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.
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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Have you noticed that your card shakes a bit when it’s being withdrawn from the card reader?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.
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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.
Everyone is shocked when corporate executives are led off to jail in handcuffs for employee theft and we shake our heads at the magnitude and greed when hearing of these scandals in the news.
A decade ago Enron collapsed under the weight of a massive fraud that included faulty accounting and business practices.
Small companies have been devastated by bookkeepers who pay themselves a little something extra by submitting bogus invoices and forging cheques.
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What is rarely newsworthy is the quantity of loot taken home by employees at all levels on a regular basis.
Employee Theft: No business is immune
Employee theft and fraud is a serious problem in every industry and at every level.
I’m not just talking about taking home a fistful of pens; wrongdoing also includes padding expense accounts, supplier kickbacks, restaurant employees eating the food, and merchandise pilfering.
Canadian retailers lose an estimated $2 million every day to employee theft – almost as much as they lose from shoplifters.
While some corporate executives with huge expense budgets have padded their expense accounts in the tens of thousands of dollars, the most successful thieves take stuff in little bites and stay below the radar.
The thefts may not be discovered until years after they have begun – if ever – and usually by some irregularity.
A study found that the majority of workers believe all employees, at some point, remove items from work for their personal use.
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Interestingly, pens, post-it notes, rulers and envelopes are the most common office supplies taken home.
Fictional accounts
Some crimes are quite creative. Like the above-mentioned bookkeepers, employees invent all kinds of bogus practices.
Personnel managers authorize salaries for fictitious workers; purchasing agents invent nonexistent suppliers; and executives cook the books to justify year-end bonuses.
Related: How To Spot Investment Fraud
It seems to depend on the opportunities available at his or her level.
Time theft
Many workers who wouldn’t even think about taking home so much as a paper clip are involved in time theft.
This includes coming to work late or leaving early, taking an extended lunch break, excessive socializing on the job and wandering around the office trying to look busy.
It’s quite common for workers to fake sick days to extend their vacation time or for other personal activities.
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How many of us check our personal emails, play computer games, post status updates on Facebook or tweet on a regular basis during the work day?
Some people actually use company time and the facilities to operate their own businesses.
Is everyone becoming unethical?
Apparently, taking home a little something extra is a routine practice at all levels of the workplace. Small time pilfering seems insignificant. Who would ever miss those little items that seem so abundant?
The majority of those who are caught show no remorse. They rationalized their behavior by claiming to be mistreated or underpaid – besides the company can afford it.
No matter how a person rationalizes it, though – stealing is stealing. And stealing is costly – to everyone.
What do you think about employee theft in the workplace?
Fixed or variable? Long or short? Whether you’re a buying your first home or renewing your mortgage, finding the right mortgage term can be a difficult decision.
The majority of homeowners opt for a five-year fixed term as protection against future interest rate hikes. However, you’ll pay a premium for that peace of mind, both in terms of higher rates and stiffer penalties to break your mortgage.
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If you’re looking to save money on your mortgage, nine times out of 10 you’re better off with a variable rate. Going variable used to get you big discounts, as much as prime minus 0.80%.
But times have changed, and those discounts have all but disappeared. Robert McLister, editor of Canadian Mortgage Trends, says one-year fixed rates are now below floating rates.
Whereas the best variable rate is currently 2.65%, a one-year fixed term can be had for 2.39% or better.
“That makes them a solid variable rate substitute, especially since one-year rates move with variable rates 93% of the time,” says McLister.
Advantages of a One-Year Fixed Term
At today’s rates, you’ll save nearly $700 per $100,000 of mortgage in the first year with a one-year fixed term versus a five-year fixed term.
So, if you’re looking for a mortgage today, a one-year fixed term might be right for you. Here’s why:
You’ll get more flexibility because you renew your mortgage in 12 months instead of in three to five years.
At that time you can renew into another one-year term, lock-in to a longer-term fixed or take a variable at presumably a better discount than today.
Related: Shopping For Mortgage Rates – Fixed Or Variable?
In a rising interest rate environment, the rate on a one-year mortgage increases slower than a variable rate.
You can lock-in your renewal rate in just six to nine months – you don’t have to wait a year.
One-year fixed terms are also smart for people with short amortizations. That’s because potential rate increases at renewal won’t affect you as much since your payments are mostly principal.
Disadvantages of a One-Year Fixed Term
So why don’t more homeowners choose a one-year term? According to the Canadian Association of Accredited Mortgage Professionals, just one in 16 borrowers take a one-year fixed.
That’s partly because people don’t want the headache of renegotiating every 12 months and partly because variable rates have typically been better.
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There are other disadvantages to going short with your mortgage.
Lenders usually pay your switching costs when you choose a longer term mortgage (three to 10 years).
By contrast, when you move to another lender and select a one or two-year term, lenders often won’t pay your switching costs.
A one-year term can leave you exposed if rates jump, so you’ll need to be well-qualified and open to risk, or have only short-term financing needs.
Well qualified means having good credit, reasonable debt ratios, provable stable income and ample emergency savings or equity.
Related: How Much House Can I Afford?
It’s harder to qualify for a one-year fixed term. With a five-year fixed, you’ll have to prove you can make payments at today’s rates (2.99% – 3.09%).
But if you’re getting a one-year fixed term, most lenders want to ensure you can afford the five-year posted rate – which is currently 5.24%.
That rules out many first time home buyers, who generally have much less equity, net worth, job stability and ability to withstand 20 to 30% payment increases. They’re usually better suited to longer terms.
Fortunately, the rate differential between long and short terms is exceptionally reasonable today. For just 0.6% more than a one-year fixed, homeowners can guard against interest rate hikes for five full years.
Final Thoughts
McLister points out that anyone choosing a one-year fixed term should consider setting their payments based on a rate that’s 2% higher.
“That way you’ll have minimal payment shock if and when rates climb. You’ll also chip away big chunks of principal,” says McLister.
That’s exactly what we did when we bought our house last summer. We went variable, since the discount was prime minus 0.8%, but we set our payments based on a 5% rate.
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The economic outlook remains bleak, so interest rates won’t likely be rising any time soon.
Variable rate aficionados should consider a one-year fixed term; at least as a temporary measure, until we see those big discounts on variable rates come back.