What is online banking?
Online banking provides 24-hour access to your bank accounts from the comfort of your home, making paying bills, transferring and keeping track of your money easier than ever.
According to the Financial Conduct Authority, one of the many perks of online banking is that you’re 24% less likely to incur unarranged overdraft charges if you use a mobile banking app and SMS alert services. So, what is the definition of online banking, and how does it work?
What is internet banking?
Online or internet banking allows you to access your bank accounts and complete common transactions via your smartphone, tablet or computer.
Also known as mobile banking, it’s usually a free, quick and easy way to pay your bills and transfer money without visiting your local branch or calling your bank.
Available from most banks, you can often download an online banking app to make the process easier. Some of the things you can do via online banking include:
- Checking your bank balance
- Paying your bills
- Transferring money to another bank account
- Setting up & cancelling direct debits and standing orders
- Checking on any mortgages, ISAs, loans or investments you might have
How does online banking work?
Anyone with a bank account can usually access online banking by creating an online account on the bank’s website or downloading the bank’s internet banking app. Once that’s done, you can quickly and easily complete most financial transactions online, whether that’s on your laptop, phone or tablet.
Once your account is set up, you can make transfers to people by adding them as a payee. To do this, you’ll need details such as their name, account number and sort code. You might also need the name of their bank to ensure that the money goes to the right place. Most online banking services use Faster Payments, which usually reach the recipient instantly but can take up to two hours.
Depending on your bank and the online features they provide, you might be able to set up savings accounts, apply for loans or a mortgage and arrange an overdraft via online banking.
How to set up online banking
Internet banking is available from most UK banks, making it an accessible service that is usually straightforward to set up.
To get online access to your bank account, you can register digitally on your bank’s website, in-person by going into a branch or even over the phone.
The registration process will involve a few security steps that might include a password being posted out to you, an appointment in-branch or even the use of a small security device that’s sent directly to you.
If your bank doesn’t offer online banking, you might want to think about switching to another provider, since it does offer benefits that banking in-person doesn’t, as shown below.
Open a current account and other savings accounts online
Transfer money electronically, instead of writing checks
Typically considered safer than traditional banking
Transfer funds quickly and easily
Speedy loan application process
Deposit checks using a mobile device
The advantages and disadvantages of online banking
Advantages of internet banking | Disadvantages of internet banking |
|---|---|
The main advantage of online banking is the convenience to complete your day-to-day transactions from the comfort of your own home. Online banking is great for those who don’t have access to transportation and don’t live near a local bank branch. | The main drawback of online banking is that you might not have access to all the services you can in-branch, such as depositing or withdrawing money, and notary services such as identity verification or obtaining important documents. |
The lack of bricks and mortar can also make for better interest rates, with online-only banks typically offering more competitive rates. This principle can also apply to loans, meaning loans with an online-only bank might mean paying back less interest. | Technology issues can be an unavoidable disadvantage of online banking, as you’ll be relying on your personal computer, tablet or smartphone to access your account. |
Thirdly, the services you access online often have lower fees than what's available in-branch. | Finally, there’s the concern that online banking isn’t as safe as the traditional brick and mortar methods. While you might be more exposed to cyber crime, there are steps both you and your bank can take to minimise this risk. |
Is online banking safe?
Online banking is usually very safe, and there are several things you can do to minimise your exposure to fraud and keep your account and money secure.
- Double and triple-check that you have input the correct details when completing a transaction
- Check your statements frequently so you can identify any strange activity straight away
- Don’t reply to any emails or text messages that claim to be your bank but don’t look quite right. Should you have any queries or concerns, contact the bank directly
- Use a secure Wi-Fi connection and avoid accessing your online banking account when you’re on the Wi-Fi of a cafe, restaurant or anywhere that isn’t your home. If you need to access your account when out and about, use your phone’s 3G, 4G or 5G connection instead
- Don’t use the same passwords across multiple accounts and choose any passwords you do use very carefully
- If you need to access your account and don’t have an internet connection, only do it using a trusted friend or relative’s computer, or visit your local branch instead
- Remember to log out of your account when you’ve finished completing a transaction. Most providers will usually log you out after 15 minutes of inactivity, but you can log out yourself once you’re finished
You can find out more here about how safe online banking is.
Can I access online banking without an internet connection?
If you don’t have access to the internet at home, you should still be able to access online banking from a computer in a branch of your bank.
Alternatively, if you know someone who has a secure internet connection at home, such as a friend or family member, you could use their internet to connect to your online banking.
What should I do if I make a mistake with my online banking?
Don’t worry, if you make a mistake with your online banking or if something goes wrong, such as sending money to the wrong account, you just need to contact your bank as quickly as possible. They’ll make any necessary corrections to your account and ensure all your details are secure. Find out what to do if you fear you have been scammed.
Safe savings with Raisin UK
Whether you’re a complete beginner to online banking or you’re looking for an easy-to-use internet banking service with a reputable provider, you might want to consider opening an account with Raisin UK.
We provide an easy-to-use, simple savings service that allows you to choose from a great choice of different banks. Think of us in the same way you would a travel agent or insurance comparison site, giving you total transparency regarding what’s on offer and enabling you to choose an account that’s just right for you.
Registering at Raisin UK is completely free and easy to do. Find out more and sign-up for free here.