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Digital banks vs traditional banks both have their advantages and disadvantages. Digital banks are becoming more popular, but people still prefer the standard brick-and-mortar institutions. Digital Banks, also known as online banks, try to innovate the banking industry by facilitating easier access to financial accounts through a computer or mobile device.
Digital banks give you flexibility, accessibility, and control over your money, but most importantly digital banks are always available. Digital Banks accounts provide the security of FDIC insurance, offer free checking, and are very flexible. They offer a variety of services that traditional banks don’t, including better rates on savings accounts, higher interest rates on loans, and lower fees for checking accounts. And they do it all without charging monthly maintenance fees or requiring minimum balances.
Digital banks offer better services than traditional banks because they use technology and automation so everything is done online or through an app on your phone instead of having to deal with human interaction most times.
This means no more waiting in line at branches, no more paying fees every month, and no more getting bad customer service from tellers when you go into the branch. Plus, these digital banks will save you money by offering great interest rates on savings accounts and low-interest loans compared to what traditional banks would charge you for that thing.
- 1 Digital Banks
- 2 Traditional Banks
- 3 Differences Between Digital Banks and Traditional Banks
- 3.1 Access to Banks
- 3.2 Maintainance Fees
- 3.3 Help in Financial Decision
- 3.4 High-Interest Rates
- 3.5 Technological Advancements
- 3.6 Security
- 3.7 Ease of Transactions
- 3.8 Money Transfer and Currency Conversion
- 3.9 Travelling
- 3.10 Identity Theft
- 3.11 Customer Service
- 3.12 Quick Payments
- 3.13 Investment Opportunities
- 4 Summary
Digital bank(or Digital-Only Bank) is an emerging form of financial service that provides customers with the ability to bank remotely using a mobile or web-based platform. Digital banks do not have any physical branches, thus eliminating the costs associated with maintaining and operating brick-and-mortar locations.
Digital banks are able to offer lower fees than traditional banks because they do not have to pay salaries for tellers, branch managers, and support staff. Digital banks offer all of the services that a traditional bank offers with some added benefits such as mobile deposit, better interest rates on loans and savings accounts, and increased security. Digital banks typically have high interest rates on their checking accounts which can help you earn money on top of your standard savings account.
Digital banking provides you with 24/7 access to your financials anywhere, anytime, which is great for people who are constantly on the go or don’t like having to deal with human interaction. Digital banks usually offer you a better mobile experience than traditional banks by making it easy and convenient for you to manage your money on the go. Digital banks are relatively new in the industry; however, they are growing rapidly due to their attractive benefits for customers.
Traditional banks are brick and mortar institutions where you can do your banking and financial-related tasks in person. They offer a full range of services including cash withdrawals, savings accounts, checking accounts, loans, mortgages, wealth management, etc.
Traditional banks use an extensive array of technologies to assist customers with their services such as ATMs (automated teller machines), debit cards, mobile banking apps, online portals, etc. These traditional banks offer a wide variety of branch services and high-quality customer service to help people manage their money more effectively.
Traditional banks have a long history in our country and are often seen as the safest place to park your assets because they uphold regulations that enable their customers to avoid any major financial issues. Digital banks are fairly new in comparison to traditional banks, however, they offer increased security over traditional brick and mortar locations. Digital Banks are insured by the FDIC just like traditional banks so depositors don’t have to worry about their money is safe.
Let us understand the differences between digital and traditional banking systems.
Differences Between Digital Banks and Traditional Banks
Access to Banks
Digital banks offer online banking, which means you can handle your finances anywhere, anytime. What’s more, Digital Banks are always open. While traditional banks have limited hours or might be closed on certain holidays if they are not in mall locations that stay open into the night, Digital Banks never close. Digital Banks also offer 24-hour telephone customer service and online chat.
Digital Banks do not require you to pay monthly maintenance fees or require minimum balances, which can save consumers money over time. Digital Banks are secure, have an easy-to-use site, and there are no hidden fees involved. Digital Banks do not charge late fees or require minimum balances, which means Digital Banks are better for consumers who need to budget their money.
Help in Financial Decision
Digital Banks promote financial health by helping customers make responsible decisions financially for themselves and their families with features like daily balance alerts that let you know when your account balance gets low or online bill pay that makes managing your finances convenient. Digital banks even provide image statements or alerts that let you know when a charge posts to an account.
Digital banks also offer higher interest rates on savings accounts which is another benefit over traditional banks. Digital Banks also offer lower interest rates on loans for people with good credit. Digital banks can help you save more of your money over time plus earn interest on top of it so it grows faster than in a traditional bank.
Digital banks are up-to-date with the newest technological advancements that traditional banks just can’t compete with when it comes to customer service and convenience. Digital Banks offer has no physical bank location, which means Digital Banks are great for people who are constantly on the go or don’t enjoy human contact.
Digital Banks are very secure which ensures consumers that Digital Banks are using the most up-to-date encryption technology to protect their information. Digital Bank customers can access their accounts from any computer, tablet, or phone device which makes Digital Bank great for consumers.
Digital Banks offer increased security over traditional brick and mortar locations. Digital Banks are insured by the FDIC just like traditional banks so depositors don’t have to worry about their money is safe. Digital Banking also offers several different security measures, including 2-factor authentication and alerts if activity on your account is suspicious. Digital bank provides increased access to funds and easy payment options that traditional banks do not provide. Digital Banks is known for having some of the highest security standards when it comes to Digital Bank accounts.
Ease of Transactions
Digital Banking is even available through mobile applications so you can check balances, transfer money between accounts or pay bills wherever you are as long as you have your phone. Digital Banks also offer video teller services where customers can connect live with their bank just like they would if talking to someone in person, except the conversation takes place via webcam.
Money Transfer and Currency Conversion
Digital Banks function by transferring money via an electronic network instead of paper or coin currency. Digital Banks offer this service for free while traditional banks usually charge fees. Digital Banks make it much easier to transfer money between countries because there is no need to worry about exchange rates, foreign transaction fees, or bulky paper bills.
Digital Banks make it much easier to do business on a global scale, no matter the country. Traditional banks also charge fees for money transfers abroad, usually $50-$75 per transfer, depending on how many transactions you’re making and which bank you use. Digital Banks like Transferwise are known to be cheaper than traditional banks by about 50% and provide free international transfers.
Digital Banks like Transferwise use local banks on the receiving end, which means Digital Banks don’t have to charge foreign transaction fees or mark up the exchange rate of your money as traditional banks do. As for currencies, Digital Banks offer more currency pairs than traditional banks, Digital Banks have a huge advantage when it comes to currency exchange. Digital Banks offer low fees and fast transfers while giving customers multiple options of payment methods Digital Bank accounts make it easy for people to track their expenses and manage their finances.
Using traditional bank-issued cards can be pretty expensive when travelling. You’ll pay fees on every transaction you make, even if it’s in the local currency. Digital Banks offer customers cheaper ways to pay for goods and services abroad by only making exchange rates when you actually use your Digital Bank account to complete a transaction. Digital Bank accounts can be loaded with foreign currencies before travelling so Digital Banking users do not have to worry about paying fees for every transaction they make. Digital Bank users also do not have to worry about exchange rates increasing or decreasing because Digital Banks set the exchange rate at the time of your transaction, Digital Banks offer lower fees than using traditional bank-issued cards while Digital Banking users can access more funds than they would with traditional bank-issued cards.
Digital Banks are much more secure than traditional banks because Digital Banks do not have physical locations. Digital Bank customers’ money isn’t stored in one central location, Digital Bank customers can access their money from anywhere in the world by logging into their Digital Bank account with a username and password or fingerprint scan.
Digital Banks also keep customers’ money separate from the Digital Bank’s own funds, which ensures Digital Banking customers that Digital Bank will not use customer funds for company purposes. Traditional banks are known for having low-security standards when it comes to Digital Banking because traditional banks often have physical locations where individuals can rob or simply defraud their customers with ease. Digital Bank accounts automatically notify Digital Banking customers when certain transactions are made so it’s easier to tell if someone is trying to steal the Digital Bank account information.
Customer service plays a big role. At least from the customer’s perception. Digital Banks can offer better customer service than traditional banks because Digital Bank customers can communicate using the Digital Bank’s website, Digital Banking apps, and social media, Digital Banking provides more ways to contact Digital Bank customer service than with traditional banks which only provide one way of contacting their customer service department.
By having a good digital presence and offering so many ways to contact Digital Bank customer service, Digital Banks make it easier for Digital Banking customers to ask questions or express their concerns. Digital Bank customer service is available 24/7 while traditional banks only offer customer service during business hours.
Traditional banks can take three days or more to transfer money from one account to another, Digital Banks have a much faster transfer system that transfers money instantly. Digital Bank users can transfer their Digital Bank account into another Digital Bank account in just one day.
Digital Banks offer more ways to deposit and withdraw money than traditional banks because Digital Bank customers are not limited by the number of locations nearby, Digital Banking empowers Digital Banking customers to make deposits at any ATM or find nearby Digital Banking locations. Digital Bank users also do not have to wait in long lines like they would at traditional banks. Digital Banks offer Digital Banking customers more options for depositing and withdrawing money than traditional banks because Digital Banking allows Digital Banking customers to deposit and withdraw using an ATM.
Investing is something that traditional banks readily offer their customers through their separate entities. Digital Banks, however, do not offer investment services to Digital Banking customers as Digital Banking is a mobile app and Digital Banks only serve to hold Digital Banking customers’ money.
Digital Bank never invests in Digital Bank customer funds because Digital Bank does not allow external parties to take Digital Bank customer funds. The majority of traditional banks do not invest their own capital either, Digital Banks can offer much better interest rates than traditional banks because Digital Bank does not have the overhead costs of operating a physical bank. Digital Bank customers do not need to maintain Digital Banking accounts in order to keep earning higher interest rates on their accounts.
Digital Banks are better than Traditional Banks. Digital Banking customers have the advantage of being able to access their Digital Bank accounts from anywhere using Digital Banking apps, Digital Bank’s website, or any internet-enabled device. Digital Bank users also do not have to wait in long lines when making deposits or withdrawals at Digital Banking ATMs because Digital Banking ATMs are much more convenient.
Digital Banks have Digital Banking apps, Digital Bank websites, and social media so Digital Banking customers always have many ways to contact Digital Bank customer service which is available 24/7. Digital Bank also offers much better interest rates than traditional banks because Digital Banks do not depend on physical locations.