The development of technology and the commercialization of the internet led to traditional brick-and-mortar banks providing online services to their customers.
However, many further advancements have been made, from traditional banks providing online services to completely virtual banks with no physical premises.
What are virtual banks?
A virtual bank is one that offers banking services completely electronically and has no physical branches.
Everything from opening a bank account, taking out loans, making deposits, and carrying out other banking transactions is done completely through a mobile app or a website.
You can access absolutely any financial and banking service as you would with a traditional bank, except online.
There is absolutely no need for a physical walk-in!
Popular virtual banks amongst users include:
Revolut is currently one of the top virtual banks that is extremely popular, especially for those who love traveling.
Through Revolut, you can easily make international money transfers with no hidden fees.
Additionally, you can hold money in up to 30 different currencies within the app.
Despite only starting in 2015, Revolut has now over 12 million customers worldwide.
Revolut aims to be the world's first truly global financial super app, currently offering innovative products that generate 100 million transactions a month.
Some of Revolut's services include transferring money abroad in 29 currencies, pre-paid debit cards that enable cash machine withdrawals in 120 countries, vaults for budgeting money, and a cryptocurrency exchange allowing users to convert currencies into Bitcoin, Litecoin, Etherium, Bitcoin Cash, or XRP.
Monzo is an extremely popular challenger app-based bank that has amassed nearly 4.5 million users.
With Monzo, you can open both personal and business accounts, save and borrow all through one app.
Additionally, you can sync up your other bank accounts into one place and get instant notifications regarding your spending habits.
Some of Monzo's services include spending budgets, saving pots, bills pots, instant spending notifications, free cash withdrawals abroad, energy switching, shared tabs, loans, and no transaction fees when spending abroad!
Starling Bank is an award-winning digital bank that received its banking license in 2016 and introduced the UK's first mobile-only current account in 2017.
With Starling Bank, you can open a range of bank accounts, including a business, joint, teen, child, euro, and dollar account.
Additionally, Starling Bank also provides B2B banking and payment services.
Some of Starling Bank's features include easily setting up saving goals, instant spending notifications, categorized spending, paperless bank statements, free cash withdrawals abroad, no foreign transaction fee when spending abroad, and international money transfers with a fee as little as 0.4%!
What makes virtual banks so popular?
According to financial technology heavyweight FIS, customers show an 88% satisfaction level when it comes to digital-only banking (2018).
To understand why virtual banks are so popular, let's take a look at some of their advantages.
1. Guaranteed Security
Virtual banks run purely online and therefore utilize a highly secure platform that enables the encryption of devices to guarantee that all customer data is secured.
Additionally, virtual banks have multi-factor authentication and biometric login features to your mobile apps and online bank accounts for added security.
2. Instant International Payments
Compared to international bank transfers with traditional banks with high transfer fees, you can easily pay and accept payments with the use of virtual banks.
If you create a virtual international bank account, all your global transactions can be completed all through your phone with a click of a button.
Virtual banks allow you to access banking services wherever you are around the world.
Your account information and access to services are all available from your mobile phone.
By never having to visit a branch, you save much time!
4. Better spending insights
Due to the customizable nature of virtual banking, you can benefit from features such as round-up savings and saving pots.
Additionally, due to the incorporation of AI and machine learning, your spending insights with virtual banks are more accurate and helpful when budgeting and setting financial goals.
5. Higher Interest Savings
Operating a virtual bank is much cheaper than the costs a traditional bank would have to incur.
Therefore, the savings received come in the form of higher interest on savings which means that with virtual banks, your money works harder for you.
6. Better customer support
Due to there being no physical branches, virtual banks need to have 24/7 customer service, which saves you a lot of time and effort compared to traditional banks where you would have to wait in long queues.
7. More environmentally friendly
There are no paper statements, no driving to the bank, and no additional space needed for staffing or housing of operations with virtual banks. Additionally, virtual banks allow you to become completely cashless, which adds to the convenience aspect.
However, there are a few concerns...
Technical difficulties are extremely common, and as a result, websites and mobile applications can go down for some time due to glitches or planned maintenance.
If you need to make an important transaction and the website or application is down, you won't be able to access your bank or make any transactions because there is no physical branch.
Moreover, if you lose your phone or no longer have access to the internet, you won't access your bank or make transactions which can be extremely inconvenient.
Lack of human interaction
Some argue that the lack of human interaction in virtual banking makes making inquiries complicated as opposed to traditional banking, where you do not have to rely on internet connectivity and can get your problem solved face-to-face.
Virtual banks are making the most of modern technologies such as machine learning and artificial intelligence to provide the most innovative services to their customers.
Moreover, according to EY's Global Banking Outlook 2018, customers have shown greater loyalty to virtual banks due to the transparency and convenience of personalized banking services.
Lastly, when considering a virtual bank to use, there are several factors to consider.
These include your own personal comfort level and compatibility with technology.
Additionally, virtual banking might not be for you if you prefer your banking services to have a human element or prefer to make transactions in person.
But why not have the best of both worlds?
Open an account with Statrys today and you'll get the equivalent of a virtual bank account, with the added human interaction with our dedicated support squads.