The Internet made our lives simpler in many ways. It negated the need for physical interaction between the concerned parties, thus adding convenience to the trade.
The banking industry was among the sectors which benefited a lot by going online. With the introduction of online banking, the customers can now remotely manage their funds without the need to go to the bank.
The banks found it easier to keep track of funds and provided a lot many services to customers, which helped them increase their userbase and profits. They also found it easier to manage the interbank and intrabank transactions.
The need of lesser human resources allowed them to invest in other areas to improve the overall banking experience for users.
But going online had its cons as well. Bank heists went digital. Robbers found it a lot more convenient to steal money using the internet rather than breaking into the physical resources.
However, the pros outweighed the cons with a significant margin, and the entire banking sector gladly incorporated the digital ways into their existing mechanisms.
In this article, we will go through some of the noteworthy moments and interesting figures related to online banking. It will help you understand the benefits and challenges associated with going digital.
The early traction
The shift from physical banking to digital one was not an overnight process. It took banks some time to adapt to the changes and then wait until the internet was easily accessible for everyone.
There were also a few not so sure about the changes, and the same goes for the customers. It took some time for both parties to understand the benefits of internet banking.
Once the developed nations showcased that online banking is the way to go into the future, the rest of them followed. This phase took lesser time as everyone had an idea of what to expect from this new way of banking
1. Online banking started in the 1980s
Banks started internet banking as early as 1980s. However, the internet was still not a common luxury at that time. It took nearly a decade for the internet to become easily accessible to the hoi polloi, and then internet banking gained some traction.
Banks used to provide telephone banking services at that time. It allowed users to take care of their banking activities from the comforts of their home.
2. New York City was the first place in the US to get online banking
Citibank, Chase Manhattan, Chemical Bank, and Manufacturers Hanover were the first four banks to provide their services for home banking. Home banking included the facility of banking through telephone, as well.
3. 80% of the US banks offered online banking by 2006
It didn’t take long before banks and customers started realizing the benefits of online banking. More than 80% of the US banks provided the online banking facility in the first decade of the 21st century.
4. UK’s first online banking service was launched in 1983
Homelink was the UK’s first online banking service, and it started in 1983. Bank of Scotland backed the service, and it was launched by Nottingham Building Society.
5. Stanford Federal Credit Union offered online banking to all its customers in 1994
Stanford FCU was the first bank in the United States to offer online banking services to all its customers.
It wasn’t exactly a rocketing start for them with only four members in the first month and none in the second. However, it was almost a year ahead of every other bank in the country to offer internet banking services.
(Source: Credit Union Times)
6. Bank of America had almost 3 million online users in 2001
Bank of America reached the mark of 3 million online users at the beginning of the 21st century. It was almost 20% of the company’s user base. People were starting to sway toward online banking because of the benefits associated with it.
(Source: Bank of America)
The numbers game
Once online banking soared to popularity, the numbers started to reflect success. Mobile banking made things a lot merrier.
Once people started trusting online banking, banks saw much of their business happening digitally. With mobile banking options, one can take care of banking on the go.
The freedom and convenience that come with these digital ways were enough to attract banking customers from all age groups and backgrounds to manage their accounts digitally.
Here are a few numbers to showcase the popularity of internet banking and what might be in store for it in the future.
7. More than half of the European population is using online baking
The percentage of the population using online banking in Europe has doubled between the years 2017 and 2018.
The younger generation seems more responsible for the growing popularity of online banking in the region. 68% of adults aged between 24 to 25 years use internet banking.
8. India has the highest percentage of users involved in mobile banking
India has the highest percentage of mobile banking users in proportion to the number of current account holders. Sweden falls second in the list. Malaysia, Australia, and Italy were the countries with the biggest growth recorded in the domain.
9. 2 billion people using digital banking services in 2018
Nearly 40% of the world’s adult population was expected to indulge in digital banking in the year 2018.
Growing markets such as the ones in India and China are among the key factors for such numbers. Digital marketing includes all the mediums, such as tablets, laptops, smartphones, and PCs.
10. Less than 10% of all banking transactions happen within the branch network
Let’s face it, digital banking has taken over the ways people store and move their money.
Fifteen years ago, more than 50% of the banking transactions weren’t digital. Digital means did not take long to capitalize on the banking space since their introduction.
However, it is this digitization that is now threatening the very existence of banking institutions. 100% digital banks, or Neobanks, or BaaS are proving to be a significant threat to them.
(Source: Payments Card & Mobiles)
11. 61% of people check a bank’s mobile capabilities before opening an account
The digital services provided by a bank are now among the key factors that a person considers before associating with the bank.
61% of them would focus on the mobile banking facilities that come with the banking account, and 47% of them specifically look for a feature that would let them temporarily turn off a payment card from their phone.
The banks not only need to involve all the digital features, but coming up with new and innovative ones can help them get a lot more traction.
(Source: Business Insider)
12. 89% of the US banking customers use mobile banking
The shift towards digital has affected a lot of industries, and banking is one of them. The customers now prefer being able to manage their accounts whenever they want.
Nearly everyone is into digital banking these days, and a significant portion of such users are taking up mobile banking to enjoy more freedom.
89% of the US bank account holders use mobile banking to manage accounts, and mobile banking is the primary way of managing accounts for 70% of them.
(Source: Business Insider)
What’s up with digital-only banks
Digital-only banks or Neobanks seem to be gaining a lot of popularity lately. These banks don’t usually have physical branches, unlike the traditional banking institutions we are used to.
Since digital-only banks save a lot by not having a physical presence, it is much easier for them to provide better returns to customers. These fintech companies provide the user with a lot of resources to manage their money better.
Past few years have seen substantial growth in the number of Neobanks. But it still might be a bit too early to say if they can replace the existing banking institutions.
Some communities seem to be accepting digital-only banks a lot better compared to others. It will also be interesting to see how the upcoming generations affect the landscape.
Here are a few statistics to throw some more light on the issue.
13. 45 Neobanks have been established in the past 3 years
Neobanks are different from the conventional banks, as we know, is because the customer interacts with Neobanks digitally. They usually do not have branches and offer their services digitally.
There has been an increase in the number of neo banks cropping up around the scene. Only 6 Neobanks started between 2004 and 2011, 28 in between 2011 and 2015, and now 45 new Neobanks started between 2016 and 2019.
There might come a time when Neobanks would be the primary preference of most account holders.
14. 85 million Europeans will be using Neobanks by 2023
With the high costs associated with traditional banking practices and the preference of digital means by Millennials and Generation Z, the future seems bright for Neobanks.
As the younger generation takes over, things will sway more in favor of technology. An estimate says that there will be 85 million Neobank users in Europe by 2023.
(Source: AT Kearney)
15. Only 3% of Millennials in the US have a primary Neobank account
Even though the United States is home to the first Neobank in the world, the American population seems a bit hesitant to move towards a digital economy.
The general perception around the globe is that the newer generation is keener on going digital, but the stats say otherwise, at least for the United States.
Only 3% of Millennials in the country are using Neobanks as their primary method of banking. The percentage slips down to 1.5% and 0.8% for Gen Xers and Baby Boomers respectively
16. There are only 7 million deposit accounts in digital banks in the US
Another stat which emphasizes the fact that not everyone might be ready to start banking in digital ways only.
There are only 7 million deposit accounts at digital banks. It is tough for people to comprehend the reason behind such numbers.
One rationale can be that since the conventional banking systems are providing all the digital features, customers might not mind the slightly higher fee to stay with more reputable brands.
17. Neobank market is estimated to grow at the rate of 50.6% between 2017-20
Neobanks are gaining popularity among customers and investors alike. Customers appreciate the lower fee and higher freedom associated with these digital banks or BaaS. Investors see this as the right time to invest in budding neobanks around the world.
The reasons mentioned above have provided some serious boost to the neobank market. And it is expected to grow at 50.6% annually.
18. There are more than 161 million digital banking users in the USA
The growth in the number of digital bankers seems to have plateaued in the past few reasons. It is mostly because nearly everyone is already engaged in digital banking.
The growth in the number of digital banking users seems consistent with the growth in the number of bank account holders.
There are more than 160 million digital banking customers in the word’s biggest economy.
19. UK expects to have 35 million customers for digital-only banks by mid-2020
Neobanks in England are experiencing tremendous growth. The trends are similar to what is being observed all across Europe.
The number of digital-only banks is increasing in the country, and customers seem comfortable opening their primary accounts in such banks.
The customer acquisition rate for these banks is 170% in the country, which would help them have more than 35 million customers in the first half of 2020.
20. 55.4 million Millennials will use digital banking in 2019
Millennials are becoming drivers of the economy in the US, and approximately 55 million of them will use digital marketing in 2019.
But they also seem to stick with existing banking institutions rather than going with the entirely digital ones. These trends are almost opposite what the banking sector is experiencing in Europe.
Online banking and cybercrime
As the banks started going online, criminals followed. It did not take them long to figure out how to take advantage of online banking mechanisms.
As banking systems started providing a variety of online services to their customers, cybercriminals found new avenues to try to exploit the system.
Frauds and crimes related to online banking aren’t a rarity these days. Sometimes these criminals take advantage of loopholes in the banking system, or they might use social engineering and fool the user into doing something stupid.
We have compiled a few such instances in which the cybercriminals seem to be ahead of banking institutions in the ongoing cat and mouse game.
21. Banks around the world lose $1 trillion to cybercrimes annually
Cybercriminals keep coming with new ways to find loopholes in the system and get away with the so-called digital robberies.
Even though banks spend a lot on cybersecurity, there is always a cat and mouse change between the cybersecurity and experts.
The president of World Economic Forum announced that banks are now losing $1 trillion to cybercrimes globally.
22. The average cybercrime cost per company is $18.37 million for the banking sector
The banking sector is the worst hit by cybercrime as compared to any other industry. It’s only obvious that cybercriminals will try to hit organizations where all the money is.
The increasing number of cyberattacks on the banking sector can turn out to be a huge problem as more and more people are now incorporating digital banking into their lives.
23. Hackers steal $100 million from the central bank of Bangladesh
Hackers transferred $100 million from Bangladesh Bank into their accounts. The criminals moved the funds overseas, making it difficult for the authorities to trace or recover the money.
$100 million was only a part of what the hackers had in their minds. The bank was able to stop the transfer of another $870 million.
There were speculations that North Korean hackers were behind the heist, but there wasn’t any significant evidence to prove the same.
(Source: Bank Info Security)
24. When Russian hackers made Taiwanese ATMs spit out NT$83 million
It is among the most discussed bank heist which had both cyber and physical involvement of the criminals.
The criminals first hacked into the bank’s servers and instructed multiple ATMs to dispense cash. The team of robbers then visited these different ATM locations to collect money before they fled to Russia.
The malware, Carbanak, used in the heist, was allegedly used for a lot of other cybercrimes against banking institutions around the world.
(Source: South China Morning Post)
25. Hackers steal £650 million from banks around the world in what is being called the biggest bank raid ever
Banks around the world collectively lost almost £650 million after a worldwide attack. It was said it took hackers two years to make their plan come to fruition.
Then injected malware in bank computers. The malware relayed a lot of sensitive information back to the hackers, allowing them to design a plan of action.
They created dummy accounts and wired money and made ATMs dispense cash without the user cards. Russian hackers were believed to be behind this attack.
(Source: The Telegraph)
26. 20 million South Koreans lost their credit card information
This was an insider job and did not require any brilliant hacking skills at all. A contractor working for a credit scoring company downloaded the information in a USB drive.
Apparently, the credit card companies provided the credit scoring company with way too much information. The contractor then sold this information to marketing firms.
The incident brought the careless attitude of credit card companies towards the personal information of their clients.
27. Malware which keeps a record of ATM transactions, detected in Indian banks
Kaspersky discovered a malware in India’s financial institutions, which keeps track of ATM transactions and even allows the hackers to remotely control the infected devices.
The infamous North Korean hacker group is believed to be responsible for spreading the malware.
(Source: Economic Times)
28. Two-factor authentication isn’t that safe after all
2FA was considered to be a failproof mechanism against someone trying to access accounts without necessary permissions.
However, when some Metro bank customers got compromised by attacks that bypassed 2FA, cybersecurity experts found themselves with a new problem to deal with.
Telecom companies use the SS7 protocol to manage texts and calls. The hackers were able to find an opening and exploit the protocol. It allowed them to redirect the OTPs that are supposed to reach the user’s device to one they manage. Rest is a cakewalk from this point forward.
(Source: IT Pro)
29. Tesco bank made it easy for hackers to guess card numbers and suffered a £16.4 million fine and lost £2.26 million to hackers
A series of mistakes made by Tesco bank, which included them making it easier for the criminals to guess the card number, led them into quite a lot of trouble.
The debit cards issued the bank were compatible with Pos 91, and the fact that that the bank issued cards were numbered sequentially, allowed hackers to make illegal transactions worth £2.26 million.
Citing the failure of the bank to prevent these attacks, the Financial Conduct Authority of the UK slapped a fine of £16.4 million on the bank.
(Source: Bank Info Security)
30. Disgruntled bitcoin users launched a DDoS attack on People’s Bank of China
Some attacks on banking institutions can also be a mark of protest rather than someone trying to make a fortune out of it.
Something similar happened in the case of the People’s Bank of China. The bank experienced a DDoS attack, which was supposedly carried out by angry Bitcoin users.
The attack came weeks later after the announcement that financial institutions in China would no longer support Bitcoin. The largest Bitcoin exchange in China also discontinued its services in Chinese currency.
(Source: The Diplomat)
Data Sources & References
- Credit Union Times
- Bank of America
- Payments Card & Mobiles
- Business Insider
- Business Insider
- AT Kearney
- Bank Info Security
- South China Morning Post
- The Telegraph
- Economic Times
- IT Pro
- Bank Info Security
- The Diplomat