In the complex world of banking, things move and evolve rapidly. The banking industry has witnessed some drastic changes and developments over the past few years. About 50 years ago, customers had to be physically present in a bank to withdraw money, transfer funds, or even seek information related to banking or their account. Today, it’d seem unusual if you did any of those things at a branch. While everyone may be a daily user of these digital services, many also likely to confuse digital banking and digitized banking. There is an important distinction between the two. Let’s understand what Digital Banking is first.
Introduction to Digital Banking
Digital Banking, according to FFIEC, can be defined as the automated delivery of new and traditional banking products and services directly to customers through electronic, interactive communication channels. It includes systems that enable customers to interact with the financial institutions through a digital medium to access accounts, carry out transactions for business, and obtain information on financial products and services.
Digital banking is seamless, quick, and convenient for modern-age customers who want to carry out transfers or seek information instantly and on the go.
Digital Banking Vs. Digitized Banking
The key difference between digital banking and digitized banking is that while digital banking is a medium, digitization of banking is an essential tool that supports this medium.
Digital banking, however, is a process through which the need for traditional banking systems can be eliminated. It assists in overcoming challenges like location barriers faced by banks by making information and services available all over the internet, accessible to the customer anywhere and any time. Digital banking, hence, is the application of tech to each and every banking activity, process, or program, to make it more accessible to a customer, especially in remote locations.
Digitized banking refers to the conversion of important data from an analog format to a digital format with the help of technology. It is a tool through which data is made more accessible and helps banks in providing enhanced services and experiences to customers. It is key in reducing human error by providing a consistent flow of data that can vary from consumer behavior, preferences, and other important information that can help retain customers and improve overall loyalty. This is the key difference between Digital Banking and the digitization of banking.
Importance of Digitization in Banking
Digitization is a crucial banking process that utilizes tech to convert analog data to digital data that has better accessibility. It is important due to the following reasons:
- It drastically improves and enhances the overall customer experience.
- It allows both financial institutions and users to save a monumental amount of time by providing important information in a digitized and accessible format.
- The cost for banks and customers is significantly reduced.
- Digital data helps make data-driven, strategic, and marketing decisions beneficial for financial institutions and customers.
- It reduces overall human error.
Advantages of Digital Banking
Digital Banking has evolved considerably over the past decade, and with the emergence of technologies such as Artificial Intelligence (AI), blockchain tech, big data, etc., it is only getting better. Financial institutions globally have moved beyond mere acknowledgment of its advantages to being actual adopters en masse. Here are a few advantages of digital banking:
- Digital banking simplifies the on-boarding process for customers and employees through a mobile or digitized process that is in place thanks to advanced technologies. Uploading important documents can be done simply via a smartphone and be submitted instantly, saving time and effort.
- Banking is made accessible anytime and anywhere, as customers can instantly access their accounts via laptops, PCs, or smartphones. Essential services such as customer support channels, co-browsing, and much more in real-time are now available, and extremely effective.
- Automation of banking processes helps in significantly reducing costs, both for customers and the banks. It also reduces staff expenses and overhead costs, which help in saving money, and digitization eliminates the need for printing statements, which is beneficial for the environment.
Needless to say, both concepts are essential and mutually support each others’ functions. Both these concepts have higher applicability than traditional banking systems as they utilize emerging technologies to save time, money, and enhance the overall customer experience.
Digital banking, however, has been exploring new frontiers. Neobanks, based on the idea of entirely digital banking experiences, are rapidly gaining in popularity. Salt is one such neobank, without any compromises on traditional banking features and functionality.