The trend to online banking is reaching the tipping point. Consumers have adopted the habit of buying online and are now becoming more comfortable managing their money online. Enabling technology such as mobile has opened up the market for internet only banks by solving the problem of depositing cheques. With a mobile phone customers can take a picture of the cheque which is then remotely deposited into their online banking account. This technology now allows the internet banks to chase more corporate business.
Source: Everbank investor presentation
We believe the best way to play this growth trend is through BofI, the owner of Bank of Internet USA.
BOFI is based in San Diego and its portfolio is concentrated in the region consisting mainly of single family housing. BOFI has total assets of $2.6 billion. The business outlook is strong with $180 million in pending applications.
No branches = Less fees
BOFI is a branchless bank, because it does not have the cost base of a regular bank BOFI is able to cut fees by an average of 30-35% . The lack of branches leads to a near 50%
cost advantage. 
Some of these benefits are passed onto the consumer through initiatives such as no overdraft fees. The average account age tends to be relatively sticky at 3-4 years. BOFI does not have its own ATM network but happily refunds any fees charged by other banks. Its ATM footprint ends up being the entire network!
How do they make loans?
Its always a good measure of a company to see who they are
doing business with and here BOFI stands out. BOFI has an affiliation agreement
with Costco for mortgages. Members of Costco can apply for a loan at great
rates. Costco consumers trust the Costco brand to deliver value and with its cost structure BOFI is able to fit the bill.Insiders own around 16% of the bank, we are banking alongside mangement that this trend to online banking will continue.
Jason
Disclosure: Decisive is long BOFI
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