Internet banking: The backbone of modern financial transactions

By Tushar Shankar, Co-founder & Head – Global Sales, Phi Commerce

Internet banking has evolved into a secure, efficient, and convenient service for managing high-value transactions. Despite competition from newer payment methods, continuous innovation ensures its relevance.

Having spent years in the payments sector, I’ve seen firsthand how Internet banking has revolutionized high-value transactions for both retail and enterprise settings. This transformation didn’t happen overnight. It’s the result of continuous innovation and adapting to the ever-changing needs of businesses and consumers.

Internet banking started as a simple online extension of traditional banking, allowing users to check account balances and transfer funds. However, it quickly grew into a sophisticated service with features like bill payments, loan applications, and investment management. The introduction of encryption and multi-level authentication was a significant milestone, addressing early security concerns and building trust among users for handling high-value transactions. With the rise of smartphones, internet banking services became even more accessible through mobile apps. This increased accessibility has made it incredibly easy for businesses to offer a variety of payment options to their customers without the hassle of managing multiple systems.

In India, internet banking continues to thrive. According to industry reports, India boasts the highest number of digital banking users at 295.5 million, with the number of people using digital banking growing at 20%-25% annually. This growth underscores the ongoing trust and reliance on internet banking. While UPI and digital wallets have gained popularity, they often complement rather than replace internet banking. Internet banking is especially vital for high-value transactions, such as income tax payments, insurance premiums, mutual fund investments, and e-commerce transactions. It offers a level of security and convenience that is unparalleled, making it the preferred choice for many businesses and consumers.

High-value transactions are a critical aspect of internet banking, particularly for businesses that need to transfer large sums of money efficiently and securely. Internet banking’s advanced security measures, such as encryption and two-factor authentication, ensure that these high-value transactions are conducted safely. Additionally, internet banking provides real-time transaction processing, which is crucial for businesses that need to manage their cash flows and financial commitments promptly.

The Reserve Bank of India (RBI) is set to redefine internet banking in 2024 with a game-changing move towards interoperability. This initiative aims to democratize the internet banking space by allowing banks to avoid the cumbersome process of integrating with each payment aggregator separately for every single transaction. Currently, the lack of interoperability causes delays in settlement and payment receipt for merchants. An interoperable payment system will eliminate these delays, making the merchant payment ecosystem more agile and efficient.

The RBI’s approval for NPCI Bharat Bill Payment to implement an interoperable payments system for internet banking transactions is a significant step forward. This system will streamline the process, reducing settlement risks and ensuring quicker receipt of payments by merchants. It will also simplify the integration process for banks, allowing them to focus on enhancing their internet banking services rather than dealing with multiple payment aggregators.

Internet banking has evolved into a secure, efficient, and convenient service for managing high-value transactions. Despite competition from newer payment methods, continuous innovation ensures its relevance. Internet banking remains a critical tool for businesses in India, offering unmatched security, cost-effectiveness, and comprehensive financial management capabilities. By staying ahead of technological advancements and proactively addressing challenges, internet banking will continue to play a vital role in the future of business payments. The RBI’s initiative for interoperability will further strengthen this service, ensuring that internet banking remains a cornerstone of financial transactions in India.

Internet banking is not just a trend; it’s here to stay, shaping the future of financial transactions in India and beyond.