High street banks are being challenged by digital only banks, but what's the attraction of this new wave of banks that are threatening to change the face of banking?
What are digital banks?
On the whole, digital banks focus on the mobile app experience and do not have any actual physical presence - i.e. no high street branches. With digital bank Monzo reaching the milestone of a million customers and its rival Revolut revealing they have nearly three million users, it's clear that digital banking is a trend that isn't going away.
Monzo signs up around 20,000 new customers per week, accounting for 15% of new weekly current account openings in the UK, while Revolut is adding around 49,000 new subscribers in the same period, both banks are growing at an extremely fast rate. But what is facilitating this growth? The need for cost cutting and increased revenues, poor customer experience, unfavourable rates and the benefits of new technologies all play a major role.
How does digital banking work?
As digital banks aim to provide a more modular, transparent service to their clients, they're clearer with what they provide and allow users greater visibility and control over their finances. Spending updates are in real time, 24/7 in app support is provided and such banking allows commissions free spending abroad, so the benefits to users over their traditional competitors are clear. Plus, as digital banks are doing their best to stay ahead of the competition, the likelihood is that their users will be the first to benefit from the latest banking innovations.
Could your business benefit from digital banking?
In brief, yes. There are several benefits your business can enjoy from digital banking, including:
- Reduced costs: Digital banking may facilitate operational cost savings for your business.
- Increased agility: The automated element of digital banking software means that you can act quickly when it comes to market changes.
- Users are more likely to benefit from a more efficient, advanced service and the front-end interface is likely to much more user friendly.
However, there are also disadvantages associated with such banking methods. Technical glitches can cause major issues for users and the threat of a cyber security breach is much greater.
Do I still need a traditional bank?
Many businesses opt to open a digital-only bank account to work in tandem with their existing accounts, so it may not necessarily always be a case of having one or the other. Some choose to use their digital bank account as a budgeting tool alongside their existing traditional accounts. Unlike traditional accounts, your digital bank will be able to offer you: New digital-only banks are on the whole more flexible, quicker to adapt to user needs, more user friendly and more personal than traditional banks. Their biggest advantage is that they start with a digital platform using the latest technology, which is nothing but beneficial to businesses.