How Does Online Banking Affect the Banking Industry - Dissertation Example

Traditionally up until the 1980s, all banking activities were centered around branch banking, wherein most banking activities for customers, are executed in the branch by Tellers and Customer Service Representatives (CSRs). The relationship between the bank and the customer was solely dependent on the customer’s relationship with the Tellers and CSRS, and the profitability and business reach of a bank vis-à-vis its customer. Occasionally, a customer would phone a bank representative of choice, for financial information (balance in the account, check clearance, the status of money transfer, etc.).Prior to the internet/web, ATMs allowed the customer the flexibility of executing certain banking transactions (mainly balance checking, cash withdrawal).

Subsequent to that, some banks introduced so-called PC banking, where an application installed in a customer’s PC established a secured connection with an application running in the bank to perform transactions. Early in 1981, when the internet became prevalent at home, some of the banks in the US with a large customer base tried introducing a few facilities to their customers, wherein the customer could perform a few activities, by signing up for additional services from its bank. Some banks charged the customer for these transactions, and these mainly included value-added services to the customer at a lesser cost. (E.g.

Availability of Dow Jones Retrieval/News Service at a much lesser cost provided by CitiBank). With the ubiquity of the internet and customers need for mobility, banks and financial institutions were forced to adopt current technology as a basis for providing its customer, online banking services, available at the reach of the customers’ personal computers, at home, at the workplace, or anywhere a customer has access to his/her bank and account. The trend continued with the advent and following rapid progress in online technology, from internet banking to mobile banking.

Another reason for this shift in service offering on the part of the bank is also due to the fact that the customer base for banks and the volume of transactions saw significant growth from the 80s till date.