The term “digital banking” is not a new concept, it has been floating around for years in fact, but despite its long existence in the market, not many fully understand exactly what it means and how it compares to other forms of banking such as online banking and even traditional banking.
Digital banking is the FULL digitization of a bank from its processes to its products and to the services it provides. This goes beyond just a brick and mortar bank having an app or a website. Digital banking can completely migrate all the aspects of a bank into a portable device, which means clients can perform transactions and all their banking errands within the confines of a mobile application.
With digital banking, there is no need for human intervention -- everything is automated using the latest in technology as well as data to improve the overall customer experience. This is different from online banking, which yes, makes bank functions available via the internet, but some if not most of the processes still follow the traditional way.
How does a digital bank work?
The most identifiable difference between traditional banking and digital banking is that traditional banking relies on face-to-face contact and a lot of manual processes. These are required to ensure the security of both the customer and the bank and is not a step that can be bypassed. But with the technologies deployed by digital banks, they can provide an all-digital, end-to-end, safe, and secure onboarding experience:
Facial Recognition via Mobile Application
All banks have “Know Your Customer” (KYC) policies to ensure that their products are not abused. That’s why before opening an account, customers are required to make a personal appearance, submit government documents, and fill up forms. With digital banking, the bank can perform KYC via the mobile application; all customers will have to do is fill up online forms and take a photo of themselves along with a valid ID.
Secured Digital Document Upload
To complete the KYC process via a digital banking app, customers will have to send in all necessary documents. Again, this is all done through the app and requires customers to take a photo of their IDs, which will be uploaded.
Digital Signature Capability
After filling up all the required information, customers will be required to provide their digital signature, which can be signed directly on their phone screens or by taking a photo of their actual signatures.
Why Choose Digital Banking?
While digital banking has become an increasingly advantageous business model because it significantly reduces cost, this alternative, or a new way of banking, appeals to people of all ages and demographics for a couple of reasons:
Digital banking was designed so that account holders can have full control of their finances in the palm of their hands. This means that they can sign up for a bank account and access their accounts anytime as long as they have a smartphone and a stable internet connection.
Having this option addresses the pain point of having to dedicate an hour or more of your day to do banking errands and the hassle of being constrained by regular banking hours. Additional features also allow account holders to buy load and pay their bills through a single app.
Because digital banks can cut a bulk of their operation costs by not having a branch and employing less people, they are also able to lessen or completely eliminate the fees typically charged by traditional banks. This includes free withdrawals, free interbank transfers, and more.
Opening a bank account, in general, requires quite several forms and other standard operating procedures before anyone can get approved for even a regular savings account.
But with digital banking, everything is done within the app, and as long as you provide and fill-up everything correctly, you can open an account in just a few minutes. And unlike all traditional banks, some digital banks allow customers to open an account without having to make an initial deposit.
It's Safe & Secure
Like any other bank account, a digital bank account requires a password before it can be accessed. But unlike regular banks, account holders are doubly protected by having to provide a fingerprint before a transaction is made or having to confirm it with a one-time PIN (OTP).