With the meteoric rise of Internet commerce, it has become necessary for the banking world to keep up apace. Retailers and their customers now need to exchange goods and services for money without ever having any physical contact and they need to do so safely and speedily.
What’s more, e-commerce often transcends national borders so people need banking methods that can accommodate multiple currencies, varying time zones, and even conflicting laws.
As a result, not only have traditional banks had to up their game, but a slew of new players have entered the field to provide more appropriate alternatives to traditional banking. And the business of online banking is certainly booming.
Here’s a look at how extensively internet banking methods have evolved over just a few decades since they first became necessary:
Traditional Methods Go Online
Of course, when e-commerce first came out, credit and debit cards were the most logical choice for transactions. All customers needed to do was provide their Visa, MasterCard or Maestro card details and their banks would do the rest.
In fact, initially, you could even transact online using your old chequebook, but this practice is now virtually extinct because it was too open to fraudulent activity.
Similar troubles arose with bank card transactions online as unscrupulous websites began to trick users into disclosing private financial information and then cleaned out their bank accounts. The risk of this is enhanced by the fact that many such websites are based in foreign countries so they are able to dodge the law. Even finding out the identity of such websites’ proprietors can be impossible thanks to clever internet encryption.
One solution that has been offered for this problem has been offered by third-party providers of secure websites, to which customers are redirected for payment. Here, they are able to enter their details without the risk of a dodgy enterprise stealing their information and their money.
Introducing Electronic Banking
Electronic banking is the traditional banker’s answer to e-commerce. By giving clients access to their funds via a virtual online platform, banks now enable people to make and receive payments when and where it suits them.
Electronic funds transfers remain a popular choice for e-commerce as they are widely considered to be safer than card transactions. Also, not everyone has a credit card and debit cards are not accepted everywhere.
However, EFTs also come with their share of risk, as customers may find themselves paying for goods or services that they never actually receive, if they’re not careful.
e-Wallets Create a Banking Buffer
e-Wallets – also known as web wallets or digital wallets – are virtual banking services that first began to emerge in the mid-2000s. They are considered to be among the very safest payment methods available for e-commerce transactions because they create a buffer between the payer and payee.
Essentially, the user transfers money from his or her bank account into an account – the e-wallet -with a third party financial services provider like PayPal, Neteller or Skrill. They then make payments to e-retailers out of their e-wallet, ensuring that their banking information is kept safe.
Similar to e-wallets, pre-paid cards such as PaySafeCard enable customers to deposit money into an account at a land-based outlet and then perform online transactions using that card and a secret password. This is ideal for individuals who don’t want or don’t qualify for credit cards.
Mobile Transactions and Banking Apps
Another increasingly popular banking option for online transactions involves your mobile device. Some e-wallets are linked directly to customers’ smartphones or tablets, to which they need to download the necessary software in order to transact.
Many banks now also offer mobile app versions of their online banking services, so that customers can make online payments using their portable electronic devices. Cell phone banking further simplifies this as even old devices can be used as the system is based on dialling a number and following prompts and entering passwords, much like you would at an ATM.
The Creation of Cryptocurrency
Cryptocurrency is the next big thing in the world of online banking and the virtual currency known as Bitcoin is leading the way.
Bitcoin and other cryptocurrencies are mediums of exchange that use cryptography to safeguard transactions and to manage the generation of further units of the currency. They are effectively digital alternatives to national currencies like the US dollar or the Japanese yen.
Although there have been questions raised about the legitimacy of Bitcoin as a currency it is perfectly legal and appeals to consumers because it protects their funds and identities.