Are Security Banking Risks Inherent for Online Transactions?

If you’re worried about Internet security, banking online may be a cause of concern for you because of the risks attached to it. On-line banking transactions primarily mean that you will use a personal computer, or even a mobile phone, to conduct your banking activities from a remote location. There are a few elemental details involved in online banking that help define the risks associated with each banking activity.

Closed Networks Vs. Open Networks

On-line banking is completed on both open and closed networks. Closed network banking require clients to directly dial into the banks internal data processor for their transactions. The customers must follow protocols and use specific software for closed network systems. Since the customer has a direct connection with the banks data processor, an authentication for login and password authentication are required. Also, the risk of security breaches and privacy concerns are reduced. This network method is becoming less popular and is very seldom used today.

Open network processing goes through various network channels before it goes to the bank's processor. Since the Internet has become the primary means to access online banking interfaces, there is an inherent risk in exchanging data with the bank.

Risk: Phishing & Falsification of Bank Login Page

Banks typically use a home page that customers use. The bank customer will enter their login and password and access their online banking interface. It is possible to choose a link from an un-trusted third party webpage, or email, that claims to redirect you to your bank’s home page for logging into your account. Once you log in, your credentials are used for bank identity thefts and used to access your real bank account to siphon off your money. Banks try to counter this by having regular information about such fraud sent out to customers, and making customers verify the security certificate of the online banking sites before submitting personal information online.

Risk: Malicious Code – Keystroke Logging

There are various malicious scripts that infect millions of computers everyday. Some of these scripts reside in your computer and silently collect and store login and password information that you may enter on any site. This information is then sent via your internet connection to malicious individuals that use this for unauthorized access to your bank accounts and other sites requiring you to log in. Make sure you run regular malware sweeps on your computer to avoid these traps.

Risk: Interception of Data

Interception of key customer authentication data is a big risk in online banking. Data can be intercepted en route to the bank’s servers, and hackers might be able to copy this information and then use it later on for fraudulent purposes. Most modern banks use 128-bit SSL encryption and firewalls for conveying information to and from the bank’s servers. However, hackers are sometimes able to crack these encryption to access your data for illegal purposes.

Risk: Database Hacking

There is a possibility that the database that stores information about your bank account and security credentials is hacked and your information is compromised. While banks take maximum steps to guard against this, it has happened in the past, and is likely to happen again.

Online banking security certainly has risks, and you should be aware that some banks limit your liability as a customer if you are the victim of an online banking fraud. You should also be aware that FDIC insurance does not cover any issues resulting from online banking frauds.

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Are Security Banking Risks Inherent for Online Transactions?

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