Digital-only banking is gradually taking over the African financial space. These days many people enjoy easy access to everyday banking activities via a computer or mobile device.
But first, who remembers the good days of collecting a penned down ‘number’ and scrambling for seats before carrying out bank transactions? Well, that doesn’t happen anymore or at least not too frequent.
A simple tap of the phone and next thing- debit alert, credit alert, transfer, debit, debit, light bill, that bill and another debit alert. It’s as easy as that all thanks to Digital-only banking.
Digital banking has recorded remarkable success in Africa following the popularity of telephones and mobile gadgets globally as transactions can easily be carried out via the internet without the need for a physical presence.
Although this change has been long forthcoming, the pandemic however amplified its emergence.
Digital Bank In Africa
The average traditional bank has the ambition to change — or at least, create change. In catchy copies and amazing graphic edits on public holidays, we are constantly reminded of this willingness.
But, buckled with high operation costs, slow customer service response systems and a list of other bad attributes, customers look for alternatives and ease to their banking experience. This search for more has propelled a new form of banking in the financial industry.
Alternative banking platforms such as Kuda, Fairmoney, Tymebank, etc are examples of the ‘more’ who are redefining banking.
However, the success of this ‘new’ banking system is sponsored by the rise of a tech-savvy generation, a generation that desires flexibility and financial systems that understand their needs at transactional levels.
Now we have seen the numbers, what then is Digital-Only Banking System?
The Digital-Only Banking System
The digital-only bank also referred to as Internet-only banks, are institutions void of physical structures. It is the automation of traditional banking services that enable customers to access banking products and services via an electronic/online platform.
This new form of banking has replaced core physical facilities with fully integrated cloud structures. These cloud structures are an integration of systems that combines traditional banking operations with an agile approach to provide customers with the opportunity to receive financial services remotely.
How Digital-Only Banking Differs From Online/internet And Mobile Banking
Although largely mistaken for each other, there are differences between the digital-only banking system and online banking. However, while both run on the internet and largely constitute similar frameworks, their scope of operation is totally different.
Let’s say you opened an account with a bank that has a physical address and rather than going to one of their branches to pay for a transaction, you simply log into your mobile bank app and make a payment. This is called Online Banking.
The differences between the both are further highlighted below:
- Online banking exists to digitize the already existing banking operations, making them easier to access over the internet. Here, everyday operations such as bill payments and transfers are made via the internet. It’s just shifting daily transactions to an online presence.
- Digital-only banking is a different form of banking entirely. The principle behind this banking system is the belief that the entire banking process can be conducted remotely. Here, every single banking practice, from account opening to processing of payments, and other financial interactions, can be done behind a smart screen.
- Online banking is the general term for all banking operations that happen over the internet. General transactions such as checking account balances, money transfers, bill payments, and other daily transactions are included as part of the online banking transactions. They are modern solutions offered by typical banks.
- Digital banks are different. They offer a broad range of internet-enabled services. With cash and wireless transactions, the possibilities under digital banking are inexhaustible. The digital-only bank runs on the premise that the entire banking operation can be handled through the internet, void of physical structures and interactions.
Digital Banks Vs. Traditional Banks: How Do They Compare?
By simply reading out their different names, anyone can point out the apparent distinction between both forms of banking.
The digital-only bank relies exclusively on the internet as a driver and platform for all its operations. They are mostly referred to as branchless banks, neo-banks, or internet-only banks.
While traditional banks are more common. They are banks with a physical presence and a domesticated license of operation. Traditional banks are the regular banks you find in your neighborhood. They offer their customers the privilege of walking in to make deposits and lodging complaints, to customer care representatives.
But these are not the only differences between these forms of banking. Let’s go deeper.
Big Data
This is one of the differences between traditional and digital banks.
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The digital-only banking is more distinct in its ability to amass big user data. This is because all operations are completely electronic making it easy to trace and analyze data collected from users.
Everything on a digital banking platform can be tracked and analyzed in bulk, allowing for a deeper insight into their customer base than most traditional banks.
With access to big data, digital banks may better tailor their platforms, customizing them to best meet the demands of their customers and increasing customer satisfaction.
In a world of divergent tastes and preferences, understanding the different users of a product or service is beneficial in providing maximum satisfaction. This is one huge advantage that digital-only banks have over their contemporary. The analysis of data also enables the proper customization of their platforms to accommodate wider demography.
Seamless Transactions and Operations
Automation is a big word in this current era. The ability for transactions to happen with little or no human interaction is a significant difference between both banking systems.
The traditional banks rely heavily on the many individuals working behind the clock to ensure that transactions can take place. The human input ranges from deposit cashiers to customer care agents, and even the security officials working within the bank premises.
Digital-only banks operate over the internet. Every transaction is simplified and automated to ensure limited third-party intervention for transactions to occur. This ideally cuts down on multiple costs making it possible for digital-only banks to offer lower operation fees, better interest rates and a higher little to no transfer fees.
Welcome to the New Age of Digital-Only Banking
As different aspects of the financial industry get integrated into the internet, new methods of financial transactions get developed.
It’s clear that digital-only banks can offer customers who may not have access to traditional banks, especially in remote areas, the chance to start up or further their financial journey with ease. Banking has evolved from a product-centered approach to experience-centric procedures.
They’re also able to grow faster, as they don’t need to worry about setting up physical branches across the country. Now that the digital revolution is sweeping Africa, it’s clear that this is just the beginning for digital-only banks in the region. It will be interesting to see how they develop in years to come.
Africa’s introduction to the world of the digital-only banking system was ushered in by platforms like Kuda, Bank Zero, and several others.
The sector still has a long evolutionary period to grow through as we are only in the wake of a new means of financial interactions. A necessary mindset for the coming revolution changes from a product-centered approach to experience-centric procedures.
Several gaps still need to be filled before more people can trust the digital-only banking system. Issues such as data privacy and security for individual customers remain grey areas.
Customers can also point out minor inconveniences like; network downtime, website error and several internet-related issues. But, compared to the benefits and ease these new banking systems offer, most customers would choose a digital-only service, again and again.
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