The difference between traditional banking and online banking


Traditional banks have had to adapt to keep pace with the rapid evolution of online and mobile banking. What does this mean to you?

Modern customers have started to place more importance on the online banking capabilities of their financial institutions. This is forcing banks to launch new products and adjust their digital strategies to keep pace. Fewer customers visit local branches; in fact, reports claim that online banking has been a factor in branch closures in recent years.

The appeal of online banking is its convenience, but traditional banking has its advantages.

Online banking vs traditional banking

Banks have been around for centuries, although they were generally reserved for the wealthier citizens. Nowadays, having a bank account is a basic requirement – and a right – to fully participate in society, according to the European Commission.

What is traditional banking?

The biggest difference between traditional banking and online banking is physical presence. A traditional bank has a head office, as well as regional headquarters, with branches located in the countries in which it operates. Many traditional banks operate their own ATMs. Small, traditional banks can come together to operate large numbers to share the costs. Traditional banks, with their local branches, were first chosen for their convenience as well as their face-to-face customer service.

According to a 2016 Global Consumer Banking Survey, which surveyed 55,000 consumers in 32 countries, 60% said they would like to visit a physical branch or talk to a real person in order to purchase a new financial product or to ask for advice. Traditional banks, with an emphasis on in-person customer service, may seem more trustworthy than banks that lack physical operations. This is particularly the case when the consumer opens an account.

However, accessibility can be lacking with banks that do not have online banking capabilities. Customers have limited access to their own banking information outside of business hours. When traveling, they may not be able to find a branch or ATM without high fees.

What is online banking?

Digital banking is of the utmost importance to modern consumers. In the same survey, 66% of consumers said a great digital presence was an important feature of the bank of their choice. A majority of Europeans prove it; Eurostat data shows that 59% of European internet users do their banking online.

To remain competitive and ensure customer satisfaction, most traditional banks have integrated internet banking into their services. Online portals allow customers to view their balances, transfer money, open new accounts and even apply for a mortgage – all available 24/7 unlike physical branches. . Online customer service, including email, chat, and video calls, goes beyond phone calls and branch visits.

Mobile banking services have also grown, with a report showing that 47% of global consumers did so in 2016. Banking apps are also skyrocketing, enabling consumers to make quick digital payments at stores, events and in line.

Of course, all of this convenience comes at a price sometimes. The rise of digital banking has also created an increase in cybercrime, as online banking opens up a new avenue for criminals: if a customer accesses their banking information through an unsecured network, anyone can eavesdrop and access login information or other information. . Email phishing attempts can convince the less digitally savvy to click on links that appear to be from the bank itself. Banks offering online banking products can secure their own sites and apps, but they also need to educate their customers on how to use them securely.

Online banking only

Another category of banks has emerged: banks that operate only online, also known as direct banks or branch banks. Direct banks offer all the functionality of a bank, but without local branches. They often offer more attractive rates, but less financial products, as well as the face-to-face customer service that some global consumers still covet.

NFC payment made with a mobile phone

Online banking is often advantageous for expats as well as internationals who move or travel a lot. These financial institutions are not only active in several countries – sometimes even around the world – they also often offer applications and platforms in different languages. Some will even offer multi-currency accounts. It is often possible to open an account with them before your move, which can be very practical when you have to send housing deposits, for example.

Some online banks popular with internationals include:

Alternative financial service providers have established strongholds in the market, such as PayPal and Google Wallet, which have made consumers less dependent on their banks. There is of course also a plethora of money transfer services which can sometimes offer advantages over banks, especially when you are moving house and have not yet had the opportunity to open a bank account.

The future of online banking

The financial services industry is still growing, with more and more non-bank players entering the market. As a result, banks have started to rethink their strategies to ensure that they remain relevant to modern consumers. Traditional banks, with their personal care, remain important to consumers – but with the growing offer of online banking services, it is prudent for banks to focus not only on digital tracking – by not only expanding their digital services. internal, but by partnering or acquiring FinTech – but maintaining the personalized service that traditional banks have always offered.


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