This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Are Direct Banks The Future?

In the battle of the banks, branch-less institutions appear to be winning. According to an analysis of 2012 banking data, direct banks -- also known as online banks -- are the only type of bank that gained market share last year.

Consultancy group TNS recently issued a white paper that details how national, regional and even community banks have struggled to maintain market share against online institutions. Deposits at major direct banks have more than doubled in the past five years.

High savings account rates may be a draw

The analysis looked at deposits for these four major direct banks:

These banks forgo traditional branches and, largely as a result of their low overhead, currently offer savings account rates and CD rates that are well above the national averages. Those rates may be one reason why individuals choosing direct banks tend to have higher levels of income and assets.

The TNS report found that 36 percent of those using direct banks have incomes exceeding $100,000 per year. In addition, 39 percent have more than $100,000 in investable assets. Those figures are well above the averages for American households with incomes of more than $100,000 (23 percent) and investable assets of more than $100,000 (28 percent).

Consumers warm up to online services

While market share for direct banks has doubled, they still have a relatively small customer base. Only 5 percent of consumers currently use a direct bank as their primary institution. Instead, some consumers are using a brick-and-mortar bank for their primary account while using an online bank for their savings accounts.

However, direct banks may see their popularity increase as they offer more products and additional ways to access money. For example, Ally Bank provides customers with access to IRAs and has no ATM fees for those withdrawing money from their checking accounts. And while debit cards come standard for virtually all direct bank checking accounts, Capital One 360 will even send customers old-fashioned paper checks if they want.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.86 0.13%
FB $118.64 0.90%
GOOG $699.97 1.00%
TSLA $242.79 0.84%
YHOO $36.56 -0.10%


Chart of I:DJI
DOW 17,897.22 +123.58 0.70%
S&P 500 2,080.56 +15.26 0.74%
NASDAQ 4,814.73 +39.3720 0.82%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs