President
& CEO Bruce Cleveland answered your question on Quote.com
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September
7, 2000
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Other Quote.com
Online Chat Sessions
September 5, 2000
September 19, 2000
September 20, 2000
With
the many online banks opening up, do you think that strictly web based banks
will consolidate?
Is it possible that a bank could lose your account info in
a technological meltdown?
Does the customer need to get special software for encryption?
What types of laws are in place to help deter would-be hackers
of financial information?
Will wireless make it harder to protect information when it's
getting zapped through the air?
Does the practice of selling information to other agencies
go on in online banking?
Will banks have Tech administrators on call 24 hours?
Will I continue to receive statements with my online account?
What do you think the major drawbacks are of an online bank
vs. a "mouse and mortar bank"?
Could there be a virus designed not for e-mail systems but
for banking systems?
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There
seems to be many online banks opening up, do you think that strictly web
based banks will consolidate? There just seems to be too many to pick
from, brand loyalty will suffer...
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There does seem to be quite a few Internet
banks. It's relatively easy to start one, if you have the capital. But at Presidential
Bank, we have always felt that the Internet-only banks generally do not have a
good business model. Some kind of consolidation is inevitable.
The fundamental reason is that banks really make their money by lending, and not
by merely obtaining deposits. Most Internet-only banks have little or no lending
capability; therefore, they are forced to buy loans or other assets in the open
market. If they do this, then there is normally very little interest spread between
what they pay their depositors and what they can earn on their assets, because
the assets available on the open market don't have high enough yields at acceptable
risk levels. Thus, it is nearly impossible for the typical Internet-only bank
to produce an acceptable return on equity to actually justify the investment necessary
to start one.
For these reason, it is likely
that substantially all Internet-only banks will be forced to sell themselves to,
align themselves with, or internally create, organizations that have the ability
to produce loans with acceptable banking industry yields at reasonable risk levels.
Stand-alone Internet banks that do not develop the people-intensive, low-tech
lending organizations typical of traditional banks will probably not survive.
At PresidentialBank.com we place at least as much emphasis on the lending side
of our business as on the deposit side of the business. We believe that we are
skillful lenders and that successful lending is the key to our long-term success.
It is actually much harder to do a good job lending out the depositors' money
than it is to bring in federally insured deposits over the Internet. Internet
Banks that don't do both reasonably well can't survive indefinitely.
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Is
it possible that a bank could lose your account info in a technological
meltdown and so you'd have no claim for such FDIC insurance? I imagine
the bank is responsible for keeping your info, not the FDIC...
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It is true that banks, not the FDIC,
are responsible for keeping accountholder information. However, Internet banks,
including PresidentialBank.com, keep the records of their depositors' accounts
on the same computer systems that are used for the records of non-Internet customers.
As soon as an Internet customer opens his or her account online, the information
is uploaded to our main deposit system that serves all of our customers, whether
or not they came in over the Internet. When an Internet customer accesses his
or her account through our web site, they are merely looking at information downloaded
off of our mainframe deposit record keeping system. If they do an online money
transfer, the instructions are uploaded to the mainframe system. Therefore, any
technological risk associated with FDIC insurance is really the same, whether
a customer uses an Internet bank or their local community bank on Main Street.
At PresidentialBank.com, we even have daily microfiche backup records of all the
transactions and balances in every customer's account, including our Internet
banking customers. We could look up a customer's account balance on microfiche,
even our computers completely stopped functioning.
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Does
the customer need to get special software for all this encryption, etc.?
Do banks hand this out when you open an account?
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Neither. You don't need special software,
and Internet banks don't normally hand out any special software. The encryption
is already built into your browser, whether you use Netscape, Internet Explorer,
AOL, or whatever. The industry uses as standard encryption interface built into
your own computer called "Secure Socket Layer." You may notice that when you go
to a secure online site, such as one which takes credit card information, the
URL line on the browser begins with "https" rather than "http". "Http" stands
for "hypertext transport protocol", which is the standard worldwide language used
over the Internet for transmitting and receiving web pages. The "s" on the end
of "https" stands for "secure", representing the worldwide standard secure version
of "http."
You don't have to do anything different to use encryption. If the web
server you are communicating with is a secure server, then you can only communicate
with it via "https", and if the encryption isn't working, you can't communicate
with that server at all. At Presidential this process is largely invisible to
you. When you go to our web site, you go to http://www.presidential.com (or www.presidentialbank.com,
they are the same site). As soon as you do something that requires secure communication,
such as opening an account, you go to a different, secure server. For example,
when you open an account online, our web site automatically, and invisibly to
you, shifts you over to a separate, secure server, https://secure.presidential.com.
The very fact that you can continue communicating with us as you provide your
personal information demonstrates that the connection is encrypted and secure.
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What
types of laws are in place to help deter would-be hackers of financial
info? I know laws are after-the-fact, but it would make me feel better.
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Essentially any kind of dishonesty
or malicious mischief involving a bank is a federal crime, because banks are federally
regulated, federally insured, and federally protected. This general rule applies
whether someone robs a bank, submits fraudulent financial information to a bank
to obtain a loan, or hacks a bank's computers. Specifically, Title 18, Section
1030, of the United States Code (Fraud and Related Activity in Connection with
Computers), makes unauthorized access to a computer containing the financial records
of a financial institution a federal crime punishable by imprisonment for up to
10 years.
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Wireless
seems to be the wave of the future--will this make it harder to protect
information when it's getting zapped through the air?
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It really shouldn't matter whether
a person is connected to the Internet via a wired circuit or wireless device.
The issue is the same. Unauthorized persons can intercept wireless transmissions
and can also monitor data going over any other part of the Internet they are able
to gain access to. In either case, data can be read by such unauthorized persons,
except when it is encrypted. When secure transmission is in use, then all data
in a connection between the secure web site and the client browser will be encrypted
end-to-end. The same encryption that protects these transmissions over the hard-wired
portion of the Internet will also protect any wireless links in the path.
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Right
now there is a huge problem with firms selling information to other agencies
for advertisements and whatnot. Since web banking is essentially a B2C,
are these same practices going on? If so, I will NOT sign up for an online
bank. I hate spam!!!!!
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Naturally, we at PresidentialBank.com
are not privy to what happens at other online banks. We can only speak for ourselves.
At Presidential Bank WE ABSOLUTELY DO NOT PROVIDE ANY CONFIDENTIAL CUSTOMER DATA
to outside organizations, PERIOD. Therefore, you will never get spam because you
gave us your email address.
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Will
banks have tech administrators on call or working 24 hours? I'd like to
know someone is there is something DOES go wrong.
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At PresidentialBank.com we host our
own web sites so that we can directly control the quality of our services. We
have automatic monitoring equipment on our web server system that automatically
beeps the responsible person bank employee, 24 hours a day, 7 days a week, if
some thing goes wrong.
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I
like the idea of being progressive and banking online but what about all
my canceled checks that I get with my statements. Will I even still receive
statements?
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Under Federal Reserve Regulation E
(Electronic Funds Transfers), any bank that provides electronic access to its
accounts (such as ATMs, electronic debits and credits, and even electronic balance
inquiries) must send statements at least monthly whenever there is any electronic
access to your account, and at least quarterly in any case. There is no regulatory
requirement that canceled checks be returned, however. Nevertheless, at PresidentialBank.com
we physically return all canceled checks with customer statements. We also provide
online access to all of your historical bank statements (going back to 1996) and
we are presently launching online access to the front and back images of all your
canceled checks (going back to the beginning of 2000).
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What
do you think the major drawbacks of an online bank vs. a mouse and mortar
bank? The way I look at is that you can always visit a mouse and mortar
in the event that the online bank fails you...do you agree?
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Some online banks have chosen to offer
their services via the Internet only. At PresidentialBank.com we have chosen to
continue to offer in-person banking at walk-in branches, even though Internet
banking is becoming an ever increasing portion of our business. This is because
we believe that many, perhaps most, customers feel more comfortable if they know
that their online bank does also have physical branches where they could meet
a real human representative of the bank, fact-to-face, if they ever wanted to.
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The
ILOVEYOU virus got lots of press, and others have gone around, too--could
there be a virus designed not for email systems but for banking systems?
How paranoid am I being?
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For a virus to be spread, it needs
to be transmitted to your computer system from outside of your organization somehow.
That's why viruses are often spread by email. Once you get the virus into your
system, it usually attacks something other than your email.
At PresidentialBank.com we place a lot of emphasis on system security. For example,
our email system is programmed to scan incoming e-mails for viruses and to block
e-mails that contain viruses. We have recently had viruses arrive via email, but
they are blocked by our email system.
For a virus to do harm once it is inside your organization, the virus creator
has to know something about your computer systems. For example, viruses often
lodge themselves in word processing or other widely used software, because the
virus author can assume that you probably have word processing software. Each
online banking system is complex and unique, however, so the hacker will not know
in advance how it is constructed. A "firewall" system is used to screen the bank's
internal computer network from the outside world, so a hacker can't prowl around
inside the system to learn how it is constructed. At PresidentialBank.com we also
periodically hire independent consultants to attempt to penetrate our systems
from the outside, to make sure they stay safe. Finally, of course, all computer
systems are backed up daily onto a physical medium that is stored off-line where
it is impossible for a hacker to gain access, so that if something does go wrong,
all systems can be restored to where they were before the problem occurred.
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