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What Is Online Banking?
Online banking allows for financial transactions to be conducted online. Online banking offers customers virtually every service that was once only available through the use of a local branch, including deposits, transfers, and online bill pay.
Virtually every banking institution has some form of online banking you can access through a computer or app. Online banking is also sometimes referred to as internet banking or web banking. Online Banking: What Is It? Definition and Operation
Key Takeaways
Online banking is a method of conducting financial transactions using the internet via a computer or smartphone. You do not have to visit a branch for many types of transactions with online banking. Many online banks boast lower fees and better rates compared to their brick-and-mortar competitors. To use online banking, you will need an electronic device, access to the internet, and maybe your debit card or account numbers.
The Operation of Online Banking
Online banking is a very popular way of conducting business with a bank. With online banking, you are not necessarily required to visit a bank branch to conduct most of your basic banking transactions. In other words, you can do all of this at your convenience, wherever you want—at home, at work, or on the go. Online banking can be done using a browser or app. Mobile banking is online banking that is done on a phone or tablet.
Here are some of the common ways you can use online banking.
Bank Anytime
With online banking, you will not have to go to a bank branch physically, but you can do it wherever you want—be it at home, work, or on the go. Besides, you can usually do online banking 24/7. However, customer support may not be available all hours.
Access Accounts With Browsers and Apps
Online banking can be done through the web portal of a financial institution using any web browser, such as Chrome or Safari, via a mobile
Checks for deposits
You can usually deposit a check through a mobile app using a process known as remote deposit capture. Enter the check amount, then use the app to take a photo of the front and back of the check to complete the deposit.
Control Your Money
Many banks and credit unions have tools available that allow you to review and balance your budget in either an app or online. You may also be able to track spending trends or save money toward reaching a goal.
Execute Additional Financial Services
Online banking transactions are not the same from one intermediary to another. Most banks regularly provide basic services such as electronic transfers and bill payments. Others will allow opening new checking accounts or CD accounts or permit you to apply for credit cards using web portals. Other online functions also include ordering checks, stopping check payments, or reporting a change of address.
Internet-Based Banks
Online banks are those that exist only online and do not operate any branches where you can go and conduct business in person. The best online banks offer low or no cost banking, coupled with above-average interest rates on their savings accounts, certificates of deposit, and money market accounts.
These banks handle customer service by phone, email, or online chat rather than in person. Prominent online banks in the U.S. include Ally Bank, Discover Bank, and Synchrony Bank.
Online-only banks may not offer direct ATM access, but most allow clients to use other banks’ ATMs and even retail store ATMs. They may even reimburse some or all of the ATM fees that the other financial institutions charge. The savings from not having to maintain physical branches usually enable online banks to offer significant savings on banking fees.
Advantages and Disadvantages of Online Banking
Advantages
- Convenient
- Fast and efficient
- Easy to monitor accounts
Disadvantages
- Customer service challenges
- Technical and connectivity issues required
- Hacking risk
Pros Explained:
- Convenience: You can carry out basic banking transactions at any time of the day or night and on every day of the week. If your bank has a payment network like Zelle, you will be able to use your online bank account to send money to an individual or a business. You can also create and close different accounts online, such as checking and savings accounts.
- Fast and Efficient: Transfers between accounts can be effected within a few seconds, especially if the two accounts are with the same bank. Additionally, deposits by check through a mobile can be done in minutes.
- Ease in Account Monitoring: You can monitor your account closely to detect any suspicious activities. Accessibility to banking information anytime facilitates early detection and is thus preventive against losses through fraudulent acts.
Disadvantages of Online Banking
- Customer service issues: Sometimes, you may have to go to a branch to complete a particular transaction, like buying a cashier’s check. At other times, you may not even have access to a branch. You may also prefer to deposit checks, withdraw cash, or discuss your financial needs in person.
- Tech and connectivity required: A number of consumers are still uncomfortable with the technologically heavy sides of online banking. For example, some clients may have problems with some online tasks, like setting up an automatic bill payment. Besides, online banking is fully dependent on uninterrupted access to the Web. Every now and then connectivity issues will keep you from processing transactions whenever you need it.
- Hacking risk: Despite all the improvements being made with security, online accounts can always be vulnerable. To avoid illegal access to it, customers should use their wireless plans and not public Wi-Fi networks for opening an online bank account.
What Is Necessary for Internet Banking?
To utilize online banking, you will want internet access and a computer or mobile device. After you get the account set up, you will want to have available a debit or other bank card and your account numbers.
It might be relatively easy to set up your online banking account. However, to open an online checking account or savings account, just like a brick-and-mortar bank account, you will be asked for a couple of things that the bank requires to set up the account, and they are always stated on its website, but this generally requires:
- Your name, date of birth, address, and other information
- Social Security number
- Government-issued photo ID, such as a driver’s license or passport Something to fund your account with
How Can Online Banking Be Done Safely?
To safeguard your money and your personal information from cyber thieves, you should take these precautions to safety:
- Set a strong, unique password, and change it regularly. The federal Cybersecurity & Infrastructure Security Agency recommends a password with at least 16 characters. The password should contain a random string of uppercase letters, lowercase letters, numbers, and symbols.
- Use a password manager to safely set and store passwords.
- Enable two-factor authentication or multi-factor authentication, if offered. This involves at least two methods of verification, such as a password and a fingerprint, to log into an online account.
- Never share your online banking information with others.
- Avoid doing online banking while on public Wi-Fi hotspots at a coffee shop or restaurant, for example.
- Regularly check your accounts for suspicious activities and report fraud cases immediately.
Conclusion
Summary of Main Points
Online banking has actually revolutionized the financial world by offering convenience, security, and innovative tools for managing money.
Encouragement towards the Usage of Online Banking
Now’s the time to consider and avail yourself of its features if you are one of those who hasn’t embraced online banking.
FAQs
What are the prerequisites of online banking?
You must have an operative bank account, access to the internet, and a compatible device.
Is online banking safe?
Yes, if you use good security practices, including passwords and not clicking on suspect links.
Can I use online banking for sending money internationally?
Most of the banks provide this service for international transfers; therefore, one should know about the policy and fee structure of his or her bank.
What if I forget my online banking password?
Use the “Forgot Password” feature or call your bank’s customer service.
Are there any fees for online banking?
Some services will have a fee associated with them, while many other features of online banking are free.
