Internet Banking and Its Advantages


This paper analyses the advantages of internet banking both to the customers and the banking organizations. Globalization and innovation are the major forces driving the global economy; the internet as an element of globalization and innovation has become a popular platform that supports business activities in the global economy. All business sectors have evolved and shifted their business activities to the internet. The internet facilitated quick, reliable and accurate services to customers. It also provides the service provider a competitive edge over other organizations providing similar services.

The banking sector has been fast in adopting and implementing internet technology in its business procedures to offer efficient and reliable services to its customers. Bank’s accounting procedures and money transfer systems are now operated online platforms. Mobile telephone banking is also being adopted by banks as a means to enable more people to access banking services from anywhere.

Benefits of Internet Banking to Banking Organizations

Core banking services are currently supported and run over the internet. This is because of the numerous advantages the system offers banking organizations. The benefits range from marketing to supporting back office operations of the bank (SCN Education B. V 115). The internet allows banks to provide unlimited access to banking services by their customers. Bidgoli notes that the ATM services allow customers to access their money from banks anytime and everywhere (102).

The internet is capable of supporting a wide range of banking services. This enables banks to enlarge their customer base as well as the services offered to the customers. Stegman notes that players in the financial service industry have increased over time because of the demand in the market (43). Some major players in the industry include; mutual funds, mortgage firms and insurance companies. The increase in the number of players in the industry has also raised competition (Bidgoli 98). The internet enables banks to remain competitive by allowing them to make transact on their corporate web portals.

Customer retention is one of the challenges banks are faced within the highly competitive business environment. Customers operate banking accounts like nomads, moving from one bank to another anytime. Stegman notes that customers change banks either because they are relocating to other places or the bank does not provide services tailored to their needs (44). Online banking helps banks to retain customers even when they are relocating since they can be able to access bank services online from anywhere.

Internet banking eliminated the limitation of banks to their own geographic locations. Mathieson et al indicate that the internet facilitates banks to offer banking services to customers on a wider geographic section (153). “ATM services, banking by mail and mobile phone banking have motivated banks to market their services to regions where they do not have a physical presence” (SCN Education B. V 116). These technological applications enable banks to offer excellent remote banking services to their customers.

Banks have been able to develop web applications that allow them to track and analyze their customer banking trends online. This information is important for the marketing department together with the management for developing products tailored to the exact needs of the customers. With this information, the bank can establish products and services that are in high demand and respond appropriately. Cross-selling software is an intelligent online system that monitors the most inquired services by customers and automatically generates appropriate adverts to customers (Mathieson, et al 152). This is a very significant approach that banks apply in marketing their products to customers.

The internet can also be used to accurately capture customer information and rate them in terms of their profitability to the bank (SCN Education B. V 117). After identifying profitable customers, the marketing team can develop strategies of how to be more loyal to them. These benefits have made banks pursue internet banking technology, investing millions of dollars to develop the most secure and reliable online banking solution.

Benefits of Internet Banking to Consumers

Banking service consumers have benefited widely from internet banking; internet banking allows consumers to conveniently manage their financial information. Online transactions such as online money transfers and ATM withdrawals are accurately verified and the transaction information is stored in retrievable forms on the internet. Xiao notes that internet banking services ensure the privacy of the customers’ information as the information is stored on secure servers that can not be accessed without appropriate log-in details (107).

Internet banking offers a customer flexible banking services, a customer with an ATM card can be able to access money from his or he accounts anytime and in any of his bank branch. The ATM also reduces the time spend on accessing banking services compared to manual banking. Human beings take more time to respond to the customer’s needs compared to a machine.

Stegman suggests that the cost of accessing banking services to a customer using internet banking is low then one who uses manual baking services (41). This is a strategy that banks have adopted to entice more of their customers to shift to internet banking. Withdrawal charges for example for one using ATM services will generally be lower than the charges for over-the-counter withdrawal. Customers, therefore, drift towards online banking to save some money on banking charges.


Internet banking is set to be a major platform on which banking services shall be delivered to consumers. Banks have been so fast to embrace this technology as it enables them to serve customers more conveniently. They are able to obtain accurate information from the customers and accurately respond to the customer’s needs. Consumers on the other are able to access banking services in a flexible way without having to stick to the working routine of the bank. It saves the customers time by allowing them to make their transactions faster. These benefits are set to be the basis of the adoption of internet banking on a large scale by both the customers and the banking organizations.

Works Cited

Bidgoli, Hossein. Electronic Commerce: Principles and Practice. California: Academic Press, 2002.

Mathieson, J. Donald, et al. International capital markets: developments, prospects, and key policy issues. Washington DC: International Monetary Fund Publication Service, 2001.

SCN Education B.V. Electronic banking: the ultimate guide to business and technology of online Banking. Wiesbaden: Friedr. Vieweg & sohns Verlagsgesellschaft, mbH, 2001.

Stegman, A. Michael. Savings for the Poor: The Hidden Benefits of Electronic Banking. Washington DC: The Brookings Institution Press, 1999.

Xiao, J. Jing. Handbook of Consumer Finance Research. New York: Springer Business + Science Media LLC. 2008.

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