Digital banking refers to a banking process performed electronically, without requiring you to visit a bank in person. For example, visiting the website for your bank to check your balance is a form of digital banking. Depositing a check remotely and performing any bank transaction on a mobile device, such as a cellphone, also fall in the category of digital banking. With the exception of ATMs, which have been available for many years, most forms of digital banking are relatively new and rapidly expanding.
Not long ago, visiting a bank branch to conduct business was a commonplace occurrence. However, ATMs, computers and mobile apps make doing so unnecessary in most cases today. For example, it is far more convenient to scan an image of a check you receive into your online banking app than to deposit it at a branch office. When trying to predict how such changes may impact banking in the future, only educated guesswork is possible. However, there are multiple changes likely to take place. Below is a list of some future digital banking trends to watch for.
Digital Banking Perks May Become Requirements
As of writing, there are still many aspects of digital banking in the early stages of development or yet to be developed. However, many digital services that are now commonplace were once considered extraordinary perks. There was a time when a customer opening a bank account did not get immediate access to the app for the bank in question. Now, access to an online banking app is considered a necessity by many customers. Every customer wants the ability to check balances and perform transactions on the go.
The smartphone technology that makes doing so possible also used to be a novelty, but today smartphones are everywhere. Some existing digital banking perks offered by certain banks in 2018 that may become future requirements for all banks include:
- Artificial intelligence (AI) spending and saving tips.
- Mobile check deposit capabilities.
- The ability to use one banking app to view accounts opened through other banking institutions.
- Voice assist technology for digital banking transactions via mobile devices.
- The ability to open bank accounts digitally.
Making Branch Locations Irrelevant
Branch offices are an important part of banking, but they are becoming less so as mobile banking grows in popularity. In the past, having several branch offices in one’s neighborhood was considered convenient. Customers could visit any one of them to conduct transactions. Today, branch offices are not nearly as essential. Maintaining such branches and staffing them costs money. Prior to digital banking options, branch offices paid for themselves. Today, many banks find it more cost effective to focus on mobile banking.
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Many banks still have some types of transactions, such as setting up a mortgage, that require in-person interaction with bank agents. For this reason, and because banking institutions value visibility in communities, some branches are still necessary. However, many banking institutions are performing some of the following actions to reduce the money spent on branch offices:
- Reducing the physical size of bank branches to reduce costs.
- Employing fewer staff members in branch offices.
- Implementing digital banking kiosks and other technologies to replace closed branches.
- Closing many branch offices entirely.
Digital Banking May Make Community Banking Institutions Disappear
The switch to primarily digital banking is already happening. It is affecting all banking institutions, but particularly small community banks and credit unions. Small banks do not have the funds or resources to keep up with the major digital changes required to stay competitive with their larger counterparts. As a result, mid-sized banks are capitalizing. As small banks lose customers, they either shut down or are acquired by larger banks.
As mid-sized banks acquire smaller banking institutions, they gain more influence. Some of the largest banking institutions are beginning to suffer under the new threat from mid-sized banks. In addition, those larger institutions experience more scrutiny and must adhere to an increasing number of regulations. As a result, digital banking may have a negative impact on both the smallest and largest banking institutions.
Less Need for Physical Currency
Another digital banking trend is a reduction in the use of physical currency. Debit and credit cards have been popular for years, but now consumers have many additional digital options. For example, it is now possible to send funds from one account to another by pressing a few buttons on a cellphone. There are also almost no physical venues left where cash is required.
In the past, physical currency also created problems when traveling between countries. For instance, someone traveling outside the country had to convert U.S. dollars to the currency used at each destination. Any unspent currency had to be converted back to U.S. dollars at the end of the trip. Such conversions required the traveler to pay transaction fees throughout each part of the process.
Today, there are several forms of digital currency available. Among the most notable is Bitcoin. The use of digital currency is rapidly expanding. As a result, government-specific currency and physical currency may have to compete with these currencies in the future.
Digital Banking May Cause a Shift in Banking Focus
The increased trend in digital banking is causing a shift in focus as banks adapt to changing technologies, as well as to changing customer demands. As competition in the digital banking world increases, banks are slowly changing their approaches to customer service. Bank executives have historically focused more on the best practices to improve bank profits. The new trends are shifting more toward improving the experience of the customer.
To survive in the ever-growing digital banking industry, banks must develop intuitive technologies and customized marketing strategies. Some banks are already beginning to employ those strategies. There are certain banking apps capable of making suggestions to customers or presenting customized offers based on past transactions. Technological improvements at ATMs are also placing added emphasis on user-friendly interactions. Some ATMs now feature the ability to digital conference with staff members on the spot if there are problems with transactions. As consumers become used to such digital banking features, these perks are likely to continue to expand in the future.
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