What Makes Digital Banking Different?
The most significant difference between traditional and digital banking is obvious — doing business in person versus online. However, there are several more differences to consider. Unlike conventional banking, digital banking allows customers to access their financial information from anywhere, at any time. With most people on the go and busy, this has become a significant incentive for organizations to offer digital banking account opening options.
Other differentiating factors include being completely electronic (i.e., accounts, documents, banking information, etc.), requiring fewer staff members, cloud computing (services done over the internet), and big data access (user data tracking and collection).
And because of these differences, there are different challenges and opportunities you will experience.
Digital Banking Challenges
These are the most common digital banking challenges (and how to overcome them):
- Clearly communicating full product offering and digital banking capabilities to customers. This can be accomplished through customer onboarding and by creating informative content about your online product offerings and how customers can make the most of them. Videos, text, and images can all be used to create this content, making it easy for customers to find the information they need and learn about all the features available. By taking the time to ensure that your customers are fully informed about your digital banking offerings, you can provide a better experience. The better your customers understand the ins and outs of your bank's digital banking, the better their experience will be and the more they can benefit. This will, in turn, mean more potential customers (mainly referrals) and happier current customers.
- Overcoming the security concerns that are traditionally associated with digital banking. Security concerns are one of the primary reasons why some customers have been slow to adopt digital banking. However, as digital banking becomes more widespread, the security concerns that have traditionally been associated with it are becoming less of an issue. This is partly due to the fact that financial institutions are increasingly investing in security measures, such as encryption and two-factor authentication. Nevertheless, it is still important for customers to take steps to protect themselves from online attacks. One study revealed that 81% of cases could be attributed to a stolen or weak password. Therefore, it is essential to educate customers on how they can keep their accounts safe, such as by using strong passwords and being cautious about the links they click on
- Digital banking can cause some disconnect between you and your customers. Building relationships is essential to any business but particularly important for banking since customers prefer to keep their money or take loans from organizations they can trust. Studies show that 49% of people cite trust as the most important factor when choosing a financial institution. Build and maintain customer connections by providing access to real people and digital customer service options. This ensures that customers can get quick answers digitally when they need to but can also reach a customer support professional when they need additional assistance.
- Technical issues are more common with digital banking compared to traditional banking. Even with the most secure systems in place, there can be occasional technical glitches that cause disruptions in service. Whether service or technology issues/interruptions, any downtime between repairs or maintenance can impact the user experience. Although these issues can be inconvenient for users, the main concern with these scenarios is the safety of customer funds and data. However, updating customers regularly on scheduled maintenance and repairs can go a long way, easing these concerns and allowing users to plan for service interruptions.
Using the appropriate software, you can efficiently overcome these challenges and provide your customers a reliable, safe, and trustworthy digital banking experience.
Digital Banking Opportunities
Despite challenges, digital banking comes with a number of opportunities for banks to capitalize on.
- Attract/retain customers beyond the footprint of your current branches. Times are changing, and so are consumer needs and wants. This is particularly true regarding the increase in the number of people that would rather access their accounts online than visit a bank in person to make a transaction. A recent study found that most (78%) consumers prefer to do their banking digitally. Experts have seen this coming for some time. However, the pandemic did speed it up as more people considered alternative options to in-person interactions.
- Attract more borrowers when access to loans online makes the process easier. Along with more customers, the banking industry also sees more borrowers when offering digital banking. This is because there are more opportunities for those looking for a loan to access all their options online, fill out the application, and following approval — manage their loan from anywhere, any time. Not only is the online experience more streamlined, but a Deloitte banking survey reports that 26% of borrowers prefer online applications to paper forms, and 33% are already familiar with applying for loans using a digital platform.
- Mobile banking reaches the millions of consumers that have gone mobile for most tasks. Mobile online users have steadily increased over the last decade. According to Insider Intelligence, this is a pervasive trend that isn't solely preferred by the younger generation. Their report found that not only are 97% of Millennials already using mobile banking, but 91% of Gen Xers and 79% of Baby Boomers acknowledge the benefits of mobile banking. By offering mobile banking options, your bank will appeal to the large percentage of Americans that expect to be able to access their accounts and funds from their mobile wherever and whenever they want.
- Around-the-clock services maximize your profits. Unlike traditional banking, digital banking allows users to access their money anywhere, whenever needed. Not everyone has the time or the means to make it to an ATM or branch to pay a bill, get cash out, or make a wire transfer. Although there a more limitations to digital transactions for safety purposes, there's more flexibility for those who need access to their money quickly.
- Data collection capabilities mean more informed market predictions. Knowing and understanding your target audience isn't a walk in the park. You need reliable data to reach and resonate with current and potential customers better. No data is more reliable than first-party data collection obtained and interpreted in-house. Since digital banking is, first and foremost, digital, you will also benefit from digital tracking and measuring capabilities.
Types of Digital Bank Accounts
Much like traditional bank accounts, digital banking offers several account opening options. Each option has its pros, cons, and specific purposes. However, the most common factor is that the user is not required to complete the account opening process in person. Documentation is done entirely online, and verification (i.e., identity verification, facial recognition, fingerprint scanning, and voice recognition) is required to proceed.
The three most common digital bank accounts are:
- Savings account
- Checking account
- Money market account
1. Savings accounts
Digital savings accounts are the same as traditional ones, designed to save money. The funds can be used with little to no fees with a digital savings account compared to traditional accounts that typically require maintenance costs. While traditional savings accounts come equipped with a physical card, digital accounts are most commonly associated with virtual debit cards that can be used online or via mobile applications.
2. Checking accounts
A digital checking account refers to the ability to access checking account information, documents, and funds online. It does not require a trip to a physical location to set up or complete transactions. Still, it does require rigorous verification applications to ensure the user is using the correct identification and safe from cyber-attacks.
3. Money market accounts
Much like savings accounts, money market accounts are a way of saving money. The difference, however, is that money market accounts are pooled together to invest in heavily-regulated investments. While they tend to have a higher return than regular interest-bearing savings accounts, money market accounts require more risks as there is no guarantee that customers will get a return.
Does Digital Account Opening Lead to Fraud?
As we touched on, digital banking is secure — despite its stigma — when both parties take action to ensure it. For customers, you must try your best to educate them on the importance of taking proper security precautions with their accounts. This can also be an excellent opportunity to build customer relationships by showing you care and helping them stay safe online.
Some essential digital banking security tips to pass along include:
- Create strong and unique passwords that are random, unrelated to the user, and avoid common sequences (i.e., 1234 or ABCD)
- Do not access bank accounts on public WiFi
- Always be on the lookout for phishing scams that trick you into providing the scammer with personal information they can use to access financial information.
- Sign up for banking alerts to stay up-to-date on fraudulent activity
- Activate two-factor or multifactor authentication to add a second layer of security
When users follow these crucial security tips, they can rest assured their bank is up-to-date with one or more of the following digital security measures:
- Updated programs for anti-virus and anti-malware protection — updated anti-virus and anti-malware applications put a stop to common forms of cyber attacks. When combined with firewalls, the bank's network can catch and prevent attacks from getting into the network.
- Firewalls — firewalls help banks protect their network from attacks and malicious activity. In addition to anti-virus and anti-malware applications, firewalls detect risks and prevent the network from being overrun by viruses and malware.
- Encryption — bank websites typically use a current standard 128-bit encryption to protect customer data when users are active on their digital accounts. For instance, a user will get blocked from accessing their account if the browser they're on isn't aligned with the bank's security standards.
- Multifactor authentication (MFA) — Multifactor authentication plays a significant role in making it vastly more secure for users to log into their digital accounts. MFA has been linked to preventing as much as 80% to 90% of cyber-attacks.
- Electronic signature verification — an e-signature provides customers with another layer of safety, creating an audit trail that links them back to you, reduces the risk for fraud, and helps ensure compliance.
- Regular account monitoring and fraud prevention monitoring — just as users should always have their digital banking account notifications turned on, banks must regularly monitor activity. When a purchase seems off — whether it be because of the amount, location, duplication, etc. — banks immediately contact customers with an alert to respond with confirmation or refute. This ensures problematic transactions are either prevented before going through or addressed as soon as possible if the transaction is complete.
- Automatic logouts — by automatically logging customers out of their digital bank, banks can help ensure that other people cannot access those accounts when the user forgets to log out and vacates the premise. Whether the user is on a desktop, mobile phone, or laptop, an automatic logout shuts down access after a few minutes of inactivity, minimizing the risk of an account being hacked or records/financial information being obtained without permission.
Implementing Digital Banking at Your Institution
Implementing digital banking at your institution begins with determining whether it is the best option for you and your bank. It's common for many banks to rely on traditional ways of banking since it has worked in their favor for decades, but if you're still on the fence, it may be time to consider your customer's ever-changing needs and demands. As more people expand into the digital world, it's becoming increasingly clear organizations will need to venture into the new technology to stay competitive.
From there, you can implement dozens of initiatives into your platform to boost customer experience. To prevent these digital account opening initiatives from failing, lay the groundwork and assess the potential returns/results each initiative will bring to your bank and customers as you move forward. For instance, some items to consider when working on a digital initiative include:
- Does it display your best offers easily and understandably?
- Is the onboarding process relatively straightforward and simple to complete?
- Do you have a trigger to direct prospective clients back when they start the process of opening a new account digitally but abandon it?
- Does your process collect data throughout the entire digital journey?
When you decide to move forward with digital banking, you can get started with digital banking account opening software by:
- Scheduling a demo with a trusted software company can help you succeed in your digital initiatives.
- Work closely with your software company to set up your digital account opening experience and connect to your core systems.
- Embed your digital account opening experience into your platforms (i.e., website, social media, and emails).
With the right software and the latest digital banking trends, you'll be better able to meet consumers' expectations in today's Digital Era. Better yet, you'll have the unique opportunity to exceed those expectations and maximize their experience with your bank.
Want to Know More About Digital Banking Account Opening Software?
Digital Banking Account Opening software allows banks to customize the customer experience and streamline the path to open new accounts online. Although digital banking has been around for some time, many banks have been hesitant to move forward with the new trend. Luckily, with the help of technology, that's starting to change.
One of the primary concerns for banks has been security — and rightfully so. However, by working with a trusted software company, you can ensure your bank's security while still providing an excellent customer experience.
If you're interested in learning more about digital banking account opening software and how it can benefit your bank, reach out to schedule a 30-minute demo.