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Fed Meeting Preview and Deposit Rate Forecast - Oct 25, 2023Inside Look at Bank of Internet
POSTED
ON BY Ken Tumin
A San Diego Source interview with Gary Lewis Evans, the founder of Bank of Internet (BofI), gives a look inside one of the oldest pure-online banks. BofI opened in July 4, 2000 and still has only one office in San Diego with only 25 employees. Evans follows the internet model in which the internet is used to keep office space cost and employee cost to a minimum.
The article mentions that BofI currently has 21,000 customers. After over six years in operation, that seems low. Compare that to ING Direct which started the internet operation in September 2000. It now has 3.5 million customers. Also, compare BofI's number to that of EmigrantDirect which now has more than 250,000 customers. EmigrantDirect has been offering its online savings account for only about 18 months.
BofI offers many deposit products including CDs, checking accounts, savings accounts and money market accounts. However, the savings and money market accounts have never had very high yields. Currently, BofI's savings account currently only has an APY of 2%. The Money Market Savings' APY is only 3.90% for balances under $99K. ING Direct's model of a simple high yield, no-minimum savings account that links to an existing checking account is something that does well. EmigrantDirect copied this model and was able to attract customers with higher yields. Other banks have continued to puruse this model.
Although BofI doesn't have competitive savings accounts, it does provide decent high yield checking accounts and competitive CD rates. The Freedom Checking Account currently has an APY of 3.40% for balances under $25K. There's a $1K minimum balance to avoid a monthly fee. BofI's certificates of deposit have yields ranging from 5.43% APY for a 6-month CD to 5.66% APY for a 12-month to 5-year CD. The CDs have a minimum requirement of $1K.
In addition to the minimums and fees, another feature that may have hurt BofI's growth is the lack of an ACH transfer system. The online account applications only have check or wire options for funding.
The article mentions that BofI currently has 21,000 customers. After over six years in operation, that seems low. Compare that to ING Direct which started the internet operation in September 2000. It now has 3.5 million customers. Also, compare BofI's number to that of EmigrantDirect which now has more than 250,000 customers. EmigrantDirect has been offering its online savings account for only about 18 months.
BofI offers many deposit products including CDs, checking accounts, savings accounts and money market accounts. However, the savings and money market accounts have never had very high yields. Currently, BofI's savings account currently only has an APY of 2%. The Money Market Savings' APY is only 3.90% for balances under $99K. ING Direct's model of a simple high yield, no-minimum savings account that links to an existing checking account is something that does well. EmigrantDirect copied this model and was able to attract customers with higher yields. Other banks have continued to puruse this model.
Although BofI doesn't have competitive savings accounts, it does provide decent high yield checking accounts and competitive CD rates. The Freedom Checking Account currently has an APY of 3.40% for balances under $25K. There's a $1K minimum balance to avoid a monthly fee. BofI's certificates of deposit have yields ranging from 5.43% APY for a 6-month CD to 5.66% APY for a 12-month to 5-year CD. The CDs have a minimum requirement of $1K.
In addition to the minimums and fees, another feature that may have hurt BofI's growth is the lack of an ACH transfer system. The online account applications only have check or wire options for funding.
"Boomer Checking" for those over 40 is also free of service charges and pays 3.45% APY.