This article contains general information and is not intended to provide information that is specific to American Express, or its products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
Digital banking is the delivery of financial services through online and mobile platforms, potentially streamlining everyday banking tasks like payments and transfers.
Businesses are using digital banking services to manage their accounts, access potentially lower fees, and enjoy more convenient user experiences. In this guide, we'll explore what digital banking is, including potential benefits and and considerations, comparisons with traditional banks, and cybersecurity information to help keep business finances protected.
Key Takeaways:
- Digital banking is the process of banking — including making payments, transfers, and deposits — through online and mobile platforms.
- Businesses might use digital banks to process payments and help manage accounts on the go.
- When choosing a digital bank, businesses might look for strong security features, low or no fees, and reliable customer support services.
Digital Banking Defined
Digital banking is the use of online and mobile technologies to deliver traditional banking services, with the goal of helping to enable payments, easier account management, and real‑time financial visibility.
Digital banking solutions may offer many benefits for growing businesses, such as enhanced convenience, advanced security features, and reduced reliance on physical branches.
Digital banking products and services may include:
- Checking accounts
- Savings accounts, certificates of deposit (CDs), and money market accounts
- Money transfers
- Online bill payments
- Mobile deposits
- Balance inquiries
- Credit cards
- Personal loans, mortgages, and auto loans
- Peer-to-peer transfers
- Investment products
- Wire transfers
Traditional vs. Digital-Only Banks
Both traditional and digital-only banks may deliver financial services to businesses and customers but in different ways. A digital bank account, for example, might offer faster, lower-fee, self-service transactions through a streamlined app. Meanwhile a traditional bank might take a more relationship-driven approach with in-person services.
Benefits and Considerations of Digital Banks
While digital banking services may streamline money management for many businesses, there are certain situations where traditional banking solutions may be valuable.
The benefits of digital banks may include:
- Convenience: Digital banking is not limited to the operating hours of a brick-and-mortar branch. That means accounts and services may be accessible 24/7 through an internet-connected device.
- Lower fees: Digital banks may offer low or no account maintenance fees, and some don’t require a minimum balance to open an account.
On the other hand, digital banks may come with potential considerations, such as:
- Lack of in-person support: Digital banks may not provide in-person customer support or services.
- Limited ATM access: It may be less convenient to deposit or withdraw cash — some digital banks partner with third-party networks, which may charge fees for using their ATMs.
- Security considerations: Since all services are provided digitally, security features to protect customer information should be considered.
What to Look for in a Digital Bank
When choosing a digital bank for your business needs, you might consider key factors and services, including:
- Strong security features: Banks might use robust security features, such as data encryption and real-time fraud protection.
- Low or transparent fees: You might look for a bank with low or no fees, such as monthly maintenance, minimum balance, and overdraft fees.
- Intuitive mobile and online tools: Just because banks have websites and apps doesn't mean they're easy to navigate. Businesses might seek user experiences that are efficient and intuitive across platforms.
- Reliable customer support: Some online banks may provide 24/7 customer service via chat, phone, and/or email.
- Customizable services: Digital banks could offer tools like mobile check deposits, peer-to-peer transfers, and money management features.
- ATM access: If you need to withdraw or deposit physical cash, you could look for a bank with a fee-free ATM network.
- Relevant account options: Determine if you may be able to set up the account(s) of your choosing, such as a checking, high-yield savings, or certificate of deposit (CD) account.
- Third-party integrations: Some digital banks offer integrations with other business services such as payment gateways, accounting software, and expense management platforms.
Cybersecurity Considerations
Digital banks may come with built-in tools to help protect sensitive business and customer information. In an effort to prevent fraud and cyber attacks like phishing, businesses may consider security features such as:
- Multi-factor authentication: Banks might require at least two forms of identification, like a strong password and one-time code, to log in and verify each user.
- End-to-end encryption: Secure banks may encrypt financial information during transmission, storage, and processing to prevent data breaches.
- Real-time fraud protection: Banks may use machine learning to automatically detect suspicious activity and send real-time alerts.
What’s Next for Digital Banking?
Digital banking solutions could continue to evolve as new technologies help make banking faster, more integrated, and more intuitive in the years ahead.
These are just some of the emerging trends and innovations expected to help shape the future of banking:
- Real-time payments: Banks could process transactions and move funds between accounts, potentially providing faster results than traditional ACH transfers or physical checks.
- Embedded financial tools: Digital banks may integrate with non-banking apps like retail platforms or accounting software to help enable faster purchases and transactions.
- Stronger cybersecurity protections: Security features like biometric logins and tokenization could continue to advance to help keep data protected and prevent fraud.
- Open banking: Banks may use application programming interfaces (APIs) to securely share financial data with third-party platforms like fintech apps to help enhance personalization.
Are Fintech Solutions the Key to Helping Unlock Small Business Growth?
Digital banking could be foundational to small business success and scalability. Through online platforms and mobile apps, businesses may be able to more easily manage their accounts, gain real-time visibility into their finances, and potentially even access lower fees.
Still, digital banking is just one fintech solution that small businesses may use to streamline financial processes and improve customer experiences. Growing companies are leveraging next-generation digital services to help transform operations, including payment processing, payroll and accounting, and insurance and wealth management.
Photo: Getty Images
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