Digital Banking: The Name of the Game

Banks have been going digital during the global pandemic. It’s no surprise, considering how the internet has permeated all areas of our lives. This article will reveal exactly why digital banking is here to stay, and revolutionize.

COVID-19 has been an impactful event on world economies. Some countries, of course, have been more affected than others, but there is one common thread: the digitalization of banking as a response to the pandemic. This has been fueled by a pre-existing condition, which is the digitalization of our lives in general.

It all began with the internet. Then smartphones were invented. The inevitable result was an increasing demand for fast and convenient digital services. Tech startups (at that time) like Amazon and Netflix swooped in to meet that demand; and that was just the beginning.

The banking sector then caught the digitalization bug too. Millions of people in lockdown and concerns for health and safety, but money never sleeps, which led to a sharp demand for online banking services. The world banks sprang into action. Of course, only time can tell what the general economic fallout will be post COVID-19.

Banks Have Their Hands Full

In any recession, banks are vulnerable to suffer. Credit losses, declines in investment values, and reduction in business revenues are all risk factors. This particular pandemic has thrown another spanner in the works: social distancing and lockdowns. This has led to restrictions on physical banking activities. The banks have had their work cut out for them.

However, banks responded swiftly to new challenges. They did so by implementing digitalized transactions that served customers’ needs. Public health and safety depended on it. Even the World Health Organization came out advising against the handling of banknotes. They strongly proposed the use of contactless payment instead. This was in light of scientific advice that suggested how contagious banknotes are. Banks adjusted accordingly.

Lenders have been urged by federal bank regulators to offer financial relief to those hardest hit. These include borrowers and businesses that face declining profits, slower sales, and job losses. Customer service systems have had to respond appropriately to increased demand. In this regard, thanks to the digital age; banks have been able to do just that. They have pushed through and made innovative adjustments, which apart from being safe and convenient at the time, are disrupting and more effective. Digitlization is here to grow and stay.

How Banks Have Reacted

So, how exactly have banks responded to the pandemic? It began with the decreased circulation of banknotes, which further exacerbated the need for digital banking services.

The Bank of Korea began with quarantining bills that had come from the local banks. The notes were isolated for a maximum of 2 weeks. Similarly, the Chinese government asked lenders to disinfect bills and put them in quarantine. In the U.S., the Federal Reserve started to isolate notes originating in Asia for up to 10 days.

Citibank in the U.S. had an 84% daily uptake in mobile check deposits in May. They also had a tenfold surge in Apple Pay activity. In March, the Mexican operations experienced an 80% jump in mobile app use. Also, digital payments increased by 78%, and downloads of their mobile app catapulted to 116% between February and April this year.

In China, Citigroup ambitiously partnered with technology companies renowned for their digital platforms. Alipay, for example, is responsible for nearly 70% of payments handled by Citigroup for its customers. These digital payment technologies can also be found on popular social media platforms like WeChat and LINE. WhatsApp is hopping on the train as well.

In India, Citigroup has also entered into a credit card partnership with Fintech Paytm. In Singapore, influential lenders make use of Facebook chatbots to help customers. Speaking of Singapore, the DBS bank provided customers with a very well-oiled digital banking system. They digitalized 11 financing processes and offered businesses instant interbank fund transfers. The bank also trained their staff to be digitally literate.

The Future Is Digital

It’s not just digitalization that’s shaking up the banking industry. There are also new players in the field, which come in the form of giant tech companies. Web-first lenders have cropped up as viable alternatives to traditional banks. Nubank, in Brazil, is a startup company that has done just that. Interestingly, their customer base is filled with hundreds of people over 60. A few hundred of them are over 90! This is another way they are challenging traditional banks. Older people have always been thought of as resistant to change. In the past, they have not been as open to abandoning their traditional branches.

Another technological innovator in the banking industry is Amsterdam based ING. During the emergence of the internet, ING Direct was created. The bank’s operations in Spain, Germany, and Australia are completely web-based. ING Direct is highly ranked in all these countries.

This just shows the extent to which people are embracing digitalization in banking. There was a time when you had to have billions of dollars to operate bank branches. You also had to have millions to purchase mainframes from IBM. Now, if you’re a tech company you can use the internet to acquire your customers, create a better user experience, lower your costs, and become a bank.

The pandemic has only highlighted what was brewing beneath for a while now. Digitalization existed before COVID, it has flourished during the pandemic, and is well and truly here to stay. Banks and tech giants have certainly embraced it. Time will tell the full extent to which digitalization will transform the industry, but it is certainly a massive factor to look into as a customer and as an investor.

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