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The black-and-white picture shows a television set the size of a suitcase. The keyboard next to it looks like a cross between an electric typewriter and a label printer. The woman who operates it is almost an arms-length away and touches a key with one finger as though she fears being sucked into the machine like Tron. It’s around 1981 and the article in Digital Deli describes how Chemical Bank has released Pronto, America’s first home banking service. Within two months of launch, the $20 million of development costs had been rewarded with no fewer than… 500 users in the New York area . The bank was hoping to add another 2,000 before the year was out.
In addition to Chemical Bank, Chase Manhattan, Citibank and Manufacturers Hanover also produced home banking systems in the early eighties. The services offered by those early platforms were basic but they covered most of the functions that a bank’s customers might need. The screens displayed balances and cash flows. Users of Chase Manhattan’s Paymaster system could make payments, review cash, and they could call the bank if they got stuck. Chemical planned to add portfolio analysis and “teleshopping” to its list of services. Citibank tried to make the $10 monthly fee it charged users worthwhile by including a Dow Jones News/Retrieval Service, content that had previously cost as much $160 a month.
In those pre-World Wide Web days, the service was delivered using videotex, a very simple network. But videotex only took off in France in the form of Minitel. In the United States, the system soon faded away, and took those early online banking systems with it.
The rise of the World Wide Web in the mid- and late nineties, together with the merging of banks (and their customer databases), gave the idea of home banking a new lease of life. Now it was possible to deliver banking services through a system that people were starting to bring into their homes anyway. Customers no longer needed to buy special equipment. The banks weren’t charging $10 a month and they didn’t need to spend $20 million to create a website. By the turn of the millennium, as the dotcom bubble was about to burst, almost all US banks were offering ebanking in one form or another.
But while the changes in technology meant that take-up was faster than it had been in the eighties, growth in the use of ebanking was still slow. Customers weren’t yet used to the idea of trusting their credit card details to a website and they worried about accessing financial details on a computer system. According to a 2009 Federal Reserve Bulletin, just 7 percent of US households used online banking in 1998. Three years later, as Internet users grew accustomed to placing orders on Ebay and Amazon, the numbers had risen to 21 percent but even in 2006 only around half of US households were banking online. The most popular services offered the simplest of functions: monitoring accounts, transferring funds between accounts, and paying bills. Just 11 percent of online bankers in 2006 were using bank websites to apply for loans.
By 2009, usage had improved substantially. Eighty percent of US households with Internet access said that they were banking online, a total of nearly 72.5 million households. The types of customers who were using online banking services had changed too. Once the preserve of the young and the educated, nearly half of the people logging into their online bank accounts at the end of the millennium’s first decade were aged between 35 and 54, and nearly a quarter were older than 55.
Banking customers used to lining up and talking to a teller were now getting into the habit of sitting at their computer and using a website to check their accounts and the pay their bills. With that change in habits rose a new form of bank: a financial institution that had no local branches and no bricks and mortar stores at all. Brands like EQ Bank and BankMobile were launched to serve retail customers exclusively online.
The next big change in ebanking came with the rise of smartphones. Now bank customers didn’t even need to sit in front of their desktops to manage their bank accounts. They could open their iPhones or their Samsung Galaxies and perform all of their banking needs through a dedicated app. The 2015 Federal Reserve report found that 39 percent of all mobile phone owners and 52 percent of smartphone owners with a bank account had used mobile banking in the previous twelve months. Mostly they’re using those apps to keep an eye on their balances and recent transactions but also to transfer funds and receive notifications. Just over half of mobile banking users have deposited a check using their mobile phones, and 22 percent had used their phones to make a mobile payment.
A process that had started as a dedicated machine targeted at high-end business users has become one function on a device owned by more than two-thirds of the population.
The benefits to banks of that shift are clear.
Why Banks Love Ebanking… And So Do Customers
In 2015, JPMorgan Chase closed 142 branches and laid off 10,000 employees. Citigroup shaved the number of its branches by 13 percent over the year. Bank of America went from 4,947 branches to 4,741 while installing 2.5 percent more ATMs… and reducing its workforce by 7 percent.
That was a lot of shrinkage, caused at least in part by low interest rates that have weighed heavily on banks’ ability to generate profits. But the rise of online banking has given banks an easy way to cut costs. According to Brian Moynihan, Bank of America’s CEO, a mobile transaction costs just 10 percent of the cost of a transaction that takes place in a branch. Together with JPMorgan and Wells Fargo, Bank of America reported double digit growth rates in the number of mobile banking users in 2015. At the same time, its operating expenses fell by 4 percent.
For banks, the rise of online banking is an opportunity that has come at exactly the right time. Just as they were looking for ways to reduce overheads and slim their workforces, they’ve been presented with a tool that enables them to close branches without sacrificing the quality of their services.
That last point is critical. Cutting services, particularly the frontline services when members of staff meet customers, usually results in lower customer satisfaction. But in February 2016, America’s six largest banks had higher customer service rankings than their smaller rivals. Much of that satisfaction came from younger customers, the type most likely to engage with new technology. American Banker, an industry website, put the high marks largely down to the rise of ebanking. “The results… suggest that the big banks are reaping measurable benefits from their considerable spending on consumer-facing technology,” the publication said.
For those young customers used to shopping with their mobile phones and sending small payments to each other with apps like Venmo, the idea of driving down to a bank and waiting in line to carry out a transaction sounds as outdated as buying a bag of beans in a village market. They’re able to check their accounts, track transactions, deposit checks and perform a host of other functions at a time they choose and in the comfort of their own homes. Online banking is both familiar and convenient.
In this report, we’re going to look closely at ebanks and ebanking . We’ll examine what you can with an ebank, review the risks of ebanking and explain how to reduce them, and we’ll talk a little too about the future of ebanks.
The most remarkable aspect of ebanking isn’t just its convenience: the ability to handle most of an individual or a business’s banking services from the comfort of their home. It’s also the range of those services. A system that started as little more than the ability to monitor accounts and review transactions has now morphed into an entire bank branch located on a single website or mobile app.
In this chapter, we’re going to look at the services offered on ebanking platforms and reveal some of the lesser known resources available through ebanking. The functions can be divided roughly into the non-transactional, and the transactional.
The simplest services, and the ones you’re likely to use the most often, are non-transactional. These largely involve monitoring your account, making sure that you don’t accidentally fall into overdraft and checking to see whether the check you’ve deposited has cleared or the money you were promised has been paid. They include viewing account balances and checking recent transactions.
Those services might be simple and clear, but they’re also important. There are no official figures that show the number of people who balance their checkbooks every month, but a survey of 2,500 people on Statisticbrain.com found that 69 percent of people now say they never do it, 10 percent say they do it rarely, and just 21 percent say they sit with their outgoings and incomings on a regular basis. It’s no surprise that more and more banks have phased out paper reconciliation forms entirely from their paper statements.
For most people balancing a checkbook is something their parents did, like smoking and driving a stick.
Let’s say you want to know how your account is sitting right now, and what happened to your balance after you paid for your meal. That basic account monitoring function is now essential.
But ebanking services can take that monitoring function even further. Ebanks might also allow for the downloading of bank statements, often in PDF format, and more importantly the ability to see images of paid checks, a way of seeing exactly where funds come from that is remarkably smooth and easy.
Users can also order new checkbooks online, stop the payment of checks, activate a debit card and order a replacement card, and even dispute a transaction on a debit card (a move that often results in the immediate suspension of the card, so take care before using it).
In short, the non-transactional functions available on ebanking platforms, the services that don’t require any movement of funds, might be simple but they’re also essential. They’re the functions that you’re likely to find yourself using the most. The ability to access your balance, your available balance and your statement history in real time, any time and anywhere is a benefit that we take for granted. It’s only available as a result of the advances in ebanking services.
Transactional ebanking services move money from one account to another. That can happen in a number of ways and for a number of different reasons, not all of them obvious.
One common use is to transfer funds between a customer’s linked accounts. Using nothing more than your mobile device, you can open a savings account and arrange for regular transfers to that account, giving yourself an automatic savings plan and creating a nest egg for the future. It’s a function that can take just minutes but can have lifelong effects.
You can also set up Bill Pay, one of the most featured functions of an ebanking platform. Instead of putting a check in the post, customers can pay bills that range from mortgage and cell phone demands to dentistry fees and babysitters. According to a 2015 survey by the Federal Reserve, 65 percent of mobile phone users have used their smartphones to pay a bill. But those customers aren’t necessarily paying their bills on the bank’s website or app. Bill payments made on ebanking platforms actually declined from 38 percent of bills paid online to 30 percent from 2010 to 2013. One reason, according to The Financial Brand, is that to pay bills from a bank, customers have to enter the recipient’s account details; pay the bill on the recipient’s website and that unfamiliar information is already present. They can also see exactly what they’re paying for.
Using an ebank to pay a bill then might not be as attractive as it sounds but ebanks have a couple more tricks up their sleeve: they allow customers to set up automatic payments for recurring bills such as college fees or utility bills; and they also let customers send funds directly from their account to the account of another individual, even an individual who banks at a different institution and sometimes using nothing more than their email address or telephone number.
One of the biggest challenges faced by anyone trying to manage their finances though is understanding what to do with their surplus. While people might know vaguely about stocks and bonds, they’re usually well into adulthood before they have an opportunity to put that basic knowledge to the test. The result is that they find that they lack even the simplest financial knowledge. The average results for all ages groups tested for the National Financial Capability Test is just 62.4 percent. That might sound low but a typical question on the test asked customers how much money they would have after 70 years if they invested $100 at age 21 and earned 7% a year. The answer choices were:
Only 27.9 percent of 8,411 test subjects correctly calculated that compound interest would give them more than $1.5 million over 70 years, and it took them more than a minute to figure it out.
So the ability for an ebank to guide people out of their current account monitoring through savings account and into an investment account that helps them manage their capital is particularly useful, and banks are exploiting the opportunity online. Customers using Bank of America’s online banking site can open an account with Merrill Lynch and start dabbling in stocks and bonds. They can create virtual accounts before they move any of their own savings and they can spend time gaining an understanding of how the stock exchange works, what to buy and when to sell.
That ability to move from a struggling saver to an investor may well be the most important part of an online bank. While it’s something that only becomes useful when you have the money to take advantage of it, it may well be the part of an ebank that brings the most financial security.
And banks, of course, are in the business of lending money, so it’s no surprise that an ebank also provides ways for customers to apply for a credit card and with a little more effort to apply for a personal loan too. They can enquire about overdraft limits (and, more importantly, set up warnings before they reach those limits), apply for a mortgage and track their mortgage payments and mortgage balance.
That range of functions, both transactional and non-transactional, from account monitoring to loan applications, bill paying and financial management, cover most of the banking services that the majority of bank customers need. They’re all available now on a browser or on an app, and they’re the functions that customers tend to turn to the most. But buried in the menus and navigation bars of an ebank’s website are a bunch of other functions that are no less useful… even if they’re largely ignored.
Usually, when you visit a bank’s website or open the bank’s app, you have a particular goal in mind: to make sure your salary was paid; to find out whether your check cleared; to make sure you still have a positive balance. So you miss many of the other functions that are rarely used and hidden away on the site or the app. Not all of those functions will be useful. If you’re salaried, you might not be too interested in any of the services offered specifically to small businesses, and if you’re already loaded up with credit cards, additional plastic might well be the last thing you need.
But dig around on an ebank website in particular, and you can find some real treasures. Here are seven of them.
Hardly anyone balances their checkbook any more but ebanking provides far more details about an account than a simple list of incomings and outgoings. Ebanking websites often have report sections that contrast monthly expenditures and monthly incomes, and also break them down by category. You can see how much you’re spending on food and utilities, on insurance and on rent or mortgage payments.
The results are often surprising. Once you’ve set up automated payments for life insurance and mortgage insurance and car insurance and household insurance it’s easy to lose track of the amounts you’re paying each month. When you do a weekly shop, then head back to the grocery store to buy more beer and top up the cookie jar it’s easy to overlook those additional outlays. When you decide to order another pizza instead of making a sandwich, it’s easy to forget that treat. Bringing up a report on a bank’s website will show you exactly how much you’re spending on each of those “treats” each month. You’ll be able to see how those expenses vary over previous months… and you’ll be able to pick the right places to start making savings.
If you’re shocked by the amount you’re spending on insurance each month, you can head back to insurance marketplaces and shop around for better offers. If you’re stunned by the amount you’re spending on restaurants, you might decide to cook more and order less.
Those reports give you the information you need to gain control over your finances and make smarter decisions.
Few of us really want to think about our bank accounts until we really need them. And by that time, it’s often too late. You present your debit card at the gas station, only to find you’ve reached your overdraft limit. Or you get a call from a service provider who tells you that your check bounced because you didn’t monitor your balance.
Ebanking platforms often include flexible alert systems that can keep you informed even when you’re not thinking about your finances. They can tell you when you get close to your overdraft limit, send you weekly SMS messages containing your current balance and email you monthly analysis of your investment portfolio. Instead of managing your finances whenever you remember, alerts force the bank to keep you informed of the state of your money and make sure that you don’t spend more than you should. They make financial awareness a part of your daily routine.
The ability to set up automatic payments is simple enough when you have recurring bills to pay, but that function can have another use: you can also set up an automated payment plan to manage your savings. Set aside a certain percentage of your salary and move it each month into a savings plan. You’ll ace the financial test that most people fail, and you’ll make the most of the power of compound interest. You might not be able to earn 7% over 70 years but you will be able to build a nest egg that you can crack open when you need a deposit on a home… or a round the world plane ticket.
Those automated payments buried on an ebanking platform will keep the lights on but they can also really help you go places.
There’s only one thing more painful than managing your finances, and that’s filling in your tax returns. A number of banking platforms have functions that help to make that easier by integrating your bank account with your accounting software. Quicken, for example, can download bank account data to help prepare your tax forms. That might sound a fairly arcane feature but anything that can cut time off your tax returns is worth its weight in… well, tax returns.
The unconscious filtering that lets you surf the Web without being distracted by banner ads and pop-ups also comes into play on banking websites. Banks push their offers on their home pages and customers brush past them on the way to the password field and their balance. So banks push their offers harder. Sometimes they add irritating interstitials between sign-in and statement, but sometimes they also improve their offers, promising super-low interest rates on loans and incentives for opening new accounts.
In October 2016, for example, visitors to Bank of America’s website would have seen a “$100 online bonus offer” that gave 1% cash back on every purchase, 2% at grocery stores and wholesale clubs, and 3% on gas up to $2,500 per quarter. Customers would need to read the offer’s small print carefully and make sure that the offer wasn’t costing them more in the long run. But if it fitted their spending patterns, they could have found themselves saving as much as $10,000 a year… but only if they saw the offer. That would only have happened if they had scrolled down the page; while the log in fields are in the top left corner of the website’s home page, the offer was at the bottom, below the fold.
Banks do place special offers on their ebanking platforms. It’s worth keeping an eye out for them and assessing whether they’re worth accepting.
You pay to use a bank. You pay to cash checks, to use a bank card, to access the mobile app… even when it’s “free”. You don’t get a bill every time you do it. But you still pay. You just don’t notice because those fees occur occasionally as single line items on your bank account. You probably have no idea how much you’re paying in effect for your savings account or your checking account. But you can find out.
On every ebanking platform is a link, buried in one of the menus, that lists your rates and your fees. You should certainly check them if you overdraw, but you should also check them even if you don’t. Also, you can compare those fees with the amounts charged by other banks. Sometimes, if you have plenty of money in the bank, you can call up your bank manager and negotiate. You won’t be able to do that online. However,before you can try to do it at all, you’ll need to know exactly how much you’re paying.
Customers who use ebanking platforms tend to use the same set of features: account tracking, bill paying, and money transfers. But ebanking platforms can be flexible and sometimes provide features that can be very beneficial. Many of those features though, carry risks. In the next chapter, we’ll look closely at the possible dangers of using ebanking platforms.
The Internet has brought banks into every home. Smartphones have put them in everyone’s pockets. Previous institutions with guards and cameras now has millions of separate entrance points. It stores information on customers in servers protected by little more than passwords and firewalls. That’s a huge convenience for thieves. Nowadays criminals just have to figure out how to hack into a website or app and make a transfer. The same processes that has saved banks money has also made life easier for a new, smart kind of criminal. In this chapter, we’re going to look at the biggest risks of ebanking and explain how to reduce them.
In 2014, Guardian Analytics, a security firm that specializes in identifying suspicious behavior in bank accounts, tracked a number of attacks made against its customers. The targets were “hundreds of retail clients and a smaller number of commercial accounts at fifty or more banks and credit unions of all sizes”. That wasn’t new. One estimate has put the value of online banking fraud at nearly $7 billion by 2020. What stood out in Guardian Analytics’ discovery, however, was how the attacks were launched.
The fraudster would enter a username then press the Forgotten Password button challenge. The bank’s website would ask a challenge question which the fraudster could answer before resetting the password. If the bank sent a confirmation email, the fraudster might hack the email account and attempt to intercept the message but usually they could change the password and access the account without receiving the confirmation.
Once the fraudsters were inside the account, they didn’t try to transfer funds or steal cash online. Instead, they looked for information such as the account summary, the bill pay history and check images. They then used that information to attempt offline fraud, asking for transfers through the call center, and check fraud.
What was remarkable about that attempt at online banking fraud was the vulnerability of the system. The fraudsters might have had some of the account holder’s personal information but they might just as easily have been able to guess the answers to security questions that gave them access to passwords.
Other fraudsters tend to be more sophisticated. Three men in the UK were sent to jail for up to eleven years for stealing £113m from 750+ victims. The gang would receive account details from corrupt bank employees but they would also cold call victims. They said they were the bank’s fraud department, and would persuade victims to give away their banking details. Only £47m of the stolen funds have been recovered.
The act of hacking online bank accounts tends to be much simpler. Hackers might send out millions of phishing emails that appear to come from banks. When the user clicks a link to log in to their account, they’re sent to a page that looks official. However, it’s actually their own page that will capture their username and password. The success rate might be tiny, but the numbers of emails is high. Fraudsters don’t need high numbers of victims to make the efforts worth their while. Some viruses too, are capable of recording key strokes, including those used to log into a bank account.
When the main way into an online account consists of nothing more than a username and password. The gateway will always show a certain amount of vulnerability.
While hacking into an online bank account is possible for a sophisticated fraudster, the protections are also relatively simple.
The easiest advice is never to click a link in an email to reach a banking site’s log in page.
Even if you believe the email does come from the bank, it’s worth opening your browser and accessing the website directly instead of through a link. Similarly, banks won’t call and ask for your access details; they already possess those details. If a bank calls you and asks for personal information, hang up and call back. If you’re accessing the bank, you can be confident that you’re talking to the bank and not an impostor.
You should also make sure that your anti-virus software is installed and up to date so that it squishes any viruses that make it through email filters before they can do any harm. Don’t access your online bank account details while using a public network such as a café’s wifi; apart from the ability of passers-by to look over your shoulder and see all of your personal financial details, open wifi transmissions can be intercepted and the data stolen. The chances of that happening might be small, but it is worth remembering that a public place is not the right location to look at information as confidential as your bank account.
You should also make sure that you log out of your ebank account as soon as you’ve finished using it. Although most ebanking websites will time users out automatically, those minutes may be all a fraudster needs to access your account—and it’s too easy to forget that closing a tab is not the same as logging out.
Finally, over the last few years, ebanks have tried to improve the accessibility of their websites, sometimes at the expense of security. Bank Of America, for example, used to demand three fields of confidential information as well as a passcode before granting access. Those demands have since been reduced. You may find that the password requirements at your online bank are now less onerous than those demanded to see your cellphone bill. Passwords might not require capital letters, have a minimum limit on character numbers or require non-alphanumeric characters. That makes it easy to use the kind of pet names or nicknames that are easy to remember… and very easy for a hacker to either guess or learn. A better solution is to use a unique password for your online bank account and keep it stored in an encrypted form.
Some fraudsters pose as bank employees in order to obtain personal details but it’s often easier to pose as someone else. In March 2016, The Guardian newspaper wrote about a couple in the UK who had hired a contractor to build an extension to their home. In October the previous year, the contractor had sent the couple an invoice for £27,829. The invoice carried the company’s logo and listed its bank details.
A few days later, the couple received a second message from the same employee, informing them that the company had changed its bank and needed to update the payment details. That invoice too carried the company’s logo. The couple transferred £25,000, the most they could transfer in a single day… then received a third message from the contractor reminding them that the amount was still outstanding. The second email had been fake.
The most likely explanation, the newspaper said, was that either the building company or the couple’s email had been hacked, allowing the thief to intercept their messages and take over the conversation. When the couple looked again at the fraudulent email they noticed that the company’s name in the return email address included the word “developments” instead of “development.” One letter was the only difference between the attempt at fraud and the genuine message.
The money was immediately withdrawn, and as neither the couple’s bank nor the receiving bank were victims of fraud, neither bank was able to return the funds.
Incidents like these are rare and are the result of weaknesses in email security rather than in banking security. Whenever you receive payment details on an invoice, confirm that those details are coming from a company that you expect to pay, and pay attention to any discrepancy in the documentation. A single letter might just be the difference between a genuine payment demand and a fraudulent request.
What’s true of the link between convenience and vulnerability in online banking is even more true for mobile banking. Around 70 million smartphones are lost each year. With people accessing their bank accounts through dedicated apps on their phones, those lost and stolen devices give fraudsters an easy entryway to the owner’s finances. From the app alone they can see where the telephone owner banks. A quick trawl through the phone’s Facebook app will reveal the owner’s date of birth and perhaps the name of their pet or their children’s dates of birth, all of which make for likely passwords.
The browser might even use autocomplete to fill in the password fields on the bank’s mobile website. A mobile phone is such a treasury of personal information that to thieves, it’s like someone leaving the key to their front door on a café table.
We take the convenience of carrying a mobile phone for granted and we think too lightly of the possibility that a device worth nearly a thousand dollars could be stolen or left somewhere. We should remember just how much personal information it contains and make sure that that information is protected.
Fortunately, even if the owners of 70 million mobile devices a year underestimate the chances that they might lose their phones, the manufacturers of those devices understand the risks. They provide plenty of tools to make it hard for their phones to be used once taken or found. The lock page passcode or thumb recognition reader might be an irritation when you just want to pick up your phone and sneak a quick look at Facebook but they’re worth using. If someone does take your phone, the only thing they should be doing is trying to get in touch with you to return it.
That passcode will provide a strong barrier against someone accessing your phone’s bank details. But you should also be sure only to access your bank account using the bank’s app, not the website. Don’t autocomplete passwords or store unencrypted passwords on a file that can be easily found and read. And as soon as you lose your phone, log on to your bank account and change the password.
Before the days of online banking, customers had few choices about where they banked. There might be just two or three different banks in their town. They chose the one where they opened an account to deposit their allowance when they were kids. eBanking hasn’t just opened up the choice of banks for customers no longer limited by geography. It’s opened the choice to any bank anywhere. Let’s say a bank in Sweden is offering higher interest rates and is willing to accept foreign funds. That means you can skip your local bank and stash you cash across the sea. You’ll still have to pay your taxes. However, you’ll be able to benefit from higher interest rates in economies around the world.
But with those extra choices come extra complications. In the run up to the financial crisis of 2008, interest rates in Iceland reached 15 percent. Savers looking at low rates in their own countries sent their savings to Icelandic ebanks they found online… only to see their savings vanish when the banks collapsed. Had they kept their funds in banks in their own countries, they would have benefitted from local laws. In Iceland they had far less protection. National governments stepped in to protect their citizens’ funds. However, the event showed one of the dangers of putting money in an ebank that might be in a foreign jurisdiction and about which customers know very little.
Having a wide choice of ebanks in which to store your funds is a benefit of the rise of ebanking. But with that benefit comes responsibility. When customers are considering a bank with which they’re not familiar, they have to do the research. They need to know which laws govern the bank and what sort of customer protections they can enjoy. Collapses are rare but you should know what would happen to your money if the bank disappears.
Every time you move money from one place to another, you’re always taking a financial risk. The rise of online banking has increased that risk by offering additional entry points to bank accounts and by moving the responsibility of guarding those entry points to customers.
While banks have always needed to rely on security guards and cameras to protect the money they hold, it’s now also up to customers to safeguard passwords and restrict access to their accounts. That’s a serious responsibility, but it’s not an onerous one. Some simple precautions are all it takes to keep an online bank account safe.
Ebanking has come a long way since the early days of dedicated terminals and limited subscription services. From devices that took up desk space to programs that take up pixels in a folder on a mobile phone, it’s now become easier than ever for everyone to access and control their finances. But the development never stops. Ebanking continues to develop and grow, finding new ways to serve customers and make online financial management easier than ever. Today we’ll explore some important developments you can expect to see in the future of online banking.
The biggest battle will always be over security. As ebanks add new safeguards, fraudsters will continue to look for ways around them. They’ll release new viruses that exploit weaknesses in firewalls, push through back doors and hack servers designed to protect data. In September 2016 Yahoo had been the victim of the biggest hack ever revealed. The personal information of 500 million email accounts were in the hands of international criminals. Some of those passwords would also have been used on banking websites. Also, not all of those account holders would have responded by rushing to their online bank accounts and changing them.
With each new announcement of personal information compromised by a hack, the risk rises and ebanks and their security firms respond by putting up a new layer of security—and new ways to implement that security.
At the end of 2015, for example, researchers began rolling out GOTPass, an authentication system that swaps passwords for image selection. Users select a username then draw a shape on a pattern lock screen. The system displays 30 images covering four random themes and the user selects one image for each theme.
When the user logs in, they enter their username and lockscreen pattern then have to identify two of their selected images from a page of decoy images, entering a code associated with the pictures. The researchers found that the images were easy to remember but the random shuffling, limited tries and change of image codes meant that of 690 attempts to hack, only eight were successful.
Even if you don’t find GOTPass or a variant of image-based authentication at the gateway to your account, expect ebanks to continue to look for more varied ways of ensuring security.
If the Internet has changed the way we live, the rise of mobile devices has changed the Internet. Some institutions saw the change coming and got ahead of it. For example, Facebook which now receives more than half its traffic on smartphones and tablets, survived and thrived. Companies, like Microsoft, that were slow to adapt soon found themselves struggling and losing dominance.
Banking institutions have largely embraced digital banking, but only up to a point. The apps produced by ebanks provide all of the services you might expect. Customers can review balances, order credit cards, pay bills and even deposit checks, all of which make up the most popular functions of an ebank. But there is more that they can do and as banks experiment with different options, we can expect to see other banks follow suit. Simple, for example, is an ebank with no physical branches that has put some extra thought into the services offered by its mobile app.
In addition to all of the usual features, the app also makes saving easy by allowing to customers to set a goal and put aside funds until they reach it. So they could create a label for “Trip to Bahamas” and tell the app to reserve $20 a day until they needed to buy the ticket. An amount at the top of the screen indicates how much is available to spend that month, taking into account other savings plans such as for rent or bills.
The result is a banking app that doesn’t just provide access to funds; it also provides for the kind of daily budget management that’s so essential… and with which so many people struggle.
The ebanking services currently provided by apps may also integrate with other commonly used apps. Users of WeChat, China’s main social networking application, have long been able to do much more than share cat videos and photograph their food. They can also pay bills, send money to friends, buy tickets, take out loans and even make investments. For China, the integration of social media with ebanking is complete. Mark Zuckerberg has certainly noticed. He’s already introduced P2P payments, a service which will rival Venmo and Snapchat’s payment service than any ebanking app. Whether that initial foray into ebanking spreads into a more integrated banking service will depend on whether the banks want to pull people away from their own apps, and whether users trust sites like Facebook with their financial information.
In a 2015 financial services report, Bain, a consultancy, argued that banks should focus on six goals when developing apps: design; simplification; communication through chat and video at any time; rapid development of new features; personalization; and “organizational agility.”
Not all of those features are likely to find their way into banking apps, and not all of them will be noticed by users. It’s always much easier for startups to rush out new app features than it is for apps created by banking institutions that have multiple departments to please and need multiple executives to sign off. But it is likely that we’ll see improvements to design and greater personalization, whether that comes through integration with social media platforms or the smarter use of the data banks already possess about their customers.
One of the most significant development in ebanking in recent years hasn’t come from the banks themselves. It’s come from start-ups like Venmo, now owned by Paypal, which enabled the immediate transfer of small sums between friends. This is a process that has since been copied by Snapchat and Facebook among others. It’s also been copied on payment platforms like Due.
It’s a feature that really should have been led by the banks. They’ve been in the business of transferring funds for far longer than upstarts like Venmo and Due. However, they were slow off the mark. Other platforms with user lists were able to use those demographics to set up processes to move money between contacts.
Some ebanks have now caught up. Bank of America’s website, for example, lets customers send money to their contacts using nothing more than email address. This is a big step-up from the IBAN, routing and bank account numbers usually required to transfer funds. On the bank’s website, that facility is buried instead of being placed front and center like on digital payment platforms.
As more people use peer-to-peer payments, expect banks to bring that function forward and make it more prominent.
Banks face a challenge when it comes to developing ebanking services. They’re financial institutions, not tech start ups. Their ebanking apps might be built by contractors or teams with weak linkage to finance departments and banking customers. The digital functionality is often a supplementary service for a bank rather than a reason for the company’s existence. That makes development slower than it should be and innovation less sharp than it might be.
But banks know they have to keep up. They might not lead but they have their customers’ finances and their customers’ trust. As long as customers continue to use banking apps, expect to see banks seek to secure and refine them.
Ebanking may well be the most important development to hit banks since the check book and the credit card. A financial saving for banks and a huge convenience for customers, the ability to manage finances at any time and in any place, without waiting in line or losing hours in a branch has been a huge benefit for both sides.
Banks are already offering a range of essential services. Some are expanding that range to include savings plans and budgeting tools that make yesterday’s checkbook balancing look archaic. Those features will continue to grow. It’s possible that Facebook and social media apps will never have the same level of financial integration as China’s WeChat. WeChat has fewer competitors and easier co-operation. However, we can all expect payment transfers to become easier, security to become tighter, and services to become more personalized.
We can also expect that however much security improves and customers become better at safeguarding their accounts, there will always be risks. As long as passwords have to be remembered and hackers can break their way into servers and email accounts, robbing an ebank will be no harder than holding up a bank branch. Mobile ebanking may even make it a great deal easier.
In this report we looked at where ebanking has come from, what it offers, the risks it contains and the directions it might take in the future. However ebanking does develop, expect to see more banks making it an integral part of their customer service… and more customers seeing it as the best way to get the banking services they want.
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