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What is digital banking?

Often a misnomer for online banking – digital banking also encompasses essential banking services,
but is not exclusively offered by specific financial institutions or traditional banks.

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Rather, digital banking covers the broader subject of the digitization of traditional banking services and systems.

Therefore, this means that digital banking is essentially the digital transformation of finance systems and processes, from physical bank branches to online-based bank accounts, optimized transactions, and more. 

How does digital banking work?

Traditional brick-and-mortar branches are no longer necessary to open and close bank accounts, or to deposit and transfer large sums of money. Digital banking enables fintechs and financial institutions to improve their services and business models through digitization and optimization with new technologies and artificial intelligence. Many processes are automated to increase efficiency and accuracy. 

For example, this could include the use of big data from customer profiles to create more relevant predictive offerings to banking customers. Or artificial intelligence can be used to design an interactive assistant or chat bot that helps customers create savings goals or spending limits on their credit cards. 

Digitization of financial services also allows these bank providers to reach new customers outside their geographic region, as users can create and access bank accounts through mobile apps from anywhere.

Key benefits of digital banking

Digital banks and fintech companies are revolutionizing the banking industry at a rapid speed. This also means big changes – and lots of benefits – for end users like consumers and business owners, as well as corporate finance teams. 

Better accessibility 

The rise of mobile banking means that business owners and employees can access any banking service from their mobile device at any time: business purchases, transferring account balances, approving employee expenses, etc. 

No matter if you're working at the office or traveling for a business trip–you're able to instantly complete financial admin tasks with a few swipes in a mobile app. New challenger banks like Monzo, Revolut, and N26 have grown quickly based on this modern customer experience.

Comprehensive banking experience

Digital technology in online banking also creates a smoother and more dynamic user experience. In addition to typical transactions like money transfers and paying bills, banking customers can also do things like book travel, buy event tickets, or even request a loan – all from their online account.  

To enhance the customer service experience, many banks now feature virtual chat bots that can provide users with an instant summary of their spending behaviors, set up personalized savings goals, set bill reminders or schedule payments, and even consult on financial planning. 

These features help banking customers stay connected and in control of their finances, as well as have an overall view of how to manage their spend in order to maintain a healthy credit score. 

Centralized account management 

Instead of having to speak with multiple customer service representatives from different departments, the banking experience is consolidated into one digital platform. 

Authentication of financial transactions is safe and easy and in the case of lost or stolen cards, most mobile banking apps allow you to freeze or cancel credit cards in real-time.

You can also download multiple mobile banking apps on your mobile device, to access every digital bank account you have from one place.

Benefits for finance teams

There are tangible benefits of the digital banking movement for finance teams. A plethora of banking products on the market enable companies to work smarter and faster, both internally and externally. 

With big data on consumer profiles and their purchase behaviors, companies and digital banks are able to target relevant opportunities and create more personalized offers, thereby increasing revenue channels. 

With online banking, finance teams can optimize internal processes like invoice payments, expense reimbursement, and onboarding with more organized systems that increase productivity and reduce costs. 

With an all-in-one spend management tool like Spendesk, finance teams can consolidate all these tasks into one platform and accelerate end-of-month closing up to four times as fast, while maintaining 100% visibility on all operational spend. 

Benefits for employees

Digital banking can benefit workforces of all sizes, from small and medium businesses to large enterprises. Online banking and financial products like individual corporate cards give employees the ability and independence to make essential purchases for their jobs, without having to jump through administrative hoops or hurdles. 

Online banking and spend management tools like Spendesk also ensure that finance teams and managers can review, monitor, and approve things like employee expenses, subscriptions, invoices, and spend reports in real-time.

Clearly defined company spending policies, including preset thresholds for teams and individual employees, increases transparency across the board and prevents unexpected overspend. 

Empowering employees to take charge of how they spend for the company requires trust and accountability. Products like virtual cards and prepaid debit cards can strengthen employee autonomy, while allowing finance teams and management to maintain control and oversight of budgets.

If you're looking to facilitate efficient and accurate spend management in your company, check out Spendesk to discover which plan would be perfect for your company's unique needs or book a demo with one of our specialists!

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Last update: August 13, 2021