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Electronic Banking is easier and safer than ever. You know you want to do it, all your friends are doing it. And if you're not easily swayed by peer pressure, keep reading to find out why it is good for you and your money.
Electronic Banking: the Next Wave Electronic banking. What is it? You probably already take advantage of some form of computerized banking every day. Ever watch a check-out clerk run your paper check for some groceries through a check scanner? Information read off of magnetic ink on your bank draft was sent as binary information over a modem. Same thing goes for credit card scanners. Banks and merchants have been using computerized banking for years to make their lives easier. Electronic (AKA virtual, digital, and Internet) banking allows customers with accounts to use their Web browser to transfer funds, schedule payments, write electronic checks and digitally sign them, and reconcile their statements 24 hours a day, 365 days a year.
4 Good Reasons to Virtually Bank 1. Internet banking is not as daunting as it sounds.
Why are we so nervous about electronic banking? Why on earth would we rather continue to wait in line at the bank, or lick envelope after envelope as we pay our monthly bills? Well, for one thing, electronic banking doesn't provide the "context clues" we use unconsciously every day to determine whether or not a business is legitimate. We have become accustomed to accepting a merchant as legit if they've got enough money to rent a storefront or to produce a slick and glossy catalog. On the Net, however, you can look convincing and professional for very little money, and that does -- and should -- scare people.And there are other important physical cues missing: Despite the hassle, all those deposit slips and receipts and bankbooks and paychecks feel, well, real. Most of us probably even imagine that our bank keeps a stack of currency with our name on it. But this isn't what happens: When you deposit a paycheck, your bank agrees to pay you a certain amount in the future, because the paycheck represents a promise that your employer's bank will transfer that sum to your bank. This won't be a physical transfer of currency, though -- it will be an electronic funds transfer, an exchange of information. (That's why bank architecture leans more towards the big plate-glass window look these days, as opposed to the imposing barred fortress design.) Essentially, all banking these days is the process of exchanging certain verifiable pieces of information -- a check (verifiable because of paper quality, watermark, printing, signature), an ATM card (verifiable by PIN number), and so forth. And since banking is information based, it really is perfectly logical to do all transactions online.
2. It's easy.
Another reason that people are confused is that banking on the Internet is not the same thing as what is being called "online banking." The latter is what people who buy money-managing software do when they use their computers to keep track of their bank transactions. But they still have to manually enter in each transaction, keep track of their checks, balance their checkbook, and so forth.Internet banking is different in three important ways:
You do not have to purchase any software, store any data on your computer, back up any information, or wait months for new versions and upgrades, since all transactions occur at the bank, over the infrastructure of the Internet.
You can conduct your banking anywhere you have access to a computer (not necessarily your own computer, in other words) and a modem -- whether it's at home, at the office, or in a place outside the U.S. (And in this day and age, where changing jobs and shifting careers often means moving across the country, if not the world, the ability to keep the same account at the same bank is a convenience you must have!)
Your bank and the software you use to conduct your transactions are one and the same -- you are talking directly to the bank when you access your account. You can call, e-mail, or bank 24 hours a day, 7 days a week, 365 days a year. Therefore, you no longer have to reconcile a bank statement or manually track your ATM and paper checks. The virtual bank updates and reconciles your statement daily and simultaneously. Your electronic payments, paper checks, ATM/debit transactions, and so forth are all automatically logged in for you, usually within 1-3 days from the actual transaction. No more waiting until the end of the month to find out how much money you have!
Online banking is great, but it has its limitations: You have to install a software package that resides on your computer. This limits you to doing your banking from only that computer, making a call to access a separate network, and to working with a separate software company and bank who limit their hours of operation. You get the idea -- less convenience, more potential headaches, and higher cost. As an Internet banker, you don't have to do anything except log in and enjoy. (But for those of you who are devoted to their personal finance software, most Internet banks do allow data interchange between your account and software like Quicken.)
3. Your accounts will be secure.
For a thief to steal money out of an account via the Internet requires breaking its 40-bit encryption, logging in under your name, scheduling a bill payment to himself (including address and phone number), hoping the customer doesn't notice the pending payment, then cashing the check. Any electronic bank that's on the level REQUIRES you to use Secure Sockets Layer (SSL) protocol to log in. That means that your password is heavily encrypted, making it nearly invulnerable to someone running a "packet sniffer" somewhere on your network.SSL is nearly impossible to crack, so that's the easy part of the equation. The hard part is coming up with a good password in the first place. If you're naive enough to use your own name, birthdate, mother's maiden name, or your social security number as a password, there's a damn good chance you could get cracked. In truth, you should be sure to use a "dictionary-secure" password - i.e., your password can't be a word that could possibly appear in a dictionary. So "forgotten" and "skibum" are both lousy choices, but "88KeYs1PiANO" and "2legit2quiT" are better. And, of course, it goes without saying that you must never leave your passwords and account numbers out and accessible.
A great place to learn about the banking industry's encryption requirements is at Tripod's Security First Network Bank Satellite, Internet Banking Security or, for the techies out there, try RSA Lab's Cryptography FAQ. The Wells Fargo Bank will only let you set up and log on to your electronic banking account if you are using a secure browser. Here's their list of approved Internet browsers. And like other banks, your deposits at Internet banks are FDIC insured up to $100,000. So in the very hypothetical case in which your money is stolen, you're guaranteed to get it back!
4. You'll save time
Internet banks offer a convenient bill paying service. You can set up recurring payments for things like your car loan and rent in one simple step. You can pay bills faster because the bank does the work for you. For those merchants who accept electronic payments, the bank securely transfers funds to the merchant's bank. The money is credited directly to the merchant's account in 1 to 3 business days. For those few regular bills that you just can't pay electronically (say, your landlord), the bank will actually print a paper check and send it through the mail! An added bonus is that although you can immediately schedule a regular payment to be delivered days or months ahead of when it's due, you can still change or cancel any payment right up until the day it is sent.So why worry about paying your bills yourself? Rather than waiting till the last minute, chewing your nails wondering if your check will clear, you can immediately see online which checks have cleared, call up your account balance, and then schedule for the bank to send an electronic or paper bill payment for you.
And there you have it. Internet banking offers unparalleled convenience for those of us who can break the habit of thinking of money as an object, rather than as information. Any other questions? See below for answers.
Public Opinion on Virtual Banking
Survey on Internet Money: This is an analysis of The Management School at Imperial College's survey on Internet Money and Payment Systems. A major finding was that 51% of those surveyed were willing to use Internet payment systems (i.e. bill paying services offered by Internet banks) as long as they are secure. 12.2% have already done so.
Electronic Financial Services: The Critical Beachhead for Bringing the Majority to Electronic Commerce: This paper by an MBA class at Vanderbilt University hypothesizes that online banking will create a domino effect of widespread acceptance of transacting business on the Internet.
The Best Online Banking Deals: The Bank Rate Monitor regularly lists the best deals for online banking and Internet banking (see above for the different definitions). Also, take a look at the latest news on its homepage because it frequently has articles about banking via the Internet.
Tripod's Security First Network Bank Satellite: SFNB offers complete Internet banking. Learn all about Internet banking, have your questions answered, and test drive the demo. Tripod is offering SFNB as a special service to its members.
Wells Fargo Online Banking: Wells Fargo is the other major U. S. bank that offers Internet banking. Access to some of its banking pages requires the usage of a secure browser. If you aren't using one, Wells Fargo will provide instructions and links to help you download a suitable browser and load it onto your computer.
The WWW Security FAQ: Answers to the most frequently asked questions related to the security implications of running a Web server.
Internet Banking Security: SFNB thoroughly discusses the security issues and explains the technology that it uses to keep your accounts safe.
On Security: Netscape's thorough discussion of the subject includes a description of its implementation of Secure Sockets Layer (SSL) protocol in its browser. It has very good links to additional resources.
RSA Laboratories: This cryptography company has published a very detailed FAQ to answer questions about encryption.