The banking system has undergone several changes over the years. Until the 1990s, the word banking was associated with brick and mortar buildings with several sections, each serving a particular purpose. Since the 2000s, digital banking has gained rapid popularity, being used by a significant number of people all over the world. The latest change in this sector is the rise of digital-only banks like Alex Bank, also known as internet-only, digital and virtual banks. These operate exclusively online without any physical branches and offer services that you can access anywhere and anytime. Interesting right? What are the other features of these types of banks? How do they operate, and do they offer any unique benefits? Get the answers to these questions here.
What are digital-only banks?
In a digital bank, all kinds of financial transactions are conducted online. From offering personal loans to savings accounts, they fulfil a wide range of functions. The focus, among other things, is on being tech-savvy. These financial technology firms do not have any physical branches that are commonly associated with traditional banking. They still need to acquire a licence from the central banking authority of their country. The regulator will only grant the bank a permit when satisfied that they possess the capabilities and resources required to run a bank.
Difference between 100% digital banks and internet banking
People who aren’t aware of the difference between the two might mistake digital banking and digital banks to be the same. However, they are not. Digital banking is an online service offered by a traditional bank that you can use on mobile phones and computers. They are an online partner or subsidiary of a regular bank. Online banks are independent technica financial companies that don’t have physical branches and work solely through the internet. They are popular among people because they are faster, simpler and offer more efficient services.
What are some of the features of virtual banks?
Virtual banks, just like traditional banks, need money to survive. Net interest collection is one of the ways they do that. However, their overall business model is different. Since they are spared the expenses of maintaining a physical branch, the fees are significantly lesser. The decision-making process is influenced by the data collected from their clients and is made simpler by using AI-powered credit scoring. Collecting and analysing data is easy for them because of their modern technological platforms. Fully digital banks also use Application Programming Interface, or APIs, to prioritise user-friendliness and attract more customers.
How do online banks make money?
Online banks usually have higher profits than traditional ones because of the fewer overheads involved. A considerable chunk of their earnings comes from interchange fees paid by merchants when customers use their debit cards to make payments. The type of merchant involved also affects the rates. For example, if it is a hotel, the rates are considerably higher. The interchange percentage allowed for these types of banks are significantly higher. They also make money by charging interest on deposits, offering credit, and charging businesses during transactions.
Advantages of fully digital banks
It is extremely convenient
Although traditional banks also provide digital banking services, they are somewhat limited in scope. Opening accounts, conducting transactions, depositing money or performing other tasks while visiting banks with fixed working hours or units found only in certain areas can be highly inconvenient. You might also need to visit the physical branch from time to time. You can conduct whatever banking transactions you want through an app with entirely digitised banks anytime and anywhere and manage your account on your smartphone or device itself while viewing any activity that has taken place immediately.
They are user friendly
It is annoying and frustrating having to carry out monetary transactions on websites or apps that are glitchy and won’t run smoothly. Apps that freeze in the middle of payment or won’t perform the intended task are next to useless. Since digital banks prioritise customer experience and primarily work on digital platforms, their apps are smooth, efficient, and user-friendly.
The fees are lower
Since online banks operate entirely in the virtual space, they don’t have to rent a building or worry about the costs involved in maintaining a physical branch. There is no credit risk involved, and the products don’t require maintenance fees monthly. The benefits of lower costs are transferred to their customers in the form of lower prices. They may even offer a wide range of add-on services, including prepaid multi-currency cards, foreign exchange rates, apps, offshore or onshore accounts and escrow accounts.
Transaction details are provided immediately
With traditional banks, you may need to wait for a little while before your recent transaction details are updated. That is not the case with digital banks, where you are immediately updated on your account details. You are also able to view your finances daily.
Opening an account is very easy
This factor deserves a special mention because even though the process of opening an account has become more manageable, you never know what problems you might encounter. Opening an account with digital banking is effortless since they rely on a video identification process to do it. Neither do you have to go anywhere, and neither does a representative from a bank have to meet you face-to-face. Online ID check and other processes involved are all completed online. Just follow the steps mentioned by the banking app, and your account will be ready in a few minutes.
Enhanced security
One of the main concerns of the people while doing digital banking is security. Because virtual banks do everything digitally, they come with more in-built security features. Some advanced security measures available with virtual banks are role-based access control (RBAC), biometric verification, encryption technology and 2-factor authentication (2FA). These features ensure that your data is entirely safe and secure during all financial transactions and dealings carried out with the banking app.
Loan approvals are quicker
Waiting for your loans to be approved can be tiring. If the waiting period is extended, it can be even more frustrating. Online banks usually take significantly less time, sometimes even one day, to approve your loan. The credit evaluation and other procedures are completed quickly. The following process, where the funds are transferred to your account, also takes significantly less time. However, any loan process application will require identification.
Fully digital banks like Alex Bank are the future of banking because the financial services are fast, efficient and cheap. Backed by artificial intelligence, machine learning and other modern technologies, they offer you the most satisfactory customer experience.
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