With internet usage rising, most banks have turned to online banking apps for smartphones. The convenience of checking a bank account or making a transaction has brought about significant changes to the banking industry as a whole, allowing new players to enter the realm of banking.
People are slowly moving away from traditional, brick-and-mortar bank locations, opting instead for strictly online banks and services, but how do these online lenders compete with well-established banks?
Recently, MarketWatch reported that J.P. Morgan Chase is expanding its online-only bank affiliate, Finn. Chase is attempting to get ahead of its traditional counterparts by entering this market and providing significant benefits to consumers. For example, Chase and many other online banks do not charge high, or any, overdraft fees because they save money not paying for physical locations. According to a report from Moebs Services, consumers paid around “$34.3 billion in overdraft fees in 2017,” so online-only banking could save consumers money.
Another benefit is that most online banks allow ATM transactions with minimal fees because of deals and partnerships made with other banks, giving customers more freedom and convenience withdrawing cash.
Business Insider notes that online banks usually require significantly lower minimum savings account balances, only $350 on average, $4000 less than the traditional bank average.
Online banks, and now some traditional bank’s mobile apps, often feature software that can track spending, breaking it down into what types of items are purchased and at what frequency. This feature can help when customers want to budget, which for many people is difficult to do manually.
An issue people tend to see with strictly online banks is customer service. While services are available during regular business hours (sometimes even 24 hours), some reviews claim that service is generally less reliable than that of a traditional bank. Some people like having a face to face interaction with a banker to assist them, which could be more reliable than over the phone or through an online message.
One potential downside to online checking and savings accounts are increased security risks. According to Time’s financial branch Money, online banks put more of their resources towards online security. While, both traditional and online banks follow the same security laws and regulations, but potential customers should verify if the online bank is Federal Deposit Insurance Corporation (FDIC) insured.
Customers using online banks should be vigilant and make sure to set a secure password and change it periodically. Experts suggest that users should not bank online using public Wi-Fi which is more susceptible to data breaching. Online banks can only be accessed with an internet connection, which means that users should look for a larger data plan if they want to access the app or website more frequently. Sites and servers can also crash, which means some people could be prevented from making deposits or checking their bank accounts.
Some online banks do not offer loans, and some consumers may prefer to go to a physical bank when receiving a loan. Others may be comfortable with getting a loan online.
Of course, the question as to whether or not online banks are worth it is entirely up to the consumer. Some people simply prefer the face-to-face interaction that brick and mortar locations provide where others may be fine without. The differences between the two are shrinking, with more traditional banks opening up online apps for customers, with similar features as online-only banks. Each has pros and cons, but younger generations may look to less traditional methods of savings than their predecessors.