Trends in Digital (Online) Banking

Customers could be able to scan their finger to access online banking in the near futureThe 21st century is the century of information. The advent of the information revolution, the computer, the mobile phone, and other communication devices have facilitated this process.

Internet access makes it possible for people to stay at home to transact business online. Today, online banking has emerged as a major channel to supplement face-to-face banking.

It has revolutionalised the banking industry since customers can now complete financial transactions by visiting secure websites that are maintained by banks, credit unions and other financial institutions.

It is now becoming the preferred form of banking among certain segments of the population, especially among the youth, especially “digital natives” who are growing with the technology.

This group have grown up with a computer and internet access, and value anytime/anywhere convenience. Other segments of the population are adopting this form of banking as their technology comfort grows.

Experts have classified Internet banking into four main categories, from Level 1- minimum functionality sites offering access to deposit account information – to level 4 sites.

Such sites are classified as highly sophisticated with services beyond online banking to include investment and insurance.

Over the past couple of years, new trends in digital banking has emerged. One of such trends is gamified banking (sometimes called banking gamification). It emerged from gamification, which is the application of computer game concepts to day-to-day software applications, apps and web sites.

Gamification in banking is a product engagement strategy used to encourage continued engagement of customers to modify their behavior through game mechanics. For example, GoalCard is a Facebook-linked debit card that enables users play financial literacy games with friends to win rewards points that they can trade for cash prizes. Also, Foursquare Check-Ins is a GPS-based social media platform that rewards people for making frequent branch visits by tracking check-ins.

Another trend is customer analytics, defined by wikipedia as a process by which data from customer behavior is used to help make key business decisions via market segmentation and predictive analytics.

With the advent of the digital revolution, there has been an explosion in the amount of available customer information within the banking industry.

Demographic data, transactional records, online activity logs, etc. is now widely available to banking institutions. Banking institutions are now beginning to use these massive volumes of data into actionable insights to understand individual customer behavior and preferences and to predict the banking behavior of these customers.

This information is sometimes used to improve digital offerings and banking services to customers. With the current fierce competition among the banks, customer analytics will enable banks maximize the use of customer information, predict their future needs and build stronger, more profitable relationships.

Mobile banking (or m-banking) is one of the digital banking services that allow customers of a financial institution to conduct a number of financial transactions through a mobile device such as a mobile phone or tablet It operates across all major mobile providers through one of three ways: SMS messaging; mobile web; or applications developed for smartphones.

Short Messaging System allows users to check their balances and transfer funds via text message while mobile web allows for checking balances, bill payment and account transfers simply by logging into the user’s account via a mobile web browser.

Also, mobile banking connects the user directly to the bank server for complete banking functionality without having to navigate a mobile web browser.

New mobile banking applications such as account rewards confirmation, person-to-person payments (P2P), and remote-deposit capture (RDC), a service allowing users to scan checks and transmit the scanned images to a bank for posting and clearing.

With mobile airtime, the movement of money over mobile devices has been made very easy; people in remote communities can receive money without any travel time; people can buy groceries with a few punches of keys without money changing hands.

M-banking has changed the way traditional (brick and mortar) banking is conducted by offering similar banking services but on more flexible terms. M-banking services is more cost-effective than traditional banking. The low cost of using existing infrastructure makes such channels more amenable to use by low income customers.

Branchless banking is a distribution channel strategy used for delivering financial services without relying on physical bank branches. It has been defined as the delivery of financial services outside conventional bank branches, often using agents and relying on information and communications technologies to transmit transaction details – typically card-reading point-of-sale (POS) terminals or mobile phones.

It is more about redefining the branch than getting rid of the branch all together and has the potential to radically reduce the cost of delivery and increase convenience for customers. It has the potential to increase people’s access to financial services due to the involvement of a wide range of agents outside bank branches.

Branchless banking enhances the efficiency of banks. Today’s bank customers want convenience, and going branchless is a way to recruit and retain customers, as they don’t have to compromise their busy lives. Branchless banking helps reduce congestion and cost of bank branches. Bank employees can visit the client to gather the needed information for account opening and other banking services.

Given the current global banking landscape and the further changes in customer behaviours on the horizon, banks that grasp and execute these new business models will be better equipped to survive and thrive now and into the future.

Even though concerns around security, customer privacy, fraud, etc. have been expressed, over the years, new banking technology have emerged to provide better protection to customers.

For example, encryption technology is employed to protect the online transfer of information. In addition, firewalls and filtering routers are used to protect the identity of legitimate users.

Also, digital certification procedures have been used as a further protection layer. With such security measures the expectation is that the number of customers who choose digital banking will continue to increase.
Dr. Osei K. Darkwa

Print Friendly

Leave a Comment