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Virtual Banking

Virtual Banking

There is nothing “virtual” about a virtual bank. There are real customers, real money, real successes, and real failures.

The Virtual Bank: A Brief History in Canada

Security First Network Bank, which opened in October of 1995, is often cited by industry analysts as being the first virtual bank. This is untrue. Security First may have been the first banking operation to refer to themselves a virtual bank—but they weren’t the first to offer banking services without branches. Manulife Bank, located in Waterloo, Canada, has been offering banking services without brick and mortar branches for almost 15 years. Manulife Bank shed their retail outlets in 1993 (sold them to Laurentian Bank) and transformed themselves into a bank that provided banking services through advisors, banking consultants, call centre personnel, interactive voice response and, in the mid 1990’s, web banking.

Not only was Manulife Bank an innovator when it came to virtual banking, they also created the first product of its kind in North America (the Manulife One product). Manulife One is a loan product suitable to more sophisticated consumers who are not highly leveraged.

ING DIRECT was another early virtual banking success for Canada. ING DIRECT opened their virtual banking doors in Canada by 1997, years before they opened for business in Spain, Australia, the United States, France, Germany, UK, and Austria.

DISCLOSURE: Both Manulife Bank and ING Bank of Canada are SIT customers.

Hybrid-Virtual Banks (Clicks-and-Mortar): More Canadian Innovation

While a virtual bank forgoes any location advantage to focus on consumer marketing, channel marketing, or technical operational proficiency, the hybrid virtual bank leverages location, along with loyalty, to take market share. Some analysts refer to hybrid virtual banks as click and mortar banks because, more often than not, a hybrid virtual bank is in fact an existing retail chain that leverages its retail market position (and locations) to capture new banking clients. Examples of hybrid virtual banks in Canada include Canadian Tire Financial Services and Presidents Choice Financial. Both of these hybrid virtual banks leverage their brand popularity and their coast-to-coast locations to help capture new customers.

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Strategic Information Technology (SIT) and Virtual Banking

SIT, with its flagship product Portfolio Plus, has proven itself with virtual and non-virtual financial institutions alike.

If you're interested in starting or funding a virtual bank and need to know what the systems requirements and possibilities are, contact us.

You could read our products page to educate yourself but try not to get overwhelmed. There's a lot to think about. Again, give us a call to discuss and we can help you map things out.