Mobile Banking : Pros and Cons

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Earlier this month eleven people were indicted in the single largest case of identity theft to date. Over the course of several years, 40 million identities of consumers were stolen by hackers who were able to detect which retailers transmitted customer info using unencrypted servers—leading to countless cases of credit fraud.  This incident brought the safety of simply swiping a card into question. But, if examined closely, it should cause consumers to truly examine the risk involved with several modern conveniences. And it should lead each of us to put our own plan for identity theft prevention in place. 

One of the conveniences that currently has consumers questioning whether it is safe or not is the relatively new practice of banking from one’s cell phone or Personal Digital Assistant (PDA). Banks are now spending big money to advertise the new system which allows account holders to check balances or initiate transfers anytime and from anywhere. Although, identity theft experts aren’t yet panicked, many of them have admitted that it is only a matter of time before thieves find a way to break into this system. Online identity theft is a huge problem that leads to numerous cases of credit fraud and bank account fraud each and every year. Cell phones should expect to encounter some of the same problems.

Before you make up your own mind about the issue, you can examine some pros and cons below so you will know exactly what you should ask your bank about identity theft protection before signing up.

Pros: Anytime, Anywhere is Good

1) Banks are currently offering three ways to connect with them from your phone (besides calling). Each bank has its own way of breaking into this new market, and each phone is equipped with its own set of limitations. Because of that banks are trying to offer something for everyone with a cell phone. The most common way is through a web browser on phones with internet surfing options. Basically, you log on to your bank account on your phone in much the same way you log on via the computer. Only the screen is smaller and you have limited options. But the basics like account balances and account transfers are still there. Other banks are offering similar options, only you access the bank through special software you’ve downloaded onto your phone. And, a few banks even offer balance information and other similar features via text message. So, really it’s a matter of preference and phone compatibility. Just remember to keep your identity theft protection plan—and not just convenience—in mind when you make your selection.

2) Account numbers aren’t usually transmitted over wireless cell phone connections. When logging onto your bank’s website from your phone, you will notice one major difference from logging on online. You aren’t asked for your account information, and even once you access your account your account number is never visible so it is less likely (although not impossible) to be compromised. So, in the long run, this might eliminate some of the exposure to the problems encountered with computer based banking that lead to online identity theft. 

3) Most banks use encrypted servers for all wireless transactions. Unlike the retailers who lost 40 million customer account numbers (and led to countless cases of credit card fraud) due to using unencrypted servers, banks aren’t taking that risk. Although the safety guarantees vary from bank to bank, most of them are not handling your information irresponsibly. If handled correctly, wireless connections can be more secure than wired connections. Using encrypted servers definitely increases your safety, but it still doesn’t guarantee it. So, a product like ID Secure might be worth considering. 

4) The added service is generally free (from the bank). Most banks aren’t charging more for the added service, but cell phone companies still charge increased fees for internet usage from your phone. Unlike some of the identity theft protection or bill pay features banks offer, they aren’t offering the convenience of mobile banking just so they can make more money off of you. Since some mobile banking programs offer you the opportunity to pay your bills from your phone, they might be even cheaper than some online programs for which you are currently enrolled.

Cons: It’s Not a Tried and True System Yet

1) Some features (like text messages) are not encrypted and they are stored on the phone. Much like emails, text messages aren’t encrypted. So if you sign up for regular account balance checks via text message, your information is being transmitted in a way that makes it vulnerable to interception. Even if a message does reach you, it doesn’t mean someone else wasn’t able to intercept it in the process as well. Another downside is that text messages can be stored in a phone (even if you’ve deleted the initial message) and if your phone is stolen a tech savvy identity thief could potentially hack into your phone’s hard drive and harvest information from it. The similarities between cell phones and computers seem to imply that identity theft from cell phone banking could still be a real possibility.

2) Many phones aren’t yet compatible with anti-virus software. Most cell phones don’t come standard with anti-virus protection even if they have the capacity to browse the internet. Some phones aren’t even compatible with the anti-virus software available and there are known cases in which people were unable to put anti-virus software registered to them on corporate cell phones. Although identity thieves are still a few steps behind when it comes to learning to implement some of their most successful computer tricks (phishing, spamming, spreading viruses, account hacking, etc…) on a cell phone level, experts agree that is only a matter of time and people shouldn’t assume that anti-virus software isn’t necessary for cell phones.

3) Some banks don’t offer the same level of protection for cell phone banking that they do for online or in person transactions. Because the risks are still generally unknown some banks have been slow to make promises about what will or will not be covered when you use cell phone banking. Other banks, however, like Wells Fargo has universal policies that apply both to online and cell phone transactions and offers what they call a 100% security guarantee. So check with your specific bank and other financial institutions to see what their policies are before you enroll in a mobile banking program.

In all honesty, it’s too early to tell if mobile or cell phone banking is really going to offer all of the conveniences it promises without increasing consumer risk of identity theft or exposing users to greater risks of online identity theft. So, if it sounds like something you are interested in it might be worth trying. But ask both your bank and your cell phone provider some specific questions about encryption and identity theft protection before you enroll. It’s your identity—at home, at work and on the road. And it’s your job to protect it.