Impact of e-commerce in Banking sector Essay Example | Topics and Well Written Essays - 3250 words

Impact of e-commerce in Banking sector - Essay Example The concept of electronic commerce is descriptive of the process of conducting commercial transactions of services, goods, and information by means of computer networks. In e-commerce products and services can be bought online. Due to the fact that the banking sector is probably the busiest service sector, running it efficiently usually requires more manpower. Technological innovations such as computer based commercial transactions, however, do not usually need direct supervision from workers, and thus have contributed towards banks being more efficient in their dispensation of services. In traditional banks’ manual services, consumers usually have to queues to get to the necessary services. The introduction of e-commerce brought a much needed change to combat such inconveniences (Mahdi and Mehrdad, 2010). Banks have to make use of the offerings of e –commerce so as to remain relevant while outwitting their competitors. In the banking industry, productivity is dependent on the delivery of high quality services. E-commerce in the banking sector has to do with allowing customers to be able to access their bank accounts through the internet by means of a modem. Online banking options were first provided, in a limited capacity, by baking institutions in America in 1995. It has been speculated that this was as a result of the pressure faced by American banks as a result of aggressive competition between international banking institutions across the globe (Mittal and Sanjay, 2007). At first, the ‘online services’ only had to do with providing customers with information about the various services that were being offered by different bank branches. The rapid development of communication technology witnessed in the last two decades, however, allowed for banks to start allowing their customers ways of accessing their accounts through the internet. Banks also made it possible for customers to transfer money while also being able to procure finan cial offerings on their behalf. Since then, there has been a rapid spread of the use of online banking options across the world. While, in traditional banking, workers handle all financial activities such as the provision of loans and the collection of deposits, in e-commerce in banking, a number of distribution channels are used to supply information about banking transactions. In the use of e- commerce, banks use delivery systems such as digital television, cell phones, and laptops to relay information to their consumers. In transactions conducted through the traditional system of banking, payment transactions are conducted through a bank branch. The utilisation of e-commerce in the banking system today, however, has allowed for the automated delivery of services to banking customers by use of the internet (Khalfan and Abdullah, 2006). In most banking facilities in developed nations, the electronic banking system involves the automation of factors such as ATMs, direct deposit, tel ephone banking, debit and credit cards, web-based banking, and bill payment. Most banking institutions around the world have some sort of e-commerce function. While some scholars have observed that e-commerce in the banking sector might soon be responsible for the abolition of traditional functions of banking, this is not likely unless banks begin to gain substantial profits through e-banking services (Kjell, VebjOrn and TjOstheim, 2006).