There have been no major developments to talk about in the world of online banking in the past week, so I am going to take a step back and discuss the history of online banking. The term "online" banking first became popular in the late '80s and referred to the use of a computer to access the banking system using a phone line.
Many major banks started offering a "home" banking service which was essentially a pilot version of the internet programs we have now. There were actually similar issues related to "home" banking then there are to "online" banking in terms of concerns over privacy. Thus, the banks took extra precautions to prevent any sort of identity theft. For one, they required four verification steps to access their accounts. Users have to input their household code, personal identification code, personal "handle" and household "handle." While the bank has records of three of the codes, they don't have the PIC so employees of the bank or people hacking into the bank's records would not be able to gain access to the account.
"Home" banking served many of the same purposes that "online" banking does today. Customers were able to set up electronic payments with their bank so that they could pay certain accounts through the online system. "Home" banking allowed electronic money transfers and other basic banking tools.
Ultimately, as the internet revolution began home banking shifted to online banking. In fact, the first bank to offer free online services was none other than our own Stanford Federal Credit Union in 1994. The SFCU was also one of the revolutionaries in online bill pay, introducing the feature in 1997. Is there anything Stanford hasn't been instrumental in accomplishing?!?
Sources: http://www.atariarchives.org/deli/home_banking.php
Sunday, December 4, 2011
Sunday, November 27, 2011
More Convenient Online Banking
The last year has led to a massive movement as banks try and win customers over to their product by improving their online software. One very high-profile bank that has recently done so is Citibank, who have completely revolutionized the field of online banking.
Citi has created a new website that displays all financial information in one place, including credit cards. They even have tools in place that allow the user to download information from accounts held with other banks.
Even more impressive is their expenditures tracking software, which shows the user how much money they have spent in each particular category, from gas to retail to dining. This, along with their budgeting features, is intended to further help their customers control their spending and keep people out of debt.
Personally, I think this software makeover is a great thing. Online banking allows for so much more capability than personal banking ever could, and it is time banks took full advantages of online abilities. These tools could make a real difference in people's lives by by helping them manage money in easy to use and understand ways. No longer will people have to create their own budgets and try to track their own spending when banks are willing to do it for them. Citi's software is truly one of the best things to happen to online banking.
Citi has created a new website that displays all financial information in one place, including credit cards. They even have tools in place that allow the user to download information from accounts held with other banks.
Even more impressive is their expenditures tracking software, which shows the user how much money they have spent in each particular category, from gas to retail to dining. This, along with their budgeting features, is intended to further help their customers control their spending and keep people out of debt.
Personally, I think this software makeover is a great thing. Online banking allows for so much more capability than personal banking ever could, and it is time banks took full advantages of online abilities. These tools could make a real difference in people's lives by by helping them manage money in easy to use and understand ways. No longer will people have to create their own budgets and try to track their own spending when banks are willing to do it for them. Citi's software is truly one of the best things to happen to online banking.
Sunday, November 13, 2011
Trapped by Online Bills
This is somewhat of a continuation of the topic I introduced last week in terms of controversy involving new fees being introduced by major banks. This week, an article by the New York Times detailed a major issue related to online banking: people who participate in online banking are finding it increasingly difficult to switch banks due to their reliance on the online software.
This problem is primarily due to online bill paying. Online banking software has made it so that people have numerous bills being paid over the internet. Switching banks would mean a major hassle in terms of stopping bill payments in one account and re-entering them to be paid by the other bank. This inconvenience prevents people from switching banks, which allows the banks to make controversial changes like raising fees with less fear of customer abandonment.
This fact can easily be represented through the statistics. In the last 30 days, 44 million people have used online banking software to pay their bills, which is up from just 32 million five years ago and just 7% of people have chosen to switch banks this year, down from 12% last year.
Earlier this month, Representative Brad Miller of North Carolina introduced a bill that attempted to make it easier for people to switch banks. The bill stated that, among others (you can read the full list here), a person has the right to close his or her account at any time for no charge, whether his or her account be positive, negative or zero. Unfortunately for all of us, this bill has little chance of passing through the Republican Congress.
Thus, the question I ask you is whether it is fair that a company to make their software complex just in an effort to keep customers. Online bill payment is such a convenience that people are definitely going to use it. To me, it seems morally wrong to take advantage of this fact to prevent customers from switching to a competitor.
Sunday, November 6, 2011
#Occupybanking?
Most of you by now have probably heard about the Occupy Wall Street movement (if not, here is a handy wiki article with a breakdown). What you may not have heard of is the much smaller, but somewhat more related movement called Bank Transfer Day. While this might not be completely related to my blogs topic, I believe that it is an interesting tale of the use of social media within a protest against the major banks.
The protest was started by Kristen Christian, who created a Facebook event for yesterday, November 5th, entitled "Bank Transfer Day" as a form of protest against higher bank fees. She urged people to transfer their funds from major banks to local credit unions, and by Friday afternoon more than 78,000 people had joined the cause on the groups Facebook page. The Occupy Wall Street movement has extended their support to Christian's cause, which has helped the rise of the movement.
In such a short time, they have been able to make a difference. According to this nytimes article, more than 650,000 new accounts have been created at credit unions since Bank of America announced their plan (which they have since dropped) for 5 dollar fees for using debit cards.
Major banks have a legitimate worry in terms of losing customers to small credit users. The Wall Street Journal reports that it costs major banks $350 to $450 to maintain an account, compared to just $175 to $250 for small credit unions. Thus, banks add extra charges to try and recoup their costs. While we may not see a major shift from big banks to credit unions, as banks offer a ton of services (like online banking) that many credit unions do not, it is interesting to see how much momentum the Bank Transfer Day picks up, and whether we will see reform in banking policy over the next few years.
The protest was started by Kristen Christian, who created a Facebook event for yesterday, November 5th, entitled "Bank Transfer Day" as a form of protest against higher bank fees. She urged people to transfer their funds from major banks to local credit unions, and by Friday afternoon more than 78,000 people had joined the cause on the groups Facebook page. The Occupy Wall Street movement has extended their support to Christian's cause, which has helped the rise of the movement.
In such a short time, they have been able to make a difference. According to this nytimes article, more than 650,000 new accounts have been created at credit unions since Bank of America announced their plan (which they have since dropped) for 5 dollar fees for using debit cards.
Major banks have a legitimate worry in terms of losing customers to small credit users. The Wall Street Journal reports that it costs major banks $350 to $450 to maintain an account, compared to just $175 to $250 for small credit unions. Thus, banks add extra charges to try and recoup their costs. While we may not see a major shift from big banks to credit unions, as banks offer a ton of services (like online banking) that many credit unions do not, it is interesting to see how much momentum the Bank Transfer Day picks up, and whether we will see reform in banking policy over the next few years.
Sunday, October 30, 2011
How to Protect Yourself Online
In my last blog posts, I have discussed the fact that there are some risks involved with online banking. Banks do their best to protect their data, as identity theft is clearly not something they want people to associate with their brand, but there are still things that you, as a consumer, can do to help protect yourself online.
Firstly, and it may go without saying, but you should never, under any circumstances, allow your password to be compromised. There are numerous steps you can take to ensure this, but the most essential is to avoid viruses and other software that could monitor keystrokes or steal passwords from being downloaded onto your computer. The best way to do this is to follow these steps, which may seem simplistic but are important (from http://www.techsling.com/2010/09/essential-guide-to-online-banking-protection/):
Firstly, and it may go without saying, but you should never, under any circumstances, allow your password to be compromised. There are numerous steps you can take to ensure this, but the most essential is to avoid viruses and other software that could monitor keystrokes or steal passwords from being downloaded onto your computer. The best way to do this is to follow these steps, which may seem simplistic but are important (from http://www.techsling.com/2010/09/essential-guide-to-online-banking-protection/):
- 1. Keep your firewalls set to the highest level of security possible.
- 2. Ensure that your anti-virus software is operational and up to date.
- 3. Never open an e-mail attachment from people you do not know and scan with anti-virus, if you must.
- 4. Never double-click on an e-mail attachment that ends in .exe as this denotes that the file is an ‘executable’ file which has the potential of harming your computer.
- 5. If you suspect that you are already a victim of an Internet banking scam, contact your bank immediately. Banks will normally reimburse genuine victims of online banking fraud.
In addition, you should make sure you check the e-mail addresses of e-mails you receive from your bank. This blogger has often received e-mails from "banks" asking to "verify account data" only to look at the address and see that the e-mail is clearly not from who they say it is.
An another thing to consider is investing in identity theft protection. Most banks provide it, which gives you another added layer of security in data encryption. It is important to take any extra protection you can get if its an option.
Lastly, and I know this is a subject I've touched on a lot in the last few posts, but in terms of transfers over e-mail and text message it is essential to check who you are sending it to! It is entirely possible to be completely safe using internet transactions, but you have to use some common sense and make protection a priority.
Sunday, October 23, 2011
Mobile Banking
Another similar concept to the rise of online banking is the rise of mobile banking, which allows for people to conduct basic transactions over a cellular phone. Many major US banks, including Bank of America and CitiBank, have mobile banking programs. As stated in this article from identitytheft.com, banks have been making an effort to try and protect their costumers identities over their mobile phones. Account numbers are usually not transmitted over the phone network, nor are they made visible on a bank's mobile site. Similarly, all transactions made over the wireless network are protected by their powerful encryption software. Identity thieves themselves are much more versed in committing their crimes over the internet rather than cellular devices, which is a form of protection in itself. This does not mean that the software is perfect, however. While security is provided, it is considerably less than the security for online banking. Some features, like text message banking, is not even encrypted. And the possibility of texting to the wrong number is very real.
While mobile banking has not revolutionized America, it has had a huge effect on the nation of Kenya. Their software, M-Pesa, is essentially a form of mobile banking which allows Kenyans to use basic banking transactions solely through the mobile phone. The program now has over 14 million registered users, and it's local transactions has actually surpassed the number of global transactions made by Western Union costumers (article). It will be interesting to see if a program that obviously has had major success in less developed nations would be able to be implemented in more advanced American society.
While mobile banking has not revolutionized America, it has had a huge effect on the nation of Kenya. Their software, M-Pesa, is essentially a form of mobile banking which allows Kenyans to use basic banking transactions solely through the mobile phone. The program now has over 14 million registered users, and it's local transactions has actually surpassed the number of global transactions made by Western Union costumers (article). It will be interesting to see if a program that obviously has had major success in less developed nations would be able to be implemented in more advanced American society.
Saturday, October 15, 2011
Online Banking Breakdown--Wells Fargo
Hello all,
Today I am going to use this post to highlight the massive number of online services provided by banks online. As most Stanford students use Wells Fargo, I will be specifically focusing on them.
Online Statements
This is a rather simple one, as basically every bank is providing this service now. The concept is rather basic--account and credit card statements that one would usually receive in the mail are now being sent over e-mail. Banks prefer this method of delivery because it saves them a huge amount of money in printing and mailing costs. Because of this, Wells Fargo has been offering incentives for costumers to switch to paperless statements (as detailed in my last post). This shift, while hardly revolutionary, has lead the way to a number of other paperless advances.
Bill Pay
In the past, paying bills was a bit of a hassle. One had to hand-write checks and mail each one directly to the company to which they owed money. Since most adults have a number of bills to pay each billing period, this naturally has lead to much aggravation and annoyance. Wells Fargo's Bill Pay option is a way of creating a more convenient system of handling all those payments. All one has to do is add the person to whom they owe money (whether it be a credit-card company or just a friend) as a payee. Then, each payment cycle, they just need to type in the amount they owe each payee, set the date of delivery, and click "pay." No paper checks needed. While obviously there are some risks involved in making wire transfers of this nature so easy, it is an incredible advance in banking that has been able to save Wells Fargo costumers tons of time and effort.
Wire Transfers
Online wire transfers are one of the most controversial features of online banking. At first, they worked somewhat similarly to Bill Pay. One would go on the Wells Fargo site, type in the account number they mean to send money to and the other necessary information and send money that way. This year, however, a number of banks including Wells Fargo, JP Morgan Chase and Bank of America have implemented a new program called clearXchange. This advance allows people to transfer money through text or e-mail. All they need to do is type in a person's phone number or e-mail address and the amount they would like to send. The person receiving the transfer would then be lead through steps to accept the money on their end. Immediately, the potential safety hazards of this program become clear. What if someone mistypes the address / number they mean to transfer the money to? The New York Times had the same thought when they heard of the program, and asked the executives how they would deal with this problem:
"bank executives said the potential thief would need to have your online banking user name and password. If someone did manage to break into your online banking account, they could conceivably send your money to their own account. That’s not a new threat though. If a fraud were to occur, the banks said they would refund the person sending the money as soon as possible."
At least to me, this does not seem like the most ringing endorsement of the safety of clearXchange. Time will tell if this program grows in popularity, but to me it seems as though banks are straying too far into the danger zone in terms of online safety. It is one thing to provide a service like Bill Pay, in which the convenience comes with small risk, but a much different story to create clearXchange which has some rather large security risks for the small increase in efficiency it creates.
Today I am going to use this post to highlight the massive number of online services provided by banks online. As most Stanford students use Wells Fargo, I will be specifically focusing on them.
Online Statements
This is a rather simple one, as basically every bank is providing this service now. The concept is rather basic--account and credit card statements that one would usually receive in the mail are now being sent over e-mail. Banks prefer this method of delivery because it saves them a huge amount of money in printing and mailing costs. Because of this, Wells Fargo has been offering incentives for costumers to switch to paperless statements (as detailed in my last post). This shift, while hardly revolutionary, has lead the way to a number of other paperless advances.
Bill Pay
In the past, paying bills was a bit of a hassle. One had to hand-write checks and mail each one directly to the company to which they owed money. Since most adults have a number of bills to pay each billing period, this naturally has lead to much aggravation and annoyance. Wells Fargo's Bill Pay option is a way of creating a more convenient system of handling all those payments. All one has to do is add the person to whom they owe money (whether it be a credit-card company or just a friend) as a payee. Then, each payment cycle, they just need to type in the amount they owe each payee, set the date of delivery, and click "pay." No paper checks needed. While obviously there are some risks involved in making wire transfers of this nature so easy, it is an incredible advance in banking that has been able to save Wells Fargo costumers tons of time and effort.
Wire Transfers
Online wire transfers are one of the most controversial features of online banking. At first, they worked somewhat similarly to Bill Pay. One would go on the Wells Fargo site, type in the account number they mean to send money to and the other necessary information and send money that way. This year, however, a number of banks including Wells Fargo, JP Morgan Chase and Bank of America have implemented a new program called clearXchange. This advance allows people to transfer money through text or e-mail. All they need to do is type in a person's phone number or e-mail address and the amount they would like to send. The person receiving the transfer would then be lead through steps to accept the money on their end. Immediately, the potential safety hazards of this program become clear. What if someone mistypes the address / number they mean to transfer the money to? The New York Times had the same thought when they heard of the program, and asked the executives how they would deal with this problem:
"bank executives said the potential thief would need to have your online banking user name and password. If someone did manage to break into your online banking account, they could conceivably send your money to their own account. That’s not a new threat though. If a fraud were to occur, the banks said they would refund the person sending the money as soon as possible."
At least to me, this does not seem like the most ringing endorsement of the safety of clearXchange. Time will tell if this program grows in popularity, but to me it seems as though banks are straying too far into the danger zone in terms of online safety. It is one thing to provide a service like Bill Pay, in which the convenience comes with small risk, but a much different story to create clearXchange which has some rather large security risks for the small increase in efficiency it creates.
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