Electronic Banking

Filed Under: Business

Date Created:01 Aug 2012

Last Modified:18 Dec 2012

Number of Views: 783

Written By: Diana Kapilya Lungu

Over the recent past, a number of innovative financial products have been developed taking advantage of the rapid progress in technology and developments in the financial market. Major institutions that offer remote banking services such as ATMs and Telephone banking have started to offer a growing number of online PC banking and internet banking services.
Electronic banking in the form of ATMs and telephone banking is not a new phenomenon. However, with increased use of the internet, the number of banks offering online services and also the number of customers using internet services has increased substantially.
Electronic banking faces a number of risks including electronic banking risk itself. E-banking risk is a risk associated with information communication technology (ICT). The risk arises due to the fact that E- banking uses a global communication network which is affected by hackers.
ICT depends on other communication service providers and thus a breakdown in communication affects operations of electronic banking. Communication service providers do not know the impact of communication breakdown. The cost of the risk posed by hackers is borne by the bank and this increases costs and directly affects the bank’s profitability.
The profitability of electronic banking however is questionable despite its overestimated potential resulting from overconfidence in the so called new economy. Advertising expenses of E- banking are high and a number of new accounts cannot develop as expected.
Security seems to be restraining the expansion of E-banking especially in Zambia as complaints of customers on the miscalculations on accounts of customers keep increasing. Electronic banking however can reduce operational costs significantly since it requires smaller workforce and no physical branch network.
Nevertheless, E-banking continues to have strong potential to help banks reduce their costs and operate more efficiently.

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