There is no doubt that the irruption of the digital is no longer just a change in the ways of life but a progress of it. Traditional banking can no longer be maintained if it does not update its services and adapts to the demands of increasingly digitized consumer profiles. Technologies such as Big Data or the Cloud are already part of new business models that have made the banking sector more updated than ever.
We can see it with the appearance of Blockchain or Fintech and in such simple actions as making payments with only a slight movement in the mobile phone. As a result we have a modernization in the sector that facilitates faster transactions and many other advantages. But why is traditional banking being left behind? The Director of the Master of Finance and Digital Banking Raul Maestre tells us the keys to this change.
Differences between traditional banking and digital banking
It is clear that banking has undergone many changes over time, but now we are at an important moment, in which we must detect the opportunities that digital banking brings us, both for business and for consumers. These are his main differences according to Master:
The customer’s position
According to our expert, “with the increase in the number of people who have access to the Internet, most of the clients that were using the services of traditional banking have gone to use the services of virtual banking or the case has come that he has replaced his life bank with a Fintech. ” There is no doubt that digital banking is gaining more and more weight within the financial market so they are attracting more customers and more market share. Therefore, the main difference is that the traditional bank is committed to the client that uses a card and cash and that moves to the bank branches while the digital client uses the latest technologies and does not need to move to make transactions.
Two types of support
While the online customer is committed to digital support, the traditional customer uses the bank offices to interact with the bank. The main advantage of online banking is its availability 24/7, making the traditional customer more limited in time and space
Greater advantages in Fintech companies
Maestre says that “among the main comparative advantages of digital banking to traditional banking is the convenience, speed and ease of management. On the contrary, in favor of traditional banking, the personalized treatment of the client turns out, although they often make a more commercial function than advising”.
The access mode
Each type of bank uses a few devices, the way to access financing in both types of banking is different. While in the digital format customers can, for example, request a loan from a computer or tablet, the traditional customer will have to do so in the office. “The main drawback is that although we can do it from any mobile device, the conditions of the loans are the same as if we manage it from a bank office,” says Maestre.
Check the movements of the account
In traditional banking clients consult the balance, the history or the transfers through the cashiers of their cards, while in digital banking they can consult their data at any time with just a couple of clicks, as well as having the possibility of Download the operations.
Advantages of digital banking
In spite of having highlighted the differences, it is important to know why to choose digital banking and the best way is to know its advantages.
It offers transparency and less fine print when it comes to carrying out procedures. The fact of contracting services through the Internet, requires that the conditions and contracts are on the web or mobile application and, at the same time, are more clear and concise than a traditional bank office, so that the user does not have the need to use an office or call a phone number.
It allows to carry out procedures through the Internet. Users can save themselves by going through the office and, therefore, the different procedures can be done through a mobile device or a computer, quickly.
The digital banking does not have schedules, that is to say, 24 hours 7 days a week, since all the procedures are carried out through Internet, there is no schedule to do them.
Fewer commissions or at least make them almost non-existent, make digital banks a good option for those users who seek to save maintenance or administration fees.
Attention to users 24 hours a day. Although they do not have face-to-face attention as in physical offices, most digital banks have customer service numbers or emails so that users can contact the bank whenever they need it.
Influence of the digital in banking
Digital banking has influenced growth in the banking sector in the following ways:
New experiences: digital has long ceased to be a theoretical concept to become a reality. Thus, in the same way that users every day consult their social profiles or email, users have been adapting to digital interactions in banking entities. The main challenge is the new paradigm is that banks will have to live for many years with two different types of customers, physical and digital, to which the same services must be offered and pay the same attention.
Fintech: In recent years, startups with a technological component have burst onto the financial sector, taking advantage of market niches between the new demands of users and the often obsolete services offered by traditional banks. However, and despite what may seem, traditional banks do not perceive the entry of the fintechs as a threat, rather as an opportunity to learn and improve their processes.
Internal culture: since the 90s of the last century, most financial institutions have Internet banking services through which users can access part of the product portfolio. However, in recent years this process of digitization has accelerated and it is no longer enough to have a web portal or smartphone application. Therefore, it goes beyond the technological adaptation of traditional banking, since it requires a profound change in the operating model, since in order to do things differently, banks must do things differently.
Automation of processes: automation allows eliminating manual and repetitive tasks, improving efficiency and, finally, seeking to reduce costs to increase profit margins.
Different geographical areas in the use of digital banking: in the last decade a process of transformation at the global level has been under way with a clear vision towards the end user, however, there are great differences at the geographical level. The speed of the market in Poland is not borne by the Latin American markets, which present a huge disparity.
Challenges of digital banking
“Users have become the focus of any service, they benefit from an ever wider range of products, closer and with greater knowledge of their real needs,” says Mestre.
For the expert, banks have opened spaces for disruptive innovation, listening to innovative companies. “The banking sector is connecting with its users, knowing their needs based on a greater analysis of data and information and can be more applied in offering a better service in digital banking,” he adds.
So, what is the objective of digital banking? Maestre says that his main goal is to take advantage of information technologies. “This has resulted in the use of FinTech alternatives and even Blockchain technology, as well as the use of different APIs”.
Another of the main challenges of banking is to ensure that the customer ‘Customer Journey’ is completely digital, since the main advantage is cost savings.
How to take advantage of digital banking opportunities
“Digital banking must build an emotional connection with our customers through digital media, as this type of banking entity should make its users feel important,” says the expert.
On the other hand, digital banking must offer a 2.0 experience to its users. “The emotional connection with users must be crucial to cultivate deep relationships, the digital experience must not be forgotten,” he adds.
Another important part for the expert is the responsible use of user data. “It is important to use big data and machine learning to maximize the user experience, but in a way that is not perceived as invasive, since users should feel that their privacy is in the best hands” he concludes.
Also published on Medium.