What is online banking?

Online banking provides 24-hour access to your bank accounts from the comfort of your home and when you’re on the go to make paying bills, managing transfers, and keeping track of your money easier. So, what is the definition of online banking, and how does it work?

The information provided here is for informational and educational purposes only and does not constitute financial advice. Please consult with a licensed financial adviser or professional before making any financial decisions. Your financial situation is unique, and the information provided may not be suitable for your specific circumstances. We are not liable for any financial decisions or actions you take based on this information.

Online banking, also known as internet banking, allows you to access your bank accounts and complete common transactions via your smartphone, tablet, or computer. Mobile banking is simply the same service accessed through a smartphone app.

Available from both traditional high-street providers and digital-only banks, online banking is generally free to use and lets you pay your bills and transfer money without visiting your local branch or calling your bank. Most UK banks offer a mobile banking app to make the process easier. 

Online banking in the UK allows you to:

• Check your bank balance and view recent transactions
• Pay your bills
• Transfer money to another bank account (via Faster Payments or Bacs)
• Set up and cancel direct debits and standing orders
• Set up low balance or spending alerts
• Pay in cheques using the mobile app, known as cheque imaging (if supported)
• Apply for overdrafts and keep track of overdraft limits
• Set up savings accounts and transfer money into them
• View and download bank statements
• Manage debit or credit cards – for example, you can freeze a card if it’s lost or stolen
• Check on any mortgages, ISAs, loans, or investments you have with the same bank (if your bank supports this)

It can help to check how to access online banking services from your particular bank, as processes can vary. Anyone with a bank account can usually register for online banking and set up login details on the bank’s website or through its mobile banking app. As part of the registration process, you’ll create a secure username and password, and you typically have to set up security questions. Once you’re logged in, you can check your balance or review transactions. You can also send money and set up recurring payments by using the payee’s account number and sort code. In the UK, online banking payments are often processed through Faster Payments, Bacs, or CHAPS. You can see your updated balances immediately.

Banks use tools like two-factor authentication (2FA) and one-time passcodes, which you might receive when logging in or completing transactions. Your bank might also automatically set up alerts for any unusual activity to help keep your account secure.

Online banking can be a convenient way to manage your money, but for some services, you may still need to visit a branch of the bank, particularly if security or potential fraud is a concern.

• Convenience: Complete everyday transactions from your home or on the go
• Better interest rates: Since they don’t have the additional cost of running a physical branch, digital banks sometimes pass savings on to customers via more competitive interest rates
• Money management tools: Some mobile banking apps come with budgeting tools to keep track of how much you’re spending or saving
• 24/7 access: Manage your money at any time using an internet-enabled device
• Time-saving: There’s no need to queue or travel to a branch for routine transactions, which is helpful for those with no bank branch nearby

• Limited services: Some services, such as depositing physical cash or in-person identity verification, may still require a branch visit
• Technology dependence: Online banking requires access to a computer or mobile device, a stable internet connection and digital literacy, plus there’s the chance of service outages or technical issues
• Security concerns: Online banking exposes you to cyber threats so users must follow security best practices like setting up strong passwords and completing two-factor authentication when logging in
• Less personal interaction: Some users may prefer face-to-face guidance for more complex banking needs

In the UK, online banking is available from most banks, but you must typically have a current account with the relevant bank to get started. You’ll also need a secure internet connection on your device. Depending on your bank, you can register via the bank’s website, by going into a branch, or over the phone.

The registration process typically involves a few security steps. This could include:

• Receiving a password or activation code by post
• Attending an appointment in-branch to verify your identity
• Using a small security device provided by your bank

Once you’ve set up online banking, you might be able to download your bank’s app (if available) from the app store on your phone or tablet. Some challenger banks offer online or app-only banking, but most banks offer a combination of online and in-person banking services.

Banks use various security measures to protect you when using online banking in the UK. An example is two-factor authentication, where a code is sent to your phone when you make a payment or you use a fingerprint or facial recognition when logging in.  There are several things you can do to minimise your exposure to fraud and keep your account and money as secure as possible.

• Double and triple-check that you have entered the correct details when completing a transaction.

• Check your statements frequently so you can identify any unusual activity straight away.
• Don’t reply to any emails or text messages that claim to be your bank but don’t look quite right. It could be a phishing email or message. If you have any concerns, contact the bank directly.
• Use a secure Wi-Fi connection and avoid accessing your online banking account when you’re on a public Wi-Fi connection. If you need to access your account when out and about, use your phone’s mobile data (3G, 4G, or 5G) instead.
• Don’t use the same passwords across multiple accounts; use unique, strong passwords for each account.
• If you need to check your account but have no internet, use a trusted friend or relative’s computer, or visit your local branch instead.
• Remember to log out of your account when you’ve finished a transaction. Most banks will log you out after 15 minutes of inactivity, but you can log out yourself once you’re finished.
• If you make a mistake, such as sending money to the wrong account, contact your bank as quickly as possible. They’ll be able to investigate the issue and advise you on the next steps. Find out what to do if you fear you have been scammed.

Looking to manage your savings digitally? At Raisin UK, you can easily compare savings accounts by interest rate, account terms, and features. Simply apply to open an account from a range of partner banks through a single online platform, and manage everything with one login. Plus, the Raisin app lets you manage your savings at any time, anywhere, straight from your mobile device.

Registering at Raisin UK is completely free and easy to do. Find out more and sign up to get started.