Digital Banking Explained for Dummies

What is digital banking?

Simply put, digital banking encompasses the digitization of all the traditional banking activities and services undertaken by banks and their customers. Digitization, commonly referred to as moving online, is the process of transforming information into a digital format. Observing websites regarding digital banking, the following descriptions help to get a better understanding of the nature and extent of digital banking:

• ‘Digital banking systems are much more flexible [than online banking] and allows banks to add and expand features much faster than traditional systems … [and] provide banks and their customers with high levels of cost-efficiency, security, and flexibility.’ (finance, a digital core banking platform)
• ‘Digital banking goes much deeper [than online banking] and mandates comprehensive re-engineering of a bank’s internal systems. Digital banking is a titan, potentially encompassing every digital program and transaction ever undertaken by either a financial institution or the customers that they serve.’ (Soldo, ‘the payment and spend management automation platform for business’)

 

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Are digital banking and online banking the same?

To a great extent, the two terms are synonyms and are used interchangeably. Online banking has changed our relationship with banking systems fundamentally. It enables us to execute and manage our core and everyday financial transactions without the need to visit a physical bank branch. We can use our laptop, computer, tablet, or smartphone to execute and process transactions such as:

• Do payments
• Add beneficiaries
• Transfer money between accounts
• View or download statements
• Buy electricity
• By airtime, SMS bundles, and data
• Stop-loss or stolen cards immediately
• Update cards (debit cards and credit cards) immediately
• Pay traffic fines
• Reverse and stop debit orders (to a certain limit)
• View or download tax interest certificates
• Transfer money internationally

In short, online banking also referred to as virtual banking, internet banking, and e-banking deals with essential and core financial transactions. Online banking has changed our banking experience drastically, but digital banking takes us to new levels of cost efficiency, security, and flexibility, providing an exciting new banking experience.  

Digital banking services offered by South African banks

Scanning the websites of some of the South African banks, it is evident that the banks are using digital banking innovatively, offering exciting new services in addition to those already available on their online banking systems.   The following slogans are examples of how banks view digital banking as a new and exciting phase for their customers:

• ‘The future of banking is here’ (Discovery Bank)
• ‘A full bank branch in the palm of your hand’ (Discovery Bank)
• ‘Bank wherever the app takes you’ (FNB)

Absa ensures its clients ‘our diverse mobile and online banking tools and services are suitable for any banking need.’   Digital banking services provided by South African banks[1] In addition to online banking services already provided, South African banks offer, inter alia, the following digital banking services:  

• Open a bank account without visiting a bank branch

Paperless verification allows customers to open a bank account without the effort to visit a branch.  

• Use of facial recognition technology

Advanced facial-recognition technology enables customers to open a bank account quickly and easily. In addition, customers can log in to their banking app with facial ID as well.  

• Advanced security technology

Advanced security technologies, such as facial recognition, data loss prevention, and strong passwords protect clients’ accounts.  

• Cash withdrawals at large retailers

Bank clients are allowed to withdraw cash at till points at large retailers like Pick n Pay, Checkers, Shoprite, and Spar.  

• Payments with digital wallets

Clients can make payments at any time at any place with a smartwatch, smartphone, or any other applicable device by using a digital wallet such as Samsung Pay, Apple Pay, or Garmin Pay.  

• Digital vault

A digital vault is an online security vault that can be used by clients to upload and store receipts and other types of documents such as invoices and till slips. In addition, warranty cards can be scanned and saved in a digital vault. Customers can change the description of a transaction, link documents to specific transactions, add personal notes, and quickly search for particular documents.  

• Virtual credit cards

A virtual credit card is a feature in digital banking that can be used when shopping online. When a customer plans to make an online purchase, he or she can request a virtual credit card through their online account with their bank. The customer will then receive a randomly-generated card number that has an expiry date, a specified limit (set by the customer), and a security code that is tied to his/her actual credit card account. The number is only used once and then disposed of, protecting the customer against fraud.  

• Integrated payments platform

If a bank provides an integrated payments platform, a customer is able to instantly pay medical bills without the hassle of paperwork. Additionally, other clients on the same integrated platform and on the client’s contact list can be paid without using their cell phone numbers.  

• Numerous ways to access online banking

Online banking can be accessed on banking apps on smartphones, as well as on desktops, laptops, or tablets.  

• Cardless cash withdrawals

Cardless ATMs allow clients to withdraw cash without the need for a physical bank card. A client’s account is verified via a text message or a banking app on his/her smartphone.  

• Send cash

Typically, banks refer to this service as CashSend. It allows a client to send cash to another person, even if the person does not have a bank account.   Normally, the money is immediately available to the recipient. The recipient receives a pin that allows him or her to withdraw the cash from an ATM of the bank that the sender belongs to.   [1] The information regarding the services provided was obtained from the websites of Discovery Bank, ABSA, and Capitec Bank

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