What Is Digital Banking and Is It Right for You?

Digital banking is a term for managing your bank accounts online, either through a bank's website or mobile app. It's a secure way to handle your finances, including reviewing recent transactions, entering transfers between accounts, paying bills and updating your personal information. In the past, these tasks would have required a trip to the bank. Now, you can easily handle them with a few taps on your phone or clicks on your computer.

Here's a closer look at the rise of digital banking and why it has become an increasingly popular method to manage your money.

Digital Banking vs. Mobile Banking vs. Online Banking

When examining your banking options, you may come across banking terms such as digital banking, mobile banking and online banking. Here's a comparison of what they mean.

Online banking

Online banking includes all tools used to manage your banking through a web browser. If you log onto your bank's website using your laptop or desktop computer, you're using online banking.

Online banking features vary depending on the bank you choose. With Synchrony Bank, you can view balances and recent transactions, transfer funds and download recent statements, among other tools.

Mobile banking

Mobile banking refers to an Android or iPhone app that allows you to access your banking from your mobile device. Mobile banking typically includes everything you can do with online banking. An additional feature you'll generally find with mobile banking is the ability to deposit a check using your phone's camera.

As long as you keep your phone and mobile apps updated, mobile banking is generally secure. Mobile banking is much like online banking, but you can check your accounts and manage your finances from nearly anywhere.

Digital banking

Digital banking is an all-encompassing term for online banking and mobile banking. Whether you're using your bank's website or mobile app, you're engaging with digital banking features. As an online-only bank, digital banking is Synchrony Bank's specialty.

Advantages of Digital Banking

Digital banking offers major benefits compared to traditional banking in a brick-and-mortar branch. These include:

• • Convenience: A trip to the bank can be a hassle. You must go during business hours, possibly deal with traffic, wait in line, explain your needs to a teller or customer service representative and then commute home. Online banking allows you to manage your money from the couch or during your lunch break. No need for an extra trip!
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• • Cost-effectiveness: Online banking is cost-effective for customers, allowing them to deposit checks without spending time or money on a visit to the bank or mailing a check, for example. Most online banking services are free or less expensive than traditional banking. Because online-only banks don't have to spend money to maintain expensive branch locations, they often pass on favorable interest rates and lower fees to customers.
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• • Access to a wide range of financial services: With digital banking, you can transfer funds, pay bills, deposit checks, view balances, review recent and pending transactions and much more. And with self-service, you can often handle basic banking tasks quickly on your own rather than waiting on the phone with a customer service representative.
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• • Enhanced security: While the idea is counterintuitive to many people, digital banking is often more secure than traditional banking. For example, with online statements, there's no chance of your statement and personal information being stolen from the mailbox. As long as you follow online security best practices, digital banking is one of the safest methods of managing your finances.

Challenges of Digital Banking

While online banking is the preferred method of handling finances for many households, you may encounter a few common challenges. But with the right knowledge, they can be easily overcome.

• • Cybersecurity threats: Hackers and other cybercriminals may try to steal your personal information and use it to drain your bank accounts. Some of the best ways to avoid cybersecurity threats are to keep your software updated, use a unique password on every website and use a virtual private network (VPN) service when connecting to your bank with public Wi-Fi, such as at hotels or coffee shops.
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• • Customer awareness and education: People who grew up with digital technology, including millennials and Gen Zers, often feel comfortable navigating digital banking apps and dealing with their money online. But for many others, online and mobile banking can be more challenging. Watching videos and reading your bank's help documentation can be beneficial in learning how to take the best advantage of digital banking.
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• • Technological limitations: If you use outdated technology or your bank doesn't follow industry standards, you may find yourself unable to handle everything you want with your online or mobile banking options.

Digital Banking Trends

• • Artificial intelligence and machine learning: Banks are increasingly integrating artificial intelligence (AI) and machine learning to enhance customer experiences, personalize services and improve security. These technologies enable predictive banking, fraud detection and automated customer service interactions, leading to more efficient operations and improved client satisfaction.
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• • Open banking: This trend promotes greater financial transparency and consumer choice by allowing third-party developers to build applications and services around the financial institution. Open banking facilitates a more integrated and personalized banking experience, encouraging innovation and competition within the industry.
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• • Digital wallets and payments: The surge in digital wallet use represents a shift toward contactless, convenient and secure payment methods. Consumers are increasingly adopting digital wallets for their ease of use and the ability to integrate multiple payment methods and loyalty programs, significantly altering the traditional banking transaction landscape.
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• • Blockchain technology: Blockchain is gaining traction in the digital banking sector due to its ability to offer secure, transparent and efficient transactions. This technology underpins cryptocurrencies and enables smart contracts, enhancing the security and efficiency of digital transactions and recordkeeping in banking.

Future of Digital Banking

Digital banking continues to evolve to improve the customer experience. Major focuses include personalization and integrating social media services with banking apps. With newer technologies, banks can better provide the information you need most, where and when you need it. Even if you're scrolling on Instagram or TikTok, for example, you may see important alerts and be able to get customer support without leaving the app.

As the internet grows around the world, we're also seeing an expansion of digital banking services to emerging markets, such as lower-income countries in Africa, Southeast Asia and Latin America.¹

Embrace the Digital Banking Revolution

If you're not already taking advantage of digital banking offerings, it's not too late to get started. Download your bank's mobile app and find the most useful features. Whether it's paying bills, depositing checks or monitoring your accounts for fraud, there's no limit to how you can use digital banking to improve your finances.

If your bank isn't cutting it, check out Synchrony Bank's digital banking offerings. With the Synchrony Bank app, you can make the most of every dollar you keep in the bank.

 

Eric Rosenberg is a financial writer, speaker and consultant based in Ventura, California. He is an expert in banking, credit cards, investing, cryptocurrency, insurance, real estate, business finance and financial fraud and security. His work has appeared in many online publications, including Time, USA Today, Forbes, Business Insider, NerdWallet, Investopedia and U.S. News & World Report. Connect with him and learn more at EricRosenberg.com.

 

READ MORE: The Ultimate Guide to Personal Finance

 

Sources/references

1. COVID-19 Drives Global Surge in use of Digital Payments. The World Bank. June 29, 2022.