Online Banking: Meaning, Advantages & How it Works?

Online Banking, also known as internet banking is the process of availing banking services such as online bill payments, deposits, fund transfers etc. using an internet connection.  

In this blog, we cover the details of what is the meaning of online banking, its advantages & disadvantages & the security implications of online banking.

What is Online Banking?

Online banking refers to using internet to do routine financial tasks such as checking balance, fund transfers, deposits and bill payments. Online banking allows you to do everyday banking at your convenience.

Key Features of Online Banking

Online banking gives customers a host of features over traditional banking. The most popular features include: 

• Online banking reduces the customers’ need to visit the physical branch & saves them time & money.
  • Online banking offers a superior customer experience on their apps & websites with features such as chat, automated banking etc.
  • It reduces dependencies on visiting physical bank branches for daily banking tasks such as fund transfers, loan applications, and account balance information.
  • Online banking charges are usually lesser in comparison to traditional banking. 
• Many banks also offer additional services such as budgeting tools, credit score monitoring & other financial services on their websites & app.

Advantages of Online Banking

Online banking comes with a host of advantages such as:

1. Convenience: Online banking makes it easier for customers to access their accounts from anywhere at any time. You no longer have to wait in line at the bank or worry about business hours.
2. Lower Fees: Online banking usually has lower fees than traditional banks as customers can save money on things like overdraft fees, ATM fees, and monthly maintenance fees 
3. Easier Fund Transfer: Online banking makes it easy to transfer money between accounts and make payments. Customers can set up automatic payments and transfer funds to other people quickly and easily. 
4. More Savings: Online banks often offer higher interest rates on savings accounts than traditional banks, so customers can earn more money on their deposits. 

Disadvantages of Online Banking

While online banking has several advantages, it comes with its fair share of disadvantages as well. These include:

1. Technology Issues: Online banking can be unreliable if there are technical issues. Customers may have difficulty logging in or accessing their accounts if the website is slow or down. 

2. Limited Services: Online banking may offer fewer services than traditional banks. For ex: Customers may not be able to get advice or help with financial planning and other services. 

3. Security & Fraud Concerns: Even though online banking is secure, there is still a risk of fraud & security. Banks routinely update their security measures to keep the confidential and important financial data of their customers safe. should be aware of phishing scams and other online threats. 

We’ve compiled a list of common security threats while making online payments &                how you can avoid them.

4. Lack of Human Interaction: Online banking does not provide personal customer service as traditional banks with a representative. With the introduction of chatbots & other technological advancements, customers receive automated responses which might lead to frustration. 

5. Inefficient Customer Service: Customer service for online banking can be inefficient. It can take a long time to get help with an issue if it is not easily resolved online.

How to set up Online Banking?

Here are the simple steps to register for Online banking:

1. Register for Online Banking: You will need to register for online banking with the bank. You can do this either online or by visiting the bank.

2. Activate Your Online Banking: Once you have registered, you will need to activate your online banking account. You will need to provide some personal information such as your name, address, and phone number.

3. Set Up Security Measures: The bank will provide you with a username and password. You will also need to set up a security question and answer to protect your online banking account.

4. Link Your Accounts: Once you have set up your online banking, you can link your existing accounts with the bank. This will allow you to easily transfer funds between your accounts.

5. Log in and Use Online Banking: Log in to your online banking and start using the services of your bank. You will be able to transfer funds, pay bills, and check your account balance.

How is Online Banking different from Mobile Banking?

How Secure is Online Banking?

Banks have extended their services as per the global shift in the way people bank in the post-Covid era. This has led to a rise in security threats as well. Cases of sensitive information being hacked, fraud & phishing attempts have led to banks using a number of measures to protect their customers’ data.

Latest technological innovations have improved the security of online banking. These include encryption technology, two–factor authentication, and secure server technology. Banks also ensure their online banking systems are regularly updated with the latest security measures.

Retail banks also provide customers with helpful information that helps protect their customers’ online banking accounts.

RBI also routinely takes initiatives to educate consumers about the importance of safe banking and how to have a secure online banking experience.  They have also created guidelines for safe digital banking practices. 

Online Banking for Businesses

Online banking has significantly changed our lives. Similarly, the landscape of online banking for businesses has also changed. From traditional banking to new-age banking, fintechs have led the charge for the evolution of banking services. Neobanks have taken business banking by storm since they make their daily financial operations seamless and automated. 

Read more: What is a Neobank?

How does my business benefit from using online banking supercharged by RazorpayX?

• RazorpayX allows business owners to open digital current accounts, pay taxes, schedule payments, pay vendors seamlessly and check invoices from a single dashboard. This saves valuable time and effort. 
• It is an accounting and banking platform that fills the gap between advanced banking solutions and finance professionals. It allows easy accounting software integration.
• With RazorpayX Payroll, businesses can automate salary payments and provide insurance policies to their employees.

Frequently Asked Questions