A Digital-Only Bank — One App to Rule All Operations

Betting On Digital-Only Banks: A Worthwhile Venture or Futile Danger?

When you’ve got all essential banking features on your fingertips, it’s difficult to imagine a life without a similar digital bank replica. Yet it wasn’t always this way. If you were a resident in a developed twentieth-century country, you’d probably need to stroll to the nearest bank, stand in an endless line, ask a few responsible employees for a consultation, and only then get an opportunity to cash your cheque. But what are the most common reasons why people remain loyal to traditional banks today? Well, here’s statistical data: 65% of Great Britain residents relied on conventional bank accounts in 2020 due to good treatment from employees. In turn, 51% of respondents preferred in-person cooperation with bank specialists, whereas only 16% abstained from switching to other bank types because they tried to avoid extra hassle.

The fundamental question implies whether digital-only banks can ever become an ultimate solution to rein all their clients’ needs. Fresh research indicates that this turn of events may soon develop into ordinary reality. In the UK, the first quarter of 2020 demonstrated that non-traditional banks doubled the number of their money management services compared to traditional alternatives. What a similar trend displays is that digital banking innovators don’t hesitate to avail themselves of cutting-edge technology and up-to-date solutions to maximise value for their customers. For conventional financial institutions to stay afloat, it’s vital to incorporate more fintech tricks into their outdated systems and pay careful attention to the concept of customer satisfaction.

What Is a Digital Bank, and How to Use It?

So what is a digital bank, after all? It’s not only about scaling down your interactions with a bank to a few clicks on your smartphone, isn’t it? To put it simply, online banking traces its roots to the 1990s, while mobile banking was born slightly later — in the early 2000s. Consequently, when online and mobile forms of banking merged, digital banking came into play. Here are a couple of the most common traditional bank issues that stirred the emergence of digital banking:

  • High and often redundant fees for various banking services;
  • Problems related to ATMs as well as their locations;
  • Legacy infrastructure;
  • The lack of customer engagement and loyalty programs;
  • Low or even no interest rates;
  • Poor service.

Though traditional banks have been the torch-bearers of all financial services since the first grain loan given by ancient merchants to farmers, the digital revolution is winning all the marbles in today’s world. How to start a digital bank, make use of it, and never lag behind? There are 2 options, depending on your taste, including via online banks or brick-and-mortar ones in partnership with credit unions. If you happen to grab the first opportunity, all you need is to pick a bank that operates solely in an online regime.

Be it Ally, CIT, GO2bank, Douugh, or FirstBank digital banking, similar solutions usually offer their clients low- to no-fee systems, let alone high-interest rates without any need to pay a call on any physical financial institution. Merely choose a bank, register, provide IDs along with other essential personal information, download a related application, and you’re good to go. Notably, the situation is almost identical if you choose the alternative option, the only difference being that your digital banking will be connected to a brick-and-mortar branch.

Is Digital Banking Only for Millenials and Zoomers?

Nope, for sure. Speaking from the Generational Theory viewpoint, ‘Boomers’, ‘Gen Xers’, and all other generation representatives can relatively easily take advantage of digital banking. The statistics reveal that about 75% of Millennials living in the US used digital banking in 2018, with the same figures expected to surge up to 77% and even more by 2022. Still, another chart displays a different side of statistics — in 2018, more than 92% of Millennials, 71% of Gen Xers, and almost 50% of Baby boomers used mobile banking in the US. And the numbers are only yet to grow.

So why should anyone quit strolling to their favourite bank branch and take a look at digital-only bank benefits? Let’s provide a handful of noteworthy reasons to ponder over:

  • Lower fees with sufficiently higher interest rates;
  • No necessity to burden yourself with in-person visits to a bank;
  • A wider variety of features to manage your finances;
  • More security layers to protect sensitive information;
  • More 24/7 convenience.

Quickly checking your balance, depositing checks from anywhere, and effortlessly transferring money with almost no restrictions is what mobile banking brings to its users. Unfortunately, the traditional bank issues today impede the digitalisation of financial institutions, meaning that they need to implement more innovative technologies to keep up with fintech trends and remain competitive.

Digital Banks: Which Features Alienate Them from Traditional Institutions?

Not all conventional banks should be regarded as obsolete institutions where you bring cheques to receive cash as a reward for standing in line for an hour, right? Brick-and-mortar branches may also serve you well. Investment services, wealth management, trust funds, and other significant options are available in one place. Isn’t it convenient? Irrespective of current bank issues, physical banks have many features to offer. For instance, banks like Wells Fargo or Chase operate multiple brick-and-mortar locations in the US, not to mention that they offer a high number of ATMs that are free to use.

In contrast to physical ones, digital banks are accessible without delay, and you’re not limited to a particular street where your branch is located. It’s especially critical when it comes to utilising financial services during pandemics, while working remotely, or when you’re on vacation. Among all bank issues to which digital solutions are prone, service interruptions, security problems, identity theft risks, and limitations on deposits are worthy of peculiar consideration. So what critical aspects will allow you to differentiate between digital and physical banking institutions? To sum up, customers usually prefer brick-and-mortar financial solutions because:

  1. They’ve been building strong strategic relationships with a particular bank for years;
  2. They regularly deposit sufficient amounts of cash, which is easier with offline banks;
  3. They need mortgages and/or auto, home loans;
  4. They’re afraid or cautious about managing their finances exclusively via digital platforms;
  5. Officially insured banks provide the safety of their deposits.

Fundamentally, the actual difference between traditional physical and digital banks isn’t as huge as it may seem in most cases. Both operate under strict government regulations and are usually subjected to an equal probability of human error, inaccuracy, security breaches, and limitations. Moreover, today even the most traditional banks with a massive historical background offer digital banking services to their customers. Just look at Barclays, HSBC, and Metro Bank. Some of them were founded or launched first operations in 1865 or even 1690! Today they already offer both brick-and-mortar as well as digital banking services. Still thinking that banks erected by great-great-grandfathers have nothing to offer for Millenials and Zoomers?

What Are Security Issues Concerning Digital-Only Banks?

Security issues are what probably bothers most bank customers, no matter whether they prefer digital-only or traditional institutions. Terminologically, a digital, mobile-only bank functions as an entity responsible for providing the same services as brick-and-mortar banks or mobile offshoots thereof. The only difference is that they were established to conduct their operations exclusively within the digital domain. Just as the IoT security issues or concerns related to social security issues, digital-only solutions also come with weaknesses. The most widely debated of them are as follows:

  • Identity theft. Did you know that 3.2m identity-theft and consumer-fraud complaints were filed in 2019? A considerable proportion of them were associated with credit cards.
  • Account takeover. As of 2021 (its first quarter), Arkose Labs network, fraud and abuse prevention platform, detected about 285m account takeover cases.
  • Data leaks. In 2019, the banking/financial industry experienced 108 data breaches, while healthcare and business — 525 and 644, respectively. Oh, wow, there’s now less to worry about!
  • Phishing. By getting credit card details and other sensitive information through emails, ads, and text messages, criminals compromise online banking services.
  • Spoofing. Being one of the freshest cyberthreats, criminals employ it to ‘steal’ a banking website’s URL and create a similar copy of it to compromise personal customer data when it’s entered by a real person willing to log in to the original site.
  • Insecure third-party services. 42% of respondents in a 2019 survey were unaware that their online banking apps allowed third parties to gain access to bank account data. Unfair, right?

What can be done to mitigate these risks and ensure more security for digital-only bank users? Organisations should:

  • invest more heavily in APIs;
  • train their employees to respond to different security issues;
  • hire more cybersecurity experts;
  • use time-based one-time passwords (TOTPs) for logins or other multi-factor authentication methods;
  • implement end-to-end encryption and/or tokenization.

Any reputable software development company must implement at least some of the aforementioned solutions to protect their customers’ data.

Digital-Only Banking Use Cases

In pursuit of the best digital bank, people often find themselves taking a backseat and going with the first one or that most widely preferred in their professional area. No doubt, the number of digital-only bank account holders is only growing and is expected to increase up to almost 20% of the US population by 2025. According to Insider, neobanks are continually raising the bar for customer satisfaction, implying that digital-only banks are to flood the market of financial services in the near future due to more value provided for end-consumers.

Thus, in what cases do you need to switch to a neobank? Try out a digital-only bank if:

  1. Your traditional bank hesitates to offer digital services and extend its operations to the digital realm;
  2. You’re willing to manage your finances remotely and without any connection to a geographical location;
  3. You’re unsatisfied with your current bank, be it a digital offshoot of a bank or its brick-and-mortar representation;
  4. You’d like to earn more money from higher interest rates and lower fees;
  5. You want to save time and minimise in-person communication.

A Digital-Only Bank for Business

In cases of small businesses, you’ll benefit from almost any neobank as they all usually offer better cooperation conditions than conventional institutions, not to mention that you’re likely to save much time and effort. Consider the following digital banks and evaluate them based on your specific needs:

Chime

Founded in 2013 and headquartered in the US, this online bank offers features like the absence of any fees, automatic savings program, cashback rewards on purchases, daily balance updates, no-fee ATMs, and 1.75% on savings.

First Direct

With headquarters in the UK, HSBC as a parent company, more than 30 years of operation, and 690+ employees, this digital bank supplies with the broadest range of financial services, including insurance, almost any loan, mortgage, and investments.

Monese

Another UK-based mobile bank to manage your financial resources. Launched in 2013, Monese provides contactless prepaid debit cards, supports 11 languages, and is available not only in the United Kingdom but also in Europe. The app allows you to open an account for free. It also supports GBP and Euro.

Consequently, the banking industry is replete with multiple opportunities for businesses of any scale, so there’s no need to limit yourself to the banks mentioned above. Depending on expectations and requirements, you should pick a digital-only or any other bank that will help you achieve your goals. After all, there’s plenty of solutions for any taste. You can even break free from traditional technologies and partnerships by building an already-made niche brand within a month and a half with the help of Nymbus. The company positions itself as an alternative to the legacy business model that helps customers create their own full-service digital bank.

Is the Digitalisation Game Worth the Candle for Banking?

The question seems like a no-brainer! It’s undoubtedly worth going digital, inasmuch as the industry requires innovations, let alone customers are expecting new features and more options to choose from.

Today every business requires a fresh and cooling touch of digitalisation, so go ahead and check out these innovative solutions yourself. To make this process smoother and more straightforward, contact DashDevs to receive high-quality professional consultation from fintech experts!

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