What is a digital bank? | Banxe

authorBanxe Team
time 3 min read date 17.08.2022
image delimiterLearn hub

Digital banking means that all banking services are done via smart devices by using digital platforms, which eliminates the need for traditional banking methods. With the aid of virtual processes, financial transactions are facilitated, simplified and automated.


History of digital banking

The revolution in the banking world occurred in parallel with the advent of the global internet. As early as the late 1990s, customers were able to access many services using online platforms with the help of the internet. Previously, all processes were carried out by telephone. The first digital bank was called First Direct, which began operating in 1989. After 6 years, more than 500,000 customers used this new service. As of 2022, more than 2 billion users use digital banking. This figure is expected to reach 2.5 billion users by 2024. 

Digital banking is divided into 2 major components: mobile banking and online banking.


Mobile banking

Mobile banking is online banking implemented using special software on smartphones, tablets and computers. The introduction of mobile banking has expanded the possibilities of automating the process of banking since the clients themselves can carry out various transactions and maintain their account.

Mobile banking requires an internet connection. Sometimes commands are executed using SMS, compiled according to a certain standard. Also, in mobile banking, a 3D Secure protocol is used. 3D Secure is a unique secure user authorization protocol for performing operations without a physical card (CNP operations). 


Online banking

Online Banking is the implementation of financial transactions with internet access. The banks create and use their websites as a gateway for all their services. The introduction of Online Banking eliminates the need to visit a local branch. The websites are built in such a way as to create a favourable and convenient service for customers to use. The simplicity of accessing all their activities with a few clicks continues to drive clients to choose online banking. 


Advantages of digital banking

Among the advantages, we can highlight the following:

Low fees - due to reduced spending on overhead expenses, digital banks offer lower costs for financial transactions to their clients. 

Easy account setup and personalization - creating a digital bank account is straightforward and quick. Most accounts can be fully set up using mobile banking.

Increased financial inclusion - Banks are more amped to accept clients with no credit history and poor ratings due to low transaction costs.

Greater focusing on security - with remote access and clients ability to carry out many transactions, banks are focused on protecting clients assets. In the event of a threat, both the client and the bank can restrict access to accounts.

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