transaction information is stored in a database, a specialized software that can store and process large amounts of data in high speed. The function of the web server is to interact with online customers and deliver information to users through the Internet. When the web server receives a request such as an account inquiry from an online customer, it requires an external web application program to process the request. C, Visual Basic, VBScript, and Java are some of the languages that can be used to develop web application programs to process customer requests, interact with the database, and generate dynamic responses. Then, the web server will forward the response HTML files to e-banking customers. Several banks, such as NationsBank, also use state-of-the-art imaging systems, allowing customers to view images of checks and invoices over the Internet.

One of the main concerns of e-banking is security. Without great confidence in security, customers are unwilling to use a public network, such as the Internet, to view their financial information online and conduct financial transactions. Some of the security threats include invasion of individuals' privacy and theft of confidential information. Banks with e-banking service offer several methods to ensure a high level of security: (1) identification and authentication, (2) encryption, and (3) firewalls . First, the identification of an online bank takes the form of a known Uniform Resource Locator (URL) or Internet address, while a customer is generally identified by his or her login ID and password to ensure only authenticated customers can access their accounts. Second, messages between customers and online banks are all encrypted so that a hacker cannot view the message even if the message is intercepted over the Internet. The particular encryption standard adopted by most browsers is called Secure Socket Layer (SSL). It is built in the web browser program and users do not have to take any extra steps to set up the program. Third, banks have built firewalls, which are software or hardware barriers between the corporate network and the external Internet, to protect the servers and bank databases from outside intruders. For example, Wells Fargo Bank connected to the Internet only after it had installed a firewall and made sure the firewall was sufficiently impenetrable.

The range of e-banking services is likely to increase in the future. Some banks plan to introduce electronic money and electronic checks. Electronic money can be stored in computers or smart cards and consumers can use the electronic money to purchase small value items over the Internet. Electronic checks will look similar to paper checks, but they can be sent from buyers to sellers over the Internet, electronically endorsed by the seller, and forwarded to the seller's bank for electronic collection from the buyer's bank. Further, banks seek to offer their customers more products and services such as insurance, mortgage, financial planning, and brokerage. This will not only deliver more value to the customers but also help banks to grow business and revenues.

see also E-commerce; Privacy; Security; World Wide Web.

Ming Fan


Furst, Karen, William W. Lang, and Daniel E. Nolle. "Special Studies on Technology and Banking." Office of the Comptroller of the Currency Quarterly Journal 19, no. 2 (2000): 2948.

Kalakota, Ravi, and Andrew B. Whinston. Electronic Commerce: A Manager's Guide. Reading, MA: Addison-Wesley Longman, 1997.

Wenninger, John. "The Emerging Role of Banks in E-Commerce." Federal Reserve Bank of New York Current Issues 6, no. 3 (2000): 16.