The first online banking solution appeared in 1997, and by 2010, most banks had implemented it. However, bank customers were slow to embrace the innovation and often preferred visiting bank offices rather than dealing with digital solutions.
The beginning of 2020 has flipped things around, and with the pandemic outbreak, many bank customers started quickly switching to online banking, discovering its capacity.
In this article, we’ll look into what online banking is, what benefits it brings to banks and their clients, and why online banking is still a must-have feature for any finance-related application in 2023.
The Concept of Electronic Banking
Electronic banking, or online banking, simplifies banking operations, excludes paperwork and visiting brick-and-mortar facilities, and uses automatic teller machines (ATMs).
Online banking allows users to make money transactions, pay bills, open new accounts, and do other finance-related activities in the comfort of their homes or on the go.
There are various electronic banking services that e-banking can provide to their customers. These services are divided into two main types – retail electronic banking and wholesale electronic banking.
Retail electronic banking is personal banking. It provides financial services to individuals, including ATM, credit and debit card management, point of sale, check transactions, retail automated clearinghouse, etc.
Wholesale electronic banking services serve large clients like banks, corporations, financial institutions, and others. Wholesale banking allows these organizations to manage their cash, perform wire transfers, and fulfill automated corporate clearinghouses.
Benefits of Online Banking
Online banking allows its users to utilize almost every banking service available in brick-and-mortar facilities. Therefore, banks and users gain a variety of benefits when switching to this type of banking. Let’s have a closer look at them.
Availability
E-banking users can access its services any time throughout the year and, often, from any part of the world once they have a stable internet connection. This way, bank clients don’t need to spend time traveling to their bank to solve their banking issues or wait till one of the branches opens.
User-Friendliness
When building their digital solutions, banks try to make them simple and easy to use. They usually include various visual clues and FAQs on how to use their apps. App users can take their time and study the app at their own pace, though banks also add a customer service feature to the app in case there is something unclear.
Convenience
Now, bank clients can handle their financial operations using just one device. They don’t need to spend hours in a queue to pay their utility bills or check their account balance. All they need is to subscribe to the service and have internet access.
Time Efficiency
Digital systems help banks to smoothly organize their workflows and interact with their customers and other institutions. Therefore, bank clients can perform any banking operations like funds transferring or opening a deposit account within several minutes on net banking.
Transaction History
Banking apps keep records of every fulfilled transaction, making it easier for users to keep track of their operations. Now, bank clients don’t have to worry about where they put their acknowledgment receipts, as the app will keep them all in one place.
Challenges of E-banking
As businesses increasingly rely on electronic banking, it’s crucial to be aware of the potential obstacles and challenges they may encounter in this area. Here’s a detailed description of the key challenges of e-banking:
Security Concerns
Cybersecurity threats are one of the most irritating obstacles in e-banking. Malicious agents constantly develop new methods to breach security systems. This way, phishing attacks, malware, and data breaches bear constant risks.
Thus, businesses must put resources into quality security measures to shield sensitive financial information and customer data.
Compliance and Regulation
The financial industry is heavily regulated, and e-banking is no exception. Adhering to local and international regulations, such as KYC (Know Your Customer) and AML (Anti-Money Laundering) requirements, can be complex and demanding for businesses.
Technical Challenges
E-banking relies on complex technical infrastructure. System downtime, software glitches, or network issues can disrupt services and cause customer frustration and potential financial losses.
Customer Adoption
Encouraging customers to adopt e-banking can be tough, especially for those accustomed to traditional banking. Some customers may need more confidence to trust an online digital banking (BaaS) platform with their financial transactions.
Operational Risks
E-banking bears operational risks related to technology failures, human errors, and process inefficiencies. These risks can impact the efficiency and reliability of electronic banking services.
Solutions for E-banking
To overcome the challenges associated with e-banking, businesses can implement the following solutions:
Latest Cybersecurity Measures
Implement state-of-the-art cybersecurity measures, such as encryption, intrusion detection systems, and firewalls, to secure sensitive data. Also, regularly update security protocols to stay ahead of emerging threats.
Compliance Management
Establish a dedicated compliance team or apply compliance software solutions to guarantee adherence to local and international regulations. Try to stay informed about evolving regulations and adapt your processes accordingly.
Technical Infrastructure Resilience
Develop a robust technical infrastructure that includes redundancy and disaster recovery measures. Implement load balancing to evenly distribute traffic and reduce the risk of system failures.
Customer Education and Support
Create user-friendly interfaces and provide exhaustive educational materials to help customers navigate e-banking. Offer responsive customer support to address questions and concerns promptly.
Fraud Detection and Prevention
Invest in advanced fraud detection technologies that use machine learning and AI to find abnormal patterns in transactions. Implement real-time transaction monitoring and employ behavioral analytics to detect anomalies.
Operational Risk Management
Arrange regular operational risk assessments and audits to detect weaknesses in processes and systems. Develop robust contingency plans and train staff to respond effectively to operational disruptions.
Data Privacy and Protection
Implement strict data privacy policies and practices, such as data encryption, access controls, and systematic security audits. Comply with data protection rules and obtain customer consent for data processing.
Multi-Factor Authentication (MFA)
Implement MFA to provide an extra level of security. Also, require users to pass multiple means of authentication, such as passwords, facial recognition, or one-time codes, before granting access to accounts.
Regular Updates and Patch Management
Constantly update all your systems with the latest security patches and upgrades. Cybercriminals always seek ways to make profit from vulnerabilities in outdated software.
Emergency Response Plan
Develop an exhaustive emergency response plan to manage all security breaches. Distribute roles and responsibilities and set communication channels to notify involved teams.
Continuous Monitoring and Threat Intelligence
Install continuous monitoring systems to find and cope with security threats in real time. Follow the latest threat intelligence to address emerging risks.
SCAND Experience in Online Banking Solutions Development
At SCAND, we understand the critical importance of secure and efficient online banking solutions.
With our extensive experience in banking software solutions development, we have successfully designed and implemented online banking systems that cater to the unique needs of businesses across various industries.
Our software development experts empower desktop, mobile, and web applications with banking and finance management features, helping them to reach their financial goals.
Conclusion
Online banking is a convenient technology that works for both – banks and their customers.
While banks can keep their customer flow at the level of pre-pandemic times, bank clients get convenient access to all the banking services without the need to visit brick-and-mortar facilities.
Now, having their own business app with online banking functionality is already a must for banks and financial institutions. And we expect that its popularity will only grow in the future.
Want to level-up your banking experience? Contact SCAND today and embrace the future of finance with our cutting-edge e-banking solutions!
