Traditional banking has been around for decades, but digital banks have only recently begun to surface as an alternative to traditional banking products and services. If you’re considering switching to digital banking, here’s everything you need to know about what it is and how it differs from traditional banking, including the types of digital banks available today.

History of Digital Banking

For starters, digital banking isn’t necessarily new. Remember pre-paid debit cards? Their inventor was inspired by digital banking: American Express’s Green Card, which revolutionized financial transactions when it was first introduced in 1966. However, in recent years we have seen an explosion of different types of digital banks. In 2018, you can open up a bank account on your phone that has many features of traditional banks with far fewer costs – completely eliminating the need for expensive brick-and-mortar branches!

Digital banking, or e-banking as it was formerly known, has been around since 1998. Online banks have always offered services that are similar to that of physical bank branches—you can withdraw cash from ATMs and make payments through check or debit cards. But some banks have been experimenting with different features beyond traditional banking options like mobile apps with tools to track your spending. As long as you’re comfortable conducting financial transactions online, there’s no reason why you shouldn’t use digital banks instead of traditional brick-and-mortar establishments (they’re also much easier on your wallet). The advantages are many: digital banks offer perks like better interest rates on savings accounts, less complex payment plans than physical banks and more affordable services overall.

Types of Digital Banks

While all banks are essentially digital institutions, there are three primary ways in which they can be categorized as digital banks. The first distinction that can be made is between banks with physical branches versus those without. The former obviously have an advantage in terms of foot traffic, but most people choose to do their banking online anyway due to its convenience. That being said, when significant numbers of customers abandon physical branches—which could happen sooner than you think — traditional banks may find themselves short on foot traffic and scrambling for solutions.

Why Choose a Digital Bank?

Digital banks, also known as online banks or web-based banks, have only one physical location. Instead of offering customers physical branches, digital banks offer access to accounts via their website or through mobile apps. The key feature that sets digital banking apart from traditional banking is customer control over their money. Customers can easily transfer funds in and out of accounts at any time with just a few clicks on their computer or touch screen smartphone. In addition to added convenience, digital bank accounts often come with lower fees and higher interest rates than traditional bank accounts; however, some people may prefer not to bank digitally due to security concerns.

Unique Features of Digital Banking

The main benefit of banking digitally is that users have access to real-time information about their finances. No longer do you have to wait for your monthly statement to get an update on your account activity. You can also see at-a-glance how much you’ve spent or earned in a particular period, allowing you to make better financial decisions. These features make digital banking ideal for small businesses who operate with limited budgets. With real-time information at their fingertips, they can make more informed business decisions based on actual data rather than relying on projections. Since they spend less time digging through statements, they are also able to take advantage of unexpected opportunities that present themselves without having to waste any time filling out paperwork.

Advantages Over Traditional Banking

With all of these advantages, digital banks are clearly here to stay. The key difference between traditional banking and digital banking is security. With digital bank users can: Check their balance 24/7; Track transactions using online portals; Set alerts for specific transactions; Deposit checks using mobile devices or through email; Reduce risk of identity theft because there’s no physical check deposit process. These features are only available with a digital bank, which offers users an overall more secure financial experience when managing personal finances. Not only do they provide an immediate response to your requests but they also keep you up-to-date on what’s happening with your account at all times. As more consumers learn about how great digital banks can be, they will continue being adopted as our main method of banking.

Disadvantages of Digital Banking

Online-only banks can face several challenges in terms of convenience, ease of use, customer service, and more. A digital bank doesn’t come with teller hours or free access to an ATM machine. If you want to visit a bank in person, you’ll need to plan ahead because most don’t have offices (though some are starting to open up). You may also find that digital banks simply don’t offer some of your financial needs. For example, they might not be equipped to help small businesses get loans or have investment products like mutual funds—the kind of services traditional banks are still known for.

Difference Between Online and Digital Banking

Online banking allows you to do your banking with only your computer, making it convenient. With traditional banking, you must go to a physical bank location, which can be inconvenient. However, while online banks provide many conveniences, they are typically more limited in features than digital banks. And that means those features need to be carefully considered before using them. A digital bank aims to combine both worlds by providing many of the same conveniences of online banking as well as maintaining some of traditional banks' features. This can help users avoid having to use multiple services while also enjoying convenience benefits such as checking account balances at any time or paying bills without having to go through too much effort.