what is the risk of e-banking

What is the risk of e-banking?

Online banking is prevalent widely among the modern generation. Who liked the online banking services with enthusiasm. However there are some online risks which answer the question of “what is the risk of e-banking?”.

Nowadays, the Internet plays a crucial role in the banking sector. Which makes a service for an easier customer. Which services are provided fastly by the internet. This convenient system is liked by the customers. However, there are some challenges in terms of various risks which may affect the bank\’s profitability, goodwill of the bank as well as its capital. There are some risks which are arised on the way of online banking.

Operational Risk
Credit Risk
Liquidity Risk
Foreign Exchange Risk
Security Risk
Compliance Risk
Reputation Risk
Legal Risk
Strategic Risk
Money Laundering Risk
Internet Rate Risk

(1). Operational Risks:- These risks are those which arise due to the internet error, fraud and inability to provide services to customers as per the customers expectations, Which may result in current and prospective loss of earning to the bank. Weak technology adoption or design system as well as human lack of awareness on the part of employees or customers may lead to operational risk. Besides, inaccurate transactions and unauthorised access to online banking also can create operational risks.

(2). Credit Risks:- The credit worthiness of the customers cannot be properly evaluated through the internet banking. Credit risks may arise due to when the under credit party fails to settle their obligations. A regular and consistent proper evaluation is required to check the repayment progress of the customers. Which will be helpful to avoid such a risk.

(3). Liquidity Risk:- If all customers of banks will use the online services of banks. There will be a deficiency of liquidity in the hands of banks. If outflow of funds occurs suddenly, sufficient funds will be required in the form of liquidity for the settlement demands of the customers. Thus liquidity risk may be arised on the way of online banks.

(4). Foreign Exchange Risk:- Some banks are providing their services in different geographical areas. So internet banking is required in this case. Here legal and regulatory risk may be arised as per requirements of different areas. Because every country has different rules and regulations, it is a difficult task to meet all the required legal laws.

(5). Security Risk:- Security is a very important issue of online banking. Because every information concerned with banking is considered very precious. It is known as the assets of the banks. Which needs to be protected from hackers. So firewalls are used on internet banking to protect such essential information related to the customers of the banks. These firewalls are a combination of hardware and software established between the networks. Through which all traffic will go through. These are treated as guard against the unauthorised individual gaining access to the bank\’s network.

(6). Compliance Risk:- There may be a risk of compliance and regulatory failure if the bank does not follow the guidelines and instructions given by the supervisor or the regulator. Due to the transparency and awareness, the bank can fail to apply such a system. Which is needed to the bank system. So more active care is essential for the purpose of compliance with given guidelines.

(7). Reputation of Risk:- When the online banking does not meet the expectations of the customers. Then negative effects will be raised on the goodwill of the bank. Because nowadays, people like the service of online banking. If such an online system fails or discontinues for a considerable time. Then banking products remain unawares from the customers. However, during such an uninterrupted system of online banking, such enhancement has increased many fraudulent activities. Whose benefit may be taken by the heckers and external persons.

(8). Legal Risks:- Nowadays internet banking is a new criteria in the ground of financial place. So its legal issue is not ambiguous for the many customers. Whether it may be for selected people whose business is dependent on the financial transaction. However, they may arise from the violation of established laws, rules and regulations as per the prescribed practices. Banks may face legal actions from their customers in the financial arena. But such a situation may arise where there is no adequate framework established by the banks. what is the risk of e-banking

(9). Strategic Risks:- Strategic risk may be raised due to the wrong implementation of unfavourable market conditions concerned with the banking products. These risks may be through the electronic channel, online technology and strategic decision making as financial policy. So a proper survey related to the technology market is essential before taking any final strategy of online banking.

(10). Money Laundering Risks:- We know that online banking lacks personal interaction between the customers and the bank staff. So services provided to their customers based on knowing your customers norms can not be effectively implemented by the banks. Due to which some transactions may be dubious in nature. Which can be done without much hassle.

(11). Interest Rate Risk:- Nowadays electronic money is becoming widely available in the payment system of finance. So the interest rate and market risk will have an impact on the value of banks assets against its electronic money liability. Because most people would like to keep their transaction throughout the electronic via. Which seemed to be a convenient system. But increasing such online transactions increases the electronic liability of the banks. What is the risk of e-banking?

Conclusion:- Thus, online banking is increasing day by day as well as becoming prevalent among the banking customers. But as discussed above, risks may be raised in the way of online banking. So needs for banks and customers are arised to be aware of such risks in the online banking so as to avoid their risks in the online banking. what is the risk of e-banking

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