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Bank tech a mixed bag in disasters

By Claes Bell · Bankrate.com
Thursday, November 1, 2012
Posted: 7 am ET

In normal times, technological advancements in the way we manage and access our checking accounts have a lot of benefits in terms of convenience and speed. But are they a liability when massive disasters like superstorm Sandy sweep through an area?

In some ways, yes. In particular, Americans' reliance on debit cards over cash can create problems for disaster victims, because merchants need electricity and working phone or Internet connections to process debit card payments -- two things that can be in short supply in the days following a major disaster, says Debbie Woods, general manager of marketing and industry research at Jack Henry & Associates, Inc., a banking industry services providerĀ  in Monett, Mo.

"In an instance where New York is right now, where you've got 2 million people without power, that means the point of sale is not working. So in that particular case, a debit card is not going to help you," she says.

Paper checks might not be much better because most retailers process checks electronically these days, Woods says.

Smartphone-powered payments systems such as those offered by Square Inc. may offer some hope for solving the electronic payments problem in future disasters, says Woods. But until they become more widespread, you're much better off withdrawing a generous helping of cash before a disaster hits than trying to muddle through with a debit card, especially since extreme weather tends to knock out one of our other favorite modern conveniences -- the ATM.

Still, today's banking technology isn't entirely a liability for disaster victims. For instance, as long as you they have some kind of mobile device, a data signal and some charge left on their battery, mobile banking services offered by many banks allow customers to check their balances, pay bills, deposit checks and take care of other critical financial tasks without leaving home, Woods says.

The availability of those banking services typically aren't affected by storms because they're provided by data centers that are often far away from where the banks themselves are physically located, allowing customers to access their banks even when branches are closed, Woods says.

That access to bank functionality is key. Natural disasters put financial stress on families, resulting from facing lost wages, paying for storm supplies and, in some cases, having to evacuate. The last thing people need in that situation is to deal with overdrafts or late bills because they aren't able to get their banking business done because banks are closed, or because leaving home to run errands is difficult or even dangerous.

What do you think? Is modern banking technology a hindrance or a help when it comes to disasters? What's been your experience?

Follow me on Twitter: @ClaesBell.

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