Teach Yourself Today e-Banking Teach Yourself Today e-Banking Managing your money and transactions online Mary Dixon Brian Nixon 201 West 103rd Street, Indianapolis, Indiana 46290 Sams Teach Yourself e-Banking Acquisitions Editor Today Jeff Schultz Copyright ©2000 by Sams Publishing Development All rights reserved. No part of this book shall be reproduced, stored Editor in a retrieval system, or transmitted by any means, electronic, Alice Martina Smith mechanical, photocopying, recording, or otherwise, without written Managing Editor permission from the publisher. No patent liability is assumed with Charlotte Clapp respect to the use of the information contained herein. Although every precaution has been taken in the preparation of this book, the Project Editor publisher and author assume no responsibility for errors or omis- Andy Beaster sions. Nor is any liability assumed for damages resulting from the Copy Editor use of the information contained herein. Patricia Kinyon International Standard Book Number: 0-672-31882-2 Indexer Library of Congress Catalog Card Number: 99-69443 Greg Pearson Printed in the United States of America Proofreader First Printing: February, 2000 Candice Hightower 03 02 01 00 Team Coordinator 4 3 2 1 Amy Patton Interior Designer Trademarks Gary Adair All terms mentioned in this book that are known to be trademarks Cover Designer or service marks have been appropriately capitalized. Sams cannot Jay Corpus attest to the accuracy of this information. Use of a term in this book Copywriter should not be regarded as affecting the validity of any trademark or Eric Borgert service mark. Editorial Assistant Warning and Disclaimer Angela Boley Every effort has been made to make this book as complete and as accurate as possible, but no warranty or fitness is implied. The information provided is on an “as is” basis. The authors and the publisher shall have neither liability nor responsibility to any per- son or entity with respect to any loss or damages arising from the information contained in this book. Dedication For Arthur Dixon and Arthur Nixon, our great dads. Table of Contents Introduction 1 Part I Getting Started 1 The Revolution Is Upon Us 7 2 What Online Banking Means to You 19 3 What You’ll Need for Online Banking 35 4 Choosing Your Bank 47 5 Ready, Set, Stop: Do Your Due Diligence 59 Part II Using Online Banking Products and Services 6 Begin with the Basics: Opening an Account and More 71 7 No Postage Necessary: Paying Bills Online 85 8 Beyond the Basics: Cool Add-On Products and Services 97 9 Shortcuts to the Best Deals 111 10 Attention All Small Business Owners 121 Part III The Facts About Security and Privacy 11 Trust Is More Than a Word 135 12 The Dark Arts: Cryptography and Encryption 147 13 Privacy Please! How to Protect Your Privacy and Who Else Cares About It 159 14 Your Privacy and Security Checklist 173 Part IV The Banking Revolution Is Just Beginning 15 What Customers Like Best About Their Online Banks 183 16 The Bottom Line on Sanity and Banking Online 193 17 Welcome to the Future: What’s Next for Online Banking? 205 Part V Appendixes A Banking Sites in This Book 215 Glossary 225 Index 235 Acknowledgments A book of this scope is not written and produced in a vacuum by two authors huddled over their keyboards night after night. We want to thank the many sources who contributed their views and shared their expertise on online banking as it currently stands and where it is headed in the future. We also wish to thank the members of the Macmillan publishing team for conceiving of this project and working diligently and efficiently to help us bring it to completion. The Macmillan team contributed to the format and style of this book, which we hope you’ll find both useful and helpful. We would also like to note that any sins of omission are ours alone and not those of the excellent Macmillan staff. INTRODUCTION Ever get a tour inside your bank? That’s what we bring to you in this book. No, not a look at your bank’s vault of cash or at the safe deposit box area, but at something valuable nonetheless. We’re going to take you inside the world of online banking. We’re able to provide this perspective because we have worked together producing a banking magazine, Community Banker, which is published by America’s Community Bankers, the Washington, D.C. trade association for community banks. We write about banking all the time. We talk to bankers and their consultants on a daily basis. Our lives revolve around the interests of our readers who are community bankers across the nation. They compete with mega- institutions such as Citibank and Chase Manhattan. These com- munity banks have been racing to keep up in the technology game, including placing their products and services online. Throughout 1999, banks have geared up for the year 2000 date change. Regulators were on them to make sure that their systems wouldn’t crash on New Year’s Day. They spent millions of dollars preparing and preparing. In doing so, many upgraded their com- puter systems and began gearing up for their next technological challenge—transforming themselves into online banks accessible to their customers from anywhere, at anytime, with a click and the Internet. As banks move online, there’s a definite feeling of “dot-com mad- Note: ness” in the industry. You can’t go to a banking industry confer- James Pushnill, an analyst for Forrester ence without experiencing a heavy emphasis on e-banking. Banks Research Inc., a con- are speeding ahead to create their online sites for one big rea- sulting firm follow- ing the progress of son—they want your business. Many bankers face a definite e-commerce, told us: learning curve about the technology and promise of the Internet, “Any bank that hasn’t moved yet but they are fearful that if they don’t get online, their customers into Internet bank- will be snatched away by other online banks. They also fear non- ing is still stuck in first gear.” 2 SAMS TEACH YOURSELF E-BANKING TODAY banks, such MSN.com and Charles Schwab, who are gradually getting into the banking business. Online Presence What does this mean for you? It’s a great time to start banking but No Meat: online. The industry has progressed enough to offer you some When we went to press, the Federal dynamite, user-friendly sites—and the fees at most of the banks Deposit Insurance are low. We think it’s smart to shop around for a bank that doesn’t Corporation was reporting that 30 charge for this service, but then again, your priority might be percent of all banks banking at a site that navigates well. To some of us who are and thrifts had a Web presence. But pressed for time, that’s just as important as money. only 7 percent had transactional We got hooked on e-banking after we began the practice our- Internet sites where selves. It’s convenient, fast, and empowering. The first time you you can actually per- form banking func- log on to view your account history or to transfer funds, you feel tions and not just like you won’t ever have to stand in another teller line again. And read marketing materials about an many other functions are available as well, including paying bills, institution. buying checks, getting a loan, or even just checking out the loca- tion of the closest branch. You never have to get stuck in tele- phone darkness again—”Press 1 if…press 2 if…press 3 if…”—where you’re left wondering what button to press to speak to a real, human person. Banks as Starting When you bank online, you can perform most banking functions Point: without having to rely on a banker. Many sites are easy to navi- Bill O’Connell, vice president of market- gate or surf, and they require very little information or keying in ing for Home of information. You can bank at midnight, in your pajamas, while Account (an Internet provider for banks), watching television. You can bank from anywhere in the world, as told us that banks long as you have an Internet connection. need to think of their sites as “finan- During our research on the book, we surfed more than 100 bank- cial service hubs— basically a financial ing sites. We quickly learned what the best institutions have, service portal site.” including 24-hour personal service over the telephone. Yes, the sites are easy to navigate, but you will undoubtedly have a ques- tion now and then. We say: Insist that your bank provide this 24- hour service. As you read this book, remember that we have taken a strong consumer angle. We wanted to bring our industry knowledge to the table so that you will be a customer that is not intimidated by any of the growing array of financial services providers, online or offline. INTRODUCTION 3 Inexpensive and Worth It David Becker, chief executive officer of First Internet Bank of Indiana (www.firstib), is convinced that Internet banking is here to stay. He says 40 million Americans will bank online by the end of 2000. As a banker, he likes the fact that it costs an institution $2 for each transaction in a teller line compared to a penny for each online transaction. (In just three months, Becker spent $800,000 marketing his online bank!) In this book, you will learn the basics—how to chose a bank and how to get started.