Difference Between Internet Banking and Traditional Banking

Edited by Diffzy | Updated on: April 30, 2023


Difference Between Internet Banking and Traditional Banking

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The ever-evolving technology has given way to comfort and convenience for us. The time consuming and painful long lines have been replaced by the solace of our homes and availability, all due to the progress moving from traditional banking towards internet banking.

Banking has been around for millennia and has become such an integral part of our lives that we hardly consider how frequently we use it. In most nations, things like paying bills, collecting a salary, and applying for credit cards have become common and people often forget its deep progress and significance.

The primary or the most fundamental difference between traditional banking and internet banking, as we all know, is the physical aspect of their functioning. Traditional banks have physical locations where customers can be served, however, Internet banks do not have physical locations because services are given online. Therefore, moving the focus to the details, this article will delve more into the research aspects of the main and determining factors of traditional banking and internet banking. Furthermore, this article will discuss the difference on the basis of presence, time, accessibility, security, finance control, expensive, cost, customer service, and interaction, the distinctions between traditional banking and Internet banking. So, given below are the basic differences between traditional and internet banking.

Traditional Banking vs. Internet Banking

Traditional banking's primary purpose is to serve the customers physically, due to which it takes a long time to complete bank transactions such as checking bank balances and transferring money from one account to another. Internet banking, on the other hand, does not serve customers physically because services are provided online, making it more efficient. Also, the main distinction between online banking and traditional banking is that online banks primarily provide mobile and online banking services. A customer will not be able to speak with a banker face to face, but they can access their respective accounts at any moment using a mobile device or a computer.

Traditional banking is also distinguished by rigorous controls, but internet banking is distinguished by the passage of new legislation that resulted in the deregulation of major areas of the banking system.

Difference Between Traditional Banking And Internet Banking In Tabular Form

Parameters Of Comparison Traditional Banking Internet Banking
Time Efficiency It consumes a lot of time as customers have to visit their respective banks to carry out procedures like- checking bank balances, and transferring money from one account to another. Customers do not have to visit banks to monitor bank balances or transfer money from one account to another, so it saves time. Also, customers can easily access their accounts from anywhere they have access to a computer and the internet.
Accessibility Customers are expected to visit the bank as per the bank’s working hours. There is 24 hours accessibility for internet banking.
Operation Traditional banking requires lengthy paperwork and procedures. Internet banking is simple and easier to operate. Customers find that transacting online is much more convenient than visiting a branch for the same.
Presence Or Activity Tracking For traditional banking, banking services are present for the customers physically only.  Internet banking does not have any physical presence as the services are provided through an online platform or portal.
Financial Control Customers working abroad have difficulty keeping a check on the details of their finances. Also, customers abroad do not have much control over their finances. Customers have no difficulty in keeping a check on the details of their finances. Also, the customers have much greater control over their finances.
Customer Services In traditional banking, customers have to wait and follow up with the staff as they can attend to only a few customers at the given time period. Customers who use internet banking do not have to wait in lines to complete various bank transactions.
Expenses In traditional banking, the customers have to spend money to visit their respective banks. In internet banking, such costs are eliminated as the physical presence of the customers is not required.
Contact Customers have face to face contact with the bank staff at traditional banks. Customers can have contact only through electronic mediums and portal messages.
Costs Traditional banking costs comprise a large number of operating and fixed charges.


Since internet banking does not have a physical presence, such costs are eliminated.


Security Traditional banking does not have complete security over physical assets. However, traditional banking does not encounter e-security threats. Hackers are attracted to online banking because it is a lucrative target. One of the issues clients have when accessing accounts via the internet is secure against hackers.

What Is Traditional Banking?

The major recognising characteristic of a traditional bank is its physical existence. A traditional bank has national and regional headquarters, as well as branches across the countries where it does business. Many traditional banks have their ATMs, complete with logos. To save money, smaller traditional banks may band together to run a large number of branches. Traditional banks were initially preferred because of their convenience and face-to-face customer service, as well as local branches.

According to a survey organised by the Global Consumer Banking Analysis conducted in 2016, 60 per cent of the clients in 32 countries would prefer to visit a physical branch or interact with a live person when purchasing a new financial product or receiving advice. Due to their emphasis on in-person client care, traditional banks may appear more trustworthy than banks without physical facilities. When a customer registers a new account, this is especially a fact.

The main advantage of Traditional banking is that it is impervious to cyber-attacks. Many e-banking-related cases have recently surfaced. Traditional banking is now more secure and reliable than e-banking, which has always been a tempting target for hackers.

Traditional banking is made up of three parts:

  • Capital

Traditional banking relies heavily on capital. All banks are built on a capital base. This capital money is then wisely transformed into loans, resulting in job creation and economic growth.

  • Deposits

Once the capital has been invested, it is sustained by the accumulation of deposits, which serve as individual and company savings and liquid cash reserves.

  • Loans

Loans are the result of combining capital and FDIC-insured deposits to determine the amount of money that can be given as loans.

Significance Of Traditional Banking

Traditional banking is extremely important to the economy. They don't just offer clients an essential service. They do, however, help to create capital and liquidity in the market.

They keep their liquidity by taking money from their clients' accounts and lending it to others. Traditional banking contributes to the creation of credit, which leads to greater production, employment, and consumer spending, all of which contribute to economic growth.

Traditional banking may also provide services that mobile banking does not. Traditional banks are currently the sole place to get mortgages, loans, various types of insurance, and investment services. Going with a traditional bank may be the best option if a customer wants a one-stop-shop work done.

Also, if a customer values personal service, traditional banking is likely to be more appealing to them. Customers sometimes need a bit of advice on how to manage their accounts or maximise their money, and having a face-to-face chat about it establishes a lot more trust and reliability. Traditional banking gives customers the opportunity to form bonds with their workers. Therefore, it is rightfully said that Traditional banking is unbeatable when it comes to trust and service.

As a result, traditional banking is heavily regulated by the central banks of their respective countries or regions. Traditional banking, for example, is subject to reserve requirements imposed by central banks. This means that banks must keep a certain percentage of their customer deposits at the central bank as a safety net in the event that the general public withdraws funds urgently or in an emergency.

What Is Internet Banking?

Internet banking, also known as online banking, e-banking, or Net Banking, is a service provided by banks and financial institutions that allows users to access their accounts using the internet.

A user can make financial transactions via the Internet with online banking. Internet banking is sometimes referred to as web-banking or Online banking. Customers can use internet banking to access practically all of the services that are offered in a physical branch, such as deposits, transfers, and online bill payments. The majority of basic banking transactions may be completed without having to visit a bank location while utilising internet banking. To properly utilise the facilities provided by internet banking, a customer would need a device, an Internet connection, and a credit card. To use the service, the customer must first register and create a password according to their bank’s guidance.

The types of online banking transactions available differ by different bank institutions. Basic banking services on online platforms include transfers and bill payments which are commonly available at most banking institutions. Customers can use online banking portals to open new accounts and apply for credit cards at some institutions. Ordering checks, setting stop payments on checks, and reporting a change of address are examples of other functions.

Feature Of Internet Banking

  • Checking the account statement on the internet.
  • Opening a savings account with a fixed deposit.
  • Paying the utility bills, such as water and power bills.
  • Making payments to merchants.
  • Making a money transfer.
  • Placing an order for a chequebook.
  • Investing in general insurance.
  • Recharging the prepaid phone or DVR.

Benefits Of Internet Banking

In the modern generation, internet banking is a very common platform used regularly. Here are some significant benefits of internet banking mentioned below:-

  • Time Efficient

Internet banking allows the customers to complete any transaction in a matter of minutes. Netbanking allows the customers to transfer money to any account in the country or open a fixed deposit account in a matter of minutes at the comfort of the customer's home.

  • Simple Activity Tracking

One can obtain an acknowledgement receipt when they complete a transaction at a bank branch. There's a chance a person can misplace it. Therefore, all transactions one makes on a bank's internet banking interface, on the other hand, will be logged. If necessary, one can also use this as proof of the transaction. The name of the payee, the bank account number, the amount paid, the date and time of payment, and any remarks will all be recorded online and accessible anytime.

  • Easy To Use

It is quick and straightforward to use the services provided by internet banking. Many people find that transacting online is much more convenient than going to a branch.

Main Differences Between Traditional Banking And Internet Banking in Points

  1. Traditional banks have physical locations where customers can be served, however, Internet banks do not have physical locations because services are given online.
  2. The main difference is that with internet banking, the customers may access their account, make payments, and reconcile statements using their computer, whereas, with traditional banking, they must visit their local branch or office to manage their account.
  3. Traditional banking clients who go to foreign countries are unable to closely monitor their financial transactions, whereas internet banking users can monitor their financial transactions from anywhere in the world.
  4. Clients in traditional banking must spend money to visit their separate branches, however customers in internet banking can avoid these fees and hassles.
  5. Customers do not suffer e-security dangers in traditional banking, but traditional banking security is one of the issues customers confront when accessing accounts via the internet, as online banking is a tempting target for hackers and cyber attacks.


Both Internet Banking and Traditional Banking have unique features that are vital in allowing consumers to access and manage their accounts. Customers in traditional banking are served physically, so bank transactions take a long time to complete. Checking bank balances and transferring funds from one account to another are two examples. Customers are not served physically with internet banking as the services are offered online, making it more efficient.

In all, when it comes to managing one's funds, e-banking provides a better level of convenience. However, it continues to pose threats to personal privacy and financial security. As a result of Internet Banking, many people's account information has been compromised.


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"Difference Between Internet Banking and Traditional Banking." Diffzy.com, 2024. Mon. 26 Feb. 2024. <https://www.diffzy.com/article/difference-between-internet-banking-and-traditional-banking-126>.

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