Online banking as safe as, or safer, than face-to-face

  • Posted: Tuesday, January 29, 2013 1:37 a.m.
    UPDATED: Tuesday, January 29, 2013 2:07 a.m.

Now that pervasive Wi-Fi coverage, smartphones and mobile apps allow users to access the Internet just about anywhere, online banking has never been easier or more convenient. Why wait for a monthly statement when you can check your accounts on demand? Why visit your neighborhood branch office when you can transfer funds, open a new account and pay bills with a few keystrokes?

But is it safer? Transforming your relationship with your bank — and your money — into a collection of electrons makes some people nervous. And reports of hackers, identity theft and data breaches amplify these fears. But the reality is that online banking is just as safe, if not safer, than face-to-face banking, so long as both you and your bank take certain precautions.


There are legitimate reasons to be suspicious of online banking. Between 2006 and 2008, the U.S. Bureau of Justice Statistics calculated that almost 12 million Americans were victims of identity theft. In June 2011, Citigroup disclosed a data breach in their credit card operation that affected 210,000 customers. In March 2012, Global Payments, a payment processor, discovered a hacker had accessed millions of credit card users’ account data. In June 2012, the House Financial Services Committee held a hearing to discuss the threat of hackers targeting the bank accounts of small and mid-sized businesses. And in October 2012, TD Bank notified 260,000 customers of a security breach stemming from a misplaced backup data tape.

Thankfully, banks employ several measures to keep their customers’ data secure. First, most online banks use 128-bit encryption algorithms and require customers to use browsers with 128-bit encryption. 128-bit encryption is the most powerful currently available, so powerful that the U.S. government forbids its sale overseas. Encryption may also make online banking safer than face-to-face banking because encryption scrambles data. Face-to-face banking, in contrast, often generates receipts and records that can be read by anyone if found or stolen.

Second, the Financial Services Modernization Act of 1999 requires banks 1) to regularly provide customers with a privacy notice outlining what information the bank gathers and how it is used and shared, 2) to develop a written information security plan that describes how the bank will protect customers’ information and 3) to implement safeguards to protect customers from scams and hackers.

There are also several steps you as a customer can take to prevent the theft of your information. First, change your passwords often, and pick robust passwords that contain letters, numbers and symbols. Do not reuse passwords from other sites, and do not use common phrases like “password” or names and birthdays of family members.

Second, avoid emails that appear to be from your bank but ask you to update your password or to open a seemingly safe attachment. Banks will never email you to do either of these things.

Third, shred or safely store your banking paperwork. Even better, switch to paperless accounts if offered by your online bank. Not only is this better for the environment, but it is also more secure as it reduces the changes of someone stealing your account information.

Fourth, online banking makes it easy to check your account, so do so regularly and look for fraudulent activity. If you believe you are the victim of fraud, contact your bank immediately. You will likely not face any penalty, and you should get all your money back.

But even if you take every opportunity to protect your information, vulnerabilities exist at other points. Thieves can attach “skimmers” to ATMs that steal your card information. Hackers love targeting payment processors like Global Payments because they handle millions of transactions every day. Even networks like Gmail and the Play Station Network have been hacked in order to harvest users’ nonpublic information.

Banking online is like any other online activity: there are certain risks, but they can be minimized. Instead of fearing the risks of online banking, protect yourself against them. So long as you undertake certain precautions, online banking can be just as, if not more, secure than face-to-face banking. When improved security is combined with improved convenience, it is no wonder why many customers are switching to online banking.

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