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Deposits

A Full Overview of Deposits

A Full Overview of Deposits

A deposit is the action taken when a payee gives a check to a bank so that the bank will add the value of the check to the payee’s account with that bank. The payee is giving the bank the money so that the payee may then draw it out of the bank at a later point.
Sometimes the payee will deposit the money directly into a checking account so that it may be drawn from the account with ease. Other times, the depositor will put the money into a savings account so that it might accrue interest. Regardless, the act would be considered a deposit and would be subject to the rules and characteristics of deposits.
The checking system relies upon money being in the drawer’s account in order to support payment on the check. Deposits are the method by which this money is put into the account. Deposits, then, are one of the more important differences between the modern use of checks and the use of checks in their initial form, when checks were actually closer to promissory notes and indicated only debt between two parties. With the addition of a third party, the bank, and deposits which then allow the bank to pay off the check, the process changed significantly into what it is today.
Deposits actually outline exactly how the current system functions in that it does not take the form that most might imagine. Deposits are not payments made to the bank such that the bank can store those funds for the depositor’s later withdrawal. In actuality, deposits are loans made to a bank which can be called in at any time. A check simply allows the depositor to direct the bank to pay the loan directly to a third party instead of to the depositor him or herself. To find out more about the basic history and nature of checks and deposits, follow the link.

Expedited Funds Availability Act (EFAA) of 1987
The Expedited Funds Availability Act of 1987 was designed to protect customers from a previously common practice of banks. Before the Act, a bank could hold off on processing a deposit, and thereby prevent the depositor from gaining access to the funds of the deposit for some time. This practice would lead to complaints and anger from customers, as they would overdraw accounts, thinking that they had made a deposit which would cover their purchases.
The Expedited Funds Availability Act set specific time limits on the amount of time that a bank could take before processing that check and depositing funds into the account. The amounts of time are relatively variable, but depend primarily on the categories of the amount of the checks being deposited, whether or not they are local, and whether or not there are any extra factors.
A check for more money, for example, would hold a greater significance to the bank if it were to be held liable for such a check, and as a result, a bank can hold such a check for a longer time period in order to ensure the check’s validity. Non-local checks are similarly slightly more suspect, and the bank is allowed a bit more time to investigate them.
Exceptions that might affect the amount of time available to a bank for holding a check include whether or not the account from which the check is drawn has been overdrawn for some time, or for a large amount of money. For more about these circumstances and the time limits enforced under the Expedited Funds Availability Act, click the link.

Other Requirements

In order to make a bank deposit, the customer must perform certain actions. The customer generally will need to provide the bank with a deposit slip containing information about the account into which the deposit is meant to go and each check in the deposit. The total amount of the deposit and the routing numbers of those checks, and of the depository account, will also likely be important. The deposit slip may even require a signature from the depositor.
Furthermore, every check being deposited will have to have been endorsed properly by the payee, such that those checks may be deposited. If the depositor wants to be perfectly safe, then he or she should only endorse those checks at the bank, in front of a teller, and should do so with a restrictive endorsement stating “For Deposit Only”, as well as include the account number of the account into which the deposit is going. The bank, then, would have certain responsibilities to the depositor.
The bank would have a limited amount of time under which to process the deposit based on the EFAA. The bank would also have to ensure that when the account holder does draw the funds from the account, after they have been successfully deposited, that they are available for the proper methods of withdrawal.
Additionally, the bank would have a duty to confirm the deposit and ensure that the customer made no mistakes in calculation. Follow the link for more information about the additional duties that customers might have in making a deposit and that a bank might have towards the customer.


Interest Accounts
An interest account is a depository account on which the account holder can earn interest. This is a valuable type of account because it allows the account holder to earn money on funds which would otherwise be static and unchanging. Money in a bank account does not do the account holder any good in terms of making more money unless the account is an interest account.
There are different kinds of interest accounts, each of which is oriented towards a slightly different goal. A checking account, for example, might even be an interest account, but generally speaking, the interest on a checking account will be so phenomenally low that the account will generate next to nothing, as the primary advantage of a checking account is the ease of transaction and not the interest.
Another primary type of interest account is a savings account. Savings accounts will generally have much better interest rates than will other types of accounts, but the money in a savings account is nowhere near as immediately accessible as it would be in a checking account. There might be a charge, for instance, to withdraw money from a savings account. But one can be relatively assured of the safety of one’s money and of making some profit on money deposited into a savings account.
A money market account is something of a combination between the two and is a competitor to money market funds. With a money market, the money is more accessible than it might be in a savings account and would still have higher interest rates than it would in a checking account. To find out more about each of these different types of interest account, click the link.

Collection Process
The process through which a depository bank has to collect the money deposited into it is not terribly simplistic. The depository bank must send the check to the payor bank, and the payor bank must issue credit to the depository bank, such that the depository bank can then issue credit to the individual account of the depositor. 
There are numerous intricacies to this process, including the fact that transactions must function differently when they take place between customers of the same bank than they do when they take place between customers of different banks. Furthermore, the Federal Reserve System plays an important role in the collection process that should not be overlooked, as it performs many of the transactions between banks, thereby both enforcing the validity of those transactions and protecting them so that the customer will not be injured.
The collection process is also significantly changing with the advent of the Internet and digital communications, as they provide avenues for collecting money which are significantly easier, faster, and cheaper than the physical processes used in the past. Even simplistically, sending a digital image of a check is cheaper than sending the physical check. For more information on the collection process and its many changing components, follow the link.

Designation of Banks That Collect Money

Designation of Banks That Collect Money

The banks involved in collecting money each have a different designation, demonstrating the role of that bank with regard to the overall process. These designations fluctuate depending upon the exact nature of each collection, of which bank holds the bank account from which money is being drawn, and so on.
The depository bank is the bank into which a given negotiable instrument is deposited. This can also be understood as the first bank to accept the negotiable instrument, besides the payor bank. This is usually the bank doing the collection, as it intends to receive payment from another bank account.
Because of the nature of a check, the depository bank to whom the check is given for final payment is actually the one to whom a debt is owed by the bank tied to the drawer’s bank account. Thus, the depository bank is usually the collecting bank. Being the collecting bank means that the depository bank holds most responsibility for ensuring payment to the bank account. Also, the depository bank would hold most warranties for presentment or transaction and would be liable if there was anything false about the check.
The payor bank is essentially another way of defining the drawee. Normally in a draft, there are three parties: the drawer, the drawee, and the payee. The payee is the recipient of the draft, while the drawer is the individual who originally wrote the draft, and the drawee is the party to whom the drawer was giving an order to pay the payee.
In a check the drawee is always a bank. Because the drawee is the actual party which issues payment to the payee, then the drawee could also be known as the payor. In the above example, the bank making a payment to the depository bank from one of its own accounts would be described as the payor because it is paying the depository bank.
The payor does not hold much liability for the transaction, as it is the depository collecting bank which is making warranties regarding the check in question. The payor would hold liability, however, to the bank account from which it draws money and the drawer who is connected to that bank account.
An intermediary bank is any bank which is acting as an intermediary between two parties. This would in theory refer to the role that most banks play, but in actuality, a bank is only referred to as an intermediary bank in a situation in which that bank does not play a direct role within the transaction.
Intermediary banks are most often those banks which help facilitate transactions in places where another bank is not present. For example, if one were to make a payment from one’s bank account to a vendor in a different country, then the bank that holds that bank account might not be present in that country and would need the help of an intermediary bank to transfer the funds. As a result, an intermediary bank may be the one that actual transfers the funds to the collecting bank after the payor bank transferred them to the intermediary bank.

A Guide to Electronic Funds Transfer Systems

A Guide to Electronic Funds Transfer Systems

Electronic funds transfer systems are those systems which are used to perform an electronic funds transfer. There are a number of different systems that fit this bill, from systems that had been in much wider use at the time of the Electronic Funds Transfer Act’s implementation, to systems that have since become significantly more important. Each of these systems performs transactions that can be qualified as electronic fund transfers.
The first, and likely still most known electronic funds transfer system, is that of a card used for a payment. This would cover both credit cards and debit cards, as well as charge cards and stored-value cards. All of these different types of cards would be systems of electronic fund transfer because each of them eschews the paper system of negotiable instruments and deal strictly with electronic transactions. 
When such a card is read by a machine, the transaction is posted electronically wherever necessary, whether to the credit card account, or to the checking account attached to the debit card. Most of the time, these electronic funds transfer systems involve magnetic strips which allow the card to be read, though some of them are smart cards with some form of integrated circuit which can send and receive information, or proximity cards, which similarly contain integrated circuits.
Next are direct deposits. Direct depositing counts as an electronic fund transfer system for the same reason that the cards above do: the system allows for bypassing of the paper or physical negotiable instrument and performs the entire transaction electronically. A direct deposit is used generally by employers to post salaries directly into the accounts of employees, as opposed to granting those employees physical checks. It ensures that the check cannot be lost and that the transaction has the speed and surety of electronic fund transfer systems in general.
Direct debit payments are another type of electronic funds transfer system. Direct debit payments are often seen in Internet transactions when the customer submits the information for his or her debit card in order to make a payment on a given item. The company actually would be submitting the payment with the permission of the customer. The difference between this type of transaction and a standard negotiable instrument transaction is that the company is writing the order to pay, as well as making itself the recipient by acting as the agent for the customer, essentially.
Electronic billing is an electronic funds transfer system, in general, whether it be used for utilities or for some form of online banking. As long as the paper documents are eschewed in favor of instantaneous transactions performed via electronics, through the Internet or even over the phone, then the system would count as an electronic funds transfer system.
Wire transfers compose the final primary electronic fund transfer system. These are normally used as commercial electronic fund transfers, as companies transfer large sums through the transaction agencies like Fedwire or CHIPS. These are again transactions which occur entirely electronically so as to speed up the transaction and avoid the costs of performing the transaction through paper.

Electronic Funds Transfer Act

Electronic Funds Transfer Act

The Electronic Funds Transfer Act, or EFTA, is also known as Regulation E. The Act was created in 1978 in order to help define and regulate electronic transfers, which were becoming more and more common thanks to the improvements in technology.
Electronic transfers are increasingly proving to be more efficient and less costly than any form of physical fund transfer requiring a negotiable instrument. However, prior to the Electronic Funds Transfer Act, they were dangerously unregulated. The Electronic Funds Transfer Act sets out exactly what the rights of the consumer are with regard to a consumer electronic transfer.
The Electronic Funds Transfer Act gives consumers the right to seek restitution for errors made in an electronic transfer. When a customer notes an error marked on a transaction review sheet, then the customer should contact the institution with whom the consumer fund transfer was made and provide all necessary information.
That financial institution would then have a duty, under the Electronic Funds Transfer Act, towards the consumer to determine why the error occurred and to correct the error, if such an error is identified. This is probably the type of practice that would be expected of any such situation, but without the Electronic Funds Transfer Act to codify such practice, some financial institutions might have abused an electronic transfer by ignoring customer pleas regarding mistakes.
The Electronic Funds Transfer Act also protects customers from situations in which they lose their debit or credit card, which they use for consumer an electronic transfer. If the consumer quickly reports a missing or stolen card before any transactions take place, then the consumer cannot be held liable for any illegitimate electronic transfers conducted with the card. But if they do not report it before transactions take place, then the consumer would hold some liability for those electronic transfers, depending upon how quickly the consumer alerts the financial institution.
If he or she alerts the institution within 2 business days, then he or she only suffers $50 liability, but after two days, it goes up to $500 liability, and after 60 days, the consumer would probably be liable for all electronic transfers. In all such instances, however, the financial institution in question would have to alert the consumer to the level of liability that he or she might hold in order to ensure that the consumer is properly informed.
The Electronic Funds Transfer Act grants certain other rights to consumers. For example, a consumer receiving electronic transfers for his or her salary or his or her payment from a government benefit, can choose the financial institution into which those transfers pay. The Electronic Funds Transfer Act also guarantees that a consumer debtor cannot be asked to repay a loan in the form of an electronic transfer, except in the case of overdraft fees from checking accounts. These may be very specific rights, but they do act to further protect consumers from potential misuse of electronic transfers by other institutions or agencies.
The Electronic Funds Transfer Act covers many different forms of electronic transfer, including transfers over a phone, along with transfers through computers and through cards with magnetic strips. Of late, the majority of electronic transfers are likely to have been based on Internet transactions in particular.
These transactions are likely to begin requiring a different set of more specified rules, however, as the Electronic Funds Transfer Act provides a good set of rules to protect consumers in basic electronic transfers, but the Internet complicates the situation with additional means of breaching security and concerns with the availability of information.

Deposit Money Quickly with Interest Accounts

Deposit Money Quickly with Interest Accounts

Interest accounts are a specialized form of deposit
account. One would still deposit money into an interest account and would still
retain the right to withdraw money from such an account. But interest accounts
benefit from additional terms. Specifically, an interest account allows account
owners to profit from the accrued interest of the account as it builds over
time. Often, the price that interest account owners pay for this accrued
interest is ease of withdrawal, but for some, this is a worthwhile price if the
account will exist for a long enough time period.

A savings account is a primary example of a type of
interest account. In a savings account, the account owner deposits money into
the account, but cannot access that money as easily as if it were in a checking
account, for example. The account owner would not be able to treat whatever
funds were in the savings account as if they were directly available assets.
This is primarily represented through a greater cost on a withdrawal from a
savings account, along with a greater amount of time required to file the
withdrawal. But the benefit of a savings account lies in that the interest
rates for such accounts are normally high enough that the accrued interest over
long periods is significant.

Some checking accounts are actually interest accounts in
that the money within the checking account is earning interest at some rate.
But the rate of interest is usually so small that for the accrued interest to
have any significance
,
it
would take a tremendous amount of time or a large amount
of money in the account. Checking accounts fluctuate in amount consistently,
however, which would mean that they are unlikely to have such a large amount as
to generate significant accrued interest, even if they are interest accounts.

Money market accounts are yet another form of interest
account
. Using a money market account, one might be able to make a fair amount of
money through accrued interest. The primary flaw of a money market account is
that they require a certain balance in order to make money and
, in fact, may result in
charges if the balance within the account dips too low. They do offer fairly
high interest rates, however, and though they are legally treated in much the
same fashion as are savings account, the account owner can usually draw checks
on a money market account.

There are some restrictions to the account, such as the
fact that only six withdrawals to third parties are allowed per month from a
money market account, but these restrictions are usually compensated easily by
the potential for high accrued interest. As long as one keeps a money market
account relatively full of funds, then one can avoid most of the problems of a
money market account, while still generating a great deal of interest.

The primary advantage of interest accounts is that they
allow money which would otherwise be doing nothing to be growing and creating
accrued interest. If the money were in a non-interest checking account, then it
would be available and protected, but it would not be growing at all
. Interest accounts allow for growth, while continuing to offer a fair degree
of protection. Some would advocate investment into the stock market as a better
means for generating accrued interest on invested money, but most would also
acknowledge that the stock market is a substantially riskier way to generate
interest.

Getting the Most Use of Internet Money Services

Getting the Most Use of Internet Money Services

Internet money services are similar to traditional money services in that they allow for money to be transferred easily from place to place. But because they do not have physical elements, e-money services have certain advantages to more traditional money services. Specifically, anywhere that one person might have access to the Internet with the availability of Internet payment services, one can make a money transfer or perform some other kind of money service.
Often, Internet payment services are used specifically to pay for products bought on the Internet, as e-money allows for easy payment for situations in which one person might be buying a single product from another person through eBay, for example.
An Internet payment service, such as PayPal, would take the information of a given account from the customer and would then draw the requested amount of money from that account. This money would be entirely e-money; it would never take a physical form through the transaction. PayPal could transfer those funds to the recipient’s account, for which it would also have the necessary information. An Internet payment service like PayPal would be able to perform transactions both based on credit cards and on debiting a bank account directly.
As these Internet payment services are handling money to the same extent that traditional money services might, even if that money is e-money and not physical money, lawmakers felt the need to provide some form of regulation for these internet payment services. The Uniform Money Services Act was, in fact, specifically designed to cover elements of Internet payment services, as these services would otherwise have potentially been able to escape regulation by not quite fitting the standard definitions for those regulations.
The Act provides for e-money, for example, to effectively qualify as real money, as it bears “monetary value.” “Monetary value” only goes to those monetary stand-ins that can be successfully used to make payments to a wide range of parties. As such, a gift certificate which could only be used for a single store would not have monetary value. But e-money, insofar as it can be used to pay any merchant, would have monetary value, and as such, Internet payment services dealing with e-money would thus qualify as dealing with monetary value.
This was done primarily because Internet payment services would seem to have the same risks as traditional money services, as evidenced by examples of fraud in PayPal’s history. A PayPal user’s account information might be stolen, for example, and fraudsters might then use it to make unauthorized payments or purchases.
Theoretically, PayPal, as an Internet payment service, would then be held responsible for repaying the lost funds unless they were taken directly from a PayPal deposit account. If they were taken from a deposit account, then PayPal would not have to restore the funds to the user according to the agreement made between PayPal and the user.
Internet payment services are useful tools, and even traditional money services, like Western Union, have begun offering Internet payment services and e-money services as well in order to expand their markets. But for any customer, it is important to be aware of the risks of the e-money service in question.

How to Use Online Banking and E-Payments

How to Use Online Banking and E-Payments

Online banking practices represent a new development for the functioning of America’s economic system and the economic system of the world. At the same time that these practices provide cheaper and more convenient methods to perform banking actions, they also undermine regulations and rules that have extended for years prior, when no such methods existed.
This does not mean that online banking practices are bad, but it does mean that considering their place in the overall structure of business law in America is important, as simply integrating them without a thought under America’s banking laws and regulations is not a viable possibility.

Background
Online banking is a natural outgrowth of advances in communications technologies. In the 1980s, the first attempts to implement some form of online banking system cropped up, and though these attempts were failures, the seeds of the later online banking system had been planted. The success of online banking since then was a direct result of the technology improving and becoming more convenient for the common user.
One of the flaws of the original 1980 form of online banking was that it would require consumers to buy a dedicated piece of equipment. Now, however, most people in America have some form of computer with access to the Internet; even phones have reached a point where they can give access to online banking websites. As such, online banking has become much more convenient than banking through physical transactions at the bank itself because an online banking service is so much more accessible.
Furthermore, the additional services offered by online banking only make it all the more appealing, as information can be exchanged very rapidly and a customer would be able to enact changes to his or her account at any time (though these changes might not be processed right away). This has allowed purely online banks to spring up. These banks would have no physical location, but would offer all the same services of a standard bank thanks to the facility granted by Internet banking.
The Internet has also increased the value of e-payments for similar reasons, as they are very convenient and allow for transactions between parties that may not be located anywhere near one another. To find out more about the basic background of online banking and e-payments and why they are so effective in today’s world, click the link.


Banking Services Provided Online
Banks often offer a number of different services for their customers, online or otherwise, especially as one of the primary enticements that any bank can use to attract a new customer is a promise of certain online services in addition to any standard services the bank might offer. Some of these services are transaction services, meaning that they are services with which a customer may make transactions in his or her online bank account. These could include transfer transactions, wherein a customer transfers money from a checking account to a savings account, or vice versa, and they might include payments.
These payments are often used to pay bills, as banks will often offer their online customers an aggregation service which will compile all of the customers’ different bills into a single transaction, which the customers could then pay online through the bank. Using these payments online would likely save the customer a fair amount of time and would save all parties involved the cost of mailing the bills, or mailing back a response, along with the cost of the paper involved.
Banks may also offer non-transaction services, the most common of which are likely to be account statements which a customer can access quickly and easily at any time. Banks may even offer up the services of their employees for help online so that a customer can get in contact with banking personnel easily through the website.
Online banking services might also include services that can condense banking information into easily “translated” form so that the banking information can be quickly plugged into accounting software of some form. Follow the link for more information about the many services that banks can provide for their customers online. 

Regulation and Compliance
Regulation of online banking is a difficult matter because many regulations which were designed to regulate banks in the past might encounter some difficulty when they are viewed in light of an online banking service. Some of these regulations are primarily focused on elements of the bank that are physical, and therefore, would not apply to online banks. But some steps have been taken to ensure that some of the regulations put into place in the past do extend to cover online banking, especially as online banking rises into prominence.
The Uniform Money Services Act, for example, ensures that all money is treated the same under Government regulations, whether it is real money or e-money used in online banking or online transactions. Furthermore, online banks are still banks, and therefore, they have to comply with many of the most basic standards of banks, including rules concerning the bank’s role as an agent acting on behalf of customers. Regulations are also in place which would protect customers in online banking from wrongdoing on the part of fraudsters and the like, much as customers would be protected from fraud in physical banking.
The primary methods of ensuring that an online bank is legal, to the extent that such banks fall under legal purview for the time being, is to ensure that it is a member of the Federal Deposit Insurance Corporation, thereby proving that the bank has some level of validity to it and that its customers are protected from the bank’s potential failure. To find out more about banking regulations and compliance, and how they interact with online banking, click the link.

Protecting Privacy with Online Banking
When banking online, one of the primary concerns that may arise is that the customer’s information is going out into the Internet, where, to many individuals, security feels inherently more lax. It is true that there are hackers who are able to use the information of those individuals who perform online banking to break into those customers’ accounts and steal large sums of money. But online banking services work very hard to ensure customers’ safety from attempts to penetrate their online privacy, as they are required to do under law.
This is because consumers are still protected from fraudulent uses of their bank accounts, and if the banks do make payments based on fraudulent authorizations, then the banks are held liable. As a result, banks implement stronger and stronger security measures for online banking in order to protect both themselves and their customers from attempts to steal information.
In addition to legal policies which ensure that banks have both a desire and responsibility to protect customers from information theft, there are legal policies which extend to the practices of online banking services which would protect customers from having their information given out, be it to third parties or even to Federal agencies. Learn more about privacy and how it is being protected in terms of online banking by following the link.

Know the Requirements of Bank Deposits!

Know the Requirements of Bank Deposits!

Making a bank deposit has relatively mundane requirements for the most part. In general, these requirements can be summed up as: (1) provide a deposit slip with the necessary information and (2) ensure that all checks being deposited are endorsed properly. So long as those checks and any deposited cash are together in an envelope, for example, one should be able to make a bank deposit with little to no difficulty.
This first requirement, concerning deposit slips, is relatively easy to manage. While not required under banking laws, most banks have large supplies of generic deposit slips in the bank proper. Obtaining one of these slips and making a bank deposit with it are fairly simple tasks, especially when done with the aid of a teller. Having a teller assist in filling out a deposit slip will further protect a deposit, as it will ensure that the deposit slip is filled out properly for an amount verified by another person.
Deposit slips should usually contain all pertinent information for a given bank deposit, including the name of the depositor, the amount of money being deposited, both as a total, and as separated out between cash and checks, the account number of the checking account into which the bank deposit is going, and the date. Bank deposit slips may also require a signature from the depositing party, though this is not always necessary.
If you were looking for cash back from your bank deposit, which is allowed under banking laws, then you could mention it on the deposit slip. Doing so will likely require you to present some form of ID to the teller when submitting such a deposit, but otherwise should cause no difficulty.
In terms of ensuring that checks in a bank deposit are endorsed correctly under banking laws, the best way to endorse checks intended for a bank deposit is with a restrictive endorsement bearing the terms “for deposit only”. Adding “for deposit only” and an account number to the check ensures that the check can only be deposited into that one specific account when it is endorsed, and therefore, would protect the bank deposit under banking laws, specifically the Uniform Commercial Code.
After the bank deposit is submitted, the bank then has certain requirements which it must follow in terms of making the deposit available to the depositor. The Expedited Funds Availability Act (EFAA) of 1987 defines the amounts of time over which a bank can hold a check without making its funds available to the depositor. Even a bank deposit made at a non-proprietary automatic teller machine must be made available to the depositor after a certain amount of time, normally only five days.
The primary determinants of how long a given check can be held are whether or not the check is from a local bank, meaning one with a local transit number, and the amount of the check. Once funds are made available, then the depositor is allowed to draw on those funds without difficulty, whether for cash withdrawals or drawn checks. Banks can still manipulate their own requirements somewhat, however, in attempts to push accounts into becoming overdrawn, but they are limited thanks to banking laws like the EFAA.

Protecting Your Privacy with Online Banking!

Protecting Your Privacy with Online Banking!

One of the biggest worries surrounding any online banking practice is that the customer might become vulnerable to attempts to steal his or her information. Internet fraud is one of the more frightening forms of fraud in the world today, as it would allow a fraudster to steal another person’s information and make purchases using that person’s accounts without ever having to leave home.
Though it is often illegal to obtain the kind of information that would threaten online banking, whether through the Electronic Communications Privacy Act of 1986 or through some other Act, there will always be those who attempt to obtain such information.  Thus, methods to support and strengthen online privacy in online banking are quite important to the overall success of online banking.
After all, despite its relative inconvenience, the risks of someone stealing a customer’s information when that customer physically goes to a bank to make a deposit seem substantially lower than when a customer puts his or her information into the Internet.
Fortunately, as this concern has been at the core of online banking practices since their inception, many improvements and moves towards greater online privacy have been made over the years. In general, a website might use a single password coupled with an email address in order to provide protection for an account, but online banking services long ago deemed this insufficient for protecting its customers and their accounts, as a single password is too easy to break for a determined hacker.
Instead, online banking primarily uses two means for security. One system uses the Personal Identification Number (PIN) associated with a given account coupled with a Transaction Authentication Number (TAN) to perform a transaction. Where a PIN is always the same with the same account, a TAN would be different for every transaction.
The system is more complex than this, but essentially, it ensures that online banking conducted with the use of web browsers capable of a secure kind of transaction would be able to maintain online privacy successfully.
The other system of protecting online privacy in online banking uses encryption and keys, where all transactions are encrypted and can only be decrypted by temporary keys given to the computer after the transaction.
Users can protect their own online privacy and their online banking practices by ensuring that their computers are safe. Antiviral programs can run periodic scans on computer systems in order to ensure that no viruses or other bugs are inside the computer which would then violate online privacy when performing online banking.
But a large number of schemes to penetrate online privacy instead focus on tricking the bank’s customer into giving away information such that the fraudster can use the account without authorization. Often, the best defense and aid to online privacy is common sense and a reluctance to give out information to anything other than trusted sites, thereby eliminating most chances that a fraudster might be able to violate online banking security and privacy.
Governmentally speaking, one’s online privacy is enforced and supported under law. The Financial Services Modernization Act of 1999, for instance, ensures that banks provide customers with a notice explaining those banks’ privacy rules and where the information of the user’s account might go. The customer can then decide whether or not conforming with those rules is in his or her best interests. This prevents customers from being caught unawares when their online privacy might not be as secure as they would have thought simply because of the banks’ policies.
The Right to Financial Privacy Act also applies, ensuring that banks cannot give the financial information of a customer to a Government agency without that customer’s permission. Online banking would be affected by this, just as much as regular banking. In other words, the law is, in general, on the side of online privacy, though there have yet to be a definitive set of laws which would codify the terms of online privacy.

The Regulation and Compliance of E-Banking

The Regulation and Compliance of E-Banking

E-banking is a very useful and important tool in the modern world, but one of the issues surrounding e-banking is, quite simply, that it is a relatively new practice. While electronic funds transactions have been around for some time, e-banking only genuinely was employed for all bank customers in 1994, when Stanford Federal Credit Union offered its online banking service to all account holders.
Since then, e-banking has risen to greater and greater prominence and has also shifted gradually in terms of capability and function along with the nature of technology. One of the unfortunate side effects of such a constant shifting is that regulations concerning e-banking are not very strongly in place, as e-banking fills a niche somewhat unanticipated by many banking regulations, especially with the advent of banks which are only an online banking service and do not even have a physical presence.
As such, determining exactly how e-banking falls under banking regulations already in place is one of the more important components of modern day banking law. There are some elements concerning an online banking service which quite clearly fall under regulation. The Uniform Money Services Act, for example, ensures that all money, physical and electronic, falls under the same set of regulations. This would include e-money, Internet scrip, and those devices that have a set amount of money stored on them.
An online banking service, insofar as it deals with e-money, would then have to deal with such regulations. But an online banking service would not, in and of itself, fall under any regulations specific to its function in e-banking and would instead most likely only fall under those regulations which can apply to physical banks.
For example, an online banking service would still likely have to fulfill the reserve requirement for banking, even if it were a bank entirely devoted to e-banking without a physical branch. An online banking service would also likely have to report its annual financial statements as a regular bank would.
There are statutes applying to physical banks that don’t clearly apply to an online banking service. For example, the Home Mortgage Disclosure Act and the Community Reinvestment Act would require banks to define their market areas to ensure that banks do not offer discriminatory loans based on the location of the recipient party.
But a bank engaged in e-banking would not necessarily be able to provide such information as readily, especially if it were only an online banking service and offered no physical location. Such a bank might have clients scattered throughout the country and would not be able to define its marketing area. This is just one example of a way in which a regulation which might apply to physical, traditional banks, might not apply to banks in terms of e-banking.