E-banking is defined as the automated delivery of new and traditional banking products and services directly to customers through electronic, interactive communication channels (Federal Financial Institutions Examination Council, 2003). The "E" can mean anything electronic like the Internet, telephone, television and things that can perform a function electronically, at such customer have access to their account, Transfer fund, make payment, make enquiries and so many more just by the connection through an E-channel.
EVOLUTION OF E-BANKING
Until the early 1970s functional demarcation was predominant with many regulatory restrictions imposed on financial sector (Delving 1995), E-Banking has developed since the late 1970s from just virtual insignificance to many users worldwide. However, Electronic Banking is the product of different types of electronic transactions.
Mainframes were the earliest applications of computer within the banking sector which are mainly use for calculations, and later minicomputers as a result of advancement to process bank inventories, customer accounts, personel records and accounting which later became the spreadsheets. The use of all these technology was to help bankers deliver their work faster, more conveniently and with less errors so as to deliver good customer services which brought competition and pressure on banks as different banks need to deliver the best service to maintain a competitive hedge,
According to the survey conducted by Techweb News found E-banking to be the fastest growing commercial activity on the internet, 13 million Americans carry out some banking activity online on a typical day which is a 58% jump from 2002.
The advancement brought about the evolution of various E-banking elements mainly to cut down the cost of transaction and to speed up payments. This led to the development of specialized elements such as: Automated Teller machine (ATM), Electronic Point Of Sales (EPOS), Mobile/Telephone Banking, PC banking, E-banking Kiosk
Automated Teller Machines (ATMs): in 1968 were the earliest well-known machines to give electronic access to customers in a public space without the need for human help, it is available 24-hour which give consumers the opportunity to access his/her bank account almost any time, from being mere currency dispensers they now have multifunctional attributes which enables customer perform a wide range of transactions like account management, fund transfer, bill payments which brings about the development of Electronic cards such as : Credit/Debit cards
Credit/Debit Cards: They are virtual money cards with stored-value of money such, they have specific amount of credit embedded electronically in the card, these cards can be used to make payments, Transfer money and pay for bills, as a result they the transaction fast, easy and convenient.
Electronic Point Of sales (EPOS): The next step in providing direct customer service came with the extended use of credit and debit cards in merchants' shops through EPOS(electronic point of sale) to basically make payments . mainly to cut down the cost of transaction and to speed up payments. This led to the development of specialized products like corporate cash management systems.
PC Banking: PC banking superseded the ATMs in the sense that it allowed users to interact with their bank by means of a computer, Instead of having to locate the ATM or EPOS this time, Consumers can view their account balances, request transfers between accounts, request bank statement, View banking information and pay bills electronically from home with the use of their account information and some details provided on their Electronic cards, This has to do with connection through the internet using the dial-up or broadband internet technology to access the bank information systems.
E-banking Kiosk: This evolution eliminates the need to deposit Checks into bank account personally by customers, with the development of the banking kiosk which can perform the duty of a bank worker by accepting checks deposit, kiosk can also perform personal enquiries by allowing you to check your account balance, print a mini statement and make checks book requests, connects to the internet and carry out transactions through e-banking,
Telephone/Mobile Banking: Telephone banking used to be a situation where users call their bank's information systems with the use of landline telephones and use the phone keypad to perform transactions and make enquiries by following programmed instructions and answering some questions, the advances in telecommunication technology have helped in this area of electronic banking known as mobile banking, customers can access their account through Wireless Application protocol (WAP), Wireless is estimated to be growing at more than three times the rate of landlines globally. With the number of connections estimated at 2.6 billion at the end of 2006, and expected to cross 4 billion by this year, mobile banking is set to become a major delivery channel. Some banks are making significant investments in mobile systems to deliver business activities so as to increase efficiency and reduce cost, to improve operational effectiveness and customer services.
ELECTRONIC BANKING COMPONENTS
There are various components that contributes to the functionally of the various Electronic banking elements mentioned above which are
ICT Infrastructures: Email and internal networks communication systems, ATM, servers for net-banking, Storage area networks (SAN) and Item processing equipment such as MICR coders ATM.
Applications: Core banking processing system, Operating systems, E-banking applications such as bill pay, system performance monitoring, automated decision support systems, intrusion detection systems.
Operational aspects: Programming support, security management, Network administration, firewall configuration and management and Configuration management.
Service provider: disaster recovery services and Website design and hosting.
IMPACTS OF E-BANKING
According to Carol Sergeant Financial Services Authority (29 March 2000), Experience in Scandinavia (arguably the most advanced e-banking area in the world) appears to confirm that the future is 'clicks and mortar' banking. Customers want full service banking via a number of delivery channels. The future is therefore 'Martini Banking' (any time, any place, anywhere, anyhow). Banks were known to be branch-banking model with two basic competitive advantages; namely, brand name and customer relationship. The advancement in information technology has turned around the banking system and will continue to influence future banking trends.
Competition in the banking sector is determining the success of a bank by ability to deliver innovative products and services in a technologically advanced way that meets the changing needs of the customer. This have some Positive and negative impacts on the normal traditional banking.
Changing customer profile: initially customers only change bank account at extreme cases but now it can be done at the click of a mouse, by surfing the internet for information provided by the banks. The cost of changing bank account is very low in the case of electronic banking which reduces customer loyalty and on the other side there is overload of information, at such they get confused of whom they are dealing with and on what basis which leave them open to scam and fraud
Market Transparency: Due to the easy availability of information, banks can get information about new innovative products offered by competitors, accelerating product standardization and commoditization
Cross-Selling: with the availability of customer banking trends and preferences, banks have the potential to cross-sell other financial products and services once they are able to identify the customers want by the information available on the internet.
Choice and convenience for customers : As customers want better choices, providing unique services is an approach that will retain customers, There is importance in human touch for customer (Avkiran,1999), banks need to develop personal relationships with customer because there are some services that are needed by customers that cannot be automated. Data mining technology can help in identifying customer needs.
Attracting High value customer: With good customer services provided by banks through e-channels, high profit customers are attracted which brings more income for the banks because most of them are using online channels for different kind of transactions
Enhanced Image : One of the many advantages that the internet banking has over the traditional banking is that it is effective and dealing with thousand of customers within a short period of time is no problem. Because E-banking is a customer focused organization, an attractive banking website with wide range of innovative products will enhance bank image which also help in effective e-marketing and attracting customers.
Increased Revenue: The cost of running the bank in terms of expenditure is lower which has influenced higher profit margin of the bank, cost of running E-banking channels becomes cheaper that the normal traditional banking and it also brings about possible increase in number of customers, customer retention and cross-selling opportunities.
Easier Expansion: Customers now enjoy the benefit of bank accessibility round the clock, regardless of their location, receive and send money through their account within seconds, apply for a loan, buy or sell stocks and can even open new accounts because there is no little or no geographical boundaries, There is no need to build branches with is usually expensive to start up and maintain, e-channels can be offered in another area where the bank is not located.
SECURITY CONCERNS
Since E-Banking is a technology that provides many capabilities, it also has so many potential problems, users some how find it difficult to use the system because of the fear of security. Online banking security issues have become one of the most important concerns of the banks affecting areas like: government, businesses, banks, individuals and technology.
Government: Electronic Banking system poses a threat to the governmental regulatory laws. E-Banking also brings about concerns in requirements of the bank reserve, deposit insurance and the consumer protection laws attached with e-transfer of money.
Businesses: Businesses also have some concerns about this media of interaction. There is always huge transfer of money which is most done by businesses, they become seriously concern about the safeness of their money and at this same time the media have the potential to save time and financial charges(physical deposit usually attracts bank charges)associated with it because if workers are employed to attend to customers they need to get paid. Another businesses concern is related to the customer. There are some customers that will not transact businesses because it does not offer some payment methods e.g. e-transfer and debit cards which usually result to loss of customer, On the other side, if this system is widely spread and used, it pushes more buying power to the consumer which makes businesses see the reason to allow wide range of e-transfer system.
Banks: As competition rises banks are pressured from other financial institutions to deliver a value added financial services to their customers. Profits are made by banks by handling financial transactions, by charging customers for some transactions and by investing the money held from customers deposit in other areas which is known as "spread", The security of the bank's system is a big concern to them as most of the e-transactions are being processed by their central computer systems
Individuals: For individuals concerns are probably too much information and not understanding whom they are really dealing with and on what basis, they in this case are vulnerable to scams and frauds. Security of the system is most time the concern of individual, mainly with the unwarranted and unauthenticated access to their accounts, customers are also concerned about the confidentiality of their personal information. Banks have to make sure that the customers receive assistance quickly if they need help. major problems or disastrous without quick reactions by the bank can destroy the image of the bank easily. Customer should be made to trust online banking by showing Internet is reliable. Some privacy technologies related to the electronic banking industry are electronic cash and electronic checks which will be discussed in the software solution section.
Technology: To enable secure and effective banking transactions, there are three major technology issues that needs to be resolved which are
Security: Security of the transactions is the primary concern of the Internet-based industries. The lack of security will leave the banking system open to serious damages, more on security issues will be discussed in the next chapter, E-banking system are usually open to potential hazards during transferring funds, on-line transactions, and minting electric currency, etc.
Anonymity/Privacy: Customers and other banking partners are seriously concerned about sending confidential and personal information through the e-channels; so much focus on strengthening the area of privacy technology will ensure the secrecy and security of the transactions, private information such as the date and time of the transaction, the amount of the transaction, and the name of the merchant or customer where the transaction is taking place are related to the banking industry and needs to be taken care of.
Authentication : Transactional website will expose a e-banking system to higher risk since they permit transfer of customer information and funds which have direct linkage to the bank's information systems, a very high control is needed because unauthorized access in this kind of environment may lead to fraud or system disasters, Authentication Encryption may help in this case as The bank may be liable for unauthorized transactions and losses from fraud and unauthorized access to confidential customer information during transmission or storage.
