RESEARCH STARTER

Online and Mobile Banking

Online and mobile banking have revolutionized the way customers interact with their financial institutions, enabling account access through computers and mobile devices connected to the Internet. These banking services allow users to view accounts, manage personal information, transfer funds, set up automatic bill payments, and deposit checks, providing 24-hour convenience. Originating in the 1990s, online banking has grown substantially, leading to the emergence of online-only banks without physical branches. Despite advanced security measures, users must remain vigilant against unauthorized access, as online banking carries inherent risks, particularly if basic safety principles are not followed.

Historically, Stanford Federal Credit Union was the first to offer online banking in 1994, which led to significant growth in the sector by the early 2000s. The introduction of the iPhone in 2007 further accelerated the adoption of mobile banking. Users benefit from avoiding long lines and accessing services internationally; however, they may miss the personalized customer service found in traditional branches. While online banking is generally safe for consumers, it is crucial to research a bank's security policies before opening an account, given the potential for cyber threats and the importance of safeguarding personal information. Overall, online and mobile banking are key innovations that have shaped the modern banking landscape, making it essential for consumers to stay informed about both the advantages and risks involved.

Full Article

Online and mobile banking are tools developed by commercial banks and credit unions that allow customers to conveniently access their accounts using computers or mobile devices connected to the Internet. Customers using online or mobile banking can view savings and checking accounts, manage their personal data, obtain bank statements, order supplies, transfer funds between accounts, set up automatic bill payments, peer-to-peer payments, and deposit checks. The development of online and mobile banking systems has been one of the key innovations in personal banking since the 1990s. This has led to the emergence of online-only banking, in which banks do not have physical locations and handle all customer transactions remotely.

Although banking institutions have developed complex systems to protect their customers’ privacy and security, customers using online and mobile banking still place themselves at an increased risk of unauthorized account access if proper security practices are not followed. However, internet and mobile banking are considered safe so long as users adhere to basic principles regarding computer security and the protection of personal information. In addition, customers are advised to research account protection policies, including fraud and error-resolution protections, before opening an account at a bank or credit union.

History of Virtual Banking

The first financial institution to offer online banking was the Stanford Federal Credit Union, which debuted banking through a web browser in 1994. Interest in online purchasing and banking surged around the turn of the twenty-first century as internet use expanded, and after the Y2K "crisis", the anticipation that a glitch in computer calendars, also known as the "millennium bug," would cause a widespread cascade of problems at midnight on January 1, 2000, proved to have been exaggerated and misunderstood. By 2001, more than eight million customers were using online banking in the United States. That number rose to 216.8 million by 2025. The Federal Financial Institutions Examination Council (FFIEC), a governmental agency that develops national standards for the banking industry, updated guidance on authentication and security for online banking in 2005.

Direct banks, banking institutions that do not have physical locations and offer their services entirely through telephone, Internet, or mobile access, first emerged in the late 1980s in Europe. The direct-banking industry expanded rapidly in the twenty-first century, with institutions such as ING Direct and E-Trade opening virtual banking services in many US cities.

The Apple iPhone, which debuted in 2007, introduced a widely used full web browser on a touchscreen smartphone, and it inspired a global trend toward using smartphones in business and commerce. In the United States, banks such as Citibank, Wachovia, Bank of America, ING Direct, and Wells Fargo were among the first to develop and offer mobile applications that allowed customers to access their checking and savings accounts.

By 2025, the primary services offered through online and mobile banking apps included the ability to access account balances and transaction records remotely, to transfer money between accounts and from person to person, and to save, print, or view bank statements. Many banks also allow customers to manage recurring payments to credit cards, utility companies, and other businesses, to deposit checks via smartphones by photographing the front and the back, to access personal documentation, and to chat with customer service representatives.

Benefits and Disadvantages

The primary benefit of online and mobile banking is convenience. Online banking provides twenty-four-hour access to account information. The advent of mobile deposits, online checking, and online payments, coupled with mobile banking, vastly expanded users' ability to conduct important transactions from home. This is especially beneficial for those who have difficulty visiting a bank during business hours.

Online and mobile banking also made it possible for customers to access their accounts internationally, such as while on vacation or traveling for business. Online and mobile banking allow customers to avoid waiting in lines at bank branches, and many banking institutions offer personal customer service online, including virtual real-time chat and e-mail communication. In addition, banks can provide users with information on additional services, such as applying for loans and opening new accounts, and allow users to apply for these services online.

The primary disadvantage of online and mobile banking is the sacrifice of personal customer service, familiarity, and personal identity protection. At branch locations, bank tellers can verify a customer’s identity directly, thus reducing the possibility of unauthorized account access. Online banking effectively eliminates in-person identity verification but often relies on digital identity verification methods such as passwords, multifactor authentication, and biometric login. In addition, some customers may prefer personal interactions with bank employees, which may be difficult to replicate for virtual customers.

Safety and Security

In 2015, David E. Sanger and Nicole Perlroth reported in the New York Times that, according to an investigation by internet security firm Kaspersky Lab, a group of internet hackers had used malicious programs known as malware to steal as much as $1 billion from more than one hundred financial institutions in thirty nations over the course of two years. By 2024, there were 3,158 publicly reported data breaches, and the global average cost of a data breach reached an all-time high of $4.88 million. Such incidents have become more common as more people use online banking, so banks have had to expand security measures and protections. Some precautionary measures banks have added to their online systems are multi-factor authentication, which requires users to verify their identity using biometrics or one-time passcodes in addition to passwords; end-to-end encryption, which ensures that sensitive data cannot be read or used if intercepted; and artificial intelligence-powered threat detection, which analyzes data for abnormal patterns to detect and respond to threats in real time.

According to the Federal Deposit Insurance Corporation (FDIC), online and mobile banking is generally safe for most consumers, as long as customers adhere to personal safety guidelines and only conduct banking with federally insured, legitimate banking institutions. The rise of internet-only banking has left consumers vulnerable to exploitation by illegitimate banking institutions or by emerging banks that lack the ability to protect consumer assets. The FDIC therefore recommends that consumers research a bank before opening an account online and only bank at institutions that are insured by the FDIC. Similarly, credit union customers are advised to bank only at credit unions that are insured by the National Credit Union Administration (NCUA), which provides protections against failure similar to those the FDIC provides to banks.

While the FDIC guarantees against loss due to bank failure, it does not guarantee against theft. However, banking institutions typically have a banker’s blanket bond, which is a separate insurance policy to protect the funds stored in the bank against theft, embezzlement, fire, flood, earthquake, or other incidents. Before joining an online bank, customers are encouraged to ensure that the bank offers insurance to protect customer accounts in the case of theft or cyberattack.

Most incidents of theft or unauthorized account access are a result of user error. Security experts recommend that users avoid sharing personal or sensitive information, especially when using mobile or online banking. Theft of passwords or other identifying information can allow criminals to access a customer’s bank accounts. Banks and security experts recommend that users avoid engaging with strangers online or opening e-mails or hyperlinks sent by strangers. These types of e-mails and communications are a primary avenue for introducing malware onto a computer or mobile phone, and malware can transmit sensitive data about a user’s browsing history.

The use of passwords and other security measures has greatly enhanced web security since the advent of online banking, but security experts argue that online safety is still highly dependent on the user. Customers are encouraged to choose unique, original passwords for online banking and for mobile banking access. Users are also cautioned to avoid giving away passwords or other sensitive information, such as Social Security numbers.

Many banking institutions offer identity theft protection, either as part of basic account services or for an additional fee. Consumers should research a bank’s identity theft and unauthorized access protection services before deciding to open an account or begin banking online. If unauthorized access is detected or suspected, users should contact their banking institution immediately. Many banking institutions offer twenty-four-hour phone or digital reporting for customers suspecting crime or unauthorized access to their accounts.

Impact

Online and mobile banking are the most important innovations of the banking industry in the twenty-first century, and the shift towards mobile services has greatly influenced the development of banking services. In 2013, the Pew Research Center reported that more than half of Americans were using online banking, and approximately 32 percent of US adults and 35 percent of all cellphone users used some form of mobile banking. By 2024, 55 percent of US adults used online banking, and more than half of US consumers conducted their banking through mobile apps on cellphones, according to the American Bankers Association.

Online and mobile banking services have continued to evolve and were a major focus of banking development in the first half of the 2020s. Due to lower operating costs, online-only banks are becoming more popular as they present lower overhead costs for banks and greater ease of access for customers. According to the University of Chicago's Booth School of Business, online banks have increased their deposits by a factor of thirty between 2001 and 2024, which is triple the rate of traditional banks. Interest rates and annual yields were also higher for online banks as compared to brick-and-mortar branch banks.


Bibliography

Dela Luna, Claire. “Cybersecurity in Banking: Threats, Solutions & Best Practices.” eSecurity Planet, 13 Sept. 2024, www.esecurityplanet.com/cloud/cyber-security-in-banking/. Accessed 6 Mar. 2026.

“Digital Banking Statistics.” Self, Oct. 2024, www.self.inc/info/digital-banking-statistics/. Accessed 6 Mar. 2026.

Fox, Susannah. "51% of US Adults Bank Online." Pew Research Center, 7 Aug. 2013, www.pewresearch.org/internet/2013/08/07/51-of-u-s-adults-bank-online/. Accessed 6 Mar. 2026.

Gonzalez, Deborah. Managing Online Risk: Apps, Mobile, and Social Media Security. Butterworth, 2015.

Heeb, Gina. “Main Street Banking Model Is Being Squeezed.” The Wall Street Journal, 24 Apr. 2024, www.wsj.com/finance/banking/main-street-banking-model-is-being-squeezed-424ff689. Accessed 6 Mar. 2026.

"Is Digital Banking for Me?" Federal Deposit Insurance Corporation (FDIC), 1 Aug. 2023, www.fdic.gov/consumers/consumer/news/april2020.html. Accessed 6 Mar. 2026.

Kardaszyńska, Dagmara. “Key Digital Banking Statistics – Trends and Insights in 2025.” LiveBank, 23 July 2025, livebank24.com/digital-banking/key-digital-banking-statistics-trends-and-insights-in-2025/. Accessed 6 Mar. 2026.

Lavingia, Christina. "Should You Break Up with Your Bank and Go Online?" US News & World Report, 5 Feb. 2015, www.usnews.com/banking/articles/should-you-break-up-with-your-bank-and-go-online. Accessed 6 Mar. 2026.

Lowry, Erin. "The Best Online Banks for Linked Checking and Savings Accounts." US News & World Report, 13 Jan. 2015, www.usnews.com/banking/articles/the-best-online-banks-for-linked-checking-and-savings-accounts. Accessed 6 Mar. 2026.

“National Survey: Record Number of Bank Customers Use Mobile Apps More Than Any Other Channel to Manage Their Accounts.” American Bankers Association, 22 Nov. 2024, www.aba.com/about-us/press-room/press-releases/consumer-survey-banking-methods-2024. Accessed 6 Mar. 2026.

Palmer, Kimberly. "10 Ways to Stay Safe While Shopping Online." US News & World Report, 22 Nov. 2011, money.usnews.com/money/personal-finance/articles/2011/11/22/10-ways-to-stay-safe-while-shopping-online. Accessed 6 Mar. 2026.

Sanger, David E., and Nicole Perlroth. "Bank Hackers Steal Millions via Malware." New York Times, 14 Feb. 2015, www.nytimes.com/2015/02/15/world/bank-hackers-steal-millions-via-malware.html. Accessed 6 Mar. 2026.

Thies, Becca. “Cybersecurity Industry Statistics: ATO, Ransomware, Breaches & Fraud.” SpyCloud, 20 Feb. 2026, spycloud.com/blog/cybersecurity-industry-statistics-account-takeover-ransomware-data-breaches-bec-fraud/. Accessed 6 Mar. 2026.

Weinberg, Neil. “Online Banks Are Passing on Higher Rates Faster.” Chicago Booth, University of Chicago, 23 Oct. 2023, www.chicagobooth.edu/review/online-banks-are-passing-on-higher-rates-faster. Accessed 6 Mar. 2026.

Full Article

Online and mobile banking are tools developed by commercial banks and credit unions that allow customers to conveniently access their accounts using computers or mobile devices connected to the Internet. Customers using online or mobile banking can view savings and checking accounts, manage their personal data, obtain bank statements, order supplies, transfer funds between accounts, set up automatic bill payments, peer-to-peer payments, and deposit checks. The development of online and mobile banking systems has been one of the key innovations in personal banking since the 1990s. This has led to the emergence of online-only banking, in which banks do not have physical locations and handle all customer transactions remotely.

Although banking institutions have developed complex systems to protect their customers’ privacy and security, customers using online and mobile banking still place themselves at an increased risk of unauthorized account access if proper security practices are not followed. However, internet and mobile banking are considered safe so long as users adhere to basic principles regarding computer security and the protection of personal information. In addition, customers are advised to research account protection policies, including fraud and error-resolution protections, before opening an account at a bank or credit union.

History of Virtual Banking

The first financial institution to offer online banking was the Stanford Federal Credit Union, which debuted banking through a web browser in 1994. Interest in online purchasing and banking surged around the turn of the twenty-first century as internet use expanded, and after the Y2K "crisis", the anticipation that a glitch in computer calendars, also known as the "millennium bug," would cause a widespread cascade of problems at midnight on January 1, 2000, proved to have been exaggerated and misunderstood. By 2001, more than eight million customers were using online banking in the United States. That number rose to 216.8 million by 2025. The Federal Financial Institutions Examination Council (FFIEC), a governmental agency that develops national standards for the banking industry, updated guidance on authentication and security for online banking in 2005.

Direct banks, banking institutions that do not have physical locations and offer their services entirely through telephone, Internet, or mobile access, first emerged in the late 1980s in Europe. The direct-banking industry expanded rapidly in the twenty-first century, with institutions such as ING Direct and E-Trade opening virtual banking services in many US cities.

The Apple iPhone, which debuted in 2007, introduced a widely used full web browser on a touchscreen smartphone, and it inspired a global trend toward using smartphones in business and commerce. In the United States, banks such as Citibank, Wachovia, Bank of America, ING Direct, and Wells Fargo were among the first to develop and offer mobile applications that allowed customers to access their checking and savings accounts.

By 2025, the primary services offered through online and mobile banking apps included the ability to access account balances and transaction records remotely, to transfer money between accounts and from person to person, and to save, print, or view bank statements. Many banks also allow customers to manage recurring payments to credit cards, utility companies, and other businesses, to deposit checks via smartphones by photographing the front and the back, to access personal documentation, and to chat with customer service representatives.

Benefits and Disadvantages

The primary benefit of online and mobile banking is convenience. Online banking provides twenty-four-hour access to account information. The advent of mobile deposits, online checking, and online payments, coupled with mobile banking, vastly expanded users' ability to conduct important transactions from home. This is especially beneficial for those who have difficulty visiting a bank during business hours.

Online and mobile banking also made it possible for customers to access their accounts internationally, such as while on vacation or traveling for business. Online and mobile banking allow customers to avoid waiting in lines at bank branches, and many banking institutions offer personal customer service online, including virtual real-time chat and e-mail communication. In addition, banks can provide users with information on additional services, such as applying for loans and opening new accounts, and allow users to apply for these services online.

The primary disadvantage of online and mobile banking is the sacrifice of personal customer service, familiarity, and personal identity protection. At branch locations, bank tellers can verify a customer’s identity directly, thus reducing the possibility of unauthorized account access. Online banking effectively eliminates in-person identity verification but often relies on digital identity verification methods such as passwords, multifactor authentication, and biometric login. In addition, some customers may prefer personal interactions with bank employees, which may be difficult to replicate for virtual customers.

Safety and Security

In 2015, David E. Sanger and Nicole Perlroth reported in the New York Times that, according to an investigation by internet security firm Kaspersky Lab, a group of internet hackers had used malicious programs known as malware to steal as much as $1 billion from more than one hundred financial institutions in thirty nations over the course of two years. By 2024, there were 3,158 publicly reported data breaches, and the global average cost of a data breach reached an all-time high of $4.88 million. Such incidents have become more common as more people use online banking, so banks have had to expand security measures and protections. Some precautionary measures banks have added to their online systems are multi-factor authentication, which requires users to verify their identity using biometrics or one-time passcodes in addition to passwords; end-to-end encryption, which ensures that sensitive data cannot be read or used if intercepted; and artificial intelligence-powered threat detection, which analyzes data for abnormal patterns to detect and respond to threats in real time.

According to the Federal Deposit Insurance Corporation (FDIC), online and mobile banking is generally safe for most consumers, as long as customers adhere to personal safety guidelines and only conduct banking with federally insured, legitimate banking institutions. The rise of internet-only banking has left consumers vulnerable to exploitation by illegitimate banking institutions or by emerging banks that lack the ability to protect consumer assets. The FDIC therefore recommends that consumers research a bank before opening an account online and only bank at institutions that are insured by the FDIC. Similarly, credit union customers are advised to bank only at credit unions that are insured by the National Credit Union Administration (NCUA), which provides protections against failure similar to those the FDIC provides to banks.

While the FDIC guarantees against loss due to bank failure, it does not guarantee against theft. However, banking institutions typically have a banker’s blanket bond, which is a separate insurance policy to protect the funds stored in the bank against theft, embezzlement, fire, flood, earthquake, or other incidents. Before joining an online bank, customers are encouraged to ensure that the bank offers insurance to protect customer accounts in the case of theft or cyberattack.

Most incidents of theft or unauthorized account access are a result of user error. Security experts recommend that users avoid sharing personal or sensitive information, especially when using mobile or online banking. Theft of passwords or other identifying information can allow criminals to access a customer’s bank accounts. Banks and security experts recommend that users avoid engaging with strangers online or opening e-mails or hyperlinks sent by strangers. These types of e-mails and communications are a primary avenue for introducing malware onto a computer or mobile phone, and malware can transmit sensitive data about a user’s browsing history.

The use of passwords and other security measures has greatly enhanced web security since the advent of online banking, but security experts argue that online safety is still highly dependent on the user. Customers are encouraged to choose unique, original passwords for online banking and for mobile banking access. Users are also cautioned to avoid giving away passwords or other sensitive information, such as Social Security numbers.

Many banking institutions offer identity theft protection, either as part of basic account services or for an additional fee. Consumers should research a bank’s identity theft and unauthorized access protection services before deciding to open an account or begin banking online. If unauthorized access is detected or suspected, users should contact their banking institution immediately. Many banking institutions offer twenty-four-hour phone or digital reporting for customers suspecting crime or unauthorized access to their accounts.

Impact

Online and mobile banking are the most important innovations of the banking industry in the twenty-first century, and the shift towards mobile services has greatly influenced the development of banking services. In 2013, the Pew Research Center reported that more than half of Americans were using online banking, and approximately 32 percent of US adults and 35 percent of all cellphone users used some form of mobile banking. By 2024, 55 percent of US adults used online banking, and more than half of US consumers conducted their banking through mobile apps on cellphones, according to the American Bankers Association.

Online and mobile banking services have continued to evolve and were a major focus of banking development in the first half of the 2020s. Due to lower operating costs, online-only banks are becoming more popular as they present lower overhead costs for banks and greater ease of access for customers. According to the University of Chicago's Booth School of Business, online banks have increased their deposits by a factor of thirty between 2001 and 2024, which is triple the rate of traditional banks. Interest rates and annual yields were also higher for online banks as compared to brick-and-mortar branch banks.


Bibliography

Dela Luna, Claire. “Cybersecurity in Banking: Threats, Solutions & Best Practices.” eSecurity Planet, 13 Sept. 2024, www.esecurityplanet.com/cloud/cyber-security-in-banking/. Accessed 6 Mar. 2026.

“Digital Banking Statistics.” Self, Oct. 2024, www.self.inc/info/digital-banking-statistics/. Accessed 6 Mar. 2026.

Fox, Susannah. "51% of US Adults Bank Online." Pew Research Center, 7 Aug. 2013, www.pewresearch.org/internet/2013/08/07/51-of-u-s-adults-bank-online/. Accessed 6 Mar. 2026.

Gonzalez, Deborah. Managing Online Risk: Apps, Mobile, and Social Media Security. Butterworth, 2015.

Heeb, Gina. “Main Street Banking Model Is Being Squeezed.” The Wall Street Journal, 24 Apr. 2024, www.wsj.com/finance/banking/main-street-banking-model-is-being-squeezed-424ff689. Accessed 6 Mar. 2026.

"Is Digital Banking for Me?" Federal Deposit Insurance Corporation (FDIC), 1 Aug. 2023, www.fdic.gov/consumers/consumer/news/april2020.html. Accessed 6 Mar. 2026.

Kardaszyńska, Dagmara. “Key Digital Banking Statistics – Trends and Insights in 2025.” LiveBank, 23 July 2025, livebank24.com/digital-banking/key-digital-banking-statistics-trends-and-insights-in-2025/. Accessed 6 Mar. 2026.

Lavingia, Christina. "Should You Break Up with Your Bank and Go Online?" US News & World Report, 5 Feb. 2015, www.usnews.com/banking/articles/should-you-break-up-with-your-bank-and-go-online. Accessed 6 Mar. 2026.

Lowry, Erin. "The Best Online Banks for Linked Checking and Savings Accounts." US News & World Report, 13 Jan. 2015, www.usnews.com/banking/articles/the-best-online-banks-for-linked-checking-and-savings-accounts. Accessed 6 Mar. 2026.

“National Survey: Record Number of Bank Customers Use Mobile Apps More Than Any Other Channel to Manage Their Accounts.” American Bankers Association, 22 Nov. 2024, www.aba.com/about-us/press-room/press-releases/consumer-survey-banking-methods-2024. Accessed 6 Mar. 2026.

Palmer, Kimberly. "10 Ways to Stay Safe While Shopping Online." US News & World Report, 22 Nov. 2011, money.usnews.com/money/personal-finance/articles/2011/11/22/10-ways-to-stay-safe-while-shopping-online. Accessed 6 Mar. 2026.

Sanger, David E., and Nicole Perlroth. "Bank Hackers Steal Millions via Malware." New York Times, 14 Feb. 2015, www.nytimes.com/2015/02/15/world/bank-hackers-steal-millions-via-malware.html. Accessed 6 Mar. 2026.

Thies, Becca. “Cybersecurity Industry Statistics: ATO, Ransomware, Breaches & Fraud.” SpyCloud, 20 Feb. 2026, spycloud.com/blog/cybersecurity-industry-statistics-account-takeover-ransomware-data-breaches-bec-fraud/. Accessed 6 Mar. 2026.

Weinberg, Neil. “Online Banks Are Passing on Higher Rates Faster.” Chicago Booth, University of Chicago, 23 Oct. 2023, www.chicagobooth.edu/review/online-banks-are-passing-on-higher-rates-faster. Accessed 6 Mar. 2026.

More Like ThisRelated Articles

Related Articles (5)

Related Articles (5)