Online Banking

JACK BJELLAND

Every day, we rely more and more on mobile phones as a part of our daily life. As more and more of our activities are online, we find new ways to use our phones to automate and aid our daily lives. However, something Americans are still wary of is the approaching transition to online banking. Just in 2013, the number of people in the United States using online banking services reached a majority at 51%. However, many still find comfort in conventional branches because of face to face interaction with a human being, and knowing exactly where their money is. As more and more people transition to the online realm, will physical bank branches continue to stay relevant, or will the banking system be forever digitized in the increasing web of internet services?

In terms of banking online, the concept is relatively easy to grasp. Online or mobile banking is using a bank with no physical branches or stores. This means you can use all of your money online, or can extract cash from ATMs. However, the US isn’t big on mobile banking, and neither is the rest of the western world. In fact, a surprising leader in the mobile banking market is Kenya. Their system called M-Pesa provides banking access to poorer residents and rural areas where conventional bank branches are unavailable. According to Lyndsey Gilpin, a writer for techrepublic.com, M-Pesa services around 17 million people, or about 80% of cellphone users in the country. The service has expanded from simple money transfers to a complex system of banking, billing, and paying all through a cell phone service. These phones don’t necessarily have to be smartphones either; most of the services work through basic text message. This service allows Kenyans unprecedented access to paying for everyday things. One can send money to anybody who has a phone account, they can pay for restaurant bills, and even public transportation fares.

7171804334_5b23bd85fe_bAn example of the M-Pesa system. By Rosenfeld Media

The most important aspect is that it provides safe access for those who don’t have access to a bank branch. Secure and fast money transfers are commonplace compared to the old system of couriers and hand-delivery. Mobile banking decreased the risk of robbery, and allowed the country’s poorest to be able to receive money remotely. About 60% of Kenyans who are under the poverty line have access to some sort of mobile phone (Gilpin), which helps them gain access to savings accounts, fundamentally changing their financial situation. This is an instance where poor people benefit greatly from technology designed and implemented for the common good.

However, the discussion over online banking also leads into the merits of cryptocurrencies like Bitcoin. Cryptocurrencies are currencies that operate on computer algorithms to generate new money, and operate outside of a traditional bank. Bitcoin is probably the most popular cryptocurrency, servicing 12.7 million users as of today, and expecting to serve even more in the coming year. Bitcoin works by compiling a list of all Bitcoin transactions over a period of time, usually around 10 minutes, and puts the data into a ledger, or a block. Once there is a completed block, other computers check the work and make sure all the information is correct. Anybody can use their computer to compile transactions and check work, which is known as Bitcoin mining. Once the block is complete it is added to what is called the blockchain, and every transaction in the blockchain is considered valid and is irrevocable. This means that all transactions are secured and validated quickly. However, if transactions are too small they may take longer to validate adding to wait time. Another problem with bitcoin is each block currently can only contain 1 megabyte of information, which means a large volume of transactions may take even longer than normal to compile.

icarus_bitcoin_mining_rig

A bitcoin mine in China. By Xiangfu (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)%5D, via Wikimedia Commons

To conclude, as America trends more and more towards online banking, how will our systems change to meet consumer’s demands? Will we transition to a system like M-Pesa, or diverge from traditional banks and invest more in cryptocurrencies? Whatever the future holds, one thing is for certain; the internet isn’t going away, so banks must either adapt or fall behind in our ever advancing world.

 

References

Fox, Susannah. “51% of U.S. Adults Bank Online.” Pew Research Center: Internet, Science & Tech. Pew Research Center, 06 Aug. 2013. Web. 22 Mar. 2017.

Gates, Bill, and Melinda Gates. “2015 Gates Annual letter Our Big Betfor the Future Bill and Melinda Gates.” Gatesnotes.com. N.p., n.d. Web. 22 Mar. 2017. <https://www.gatesnotes.com/2015-annual-letter?page=3&lang=en&gt;.

Gilpin, Lyndsey.”The world’s unlikely leader in mobile payments: Kenya.”                                                         techrepublic.com. CBS Interactive, 20 March.2014. Web. 22 Mar. 2017.