Why Digital Only Banking is the Future
Fuelled in large part by the pandemic – and the shift in our lives to online – the number of people signing up to use digital-only banks has skyrocketed.
Although banks remained open as essential businesses over the last few years, many people preferred to keep their distance to avoid coming into contact with the virus. Likewise, cashless payment methods soared in popularity since the disease could be transferred via banknotes.
Not to mention, as non-essential stores shut, everyone became more used to carrying out essential activities online as the world embraced the rapid digital transformation that the pandemic made necessary.
These factors meant that digital banking became more popular than ever, and this popularity continues to grow. The number of people using digital banking is expected to soar to 3.6 billion in 2024.
What is digital-only banking?
There’s a difference between online banking services you use with a traditional bank – one with physical branches that you can visit – and digital-only banks.
Digital-only banks, as the name suggests, only operate online and don’t have a physical presence.
New customers can sign up online with a digital-only bank by inputting their basic information and submitting documents verifying their identity online. From here, they can use financial services such as current and savings accounts, make transfers and payments, and access various extra features that traditional banks don’t typically offer.
Here’s why we think a future with digital-only banking is looming.
Convenience is key.
In a world where you can buy a product from Amazon and have it arrive the same day with just one click, people are becoming increasingly impatient, and efficiency and convenience are top priorities.
So, travelling to a physical bank to care for your financial needs presents a less-than-ideal solution for this modern mindset. Signing up for a new account – or opting to use investment services – is a long and tedious process, making paperwork and bank visits necessary.
However, customers of digital-only banks can hop online and set up a bank account in minutes without leaving the comfort of their homes.
Likewise, after creating an account, digital-only bank users can access their banking via their smartphone at any time, being instantly able to check their balance, receive alerts about their spending and make payments and transfers on the go.
They cost less to run.
Since there are no physical branches, digital-only banks have less overhead to contend with: they don’t need to factor in the building – and maintenance – of a physical branch, and they forgo the need to pay customer-facing staff.
For this reason, setting up a digital-only bank is much more appealing – not to mention, there’s a much lower barrier of entry in terms of cost – and you can bet that any new banks will enter the financial scene in the future will be digital only.
Due to the lower costs of maintaining a digital-only bank, digital-only banks have many financial benefits for customers, encouraging them to switch.
Often, digital-only banks allow fee-less transfers of funds from your account to other banks and offer free withdrawals from ATMs. They also forgo high-interest deposits and don’t charge exorbitant fees if customers dip into their overdraft (most digital banks don’t even offer an overdraft, compared to traditional banks that make a lot of money from their customers in this way).
Increasingly digital native population.
The younger generations – namely, millennials and Gen Z – are quickly becoming a dominant force in the economy and tend to guide (and indicate) consumer trends.
Critically, these are generations who have grown up in a technologically enabled world and are very comfortable completing everyday activities online that older generations may be more cautious of.
However, now that these digitally native generations are up to forty years old – and, as the years go by, they will comprise an even greater majority of the population – banking is likely to change as a result of the differing proclivities of these generations to those that came before them, paving the way for digital-only banks to become the new normal.
Digital-only banks offer services that traditional banks typically don’t, presenting users with a more personalised banking experience.
Many digital-only banks offer a budgeting feature to help customers save money and stay fiscally fit, including the option to set up spending alerts. Many digital-only banks also include the opportunity to receive in-app financial advice, set up ‘bill splitting’ to make shared bills less hassle, and even facilitate investing.
This helpful, more personal approach to banking is making many customers switch to digital-only, thanks to a banking model that aids – rather than detracts – customers’ financial health. We expect more and more will make the switch in the future as digital-only becomes the norm.