The role of trade usage and the allocation of risk for unauthorized transactions in internet banking : a re-evaluation of the traditional bank-customer relationship

Abstract

The Internet has had and will continue to have a major impact in the way in which banking business is conducted. This dissertation primarily considers the allocation of risks associated with Internet banking and in doing so considers the role of trade usage in Internet banking.

The question of what the Internet is and more specifically what constitutes Internet banking is addressed.

In order to have an understanding of the allocation of risks in Internet banking a good understanding of the traditional bank-customer relationship is necessary. The contractual basis for this relationship is discussed.

The duties of the bank and the customer are discussed. In this regard the duty of a bank to act in terms of its customers mandate, the banks duty of confidentiality and the customers duty to exercise reasonable care are considered. The concept of a customer is briefly discussed.

As trade usage plays a significant role in the contract between the bank and its customer, attention is given to the requirement for the recognition of a trade usage generally and more particularly in South Africa.

The effect of Internet banking on the traditional bank-customer relationship is considered. The fact that a bank is still required to act in terms of its customer's mandate but is unable to identify is examined.

As most Internet banking contracts impose an obligation on the customer to take security precautions and also limit the liability of banks, consideration is finally given to the possibility that the practices of banks in regard to Internet banking may have acquired the status of trade usage in this particular sphere of banking.