The Evolution of Digital Banking: From an Exaggerated Utility to a Necessity

Introduction

The digital banking industry has come a long way since Charles Schwab opened the first online brokerage account in 1975. From an exaggerated utility to a necessity, digital banking is now one of the most popular financial services available today. What started as simple online transactions and bill pay has evolved into digital-only banks that offer more than just checking accounts – they provide loans, mortgages, credit cards, insurance coverage and more. This also means that banks will no longer be restricted to opening hours but will also offer the ability to carry out certain transactions from anywhere at any time.

cashless banking illustration

Technology has been a driving force behind the growth of digital banking. It allowed for the development of innovative features and products that have made digital banking more convenient, accessible and affordable for consumers worldwide. For example, mobile banking allows customers to conduct transactions from anywhere using their smartphones and other mobile devices. This was also beneficial during the pandemic as it allowed people to continue operating their financial affairs even if they were self-isolating or quarantined.

This article will take you through digital banking’s evolution over the last 40 years, exploring how technology impacts digital banking today!

Digital banking and its evolution

The digital era has ushered in a new banking era, and digital banking is the future. But how did this get started? The first cashless financial service provider was the digital branchless (DB) banking system, which emerged from technology-driven changes in customer behaviour. The need for convenience has led to people conducting financial transactions on their terms and time and DB systems were created to make this possible. In India, it started early in 2006 when the RBI circular permitted business correspondents by bank branches to increase client coverage and financial inclusion apart from offline banking. This package allowed customers to conduct various types of transactions such as paying utility bills, transferring funds online, etc. all from home without having to go into a branch or ATM physically. Online banking also revolutionised retail banks worldwide by increasing profitability through reduced operational costs while furthering customer satisfaction with improved service levels during transaction processing times. In fact, it helped increase new account openings due to its ease of use.

payment system indicators

Growth of digital banking

The path to digital banking is irreversible, and there are key factors in this development. Technology plays a huge part in digital banking, especially digital payments. The latest Development Edition of World Payments Report by Capgemini analyzes digital payment trends for 2021 and reports that by 2025, instant payments and e-money payments will account for more than 25% of global non-cash transactions, up from 14.5% in 2020.

online money transaction

The digital finance market is projected to reach $90 trillion, and digital banking will rise from 62% of the world’s banks that offer online banking by 2020 up to 75%.
A study conducted in 2017 reports 36% of consumers would instead visit a branchless bank than go into a physical location. This shows digital banking in India has grown over time, an evolution, if you may call it, moving away from its previous role as an exaggerated utility. The capabilities offered through digital channels such as mobile apps have become necessities for customers instead of perks they’d like to avoid at all costs. Customers now rely heavily on their smartphones for everything: organizing daily activities, communicating with friends and family, so why not banking?

Advantages of digital banking

  • Digital banking is 24/seven accessible; customers can bank anytime and anywhere.
  • Digital solutions such as mobile apps offer a self-service option since the customer handles their needs through an app on their phone instead of having to talk with someone who takes care of business for them.
  • Digital payments and mobile wallets have become more the norm than the exception.
  • Transactions are processed quickly.
  • Digital banking was of great help during pandemics as customers could access their account from anywhere without having to go into a physical bank branch.
  • Surpassed the number of people visiting bank branches.

checklist for online banking

Role of digital banking during the pandemic

The HINI Flu Pandemic in 2009 was one instance when digital channels helped to ease the stress of many people and especially during the COVID-19 pandemic, the role of digital banking changed permanently. Banks adapted the business model to ease operations and gave a better online banking experience to their customers. The COVID-19 pandemic has forced banks to rethink the customer experience from another perspective. According to the study, the isolation caused by confinement during COVID-19 has stimulated the adoption of digital channels by this audience, incorporating them into the world of banking digitization and online commerce.

growth of digital banking during covid-19

Conclusion

There is no doubt, digital technology has disrupted how we live our lives, including how we bank. There are now more than 2 billion active digital banking users worldwide. This number will only grow as customers demand more convenience and faster services from their banks. Digital banking enables customers to do more than deposit a check or transfer money. The digital banking experience has come to be seen as a necessary utility for everyday life, rather than an exaggeration of its benefits.

People are now more comfortable conducting their personal and financial business online. Banks of India have responded with innovative new features and enhancements that make the digital banking experience even more convenient and user-friendly. Transactions can now be conducted in real-time, round the clock, from anywhere in the world. Security is always a top priority, and banks employ multiple layers of security protocols to ensure that customer’s information remains confidential at all times. To sum up, digital technology has had an enormous impact on how we live our lives, and this is how it became an exaggerated utility to a necessity.

Reference blogs:

https://www.rbi.org.in/Scripts/BS_ViewBulletin.aspx?Id=18409

https://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=2234

https://www.rolandberger.com/en/Insights/Publications/The-new-normal-in-banking-Covid-19-as-a-catalyst-for-existing-trends.html#!#&gid=1&pid=2