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Online Banking: Security Issues for Online Payment Services

Although online banking has it own advantages, the security issues pertaining to the same are immense. Read on to know more about the security issues for online payment services and the measures taken by the banks to curb them.
WealthHow Staff
Online banking allows customers to conduct financial transactions on a secure website operated by their banks, credit unions, or building societies. Internet banking has grown rapidly using today's computer technology, thereby providing the option of online payment to bypass the time-consuming, traditional banking. As per the survey conducted by the Pew Internet and American Life Project, nearly one-quarter of all adults, and almost half of all Internet users have reported being Internet banking customers. Banks see Internet banking as a value-added customer service and are trying their best to facilitate convenience and speed at low cost.

The Beginning

The concept of online banking, as we know it today, started in the early 1980s. In 1995 the Presidential Savings Bank first announced this facility for regular client use. These days, quite a few banks operate solely via the Internet and have no 'four-walls' entity at all. This advent of the Internet and the popularity of personal computers offered both, an opportunity and a challenge, for the banking industry. Millions of daily transactions are updated using powerful computers by financial institutions across the world. With the accessibility of Internet to common people, banks envision similar economic advantages by adapting those same internal electronic processes to home use.

Advantages

We all know that Internet banking has made life much easier and banking much faster and more pleasant, for customers as well as bankers. One of the many advantages of it is that it is cost-effective and thousands of customers can be dealt with at once. The administrative work gets condensed drastically with Internet banking. Expenditures on bank stationery have gone down, which has helped raise the profit margin of the bank by a huge number. Customers reap the benefit of accessible account information round the clock, regardless of their location. They can reorganize their future payments from their bank account while sitting thousands of miles away. By using online payment services, they can electronically transfer money from their bank accounts or receive money in their bank accounts within seconds. Customers can apply for a loan, can buy or sell stocks, and can even open new accounts.

Security Issues

We all have to agree that the Internet offers safe and convenient new ways to shop for financial services and conduct banking at any point of time. However, security issues have become one of the most important concerns of the banks. Frauds are the main reason why the people or potential customers tend to avoid Internet banking, as they perceive it to be very vulnerable to fraud. It is very important to understand that the security measures employed by most of the banks can never be completely safe and secure. Further, Internet banking becomes less secure if users are careless or computer illiterate. An increasingly popular criminal practice is to gain access to a user's finances is phishing, whereby the user is in some way persuaded to hand over their password(s) to a fraudster.

Steps Taken to Address Security Issues

Some banks require more than a single password authentication before completing a transaction. This is far more secure than the single mode of authentication, which is prevalent today. Usage of security tokens is also becoming more popular and is far more secure than any other method, as it provides a two way authentication facility. Some banks offer enhanced security using digital certificates, which digitally authenticate the transaction by linking the user to a physical device like a computer. Most banks usually use one or more of the above combinations to enhance their security features.

There are a certain tips for online security, which every customer should follow, irrespective of the fact that you have an account with a traditional bank or an online bank that has no physical offices. It is wise to make sure that all transactions are legitimate and that your deposits are federally insured. To verify a bank's insurance status, look for the familiar FDIC logo or the words "Member FDIC" or "FDIC Insured" on the Web site. Also remember that the FDIC does not insures all the banks operating on the Internet. It is important to note that the FDIC protects only deposits offered by FDIC-insured institutions. Keep all your personal information private and secure, and always keep the information, such as where to go for more assistance from banking regulators, handy.

To reiterate, it is vital that the customers never share personal information with anyone, including employees of the bank. To safeguard the confidential information, it is important that documents that contain PIN or password mailers should not be stored; the passwords should be changed immediately and memorized before destroying the mailers. One should also ensure that the logged in session is properly signed out.

Internet banking is wonderful and convenient, only a little precaution is required to avail all its features and to sort out the security issues.