Manage Your Money Online – Benefits and Risks

Technology has simplified many tasks for human beings. Activities such as cooking, washing, cleaning, transport, communication, etc have been made more simplified or cost effective using powerful technology which saves time, energy and costs.

For instance today people no longer have to write a letter, post it and wait for weeks or months to get a reply, instead one has easy access to a mobile phone, online chat or even video conferencing. Technology has helped in reducing distances and bridging the gaps of distance, time and energy.

Changes in Basic Banking

I’m sure most people who read this article already have a bank account with internet banking facility. In the olden days I remember people visiting a bank to withdraw money and it used to take a long time in queues to withdraw money from your own account.

Today you can withdraw money instantly at ATMs. If this is too obviously, let me tell you that people faced a lot of practical issues in olden days.For instance if you want to know the balance in your account, in some cases you can get this from the teller or bank’s customer service desk.

However, in most cases you have to update your pass book, which will take hours. Many people used to leave their passbook in the morning and take back by afternoon or the next day. The banking service hours were limited (say 5-6 hours a say), which means you cannot check your recent transactions or know your balance until the pass book gets updated.

Today, you can check your balance instantly online, and also keep abreast of recent transactions any time from any where. Today banks are computerized and also provide customers online banking facilities, debit cards, ATM, phone banking, etc. This means customers can do most of their routine transactions through these channels, and in some cases their queries can also be resolved online or via phone.

Development of Stock Markets

Share market in the past involved a lot of paper work and paper transactions. For instance shares were issued in the form of printed certificates to all shareholders. This also meant a lot of manual work, costs as well as issues such as damage, loss in transit, etc.

Many transactions could not go through because of damage, frauds, fake certificates, etc. However, today after computerization one can hold stocks in dematerialized or electronic form. Even trading shares which was earlier done through an open outcry system can now be done through electronic terminals connected to a stock exchange.

For instance individuals and institutions across India can trade on National Stock Exchange because of the wider reach through network and satellite based technologies.

Benefits of Managing Money Online

1. Avoid Physical Records You can virtually avoid lot of physical records such as bank statements, physical contract notes issued by brokerage firms, pass books, etc. This means you can get access to the most updated information online

2. Frequent Monitoring In many cases we tend to lose track of some investments, insurance policies, etc because the relevant papers may be missing. However today most of these are online so it is easier to keep track or monitor. This will also help in selling out investments that are no longer relevant to your financial goals Keeping a tab on your investments also enables you to book profits in a highly bullish market, as well as to cut down losses on investments which are not performing well.

3. Save Trips to the bank In the past it was quite common to make a couple of trips or more to the bank. Today very few people actually go to the bank for routine transactions; instead it happens over ATM, online or by dropping cheques at drop boxes, etc. In present times most banks encourage you to use various banking channels instead of visiting a brick and mortar branch.

4. Save time and energy on bill payments Many bills and routine expenses can be routed online. For instance payment of bills related to telephone, electricity, credit cards, cable, etc. This means you save almost a dozen trips or more every month that is normally spent on running around to pay these bills. This may seem trivial to some, but for many working executives and for families where both spouses work, there is hardly any time left after work or before work to pay bill or run errands.

5. Managing your Portfolio As we discussed above managing a portfolio in the past would have meant maintaining a huge suitcase (s) full of share certificates. Whenever they need to be delivered you have to incur costs on stamp duty/registration charges. Moreover, it used to take a week or more for the delivery to get complete, which is another drawback. Today, no one would invest in stocks if the same situation were to continue. Now, you can buy and sell stocks if you have internet connectivity. This means the time, effort and costs involved in physical transit, maintenance, etc has come down drastically. In addition to stocks, you can also maintain mutual funds, bonds (a select few), ETFs, derivatives transactions, etc in the same account.

6. Access to Services Today most banking services are being routed through various channels such as online, phone, ATM, etc. Whether you want to check your balance, keep track of recent payments, do a stop payment, etc, these can all be done online. If you have any queries about a transaction, product or service you can use email or contact a customer care executive. This means you get access to services from anywhere over phone or internet. This is very critical in situation when you lose a debit card, password, etc.

7. Transactions between account Budgeting This is similar to monitoring discussed above. Since most of the transactions can be captures from online accounts or statements keeping track of budget can be easier. For people who spend on debit and credit cards the account statement itself will serve as a rough budget. This can help in knowing whether you are spending reasonably.

8. Remittances Most young professionals are mobile due to the change of job, family circumstances, education, etc. They may have to remit money to their parents, siblings or folks back home. This was most done through money orders which is the most effective and cheaper mode of remittance. Today this is done through online banking, which is free of cost.

However, some people prefer to drop cheques or deposit cash in to the respective account. In any case online fund transfer is definitely a boom and picking up in volumes too. For example take the case of Ravi who is a young techie working in Bangalore. He remits Rs.10,000 to his father based in Coimbatore to take care of household expenses. Another example of Mr.Venkat a software engineer who moved to California in mid 2000’s remits $300 to his family based in Chennai.

9. Loan Payments Many banks have ECS (Electronic Clearing Services) which enables them to have a facility to periodically debit certain sums towards loan payments. For example payment of EMIs on home loans, car loans, personal loans. In the past the only option to pay EMIs was to write several cheques.

For a car loan you may have to write 36 or 48 cheques, while for a home loan this can even go up to 100 or more. Today the ECS facility saves a lot of time and energy on writing, managing and clearing cheques. In addition to writing cheques, keeping track of the dates, depositing it at the right time were all cumbersome. In case the cheque has a mistake in terms of date, amount, signature, etc., then it could get returns too. This is a welcome change not only for the borrower, but a sigh of relief for the bank as well.

10. Dividends, Interest, etc As discussed above in case of investments too the dividends, interest are routed through ECS directly to your bank account. For people who have a 3-in-1 account with a stock portfolio, the dividends would get credited directly to their registered bank account. This saves time, energy and costs for the company or registrar from activities such as dispatching cheques or warrants.

11. Relocation When you move from one city to the other you have to spend a lot on moving costs. Similarly you need to do some procedures to get new utility connections. In many cases you had to open fresh bank accounts, new telephone connections, etc. You also had to update your address in your bank account, stocks, insurance policy, utility connections, etc.

Today given the facility of maintaining accounts online you can still operate the account from anywhere and at anytime. This means you can carry on with your transactions smoothly even in case of relocation. However, you can change your address in bank records by providing the necessary documents.

Today it is possible to update your address across several stocks in your portfolio if you update your address in the trading and demat account. In the days of physical certificates one had to write to each individual company or registrar to change the address so that dividend cheques are received. Technology in this case has truly benefited small investors.

Risks in Online Transactions

Risks are inevitable in all transactions – both online and offline. For instance there are several cases of phishing where online accounts have been hacked by fraudsters who manage to access accounts and misuse them. Similarly there are credit card identity thefts, lottery winning emails, etc. One has to be very careful and avoid giving any personal or financial information online. In addition to hackers there are other schemes such as trading tips, multi level marketing schemes, etc.

This is one of the worst ways to end the article discussing bad points about online transactions, but my intention is only to make you aware. The best way to eliminate or minimize these issues is to keep your accounts confidential and safe. Further, try to monitor your accounts and transactions and report promptly if you find any suspicious transaction or entry.

There are people who don’t log in to their accounts for months and don’t do any transactions, which leads to the account getting locked by the bank for safety. Sometimes these dormant accounts (with very few transactions) can be a good hunting ground for fraudsters.

Conclusion – Manage your Money Online

My last word of advice is to be aware and get closely involved in your money matters. Last year we heard of a case where a Relationship Executive at Citibank was able to take investors for a ride with a scheme offering unbelievable returns which finally turned out to be a scam. There are many such cases in the news in various cities.

The best way to eliminate these risks is to be aware as well as spend some time and effort in knowing the products and procedures well. Most investors don’t bother to sign or fill up forms, which is critical. Remember, that technology has definitely made our lives easier, but we still need to take a few precautions to ensure that our money and investments are in the right place. This is equally important to ensure that you don’t lose sleep but rather spend more time in building wealth and accomplishing your financial goals.