How Safe is Online Bill Pay?


Online bill pay is convenient and easy, but is it safe? Many banks take a number of safeguards to ensure that online banking is a safe as possible. In addition, there are steps individual consumers can take to protect their online bill payment transactions, including taking an active role in tracking their online transactions and taking quick action if they discover irregularities.

How Online Bill Pay Works

Online bill pay eliminates the need for stamps or paper bills. Many merchants offer the option for customers to receive bill notices by email, then log onto the merchants' websites to authorize payments through their checking accounts or a credit or debit card. Payments can be automated to take place on a particular date--once a month, once per quarter or on any schedule the customer chooses. Many banks also offer their customers the opportunity to set up regular payment schedules or one-time payments for various merchants. In either system, the payment is deducted from the customer's bank account or credit card and applied to the particular bill.

Access Protection

According to John M. Jordan, executive director of the eBusiness Research Center at Penn State's Smeal College of Business, there are three ways for customers to verify their identities when making financial transactions: through unique information, such as a password; by using an actual or virtual key, such as an ATM card; or through personal identification, such as a driver's license or fingerprint.

Most online bill pay systems only use one of two these methods: a password or PIN by which customers access their accounts. However, some financial websites have enhanced their security access by having their customers set up their accounts with a graphic image or photo, a unique access phrase, or both along with the password or PIN. Once the account is set up, access to the account requires the extra step of correctly identifying the graphic image and/or access phrase. The system will also warn the customer not to go further if the graphic image and/or access phrase is not presented when she attempts to access her account.

Website Encryption

Financial websites almost always secure online transactions by encryption, or disguising the actual content of the information being transmitted. The symbol for a protected website is often a padlock displayed in the lower portion of the browser window. Customers can also install verification software which detects scam websites. Conducting online bill pay transactions on a website which is not encrypted, or that doesn't provide any means of determining if the website is legitimate is taking an unnecessary risk.

Firewalls and Spyware Detection

Consumers also have a role in protecting their sensitive banking information. In addition to anti-virus software, a firewall is a must on any computer where the user accesses the Internet. Along with a firewall, consumers can also install anti-spyware to protect themselves against unauthorized access to their financial information by such means as keyloggers,which track the keystrokes entered by a computer user.

Protecting Sensitive Information

Although there are a number of technological means of safeguarding sensitive financial information on a computer, the safest bet may be to remove the information from the computer altogether, according to David Nelson, a fraud specialist in the FDIC's Division of Supervision and Consumer Protection. He suggested storing financial records such as electronic bank statements and tax returns on an external hard drive, CDs or a flash drive, to be connected to the computer only when making financial transactions. So-called virtual credit cards, which are generated for one-time use or or use with a single merchant, also allow customers to enjoy the convenience of online bill pay without exposing their actual credit cards on the Internet.

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