Digital-only bank brands are rapidly inflowing the U.S. market after the success of Simple, launched by BBVA Compass in 2009. Ever since, quite a few large banks have followed, together with JPMorgan Chase with Finn and Wells Fargo with Greenhouse. As stated by the Federal Reserve, more than half of all smartphone users avail mobile banking facilities, and that number escalates to 67 percent among millennials. The primary significant banking strategy acknowledged by bankers in 2018 was to restructure or increase their customers’ digital experience.
Digital transformation is a survival strategy for banks today. Retail banks in the United States are investing heavily on new technologies and staff as a part of a larger push for digital initiatives. U.S. banking digital revolution expenditure is projected to rise at a yearly rate of 22.5% by 2020, with most of the reputable banks assigning approximately 40% of their IT budget to meet these digital transformation goals.
On the business end, the new-age of digital-only banks are more alert than their brick-and-mortar counterparts. They are nearly 100% cloud-based business influencing the expertise of cutting edge digital networks rather than relying on stand-alone and often obsolete on-premise technology. Along with this, many of the leading digital-only banks are partnering with block-chain technology like Ripple, Ethereum, and Bitcoin payment services. Cloud-based infrastructure and lower operating costs lead towards a collective advantage for the bankers as well as their clientele. Banks can charge lower fees, one of their main appeals to be cost-effective per client. The disadvantage, for clients and banks, is that services are restricted to simple banking like checking/debit and savings accounts.
Why digital-only banks are attractive?
In addition to being modest and suitable for next-gen customers, digital-only banking also offers a superior customer experience by analysing consumer needs using social and geo-related perceptions. It is not just the customer value that makes digital-only banks notable; there is also a powerful case in their cost-effective operating model.
Benefits to consumers include:
Banking services on finger-tips:All banking-related annoyances ceased with the arrival of digital-only banks, where consumers can just click and upload their documents in a bank’s soft locker, open bank accounts, and execute transactions from the comfort of their homes. Speed, ease, and superior customer experience are the key factors that are motivating consumer preference towards digital-only banks.
Low transaction fees: Banks with no physical existence pass on their minimal operating costs to their banking customers, thus making them cost-efficient and compelling for the next-gen consumers.
Digital-Only Banks Threats and Concerns:
Although digital-only banking offers various assistance to consumers and bankers, there are still a few risks involved. The foremost risks are numerous; safety, customer approval, and scalability.
Security at digital-only banks is the main apprehension and there are risks involved for both bankers and clients. The bankers and clients have to be cautious of hacking, fraud, malpractice, and other regulatory concerns.
Financial fraud is the #1 Internet crime worldwide and very easy to perpetrate. Potential users of digital-only banks are advised to use caution when selecting a bank. Don’t trust the word of a website that it is regulated or trustworthy, always inspect with local banking authorities to be sure your digital bank is legal.
Customer satisfaction is also a key concern because it is attached to one of digital-only banking’s biggest charm; no physical locations. Without a physical location, there is nowhere for the customer to turn for help other than the apps, or a phone call, and that is disliked by many people. Furthermore, digital-only banks have a tougher time making connections with clients so that is a top priority. The problem is that there is very little a digital bank can do in addition to what’s already been done.
The final obstacle that may keep digital banking at a small scale is scalability. The digital-only banking sector is hindered by its limited product offering and this, in turn, is hampering customer growth and retention.
Key Concerns Related To Digital-Only Banks Discussed By the Online Essay Writer:
An individual relationship with the Bank is not established: The old-style brick and mortar bank relate to the customer developing a mutual bond. Familiarising with the work-force in the bank in your area can be advantageous at the time of applying for a loan or any other special service. They might help to deal with the matters of service charges or reducing the fees. In the case of business loans, especially this bond will help to get the required capital.
Issues with transactions: When dealing with a complex transaction, it is better to sit and resolve it face to face. International dealings also have many apprehensions that need to be looked after. It is sensible that in these cases you should sit and consult with your bank official to resolve the issues. Making them online might lead to link failure hindering the mode of transfer.
Security issues: Identity theft is an important issue to contemplate these days. If strong encryption software is not in place then all your confidential account information will be available on the web posing serious threats to your investments.
Conclusion:
Digital-only banking is easy, it is cheaper, and is achieving hold among global consumers. At present at least, digital-banking is restrained by a number of other aspects that will keep it a niche market. Over time, prominent digital-banking institutions will solve the problems of security and customer satisfaction and that will lead to developed scalability. However, till then, traders, investors, and clients of digital banks need to be ready for unpredictability as the market develops.
There are some approaches the digital banks can take to help grow their numbers of clients. One such direction is cryptocurrency. Digital banks are already affiliating with eminent block-chain technologies to control their function; it is only normal for these institutions to list the tokens that underlie the block-chains as well. In that connection, it is also natural for the digital banks to increase their services in other directions including loans and other financial products.
Modern banking demands a "technology first" approach. Consumer presumptions are varying with the rate of technological advancement, and this includes their expectations about banking. For banks to remain competitive, they need to offer consumers services that are both convenient and secure. A key way to accomplish this is by using more secure user authentication methods that have minimal impact on the user’s experience. This can be achieved by implementing behavioral biometrics-based technology.
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