Virtual bank

A virtual bank is a bank with a very small or nonexistent 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 retail banking, particularly bank branches, virtual banks may offer higher interest rates and lower service charges on their savings accounts than their 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 virtual bank was the Security First Network Bank (SFNB) which began operations on October 18, 1995 Fact|date=March 2008. Based at Atlanta, Georgia, USA, it was the first virtual 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 virtual banking could work.

Europe's first full-service virtual bank was "First-e" launched by Enba Fact|date=March 2008, 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 virtual bank, it was not a full-service virtual bank initially.

Asia's first virtual bank was finatiQ – a division of the Bank of Singapore Fact|date=March 2008. It opened on April 3, 2000 (though the public launch was on April 18, 2000), heralding the arrival of virtual banking in Asia.

List of virtual banks

* AmTrust Direct, a division of AmTrust Bank (United States)
* AXA Banque (France)
* BankDirect a division of ASB Bank (New Zealand)
* Bank of Internet (United States)
* BiGonline (Portugal)
* Boursorama and several other brands (Europe)
* Citi Direct, a division of Citibank (United States)
* Citizens Bank of Canada (Canada)
* Ebank (United States)
* Emigrant Direct, a division of Emigrant Bank (United States)
* E-Trade Bank, A division of E-Trade Financial (United States)
* EverBank Direct (United States)
* FNBO Direct, a division of First National of Nebraska (United States)
* FinecoBank, a subsidiary of Unicredit (Italy)
* First Internet Bank of Indiana (United States)
* HSBC Direct, a division of HSBC Bank USA (United States)
* HSBC Direct, a division of HSBC Bank Canada
* ING Direct, part of ING Group (worldwide)
* IW Bank, a subsidiary of UBI Banca (Italy)
* Inteligo, a division of PKO BP S.A. (Poland)
* Klikkbank, a division of Erste Bank (Hungary)
* Manulife Bank of Canada (Canada)
* mBank, a division of BRE Bank SA (Poland)
* mbanx, a division of Bank of Montreal; now defunct (Canada)
* NetBank, one of the first Virtual Banks in the USA; now defunct (United States)
* Openbank (Spain)
* President's Choice Financial (Canada)
* Rabobank (Belgium, The Netherlands)
* RaboPlus, part of Rabobank (New Zealand, Australia, Republic of Ireland, Netherlands, and Belgium)
* Skandiabanken (Norway, Sweden, Denmark)
* Smile ( a brand of the Co-operative Bank, UK)
* USAA (United States)
* UmbrellaBank, a division of New South Federal Savings Bank (United States)
* UnivestDirect, a part of Univest Corporation of PA (United States)
* VirtualBank (United States)
* WaMu Direct, a division of Washington Mutual(United States)
* WTDirect (United States)

ee also

* Online Savings Account