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The advancement in technology and ever-changing customer expectations has caused a massive transformation of traditional banking into digital banking. Many traditional banks have realized the importance of serving the customers’ expectations and have transformed their operations into the digital arena.
Traditional banking has been in the scene for decades now. It is a form of banking where customers have a direct face to face communication with banks. It involves a brick and mortar branch where customers visit in person to do their daily transactions.
Digital banking means banking done through a digital platform. It helps you to do all your banking transactions online without having to visit a brick and mortar branch in person. It allows you to access your bank accounts and perform your transactions at any time and at any place.
Traditional banking has been prevalent in India for decades, where people tend to visit banks for fulfilling their financial needs. Be it for enchasing money or depositing it or for transferring money from one bank account to the other. They required standing in long queues to complete their financial needs. In case of opening a bank account, you required going to the bank and fill numerous forms to open a bank account.
All this process took time, and with digitalization in many industries, financial service providers realized the need for shifting to digital means to do banking. Customers’ expectations also started shifting, where they demanded better customer service and excellent user experience from banks.
Financial service providers realized that with banking going digital, it could help them in various aspects such as it will improve efficiency, generate growth, and the convenience that it will provide users will cause the addition of more prospective customers. Now with most of the banking services going digital, you find that people are enjoying the simplicity of managing their finances without actually having to visit bank branches.
Digitalized banking differs from traditional banking in a number of ways. In the table provided below, we bring to you the aspects that make both different.
|Standards of Comparison||Digital Banks||Traditional banks|
|Customer service||Customers don’t require standing in queues to perform their banking transactions.||The employees of the bank can only attend a limited number of customers, and customers must wait in the queue to make transactions.|
|Costs||Lower operational costs||Traditional banks incur a lot of operational costs and fixed costs|
|Accessibility||Customers don’t have to wait for the banks to open; they can access their bank accounts anywhere and at any time.||In order to do banking transactions etc. customers require visiting the bank branches and within the banks prescribed working hours.|
|Time||Various bank operations can be done in a matter of a few minutes as with this form of banking, speed is one of the most significant advantages.||Traditional banking requires patience as it takes some time to process your requests.|
The following elements actuate traditional banks to consider shifting their operations to digital:
Traditional banks have realized that the key to winning, growing, and retaining customers in a competitive environment is by providing them a great customer experience. Consumers prefer staying at a place where they find a better customer experience. Therefore traditional banks understand that digital banks offer fast, convenient, and active banking to their customers, and to continue in the long run, banks must adopt these to retain customers.
With digital banks, most of the banking operations are simplified. Streamlining operations also save time, money, and help the internal banking teams to work efficiently. It will also attract more customers to the bank where the operations are streamlined.
Financial institutions or companies that have embraced digital transformation have been more profitable than their average industry competitors and also enjoy a higher market valuation. This factor also contributes to traditional banks shifting to the digital arena.
As stated earlier, digital banks are known for providing a better customer experience. Hence, it helps them to retain customers and grow their customer base.
Technology allows a bank to manage, use, and exploit all different digital channels and expand its reach. Traditional banks can also keep this aspect in their mind and adopt the digital mode of banking, which will allow them to expand their reach.
With the use of technology platforms, the top management in the banks can make strategic and informed decisions. Robust analytics will help the banks to come to better judgments and conclusions, which could be profitable for them in the long run. For grants of loans also technology can assist in whether to provide loans to a particular person or not.
Digital banks have lower operational costs as they don’t require setting up a brick and mortar branch and save on rental costs of a physical bank branch.
Despite all the advantages of digital banking, traditional banking hasn’t been eliminated or knocked out of the race. It is still very much in the picture and continues to play a significant role in the banking landscape.
The reason for this is as mentioned below:
Read our article:Digital Transformation in Banking: Opportunities and Challenges