“If all of us start transacting through online and mobile banking, it will be our great contribution towards eradicating corruption and black money from our country”
-Narendra Modi

Do you prefer a bank with the old method which has its automated teller machines (ATMs) or an online system that gives you an automated experience on a server to do payments?

After learning about each one’s merit and demerit maybe you can decide that with your own

We are living in an era of technology where everything has turned digital and so that our banking sector has adapted the same. Many people among us are well aware of the online system and we are even using it to do the transaction and other practices just by clicking a few buttons in the mobile but there is even a huge crowd among us who are afraid to do so as they are not aware the merit. These online systems do have demerit which should also be known to us to take prevention.

Traditional and online banks both subject to the same laws and regulations. Online banks are guaranteed by Federal Deposit Insurance Corporation (FDIC) just like the accounts held at traditional banks. The security for both is the same overall as in both encryption technique is used to secure and protect people’s funds and identity.

But even if both are somewhat identical they do have some distinct procedures to be followed and ways to adopt. Both the direct banks leverage their lower costs to offer better interest rates and, often, lower fees. The traditional one while offering a convenient way for deposit and transaction including offering the option for face-to-face service at a bank branch when you need it. While the online system is time convenient and less trouble making. Before choosing an online bank, it’s important to decide what features are most important to you. Is there less over heading in the online bank as compared to traditional ones also it including lower fees and accounts with higher APYs. But in an online system, there is a lack of personnel relationship and more limited services.

The online system arrived in early in the late 1990s, by then the traditional bank lookout ways to convert themselves in full organized online services that could be delivered to the customers. For the first place, online websites were established in which all information was made available for the customer to look into. The early feature included in the websites where the ability to open new accounts, download forms, and process applications. Slowly this all things leads to online bank only. These systems allowed all kind of financial work without reaching the main branch now everything was possible with a button and OTP.

As now most of the people consider virtual banks thus the enthusiasm for banking online increased. About more than 60% of account holders do at least some of their banking on the internet, according to the latest report on banking behaviour from the FDIC.

Pros of Digital payments:

There are several advantages that these virtual systems provide us to make the task as well as life easy. More so ever their various options available in this online-only banking system or a digital system like mobile banking, Internet banking, Banking Cards, USSD, AEPS, UPI, Mobile Wallets, Banks Pre-Paid Cards and Point of Sale.

The traditional banking lack infrastructure and overhead due to which they need to pay high-interest rates or annual percentage yields (APYs) on savings. The most they come up with about 1% to 2% more than you’ll earn on accounts at a traditional bank a gap that can add up with a high balance. There are some traditional banks which provide only saving accounts and lack various other options such as certificates of deposit (CDs), and no-penalty CDs for withdrawal.

 Also, they charge a wide range of fees when you have a minimum amount of money in the bank, making direct deposits, or paying by check or debit card. Accounts at direct banks are more likely to carry no minimum balance or service fees. Online banking provides a better experience as traditional banks are investing time as well as money in improving the virtual service to provide good facilities. Even apps are being launched and websites are updated from time to time. But overall, direct banks appear to retain an edge when it comes to the online banking experience.

The survey shows that traditional systems are decreasing day by day as more people prefer the online system. Due to the advancement in services the customer care is been launched in which the client can call the bank employees for cross-checking their doubts. There is about 1% to 2% gap between the interest rates earned by accounts in traditional banks and internet banks.

Online banking provides mobility as it can be done from anywhere as long as you are having a proper internet connection. Even if you are away for business purpose or vacation you can still take care of your business desires, there is also no extra charge because travel expenses are now zero. Most of the banks have tried to be total paper-free as of now online statements comes into a business most statements and correspondence is done online reducing the amount of paper used and sent out to you this makes online system eco-friendly.

Now even bills can be paid online so no longer need to stand in large queues and wait for your number and also reminders are set online to make you remember monthly payments and you wouldn’t forget to do payments. Transfer of money has also become easy. Order cheque is not required as don’t online banking and debit purchases are made available.

Cons of Digital payment:

Banking online also share some drawbacks and inconveniences.

The traditional banking system provides the opportunity to interact with staff in the banks and it provides the benefit of building relationship so that if in the future you required any financial advice then, of course, we could in contact with them such as a loan, or when you have to make changes to your banking arrangements. Now even the flexibility with the transaction has become less as the direct contact are not only maintained for not only building human relationships but also about your finance. Also, transaction issues are faced by a large group of people out there. Sometimes a face-to-face meeting is required to complete complex transactions and address complicated problems. In traditional banks to solve such problem experts are consultant but in online service, it is a bit hard. There is also a problem faced in the international transaction as now it’s difficult than usual times Another probable drawback is that most direct banks do not have their ATMs.

People have faced a large number of service issues as some portable banks lack important service that needs to be provided such as insurance and many more that is a huge loss to loyal customers while if we talk about traditional banks then they would probably offer preferred rates to loyal customers.

While one more big issue is with security as being reliable on a machine for everything is a bit risky and due to that reason, only the remaining 40% does not want to do this online procedure. encryption software is designed to protect your account information, but no system is perfect. Accounts may be hacked by hackers. Even malware and other unofficial activity can also be performed and identifying such threat is not easy but some online banks take these risk and it is mentioned in their policy to be aware we should always go through them.

Also, the internet connection is a large issue because there are some places out there where the network is very slow and thus doing an online transaction and other activities is not at all possible. sometimes in between a transaction, the connection is lost and then we check then the amount is being deducted from the account but hasn’t reached to the other person. E-filing complain take a lot of time to be considered.


Internet banking is increasingly becoming a ‘need to have’ than a ‘nice to have’ services. But getting the best service is a client’s right thus to be at the safe side make yourself aware of terms each system provides.

About the Author

BankReed Admin

Banking Professional with 16 Years of Experience. The idea to start this Blogging Site is to Create Awareness about the Banking and Financial Services.

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