Opening a digital bank account comes with benefits and challenges; you might not use them to their full potential unless you know them. Stay with me as we discuss what a digital bank account can offer you.
Digital banking has revolutionized the banking system, as people can now perform all banking transactions without visiting a physical bank. It offers customers many benefits, such as convenience and self-service customer care, lower fees and higher interest rates, advanced features, and other benefits. However, it also comes with challenges like limited physical access, technical issues, and limited product offerings.
Despite the challenges of digital banking, according to Statista, the adoption rate has constantly increased, from 62 percent to 65.3 percent from 2018 to 2022, in the number of Americans who used digital banking.
This consistent increase in its adoption is mainly because the benefits of opening a digital bank account far outweigh its challenges. And when compared to a traditional bank account, you’ll see reasons not to consider one.
Top 6 Benefits of Opening a Digital Bank Account
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Here are some of the reasons people have opted for a digital bank account over a traditional one:
The most significant benefit of a digital bank account is the convenience it offers. With a digital bank account, you don’t have to pause your life to perform a significant banking transaction like depositing a check, making a payment, or accessing your account statement. You can access your account information and perform transactions from anywhere, anytime, using your mobile phone or computer.
This has increased people’s productivity in the United States, as what would have taken at least one hour to sort in a traditional bank can be done in less time, allowing them to focus on more critical tasks.
2. Lower Fees
Apart from offering much-needed convenience, a digital bank account generally costs less than a traditional one. Digital banks do not incur the overhead costs most brick-and-mortar banks rack up daily, enabling them to save considerable money. These savings from overhead costs are passed on to the customers in the form of lower transaction and maintenance costs.
3. Easy Account Opening
Opening an account at a traditional brick-and-mortar bank is an arduous task most people do not want to experience. The process is lengthy and often unnecessary. However, digital banks have made it possible to open a fully-functional bank account in minutes.
To open a digital bank account, you must sign up on the digital banking platform of your choice, provide your personal information and proof of the information provided, and voilà, you have an account.
4. Increased Security
Digital banks offer more security to their account users through two-factor authentication, biometric authentication, and other high-tech security measures. These security measures help protect your account and personal information from fraud and identity theft, which are prevalent in traditional bank accounts.
5. Higher Interest on Savings
Most digital banks offer high-yield savings accounts to their customers, with interest rates ranging from 3% to about 9% in some banks. According to Bankrate, the average interest on a traditional savings account is 0.24 percent. That shows that digital banks generally offer higher interest rates than traditional banks.
6. Advanced Features
Digital banks often offer advanced features such as budgeting tools, small business management tools, automatic savings, and integration with third-party financial apps. These features help you manage your finances and reach your financial goals.
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5 Challenges of Opening a Digital Bank Account
Despite their incredible benefits, digital banks also have certain challenges you might want to consider when opening an account. Here are some of them:
1. Limited Physical Access
While digital banks offer convenience, they do not offer the same level of physical access as traditional banks. While most digital banks have only one physical address, others do not. That means to deposit money or speak to a customer care representative in person, you may need to fall back on a traditional banking institution.
2. Technical Issues
Digital banking relies heavily on technology. You may have issues accessing your account or performing transactions if you experience a slow internet connection or your device malfunctions. That could be quite disappointing, especially when you have urgent transactions.
3. Security Concerns
Though digital banks put strong security measures in place to protect their customers’ accounts, there is always the risk of cyberattacks and identity theft. While the bank does its best to keep your accounts safe, you must protect your accounts and information by using strong passwords, activating two-factor authentication, and avoiding public Wi-Fi networks.
4. Customer Service
Digital banks don’t have the same level of customer support as traditional banks. While traditional banks have in-person customer care personnel who can meet your needs, digital banks don’t. Therefore, if you have an issue with your account, you may only have email and online chat support to sort out your problems.
5. Limited Product Offerings
One of the most significant challenges facing digital banks is their limited product offerings, as they don’t offer the same range of products and services as traditional banks. Most digital banks do not offer products and services such as safe deposit boxes, wire transfers, mortgage loans, small business loans, etc., which are popular in traditional banks.
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Conclusion – Benefits and Challenges of Opening a Digital Bank Account
As the world is becoming digitalized and consumers seek convenience and self-service options from businesses, we can understand why digital banking is the future of banking services. Despite its disadvantages, the advantages of digital banking make it irresistible to millennials, Gen-Z, the majority of Generation X, and a few baby boomers.