The effects of technology are widespread, and the banking industry is also very much affected. The rapid development of processes, applications, devices, and infrastructure gave rise to banking going digital. The process of banks going digital may entail traditional banks offering their services online or for some banks being purely digital.
Digital Transformation in Banking
Numerous traditional banks have offered their services online to stay up with the development of the times. They need this to stay relevant and to upgrade their business. To go digital, traditional banks offer their paper-based services and process on the web. Mobile banking and mobile application being offered by numerous banks are instances of them moving digital.
On the other hand, digital banks have all their processes, both front and back-end automated. These are all online-only organizations providing banking services through mobile or web applications. The technologies they rely on are big data, data analytics, and the latest in information technology security. The top mobile banks are Transferwise, Revolut, Bunq, Monese, and N26.
Digital Banking has become popular in various locations in the world. For instance, Transferwise and Revolut have been in operation in Europe, the United Kingdom, and Asia. And the number of these banks had been growing due to the following benefits of banking going digital.
The convenience of users, both customer, and bank personnel is one of the primary benefits of bank digitalization. As long as users have the application and web connectivity, users can access their accounts in the comfort of their homes.
Transactions such as the opening of accounts, transfer of funds, updating personal information, and financial applications, among others are already available online. Long queues are thus prevented, and paperwork is diminished, if not eliminated.
Round-the-Clock Availability of Services
Since the banking service is available online, users are provided with 24/7 access to their accounts. Verification of bank accounts can be done at any time of the day with a real-time update of transactions. Some valuable use of this feature includes the checking of bank transactions, reporting of lost cards, as well as the modification of card limit and transaction types.
Moreover, if users need to transfer money to an account or if bills payment is required, there is no need to wait for the bank to open to conduct the business. Customer service is also highly improved with the inclusion of real-time support channels such as live chat for query resolution.
Online banks have the reputation of offering higher annual interest rates for their savings accounts or lower interests when applying for loans. The primary reason that digital banks can do this is because of the lower costs they incur as they no longer need to maintain a physical branch. Do note that the rates of digital banks vary and usually change to keep up with the market. It is for this reason that some users have accounts in different banks and transfer their money where rates are higher.
In the United Kingdom and the United States, challenger banks are becoming prominent as they provide the masses with more banking options and services that customers want. These challenger banks are generally digital banks that aim to compete with established and large bank institutions by providing customers with more opportunities and services. To win over consumers, they provide transparency with regards to fees and offer more competitive rates for customers.
One of the advantages of opening an account with a digital bank is the potential for a free checking account. There are various digital banks that offer their customers with checking accounts with no opening deposit amount or the requirement of a minimum balance. They also remove the standard fees imposed with checking accounts and some even enable you to earn interest with the cash you have in the account, although its rate is lower than that in your savings.
With the user account being online, it is now easier to manage the information required for a transaction. Digital bank users can enter the data themselves and maintain it as needed. For instance, when paying a biller, users can input the details of the biller, the amount due, and if the payment reoccurs.
They can also stop the recurring payment anytime through the application. Payee information is also retained online, eliminating the need to enter the specifications every time. The same is true when transferring funds to other accounts as users can save the details in the system and select it to perform the transaction.
The introduction of the automation process in banking results in the reduction of their expenses. As its operation process also becomes more efficient, unnecessary steps are bypassed and eliminated. Overhead cost and staff expenses are also minimized because of digitization.
Another perfect example of this is the elimination of paperwork, as seen in traditional banking transactions. A study showed that the reduction of paperwork results in a decrease of 25% in operation cost, constituting 70% of record management costs. E-statements are now automated, saving the institution time. Furthermore, no more paper statements to be printed and delivered since this can be distributed through email.
And with the reduction of expenses, digital banks can now provide their consumers with better rates and reduced charges.
With banking transactions being online, these data can be utilized for finance allocation. Some bank applications have built-in features that provide users with a spend analyzer or even a space for budgeting. There are also finance apps that enable users to synchronize their online banking data and utilize these for budgeting, tracking of finances, and for making better purchasing decisions.
These benefits of going digital definitely make banking activities easier. However, this also opens an opportunity for hackers and online thieves. Thus, it is essential to recognize how to secure your personal and bank details.
One must conscientiously think before providing personal information online, keep your devices secure both physically and digitally by installing updated software and antivirus, as well as refraining from using public networks when accessing bank accounts. Remember that digital banking may have its advantages, but data protection is a must that starts with vigilant and security-conscious users.
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