What is the difference between a bank and a digital bank?
While most financial institutions offer digital banking, online banks operate fully online and often have more robust, user-friendly websites and mobile apps than traditional banks. Often, these digital banks also tout lower fees and more competitive interest rates.
Digital banks are a type of financial technology (fintech) entity. They offer many of the same banking services as a traditional bank, but the main difference is that digital banks don't have physical branches.
Digital banking is an advanced financial solution that uses technology to provide a complete set of services. Going beyond the basic features of checking your account balance or transferring funds, digital banking covers services which may include online banking, mobile banking, virtual assistants and more.
Digital banking is the shift of all banking transactions and services to the Internet. Digital banking provides services such as setting up a bank account, transferring funds, and making withdrawals. Moving to the online space allows you to save money on opening bank branches. Most tasks are automated.
An online bank not only typically provides a better virtual experience, but you will likely also get fewer fees and higher rates on savings accounts.
If they're FDIC-insured, online banks are as safe as traditional brick-and-mortar banks in many ways. You can also take steps as a consumer to ensure your account is as protected as possible when banking online, whether you bank with a brick-and-mortar or an online bank, also called a direct or digital bank.
One way that digital bank accounts differ from traditional accounts is that they may offer much higher yields and lower fees. The market for savings accounts is much more competitive with digital banks. Because the account is digital, you won't need to worry about looking for local branches.
It includes cybersecurity risks, the risk of non-compliance with data protection regulations, and the risk of legacy systems. While banks develop thorough plans for dealing with financial risks, they may not be aware of technological risks. Banks might face several challenges when they try to mitigate technology risks.
Institution name | Top APY |
---|---|
Laurel Road | 5.00% |
Everbank | 5.15% |
Capital One | 4.35% |
Discover Bank | 4.35% |
Chase* is a digital bank owned by US banking giant J.P. Morgan. It launched in the UK in September 2021 and offers fee-free banking via its mobile app. While relatively new to the UK, it operates more than 4,600 branches worldwide and has already amassed over 50 million active digital users in the US.
Are ATMs digital banking?
An automated teller machine (ATM) is an electronic banking outlet that allows customers to complete basic transactions without the aid of a branch representative or teller. Anyone with a credit card or debit card can access cash at most ATMs, either in the U.S. or other countries.
Some disadvantages of online banking include: No physical branches when you need help. Challenging cash deposits. No access to foreign currency.
Functionality. Digital Banking allows you to perform banking through multiple avenues like your desktop computer, tablet, laptop, etc., whereas Mobile Banking is only accomplished via mobile devices. Plus, you can conduct mobile Banking with the internet via banking apps or without the internet via SMS.
Bank | Forbes Advisor Rating | ATM Network |
---|---|---|
Chase Bank | 5.0 | 15,000+ Chase ATMs |
Bank of America | 4.2 | 16,000+ ATMs in the U.S. |
Wells Fargo Bank | 4.0 | 11,000 |
Citi® | 4.0 | 65,000 |
- Nubank. Founded in 2013 with the mission of reinventing financial services, Nubank has become one of the world's largest banking platforms in the world – serving 90 million customers across Brazil, Mexico and Colombia. ...
- Quontic. ...
- Varo. ...
- NBKC Bank. ...
- Chime. ...
- Revolut. ...
- Discover Bank. ...
- Starling Bank.
Cons of online banks:
You are more likely to incur ATM fees if the online bank has no ATM network or is part of a small network. You can't deposit cash unless the bank is linked to ATMs that accept cash. Check deposits, done online or on a mobile app, may take longer to process. They aren't a good fit for everyone.
Yes. Most online banks will allow you to withdraw cash from a checking or money market account via any ATM. Before you do, be sure to see if there are free ATMs or if the bank reimburses ATM fees.
Digital money generally represents fiat currencies, such as dollars or euros. It is exchanged using computers, smartphones, cards, and online cryptocurrency exchanges. In some cases, it can be converted into physical cash using an ATM.
When banks fail, the most common outcome is that another bank takes over the assets and your accounts are simply transferred over. If not, the FDIC will pay you out. Funds beyond the protected amount may still be reimbursed, but the FDIC does not guarantee this.
As of right now, no. Virtual banks will reduce the need to have brick and mortar banks on every corner, but there will always be a need to have a physical branch. For cash transactions, coin counting, bond redemption, etc. these all need to take place in a branch with a banker or teller.
What percent of Americans use online banking?
The tides have shifted, and the majority of Americans are now on board with digital banking. As of 2022, 78% of adults in the U.S. prefer to bank via a mobile app or website. Only 29% of Americans prefer to bank in person.
Online banks make it quick, easy and convenient to manage your money wherever you are in the world. All you need is a device and an internet connection. But they do have their downsides, including lack of in-person customer service, the option to deposit cash and potential security risks.
As digital banks do not offer brick-and-mortar services it is difficult for those paid in cash or heavily relying on cash in their economic activity to deposit that money into an account. In this sense, digital banking is not a strong option to those who are cash reliant.
The answer is that yes, your money is safe in the bank. As long as your deposit accounts are at banks or credit unions that are federally insured and your balances are within the insurance limits, your money is safe.
You can look up banks by name or website address to verify whether they are a real FDIC-insured bank. Compare the bank name with the web address or URL. Watch for letters out of place or the bank name as a sub web address of the fake name.
References
- https://www.nerdwallet.com/article/banking/is-my-money-safe-in-a-bank
- https://www.fdic.gov/resources/consumers/consumer-news/2023-10.html
- https://www.investopedia.com/what-happens-if-my-bank-fails-7378029
- https://jsis.washington.edu/news/digital-banking-and-economic-development-inclusion-and-exclusion-in-latin-america/
- https://em360tech.com/top-10/best-digital-banks
- https://www.investopedia.com/terms/a/atm.asp
- https://moneytothemasses.com/banking/chase-bank-review-is-it-the-best-uk-digital-bank
- https://www.forbes.com/advisor/banking/safest-banks-in-the-us/
- https://www.dbs.com/digibank/in/articles/save/digital-banking-vs-mobile-banking
- https://www.chime.com/blog/pros-and-cons-of-internet-banking/
- https://www.investopedia.com/are-online-banks-safe-7642966
- https://www.forbes.com/advisor/banking/banking-trends-and-statistics/
- https://www.tibco.com/glossary/how-to-address-banking-risk-in-a-digital-world
- https://www.bankrate.com/banking/savings/online-vs-brick-and-mortar-banks/
- https://www.bankrate.com/banking/digital-banking-trends-and-statistics/
- https://wise.com/us/blog/online-banking-advantages
- https://www.moodybank.com/news/post/digital-banks-vs-digital-banking-with-traditional-banks
- https://www.investopedia.com/terms/d/digital-money.asp
- https://www.chase.com/personal/banking/education/basics/digital-banking-vs-online-banking-whats-the-difference
- https://www.cnet.com/personal-finance/banking/advice/how-to-get-cash-from-your-online-bank/
- https://sdk.finance/what-is-digital-banking/
- https://fortune.com/recommends/banking/best-online-banks/
- https://www.quora.com/Will-virtual-banks-replace-traditional-banks
- https://www.fool.com/the-ascent/banks/articles/this-was-the-biggest-benefit-of-switching-to-online-banking-for-me/