Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Mar 22, 2012

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Online banking and management of personal loans is a practice that can cause even the most veteran of computer users to feel a twinge of unease and nervousness. Hackers are growing more numerous and more sophisticated with each passing day, and the risks involved with online banking are enormous: an individual’s entire monetary worth. But in this increasingly digital world of ours, the management of personal loans and money transactions online is moving to the forefront of banks’ security research.

The most common methods of security we’re all familiar with are the use of user names and passwords. A user is permitted to create a unique user name tied to a unique password, which presumably only that user will know and be able to use. While this worked fine at first, hackers soon devised methods of cracking both of these fields through sophisticated algorithms and what’s known as “brute force attacks.”

“Simple authentication—a password and user name—is just not sufficient enough to protect,” said Cary Whaley, vice president of payment and technology policy at Independent Community Bankers of America, to Bankrate. “That’s a good starting point, but you need more.”

Now banks use methods that include email tethering, phone number linking, and secret questions. While these methods serve as adequate protection for many, they are still not ironclad solutions. With the advent of social networking websites, email addresses, cell phones, and answers to both general and specific questions can be easily obtained by virtually anybody. If somebody wanted to sign into a victim’s personal loan banking account and was prompted with the question, “What is your mother’s maiden name?” some may find themselves particularly vulnerable given Facebook’s often publically visible “Family Members” sidebar.

Greater Security Means Greater Burden

Since the hacking culture is growing more and more popular, and now even the most juvenile of computer users can download premade hacking “packages” that allow them to begin trying to break through security measures, banks are attempting to become more impenetrable.

The downside to this effort, however, is personal loan borrowers will be forced to jump through more hoops when operating online.

But as Whaley told Bankrate, “Consumers have to be sensitive, and I think they are, to the fact that banks are extremely concerned with making sure it’s them doing the transaction and not somebody else.”

The additional burdens do not only sit on borrowers’ shoulders either—banks are being forced to improve their own practices to ensure personal loan security as well.

In 2011, the Federal Financial Institutions Examination Council (FFIEC) released new internet security guidelines for banks to follow. In their guidelines titled “Supplement to Authentication in an Internet Banking Environment,” the FFIEC recommended the following:

  • Banks should perform periodic risk assessments of their security measures.
  • They should identify security measures that are outdated or ineffective due to increases in hacking ability.
  • Financial institutions should regularly educate consumers about banking online.

Improved Security Technology

Some of the possible security upgrades we may see on online management of personal loans and money transactions will take place behind the scenes. Complex identification procedures, such as identifying a computer’s configuration, IP address, and browser identification, could help a bank’s system determine the likelihood of a user being who they claim they are.

Additionally, more advanced technology such as geolocation, a process that helps identify the actual physical address of a computer, can help banks make sure a person is accessing their site from the correct location.

Finally, banks are looking into incorporating more unique and nonsensical questions that likely would not be answered on social media sites.

Consumers Are Responsible Too

But as with all activity online, consumers are the most important line of defense in the fight for their own safety. Bank-implemented security measures are only meant to supplement good and healthy consumer practices. Those who do their personal loans online should take special care not to download any file from untrusted websites… ever.

They should also run anti-virus software whenever they work with their online personal loans.

“The most important thing consumer can do to protect themselves is to practice safe computing at home,” Greg Hernandez, a spokesman for the federal Deposit Insurance Corp., told Bankrate. “They should use a firewall and anti-virus/anti-malware software and keep it updated. They should be on the lookout for suspicious emails and avoid suspicious websites. They should not click on links contained in suspicious emails or download software from questionable sources.”