Of course, some traditional banks also offer online services, but it is the online-only banks that have raised the industry bar for banking services. These banks charge almost no fees, keep ATM surcharges very low, pay interest on checking account balances, and allow access to other services such as mutual funds and brokerage services.
This is in marked contrast to the practices followed by most traditional banks, which typically charge fees that account for almost half of their profits. Industry consolidation has also led traditional banks to raise the minimum balances required, add surcharges for certain ATM transactions, and pay very low interest rates on deposits. Some banks also charge for teller services that can be done for free on ATMs.
Online banking is advantageous to banks and customers because it reduces the costs incurred by both. Some of the benefits of online banking for customers include:
- lower fees for a variety of basic services
- better access to other services like mutual funds and brokerage services
- lower costs and less hassles in payment of bills
- greater worldwide access to accounts due to the removal of geographical barriers
- lower establishment costs, as physical offices need not be set up
- lower operating costs due to lower manpower costs, lower stationery costs, and reduced processing times
