Digital Banks vs. Traditional Banks Learn the Pros and Cons

Digital services are rapidly expanding in today’s fast-paced world, offering the convenience of handling numerous tasks online, such as banking. This trend has gained significant momentum, leading to a decrease in face-to-face interactions.

However, does traditional banking still make sense in 2023? Should we shift to online banking? Or the combination of both is the way to go?

To start, it’s essential to familiarize ourselves with new terminologies that have emerged as a result of the rapid digitalization of conventional services. These terms include mobile banking, online banking, and digital banks, and while they may appear similar, they each possess distinct characteristics and functions.

– Mobile banking involves using a smartphone or tablet with a bank’s app and is offered by both traditional and digital banks.
– Online banking is closely related to mobile banking and usually refers to using a traditional bank’s online platform through their official website.
– Digital Banks are those without physical branches, and some may refer to online banks as digital banks.
– eWallet is a digital or electronic wallet that allows users to store and manage their money digitally on a mobile device or computer.

Traditional Banking vs. Digital Banking:

Traditionally, people would visit physical bank branches to perform banking tasks like paying bills, depositing checks, or opening accounts. However, advances in technology have given rise to online banking from which most of these transactions can be done clicks away.

Digital Banking:

Digital banks are exclusively online and have no physical locations. Due to their lower overhead costs, they can often provide customers with no or low fees and competitive interest rates. They typically offer various types of bank accounts, debit cards, and sometimes other financial products like credit cards.

How Online Banks Work

Online banks operate similarly to traditional banks but lack in-person services. You can open an account online by providing personal information virtually. Many online banks are insured by the PDIC, providing security for eligible deposit accounts.

Benefits of Online Banks:

– Lower fees due to reduced overhead costs.
– Competitive interest rates and product offerings.
– Convenient 24/7 access to banking services.
– Virtual banking suits tech-savvy individuals.

Downsides of Online Banks:

– Limited customer service options (relying on phone or online support).
– Smaller or no ATM networks.
– Suitable for tech-savvy users.
– May not offer checking accounts.

Benefits of Traditional Banks:

– Physical branch locations with in-person services.
– A broader range of services, including cash deposits and personalized advice.
– Extensive ATM networks.
– For people who prefer human interaction.

Downsides of Traditional Banks:

– Limited operating hours.
– Higher monthly fees.
– Varying customer service quality.

Banking has evolved rapidly and with the rise of digital banks offering consumers more choices and flexibility in how they manage their finances. The decision of which type of bank you should use is still up to your preferences and purposes, or you can use both. (ASC)