Impact of E-Commerce in Banking Sector

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Today “Electronic Commerce” is a buzz word in all the trade, industry and government all over the world. Some believe it is a mere hype created by some interested parties, while most of the others believe it is a genuine phenomenon which is drastically redefining not only the parameters of Technology and Trade as we know them, but also the very basis of our thinking and the way we lead our life.

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Electronic Commerce has been around for the last two decades in some form or the other, but the new force that is driving Electronic Commerce is the Internet, which is revolutionizing the way companies around the globe conduct business. Internet based electronic commerce is playing a critical role in addressing strategic, mission critical business needs of the companies and hence the companies are making it an integral part of their business strategies.


E-banking (Internet banking) is an e-commerce application which allows the customers to perform any of the virtual banking functions, financial functions online in a protected and secure manner. It involves using the internet for delivery of banking products and services. ICICI was the first bank to champion its usage and introduced internet banking to its customers in 1996. With lower internet costs and increased awareness about electronic media, online banking established itself only in 1999. Other banks followed suit, including HDFC, Citibank and the now redundant Times Bank. The Government of India enacted the IT Act, 2000 with effect from October 17, 2000 which provided legal recognition to electronic transactions and other means of electronic commerce. The Reserve Bank is monitoring and reviewing the legal and other requirements of e-banking on a continuous basis to ensure that e-banking would develop on sound lines and e-banking related challenges would not pose a threat to financial stability.


E-banking is a generic term making use of electronic channels through telephone, mobile phones, internet etc. for delivery of banking services and products. The concept and scope of e-banking is still in the transitional stage. E-banking has broken the barriers of branch banking. It increases efficiency in the sphere of effective payment and accounting system thereby enhancing the pace of delivery of banking services considerably. It allows customers to access banking services electronically such as to pay bills, transfer funds, view accounts or to obtain any banking information and advice. E-banking also facilitates new relationships with customers, regulatory authorities, suppliers and banking partners with digital-age tools. For example, customers and bank relationships will become more personalized, resulting in new modes of transaction processing and service delivery.


Internet Banking

Debit Cards

Cheque Truncation Payment System

Credit Cards

Electronic Funds Transfer System

Bill Payment Service

Investment Through Internet Banking

Mobile Banking

Automated Teller Machines

Smart Cards


Time saving: Online banking, undoubtedly, saves time by allowing direct transaction from office, home or any place.

Convenience: We can pay phone and electricity bills via online banking without rushing to the utility company’s bill collection outlets. It helps you avoid delayed payments.

24×7 services: Online banking transactions can be performed at any time and from anywhere.

Eco-friendly Process: Online banking is an eco-friendly process as it does not consume volumes of paper like conventional banking modes and hence helps protect the environment.

Easy Access: To perform online banking tasks, all you need is a basic computer system connected to the Web.

Faster Banking: Online banking is a faster way of performing banking functions. Whether you buy goods online, pay bills or transfer money, it gets done in real time and within moments.

Cost Saving: The process is very cost-effective. It rids businesses of the practice of deputing people to specially pay company bills, who waste hours making the rounds of the banks to perform all the firm’s banking-related functions.

Other Benefits: Online banking has several other benefits. Users can shop online, buy tickets, make advanced bookings, etc.


The concept of e- banking cannot work unless and until have a centralized body of institution, which can formulate guidelines, regulate, and monitor effectively the functioning of internet banking. The most important requirement for smooth working of internet banking is the use of best security methods. This presupposes the existence of best technological devices and methods to protect electronic banking transactions. The Reserve Bank of India constituted a working group on Internet banking which focused on three major areas of E-banking:

Technology and security issue

Legal issues

Regulatory and supervisory issues


The Internet has brought about a revolution in the way business is done locally and internationally. The E-commerce in India will have its own advantages to both the banks and the customers. As India second largest populous country and the 3/4 population lives in rural areas and there is a proper need to divert the efforts the entire areas city as well as villages. The use of information technology will not only reduce the costs of operation but also would be effective, easy to maintain, speedier and highly competitive. The challenges posed by the Internet banking are mostly of procedural nature, which can be easily counterbalanced by adopting suitable technological and security measures.

The domestic standards of banking have to be in conformity with the well-known international standards and in the near future international dealings from India would be a reality, which are presently not liberal enough. There can be no doubt about the huge potential and open opportunities offered by advances in technology. However, there are pre-requisites and preparations, which have to be made before the full benefits of the technology can be harvested.

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