How is an Online bank different from a retail bank

How Is an Online Bank Different From a Retail Bank?

Constant technological innovations and digitization have not skipped the banking industry. Consequently, retail banks have found a worthy opponent in the form of online banking platforms.

While both retail and online banks offer more or less the same services, clients are still bound to have a different experience with both. In this short guide, we’ll be taking a look at the fundamental differences between online and retail banks and shedding some light on their respective pros and cons.

Online Banks vs. Retail Banks: Definitions


First things first, what are retail and online banks? Their definitions can be summed up as follows:

How Is an Online Bank Different From a Retail Bank?


Aside from the obvious surface differences, online and retail banks differ in several other key aspects, such as:

Convenience and Accessibility

Online banks are unparalleled when it comes to convenience. They let customers access their accounts anytime, anywhere, and they often provide 24/7 client support, ensuring customers can receive proper assistance even during weekends and holidays. 

Online transactions and services are also convenient. With just a few clicks or taps, users can transfer funds, pay their bills, and micromanage their finances electronically, without having to waste precious time going to a physical branch. 

In contrast, brick-and-mortar banks have limited working hours and require in-person visits for a lot of financial services. Note, though, that a lot of online banks do not feature all financial services. For example, it is still pretty much mandatory to visit a retail bank to apply for a loan or a mortgage.


An online bank has lower operating costs compared to its retail counterparts. There is no rent; there is no maintenance; there is less staff to pay, etc. Moreover, by relying on a number of automated financial services and eliminating the need for the analog infrastructure that is necessary for a retail bank, internet banks can render their services more cost-effective. 

Consequently, online banks sometimes offer higher interest rates on, say, savings accounts. On the other hand, retail branches tend to incur higher fees for customers. This cost advantage makes online banks an attractive option not only for clients looking for a more convenient way to manage their finances but also those on a budget who are seeking a more affordable banking experience.

Personalized Banking Experience

The online financial market is becoming ever larger. To stay competitive, many online banks offer users customizable, user-friendly platforms that allow for personalized financial management. What’s more, they provide a wide range of resources and customer support to help build financial literacy and ensure clients know what they’re doing with their funds. 

In contrast, retail bank clients might not have ready access to such tools, having to rely on in-person interactions to get most of the work done. As mentioned in the intro, online banks prioritize convenience. That is, they aim to deliver as seamless a banking experience as possible. This is their biggest selling point, especially nowadays when the average client’s professional life tends to be hectic, leaving no room for frequent visits to the bank.

Security and Trust 

It has been estimated that a cyberattack takes place every 39 seconds. As a consequence, digital safety has become everyone’s top priority, especially when it comes to finances. Fortunately, online banks almost universally feature encryption, multi-factor authentication, and biometric login systems to safeguard customer information. 

However, even though online banks put a huge emphasis on cyber security, the nature of the internet is such that no data is ever truly safe. Online banks actively address user concerns by listing transparent terms of service, emphasizing clear communication, and doing their best to provide users with educational material that can help them protect their funds. 

Personal Relationships 

Although sometimes not convenient, one of the advantages of retail banks is their insistence on face-to-face interactions and personalized assistance. A lot of customers eventually come to value the relationships they establish with bank employees and the advice they receive from them. 

As online banks prioritize self-service, they lose the element of intimacy and guidance provided by retail bankers, tellers, and officers. Consequently, some Internet banks are striving to bridge the gap between the convenient and interpersonal banking elements. Of course, in turn, retail banks are developing online solutions to streamline some of their processes

Do Online Banks Have Any Downsides?


So far, it seems like online banks take the wreath as the obvious winner in this banking clash. However, there are some downsides to them that might dissuade a lot of potential clients. For example:

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