Nowadays information technology is not an additional service/feature provided by the banks, but a necessity in cutthroat market competition. Information technology, coupled with wireless, and mobile technology not only make the life of customers easier who want real time accessibility, but also give a competitive advantage to the banks. Banks, can now conveniently have inter-branch, or inter-bank transactions, but also to the customers who want to access their account.

E banking that is banking through internet is becoming popular, and upholds the reputation that one cannot access accounts any faster than through e-banking. Customers must logon to the website of banks using their identity, and security key to perform their activities using E banking from their homes, offices, or anywhere they want. This makes banking service easier as most people now perform their tasks remotely, thus less number of customers physically visit the banks, making it dependent upon the internet.

E-banking might not be as secure as tele-banking, reason being that while the transaction is not yet completed, and the connection with the server is reset, then the customer does not know whether the transaction has completed or not. Moreover, in tele banking at the other end, no one knows you have punched in what number, but in case of E-banking, there is always a chance of masquerading, and hacking.

The electronic transmission of financial transactions from one bank to another is known as electronic data interchange (EDI). This involves an instantaneous diffusion of monetary transactions in a virtual manner to the other party in the form of electronic mail. Whilst both banks and households can use internet banking, EDI is used for the sole purpose of banking transactions.

EDIs are automated systems, which are more reliable, accurate, and reduce delay, but still there are some financial transactions, which have to go special automated systems called clearinghouses. Clearing houses batch process cheques deposited in a bank in real time.

Financial institutions, using this system, must have a fault-tolerant computer connected to the actual clearinghouse automated payment system (CHAPS). One argument in favour of this payment technique is that once payments are made, they cannot be rolled back, and therefore, it reduces default risk incurred by banks.

Financial institutions manage their clients by keeping records in the form of a database. A database is a collection of data, which may sometimes be a simple list of names and addresses, or in the case of banks, it may enclose client details including savings and current accounts, standing orders, fixed deposits, and credit limits. One of the oldest risks to which banks are open is the credit risk that involves the danger to which a bank is exposed when a borrower defaults on a debt obligation.

Obsolete database is of no use, thus must be kept posted with latest transactions. All the banks and their branches are connected to a centralised database, providing accessibility to the authorised personnel. A centralised database enables a client to transact from anywhere, any branch of any bank, and access his account.

Edwood Woodward is a financial discussant. You may consult with him to take debt help and get more alternatives to make financial decisions of your life at

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