The age of the internet has changed the way we approach a lot of things, and money is chief of those.
There was a time when opening an account meant having to enter a physical bank location, possibly queuing for hours and filling some mundane forms just to have your preferred account type opened. These days, you could just sit in a coffee shop, connect to the Wi-Fi and have an account created before you finish that cup at hand.
This shows how much the age of digital banking is being ushered in. The question is, is that age here to stay?
What is Digital Banking?
Digital banking is something you might have come across in another way. For some, they choose to refer to this mode of banking as internet/ online banking. Others engage with the digital banking model in what they have come to know as mobile banking instead.
No matter how you look at it, it takes nothing away from the core meaning of digital banking.
Thus, digital banking can simply be said to be the collection of platforms by which a financial institution moves its banking services online so that they can easily be accessed by the consumer. In other words, the consumer can now make payments, withdrawals, submit requests and much more without having to be present at a physical bank or any such dedicated locations.
The Case for Digital Banking
While many people are just tapping into the benefits and framework of online banking now, it is not a new concept.
Research shows that up to 80% of all banks in the US have offered digital banking – in one form or the other – since the year 2006. Even the Bank of America was boasting an impressive 3 million online users as far back as 2001. This is more impressive when you note that those figures represented 20% of all customers the bank had at the time.
Within then and now, we have seen a lot of fintech startups spring up. Likewise, these startups have promised to disrupt the financial industry, but the traditional banks are still around today.
Basing conclusions on that alone, it would seem that digital banking has not done anything to cause the disruption that they are so clamoring for. Going by Ernst & Young, though, 64% of consumers have tried out no less than two fintech platforms – and the numbers are only going up.
So, what makes them drawn to these digital banking solutions?
1. Paying Bills
Almost every household has to sort the bills first before they start paying for other stuff. It does happen that in some months, though, there is a missing check or two in the mail. That can cause a lot of hassles – from late payments to having to request new checks so that payments can be made.
These would never happen with online payment models.
Consumers now have the convenience of just attending to their bills with the tap of some buttons on their preferred internet-enabled devices. They also don’t have to be at home to get the checks anymore since they can just pay the bills from anywhere in the world.
Perhaps the biggest win between the traditional and online banking model is the convenience that ships with it.
Think about having to go to the bank every time to initiate the smallest of transactions. Consider the stress of being physically present at your financial institution just because you wanted to request a card, generate your statement of account, etc. That is not to mention the long queues which every banking customer surely dreads.
Digital banking makes all those a thing of the past.
From the comfort of a banking app, for example, it becomes possible to request/ deactivate a card, initiate a bank statement request and much more. The best part of this, again, is that you can get anything done at almost any time of the day – not just the bank’s official hours.
Speaking of official hours….
3. Customer Service
If you thought digital banking was limited to only the dedicated apps, websites, and platforms that have been created by the banking/ financial institution you are dealing with, you might not know the extent of this concept.
Leveraging other established platforms and infrastructure, financial services – chief of which is customer service – can now be effortlessly and better delivered to the consumer base.
That is why we now have 24/7 customer service to boast from fintech ideas. While banking platforms have dedicated customer support sections, too, it is no news that third-party media (such as social media) tends to be where complaints get the most traction.
Customers don’t always have to wait for their bank branches to open before they can complain anymore. By simply calling out the necessary handles online, important issues are resolved in the consumers’ pastime.
4. Personalized Services
About 60% of consumers surveyed in a study by BusinessWire admitted that the majority of the brands who ought to know them do not. This would not have meant a lot for a business model that doesn’t need to get personal, but that is not the case with the financial industry.
When it comes to money, it is always personal.
Digital models allow the collection of important metrics and data which can then be used to make products and services that meets the needs of individual consumers available to them. This way, consumers can get better loan rates, improved investment/ savings packages and much more.
5. Improved Rates
Many consumers’ move to digital platforms was bolstered by the better interest rates which they enjoy on these services. Most digital banking platforms, besides giving better savings rates and returns, will even mitigate the costs of initiating some other account-related processes.
Thus, consumers can get to pay fewer charges on transfers, get reduced commission and VATs, and much more.
Some will argue that the interest rates and lesser fees imposed by digital banking platforms are not sustainable and are only there to bring in the customers. We believe that to be wrong.
Note that digital banking means that the companies behind such innovations don’t have to pay overhead fees in the form of cost of running physical branches and the employees that come with them. Thus, they can pass on the massive savings they are making to the consumers in the forms related above.
The Case Against Digital Banking
As great as the concept of digital banking sounds, there are proponents for moving against this form of banking. While there are a lot of sentiments being thrown around in this section, we have focused on only the concrete points that have been raised as to why digital banking might not take over.
Those compelling reasons can be best summarized as:
- Security concerns – it makes sense to start here since this is the biggest bone of contention for many people who are against digital banking. While these digital banking platforms have grown so much that they are now more secure than they were before, the fact that they cannot substitute for physical locations still makes them susceptible to hacks. From connecting to your digital banking services via unsecured networks to losing your login credentials to a hacker, there is nothing that stops unauthorized personnel from wiping out your entire funds.
- Relationship – Those running big businesses need to have a certain level of relationship with their bank managers/ customer care rep for faster processes when need be. If such a company has based all its transactions online, though, they might just be seen as another name in the book rather than a high-ticket consumer.
- Services – Of course, we are getting more and more services added to the digital banking profile, but most of the important ones still require that the customer be available at a physical branch. Loans can be applied for and mortgages can be taken, for example, but there would still be a need for the physical signing of the forms and verification of related documents
- Other limitations – There are some complaints which will never be resolved on digital platforms, and for reasons best known to the financial institution in charge. At other times, certain services might not be available in some regions of the world, limiting the consumer by location. This, and we have not even made mention of the limitations on transfers/ deposits which could be made via online banking platforms.
What the future holds
Seeing the challenges above, it might look like digital banking has a lot of challenges to face in the market before it overcomes traditional banking. That could not be farther from the truth.
Digital banking is growing at a really fast pace, and it is threatening to kick traditional banking to the curb in the nearest future. Of course, it has challenges of its own to deal with – but what good thing doesn’t have any challenge to surmount?
For the very fact that digital banking meets the consumers at the point of their needs makes it a better alternative – and means it will keep growing. To buttress that point, there is an increase in the number of financial transactions initiated and competed via the adoption of digital banking as compared to traditional modes of banking.
On the side of the innovators, they not only get to have loyal customers while cutting the majority of the overhead costs but also have fertile land for an end to end digital marketing right on their hands. This doesn’t even have to be about putting out large volumes of content, but concise notifications which come at the ideal time and will be sure to reach the consumer.
We are at the point where traditional banks have to join the train if they don’t want to be phased out in the coming years.
Already, we have seen fintech startups being adopted and backed up by individual banks – even if those fintech innovations will have integrations to work with other banks. This shows how the intelligent traditional banks are seeing the ball roll away from their court, but making sure they have a cut of the new pie too.
With the explosion of technology, increased improvement in the way of security on digital platforms plus all the promises which these services already pack, digital banking will not shape the future of banking. Rather, it is already shaping the future of banking, as we know it.
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