A financial institution that handles all transactions via the Web, email, mobile check deposit and ATM machines. By not having the overhead of physical branches, people expect a virtual bank to offer higher interest rates on their accounts. Traditional banks may also own a virtual bank subsidiary.
Also called a "direct bank," "neobank," "branchless bank," "digital bank" and "online bank," the first bank without branches debuted in 1989 in the U.K. when First Direct bank offered telephone banking. However, in the mid-2000s, many virtual banks emerged due to the ease of access via the Internet and mobile phones.
Virtual Banks vs. Online Banking
All transactions in a virtual bank are handled entirely online, whereas "online banking" is an Internet-based option offered by regular bricks and mortar banks. See
mobile check deposit and
online banking.