History of Electronic Banking

Electronic banking started in the early 1980s both in the United States and the United Kingdom.

It really took off with the arrival of the World Wide Web, when traditional banks offered their clients account access online, while some new banks started operating on the Web only. Today, almost half of all Americans bank online.

Online or e-banking was preceded by home banking, which allowed clients to access their accounts and perform basic transactions over the phone.

It was introduced in the mid-1970s in order to reduce back-office check-processing costs. Robert Spicer, Vice President of Chevy Chase, a federal savings bank, says that it failed to generate enough consumer interest to become cost effective.

According to "Banking and Finance on the Internet," edited by Mary J. Cronin, online banking was first introduced in the early 1980s in New York. Four major banks--Citibank, Chase Manhattan, Chemical and Manufacturers Hanover--offered home banking services.

Chemical introduced its Pronto services for individuals and small businesses in 1983.

It allowed individual and small-business clients to maintain electronic checkbook registers, see account balances, and transfer funds between checking and savings accounts. Pronto failed to attract enough customers to break even and was abandoned in 1989. Other banks had a similar experience.

Almost simultaneously with the United States, online banking arrived in the United Kingdom. It was the Nottingham Building Society that in 1983 introduced Britain's first electronic home banking service through a joint venture with Prestel, a computerised information service owned by British Telecom.

In the 1990s, banks realised that the rising popularity of the World Wide Web gave them an added opportunity to advertise their services.

Initially, they used the Web as another brochure, without interaction with the customer. Early sites featured pictures of the bank's officers or buildings, and provided customers with maps of branches and ATM locations, phone numbers to call for further information and simple listings of products.

Wells Fargo was the first U.S. bank to add account services to its website, in 1995. Other banks quickly followed suit. That same year Presidential became the first bank in the United States to open bank accounts over the Internet. According to research by Online Banking Report, by the end of 1999, less than 0.4% of households in the U.S. were using online banking.

At the beginning of 2004, some 33 million U.S. households (31% of the market) were using one form or another of online banking. Five years later, 47% of Americans were banking online, according to a survey by Gartner Group.