Introduction to Online and Mobile Banking

Jeanne Lee
By Jeanne Lee 

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Technology is reshaping how consumers take care of finances. Online banking is now the top way Americans interact with a bank or credit union, beating out branches, phones, mobile apps and ATMs.

Online banking was favored by 32% of bank customers surveyed in 2015 by the American Banking Association. And when a 2015 Gallup poll asked bank customers whether they would rather give up mobile and online banking or personal access to branches and call centers, 53% said they’d give up the personal touch.

Advantages of online banking

Back in the day, bankers' hours limited people's ability to manage their money. Now, 74% of customers use online banking, according to the Federal Reserve, and can securely access their accounts day or night.

When you log in to your secure account from your computer or tablet, you can see current account statements, search through old ones and review recent transactions. You can transfer money between accounts, manage and pay your bills and more. Some banks let you view multiple accounts, including credit cards, all in one place.

Online banking can also help you keep closer tabs on your money. For example, you can sign up to get low-balance alerts by email or text, to reduce your risk of overdrafts and fees. If you opt for e-statements only, your institution may waive certain account fees since it's saving the cost of printing and mailing paper statements.

Online-only banks

Some banks have gone branchless. With few or no branches to staff and maintain, online-only banks like Ally and Synchrony pass some of their savings along to customers in the form of higher interest rates and lower fee structures. Some online banks pay interest rates of 1% or more on savings accounts, compared with the overall average rate of 0.06% that banks offer.

Since there are no branches, you make deposits via direct deposits, bank transfers or mobile check deposits. Some online banks offer sizable free ATM networks and may reimburse you for fees incurred at another bank’s ATM. If high yield is a priority for you and you’re comfortable conducting most of your business online — and never going to a branch — an online bank could be a good choice.

Mobile banking makes gains

Rarely used just five years ago, mobile banking is now the preferred method for 12% of bank customers, according to the banking association. By connecting to banks through their mobile phones, consumers can get a real-time feed of balance information and notifications. In the past year, according to the Federal Reserve, 63% of mobile banking users checked their balance before making a large purchase — and 53% of those decided against the purchase based on that information.

The fastest-growing use of mobile banking, though, is depositing checks with a cell phone camera, which can save the time and gas money that a trip to a branch or ATM would take. Transferring money between accounts and setting up bill payments are also popular features.

Mobile-focused banks: next generation options

For those who live by their smartphones, a new generation of startups offers cost-effective, basic bank accounts designed to be used primarily through an app. Some are aimed at users who don't have a traditional bank account or who rely on alternative financial services.

Unlike traditional banks, mobile banking startups like Simple, GoBank and Moven offer limited accounts that you can use on the go. If you’re a digital native or a tech early adopter, you might enjoy offerings like budgeting and savings tools that are meant to deepen your engagement with your finances.

Another draw is that these pared-down financial services don’t have many traditional bank charges like monthly maintenance fees and overdraft fees. Some are designed to deny a transaction if you don’t have enough money, rather than let you pay for something and then ding you with a high fee.

Most mobile-only banks are owned or backed by FDIC-member banks. That means your deposits would be fully insured by the government, as with a traditional bank.

Digital banking security

Financial institutions and consumers are acutely aware of cybersecurity following a spate of data breaches affecting large banks. The banking industry invests heavily in the security technology for both online and mobile banking, and your account information is kept behind institutional firewalls and encrypted to strong standards.

Though identity fraud does happen, consumers typically are not liable for fraudulent transactions if they report the transactions to their financial institution within 60 days of receiving their monthly statement.

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