Some of the best interest rates are offered by online banks, but how did this come to be?
The practice of online banking actually began in the 1980s, although the concept didn’t take off until the mid-90s, as the internet truly took flight with consumers signing up for internet connection.
As Americans increased their internet use, the advantages of banking online became more apparent in consumers’ day-to-day interactions with their financial institutions.
The History of Online Banking
In October 1995, the Presidential Savings Bank became the first bank in America to offer accounts over the internet. In the next few years, other well-known banks followed suit, like Wells Fargo and Chase Manhattan Bank, now known as JPMorgan Chase Bank. Today, virtually every financial institution in America — whether it be a national bank or local credit union — offers some component of online banking to its service list.
Online Banking Sparks Security Concerns
Initially, consumers distrusted the idea of conducting sensitive financial transactions over the internet. The online market wasn’t entirely prepared to protect consumers’ privacy and security from the onset, giving rise to hacker threats over sensitive account information. This fear is what kept a lot of bank customers from adopting the practice of online banking.
However, as the internet and online banking products developed, a more sophisticated standardization of payment processing and heightened online bank security gave consumers the assurance they needed.
Online banking and online bank account management grew in popularity. It was originally estimated that 55 million American families would be doing their banking online by 2010, and the numbers continue to grow. The Pew “Internet & American Life Project Tracking Survey” found that 61 percent of adult internet users bank online.
Benefits of Online Banking
The advantages of online banking predominantly fall into the convenience category. Unlike conventional banking, online banking allows consumers to easily access basic account information, like transaction histories and checking account balances, from the convenience of their home computers.
Another benefit of banking online is the ability to pay bills online, and even set up automatic online bill-pay that reduces the risk of missing a payment and incurring late fees. But the benefits of online banking and online banks don’t stop there.
Consumers also have the ability to view and receive paperless statements, easily make online transfers to accounts at other banks and even receive email alerts when their account reaches a low balance or logs suspicious activity.
Due to the fact that overhead costs are low, online banks are often able to offer customers the best interest rates on certificates of deposit, money market accounts and savings accounts, adding the perk of higher returns for depositors.
These features are just some of the advantages that many customers find attractive about online banking. With online banking, consumers have a more accessible relationship with their financial institution and can be as involved, or hands-off, with their financial accounts as they see fit.