What Is a Virtual Bank Account? How It Works & Benefits

If you prefer to manage your finances online rather than wait in long queues, a virtual bank account might be a good fit for you.

In fact, you’re not alone. 60% of Americans state that they are very likely or somewhat likely to use a virtual bank’s service in the next year. As more people become comfortable with online transactions, the future of virtual banking is definitely on the rise.

In this guide, we'll walk you through everything you need to know about virtual bank accounts, from what they are and how they work to all their benefits.

So, let’s begin.

What Is a Virtual Bank Account?

Virtual bank accounts, or online bank accounts, are a type of bank account that operates entirely through mobile or desktop interfaces.

Much like traditional bank accounts, they provide essential banking services but with the added benefits of convenience and efficiency.

❗Important: Online bank accounts and online banking are two different things.

How Do Virtual Bank Accounts Work?

A virtual bank provides banking services entirely via online platforms.

Thus, you can open an account, apply for loans, deposit, withdraw, and make other banking transactions without visiting a physical branch.

Virtual banks are regulated by the financial regulatory bodies of their countries. For instance, in Hong Kong, they are regulated by the Hong Kong Monetary Authority (HKMA), while in the United Kingdom, they are regulated by the Financial Conduct Authority (FCA).

Are Virtual Bank Accounts Safe?

Due to their digital nature, virtual banks utilize a highly secure platform that ensures all customer data is encrypted and protected. In addition, they offer multi-factor authentication and biometric login features for security when accessing mobile apps and online bank accounts. These security procedures ensure that our money is safe and secure in virtual bank accounts.

Examples of Virtual Bank Accounts

Numerous virtual banking solutions are available today, and we will provide a list of some of them.

ZA Bank

ZA Bank is a virtual bank under the ZA Group, which pioneered virtual banking in Hong Kong in March 2020. With around 600,000 users on their platform, ZA Bank is currently the largest virtual bank in Hong Kong.

It is also the first bank to be granted a license to offer insurance, including Life Protection, Accident Protection, Heart Attack and Stroke Protection, and Cancer Protection. Additionally, ZA Bank is backed by Mainland capital.

Services and account features:

• Personal Accounts and Business Accounts
• Physical and Virtual VISA Debit Mastercard®
• Loans
• Foreign Exchange
• Insurance Services
• HKD, USD, CNY supported currencies
• Local funds transfers and payment services (FPS/CHATS)

🔎 If you are interested, check out our review to learn more about ZA Bank's features and how to open an account.

Livi Bank

Livi Bank is another virtual bank based in Hong Kong. They received a virtual banking license from the Hong Kong Monetary Authority in 2019 and have operated their business since August 2020. With a vision to provide innovative and customer-centric banking solutions, LIvi Bank has quickly gained significant recognition in the region.

Services and account features:

• Personal Accounts and Business Accounts
• Virtual Debit Mastercard®
• Loans
• Travel Insurance Services
• HKD, USD, CNY supported currencies
• Local funds transfers and payment services (FPS/CHATS)

🔎 Explore our guide to learn how to open a Livi bank account.

Mox Bank

Mox Bank is a well-known virtual bank in Hong Kong established in 2020 and backed by Standard Chartered. Its popularity among clients is due to the various incentives it offers, including discounts and low interest rates.

Services and account features:

• Personal Accounts only
• Debit and Credit Mastercard®
• Loans
• Foreign Exchange
• HKD supported currency
• Local funds transfers and payment services (FPS/CHATS)

🔎 Read our guide to understand how to open a Mox Bank account.

Revolut

Revolut is currently one of the top virtual banks that is extremely popular. It serves 30 million users and 500,000 businesses worldwide with 29 in-app currencies. It offers seamless and borderless financial solutions for travel enthusiasts.

Services and account features:

• Personal Accounts, Business Accounts, and Freelancer Accounts
• Money transfer abroad in 29 currencies
• Pre-paid debit cards for cash machine withdrawals in 120 countries
• Vaults for budgeting money
• Cryptocurrency exchange for converting currencies into Bitcoin, Litecoin, Ethereum, Bitcoin Cash, or XRP.

🔎If you’re interested, check out our article to complete the process of opening a Revolut account for your business.

Looking for personal use? Learn how to open personal accounts with our walkthrough guide.

Monzo

Monzo is an extremely popular challenger app-based bank that has amassed 7 million users. It was founded in 2015 by a group of ex-Starling team members and operates through a mobile app and prepaid debit cards.

In 2017, Monzo obtained a full banking license and began offering current accounts to its customers, including business accounts. As a result, the bank is regulated by both the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).

Services and account features:

• Personal Accounts and Business Accounts
• Sync up other bank accounts into one place
• Virtual Credit Mastercard®
• Spending budgets
• Saving and Bills pots
• Free cash withdrawals abroad
• Loans
• No transaction fees when spending abroad.

🔎 To guide you through the process, explore how to open a Monzo account with us.

Starling Bank

Starlink Bank is a UK-based that aims to revolutionize how people manage their finances. It is an award-winning virtual bank that received its banking license in 2016. Starling Bank offers a range of bank accounts, including a business, joint, tee account, and much more. Additionally, the bank provides B2B banking and payment services.

Services and account features:

• Personal Accounts and Business Accounts
• B2B banking and payment services
• Quickly setting up saving goals
• Free cash withdrawals abroad
• No foreign transaction fee when spending abroad
• International money transfers with a fee of as little as 0.4%.

🔎Read our article to learn more about Starling Bank’s business account and application process.

Benefits and Challenges of Virtual Bank Accounts

In this section, we discuss the benefits and challenges of virtual bank accounts so that you can have a better understanding of this modern banking approach.

Benefits of Virtual Bank Accounts

Virtual bank accounts have several advantages, and here are some of their benefits:

Convenient and Cost-Effective

Unlike traditional banks, virtual banks usually don't require a minimum balance to open an account. Additionally, there's no need to leave your home to make transactions, and you can do so at any time of the day.

Because of branchless, virtual banks often offer lower fees, which is why many American customers switch to virtual banks, according to Statista.

For those who prioritize convenience and affordability, virtual banks are an excellent choice.

Multi-Currency Accounts 

As someone travels internationally often for business, dealing with multiple currencies can be a hassle.

However, a virtual bank account can simplify things by allowing you to convert and hold funds in various currencies all in one account.

This means you can make cross-border transactions without having to worry about extra fees.

Better Spending Insights

Due to the customizable nature of virtual banking, you can benefit from features such as round-up savings and saving pots.

Moreover, since virtual banks incorporate artificial intelligence (AI) and machine learning (ML), they can provide spending insights that empower you to make informed financial decisions, set savings goals, and track progress toward financial stability.

Online Customer Support

Most virtual banks offer online and 24/7 customer service, which saves you a lot of time and effort compared to traditional institutions, where you would have to wait in long queues.

Additionally, virtual banks usually employ technologies that simplify many of your banking operations. This, in turn, reduces the need to reach out to customer support.

Challenges of Virtual Bank Accounts

Despite the progress and benefits virtual bank accounts have brought, concerns still need to be addressed.

Technical Difficulties

Technical difficulties are prevalent. As a result, websites and mobile applications can go down for some time due to glitches or planned maintenance.

If you need to make an important transaction and the website or app is down, you won't be able to access your bank or make any transactions because there is no physical branch. 

Moreover, if you lose your phone or no longer have access to the internet, you won't have access to your account or make transactions, which can be inconvenient. 

Lack of Human Interaction

Some argue that the lack of human interaction in virtual banking complicates inquiries. In contrast, with traditional banking, you do not have to rely on Internet connectivity and can solve your problem face-to-face.

Bottom Line

The popularity of virtual bank accounts is rising thanks to their remarkable convenience and cost-effectiveness. Virtual banks leverage modern technologies, such as machine learning and artificial intelligence, to deliver innovative services to their customers. As a result, the trust and the adoption of virtual banks reflect their promising future in the financial industry.

However, before you jump on board, it's essential to consider a few factors.

One of these is your comfort level with technology, as virtual banks rely heavily on digital interfaces for transactions. While they offer unparalleled efficiency, some individuals may miss the human touch associated with banking interactions.

Overall, virtual banks offer innovative solutions in the financial sector, making them worth exploring for anyone seeking a seamless and forward-thinking banking experience.

Embracing these innovative platforms can revolutionize the way you manage your finances.