From the Motley Fool:
Like many moneymaking enterprises, financial entities such as banks and credit card issuers haven’t been immune to the influence of the Internet. Many banks have offered their customers online banking services for years, but times are changing and there is a movement afoot to innovate online-only products. As the profits roll in, credit card companies are also stepping in with their own online offerings.
There are many reasons for financial companies to increase their online presence, not the least of which is that it makes good fiscal sense. Online transactions save on paper and personnel, something banks have known for years. Consumers are asking for more Internet-based banking services as well, and even financial-reform legislation has helped accelerate the move to online services. The new trend is moving toward online-only savings accounts that offer higher interest rates than regular banks, and it’s not only banking institutions that are jumping on board.
As consumers become more comfortable with the concept of online banks, institutions are increasingly open to entering this market. And with significantly lower-fixed costs, as well as reduced variable costs, the economics of this business model are compelling. There will likely be increased competition in this market space in the near term, as well as an increase in new online product offerings.
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