What is Home Banking?
Home banking refers to banking services that can be accessed from home, either through the internet or by phone. Often referred to as online banking, most banks offer digital services that allow customers to conduct various transactions through the internet. They can include viewing account balances, reviewing transactions, making payments, and transferring money.
In addition to more traditional branch banking, home banking services form one part of a bank’s overall system. In recent times, some banks operate as virtual banks, which provide banking services directly through the internet. While home banking provides customers with greater convenience, banks also benefit through greater cost-effectiveness by being able to maintain fewer physical locations.
- Home banking refers to banking services that can be accessed from home, either through the internet or by phone.
- Services offered through home banking can include viewing account balances, reviewing transactions, and transferring money.
- Home banking minimizes the need for physical locations, which results in greater operating efficiency and cost-effectiveness.
How Home Banking Works
Home banking operates as an alternative to branch banking by providing banking services through the internet or by phone. For a customer to access online banking, they typically register with their financial institution and set up credentials for online verification. After setting up the account, a customer can log in using their credentials and access banking services.
Home banking services are linked to a customer’s accounts within the bank, such as checking accounts, savings accounts, or credit cards. Once connected, customers can conduct transactions through the internet or by phone.
In addition to providing a more convenient customer experience, banks also benefit financially from home banking services. By providing customers with a platform to conduct their banking from home, banks can reduce transaction costs and save money by being able to maintain fewer branch locations.
Home banking can also provide a better way to market new products to existing customers and allows for greater integration of services under one platform, which helps retain customers and minimize overhead.
Functionalities of Home Banking
In terms of the services provided through home banking, each bank may differ in terms of functionality. At a minimum, most banks provide a basic level of online and phone services. They can be broken down into two main categories – transactional and non-transactional functions.
- Bill payments
- Transferring funds between accounts
- Depositing checks
- Buying and selling investments
- Applying for loans and credit cards
- Viewing account balances
- Reviewing recent transactions
- Viewing bank statements
- Ordering checks
- Updating address and other personal information
In contrast to more traditional banks, direct banks are banks that operate solely through online and phone services, without any physical branches. Also known as virtual banks, direct banks provide home banking services to customers without any need for physical locations.
To provide customers with consistent service, direct banks are often connected with interbank networks to provide customers with ATM access, while all other transactions are conducted through the internet or by phone. By operating as direct banks, the institutions can save significant amounts of money by eliminating the costs of maintaining a branch network.
For customers, direct banks offer deals that may be unavailable through larger financial institutions. By eliminating physical locations, the banks operate more efficiently and are significantly more cost-effective. As a result, the savings are often passed on to the customer in the form of higher interest rates.
One product that is common for direct banks are online savings accounts, which are savings accounts managed through the internet. Compared to traditional banks, online savings accounts often offer much higher interest rates, lower fees, and no minimum balance requirements.
CFI is the official provider of the Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to transform anyone into a world-class financial analyst.
In order to help you become a world-class financial analyst and advance your career to your fullest potential, these additional resources will be very helpful: