Banking
I had a random thought while I was depositing and transferring my money between banks about how it all works. What does the American banking system look like as a software system?
Direct Deposit -> ACH
It’s useful to first work through specific functions before trying to get the entire picture of digital banking. One of my transfers ended up as a direct deposit from BoFA, even though it was sent as an “ACH” transfer. “Direct deposits” are quicker because your bank looks at the unprocessed ACH and credits your account.
So what is an ACH? An automated clearing house functions as a middleman between banks for two fundamental operations: “credit” and “debit”. A digital ACH is a software system your banking provider can integrate with.
Personal Security
Our banking account + banking information is one of the more important accounts to keep secure. The main items here are our personal information, account password, and personal banking information. Each, if exposed, can lead to security concerns and unauthorized actions against our account.
The first is your bank account number and routing number. With those two pieces of information, a person can create fraudulent checks or make ACH payments on your behalf. It is oddly easy for someone to commit fraud this way, given how present the information is on checks and user accounts. Reversing a transaction is seamless if you report it early.
The second is having access to your bank account details. From here, an actor could initiate fraudulent transfers or create fake checks to cash. In this case, they could issue cashier’s or money order checks instead of faking checks in your account’s name. The worst-case scenario is your authorization devices being compromised, which allows wire transfers to be made.
The third is identity theft. People getting your private information from previous data leaks can use it to get loans and create accounts in your name. If you were specifically targeted, an actor may try to “sim-swap” your cellphone in order to grant access to your personal accounts1.
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Sim-swapping has been done extensively for cryptocurrencies, as it is harder to recover a fraudulent crypto transaction than even a fraudulent wire transfer. ↩