How secure is online banking?

Sam Jackson

May 18, 2010

November 13, 2018

How secure is online banking?

It's perfectly natural to be cautious about online banking, as you're dealing with your own savings. We have all heard rumours and stories on TV about cyber-thieves stealing credit card numbers and identities. In reality, however, online banking is just as secure as going into your local branch, and is certainly more secure than the media would have us believe. In fact, online banking may be even safer than traditional banking.

Traditional Banking vs. Online Banking

It's not immediately obvious, but traditional banking exposes you to several security threats. Your incoming mail containing your bills and bank statements can be intercepted or wrongly delivered. When you use the ATM, you are vulnerable to physical theft and, more subtly, information theft, if someone is able to read your details or see you type your PIN code. Your details can also be accessed by bank employees. When you pay your bills with a cheque, your name, your account number, and the address of your bank are usually printed on the paper cheque, opening you up for identity fraud.

These threats can be avoided, or perhaps even totally eliminated, with online banking. Financial transactions are made in the comfort and security of your home or office. Moreover, banks are well aware that online customers are hesitant, so security is their highest priority.

Online Banking Security Measures

Although single password protection is the most common security method for a lot of web pages, banks do not consider password authentication alone to be secure enough for the sensitivity of this information. Online banks, therefore use a more intricate system to protect their clients (and ultimately, themselves), involving several layers of security measures. These measures vary according to the choice of the bank. Here are some methods commonly employed by online banks:

The https Protocol: HTTPS is a URI (Uniform Resource Identifier) scheme that is used to identify a secure HTTP connection making use of data encryption. Encryption means converting the plain text data into codes before transmitting it. Encryption is an excellent process for preventing hackers from accessing personal information through data interception. TANs: Transaction authentication numbers, or TANS, are passwords that are intended for a single session only. Banks using this measure include the Deutsche Bank, the Philippine National Bank, and the Asian Development Bank (ADB). Security Tokens: Some banks issue security tokens to their customers. These tokens dynamically change the numbers customers need to enter for each transaction. Online banks using this measure include the Bank of Ireland, the Commonwealth Bank of Australia, the National Bank of Dubai, the Bank of Queensland and the Montgomery Bank. IC Cards (Integrated Circuit Cards): Also known as chip cards or smart cards, provide an easy means to conduct business transactions in a standard, secure manner with minimal human interaction. The cards are unique to each customer. Chip cards contain encrypted digital certificates along with other important information about the holder. Combined with biometrics, chip cards provide an authentication system with two to three factors. The Industrial and Commercial Bank of China (ICBC), the Hong Kong and Shanghai Banking Corporation (HSBC), the Qatar National Bank, the Royal Bank of Canada (RBC), the Standard Bank, and the Barclays Bank use the chip card system. Digital Certification: Digital certificates allow you to digitally authenticate your transactions by linking them to a physical device such as a personal computer or a mobile phone. Digital certificates are being used by Barclays Bank, HSBC, the China Merchants Bank, the Bank of Montreal, the Bank of the West and many others. Personal finance softwareis also a good way of managing your finances online, as you have access to the transactional data, but can't make any changes. So if a third party is able to gain access, they still can't take your money.

Every online bank or Internet bank will have their own security policies and procedures listed prominently on their website. You can read through them before making a decision about which bank to trust. If you have further questions about their methods, send them a message and they will provide you with more details.

Sam Jackson

Money Dashboard

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