What Is Digital Banking?

what is digital banking

There are now 14 million people in the UK who have a digital-only bank account. 76% of citizens have also used an online banking service in the last 12 months. But, do you know what these services are?

Both digital and online banking have some major differences. Read on as we answer the question “What is digital banking?”

What Is a Digital Bank?

A digital bank is a financial institution that has all of its operations online. Services that were previously available at physical branches can be undertaken in browsers, mobile applications and digital environments.

They do not have brick-and-mortar premises but exist solely through digital means. 

What Is Digital Banking?

Digital banking involves transforming all activities, processes and banking products into digital transactions. This allows them to be done anywhere with internet access, making banking much easier for the consumer. Most services are 24 hours and do not require a staff member to be present in a bank.

  • Obtaining Records and Statements
  • Transferring Funds
  • Withdrawing Cash
  • Bill Payments
  • Account Management
  • Monitoring of Transactions

There are also many advantages for the bank itself. As many processes can be automated, it reduces human error and the labour required for repetitive tasks. 

What Is the Difference Between Digital and Online Banking?

These two terms may seem interchangeable. However, there are two key differences between them. 

Online banking works through internet access. It has several basic banking products and functions. However, the system has limitations and it can not expand to add further services to consumers.

You would find this in use with traditional institutions that have added internet banking as an additional service. It works alongside their other operations. 

Digital banking is more in-depth and flexible. It has API, automation and web-based service at its core. This means it can provide more security and cost-efficiency.

A digital bank exists solely online. You don’t have branches you can walk into to make deposits and consult staff face to face.

If you want the ability to expand and add extra features, then digital banking is key. Metrics and analytics taken from it can help improve the customer journey. 

There is a third option: Mobile Banking. This is when banks create a designated application so that customers can perform services on their mobile devices.  

Benefits of Digital Banking

Digital banking has several benefits. It is changing at a rapid rate bringing advantages for consumers, business owners and the banks themselves.

Increased Accessibility

Digital banking means residential customers, businesses and their employees can access banking anytime. All they need is a device and internet access. They can approve expenses, make purchases and transfer balances. 

This can take place anywhere. It may be in the office, on a commute or on a business trip. With the addition of mobile banking, it becomes even easier. 

Improved Customer Experience

A well designed digital banking system also creates a better user experience. Chatbots are often available to assist customers with any problems or queries. This improves customer service while minimizing the workload of staff in the bank themselves.

Not only can tasks like scheduled bill payments be set up, but tools for financial management are also provided. Statistics on spending and saving along with financial planning are available. 

Central Account Management

With digital banking, all departments can be accessed from one location. This means you don’t have to deal with different representatives. With mobile banking, you can even download multiple apps to represent your different accounts. 

Lower Costs

Fully digital banks operate with lower overheads as they have less staff and no physical premises to operate from. They can offer higher yields on savings, lower interest rates on loans and reduced fees as a result. This is often done to attract customers who may normally get put off by the absence of a physical store. 

Benefits to Employees

From small businesses to large corporations, digital banking can provide a huge opportunity for employees. With digital banking for businesses, you can assign several corporate cards to employees who may need access to faster means of purchasing to do their job. 

With real-time metrics and analytics monitoring, business spending also becomes easier. Reviewing spending by category and approving purchases or expenses instantly is an advantage. Policies can be created and individual thresholds set for individual employees on spending. 

By providing financial autonomy, you empower your individuals. At the same time, you also retain control over the finances of the business. 

Limits of Digital Banking

While it has many advantages, digital banking should be viewed as a bridge. It can never replace the interaction you get at a branch and some transactions, such as deposits of cash and withdrawals, can not be performed. 

To get around this, digital banks usually allow cash deposits in designated partner retail outlets. However, this can often incur a larger fee. 

Future of Digital Banking

Digital banking provides flexibility, but customer needs are bound to change. This means a modular infrastructure needs to change with them. What works now may not do in one or two years.

Many banks are now starting to adapt and incorporate digital asset transactions and management into their infrastructure. This includes digital payment wallets and transfers. All of this is provided alongside the standard services for fiat currencies that people need. 

Starting with Digital Banking

Now you can answer the question “What is digital banking?”, you just need to find the services that fit your needs. Not all banks will have the same offers. Make sure you look to see what you need and who can make the best provisions. 

If you found this article helpful, CFI.CO blog has many more to help. From banking to finance, we can get the most from your money. Click here to see all our business articles and let us help your business boom in the coming year.