What is a Direct Bank?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 01 February 2020
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A direct bank is a banking operation that does not maintain branch locations or any other type of brick and mortar network. Instead, this type of bank provides services in a virtual environment that is augmented with alliances which provide customers with access to their accounts via automated teller machines operated by other financial institutions, and options to conduct mail banking. Thanks to the growth of the Internet, these types of banks provide services to clients with relatively few limitations in terms of geographical location.

With a direct bank, customers conduct the majority of their banking online. This includes access to bank accounts, transferring funds between accounts, and even utilizing online bill paying services. Most banks of this type accept direct deposits for paychecks, making it easy to structure usage so that face to face interaction is not necessary. A number of direct bank corporations also offer car loans, mortgages, and the same range of financial services as any branch of a traditional bank.

Along with online banking options, a direct bank will often offer the benefit of telephone banking. This service makes it possible to check balances, transfer funds between accounts, make payments on loans held by the bank, and a number of other options. Just as the online banking access is protected with a range of security measures, the telephone option also requires the proper credentials to access account information and conduct various transactions.


As an expansion of the online banking options, it is not unusual for a direct bank to also offer mobile banking. In some instances, this involves use of a specific application designed for use on mobile phones. Once the mobile banking option is in place, customers can conduct most types of banking transactions directly from a mobile phone, rather than having to call or use a computer to manage the bank accounts. This solution is especially practical for people who travel and may need to conduct a transaction while en route to a destination.

The popularity of the direct bank continues to increase as Internet technology makes use of this type of banking service increasingly attractive to customers. Interest rates offered by these banks are often competitive with rates offered by the more traditional brick and mortar institutions, even those who maintain web access along with a network of local branch offices. As with any banking enterprise, consumers should investigate the background and financial stability of any direct bank before choosing to open accounts and place money in those accounts.



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Would it be harder to trace one's bank account through direct banking vs traditional banks from creditors?

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