how do internet banks work? for example ING, how do regular banks benefit from them?
Saturday, November 21st, 2009
at
3:58 pm
pankitp asked:
how do banks like wells fargo, WaMu, BOA benefit from allowing Internet banks like ING to link their Accounts to them?
how do banks like wells fargo, WaMu, BOA benefit from allowing Internet banks like ING to link their Accounts to them?
Filed under: Online Banking
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I would think that if you have a savings account linked to a checking account, you’ll tend to have money in said checking account in order to eventually transfer it to said savings account. So your regular bank probably doesn’t mind the linkage because on average, having a linked savings account would motivate you to deposit money into the checking account. The same is probably true the other way around–you might eventually decide to pull your money (plus interest earned) from the online bank, and the first place it’ll go before you get access to it is your checking account.
The way the internet banks work is to do direct deposit/direct withdrawal, just like a business would do. the banks don’t care who uses the service.
ING as you know is a giant Dutch bank. You can not visit this bank in the regular way, as there are no places to go to, there are no tellers but you sign on over the web and you’ll be surprised at the services they offer. AND….way cheaper and better then the regular boys. I have had a mortgage with them…cheaper… we have invested $10,000 and received a higher rate of interest then any other bank and they are punctual and on time to give you your information. A great place to visit as far as I am concerned.
Banks like to have customers, money – the more they have the better they look.
As for the $ question – banks make money by having you affiliate with their institution. If I open an acct (online or not) with, lets say, BofA and down the road I need a Mortgage – who are going to be the first people I turn to? The people at the bank(s) where my accounts are.
This is the same theory behind free checking – sure, they make some money on overdraft fees, but the money is in establishing a client who can profit the bank down the road.
Hope this helps!