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Understanding Digital Banking

The term ‘Digital Banking’ is, to my mind, one of the most miss-understood concepts in the financial world today. Ask any group of 21st century bankers and you will get more definitions than there are member of the group. And this confusion of definition is one of the reasons why there a lack of fire and enthusiasm for the whole idea.

Many simply see Digital Banking as mobile banking or on-line banking. They see it as an add-on to existing and traditional banking services. All of these are too narrow focused. They fail to see the big picture.

How do I define “Digital Banking”?

Well, I have agonized over this for a while now, in part because I have been seeking a simple, succinct turn of phrase, ten or twelve words crafted into a killer definition. But even this eludes me.  

My best shot at this is;

Digital Banking is the application of technology to ensure seamless end-to-end (STP in the ‘old’ jargon) processing of banking transactions/operations; initiated by the client, ensuring maximum utility; to the client in terms of availability, usefulness and cost; to the bank in terms of reduced operating costs, zero errors and enhanced services.

Just for a moment I would like to expand on the benefits, to both the bank and the client, just to try to illustrate a larger reality, the way that I see digital banking.

Benefits to the bank:

  • Lower operating costs through;
    • the elimination of costly back-office processing operations,
    • fewer (or ideally no) errors,
    • smaller branch footprint (the typical branch can become a kiosk affair, providing technology interfaces for the client to use plus the ability to deal with banking specialists via a video link) – a minimum number of actual staff will be required.
    • concentrating banking/business specialists in a single centre, who are then available to clients via a technology link (either on their mobile, pc or via a kiosk branch).

Operating cost savings of between 20% to 40% could be achieved this way, according to industry experts. Cutting costs has the opposite effect on profits – they go up.

  • Dumping legacy systems;
    • Make no mistake - one of the biggest drawbacks to going ‘Digital’ is this irrational clinging to legacy systems (developed in the 1960s and 1970s) that hold progress back. Banks plead the huge cost of making the change. They are wrong. The ultimate costs of not making the change are far greater.

Benefits to the customer:

  • Improved services and product offerings;
    • 24/7 bank services and availability through your mobile, pc or kiosk branch,
    • ‘smart banking’ applications that allow ALL transactions to be completed from the device of your choice, from beginning to end (with clear instructions and fail safe mechanisms),
    • access to a FULL range of services (savings, investments, insurance, loans, mortgages, foreign currency, etc.),
    • new useful client services such as warnings, notifications, budgeting, expenditure analyses, savings programs, calculators (you name it – the range is endless),
    • Lower charges (and therefore cheaper banking),
    • Banking that meets the client’s needs (not the banks).

Of course with all this data available banks should not hesitate to follow up on what their client is doing or looking at – by e-mail, on-line chat, personal phone call. Just like the popular hotel grading system ‘Trip Adviser’ does today. If you’ve been checking out hotels – they follow up in days with a ‘Are you still interested in hotels in ….?’

However, somewhere along the way the concept is just simply getting lost to many bankers. To put it in simple terms, after a promising start, a digital application for a banking product or service comes crashing out of the digital world, spiraling down as just another piece of paper to be handled in just the same way as it has been done in the past. The illusion vanishes; the bubble bursts; the concept is dead. And we remain trapped in the same old inefficient, disjointed and highly expensive manual processing routine of the past.

Some banks are getting it right though and for those still on the shelf it is going to be one hell of an uphill struggle to catch up when the penny (or the pound) finally drops.

To my mind the concept of the ‘Digital Bank’ is vibrant, alive and exciting. It points the way to a future where banks can really add value and where customers can secure huge benefits in terms of bank products and services that are really, really useful.


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Stanley Epstein

Stanley Epstein


Citadel Advantage Group

Member since

09 Oct 2006



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This post is from a series of posts in the group:

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