It would seem that virtual banking and virtual banks are one and the same. After all, you can use a virtual bank to do virtual banking.
What is Virtual Banking?
Virtual banking, or online banking, which didn’t exist 20 years ago, is extremely common today. According to the American Bankers Association, two-thirds of U.S. adults bank online.
Nearly all banks now offer online banking, but simply providing virtual banking as a value-added service doesn’t make you a virtual bank.
What are Virtual Banks?
Virtual banks are financial institutions that have no physical presence other than their online site or their banking app. In contrast to conventional banks that have brick and mortar branches and may have drive-throughs, virtual banks have none of the above. They exist virtually, hence the name.
Virtual banks offer many of the same services as conventional banks, and these services are coming closer to parity all the time. You can open accounts, pay bills, apply for loans and get almost any other service you expect from a bank. The primary difference is that instead of your banking app being an add-on service to standard branch banking, your banking app and the bank’s website are the primary ways to bank.
Why Use a Virtual Bank?
Why would someone choose a virtual bank over a conventional bank? Doesn’t the lack of branches and tellers make banking more difficult?
It’s harder to deposit cash into a virtual bank account, though that is getting easier with the advances in ATM technology. But this minor inconvenience is more than made up for by the benefits you get from working with a virtual bank.
Because virtual banks have no physical locations, their overhead costs are significantly lower, and they pass these savings on to their customers. Virtual banks generally charge much lower fees than conventional banks and generally pay significantly higher interest rates on interest-bearing accounts.
If you’re someone that does the lion’s share of their banking online already, switching to a virtual bank is makes sense. Because virtual banks only exist as mobile banking apps, they put significantly more effort into creating a seamless online experience for their customers.
For additional information about virtual banks, view Rory Brown’s website.
About: Mr. Rory Brown has focused on financial technology and investment management for 30+ years. Rory Brown is currently working on a new app that will help consumers navigate online banking. The app will connect clients with the best virtual banks in the world, where they can get comparisons on rates for home loans, auto loans, and more.