The days of traditional banking are waning. Fewer Americans are waiting for their neighborhood bank branch to open so that they can speak to a teller behind the counter. Fewer are standing in line for an ATM so they can check their account balance.
What are they doing instead? Turning to digital banking.
The Growing Popularity of Digital Banking
More Americans are choosing digital banking options in place of traditional banking. A recent survey found that one of the biggest reasons American customers switched their primary financial institution was because they wanted better access to digital banking options.
What Are Digital Banking Options?
Two digital banking options are available to consumers: online banking and mobile banking. Online banking (sometimes known as “web banking” or “internet banking”) allows clients to access and manage their accounts through their financial institution’s website.
With mobile banking, consumers can access their accounts through an app. They can download this app on their various mobile devices and manage their finances on the go.
The biennial survey of Household Use of Banking and Financial Services by the FDIC (Federal Deposit Insurance Corporation) found that more Americans use mobile banking as their primary banking method. In 2015, only 9.5% of Americans used it as their primary method. In 2019, that percentage rose dramatically to 34% — now more used than online banking.
What Are the Benefits of Digital Banking?
One of the greatest appeals of digital banking is that it’s convenient. You don’t have to travel to your neighborhood bank branch or an in-network ATM to manage your accounts. Instead, you can complete most of your banking needs in the comfort of your own home.
Bank branches aren’t accessible 24/7. Most bank branches are open from 9:00 a.m. to 5:00 p.m. on weekdays and have limited hours on the weekend. Some even close on Sundays. These hours of operation can be a major source of frustration when they don’t mesh with your schedule.
On the other hand, digital banking is accessible 24/7. You can manage your finances at any time of day, including when bank branches are closed. You can even access your account on federal holidays like New Year’s Day, Independence Day, Thanksgiving Day, and Christmas Day.
Some factors of your digital banking will be on hold during federal holidays. For example, automatic deposits and withdrawals won’t go through because payment processing is done through the Federal Reserve Bank, which will be closed for the holiday.
Online Customer Support
Many banking websites and apps offer 24/7 customer support through online chatbots. It’s a feature that’s offered by companies like Ally Bank, Discover Bank, HSBC Direct, and more. With online chatbots, clients can ask questions and get the help they need at any time of day. They don’t have to go to their nearest bank branch to get assistance.
Some clients might also see online customer support as a better alternative to customer support over the phone. For instance, someone with social anxiety might have an easier time typing their request for help in a chatbox than talking to a stranger on the phone.
Digital banking can help you track your personal finances. Since you have 24/7 access to your accounts, you can regularly check your balances, recent deposits, recent transactions, upcoming bills, and more.
This benefit will be especially useful for budgeting. If you are planning on making a personal budget for the first time, you can start by checking your digital bank accounts. Your digital bank accounts will reveal accurate, up-to-date records of your current income and monthly expenses. This information is crucial for creating a realistic budget.
After you’ve made your personal budget, you can track your spending to confirm whether it matches your budget’s guidelines. For example, you might notice that your energy bills are higher or that your grocery spending has decreased since you first made these categories. The moment that your digital bank statements reveal a significant change, you should update your budget.
Tracking can also help you spot warning signs of financial fraud early. While looking through your bank statements, you could spot mysterious transactions or withdrawals you don’t remember making. Once you’ve spotted these warning signs, you contact your bank and take corrective action before more damage is done to your finances.
Online banking makes it easy to set up and track automatic money transfers for multiple purposes, from paying your bills to building up your savings. For instance, if you’re trying to put together an emergency fund so that you don’t have to borrow money online again, you can automate transfers between your checking and savings accounts. Moreover, the transfer could happen after every payday, guaranteeing that a portion of your paycheck goes toward your emergency savings.
Mobile Check Deposits
You don’t have to go to an ATM or bank to deposit a check anymore. Many financial institutions offer mobile check deposits through their mobile apps. All you have to do is take a picture of the check with your smartphone camera and then deposit it in the app.
You can use this feature to deposit your personal, government-issued, and business checks. However, some checks (for example, traveler’s checks) may not be eligible for mobile check deposits. Look into your bank’s requirements to confirm which types of checks are exempt from this handy feature.
A simple benefit of digital banking is setting up account alerts through emails and notifications. Some examples of customizable alerts are low fund alerts, suspicious account activity alerts, and large transaction alerts. Alerts will encourage you to immediately direct your attention to your finances and address a problem.
An online-only bank doesn’t have brick-and-mortar locations and doesn’t need to hire in-person staff like tellers, security guards, and cleaners, which means it has much lower overhead costs than a traditional bank. With lower overhead costs, it can afford to extend more savings to its clientele by offering features like low maintenance fees and high-interest rates for savings accounts.
Digital banking encourages users to focus on digital payment options over cash since cash withdrawals can only occur at brick-and-mortar branches or ATMs. This may seem like a disadvantage to using digital banking, but in recent years, cash has been considered a potential safety concern.
Consumers have become wary of handling physical currency because of the COVID-19 pandemic. They feared circulating bills and coins could carry the virus, and they would risk infection by touching them.
Since consumers across the country became wary of touching money, they turned to solutions that felt safer: contactless, digital payment options. These payment options included mobile wallets and near-field communication (NFC) cards. NFC cards are debit and credit cards users can tap against card terminals to make transactions. These payments allow consumers to minimize their interactions with paper bills, coins, and even terminal buttons.
How Can You Transition to Digital Banking?
If you like these benefits and want to transition into digital banking, you should explore what your current banks and credit unions offer. For example, do they have online banking? Do they have mobile banking apps?
If you like what your current financial institutions offer, your transition into digital banking methods should be quick and simple. If you don’t like what they have to offer, you may want to look into a different institution that meets your needs, like an online-only bank. An online-only bank will allow you to manage your money through a website or mobile app.
Online-only Banks and Neobanks
Online-only banks are sometimes confused with neobanks (sometimes called “challenger banks”). The name can give a false impression since neobanks are technically not banks — they’re fintech companies backed by private investors.
Neobanks do not have a bank charter and are not regulated by the federal government. Since they do not have a bank charter, they do not offer loans and credit tools to their clients. Instead, they tend to focus on savings and checking accounts.
Online-only banks can have a bank charter, and they can offer services that you would find in traditional banks, like loans and credit tools.
You don’t have to avoid neobanks as a digital banking option. However, you should do your research and exercise caution when signing up for an account with one. Take the following steps:
- Check whether the neobank is FDIC insured by a partner bank. Many neobanks partner with another bank (one with a bank charter) to insure their products and services. Do not sign up with one that doesn’t have this protection.
- Check the account agreement for requirements and restrictions. For instance, some neobanks will list that they do not accept business-related activities with accounts. It could be a problem if you are a freelancer, contract worker, or small business owner.
- Look up reviews from customers online.
With all of this handy information, you’re ready to start your venture into digital banking.
More Articles From the Wealth of Geeks Network:
- What Business Owners and Entrepreneurs Should Know Before Becoming Location Independent
- Review: Not Your Mother’s (Pretty Little) Liars
- 7 Great Reasons to Hire a Car Accident Attorney
This article was produced by Wealth of Geeks.
Featured Image Credit: Pexels.