PayPal, the e-commerce business formed in 2000, is the hypothetical middleman that common wisdom would have you cut out. In the world of online payments, though, it can be quite handy to have a barrier between a seller and your bank account. PayPal processes payments for commercial vendors and auction sites for a fee. The buyer pays money to PayPal, and the vendor is then paid in the form of a check or a deposit (into their own PayPal account or bank account). At no point does the vendor see the buyer’s bank information.In 2002, eBay purchased PayPal, recognizing the applications such a business would have to their online auctions. PayPal is now a wholly-owned subsidiary. Since then, PayPal has made some acquisitions of its own, including the Israeli start-up Fraud Sciences, which they are using to develop new fraud detection tools, and Bill Me Later, a service similar to PayPal which offers transactional credit at online vendors. (more…)

Online banking sites have a great deal of responsibility when it comes to their customers. That’s why a single password just won’t cut it. Instead, most banking sites use one of two main security types. The first is the PIN/TAN system. The PIN is the password for accessing the account, and the TAN is a sort of one-time password for authenticating transactionshence “Transaction Authentication Number.” TANs are usually generated by security tokens. The other type of security used is signature-based. In this security model, each transaction is signed and digitally encrypted. The encryption keys are usually stored on smartcards or other memory mediums.Electronic online banking is prone to a host of attacks, including phishsing, pharming, and monitoring programs like keyloggers. These programs attempt to steal a user’s password and TANs to access their account. The new Man in the Browser attack is a type of trojan which lets hackers modify existing transactions with their own destinations and amounts. Digital certificates and virus scanners are the best ways to protect against these sorts of threats.

A recent survey by the American Bankers Association found that 36 of respondents now preferred online banking. That’s 11 more than last year, and also 11 more than those who still prefer visiting branches. One of the reasons for the growth in supporters has to be the new benefits associated with online savings accounts.Today, while many savings accounts are lowering their interest rates, online accounts are offering higher rates and waived fees. At American Express, for example, you can create an online account with no minimum deposit or balance with a yield of 1.3. SLM offers a deposit- and fee-free account with an annual yield of 1.4. Some banks are also partnering with primary schools around the country to offer accounts with smaller deposits but greater interest rates. For instance, Cardinal Bank in Virginia offers a special account option for students at 11 elementary and middle schools, featuring an annual yield of 2.5 and a deposit maximum of 1,000. (more…)