Internet Banking Fraud: Why is Online Banking so Popular?

Convenience is the key reason of why millions of people are opting out of traditional banking for online banking. Nearly 45 percent of the 141 million adults in America pay their bills online (according to the Garter 2004 Survey). Banks also enjoy providing the option of online banking because they can save on operating costs. However, during the popularization of online banking, nearly 2 million Americans suffered from fraudulent bank activity in 2004. Consumers reported an average loss of $1, 200 per bank fraud. Most market researchers attributed the increase in the number of bank frauds to online banking.


Schemes Used In Internet Banking Fraud

Most internet banking fraud occurs in a two-step process. First, the offender must get their hands on the customer's account information, like their username and password. Second, the offender will use that information to move his victim's money to another account or withdraw it to make fraudulent purchases. For the first step, offenders often employ one of the many popular fraud schemes to obtain personal information. These fraud schemes include, but are not limited to:


  • "Over the shoulder looking" scheme: involves the offender observing his potential victim making financial transactions and recording the personal information used in the transaction.

  • "Phishing" scheme: stems from the two words "password" and "fishing." It entails sending email scams and mail supposedly from the consumer's bank as a way to obtain the consumer's personal information, social insurance number, and in this case their online banking username and password.

  • "Trojan Horse" scheme: unfolds when malicious software (malware) embeds to a consumer's computer without the consumer being aware of it. Trojans often come in links or as attachments from unknown email senders. After installation the software detects when a person accesses online banking sites and records the username and password to transmit to the offender. People using public computers, in places like Internet cafes, are often susceptible to Trojans like malware or spyware. They also are higher at risk of falling victim of identity theft.


The FBI estimates that 1 million PCs in America are being compromised in a similar fashion to conduct fraud. Although, analysts note that the use of Trojan schemes has jumped in the recent years, phishing remains the most popular scheme. According to the 2004 study by the market research Gartner, 1.8 million Americans responded to phising emails with their personal information.


Ways to Protect Yourself

Thinking of ways to protect yourself from online banking fraud schemes? We made it easier for you by providing information on how to detect Trojans that appear on your PC in the form of viruses, spyware or malware. Visit Tips for Buying Antivirus Software, How to Remove Spyware, and Is Adware Safe?pages to become informed of the different types of software that can track your online activities and personal information.

Also, learn to keep your cards, documents and passwords safe, and monitor your accounts to safeguard yourself from bank fraud committed through identity theft. Most importantly, find out how to protect your personal information to avoid identity theft from happening to you.


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You can protect your computer from viruses without expensive software. Instead, follow these simple tips:

Stay up-to-date on all system updates.

Don't download any email attachments you weren't expecting.

Avoid freeware and peer-to-peer sharing sites.

Use alternative web browsers and email software.