Virtual Bank Definition

Written by alex kocic
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Virtual Bank Definition
Virtual banks exist only on the Internet. (Internet image by Stephanie Bandmann from

Virtual banks exist only on the Internet. They offer all their services electronically, without having any physical branches. They are also called e-banks or online banks. There are very few online-only banks; more commonly, standard brick-and-mortar banks offer online banking facilities too.


Virtual banking started in the 1980s with major U.S. banks such as Citibank and Chase Manhattan, but it only took off in the 1990s with the growing popularity of the World Wide Web. In 1995, Presidential became the first U.S. bank to allow its customers to open bank accounts over the Internet.

Advantages of Virtual Banking

Virtual banks offer convenience because clients can access their accounts from anywhere and do not have to change branches if they move house. Also, because they don't have to spend money on branches, virtual banks can offer more competitive rates on credit cards, savings accounts and even mortgages.

Disadvantages of Virtual Banking

Virtual banks have very few or none of their own ATMs, which means their clients might have to pay fees to the bank whose machines they use to withdraw cash. Depositing money is another problem, because a virtual bank has no offices clients can go to. This means that clients probably need another account, with a standard brick-and-mortar bank, from which they can make electronic transfers to their virtual-bank account.

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