Virtual Accounts in Nigeria: All You Need to Know
There is a business person somewhere in Nigeria still scared to deposit money in Nigeria’s traditional banks. Only few can blame such a person; especially with the bottlenecks involved in opening bank accounts, unreasonable bank charges and poor customer care handling of monetary issues. The pandemic situation has not made it easier at all. Therefore, people have to adapt knowing Covid-19 has come stay even if there have been ground-breaking developments with vaccines and cure for the pandemic. The fact still remains, something has to change and that is where virtual banks come in. There is nothing better than convenience and knowing it is enduring as well as sustainable. Virtual banking promises you far more than convenience in ways the banking establishment in Nigeria has never seen.
If you have tried sending money abroad from anywhere in Nigeria, you would understand how difficult it can be. Even with a domiciliary account, the inflow and outflow policies coupled with exorbitant onshore and offshore charges can be frustrating. Virtual banking allows for easy access and movement of monies to any part of the world. Virtual accounts are foreign currency accounts that are operated like local bank accounts. It is true they are like domiciliary accounts but they are a far extension of it in ways never witnessed before. Gone are the days of waiting long hours in traditional banking halls wanting to carry out financial transactions that should take few minutes. As the name implies, virtual banking involves access to various financial services such as bill payments, making withdrawals and deposits, checking account information, that are offered digitally instead of having to visit a physical banking location.
Virtual Banking: All You Need To Know
TechFunnel gives a rather completely exhaustive guide to everything you need to know as far as virtual banking is concerned and it reads as follows:
Virtual banks operate through 3 simple ways: creating an account, transferring money in, and then transferring money out. Here is how they work?
1. Creating an Account
A virtual bank works when a customer, first of all, opens an account with the virtual bank. This means the individual would have to fill out an online application and make a deposit. The customer can submit the form online or simply print it and mail it.
To make the deposit, the customer would have to transfer money to the bank electronically or send a check via mail. Before concluding this stage, the bank may also request that the customer fax it a copy of their identification.
2. Paying Funds In
One way a virtual bank allows you to deposit money into a virtual account is by having your employer deposit your paycheck directly into the account.
Also, it is possible for you to transfer funds from another bank or a PayPal account into your virtual account. It also works by allowing customers to snail-mail deposits to the virtual bank.
Conclusively, some virtual banks may operate by allowing you to take a smartphone picture of the deposit to carry out a transaction. Even if your virtual bank does not provide this feature, PayPal does. Thus, you can transfer money from your PayPal account.
3. Paying Funds Out
Just as with a traditional bank, virtual banks also issue debit cards, and a customer is also allowed to order checks. With these provisions, you can buy products as you would normally do. Additionally, virtual banks provide the option of paying bills online.
Although virtual banks do not have their own ATMs, they enable the operation of cash withdrawal by allowing you to use an ATM machine that is owned by another bank. However, the bank in charge of the ATM will most likely charge you for ATM withdrawal fees, although virtual banks won’t. It is however possible that your virtual bank may reimburse these charges.
Importance of Virtual Banking
1. Guaranteed Security
One of its importance today is that security is assured. This is large as a result of the fact that banks all around the world have begun to offer online banking as one of their major services.
Virtual banks utilize a highly secure platform that enables the encryption of devices to guarantee that all customer data is secured. With the absence of and protection from the security breach, you are ultimately shielded from online scams and account hacking.
It can always be relied upon even if you are minutes away from the deadline to pay your bill and avoiding being levied a penalty. From the comfort of your home, you can make online transactions anytime and with ease. What’s more, is that you do not have to go through the hassles of being physically present for a huge amount of transactions. It enables the safe transfer of funds without disappointments.
3. No Hidden Charges
It is quite normal to assume that with the convenience that it offers, there would be some hidden charges associated with carrying out online transactions.
However, there are zero hidden charges! When you make an online transaction, you are only charged a nominal transaction convenience and the rest is handled by your bank.
4. A Bank in Your Home
Indeed one of the importance is the fact that convenience is guaranteed. They bring the banking hall right to the middle of your home. This means you no longer have to wait in long queues at the bank. Whether you are stuck in a traffic jam or you are in the middle of some urgent work, you can always finalize transactions on the go.
Consequently, it makes it easier for you to confirm your balance before making cashless purchases so as to avoid embarrassment if your account does not have sufficient funds to purchase everything on your shopping list.
5. Manage Your Accounts Up Close
Finally, another essential feature is the ability to budget and monitor your account via access to mobile banking and an efficient budgeting application. It becomes simpler to monitor real-time expenses while making purchases or calculating your savings and expenses for the month.
That is, after making transactions, you do not have to wait for the day of the month to end before you check your transaction logs.
Forms of Virtual Banking
Below are different forms:
- Centralized fund management schemes(1)
- The electronic clearing service scheme
- Use of magnetic ink character recognition code (MICR)
- An electronic fund transfer scheme
- Computerized settlement of clearing transactions.
Advantages of a Virtual Banking
1. 24/7 Access to your account and bank information
As long as you are connected to the internet, online banks are accessible all day long. In fact, some advanced virtual banks raise the competition bar by providing you with 24/7 access to a real-life customer service agent.
This becomes very beneficial in case you do not have access to the internet, or if you feel more comfortable interacting with a human, instead of a programmed computer algorithm.
2. Faster Speed and Efficiency
Recall that with the traditional brick-and-mortar banking institutions, you have to go through the time-consuming stress of waiting in line to perform almost every banking transaction such as applying for a loan or transferring funds. However, this is not the case.
Here, speed and efficiency is an advantage on your side as you do not have to wait. All you have to do is log in and access your online account, and you can perform almost every banking transaction (request a new credit card, lodge a complaint, etc.) without having to walk down to a bank and wait in line.
3. Online Payment of Bill
The ability to pay bills online is one of the awesome advantages of online banking. In traditional banking, you have to write checks or fill out forms to pay bills. However, with virtual banking, all it takes is a simple click after you set up your accounts on your online bank.
In fact, you can even automate the payments of your bills with a set time duration. With this feature of online bill payment, it is easy to monitor your accounts from one central source and to oversee the payments into and out of your account.
4. Cost of Operation Is Cost-effective
Traditional banks have to pay for expenses that include rent, electricity, landscaping, janitorial services, etc. However, virtual banks do not have to pay for these things and that means they can pass these savings along to their customers.
Because they have a relatively reduced cost of operation, virtual banks tend to charge lower fees than traditional banks. This is why there are a lot of virtual banks that provide free online checking account with zero deposit, along with other no-fee bank accounts, like IRAs. Some virtual banks enable free checking and zero minimum balance.
This is particularly useful if you are concerned that your application for an account may be refused because of bad credit. You may be allowed to create a bank account online free of charge. There is no need for a credit check, but there might however be ongoing fees.
5. High-Interest Rates
As a result of low overhead, virtual banks usually offer the best interest rates, regardless of if you want a certificate of deposit, a high girl checking account, or deposit accounts with high interest, like a money market account.
Other advantages include:
- The flexibility of its system
- They are sensitive to the environment
- Easy occupation and user-friendliness
- Digital signs for security
- The ability to check data about transactions at current and retrospective ways
Disadvantages of Virtual Banking
1. Security Threats
As expected, every innovation that is based on IT faces the issue of security. This is why some customers are still skeptical about it. If someone gains illegal access to your account by hacking or hijacking your password or log-in details, your account (and of course, money) is at the risk of theft.
Also, the fact that virtual banks do not have a physical presence makes it difficult for people to trust them. If the website crashes or your digital identity is stolen, what happens to your money?
2. Inefficiency Execution of Complex Transactions
Virtual banks are good for carrying out simple banking operations like transferring funds between accounts and paying bills online. However, if your virtual bank does not have a global outlook, it may not be able to efficiently execute global transaction functions like sending payments to numerous currencies of different countries all over the world.
In fact, it is impossible for virtual banks without a physical presence to carry out the services of notary public since it requires a physical visit, and it is vital for essential financial activities like purchasing a home.
3. Inability to Create Relations with The Bank
An edge that traditional brick-and-mortar banks have over virtual banks is the fact that a customer can easily create familiarity and relations with a banker. However, this becomes nearly impossible.
This is because virtual banks typically hand you off to an anonymous customer service agent who will most likely be unable to differentiate you from the next customer.
Other disadvantages are:
- The mobility of banking websites
- Cost of access
- The difficulty that may be attached to learning the online processes
- Skepticism about the validity and effectiveness of the operations
Make no mistakes, online banking and virtual banking are two different phenomena. Most people use both terms interchangeably but they are considerably distinct in their unique ways. Online banking can be created and owned by a traditional bank. Hence, it can be operated like any normal local bank account as long as you have gadgets that are permissible to internet connection. Meanwhile, virtual banking is created and operated by an individual with no interference with any local bank. That said, virtual banking gives more power to an individual. This means that these individuals have the coinage to do their banking in whatever way befitting of their informed choices and preferences. Thus, virtual banking eliminates “the Abacha grip” of most traditional banks in Nigeria.