VIRTUAL BANKING

Virtual Banking

Virtual bank is an Internet based financial institution that offers deposit and withdrawal facilities, and other banking services, through automated teller machines or other devices, without having physical (brick and mortar) walk-in premises. The concept of virtual banking was initiated with the installation of the first ATMs in the 1970s. Virtual banking started in the 1980s with major U.S. banks such as Citibank and Chase Manhattan, but it only took off in the 1990s with the growing popularity of the World Wide Web. In 1995, Presidential became the first U.S. bank to allow its customers to open bank accounts over the Internet. (Virtual banking is the provision of banking services via means other than traditional physical branches. Currently, virtual banking exists in the forms of ATM, phone banking, home banking, Internet banking, smart cards and EFT point of sale systems. Virtual banking can help financial institutions to formulate appropriate marketing strategies for new forms of banking on the basis of need of the people.

Virtual Internet Banking offers a wide range of online services which makes banking accessible anytime and from anywhere.(It is also known as cyber banking, e-banking, home banking or online banking, includes provision of, and access to, various banking activities conducted virtually (from the road, external businesses or homes) rather than at a physical bank.Virtual banking allows customers to secure loans, pay utility bills, make deposits and check their accounts from remote locations.
According to Robert E. Grosse there are two basic models of virtual banking systems. The first is the electronic replacement of existing bank services by the Internet or telephone; the second involves offering new services that were previously not offered in virtual form. Some types of virtual banks have no physical infrastructure at all and exist only over cyberspace. Virtual banking offers a multitude of informational, administrative, transactional and portal services, including financial educational information, interest rate quotes, current bank news, account information, corporate services, online brokerage and insurance services, links to local businesses, links to community information and search functions.

Advantages

Virtual banking systems have numerous advantages over
traditional brick-and-mortar banks.
1. Customers have access to instant service provision.
2. Transaction cost is less.
3. Account maintenance costs can be reduced.
4. There is no need of visiting a bank physically.
5. Virtual banks are safe.

6. It installs high-end firewall and data encryption software that ensure the integrity of customer data.
7. Users are assigned individual PINS (personal Identification numbers) that allow them to access their online accounts.

8. Most online banks log off customers automatically alter a few minutes of inactivity.
9. Virtual banks offer convenience because clients can access their accounts from anywhere and do not have to change branches if they move house.

10. They don’t have to spend money on branches so the virtual banks can offer more competitive rates on credit cards, savings accounts and even mortgages.

Limitations

1. Virtual banking systems have some disadvantages for both the banks and customers.
2. Initial setup costs for starting a virtual banking system can be high.
   New users may initially find banking sites difficult to navigate and use.
3. Most virtual banking systems cannot be accessed without the Internet, and users may be required to invest in high speed broadband for quicker, reliable access.
4. Technological hitches can cause virtual banks to go down-an inconvenience.
5. While virtual banks give customers numerous advantages in terms of bill payments and account information, at the end of the day, customers still need to visit ATMs to withdraw cash.
6. Virtual banks have very few or none of their own ATMs. which means their clients might have to pay fees to the bank whose machines they use to withdraw cash.
7. Depositing money is another problem, because a virtual bank has no offices clients can go to. This means that clients probably need another account, with a standard brick-and-mortar bank, from which they can make electronic transfers to their virtual-bank account.
8. As with all technologies, online banking websites sometimes go down. If this happen when we closed our local bank or credit card accounts, we will definitely go penniless.
9. Even though online banking sites are heavily encrypted, with the developing technology, it’s hard to rule out the “hackers” who may access our bank accounts.