It's never been clear to me what advantage these totally virtual banks have over an account at a local bank or credit union with a real local brick and mortar presence and real people who can help you face-to-face with any issues.
For shops, it's different: it's convenient to be able to pick something up immediately; visiting in person often makes comparisons better; and some things have to be seen in person to buy (fresh groceries, for example, or most books). Occasionally shopping can even be fun (bookshops). But none of those apply to banks.
Using a virtual bank, I would be able to request one, and have it mailed... the entire time it's being mailed, I would be on pins and needles, because that certified cheque is literally cash, and that cash is no longer in my account.
Should it get lost, you are SOL.
(last time I got a cheque was 2 decades ago as an already semi-dead payment method)
Also one day there will be be a power cut of various size and duration and you digital wallet will become nothing.
We're getting too trusting of tech.
Sure, at some point the ATMs may all get disconnected. But if that happens, your local branch may also be disconnected, so even if you go in person, you still won't be able to access your account.
> Sure, at some point the ATMs may all get disconnected
What I'm saying is that without power digital currencies functionally don't even exist, whereas paper notes do and remain usable, not vanishing from your pocket.
It's also nice for certain loans, especially when you can chat with the loan officer and learn that if you push for the 10 year mortgage vs the 15, they don't sell the 10 year ones.
I'm confused, you seem to be implying that "we don't sell 10 year mortgages" couldn't be portrayed through digital or telephone banking (and is nice for some reason). Am I missing something or did you miss a word that changes the meaning or..?
It's a minor thing, but's also the kind of thing you might not find just interacting remotely.
And I make a lot of money. Just not that much money.
I mean, yeah, you're not going to be able to get $500,000 in cash, but that would be a very rare thing anyway.
Edit: and if you show up at your local bank branch and ask for $500,000 in cash on the spot, they probably will not be able to give it to you anyway. You'll have to give them a couple of day's notice, at least.
Most online banks reimburse ATM fees. So every ATM becomes your ATM. Which I find more convenient than having to search for branded ATMs.
Everyone takes Zelle, CashApp, Paypal, Venmo these days.
Anecdotally, I can go for months without withdrawing cash.
I only visit an ATM a couple times a year but there's no reason I couldn't go every couple days if I used mostly cash.
I live in the UK which has multiple established neobanks.
Back in the day I used one of the biggest traditional banks. I had to schedule an appointment to open an account. Twice, because some of the papers they wanted from me were apparently outdated. The appointments were weeks in advance and for the second one I had to go to a neighboring city as the branch there had the best availability.
They would regularly block some of my transactions at random, sometimes sending me an SMS and demanding a response to continue. I was not even able to send the SMS back as my carrier blocks messages to paid numbers by default. Their software wouldn't let me update my address correctly. It would randomly cut off half of it. Their app was antiquated and had 5 or so different codes/passwords that they wanted me to write down for different purposes.
As an absolute cherry on top, I made a completely regular transaction while abroad and they decided to block all my spending to "protect me from fraud" and demanded that I show up in person to one of their branches to have it unblocked. I was abroad for 6 months with no way of accessing my main bank account.
The neobank I moved to let me register online, selfie with a passport plus a day of waiting. Their security was far better as they actually adhered to modern best practices and their fraud protection was minimally invasive. At no point was I prevented from making a transaction for longer than 5 minutes and all their precautions were reasonable. Their app is a joy to use and contains genuinely useful features. And all this was handled without me ever talking to anyone.
I could keep going for longer, but the point is neobanks are more customer friendly in all ways imaginable while consuming far less resources by automating that which is easily automatable.
- Do not require minimums (something that until recently was standard practice across all major banks)
- Offer products that help customers through cashflow issues (Example: Chime's SpotMe feature)
- allow you to create a bank account in a matter of minutes regardless of your geography (atleast in the States)
- Offer a network of ATMs that you can withdraw money from (again w/o a fee)
- Provide a digital product experience that isn't a series of compromises due to having to work w/ legacy systems (unlike most established banks or credit unions)
- I'm not familiar with SpotMe specifically, but this seems like a credit card with extra steps and less security, depending on the exact implementation
- I can do this for new accounts at my current bank, and in 10-15 minutes at a new bank
- Most banks (admittedly not for lower level accounts) will reimburse ATM fees.
- No argument with me on this one, consumer bank tech is some of the worst out there
Not sure if this comment was attempting to refute it's parent but it doesn't sound like a very strong argument when most of your points support the parent
I’m sure there are potential downsides - if I trigger some opaque security process and find my account locked that’d be annoying, but that happened in the last week with both my company’s and my wife’s accounts, both with brick and mortar banks, and both were extremely painful to correct over multiple days. Having to go to a physical place with opening and closing times to talk to someone face to face is not something that I consider a positive feature of traditional banking. Nor is trying to do the same online or by telephone with any bank I’ve ever had, especially when the battery on the security single they sent me has run out.
Not only is the friction of every interaction lower, this also leads me to being far more engaged with my finances which is great. If there’s a bank that provides identical services via mobile to Monzo then that’s great, but I couldn’t currently be happier (and I can integrate other accounts in the app if I happen to need them). Personally I’m amazed Apple hasn’t bought one/many of these banks, it feels so natural on mobile.
Keep in mind that because banks are driven by software, at least in the UK, branch staff have very little power above what you can do yourself - they won't be able to help you if "computer says no". I'd rather have the computer say no to me directly than having to waste time going in-person just to get the same outcome.
This may be different to US credit unions, but even then, the writing is on the wall and it's only a matter of time before they get reduced to being mere servants of the computer.
Number of times I have needed a face-to-face interaction with a person from my credit union in the past 20 years: 1
...and I haven't lived in a state where they have a branch for the past 17 years. Don't get me wrong, my credit union is great, but they're not really into innovation the way that fintech startups are.
Banks without physical presence often offer better interest rates and better fee structures (free checking, cheap or 0 overdraft fees, etc.)
So, the neobanks have more services, for cheaper, and with better UX. The only reason I keep my bank account at the traditional bank is because i have a house loan through it and it's a requirement to keep their sweet low interest.
From what I can tell, neobanks are the Robinhoods of banking. They target users willing to trade off real features for a cute interface. I don't get it, because I like money and competence. But I suppose I see the niche. There are domains of my life in which I too will pay a premium for aesthetics, even at the expense of functionality.
(I bank with Fidelity. They're great. I've never been into their physical locations, though I suppose they exist.)
Sorry for being unclear, I was comparing neobanks with other online banks. The advantage over those with brick-and-mortar locations is clear. Apart from the subprime market, which American neobanks have targeted and who may have trouble accessing higher-aiming online banks, I don't see the pitch.
But there are online-focused credit unions, too.
However, it also isn't going to run out of funds, either.
People hate traditional banks because their physical location adds a cost which means they have to charge more. Just look at how many people have opened up accounts at neobanks in the last two years
When I was a child I lived in a small (but wealthy) village, growing up I remember there were two banks, in small purpose built buildings, plus a post office (operating similar services to a bank) and two building societies (offering mostly savings and mortgages, no current accounts)
By the time I was a teenager, the banks had left, and all that remained was limited services from a "post office" which now had a single counter in a general store, and a Real Estate agent who had taken a weekend course in some basic tasks to operate as an agent of a Building Society with which they had an agreement. This is about the time I needed an actual bank account and I picked First Direct.
A few years after I joined, First Direct made a big deal of their exciting new electronic banking service. Just dial up to the number provided, install their software and conduct several transactions electronically. I never used this service, my family did not own a modem.
But a few years after that, Netscape shipped their SSL feature (today its successor is TLS 1.3) and First Direct began to move towards what we'd consider today an online bank.
I moved to a city to study, and I never left. When I arrived, the city district where I live had all the major high street banks, including one of the building societies (which had since de-mutualised, destroying its social value for a quick money grab) I'd grown up with. Today none are left, although they do all still own a building somewhere in the city, and most operate a branch open to customers in the city centre.
If you used branch services from any of the conventional banks, at all, ever the service got significantly worse in this period. But for First Direct nothing changed, the people who pick up (in under 5 rings per the founder's goals, I've met some of them, actually I worked for some of them in a previous role) are technically call centre workers, but they've got all the skills needed to assist customers the same way a deputy branch manager or equivalent might have if there were still branches, which there are not.
Obviously most banks these days have a web portal where basic stuff can be done, and that all exists for First Direct. I can check my balances, recent statements, move money, order some basic stuff... but any time the web portal can't do it, I just call them and that's where the magic is.
There's no nonsense trying to fob you off with a machine, every call is answered (aim: under 5 rings) by a human, who can verify you are who you claim to be and either do what's necessary in most cases or hand you off. Almost everything is 24/7 so I have literally never thought about when I call them, I just call them, and talk, like the person who picks up is a bank manager, because in effect that's the role they have.
I've called them to move the price of a home from my account to a lawyer (to buy the place where I live now), and I've called them to ask my current account balance at like 2am, I've called to say "I lost my credit card, oops" and I've called to ask what happens if I want cash (answer: for small amounts they just cause it to be vended from a nearby ATM on request, for large amounts it comes by courier). There's no sign that they even distinguish between the most trivial silly requests and those that you'd need to make an appointment for at a "real" bank. It's all just part of the job. I've never applied for a loan from them (I don't like owing people money, hence I bought my home for cash) but my understanding is that I could get a mortgage by just calling. After all they have all my financial records for decades.
Frankly, I'm astonished it's survived. It was always an 'internal startup' in a big bank (Midland, before they were taken over) and I would have thought the bean counters would have successfully lowered service standards by now - or at least stuck a heavy fee on and marketed it as 'premium'. But no, it just keeps rolling on, delivering excellent customer service, decade after decade.
I don't even like HSBC, but it's so good I don't want to leave.