Following the rise of Fintech, there is a tendency to debate which type of banking or system is better: digital banking or traditional banking. Digital banking focuses its financial activity on customers who make transactions using the digital channels offered by internet banking (web version, mobile application, among others). For its part, traditional banking offers its financial products and services to all its clients through multiple “traditional” channels, such as bank branches, agencies, telephone calls, ATMs, among others. Although at present traditional banks use a combination of both systems, the truth is that throughout history, banks have had majority use of the traditional system; however, between the end of 2019 and the beginning of 2020, this behavior changed (because of Covid-19), which caused the use of digital channels to openly exceed the use of traditional channels.
Digital banking vs traditional banking
More and more users are interacting with their bank through an application or website, at the same time, transactions have multiplied, largely due to the crisis generated by the pandemic, taking physical operations to Online routes; this means that “forced” digitization took place in many countries and demographic groups. Traditional banking is then involved in the process of irremediable digitization, in which it must update its services and adapt to the new profile of consumers, increasingly digitized, accustomed to online platforms, and fast and intuitive applications. However, traditional banking has a “new entrant” that has accelerated the transformation or transition “from the office to the web”: Fintech companies and digital banks.
Approximately 87% of traditional banking customers had not used any online banking application before the pandemic. Still, they say that now they will continue to do so because of the convenience and security they offer and other additional benefits. We can also observe the increase in the number of customers who now have access to the Internet and demand better-digitized services, that is, more speed, efficiency, and security. This indicates that digital banking is gaining more ground within the financial system every day, attracting more and more customers who use virtual banking services, which has led many users to choose to change from the “bank of their entire life” for a new Fintech.
The main difference between both models
We could say that the most important difference between digital and traditional banking is that the latter is committed to the customer who uses cash and who goes to bank branches in search of face-to-face service. In contrast, digital banking uses emerging technology and digital transactions, in which the customer does not need to make any physical movement to carry out their banking operations.
Another significant difference between the two models can also be added: The time spent with the customer, for example, online banking is always available (24 hours and 365 days a year), while traditional banking limits customer service to a “preset” hours on weekdays.
What do you think about this topic? What type of banking do you prefer: traditional or digital?
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