No industry has avoided the impact of digital technology, and banking is no exception. The banking industry is undergoing a radical digital transformation this year, nudged by evolving customer needs and, of course, the COVID-19 pandemic.
Although it has stood with one foot in the digital doorway for years, banking has finally crossed the threshold to embrace its future: digital banking.
Mobile platforms have evolved into powerful e-commerce and communication tools, and bank customers have pushed for that same convenience and security in their financial transactions. Although established banks began to offer online banking two decades ago, in recent years, the industry has expanded to incorporate the concept of digital-only mobile banks.
Lacking a physical infrastructure, mobile or digital banking operates exclusively online and can serve customers on multiple continents. Below, we look into the benefits of having a digital bank account, the considerations you should make when choosing a mobile bank, and how you can start your digital banking journey.
The Benefits of Mobile Banking
Mobile banks generally offer the same services as conventional banks, minus the hassle of having to dress up, head out, and stand in long lines to carry out your transactions. A digital bank account gives you the convenience of being able to access your account anytime, anywhere—as long as you have an internet connection.
You might be on-the-go—at work, shopping, at a restaurant, or in a hotel far from home—and still be able to pay for bills, transfer funds, deposit checks, or bill a client through your mobile banking app. All you need is the phone with your banking app installed.
Frequent travelers will find that mobile banking makes transactions in foreign countries so much easier. You can access your account no matter where you find yourself. You can withdraw funds in the local currency from a network ATM to avoid foreign exchange fees.
Need to transfer more funds between accounts while shopping in that market in Marrakech? No problem. Geolocation technology allows banks to determine your physical location, verifying your identity and approving your transactions quickly.
Since digital banks are products of innovation and technology, they can offer multiple programmed features that brick and mortar banks cannot do as easily. For example, automated savings allows you to request that a particular amount be transferred from your primary to your savings account regularly.
Digital banking also comes with a range of financial management tools that are not available in primary banks. If associated or partnered with a conventional bank, digital banking is subject to regulations by the Federal Deposit Insurance Corporation and the U.S. Securities and Exchange Commission. Startup digital-only banks must apply for and gain FDIC charter approval, as Varo has recently done.
Usually, mobile banks can offer higher annual interest rates and better debit card rewards since they are saving on overhead expenses by not operating physical branches and offices. They also offer lower fees (including out-of-network ATM fees) than typical banks.
Some mobile banks don’t require a minimum deposit to open an account. In addition to making bank accounts more accessible, this policy has become a primary selling point to entice potential clients to jump ship.
Factors to Consider When Choosing a Digital Bank
Need help choosing the right bank that suits your preferences and needs? Plenty of options exist, and doing your research before downloading a banking app and taking the plunge will help ensure that your chosen bank is a good fit. Factors to consider are security, customer service, and financial management features.
The best digital banks provide you with security at multiple levels.
First, make sure the digital security of your funds remains protected by systems that prevent digital hacks from breaking into your account—for example, in case someone accesses your device or account number. Second, be sure to choose a bank that is FDIC-insured (if you are a U.S. resident). If you’re outside the U.S., make sure you have a deposit insurer.
Not all mobile banks are FDIC-insured. If the security of your funds is a crucial factor for you (as it should be), limit your choices to those with an FDIC charter. The FDIC allows a maximum deposit of $250,000 to an FDIC-regulated bank, which guarantees that if anything happens to the bank, your cash will be safe up to that ceiling amount.
Customer service is an equally important consideration given that digital-only banks do not have branches or physical offices to visit if you have a concern regarding your account.
When bank-shopping, compare the availability of 24/7 customer assistance and the communication channels they offer. We highly recommended mobile banks with real-time customer support that is responsive through either live chat, phone, or e-mail.
Financial Management Features
Mobile banking offers a slew of innovative financial management features. Define your purpose for opening an account then choose based on which bank can best help you achieve what you desire.
Some online banks cater to high-yield savings accounts or accounts with interest rebates, but these may come at a premium.
If you need an account primarily for online deposit transactions and bills payment, choose a bank that offers no hidden fees or extra charges for services like wire transfers to other banks or billers.
Opening a Digital Bank Account
Most mobile banking providers offer an easy, paperless set-up process. Generally, they require you to download the app on your smartphone. They will ask you for a government-issued ID. You will then choose which type of account you want to open—savings, checking, or CD, for example.
Once the banking provider verifies your credentials and approves your account, you will be able to make your initial deposit and start maximizing your choice of features.
If you have inquiries, most banks’ websites have a list of FAQs, which provide answers to potential queries regarding the sign-up process. Many banks also have live chat so they can walk you through the process, or a telephone number you can call for assistance.
2020 is the year of digital banking. Banks are more accessible today than they have ever been. The hottest commodity of all is the all-digital bank, which provides mobile-first services for all your financial management needs.
Mobile banks primarily offer the convenience of managing your account and processing transactions in just a few taps and clicks. They also feature advantages in terms of interest rates, yields, and avoiding high fees.
You can achieve your financial goals by taking advantage of the innovative features of digital banking. Just be sure to do your research on features, privacy policies, and insurances to see which bank will meet your needs the best.