Discover the transformative advantages of online banking, from convenience and enhanced control to community connections, revolutionizing the way we manage our finances.
According to a recent study on U.S. Consumer Banking Statistics by Forbes Advisor in 2023, approximately 78% of Americans now prefer using mobile apps or websites for their banking needs rather than conducting transactions in person.
While the global pandemic highlighted the importance of digital banking platforms, it's important to note that mobile and online banking have been in existence for some time.
Kevin Cohee, the owner, chairman, and CEO of OneUnited Bank, the largest Black-owned bank in the United States, headquartered in Boston, emphasizes that the pandemic only expedited a trend that was already underway.
Traditional banking methods, such as visiting a branch, using the phone, or utilizing ATMs, have lost their appeal. During the Covid-19 pandemic, many banks closed their branches or reduced their operating hours, leading to increased reliance on digital banking options. Furthermore, customer service call centers often face long wait times, further incentivizing customers to explore digital banking alternatives in recent years.
What is digital banking?
Digital banking refers to the complete execution of banking activities through online platforms, including websites and mobile applications. It enables customers to conduct various banking transactions and access banking services without the need to physically visit a brick-and-mortar branch.
The convenience and practicality offered by digital banking have contributed to its growing popularity in recent times. Customers have the flexibility to manage their accounts anytime and anywhere, empowering them to engage in a multitude of transactions. These transactions include checking their account balances, transferring funds, paying bills, and even applying for loans.
Advantages of Digital Banking
Whether you're already an avid user of digital banking or you're considering downloading your bank or credit union's mobile app, it's crucial to understand the benefits that come with banking online. Here are the key advantages of digital banking:
- Convenience One of the primary advantages of mobile and online banking solutions is the ability to bank anytime and anywhere. With features like remote check deposit, balance checking, fund transfers, and overdraft notifications available through mobile banking apps, there's no longer a need to visit a physical branch. Digital banking also offers the convenience of going cashless, providing more security, hygiene, and better transaction tracking.
- Features Modern digital banking experiences often offer an array of features that are on par with or even surpass traditional in-person banking. In addition to basic tasks such as viewing statements, account balances, and bill payments, banking apps may provide personalized financial advice, savings tools, big-purchase calculators, virtual assistants, and peer-to-peer payment options. Some apps even incorporate live chat functionality to bridge the gap between in-person and digital banking experiences.
- Security Financial institutions prioritize security in digital banking. Banks implement various measures such as multifactor authentication and biometric logins (e.g., fingerprint or facial recognition) to enhance security. Mobile banking apps often include automatic risk scanning, and digital payments and e-wallets are reported to offer greater security than physical cards in some cases. Additionally, deposits in FDIC-insured banks or credit unions are protected up to $250,000 per depositor, per bank, ensuring the safety of customers' funds.
- Control Digital banking provides customers with greater control over their finances and real-time access to manage and move money as needed. Unlike traditional banking, there are no time restrictions on performing tasks like depositing checks or transferring funds. The advancements in technology have made daily transactions more seamless, enabling easier money reception and spending. Automated savings tools, push notifications for low balances or overdrafts, and card activation options further enhance control and convenience.
- Benefits Beyond Banking Digital banking platforms have the potential to create broader financial, social, and economic changes. They serve as a means to offer financial literacy education and provide tailored options and communities for specific customer needs. For example, Black-owned banks can extend their reach by offering online banking services to Black communities across the country. Specialized digital banking platforms like Daylight cater to the financial lives of LGBT+ individuals, addressing their unique challenges and promoting community and empathy.
In summary, digital banking offers unparalleled convenience, a wide range of features, enhanced security measures, increased control over finances, and broader social and economic benefits. It has transformed the way customers interact with their banks, empowering them to manage their finances efficiently and effectively.
How safe is online banking?
Online banking is generally considered safe due to the various technologies employed by banks such as encryption, firewalls, and multifactor authentication to safeguard customer data and prevent unauthorized access. Nonetheless, accessing online banking through public Wi-Fi networks or unsecured devices can pose risks and make customers vulnerable to attacks by hackers.
Valuable Tip
To ensure the security of your personal and financial information while banking online, it is essential to maintain a vigilant approach and implement necessary precautions. This involves the following measures:
- Create Strong Passwords: Use unique and robust passwords for your online banking accounts. Avoid common passwords and consider incorporating a combination of uppercase and lowercase letters, numbers, and special characters.
- Keep Devices Updated: Regularly update your devices, including smartphones, tablets, and computers, with the latest security patches and operating system updates. These updates often contain important security fixes that help protect against vulnerabilities.
- Avoid Sharing Sensitive Information: Be cautious about sharing sensitive information, such as account numbers, passwords, or social security numbers, with others. Legitimate financial institutions will never request such information via unsolicited emails or phone calls.
By adhering to these precautions, you can enhance the security of your online banking activities and protect your personal and financial data from potential threats.
Fees Associated with Online Banking
Compared to traditional banks, online banks generally have lower operational costs, resulting in fewer and often reduced fees. However, depending on the institution you choose, you may still encounter some common fees related to online banking. These fees can include:
- Monthly Maintenance Fees: Some online banks may charge a monthly fee for maintaining an online banking account, particularly if certain balance or activity requirements are not met.
- Overdraft Fees: If you spend more than the available balance in your account, you may incur overdraft fees. It's important to closely monitor your account balance and transactions to avoid such fees.
- ATM Fees: When using an out-of-network ATM to withdraw cash or conduct transactions, online banks may impose ATM fees. It is advisable to use ATMs within your bank's network to avoid these charges.
- Wire Transfer Fees: Online banks may levy fees for sending or receiving domestic or international wire transfers. These fees can vary depending on the destination and currency involved.
- Stop Payment Fees: Requesting your bank to halt a check or ACH transaction before it clears may result in stop payment fees.
- Foreign Transaction Fees: Making purchases in a foreign currency may subject you to foreign transaction fees. These fees are typically charged as a percentage of the transaction amount.
It's important to review the fee structure of your chosen online bank and familiarize yourself with their specific fee schedule. Understanding the fees associated with online banking will help you make informed decisions and manage your finances effectively.
Top Online Banks for Digital Banking
For an exceptional digital banking experience, the best online banks offer highly rated mobile apps and user-friendly websites equipped with advanced features. These platforms allow users to effortlessly perform daily banking tasks, gain greater control over their finances, and even connect with a community of individuals sharing similar financial goals. Based on Forbes Advisor research, the following seven online banks are considered among the best for digital banking:
- Discover Bank
- Axos Bank
- nbkc bank
- Quontic Bank
- Ally Bank
These banks have demonstrated a commitment to providing innovative digital banking solutions, ensuring a seamless and comprehensive banking experience for their customers. Whether through their mobile apps or web portals, these institutions prioritize user satisfaction, convenience, and a wide range of features to meet various financial needs.
Bottom Line
Mobile and online banking empower individuals to manage their financial lives more effectively, offering convenient access to essential tools and features. However, the advantages of digital banking extend beyond traditional banking services. It enables connections to specialized communities and tailored banking opportunities, catering to individual preferences and needs, regardless of geographic location. Embracing digital banking opens doors to a comprehensive financial experience that goes beyond mere transactions.