The Pros (and Cons) of Internet-Only Banking
The result? Internet banking. In fact, some banks have staked their entire reputation on the web and offered customers Internet-only banking. Is this a wise move? How does it help, or hinder, you? Let's look at these questions in-depth and examine some pros and cons of Internet-only banking.
Advantages of Internet-Only Banking
Cost-Savings Passed To Customers
How often do you visit your branch? With Internet-Only banks not having the overheads involved in maintaining a physical presence in your town or city, they can pass those cost savings across to you; the customer. So, what does this mean for you? Lower loan rates and higher savings and deposit rates. This is one of the big benefits of Internet-only banking. "But, how do I withdraw money?" I hear you ask. Well, this can still be done from any ATM.
Paper Statements Are Available On Demand
Look back across your life - can you remember how many times you've needed to access a paper bank statement? If you've ever had any type of credit the odds are that you have used a paper statement as proof of income or savings. But wasn't it tedious waiting for the bank to mail you a statement?
Fortunately, you can now get your much needed paper work on demand. By cutting out the middleman (the cashier) and printing off you statements at home you have almost instantaneous access to your banking information.
Instant Visibility of Your Financial Health
‘How much money do I have available to spend?’, ‘What do my monthly outgoings look like?’ or ‘Can I really afford a holiday this year?’ - these are the sort of questions most people find themselves wondering on a regular basis. Not so long ago, providing an answer involved going to your bank, ordering statements and then using a pen and paper to work out how healthy your finances really were.
Online banking changed all of this faster than you can say, ‘Damn, I’m broke!’. Whilst access to your banking data is pretty much the norm, most banks have gone one step further and now provide you with a selection of tools that give a graphical depiction of your spending history.
Access To All Banking Facilities From Your Armchair
This boils down to convenience. Traditionally, banks required customers to deal with certain issues and requests over the counter. This allowed banks to keep a tight rein on security and put new offers, loans and deals directly in front of the customer (because, after all, we know how ineffective most mail marketing campaigns are, right?)
Internet only banking has changed this whole business model. Sure, some people still like to have the personal touch involved in their financial dealings. But, more and more, their hectic lifestyles are fuelling a demand for Internet-based banking activities. Ordering a cheque book, raising your overdraft limit and applying for loans can now all be done from the comfort of your armchair.
Real-Time Account Alerts
A few years ago, the first you knew that you’d breached your overdraft limit was when a plain, white envelope landed in your mailbox. Accompanied by a penalty charge. Not a nice feeling for anyone, we know. It’s not that we’re all spendthrifts - sometimes we just have a bad month. But, with an arcane method of banking based on customers visiting their local branch, all but the most iron-willed eventually lose track of their finances.
Real-time alerting solved this problem almost overnight. With minimal effort, it’s now possible to set alerts for just about every financial eventuality you could ever think of. Want a warning when you’re close to your overdraft limit? Simple - set up an email alert. Interested about how much money gets spent using debit cards? No problem - the bank will send a text direct to your phone.
Paying Your Bills Online
Remember the bad old days when online payments were simply the twinkle in an application developer's eye? Debit cards were touted as the revolution that would signal the end of having to carry cold, hard cash in your pocket. This meant that your payment mechanism was incredibly secure - unless you wrote your pin number on a post-it note and stuck it to the back of your card!
But online payments have managed to fill this gap as well. This is one of the real plus points of Internet only banking. Sure, pretty much all of the banks have online payment facilities but do you want to go back to the bad old days of filling in reams of paperwork every time you want something done? I guess not, which make this argument fairly moot. The bottom line is this: Internet only means exactly that and it also leaves you free from the normal headaches you associate with the big high street banks.
So, that's four advantages of moving your bank account away from the tired old system that's been in place for hundreds of years. Does it all seem a bit too good to be true? Of course it does. You see, like anything in life, there are always negative aspects to consider. Let's take a look at some of the most obvious points
Disadvantages of Internet-Only Banking
Do you still receive checks for payment? Without a local branch to visit, banking checks can be an inconvenient process. You'll need to post them off in the mail. So, if you're hoping to get quick access to the money, be aware that the whole clearing process may take significantly longer.
There Will Always Be Security Concerns
When you think about security what's the first thing that comes to mind? Did you lock the doors before going to bed? Would it be better to put the parcel in the trunk of your car rather than simply leaving it on the back seat? How difficult would it be for someone to break into your bank, steal all the money and bankrupt you? That last question doesn't really apply to you, does it? After all, Internet banks don't have physical premises being spied on by cunning thieves, right?
Yes, this is very true, but there are other security concerns that put customers off. After all, we live in the age of the world wide web. A dangerous place filled with hackers and crackers who are attempting to steal your information at every turn. It's fair to say that most banks have incredibly complex security mechanisms to prevent such a thing happening. But, ultimately, we are the weakest link in the chain. Or, to put it another way, hands up who has their online account details 'disguised' as a person's name and telephone number? See how easy it is to steal your details?
No Access To All Banking Facilities From Your Arm Chair
As we noted earlier, ease of access from pretty much anywhere in the world is a big plus point for Internet banks. Our busy lives have made it harder and harder to deal with the everyday, tangible stuff that simply must be done. Even a 10 minute detour to drop a direct debit form to your local branch can turn into a 45 minute journey from hell when you hit the rush hour traffic. Thank heavens for Internet access. Unless, of course...
...your internet connection dies! Sure, most of the time that's not a major issue. You simply get up and go somewhere else where the web is working. But, although that proves universal access works, it's still an inconvenience which is what you were trying to get away from. Have you considered what you would do in the event of your bank's website going down? Scary thought if your only access to you account is via the web.
Your Clunky Computer Might Not Be Up To The Job
Do you remember the excitement that coursed through your body when you unpacked your brand new computer? The hours spent assembling all the components (a job that normally takes on minutes but ended up taking what seemed like an age because, like me, you, 'don't need an instruction manual'). Can you recall regaling your friends with tales of how the digital love of your life opens websites in the blink of an eye? But that was 5 years ago.
Technology, both in your computer and on the web, moves on. Sorry, it doesn't move on - it accelerates into the distance at mind boggling speed which few home computer users can ever dream of keeping up with. Now the once pristine companion you welcomed into your life with a fanfare that would rock the heavens sits in the corner; dusty, unloved and slowly failing. Is it any wonder you get tired of waiting for two minutes as your computer tries to load the login page of your Internet bank?
You Don't Speak 'Bankese'
A long time ago, human beings evolved a clever mechanism that allowed to communicate basic commands, warnings and stuff needed to stop them from being eaten by very large, hungry predators. Many, many years later this series of grunts and clicks became something far more complex - the power of human speech. As social animals, the ability to communicate complex ideas and principles has ensured we dominate the planet. But have you ever tried to read a bank's legal documentation? It's mind numbing.
If you're using an Internet only bank you only have two options - wade through swathes of non-sensical words and phrases that will paralyse you with boredom or pick up the phone. If you choose the latter option, expect to either be put on hold for some time or be transferred from department to department as the operator tries to work out what you want (even though you really did select the right options on your phone's keypad). Sticking with a bank that has a physical branch means you have access to staff who don't speak some arcane banking language that was born in the dark ages and they can give you the answers you need instantly.
Do You Know Who I Am?
There is, of course, also the personal aspect of banking. Perhaps you remember the days of being able to visit your branch and speak to your bank manager - someone who knew you - to get help with solving your problem? Those days have gone, replaced by minimal staff numbers, super-efficient services and staff who can't wait to suggest you go online for assistance or to apply for the service you require. With Internet-only banking it's even worse. If you have a problem then you can't visit your local branch - you have to rely on telephone service and online help. You're no longer a person, you're simply a number.
Pros and cons of Internet-only banking. Which route are you going to take?
Written by James Redden
Additional by Alastair Hazell
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Last update: 23 June 2013
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