Online Banking Might be Hot for Retail - But Probably Not Your Business.
Most all of us do banking online now to some degree. All the major US banks have mobile apps and website that allow you to pay bills, transfer money and more. Beyond that though, there’s a new type of banking on the horizon. Some argue that it’s here already: online banking.
No, we didn’t just flip the words banking and online - they’re two distinctly different services. Banking online refers to traditional bank, with brick and mortar locations. Online banks exist entirely virtually. There is no physical location, they don’t have their own ATMs (though, they’ll likely work with an existing ATM network).
To some people, this seems a little scary. Even if we do a majority of our banking via our phones now, there is some level of security in knowing that there’s a physical location you could walk into for that business. You know if you need to make a request or need help, you can stop into a branch and speak to a banking expert. Online banks do not offer this at all.
But what they do offer are higher APYs and oftentimes, lower fees. The reason for this is practical - as businesses without any physical branches, they have a much lower overhead. Opening a CD account, or even a simpler savings account, with an online bank will more than likely earn you far more money in interest than banking at a traditional bank.
If you’re concerned about security, you probably shouldn’t be. Given that these banks exist entirely interactively, they’ve had to make a concerted effort to be as safe and secure as possible. If they’re FDIC insured, which they should be if you’re even willing to consider them, then you best believe they had to work very hard to get that distinction as an online bank.
Another perk is that you can probably say goodbye to paying ATM fees with an online bank. Most of these banks have made deals with national ATM networks that you’ll find in convenience stores and gas stations so that you’re able to do most banking at a pretty wide range of generic ATMs, instead of having to hunt down your own bank’s ATM in order to avoid a charge.
The downside to this is that these machines are far less versatile when compared to a traditional bank’s in-branch ATM. A lot of traditional banks now allow you to deposit cash straight into an ATM and it’ll clear instantly.
You probably can’t do that with most off-brand ATMs meaning dealing with cash deposits in general can be a bit of a pain for you. They fall a bit short when it comes to paper checks, too. But these are symptoms of not having physical branches –
and it’s clear they are still mostly servicing the retail consumer, not commercial ones.
In spite of this, online banks are growing and developing. With the world continuing to grow more digital, stands to reason that these banks will become more popular.
Will entirely digital banks end up usurping traditional banks?
Maybe not in the near future. But they do serve as a sign of things to come, giving you new options when it comes to banking and they could push traditional banks further into the digital space.
For now, consider your banking habits as they are, and decide whether or not you take advantage of the benefits of a traditional bank. If not, now could be the time to make a switch, or maybe just open up a separate account that takes advantage of what online banks do well without going completely without a brick and mortar branch.