Digital banking means digitising banking operations and services by replacing physical banks with online platforms. It refers to the use of digital technology for automating traditional banking processes on an electronic or online platform.
It is to provide banking services and conduct financial transactions on a digital platform. This can save time and effort from the tedious paperwork of banks. Not only bank officials will have ease, but also
Also, customers can have the benefit of accessing the digital platform anytime anywhere as against the traditional banking system, where one needs to pay a physical visit during fixed working hours of the bank.
What does Digital Banking do?
Digital banking apps or platforms provide the same products and services that traditional banks offer. However, they offer them in a digitalised process where the customers need to go to banks physically. Customers can access their bank accounts and perform various banking activities through electronic devices such as computers, smartphones, and tablets.
Let’s understand how-
Online Banking: Customers, be they individuals or business merchants, can visit the bank websites or download mobile banking applications to avail of digital banking services. They can create new accounts within a few minutes. Customers can also log in for net banking if they have an existing account. They can enable net banking services, UPI payments, overdraft facilities, credit cards, chequebooks, debit cards, loans and new savings/fixed/recurring/current accounts.
When we talk of digital banking, it is not limited to mobile banking sites or apps. There are several third-party online banking apps, UPI apps, digital wallets, lending solutions, postpaid services, etc. Most third-party apps partner with some bank or financial institution and provide different kinds of banking services.
For example, neo-banks are digital banks that provide digital banking services in partnership with traditional banks. One can open a new account online and operate it like a traditional bank account.
There are several online credit card and loan providers that partner with banks and NBFCs for lending loans and credits.
Fund Transfers: Customers can send or receive payments via digital banking apps. They can add beneficiaries online to their mobile banking apps for fund transfers. These apps also enable UPI payments and hence by entering the UPI id or phone number, they can make payments.
Similarly, UPI apps like Paytm, PhonePe, GPay, etc. allow customers to link their bank accounts. With that, they can make direct bank-to-bank transactions, view balances and check the track record of all transfers and payments. It is real-time, quick and easy.
Postpaid or lending service providers can also transfer funds online and you can get loans online.
Online banking has helped online businesses and e-commerce stores to prosper. Online banking helps businesses to collect payments. They can receive pre-paid orders from customers than completely depending on cash-on-delivery (COD) orders.
Refunds also become easier when the source of payment by the customer is an online payment mode. Moreover, they can make quick payments to their partners and vendors for creating inventories. Likewise, they can make instant payments to logistic suppliers and delivery agents. Whether those are employee wages, incentives or partner commissions, digital banking can speed up the process.
Online Passbook and Bank Statements: All online transactions are safely recorded and bear a transaction or reference number. You can check the details of transactions and even seek customer support when you face any trouble like failures or unauthorised transactions. Many online banking apps provide bank statements and have an online passbook.
Bill Payments: Bill payments have never been easier before. Customers need not to go any department for paying bills like visiting the electricity board, gas agency, etc. They have the luxury to pay all utility bills like water, electricity, gas pipeline, landline, etc. by staying at home. Moreover, most apps allow auto-pay which can save them from missing payments and paying fines or late charges.
Customers can also for subscriptions of products and services. They can pay credit bills, postpaid bills, loan EMIs, SIPs and other such financial instruments via your digital banking app. Automating these bills will save them from penalties for missed/delayed instalment payments.
Therefore, from account management to getting customer support and assistance for bank-related inquiries, digital banking platforms provide it all.
These digital banking platforms ensure data protection through advanced measures like incorporating encryption, enabling two-factor/multi-factor or biometric authentication and other security measures. All this can prevent unauthorized access to the confidential banking information of the customers.
Benefits of Digital Banking
Why are people adopting digital banking when the services that they offer already existed and were offered by traditional banking systems? Well, the answer is simple. New digital methods of banking draw several advantages-
- Convenience: First of all, digital banking platforms have brought ease and convenience to customers. They don’t have to physically go to a bank for banking services but can access online banking from any region. It is accessible 24×7, unlike the banks that have fixed working days and hours. Business merchants also enjoy this benefit as they carry out bulk transactions daily and cannot be visiting the bank each time. Merchants need instant settlements of payments to get access to working capital
- Efficiency: Time-taking paperwork such as KYC procedures, opening a new account, standing in the queue for bank statements, cheque clearance, loan processing, etc. can be done more efficiently. Most apps allow online KYC, video KYC or AADHAAR-based KYC. Likewise, one can generate bank statements online, view cheque status, stop cheque payments, open new accounts, etc. on digital banking apps. Businesses can get an overview of payments and balance to gain insights about revenue and budget. They can manage loans and other financial transactions more effectively
- Customised Services: Digital banking platforms present personalised investment ideas or other financial services. Based on income, patterns of spending, credit score, etc. they may offer customised banking services. It makes it easier for both individuals and businesses to pay taxes and manage personal finances
