What is a Virtual Bank and Why it is so Popular?
The popularity of smart gadgets and the advancements in internet technology have contributed significantly to the transformation of the banking industry.
Also, the changes in consumer behaviour, especially since the COVID-19 pandemic, have resulted in a significant rise in the number of virtual banks. As a result, many customers are choosing virtual banking over traditional banking.
Are you interested in learning about virtual bank accounts? If so, you have come to the right blog post. In this article, we will tell you the meaning of virtual banking, what virtual banks are, how they operate, and how they differ from conventional banks.
Meaning of Virtual Banks
Virtual banks are online-based financial institutions that provide many of the same services as traditional banks. However, one significant exception is that they are available around the clock via the internet, and they do not have physical branches. Their customers have 24/7 access to their accounts and can conduct many types of transactions at any time.
How a Virtual Bank Works
A virtual bank allows individuals and businesses to conduct business transactions via the internet rather than at physical locations. Typically, a virtual bank allows customers to perform three simple operations: remote account creation; paying in funds, and paying out funds.
Online account creation
A virtual bank allows customers to open accounts from any supported location. Instead of visiting a physical office, they use their computers or smartphones to access and submit online account registration forms at the websites of their chosen virtual banks. Having received an electronic application, some virtual banks carry out identity verification and KYC checks before account creation.
Paying in funds
Virtual banks allow their customers to electronically deposit money into their accounts. They provide you with options such as allowing your employer to make a direct transfer of your wages or salary to your account, as well as other alternatives like receiving money via EMTs, wire transfers, and m-wallets.
Paying out funds
Like traditional banks, virtual banks allow their customers to order cheques. They also issue various types of physical and virtual cards, including credit, debit, and prepaid. All these are provided to create a more convenient payment experience, whether you are shopping at eCommerce stores and retail outlets or paying bills and fees.
While virtual banks do not operate their own ATMs, they do allow you to use an ATM that is owned by another bank to make cash withdrawals. The owner or operator of the ATMs may charge a withdrawal fee for the service.
Virtual Banking Services
When you think of virtual banking, there is a wide range of services that should come to your mind. They vary across different virtual banks. Nevertheless, while you may not find one that offers all of them, the following are the sorts of services you can expect:
- Opening checking and savings accounts, including IBANs.
- Making domestic and cross-border payments, such as SEPA and SWIFT.
- Bills payment online.
- Loan provision and repayment.
- BNPL services.
- Real-time analysis of your transactions.
- In-app transaction monitoring.
- Advanced security, fraud prevention, and protection against hackers.
- Issuing physical and virtual bank cards.
- Remote customer support.
Forms of Virtual Banking
Virtual banking can occur in different forms. You participate in virtual banking when you use services such as digital banking platforms, neobanks, e-wallets, ATMs, electronic fund transfer schemes, centralised fund management services, magnetic ink character recognition codes (MICRs), electronic clearing service schemes, computerised settlement of clearing transactions, and RTGS (real-time gross settlement).
Best Virtual Banks for Individuals and Businesses
The best virtual bank account providers are those that offer a variety of services ranging from online access to accounts, competitive interest rates on savings and loans, and advanced security with anti-fraud systems to reliable customer support.
Here is our list of the top virtual banks on the market.
Revolut
Revolut is a superb virtual bank. It has its headquarters in the UK and millions of clients in Europe and beyond. Revolut offers a lot of incredible benefits. You can use this virtual banking platform to save smarter, pay and get paid from anywhere, split and settle bills easily, as well as invest conveniently with just $1. It provides a variety of cards for different accounts, supports open banking, and simplifies budgeting and analytics. For more details, see our in-depth review of Revolut.
Monzo
Monzo is a virtual bank that provides innovative products and services for its millions of customers in different parts of the world. It is based in the United Kingdom, authorised by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA). Its users can open current accounts, premium accounts, business accounts, accounts for teenagers aged 16 and 17, and joint accounts.
You can also use Monzo for savings, cash ISAs, overdrafts, and loans. Besides, this virtual bank offers attractive travel and accommodation benefits for individuals, business owners, and couples planning their weddings and honeymoons.
Starling Bank
Starling Bank is an award-winning virtual bank. It charges no monthly fees and offers multi-currency accounts through safe mobile and online banking with support for many digital wallets. The bank is registered in the United Kingdom, authorised by the PRA, and regulated by the FCA and the PRA.
Create an account with Starling Bank if you are interested in getting the best overdrafts and loans, Mastercard cards with rewards, money transfers, current accounts, and business banking without the need to visit a physical location.
N26
The virtual bank N26 is situated in Berlin. With this bank, you can obtain a Mastercard card without paying an annual fee. It has no hidden fees, minimum account balance requirements, or other typical restrictions. Additionally, a broad range of perks is provided for customers. They include personal and business accounts, insurance, and support for Google Pay, Apple Pay, and Wise.
bunq
bunq is one of the best virtual banking service providers for individuals and businesses. It is a Netherlands-based online bank that operates with a permit from the European Central Bank (ECB). The ECB is in charge of managing the euro and the economic and monetary policies of the European Union, including the control of inflation in the continent.
bunq offers many sub-accounts with unique IBANs, mortgages, budget automation, and reliable bookkeeping integration for businesses. It offers Maestro debit cards, metal cards, and Mastercard credit cards.
Monese
Like many other virtual banks, it takes only a few minutes to register and start operating an account with Monese. This virtual bank promises to pay you up to €225 if you invite your friends and satisfy some simple terms and conditions. Its range of services includes a credit builder for those with poor credit, low-interest insurance, open banking, card issuing (prepaid debit cards), money transfers, budgeting, and travel support.
Bankera
Bankera is a virtual bank authorised by the Central Bank of Lithuania. It saves you from the complicated processes of traditional banks by moving your financial institution to your smartphone.
With Bankera, you can have a free personal IBAN account for all kinds of payments. It also provides funds transfer via alternative options such as sending and receiving money using your phone number or email address. Moreover, its Visa cards allow you to make payments in more than 200 countries.
If you are looking for more reasons to bank with Bankera, read this overview to learn about its cryptocurrency ecosystem and other services.
Advantages of Virtual Banking
Virtual banking comes with many advantages. They can be summed up into the following:
24/7 banking
Online banks are available 24/7 provided that your connection to the internet is active and stable. There is no need for you to go to a physical branch because they lack any.
In addition, some cutting-edge virtual banks increase the stakes in the market by giving you round-the-clock access to a live customer support representative that can understand your situation better than a programmed computer or bot.
Faster and more efficient services
Keep in mind that practically every banking activity, including applying for a loan or transferring money, requires you to wait in line at traditional brick-and-mortar financial institutions. The situation with virtual banking is different, though.
Since you don't have to wait, efficiency and speed work in your favour here. With only a simple login to your online account, you can do practically all financial transactions whenever you want, wherever you are.
Online (paperless) payments and eco-friendliness
One of the fantastic benefits of internet banking is the opportunity to pay bills online. In traditional banking, paying bills requires filling out forms or writing cheques. In contrast, virtual banking only requires a single click after your accounts have been set up. And not having to fill out papers is a pro-environmental development, which is sustainable and good for the climate.
Besides, you can even automate the timely payment of your bills using your virtual bank's mobile app on your smartphone.
Less cost of operation and more rewards
Rent, energy, landscaping, cleaning services, and other costs must be covered by traditional banks. Virtual banks, on the other hand, do not have to pay for these expenses, which results in cheaper operating costs. They can, therefore, easily charge less than traditional banks do.
Consequently, there are several virtual banks that provide free online checking accounts with no minimum balance requirements, as well as other no-fee bank accounts. Some virtual banks provide no minimum balance requirements, high-interest rates on savings, and low charges on credit and loans.
Regulation
The financial authorities of the countries where virtual banks are based oversee their regulation to ensure that they are not unfairly handling the affairs of their customers. They also help to promote effective competition, among several other functions. For example, the Financial Conduct Authority (FCA) is the main regulator of virtual banks in the United Kingdom. Hence, there is no need to fear a licensed and regulated virtual bank.
Note: Virtual banks provide several other benefits for users, which are as follows:
- Lower fees when compared to traditional banks.
- Free mobile apps for managing your money on the go.
- A broader range of customised services and more appealing perks than traditional banks.
- High-level security measures to protect users’ data and money.
- User-friendly platforms with interfaces that are compatible with diverse devices, such as MacBooks, Windows computers, iOS phones, and Android phones.
Disadvantages of Virtual Banking
Despite the advantages of virtual banking, some disadvantages are linked to having a virtual bank account. They range from cybersecurity threats to poor personal relationship building with your bank.
Cybersecurity threats and trust issues
Every IT-based innovation, as usual, must deal with the online security issue. Because of this, some customers are still hesitant to open virtual accounts. Your online bank account (and money, obviously) is at risk of loss if someone illegally accesses it using your password or log-in information that has been compromised or stolen.
People also find it challenging to trust virtual banks because they lack a real presence. They worry about what would happen to their money if the website broke down or if their online identities were stolen.
Inability to execute services that require physical visits
Although we live in a digital age, there are still certain services that cannot be performed online. For example, notary public services need a real visit and are required for important financial transactions like property purchases. Hence, a virtual bank might limit your ability to perform some important transactions.
Weak personal relationship building
Being able to readily establish familiarity and relationships with a banker gives conventional brick-and-mortar banks an advantage over virtual banks. On the other hand, virtual banks frequently pass you off to an anonymous customer care representative who will probably be unable to identify you in person.
Are Virtual Banks the Future of Banking?
Companies like Revolut, Monese, bunq, Starling Bank, N26, Monzo, Bankera, and other virtual banks which have the potential to become highly successful are predicted to hold the future of the banking industry.
Below are the reasons why virtual banks are believed to be the future of banking.
Convenience
You can use virtual banks to obtain financial and banking services from anywhere. They allow you to access your account information and send/receive payments, regardless of location or time zone.
By eliminating time-consuming procedures like travelling to a physical location to make payments or even seek assistance, using a virtual bank account can also save you time for other activities.
Security
Virtual accounts are entirely online-based; thus, they make use of a very secure infrastructure that allows encryption to ensure that all user data is protected.
For enhanced protection, virtual banks also provide biometric and multi-factor verification for your mobile apps and online bank accounts.
Better spending insights
Virtual banks offer better spending insights than traditional banks. They allow customers to benefit from features like round-up saves and saving pots. As virtual banks use AI and machine learning, they can give you spending information that aids in budgeting and setting financial objectives.
Environmentally friendly
With virtual banks, there are no paper statements, no need to drive to the bank, and no need for additional space for housing or employees. The convenience is increased by the ability to fully eliminate cash thanks to 24/7 online transactions under virtual banking.
FAQ
Virtual banking offers guaranteed security of your data and account, provides reliable 24/7 access to your money, charges lower fees than traditional banking, and offers attractive discounts and bonuses.
Hence, it is almost impossible to have a good life without some form of virtual banking today, especially if you have a smartphone with an internet connection.
Virtual banking is the practice of taking traditional banking services online, thus eliminating the need for physical branches and many paper-based applications. Here, everything is done using a smartphone or computer with an internet connection.
Customers are attracted to digital or virtual banks for many reasons. The most common are the convenience of having 24/7 access to their accounts from a supported location and the attractive perks they offer.
The features of virtual banking include fast account creation, automatic bill payment, prompt notifications, software integration, support for digital wallets, fast money transfers, account summaries and reports, mobile cheque deposits, fraud alerts, advanced security, ATM and bank locator, and much more.
Virtual banks provide a wide range of services, which include 24/7 access to your money and financial records; reliable customer support; cost-effective alternatives to traditional bank accounts; and mobile apps that let you access your account information wherever you are.
A virtual bank is different from a traditional bank because it offers all its services online. Unlike traditional banks, virtual banks do not have physical branches.
You can transfer money to a virtual account by getting the necessary details about the digital account and using a supported payment method for the transaction. Depending on the options provided by the virtual account service, you can use options like email money transfer, direct bank transfer, or PayPal.
Open a Virtual Bank Account Today!
As you can see, virtual banking has more advantages than disadvantages, and it performs better than traditional banks in many aspects. So, create an account with a virtual bank or switch from your traditional bank to have a new and better experience of saving your money and managing your income and expenses.
What are you waiting for? Join the train and take advantage of the numerous benefits of virtual banking. Open an account with one of the top virtual banks that we have listed in this article.
