Direct bank

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A direct bank is a bank without any branch network. It offers its financial services by:

By eliminating the costs associated with bank branches, direct banks may offer higher interest rates and lower service charges on their products than their traditional competitors.

History [edit]

Direct banks were originally based on providing banking services via telephone. One of the world's first fully functional direct banks was First Direct, which launched in the United Kingdom on October 1, 1989. A subsidiary of the then Midland Bank, it pioneered the concepts of no branches and 24-hour service from a call center based in Leeds.

However, it was the commercialization of the Internet in the early 1990s that was the biggest driver in the creation of direct banking models. As the Internet became more generally accessible, traditional banks began to realize its potential to deliver services to their customers while reducing long-term operational costs. Upon realizing this, traditional banks began to offer limited online banking services.

The initial success of internet banking services provided by traditional banks led to the development of internet-only banks or "virtual banks". These banks were designed without a traditional banking infrastructure, 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.

One of the first fully functional direct banks in the United States was the Security First Network Bank (SFNB), which began operations on October 18, 1995[citation needed]. Based in Atlanta, it was the first direct bank to be insured by the Federal Deposit Insurance Corporation (FDIC). After three years of operation, it was acquired by the Royal Bank of Canada (RBC). Though SFNB did not make much profit in its initial years, it demonstrated that the concept of direct banking could work.

One of Europe's first full-service direct banks was "First-e", launched by Enba[citation needed], a Dublin-based company under the banking license of Banque d'Escompte, France. First launched in the UK in late September 1999, it garnered appreciable attention, resulting in more such ventures all over Europe. After about two years of operations, it shut down its operations during the dot-com bubble bust. Although Egg Bank, launched earlier in October 1998 by Prudential plc, was touted to be a direct bank, it was not a full-service direct bank initially.

Asia's first direct bank was finatiQ, a division of the Development Bank of Singapore[citation needed]. It opened on April 3, 2000 (though its public launch was on April 18, 2000), heralding the arrival of virtual banking in Asia.

Noteworthy direct banks around the world [edit]

See also [edit]

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