What is Virtual Banking?

Virtual or internet banking is a system where all the transactions of the bank are done online and there are no physical branches of the banks. It is the latest technological breakthrough to provide the customers the ease of banking while on the go i.e. they don’t have to personally walk into any bank branch and can operate ones account or other services online only. The system has gradually moved from ‘nice to have’ to a ‘need to have’ service in some of the developed countries where net-banking have become a new norm rather than an exception. It is the quickest way to bank and also the cheapest as it saves both time and money. Many types of bank accounts can be accessed virtually like checking accounts, savings accounts, certificates of deposits,  etc. Thus, users mostly use virtual banks for many services like- checking the account balance, transfer funds, bill payments, etc. Also, there are no banking hours and thus customers can operate their accounts at any time of the day.  Many banks also allow to open new accounts online. As there are no physical operations, so these banks have less overhead costs and can thus  pass these savings to customers in form of higher rates of interest on savings, waiving off of bank account fees.

The services can be classified into three categories:

  1. Basic level service: They are provided by bank website which gives information on different products and services.
  2. Simple Transactional Service: Under this, the customer carries out simple functions like give applications for different services, check account balance etc.
  3. Fully Transactional Websites: These allow customers to perform core banking functions like transfer of funds, payments of bills etc.

The growth of popularity of internet banking also gave way to many associated problems which can be categorised under three heads-

  1. Legal and Regulatory issues like jurisdiction of law, validity, gaps in legal and regulatory environment of e-commerce etc.
  2. Security and Technology issues like maintenance of sophisticated technology standards, fear of virus and spyware, encryption/decryption, verification of digital signatures etc.
  3. Supervisory and Operational issues like risk control, advance warning system etc.

In addition, to the above the Indian customers don’t have much trust in internet services and prefer walking to a branch and personally talk to a person before making a banking decision. They are not sure of the type and authenticity of the service being offered and also hesitate to disclose their details online due to fears of hacking.


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