What is virtual bank, direct banks, digital bank, etc?

What is virtual bank – The arrival of the internet brought tremendous relief to how a lot of tasks are being executed across several industries.

The Banking industry is not an exception to such benefits, following this trend, customers of several banks are availed the opportunity to carry out their transactions from the comfort of their locations regardless of the bank work hours.

Virtual banking provides an avenue for ease of banking, given this, you are not required to visit the bank, you can access virtually every transaction online.

What is a virtual bank?

A virtual bank is a financial institution that operates online, given this, such institution provides a digital platform for customers to consummate their transactions with ease online.

Transactions that customers may perform include but are not limited to;

• Opening account
• Check account balance
• Send and receive funds, as well as various financial products.

A virtual bank can also be referred to as; an online bank, digital bank, or direct bank. The online bank eliminates the need to visit a physical office location.

Benefits of virtual/digital banking

• Transactions are conducted within the shortest turn-around-time which transmits to speed and being fast.
• Digital banking benefits the bank as much as it benefits the customers, there’s always a risk of staff theft and compromising services as the case may be, however, a staff is not required to interface with the customers here, all transactions are treated digitally under a tight end-to-end security.
• There’s a case of reduced staff strength, as well as the cost of running a physical branch across states, and cities other than the resident location of the bank, all transactions are carried out online.
• Against the usual branch location, the bank will reach a wide range of customers it wouldn’t have access to via a branch location. Virtual banking leads to an increased customer base.

How virtual banks work

You must understand that online banks are not far from traditional banks, they only differ in the fact that while the traditional banks are designated to particular locations, direct banks are accessed on the internet platform.

There are three steps to the operation of digital banks, these include but are not limited to;

• Open an account: To access the platform, you are required to open an account online using personal details like name, phone number, valid email address,
• Fund your account using the customer-designated account number
• Send money and complete payments as the case may be.

How do virtual bank accounts work?

Kindly be informed that virtual bank accounts are not different from the traditional bank account, they have similarities with a function to send and receive funds.

Virtual accounts cannot necessarily hold money, they however receive money, as well as collect necessary information about the sender, and forward them over to the primary account.

What is another name for a virtual bank?

The term virtual bank refers to an institution that provides banking services online to its numerous customers, to make banking easy and seamless regardless of the location of a customer.

Virtual banks may as well be called; internet banks, direct banks, online banks, digital banks, etc.

 The difference between online and digital banking

While these may pass as similar in definition and concept, they have a unique difference.

Transactions are consummated online on virtual banking, while online banking represents an internet-designated option used and offered by traditional banks.

Choosing a virtual bank

Have got acquainted with virtual banks, you are looking to start using one, but a challenge you may encounter is how to choose a digital bank.

To choose any, you will need to pay key attention to the following parameters.

• APY: There’s a need to grow your funds, given this, you are advised to consider a bank that offers a competitive interest rate. Such virtual banks should offer a good APY on savings, so why not shop around for the best rates online?
• A virtual bank with money management tools: A virtual bank that offers money management tools can help you grow your finances effortlessly. Money management is usually structured around good investment advice, budgeting and frugal living, a virtual bank that offers these benefits is arguably good for you.
• Professional customer service: The importance of good customer service cannot be downplayed. You need to pitch your tent with a bank that has not just a standby trained personnel to attend to your concerns, but a customer service that empathizes and springs to action towards the resolution of issues.
• Safety of funds: The major stock in trade in banking is money, you should only choose a bank if you have the assurance that your funds will be safe as well as be made available on request at any time.

Virtual banking advantages and disadvantages

While the song has been all glory about digital banking, it’s worth knowing a few downsides too.

Advantages

• Ease and convenience: Using a virtual bank comes with relative ease, you just need to have a strong internet connection.
• Good interest rates: Virtual banks usually offer the best interest rates on your idle cash than the traditional banks, this can be attributed to the fact that there are no overhead costs to run or branch staff to maintain.
• Bill payments online: Doesn’t it feel good to settle your bills online from home, it’s.
• Low fees: Virtual banks have lower fees than traditional banks, this is a valid point to consider.
• Account control: Nothing feels like knowing that you can control your bank account from a location of choice with just an enabled internet service, you can take action at will.

Disadvantages 

• No ATMs: Virtual banks do not have their ATMs, however, they rely on ATM networks of traditional banks to offer services to their customers, bear in mind that using third-party ATMs comes with high fees.
• No cash deposit channel: You apparently can’t deposit cash with digital banks, however, you may deposit checks via the mobile banking app. Where cash deposit becomes unavoidable, you will need to a deposit accepting ATM, alternatively, transfer money from your other bank account virtual bank account.
• No interpersonal contact: Unlike traditional banks, you cannot interface with a staff of the bank for certain concerns or relationships.

Types of virtual banks

Neobank: This is a digital bank that operates online without a physical presence anywhere, it provides its customers with remote services via a mobile app.

Challenger Bank: This is a recently launched bank that originated in the UK that challenges traditional banking institutions.

Challenger focuses on audience segments that are perceived as underserved by traditional financial institutions.

New bank: These are licensed Neobanks that offer a full range of banking services, however, they operate online exclusively.

Nonbank: These are non-bank institutions that provide financial services, however, do not accept deposits or offer checking savings accounts.

Examples of virtual banks

A few examples of virtual banks include but are not limited to;

• Livi Bank
• Mox Bank
• ZA Bank
• Starling Bank
• Monzo
• Revolut, etc.

Final thought

A virtual bank is a financial institution that operates online, given this, such institution provides a digital platform for customers to consummate their transactions with ease online. Potential customers are required to open an account first, fund and start sending money pay bills, etc., as the case may be.