Choosing between a digital banking or a traditional banking look complicated for you? It all depends on your needs. On the one hand, we have traditional banks with their heritage, physical branches and long-standing customer relationships. On the other, virtual banks are emerging, bringing innovation, flexibility and a forward-looking approach.

We will explore these two worlds in depth, analysing their benefits, their challenges. You’ll also discover the third, lesser-known form of banking: challenger banking. Without further ado, let’s begin our journey between banking tradition and modernity.

I) The Difference Between Digital Banking and Traditional Banking

In today’s financial landscape, the distinction between digital banking and traditional banking is becoming increasingly marked. While one relies on technology and dematerialisation, offering services primarily online. The other relies on a physical presence and face-to-face interaction.

A traditional bank, (physical bank), is one that has physical branches or offices where customers can go to carry out transactions and consult advisers in person. The traditional bank is the classic bank as we know it, with branches all over the country and often with a long history. As stated in the introduction, traditional banks generally also offer their customers a range of online services accessible via a mobile application or website from a computer, smartphone or tablet, in addition to the traditional bank branch.

These banks use online services to pay loans, taxes, perform incoming and outgoing bank transfers, handle bills, fines, and other taxes. But the fact that these banks also offer online services does not make them digital banks. A digital bank, also known as a digital bank, is a bank that operates mainly on the internet, without physical branches, allowing users to manage their finances and carry out banking transactions online or via a mobile application.

On the one hand, digital banks are emerging as technology- and dematerialisation-focused entities, prioritising the provision of services primarily online. On the other hand, traditional banks are rooted in a physical presence, with physical branches and direct interaction between customers and advisers.

II) Advantages and disadvantages

First of all, it is important to specify that when we talk about a digital bank. We are referring to a credit institution that does not have a branch network. The absence of such a network means lower costs and other benefits for account holders, such as higher interest rates on deposit accounts.

Of course, given that online bank account holders still need to carry out ‘physical’ transactions. For example depositing cash or receiving their chequebook, online banks normally have a network of advisers. Throughout the country with whom customers can make appointments. Very often, digital banks also have ATMs, particularly in large towns, where customers can carry out operations such as withdrawing and depositing cash, commission-free, even though these digital banks often enter into agreements with traditional banks to keep the cost of these withdrawals as low as possible.

The more autonomous account holders are in managing their transactions via online applications. The more banks, both traditional and digital, save on management fees. This is why all the banks that have made virtual platforms available to their

customers. The goal is to anticipate clear advantages for their customers who are inclined to use online services. Of course, the main advantages are financial, such as reduced or no charges, no account management fees, and higher deposit interest rates. What’s more, customers can save time by not having to visit a branch and can carry out transactions 24 hours a day, 365 days a year.

Technology start-ups designed to enter the financial market are known as challenger banks. Consequently break with traditional banking models by offering direct, transparent ways of managing your money. These are the new banks that aim to challenge the old guard of traditional credit institutions.

III) Digital Banking : the real innovative force in the banking system

Because they enable their customers to use services that are only available via the smartphone, challenger banks often need to form partnerships with traditional banks. Which are responsible for depositing money and complying with banking law standards. As well as implementing vigilance and anti-money laundering procedures.

However, challenger banks aspire to become fully-fledged banks with their own banking licence. For example creating a new banking experience for customers with a data-driven business model. They are proposing a new offering in terms of prices, products and services provided by themselves.

These banks offer the following services: opening current and deposit accounts, credit and debit cards, basic services. As well as personal finance management tools that help users with certain shortcomings in financial management to optimise their finances.

Conclusion

In conclusion, this article highlights the dynamic evolution of the financial landscape, marked by the growing distinction between digital and traditional banks. While traditional banks remain with their physical branches and face-to-face interactions, digital banks are emerging as dematerialisation and technology-driven players. The benefits of online operations, whether from traditional banks offering virtual services or challenger banks redefining the banking experience, demonstrate the ongoing transformation of the sector.

The emergence of challenger banks, with their transparent and direct approach, represents an innovative force, shaking up traditional banking patterns. Ultimately, the duality between tradition and innovation in the financial sector continues to evolve. In order to offering consumers diverse options and reflecting the constant advances in technology in the way we manage our finances.

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Source of information

https://www.bbc.com/news/technology

https://dictionary.cambridge.org/fr/dictionnaire/anglais-britannique-essentiel/technology