Online Banking (e-banking)

How Banks Operate using the Internet?

Many banks offer their customers accounts they can operate themselves through the bank’s website on the Internet. Customers can go to the website to transfer money from one account to another, pay bills, check their account balance, see and print out statements, arrange overdrafts and carry out their transactions.  

Internet banking is commonly called ‘e-banking’. To prevent fraud from ‘hackers’ (thieves who break into Internet bank accounts to steal money), customers are given passwords and other security codes to use when they access their accounts.

People using e-banking facilities can still pay money into an account using the post or by visiting a branch in the traditional way, and withdraw cash from one of the back’s branches or a cash machine. The laws that govern banking –notably the Supply of Goods and Services Act 1982 – apply equally to e-banking.

Who Regulates e-banks?

e-banks operating inside the UK are regulated by the Financial Services Authority (FSA) and observe the banking code.  Outside the UK, banks are regulated by authorities in their home country, so before you open an Internet account with one, ask about protection – particularly complaints procedures and compensation arrangements if your account security is infringed or if the bank stops trading.

In the European Economic Area (EEA – the majority of EU states including Iceland, Liechtenstein and Norway), e-banks come under the Electronic Commerce Directive. This regulates the way in which service providers can advertise themselves online, make contracts, establish codes of conduct and make these codes knows to the public. For more details, contact the Department for Trade and Industry (DTI).

How Secure is e-banking?

The banking Code does not protect customers against online fraud such as attacks by hackers. So, to protect yourself, you should read the terms and conditions of an Internet account carefully to see what guarantees are offered if you are the victim of online fraud. Accounts offer four types of guarantee: 

No-strings Guarantee

The bank guarantees that you will not be liable for any loss. 

Special Requirements

You are not liable for any loss provided that you comply with special requirements. For example, you must change your password every twelve months or more often, and keep your anti-virus software up to date.

Limited Liability

The bank initially holds you liable for a maximum sum, usually £50.

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For more information on:

  • Full Liability
  • Changes to the Law
  • Example
  • A Double Debit