A look at the realities of modern banking and the risks of fraud and identity theft.

Electronic banking in all its forms – from debit cards you swipe at the counter or pump, to Internet banking, paperless billing, and even wireless transactions – has been embraced in Canada. We have more bank machines and use our debit cards more than people in almost any country of the world.

It’s easy to understand why electronic banking is attractive to both financial institutions and consumers alike. For the financial institutions electronic banking enables them to deliver services from central areas like call centres which can result in a lot of cost savings. And for consumers it’s all about convenience.

But should you worry about electronic banking? What about the possibility of fraud and identity theft? Here’s a look at the realities of modern banking and what you should consider when making the choice.

Automated tellers and debit card use
The banks want you to use their machines (ABMs) and your debit card – it’s good business for them on a variety of levels. And of course these are both really quick and easy ways to bank and make purchases.

Any use of your bank card, however, depends on the use of your PIN or personal identification number – and every time you type it into a keypad, there is a risk someone might record that information in some way. Debit card fraud is a large issue in Canada. Although rates are difficult to find, in some municipalities debit card fraud has been estimated to more than double the rate of credit card fraud.

And consumers can end up on the hook for debit card fraud. If you have contributed to the debit card fraud in any of the ways below, you may be responsible for the full amount:
• writing your PIN on or near the card, such as elsewhere in the wallet
• using an easily deduced PIN such as one’s birth date
• failing to notify the financial institution immediately on becoming aware of the loss, theft or misuse

And even if you haven’t, the protection for consumers is not as clear as with credit card. Review your banking agreements or call your bank and be sure you understand what your liability is. If you’re concerned, consider keeping a small amount of cash in an account that you use for small purchases and withdrawals, and keeping the remainder of your funds in an account where you do not use a debit card to access the account on a regular basis.

With those caveats, the banks in Canada want you to feel comfortable about using your debit/bank card. Many banks are quick to respond to concerns and willing to repay any fraudulent amounts in full.

Internet banking
A 2004 CBA survey found the percentage of Canadians who bank primarily through the Internet had almost tripled in the past four years from eight per cent in 2000 to 23 per cent in 2004. The survey also found that 32 per cent of the respondents who were not currently banking online expected to be conducting banking transactions over the Internet within the next two to three years. But in 2005 the number of people who were adopting Internet banking leveled off. A survey conducted on behalf of TD Canada Trust suggested that fears around Internet security were part of the reason.