This Is What You Need To Know About Digital-Only Banking

Digital-Only Banking Is A Growing Industry

Digital-only banking is a growing wave of consumer-oriented banking institutions focused on serving their clientele exclusively through online means. Imagine, a bank you never have to visit, lines you never have to wait in, and no hassles with onerous paperwork and cumbersome cash.

In many cases, all it takes to open an account with a digital-only bank is an application and few verification documents. Documents include simple items like scans of ID cards and copies of bills whose account holder and address match the one on the account. A few of the benefits include, but are not limited to;

  • Easy sign-up
  • Quick balance check features through mobile platforms
  • Photo-bill payments, snap a pic and the app pays your bill from your account.
  • Access accounts exclusively through app, reset pins, order cards, etc.
  • Easy expense management, through different hashtags like #expenses, #utilities and other spendings.
  • Real-time data analytics

One of the aspects digital-only banks are focusing on is real-time data analytics. This will allow banking apps to warn users when purchases or spending habits are outside their budget or notify them when geo-targeted deals are available. In fact, it is the convenience and customer experience that are driving so many Millennials to the digital-only banking sector. When they get there the speed of transactions and cost-effective fee structures make them want to stay.

On the business end, the new-age of digital-only banks are more agile than their brick-and-mortar counterparts. They are virtually 100% cloud-based business leveraging the expertise of cutting edge digital networks rather than relying on stand-alone and often obsolete on-premise technology. Along with this, many of the leading digital-only banks are partnering with block-chain technology like Ripple, Ethereum, and Bitcoin payment services.

Cloud-based infrastructure and lower operating costs (no physical presence means less cost) lead to a combined benefit for the bankers and the clientele. Banks can charge lower fees, one of their attractions, and make more money per client. The downside, for clients and banks, is that services are limited to simple banking like checking/debit and savings accounts.

There Is Cause For Concern

While digital-only banking offers many benefits to consumers and bankers there are still some risks and causes for concern. The leading risks are threefold; security, customer satisfaction, and scalability.

Security at digital-only banks is the primary concern and there are risks for both bankers and clients. The bankers have to be wary of hacking, fraud, malpractice, and regulatory concerns. Clients need to be wary of all the same concerns, and the bankers too.

Financial fraud is the #1 Internet crime worldwide and one very easy to perpetrate. Prospective users of digital-only banks are urged to use extreme caution when choosing an institution. Don’t take the word of a website that it is regulated or trustworthy, always check with local banking authorities to be sure your digital bank is legit.

Customer satisfaction is also a concern and doubly so because it is tied to one of digital-banking’s biggest attraction’s; no physical locations. Without a physical location, there is nowhere for the customer to turn for help other than the apps, maybe a phone call, and that is a turn-off for many people. In addition, digital-only banks have a harder time making connections with clients so that is a top priority. The problem is that there is little a digital bank can do other than what’s already been done.

The final hurdle and the one that may keep digital banking at a small scale is scalability. The digital-only banking sector is hampered by its limited product offering and this, in turn, is hurting customer growth and retention.

How Many Digital-Only Banks Are There

There are more than enough digital banks on the market to serve the needs of consumers. A quick search of the Internet will turn up at least two dozen top-rated financial institutions with no link to the traditional brick-and-mortar banking system.

Digital-Only Banking, On The Rise But Still Just A Niche Market

Digital-only banking is convenient, it is cheaper, and it is gaining traction among global consumers. Digital-banking is also shackled by a number of factors that will keep it a niche market, at least for now. Over time, the leading digital-banking institutions will overcome the problems of security and customer satisfaction and that will lead to better scalability. Until then, traders, investors, and clients of digital banks need to be prepared for volatility and churn as the market matures.

There are several directions the digital banks can take to help expand their numbers of clients. One direction is cryptocurrency. Digital banks are already partnering with prominent block-chain technologies to power their function, it is only natural for these institutions to list the tokens that underlie the block-chains as well. In that light, it is also natural for the digital banks to expand their services in other directions including loans and other financial products.

This Is The Future Of Digital-Only Banking

Regardless of the path to growth, digital banks are going to have to work hard to cement their place in the financial landscape. They need to find a way to secure their place in the financial landscape or else run the risk of obsolescence, ironic as that is.

The outcome, for the consumer, is likely to a blend of digital and traditional banking. The two will work hand in hand to provide financial products, access to markets, and account services across the spectrum of fiat and cryptocurrency.

Imagine, shifting some money from a traditional bank to a digital bank for use on a trip. The digital bank can exchange your money into any currency you need, for access on your ATM card. The ATM card is accepted everywhere in the world because it is backed by block-chain and local currency. How easy is that?

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