Page 37 - Banking Finance June 2025

ARTICLE

cial behavior, digital banks can offer users tailored ad- transfers, and easy bill payments which further increases
vice and even alerts on ways to save money or manage better user experience.
their budget.
The Impact of Digital Banks on Tradi-
Changing consumer preferences: Customers are increas-
ingly demanding personalized, convenient, and afford- tional Banking
able banking services. Digital banks can operate at a The rise of digital banks has forced traditional banks to re-
fraction of the cost of traditional banks, mainly because think their business models and adapt to the changing land-
they do not maintain physical branches and their over- scape. Many traditional banks have launched their own digi-
head costs are much lower. This cost-saving translates tal platforms and mobile apps to compete with neobanks.
to better deals for customers, such as lower fees, higher They are also investing in technology to improve their cus-
interest rates on savings accounts, and more competi- tomer experience and offer more personalized services.In
tive loan rates. In addition, the transparency offered by addition, traditional banks are exploring partnerships with
digital banks-such as no hidden fees-resonates with cus- fintech companies to leverage their technology and innova-
tomers seeking more straightforward and honest finan- tion. This allows them to offer new products and services
cial products. Customers can access their accounts any- without having to build them from scratch.The impact can
time and anywhere, using only their smartphones or be visualised in several key areas:
computers. This level of flexibility makes it easier to stay Customer Experience and Engagement: Digital banks are
on top of finances and conduct transactions without the built with the customer experience at their core. With
need to visit a branch or wait in line. user-friendly apps, 24/7 customer support, and personal-
Regulatory changes: Governments around the world ized financial insights, digital banks offer a more engaging
have introduced regulations that promote competition and dynamic experience compared to traditional banks
and innovation in the financial sector like the introduc- partnering with FinTech companies to enhance their digi-
tion of the EU's PSD2 in the European Union and the tal offerings and improve customer engagement.
UK's open banking initiatives.These regulations encour- Disruption of Revenue Streams: Traditional banks have
age innovation by allowing digital banks to access bank- long relied on revenue from fees related to account
ing infrastructure and collaborate with third-party pro- maintenance, overdrafts, and wire transfers. However,
viders for a more seamless customer experience. digital banks have largely eliminated or reduced many
Lower Costs and Fees With Better User Experience: of these fees, instead focusing on offering products with
One of the biggest draws of digital banks is their ability lower interest rates and fewer charges.Furthermore,
to offer lower fees compared to traditional banks.In ad- digital banks have revolutionized lending by offering
dition, digital banks often offer faster services, such as quicker, more accessible loan approval processes, often
real-time notifications of account activity, instant money with lower interest rates than traditional banks. As a

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