What Are Digital Banks?
In the world of financial technology, or fintech, neobanks are the new kids on the block and they’ve got everyone talking. As these new apps gain momentum on a global scale, the question you might be asking yourself is, “What are Digital Banks?”
Here, we’re going over what neobanks are, what makes them different from regular banks, how neobanks work, and the advantages they can offer you.
What Makes Digital Banks Different From Regular Banks?
The term Digital Banks describes a bank that doesn’t have a brick and mortar foundation. Digital Banks function entirely online and you won’t find any of their branches in your regional area.
They can do most of what your traditional bank could, but cater to tech-savvy customers who are looking for digital or mobile-first solutions. Digital Banks offer money transfers, lending, and with the help of bank partners, they can even provide licensed services without a bank license of their own.
That’s right - Digital Banks aren’t licensed institutions. Yet customers are still taking advantage of their services because they fill a gap in the market. These online banks aren’t bogged down by an outdated infrastructure that regular banks struggle to overcome.
Essentially, Digital Banks are the present and future of fintech while regular banks are the past.
How Digital Banks Work
Digital Banks use a business model vastly different from what’s used in traditional banks. Digital Banks are much more customer-focused and use data to drive decisions. Algorithms help neobanks provide a unique experience based on their customers’ individual needs.
Plus, as a business that runs entirely online, neobanks forego any issues related to having a physical presence. This means reduced fees and an overall more streamlined execution.
Advantages of Digital Banks
So, why should you start using a Digital Banks? Well, one reason is that neobanks are simply the way the world is moving. People are embracing digital banks and wallers like never before which means less interest in physical cash and tellers.
Let’s go over some advantages of using a Digital Banks.
Easy Account Creation
For better or worse, it’s getting harder and harder to justify leaving the house for anything and the banks is the last place we want to go. Gone are the days of meeting with a bank employee to open a new account with all that old-fashioned bureaucracy. With neobanks, you can do everything online or through an app on your mobile device.
Plus, it’s most often free to open a Digital Banks account - something you can’t always find at a traditional bank where high fees are the name of the game.
Hassle-Free International Transactions
Especially with more and more people working remotely or in a freelance capacity, individuals are likely to perform international transactions more frequently. Digital Banks make the process of international transfers painless and hassle-free as opposed to regular banks where international transfers mean exorbitant fees.
As previously mentioned, neobanks use customer data to provide a user-friendly experience. Traditional banks have notoriously glitchy websites but with neobanks, since they’re just as much tech companies as they are banking companies, you’ll get an overall better interface.
So, that just about covers it - the basics of neobanks. Are you ready to switch to the future of banking?
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