What Are the Benefits of Online Banking?

Introduction

Once upon a time, in a land far, far away, people took care of their financial matters in a building called a bank. They would come from all across the land to stand in line waiting for a bank teller to invite them to a window. There they would hand over pieces of paper along with a paper passbook to print out a record of the transaction. Or they would ask to retrieve some paper bills and subtract the total from their bank balance.

It was a much slower world back then, with lots of waiting and lots of paper. Things needed to be manually recorded (on paper), manually requested (through paper), or manually retrieved (as … yes, paper).

These days, technology allows us to do a lot of things that we could only dream of in the past. Or, well, we probably didn’t dream about it much, because we didn’t know it would be possible in the future.

But now it is possible, and many people work at jobs, get paid regularly, manage their savings, and pay their bills without ever setting foot inside a physical bank. How? Through the power of online banking.

What Is Online Banking?

Online banking is the act of using a website or mobile app to conduct financial transactions or view account activity over the internet. Nearly all financial institutions offer some type of online banking, whether it’s account access through a website, a mobile app, or both.

This advancement in technology allows people to do almost every type of service that’s available at the local branch of a brick-and-mortar bank. You can pay bills remotely, monitor your balances, send and receive money electronically, make transfers, and even deposit a check.

The only exceptions are opening certain types of accounts or changing important information, like your name. These things sometimes (but not always) require you to go in and meet with a banker. Oh, and withdrawing cash, of course. Technology still doesn’t allow us to send paper money over the internet. Hey, we’re still waiting for flying cars too, so that’s OK!

Beyond the online banking services available from physical banks, there’s also a growing number of virtual banks that don’t have any branches. Some of them even have more desirable terms — like higher annual percentage yields (APYs) on savings accounts — since they have a lower overhead than brick-and-mortar outlets.

How Online Banking Works

Regardless of whether you’re dealing with a traditional bank that offers online banking services, or a virtual bank that only exists online, a lot of the processes are going to be the same.

Online account opening

First things first — you need an account to use online banking. Luckily, all virtual banks and many physical banks let you open a bank account online in just a few minutes by submitting your information digitally.

To set up checking or savings accounts online, you’ll need to supply your name, date of birth, phone number, email, home address, Social Security number, and a copy of your identification, like a driver’s license or passport. You also might need to submit proof of address, like a utility bill.

Next, you need to put money in your new account. One option is to set up direct deposit with your employer, which automatically sends your weekly paycheck to your account. Sometimes you’ll even get access to your wages a couple of days early.

You can also often deposit cash through a network ATM or partner store, or use the mobile deposit feature to upload a check. The final option is to transfer funds into the account from another bank.

Transferring funds online

Depending on where it’s coming from and where it’s going, you can move money online in different ways and at different speeds. Transferring funds from your checking to your savings account within the same bank is as simple as logging in and choosing the source, destination and amount. And it usually happens instantly.

If you’re sending money elsewhere, you can do it quickly with peer-to-peer (P2P) payment services. Zelle works directly through your bank account, or you can choose third-party platforms like Venmo, PayPal, or Cash App. These applications let you send money to other people in real time, whether to split a lunch bill, pay a contractor … or for any reason at all, really.

Other processes you initiate online still take several days, like automated clearing house (ACH) and wire transfers. That’s why your credit card or utility bill payment takes some time to get posted to your account. But those are bank network processing times, and have nothing to do with actual online banking services.

Mobile deposits

Most mobile banking apps let you easily deposit a physical paper check by entering the amount, then taking photos of the front and back with your smartphone. You can even sometimes deposit checks through your desktop computer using remote deposit capture technology and a scanner — although this capability is often reserved for business accounts.

Paperless transactions

There are many reasons to go paperless, including reducing clutter and helping the environment. And online banking almost completely eliminates the need for using paper in any day-to-day transactions. From reading your monthly statement to transferring money and paying bills, paper is pretty much obsolete in the online banking world.

Automatic bill payments

Paying bills used to require waiting for your monthly statements to arrive in the mail. Then you had to write a check for each one, record the amount in your checkbook, tear off the payment slip, put each bill payment in an envelope, and mail them all in before the due date.

Phew! It took longer to type that last sentence than it does to pay bills online these days. And you can even do it automatically for nearly every bill — just set it and forget it through AutoPay. Some providers, like your mobile phone carrier, might even give you a discount for using automatic payments. 

Activity tracking

With all these transactions happening automatically, it’s important to make sure the correct amounts are going to the right places. With online banking, you can check your balances, see each transaction amount, and look for any forgotten subscriptions that you might not want anymore.

Benefits of Online Banking

Online banking has numerous benefits over traditional in-person banking.

Convenience

Probably the best and most obvious benefit to online banking is the convenience. You can manage your finances from the palm of your hand, anywhere you are, any time of day — and that clearly beats having to go to a physical location during a certain time frame.

Banks traditionally keep relatively short hours. And even if those hours work for you, and there aren’t any lines, and you live close by, banking offline will always take more time and effort than just logging in to a website or opening an app.

Speed

Besides saving time that you would have spent going to the bank, many online banking processes themselves are faster. When you can transfer funds in seconds instead of days, everything else seems slow.

Options

Online banking lets you choose who to deal with, depending on which type of financial institution you prefer and who’s offering the best rates or benefits on the services you need. You even have options when it comes to individual transactions. Would you rather make an instant transfer for a fee, or a free transfer that takes a few days? Your decision can be based on which is more important that day — your money or your time.

Accuracy

If you’re worried about human error, online banking can be more accurate than in-person banking. That’s not to say that the tellers working in your neighborhood bank aren’t skilled at their jobs, but people can make mistakes. Technology usually only makes mistakes if a person programmed or executed something incorrectly first.

Enhanced Security

On top of all this, online banking uses the latest technology in encryption, anti-virus protection, firewalls, fraud monitoring, and other security features to keep your money safe. You can generally trust that your online banking activities are protected from hackers and data breaches.

Of course, it’s important to create strong passwords that people can’t easily guess, and make each password unique instead of using the same one across different accounts. Also consider using multi-factor authentication for additional security.

Bottom Line

You can use physical brick-and-mortar financial institutions for your banking needs if you want to. Chances are these well-established businesses won’t be going away any time soon. But you can also try a new virtual bank if you prefer, or if the offerings better fit your needs and financial goals.

Either way, online banking services are undoubtedly available through your chosen financial institutions. These can range from mobile apps to online logins and automatic bill pay. And they include viewing and monitoring your account activity anytime, anywhere. Once you get used to internet banking, you’ll likely find that online access and digital transactions make life easier and, sometimes, much faster.