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Not Your Mother's Videotex: High-Tech Banking Takes Off

hightechAs the industrial revolution transformed life in the late 19th century, the Internet revolution is changing our lives in the early 21st century. Can't remember the lyrics of a song? Find them and the song writer instantly on Google. Need to travel to DC? Compare discount airfares on discount travel sites, then book the cheapest flight online.

Not only does the public have a universe of information at our fingertips, but we also can conduct many routine transactions—including banking and payments—from our computers or even in the grocery store on mobile phones.

High-tech banking has come a long way. In 1981, four banks began offering home banking systems using an electronic device called a "videotex." Online banking did not catch on in earnest until the mid-nineties, when home computing became common. Today, online banking is the preferred method. As of 2011, 62 percent of adults prefer online banking to any other mode, according to a survey from the American Bankers Association. The survey also found:

  • Fifty-seven percent of banking customers 55 and older prefer online banking to visiting a physical branch or an ATM.
  • Only 1 percent of all adults prefer mobile banking, or banking using a mobile device, like a smartphone, with an app from the bank. Even among younger adults, only 4 percent said they prefer mobile banking to other modes.

Online banking
Below are some of the options online banking offers:

Pay bills online. Most banks allow customers to pay all their bills from the bank website. At the bank's bill payment site, you enter the name, address and account numbers of billers, such as:

  • Credit card companies
  • Auto lenders
  • Utility companies
  • Mortgage companies

You can also:

  • Schedule automatic payments, such as a mortgage payment
  • Schedule automatic e-mail payment reminders
  • View electronic versions of bills
  • Download transactions to banking software

Apply for a loan. Apply for a loan online. Some banks offer lower interest rates for loans they grant through their website, especially if the borrower agrees to automatic debits for payback.

Transfer funds. You can transfer funds between accounts. This requires some setup, especially if you are transferring between accounts not at the same financial institution.

Manage credit cards. Pay your bills, review purchases, notify your bank of lost or stolen cards, and so on.

Manage insurance policies. Set up or review homeowners'or auto insurance policies, and even modify coverage. You can also report claims and download identification cards.

Mobile banking
Some banks offer smartphone apps you can use to do all your banking. Although the American Bankers Association survey indicates that mobile banking does not have nearly the appeal of online banking, it still offers convenience. To deposit a check, for example, you use the app with your smartphone's camera to take pictures of the check (which you then destroy).

Pros and cons of high-tech banking
Advantages

  • It's convenient, accessible all day, every day wherever Internet or cellular service is available.
  • It's cheap—you save on gas and postage.
  • You can monitor transactions in real time rather than waiting for a monthly bank statement.
  • You can immediately report lost or stolen debit and credit cards, and detect and report suspicious activity.

Disadvantages

  • Online/mobile: If the bank has no physical presence, you must research it to ensure the bank is legitimate.
  • Online/mobile: Your sensitive financial information is all in one place, which is a security concern. Do more research to ensure the bank adequately protects your data and finances.
  • Online/mobile: Ensure that the bank offers all the functionality you need.
  • Online/mobile: If the bank exists in cyberspace only, you cannot drive to it if Internet or cell phone service is down.
  • Online/mobile: You must be comfortable with the technology.
  • Online/mobile: You must have Internet access or cellular service, which can be spotty.
  • Online/mobile: You probably won't get the level of customer service you get from a teller.
  • Mobile only: Requires a smartphone and an app from the bank.
  • Mobile only: Data plans can be expensive.

October 5, 2012