The paper 'The Use of Electronic Banking' is a perfect example of a financial and accounting case study. Electronic banking has gained popularity in the financial industry in different countries around the world. The increase in preference comes from the fact that e-banking increases convenience in money transfer. between individuals in different regions due to its features. The legal framework regulating is not clear, less developed, and slightly different from the traditional system. The financial industry, legal, and information technology dynamic must match to reduce the challenges facing electronic banking. The features and challenges facing electronic banking are developed below; Essential features of electronic bankingThe use of electronic banking has brought inefficiency in the financial industry that is directly or indirectly associated with the use of technology.
These features include; First, electronic banking gives the individual ability to use smart cards and digital cards to transact in their daily business. This feature has reduced theft and inconveniences that result from carrying a huge amount of cash (Bakare, 2015). For example, when an individual is transacting a million-dollar business, he or she can comfortably use a visa or any other digital cash to make a payment that is easy than paying for the product in cash.
The ability to transact with smart cards and digital cash is enabled by sells person installing point of sales system in their premises. Also, smart cards and digital cash secure than carrying cash due to the presence of digital signatures and a well-protected system. For example, before making payment one is required to provide a password, fingerprint, or eye scan. This makes it hard for unauthorized individuals to make payments without the consent of the owner. Secondly, electronic banking allows the use of magnetic ink character recognition (MICR) which makes clearance of cheques and other documents between two or more financial institutions easy and fast.
The efficiency in the clearance of the cheque provides a competitive advantage to the financial institution using the technology since they can achieve high consumer satisfaction (Bakare, 2015). Also, electronic banking provides a good procedure for truncation. For example, when making payment the electronic system will efficiently execute required checks before authorization money transfer.
The execution carried out includes checking similarity of the digital signature, cash available in comparison with the current needs, and counter checking of recipient information. Electronic banking reduces the issue of dishonored cheques and waste of time cheques clearance in the traditional system. Thirdly, electronic banking allows ‘ real-time’ payment and receipt of cash regardless of the geographical distance between two or more individuals. The real-time feature has increased the volume of domestic and international trade since one can easily make payment of goods or services. It eliminates the need to make money or pay receipt physically to allow the dispatch of the product or service purchased (Bakare, 2015).
For example, Alibaba. com uses electronic banking where individuals can make payment of goods purchased via the website by the use of visa and other electronic means of remitting money. Also, the real-time feature reduces opportunity cost due to shortages and lack of satisfaction due to delays in payment for the products required. A point of sale system provides a good example of a real-time feature, for example when consumer purchases goods, the bank balance adjusts immediately and automatically.
ReferencesBakare, S. (2015). Varying Impacts of Electronic Banking on the Banking Industry. J Internet Bank Commer, 20(2).