digital banks

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Take control of your financial life by understanding where your money is, where it's going and how it's helping you achieve your goals.

The digital banks scored highly on two attributes in particular: 1) making it easier for consumers to manage their financial lives, and 2) helping consumers make better financial decisions.

See your accounts in one place—even accounts you have with other banks
Track your spending and see how it trends over time
Keep track of your debt and create a budget to tackle it

As Millennials age, and their financial lives become more complex, they will shift their selection priority from convenience to financial management assistance—enabling the digital banks to grow market share.

Perhaps most important, online banks typically charge lower fees and offer better interest rates than traditional banks. As of this writing, the average interest rate for savings accounts nationwide is 0.09%. Some traditional banks pay as little as 0.01%.

How Digital Banking works in real life

Manage all your accounts in one place.
Manage your accounts through your mobile device.
Deposit checks from home or on the go.
See where your money goes each month and how your spending changes over time.
Pay your bills and set up recurring payments.
Send money to friends, family and people you trust with Zelle®.
Set up text or email alerts to monitor your transactions and cards.

Azlo Bank – Digital Business Checking

Rewind the clock (to say 35 years ago from today) and cinemas were opening for the first time to the iconic time-traveling antics of Back to the Future. Looking at Doc and Marty and knowing their contrasting personalities – one an eccentric inventor and one a streetwise kid – you wouldn’t think their partnership would work. But their dynamic makes for spectacular viewing!

Similarly, two parties with very different mindsets in finance have recognized the unique collaboration opportunity at their fingertips. Instead of navigating the complexity of time travel though, it’s the customer experience. Just as fintechs and challenger banks bring innovation and digital-first experiences to the table, traditional community banks and credit unions come with their own unique set of skills, including the wealth of experience and knowledge of their local customer bases.

Only a few years ago, discussion in the banking industry was fixated on how fintechs would engulf incumbents. Today, we see the opposite: the beginnings of a budding and unexpected friendship as more fintechs and traditional community banks partner up to reach new heights of success that could really bring banking into the future.

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Embracing the creativity of modern banking

Fintechs are the inventors of this unlikely duo – our Doc. Fintechs embrace the modernest of technology, employing digital-first tools and techniques which have seen them rapidly improve efficiencies across the board. They have the cutting edge tools to get the job done, much like the famed DeLorian.

By offering more modern, often cloud-based systems, they are able to deliver real-time software updates, faster processing, quicker transactions and reduced human error. Crucially, they are also matching consumer expectations of on-demand, mobile-ready banking services as more customers look to take control of their own finances via open banking and digital interfaces. This is particularly important in the age of Covid-19, with in-person visits difficult, if not impossible, for many.

In resemblance of Doc’s independent and bold attitude, most fintechs have end-to-end ownership of their own frameworks and digital roadmaps. Meanwhile, traditional community banks and credit unions are often lumbered with legacy technology. Due to their smaller size and lower budgets, most can’t afford to build new software from scratch in-house. Fintechs offer them access to customizable, third-party software and, when chosen and integrated correctly, the right fintech partner can help traditional community banks and credit unions become more competitive and scale up.

There’s no doubt that fintechs can provide banks with technology they would not otherwise have access to. However, it’s not all about being inventive and embracing technology. Like fintechs, Doc was flawed in that he lacked connection to the real world around him and, despite his youth, Marty was the more grounded of the pair. Traditional banks make their own contribution by rendering these fintech offerings more accessible thanks to their wide-reaching, loyal customer bases.

Keeping finance accessible

Although traditional community banks have historically proven themselves more conventional, which can make innovation slower for them, the skills they bring to the table are still of enormous importance. Their on-the-ground, person-to-person values and historic expertise as incumbents in the world of banking have kept customers by their side for not just years but decades, even generations.

While digital banks offer important technological capabilities, traditional banks have practical skills that fintechs haven’t quite mastered. In the same way that Marty brings practical skills like guitar and skateboarding to the table, banks can facilitate physical tasks like processing a cashier’s check. In this way, digital banks are sometimes seen as inaccessible for individuals with lower levels of technological literacy. Research is also showing that it is not only baby boomers visiting banks, with many young people stating that they have no problem going to a branch and interacting in-person. Therefore, traditional bricks-and-mortar banks still have a role to play in providing financial access to certain demographics and offering certain key services, ultimately providing a personal touch that digital-only banks may struggle to achieve.

Additionally, traditional banks often have the upper hand when it comes to regulation. Not only do they already have regulatory approval, but they have the structures and knowledge to know how to approach compliance. They have the superior knowledge of the regulatory landscape and their fintech counterparts should leverage these expertise.

As the banking sector digitalizes, it is also important not to lose the personal knowledge of customers held by traditional community banks and credit unions. Traditional banks have an advantage in that they have the historical data of their clients to tailor services to them. Personal attention to customers is of the utmost importance in building up trust, and knowing your customer is extremely valuable. A person-to-person approach can often see complex problems solved more efficiently, with less of the frustration that could be caused by dealing with things like chatbots with automated generic responses. The importance of personable customer service and the Marty-like qualities of loyalty and approachability are a lesson community banks can teach digital banks trying to achieve more frictionless experience.

Read More: Why Does Every Bank Need a Balanced Remote On-boarding Process?

A forward thinking partnership

It’s understandable to see why traditional banks have their reservations. They are proud institutions, but this can lead to taking unnecessary risks reminiscent of Marty’s reactions when accused of being “chicken.” Banks need to embrace where things are heading and establish collaborative, mutually-beneficial relationships with fintechs.

As with our time travelling companions, it is the very differences between fintechs and traditional community banks that make them so symbiotic. Their opposing skill sets complement each other perfectly. The combination of digital-first technology and people-first customer service can help both community banks and fintechs cater to the evolving requirements of their customers. As both sides share tools and expertise, they can work in tandem to embrace their next forward thinking adventure.

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