This allows clients to do their banking outside of bank hours and from anywhere where Internet access is available.

In most cases a web browser such as Internet Explorer is used and any normal Internet connection is suitable.

No special software or hardware is usually needed.

Features

 Online banking usually offers such features as:

•   bank statements, with the possibility to bring in data in a personal finance program such as Microsoft Money or Quicken
•   electronic bill payment
•   funds transfer between a customer's own checking and savings accounts, or to another customer's account
•   investment purchase or sale
•   loan applications and transactions, such as repayments
•   account aggregation to allow the customers to monitor all of their accounts in one place whether they are with their main bank or with other institutions.

There is a rising number of banks that operate exclusively online.

Because these online banks have low costs compared to traditional banks they can offer high interest rates.

Security

Protection through single password verification, as is the case in most secure Internet shopping sites, is not considered secure enough for personal online banking applications in some countries.

Online banking user interfaces are secure sites and traffic of all information - including the password - is encrypted, making it is impossible for a third party to obtain or modify information after it is sent.

However, encryption alone does not exclude the possibility of hackers gaining access to weak home PCs and intercepting the password as it is typed in (key logging).

There is also the danger of password cracking and physical theft of passwords written down by careless users.

Many online banking services therefore inflict a second layer of security.

Strategies differ, but a common technique is the use of transaction numbers (TANs) which are basically single, use passwords.

Another plan is the use of two passwords, only random parts of which are entered at the start of every online banking session. This is however slightly less securing than the TAN alternative and more inopportune for the user. A third option, used in many European countries and currently being trialed in the UK is providing customers with security token devices capable of making single use passwords unique to the customer's token (this is called two-factor authentication or 2FA).

Another option is using digital certificates, which digitally sign or authenticate the transactions, by linking them to the computer, mobile phone.

While most online banking in the United States still uses single password protection, the FDIC has launched regulations requiring that banks implement more secure authentication mechanisms by the end of the year 2006.

Banks in many European countries (including the Scandinavian countries, The Netherlands, Austria and

Belgium) are offering online banking for e-commerce payments directly from customer to merchants.

Fraud

Some customers keep away from online banking as they see it as being too weak to fraud. The security measures employed by most banks are never 100% safe, but in practice the number of fraud victims owing to online banking is very small.

Indeed, conventional banking practices may be more prone to abuse by fraudsters than online banking.

Credit card fraud, signature fake and identity theft are far more extensive "offline" crimes than malicious hacking.

Bank transactions are generally traceable and criminal penalties for bank fraud are high.

Online banking can be more insecure if users are careless, naive or computer illiterate.

An increasingly popular criminal practice to gain access to a user's finances is phishing, whereby the user is in some way persuaded to hand over their password(s) to the fraudster.