Digital Banking: definition, benefits, and best practices

7 mins read


Banks are affected by digital disruption, they need to act fast to stay relevant and keep their customers’ loyalty. Digital Banking offers an opportunity to centralize all their actions into one digital environment.

What is Digital banking

Through Digital Banking, all conventional banking activities are moved into the online medium, from digitizing products and services up to automating processes. Through Digital Banking, customers are able to deposit money, check accounts, manage their loans, pay their bills, etc. While online banking has a narrower approach, digital banking covers everything from customers’ actions to back-end processes.

How is it different from online banking?

The main differences between digital banking and online banking consist of the level of digitization. Online banking focuses solely on digitizing the front-end, while some activities still require manual interventions. Digital banking involves both front-end and back-end, it digitizes the products and services and automates the processes behind them. Customers want to have the ability to do certain transactions without needing to visit the physical branch, so they would prefer digital banking over online banking.

How it works?

Through Digital Banking, all traditional banking activities are moved in the online medium, offering customers the option to not visit the physical branch. In traditional banking, people choose the branch closest to their home, so it would be easier and less time-consuming to go to the bank. Through digital banking, these actions are done in one tap. Pretty convenient, right?

For the digital era, people choose the bank that has all the features to make their lives easier. Also, client acquisition through the digital environment is easier and cheaper. It minimizes the effort of finding customers locally or endless visits to the branch.

Advantages of digital banking

1. Less friction regarding the onboarding process

When it came down to the company numbers, we were able to see the incredible growth that reflected all the work we put into our projects over the course of 2017. Thus, our turnover saw a 43% growth and our company’s profit saw an increase of 58%.

2. Accessing the bank account 24/7

Digital Banking offers your customer the possibility to check their bank account whenever they need to. Having a mobile app that allows them to access their accounts whenever they need to transfer money, pay bills, check account balances, or open a savings account. All these actions could be done anytime, anywhere in just one tap. Pretty convenient, right?

3. Decrease costs while delivering more value to customers

Automating various processes could decrease costs and streamline processes, offering more value to your customers. Digitization can also play a role in reducing costs and staff expenses, which can be passed on to customers in the form of reduced charges.

4. Fewer errors

Digital banking can lower the operating cost, eliminating back-office processing operations. Due to the elimination of manual processing, this could result from fewer to ideally no errors, while saving time.

Best practices in Digital Banking

1. Improve your customer experience by having a user-centered approach

Many customers are seeking frictionless procedures, with as few actions as possible. Think about what goes through your customers’ minds. What do they feel when they have to wait a few days to apply for a loan? Create a persona for each type of customer you have, from Anna the Mother to Joe the Entrepreneur. This will give you a better knowledge of what customers need. 

After creating personas, put them in relevant scenarios. While mapping their journey, ask yourself: what step can be done easier and faster? This will improve your customer experience and limit dissatisfaction. By avoiding consumer dissatisfaction, banks can bypass unfortunate scenarios and can notice, then improve pain points. Besides, digitizing processes from start to finish will free up the bank staff.

2. Omnichannel Banking

“Omnichannel is much more than providing multiple ways for customers to transact. It is about a seamless and consistent interaction between customers and their financial institutions across multiple channels” (IBM). Omnichannel has a client-centric view and allows customers to interact with the banks through multiple channels. It relies on Big Data, a technology which is allowing data in all kinds of varieties to be managed and analyzed. Omnichannel banking improves customer experience through real-time data synchronization. If a customer starts performing a transaction, they don’t have to re-enter the same data again.

Through omnichannel banking, you are offering your customers a variety of options and ensuring a constant customer journey throughout every interaction they have with your bank, no matter the means of communication. They also have the option to access their documents when applying for a loan, be identified on all channels in which they log in and their activities are constantly updated. For example, if a customer applies for a loan at your bank, he’s offered multiple ways to sign various documents: at the branch, through the mobile app, through a text message and so on. 

This would be a way to combine physical with digital channels, and offer an integrated and dynamic shopping experience while keeping your customer relationships ongoing.

3. Take advantage of Data

Data analytics can help banks understand their consumers, identify opportunities, and minimize costs.  By using data, financial institutions can be one step ahead when it comes to their customers’ journeys. Data analytics can help banks notice customer patterns, loan defaults, or reprice services according to consumers’ needs. They can improve the quality of their products and services according to their customer needs.

Mining data can also help in better prospecting. Meaning prioritizing leads and establishing a connection between current and potential clients. Behavioral analytics helps to identify consumer patterns and the ones likely end the collaboration. By this you can create individual action plans to keep these customers loyal.

In a 2018 Deloitte survey, banks are viewed globally less favorably than consumers’ favorite brands. Around 48% have considered that their primary banks routinely look for ways to improve their experience or deliver greater value. For their favorite brands, the percentage was 68%. Also, 49% consider that their primary bank knows them and what they need. For favorite brands, the result was 61%. Using data to improve the products and services they deliver can increase customer satisfaction. It can also ensure customer loyalty, and make an easier shift from prospects to customers.

4. Provide personalized experiences

In other words, banks should shorten the distance between customers and the company. As a customer, having a personalized experience means having a bank that knows your needs and wants. For this reason, social media might be a great tool, as it facilitates two-way communications between companies and consumers. Another advantage of social media consists of advertising effectively your products and services by using everyday languages and target specific groups based on their characteristics. Aside from that, social networks are a great way to provide your customers with simple and responsive customer care. 

But personalization doesn’t stop there. It offers a unique opportunity for banks to please their customers with proactive and smart online advisory. It is also a much-needed feature to improve consumers’ financial performance. 

5. Chatbots can help

Some of the world’s most popular banks have implemented chatbots in their platforms and apps. This way, they offer an easier means for customer service, creating accounts, and managing money. Simplicity, speed, and the easiness of procedures are the differentiating factors for banks in consumers’ minds. Here’s where a chatbot can help. When browsing your website, users can find everything they need by answering the “Hello. Can I help you with anything?” provided by the chatbot.  Having information at their disposal at any time will leave a good impression.

A chatbot used as conversational money management can make a difference in your customers’ experience. Your consumers will know their credit score, apply for a loan,  manage budgets, etc. This type of chatbot could increase customer satisfaction and loyalty. An action that would have taken up to a few hours, would last only 5-10 minutes.

If your customers are dissatisfied with the waiting time calling the helpdesk, maybe you need a chatbot for it. People find phone calls tedious and time-consuming compared to instant chat. This will give the option to solve a problem by just typing a “Hello” in the chat window.

What to avoid in digital banking

1. Make sure you’re focusing on the right things

Before beginning a digital transformation process, you must analyze this process on an advantage/effort level from the company’s and customer point of view. What features will facilitate your customers’ experience? What would improve the efficiency of your bank’s processes? Focus on adapting your digital services to your personas, the customers’ and the employees’. You could also add more benefits for them besides your already existing products. Verify what needs to be improved and what would be a nice to have, test your theories. Once you have all the valuable inputs, the digital banking process will become easier and organized.

2. Don’t think just like a bank, but like a customer as well

Designing new digital banks begin by looking at what will attract new customers and how to make the bank stand out. Establish your customer journeys and invest in the relationship with your customer, this will assure that your customers will expand their use of your services.

3. Testing is bigger than it seems

When it comes to testing, don’t focus solely on friends or family to validate whether your product and experience will work. Run small scale tests with a live audience and measure results, learn from the metrics, and go through several iterations until you come close to getting it right.

Understanding your customer and adapting your services for their needs will keep them loyal and happy.

4. Don’t treat back-office and front-office the same

Back-office favors predictability and a long-term cycle, while distribution needs the agility and freedom to react to changing customer’s needs and preferences. Customer-related processes and systems need to exist in multiple variations and be tested in parallel for different products and channels.

5. Pay attention to the less visible platforms

Be cautious about your digital banking platform, you could pay attention to only the visible part, while other processes may be neglected. In order to avoid unfortunate scenarios, you need to focus on the platform that your clients never see, but that supports the weight of UX. This is where rapidly changing product catalogs, flexible decision engines, integration to new fintech services exist. These less visible components are the essential parts in building a new banking platform, hidden from view but critical to operations.

6. Innovation means progress, but be efficient

Avoid investing internally in developing all the features of your digital experience. If there are solutions already available on the market buy them. Be efficient in this process and make sure you’re focusing on the right parts, those that truly differentiate you against the competition.

For example, we have developed Picard, a chatbot that helps banks in lead qualification and conversion. It took us a great deal of time to bring it where it is today but you can have it tomorrow. You can customize it and integrate it in your digital experience and focus your attention on the next steps.. 

If your end-goal is to innovate and differentiate from the market, consider some digital specialists that could help you ease the process and have the project ready in a timely manner. At Grapefruit we focus solely on digital innovation, and we have the right amount of expertise to tailor the best strategy for your company, do all the research needed and develop a digital product that would improve your position on the market.

These are just the tip of the iceberg when it comes to digital banking. As it is a complex field, with various strategies specially tailored for each bank and each customer. If you want to make a difference in the market and delight your customers with a great experience, consider digital banking as a way to strengthen your customers’ loyalty. By providing an excellent experience, your customers will feel that you understand their needs and will identify themselves with your bank, and it is the one that knows them best.


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