Where Does Digital Banking Have An Upper Hand To Traditional Banking?
Since the introduction of digital banking, particularly through the use of cryptocurrency, traditional banking has needed to revamp to accommodate these changes. While many people still prefer to rely on traditional methods, it cannot be denied that each day, the shift to digital banking gets more prominent.
Data released by Discover in 2019 showcased that nearly 85% of people in the U.S. use digital banking for their transactions. In contrast to this, only 68% of people opted for traditional banking. The ease of digital banking is further facilitated by the use of smartphones, mobile devices and other tablets that are creating apps that specifically accommodate this factor.
So, is digital banking really the best option here? Moreover, where does digital banking have the upper hand to traditional banking? These are questions that have long been debated, particularly when looking at the strength that these mediums have in the market.
The answer to these questions can be found by comparing the following aspects:
Convenience in Transactions
Online and digital banking is one of the most convenient means of facilitating transactions. This is the major reason why people favor online banking. With this option, they get to take advantage of the following benefits:
- Wait times – There are no queues, crowds or other delays for transactions so, wait times are effectively eliminated.
- Ease of use – Payments of bills, the deposit of cash and transfers can be done at any time from any place.
- Accessibility – With online banking, accessibility is possible on a 24/7 basis.
In contrast to this, traditional banking does not offer these advantages. A comparison of the benefits shows that:
- Wait Times – Going to traditional banks can require one to wait in a queue or expect some other transactional delay.
- Ease of Use – Payment of bills and deposit of cash or cheques can be done with ease but the transaction may take a day or two to be processed.
- Accessibility – Only limited to the working hours. Banks are known to only be operational during the day only.
The only area where traditional banks are better than digital ones here is in the ease of use for depositing cash or cheques into an account.
Improvement in Services
The services that a digital bank has to offer are known to be marginally better than what users can enjoy at traditional banks. Making a comparison in this area also shows that there is a huge difference in the services that digital banks offer. The following are the services that digital banking offers:
- Deposit of checks – Can be done through mobile and smartphones
- Secure payment of bills online
- Secure transfer of funds online
- Accessibility to check bank balance
- View all account activity
Traditional banking does offer these services but they are usually limited. You also cannot check account activity as easily as you could through digital banking. Another interesting factor to consider here is that traditional banking’s services will come to a stop when the bank closes for the day.
With digital banking, one does not have to deal with this issue. Not only are all services available at any time but, users can also get access to a 24/7 helpline. Most helplines are also toll-free, which means that you can call the bank without any additional costs to worry about.
Low Fees and Better Rates
Another area where digital banks are outshining traditional ones is in the fees and transactions area. With online banking, there are limited fees to worry about. Since they do not have the over-head costs that brick-and-mortar banks have to deal with, online or digital banks can forgo many of the fees on transactions that traditional banks ask for.
Moreover, when it comes to interest rates, digital banks can offer the highest rates. A study by MoneyRates.com highlighted that the average rate of interest offered on savings accounts was 5% to 6% higher than what traditional banking institutions could offer. It should also be noted that many traditional banks do not offer interest-generating savings options to people with bank balances that are lower than $10,000.
In stark contrast to this, digital banks allow their customers to earn interest on their savings account, regardless of what their bank balance is. Similarly, when it comes to fees, traditional banking fees were found to be much higher than what digital banks charge their consumers. In fact, certain digital banks, such as Ally, do not charge any maintenance fee on a monthly basis nor do they require a minimum balance.
Sense of Security
One area where traditional banking can outrank digital banking is security. With cybersecurity issues, hackers and data theft becoming a huge issue of the online stratosphere, there is a major concern among digital banking users about the security of their assets.
With traditional banking, many people feel a sense of security in personally handing documentation to the banks. It reassures them of the validity of the transaction. Despite this factor though, the risk of security is present with both digital and traditional banks.
In this area, people making use of banking services have to make sure that they are careful about their credentials and details. Similarly, there are also digital banks that are FIDC-approved. These are known to enforce more stringent policies for the security of all transactions.
In doing so, you can ensure that you can easily enjoy the same amount of security that traditional banking has to offer.
By comparing all these factors, you can see that digital banking does have an upper hand over traditional banking, particularly in the areas of lower fees, higher interest rates, better services for transactions and more.
It should be noted that despite the obvious upper hand that digital banking has, one should not be too quick to overlook traditional banking. In fact, many users have had better success by having a banking strategy that makes use of both forms of banking services.
As digital banking and traditional banking are being developed side-by-side, it is going to be interesting to see how both mediums develop. If you want to learn more about this aspect, get in touch withWinjit today.