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Insoftex is a leading provider of technology consulting, engineering, and data science services for Fortune 500 corporations undergoing digital transformation. We serve some of the largest US retail, e-commerce, tech, and financial services companies, delivering our solutions using open-source, cloud-based technologies.

What Is Digital Banking? Meaning, Types, and Benefits

The digital revolution in the banking sector was already in full swing. Still, the coronavirus pandemic, self-isolation, and the transition to remote work globally pushed financial institutions to an even faster transformation. Digital space has become an integral part of the life of modern people. Everything is digital today: shops, telecom operators, social networks, and instant messengers. To maximize customer satisfaction in financial services, banks also need to be digital. Let’s see what is digital banking.

What is Digital Banking

Today, digital banks are becoming especially popular. Digital banking does not need an office, employees, cash desks, ATMs, and terminals. The client receives all this in a convenient application or online bank version.

In simple terms, digital banking definition is the automation of traditional banking services, thanks to which retail and corporate clients can use banking products and services through online channels (Internet and mobile networks).

The development of digital banking was facilitated primarily by unsatisfactory assessments of the traditional banking system. Investors, digital developers, artificial intelligence developers, and so on became interested in developing digital banks. Digital banking can be considered a new generation project.

For example, world-famous financial corporations such as Revolut, Nubank, and N26 can be cited. Later, the management of corporations decided to change the existing system and digitize financial products: bank accounts, lending, and insurance.

What should a bank have to be digital?

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To be considered a digital banking provider, your bank must offer:

Full range of all services: You need to implement a full range of services, including all processes from the registration of new retail and corporate clients to the remote provision of all your front office services, both financial and non-financial, remotely.

Service Availability 24×7: Service availability 24 hours a day, seven days a week. Customers should not be limited by bank opening hours; they should be able to receive services at any time.

Services beyond traditional banking: To fit the new digital lifestyle, you must implement new services such as geo-targeted advertising, gamification, personal finance management, and predictive analytics based on customer behavior.

 

Unified customer journeys: Digital banking solutions should provide customers with a consistent customer experience across all service channels, no matter which one the customer uses on different occasions. This means that you must constantly keep the client in the center of your attention, providing him with personalized messages and a single source for quick access to information.

Intuitive User Experience (UX): UX aims to create a digital financial service tailored to users’ needs that offers simple and easy-to-use banking experiences.

Attractive User Interface (UI): Innovative and engaging user interface design in digital products is indeed a necessary but not sufficient condition. The user interface should be user-oriented. This means that its development should be carried out to understand what the client wants as a user and what he expects from your product.

Efficient Services: Time is of the essence because the less time or actions the user needs to complete any operation, the better. Accordingly, you need to reduce the number of user actions. In this case, “less is more.” Develop the most understandable solutions that require a minimum of steps from the user.

Benefits of Digital Banking

Digitalization in banking implies efficient and high-quality financial management and the development of technologies (like cloud computing), equipment, and software. Digital and technological progress are inextricably linked, and the growing popularity of remote service opportunities in the financial sector will contribute to the rise of the IT segment.

Today, digital banking solutions can already offer the following benefits:

Geographic expansion: from an economic point of view, digital banking is considered the most profitable opportunity for expanding the geography of the bank’s activities: you can increase the reach of the audience with banking services without the need to open new branches.

New revenue streams: Digital banking platforms help banks create new revenue streams by enabling customer data to be used to build meaningful customer experiences and develop new services.

Paperless Transactions: One of the most significant disadvantages of traditional banking has been the excessive amount of paper documents that have become unnecessary with the development of digital banking.

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Reduced costs: Eliminating the need to process paper documents and manually perform a variety of other processes, wasting the time of bank employees, leads to significant cost savings for banks.

Convenience: Providing customers with an exceptionally convenient experience is a priority for banks, and digital banking is the solution that allows customers to use all types of banking services remotely and 24×7.

Disadvantages of Digital Banking

Today, the main problem in digitization in banking is the difficulty of starting customer service without their physical identification.

Also, the security and protection of personal data remain acute when using the applications of financial organizations. Users need to understand that their funds are reliably protected.

Both of these problems can be solved in the foreseeable future due to the development of biometric technologies in digital identification. Even today, banks have made great strides in verifying their customers, which has positively impacted the procedures for providing the necessary financial services.

The Future of Digital Banking

Banks and financial organizations will use every step of users to fully understand the lives and needs of customers and personalize the offered services with the help of artificial intelligence.

  • The bank’s role will be to determine and offer the most relevant service to the client at the moment, to order and ensure its payment.
  • Payment for products and services will become “invisible” to customers.
  • Interaction with customers will be as simple and convenient as possible using voice, biometrics, and wearable devices.
  • Credit products will become more flexible and personalized, and the borrower’s risk assessment will be based on lifestyle habits and purchase history.
  • Platformization: banks will create digital platforms on which customers can choose among the services offered by different service providers, those that best meet their needs and satisfy their life needs as much as possible
  • Digital currencies will improve the convenience and speed of payments and enable the launch of innovative services.
  • Context-relevant financial services will replace traditional banking products. New products will combine all recurring household payments into a single payment.
  • The issue of users’ confidence in the security of their data and its intended use will play a significant role, and cyber security will use AI to protect data.

Conclusion

Being a digital bank is not only about providing financial products and services through internet banking and mobile banking. While implementing digitization of banking, It is necessary to achieve complete consistency of service channels and connect them in one system (omnichannel). Omnichannel allows the client to solve problems through channels convenient for him and the bank to track all transactions in a single window. Insoftex has significant experience in developing digital banking solutions. Contact us to find out more.

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Insoftex is an owner-managed software engineering company based in Eastern Europe (Lviv, Ukraine). Our management team has over 25 years of experience in product development and project delivery. We offer a wide range of software engineering services to small and medium-sized enterprises in Europe, North America, and the Middle East.

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