Gone are the days of waiting in long queues to deposit or withdraw cash. It's the digital age, and banks are digital, too. So, what is digital banking? Digital banking involves banking activities such as withdrawing cash from ATMs, paying bills online, transferring money to another account, etc. It is paperless, fast, easy, and very convenient.
Digital Banking Meaning
By definition, digital banking is banking through a digital platform without any paperwork. You can access your bank account and all banking products and services online anytime, 24*7. Digital Banking means all banking operations are digitised, and customers' need to visit bank branches is eliminated. Digital banking in India is growing at a rapid rate, and it is completely changing the way banks operate.
Benefits of Digital Banking
Digital banking offers many benefits and solutions, and it is an excellent example of using the latest technology to improve customer service and experiences.
- Convenience: We can do all banking activities from the comfort of our homes, and there is no need to visit banks for small errands. It saves time and effort.
- Paperless Banking: All bank account data and information, fund transfers, etc., are available online, eliminating the need to file and store important bank documents safely.
- Online Payments: Digital banking has revolutionised payment methods. Shopping and paying online have become relatively easy and quick.
- Service to Remote Areas: Today, the internet and smartphones have reached every corner of our country. Even the most remote places have internet access, so digital banks in India are also growing.
- Set up Automatic Payments: With digital banking, you do not need to worry about remembering to pay monthly bills such as gas, credit cards, etc. Banks can send you alerts for payments due or pay monthly bills directly from your account.
Types of Digital Banking Payments
- Banking Cards: Banking cards, such as debit and credit cards, have multiple uses. We can withdraw money, pay online, or use it at point-of-sale (PoS) machines.
- Unstructured Supplementary Service Data (USSD): Using your registered mobile number, you can easily carry out digital banking transactions on your mobile by dialling *99#. This service is available throughout the country. When you dial *99#, an interactive voice menu opens, allowing the user to select the needed banking activity.
- Aadhaar Enabled Payment System (AEPS): Once the customer's Aadhaar Card is successfully linked with his bank account, AEPS allows online transactions.
- Unified Payment Interface (UPI): It allows users to transfer funds without entering bank account details or IFSC codes. Users can also consolidate various bank accounts in one place. Google Pay, Phonepe, and BHIM are UPI-based apps in India.
- Mobile Wallets: Mobile wallets like Paytm can store bank account details and card credentials, eliminating the need for CVV or four-digit pins. These wallets can also be used to pay other merchants with similar apps.
- PoS Terminals: These point-of-sale devices read a card, such as a debit or credit card, to authorise payments. They are most often used in supermarkets, restaurants, and petrol pumps.
- Internet and Mobile Banking: These are part of digital banking. Internet banking, or e-banking, allows core banking functions like transferring funds or opening and closing bank accounts over the Internet. Mobile banking means using digital banking services through mobile-based apps.
Difference Between Digital Banking and Online Banking
Digital and online banking are often used interchangeably, but there is a difference between them. Digital banking consists of the entire banking process, not just the central services being digitised. In contrast, internet banking involves only the core services, like transferring funds, reviewing balances, etc., being done online. So, internet banking is a part of digital banking.
Digital Banking vs Online Banking
| Digital Banking | Online Banking |
|---|---|
| It is the entire banking process and services being digitised. | It is a part of digital banking, it uses internet to core banking functions online. |
| It can be accessed through the bank’s website and bank’s app. | It can be only accessed via the bank’s website. |
| It is more focused on transferring the entire banking system online, so that the need of physical banks is almost eliminated. So it includes digital wallets, investment platforms, mobile banking apps, etc. | It deals with everyday core activities like checking balances, transferring funds, paying bills etc. |
Advantages of Digital Banking
Digital banking offers several advantages.
- Accessibility & Convenience: Since the need for physical bank visits is almost eliminated, banking has become more accessible. All banking activities can be done anywhere in the world, making banking more convenient.
- Time-Saving: Transactions are processed faster since there is no paperwork involved.
- Customer-Support: Most digital banks offer online customer support all day, so queries are solved quickly.
- Ease of Payments: Digital modes of payment, like UPI payments, make transactions quick and easy.
- Awareness: Due to the digital revolution, almost everyone in the country knows the importance of having bank accounts, doing transactions online, etc. Even the most minor vendors and stall owners now have UPI apps to ease transactions.
Disadvantages of Digital Banking
It is clear that digital banking in India is booming and offers many benefits, but it does have some disadvantages and risks.
- Cybersecurity Threats: Using digital banking services can result in cyberattacks, such as phishing and data breaches.
- Online Frauds: Digital Banking often faces online frauds, such as hacked accounts and unauthorised fund transfers.
- Account Lockout: Forgetting passwords or specific security measures sometimes results in getting logged out of online accounts, resulting in a temporary loss of digital banking services.
- Privacy Concerns: Banks often share customers' personal and financial data with third-party service providers.
Like most things, digital banking has a few disadvantages, but the advantages of digital banking outweigh the risks. Many new digital banks are coming up in India, providing the best services.
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FAQs on Digital Banking
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When did Digital Banking start in India?
In the late 1990s, India got its first digital bank. ICICI started it and provided online services to clients. In 1999, there was a rise in awareness and trust in the internet, and internet prices also reduced. This was when digital banking started developing and providing more services.
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Is digital banking safe?
Yes, digital banking is generally safe, as banks use many security measures, such as encryption, multi-factor authentication, etc., to protect your account and transactions. However, always keep your login credentials confidential and follow all security practices.
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Are there any charges for using digital banking?
It usually varies from bank to bank and also depends on the type of account. Some digital banks in India do not charge fees, while others charge fees for specific services or account types.
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What should I do if I forget my digital banking password?
Every bank has a system for password recovery, such as answering security questions. You can also get a temporary password via e-mail or SMS to access your account.
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How do I sign up for digital banking?
Signing up for digital banking is easy. You can visit the bank's branch or even check its website. To open a digital banking account, you must provide your personal information, set up login credentials, and verify your details.
