The era of the internet has affected every area of the 21st century from transport, healthcare, socialisation, and the banking industry is not left out. Infact, the banking industry has experienced a massive change in the last few years as digitalisation keeps revolutionising the industry. Thanks to smartphones and the power of the internet that has taken the world by storm, digital accessibility to the financial system has eliminated the need to visit physical branches. With only a few taps on screens, any banking transactions can be carried out without hassle. That is why many are turning to digital-only banks without having to set foot in brick and mortar banks.
The traditional banking counterparts as well are not left out as they embrace digitalisation in order to adapt to customers preferences and meet their ever-changing needs. However, there is no denying that digital banking is setting the stage and of course, this comes with its implications. This post explores the benefits of digital banking and its effects on traditional banking.
What does digital banking means
Digital banking means banking activities that are carried out online. It provides services that were previously carried out at traditional banks online. It allows users to open a digital savings bank or any type of account and access financial data 24/7 on mobiles, computers and compatible smartphones. A modern digital bank uses the best and latest technology to create a cutting edge banking platform that provides best-in-class services.
What are the benefits of digital banking
As compared to the traditional, there are various benefits a digital bank provides including the following:
Digital banking allows you to perform any financial transactions right at the comfort of your home. Gone are the days of frustrating long hours queueing at the brick and mortar banks.
Digital banking can be accessed anytime, anywhere and users can carry out the same activities that are carried out in traditional banks.
Another perk is the lower cost. Digital banks have no digital branch networks to manage. Hence, the lower costs of maintenance are passed on to benefit customers. That is why some digital banks offer better interest rates on savings and many demand zero to low deposits to open accounts.
It provides a better user experience even far better than traditional banking. For one there is speed and simplicity of transaction. The apps and interface are easy to navigate. Plus, there are other features provided such as budgeting tools, insurance, financial advising, investment options and many more.
Digital banking offers the highest level of security. This prevents hackers access to your financial information.
With digital banking, international transactions can be carried out online without hassle.
What are the effects of digital banking on
traditional banking
Digital banking has been challenging traditional banks value chains for quite some time while the latter still struggle to catch up. Here are the impacts of digital banks on traditional banking.
Increased competition: digital banking has accelerated competition and contestability in the banking industry. Digital banking has become a powerful alternative for many reasons. Despite the trust earned and reputation of the high street banks, many have been slow to adapt to customer preferences. Then, the ever-evolving technologies keep disrupting the banking operations.
Superior customer experience: today’s banking system is customer-centric as this is the key to business growth. Customers want personalised services and enjoy the convenience of banking online. That is why digital banking is taking the front lead when it comes to great customer experience. Traditional banking is also leveraging digitalization as they continue to provide technology-based tools customers want.
Improved efficiency: increased competition can also lead to improved efficiency. As banks, credit unions, and other financial institutions are making genuine efforts and adopting a fully digital automated system to enhance their services. Digital banks are much more efficient as it allows for better management of your financial resources.
Long-standing: traditional banks have a long-standing reputation of providing services to customers. However, this isn’t enough if they want to experience growth in today’s highly digitalised world.
Collaboration instead of competition: instead of viewing fintechs as a threat to the traditional banks, how about collaborating to streamline operating and achieving business goals. With this, they can provide innovative, customer-centric, agile services that meet customers expectations.
Conclusion
Traditional banks like best biggest banks and other upcoming ones have started adopting digital transformation for survival. Banks who are far behind in the curve are likely to be kicked out of the banking game in decades to come. Moreover, financial institutions need to shift from a product-based to customer- based approach, aligned with business objectives to create personalised banking solutions is the key to success.
Between digital banking and traditional banking, which one do you prefer? Share with us below!
