Virtual bank accounts are a relatively new player in the banking world.
For centuries, brick-and-mortar banks, with their appearance of stability and security, have been all we know.
Then came online banking. The very first "live" attempt was in Europe.
The Bank of Scotland offered limited services that customers could access through their television sets.
Fast forward to 2021, and online banking has exploded in popularity.
Virtual banks, particularly those with no physical branches, are riding this trend and drawing more and more customers each year.
Their ease of use and tech-forward approach has transformed the banking industry and promises to continue.
When the usual banking experience of face-to-face personal communication moves online, it is only natural that customers would take some time to get used to a new normal.
However, even with more than 70% of Americans using some form of online banking, some still question just how safe their virtual accounts will be.
ARE VIRTUAL BANK ACCOUNTS SAFE?
Virtual banks have no locations in the real world.
No trusty and reassuring security guards, complex locks, and impenetrable vaults.
But they are safe—maybe even safer than physical locations.
They use a variety of systems and techniques to protect your money, including:
- High-tech Authentication
- Digital Certificates
- Secure Email Protocols
Many of these systems operate in the background; others are more obvious.
For your peace of mind and security, it's important to know how they work.
Here's how to spot security measures:
Encryption—Look for the S
Virtual banks that have their security act together will use encryption.
Encryption "scrambles" data so only those with the key—namely, you and the bank—can read it.
So how can you tell if your bank is using encryption?
Their web address will start with HTTPS rather than HTTP.
You'll also see a lock before the name of the bank.
A virtual vault, if you will.
On High Alert
The most secure banks have some kind of system of fraud alerts set up for your account.
If there's any unusual or unauthorized use, the virtual bank will notify a customer with an email, a phone call, or a text.
The speed of these fraud alerts means that you can get ahead of fraudulent activity quickly before too much damage is done.
In addition, some banks add to that protection with fraud detection software that runs all the time in the background of their platform.
These programs are on the lookout for any suspicious or hacker-like activity and add even more security to the encrypted information.
Highly secure virtual banks use a variety of password techniques beyond your username and standard password.
For example, one-time passwords for certain kinds of transactions, biometric "passwords" that read fingerprints, voice, even your face or retina, all can enhance security.
Virtual banks can also limit the number of login attempts.
If a hacker is trying to guess your password, they'll be locked out quickly.
Extra Authentic Layers
Another common technique is a Secure Sockets Layer certificate, also known as an SSL certificate, which authenticates both you and the bank using a third-party company like Verisign.
Almost everyone has received an email from a scammer pretending to be a bank.
Virtual banks can cut that strategy off by offering a secure email system for customers that opt in.
As you can see, there are plenty of secure solutions out there.
Is my deposit guaranteed?
But let's face it: any online system has some vulnerability somewhere.
And hackers and bad actors are constantly looking to exploit those weaknesses.
However, customers can rest assured if they know their virtual bank is FDIC insured.
Before you sign up with a virtual bank, the first thing you should know is if they are insured, either directly or through a partner, with the Federal Deposit Insurance Corporation (FDIC).
The FDIC was created by Congress in 1933 in the wake of a run of bank failures that devastated the industry and the economy.
Their insurance keeps your money safe, even in the event of a security breach.
All banks, including virtual ones, will announce if they are FDIC insured and to what amount.
You can also check the bank's FDIC status on the agency's website.
Additional Security Measures
Virtual banks provide a lot of ease and security.
You can add to that security and put your own mind at ease by adding additional layers of security to your account.
Best practices for virtual customers include:
- Good Password Practices: use passwords that are difficult to guess, don't use repeat passwords, and change your password immediately if you think it's been compromised.
- Use All the Tools: If your virtual bank offers fraud alerts, extra authentication, or any additional security, opt-in!
- Avoid Public Wi-Fi: Never use a public signal to take care of your online banking. There are all kinds of scams and malware floating around on public Wi-Fi signals. The risk is too great!
- Don't Give Out Your Information: to anyone, via email or over the phone!
Research before you sign up
The final and best practice for security is to know your virtual bank.
Before you sign up, know its full security measures.
Then, search to see if it has ever been a victim of a breach—and what steps the bank took to fix the issue.
There is no such thing as a completely safe environment online.
But whatever virtual bank you choose should go the extra mile.
After all, their business is dependent on keeping your money and information safe.
A security-conscious virtual bank is not just helping you.
It is also making sure it can survive in today's competitive banking marketplace.
Just because virtual banking is a relative newcomer doesn't mean it's an unproven commodity.
Follow the steps and look for the security measures above, and you can open a virtual bank account with all the confidence you might have in traditional banks.
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