Over the past few years, internet or online banking is the in word and almost everyone in the western world has used it. But what are the advantages and disadvantages of internet banking?
In this post, I will try to answer those questions while shedding more light on internet banking and its future.
Advantages of Internet Banking
Internet banking has changed the way we do banking in some wonderful ways. If someone who passed away in the 80s resurrected they would be shocked at the pace of change.
In the following paragraphs, I will try to explain some of the advantages of internet banking.
1. 24 Hour Banking Service
The fact that I can carry out things like making payments, apply for loans, etc throughout the whole day is for me the biggest advantage of internet banking. I lived at a time when almost every banking service had to be done in a brick and mortar banking hall.
I remember the times I missed cashing checks simply because I was late by a minute or so. It was very frustrating. We were all at the mercy of banks’ opening and closing times.
Nowadays one can deposit checks by just scanning it in the comfort of his home. One can also
2. The ability to pay bills online
Another advantage of internet banking is the ability to pay bills online throughout the whole day (24/7). I now don’t have to worry about deadlines as I can pay some bills close to midnight.
In the past, we would pay by cash or check and it required that you can visit the cashier’s office of the company. In other cases, you would have to post your check in the mail.
With internet banking, you don’t have to worry about your check getting lost. As someone who waits until the last moment, that is a plus for me.
I remember when I was studying for my accountancy professional exam I was fond of settling my dues on the very last day. For example, I would pay my examination fees at 10 pm in time before a 12 pm deadline.
Not long ago that would have been impossible as we had to pay by check.
I can also set up a standing order especially for payments I make to providers of some services or to others or to my other bank accounts.
Most utility companies, however, prefer Direct Debits. This enables them to take whatever amount I have incurred that period without my involvement. I can however also cancel these direct debits online.
3. Access My Bank Account Transactions
Another cool thing about internet banking is the ability to be able to access my bank transactions any time I want anywhere I have internet access. I remember living at a time when you had to wait for a bank statement to see the monthly transactions.
Alternatively, one was forced to go to the bank and ask for a bank statement or bank balance. These are indeed wonderful times. It sometimes feels like a different world altogether for some of us.
4. Ease of Access: The Advent of Mobile banking Apps
The advent of mobile banking apps has made banking easily accessible wherever you are. Using the computer to do your banking was fantastic but the advent of mobile apps has spiced it farther.
Because of this one can deposit a check by just scanning it and therefore avoid being in a queue in a banking hall. Life couldn’t be simpler than that.
Besides this one can check his bank balance, transfer funds between accounts, and make all sorts of payments.
All this of course depends on the restrictions that your bank might place on the use of banking apps. I however believe that as time goes by one might be able to do any transaction without limits.
5. Speed and Efficiency
Whereas in the past a transaction could take an hour or so to process nowadays it takes a few minutes for a transaction to go through. This is because in the past you either had to go in person to the bank or fax the bank some instructions.
I have noticed recently that even transactions from one bank to the other that took an hour or so to go through now take a few seconds or minutes.
This however depends on the status of the banks involved. I would assume that if you are sending a payment to a person with a bank account in a small bank it may still take hours or days.
This has also promoted efficiency in the whole process as the processor is involved from the beginning to the end. In any case, before the instructions are processed the banks request confirmation of the same.
6. Lows Costs For The Bank and Us
Since internet banking involves the use of machines i.e. computers, the processing costs are lower. And as more people get on board banks may be forced to shed staff and therefore reduce their overhead costs.
This means less costs for the consumer and the bank as well.
Other overhead costs that the banks will avoid are electricity for bank branches, rent, cleaning, etc.
Actually you will notice that the purely online banks charge lower frees than brick and mortar banks.
Disadvantages of Internet or Online Banking
It is not all rosy when it comes to internet or online banking. There are some advantages that one should be aware of. Knowing these advantages and find ways to get around them can save you a lot of heartaches.
1. Internet Fraud
While the internet has a lot of good stuff and good people, there are some people who are up to no good. You, therefore, need to be extra careful and make sure that your internet access is secure.
There are people who can put malware on your computer and be able to steal passwords and other information from you. These crooks can then use your stolen passwords to access your bank accounts.
One way to avoid this is to avoid public wi-fi as your access could be monitored by crooks. It is therefore important that you don’t access your bank account while using public wi-fi unless absolutely necessary.
A few months ago I heard of fraudsters from Eastern Europe who infect other people’s websites with malware that asks for bank details from visitors.
Internet fraud is costing ordinary people billions of dollars every year. You, therefore, need to be on the lookout for this.
Never ever provide passwords to strangers or anyone claiming to be from the bank.
2. Lack of Personal Contact With Bank officials
Man is a social being and wants to interact with fellow men. While internet banking has made it easier to carry out bank transactions, a lack of personal interaction is a minus.
I remember making friends with various people at the bank I used to frequent in those days. All those days are now gone as I rarely visit my bank now.
It is this lack of human interaction in so many things that are the cause of loneliness in this world. A bank used to be like an African village where people go to interact with others besides buying things.
The more and more machines take over things the less interaction there will be among human beings. This is especially true in the western world where people value their individual spaces.
I sometimes feel that it is too big a price to pay for the convenience of internet banking.
3. Technology Challenges
Technology has its own challenges sometimes as we all know. The internet can be down on your end or the bank’s side.
If the internet is down and the bank is pure online banking with no brick and mortar branches then you could be in a little inconvenience.
Another thing that people forget is that some old folk still struggle with issues dealing with modern technology. It is because of this group that checks are still in use, years after some governments wanted to abolish them.
4. Most Pure Internet Banks Don’t Have Their Own ATMs
Most internet-based banks do not have their own Automated Teller Machines such that you will have to use other banks’ ATMs. Because of this, you have to be aware of any extra charges you may face by using other banks’ ATMs.
You may also have to do your homework on the availability of those ATMs in your area. You don’t want a situation where you desperately need cash and can’t get it because of distance issues.
5. Many Purely Online Banks Offer More Limited Services
Traditional brick and mortar banks offer far more services than pure internet or online banks.
You can for instance use their stock brokerage services to purchase stocks. Some banks also offer services such as insurance which are not available with internet banks.
There are other services such as bank signature guarantees that are also not offered by internet-based banks.
One, therefore, has to take all this into account before opening an account with them. In most cases, you are better off using traditional banks for your internet banking.