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Roughly three in four Americans (78%) prefer banking via a mobile app or website to banking in person, according to a 2023 Forbes Advisor U.S. Consumer Banking Statistics study.
The global pandemic may have brought the significance of digital banking platforms to the surface, but mobile and online banking isn’t new.
“The pandemic merely accelerated a phenomenon that was already taking place,” says Kevin Cohee, owner, chairman and CEO of OneUnited Bank, the nation’s largest Black-owned bank, headquartered in Boston.
Traditional banking methods—by branch, phone or ATM—aren’t as appealing anymore. Many banks closed branches during the Covid-19 pandemic or limited branch hours, and customer service call lines are often backed up. It’s no surprise that many banking customers have taken advantage of digital banking options over the past few years.
What Is Digital Banking?
Digital banking is banking activity conducted entirely online, either through a website or mobile app. It lets customers perform banking transactions and access banking services remotely, without having to visit a physical branch.
Digital banking has become increasingly popular in recent years due to its convenience and utility. Customers can access their accounts at any time, from any location, and perform a wide range of transactions, such as checking account balances, transferring funds, paying bills and applying for loans.
Benefits of Digital Banking
Whether you’re already all-in on digital banking or you’ve yet to download your bank or credit union’s mobile app, it’s important to know what to look for when banking online. Here are some of the primary benefits offered by digital banking.
1. Convenience
The ability to bank wherever and whenever you want is one of the main benefits of mobile and online banking solutions.
Many mobile banking apps, for instance, let you deposit checks remotely. At the same time, you can check your balance, transfer funds and set up a notification to alert you if you overdraft your account—all without the need to visit a branch. It’s a real time-saver.
Digital banking also offers additional conveniences, such as the ability to go cashless.
Paying with cash isn’t as convenient as an electronic transaction, Cohee points out. Electronic transactions are more secure (you aren’t carrying cash), they’re more sanitary (you aren’t touching cash) and you can track your transaction electronically, he notes.
“A cashless society with digital transactions is much more efficient, and it allows for much better management of your financial resources,” says Cohee.
2. Features
Many banks’ mobile and online experiences offer just as many features as banking in person—if not more.
“Banks might offer personalized financial advice, savings tools, big-purchase calculators or even virtual assistants, all within the convenience of an app,” says Matthew Williamson, global vice president of financial services for digital consultancy Mobiquity.
Banking apps typically let you complete everyday banking tasks, like viewing statements and account balances, transferring funds and paying bills. Mobile check deposit, which lets users cash checks from their phone, is also common.
Features like peer-to-peer payments might not be top-of-mind, but the ability to send money in minutes through your mobile banking app can be handy, and many banks now offer this feature. Locating nearby ATMs, cardless ATM withdrawals and budgeting and tracking tools are other perks your mobile banking app may offer.
Some banks even offer the ability to chat with a live representative through their apps, which Williamson points out can bridge the gap between in-person and digital banking.
“Consumers should seek out banks that prioritize offering a human touch even in their digital channels, striking the right balance between the human element and digital automation,” says Williamson.
3. Security
“Security is a No. 1 priority for financial institutions,” says Cohee. And that extends to mobile and online banking.
Threats exist everywhere, including inside bank branches. Fortunately, many banks make it easy to take extra security precautions. For example, your bank may let you add multifactor authentication to your mobile app and online bank account.
Many mobile banking apps also let you use biometric authentication to log in. Axos Bank’s app, for instance, provides biometric login options that require your fingerprint or facial recognition. Your bank may also scan for certain risks automatically. Ally Bank asks for additional verification if it detects a login from an unknown device.
Overall, you may be more secure than you think when using digital banking.
“It’s been reported that digital payments and e-wallets actually offer more security in some cases than a physical card, giving some users even more reason to use digital banking tools,” says Williamson.
Plus, your money is guaranteed at banks insured by the Federal Deposit Insurance Corporation. FDIC-insured accounts are covered up to $250,000 per depositor, per bank, for each account ownership category, in the event of a bank failure. Federal credit unions and the majority of state-chartered credit unions provide the same levels of protection via the National Credit Union Administration.
Cohee says that a lot of the risk is often in the hands of the financial institutions, not in the hands of consumers.
4. Control
Having control over your finances with the ability to self-serve is another significant benefit of digital banking, as is real-time access to managing and moving money as you see fit, says Williamson.
Unlike banking in person, mobile banking apps and websites generally have no restrictions on when you can perform banking tasks, like depositing a check or moving money from one account to another.
And it’s getting easier to navigate daily transactions. “The world of technology is offering the opportunity to be able to receive money and to spend money in ways that are much easier than they were in past times,” says Cohee.
Banks are continuing to advance the features offered on their digital banking platforms. Automated savings tools and push notifications for events like low balances or overdrafts are commonplace. In many cases, you can even activate a new debit or credit card from your app.
5. Benefits Beyond Banking
On a larger scale, Cohee notes that we can use modern connectivity tools to create financial, social and economic change.
“This online banking product allows for a broader base of communication that can be used for things like teaching financial literacy,” says Cohee.
Digital banking is also becoming a way to find communities and options tailored to your needs as a banking customer. Many Black-owned banks in America, like OneUnited, are able to extend their reach to Black communities across the U.S. by offering online banking services.
Daylight, a digital banking platform that provides “Banking for LGBT+ people, by LGBT+ people,” is another example. Daylight’s offerings focus on community and empathy while addressing issues that complicate the financial lives of LGBT+ people. The Daylight card is a mobile-first account that features the individual’s chosen name, no matter what their official ID may state.
Is Online Banking Safe?
Banks use various technologies to ensure online banking is safe. This includes encryption, firewalls and multifactor authentication to protect customer data and prevent unauthorized access.
However, there are instances in which online banking may not be safe. One example is when customers use public Wi-Fi networks or unsecured devices to access their accounts, which can leave them vulnerable to attacks from hackers.
Pro Tip
When banking online, it’s important to remain vigilant and take necessary precautions to protect your personal and financial information. This includes creating strong passwords, keeping your devices updated with the latest security patches and not sharing sensitive information with others.
Online Banking Fees
Online banks have lower overhead than traditional banks, which means they often have fewer and lower fees. Still, you might see some of these common online banking fees depending on the institution you choose:
- Monthly maintenance fees for maintaining an online banking account, especially if you don’t meet certain balance or activity requirements.
- Overdraft fees if you spend beyond your balance.
- ATM fees if you use an out-of-network ATM.
- Wire transfer fees if you send or receive a domestic or international wire transfer.
- Stop payment fees if you ask your bank to stop a check or ACH transaction before it settles.
- Foreign transaction fees if you make a purchase in a foreign currency.
The Best Online Banks for Digital Banking
The banks with the best digital banking experiences have well-rated mobile apps and intuitive websites with robust features. These mobile and online platforms can help you accomplish daily banking tasks, maintain better control of your finances and, in some cases, connect you to a community of like-minded individuals.
These seven online banks rank among the best online banks for digital banking, according to Forbes Advisor research:
- Discover Bank
- Axos Bank
- nbkc bank
- Quontic Bank
- Ally Bank
Find The Best Online Banks Of 2024
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Bottom Line
Mobile and online banking can help you take control of your financial life, providing easier access to important tools and features. But digital banking can also offer benefits beyond banking, connecting you to a community and banking opportunities specific to your wants and needs—regardless of where you live.
Frequently Asked Questions (FAQs)
How can I set up a bank account online?
To open a bank account online, choose which institution you’d like to open an account with and navigate to its website to begin the application process. The application process typically takes a few minutes and involves entering your name, address and Social Security number, among other details. Some banks may require additional verification steps, such as uploading a photo ID or proof of address. Once your application is complete, you can fund your account and begin using it.
How do digital banks work?
Digital banks are online institutions that work through a website or mobile app. This means you can do all your banking from your computer or smartphone without ever having to visit a physical branch—although you will have to visit an ATM to withdraw cash. Since digital banks have lower overhead costs than traditional banks, they typically offer more competitive interest rates and lower fees.
How do digital banks make money?
Digital banks make money just like traditional banks: they lend out their deposits to other customers in the form of loans and credit products, and they earn interest on the money they lend. Digital banks also earn revenue from fees for wire transfers, account maintenance and overdrafts among other bank services.
