Digital banks, often known as “online banks“, are financial institutions. Customers must typically open an online account with a digital bank and go through any required identification verification procedures before utilizing the service. Then, they can undertake operations like money transfers, bill payments, and check deposits by logging into their account via a mobile app or a website. Read this article to find out more about digital banks.
Digital banks could be traditional banks that also offer online services or digital banks that don’t have physical offices.
What is a Digital Bank?
A “digital bank” is a financial institution that offers all of its banking and banking-related services online. Customers can log into their accounts and make payments through a mobile app or a website, even if digital banks don’t have physical locations.
A challenger bank often referred to as a “neobank,” is a kind of online bank that aims to upend the conventional banking sector by presenting cutting-edge goods and services. Challenger banks frequently offer more sophisticated services than traditional banks, like additional security measures, real-time notifications, and budgeting tools. They might also provide more affordable fees and interest rates.
Both challenger and digital banks provide various financial services and products, including savings and checking accounts, mortgages, and credit cards. They may also offer additional services such as investment or insurance products. It is easier for customers to manage their finances from anywhere because they can open an account and complete transactions online.
What is Digital Banking?
The automation of traditional financial services is known as “digital banking“. Customers of a bank can access banking services and products online or through an electronic platform thanks to digital banking. Digital banking refers to digitizing all banking processes and replacing the bank’s physical location with an ongoing online presence, which does away with the requirement for customers to visit a branch.
With the availability of banking services around-the-clock, digital banking enables users to conduct financial transactions without leaving the comfort of their homes. With payment channels well integrated with e-commerce sites, shopping online has become a piece of cake.
Digital Banking and online banking – what’s the difference?
When referring to financial firms that provide banking and financial services online, the terms “digital banking” and “online banking” are sometimes used interchangeably. The two terms do, however, have a slight distinction:
The practice of providing banking and financial services through digital technologies is known as digital banking. Accessing accounts, completing transactions, and managing funds include using websites and mobile apps. Both traditional banks and banks that only conduct business online can offer digital banking.
On the other hand, “online banking” refers mainly to using a website to access a bank account and conduct purchases. Online banking has been around for a while and was among the earliest ways banks provided their consumers with digital services. However, with the growing use of smartphones and the creation of mobile apps, digital banking has grown in popularity and now includes more services than just internet banking.
Benefits of Digital banks
Digital Banks are known for their features and advantages over conventional banks. Here are some of them:
- Convenience: One of the critical advantages of mobile and internet banking solutions is the freedom to conduct banking whenever and however you like. Most of the time, we have access to cell phones and computers, which lets us quickly handle a wide range of banking tasks and gives us access to our accounts 24 hours a day, seven days a week.
- Features: Many banks offer feature-rich mobile and web experiences. Banks may provide customers with individualized financial counseling, savings tools, calculations for large purchases, or even virtual agents who can advise customers on what luxuries they can afford, all through the comfort of an app.
- Security: Financial institutions place a high premium on security, including mobile and internet banking. Of course, there are threats everywhere, even inside the bank branch. Thankfully, many banks make it simple to adopt additional security measures.
- Control: Another significant advantage of digital banking is the option to self-serve, which gives you authority over your accounts and real-time access to manage and move money as you see fit.
- Advantages Beyond Banking: Consumers can enjoy a wide range of significant advantages from digital banking that can simplify their lives and help them manage their money more wisely. It is more affordable and environmentally friendly than a regular bank.
Best digital banks in 2023
CashApp (formerly Square Cash) is a digital banking app and peer-to-peer mobile payments service offered in the United States and the United Kingdom. It was introduced in 2013 by Square Inc. (now Block Inc.) and had an astounding 70+ million users.
Users of CashApp can transfer money by linking a credit or debit card, a bank account, or both to their accounts. The app also allows users to invest in stocks, pay bills, and seek payments from others.
Nubank provides its customers various financial goods and services, including a credit card with no annual charge, a checking account, and a personal loan product. Nubank’s emphasis on simplicity and openness is one of its distinguishing characteristics.
Prepaid debit cards, foreign exchange services, and other fee-free bank accounts are just a few of the financial services and products that Revolut provides. Through the Revolut mobile app, which is accessible on both iOS and Android smartphones, all of the company’s products may be handled. Focusing on foreign exchange and international payments is one of Revolut’s distinguishing characteristics.
Digital personal finance firm SoFi, also known as Social Finance, is established in the US. In addition to personal loans, mortgages, and student loan refinancing, the company, which was launched in 2011, also provides a variety of other financial goods and services. SoFi has become popular in the US as an excellent alternative to traditional financial institutions and has raised a lot of money.
- Digital banks do all their business online and provide various financial and banking services via a mobile app or a website.
- Because they frequently have lower overhead expenses than traditional banks, digital banks can provide interest rates and fees that are more affordable.
- A digital bank allows customers to open accounts and complete all transactions online.
- Real-time notifications, investing options, and budgeting tools are just a few of the extra features and services that digital banks might provide.
- Digital banks could be traditional banks that also offer online services or digital banks that don’t have physical offices.