The History of Internet Banking

Internet banking is a very important part of our new global economy. Most people really seem to take this modern convenience for granted. This article seeks to describe the history leading up to where we are today.

As early as the early 1980s, there was something called ‘distance banking services over electronic media’ which were really the forerunner to the modern online money transfer services. By the late 80’s it became popular to refer to these systems as “online” because they were accessed by connecting to a terminal with a keyboard and monitor (kind of like a PC) in order to connect to the financial systems through a telephone line.

Another precursor to online banking was called ‘Home Banking.’ This form of banking is what we would call telephone banking today but through a computer-like setup. People would call in to a service through the phone line and then send instructions to the bank using touch tone signals.

Online banking services began for the first time on a wide scale in New York City. In 1981, four New York Banks tried offering home banking services. Unfortunately, they jumped on the wrong bandwagon and tried to use the ‘videotex’ system which ultimately was a failure in the US just like beta-vision. It did, however, take off in France.

The United Kingdom also tried to offer early online banking services in 1983 through the Bank of Scotland. This system was similar to the New York System, but used a different brand of terminal to connect to the phone lines. This was commonly known as ‘Homelink’ and it allowed people to view their statements online, transfer money and pay bills. That is pretty amazing for 1983! Especially since the bill payment system worked very much the same as today’s online bill-pay systems that come standard with online financial accounts.

In the 80s there really wasn’t an internet as we know it today. It was really more of a loose web of computers which connected to each other through phone lines. However, the first financial institution to offer internet banking services to all of its members was Stanford Federal Credit Union. That did not come until 1994, another decade after these home banking systems started.

Today, there are many financial institutions that only do business through the internet. They do not have physical locations or tellers or bank branches. The world is certainly changing, but we will never be completely without physical banks.