Currently, use of information technology in banking has been on the rise as a way of improving the way banking services are provided. In this case, as the circle of technology is widening, people have become more receptive to the digital banking environment.
Currently in the United Sates, a shift towards digital banking accounts is quickly rising as more consumers prefer the internet banking services in preference to the physical banks. Thus, this shift is characterized by a number of benefits and, at the same time, drawbacks.
The rise of digital banking
Several factors have fueled the evolution of digital banking, these include technology, customer choices, and the quest for efficient banking systems. Digital banks or even the online-only bank is basically like any other normal bank which has all the facilities of the regular bank, sans the branch.
This entails the lack of brick and mortar offices, which in turn reduces the overheads, and most of the time, competitive customer offerings. Digital banks that are currently operational in the USA and considered to be among the best are Chime, Varo, and Ally Bank.
Advantages of digital banking accounts
Convenience and accessibility
Perhaps, the main benefit of digital banking is that it is extremely convenient and rather easy to access. When consumers open a digital banking account, they are able to carry out a lot of transactions right from the comfort of their homes or wherever they are.
This ranges from as simple as checking the balance in the account, withdrawing or depositing cash, making payments, and going to the extent of applying for an advance. It has come to the point where one does not even have to go to the bank as mobile banking applications and online products are available for anyone to use at any time.
Lower fees and better interest rates
Some arguments indicate that digital banks have low overhead costs than the physical ones. The cut on such costs mean they are in a position to provide cheaper charges and competitive interest rate on savings as well as loans accounts.
A majority of the players offer current accounts at a zero charge and without any required minimum balance, which is well received by young customers and the less affluent. Moreover, through interest rates on the savings account, clients can further expand their money faster than a usual bank account.
Enhanced security features
This is particularly relevant in the case of digital banks since security is of paramount importance, and modern technology is often utilized to safeguard clients’ data. Tools including, two-factor authentication, biometric login, fingerprint login, facial recognition and real time fraud monitoring make sure that the accounts are safe.
Moreover, it is also common to received real-time alerts of any transaction that occurs on the account, so that the customer can immediately report any fraud.
Disadvantages of digital banking accounts
Limited customer support
The major disadvantage of digital banking services is the inability to provide support through face-to-face interaction with the clients. Since the digital banks tend to provide customer service through phone, email and chat, some of the customers may not prefer it to interacting directly with the bank officials.
This can even be cumbersome when dealing with the issues of some finance organizations as well as tackling some conflicts. This is because conventional physical banking halls usually accompany a number of individualized services to their clients, which some consumers find satisfying.
Technological dependence
An important thing about digitally delivered banking services is that to obtain access to your account, you need a proper Internet connection and a device. When a customer reaches this level of trust, technical hitches like app crashes or server breakdowns may for a while deny customers’ access to their accounts or do business.
Further, anyone who lacks knowledge about the internet or does not have an effective internet connection cannot easily use the online facilities of banking.
Potential for cybersecurity threats
Though the clients are investing so much towards security concerns in digital banks, there is always the risk towards cybersecurity attacks. Cyber criminals and hacker are therefore always innovating on how to break into internet systems, and steal vital data.
It is worth mentioning that despite the fact that numerous cyberattacks exist, the probability of these threats is relatively rare but can become critical for definite consumers.
So while it is not directly the customer’s responsibility to apply strict security measures such as maintaining passwords, avoiding free Wi-Fi among other measures when dealing with their bank accounts, it is equally crucial to do so.
Digital banking and financial inclusion
Reaching the unbanked and underbanked
Digital banking has promising potential with regard to the expansion of the types of financial services that are available to the currently excluded groups. Traditional banks, on the other hand, demands for minimum balances and other charges that likely lock out the low income earners.
Another positive side is that because digital banks have fewer expenses and do not practice the charging of numerous fees, people who used to be excluded from banking services can now turn to them.
Empowering consumers with financial tools
This means that digital banks can introduce various financial products and services, as well as educational materials that would guide the consumers properly. As part of the online services, the banking applications provide budgets, saving plans and other financial self-management tools and materials to enable users to manage their funds to achieve certain goals.
Conclusion
Now, digital banking accounts have changed the whole scenario of banking facilities in the process of financial management in the USA. There are many benefits of using digital banking including convenience, cheaper service fees, improved interest rates, and improved security, thus, leading to increased consumers in this field.
However, one must note the corresponding disadvantages, such as little customer support and one’s reliance on the technology that comes with vulnerability to cyber threats.
It can be concluded that with the advancement in the use of digital banking, it is set to become a vital cog in banking services in the near future, with many benefits for the consumer but also problems.