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The Financial Evolution of Online Banking

It may be surprising to know that online banking first came around at the start of the 1980s, but when online banking first came, it had little popularity and was barely being used until the late 1980s. During those times, online banking had a completely different meaning that it does today. Online banking referred to the act of accessing bank accounts using a landline phone and looking at banking information at either a terminal, television screen, or computer monitor. Of course, we all know that the process of online banking takes place in an entirely different technological way.

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Brief History of Online Banking

New York City was the first city in the United States to try out the new way of banking. In 1981, a few major banks in New York City began using online banking as a part of their banking system to help better serve current bank members. The banks were Citibank, Chemical and Manufacturers Hanover, and Chase Manhattan. Because the banking customers did not really understand the functions of online banking, the new way did not gain popularity as expected and quickly failed. It was not until the mid 90s when online banking took off.

In the year 1994, Stanford Federal Credit Union was the first institution to provide online banking as an alternative to traditional banking. Soon after, many banks followed, and online banking officially became the new way of starting bank accounts and maintaining them instead of going to a traditional bank. Today, online banking is so popular that there are banking institutions that only offer online banking.

Use of Online Banking

According to a survey done by the Federal Reserve Bank in 2012, almost 70% of individuals in America claimed to have used online banking in the last year in comparison to just over 30% claiming to have used telephone banking. These figures encouraged further research on online banking, and the following research concluded that

  • 30% of online bankers were between 30 and 44 years old; 20% were 60 years old or older.
  • 73% of online bankers were Caucasian, 12% were Hispanic, and 8% were African American.
  • The numbers between genders were equal.
  • Those who make more than $100,000 a year are more likely to use online banking than those who make less than $25,000 a year.
  • 39% of online bankers have a college degree.

Protecting Your Online Bank Account

Because of the growing popularity of online banking, there is an important push to make sure that online bank accounts are and stay secured. With such frequent technological advances, it is easy for an online hacker to attempt at accessing important bank documentation through the internet. This is why online banks take extra precautions to make sure that online banking is a safe way for individuals to manage their funds.

Online banks use encryption programs to ensure the security of bank accounts. One of those technologies is the Secure Socket Layer, or the SSL. This technology uses ways to verify all activities taking place on the account, provides the safety of the account by using certain safety features, and frequently warns customers of any possible threats to their accounts and ways to avoid those threats.

There are also other financial institutions that take certain measures to ensure the protection of online banking. One, being the FDIC, always urges consumers to do all of the following:

  • Be mindful of the possibilities of websites aimed at fraudulent activity. Some sites are created to look like online banking sites in an effort to steal banking information and access your money.
  • Conduct research on online banks before you decide to open an account. Make sure that the bank you choose is a trusted bank. Look for contact information if you prefer to contact the bank before starting an account. The more answers you can get for your questions, the more comfortable you will feel with your selection.
  • Make sure that the online bank is insured under FDIC. FDIC adds that extra security onto your online bank account.
  • Make sure to keep all of your financial information in a safe place. Do not store account usernames and passwords in a place where others can access it. Refrain from using online banking on public computers. If you must, make sure to get rid of your information when done.
  • Be educated on all of your rights when it comes to online banking. If you suspect foul play, contact your bank or the FDIC immediately.

Online banking is still becoming a popular trend as an alternative to traditional banking. Essentially, it is easier and less time consuming to take care of banking matters online instead of rushing to the bank before closing hours and taking a chance on being stuck in a long bank line for hours. But be aware that online banking can be a bit tricky if you are not aware of what you are doing. Make sure that you are certain of online banking and the way the process works before you open an online banking account.