We are living in a world where traditional physical infrastructure is rapidly being replaced by virtual everything. We can buy everything from clothing to groceries online, and have it delivered to our doors. We shop for real estate, vehicles, and even life partners in virtual marketplaces designed specifically for the modern consumer. We play games with friends in virtual reality, and we interact with others through virtual platforms. It stands to reason, then, that we are also doing our banking in the virtual world.
In recent years, depending on where you live, your choices of which bank to do business with may have become much more limited. Banks have been closing smaller branches all over the country, and many small towns and villages have found themselves with few or no bank branches. The reason given by the big banks for the closures is the expense of owning and maintaining brick-and-mortar branches, paying personnel, upkeep, maintenance and repairs, and all the other expenses that go along with that system. In our capitalist system, banks need to increase their profits every year, and closing branches saves them money that can then be counted as profits.
Closing branches in smaller population centers may increase profits, but it doesn’t increase business. Once a bank closes a branch in a small town, it is obvious that fewer people will be using that bank. They will switch to a bank that has an open branch or reduce their banking business to the bare minimum to avoid having to travel to the bank. Banks have been forced to find an alternative way to retain business while still saving money, which has given rise to the virtual bank.
Banking online is nothing new to most of us – it’s been a normal way to do our basic banking for years. The range of services that can be accessed through virtual banking is growing all the time, making it possible now to manage investments, transfer money between banks, and do almost everything you could do in a brick-and-mortar bank branch without ever leaving home – all you need is a computer and an internet connection. What if you could find a bank branch nearly anywhere?
Banks have begun to install virtual branches in shopping malls, in small-town supermarkets, in little corners of gas stations, and in convenience stores. These bank branches are machines about the size of an ATM, but with many more functions. You can pay bills, transfer money, deposit checks, even access a virtual teller for help with some transactions, in some cases, and get answers to your questions. All transactions are done online, with no physical bank teller involved.
You may be asking what the difference is between online banking and virtual banking. Online banking is done through major, well established banks – it is simply a convenient feature that they provide their customers, and all online transactions are still going through the normal banking system. Virtual banking is banking done entirely online with a bank that has no branches – no bank branches are necessary. The entire bank exists only online, which gives it a number of advantages over traditional banks. Overhead costs are extremely low, there are very few employees, and since the cost of running the bank is so low, they can offer customers more attractive interest rates than are offered by the traditional big banks.
In order to begin doing online banking, you simply have to use your existing bank information to access your bank’s online features. Your online banking usage is only an addition to your physical bank account that you started in person at your local bank branch. Online banking tends to be somewhat limited, in that there are only certain types of transactions allowed through online banking, with most important things having to be done at a physical branch. You can’t arrange a mortgage – or even a small personal loan, in almost all cases – through online banking. You must go to the branch and apply in person, meeting with a loans and mortgages officer and bringing physical copies of all the required documents – proof of income, tax returns, and whatever else the bank requires.
Virtual banks work differently from conventional banks. They have no open branches. You can get a debit card, but if you want to withdraw cash from your account you will need to use your debit card in an ATM that belongs to another bank. You can be charged a fee for every ATM withdrawal you make, but some virtual banks will reimburse you for the fee as part of your account privileges. Depositing cash to your virtual bank account can also be a problem since there is often no place where you can do that. Most people deal with the issue by first depositing the cash in a traditional bank account and then transferring money to their account in the virtual bank. In most cases you can snail-mail a check to the bank’s only office, but that is a slow and inconvenient way to deposit money. Some virtual banks partner with credit unions or larger banks that do have branches open, which allows the virtual bank’s customers to do a limited number of transactions through their branches and ATMs. There are some virtual banks that allow their customers to scan a check with a cellphone or tablet and have it deposited to their account. The check will then have to be mailed to your bank, but the funds can be deposited as soon as you scan it, in most cases. The most convenient way to deposit money to your virtual bank account is to use direct deposit.
There are several advantages to using a virtual bank – the bank never closes, for one thing. You can conduct your banking business at almost any time you like, anywhere that you have internet access. Another advantage is that your virtual bank will almost always offer features that online banking with a traditional bank does not. You can invest your money with the help of your virtual bank, apply for loans and mortgages online, enjoy free checking with no strings attached, and do other things that you would need to visit your bank branch for normally. Virtual banks also use very little paper – account statements are online and can be printed by the customer if they wish, but the bank doesn’t send out paper statements as a matter of course – so they are quite environmentally friendly compared to a traditional bank. One of the biggest advantages to dealing with a virtual bank is the cost. Traditional banks almost always charge high fees for overdraft usage and other features, but virtual banks have such low overhead costs that in many cases they offer the same features and services as a traditional bank without charging anything. Mortgages and loans can be offered at lower interest rates too, which can save customers thousands of dollars over the term of the loan.
There are some drawbacks to virtual banking, though. If you can’t access a traditional bank’s online features, you always have the option of going to a branch and doing your banking there, but if your virtual bank is offline for any reason, you have no alternatives. And your virtual bank’s website will, at some time or another, be down for maintenance if nothing else. If there is an internet problem, you could find yourself unable to access your bank accounts as well, which could cause some fairly serious problems. Another drawback to virtual banking is that you cannot develop a business relationship with a person. At a traditional bank, people often have one employee that they like to do business with because that person understands their financial situation and works with them to solve problems or conduct the more complicated banking transactions. You won’t have that option with a virtual bank. There are usually online message options available, or even telephone enquiries, but you will not be able to speak to anyone in person.
I think it is safe to say that the future of banking will be increasingly automated, with software gradually taking the place of people. If current trends are anything to go by, jobs in the financial sector will disappear at an alarming rate. Experts predict that up to 50% of the jobs in the financial industry will be lost to automation within the next 20 years. This is certainly not the only sector of the job market that will suffer this fate, which means that there are people all over the world who are discussing the changing nature of work and what the world will need to do when there simply aren’t enough jobs to keep a significant part of the working-age population employed. Those who work in the banking sector today would do well to plan ahead for just such an eventuality, since the financial industry appears to be ideally suited to the application of software.