Challenges of Modern Electronic Banking

Electronic banking as a set of different ways of performing financial transactions using information and telecommunication technology provides the benefits of temporal and spatial limitlessness, speed of transactions, low prices and a wide range of banking products and services. On the other hand, apart from the obvious advantages, e-banking incorporates certain risks that need to be precisely identified and managed. This is the reason why the Basel Committee on Banking Supervision established a task group called EBG (Electronic Banking Group) that consists of banking supervisors and central banks. The group has come to a conclusion that electronic banking impacts some of the traditional risks, modifying and augmenting them, this primarily referring to strategic, operational and reputational risks. Specific challenges of e-banking services relate to rapid changes, increased dependence on the design and system, the trend toward unregulated outsourcing and heightened importance of security controls. The principles of risk management in traditional banking are applicable to e-banking activities, but the complexities of the Internet dictate that the application of these principles be adjusted to on-line banking activities and related challenges. Because of rapid changes in technology, risk management principles of electronic banking are not given as mandatory requirements or strict regulations but as guidelines that express supervisory expectations, the aim being to ensure safety and stability of the financial system. Any rigidity in the regulation of e-banking may be counterproductive because such solutions would quickly become outdated due to a fast pace of technological change.