It is fun to imagine American statesman, legal scholar, politician, lawyer economist, and banker Alexander Hamilton would think of banking on the Internet. By all accounts, Alexander Hamilton was a straightforward-thinking guy. When Hamilton was the country’s Secretary of Treasury, he pushed for a national bank to be created, a very daring proposal (or idea) at that time.
Thanks to this man’s persistence, the first conventional bank opened in the United States in 1791. Every bank in the United States worked the same way for over 200 years. People walk into the building and conduct their business with the help of bank employees.
By the 1980s, Automated Teller Machines were readily available and widely used all over the United States, and customers can conduct their banking activities without the help of bank staff. By 2006, at least 80% of banks in the United States offers digital services. And then there’s the “Online-only” banks or financial institutions with no physical presence.
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Reasons why people are starting to switch to digital banks
As the name suggests, customers can access the bank’s services on the Internet. There are no lines, drive-up transactions, no tellers and bowls of candies on the counter. Banking on the Internet or digital banking allows customers to manage their money and other financial obligations from a mobile device or their personal computers. It is not surprising at all that after more or less 200 years of doing banking the traditional way.
The switch to the Internet or Online-Only banks happened at a slow and measured speed. As many as 100 million Americans have remained very loyal to their original banks. But for people who have made the switch from traditional to a digital bank, the reason for doing it is plentiful.
There’s nothing more convenient and favorable than being able to do all your banking and financial needs while at the comfort of your home wearing your favorite pajamas. If you usually wake up in the middle of the night wondering if you have paid the utility bills or made a deposit, people can pull the information on their personal computer or smartphone.
If customers have checks to deposit, all they need to do is go to their mobile phones and open the bank’s online application. They can simply take a picture of the check, front and back, download it to their application and click “submit.” While most conventional banks offer the convenience of banking on the Internet, banks that only accept online-only transactions tend to put a lot of their resources into this kind of technology.
After all, it is their equivalent of branches. Banks that only accept digital-only transactions allow their clients to keep an eye on their accounts in one place, a desirable benefit if the clients are operating a small or startup business. Imagine you can gather all your financial records, including tax records in a matter of minutes. No falling in lines, no waiting for hours inside the establishment and no paperwork.
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Lower transaction fees
If clients have to maintain a minimum balance to avoid fees at their current bank, there is a big chance that they will find these digital -only banks more forgiving. A lot of these financial institutions offer no-strings-attached checking accounts that do not charge additional fees if the accounts have low balances.
Some online-only financial institutions provide a fee-free withdrawal from any Automated Teller Machine and will even compensate or refund clients if the host Automated Teller Machine charges to them. For example, if you need to take money out of an Automated Teller Machine owned and operated by a convenience store or different bank.
If that convenience store or financial institution charges you a service fee, your bank will refund the money back into your account. Let’s put it this way, online-only bank institutions help their clients avoid any unnecessary transaction fees.
Favorable interest rates
Online-only financial institutions can offer high-interest rates on their client’s deposit accounts since they have a lower overhead cost compared to brick-and-mortar banks. If the client is someone who likes to maintain high savings or checking account balance, it is definitely worth checking the excellent interest rate offered by a lot of online saving accounts.
Digital -only financial institutions have a lot to offer, but everything in this world has its limitations. Clients can’t directly deposit their money, and some of them do not provide full service. Not only that, if the client needed services traditionally offered by a brick-and-mortar bank like safe deposit box rental or notarization, clients would not be able to access them using a digital -only financial institution.
But there is a workaround in this issue. Clients can keep part of their money in local banks or credit unions that have free checking. If they have cash that they like to transfer into their digital-only account, they need to deposit it first into their local account. They need to write a check, scan it into their online account like any other deposit that they have made.