When I received this guest post, I was wondering, was it going to add any value to my readers? Then I read the post and found out that only 46% of internet users use online banking. There must be a reason half of them don’t use online banking. To me, online banking is a boon I never bank at local branches, I can do everything sitting on my couch using bank’s website or app.
In today’s digital world, everything seems to be done online. From talking to friends and family via video chat to shopping and everything in between, the Internet is completely eliminating the middlemen, including bank tellers in traditional bank branches around the world. Nearly every bank today offers online banking options that allow their customers to manage every aspect of their checking, savings, or investment accounts as well as perform a number of convenient functions through an online banking portal.
The majority of today’s banking customers now utilize online banking to review their accounts, transfer funds, make payments , and perform a host of other useful functions. In fact, according to MSN Money, more than 46 percent of Internet users in the U.S. utilize online banking. Unfortunately, like anything else in the virtual online landscape, there are pros and cons to online banking.
Nearly 15 years after online banking began spreading around the globe; let’s examine the benefits and risks associated with this now ubiquitous banking model to see if convenience is really worth its weight in gold.
The Convenience Factor and a Myriad of Other Benefits
There is a host of benefits associated with online banking. In truth, it has completely revolutionized the way individuals and businesses manage their finances. This can largely be attributed to the convenience of banking online.
Today, individuals and business owners can do their banking anytime of the day or night. Also, since nearly every transaction can be performed online, people no longer have to travel out of their way to a branch location to perform a number of banking tasks.
Speaking of banking tasks, online banking allows people to pay all of their bills completely online, and many banks also provide hands-free online bill pay systems that automatically pay all of a person’s bills on their behalf. In addition to being convenient, the cost savings from using fewer stamps and checks can add up significantly.
Online banking also provides consumers with much better record keeping abilities and allows for better overall financial management. Prior to online banking, bank customers had to wait for their statement to be delivered by mail each and every month, which dictated that they had to either visit a branch location and talk with a teller or wait for the statement to arrive each month before they were able to know where they stood financially.
By the time the statement was received, the information would often be at least a week or more old. Obviously, this makes it extremely difficult for a person or business to keep their finances in order. With online banking, all of a person’s financial information can be easily accessed and viewed whenever they want.
Online banking is also much more environmentally friendly. In the midst of a global energy crisis and growing environmental concern, online banking provides businesses and individuals with online, paperless statements that allow them to view their balance, transaction history, and much more. When combined with the reduced number of checks being used, this alone saves thousands of trees every single year.
The benefits of online banking may seem innumerable, so let’s recap some of the most obvious advantages of banking online:
• Online banking is available 24/7 every day of the year
• Do not have to visit a physical branch location
• Pay bills completely online
• Saves money on checks and stamps
• Better record keeping
• Environment friendly
The Risks Associated with Online Banking
Online banking may provide consumers with a plethora of benefits, but the risks associated with online banking are quite real and must be considered. Although the risks of online banking have been known since its inception, the reality really hit home in April of 2010, when Sony, the owner of one of the largest gaming networks’s in the world, was hacked. In total, nearly 80 million users were severely affected, costing the company approximately $1.2 billion.
Most people refuse to believe that a large banking institution with millions of dollars invested in online security measures could fall prey to hackers. Unfortunately, history has proven otherwise. Time and time again, large corporations, including banks, fail to protect their client’s data. Knowing this, it’s important to be aware of the most common risks associated with online banking, including the following:
• Online Identity Theft – When banking online, hacking and identity theft are real risks that must be acknowledged. Personal and account information must be available to those who bank online, and it is the responsibility of the bank to ensure that this data is safe and secure.Once a hacker is able to get ahold of a person’s account number, username, and password, the information can easily be used to transfer the money from their account into the account of the offender.
• Phishing – Phishing is a combination of the words password and fishing. It is simply an email scam that involves sending scam emails in the name of a certain bank or financial institution in an attempt to obtain a person’s username, password, social security number, and other personal information. Phishing offenders typically create a fake login page so that they can capture a person’s username and password.
• Trojan Horse Scheme – This common scheme involves malware that is embedded on a person’s computer without their knowledge. Malware usually infects a person’s computer through links in emails from unknown senders. Once malware infects a person’s computer, it is capable of detecting their username and passwords when they login into online banking sites.
• Pharming – This form of identity theft occurs by hijacking the DNS tables at the ISP level, which redirects victims to a fake login page in an attempt to capture their username and password. Although it is not quite as common, it poses a great risk to consumers because they can be scammed regardless of the firewalls and security software that they have in place.
An Online Banking Identity Theft and Fraud Case Story
Christine Tetreault considered herself to be a relatively tech-savvy person. She didn’t think twice when opening up an incoming email that asked her to confirm the security information of her bank account due to ‘recent suspicious and unusual account activity.’ In the past, she had actually received real alerts such as these from Bank of America when she tried to login from a work computer, transfer funds, and make high withdrawals.
Given this, Christine assumed that the home office visit from a computer technician was likely the cause of the bank’s email. The computer technician revealed to her that she had been using the unsecured wireless connection of one her neighbors. As a former technical support manager, she put her bruised ego aside and humbly watched as the tech reconfigured her wireless connection.
The following night still upset over her recent wireless ignorance, she received the fraudulent Bank of America security email. Given the recent turn of events, Christine opened the email and promptly answered it. She assumed that the bank somehow recognized the recent update performed to her wireless network and sent an email to confirm the changes.
When checking her account balance the following day, she immediately noticed a pending $1,000 transfer from her checking account. She immediately called Bank of America and spoke to a fraud specialist who asked her if she knew a ‘Donald Smith.’ What a creative name, she thought.
Luckily for Christine, the transfer was still pending and she was able to catch it in time. The fraud specialist immediately locked her accounts and the account of the so-called Donald Smith, helping her avoid becoming one of many phishing victims.
Online banking has many benefits and it has transformed people’s lives all around the world. However, everyone should be aware that there are significant risks involved. Thankfully, individuals can avoid many of these risks simply by ensuring that they do not open emails from unknown senders and always look for a padlock symbol in the left corner of the URL field. With a little due diligence, the risks of online banking can be greatly diminished.