Are Digital Banks Safe In 2023? [Complete Detailed Guide]
In a world where technology is constantly evolving, it's no surprise that more and more people are choosing to do their banking online.
A report by Statista shows that, as of 2019, over 60% of Americans bank online. This number will only continue to grow in the years to come. So, the question remains: are digital banks safe in 2023?
This blog post will discuss everything about digital banking and the security measures put in place to keep your money safe. To better understand digital banking, let us begin our exploration.
What Is Digital Banking?
Digital banking is the automation of the traditional banking process, where transactions and services are provided through digital channels such as online banking websites, mobile apps, ATMs, and more.
Digital banks do not have physical branches and offer a full range of banking services, from deposits to loans. With the advent of digital banking, customers can access their accounts anytime and anywhere with just a few taps on the screen.
What Exactly Are Digital Banking Services?
With digital banks, you can easily apply for loans, open savings accounts, and purchase investments.
Moreover, these digital banking platforms provide 24/7 customer service in case of any inquiries or issues regarding your account. Furthermore, online banking services come equipped with a range of options, including:
- Money Transfer
- Direct Deposit
- Mobile Banking
- Cheques management
- Transaction records monitoring
- Checking/savings account management
- Opening deposit accounts
- Funds transfers
- Loan management
- Bill payments
- Obtaining bank statements
- Cash withdrawals
Digital Banking Vs Online Banking Vs Mobile Banking
Three of these terms may seem quite similar to one another. However, there are some critical differences between the three. So, do not get confused.
Digital Banking: Digital Banking is revolutionizing the financial landscape, allowing institutions to become agile and capitalize on emerging technologies. It provides banks with cost-efficiency, security, flexibility, and an enhanced digital customer experience that can be tailored to suit their evolving needs.
With modern banking solutions, users can access automated processes and APIs to generate real-time data streams and facilitate key analytics. This streamlining of the traditionally labor-intensive banking process provides a user-friendly interface that can be updated rapidly to keep up with changing regulations and trends.
Digital Banking is a compelling option for those looking for comprehensive banking solutions that offer remarkable efficiency and convenience.
Online Banking: Online Banking is the modern way to conduct your banking activities. It provides an easy, secure, and convenient way to manage accounts and access statements without visiting a bank branch or ATM.
It also offers some transactional functions of the core banking system; however, its capabilities are limited and cannot be quickly expanded to offer additional services.
Mobile Banking: Mobile Banking is the modern way to stay in control of your finances. It is a convenient service provided by existing banks, allowing customers to complete banking transactions from the comfort of their mobile devices instead of visiting a branch location.
With this efficient and secure online banking solution, you can access all your account information and services, such as transferring money, making payments, checking statements, and more, anytime and anywhere.
Consequently, digital banking is the most comprehensive and all-encompassing of these three, as it encompasses and amalgamates both mobile banking and internet banking.
Types Of Digital Banks
Listed below are the primary sorts of digital banks:
Neobanks are modern digital banks that operate exclusively online. Without a physical presence, neobanks provide access to services via mobile apps to customers worldwide.
Many neobanks do not hold their own banking license, instead partnering with an existing bank for banking licensed operations. However, their range of services tends to be more limited than those of a licensed bank due to the different regulatory restrictions imposed on them.
Despite this, many users prefer the convenience offered by these new digital solutions compared to their traditional counterparts.
The term "Challenger Bank" originated in the UK and referred to a new banking institution that provides an alternative to traditional banking services. Challenger Banks are easily accessible, cost-effective, and created with customer experience at the forefront.
These banks prioritize customers who have been underserved by larger financial institutions, providing these customers with convenient payments and access to banking services no matter where they are located.
Challenger Banks represent a formidable challenge to traditional banks since they offer users a different type of service that is more user-friendly yet secure.
New Banks are completely licensed neobanks that offer many of the same services as brick-and-mortar banks but with a few differences.
They operate entirely online rather than relying on physical locations, meaning they can be accessed almost anytime and anywhere. Examples of these new banks include Revolut, Monzo, N26, and Starling Bank.
NonBanks are non-banking institutions that provide an array of financial services, such as streamlined loans or mortgages, to their customers while not accepting deposits or offering checking and savings accounts.
Monese is one of the many nonbanks operating on an EMI license. Nonbanks are increasingly becoming popular with consumers looking for reliable, simplified access to various improved monetary offerings.
Benefits Of Digital Banking
Digital Banking has become increasingly popular over the last few years, and for a good reason. Here are some of the benefits it offers:
Convenience and Efficiency
With digital banking, customers can manage their accounts anywhere. They can easily access financial records and make payments by simply logging into their online or mobile banking app.
Digital banking is ideal for seniors and those with packed agendas, as it provides the utmost convenience and efficiency.
While traditional banks have limited hours of operation, digital banks offer round-the-clock access to their services. Now you can enjoy the freedom and convenience of accessing your account information, transferring money, and paying bills anytime - day or night!
Streamline Your Global Transfers with Ease - Move funds quickly and securely between countries, currencies, banks, or other financial institutions without hassle. Save time and effort when sending money abroad for business or personal use!
Digital banking is an environmentally friendly option that helps minimize the need for paper consumption. With digital banking, users can view and manage their accounts without relying on physical statements and documents.
Safety And Security
Digital banks use advanced security measures to protect customer information and accounts. And with the increasing use of biometrics such as thumbprint and facial recognition, digital banking is becoming even safer. Furthermore, many of these banks are also insured by the UK's Financial Services Compensation Scheme (FSCS).
Potential Dangers Associated With Digital Banking
Digital banks are gaining popularity as customers take advantage of their convenience and easy financial access. But how safe are digital banks? There are two primary risks associated with banking digitally: data security risk and cyber security risk, both closely linked in their ability to intercept and steal customers' personal and financial information.
Malware or phishing scams are a real threat, but we can feel secure knowing that many digital banks have implemented incredibly sophisticated security measures against such threats. Hackers may always be present, but with technological advances, staying one step ahead on online banking safety is becoming easier every day.
In the following sections, we'll discuss digital banks' main challenges, what to look out for, and how customers can stay safe.
Digital Banking Fraud
In the 21st century, digital banking has become a norm. Neobanks and Challenger Banks are completely digital, with no physical premises. This grants consumers faster access to their services and a greater range of services.
Unfortunately, as convenient as it is for customers to access their financial information quickly and securely online or through mobile apps; hackers also have increased tools that make them more successful in accessing sensitive customer data like passwords and bank accounts.
Fraudsters in 2023 will be skilled enough to exploit the vulnerabilities of digital banking systems and manipulate data to their benefit.
What Key Challenges Do Digital Banks Face When it Comes to Preventing Fraud?
Lack of Historical Data:
Since digital banks are relatively new, they lack the historical data that traditional banks have used for years to detect fraud and consumer behavior.
Without this historical data, it's difficult for digital banks to detect patterns in customer behavior that could indicate fraud or other malicious activities.
As Banking Products Evolve, So Does Fraudulence:
As per research, criminals have become more sophisticated in their tactics. New banking products and services may not be much of a challenge for a criminal to exploit as these may not be as secure as traditional banking products.
Diverse KYC Protocols:
Different KYC procedures exist with unique applications and demands. Unlike traditional banks, Digital or Neo-banks are not obligated to request documents such as driver’s licenses or passports for identity confirmation.
To expedite the process, they may omit identifying verifications; however, this could expose them to potential fraudulent activity.
Digital Banks Expand Rapidly:
Digital banks often have to expand their services and customer base to remain competitive quickly. This rapid growth can also open up opportunities for fraudsters to infiltrate the system and access sensitive customer data.
How Will Banking Fraud Likely Evolve by 2023?
What will be the likely evolution of banking fraud by the year 2023? The future of banking fraud will rely heavily on the progress in technological advancements and how well banks can protect themselves from potential threats. Here are some predictions that experts have made about the future of banking fraud:
Facilitated Social Engineering Strategies:
One of the most likely fraud schemes to continue in 2023 is social engineering. Social engineering involves using deception, such as phishing and pretexting, to gain unauthorized access to assets or confidential information.
As we become more connected to technology, it will become simpler for fraudsters to manipulate unsuspecting victims into revealing critical data.
The rise of “Fraud-as-a-Service” is one of the most concerning predictions for 2023. It involves individuals and organizations creating services that allow other fraudsters to access stolen data or information about victims, making it even easier to defraud consumers.
One of the major security vulnerabilities that banks and other enterprises face is the rise of inauthentic identifications.
With synthetic identities, fraudsters can use a combination of fabricated and real information to create a virtual persona — making it difficult for organizations to detect and stop fraudulent activity. This trend is likely to only grow as technology advances.
Using AI and deep learning techniques, fraudsters have become more adept at bypassing traditional biometric authentication systems.
Biometric fraud will undoubtedly become an increasing problem in 2023 as AI and deep learning capabilities continue to develop.
Methods To Identify and Manage Fraud in Digital Banking Institutions
Uncovering and curbing fraudulent activity in digital banking platforms can be tricky. Here are some techniques that Neobanks should use to identify, monitor, and control fraud within their systems.
Ensure the Ultimate Protection by Investing in Essential Anti-Fraud Tools:
Today's ever-evolving digital landscape has made sophisticated fraud threats more challenging than ever before, requiring enterprises to have the latest technologies to stay ahead.
By investing in more recent technology, such as network analysis tools, AI, and machine learning, online banks are presented with the cost and flexibility they need to secure their client's data.
A graph database like Linkurious Enterprise can provide analysts with a complete view of their data in one location, yet it also gives them the scalability to keep up with any security changes.
Ultimately, by taking active steps to invest in essential anti-fraud tools, banks can be confident that they are sufficiently protecting their customers' data from malicious attacks.
Use Open-Source Data:
Open-source data can be a valuable resource for digital banks lacking the historical data that traditional financial institutions typically have access to.
Analysts can use tools such as social media and sanctions lists like Open Sanctions to gain insights about fraudulent behavior and delve further into their research.
By leveraging open-source data, digital banks can access an abundance of rich and valuable information economically that can contribute to their success.
Leverage the Potential of Machine Learning and Alerts to Automate Detection:
Machine learning models and warnings can be instrumental in automating fraud detection. For example, an identity verification system with alerts in the banking industry can help financial institutions avoid scammers during the account-opening process. This way, they can prevent potential fraudulent activity instead of merely identifying suspicious transactions after they happen.
Leveraging the potential of machine learning and actively implementing automated alerts has become a fundamental security measure that companies should take into account—leading them to improve fraud detection efforts successfully.
What Trends Can We Expect to See in Digital Banking by 2023?
We have reached a tipping point in digital banking, and in 2023 we can expect to see the following advancements in this ever-growing sector:
AI-driven Financial Advice
The need of the hour will be access to a digital guidance platform that understands user needs and can offer financial advice.
AI-driven systems are likely to become more advanced and be able to offer tailored financial advice based on an individual’s past investments, preferences, budgeting goals, etc.
Additionally, this could be a beneficial tool in proactively recognizing fraud, which will also likely become more frequent and sophisticated in 2023.
Build Big Data Sets
The sheer amount of data generated by digital banking services has become invaluable, allowing financial institutions to focus on customer relationships. Banks can use this data to anticipate customers’ needs and offer personalized services before they know them.
Moreover, this can help the banking institutes gain insights into customer behavior, allowing them to provide enhanced security in their services.
We can also expect the rise of open APIs (Application Programming Interfaces) that allow developers to create new apps and services on top of existing digital banking technology.
Engage With Blockchain Activities
Blockchain is closely linked to cryptocurrencies and digital assets in the financial world. However, its underlying technology also has a huge potential in banking as it strengthens security measures by eliminating intermediary players, thus reducing the risk of fraud.
We expect to see more banks and financial institutions adopting blockchain-based activities in 2023 as it is a cost-effective and secure alternative for securely transferring funds.
Initially established as a way to ignite competition and fintech, open banking has grown into an invaluable business opportunity for banks.
Open banking provides customers with the power of their data while empowering financial institutions by offering new services and creating unique products that can give them an unprecedented competitive advantage.
As open banking continues its rapid expansion, more financial firms will offer users access to a broader range of services than ever before.
Ensuring the Privacy and Security of Consumers
One of the most critical factors that affect the success of digital banking is the security of its users. In 2023, financial institutions will need to adjust their security systems to keep up with ever-evolving threats.
Banks should employ multi-layered authentication protocols and advanced encryption algorithms to protect user data from malicious activities.
It is also essential for banks to establish secure communication channels that comply with regulatory standards.
Digital Safes for Banking Customers
An eVault, or digital safe deposit box, is a secure IT infrastructure designed for banking customers. It allows customers to safely store and manage their financial documents online through the Internet.
The advanced encryption technology employed by these safes helps protect sensitive data from unauthorized access and provides an extra layer of security to banking transactions. With the growing cyber-security awareness, customers are more likely to embrace digital safe technology solutions in 2023.
These trends in digital banking will be essential for protecting the privacy and security of their customers in 2023 while also allowing them to benefit from a more efficient and personalized service. With these advancements, we can expect digital banking to become a common part of our daily lives.
Are Digital Banks Safe In 2023?
Let us finally get to our original question: are digital banks safe? The answer is an emphatic yes. Banks and financial institutions will be well-equipped to protect user data with the advancements in digital banking trends mentioned above.
So far, all these trends have delivered better customer security, which will only continue in 2023. Banks have already become increasingly aware of the importance of customer trust and are making sure to implement the highest security practices and protocols to ensure that their digital banking services remain secure and reliable.
On the other hand, be aware that digital banking still poses certain risks. It is important always to double-check the security features of your chosen bank.
We have already mentioned the possible risks with digital banking above, so it is always recommended to take these into account before you start making any transactions.
Ultimately, digital banks in 2023 will provide customers with the most secure and comfortable way of managing their finances. Therefore, it can be concluded that digital banking will be a safe option in 2023.
Is It Secure To Bank Online Via Mobile Phone?
You may be wondering if online banking via mobile phone is secure. The security of your transactions largely depends on how cautious and well-informed you are; taking the necessary steps can help protect yourself and your financial data from malicious actors.
- Be sure to change your passwords regularly.
- Do not save any login information in your Android.
- Avoid public WiFi networks and be wary of email scams.
Digital banking on iOS devices is generally safe due to the stringent standards of the App Store. However, users should avoid jailbreaking their iPhones or downloading unauthorized applications that could increase their risk level.
The best way to ensure safety when banking digitally on an iPhone is to use the official apps on the App Store. In addition, strong passwords and two-factor authentication options are always recommended for extra protection.
Reasons Not to Use Online Banking
Looking for a digital bank? But is it really for you? Online banking is convenient and easier to manage, but there are several reasons why you may want to reconsider.
Online banks may offer the amenity of never visiting a physical branch, but the lack of face-to-face interaction and limited account options are reasons to consider a traditional brick-and-mortar bank over an online-only option.
Speaking with a live person is often considered invaluable regarding financial matters. Therefore, if you frequently require financial advice or help make decisions with your accounts, you won't benefit from using an online bank.
Additionally, online banks typically only provide basic services such as checking and savings accounts. Consequently, an online bank may not be the best choice if you're looking to open an investment account or receive specialized banking products such as prepaid debit cards or lines of credit.
How to Secure Your Bank Account From Hackers?
Are you worried about your bank account being compromised by hackers? Here are some tips to ensure that it remains safe and secure.
- Firstly, always use the official banking app instead of the browser-based version.
- Keep your phone secure with strong passwords and two-factor authentication.
- Stay alert regarding suspicious links - don't just click on any link sent to you by email or SMS.
- Be wary when using public Wi-Fi networks - despite the convenience of accessing accounts online from any location, these networks generally have less security and are more vulnerable than cellular data or private home Wi-Fi networks.
Digital banking has revolutionized how we access our finances, but security risks still exist. With the right precautions, however, these risks can be minimized, and your bank account can remain safe from hackers.
Top Digital Banks In 2023
The digital banking landscape is constantly evolving, and in 2023, the industry will have seen several changes. Finding the right digital bank to meet your needs can be a challenge, and several factors must be considered.
The top digital banks in 2023 are Wise, Chime, SoFi, Revolut, Ally, N26, and Axos. Each of these banks has its unique features and benefits that make them stand out from the crowd.
Chime is a San Francisco, California-based financial technology company founded in 2012. This platform is committed to providing top-notch customer care. Account holders are issued a Visa debit card or credit card.
For their part, Chime earns revenue mainly from collecting interchange fees. With its fee-free approach and wealth of other innovative features, it's no wonder Chime has become so popular!
Chime is an excellent tool for managing your finances, offering you three different FDIC-insured accounts - checking, savings, and credit builder.
You can also access Chime through their user-friendly mobile app giving you control of your money at any time from anywhere. Aside from convenience and security, there are numerous other advantages to using Chime:
- No Overdraft Fee: Take advantage of the offer and get up to $200 on debit card purchases with no overdraft fees.
- Early Payments: Get paid two days early with direct deposit.
- No Monthly Fees: With no monthly service fee, you can save more on banking with Chime.
- No Fees On International Transactions: Transactions in foreign currencies won’t incur any extra cost.
- High-Yield Savings Account: Earn up to a 2.00% Annual Percentage Yield on your savings account balance.
- Credit Building: Build your credit score with no annual or participation fees.
Founded in 2011, Wise is a London-based financial technology company that has disrupted the world of international banking by bringing people, businesses, and banks closer together.
The pioneering technology developed by Wise allows users to transfer money overseas quickly, securely, and at a fraction of the cost of traditional banks.
With top ratings from leading consumer magazines, users can trust Wise to keep their money safe and make international money transfers more convenient than ever.
Those looking for fast and secure overseas payments for business or personal reasons should turn to Wise for the best service available. Here are some of the features you can look forward to when using Wise:
- Safeguard With Leading Banks: The bank holds the customer's money with renowned banks, separate from their own, and customers can access the funds anytime.
- Regulated Around the World: Wise is authorized and regulated by the FCA in the UK and is registered with FinCEN in the US.
- Dedicated Anti-Fraud Team: The team continuously monitors transactions and implements the latest technologies to ensure maximum security.
- Unparalleled Protection for Your Transactions: All customer deposits are held in secure, regulated banks with FSCS (Financial Services Compensation Scheme) protection. They use two-factor authentication to ensure the highest level of security.
Revolut Bank UAB is a British-Lithuanian bank and financial technology company that operates as an electronic money institution. It is headquartered in London and was founded in 2015.
Revolut offers various innovative banking services with modern banking convenience backed by experienced professionals.
This includes accounts for currency exchange, travel debit cards, virtual cards enabled for Apple Pay, interest-bearing "vaults," commission-free stock trading, crypto, and commodities investments, as well as multiple other services suited to individuals and businesses alike.
Consider these features when deciding if Revolut is the right bank for you:
- Annual Interest: Earn up to 2.5% annual interest on your deposits. Moreover, you get paid daily on your deposits so that you can make the most of your money.
- Multi-currency Accounts: Open euro, pound, and US dollar bank accounts all in one place.
- End-to-end-Security: Revolut has end-to-end encryption, so you can rest assured that your money is secure.
Axos is an iconic American finance company headquartered in San Diego, California. Established two decades ago, in 1999, it has quickly grown to become one of the leading financial institutions and direct banks in the United States.
Axos Financial has roughly $14 billion of assets and deposits under its care. Additionally, the firm employs 1100 people across the country who are committed to offering excellent solutions for their client's financial needs.
The following benefits are included when you bank with Axos:
- High-Yield Savings Accounts: Customers can earn up to 1.25% APY on their deposits.
- Smart and Experienced Management Team: The company is managed by experts with decades of experience in banking and financial services.
- Unlimited ATM Fee Reimbursements: Now, customers can enjoy free and limitless Domestic ATM fee reimbursements.
- Zero Monthly Maintenance Fees: Customers will never have to worry about paying a monthly maintenance fee.
- No Overdraft Fees: Axos Bank never charges customers for overdrafts so that they can stay on top of their finances.
- Strong Focus on Technology: The bank has a strong focus on technology and innovation, providing customers with the latest services in online banking.
- Knowledgeable Customer Service Staff: The customer service team is knowledgeable, friendly, and available around the clock.
N26 is a German neobank established in 2013 and headquartered in Berlin. This reliable, cutting-edge banking experience has gained global recognition due to its astonishing variety of online banking services. Here are some of the features that make N26 stand out from the crowd:
- Free Bank Account: Its users are rewarded with a free basic current account and a debit card, plus the opportunity to utilize convenient overdraft and investment products for those who pay the monthly fee for premium accounts.
- No Hidden Fees: N26 offers its users a transparent price structure with no hidden fees or surprises.
- 24/7 Support: The N26 customer service team is available 24/7 to answer any questions.
- Modern Security Protocols: The bank uses advanced 3-D Secure authentication protocols and fingerprint identification for maximum security.
What are you waiting for if you have yet to try out N26? Its combination of revolutionary features proves to be an ideal choice for your banking needs.
SoFi is an American online personal finance company and online bank founded in 2011. Based in San Francisco, SoFi provides a range of modern financial products designed to provide customers with an unparalleled banking experience.
From student and auto loan refinancing to mortgages, personal loans, credit cards, investing, and banking - all accessible through both the cell phone app and desktop interfaces - SoFi offers an array of convenient options that make it easier than ever to manage your finances.
If you are looking for a dependable partner to guide you toward financial stability, look no further than SoFi. Following are some of the advantages of choosing SoFi as your financial partner:
- High-Yield Savings Accounts: Get up to 3.75% APY with SoFi Money. This is one of the highest rates available today.
- Credit Card Rewards: Get ready to reap the rewards with the SoFi Credit Card - you'll receive an incredibly generous 2% in unrestricted cash back without having to pay any annual fee.
- All-in-one-App: The SoFi App is an intuitive interface that allows you to manage all your finances in one place. Now you can check your bank balance and pay your bills with mobile-friendly convenience.
- No Foreign Transaction Fees: Send money internationally without worrying about any hidden charges - it's that easy!
Ally is one of the most important and prominent American bank holding companies. Established in 1919, it is headquartered in Detroit, Michigan, and organized in Delaware.
It offers customers a wide range of services, including car finance, an online banking facility, corporate lending, vehicle insurance, mortgage loans, and an electronic trading platform for trading financial assets.
Ally has gained immense success over the years with its exceptional customer care services and convenient products that help customers reach their financial goals. Ally stands out from the other competitors for multiple reasons, and here's why:
- No Overdraft Fees: No worries about overdrafts - Ally Bank has no monthly maintenance fees or minimum balance requirements.
- High-Yield Savings Accounts: With a 3.85% annual yield (APY) on its savings accounts, Ally's rates stand out as some of the most excellent in the market.
- FDIC-Insured Deposits: Ally Bank is an FDIC-insured bank, so you can rest assured that your deposits are safe and secure.
This concludes today's discussion on 'Are Digital Banks Safe?' In the coming year, digital banking is undeniably a more secure and comfortable method to manage your finances.
With wise banks that use modern technology like Revolut, Axos, N26, SoFI, and Ally providing dependable services while safeguarding customers' data tightly, it's no wonder why virtual banking has become the go-to choice for many individuals.
Moreover, the customer service teams at these digital banks are always on hand to answer any query or resolve any issue with the utmost efficiency.
We hope you enjoyed today's discussion and found the information useful. Until next time, take care, and happy banking!