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28 Mar 2022

What Is Digital Banking?

Roshel Rebello

Digital banking can be described as the digitization or automation of almost all the traditional banking activities and services, such as money transfers, making payments, checking the account balance and more with the use of secured digital channels. These banking activities and services were previously accessible only at the bank branch.

Digital banking has redefined banking for customers as it substitutes a bank’s physical presence with its online presence, ensuring customers do not need to step out of their homes to take advantage of these services. With digital banking, customers can use digital wallets, online banking facilities, mobile apps for payments and do much more. The rise of technology in the past 20 years has brought unprecedented changes to the world of banking. People can use the Internet to perform various banking transactions with ease. Also, digital banking has resulted in a substantial increase in people adapting to online banking, and banks lowering transaction costs and improving operational efficiency through automation.

Benefits of Digital Banking

Even though traditional banking methods, such as visiting bank branches, telebanking/phone banking or ATMs, are still prevalent, the wide range of mobile banking and digital banking benefits have transformed the way people perform banking transactions and how banks interact with their customers. Below are some of the main benefits of using digital banking in the present era:

24/7 Convenience

Digital banking offers customers 24/7 secure access to various banking services, eliminating the need to take a day off or plan their day to visit the bank branch during its working hours. Digital banking apps help customers check their account balances, make payments, transfer money and do more from their mobile phones, wherever they are. Moreover, the boom in electronic banking has paved the way for cashless transactions, wherein people can pay for their purchases without having to carry wands of cash or having to visit a nearby ATM to withdraw cash. Cashless payments are secure, fast, convenient and allow customers to track the transactions electronically.

Multiple Features

Digital banking makes it easier to perform fund transfers locally and internationally. With digital banking, customers can also easily schedule payments for funds transfers and bill payments. Digital banking facilities help customers and banks go paperless as electronic statements can be securely shared to the customer’s email. Furthermore, with a banking mobile app, customers can easily locate nearby ATMs, make cardless ATM withdrawals, among others.

Safety and Security

Enabling secured and safe online and mobile banking is one of the foremost precautions that banks need to take care of. Banks have added several safety features such as the generation of a One-time Password (OTP) to complete a transaction. Also, digital transactions occur over secure servers and networks, ensuring better safety features than traditional money transfer options.

Alerts and Notifications

Customers can opt-in to receive bank account alerts for transactions through emails, text messages or push notifications on their registered email/mobile number. This helps the customers to be aware of the transactions that are happening in their accounts.

The Future of Digital Banking

Even though physical/brick-and-mortar bank branches are still functioning, in the future, banking services and transactions can be fully replaced with automation, thanks to digital banking. The convenience and the ability to perform banking activities using computers and smart devices over the Internet, from anywhere in the world, will be one of the main driving factors for customers to prefer switching to digital banking over physical bank branches. The advantages of digitization in banking make it easy for digital-savvy customers to enjoy a personalized and seamless digital banking experience anytime, anywhere.

A fully digital bank can have customizable standing options, card blocking features, financial management analytics, access to online currency, etc. Also, it can be integrated with stock market investment channels, group accounts of different banks and offer accessible assistance, according to the customer’s preference. Moreover, along with the advances in technology, the changes in the banking industry in the coming years will be a confluence between various interrelated and structural factors, such as demographic, regulatory, environmental and socio-economic changes. These changes can improve the financial well-being of the customers and help them get the freedom to make the financial choices that are right for them.

However, for digital banking to fully replace physical banks, it may take some time as people still prefer to approach the bank employees for various services and information, such as knowing the conditions of the loan or negotiating the terms of their loan.

Frequently Asked Questions

What exactly is digital banking?

Digital banking, also known as online banking or internet banking, allows customers to avail various banking services, such as balance inquiry, funds transfer, etc., through their smart devices (smartphones, tablets, laptops, etc.) over the Internet.

What are the types of digital banking?

Mobile banking and online banking (through the bank’s website) are two of the popular types of digital banking in Singapore. Customers can avail various banking services and facilities without even having to step out of their homes.

How is money transferred digitally?

You can transfer funds digitally through digital banking. Transferring funds digitally can typically involve three or two parties to complete a transaction. They can be the bank, the customer, and a merchant, or just the bank and the customer. First, the customer needs to initiate the transaction which can be done by initiating the fund transfer request online, scanning a payment code at a store, swiping a debit card at a store, or visiting an ATM. After the bank receives the request, it either approves or rejects the electronic transfer of funds based on the availability of funds and the data provided (card number, account number or routing number) by the merchant or customer. If the bank approves the digital or electronic transaction, the funds are then transferred electronically to or from the consumer's account to the intended beneficiary.

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