The Internet has invaded almost every aspect of our daily lives. For most people under the age of 30, banking has never been an experience of in-branch, paper transaction banking. This is a generation that has never understood the logic withdrawing your weekend money on Friday before four o’clock, or who have any idea that the arcane phrase “balancing your cheque book” used to be a tangible, regular exercise. We do not belong to a generation of paper trails or bank book updates, as these measures for keeping track of our finances seem redundant and messy.
Online banking first became available in the 1980s, largely to corporate customers who could afford the hard and software to maintain the system. This “PC banking” was similar to that we experience now, except instead of Web access to accounts, the bank customer was given software to plug into the bank’s own intranet, as opposed to access through the Web. The limitations, in terms of a 2005 conception of Internet banking, is that while banking could be done at home, it could not be accessed at a computer other than that where your software was installed.
Over the last five years, there has been a spike in Internet banking (this term includes Web banking or online banking and banking with “virtual” banks). One of the reasons for the shift has been simply the ubiquity of Internet access in people’s homes. No longer seen as a luxury, the home computer, with Internet access, has progressed into a necessary appliance in the contemporary home.
Also a factor in the popularity of online banking are the technology that banks have put into security measures, the push from utility and credit card providers to make online bill payment available, and a rise in the general comfort level financial transactions online.
While initial online banking services were relegated to account balances and the occasional transfer, banking online has gone so far that the newest trend is banks that exist purely online, as opposed to what are now referred to as “brick and mortar” banks. With this kind of competition, brick and mortar banks have felt the pressure to remain competitive in an online environment with virtual banks. Thus, online services have expanded to include most services that are available in a branch, including applications for mortgages and credit cards and opening new accounts. You can even manage and monitor a stock portfolio online.
Perhaps the most influential trend to banking online has been the general public’s user comfort level with the Internet. Financial transactions over the Internet, thought of as ridiculously risky only a few years ago, are now commonplace. With huge companies like eBay and Amazon.com, people are getting used to using their money to buy almost anything online. Furthermore, money (as in, actual bills and coins) has become less tangible as an entity. Generations growing up from the 1980s on have a very different sense of “money” than previous generations. Instead of bills and coins, we have cards; instead of an account balance, we see “available credit.”
Changing with the Times
With new technology, and as we embrace new technology, we need to keep track of the pros and cons of both traditional and online systems of banking so that we can manage our money comfortably and safely. The advantages of online banking are becoming more obvious to a large percentage of the general public. The convenience of online banking cannot be disputed, as long as you already have a computer and Internet access at home, or at work: it takes five minutes to jump online and pay all of your monthly bills.
Another perk is that transaction speed is real-time when you are banking online. If you pay a bill, it is debited from your account immediately and transferred to the company’s account. You bank will show payment immediately, and you won’t accidentally spend your phone bill money while waiting for that mailed cheque to clear. This is quicker than the lag experienced waiting for an ATM transaction to process.
Online accounting is getting increasingly sophisticated, and with it are the tools offered online. Most banks will offer software that can be dumped into Excel files, or the like, for easy accounting. You can also get services like rate alerts, portfolio management, and stock quotes.
One of the advantages that virtual banks hold over brick and mortar establishments is their lack of overhead. With no buildings to manage and maintain, and no bank tellers, virtual banks promote their ability to pass these savings on to the customer in the form of higher savings interest rates, lower fees and lower loan rates. One of the primary disadvantages of virtual banks is the inaccessibility of branch ATMs. Most virtual banks do not have their own ATMs, so you will be at the mercy of the fees charged by the ATM accessed. Many virtual banks give an account credit to make up for this deficiency, but to be honest, with so many larger banks closing branches, the likelihood of finding your proper bank ATM at any given time is dwindling.
Probably the most important factor in online banking success of all kinds is still, and probably always will be, a matter of security. While all online bank sites will come equipped with security like encryption (which scrambles messages so they can travel between your computer and the online bank’s), most require a fairly up-to-date computer with 128 bit encryption.
The most recent causes of distress in the online banking community has been “phishing” and “Trojan horses.” Phishing is fraud using emails formatted to look like those belonging to your banking establishment’s that will try to get you to send back financial information such as passwords, credit card numbers and bank account details. “Trojan horses” are programs that lodge themselves in your computer and linger in the background, recording your keystrokes to be sent back to the thief. To block Trojan horses, invest in a good firewall, and make sure that your virus detector is updated regularly. Trojan horses are most commonly aimed at Internet Explorer, so try to use another browser, like Netscape, Firefox or Mozilla when you can.
With new concerns about online security rising all the time, financial institutions are always exploring new ways to keep your account information secure. Apart from developing new software, more sophisticated encryption, and new password systems, banks are searching for new ways to authenticate users before providing access to account information. Some banks are trying out a token system, akin to an ATM, that would provide ever-changing passwords to your account. As the token would be a separate entity from your computer, the code could not be lifted.
Also along the lines of the ATM card is attaching a reader onto the computer through which you could swipe an access card. Even more futuristic is installing biometric readers, which use a device to scan fingerprints or retinas to establish your identification. While they sound quite cool, options from tokens to biometrics will have to become a lot more affordable options before they will balance off the costs paid from Internet fraud. For now keep your password complicated and do not store it on your computer (this includes saying ‘no’ to your computer when it asks if you would like it to remember passwords for your banking page). The advantages of online banking—from the financial rewards to the convenience—are worth putting a little faith in your bank and its desire to keep your money in their coffers as much as you would like to see it kept.
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