Virtual Banks

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  • Topic: Bank, Banking, Online banking
  • Pages : 8 (2386 words )
  • Download(s) : 155
  • Published : December 1, 2012
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Table of Contents
Introduction……………………………………………………………….……….p.1-3 Virtual Banks Defined……………………………………………….….….p. 1 Brief History…………………………………………………………..……p. 1-2 Competition………………………………………………………….……..p. 3 Major Players……………………………………………………………….p. 3 Use Amongst Canadians: ……………………………………………….….p. 4 Some Statistics

Benefits vs. Drawbacks of Virtual Banks…………………………………………...p. 4-6

Advantages ………………………………………………...…………….... p. 5-6
Disadvantages………………………………………...……………………..p. 7-8

Implementation of Virtual Banks in Canadian Banking System………………...….p. 9-10 References……………………………………………………...……………………p. 11 Introduction
Continuous innovation in technology has altered the way in which business is conducted in each industry. This is especially true for that of financial services or banking. The banking world has evolved tremendously since its inception with most recent trend being towards the development of an online platform. Most Institutions currently offer financial solutions via branches as well as over the Internet. The appeal of online activity has in turn led emergence of online only or “virtual” banks. Virtual Banks Defined

A virtual bank is one that exists online only in which nearly all financial transactions are conducted over the Internet. The differentiating factor for online banks is the absence of physical branches and ATMs. Also referred to as direct banks, these entities offer identical products and services to its compared to traditional “brick and mortar” institutions. This includes opening checking and high interest savings accounts with which bill payments, transfers, deposits and withdrawals can be made. Client’s can access money via partner ATMs or attain cash back at point of sale at certain merchants. Deposits are made directly, by mailing a check, and partner ATMs. Moreover, investments, lending products and professional advice can be acquired through the respective website. Furthermore, most virtual banks are insured by the FDIC (Federal Depository Insurance Corporation). Brief History

Banks began to move online with the commercialization of the Internet in the 1990s. Traditional brick and mortar banks were seeking ways to reduce costs simultaneously providing quality products and services. The solution was discovered by the development of an online system. Considering the success of the launch of online banking, institutions began to expand their online presence through website innovation and improvements as well as by diversifying their online product and services offerings. Following the establishment of an easily accessible and profitable online banking structure, virtual online only banks emerged. These entities were successful in overhead cost reduction having only to support the costs of a single online computer network rather than those of operating physical branches and ATMs. This enabled the provision of higher returns to their clients. The first fully functional direct bank insured by the FDIC was the Security First Network Bank, based in Atlanta, It began operations on October 18, 1995 and was eventually bought out despite having been the first to prove the viability of virtual banks. Competition

The rise of online only banks has stimulated further competition within the financial industry. These institutions face heavy competition from traditional counterparts who excel in both online and personal customer service experience. Each provides respective benefits and drawbacks however; clients may choose to utilize both options and make transfers between the two. Major Players

There are several major players within the virtual banking segment of the financial services industry. INGDirect, is currently ranked first amongst competitors. HSBCDirect follows ranked second. Others include: Ally Bank, Banco Best, Discover Bank, First Direct etc.

Use Amongst Canadians: Some Statistics

Online banking is...
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