Is the traditional branch banking model no longer viable? Pure online banks, also known as direct banks, provide a number of benefits to their customers that branch banks cannot match. However, in some circumstances, a branch bank is still the better option, making a general assessment of both types of banks impossible. This article explains which benefits and drawbacks to consider before choosing a direct bank and when a branch bank is preferable.
Advantages of online banks
Direct banks do not have their own branches, which saves them a lot of money: It starts with the room rental and extends to the branch staff, furniture, and computer equipment. Rising rents and ancillary staff costs, in particular, eat up a large portion of the budget, so banks can save a lot of money here. Customers of direct banks benefit from these cost savings, and they frequently receive unbeatable offers on terms that established bank customers cannot match.
Fees for maintaining a current account, which can cost up to € 5 per month at branch banks, are frequently waived. Transfers and the creation of standing orders are either free or significantly less expensive than they are at branch banks. A checking account comparison is strongly advised in this case. As a direct bank customer, you may be eligible for additional services such as free cash withdrawals via credit card at any ATM in Germany. It is also possible to obtain cash for free from the direct bank’s respective partner banks. Withdrawals are frequently free of charge abroad, which is readily apparent when you are on vacation and withdraw smaller amounts frequently.
Cost savings meet flexibility
Many direct banks also provide their customers with a no-fee credit card that allows them to participate in discount programs. Direct banks are usually willing to lend money on favorable terms. Furthermore, people looking for a loan should keep in mind that getting a loan approval from a direct bank is easier than getting one from a traditional branch bank. Customers have fewer obstacles to overcome because online-only banks accept borrowers who established banks would classify as too high a risk.
Not only is it easier to get a loan, but it’s also easier to get a job. Overall, because they are completely set up for online banking, direct banks score highest in terms of customer flexibility and convenience. Banking transactions can be completed from home via the bank portal at any time, regardless of bank opening hours, personal availability in the context of a job, or time constraints imposed by the family. You no longer need to go to the bank to obtain a bank statement. You can also print account statements and other documents as many times as you want, and you can choose the time span over which an account statement should provide information.
How does the account creation work without a branch?
Because the legally required identity check is performed using a video identification process, the first account can also be set up entirely digitally. Alternatively, you can prove your identity at a post office and receive account access data within a few days. Customers of a direct bank, on the other hand, benefit not only from lower costs, but also from higher interest rates on overnight money accounts due to better terms. Because banks compete for customers and must be as appealing as possible, these advantages are amplified by the fierce competition between them. Not surprisingly, direct banks frequently offer substantial bonus payments to new customers as a thank you for opening an account.
A free hotline is available to assist you if you have any problems or questions. Direct banks are not inferior to traditional financial institutions in terms of product portfolio: whether it’s a current account, a savings plan, a pension plan, or shares, everything is possible.
Challenges with online banking
Despite their many benefits, direct banks also have some drawbacks that can make them a poor choice in specific situations. There are no personal contacts who can advise, clarify, and work with the customer to find the ideal product for his needs and goals because this type of bank has no branches. Contact is limited to the hotline, e-mail, and letter, which is insufficient when comprehensive advice is required and makes it difficult to select the appropriate product.
Deposits, taking out a loan, and planning retirement provisions, in particular, can be very complicated and incomprehensible to a layperson. Anyone who isn’t very knowledgeable about the subject requires expert guidance and the opportunity to ask questions. Otherwise, misunderstandings or errors can occur quickly, costing a lot of money and nerves. Anyone interested in the aforementioned products should usually visit a branch bank.
What are the potential cons?
The fact that some people must print their own bank statements and documents can be inconvenient for them. Not everyone has a printer or wants to be completely in charge of their bank documents. People who are unfamiliar with computers or who are hesitant to use online banking may quickly become overwhelmed. If the home computer is not adequately protected, security can become a problem. As a result, cyber criminals can steal passwords and empty the account by transferring the available funds to their own account in the worst-case scenario.
Because the partner banks themselves do not draw attention to the fact that customers of direct bank XY can use their ATMs for free, the withdrawal of cash should be planned as a customer of a direct bank. If you withdraw money from the wrong bank’s machine, you will be charged fees. Last but not least, as an asset customer, you will benefit more from a branch bank than from a direct bank, because branch banks typically do not charge fees for account management, securities trading is available at reduced prices, and a personal contact with extensive specialist knowledge is available for all questions.