Today Online Banking in the UK Finance Essay

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Today online banking in the UK allows individuals to access manage and transact on all aspects of personal finance

Introduction: In the recent years, innovation has played an important role to develop the financial markets sector. One of the recent developments was the internet that becomes a source of data base and new method of communication. In the last 30 years the United Kingdom has witnessed the introduction of the online banking as method of providing a variety of financial products. In the same manner internet has used in the financial market to provide the opportunity for customers and investor to manage and invest in new financial products without the need for a financial adviser or the use of traditional banking services. These services are provided through the use of the online financial market and the online management account. (Daniel1999). The financial supermarket service provides the opportunity for investors to access different share markets and trade with different type of financial products such as saving account, cash ISA, bonds. The disadvantage of financial supermarket is that does not provide all of the financial products in the same time (Durkin, M., 2007). On other hand Non- financial corporations start to compete in the financial service market motivated by the use of internet that allow them to offer financial services to customers the same as any financial institution with lower costs(Daniel1999) . For example, Sainsbury’s now offers variety of financial services through their online website or through their retail branches. At the same time online service does not only provide financial products to customers but also provide a variety of financial data that customers and investors can use to compare between different organisations in the finical market. The banking online service has offered an Online Management Account that allows individual customers to setup an online account by registering their personal details and identification information. Also online banking provides different measure of security such as security password, proof of identification and proof of address. Once the customers have registered with online financial institute, they will able to access their online account at any time. The online account will provide customers with variety of services such as checking debt payments and standing orders and make payment through direct or credit card. Also management account can gave them access to check payment history and any received money. In recent years banking online system has developed a transferring money service through different accounts that give them cheaper method of transferring money in comparison with traditional method that are takes lot of time to process and has high costs.

Adoption of online banking in the UK:

Since the introduction of the online banking in the early 1980s, the online has been always observed as specious method of service and has been slowly adopted as new method of money transaction. Several different researches by academic bodies have showed the different development of adopting the online banking in the UK. In the year 1999 research study published by the London business school that aimed to analyse the motivation behind the development of the online banking based on two organisational and market factors. The research has involved 44 of the largest banks in the UK and showed that 25% of British Banks providing online service while 75% are thinking of developing online Banking system. (Telecomworldwire 2003) . In the year 2008 a research study by APACS showed the number of online banking users has been increased from 3.5 million users in the year 2000 to 21 million users in the year 2008 with increase of 505%. (Credit Management 2008). In the same time other authors still believe that online banking is slowly adapted. In his article (Internet Banking In The Uk), white argue that level of online banking users is not the same level as internet users, according to white research the British users still have a lot of security concerns regarding the online transactions(White,. 2004). In his research White has interviewed 56 online banking customers some of the customers where interesting in timeliness of the service while other group where concerned regarding the security system of the online banking (White,. 2004). White argues that most of customers tend to use non-traditional online banking such as Egg rather than traditional banks such as Royal bank of Scotland. The reasons is that non-traditional provide a higher level of security and better performance and credibility. Overall White believes that customers tend use online banking for secondary financial activities such as deposit accounts. He also concludes that majority of UK Customers Prefer traditional banking service for their financial priorities rather than use of online service. (White,. 2004).

The advantage of online banking:

Since 1980s the banking sector in the UK has been affected by various external developments such as internet. This development has played an important role in attracting customers and competing effectively in the financial sector. The internet will offer the opportunity to switch financial intuitions at any time with click of button (brahim, E.E,2006). It also offers customer to overview all financial product available and compare between different services in easy access. In the same time online banking provided financial organisations to reduce the number of their employees. This development has reduced the overall cost of entering in the financial market and influence new competitors to compete in the same sector (brahim, E.E,2006). Today it is not only banks that offer financial services but retail stores such as Tesco and online financial service providers such as Egg. Also the online network has increased banks profit because of internet delivery service that is more practical to customers and cheaper method to deliver services in comparison with establishing a bank (Anne, J.B,2002). It has also attracted more customers and contained the current customers. The advantage for customer is that they can be confident of fast and efficient service at all times (Anne, J.B,2002). Another benefit online banking provides higher interest rate in comparison with traditional banking. This means that customer will have higher return at the end of each year. There is no restriction on accessing the service and easier way to pay payments plus fast transactions between different accounts that saves a lot of time in comparison using the telephone service or the branch. On other hand there is several disadvantages for example security issues a high number of customer still have some concerns regarding the use of online service , also the changes in sites and new updates can be confusing and complicating to customers . Also the internet banking does not target all genders and ages. Older ages (50-65) still prefer to use the traditional banking service.

Future aspect of online banking:

The fast usage of internet among people and organisations has led banks to the development of the online service. It started when banks started provide information about their servicer through internet by setting websites and providing information details about all of their financial products and services (Waite, Harrison,., 2002). In the same time the increase access of the internet and development of providing different products through the internet has influenced banks to start develop their own websites toward providing services through the internet. In the same time online banking become faster and more efficient method of providing service rather the use traditional way and also more beneficial to the banks in the terms of lower level of expenses such establishing branch in different geographical location and low cost of maintenance. Using the online banking has influenced new competitors to compete in the banking service due to low cost and number of employees. It also meant that customers can access their account at any time in any part of the world (Waite, Harrison,., 2002). Also the use of the online banking system has opened more opportunities for banks to attract new customers from different part of the world and compete in larger scale markets. On other hand online banking has provided customers the ability to manage their account where there is reduction in time loss and no cost of using the service. In the same time some academic authors has viewed physical banking service has more in risky specially in the scale of market risk, solvency risk while in the online banking customers tend to have more advantage to control these risks. However using online banking can create different measures of risks such as privacy and security risks. The usage of customers’ personal data is an important aspect in the processing of the online service (Aodheen O'donnell 2002). The sharing of this private information can viewed as risk to many customers that has suspicions regarding the security measures provided by each bank. In the same time Banks with highly restricted security measures can create time loss risk and decrease level of services provided to customers. In general terms the future aspect online banking seems positive due to fast and easy access service.

Conclusion

Today with the influence of technology and innovation in our life and business, markets has become more aware of the changes should implemented to improve their opportunities to satisfy customer demand and meet people expectation. Today online banking sector has become one of the main attractive markets and has attract new investors and international competitors mainly because it became widely popular among people and it has positive future prospect with low level of investment . On other hand customers start observe that online banking as cheaper and easier way of payment and effect method of account management. The adoption of online banking in the UK has increased rapidly in the last ten years, mainly because of the advantages provided by the system and the wide increase of internet users. However some customers still believes that use of traditional banking are important and can’t be replaced by the online banking. According to the recent research the number of UK users has been increased from 3.5 million users from the year 2000 to 21 million users in the year 2008 and the majority of the transactions have been categorized second level transaction (Credit Management 2008). This gives clear indication that customers still specious to use online service, mainly because of the security and privacy risks that create barrier for the wide spread of the online banking. In summary, customers observe that online banking as a useful method of transaction but they still believes that traditional banking is much more secured service and can’t be replaced by the online banking even though there has been an increase in the last seven years. It furthermore indicates that traditional banking plays a significant and fundamental role in the banking sector.

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