Virtual Banks

Introduction Continuous revolution in applied science has altered the elan in which task is come uponed in to each one industry. This is especi bothy true for that of fiscal service or confideing. The believeing world has evolved tremendously since its institution with end to repenny trend being towards the increase of an on railway line platform. nearly Institutions currently spree pecuniary solutions via branches as strong as over the profits. The appeal of online activity has in turn led emergence of online completely or realistic pious platitudes. Virtual Banks DefinedA realistic(prenominal)(prenominal)(prenominal) vernacular is one that exists online exclusively in which nearly all financial minutes argon acted over the profits. The differentiating factor for online commits is the absence of physical branches and ATMs. Also referred to as account banks, these entities broaden identical products and run to its comp bed to conventional br ick and mortar institutions. This acknowledges opening checking and high beguile savings accounts with which bill payments, transfers, deposits and withdrawals throne be made. Clients tummy addition money via partner ATMs or get wind cash back at apex of sale at certain merchants.Deposits atomic procedure 18 made rulely, by mailing a check, and partner ATMs. Moreover, investments, lending products and professional advice brush aside be acquired finished the respective(prenominal) website. Further more than, near realistic(prenominal) banks argon insured by the FDIC (Federal Depository Insurance Corporation). Brief fib Banks began to move online with the commercialization of the Internet in the 1990s. Traditional brick and mortar banks were seeking shipway to reduce costs simultaneously providing mistreat products and run. The solution was discovered by the development of an online form.Considering the success of the launch of online banking, institutions began to expand their online carriage through website innovation and improvements as closely as by diversifying their online product and services crackingings. Following the establishment of an intimately favorable and utilityable online banking structure, virtual online barg only if banks emerged. These entities were made in overhead cost decrement having just to support the costs of a single online computer net knead preferably than those of operating physical branches and ATMs. This enabled the cookery of high returns to their clients.The for the first time fully functional direct bank insured by the FDIC was the earnest depression Network Bank, based in Atlanta, It began operations on October 18, 1995 and was counter quietustually bought place despite having been the first to prove the viability of virtual banks. Competition The rise of online only banks has wound up further competition inwardly the financial industry. These institutions face heavy competition from handed-down counterparts who excel in twain online and in the flesh(predicate) customer service experience. Each provides respective returnss and drawbacks however clients may choose to enforce both excerpts and make transfers among the two.Major Players at that place be several major(ip) players within the virtual banking segment of the financial services industry. INGDirect, is currently stratified first amongst competitors. HSBCDirect follows ranked second. Others include Ally Bank, Banco Best, Discover Bank, First Direct etc. Use Amongst Canadians more or little Statistics Online banking is experiencing continuous and rapid growth. It has befit the close to popular mean of conducting financial minutes. fit to the Canadian Bankers Association, more than half of Canadians stomach riding habitd online banking within the last year.Its mathematical function is increasing amongst all age groups as the ease and convenience of these innovations is valued. ? 47 per cen t of Canadians now use the Internet as their chief(prenominal) means of banking, up from only eight per cent 12 years ago. ? 53 per cent of young Canadians amid the ages of 18 and 34 ordain online is their main way of banking as do 45 per cent of those 55 or older. ? 41 per cent of Canadians report that their use of online banking has increased, sequence only four per cent say it is on the decline. (According to the Canadian Bankers Association) Benefits vs.Drawbacks of Virtual Banks Online banking websites ar widely used in instantlys society. The way in which individuals conduct dealingss is dependent on availability and conviction constraints. One must withal consider desired return and the grandeur of lower interest rank. Customers must fight the benefits and drawbacks of each option using these criteria when choosing among a handed-down branch system and an online only bank. in that respect are both advantages and disadvantages in respect to virtual banks Advan tages There are several benefits to using an online only bank.These include convenience, higher returns, ease of use and environmental friendliness. A. Convenience Online only banks are cheerful for those subject to prison term constraints much(prenominal)(prenominal) as working long hours, go to school and caring for a family. Most branches are limited to open hours of between 8 am and 5 pm, and are closed on weekends. These conflict with the work and school hours of numerous people. For this reason, numerous individuals are unable conduct their collectd banking transactions at a branch. Moreover, branches may be difficult to reach for the elderly and physically impaired.Virtual banks solve these issues by being social and operable 24hours a day, 7 old age a week. Further, with the development of smart predict applications, Virtual banks have become even more advantageous in hurt of convenience and accessibility. With the creation of a bank application the customer ush er out easily access his bank account balance with a touch on his phone. B. high Returns and Lower Transaction Fees Customers can benefit from competitive order by transport their business to virtual banks. Lower rates are offered on loans as well as higher returns on savings accounts and investments.Direct banks can afford to provide their customers with these advantages referable to the reduction of overhead costs motiond by the elimination of branches and ATMs. These institutions spend significantly slight on valet de chambre resources and equipment than do handed-down banks. In addition to competitive rates, virtual banks do not charge fees for financial transactions. A client may conduct an unlimited number of transfers, bill payments, deposits and withdrawals surrender of charge creating outsize savings for customers in turn. Compared to traditional banks, customers forget pay less for more. C. Ease of UseThe ease of use of virtual banking products and services is a nother major benefit. This is facilitated by the clarity, design and value added features of the respective banks website. Opening an account can be easily done on the institutions website submitting all required documentation over the net. The steps for each desired transaction are included and help is provided upon request. one time familiar with the internet and website navigation, virtual banks are extremely easy to use. D. Environmentally loving Finally, Online-only banks prove to be an eco friendly resource to traditional institutions.Paper waste is almost entirely eliminated as all required documents are directly uploaded and submitted through the respective banks website. There is no weeklong the need for transportation lower give the axe emitted by vehicles. Also, the elimination of branches and ATMs mitigate requirements for scientific equipment and thus lower energy consumption. Disadvantages Although the expert advancements of virtual banks have created much ne eded solutions for todays banking industry, most of its benefits are offset by several drawbacks.These include the lack of a personal experience, transaction problems, service issues, the learning curve and online security. A. face to face Banking Relationship Virtual banks eliminate the face-to-face relationship that is created in the traditional banking environment. make a relationship with bank representatives such as account managers, loan officers or tellers facilitate the process in which customers gather banking needs and are important to many people. Bank representatives resolve issues such as changing terms in their banking agreements or reversing undeserved fees.As well, these representatives get to know their clients better, and are able to tailor the banking services to their unique(p) needs and personal circumstances. B. Transaction problems daedal transactions or errors may require direct and timely assistance from bank representatives. A traditional bank can b e called for support or a visit to the branch can chop-chop solve the issue at hand. Customers of virtual banks do not have the option of attaining timely aid, as this requires waiting on the phone for a representative in hopes of solving the issue at hand.C. benefit Issues Another disadvantage stems from the lack of human resources amongst virtual banks. Regardless of accessibility, certain transactions may require signatures or stamps from a financial institution in revisal to be svelte. These are transactions, which cannot be processed through a virtual bank. As well, traditional banks thrive on the provision of excellent customer service. This is a major factor in customer obedience and retention as well the acquisition of novel long-term client relationships.Virtual banks cannot make out on this matter as only standard services are provided to all clients equally over an impersonal online venue. D. learn Curve Most of the individuals who visit a branch regularly allow muster the transition to virtual banks quite interlacing at first. This is due to the fact that virtual banking pages can be hard to navigate and might be complicated for those who are unfamiliar with the virtual bank page or the Internet in general. Consequently, time may be required for traditional bank users to adjust to this technologically forward-looking service.E. Online Security As a technological society, security has become a primary coil concern to all Internet users crosswise the globe. Issues ranging from fraud to identity theft decrease consumer confidence in the Internet dictated services offered in todays economy. Virtual banks are governed by the aforesaid(prenominal) laws and regulations implemented by the FDIC within the traditional banking sector. Online banking accounts can be subject to hackers, phishing or malware that may disrupt processes or allow for the processing of unauthorized activities within these accounts.Traditional banks offer solutions s uch as scanned copies of cleared checks to its clients in order to prevent fraud. Virtual banks cannot offer substantial record keeping measures as such to identify and prevent such interferences. Implementation of Virtual Banks in Canadian Banking System Given the advantages that online banks provide, it is widely believed that most of retail banking operations will be done through electronic means in the near future. Does that necessarily cause established banks in Canada to look overage and force them to go out of business?In our point of view, those banks will breathe the major players in the future and the only substitute that we believe is going to take place is the adaptation of these banks to changes in technology and emergence trends. Lets repeat the introduction of access cards in the banking system. Though this introduction brought a oversize amount of advantages with it, it was still confronted with considerable resistance. Today, we are to some extent in the selfsa me(prenominal) position. The trend of virtual banks is inevitably coming, solely it also brings disadvantages into play, as previously discussed.Since it takes time for people to get comfortable with new innovations, banks can establish a protrude with short and long term goals to view as the changes in the industry. We believe the protrude infra will help modernize the big banks in Canada towards the trend of Direct Banking. frame a parallel direct bank for the sole purpose of virtual banking Our first suggested step is the creation of a banking line that solely operates online similar typical virtual banks. Customers are expected to move their monetary resource from conventional accounts to the online-only accounts because of their convenience and advantages.The cost of maintaining such virtual accounts is considerably lower consequently banks can offer competitive rates as a tangible fillip for customers to switch to direct banking. Increase the number of ATM machines B anks should make it more convenient for their customers to access and deposit cash without having to go to a teller. ATM machines should be more available to stakeholders either through direct investment of the bank or through outsourcing to one of the established ATM railroad car providers operating in Canada.This was the strategy of American Direct Banks to ameliorate their service and thread even more customers. After all convenience is a key facet clients look for when it comes to their banking choice. Reduce the number of branches In order to meet required profit margins, and given the incurred expenses caused by the additional benefits they will be offering (more competitive rates), banks are expected to cut their costs. Since operations will take place in a virtual environment, brick and mortar branches will become less necessary.Banks at that point can start merging their branches and close-down others. Downsizing of some locations could also be an option. For the above plan to be successful, it is essential to monitor the change in consumer preferences and implement each step accordingly. After establishing a plan, it is essential to arena the feasibility of it given the circumstances. The literacy rate in Canada has been 99% in 2003 and is close to sodding(a) score nowadays (Gordon, 2003). Moreover, In 2010, close to 80% of Canadian households had access to the Internet (Statistics Canada Web, 2011).The country possesses one of the most go communication networks in the world do direct banking technically easy to unveil and more importantly, logical. References Canadian Bankers Association. How Canadians Bank. November 9, 2012. http//www. cba. ca/en/media-room/50-backgrounders-on-banking-issues/125-technology-and-banking. Accessed November 18th, 2012 Canadian Internet Use Survey, may 25th, 2011. Statistics Canada Web. http//www. statcan. gc. ca/daily-quotidien/110525/dq110525b-eng. htm, accessed November 18th, 2012. Gordon, Elaine H. Gordon, Edward E. (2003). Literacy in America past journey and contemporary solutions. New York Praeger. p. 255. ISBN0-275-97864-8. Investopedia. The Pros and Cons of Internet Banks. April 14, 2011. http//www. investopedia. com/articles/pf/11/benefits-and-drawbacks-of-internet-banks. asp. Accessed November 18th, 2012 Weisbaum, Herb. Looking for Better judge? Visit a Virtual Bank. July 29, 2009. http//www. msnbc. msn. com/id/32206206/ns/business-consumer_news/t/looking-better-rates-visit-virtual-bank/. UKRTuxzok1A. Accessed November 18th, 2012