While a national study says there appears to be some reluctance to do banking on line, it also suggests that within the next several years the number of people doing Internet banking will increase four to six-fold. Recent findings by the Office of the Comptroller of the Currency also note that among the many concerns that people have with online banking is the privacy issue. Is it safe to submit your personal financial information on the World Wide Web?
John Hall, senior public relations manager for the American Bankers Association said it is very safe. And one of the reasons, he said it is so safe is the amount of money and time these banks have put into their privacy policies.
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”Banks have been criticized for being too slow to put up fully capable Internet sites,” he said, “and there’s good reason for that. They are the stewards of your money.”
And even those banks that might have rushed to get on the Internet initially are becoming more secure. The OCC found that in the third quarter of 1999, more than four-fifths of the 1,100 transactional Internet banks included a privacy policy statement on their Web sites. This represents a 60 percent increase from the end of 1998, with larger banks more likely to post privacy policies than smaller banks.
The study found that 100 percent of the largest banks included on their Web sites a statement about the collection and use of customer information, and almost all banks over $1 billion in asset size did so, as compared to 75 percent of the smallest banks.
”The banking industry is certainly taking it very seriously,” Hall said.
One example of the seriousness with which the industry is approaching the practice of online banking is the Federal Deposit Insurance Corporation’s “Reporting Suspicious Internet Banking Sites” program. There, on the FDIC’s Web site, a user can type in information about organizations that he or she thinks are misrepresenting themselves as legitimately chartered, or federally insured, depository institutions.
David Barr, a spokesman for the FDIC recommended that consumers look into prospective banks on their own before filling out the Suspicious Internet Banking Site form.
Among his tips for weeding out possible hoaxes:
Although Internet banks have less operating expenses than traditional banks, if the rates that the bank quotes on deposits are significantly high, that should raise a warning flag.
Use the FDIC Institutions search engine to determine whether the entity you are questioning is a chartered, FDIC-insured depository institution. Commercial banks and savings associations, generally, must be chartered by either the federal government or a state government to legally solicit retail deposits in the United States. Additionally, practically all legally chartered depository institutions are members of the Federal Deposit Insurance Corporation. The FDIC only insures the deposits of FDIC-member banks and saving associations and insures those deposits up to $100,000.
If there is no street address or telephone number on the site, one should be suspicious.
Beware of odd looking Web addresses. In most cases, a legitimate bank will have a www prefix, the company name, and the dot com suffix. If the bank’s uniform resource locator includes more information than that, such as www.freenet/bankname.com, be cautious.
If all of these things check out, said Barr, and the consumer is still suspicious, the FDIC should be contacted.
Whether it be for privacy reasons or not, relatively few households have found a compelling reason to switch to online banking. However, the Internet holds much greater potential for providing banking services to businesses.
Hall spoke of the fewer than 20 banks which are solely Web-based organizations. He said these branchless banks are going after a niche market of high tech consumers who are very rate-sensitive.
”When there are no brick and mortar investments,” he said, “they are able to pass on savings in the way of offering better rates on deposits and loans.”
Barr said these are exactly the types of banks of which consumers should beware.
”Any time you’re giving somebody money, you should know whom you’re dealing with, especially with an entity that doesn’t have a presence in your neighborhood,” he said, “It’s easier to throw up an Internet site than a brick and mortar operation.”
