The banking system has gone through quite a few changes over time; from traditional banking to online structures, with mobile and digital banking becoming the most recent trends. Given the availability and extensive applications of emerging technology, traditional formats and prerequisites have been replaced with modern facilities and seamless experiences. Limiting physical contact and opting for methods such as digital signatures have opened up a range of opportunities for banks and its customers.
Summary of the recent changes and trends in the banking sector:
1. Timely additions to service offerings are being made
2. Purely digitized products are being launched
3. Core banking objectives are going through strategic re-evaluation to comply with the changing demands
4. New insights and business concepts are gaining increased approval from individual and business clients.
5. Further digitized services and prospects are being researched, leaving behind the requirement of a physical branch.
Online Banking vs Digital Banking:
Online banking and digital banking are often confused to be the same concept. But when we look at it in a detailed manner, there are quite a few differences. The core purpose and objectives vary, even though means of access and log in protocols may remain the same. Digital banking is being viewed as a concept for the future, with higher potential for improvement and stage-by-stage development. It requires specific provisions, in terms of technology usage and talent requirement.
So, what are the main differences between Online Banking and Digital Banking? Let’s take a look:
Activities and functions:
Unlike online banking, which replaces just some of the core banking functions, digital banking aims to eliminate the necessity of approaching a branch for any reason whatsoever. Right from completing a payment to opening an account or resolving a dispute, customers are allowed a good amount of flexibility, with complete access to banking functions from the comfort of their homes.
Use of technology:
Online banking does make use of modern technological instruments to streamline functions to a great extent. It is used for optimum transaction management, transfer of funds and customer service. But when we look at digital banking, the scale and application of future-ready technologies has had a greater positive impact on service quality; it will continue to have a significant effect in the future as well. Automation, block chain, cloud computing, analytics, robotics, machine learning and artificial intelligence are used in various respects for offering an up-to-date service package.
With digital banking, there is a constant need to innovate and think outside the box. There is higher competition in the market, to offer the best range of digital solutions, which calls for improvement in services at regular intervals, as opposed to a consistent online banking structure. Where digital banking is concerned, technology upgrades, solutions and new banking products are researched frequently for their practicality and effectiveness. Exclusive digital solutions present new opportunities to suffice interests in the long run, and banks have been keen on pursuing these opportunities relentlessly.
From a banker’s perspective, digital banking information storage and recovery process is more complex in comparison to online banking. Initial steps usually call for hiring a specialist team for additional guidance, and project management to ensure smooth transition measures. Banks need to be more careful with information management techniques and judge future implications accurately. Since there is limited paperwork, generation of data, analysis, research and processing need to be precise.
Security concerns do exist with online banking, but the variables and risks differ from those connected with a fully digital banking set-up. Given the complex information structures, operation metrics and storage models, cyber-security is often more of a concern with digital banking. Hacking, phishing, malware and data theft are some main issues with which banks are dealing. Maximum access by customers is through their mobile phones, often leaving sensitive information vulnerable. Use of encryption and access paths require proper handling and security protocols designed by specialists.
A digital banking set-up, once fully operational as per expectations, will reduce operating costs effectively. The enhanced use of technology promotes more savings for the bank with each passing year, provided timely upgrades are considered. Understandably, cost is an important factor in the decision-making process and digitization is being considered all around to improve profit margins and remain competitive as well. Automation simplifies processes and increases productivity standards.
Effect on Employment:
Online banking eases the workload on existing employees within the banking organization. Employment opportunities follow the traditional structure, with minor changes for including professionals to handle online activities. Since digital banking is aimed at complete transformation, job opportunities in this segment will be limited to people with technical knowledge and those proficient with digital concepts. In case an existing bank is planning such as change, employees are threatened as maintaining a redundant position is usually not considered.
Compared to online banking, digital banking makes use of customization tools to offer clients a more personalized experienced. There are a few obstacles in the form of data protection laws and various restrictions on use of information for specific purposes. These differ based on the region, and further influenced by threats or any recent incidence reports. Thorough research and planning is called for in order to determine compliance levels and avoid any disputes.
Impact on Customers:
From a customer’s perspective, digital banking offers a better range of solutions in comparison to online banking. Personalization methods are included in digital banking, with tools that map customer journey and determine prominent preferences. Inevitably, is has prompted better customer satisfaction levels, because of the improved accessibility to new and improved services. Digital banking online chat support services and Chatbot functions improve response times to queries, and problem-solving efforts are more streamlined.
Digital banking facilitates discounts and rebates through tie-ups with third-party organizations and e-commerce retailers. Since the cost of operations is lower, they are in a position to provide better opportunities in this regard, increasing the overall appeal to customers.
Scope of services offered:
The scope of online banking is somewhat limited; essentially they encompass the traditional branch functions being made accessible online for customers. On the other hand, digital banking goes way beyond the realms of normal banking solutions. A few years ago, the range of services offered could not have been fathomed, but today, it has become a regularity well suited to the fast-paced lifestyle.
These were the main differences between online banking and digital banking, and implications to various aspects of banking. As new banking technologies emerge, the scope for digital banking will increase further. There are a few additional constraints though, such as gaining customer trust and establishing a lasting relationship. Customer satisfaction levels will have to be maintained, making them the focus of each decision. Monitoring changing demand trends closely, and associating with a proactive decision-making format would be absolute essentials.
The banking sector is constantly evolving through a series of changes, brought forth by the digital revolution. For the digital banking segment, competition will become tougher moving ahead, calling for increased dedication from teams and regular upgrade of services to meet customer expectations. We can expect a trend of strategic partnerships and acquisitions to emerge, as organizations look to identify opportunities for optimum synergy. Management and organization for any transition and subsequent handling needs to be precise, though, to ensure smooth flow of operations.