Digital Banking: Benefits, Technology

  • Post last modified:29/04/2022
  • Reading time:11 mins read

What is Digital Banking?

Digital banking is the wave of the future. Digital banking” often gets confused with mobile banking and online banking, and even omnichannel banking. However, these involve digital applications. Digital banking has been seen as an add on advantage to traditional and existing banking services. But, the landscape of digitalising is very vast.

Digital Banking is the application of technology to ensure seamless end-to-end (STP in the ‘old’ jargon) processing of banking transactions/operations; initiated by the client, ensuring maximum utility; to the client in terms of availability, usefulness and cost; to the bank in terms of reduced operating costs, zero errors and enhanced services”.

Another useful definition provided by John Ginovosky is “Digital banking is the incorporation of new and developing technologies throughout a financial services entity, in concert with associated changes in internal and external corporate and personnel relationships, to provide enhanced customer services and experiences effectively and efficiently.


Benefits of Digital Banking

Benefits of Digital Banking to Bank

These are some benefits of digital banking to banks:

  1. The elimination of costly back-office processing operations, fewer (or ideally no) errors.
  2. Smaller branch footprint (the typical branch can become a kiosk affair, providing technology interfaces for the client to use plus the ability to deal with banking specialists via a video link) – a minimum number of actual staff will be required.
  3. With more digital data available with banks, they can take data-driven dynamic decisions by using digital analytics. This benefits both customers and banks.
  4. Technology is non-discriminatory. Everyone will be treated the same at banks.
  5. The number of customers will be increased for banks because of the increased convenience of banking.
  6. Digitalization reduces human error.
  7. The need of handling large amounts of cash will be reduced.
  8. Concentrating banking/business specialists in a single centre, who are then availing- able to clients via a technology link (either on their mobile, pc or via a kiosk branch).
  9. Repetitive tasks will be eliminated by automation.
  10. Productivity will be increased.

Benefits of Digital Banking to Customers

Following are some benefits of digital banking to customers:

  1. It offers an improved variety of services.

  2. 24/7 bank services and availability through mobile, personal computers or kiosk branches. Smart banking applications that allow all transactions to be completed from the device of the customer’s choice, from beginning to end (with clear instructions and fail-safe mechanisms) and access to a full range of services (savings, investments, insurance, loans, mortgages, foreign currency, etc.).

  3. New useful client services such as warnings, notifications, budgeting, expenditure analyses, savings programs, and calculators.

  4. Opening and maintaining bank accounts are never been this easier. v. Rural and urban gaps will be eliminated.

  5. With the increasing cashless transactions, the fake currency threat will be reduced.

Digital banking is a necessary part of every bank’s agenda as a way to overcome outdated approaches and mismanaged client relationships. Across the globe, the banks are exploring ways to convert to a more digital business model. The primary focus has been on enhancing the product suite with value-added services and achieving an integrated channel experience.

Despite several opportunities, banks face pressure from both external and internal forces that hinder full-scale digitalisation. The complexity and width of digital initiatives vary on the infrastructure, customer preferences and policy framework of the region. Digital skill gaps, lack of user awareness and adoption, regulatory restrictions and limited infrastructural support push banks to constantly modify their digital strategy.


Technology Used in Digital Banking

The technologies required for a digital banking implementation fall into seven discrete areas of strategy:

  1. Infrastructure
  2. Data
  3. Content
  4. Business Process
  5. Analytics
  6. Social and Mobile
  7. User Experience

Infrastructure

Few banks have the integrated infrastructure in place to enable the seamless retrieval, storage and distribution of information and data, both up and downstream. Cloud technologies lend themselves to digital innovation with their security, reliability and elasticity.

The cloud can also serve as a flexible integration layer, accommodating off- and on-premise applications that need to be integrated into the digital architecture, as well as digital app delivery.

Data

Precise information is the key to understanding bank customers and creating unique digital personas for tailored interactions. Financial instruments and transaction processing, however, typically involve the exchange of large volumes of data from multiple sources. It’s a mammoth task: data management accounts for 92% of the cost of the financial services business, according to estimates.

Digital banking requires a new set of plans and policies to control, protect and enhance the value of data and information assets. This effort includes reference architecture components of a master data management (MDM) strategy, unified information delivery (reporting) and information integration.

Global data semantics include industry-standard data models like IFX/FDSM, as well as the definition of supporting processes and structures, including data governance, data quality and data organization.

Content

An enterprise content management roadmap for digital banking includes storage, management, workflow, process, integration, BI, analytics, re- porting, information architecture meta-model, content type, and lifecycle and syndication methodology. It also includes consolidation, migration and search strategy, product evaluations and adoption strategies.

Business Process

Process components include service orientation, governance, technology adoption, process orchestration, tuning and optimization, rules engine adoption and enterprise service bus adoption.

Analytics

Analytics capabilities include multi-dimensional analysis by geography, customer type, product, traffic source, channel, campaign, Web page, scenario, IVR path, and speech to text. They also include data, Web site and real-time content analysis, user profiling and segmentation, campaign optimization, time and path correlation, frequency and monetary analysis.

Also important is the ability to track customer behaviour to correlate with revenue-driving activities and nurture cross-selling opportunities.

Social and Mobile

The information must be accessible from anywhere and from any mobile form factor. Other key components include social media and collaboration for external client-facing business applications and for internal productivity improvements, gamification for customer engagements, the digital app store as a one-stop-shop for mobile business applications, authentication and access security.

User Experience

A consistent user experience needs to be provided across all major interaction touchpoints. Other key factors include information architecture, personas, wireframes, screen flows (process UI), visual design, interactive mockups, campaign management, branding, search engine optimization, user experience and session management, responsive Web design, usability, prototyping and UI technology.


FAQ Related to Digital Banking

What is meant by digital banking?

Digital banking is the digitization (or moving online) of all the traditional banking activities and programs that historically were only available to customers when physically inside of a bank branch.

What is meant by mobile wallet?

A mobile wallet is a way to carry credit card or debit card information in a digital form on a mobile device. Instead of using a physical plastic card to make purchases, one can pay with a smartphone, tablet, or smart-watch.

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