Marriage of Convenience: Bank-Customer Relationship in the Age of the Internet: A South African Perspective

• Author: Mpakwana Annastacia Mthembu
• Position: University of South Africa, South Africa
• Pages: 14-23

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Mpakwana Annastacia Mthembu

University of South Africa, South Africa

mthemma@unisa.ac.za

Abstract. The last three decades has experienced the introduction of computers and

information technology at man y levels of human transaction, namely transfer of funds, data

collation and conclusion of contract. The internet is used a medium of transmission of a

customer’s mandate and communication of information b etween the parties. Banking law

proper deals with the relationship bet ween the bank and the customer. Traditionally the

relationship is that of t he mandatory and mandate e. This relationship not only embraces

mutual duties and obligations for the parties, but also offers privileges. Internet improves

the efficiency of the bank’s systems of collecting and transmitting orders for execution,

regardless of the location of the customer. In a typical internet banking transaction, the

relationship between the online bank and the customer gives rise to a hybrid nature of the

contract between the parties. The relationship of the bank and the customer does not arise

unless both parties intend to enter in a r elationship. This paper will analyse some of the

legal risks created by laws regulating the bank-customer relationship.

1. Introduction

Banking and financial services are heavily regulated products o f law. Their structure and economic value

are often determined by lega l requirements that shape the obligations of the parties

1

. The internet has

overturned the traditional bank-customer relationship by providing a common, global infrastructure for

the wide range of banking services. The internet does not only serve as the principal cha nnel for global

commercial, education and leisure communication, but a lso as an interactive co mmunication between

banks and customers whereby extensive amount of information can be exchanged. It has brought about

changes namely, moving away from physical objects as the substance o f commerce to information

2

. In the

age of internet banking is a mass market activity and therefore the relationship is not of a personal nature

as it was in the early 19

th

century and it has liberated banking from the physical constraints. Banking

services available over the internet open new possibilities for users and customers but also new risks for

the regulation of the bank-customer relationship.

3

Technically, the internet facilitates the customer’s

access to the bank’s services. Wiegand

4

argues that the bank-customer relationship is ver y complex and

difficult and that this difficulty is exacerbated when the relationship is combined with the technology of

internet banking

* BJuris, LLB- University of Zululand; LLM -University of South Africa; LLM -University of Pretoria. Senior

Lecturer, Mercantile Law Department, School of Law, University of South Africa.

1

Apostolos at 311.

2

Abu Bakar Munir Internet Banking: Law and Practice Lexis Nexis 2004 at 2.

3

Reed Chris Electronic Finance Law Woodhead-Faulkner 1991 at 1. See also Alastair Hudson The law of Finance,

1

st

ed, Sweet and Maxwell, 2009, p771

4

Legal Aspects of Bank-Customer Relationship in Electronic banking N Horn (ed) Legal Issues in Electronic

Banking 163-186, (2002) Kluwer Law International. See also Willis Nigel, Banking in South African Law 41