Digital Banking: Definition, Products, and Types

Does the thought of waiting in long queues at your local bank make you think twice about visiting? Then, you must know about digital banking. With this, you can do all the banking tasks from the comfort of your home.

What is Digital Banking?

Digital banking is an umbrella term covering all online banking-related and financial institutions-related services. These are services offered through the bank's website, a mobile application, or both. You can access their banking features remotely from anywhere in the world through digital banking.

Not only that, but digital banking also automates a lot of banking services like transferring money, opening a fixed deposit, ordering or blocking a debit card and credit card etc., through the app, making them far more efficient than their brick-and-mortar counterparts.

Products and Services

Digital banks offer most, if not all, the products and services a traditional bank offers. These products and services include:

1. Savings Accounts

Digital banks offer Savings Accounts for easy access to banking services and to preserve your money's purchasing power with interest.

2. Current Accounts

Businesses use Current Accounts as they usually need to make multiple transactions daily. Unlike Savings Accounts, these accounts aren't charged any fees after a certain number of transactions.

3. Cash Withdrawals and Deposits

Digital banking allows users to withdraw from or deposit cash into these accounts.

4. Fund Transfers

Through digital banking, users can transfer money between bank accounts, e-commerce services, or other business transactions. There are three main ways to transfer funds online.

Note: Transaction charges/ transfer fees may vary from a bank to another.

5. Bill Payments

Digital banking services allow you to pay your utility bills through them. In well-designed mobile applications, these digital banks also offer reminders for when these bill payments are due so you do not forget.

6. Bank Statements

Through digital banking, you can generate bank statements online using the bank's mobile application or website. These statements can be beneficial to users to reflect on how they have been spending their money.

7. Loans

Certain banks give loans to their users through digital means only. However, not all online banks can lend money to their users.

This is not an exhaustive list of all the products and services offered by a digital bank. Other specific services are also provided depending on the requirements and capabilities of digital banks.

Digital Banking Offered by Traditional Banks

Traditional brick-and-mortar banks have been around forever. However, in recent years, they have begun to explore online banking by offering digital banking solutions through their website or mobile applications. Since traditional banks are directly regulated by the Regulatory Authority and must have a banking licence, they can offer a wide range of services.

Types of Digital Banking Services

Here’s a list of the most prominent types of digital banking services in India.

1. Card Payments

Card payments are the most widely used tool in the digital banking space. You can use a credit/ debit card to purchase goods and services online, pay utility bills, make business transactions, etc. You can use these cards to withdraw cash from ATMs as well.

2. United Payment Interface (UPI)

UPIs are a system that allows you to link your bank account(s) to a mobile application. You do not need an IFSC code or bank details to use a UPI; payments are made through a virtual payment address (VPA) instead. Payments made through this system are quick and hassle-free. Through UPI applications, you can send or request money, pay bills, scan and pay through QR codes, make peer-to-peer payments, and much more. UPIs are gaining popularity for being the most convenient cash-free payment method.

3. Internet Banking

Internet banking functions similarly to brick-and-mortar banks. The difference is that these services are all online. You can send or receive money through Internet banking via NEFT, IMPS, or RTGS transfers. You can also avail of other services like checking your bank statement.

4. Mobile Banking

You can access digital banking services through your bank's mobile application on your smartphone. Mobile banking has become quite prominent in the last few years. One feature of mobile banking that has changed digital banking is the advent of mobile wallets.

These digital wallets allow you to add funds to the wallet to pay for goods and services through them. Mobile wallets eliminate the need to enter your card details when sending money to an online merchant.

Advantages of Digital Banking

1. Convenience

The fact of the matter is that digital banking is way more convenient for most users. They can access these features remotely from anywhere in the world, whenever they want. They do not need to take time out of their schedules to visit a physical branch to deposit or withdraw money.

2. Ease of Signing up

Digital banks are also a lot easier to sign up for. Users can create an account in these banks in just a few minutes by entering their details online.

3. Higher Interest Rates/ Lower Fees

Since many digital banks need physical locations to maintain, they save a lot of operational and maintenance costs. As a result, they may offer higher interest rates, lower fees, or both. Not all digital banks provide these features, however. They are usually seen in new-age banks.

4. Personalised Features

Digital banks offer more personalised features. These features may include bill payment reminders, saving money for a big purchase, personalised weekly budgets, etc.

5. Rewards

Digital banking solutions also offer rewards like cash-back or coupons for e-commerce websites for transactions you make through them. Digital banking comes with benefits that go beyond this; check this out to know more!

Conclusion

Digital banking offers a convenient and efficient alternative to traditional banking methods. With the ability to access banking services remotely through websites and mobile applications, users can perform a wide range of tasks, such as transferring money, paying bills, and generating bank statements. Digital banks provide products and services similar to traditional banks, including savings accounts, current accounts, cash withdrawals and deposits, fund transfers, and loans.

Advantages of digital banking include convenience, ease of signing up, potentially higher interest rates or lower fees, personalised features, and rewards. Overall, digital banking revolutionises the banking experience by making it more accessible, streamlined, and tailored to individual needs.

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Frequently asked questions

1. What is the meaning of digital banking?

Digital banking means using banking services online. Instead of visiting a bank in person and asking another person to process your service requests through a digital bank, this request is automated. All you have to do is sign in to your account and start banking.

2. Is digital banking safe?

Yes, digital banking is safe. These banks have extensive security protocols to secure your money and personal information. To ensure added safety, users should opt for two-factor authentication to confirm payments as a rule of thumb.