Online banking allows you to conduct transactions from your computer or phone, making it a great choice for the increasing number of customers who are veering away from traditional banking, said Justin Pritchard of The Balance, a website on finances. Online banking is growing and banks offering this service are working to make your banking experience easier than before. However, you also need to be aware of the downsides of online banking.
Traditional Banking and Online Banking
PWC, a multinational professional services network of firms in London, UK, found that 65% of millennials perceived a primary bank as where they hold their primary checking, compared to 56% of Gen Z, 74% of Gen X, and 81% of baby boomers. 50% of millennials perceived a primary bank as where they make most of their transactions (versus 51%, 58%, and 68%), while 57% said a primary bank is where their paycheck is deposited (versus 46%, 61%, and 56%).
72% of baby boomers said they trust their primary financial institution the most with their money unlike 53% of Gen Z. Moreover, 25% of Gen Z do not own a checking account and 79% of Gen Z card holders had a card through their primary bank, in contrast to 61% of baby boomers. However, 25% of Gen Z mortgage holders considered that bank to be their primary unlike 15% of baby boomers. Physical locations still matter but only 61% said it is important to have a local branch in 2019 compared to 65% who shared the same sentiment in 2018.
Asli Yuksel Mermod, Ph.D. of the Journal of Internet Banking and Commerce, a business research portal, assessed customers’ perspectives and risk issues on e-banking in Turkey, revealing that only 4% of respondents reported using online banking.
When asked if they trust the security of internet banking branches, 10.1% answered “strongly agree,” 49.6% “agree,” 21.1% “neither disagree nor agree,” 8.1% “disagree,” and 0.8% “strongly disagree.” The reasons for choosing online banking were “Because this bank is the bank I have been using before” (58%) and the internet banking branch services of the bank are easy and understandable (28.6%).
When asked if using online banking is complicate, 51.3% disagreed with the statement and 41.9% strongly disagreed. 50% agreed that their personal information when using online banking is safe compared to 33.9% of respondents who neither agreed or disagreed. 26.3% agreed hesitating or being afraid of making mistakes when using online banking, unlike 10.2% who said they neither agreed or disagreed and 48.3% who disagreed.
When asked if it is difficult to rectify the mistake, 22.9% agreed, 22% neither agreed or disagreed, 42.4% disagreed. Meanwhile, 22.9% of respondents strongly agreed that they appreciate the services offered by internet banking branches, while only 67.8% and 7.6% answered agreed and neither agreed nor disagreed, respectively.
Online Banking Versus Traditional Banking
Online funds transfers can be done instantly for internal accounts, while transferring money to or from an extended account, including a brokerage, takes about two to three days, explained Eric Rosenberg of Business Insider, a fast-growing business site. Online banking usually charges lower fees and offers better interest rates than brick-and-mortar banks. With online banking, you might experience difficulty with customer service, albeit it is gradually improving.
On the other hand, traditional banking is valued by some people as this is where they can conduct all their transactions with the assistance of a teller or branch manager. When you are going to a physical bank, you know who to ask for help. There are instances when it is easier to address problems in-person. If you have made a mistake, consulting someone in the bank may help you address it as quickly as possible.
With online banking, you might experience difficulty with customer service, albeit with gradual improvements. Maybe you might get a helpful and knowledgeable representative— you’ll never know. While you can always hang up and hope for a better representative to attend to your problems, it can be a frustrating experience as you are forced to play the “1-800 lottery.”
Further, a local branch gives a place where you can deposit your money. For example, if you often receive your paycheck in cash or in cash tips, then opening an account in a local branch will be a prudent move. Traditional banks offer other services like picking up foreign currency before embarking on a trip and notary services. Other than these benefits, choosing to utilize the benefits of a traditional bank depends on your needs and preferences.
Keeping Your Personal Information Safe When Online Banking
Even if your bank requires you to create strong passwords, ensure that any data stored on your computer or device is password protected, advised Steven Abrams of US News, an American media company. You can use a password manager so that you will only need to remember the master password. Be sure to keep your device’s software updated. Computer manufacturers and mobile developers launch regular updates ranging from new features to security patches. Don’t forget to update your bank’s app to the latest version. Watch out for hackers and identity who orchestrate elaborate schemes to steal your personal information.
For example, they can create a bogus website of your bank to trick you into giving them your information. Malicious actors can write emails that appear legitimate or threaten you with phone calls. Bear in mind that your bank will never request you for your personal or banking information. If someone asks you to provide sensitive information, contact your bank and verify it.
Not all WiFi networks are created equal. Your device may be secure, but if you access your bank account from an unsecured network, your data could be compromised. Connecting to a public WiFi at a coffee shop might be free, but your data will likely be stolen by thieves. Therefore, it is strongly recommended to access your email and bank account from your home WiFi.
However, if you do need to access your bank account in a public place, consider using a VPN (virtual private network). A reliable VPN usually comes with a monthly fee, but it is worth the investment if you frequently access your account from unfamiliar networks. Most importantly, consider setting up notifications for unusual activity via their website or mobile app. That way, you will receive alerts for large withdrawals, new check orders, and account closure.
You have to carefully weigh the pros and cons of opening an online bank account or switching to an online-only bank. Online banking is convenient, but you have to safeguard your account from malicious actors.