Electronic banking has been around for quite a while in the form of the Automatic Banking Machine (ABM) and Internet Banking.  No doubt, these technologies have made all of our lives easier.

People who are used to brick and mortar banking, my parents for example, still don’t fully trust these methods of managing their money.  I believe this issue of trust is mainly due to a lack of education, combined with negative reporting in the media of hacking attacks.

Related: Mobile Banking: Is This The Future?

No one reports on the tens of thousands of secure transactions that take place every day since it’s not interesting news!

Canadian banks spend tremendous amounts of time and money ensuring that your personal information and money are safe and secure.  While I can’t address global cyber crime and the media I certainly can help with the education part!

To help build your confidence in electronic banking, here’s how banks protect you.

Automated Banking Machines

Fraud prevention at the ABM starts before you even put your card in.  There is a video camera present and the ABM resides in a secure, well lit room.  The outside of the ABM has several security features such as a cover for the PIN pad and a tamper proof card reader.

Have you noticed that your card shakes a bit when it’s being withdrawn from the card reader?  This is another security feature to help thwart criminals from swiping your information.  By shaking the card, the ABM is making it more difficult for a skimming device to get a good read of the card’s information.

Related: Online Fraud Campaign Helps Protect Investors

Once you’ve inserted your card and entered your PIN the chip on your card is used to verify your identity.  The information stored in the chip is encrypted using strong, reliable industry standard algorithms.

All communications from the ABM to your financial institution are encrypted as well.  For more information on ABM, Point of Sale security and fraud visit the Interac website or read this Wikipedia article.

Internet Banking

With Internet Banking, fraud prevention actually starts with your home computer or mobile phone.  The banks own their ABMs, so they can control their security.  They don’t own your personal computer or phone!

These devices need to be secure before you do any banking.  Keep them up to date with the latest security and operating system updates and keep your PC anti virus up to date.  Make sure to have a password set on your laptop, tablet or phone as well.

When you sign in to your online account, your card number and password are transmitted over an encrypted connection to your bank.  The bank performs numerous security checks before you are granted access to your account.

In the case of online brokerage accounts, the banks may require you to enter a second password before you can execute a trade.  They also routinely check their systems for vulnerabilities to make sure the bad guys can’t break in electronically.

Related: How To Bank Online Securely

Fort Knox

Banks take security very seriously and treat your banking information like gold in Fort Knox.  Information is stored in heavily secured areas within non descript buildings, CCTV, guards and thumb print scanners.

Electronically, these systems are monitored 24x7x365 with all kinds of security tools that set off digital alarm bells if anything seems fishy.

Why does fraud still happen?

Despite all of these precautions, unfortunately fraud still happens.  Here are some reasons why:

  • We sometimes use 3rd party “white label” ABMs at a concert venue, gas station or convenience store.  These ABMs might sit in an area that is poorly lit or unmonitored, allowing someone to gain access to the device and install tools used to skim your card information.
  • Our computers or phones might not be kept up to date with the latest patches and anti virus updates, leaving them vulnerable to viruses.  These viruses can steal your banking information without your knowledge.
  • Point of Sale (PoS) devices might be tampered with in a coffee shop, fast food restaurant or retailer.  Sometimes criminals or even staff can install something that steals your card information onto these terminals.

We are also responsible for our electronic banking security

As you can see from the examples above, the end user is almost always in a position to detect a potential security issue.

  • By bringing enough cash with us, we can avoid using a white label ABM located in the back corner of a bar or use a bank’s own ABM to withdraw money somewhere nearby.
  • If we keep our computers updated with the latest patches and anti virus, our computers are less likely to get infected by a virus.
  • When making your next purchase at your local Tim Hortons, give a quick check to make sure the point of sale terminal hasn’t been tampered with by looking for any signs like extra glue, uneven edges or strange wires.

If you suspect you are a victim of fraud, contact your bank immediately.  Canadian banks are very good at taking all reports seriously, taking immediate action and reimbursing lost funds.

The banks are doing their part to protect our hard earned dollars, if we understand how electronic security works, we can do our part as well.  Electronic banking is safe, easy and it’s the way of the future.

Don’t rely on movies like Mission Impossible, Firewall, Gamer or Swordfish to help you understand fraud and hacking!

Andrew Martin is a personal finance and investing blogger from Toronto, Ontario with a background in technology and a passion for travel.  His blog, She Thinks I’m Cheap aims to help Canadians make more money by sharing facts, stories and advice.


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