Online banking is here to stay, but can you afford to do away with without branch banking completely?
Most mainstream banks and financial institutions give their customers access to online banking platforms, but there are some institutions that limit their offerings to the online world. Online banks provide their services and products through the World Wide Web, which you can access using an Internet enabled computer or smartphone. In the online world, you can bank as and when you like and there are no queues to worry about.
How does an online bank work?
An online bank is one that does not have any branches. Since this leads to a considerable reduction in overhead costs, and so these banks tend to offer competitive interest rates and keep fees to a minimum. An online bank works like a conventional bank and offers similar products and services, which means you can turn to an online bank to open an everyday or savings account. You can also open an online term deposit, home loan and even a self managed superannuation fund (SMSF).
Online banks give their customers round-the-clock access to account related information via Internet banking, and you can transact online and over the phone.Back to top
How do I compare online banks?
If you’re comparing online banks to pick one that works best for you, pay attention to the following:
- The range of products and services they offer. This aspect is important if you wish to deal with a single institution for all your banking related needs. Know that some online banks offer products and services you’d typically associate with conventional banks. Some such banks provide a range of offerings such as home loans, everyday transaction accounts, term deposits and SMSF accounts. Some offer business banking solutions as well.
- The level of security incorporated into their online systems. Many people cite security as a concern for staying away from online banking, but do you know that even mainstream banks store your information in data centres that are not really hacker-proof? For that added peace of mind, you can always choose an online bank that protects individual deposits of up to $250,000 through the Government Financial Claims Scheme.
- The extensiveness of it's ATM network. If you plan to use an account linked debit card to access your funds, paying attention to this aspect is important. Consider this - the ING DIRECT Orange Everyday account comes with a Visa debit card that you can use at any ATM in Australia for free, provided you deposit at least $1,000 in your account each month. If you get a debit card through UBank, you can get free access to all NAB and rediATMs across Australia.
- The quality of it's customer service. If you’re someone who prefers interacting with a human face when faced with a problem, branch banking might be best for you. If not, you can still expect good customer service from online banks. Some online banks have 24/7 Australian based call centres, some let you chat online and you can always get in touch with your bank via email and regular mail.
What are the pros and cons of using an online financial institution?
- Making deposits and withdrawals 24/7. Online banks can give you access to money in your account via a debit card as well as online banking and phone banking, and some also let you transact via BPAY and at Bank@Post outlets. You can mail in physical cheques, and your bank can also let you take a picture of a cheque and upload it for deposit.
- Competitive interest rates compared to big banks. Online banks tend to offer more competitive interest rates when compared to traditional banks, mainly because of their lower operational costs.
- Less fees compared to big banks. Online banks tend to have lower minimum balance requirements when compared to conventional banks, and you may not have to pay any ongoing account keeping fees. Online banks are also more likely to provide fee-free everyday accounts.
- No branches. This is a drawback for people who wish to bank in person. However, this may change in the future, with online banks trying to create some kind of a physical presence. For example, ING DIRECT has a customer information centre in Sydney that operates Monday to Friday.
Traditional bank versus online bank
When it comes to choosing between the two, a lot boils down to personal preferences. If you’ve shared a personal relationship with your banker over a prolonged time, and this makes you privy to special rates and offers, continuing with your existing banking relationship might make sense. In most cases, people are getting used to the technological changes in this realm, and even people who deal with conventional banks are turning to online and mobile banking platforms.
The main reason behind the popularity of online banks has to be the fact that they offer cheaper banking solutions. Not to fall behind conventional banks, they’re also trying to provide top notch customer service. However, the online world offers limited options as of now, and if you're looking for a credit card, a personal loan or a car loan chances are you'll have to get in touch with a conventional bank.
Frequently asked questions
How can I find out if an online bank is safe?
Find out if it adheres to the Australian Bankers Association’s Code of Banking Practice, and check if the Government Financial Claims Scheme protects your deposits.
How much time does it take to apply for an online account?
If you have easy access to the required information, you can submit an account opening application in minutes.
What details would I have to provide to open a new online bank account?
You’ll have to provide your name, contact details and details from an acceptable identification document like your driver’s license or passport.