Benefits of online banking: Complete guide to features, security, and more

Here’s an indicator of how prevalent online banking has become in the digital age: The federal government stopped issuing paper checks for most federal payments beginning Sept. 30 of 2025.

That action may prompt some senior citizens and other holdouts to join the millions who already conduct most, if not all, of their banking transactions online through their financial institution’s website or dedicated mobile app.

Online banking is here to stay and has become the preferred choice for many when it comes to routine banking transactions like cashing checks and paying bills. But it offers much more than just convenience—through your online account, you gain instant access to a wide range of banking services and detailed account information right at your fingertips. This comprehensive guide is designed to help you unlock the full potential and capabilities of digital banking, empowering you to manage your finances with ease and confidence.

Growth of online banking vs. traditional banking

Technology has transformed countless industries, banking included. The traditional business model of brick-and-mortar banks proved both costly and extremely labor-intensive when banks had to manually process cash, payroll deposits, and reams of paper checks. A traditional bank relies on physical branches and a physical presence to serve customers at a physical location.

In the mid-1990s, as use of the internet grew, banks began offering web-based services, and by the 2000s, the majority of banks nationwide had moved routine transactions online. Most traditional banks offer both in-person and online banking services, and brick-and-mortar branches remain important for certain transactions that cannot be completed digitally.

Security is a cornerstone of online banking. Banks must protect consumers’ sensitive information throughout the transaction process, safeguard their databases from cyberattacks, maintain regulatory compliance, and ensure operational stability.

Though there will always be a place for brick-and-mortar financial institutions and face-to-face interaction with experienced bankers and bank tellers, online banking is the new norm for banking – and the deployment of artificial intelligence is poised to bring new levels of innovation to the entire financial services industry.

The distinction between internet banking and mobile banking

Internet banking and mobile banking share many similarities, but there are some distinctions between the two forms of online banking.

Generally speaking, internet banking is conducted using a desktop or laptop computer. Mobile banking, on the other hand, is typically accessed through a mobile device such as a smartphone or tablet, allowing users to interact with their bank’s app and perform transactions quickly and conveniently. Mobile banking typically requires an internet connection, either through Wi-Fi or cellular data, to access your account and perform transactions. However, some banks provide limited services, such as contacting customer service via text messaging, which can work without an internet connection but still require cellular network coverage.

The majority of banks have feature-rich websites for online banking, especially non-traditional internet-only banks, since this is their primary way to interact with customers. Depending on the financial institution, you might have access to more features, such as budgeting tools, spending insights, and other features that may not be available or are slightly harder to use on smartphones due to their smaller screens and different operating systems.

For banks and credit unions that have developed mobile banking apps for use with smartphones or tablets, you’ll have to download the app to use it. You can also sign up for text alerts and push notifications that instantly inform you of low account balances or suspicious account activity.

Key benefits and core features of online banking

Despite the widespread prevalence of online and mobile banking, some people still prefer to use paper checks to pay bills, but they are definitely a small minority. Just 6% of consumers used paper checks to pay for goods, services, or bills in 2024, the Federal Reserve Bank of Atlanta reports.

Consumers in 2024 paid half of their bills electronically, either through automatic bill-pay or ACH deductions. Eighteen percent of bills were paid using debit cards, and 15% were paid with credit cards.

Online banking services offer a wide range of features, including the ability to manage deposit accounts, savings accounts, and other financial products. Banking online allows customers to access these services conveniently and securely.

Paying bills is only one of the many benefits of online banking. Additional features include:

• Convenience – It’s far easier to make a few taps on a smartphone or clicks of a mouse to pay a bill than to write out a check, put it in an envelope, address it, put a stamp on it, mail it, and have it processed over the course of a few days or even a week. Online bill pay is usually instantaneous or recorded on the same day. Setting up automated payments for your mortgage, auto loan, or credit cards also saves time each month and frees you from the worry of missed payments.
• 24/7 access for account management and monitoring – Consumers can check their balances and monitor them for suspicious activity or unauthorized deductions. They can also move money between accounts, review past transactions and monthly statements, search accounts, and filter search results by payee or category.
• Account alerts and notifications – Account alerts sent by email or text can be set up for a range of transactions, including low balances, deposits, unusual activity, payments due and made, overdrafts, fees, and many more.
• Geographic flexibility – Online and mobile banking allow people to conduct their banking needs from anywhere they have an internet connection or a connected smartphone. You aren’t limited to your home city or physical branches.
• Reduced need for branch visits – There will likely be times that require going into a branch location and speaking to a banker, but for the most part, you can skip the drive – and the lines – and conduct banking needs from the comfort of your home or office. That can add up to significant savings in time, travel, fuel, and overall satisfaction.
• Paperless statements – You can receive monthly statements via email, which reduces paper waste and mail handling.
• Debit card and ATM networks – Use your debit card for purchases and access cash through extensive ATM networks, often with no fees.

Online banking security: Protection measures and best practices

Security is the cornerstone of online banking. When accessing your accounts online, it is crucial to use a secure internet connection to ensure your information remains secure and protected from unauthorized access. Financial institutions deploy a wide range of advanced security measures to protect consumers’ transactions and accounts, as well as their internal databases and networks. Many banks have implemented features such as multifactor authentication and website encryption to help prevent identity theft and unauthorized access. Security in online banking includes:

End-to-end encryption

End-to-end encryption is widely regarded as the gold standard for transmitting data over a network because it provides data security throughout the transaction process. Sensitive data, such as a banking transaction, is first encrypted, and it’s that unreadable encrypted data that’s transmitted from a user’s smartphone or computer during an online banking transaction. When it’s received, it’s deciphered and authenticated.

Multi-factor authentication

Banks use multi-factor authentication for account access. In addition to a password, the financial institution will request a one-time code that’s texted to your phone or sent by email. It’s not a foolproof system, but it does add a second layer of security to account access.

Biometric verification

Biometric authentication in banking is the use of a user’s fingerprint or facial recognition information to grant access to accounts on smartphones. It’s an important security feature because users’ fingerprint and facial recognition data are virtually impossible to copy.

Advanced security infrastructures

Financial institutions deploy a wide range of advanced security measures to thwart sophisticated cybercriminals. These measures can include:

• Data encryption
• AI and machine learning fraud detection systems
• Industry-standard security certifications, such as the Payment Card Industry Data Security Standard for credit card information
• New York Department of Financial Services cybersecurity regulation
• Adherence to the Bank Protection Act, which includes cybersecurity, as well as other federal banking security standards

Customer security responsibilities

Banks can only do so much to protect users’ data – consumers have to help as well. Online security measures that are in your control include:

• Using very strong passwords and changing them often
• Avoiding phishing attacks that can expose sensitive data stored on your computer or mobile devices
• Routine software upgrades on your devices, especially since they often address security concerns or potential vulnerabilities
• Avoid conducting financial transactions on unsecured public networks
• Regularly monitoring your accounts for suspicious activity

The convenience of online banking comes with a small price. You’ll have to be vigilant about your accounts and how you access them in order to properly safeguard your data.

Best online banking accounts

5 ways to maximize your online banking experience

For most people, the days of driving to a service provider’s office to pay the power, TV, or garbage bill ended decades ago. Online banking and mobile apps help you pay your bills on time each month without ever leaving home.

Here are five ways to use online banking to streamline the banking process as well as save time:

1. Automatic bill pay – Online bill pay is a multi-function tool that helps you keep on top of your bills by ensuring funds are always deducted and transferred to service providers or creditors on a predetermined date.
2. Mobile check deposit – While you won’t be getting any more paper Social Security or tax refund checks from the federal government, there are times when you will have paper checks. You can deposit those straight from your smartphone using its camera to record images of the front and back of the check.
3. Direct deposit – Most companies – and the Social Security Administration – have streamlined payroll and benefits payments by using direct deposit. Your funds are delivered into your checking account on the same day(s) each month.
4. Recurring transfers – You can set up recurring transfers from checking accounts to savings or brokerage accounts to help increase your savings.
5. Person-to-person payments – thousands of banks use Zelle to allow person-to-person payments, which eliminates the need to have cash on hand or visit an ATM to pull funds.

5 reasons why physical banking still matters

Banking has largely migrated to digital transactions, but oftentimes, there’s still a need to go into a bank. Here are some scenarios where going inside a bank and speaking with a teller or banker can make a difference:

• Making large cash deposits – Some ATMs allow you to deposit up to 75 $100 bills at a time. That’s a lot of money to put into a machine. Some people might be more comfortable handing large cash deposits off in person.
• Accessing safe deposit boxes – Safe deposit boxes are important repositories for crucial documents such as marriage and birth certificates, trusts, wills, home deeds, vehicle titles, and valuables such as jewelry, old bank notes and coins, or any other important or valuable items that you don’t want in your home.
• Seeking advice on complex banking transactions – You might need to speak with a banker to take out a loan, pay off a mortgage or auto loan, conduct wire transfers, or for co-location banking services. Visiting a branch also allows you to receive professional advice from qualified banking experts for these complex matters.
• Notary services – Important documents that require notarizing must be witnessed in person.
• Building personal relationships – Visiting tellers and bankers allows you to foster stronger relationships with financial professionals, which could be helpful when you need financial guidance or assistance.

The best of both worlds: Combining online and digital banking

Digitized banking has upended traditional banking services, and millions of consumers find tremendous value in conducting routine banking transactions online or through their financial institution’s mobile app. You can save a great deal of time and money by not making trips to the bank.

That said, there are many instances when it’s important and relevant to go inside a bank and meet with its experts. They can provide insight on savings strategies, such as CD laddering, or let you know how to get preapproved for a mortgage. Branch locations are also often necessary for large loan payoffs or to unravel account issues like overdrafts. You’ll also be building trust and personal relationships with your banking team.

Taking a hybrid approach that blends both forms of banking provides a holistic approach that can serve all your financial needs.

Frequently asked questions about online banking