I get the fact that mobile banks are all done via the internet and apps but is that the only difference? With my traditional bank I can do almost all my daily banking via its app? So why would I switch to a mobile bank apart from the fact I get a cool looking card?
In: Economics
Internet-only banks aren’t new actually. They’ve been around since the early 2000s
Generally the value the offer to customers is slightly higher interest rates in savings accounts, CDs, and such.
Since they don’t have any physical locations, generally the cost for them to operate is lower than a traditional bank, so they offer slightly better rates to incentivize you to use them.
That’s really their “benefit” is just slightly higher interest rates for their customers savings accounts.
In the early 2000s when it started, some of these upstart internet-only banks were offering insane stuff like 5% interest rates, that fizzeled out quickly and now they just offer a bit more than a traditional bank.
Just basing this on ads (so I don’t suggest taking it at face value). The primary selling point of mobile banks is that they can offer higher interest rates than traditional banks just because the savings bought on by the lack of brick-and-mortar infrastructure are passed on to their clients. The mere handling of loads of physical cash around is already a costly endeavor involving armored vans, endless security measures, vaults and auditors.
Mobile banks also used to have an edge because they had optimized cashless payment channels whereas in traditional banks, you had to fill out a form and wait for 1-2 banking days just to register a merchant. Nowadays, the old banks are catching up though.
Banks that are only online can offer better interest rates and other benefits because they lack the overhead expense from 1000’s of branches, employees staffing those locations.
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