Technology has not spared the banking industry. In fact, it’s undergoing massive digital disruption in every level from the front –to the back-end. Digitization includes mobile apps, online deposits, e-bill payments and more.
Artificial Intelligence (AI) is the technology behind these digital transformations. Customers are also extremely interested in digitalized banking services. Actually, at least three in four Americans have used a bank’s mobile app to carry out their daily banking tasks.
While some banks with branches in some regions have online portals, digital banks have limited to no physical branches. They exist only in the digital realm and offers online banking through their website and mobile banking using their app.
So then, here are the top 15 digital banks in the US. The article will also discuss a number of the frequently asked questions about digital banking.
The Best Online Banks for Digital Banking
Ally Bank: It is the most popular and oldest online bank in the US. The bank offers a vast range of free savings, checking and money market accounts in addition to several CDs types. Its wide array of deposit accounts have no minimum balance amounts, no minimum deposits, or management fees. Ally bank offers high-yield savings on all account balances.
Axos Bank: This is a big bank without branches or exorbitant fees which are characteristics of traditional banks. It’s a full-blown bank offering competitive interest rates, convenient access and low to nil fees. Customers can access personal banking accounts, small business accounts, commercial banking accounts or lending. Its checking accounts have more rewards such as no monthly minimum balance, no monthly charges, up to 1.25% APY, ATM fee reimbursements and no overdraft and NSF fees. Axos is the best online bank for checking accounts.
Bank5 Connect: The online-only bank offers its customers attractive yields on savings and checking accounts as well as competitive yields in different CDs. However, it doesn’t offer credit card, loan or money market account. It also reimburses other banks’ ATM fees but not more than $15 a month.
Capital One 360 Banking: The bank offers a variety of free savings, checking and CD accounts as well as consumer and business credit products. The 360 checking has higher balances and yields, no minimum balance or opening deposit requirements. The s360 savings offers a decent yield on various balances, no minimum balance and opening deposit requirements among others. Others are 360 CDs, custodial accounts, business accounts and more.
Chime: The online bank put its customers first thus popular for its early payday promise. Chime offers checking accounts or spending account which is ideal for recurring bills or day-to-day expenses. Customers can make purchases using Chime Visa Debit Card. Its savings account allows users to save for a specific goal or hold funds that they don’t need at the moment.
Discover Bank: The bank offers competitive yields in its wide variety of deposit accounts. It has an extensive fee-free ATM network, its checking accounts have no yield but have cashback debit of 1% on up to $3,000 as well as no monthly maintenance fee. The saving account has a high yield on all balances no minimum opening balance or maintenance fee.
Go2bank: The online bank offers mobile-friendly bank account and impressive yields of 1% on savings. Customers with eligible electronic gift purchases via the app can get up to 7% cashback and 3% for Amazon eGift card purchases. Further, it has no minimum opening deposit or balance requirement. Its ASAP Direct Deposit allows customers to access two days early payment. Go2bank is a low-friction internet bank.
MoneyLion: Customers can easily open their bank account with MoneyLion because this digital bank is not interested in your credit history or score. Still, they can apply for a RoarMoney account without affecting it. Also, their loan or Credit Builder Program helps you build your credit history whenever you make an on-time payment, as well as access a loan of up to $1,000 repayable in 12 months. Therefore MoneyLion is the best neobank for second chance banking and credit building because it reports every on-time payment to the three credit bureaus on a monthly basis. This helps its customers to boost their credit scores.
N26: Although there are many digital banks giving early paycheck, N26’s customers get it in 2 days if they have already set up a direct deposit. The setup procedure is easy and can be done on its app, Easy Peasy. N26 is therefore one of the best online banks to get paid early.
One Finance: The digital bank offers higher interest rates that can’t find it elsewhere. Still, you can access your money at any time because it’s held in your savings account. Further, the bank has two types of accounts; checking and deposit accounts as well as a credit line. The checking account has a high-interest rate of up to 3.00% APY. Thus One Finance is the best online bank for savings and checking accounts.
OnJuno: The neobank platform offers its users excellent APY, instant virtual card, no monthly service fees, no minimum opening deposit. An extensive list of merchants or brands where you can get a 5% cashback. These include brands like Amazon, Best Buy, Walmart, Target, The Home Depot, Netflix, Spotify, HBO Go, Disney Plus, Whole Foods, Trader Joe’s, Starbucks, Uber Eats, Taco Bell, Doordash, Uber Shell, Lyft, Airbnb and more. OnJuno is the best neobank for cashback rewards.
SoFi: The digital bank doesn’t charge an annual fee. Accountholders earn 2% unlimited cash back which they can use to pay down a SoFi loan, redeem into crypto or invest in stocks. Maintaining 12 monthly on-time payments for the minimum payment due lowers your APR by 1%. Additional benefits include MasterCard ID theft protection, cell phone insurance of up to $1,000 and free access to spending and budgeting tools. SoFi is an online bank for credit cards.
TIAA Bank: The digital bank offers a comprehensive product line and its yield pledge has kept its savings, checking and CD yields at the top. Some of its deposit accounts have $5000 as the minimum deposit while others with lower minimums. However, there is no management fee.
Quontic Bank: The bank began as a community bank, has a nationwide footprint and small branch network. Individual customers from all walks of life and small business owners can access the bank’s category-leading savings and checking options. These accounts can be accessed via its robust mobile banking architecture. There is no monthly service fee, and an account with a $100 minimum opening deposit starts to earn interest using the category-leading rates.
Varo Bank: Customers can have both savings and checking accounts in the same bank. Actually, its savings account has no fees and high APY. Individuals who intend to save $50,000 can get an exclusive rate of 3%. However, they are only allowed to make up to six withdrawals to maintain the high APY earning. Unlike certain traditional banks, a customer with a Varo Savings Account is not required to maintain a specific minimum balance. They can also start earning interest as long they have $0.01 in their savings account. Varo is the best online bank for savings accounts.
What is an Online Bank?
Other names for online banks are digital banks, internet-based banks, virtual banks, neobanks and more. These are financial institutions that conduct their business on the internet. In other words, customers manage their accounts using their computer or mobile device.
Most online banks have no branches. However, there are some hybrid banks with both physical branches and online divisions. Digital banks tend to offer their customers lower fees and higher interest rates because they don’t have costs associated with opening and operating a network of branches.
They also invest in customer support because there are no branches for customers to walk into and have their problems addressed. So any communication between the customer and the bank is via the phone, online chat, or email.
Is Digital Banking and Online Banking the Same?
Many people use these terms interchangeably. Digital banking comprises online banking and mobile banking. With online banking customers complete their transactions through the website but they can also carry out their banking using a mobile app hence mobile banking. So then online banking and mobile banking are two functionalities of digital banking.
What is Digital Banking and Its Services?
Digital banking involves the digitalization of the entire front-to back-end of banking using technology such as AI. The technology allows financial institutions to automate operations like data processing and administrative tasks. Indeed, the purpose of deploying such know-how is to eliminate day-to-day manual tasks.
Users of digital banks want to remotely make deposits and transfers to and from their accounts. They are looking for access to tailor-made money management services and apply for loans online.
Digital-only banks are also known as neobanks meet the needs of these tech-savvy consumers. They are developed in a way that can transcend traditional banking in the US.
How has Digital Banking Transformed the Financial Institutions?
One of the many reasons that led to the establishment of digital banking is the heightened consumer demands for efficiency. They wanted smart ways of completing their financial transactions and accessing their banking records without stepping into a local branch.
The digital banking transformation, on the other hand, began with limited online banking services. Later institutions dived into a digital-only market.
How to Choose an Online Bank
There are many factors you should consider when choosing a digital bank aside from interest rates and fees. Comparing virtual banks using the following factors will help you find the best fit for your banking needs. These include:
APYs: Getting a bank that offers a competitive APY can help you get the most for your money. The good news is that online banks pay higher rates on their financial products; however, choose the one with the best rates, lower fees and more.
ATM Network: Consumers that prioritizes access to their money should look for online banks with extensive fee-free ATM network. Also look for a bank with an ATM near your location or places that you visit the most, such as shopping malls, grocery stores and so on.
Convenience: People opt for digital banking because of the convenience they get compared to traditional banking. Customers interact with the bank through its website or mobile app. You can check customers reviews online to understand what to expect from your online bank of choice.
Customer Experience: Most online banks have no or limited branch access. Because of that, have customer support in mind when evaluating online banks. So look for a bank that is easily accessible via phone, chat, email or other alternatives.
Fees: The best online bank should have low monthly fees, ATM fees and overdraft fees. In fact, a bank that reimburses third-party ATM charges is even better. You can begin by evaluating your banking behavior in order to see which fees you can avoid and which you can’t do away with. Next shop around for an internet bank that helps you to keep these fees at the minimum.
Minimums: Internet banks make it easy to operate an online account by offering lower minimum balance and deposit requirements. Such incentives increase your financial comfort level.
Products: A good online bank should be rich in financial products. In fact, a full-service financial institution is the best because it offers savings, checking, money market accounts, and more products.
Safety: Federal Deposit Insurance Corporation (FDIC) regulated all banks in the US. So your preferred internet bank should be a member of FDIC. This will protect you if the bank fails.
Is It Safe to Use Online Banking
Banks that operate online implement the same rigorous security protections as those with physical branches. Your money is safe as long as the digital bank display Member FDIC in its banking products or simply put it’s a member of FDIC. Otherwise, your money is at risk if a bank doesn’t have such a logo.
Since 1933, the Federal Deposit Insurance Corporation (FDIC) has been protecting deposits of up to $250,000. This includes savings accounts, checking accounts, certificate of deposit and money market deposit accounts.
FDIC doesn’t insure funds deposited with a credit union. The National Credit Union Administration (NCUA) provide similar coverage when it comes to credit unions.
What are the Advantages of Online Banking?
Higher Interest Rates: Digital banks offers higher interest than regular banks because they don’t have branch buildings to maintain. Therefore they pass those savings to their customers by offering them higher interest rates. In fact, branch-based banking only offers higher interest rates on checking accounts to motivate customers to open more such accounts because they have costly banking fees.
Low Fees: Online banks charges on average $2.61 service fee on checking accounts while traditional banks charge $6.44 yet this type of account doesn’t pay interest. Further, digital banks’ customers require a lower amount to create an online account and maintain a lower average balance in order to avoid maintenance fees. They also pay lower fees for overdrafts, to make online bill payments and insufficient funds.
Convenience: Digital banking offers freedom to transact whenever and wherever you are or like. You don’t have to drive to the bank, and queue in order to transact. Instead, you simply log in to your online account via a website or mobile app, at any time of the night or day as long as you have an internet connection.
Secure Sites: Most people fear operating an online bank account for fear of cybercriminals; however, even traditional banks face similar risks. It’s the norm these days to store customer information in big data centres. So internet hackers can compromise an online bank the same way they do to a traditional bank. Further, both digital and brick-and-mortar banks are members of the Federal Deposit Insurance Corporation (FDIC). So customers can recover up to $250,000 whenever their funds are stolen.
Good Customer Service: Digital banks invest more in customer support because they don’t have physical branches to focus on. So customers can reach customer support via online message centres and toll-free phone lines.
What are the Drawbacks of Online Banking?
Lack of Dedicated ATMs: The brick-and-mortar banks like Chase and Bank of America have vast ATMs networks spread across the country. However, the majority of virtual banks don’t have ATMs instead they make arrangements with traditional banks to allow their customers to withdraw without surcharge.
Mobile Deposits: Some online banks take longer to post deposits via mobile to your account. Others have either longer processes or no way of depositing cash into your account.
Limited Services: Compared to traditional banks, internet-only banks have fewer banking services. For instance, the majority of virtual banks have no business or home loans.
How Has Digital Banking Transformed the Banking Industry?
Increased consumer demands for efficient ways to complete financial transactions and access their banking records outside local branches is what has contributed to digital banking.
Traditional banking institutions and tech-savvy startups offer online banking through their website. Customers are given specific log in information to access their account or complete a transaction such as account transfers and bill payments.
During the transformation, online banking inspired mobile banking which offers similar services although through a mobile device like a smartphone or tablet.
Today legacy banks offer online services but still, there are digital-only banks that work entirely electronically. The latter don’t have established physical location, however, they are powdered through digital platforms. As a result, these online banks are ideal for Gen Z and millennial populations.
How to Protect Your Online Banking Information
Users of online banking are now an increasingly big club. In fact, nearly 73% of American maintains an online account. Managing finances through online banking or mobile banking is easy and convenient.
However, there is a big concern about this type of banking because of the increased hacking of bank accounts. For instance, hackers can drain your account through fraudulent wire transfers. Alternatively, identify thieves can steal your personal information or financial transaction details, register credit cards under your name and use them to make purchases online. So then there are a lot of online banking security concerns.
Banks on the other hand are putting various security measures in place to protect their customers. These include 128-bit or 256-bit data encryption.
The following are additional things you can consider to protect your online banking information.
Create a Strong and Unique Password
Hackers prey on customers to find out their passwords. They know that most customers make the following mistakes:
- They use personal information to create passwords such as their name, date of birth or address
- They create very short passwords so that it can be easy to remember
- They use simple number combinations or common words
- They use the same password for several logins
- They don’t regularly update their passwords.
Here is how you can make your passwords harder for hackers to guess.
- Opt for a longer password. In fact, you can pick a phrase rather than a word
- The password should be a mix of lower and uppercase letters
- Include special characters and numbers
- Avoid personal information like your date of birth, name, pets’ names, children names, spouse name, etc
- Don’t save your login details in your mobile app or online banking
- Shun common sequences like abcd, or 1234
- Update your password regularly (3-6 months)
Avoid Public Wi-Fi
You need internet to stay connected but you should steer clear of the public Wi-Fi. This free internet poses security risks such as:
- Malware and spyware
- Malicious hotspots
- Data transfer through unencrypted networks
- Electronic eavesdrop of your banking and online activities
Therefore, avoid public Wi-Fi and if you must use it then stick to encrypted sites and disable public file sharing. A virtual private network (VPN) can also help you create a private network that you can access.
Download Financial Apps Wisely
Digital banking includes the use of mobile banking apps to send money, pay bills, shop or even deposit funds in your account. However, hackers take advantage of these applications to access people’s personal and financial information.
So make sure you have the bank’s official app if you intend to do mobile banking. Next, limit access to both mobile and online banking details. For instance, some budgeting apps and Robo-advisor ask for your login credentials to your digital banking to help them pull information about your financial behavior.
You must be careful when using secondary apps because some of them are not secure and this might cause you to violate the terms of service of your bank.
Beware of Phishing Scams
Identity thieves use phishing methods to gain access to your information. There are different forms of phishing scam but email scam is the popular one.
These criminals can create an email that looks exactly like the one you receive from your bank, telling you to click on the link they have provided to log in to your account or update your information.
This link will take you to a dummy site and tracking malware will be downloaded to your computer. Therefore, carefully scrutinize any emails that request you to provide personal or financial information.
In fact, you should immediately call your bank when you receive such an email instead of clicking links. Similarly, avoid disclosing your personal and banking information on the phone. Instead, hang up, Google search the caller or the number to verify if it’s legit and then call back. This will help you verify if that is a legitimate caller or it’s a scam before you share your details.
Sign Up for Banking Alerts and Notifications
Customers should be proactive when it comes to safe online banking. One of the easiest options for monitoring your online banking security is staying updated about your banking activity.
Banks operate differently but SMS and emails are the common ways of sending alerts and notifications to their customers. You can sign up for password change alerts, failed login alerts, credit and debit transactions as well as outgoing wire transfer alerts.
This will help you to know when another person particularly an identity thief tries to log in to your bank account. Log in immediately when you get this notification and change your password.
Also, notifications can help you identify fraudulent purchases in case the criminal manages to compromise your account. You can stop this by notifying the bank immediately to stop further fraudulent activity.
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