Updated April 12th, 2023
With the rise of digital money management, virtual bank accounts have become increasingly popular. But what exactly is a virtual bank account? And are they a safe option for those looking to manage their money securely?
Learn more about what virtual bank accounts are, their benefits, and why they are important for fraud risk management.
What is a virtual bank account?
Virtual bank accounts are online bank accounts that allow you to manage your payments and financial transactions.
Unlike traditional bank accounts, virtual bank accounts don't require the use of physical bank branches to manage your money. Instead, transactions are handled via digital platforms such as online banking, mobile apps, and payment gateways.
Benefits of virtual bank accounts
There are plenty of benefits to having an online bank account, including:
Convenience
Virtual bank accounts can be managed from anywhere, at any time, making it easier to manage finances on the go. You can process payments, send money, and set up savings accounts and recurring transactions all from a computer or mobile phone.
Greater security
Virtual bank accounts offer multiple layers of protection, such as encryption, two-factor authentication, and fraud monitoring systems to help protect your data and money.
Lower costs
As virtual bank accounts do not require physical branches or checks, they can come with lower fees and charges compared to traditional bank accounts. They also tend to have better rates for your savings, although this will depend entirely on the institution you decide to bank with.
More user-friendly experience
While traditional banks have invested heavily in creating great online experiences for customers, virtual banks are digital natives. Modern virtual banks are built with a mobile-first or online experience in mind and may therefore produce a more user-friendly experience for anyone trying to manage their money.
Increased efficiency
Virtual bank accounts can automate many financial processes, reducing the need for manual intervention and saving you time. For example, some virtual banks can help you automate your savings or send you real-time notifications of transactions and changes to your balance.
How virtual bank accounts can help you avoid fraud
Virtual bank accounts are subject to the same laws and regulations as regular banks regarding data protection, privacy, and security, so you can experience a similar level of protection as many high street banks. It also means that virtual banks must have sufficient fraud risk management solutions built in.
Like regular banks, virtual bank accounts have built-in fraud monitoring systems that can detect suspicious activity and help prevent transactions from being processed. Additionally, virtual bank accounts can come with multi-level authentication methods built in, reducing the risk of unauthorized access to sensitive financial information.
Some of the most common security features used by virtual banks and non-virtual banks include:
Encryption
Virtual banks use encryption to secure their customers' financial information and transactions. This essentially means that all data transmitted between the customer and the bank is scrambled, making it more difficult for any unauthorized party to access or intercept it.
Two-factor authentication
Virtual banks often require customers to use two-factor authentication for logging into their accounts. This means that in addition to a password, customers must provide a second form of identification, such as a one-time code sent via SMS or even a fingerprint scan to access their accounts.
Fraud monitoring systems
Virtual banks use sophisticated fraud monitoring systems to detect and prevent fraudulent activities. These systems use machine learning algorithms and real-time data analysis to identify and flag suspicious transactions, which are then reviewed by the bank's security team.
You may have already experienced this yourself when you go to make a big purchase or transfer, only for your bank to call you to verify it's you before processing the transaction.
Secure infrastructure
Virtual banks invest heavily in their infrastructure to ensure that their systems are secure and resilient. This includes using secure servers, firewalls, and backup systems to help prevent unauthorized access, data breaches, and system failures.
Compliance with regulations
The financial industry is heavily regulated, and all banks must abide by strict regulatory requirements that require them to implement and maintain robust security measures. For example, the Financial Modernization Act of 1999 requires financial institutions to protect their customers' financial privacy.
Virtual banks are no different and must still abide by these rules and use similar security technology as any other bank account. This helps to ensure that customers' financial information and transactions are protected and that the bank is able to respond effectively to any security threats or incidents.
Stay vigilant to protect yourself from fraud
While virtual bank accounts are highly secure and use some of the best modern security technology available, customers should still remain vigilant. All the security technology in the world won't protect you if you have easy-to-guess passwords or you're not aware of how to protect yourself from common scams.
That's why it's worth reading up about online scams, such as phishing scams that involve scammers pretending to be from the bank to ask for sensitive information.
Remember: A bank will never call you to ask you for your password or sensitive information. If you ever receive a suspicious call, email, or text, contact your bank independently to verify.
The FBI has a resource that lets you check the most common scams and crimes to be aware of, including phishing, consumer fraud scams, skimming, and more. You can also report suspected fraudulent phone calls to the FTC.
It may be worth reading up on your bank's security protocols to ensure you're happy with the level of protection offered.
How Netspend protects you
Netspend takes financial security very seriously and uses secure socket layer (SSL) technology to encrypt your personal information. As a further security measure, you can access your Netspend prepaid debit card account information from the website only if you have enrolled in access to the Online Account Center.
Read more about Netspend's security measures, or check out our security center for more information on protecting yourself from scams.
