Online Banking: Is It Safe, and How Do You Secure Your Information?
The online banking trends are clear. Millennials, now the largest customer base for financial institutions, want to conduct their banking activities through the online and mobile channels, and other generations of banking users are following suit. According to Aite Group, 75 percent of consumers log-in at least weekly to access their online or mobile account. This has led to a rise in online-only banks which completely forego the brick and mortar bank experience. However, only having a mobile app and the bank's website and lacking any physical location makes banking customers hesitant to trust these organizations.
People wonder whether online-only banks are truly safe for their bank account, checking accounts, savings accounts, and other financial services.
Is Online Banking Safe?
There is no straightforward answer to this question. Any activity online incurs some amount of risk, and online banking is no different. That being said, financial institutions are very concerned with their reputation in the market. It has been shown that customers are more likely to switch banks after a scam or fraud incident. So, it is in the financial institutions best interest to provide a secure and convenient customer experience in both their online presence and their physical branches.
Financial institutions have numerous policies in place and are continuing to provide security measures for online banking in an effort to curb account takeover fraud. Account takeover fraud occurs when an unauthorized user infiltrates an account and then either transfers funds out of the account, uses it to apply for new banking services like a new debit card or online bank account, or other fraudulent activity. Solutions such as OneSpan Intelligent Adaptive Authentication can respond in real-time to activity that could indicate fraud. For example, if a user were to try to wire funds to an unrecognized account from an unrecognized location, Intelligent Adaptive Authentication could issue a biometric authentication challenge to ensure that the user issuing the wire is truly the account owner.
Alternatively, OneSpan Mobile Security Suite has runtime protection capabilities. If the security system identifies another application on the device attempting to access the mobile banking application, Mobile Security Suite can deactivate the app and refuse access to it. In this way, it can prevent a fraudulent activity from compromised devices.
The conflict between security professionals and cybercriminals is an ever-escalating arms race. As the security industry develops new solutions to identify and thwart fraud attempts, the criminals are working on new techniques to evade our detection. Therefore, it is important to recognize that breaches can still happen. On July 19, 2019, a cybercriminal gained unauthorized access to Capitol One’s network and stole personal information about the bank’s credit card holders as well as credit card applicants. Luckily, the perpetrator was apprehended by the FBI, and there is no evidence that the data was used for fraud or shared. Yet, the event affected upwards of 100 million Americans and 6 million Canadians.
Pros and Cons of Online Banking
Again, there is no clear determination on whether online banking is “safe”. This is a personal finance matter where each individual must determine whether the benefits of an online savings account outweigh the risks. Below is a list of the pros and cons among the best online banks:
- Anywhere, Anytime Access: The biggest draw for online banking is the ability to access your funds whenever and wherever you like through mobile banking apps. There’s no need to wait until typical banking hours to access bank services and products in a face-to-face meeting.
- Transaction History: The banking application will record your transaction history, making such information much more accessible to the user. Rather than flipping through months of statements, the online platform allows the user to track down a particular transaction or view their spending habits.
- Better Interest Rates: Online-only banks have much less overhead to manage, and typically offer higher interest rates as a result. For the same reason, online-only banks often have lower fees associated with their accounts.
- Exceptional Customer Service: Online-only banks do not have brick and mortar locations where their customers can resolve issues with a representative of the bank in person. To account for this, online-banks invest a significant amount in their customer service departments and customer-facing process improvements.
- Free ATM Access: Without a physical location, the only way to receive cash from your accounts is through an ATM. Online-banks will often waive these fees with the understanding that using the ATM is the customer’s only option.
- No Personal Relationships: There is no physical location available, which means the customers will interface with the bank exclusively through self-service platforms, such as a website, and through customer support channels. There is no opportunity to form a personal connection between staff and customers.
- Difficult to Deposit Cash: Depositing a check through a mobile app is now commonplace among major banks, but depositing cash to an online-only bank is still a challenge. If this is something will need to do regularly, it is worth investigating how the online-bank handles this process.
- Limited Services: Online-banks may not support all the financial services offered by traditional banks, such as brokerage accounts. In some cases, this is due to services being unable to be rendered over the internet, such as notarization.
The primary advantage online banks have over traditional banks is the ease and convenience of managing one’s finances on their mobile device whenever and wherever they like. To compete, traditional banks need to offer the same functionality, and to keep up with online banking, they will need to follow several mobile banking trends to secure accounts.
Secure Online Banks
Though security is never guaranteed, not all online banks pose the same risk. Here, we’ve included a shortlist of online banks that have earned a reputation for security in the market.
Ally Bank, founded in 1919, began its history as a division of General Motors focused on auto-financing before eventually transitioning in 2009 to Ally Bank. They offer a range of financial products including online brokerage services.
Barclays US Savings
Barclays traces its history back to the 18th century, but their U.S. online bank is known for consumer and small business credit cards, such as JetBlue and Hawaiian Airlines.
Capital One purchased ING Direct, one of the first online-only banks in the U.S., in 2012 and launched Capital One 360. Since then, they have rebranded the service to be just a part of Capital One.
Synchrony Bank is headquartered in Stamford, Connecticut. It offers savings and money market accounts and CDs while charging no monthly service fees.
The security of an online-only bank is dependent on the security technology the organization uses to stop fraud and protect their customers. These banks should consider deploying a combination of Intelligent Adaptive Authentication, Risk Analytics, and Mobile Security Suite. In addition, they should consider multi-factor authentication for financial institutions and behavioral biometrics. These tools provide enhanced security while also creating a smooth customer experience.
Protecting Your Personal Banking Information
Though banking customers should feel confident in the security of their online banking provider, the customer can reduce their risks of online banking by following just a few best practices:
- Only Bank on Private Networks: Wi-Fi is convenient, because it can be accessed anywhere. But, public Wi-Fi is not secure and can be used as part of a cyberattack. When using your online banking application, make sure you are not connected to any unfamiliar public Wi-Fi networks.
- Update Your Mobile Device: System updates always seem to come at the most inconvenient times, but it is important to complete the update as soon as possible. These updates often contain vulnerability patches that will protect your device when using your online banking application.
- Enroll in Text Alerts: Many online banks offer a text alert or push notification service whenever a large transaction is made on the account. This will help you quickly identify suspicious transactions and report them to the bank.
- Be Mindful of Phishing Attempts: Scrutinize any email that claims to come from your online bank. Any email that requests your account information should raise red flags. The bank already has all this information and should have no need to request it from you over email. It could be a phishing attempt aimed at identity theft.
- Change Passwords Regularly: Username password combinations are a notoriously weak security measure, but they can be more reliable if the user is diligent about updating these passwords on a regular basis. Be sure to also make each a strong and unique password. Do not use the same password on any other website.
- Only Download Apps from the Official App Stores: Whenever downloading a new application to your mobile device, only do so through the official Apple App Store and Google Play Store. These marketplaces greatly reduce the likelihood of downloading a cloned and corrupted app used for cyberfraud. They are not perfect, however, and corrupted applications do exist on the marketplace. For that reason, it is important to also review the comments on the app to verify that this is a real and commonly downloaded application.
- Use Two-Factor Authentication: Many apps and services now offer two-factor authentication to increase the security of the account. Whenever possible, activate and use two-factor authentication.