A direct bank (sometimes called a branch-less bank or virtual bank) is a bank without any branch network that offers its services remotely via online banking and telephone banking or through an independent banking agent network and may also provide access via ATMs (often through interbank network alliances), mail and mobile.[1] Direct banks reduce the significant costs of maintaining a branch network.
The concept of a direct bank gained prominence with the advent of online banking technology in the early 1990s which led to a number of direct banks being created, although many were owned by traditional banks. A number of direct banks offer only online savings account and these banks typically offer higher interest rates than their traditional competitors as these banks can be very cost efficient to operate. Since mid-2000s online and telephone banking have become a mainstay of retail banking and most banks have incorporated these into their core services and transforming or reducing their branch network to mirror the advantages that direct banks have.
In the United States, many online banks are insured by the Federal Deposit Insurance Corporation (FDIC) and can offer the same level of protection for the customers' funds as traditional banks.[2]
