Explore online banks concept, safety, legit banks, & cybersecurity for safer transactions & personal protection.
The landscape of banking has rapidly evolved in recent years, with online banks taking centre stage in the financial world. In Australia, the rise of digital banking has provided a convenient and flexible way to manage your finances.
Let’s look into the general concept and workings of an online bank, explore the purported safety of transacting with them, and provide insights into identifying legitimate online banks and enhancing personal cybersecurity.
How Online Banks Work
Online banks, also known as digital banks or internet banks, are financial institutions that operate exclusively or primarily through online channels. These banks offer a range of services similar to traditional brick-and-mortar banks, including savings accounts, checking accounts, loans, and investment options. However, they leverage technology to provide these services entirely or predominantly through websites and mobile apps.
- Online Account Opening. Customers can open an account with an online bank by visiting their website or using their mobile app. The process usually involves identity verification and other security measures.
- Remote Access. Once an account is opened, customers can access their accounts, manage transactions, and perform various banking activities remotely via the internet or mobile apps.
- Customer Support. Online banks often provide customer support through online chat, email, or phone, reducing the need for in-person visits.
- ATM and Branch Access. Many online banks have partnerships with ATMs or provide fee-free access to a network of ATMs. However, they often do not have physical branches.
The Safety of Transacting with Online Banks
Online banks have gained popularity for several reasons, including convenience, lower fees, and competitive interest rates. However, potential customers often question the safety of entrusting their money to these banks. Here’s why online banks are generally considered safe.
Regulation and Deposit Insurance
In Australia, online banks are regulated by the Australian Prudential Regulation Authority (APRA) just like traditional banks. They must adhere to the same regulatory standards, which include capital adequacy requirements and risk management.
Additionally, customer deposits with online banks are protected by the Financial Claims Scheme (FCS), a government guarantee that covers deposits of up to $250,000 per account holder. This provides a safety net in the unlikely event of a bank’s insolvency.
Encryption and Security Protocols
Online banks invest heavily in state-of-the-art security measures to protect their customers’ data and funds. This includes robust encryption techniques, firewalls, multi-factor authentication, and continuous monitoring for suspicious activities.
Compliance with Industry Standards
Online banks must comply with industry standards and best practices for cybersecurity and data protection. They undergo regular security audits to ensure they are meeting these standards.
Security Education and Alerts
Online banks often provide educational resources and alerts to help customers recognise and respond to potential security threats. They encourage customers to maintain good cybersecurity practices.
Identifying Legitimate Online Banks
While the safety of online banks is generally well-regarded, it’s essential to be cautious and ensure you’re dealing with a legitimate institution. Here are some tips to identify legitimate online banks:
- Check Regulatory Approval. Ensure that the online bank is regulated by APRA and holds the necessary licences to operate in Australia, especially ASIC and ABN credentials.
- Research the Bank. Do a background check on the bank, including its history, customer reviews, and its presence in the financial industry.
- Verify Contact Information. Make sure the bank provides clear and accurate contact information, including a physical address, phone number, and email.
- Read the Terms and Conditions. Carefully review the bank’s terms and conditions, including their privacy policy, to understand how your data and funds are protected.
- Confirm Deposit Insurance. Verify that the bank’s deposits are covered by the FCS, ensuring your funds are protected up to $250,000.
Personal Cybersecurity Measures
Enhancing your personal cybersecurity is essential when using online banking services. Here are some measures to consider:
- Strong Passwords. Employ intricate, distinct passwords for your online banking credentials and update them frequently.
- Multi-Factor Authentication (MFA). Even if you have a password protecting your account, ACMA has mandated that all banks set up a multi-factor authentication (MFA) system to add an extra layer of security. If you enter your password, the system will send you a one-time code by email or text message for you to enter at the next prompt.
- Secure Network. Use a secure and private network for online banking, avoiding public Wi-Fi networks. Subscribing to a VPN service may add to the protection, and most of all, enact anti-theft measures to protect your devices.
- Regular Monitoring. Review your account statements regularly to spot any unauthorised transactions.
- Beware of Phishing. Exercise caution when clicking on links or divulging personal details in response to emails or messages. Some phishing activities go as far as having scammers make impersonation calls to the depositor.
Online Banks vs. Neobanks
It’s important to distinguish between online banks and neobanks. While both are digital banking institutions, they have distinct characteristics.
Online banks are often associated with traditional financial institutions that provide online services alongside their physical branches, under supervision by the same government financial bodies that oversee traditional banks. They may sport a wider range of financial products and services, including loans, insurance, and investment opportunities. They will have a longer history and more established presence in the financial industry.
Neobanks, meanwhile, operate exclusively online and have no physical branches. They often focus on core banking products like savings accounts and payment services, and are possibly independent of traditional banks or partner with them for certain services. They are usually startups with a disruptive approach to banking and customer-centric innovations.
Conclusion
Online banks have become a secure and convenient way to manage your finances in Australia. They are regulated, provide robust security measures, and offer the same deposit insurance protection as traditional banks. While ensuring the legitimacy of an online bank is crucial, adopting good personal cybersecurity practices further enhances the safety of your online banking experience. As the world of banking continues to evolve, online banks offer a promising avenue for those who value the convenience and efficiency of digital financial services.
DISCLAIMER: This article is for informational purposes only and is not meant to be considered official financial advice. QUICKLE is not connected with any online bank or government finance body. It does not endorse or disparage online banking as a finance practice.
