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Banks as supermarkets
The Gramm-Leach-Bliley Act of 1999 blurred the distinction between banks, brokerages and insurance companies. The law repealed major sections of the Glass-Steagall Act, a law passed in 1932 to keep financial institutions from consolidating their reach.
As a result of the 1999 law, banks may acquire, establish or affiliate with brokerages and insurance companies to offer customers a wider range of financial services and products. In addition to loans and deposits, banks today offer brokerage accounts, insurance, annuities and other retirement investments. Because of their newfound reach, some of the largest of these institutions are referred to as bank supermarkets.
Whether your bank is one of these supermarkets or the same community bank you've been using for years, Gramm-Leach-Bliley is likely to continue to shape the landscape of banking, brokerage and insurance for years to come.
Gramm-Leach-Bliley also took steps to protect your privacy. The law requires banks and other financial institutions to clearly disclose their privacy policies for sharing customer data. The law also requires that institutions give customers a choice to opt out of sharing personal information with other parties.
Internet, or online, banking has grown in the aftermath of Gramm-Leach-Bliley as supermarket banks go head to head with smaller banks to compete for your business. The Electronic Signatures in Global and National Commerce Act (E-Sign law), passed in 2000, is another law that is likely to lead consumers to adopt online banking. E-Sign allows the use of electronic signatures for handwritten signatures to perform many types of transactions, including financial transactions.
No matter your choice of financial institutions today, online banking helps you to keep track of your finances. Some of the advantages of online banking include:
- Around-the-clock convenience. Online banks allow you to check balances, transfer funds, pay bills and review your investments anytime and anywhere. You can often apply for a loan or open an account any time of the day or night.
- Competitive deposit and loan rates. Online banks offer the same products and services at their Web sites that they do in their branches. In some cases, they may pass on better loan and deposit rates from savings earned from not having a network of brick-and-mortar branches.
- Timely account balance information. If you rely on the regular mail system to make deposits and pay bills, your account balance lags as each check or deposit clears. If you make payments and get paid online, however, your account balance is generally updated sooner. Of course, balancing your checkbook the old-fashioned way still works. Checking your balance online, however, lets you make sure that your payment to the mortgage or auto lender has cleared in time.
- Electronic services. Electronic bill payment and presentment (EBPP) allows you to pay and receive bills online. Some banks charge a monthly fee for this service or may give it away. For a few bucks a month, EBPP may still be cheaper than the time and money you spend writing checks and licking stamps. Electronic funds transfer (EFT), another electronic service, lets you schedule one-time or recurring payments in advance.
- Protection of personal data. Financial institutions use Secured Socket Layer (SSL) technology to encrypt all of your transactions. These steps help to safeguard your personal data. Online banks also maintain a privacy policy that allows you to see under what circumstances a bank shares your information. If you visit an online bank that doesn't offer SSL or have a satisfactory privacy policy, you should look elsewhere. For more information on how banks should safeguard your privacy, visit the consumer section of the Federal Deposit Insurance Corporation (FDIC) Web site.
- Data that can be downloaded to your PC. Your transaction history can be easily downloaded into a worksheet or other file in your personal computer that allows you to do personal-finance analysis. This might include calculating your average withdrawal history or identifying the peaks and valleys in your spending.
To help calculate some basic savings and budgeting problems, see these calculators:
Next, we take a look at another trend in online banking, account aggregation.
Next Topic: Account aggregation
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