Digital banking is rapidly changing the way we manage our money. Today, nearly all banks offer online services, allowing customers to check their account balances, transfer money, and pay bills from the comfort of their own homes. However, the future of the banking industry lies in the hands of online-only banks, also known as neobanks, which operate solely through the internet and have no physical branches.

Physical Branches Won’t Disappear

One reason physical branches are still present is that they provide an important point of personal interaction between customers and bank representatives. They offer a sense of security and familiarity, and allow customers to access services such as depositing cash and checks. However, as technology improves and more customers turn to online banking, physical branches are becoming less necessary. For example, TD Bank recently closed 81 branches across the U.S. as more customers chose to bank online. We will certainly see a continuation of this trend in the future, but these branches will not completely disappear anytime soon.

What Makes Digital Banks so Unique?

Digital banks have several key characteristics that set them apart from traditional brick-and-mortar banks. They typically have lower fees, offer higher interest rates on savings accounts, and have more relaxed account opening requirements. They also have a strong focus on mobile and online banking, with user-friendly apps and websites (some don’t even offer websites) that make it easy to manage your money on the go. Additionally, digital banks are increasingly offering credit cards to their customers, which are typically designed to be more user-friendly and accessible than traditional credit cards, with more transparent fees and interest rates. Some of the features that digital bank credit cards typically offer include:

• No annual fees: Many digital bank credit cards do not charge an annual fee, which can save customers a significant amount of money over time. This is an appealing offer for many consumers today.
• Low or no foreign transaction fees: Some digital bank credit cards do not charge any additional fees for transactions made outside of the country, making them a great option for travelers.
• High rewards: Some digital bank credit cards offer higher rewards than traditional credit cards, such as cash back or points for every dollar spent. They also tailor the high rewards to the places users may shop at more than others to entice you to use their services.
• Easy to manage: Digital bank credit cards can be managed easily through the bank’s mobile app, which makes it easy to track your spending and pay your bill. Although most banks (digital or non-digital) offer mobile components, these neobanks put all their focus into creating an amazing user experience, and there lies their competitive advantage.

How can we Trust Online-Only Banks?

One concern people have with digital banks is trust. How do we know our money is safe with an online-only bank? Digital banks are subject to the same regulations as traditional banks, and they typically use advanced security measures to protect customer information. Additionally, many digital banks are CDIC-insured, which means that deposits are insured up to $100,000 per depositor. Some of the big players in the digital banking industry include Tangerine, Wealthsimple, and Simplii. These companies offer a range of services, including checking and savings accounts, debit cards, and even credit cards.

Disadvantages of Digital Banking

There are also some disadvantages to consider. For example, most digital banks do not offer cash withdrawals or physical customer service. Additionally, it’s worth noting that while digital bank credit cards may offer many benefits, they may not show up on your credit score. This is because the credit bureaus may not have a relationship with these digital banks, so they don’t report the credit history to them. For instance, Neo only reports to TransUnion, and not Equifax. Additionally, digital bank credit cards may not have as many benefits and protections as traditional credit cards, such as rental car insurance or extended warranty coverage. They may also have a lower credit limit, making them less flexible for big purchases. With time, these disadvantages will no doubt start to fade away.

Conclusion

Overall, digital banking is headed in a direction where physical branches will play a lesser role, and online-only banks will become more prevalent. With the advent of technology, the banking industry is becoming more digitized with the use of mobile apps and online banking, which has made banking more accessible, easy and fast. With the increasing need for online banking, the future of banking will be more digitized with more security measures and protection for customer data.

Digital bank credit cards, in particular, offer many benefits and are a great option for customers looking for a more accessible and user-friendly credit card experience. However, it’s important to carefully consider the features and fees of a digital bank credit card before applying, and compare it with the traditional credit card options available, the industry is still young. As the banking industry continues to evolve, it will be interesting to see how digital banks will continue to innovate and adapt to meet the needs of their customers.