Internet Banking System Benefits, Features, Advantages And Disadvantages

Internet Banking System

Internet Banking System: The internet has made banking easier for people. Now, you can do many things with your bank account online. You can check your balance, send money, or tell the bank what to do—all from wherever you want. This is possible through net banking or internet banking. You just need to go to the bank's website and log in using your username and password.

Sometimes, you might need an extra code or OTP to transfer money. You can register easily and do transactions without the bank's help. Internet banking has made banking cheaper, and banks now make decisions based on data. Keep reading to learn more about net banking.

What is Internet Banking?

Internet banking, also referred to as online banking, e-banking, or Net Banking, is a service provided by banks and financial institutions enabling customers to access banking services via the internet. This eliminates the need for customers to physically visit a branch office for various services.

Access to internet banking is not automatic for all account holders; individuals interested in utilizing this service must register for it during the account opening process or at a later time. To access their internet banking accounts, users must log in with their registered customer ID and password.

How Internet Banking System Works

To use internet banking, customers must sign up for internet banking with their bank.

Anyone with a savings or current account at any bank can sign up for internet banking.
To use net banking, you need a personal computer, laptop, or mobile device with a good internet connection.
Once registered, the bank provides a unique customer ID and password, which you can use to log in to the net banking portal.

Books for Banking Exam Preparation

Classification of Internet Banking System

Banks provide various services through electronic financial platforms, and they can be categorized into three types:

Type 1: Informational Services

Basic services where banks share information about their products and offerings with customers.
Some banks may also respond to inquiries through email.

Type 2: Application and Inquiry Services

Banks in this category allow customers to submit instructions or applications for different services.
Customers can check their account balances, but financial transactions are not permitted.

Type 3: Transactional Services

Banks in this category enable customers to perform operations such as bill payments, purchase and redeem securities, and fund transfers.
Most traditional banks include internet banking as an additional method of service. Some newer banks primarily provide banking services through electronic channels or the internet. Additionally, certain banks operate solely online without physical branches.

Internet Banking websites can be divided into two types

1. Transactional Websites

Allow customers to conduct various transactions on the bank's website.
Transactions range from simple retail account balance inquiries to significant business-to-business fund transfers.
Common wholesale and retail e-banking services provided by financial institutions and banks are listed in the table below.

2. Informational Websites

Provide general information about the bank and its services and products to customers.

Internet Banking System Features

View account statements online.
Open fixed deposit accounts.
Pay utility bills such as water and electricity bills.
Make merchant payments.
Transfer funds.
Request a cheque book.
Purchase general insurance.
Recharge prepaid mobile/DTH.

How to Sign Up for Internet Banking

Many banks automatically create an internet banking account for customers when they apply for a new bank account. However, if you don't have an internet banking account yet, here's how you can register:

Submit the Internet Banking Application Form at your home branch. Include necessary documents like a copy of your bank passbook, Aadhaar card, etc.
The bank will review all the provided information and then provide you with a customer ID and password for internet banking.
Alternatively, you can download the net-banking application form from your bank's official website.
Once you receive your credentials, you can log in and start using net banking.

How to Register for Internet Banking Online

Apart from signing up at the bank, you can also register for net banking online on your bank's official website. Remember, not all banks allow online registration for this service.

Visit your bank’s official net banking website.
Click on ' login' under personal/retail banking.
Choose 'New User? Register Here.'
If you already have a customer ID and password, enter them. Otherwise, click 'Next.'
Fill in a 'Self Registration Form' with details like account number, mobile number, email, branch code, CIF number, and debit card details. Click 'Submit.'
Authenticate your registration with a one-time password sent to your mobile.
Get your temporary customer ID and password on the next screen.
Log in using these temporary details. Create a new password after the first login.

Note: Change your login and transaction password every two months for security.

Steps for Net Banking Login

After registering, follow these steps to log in:

Visit your bank’s official net banking website. Ensure the URL starts with 'https://' for security.
For retail users, choose 'Personal Log-in'; for corporate users, choose 'Corporate Log-in.'
Enter your customer ID and password on the next screen.
Enter the Captcha and click 'Login.'
Your Net Banking dashboard will appear on the next screen.

Advantages of Internet Banking System

Availability: Access banking services 24/7 throughout the year. Many services are not time-restricted, allowing users to check balances and transfer funds at any time.
Ease of Operation: Online banking services are user-friendly, providing a simpler alternative to visiting a physical branch for the same transactions.
Convenience: Conduct transactions from any location without the need to visit a bank branch. Pay bills and manage recurring deposits online.
Time Efficiency: Complete transactions swiftly, transferring funds or opening fixed deposit accounts within minutes through internet banking.
Activity Tracking: All transactions performed on a bank's internet banking portal are recorded. This serves as proof of transactions, including details such as the payee's name, bank account number, amount paid, date and time of payment, and any remarks associated with the transaction. This contrasts with traditional banking transactions where acknowledgment receipts may be lost.

Disadvantages of Internet Banking System

Internet Requirement: A continuous and reliable internet connection is essential for utilizing internet banking services. Lack of internet access renders users unable to avail themselves of online facilities. Additionally, technical issues on the bank's part, leading to server downtime, can disrupt access to net banking services.
Transaction Security: Despite extensive security measures implemented by banks, online banking transactions remain vulnerable to hacking. Advanced encryption methods may safeguard user data, but instances of compromised transaction data pose significant threats, as hackers may exploit the information for their illicit gains.
Difficulty for Beginners: Individuals in certain regions, unfamiliar with the internet, may find it challenging to grasp the workings of internet banking. Lack of guidance on the process flow further compounds the difficulty, making it daunting for inexperienced users to navigate the system without external assistance.
Securing Passwords: Access to every internet banking account relies on a password, making password integrity crucial. If the password is disclosed, it can be exploited for fraudulent activities. Moreover, adhering to the banks' password rules and changing it regularly can be cumbersome for the account holder, posing a potential challenge in maintaining security.

Ways to Transfer Money Using Internet Banking

Internet banking provides three ways to transfer money between accounts: NEFT, RTGS, and IMPS. Let's look at these methods:

NEFT (National Electronic Fund Transfer)

NEFT is a common way to transfer money from one account to another.
It has specific hours at the bank, but you can use it 24/7 through net banking.
Usually, it takes about 30 minutes for the money to transfer, but it might take longer, up to 2-3 hours.

RTGS (Real-Time Gross Settlement)

RTGS is another method for transferring funds.
It ensures that the recipient gets the money immediately.
RBI monitors transactions through RTGS, making successful transfers unchangeable.
This method is used for transferring a minimum of Rs.2 lakh.
Like NEFT, RTGS is time-restricted at the bank but accessible all the time through net banking.

IMPS (Immediate Payment System)

IMPS allows real-time fund transfers.
It's commonly used to instantly transfer funds within banks across India using mobile, internet, and ATM.
You can transfer money via IMPS using just the beneficiary's mobile number.

What do you need for Internet Banking?

To use internet banking, all you need is an internet connection and a device like a computer or mobile phone. You might also need your bank card, debit card, or account number. When you start, you'll have to create an account and set a password.

How can you use Internet Banking safely?

To keep your money and personal info safe, use the security features your bank gives you. Make a strong password and change it every few months. Use a password manager to help remember it. If your bank offers it, turn on two-factor or multi-factor authentication. Never share your internet banking details, and avoid using it on public WiFi. Check your accounts often and report any suspicious activity right away.

Can you use Internet Banking to pay bills each month?

Yes, you can use internet banking to pay your bills on time every month. Log in to your internet banking account to set up bill payments or automate them. This is a simple way to make sure you never miss a payment, especially for bills with the same amount every month, like your mortgage or insurance.

What are the limitations of Internet Banking?

Here are some things to keep in mind about internet banking:

Can be challenging for new users: If you're new to it, net banking might be a bit tricky at first.
Needs an internet connection: You have to be connected to the internet to use online banking services.
Password changes are important: To keep your bank account safe from hackers, it's a good idea to change your password regularly. For example, you might need to do it every two months.

What is E-Banking?

E-banking, or electronic banking, includes all banking services done electronically.
It lets individuals, institutions, and businesses access accounts, conduct transactions, and get information on financial products and services.
This can be done through public or private networks, including the internet.

Types of E-Banking in India

In the table below, read about different types of e-banking services in India:

E-Banking Service	Description	How It Works
Internet Banking	Enables online financial and non-financial transactions via the internet.	Users can transfer funds, check account balance, view statements, pay bills, etc., through the bank's net-banking portal.
Mobile Banking	Conduct banking transactions on a mobile phone using dedicated apps from banks.	Download the bank's mobile app from Google Playstore or Apple App Store; access services similar to net banking on a mobile device.
ATM (Automated Teller Machines)	Provides services like withdrawing funds, depositing money, and changing Debit Card PIN.	Use an ATM card and a secret PIN; nominal fees may be charged for transactions exceeding specified limits on other banks' ATMs.
Debit Cards	Connected to a bank account, allowing cashless transactions with instant debiting.	Use the debit card for various transactions; the money is deducted immediately from the connected account.
Direct Deposit and Withdrawals	Authorizes the bank to deduct funds regularly for bill payments, instalments, insurance, etc.	Set up regular deductions from the account for recurring payments.
Pay by Phone Systems	Allows customers to contact the bank via phone for bill payments or fund transfers.	Call the bank to request bill payments or fund transfers; the bank processes the request over the phone.
Point-of-Sale Transfer Terminals	Permits instant payment for purchases using a debit/credit card.	Swipe or insert the card at a store's terminal to make instant payments for purchases.

Services Provided through E-Banking in India

Telephone Banking: Banking services over the phone.
ATMs (Automated Teller Machine): Machines for money stuff like withdrawing or depositing.
Electronic Clearing Cards: Cards for electronic money movements.
Mobile Banking: Banking on your phone with a special app.
Door-step Banking: Banking services brought to your door.
Bill Payment: Paying bills electronically.
Shopping: Buying things online.
Smart Cards: Special cards for smart transactions.
Funds Transfer: Moving money from one place to another.
Internet Banking: Doing all banking stuff online.
Electronic Funds Transfer System: System for electronically moving funds.
Electronic Clearing Service: A service for electronically clearing transactions.
Telebanking: Banking through the phone.
Investing: Putting money into things that might give you more money.
Fixed Deposits: Putting money away for a fixed time to get more money later.
Insurance: Protection for unexpected money troubles.

Difference Between Net Banking and E-Banking:

Particulars	Internet Banking	E-Banking
Definition	Digital system allowing online transactions via the internet.	Broad category covering various banking services via electronic means, including Internet banking, mobile banking, telebanking, ATMs, and more. Internet banking is a part of electronic banking.
Types of Services	Offers all traditional banking services online, like fund transfers and bill payments.	Encompasses internet banking, mobile banking, telebanking, ATMs, debit cards, credit cards, and more. Internet banking is a recent addition to electronic banking.

Note: Internet banking is a type of electronic banking, and both involve using electronic means for banking services.

How to Transfer Funds Using Internet Banking

Transferring funds through internet banking is a similar process across most banks. Here's a straightforward step-by-step guide for online fund transfers:

Step 1: Log in to your bank’s official net banking portal using your customer ID and password.

Step 2: Go to the ‘Transfer Funds’ option and choose the transfer method – NEFT, RTGS, or IMPS. Ensure the beneficiary's bank supports the selected method, especially for NEFT.

Step 3: Select the beneficiary. If not already added, click on ‘Add Beneficiary.’

Step 4: Enter the beneficiary’s details: name, account number, IFSC, and bank branch name. Click ‘Submit & Save’ to add them.

Step 5: Input the amount you want to transfer.

Step 6: Confirm the transaction by entering the one-time password sent to your mobile number.

Step 7: Click ‘Confirm & Send.’ The money will be transferred to the beneficiary’s account.

How to Pay Your Credit Card Bill Using Internet Banking

Paying your credit card bill through internet banking is easy, safe, and doesn't cost extra money. Here's how you can do it:

Step 1: Go to your credit card provider's website.

Step 2: Click on the 'Pay your Credit Card bill' option.

Step 3: Enter your credit card details like the card number, email address, and the amount you want to pay.

Step 4: You'll go to the payment gateway. Choose 'Net Banking' and pick the bank account you want to use for payment.

Step 5: You'll be sent to your bank's payment page.

Step 6: Enter your customer ID and password. Confirm the transaction by putting in the one-time password you get on your mobile.

Step 7: Click 'Confirm.' The payment amount will be taken from your bank account. After it's done, you'll get a confirmation message through SMS and email.

Significance of Internet Banking

Importance to Clients

Lower Cost per Transaction: Clients save time and money as they don't need to visit the branch for each transaction.
No Geographical Barriers: E-banking reduces geographical obstacles that could hinder certain financial transactions in traditional banking systems.
Convenience: Clients can access and manage their accounts from anywhere at any time.

Importance to Businesses

Improved Efficiency: Internet banking enhances business efficiency by automating regular monthly payments and providing additional banking features.
Lower Costs: Costs in financial relationships depend on the services used. Internet banking minimizes these costs.
Reduced Errors: Electronic banking reduces errors in financial transactions, improving accuracy in account activities.
Decreased Fraud: Internet banking leaves a digital footprint for authorized employees, making it challenging for fraudsters to commit crimes.
Account Audits: Business owners and designated staff can quickly access accounts through an online banking interface, ensuring smooth account operations.

Importance to Banks

Lower Transaction Costs: Electronic transactions are the most cost-effective means of transfer.
Reduced Margin for Human Error: Electronic transmission eliminates room for human errors.
Less Paperwork: Digital records reduce paperwork, making processes more manageable and environmentally friendly.
Reduced Fixed Costs: The lesser need for branches leads to lower fixed costs.
Increased Customer Loyalty: Convenient e-banking services foster higher customer loyalty to banks.

Internet banking is a quick, cheap, and easy way to do many of your daily money tasks. If you already have a bank, you probably have internet banking. Just sign up. You can also use internet banking from traditional banks, but some online-only banks might give you more interest on savings and save you money on fees.