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Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Future of Banking - How Much Will We Benefit from More Technology?

POSTED ON BY

What will banking look like 20 years from now? Hopefully, deposit rates will be higher. One thing that’s very likely is that we’ll see more technology just like we’ve seen over the last 20 years. How much will that benefit us?

The question about the future of banking was reviewed in this Ally Straight Talk article (Thanks to DA member cumulus for posting on this article in the forum). As you might expect, new technology was emphasized. For the future, the article predicted improved voice recognition that allows for more automated customer service and a cashless society in which electronic transactions completely replace cash transactions.

This type of technology can make banking more convenient. We have seen added convenience in the last 20 years due to ATMs, online banking and mobile banking. However, in my opinion, interest rates are much more important than these conveniences for most savers.

More Competition

Technology has done more than just make banking more convenient. Online banking has allowed many banks to offer their products nationwide or statewide. Online account applications make it much easier for banks to open accounts without a customer making a branch visit. This has increased competition. Savers have many more banking options than they did 20 years ago. You are no longer limited to banks in your local area. If your local banks don’t offer competitive rates, you can go online and open accounts at internet banks and at many brick-and-mortar banks and credit unions around the country. Websites like DepositAccounts.com can help you find those deals.

Technology has also reduced costs for the banks, and those savings can be passed on to customers as lower fees and higher deposit rates. Of course, these savings often go to banking executives, but competition increases the chance that these cost savings benefit customers.

The increased competition among banks and credit unions can have a downside. If you’re taking advantage of this competition by moving your money to get the best deposit rates, you may be opening accounts at many banks and credit unions. Online banking makes it possible to manage multiple accounts. However, it can still be a time consuming process. You need to manage multiple user names and passwords, and these passwords often have to be changed every few months to comply with security policies.

Security

New technology can help make it easier to manage multiple bank accounts. Mint.com is one example. This service can be used to keep track of multiple bank accounts. An important concern with this technology is security. In fact, security is the reason many people avoid internet banks and online banking.

With so many news reports of viruses, hackers and internet scams, I can understand why people may be concerned with online banking. The more technology that banks use to make their online banking safer, the more technology hackers use to defeat the new security features.

Even though security can never be 100%, it can be so close to 100% that it shouldn’t be a concern. The challenge for banks it to improve security without making it too inconvenient for the customers. One example of this is what ING DIRECT (now Capital One 360) did a couple of years ago to make their accounts safely and easily accessible to account aggregators like Mint.com. They created a way that allows read-only access to accounts. Instead of giving Mint.com your account password, you give it an access code which only gives Mint.com read-only access. In the very unlikely case that this access code is compromised, there’s no chance that money can be taken from the account.

Bottom Line

Technology and more competition can only do so much to improve deposit rates. Nevertheless, people who are banking online are probably earning more interest than those who have stuck with their local banks and credit unions. They are probably not earning a lot more interest. It may be 0.90% vs. 0.25% on a savings account. Hopefully, future banking technology will do more than just make things more convenient. Hopefully, it will give people more options to earn more on their savings.



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Comments
5 Comments.
Comment #1 by Anonymous posted on
Anonymous
Unless there is a physical authentication of some sort like iris, dna, hart ekg or voice imprint,  any other securities can be compromised easily, including passwords and other info entered with keyboard or any screen info sent directly or indirectly is a weak point.

5
Comment #2 by nothlit posted on
nothlit
I'd be happy if the U.S. could implement some sort of instant (free, or dirt cheap) electronic money transfer system as exists in Europe. The fact that ACH takes anywhere from 1-5 business days is absurd. Currently the only "instant" options are expensive wire transfers or clunky intermediaries that require both parties to sign up for some sort of additional service like PayPal, Dwolla, or Square Cash. The ideal scenario would simply let people send money from their own bank account to someone else's bank account with no middlemen, instantaneously and for zero or little cost. How about we work on that before we start worrying about interfacing with a bank via Google Glass?

3
Comment #3 by cumulus posted on
cumulus
Good idea #2 nothlit, count me in.
Also how about an interest rate change alert?  Such a feature would e-mail
an account holder when the rate changed on their (Savings, MM) deposit
account. I know of no one that does this, yet it seems to me like such a
useful feature. (On the other hand, there are those that do a pretty good
job of hiding their rates.)

A number of places already issue e-mail alerts for things like low balances,
so the framework already exists.  Seems as if this would be a fairly easy
feature to implement; today, not 20 years from today!  Anybody already doing
this?

5
Comment #4 by Ally posted on
Ally
(Edited by moderator to remove post placed in incorrect comment thread)

1
Comment #5 by Ally posted on
Ally
Sorry I lost my page when the computer restarted after an update. This is posted in the wrong place and I cannot edit it. 

4