Online Banking Essay Example

online fraud and difficulties accessing online banking services for various reasons (Bainbridge, 2008).

According to Bainbridge (2008), online banking was created with the purpose of improving and expediting the banking process. The author suggests that by eliminating the tedious paperwork and bureaucratic procedures commonly found in traditional banking, online banking has become more appealing to customers. As a result, the speed and convenience provided by online banking have led to a significant rise in its usage within the past five years, resulting in a boom in the banking industry (Bainbridge, 2008).

It is estimated that about 55 million American families will start using online banking by 2010 due to the increasing availability of this service among banks. The motivation behind this expansion is the need for banks to stay competitive and capture a larger portion of the market. However, it should be noted that not all banks currently offer online banking options to their customers (Bainbridge, 2008).

Despite the security risks, online banking has seen growth in user numbers. However, it cannot be assumed that everyone will be ready for exclusive online banking in the next decade due to technology disparities and certain unavailable services. Nonetheless, the future of banking is expected to continue moving towards online platforms (Gup, 2003; Macesich, 2000).

The benefits of online banking

Online banking offers the convenience of performing transactions, paying bills, and checking balances from anywhere in the world. It removes the necessity to go to physical branches, except for significant amounts of money. This level of accessibility is unparalleled compared to other banking systems, as long as one's computer is connected to the

Internet.

Online banking enables users to schedule payments for payees they have registered with the bank, eliminating the need to retain paper bills and recall past visits to the bank for payment. Additionally, online banking offers a ledger that tracks fund usage, providing evidence of completed payments, which is more convenient than constantly referring to physical bills. Following successful scheduling of an online payment, depositors will receive computer validation or notifications confirming that the payment has been made on their behalf (Russell, 2008).

Online banking has several advantages compared to the ATM system (Russell, 2008). It offers faster, more efficient, and more effective service. Depositors can quickly and easily perform transactions as well as access other online services that are unavailable through other systems. The bank can provide a range of services linked to one account, such as checking, savings, time deposit, and even investment services (Levinsohn, 1999; Bielski, 2001).

2.3 Drawbacks

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One drawback of virtual banking is that it results in a lack of human interaction between staff and customers. This could reduce customers to mere objects or numbers. Meeting the bank staff brings joy to depositors, and losing the personal touch diminishes the trust that comes from knowing someone face-to-face.

Online banking makes it easier for customers to make incorrect transactions, as they are solely responsible for their decisions and any resulting errors impact their account rather than the bank.

Although online banking is convenient, there are worries regarding security weaknesses and input mistakes that may result in a loss of confidence in the

system. To address this issue, online banks have established policies declaring that online transactions are deemed definitive. Nevertheless, depositors have alternative choices. They can retain a transaction receipt and cross-reference it with their online bank statement upon its release. If any inconsistencies are detected, customers can file a complaint either through the bank's website or by visiting a physical branch.

Although many people are familiar with online banking, they may face challenges accessing a specific bank's website. Making incorrect login or password entries can result in multiple unsuccessful attempts and denial of access. In such cases, customers are recommended to visit a branch and seek help in obtaining a new password or an alternative login method. Banks address this issue by providing tutorials on banking procedures and offering customer support through chat, phone, or email (Russell, 2008).

2.4 Actual experience or application from banks regarding the advantages and disadvantages discussed.

The case of Progress Bank is highlighted in section 2.4.1.

Progress Bank and Trust, also referred to as Progress Bank or the bank, provides the convenience of online banking. This allows customers to easily manage their eligible accounts from home or any location with computer access. The services offered include viewing balances and transaction histories on enrolled accounts, transferring money between eligible accounts, paying bills to merchants, and accessing home equity loans and other eligible loans. It is important to note that meeting specific eligibility requirements is necessary for accounts to enjoy the benefits of online banking. In summary, online banking offers a convenient solution for various banking needs (Progress Bank and Trust, 2008).

Before using online banking services, there

are certain prerequisites that need to be fulfilled. These prerequisites encompass entering into a contractual agreement with the bank and understanding the potential risks involved. It is crucial to confirm that the customer has the required legal capacity to enter into such an agreement and fully comprehends the terms and conditions. Furthermore, customers must acknowledge that the bank holds the authority to verify their identity while applying for and utilizing its products or services.

The agreement covers damages and warranties related to online banking. It specifies that the bank is not liable for any losses, errors, injuries, expenses, claims, attorney's fees, interest or other damages that may occur while using online banking. These damages can be direct, indirect, special, punitive, incidental or consequential and may result from the installation, use or maintenance of personal computer hardware or software. Importantly, the agreement holds the bank responsible for any software provided by them or their suppliers.

According to Progress Bank and Trust (2008), if the bank employs a skilled programmer, it could engage in account hacking without facing any accountability.

According to the agreement, the bank is exempting itself from liability for any electronic viruses that the customer may come across after installing the software or using the bank (Progress Bank and Trust, 2008).

The bank is not liable for any losses or liability to its supplier in case the supplier fails to perform or due to uncontrollable events or conditions like communication breakdowns, acts of God, or labor disputes. The bank also denies responsibility for accidental or intentional loss, breach of confidentiality, or security issues that occur during data transmission via the Internet,

communication lines, the postal system, or any automated clearing house network.

According to Progress Bank and Trust (2008), both the bank and its suppliers are responsible for offering information, material, and functions from their individual sites. Nevertheless, they cannot assure suitability for use in the customer's location or jurisdiction.

Customers are advised by the bank to use their services at their own discretion and take full responsibility for complying with local laws and regulations. The bank and its suppliers do not provide assurance regarding the sufficiency, accuracy, or completeness of any information available on their website or on third-party sites linked to or from it. They also caution that there may be technical inaccuracies or typographical errors in the materials found on their website, which may undergo periodic updates (Progress Bank and Trust, 2008).

The bank reserves the right to alter or update the products, services, and programs mentioned in these materials without informing customers. If customers continue using the website after these changes are made, it is understood that they accept them (Progress Bank and Trust, 2008). However, relying solely on online banking may disadvantage customers by taking away their initial selection.

The bank's lack of warranties allows it to decrease its responsibilities towards depositors. It does not offer any guarantees or assurances about the accuracy, functionality, or performance of its online banking and associated software. Additionally, the bank denies all explicit or implicit warranties, including those related to merchantability, fitness for a specific purpose, and error-free operation.

According to the bank's policy, customers are required to give their consent for indemnification. This means that if a customer engages

in negligent behavior, fails to comply with the law or breaches the terms of the online banking agreement, they will be held responsible for protecting and defending the bank as well as its officers, employees, directors, suppliers, and agents against any damages, liabilities, losses, costs or expenses (Progress Bank and Trust, 2008).

The bank (Progress Bank and Trust, 2008) has the power to terminate the online banking contract or impose charges, fees, or other terms stated in the approved agreement.

Customers who have opted for online banking exclusively may feel constrained and perceive it as an unfair limitation.

As per the bank mentioned in this document, individuals who use online banking are required to comply with the laws of the State of Alabama, U.S.A., along with US federal laws. Moreover, if users wish to lodge a complaint against the bank, they must file it at a state court situated in Madison County, Alabama, U.S.A. (Progress Bank and Trust, 2008).

In the scenario of Northern Rock, there is a distinct situation.

What alternatives are there if the bank restricts access to funds? Can these transactions be done online? According to a report by Wallop (2007), Northern Rock was accused by many customers of limiting access to their website and delaying the withdrawal of billions of pounds. The reports also showed that Northern Rock's system had multiple crashes, causing customers to be hesitant about conducting online transactions due to concerns about possible future problems (Wallop, Harry, 2007).

The bank could use the excuse of slower servers to explain any delays in withdrawals. According to internet traffic monitoring during the Northern

Rock case, visits to the bank's website were much higher than usual, reaching about three times the normal amount. This surge in customer numbers caused inefficiency and ineffectiveness in the servers and software of Northern Rock, as revealed by the monitoring. This contradicts the claimed benefits of online banking (Wallop, 2007).

Wallop (2007) reported that a Northern Bank IT employee admitted deliberately restricting access to online accounts to prevent customers from withdrawing funds. The bank may argue that they are not responsible for these actions, making it difficult for customers to detect. They might also claim exemption from liability for any resulting harm due to a clause in the agreement addressing unforeseen issues such as server slowdowns. However, this assertion is untrue.

In conclusion:

The research suggests that the earlier mentioned thesis on the improved and faster service of online banking cannot be avoided but needs to be revised based on evidence found. Although certain transactions like scheduled payments and fund transfers between accounts or banks are relatively safe and secure in online banking, there are still risks associated with internet use such as virus and online security issues. Furthermore, if any errors occur, cases involving online banking would need physical documents and in-person interactions for resolution because physical evidence is believed to be more convincing than online evidence in asserting rights in court.

While online banking offers convenience, speed, and efficiency, it is crucial to consider the associated warnings. A careful analysis of Progress Bank and Northern Rock highlights a significant warning that all bank customers should be aware of before utilizing online banking. This warning has been previously explained.

By comparing the policies of other banks, it becomes evident that Progress Bank generally follows similar practices. This implies that the bank may not be held liable for any issues arising from independent software development or collaborations with suppliers or third parties to access customer funds. As a result, customers may find themselves powerless due to this apparent agreement.

The case of Northern Rock illustrates how a bank can deliberately slow down its servers without customers being aware of it. Online banking is a convenient choice for people who want a simple life and feel comfortable with the security measures provided by banks. However, for those who are cautious and more conservative, online banking can be more complex and daunting. Banks should recognize the diverse customer segments they serve. Some customers are willing to take risks in return for faster and more efficient online banking services, so the bank should meet their needs. Conversely, for individuals and entities who prefer traditional banking methods and are adverse to risk, banks should continue offering services such as ATMs, credit cards, and even manual banking, especially for large sums of money that are difficult to move.