Direct bank

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A direct bank (sometimes called a branch-less bank or virtual bank) is a bank that offers its services only via the Internet, mobile app, email, and other electronic means, often including telephone, online chat, and mobile check deposit. A direct bank has no branch network. It may offer access to an independent banking agent network and may also provide access via ATMs (often through interbank network alliances), and bank by mail. Direct banks eliminate the costs of maintaining a branch network while offering convenience to customers who prefer digital technology. Direct banks provide some but not all of the services offered by physical banks.^[1][2]

Direct bank transactions are conducted entirely online. Direct banks are not the same as "online banking". Online banking is an Internet-based option offered by regular banks.

In the United States, direct banks are defined as online/branchless institutions with federal banking charters, with either the Federal Reserve Board, the Office of the Comptroller of the Currency or the Federal Deposit Insurance Corporation (FDIC) as their primary regulator. Many direct banks are insured by the FDIC and offer the same level of protection for the customers' funds as traditional banks, although it is important to verify if this is true.^[3] As of 2022^[update], 27% of banking customers in the United States use a direct (i.e., online-only) bank.^[4]

In the United States, direct banks are distinctly different from neobanks. Neobanks are online-only banking providers without federal banking charters, instead providing a website while relying on a partner bank to hold funds. Often, the partner banks will be Durbin exempt. Their customers tend to be younger people who are more price sensitive to bank fees.