The first bank to be created in the U.
S was the Bank of the United States which was developed by the Congress in 1791 through the then treasury secretary Alexander Hamilton. He had suggested that America after independence needed a bank to settle debts and hold Federal deposits for the government and provide loans to the American population for business. Since then, the banking sector has undergone major transformation and it is currently enjoying the benefits of computer technology through online banking.Online banking is a system of banking in which customers can view their account details, pay bills, and transfer money by means of the Internet. Commercial banks apply the technology to carry out transactions, develop networks between branches of the same bank and provide services to customers while in their homes or offices.
Although the technology had earlier emerged in the 80 s, it was first adopted by the Royal bank of Scotland in 1997 and since then, online banking has gained so much popularity. Many commercial banks have switched from the conventional traditional banks to online banking because of the advantages that are associated with it. The convenience and the flexibility that comes with using online banking is the most outstanding feature that attracts people to adopt this technology.Other advantages include; the possibility of managing ones assets effectively, transactions are faster; less paper work is required to keep important and confidential information. Record keeping is therefore improved greatly and the security of information is enhanced. Also, once information has been recorded and placed in the computer, the subsequent checks and other accounting work is done automatically through the use of accounting software.
Another advantage of online banking is the ability of the banks to earn money both from the customers of the bank and shop owners who allow the use of ATMs and VISA cards. However, online banking does not provide the necessary security to the customer’s money which is normally provided by commercial banks. Internet connection is usually slow and this will make transactions and services slow.Effects of online banking include increase in unemployment rate, elimination of physical structures, and increase in customer numbers and changes in job structures.
Also being a virtual bank, it makes banks cheaper and easily accessible. Online banking has changed commercial banking to an extend that almost all the original ways of providing services has completely changed, the only feature that an online bank is not been able to overcome is the satisfaction that face to face communication gives to the customer because he or she has all the time to find out all the enquiries and the ability to query the bankers. Since technology is advancing very fast in this field, online banking is projected to go global in the next decade and cover all the middle income countries.Just a feature of it which is developing beyond imagination finally, online banking is expected to get very popular with time and in the near future physical banks will be completely eliminated as people move towards a more electronic form of banking 3.0 History of Banking in United States America needed banks immediately after independence as Congress needed to pay off the new nation’s debt.
Alexander Hamilton the first secretary of treasury suggested Congress to create a Bank of the United States to help refinance all these debts in 1791. “The bank would be the only national bank, and it would hold the federal government’s deposits and lend to the government and business” (THE FIRST BANK)This bank served as the federal government fiscal agent, receiving its revenues, holding its deposits and making payments. The shares of the First Bank were owned by domestic as well as foreign investors. In 1929 United States of America faced depression and as a result the country’s financial structure was badly damaged. Several banks went out of business and many businesses went bankrupt.
The extend of depression was so high that by 1933 one of four Americans was unemployed.Soon the depression was over and banks were revived. Despite the 1929 depression and the deregulation of the 1970’s, United States Central banking has had a significant progress. Technology has made banking to become popular since banking services have become very efficient. It has given us facilities amongst which the most commonly used ones are plastic cards (ATM cards, VISA cards) which are also known as plastic money.
The other feature commonly used now is online banking. 4.0 Online Banking Online banking is based on the technology of internet and the usage of personal computers. In earlier days banks used power full computers to computerize millions of transactions carried out every day.
Through internet Branches of the same bank can develop networks, through which they could keep up to date with transaction and could provide services to customer of any branch.This technique was further developed to online banking which has made banking services even more efficient. The first bank which provided features of online banking was the Royal Bank of Scotland in 1997 and in just ten years, online banking has gained so much popularity, that almost all banks provide certain features of online banking if not all. “Recent survey revealed that 90% more small and medium-sized businesses use online banking now than five years ago” (guardian limited). and even home banking. This technology emerged in the 80’s and since then has developed.
Online banking is a system of banking in which customers can view their account details, pay bills, and transfer money by means of the Internet.” (Internet banking definition - Dictionary - MSN Encarta) Certain banks are traditional and even provide features of online banking. While others are only online banks and have no physical presence.Online banking has many advantages and disadvantages over traditional banking for the customer as well as for the bank.
4.1 Advantages of Online Banking E-banking is relatively a new advancement in the field of banking even then there are many business and customers who have switched from traditional to online banking. The reason being quite obvious, its advantages online banking has advantages which no one can ignore the most attracting advantage being the convenience and flexibility it provides. Flexibility of time, an example of flexibility can be taken from the fact that now there are no time limitations you can pay bill at any time of the day or night no need to rush at the bank to avoid due date, of the bill.Then there is convenience an example of which can be that there is no need to wait in queues and no wasting of time in traffic everything is a just a click away. Internet has globalized this world and in the same online banking is globalize.
Difference in cities or countries even continent does not effect e-banking if u have any kind of money crises you can log on from any where in the world and can solve your problem in minutes. Transaction is very fast and effective; many online banking sites now offer sophisticated tools to help you manage all your assets more effectively.A simple example of this can be taken from the simple accounting software - some online banks provide to simplify record keeping. Another advantage of online banking is that less paper work has to be done and once u have entered information, it doesn't need to be re-entered for similar consequent checks, and future payments can be programmed to occur automatically. Another advantage can be that online banking is cheaper than traditional banking as online banks don’t have to pay for real estate. 4.
2 Disadvantages of Online Banking With advantages, online banking has many disadvantages which created hindrance in the way of online banking – one of them is security.The most important question in a customer’s mind is security. The customer can never be sure if an action he requested has occurred or not and as paper is not used the chances of a valid prove with banks stamp on it is not available. Then there is hacking, if your password is hacked you can loose all your bank balance. There are other minor problems which have created problems for online banking, but these problems can easily be resolved. Sometime to open an account or transfer from commercial to online banking can be very time consuming and in convenient.
This is a very temporary problem. The other problem is the time to learn how to move around online banks, some customers might get discouraged if they don’t get a hang of how to operate in online banks. Then there is internet connection if the internet connection is very slow transaction can take a lot of time. If the banks change there website address without notice for updating it can create confusion and can lead customers in the wrong direction. “Another drawback can be that some banks offer online banking in a limited area only.
In addition, when an account holder pays online, he/she may have to put in a check request as much as two weeks before the payment is due to that the person has lost up to two weeks of interest on that payment.” (Online banking Definition) “Online-only banks have a few additional drawbacks an account holder has to mail in deposits (other than direct deposits), and some services that traditional banks offer are difficult or impossible for online-only banks to offer, such as traveler's checks and cashier's checks” (investor words). Even though there are many disadvantages in online banking but they are all minor issues which are either temporary or easily resolvable. Thus online banking is getting very popular with time and it is expected that in near future the concept of a physical bank would decrease drastically.
With advantages and disadvantages of online banking another subject who is important is that how online banking has affected commercial banks. Effects of Online Banking on Commercial BanksThe biggest effect of any kind of automation is unemployment. With the increase in usage of online banks the number of commercial banks is decreasing and thus people who were working in banks are getting redundant. The other direct effect on commercial banks is that as banks are getting 'virtual' there is no need for a physical bank. The idea of a virtual bank makes banks cheaper and easily accessible. Now braches of a bank are not needed in every town thus the cost of managing offices has ended, no electricity builds any maintenance expenditures and no money wasted on stationery.
Thus the effect of online banks o commercial banks is that, as online banking is increasing commercial banking is decreasing. In commercial banking, the costumers account is managed or recorded by the employees with the emergence of online banking this trend has changed; now the customer himself manages his accounts. Another impact of online banking on traditional banking is that as banks are getting online face to face contact has reduced. Due to which a new user does not get the proper guidance and awareness of the facilities provided by the bank. In order to omit this obstruction a commercial bank has developed a new department.
The department of telephone operators who are available 24 hours a-day new users as well as old one, can contact these operators at any time to get opinion about a desired subject ATM cards or plastic money is a kind of online banking now people don’t stand in queues in order to transact money. People can transact money through any ATM machine which can be found just round the corner of every road.Commercial banks who earned money previously from customers now earn money from customers as well as through owners of shops. Now most of the shopkeepers have machines with the help of it u can pay your bills through cards.
Commercial banks charge a certain percentage on your bill amount and with every transaction the bank directly gets the extra amount charged. Thus the ways of earning have changed with the help of online banking. Commercial banking had the facility to cater people of an area but with online banking the commercial banks are responsible to cater people all around the globe. For example a person living in Canada is visiting London for business and a cherub has bounced he can contact London branch for assistance.Thus it can be said that commercial banks have more clients to deal with then they ever had to before. Job structure have even changed due to commercial banking previously the sole responsibility of bankers was maintaining account, recording transactions or transferring money from one branch to another.
Now online banking can easily deal with such features therefore the responsibility of bankers have converted from accounting to convincing Employees are responsible to convince their customers to take car loan through credit loans, insurances and many other features. Thus salaries are based on how well communicate and convince rather then how good your math, accounts is. Online banking has changed commercial banking to an extend, the only feature that an online bank is not been able to overcome is the satisfaction that face to face communication gives.
