The term digital banking, essentially, combines online and mobile banking services under one umbrella. Online banking means accessing banking features and services via your bank’s website from your computer. You may log into your account to check your balance or pay your electricity bill. You can access additional banking features, such as applying for a loan or credit card, via your online banking portal.
Mobile banking means using an app to access many of those same banking features via mobile devices such as smartphones or tablets. These apps are proprietary, issued by the bank where you hold your account, and usually use the same login information as your online banking portal.
Source: Focus Malaysia
Designed for people on the go, mobile banking apps tend to include the most used banking features, such as mobile check deposit, funds transfers and bill payment. They also often have convenient features like peer-to-peer payments through systems like Zelle. Banks also may use their mobile apps to send customers banking alerts such as fraud detection and low balance notifications.
Online Banking + Mobile Banking = Digital Banking
Online banking in the U.S. has its roots back in the 1990s. In October 1994, Stanford Federal Credit Union was the first institution to let its customers access banking functions via the new World Wide Web. Now estimated 80% of U.S. banks offer their customers the ability to bank online.
As mobile devices gained popularity and adoption, banks were encouraged to put their services at their own mobile banking apps. The FDIC has reported that 34% of Americans use mobile banking as their primary way of accessing their accounts.
Together, online and mobile banking create the digital banking umbrella, giving people access to banking wherever they may be.
For customers who appreciate the ability to stop by a branch to perform some of their banking functions, brick-and-mortar banks is the natural choice for their bank accounts. These traditional banking institutions also usually offer online access and a proprietary mobile app to make everyday banking functions as accessible as possible for their customers.
Digital banking offers a number of benefits for both consumers and business owners.
• Access. With both desktop and mobile access to your bank accounts available, digital banking means you’re not beholden to bank hours to manage your finances.
• Better rates and lower fees. With online banks driving fees down, consumers have choices beyond their local brick-and-mortar financial institutions. It’s easy to compare rates and fee structures to find the best bank for your needs.
• Equity. Upstart online banks level the banking access playing field by reaching unbanked and underbanked communities that rely heavily on mobile phones but may not have access to physical bank branches.
Digital banking, while highly convenient and easy to access, isn’t without its challenges.
• Downtime. If you rely solely on an online bank, you could be challenged to access your accounts should your bank experience an online or mobile app outage and there’s no branch for you to visit instead.
• Learning curve. For those who aren’t tech-savvy, online banking and mobile banking apps might be a bit much to digest.
• Security. There’s always the chance that your username and password could be hacked; however, online banks pursue the same degree of risk-reducing security protections, such as multi-factor authentication, as brick-and-mortar banks do.
Into this scenario, we have BNM approving five digital banking licenses (for Malaysia) out of 29 applicants. And these include:
1. A consortium of Boost Holdings Sdn Bhd and RHB Bank Berhad.
2. A consortium led by GXS Bank Pte Ltd and Kuok Brothers Sdn Bhd.
3. A consortium led by Sea Limited and YTL Digital Capital Sdn Bhd.
4. A consortium of AEON Financial Service Co, Ltd, AEON Credit Service (M) Berhad and MoneyLion Inc.
5. A consortium led by KAF Investment Bank Sdn Bhd.
P. Gunasegaram (of Malaysiakini, 3 May 2022) expressed caution on the changes taking shape, including the possibility of “a lot of damage” if these developments “fizzle out”.
This is a niche market and very much at an early stage globally. The digital banks are expected to commence operations in 12 months hence at the earliest. And many are anchored by strong shareholders. Also, give some credit to BNM in their evaluation. It is not some Muthu, Ali and Ah Chong consortium but real serious players. Let the music begin.
References:
What is digital banking, E. Napoletano,Daphne Foreman, Forbes, 24 Feb 2021 (
(https://www.forbes.com)
Comment| The dangers of digital banking, P. Gunasegaram, Malaysiakini, 3 May 202
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