# Direct bank

Part of a series on financial services :
Banking :
Types of banks
Advising
Banq
Bulge bracket
Central
Commercial
Community development
Cooperative
Credit union
Custodian
Depository
Development
Direct
Export credit agency
Investment
Industrial
Merchant
Middle market
Mutual savings
Neobank
Offshore
Participation
Payments
Postal savings
Private
Public
Retail
Savings
Savings and loan
Universal
Wholesale
Bank holding company
Lists of banks :
Accounts · Cards
Accounts
Christmas club
Deposit
Money-market
Savings
Time deposit (Bond)
Transaction (checking / current)
Cards
ATM
Credit
Debit
Prepaid :
Funds transfer
Cheque
Card
Electronic
Bill payment
Mobile
Wire
RTGS
NS
ACH
Instant payment
Giro
SWIFT
Correspondent account
CLS
CIPS
SPFS
BRICS PAY :
Terms
Asset
allocation
management
Automated teller machine
Bad debt
Bank regulation
Bank secrecy
Asset growth
Capital asset
Cash
Climate finance
Corporate finance
Disinvestment
Diversification (finance)
Eco-investing
Economic bubble
Economic expansion
Enterprise value
Enterprise risk management
Environmental finance
ESG
Ethical banking
Financial
analysis
analyst
asset
economics
engineering
forecast
plan
planner
services
Fractional-reserve banking
Full-reserve banking
Fundamental analysis
Growth investing
Hedge (finance)
Impact investing
Investment advisory
Investment management
Islamic banking
Loan
Mathematical finance
Mobile banking
Money creation
Pension fund
Private banking
Sustainability
Sustainable finance
Speculation
Statistical finance
Strategic financial management
Stress test (financial)
Structured finance
Structured product
Toxic asset :
Related topics
Asset pricing
Bond (finance)
Capital structure
Corporate finance
Cost of capital
Equity (finance)
Ethical banking
Exchange traded fund
Financial
law
market
participants
regulation
risk
system
History of banking
List of banks
Market risk
Personal finance
Public finance
Security (finance)
Shares
Sustainable development goals
Systematic risk
Systemic risk
Time value of money
Too big to fail
Too connected to fail
Watered stock :
Category
Commons
Portal :
vte :
A direct bank (sometimes called a branch-less bank or virtual bank) is a bank that offers its services only via the Internet, mobile app, email, and other electronic means, often including telephone, online chat, and mobile check deposit. A direct bank has no branch network. It may offer access to an independent banking agent network and may also provide access via ATMs (often through interbank network alliances), and bank by mail. Direct banks eliminate the costs of maintaining a branch network while offering convenience to customers who prefer digital technology. Direct banks provide some but not all of the services offered by physical banks.
Direct bank transactions are conducted entirely online. Direct banks are not the same as "online banking". Online banking is an Internet-based option offered by regular banks.
In the United States, direct banks are defined as online/branchless institutions with federal banking charters, with either the Federal Reserve Board, the Office of the Comptroller of the Currency or the Federal Deposit Insurance Corporation (FDIC) as their primary regulator. Many direct banks are insured by the FDIC and offer the same level of protection for the customers' funds as traditional banks, although it is important to verify if this is true. As of 2022, 27% of banking customers in the United States use a direct (i.e., online-only) bank.
In the United States, direct banks are distinctly different from neobanks. Neobanks are online-only banking providers without federal banking charters, instead providing a website while relying on a partner bank to hold funds. Often, the partner banks will be Durbin exempt. Their customers tend to be younger people who are more price sensitive to bank fees.

## History

One of the world's first direct banks was First Direct, which launched telephone banking in the United Kingdom on 1 October 1989. A subsidiary of the then Midland Bank, it pioneered the concepts of no branches and 24-hour service through a call center. The commercialization of the Internet in the early 1990s was the biggest driver in the creation of fully direct banking models.
In the 1990s, internet-only banks or "virtual banks" appeared. These banks did not have a traditional banking infrastructure, such as a branch network, a cost-saving feature that allowed many of them to offer savings accounts with higher interest rates and loans with lower interest rates than most traditional banks. However, there was initial consumer hesitation in conducting monetary transactions over the Internet, especially with an entity that they could not deal with face-to-face.
One of the first direct banks in the United States was the Security First Network Bank (SFNB), launched in October 1995, and was the first direct bank to be insured by the Federal Deposit Insurance Corporation. While SFNB did not make much profit in its initial years, it demonstrated that the concept of direct banking could work.
Some direct banks focused only on online savings accounts, providing higher interest rates than traditional banks for customers who were happy to only have access to their account on the internet. One of the first and most successful adopters of this was ING Direct that launched Tangerine Bank in Canada in 1997, expanding this to the United Kingdom, Australia, and the United States before its owner sold them around 2010.
Asia's first direct bank was finatiQ, a division of the Oversea-Chinese Banking Corporation (OCBC) of Singapore, launched in April 2000. It was shut down in 2011 and its operations merged into the mainstream banking structure with its parent OCBC saying that "Internet Banking has since become a core part of OCBC Bank's multi-channel strategy – which also encompasses branches, ATMs and Mobile Banking".
The direct bank model was used by many of the challenger banks created in the UK during 2015–2018.