Direct bank

A direct bank is a bank without any branch network. It offers its financial services by:

• Telephone banking
• Online banking
• Automated teller machines (often through interbank network alliances)
• Mail banking
• Mobile banking

By eliminating the costs associated with bank branches, direct banks may offer higher interest rates and lower service charges on their products than their traditional competitors.

History

Traditional banking was impacted greatly by the commercialization of the Internet in the early 1990s. As the Internet became more generally accessible, traditional banks began to realize its potential to deliver services to their customers while reducing long-term operational costs. Upon realizing this, traditional banks began to offer limited services online.

The initial success of internet banking services provided by traditional banks led to the development of internet-only banks or "virtual banks". These banks were designed without a traditional banking infrastructure, a cost-saving feature that allowed many of them to offer savings accounts with higher interest rates and loans with lower interest rates than most traditional banks.

The world's first fully functional direct bank was the Security First Network Bank (SFNB) which began operations on October 18, 1995^{[citation needed]}. Based at Atlanta, Georgia, USA, it was the first direct bank to be insured by the Federal Deposit Insurance Corporation (FDIC). After three years of operation, it was acquired by the Royal Bank of Canada (RBC). Though SFNB did not make much profit in the initial years, it demonstrated that the concept of direct banking could work.

Europe's first full-service direct bank was "First-e" launched by Enba^{[citation needed]}, a Dublin-based company under the banking license of Banque d'Escompte, France. First launched in the UK in late September 1999, it garnered appreciable attention, resulting in more such ventures all over Europe. After about two years of operations, it shut down its operations during the dot-com bubble bust. Though Egg Bank, launched earlier in October 1998 by Prudential plc, was touted to be a direct bank, it was not a full-service direct bank initially.

Asia's first direct bank was finatiQ – a division of the Bank of Singapore^{[citation needed]}. It opened on April 3, 2000 (though the public launch was on April 18, 2000), heralding the arrival of virtual banking in Asia.

Noteworthy direct banks around the world

• ING Direct, part of ING Group
• Discover Bank, part of Discover Financial
• UBank, part of National Australia Bank
• RAKBANKdirect, Part of RAKBANK
• RaboDirect, part of Rabobank
• HSBC Direct, part of HSBC
• First Direct, part of HSBC
• Banco Best, part of Banco Espirito Santo
• ZUNO BANK AG, part of Raiffeisen Zentralbank or Raiffeisen International Bank

See also

• Online Savings Account