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What is a digital bank?

In essence, a digital bank is just that, digital. Digital banks are remarkably similar in most respects to the brick-and-mortar banks that most people are familiar with; they take deposits and issue loans as their core business and are regulated by the government. Where digital banks differ is that they are fully online, with no branch network and no physical sites you can go to when doing your banking. Instead, digital banks utilise smartphone apps to deliver their products. However, this is not to say that they do not have support networks, as digital banks are keenly aware of the challenges some may face when switching over to a fully digital experience.


With access to innovation and new products, digital banking will pave the way for fundamental change in the banking industry. Ease of access is the name of the game in this era, and digital banks are much more capable of providing this than traditional banks are; whether it is simply a balance check or taking out a mortgage, banking will soon be near instant in its accessibility for digital users.

Benefits

Less Overhead Costs

The discarding of physical branches has a few key benefits. Not having to shell out large sums of money for purchasing branches or for their ongoing operating costs such as rent, utilitiesand staff labour means that digital banks can offer their products at a lower cost to the consumer than their traditional counterparts. These cost savings for the bank can be massive, especially when at the scale of a typical bank. These overhead savings can lead to lower fees for customers and the redirection of these funds to serve its customers where they need it most, such as higher interest rates for savings accounts.

Superior Service

In addition, the focus of digital banks being on providing an online banking experience rather than trying to serve customers at physical sites as well means that customers receive a streamlined and specialised 21st century experience without the necessary frills that come with traditional banking.

As a result, customers can expect a digital service that offers (at minimum):

- Less human error in calculations and recordkeeping;

- An app with appealing interfaces and a wider variety of features that have been specifically refined; and

- Advanced servers for quicker responses to customer input.

User Friendly

Lastly, being digital rather than physical has the added benefit of banking services being easier and faster to access. Just by owning a smartphone and having an internet connection, digital banking services are instantly available, saving customers time and money otherwise spent on travel for transactions. This is especially important for those who are not near branches, but even for those who are, having the full range of banking products at your fingertips is extremely powerful. While many traditional banks have some products available on their apps, they do not have the ability to fully service all products (e.g. loans) fully online.

Digital banks also differ from traditional offerings at the back end of operations, by using cutting edge technology platforms as the backbone of their services, ones that are decentralised (contract-based technology partners) and easily updateable. Having Artificial Intelligence (AI) at the core of their technology stack allows many processes to be optimised, leading to lower costs and quicker response times.

The ability to utilise these faster and more efficient processes, and to update these platforms when new innovations come in the technology sector, puts digital banks at a distinct advantage to offer better products to consumers going forward.

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*DayTek Capital is not a Bank but we are in the process of compiling an application for a Restricted Authorised Deposit-Taking Institution Licence with a view to lodge an application in early 2020.

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