digital banking
Digital banking is here to stay. Find out everything you need to know to help you choose which digital bank you want to trust with your hard-earned cash.

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Various brick and mortar banks have dominated the UK banking space for decades. Of late, digital banking experiences in the UK are continuously advancing. Backed by the advancements in technology such as Blockchain, Machine Learning, the Internet of Things, and Artificial Intelligence, these challenger banks are making a substantial statement in the banking landscape.

This article will help you get up to speed on what digital banking is, its features and distinction from online banking, and the services offered by these challenger banks.

What Is Digital Banking?

Digital banking is the digitalisation of all aspects of banking, from the front to back-end aspects. It refers to the automation of traditional banking services. The most vital exception from these traditional banks would be the fact that these banks operate solely on digital platforms. They have no physical banking halls you can go to for face-to-face banking services.

Following the global lockdowns in 2020, digital banks reached out to greater audiences and gained a prospectus. Essentially, digital banking combines online banking and mobile banking used by most banks.

Digital banking banks through their various platforms allow users to:

  • Bank
  • Save
  • Pay bills and make payments
  • Borrow
  • Enquire account balance
  • Transfer funds
  • Make payments
  • Apply for other financial products
  • Budgeting and spending analysis tools with automated real-time updates

The Future Of Business Payables Innovation Report in 2021 highlighted that more than half of small or medium-sized businesses believed digital banking platforms can improve the visibility of their cash flows and save them some time.

In the last quarter of 2021, around half of over 250,000 UK banking customers who switched their accounts through the Current Account Switch service responded by saying they were looking for better online banking providers. 38% looked for better customer service and the remainder were in need of better online banking services.

One survey showed that the giant digital banks, Starling and Monzo ranked 85% and 83%, respectively, in terms of customer satisfaction. The Royal Bank of Scotland had a lower customer satisfaction rating of 56%. This highlights the need by UK consumers for convenient digital banking.

We recommend you also check out Monese.

What Is the Difference Between Online Banking and Digital Banking?

Most people perceive that digital banking and online banking are the same. This is not true. They are similar yet different.

Online banking deals with everyday essentials, such as checking balances, reviewing transactions, and transferring funds. This is the core operation of the bank, which is shifted to online presence with the help of online banking. Online banking is a means to an end.

With online banking, you can access your traditional banking features and services on your bank’s website from your internet-enabled phone or computer. Online banking allows you to sit down at your computer and handle many of your personal finance needs without ever having to go to the banking hall.

Furthermore, online banking is an additional service offered by traditional banks, offering services such as:

  • Bill payments
  • Balance inquiry
  • Bill payments
  • Setting and cancellation of debit orders
  • Paying in cheques

On the other hand, digital banking outshines by providing all the above services and also:

  • Real-time spending alerts
  • Allows for customization of the service to meet personal preferences
  • Creates customer profiles toward targeted product sales

Mobile banking means using an application to access your banking features on your mobile devices such as smartphones or tablets. Digital banking combines mobile banking features and online banking features, to come up with a superior banking service.

Who Offers Digital Banking?

  1. Digital banking via brick-and-mortar financial institutions- Some traditional banks have headed to the call to venture into digital banking and remain competitive.
  2. Digital banking through online banks- These have emerged recently and dominated in offering greater banking convenience to banking users. They do not have physical banking halls and operate 100% online. Some are affiliated with traditional banks and offer online services. Check out this review of the best digital banks.

Is Digital Banking Safe?

The answer is a resounding yes! Furthermore, the financial Conduct Authority (FCA) regulates the financial services industry in the UK. Each digital-only bank before it commences offering service to the general public must have a UK banking license.

Additionally, it is required to display the Financial Services Compensation Scheme (FSCS) logo on its financial products. Therefore, one simply needs to scrutinize whether the digital bank has this logo displayed on its savings and current accounts. The FCA is a reputable regulator and hence should the banks have their license, this would imply that it is safe to transact with that digital banking service provider.

When the bank fails, the FSCS regulator compensates customers up to £85,000 of the funds held in such accounts. This guarantee affirms the safety of the digital banking platform.

What About The Digital Banking App, is it Safe?

When it comes to most digital banks, keeping account information secure is one of their greatest priorities. Most banks implemented the following:

  • Randomly generated security code when transacting which is additional to your username and password.
  • Two-step verification when you log in, which is more secure.
  • Secure banking if a member of FSCS which regularly updates the security of banks.
  • Real-time notifications after every
  • Log in using fingerprints, speech, and facial recognition

Regardless of all the security features above, there is a need for bank users to refrain from sharing their pin or login information with anyone for safety reasons.

Users also need to refrain from using public Wi-Fi when using digital banking platforms. Installing a trusted antivirus or VPN software on your devices will also be recommended, to help ensure the safety of bank users’ banking data.

What Are the Digital Banking Services?

If an individual has access to a stable internet connection and an internet-enabled smart device, digital banking has a lot to offer. Digital banking services include the following:

  1. Viewing and downloading bank statements
  2. Transfer funds using NEFT, RTGS
  3. Mobile banking through digital platforms provided by your bank
  4. Cash withdrawals on ATMs across different places
  5. Pay bills
  6. Acquire loan financing
  7. Clear cheques
  8. Monitor transaction records

Digital Banking Features

Digital banking enables you to:

  • Easy to set up as they only require your personal information and proof of identity. Verification takes less than three days.
  • Convenient access in the comfort of your home or anywhere you might be without having to go to the bank.
  • Makes money management easier through saving pots and spending alerts.
  • Easy access to all your information on your devices – there would be no need to visit a branch to enquire about any account-related issues you might be having.
  • Available 24/7 regardless of business hours. Should you be in a different time zone, you can easily transact regardless of time differences.
  • Enhanced transparency as you have access to all the product information. No shadow fees emerge when using digital banks.
  • Benefit from personalized service based on your usual product preferences from your past information.
  • Mobile banking means using an application to access your banking features on your mobile devices such as smartphones or tablets. Digital banking combines mobile banking features and online banking features to come up with a superior banking service.
  • Enhanced user confidence derived from the military-grade security software used by digital banks in the bid to secure banking transaction data.
  • Regulated and licensed. Hence, there is a quicker implementation of new regulations which enhanced efficacy in operations and customer service to users.
  • For small businesses, some digital banks such as Revolut and Tide offer access cloud accounting, and trading platforms and even crypto exchanges.

Digital Banking Pros:

  • Digital banks pay higher interest rates on savings as they have lower overheads due to operating on the internet instead of maintaining physical branches.
  • Most digital banks don’t charge monthly fees and charge lower service fees. They have no minimum balance requirement and have low minimum deposits.
  • Opening an account is easy and very quick as they only require your personal information and proof of identity. Verification takes less than three days. This is quicker than most traditional banks.
  • Gain easy access to your account at any time of the day and from anywhere in the world.
  • Enhanced transparency due to easy access to all the product information. You can easily track the money in your account.
  • Easier money management due to real time spending alerts from the digital bank.
  • Secure and well regulated. Should the bank fails, the FSCS regulator compensates customers up to £85,000 of the funds held in the digital bank’s accounts.
  • Licensed and regulated by the FCA, a reputable regulator. The FCA has measures in place to ensure that digital banks users’ money is safe.

Digital Banking Cons:

  • Limited face-to-face help because digital banks have no branches. Therefore, they offer phone and social media-based customer service which, at certain times, is not that efficient.
  • It’s sometimes hard to deposit cash in an online bank. Sometimes you have to first transfer the money into your traditional bank account. The charges you incur are based on that traditional bank and they tend to be more.
  • It might be a challenge to navigate through the digital banking platforms for people who are not tech-savvy. It is easier for millennials to use their mobile and digital banking platforms.

If this guide to digital banking helped you, please recommend DigitalSupermarket.

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