While Canada’s banks and trust companies are jockeying to position their electronic banking offerings as the first or the best, two ‘virtual banks’ – financial institutions that do all their business electronically, without benefit of bricks and mortar branches – are poised to give them a run for their money.

Citizens Bank of Canada, owned by Vancouver City Savings Credit Union, expects to launch within the next few weeks and is just waiting for the federal government to put the final signature on the document that will establish it as a federally chartered bank.

ING Direct, part of Dutch-based ING Groep NV, is also opening for business this year but has not specified a date.

There will be little difference between the types of electronic banking products offered by the virtual banks – or direct banks as ING Direct prefers – and traditional financial institutions. Both will offer banking by personal computer and phone, as well as through debit cards and bank machines.

But because they’re new brands entering the market, the new players won’t be on the same competitive level as the established financial institutions.

Where the virtual banks expect to differentiate themselves, however, are through superior customer service and lower rates.

Eli Sopow, spokesperson for Citizens Bank, says the savings incurred from not having to operate branches will be reflected in lower service charges.

‘We’re not looking for a price war with the big banks. But, that certainly will be one issue, that there’s some cost savings right up front.’

Sopow says public opinion polling and focus groups conducted for Citizens Bank in Toronto and other cities has shown that consumers wanted three things: better service than they were getting from traditional banks, lower service charges, and greater corporate responsibility to the community.

Like its parent VanCity, Citizens Bank will be involved in community social and environmental programs, while on the service side, Citizens Bank will offer 24-hour, seven-days-a-week telephone accessibility to representatives.

Sopow says Citizens Bank is high technology but human. He adds, ‘It’s not the technology that’s going to differentiate Citizens Bank in the long run, it will be the way it treats its customers and its commitment to social responsibility.’

Most of the major financial institutions have introduced their electronic banking products although Scotiabank is waiting until sometime early this year to launch its Internet banking product.

Last month, Canada Trust added EasyWeb, an Internet component, to its CT Connect PC banking system and Royal Bank of Canada launched Royal Direct PC Banking with Managing Your Money software, a PC and Internet banking product.