Benefits of Online Banking

ABA Survey Suggests Consumers Prefer Convenience
Benefits of Online Banking
Online banking is convenient and secure, and more consumers are turning to it as their primary banking channel, according to a recent survey conducted by the American Bankers Association.

In fact, banks are actually leveraging the online channel to enhance security, by enabling retail customers to keep more watchful eyes on their daily transactional history and account balances, says Nessa Feddis, senior counsel and retail banking expert for the ABA. With real-time account views, consumers are more likely to pick up on things like credit and debit fraud, sooner, and that means reduced risk and limited financial loss.

"The sooner the bank and the customer discover that someone else is using their account ... the sooner the bank will be able to shut it down to stop the fraudster," Feddis says in an interview with's Tracy Kitten [transcript below].

Online banking keeps consumers from waiting for statements to arrive in the mail. "It's a good idea to check your account online every day or so," Feddis says, "not just to prevent identity theft, but to also help budgeting and things like that."

The ABA in August conducted a survey that included responses from more than 2,000 U.S. adults. Results revealed that online banking is the preferred channel for 62 percent of consumers, and that more-and-more older Americans are shifting to the online channel. In 2010, only 36 percent listed online as the preferred channel.

During this interview, Feddis discusses:

  • How banking institutions should leverage the online channel to improve security;
  • Why worries about identity theft have dwindled in recent months;
  • How banks and credit unions can develop their online strategies to enhance retail banking services.

Feddis is vice president and senior counsel to the ABA's Government Relations Division. She focuses on consumer banking, fraud and payment system issues both in the federal legislative and regulatory arenas. Her responsibilities include relaying ABA's position on such issues to Congress and government agencies, as well as educating bankers about new laws and regulations. She has testified before Congress on behalf of the banking industry and in recent years has been involved with regulatory and legislative matters relating to consumer credit, credit and debit cards, privacy, deposit accounts, identity theft, payments systems, emerging electronic payment systems, and credit card and check fraud.

Results from ABA's Survey

TRACY KITTEN: The ABA just released results from this online banking survey conducted in August. The ABA has conducted this survey for several years, but some striking trends emerged this time around. Could you tell our audience what stood out about the survey results this time?

NESSA FEDDIS: What stood out was the enormous increase in the percentage of people over 55 who say they prefer online banking compared to any other banking method. Basically, the number has tripled from about 25 percent to 57 percent.

KITTEN: About 2,000 U.S. consumers participated in this survey from what I understand. How does that total compare with the total number of consumers the ABA has pulled in previous years, and does the demographic break down year-to-year about the same?

FEDDIS: It's about the same number of people and similar demographic background.

Lure of Mobile Banking

KITTEN: What do you attribute this uptick in online adoption rates among older Americans, those of course falling in this 55-and-up category?

FEDDIS: More and more people over 55 are using computers and the Internet for a broadening array of reasons, including social networks. They're more comfortable with technology and the computer, including online banking. This survey reflects that. As well as that, they've discovered how convenient and time-saving online banking is.

KITTEN: Why do you think consumers across the board view the online channel as being more secure perhaps than they have in the past?

FEDDIS: Because in large part it is. Banks have learned to improve. Of course there still are and always will be challenges, because criminals and fraudsters will continue to target banks. It's a dynamic type of crime. It's going to be constantly changing and the banks have to change with it, so they have to stay on-guard and continue to adapt.

ID Theft

KITTEN: One thing that we hear so much about in the industry is identity theft and many times the online channel has been noted as a weak spot, a channel that fraudsters use to prey on the public via phishing attacks. But you've noted that ID theft concerns have dwindled in recent months. Can you tell us a bit about how you've seen ID theft concerns decrease, and why you think ID theft is not quite the worry it was a year ago?

FEDDIS: In large part, I think it's because the banks have improved their systems and will continue to improve their systems. They always have to be concerned about identity theft, because they are usually the ones who suffer the loss for one, but as well as that, they suffer if their customers are dissatisfied and if their reputation is damaged. They have worked to make identity theft as minimal as possible, and as a general matter, consumers are not liable. I think that helps. It also gives of course the banks an incentive to ensure that they protect their customers and themselves. But I think a lot of it has been as a result of a lot of effort, but as I said it remains a constant challenge. ...

KITTEN: Then what should bankers glean from the results of this survey from a fraud and security perspective? With more consumers using the online channel, should institutions be concerned about more security vulnerabilities or opportunities for attack?

FEDDIS: Because of their experience and the fraud prevention systems they have built, the systems are more robust in many respects. They just have to make sure that they continue to learn and adapt to their customers and criminals. In some ways the fact that more people are online actually helps because it's easier to monitor account activity and discover fraud if people are doing online banking.

The Role of Social Media

KITTEN: We often talk about the role social media plays in online vulnerabilities, especially when it comes to older online users. The assumption is that older Americans, who are now using social networks such as Facebook more often, are not quite so savvy when it comes to protecting their personal information, and then of course fraudsters have more access to personal information that could be used to compromise log-in and password credentials for online use. Do you agree with those assumptions, and what should banking institutions be doing to ensure online security as more consumers in this age bracket turn to online banking?

FEDDIS: I don't know that I would agree that older people are less savvy. They tend to be more sensitive to privacy and fraud then young people. Young people tend to have a lot more information ... and not necessarily be aware of how that information can be used. I think that in some ways older people have the advantage. It's important for banks to make sure all of their customers, regardless of age, understand their responsibilities and what they can do to help prevent themselves from being a victim of identity theft.

Benefits of Online Banking

KITTEN: I'm going to go back to a point that you noted earlier, and that's actually that the online channel can offer benefits when it comes to ensuring security because of the real-time access and the views of banking account activity that consumers can gain when they log on to their bank accounts online. You've noted before that catching transactional fraud such as credit and debit card fraud sooner is a way that institutions can help to use the online channel to leverage security. Can you explain this a little bit?

FEDDIS: The sooner the bank and the customer discover that someone else is using their account, for example, the sooner the bank will be able to shut it down to stop the fraudster. Going online instead of waiting for a statement to arrive that might contain unauthorized transactions is much faster. ... It's a good idea to check your account online every day or so, not just to prevent identity theft, but to also help budgeting and things like that. It's the ability to respond more quickly; that's the real key here.

KITTEN: Based on the results that the ABA collected, could you offer any recommendations or are there any thoughts that you can share about what banking institutions should be doing to enhance the online channel and the services they offer to consumers as a way to maybe enhance security or other options that they provide?

FEDDIS: That's probably not something I would comment on in part because the banks don't like to publicize the systems that they're adopting to help prevent identity theft, because as soon as the criminals learn about them - and they are looking to learn about them - the system becomes compromised and it becomes less effective. So in terms of specifics, no we wouldn't be offering any suggestions there.

KITTEN: Sure, that makes sense. And what about ways that they could leverage this online channel to perhaps promote different types of services that might be of interest to these different age brackets?

FEDDIS: Online banking offers banks another channel to make sure that their customers are aware of the different products they have, and knowing that a certain demographic group is particularly interested in online banking and using online banking means that they will be able to maybe tailor certain products to that group. I think that online banking certainly offers banks and those customers the ability to find the product that fits them best.

KITTEN: Before we close, what final thoughts about the survey results generally would you like to leave our audience with?

FEDDIS: The results are striking but I don't think that they're surprising because more and more people in the 55-and-older group are using technology for all sorts of reasons. They are more comfortable which means they are more comfortable with online banking, and they have also discovered how convenient and time saving online banking is.

About the Author

Jeffrey Roman

Jeffrey Roman

News Writer, ISMG

Roman is the former News Writer for Information Security Media Group. Having worked for multiple publications at The College of New Jersey, including the College's newspaper "The Signal" and alumni magazine, Roman has experience in journalism, copy editing and communications.

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