The Advantages and Disadvantages of Electronic Banking

By Kim Franke-Folstad · August 05, 2022 · 9 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

The Advantages and Disadvantages of Electronic Banking

Electronic banking has its fans for good reason: Convenience. No lines. 24/7 access. And the potential to pay less and earn more.

It’s easy to understand why electronic banking continues to grow in popularity as an alternative to banking at a brick-and-mortar location.

Still, it may not be a good fit for everyone. The lack of face-to-face human connection and the complexity of some tasks are downsides for some people.

So if you’re looking for the right place to stash all or a chunk of your cash, there are advantages and disadvantages to electronic banking you should consider. Here, we’ll illuminate what electronic banking is and its pros and cons, so you can decide if it’s right for you.

What Is Electronic Banking?

Electronic banking (also known as e-banking, online banking, mobile banking, and internet banking) works much like traditional banking — minus most of the physical stuff. Instead of walking into a bank branch and handing the teller a check, cash, and/or deposit slip, customers can handle most of their transactions completely online, using a computer, tablet, or smartphone. You may also have access to a network of ATMs.

There are online-only banks (sometimes called “virtual banks”) that have no branches. And there are conventional banks and credit unions that have an online presence but also maintain brick-and-mortar locations. It’s critical to be clear about which of these you’re dealing with as you review your banking options. Here’s why: There are differences in how they operate that could affect your costs and comfort level. Before you decide where to open an account (or move an account to) to a virtual institution, consider the pros and cons of online banking.

We’ll help you do just that next, with an in-depth look at the advantages vs the disadvantages of electronic banking.

Advantages of Electronic Banking

If you’re tech-savvy enough to open an online bank account (and, really, it doesn’t take much), you’ll likely find it’s a handy and user-friendly way to manage much of your financial life. You can even do it while lying on the couch in your pajamas.

Here are some other pros of banking online:

24/7 Account and Customer Service Access

No more rushing to the bank before it closes or waiting for a weekday to do your banking business. As long as you have an internet connection or access to your cellular network, you should be able to use your account any time of day and any day of the week. And if you need human help, many online banks offer plenty of customer support online and on the phone.

Speed and Efficiency

Remember when the drive-thru lane was the most convenient way to get your banking done? With electronic banking, you can skip the line — inside or outside a bricks-and-mortar location. As long as you have a secure connection, you can log in. Then, you can quickly and efficiently take care of nearly any transaction from the comfort of home. (Or pretty much anywhere you like, as long as you have that nice, safe connection.)

Online Bill Payment

Online banking usually means an online bill-paying option. This can make it easier to organize your bills and make sure they’re paid on time. Instead of randomly writing out checks or phoning in payments, you can set up recurring and individual payments on your bank’s bill-paying portal and track them from there. And you only have to remember one password!

Low Overhead Can Mean Low Fees

Online-only banks have fewer overhead costs (they don’t have to build, maintain, and staff multiple physical locations), and they typically pass those savings on to their account holders. They likely charge lower fees than banks with brick-and-mortar locations (in some cases, even no fees). So if you’re looking at online-only banks vs. conventional banks with online services, you may want to do a fee comparison. There’s a good chance that the totally virtual bank will offer you savings.

Low Overhead Can Yield High Rates

Online-only banks also may pass on their overhead savings by offering higher interest rates. Although rates can fluctuate, and it’s always worth checking to see who’s currently offering the best annual percentage yield (APY). Online-only banks generally have the most competitive rates.

Ability to Easily Monitor Your Account

Regularly monitoring the activity in your financial accounts can help you stay on track in terms of spending and saving. Plus, it can help you spot fraud early. Electronic banking makes reviewing your transactions — whether it’s a direct deposit from work or a payment you made — easier and faster. If you have multiple accounts at one bank (checking and savings, investing, and/or loans), you can review them all at one time. And if your bank offers an app, you can check your accounts on the go — often in real time.

Ability to Easily Transfer Money

With online banking, transferring funds between accounts at the same bank or from bank to bank is a matter of just a few clicks. You usually can use the bank’s website or an app to transfer money. And many banks now offer low-cost or free peer-to-peer (P2P) transfers through Zelle and other vendors.


Electronic banking is all about flexibility. You can peek at your balance, deposit a check, transfer funds, and pay bills any time you like. And you can set up alerts to help you stay on top of your finances. Online banking also offers the convenience and safety of going cashless, if you choose, without having to rely on credit cards.

Disadvantages of Electronic Banking

Though online banking continues to improve, it still isn’t perfect. (Then again, what is?) There are some potential issues you might want to consider as you move to electronic banking or are trying to decide whether to park your money at a traditional or virtual bank. These include:


It may seem as though electronic banking would make you more susceptible to fraud. But in today’s world of hacking and security breaches, the reality is that you may be just as vulnerable to identity theft if you have your money in a conventional bank. And your personal vigilance — monitoring accounts and being careful with passwords and public WiFi — is important to keeping your online savings safe.

Still, with a virtual bank you will be doing your financial business in the ether most of the time. So it can be wise to research the security measures a bank has in place before opening an account there. (Do they, for example, have two-factor authentication, fraud alerts, automatic logouts, and a high level of encryption?). You may want to research a bank’s overall reputation and its policies for dealing with fraud to see if it follows requirements set by the Electronic Fund Transfer Act.

One other security step: You can use the FDIC’s BankFind tool to see if deposits are guaranteed by the federal government. This adds a layer of reassurance, as you’ll know whether your funds are protected (up to $250,000 per depositor, per insured bank, for each account ownership category) were your bank ever to fail.

Lack of Direct Contact Between Bank and Customer

If you ask someone who has used an online bank, “What are the advantages and disadvantages of electronic banking?” their biggest complaint might be the lack of personal contact. If you like the idea of working with a “personal banker” — or if it makes you feel happy to say hi to your favorite teller — you might miss visiting a bricks-and-mortar branch. If you have a concern or complaint, you also may find it’s easier to present your paperwork in person than submitting it online. And branch banks still offer some things a virtual bank cannot — including safe deposit boxes. Although online-only banks generally have a reputation for quality customer service, some people still may want or need the services of a local branch.

Technology Issues

Your satisfaction with online-only banking may only be as strong as your internet connection. If your WiFi or the bank’s website is down or your device can’t connect, it may limit your ability to complete an online transaction. (Although you may be able to get your business done over the phone or by using your ATM card.) This can be especially challenging if you’re the sort of person who travels a lot and struggles to find a secure connection.

Complex Transactions

Even if you’re comfortable with most aspects of online banking, there may be times when you have to manage a more complicated transaction. We’re talking about things like dealing with foreign currency, getting a certified check, or having paperwork notarized. Working with an in-person contact may be easier or even necessary in those situations.


If you own a business that deals in cash or you’re paid in cash, you may find that making cash deposits at an online-only bank is inefficient. You might have to deposit the cash into a branch bank account and transfer the money to your online account. Or you could buy a money order and upload it to your online bank. And some online banks allow customers to make deposits through cash-accepting ATMs or a third-party retailer. But there’s no way to directly deposit that cash.

The Takeaway

When you’re trying to decide whether to choose traditional vs. online banking, much will depend on your lifestyle and personal preferences. If you’re looking for convenience, higher interest rates, and lower fees, an online-only bank may be the right option for you. However, if you often deal with cash or complicated transactions, or just plain crave some human contact when taking care of financial business, you may still want to have an account at a brick-and-mortar branch bank.

If you’re curious to try out electronic banking and see how convenient and low-cost it can be, why not take a good look at SoFi Checking and Savings? If you sign up with direct deposit, you’ll enjoy a super-competitive APY. You’ll also be able to access your paycheck up to two days early, and you won’t have to pay any account fees, like monthly or minimum-balance charges.

Ready to see how good electronic banking can be? Let SoFi show you the way.


How does electronic banking work?

Online banking is much like traditional banking except that it can be done at any time and anywhere — as long as you have a secure internet connection. You can accomplish most banking transactions using electronic banking, including depositing and withdrawing money, transferring money, and paying bills.

What are the disadvantages of electronic banking?

Electronic banking doesn’t have all of the features of traditional banking. For instance, brick-and-mortar banks may offer notary services and safe deposit boxes. Also some account holders may prefer to discuss problems or complex transactions face-to-face with a bank representative. Additionally, It may be difficult — but not impossible — to deposit cash into an online-only bank.

What are the advantages of electronic banking?

Advantages of electronic banking include convenience, speed, and flexibility. You can bank when it suits you. What’s more, online-only banks typically offer higher interest rates and fewer fees because they have lower overhead costs. Choosing a virtual bank can make good financial sense for these reasons.

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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at

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