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Online banking is a service that allows people to manage bank accounts online. Using a computer or mobile device, customers can view statements, make transfers, set up bill payments, and make credit applications without visiting a branch.
It’s never been easier to check bank accounts, track spending, and manage payments.
While some banking activities do require people to visit a branch in person, people overwhelmingly prefer to manage their accounts digitally. In fact, 77% of U.S. consumers prefer mobile or online banking, while only 8% prefer to use a bank branch.1
But it’s not right for every situation, and remote access carries several risks for users. Find out more about how online banking works, what people can and can’t do with it, and the pros and cons.
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Digital banking is a type of account that allows users to perform banking activities remotely through a website or app.
Choose an institution that offers a secure online platform and open a bank account. Then, create an online account and log in through an app or web portal.
While traditional banking at a branch involves the account holder presenting identification or a card, online banking works by providing account access through a username and password. This is convenient, but it carries certain limitations and security risks.
Once a user is logged in, they can manage their accounts and access banking services.
Online banking involves accessing accounts through a website, while mobile banking involves using an app to access and manage bank accounts.
Mobile banking often offers additional features compared to online banking, such as mobile check deposits and PIN or fingerprint login.
Most online banks offer core functions, including account management, deposits, transfers, and automatic payments. The specific benefits of digital banking may depend on the institution. Online-only banks may have fewer services and protections than traditional banks and credit unions.
The following are common services offered by banks with online account portals:
The core service online banking provides is access to manage existing bank accounts. Someone could hold multiple checking, savings, and credit accounts that they can access through a single login.
Users can access detailed transaction histories and statements for each account they hold. They can also:
People can pay bills online with direct ACH transfers. Many service providers, such as utility companies and property managers, prefer ACH payments, and users can set these up on a recurring basis to avoid forgetting to pay bills manually.
Account holders can also set up automated statement payments with both internal and external credit cards and loans. They can select how much they want to pay monthly, like the minimum payment or a specific amount, then set payments to repeat.
Peer-to-peer networks like PayPal allow users to connect bank accounts. With a connected account, they can make transfers and payments without exchanging bank information directly.
This is an added layer of privacy that allows people to shop online without entering account numbers and send money directly to people.
Banks offer many types of credit, including cards, personal loans, mortgages, and home equity lines of credit (HELOCs). Depending on the type, people can begin and sometimes complete applications online.
For example, many credit cards have entirely online application processes. On the other hand, more complex loans like HELOCs could require additional verification via phone and physical applications. In those cases, people can usually make a start online and then complete the process in-person.
Online check deposits are a feature of mobile banking. It’s a convenient way to deposit checks without visiting a bank branch, but not all banks offer it.
How to cash a check online:
Online bank accounts can help people manage their finances with additional tools and data. Here are a few of the most common planning features:
Visualize spending based on categories: Banks collect information about the types of transactions people make, then sort them. This spending breakdown can help people track their spending and discover unnecessary expenses.
Learn about finances and budgeting: Banks want their members to have accounts in good standing, so they often provide learning resources to help people learn about finances and plan budgets. These could be articles in knowledge hubs, calculators, or access to more personalized advice.
Check credit score: Credit scores are complicated and determine what kinds of credit accounts and interest rates people can get. Many banks allow members to view their credit scores online and provide details about contributing factors.
The pros and cons of online banking come down to convenience versus security.
Online banking is convenient because it lets users perform banking functions remotely and quickly. These features make online banking extremely common.
Online banking has security risks because there’s more potential for accounts to become compromised than traditional banking. It’s a lot easier to compromise an account accessed remotely via username and password than an account accessed in person at a bank branch.
Here’s a close look at the pros and cons:
| Pros of online banking | Cons of online banking |
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Having a positive experience with online banks is mostly about making sure a user's funds and transactions are secure. Generally, online banking can be safe if the platform offers security features and users exercise caution when accessing it.
A major part of what could make online banking unsafe is that remote access points create potential for fraud from external parties. However, people can limit these risks by watching for anything that looks odd. For example, users should also check that emails are legitimate before clicking links. Check for minor variations in the email address and the bank’s domain name.
For example, Chase Bank’s domain is chase.com, so all emails from Chase should end with “.chase.com" or "@chase.com” exactly. A scammer might use a variant email address like:
Connecting an online bank account to PayPal allows users to send more to friends and family easily, as well as make purchases without providing bank information directly.
While PayPal is not a bank, users can connect it to their existing bank account and then send money in minutes, not business days.
It's your do-it-all digital wallet. Load up on cash back offers before you shop. Track your packages. And manage it all on the go.