Get ready for a banking revolution! The rise of digital banks is shaking up the industry and changing the game. Say 'goodbye' to traditional banking models and 'hello' to innovative, customer-focused solutions.
Commercial banks offer a range of banking services to individual consumers, small to mid-sized businesses, and the general public. With the advent of digital banking services, these products are now easily accessible to customers, and include services such as opening new bank accounts, transfers, and more.
Let us explore why digital banks are on the rise; how they are changing the banking game, and why you might want to consider making the switch.
What is digital banking?
Initially, both banks and customers were hesitant to move away from traditional banking towards digital formats. However, the demand for digital platforms has grown as people begin to realise the potential benefits of digital banking, such as improved customer relationships, brand image, and increased efficiency.
One of the key advantages is the reduction in operational costs. Automated applications and processes eliminate redundant labour, reduce the chance of errors, and lead to efficient results at a lower cost. Technologies like artificial intelligence (AI) further enhances automation possibilities while maintaining the fidelity of back-end processes.
Traditional banks sometimes face challenges with their outdated legacy systems, leading to weaker service offerings despite modern digital technology at the front end. To overcome this, banks are focusing on modernising their back-end systems to completely overhaul the delivery of banking services.
Banks that don't keep up with digital services may lose customers to those that do. However, those that rethink how they interact with customers can create an outstanding experience and gain an edge over their competitors. In general, the move towards digital banking services provides an excellent opportunity for banks to improve their services.
What has been the impact of digital banking?
Banking has changed a lot in the recent years, with more and more people preferring to do their transactions online or through their mobile devices. This means we are less likely to see those friendly faces behind the counter, and more likely to base our banking decisions on factors like rewards and fees.
But there is a downside to all this convenience—we are missing out on that personal touch that comes with face-to-face interaction with a financial advisor. Luckily, digital banking services have the potential to connect us with professionals who can give us the advice we need to make better financial decisions.
Of course, not all banks are created equal. Smaller banks may struggle to compete with the big ones in terms of tech and resources, which is where partnering with the right vendors comes in handy. By teaming up with experts, banks of all sizes can offer top-notch digital solutions that go beyond the basics of online banking.
So whether you are a big bank or a small one, it is clear that digital banking is the way of the future. It is up to us to make the most of it!
Difference between digital banks and fin-tech neobanking
Neobanks are the cool kids on the block when it comes to banking, offering a streamlined and customer-centric approach that traditional banks can only dream of. They come with features like budget tools and spending insights that you won't find at your typical bank.
But beware, they are subject to different rules and regulations, which can be a double-edged sword. They can adapt and innovate quickly, but deposit insurance and access to certain services may be limited.
The thing that sets neobanks apart from traditional banks is that they are 100 per cent digital—no stuffy old branches to deal with. And digital banking is a game-changer, making banking more accessible and convenient for everyone.
With the help of AI and other fancy technologies, neobanks are shaking up the banking industry and giving customers a fresh new way to manage their finances. As technology continues to evolve, it is no surprise that more and more people are turning to neobanks and digital banks for their banking needs.
How is digital banking disrupting fintech neo-banking?
Banking used to be all about traditional banks with their brick-and-mortar buildings and in-person transactions. But now, with the rise of digital banks, the game has changed. You can do everything from your smartphone or computer, without even stepping inside a bank.
Digital banks offer customers a more convenient and accessible banking experience, with user-friendly apps and quick transactions. Traditional banks have to keep up by offering similar digital services, or risk falling behind in the technological race. So it is officially time to embrace the digital revolution in banking!
Flexible cloud infrastructure
Digital banking uses super-smart cloud solutions that use AI to handle data and crunch analytics like nobody's business. This can make it tough for fin-tech companies to keep up as they are in direct competition with such digital services.
But if they want to stay relevant, they can take a cue from their hipper counterparts and start using these advanced technologies too. By doing so, they can build a more nimble system that lets everyone easily access customer and account data.
This leads to better customer insights, more productivity, and fewer risks of data theft. One way to catch up is for traditional banks to team up with startups and quickly adopt cloud-based tools, giving their clients more flexibility when it comes to banking services.
Advanced security and transparency
Traditional banks are placing more emphasis on transparency and security in their operations. Meanwhile, digital banks are already ahead of the game in data security regulations that safeguard customer information and prevent unauthorised account access.
Digital banking prioritises transparency by providing real-time updates on transactions and payments, and openly sharing information about fees and penalties.
They also use advanced technologies like encryption, biometric verification, two-factor authentication, and role-based access management to prevent fraud and cyber attacks.
Hassle-free process
The utilisation of AI and technology by digital banks has disrupted the traditional banking system.These have an automated front- and back-end processes, reducing the operational cost for banks and eliminating the possibility of human error.
Therefore, fin-tech companies will need to leverage AI-powered tools to automate almost all of their operational tasks, such as loan administration, account opening, and document verification, to stay ahead of the game.
Elevate customer experience
Traditional banks are struggling to provide a satisfactory online user experience due to their outdated technology. Meanwhile, digital banking has come to the rescue to provide a user-friendly design, cutting-edge tech stack, and an intuitive mobile app that offers 24/7 customer care via AI-enabled chatbots.
To stay competitive, fin-tech companies need to find a better balance between generating revenue and focusing on the needs of their customers. By prioritising customer feedback and personalization, these companies gain a significant advantage in the market.
Ease of use
Traditional banks are at a disadvantage compared to fin-tech companies, as they struggle to keep up with the technological advancements required to support effective consumer-driven programmes.
However, since traditional banks allocate significant portions of their budget towards digital banking, this problem may soon become redundant.
Traditional banks and neobanks can form a mutually beneficial partnership to improve the online banking experience for customers. By teaming up, traditional banks can enhance their online services and apps by leveraging the innovative features of neobanks.
This collaboration can make banking more user-friendly, with easy-to-use and understandable services. Ultimately, this partnership can help traditional banks keep up with fintech companies and upgrade all aspects of their services.
The bottom line
Can fin-tech pose a threat to digital banking? The short answer is 'yes', but the long answer is 'no'. In the long run, healthy competition between fin-tech and digital banking can only benefit consumers, leading to better services for clients.
However, in the fin-tech industry, one significant challenge companies may face in 2023 is dealing with SaaS/BaaS vendors. These vendors may present several challenges such as meeting regulatory standards, incomplete features, and limited flexibility.
While there may be some challenges for fin-tech companies and digital banks in dealing with SaaS/BaaS vendors, the overall relationship between fintech and digital banking is a positive one.
As the banking industry continues to evolve, it will be interesting to see how these two sectors work together to shape the future of financial services.
Ramitha Ramesh is the editor at Karbon Business.
The opinions expressed in this article are those of the author's and do not purport to reflect the opinions or views of THE WEEK.
