What Are the Benefits of Online Banking?
The history of online banking or internet banking dates back to the 1980’s. Granted, the internet did not exist the way it does now, but the idea of allowing people to manage their financial transactions over electronic media caught on. Financial institutions experimented with various types of home banking in the ‘80s but it wasn’t until the internet boom of the mid 1990s that online banking became more mainstream.
It started with community banks and cooperative banks. Their goal was to provide financial services that would benefit their members and in turn, would benefit the institutions themselves by enlarging their customer base. Forty years ago the concept of making banking more convenient started taking advantage of modern technology, and convenience is still one of the biggest internet banking benefits.
This article is going to cover internet banking advantages and disadvantages so you can have a better idea of how this service works.
Advantages of Online Banking
For any service to survive, it has to continuously innovate and offer new benefits that people desire. Online banking has been evolving for decades now and has accumulated a variety of advantages along the way. Most of these can be split into two broad categories — convenience and financial savings.
Online banking gives you the ability to manage your finances, do online transactions, check your balance, or send a payment almost instantly. Most of the things that can be done at a physical bank can now be done online, via secure websites on a computer or secure applications on a mobile device with a strong internet connection. Banking doesn’t have to be an ordeal, making time in the middle of the week during business hours to run to a physical location can be a thing of the past. Whether making a transaction or paying bills, account holders are able to do a variety of different services from the convenience of their mobile device or computer.
- Access your account at any time – At any time of day wherever you are, with just a few clicks you can login to your bank or credit unions secure website.
- View account summaries, bank statements, and other financial documents – Whether you’re a business owner who wants to analyze your financial statements or a student who wants to manage your budget, instantly being able to check your account gives you more control over your finances.
- Pay bills – Manage all your bill payments from one source and track payments. Setup payees once and choose that profile anytime you need to pay again. Take a picture of a check on your phone and use the bank’s app to make deposits.
- Immediate fund transfers – You can instantly transfer funds from any registered account, giving you the freedom to put your money exactly where you want. Transferring funds between different banks online takes a little longer but is still more convenient than traditional banking.
- Update personal information – Changing addresses, contact information, etc. has never been easier. All of it can be done through online banking.
Internet banking benefits don’t just apply to members and customers. Online banking can reduce overhead costs and those savings can be passed on.
- Lower fees – Without the need to pay for rent, utilities, and other overhead, most online credit unions can charge lower fees than brick and mortar banks. You can gain access to free online checking accounts, IRA’s, and other financial instruments.
- High rates – Low overhead also means that online credit unions can offer higher interest rates.
Disadvantages of Online Banking
There are enormous internet banking advantages, but there are some disadvantages as well.
Online security is an ongoing challenge that has existed since the dawn of the internet. Most people were wary of making financial transactions online in the late 1990’s, but e-commerce led by giants like Amazon and eBay quickly made online payments essential. By the year 2000, 80% of American banks offered internet banking and over the next few years more and more people started taking advantage of it.
According to FDIC, today, over 65% of Americans use online banking. Data hacks and breaches are a pertinent concern, but over the years financial institutions have developed more thorough ways of being secure and redressing security breaches.
- The Importance of Automatic Notifications – Setting up automatic notifications can help you notice any suspicious activity. Make sure your computer’s antivirus software is up to date, and if possible, learn all you can about your credit unions’ online security protocols.
The Human Factor
Internet banking may be convenient, but there are some issues that are best solved by talking to a person face to face rather than over the phone (or via a frequently asked questions section).
There are purely online banks with no physical location and there are banks and credit unions that offer a physical presence in tandem with online banking. Credit unions have members rather than customers or clients, so they might be the best for your online banking needs if you prefer a human touch as well as all the advantages that come with digital.
Some knowledge about the internet would be beneficial. Secure banking websites can become a little complex and experience with web navigation can ensure that you explore all the services your credit union provides. Setting up accounts and downloading apps might seem daunting, but these processes are generally quite intuitive and many financial institutions provide video tutorials on how to open accounts on their websites.
Institutions like us here at Mission Fed will help handhold during these processes to ensure everything is streamlined and integrated to its fullest capacity!
Some online banks that don’t have physical locations may have certain drawbacks, so make sure you do your research and choose the most optimal option (for your specific situation). They include but are not limited to:
- Depositing checks
- Limited ATM networks
- International transactions
- Lack of comprehensive financial services like brokerage accounts
- Special services for loyal or high-value customers
A Final Word
Online banking has both advantages and disadvantages; an online bank might give you the best interest rates and the lowest fees, but lack familiarity and complex financial instruments.
In today’s world, convenience reigns king, and online banking offers this above all. Thus, it’s up to you to decide whether or not you want to move your banking exclusively to digital. Here at Mission Fed, we offer the best of both worlds!
The content provided consists of opinions and ideas and should be used for informational purposes only. Mission Federal Credit Union disclaims any liability for decisions you make based on the information provided. References to any specific commercial products, processes, or services, or the use of any trade, firm, or corporation name in this article does not constitute endorsement, control or warranty by Mission Federal Credit Union.
FDIC. 2017 FDIC National Survey of Unbanked and Underbanked Households. https://www.fdic.gov/householdsurvey/
LPL Financial. History of Online Banking: How Internet Banking went Mainstream. http://www.neville-associates.com/blog/history-online-banking-how-internet-banking-went-mainstream