Banking in the Digital Age: What It Means

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The term “digital banking” refers to the computerisation of banking procedures. Customers of a bank may use digital banking to get access to the bank’s services and products via an online or digital medium. The term “digital banking” refers to the practise of replacing a bank’s physical location with an ongoing online presence, hence reducing the need for customers to visit a branch.

Advantages of Online Banking

It goes without saying that the advantages much exceed the expenses of advancing to a more technologically advanced method of doing things. Likewise, digital banking as a technology byproduct attempts to simplify the lives of bank clients. Digital banking offers the following advantages:

1. Digital banking enables consumers to perform banking tasks from the comfort of their homes, whether they are an elderly person who is tired of waiting in lines, a working-class professional who is busy with work, or a regular person who does not want to visit the bank branch to run a single errand. Additionally, it is convenient.

2. Expanding on the convenience given, digital banking enables users to do financial tasks around the clock, with access to banking services available 24 hours a day, seven days a week.

3. The excessive reliance on paper was one of the most significant problems of conventional banking. As a result of the emergence of digital banking as a service, banking has become paperless. A user may access their account at any moment to check their records.

4. A user may set up automated payments for typical utility bills such as energy, gas, phone, and credit cards using digital banking. The consumer is no longer required to make an effort to recall the due dates. The consumer may elect to receive reminders about forthcoming payments and unpaid balances.

5. The seamless integration of payment methods into online shopping platforms has made online purchasing a breeze. Internet banking has contributed greatly to online payments.

6. The expansion of digital financial services to rural places seems to be a step toward comprehensive development. With inexpensive cellphones and internet connection in rural locations, the rural populace may maximise the use of digital banking services.

7. Fund transfers offered by digital banking lessen the danger of counterfeit cash.

8. A user may report and block missing credit cards with the push of a button using digital banking. This advantage significantly enhances the privacy and security offered to bank customers.

9. By encouraging a cashless society, digital banking limits the circulation of illicit money since the government can trace the transfer of funds. On the long term, digital banking is anticipated to reduce currency minting requirements.

Digital banking payment types

Banking cards: Not only are banking cards used to withdraw cash, but they also permit various types of digital payment. Cards may be used for both online and Point of Sale (PoS) purchases. Banks may also provide prepaid cards; these cards are not tied to a bank account, but operate based on the funds deposited onto them.

Unstructured Supplemental Service Data (USSD): Mobile transactions may be conducted without an application and internet connection by calling *99#. The number is applicable nationally and supports greater financial inclusion at the local level. The service allows the caller to navigate a voice-activated menu and choose the required choice on the mobile screen. The sole restriction is that the caller’s cell phone must be associated with the specified bank account.

Aadhaar Enabled Payment System (AEPS): AEPS enables the customer to begin banking instructions upon successful Aadhaar verification.

Unified Payments Interface (UPI): UPI is now the most popular type of digital banking. UPI utilises a virtual payment address (VPA) so that the user may transfer cash without providing their bank account information or IFSC code. The applications of UPI allow you to unify all of your bank accounts into an one location. Transfers and receipts of funds are available around the clock, with no time constraints. In India, the UPI-based applications include BHIM, PhonePe, and Google Pay. In addition to transferring payments to other virtual addresses and bank accounts, the BHIM application allows the user to transfer monies to another Aadhaar number. Additionally, UPI-based payments are costless.

Mobile Wallets: Mobile wallets have removed the need to memorise four-digit card PINs, input CVV information, and carry currency. Mobile wallets hold bank account and card details so that users may simply add money to the wallet and pay other businesses using similar programmes. Popular mobile wallets include Paytm, Freecharge, and Mobiwik, among others. However, mobile wallets often have a restriction on the amount that may be put. A minor fee may also be assessed when transferring money from a mobile wallet to a bank account.

PoS terminals: They  are typically portable devices that read a card for payment authorization and completion. The majority of supermarkets and petrol stations accept this form of payment. As digital banking has flourished, however, PoS terminals have developed into more than physical PoS devices. Virtual and Mobile PoS terminals have emerged, which use the NFC technology of mobile phones and web-based payment apps to begin transactions.

Internet and Mobile Banking: Internet banking, often known as e-banking, refers to accessing some banking services, such as financial transfers and account opening and closure, through the internet. Internet banking is a subset of digital banking since it is confined to basic tasks alone. Likewise, mobile banking is the provision of financial services using mobile-based apps.

Distinction between Digital and Online Banking

The phrases digital banking and internet banking are often used interchangeably. However, there is a thin boundary between the words’ meanings.

Checking balances, evaluating transactions, and moving cash are a few of the day-to-day responsibilities of online banking. This is the bank’s fundamental activity, which is relocated to an online presence by means of internet banking. Online banking has a purpose.

However, digital banking is an end in itself. Digital banking aims to digitise all bank processes, including core and non-core. The major purpose of digital banking is to support the whole customer lifecycle, from onboarding to account maintenance through account closure. Digital banking aims to render the physical presence of a bank’s branch superfluous for its clients, allowing them to do all financial transactions from their preferred location. Therefore, internet banking is a subset of digital banking, the master set.

Disadvantages of Digital Banking?

Is digital banking safe? Contrary to the commonly held belief that internet banking entails security risks, most readers will be shocked to learn that digital banking is actually safer than conventional branch banking. While digital banking forums are susceptible to vulnerabilities and intrusions such as phishing, pharming, identity theft, and keylogging, banks are spending heavily in security mechanisms. When evaluating a service such as digital banking, security is of paramount importance. If security were breached, banks would lose a critical selling point, and financial organisations cannot risk customer data and resources because they cannot afford unfavourable PR.

In a hypothetical situation in which banks really lose your money to a hacker, you will be entitled to the full amount of your bank balance since your money is safeguarded. To avoid significant public responsibility and negative publicity, banks are compelled to make substantial investments in bolstering the security of digital banking systems.

However, users of digital banking must do their part by adhering to specific safeguarding practises:

1. Follow instructions to update your passwords often and maintain their secrecy.

2. Avoid utilising public networks and devices to access your digital banking; if you must use a public device, make sure to erase your cache and browser history. It is best practise to prevent your browser from storing your usernames and passwords for bank accounts.

3. Banks never request personal information, so avoid supplying it with anybody who requests it.

4. Anti-virus protection provides an additional degree of security for your computers.

5. Either the URL must begin with “https” or a padlock must display next to the URL. The padlock is a certificate of security. The address bar glows green when a website is protected with an SSL certificate, which serves as an extra certification of the website’s security. Therefore, utilise the bank’s URL and avoid clicking on any other links. In general, banks use at least SSL/128-bit encryption.

6. Finally, unplug the machine from the internet while it is idle.

Digital Banking in India

When did Digital Banking commence in India?

In India, digital banking began to take form in the late 1990s, with ICICI Bank being the first institution to provide the service to retail customers. Digital banking became ubiquitous only in 1999, when internet fees were cut and internet-related knowledge and trust rose. Banks did not begin offering a greater range of goods online until the internet had matured and its prices had decreased.

Which digital bank is the best?

There is a list of firms that facilitate the establishment of digital savings bank accounts. The only difference between a digital savings account and a traditional savings account is that the digital savings account also enables the customer to access all banking services without any minimum balance requirements. The user has access to a virtual debit card that can be converted to a real debit card. The banks also provide Internet banking services through their websites, such as HDFC Internet banking and ICICI Internet banking, among others.

Some of the top digital savings bank accounts with no minimum balance in India:
1. Axis Bank ASAP
2. Digisavings – DBS
3. Kotak 811
4. ICICI Bank's Pockets and Insta Save FC Account
5. Online Savings Account from Indus - IndusInd

All of the aforementioned bank products provide varied services dependent on the accounts selected. Some of the services are accessible through their website, while others need an application. IMPS, NEFT, and UPI transfers are enabled for all accounts. Pockets by ICICI also offers NFC payment capabilities. Kotak, DBS, and Axis banks all offer digital savings accounts with a 6 percent interest rate. Each account may provide many variations with varying service and fee levels.

How can I do Digital Banking?

To engage in digital banking in India, a person must first establish a checking or savings account with a bank. This may be accomplished by visiting the branch in person or by using the online account opening alternatives available on bank websites, which just need the uploading of a few papers from the comfort of your own home.

Once you’ve established an account with a bank, the majority of institutions will issue you with digital banking credentials that may be used 24×7 for smooth transactions. If you do not get your login credentials in the welcome packet, you may always contact your bank to acquire free online banking.

To establish a digital banking account in India, a person must:

1. Be at least 18 years old. 
2. Possess both a PAN and an Aadhaar card.
3. Complete KYC, i.e. paper-based verification of information, within twelve months after account establishment. Failure to comply with the standard will revoke the individual's ability to register a digital bank account in the future using the same Aadhaar and PAN.

As a future enhancement to physical KYC verification, the market regulator may permit video-based verification to enhance the digital efficiency of the process.

Future of Electronic Banking

According to a Deloitte study report on must-haves for a completely digital bank, any bank aspiring to go fully digital must have the following as the major success drivers:

1. Option to purchase currency
2. Personalised standing choices
3. Accounts associated with tax exemption status 4. Card blocking function
5. advancements in safety vaults
6. Incorporation of stock exchange investment channels
7. Analytical financial management
8. Permit the aggregation of accounts from several banks
9. Quickly available aid

Currently, a complete replacement of physical branch banking with internet banking looks like a pipe dream. Digital banking is advantageous for recurring banking requirements. Customers prefer human engagement for more significant and irregular choices, such as taking out a loan or negotiating its conditions.

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