This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

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

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs