Electronic Banking Types ,Services, and Advantages

 – Electronic Banking – 

Electronic banking is a form of banking that uses the internet, computers and electronic signals to enable banking transactions. 

electronic banking

Through electronic banking, people can conduct banking activities from their homes, rather than going to a physical/traditional bank. 

In this article, we will look at everything you should know about electronic banking. Also, we’ll see the history, importance, and types of e-banking services.


What is Banking?

Banking is an industry that handles cash, credit, and other financial transactions for individual consumers and businesses alike.

Banking provides the liquidity needed for families and businesses to invest in the future and is one of the key drivers of the U.S. economy.

You can use the products and services offered by a bank or credit union to protect your money, to borrow more, and to build savings.

Banking means you won’t have to save up before going to college or buying a house. Companies can use loans to start hiring immediately to build for future demand and expansion.

In short, banking provides the means for further financial growth.

Types of Banking

Banking comprises many activities that can be done through several financial institutions that accept deposits from individuals and other entities, and then use this money to offer loans and to invest and earn profit.

Banks can be placed into certain categories based on the type of business they conduct. Commercial banks provide services to private individuals and businesses.

Retail banking provides credit, deposit, and money management to individuals and families. 

1. Community Banking

Community banks are smaller than commercial banks. They concentrate on the local market. They provide more personalized service and build relationships with their customers. 

2. Internet Banking

Internet banking provides these services via the world wide web. The sector is also called e-banking, online banking, and net banking. Most other banks now offer online services.

There are many online-only banks. Since they have no branches, they can pass cost savings onto the consumer.

3. Savings and Loan Banking

Savings and loans are specialized banking entities, created to promote affordable homeownership. Often these banks will offer a higher interest rate to depositors as they raise money to lend for mortgages.

4. Credit Unions

Credit unions are financial institutions that operate similarly to standard banks in many ways, but with a different structure. Customers own their credit unions.

This ownership structure allows them to provide low-cost and more personalized services. You must be a member of their field of membership to join.

That could be employees of companies or schools or residents of a geographic region. 

5. Investment Banking

Investment banking finds funding for corporations through initial public stock offerings or bonds. They also facilitate mergers and acquisitions.

The largest U.S. investment banks include Bank of America, Citigroup, Goldman Sachs, J.P. Morgan Chase, Wells Fargo, Charles Schwab, and Morgan Stanley.

After Lehman Brothers failed in September 2008, signaling the beginning of the global of the late-2000s, investment banks became commercial banks. 

That allowed them to receive government bailout funds. In return, they must now adhere to the Dodd-Frank Wall Street Reform and Consumer Protection Act regulations.

6. Merchant Banking

Merchant banking provides similar services for small businesses. They provide mezzanine financing, bridge financing, and corporate credit products.

7. Sharia Banking

Sharia banking conforms to the Islamic prohibition against interest rates. Also, Islamic banks don’t lend to alcohol and gambling businesses. 

Borrowers profit-share with the lender instead of paying interest. Because of this, Islamic banks avoided the risky asset classes responsible for the 2008 financial crisis.

What is Electronic Banking?

Internet Banking, also known as net banking or online banking, is an electronic payment system that enables the customer of a bank or a financial institution to make financial or non-financial transactions online via the internet.

electronic banking

This service gives online access to almost every banking service, traditionally available through a local branch including fund transfers, deposits, and online bill payments to the customers. 

After registering for online banking facilities, a customer need not visit the bank every time he/she wants to avail a banking service. It is not just convenient but also a secure method of banking.

Unique User/Customer IDs and passwords secure net banking portals.

Special Features of Electronic Banking

Here are some of the best features of Electronic banking:

  1. Provides access to financial as well as non-financial banking services
  2. Facility to check bank balance any time
  3. Make bill payments and fund transfers to other accounts
  4. Keep a check on mortgages, loans, savings a/c linked to the bank account
  5. Safe and secure mode of banking
  6. Protected with unique ID and password
  7. Customers can apply for the issuance of a checkbook
  8. Buy general insurance
  9. Set-up or cancel automatic recurring payments and standing orders
  10. Keep a check on investments linked to the bank account

History of Electronic Banking

For decades financial institutions have used powerful computer networks to automate millions of daily transactions.

In the 1950s the Bank of America was one of the first institutions to develop the idea that electronic computers could take over the banking tasks of handling checks and balancing accounts, which was, at that time, extremely labor-intensive.

Other institutions gradually joined the effort and progressed away from using paper checks and toward all-electronic banking.

The first electronic banking machines were able to keep records of deposits and withdrawals from each client, make account balance information available instantaneously, monitor overdrafts, stop payments, and hold funds.

The machines responsible for this work today are as exact and reliable as the banking industry requires them to be.


Importance of E-banking


We will look at the importance of electronic banking for banks, individual customers, and businesses separately.


  1. Lesser transaction costs–electronic transactions are the cheapest modes of transaction
  2. A reduced margin for human error–since they relay electronically the information, there is no room for human error
  3. Lesser paperwork – digital records reduce paperwork and make the process easier to handle. Also, it is environment-friendly.
  4. Reduced fixed costs – A lesser need for branches which translates into a lower fixed cost.
  5. More loyal customers – since e-banking services are customer-friendly, banks experience higher loyalty from its customers.


  1. Convenience – a customer can access his account and transact from anywhere 24x7x365.
  2. Lower cost per transaction – since the customer does not have to visit the branch for every transaction, it saves him both time and money.
  3. No geographical barriers – In traditional banking systems, geographical distances could hamper certain banking transactions. However, with e-banking, geographical barriers are reduced.


  1. Account reviews – Business owners and designated staff members can access the accounts quickly using an online banking interface. This allows them to review the account activity and also ensure the smooth functioning of the account.
  2. Better productivity – Electronic banking improves productivity. It allows the automation of regular monthly payments and a host of other features to enhance the productivity of the business.
  3. Lower costs – Usually, costs in banking relationships are based on the resources used. If a certain business requires more help with wire transfers, deposits, etc., then the bank charges it higher fees. With online banking, they minimize these expenses.
  4. Lesser errors – Electronic banking helps reduce errors in regular banking transactions. Bad handwriting, mistaken information, etc. can cause errors which can prove costly. Also, an easy review of the account activity enhances the accuracy of financial transactions.
  5. Reduced fraud – Electronic banking provides a digital footprint for all employees who have the right to modify banking activities. Therefore, the business has better visibility into its transactions making it difficult for any fraudsters to play mischief.

E-banking Services

In simple words, e-banking refers to a banking arrangement, with which the customer can perform various transactions over the internet, which is end-to-end encrypted, i.e. it is completely safe and secure.

electronic banking

E-banking promotes paperless/cashless transactions. It comes with a number of rights, responsibilities, and fees as well. The range of services covered under E-banking are:

1. Internet Banking

A banking facility is provided to the customers through which the customers are able to perform several monetary and non-monetary transactions, using the internet, through the bank’s website or application.

2. Mobile Banking

Almost all the banks have designed their mobile applications with which you can perform transactions at your fingertips.

For this, four things are required–a smartphone, internet, mobile application, and mobile banking service enabled in your bank account.

3. ATM

Automated Teller Machine, popularly known as ATM is one of the most common and initial services, provided under e-banking.

It is not just a machine with which you can withdraw cash as and when required, but it also allows you to check your account status, transfer fund, deposit fund, changes mobile number, change Debit Card PIN, i.e. Personal Identification Number.

4. Debit Card

Debit cards are used in our day-to-day life so as to perform the end number of transactions.

However, debit cards are linked to the customer’s bank account and so the customer only needs to swipe the card, in order to make payment at Point of Sale (POS) outlets, online shopping, ATM withdrawal.

In this way, the amount is deducted from the customer’s account directly.

5. Credit Card

Just like a debit card, a credit card is also a payment card that the bank issue to the customers at their request, after checking their credit score and history.

It enables the cardholder to borrow funds up to the pre-approved limit and make payments. The banks that issue the card grant the limit.

The cardholder promises to repay the amount within a stipulated time, with some charges, for the use of a credit card.

6. Point of Sale (POS)

Points of sale system refer to the point, in terms of date, time, and place (retail outlet) where the customer makes a payment, using a plastic card, for the purchase made or services received.

7. Electronic Data Interchange (EDI)

EDI is a new mode of communicating information between businesses electronically using a standardized format, which was conventionally paper-based.

8. Electronic Fund Transfer (EFT)

When money is transferred electronically from one bank to another, it is called an electronic fund transfer. It covers direct debit, direct deposits, wire transfers, NEFT, RTGS, IMPS, etc.


Levels of E-banking

electronic banking

Banks offer various types of services through electronic banking platforms. These are of three levels of services:

1. This is the basic level of service that banks offer through their websites.

Through this service, the bank offers information about its products and services to customers. Further, some banks may receive and reply to queries through e-mail too.

2. At this level, banks allow their customers to submit instructions or applications for different services, check their account balance, etc.

However, banks do not permit their customers to do any fund-based transactions on their accounts.

3. In the third level, banks allow their customers to operate their accounts for funds transfer, bill payments, purchase and redeem securities, etc.

Most traditional banks offer e-banking services as an additional method of providing service. Further, many new banks deliver banking services primarily through the internet or other electronic delivery channels.

Also, some banks are ‘internet only’ banks without any physical branch anywhere in the country.

Benefits of E-banking

electronic banking

  1. It enables digital payments, which encourages transparency.
  2. It allows 24/7 access to the bank account.
  3. Notifications, alerts, and updates
  4. It lowers transaction costs for the banks.
  5. Convenient and ease

6. Better Rates, Lower Fees

The lack of significant infrastructure and overhead costs allow direct banks to pay higher interest rates or annual percentage yields (APYs) on savings.

The most generous of them offer as much as 1% to 2% more than you’ll earn on accounts at a traditional bank—a gap that can really add up with a high balance.

While some direct banks with especially generous APYs offer only savings accounts, most of them offer other options including high-yield savings accounts, certificates of deposit (CDs), and no-penalty CDs for early withdrawal.

7. Better Online Experiences

Traditional banks are investing heavily in improving their virtual presence and service, including launching apps and upgrading websites. But overall, direct banks appear to retain an edge when it comes to the online banking experience.

A 2018 Bain and Company survey of retail banking customers found traditional banks lagged behind direct banks in the areas that mattered most to customers, including the quality of the banking experience and the speed and simplicity of transactions.

In a nutshell, any type of banking transaction performed through electronic mode comes under E-banking.

It is a secure, fast, and convenient electronic banking facility that allows its customers to undertake online banking services anytime during the day and at any place using the internet, for which the customers used to visit the banks in earlier days.

Cons of Internet Banks


Banking with an online institution also has its share of drawbacks and inconveniences.

1. No Personal Relationships

A traditional bank provides the opportunity to get to know the staff at your local branch.

That can be an advantage if and when you need additional financial services, such as a loan, or when you have to make changes to your banking arrangements.

A bank manager usually has some discretion in changing the terms of your account if your personal circumstances change, or in reversing a mandatory fee or service charge.

2. Less Flexibility With Transactions

In-person contact with a banking staffer isn’t only about getting to know you and your finances. For some transactions and problems, it’s invaluable to head to a bank branch.

Take, for example, depositing funds—the most basic of banking transactions. Depositing a check is possible with a direct bank by using its banking app to capture both the front and back of the check.

However, depositing cash is downright cumbersome at many online banks.

So, it’s worth checking the bank’s policy if this is something you plan to do frequently. International transactions may also be more difficult, or even impossible, with some direct banks.

3. The Absence of Their Own ATMs

Since they lack their own banking machines, online banks rely on having customers use one or more ATM networks such as those from AllPoint and Cirrus.


While these systems offer access to tens of thousands of machines across the country—even around the world—it’s worth checking the available machines near where you live and work.

Check, too, for any fees you may rack up for ATM use. While many direct banks offer free access to network ATMs or will refund any monthly charges you incur, there are sometimes limits on the number of free ATM transactions you can make in a given month.

4. More Limited Services

Some direct banks may not offer all the comprehensive financial services that traditional banks offer, such as insurance and brokerage accounts.

Traditional banks sometimes offer special services to loyal customers, such as preferred rates and investment advice at no extra charge.

In addition, routine services such as notarization and bank signature guarantee are not available online.

Types of Fund Transfers using Electronic Banking


National Electronic Fund Transfer (NEFT) is a payment system that allows one-to-one fund transfer. 

  1. Using NEFT, individuals and corporates can transfer funds electronically from any bank branch to any individual or corporate with an account with any other bank branch in the country
  2. NEFT service is available 24×7 on internet banking. But, it is a time-restricted service at the bank branch.
  3. Usually, the NEFT transfer is successfully completed within 30 minutes. Nonetheless, the time can even stretch to 2-3 hours or might be completed in just 10 minutes.


Real-Time Gross Settlement (RTGS) is a continuous settlement of funds individually on an order by order basis. 

  1. This payment system ensures that the receiver’s account gets credited with the funds almost immediately and not after a certain duration, as is the case with other payment modes like NEFT
  2. The RBI tracks RTGS transactions, thereby successful transfers are irreversible. They majorly used this method for large value transfers.
  3. The minimum amount to be remitted through RTGS is 2 lakh. There is no cap on the maximum amount for transfer via RTGS.
  4. Like NEFT, RTGS is also available online 24×7


Immediate Payment System (IMPS) is another payment method that transfers funds in real-time. 

  1. IMPS is used to transfer funds instantly within banks.
  2. IMPS is an inexpensive mode of fund transfer. Other fund transfer mediums such as NEFT and RTGS charge significantly higher than IMPS
  3. It does not require details like account number, IFSC code, etc. Just the beneficiary’s phone number is enough. 


Frequently Asked Questions


1. How Can I Use Internet Banking?

To use internet banking, you must have an operating account in any bank or a financial institution. You need to register for online banking at the bank to obtain a unique ID and password.

For that, you can download the net-banking application form from your bank’s net-banking website or visit the bank and fill in the form.

2. Can I Change My Internet Banking Password?

After logging in to the net-banking portal for the first time, all the users must change the password which is issued by the bank.

Also, you should change your password at least once every two months.

3. Precautions for Internet Banking

  1. Avoid using public Wi-Fi or use a VPN software
  2. Use a genuine anti-virus software
  3. Update Smartphone’s OS
  4. Change your login password at least once in two months
  5. Avoid logging in to your net-banking portal via mailers
  6. Do not use public computers to log in to the net-banking portal

More Frequently Asked Questions

4. What Is User ID in Net-Banking?

Most of the banks provide internet banking ID and password as and when you apply for a new account.

If you haven’t received your user ID and password, you need to apply for net-banking at the bank by filling and submitting an application form.

After verification, you will receive a unique user ID and password to login to net banking.

5. Are Electronic Banking and Internet Banking the Same?

No. Electronic banking is a broad term or category which includes various forms of banking services and transactions performed through electronic means such as internet banking, mobile banking, telebanking, ATMs, debit cards, and credit cards.

Internet banking is one of the latest additions to electronic banking. Thereby, internet banking is a part of electronic banking.


In conclusion, any type of banking transaction performed through electronic mode comes under E-banking.

It is a secure, fast, and convenient electronic banking facility that allows its customers to undertake online banking services anytime during the day and at any place using the internet. 

If this was helpful, do well to share with your family and friends, and also, leave your opinions in the comment below. 

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