What Are the Drawbacks of Internet-Only Banks?

Internet-only banks operate exclusively online, providing financial services without physical branches. While convenient, this model presents distinct challenges. This article explores characteristics that can be disadvantages for individuals seeking specific banking experiences or services.

Absence of Branch Access

Customers cannot conduct in-person transactions such as depositing physical cash directly with a teller, nor can they make immediate large cash withdrawals that often require branch approval. Instead, these banks typically rely on alternative methods for cash deposits, such as third-party retail networks (e.g., Walgreens, CVS, 7-Eleven) that may charge a fee, often around $4 to $5 per transaction, or through select ATMs that accept cash deposits. Electronic transfers from another bank account or mobile check deposit are common methods for funding accounts, but these do not address the need for physical cash handling.

The lack of a physical presence also impacts the ability to resolve complex issues or obtain financial advice through face-to-face interaction. Customers cannot walk into a branch to discuss account discrepancies, apply for loans, or seek personalized financial guidance. Services like cashier’s checks, money orders, or notarizations, commonly handled at a branch, can be unavailable or require alternative, more cumbersome processes. This can be inconvenient for individuals or small businesses needing specialized in-person banking services.

Digital Dependence and Accessibility

Internet-only banks are entirely reliant on digital platforms, necessitating consistent internet access and digital literacy from their users. All banking activities, from checking balances to paying bills, are conducted through web browsers or mobile applications. This reliance means any internet outage, power failure, or technical issue with the bank’s systems can disrupt access to funds and services.

Such disruptions, while often temporary, can be problematic if banking needs are time-sensitive, potentially lasting for several hours. For individuals who are not comfortable with technology, or who have limited access to reliable smartphones, computers, or high-speed internet, managing an internet-only bank account can present a significant hurdle. The entire banking experience hinges on the functionality and security of digital tools, making technological proficiency a prerequisite for smooth operations.

Limited Direct Support Options

Customer support for internet-only banks is typically limited to remote channels, including phone, email, and online chat. This setup can lead to longer wait times, particularly during peak hours, and may result in a less personal interaction compared to speaking with a representative in a physical branch. While many routine inquiries can be handled efficiently through these remote methods, resolving more complex or sensitive issues can be challenging without the ability to engage in direct, in-person dialogue.

The absence of a specific banker or relationship manager means customers may not have a consistent point of contact for ongoing financial needs or specialized advice. Although some online banks offer 24-hour customer service, remote communication can feel less secure or efficient when dealing with financial matters or disputes. Customers have reported struggles with customer service and timely problem resolution, with the average time to resolve an issue increasing.