Is It Time to Kiss Traditional Banks Good-Bye?

Traditional Banks vs Fintech or Traditional Banks vs Digital banks are among the most discussed topics in today’s digital world. Many of us have already started believing that very soon there will be a time when physical banks will vanish completely, but is that so easy? Will the banks that have been existed for ages, vanish in a period of few years? To draw a conclusion on these questions, we will have to dive deep into the details about the banking system. 

Banks have been here since the first currency was minted or even before that, in some or the other form. The banking system first started when empires needed a way to pay for foreign goods and services, with something that could be exchanged in an easier manner. Coins of different sizes and metals served in the place of fragile. A safe place was needed to keep these coins. As numerous people such as priests and other temple workers who were hoped to be devout as well as honest, temples were selected as a place to keep this money safe. Most of the wealthy people held accounts at the temples. Records from Rome, Greece, Egypt, and ancient Babylon also suggested that temples loaned money out in order to keep it safe.

The Romans, great builders, and administrators took banking out of temples and formalized it within distinct buildings. Moneylenders still profited during this time and most legitimate commerce and most of the government spending involved the use of an institutional bank. This is how a banking institution came into existence, and even today after so many decades when we think of a time without banks we are not sure how will we perform various financial functions. 

Traditional banking has become an integral part of the way in which we do business, and it is important to analyze how much threat is digital banking to the traditional practices of operating and interacting with customers? According to a 2016 Global Consumer Banking Relevance study conducted by EY in which over 55,000 respondents from all around the world took part stated that 75% of customers still consider a traditional financial institution with branches to be their primary financial services provider.

Almost everyone has showcased factors that predict the end of the traditional banking system, but here we are trying to put some light on the other side of the coin. We have listed some features of traditional banks, that show that they are still going strong and can thrive even in the age of Algorithms. fintech news

• Trust

Most of the customers of banks, especially youths are not really happy with the service provided by them but they have more trust in traditional financial institutions than in their newer digital peers. Ever since its creation in the 14th century in Italy, the center of banking is trust. Not a single banking professional will debate on the fact that trust is at the core of the business of banking.

In the field of commerce, trust is essentially a connection inside the mind of customers between your brands and something they accept. Establishing this connection is a popular issue that digital platforms are facing and also the largest initial cost to kickstart the activity.  While every platform aims for the network effect to start at some point, in reality, it takes an enormous amount of energy and marketing to start this flywheel.

Brick-and-mortar banks have a huge advantage over digital platforms, as they have not built trust by spending millions on marketing, but by serving their customers for ages. Their brands are very recognizable, and still, inspire a large amount of trust. While the opinion of people about traditional banks and how they are managed has been negatively impacted because of the financial crisis, the institutions that survived still enjoy a quite good connection. Alluring, banks don’t seem to exploit this advantage fully.

But maybe like, in the case of dinosaurs, the real danger for traditional banks is not the meteor itself, but the small mammals that are multiplying around adapting environmental changes in a better and faster manner. Banks should not waste more time preparing for the real battle, but focus on trust as it is one of the greatest weapons any business can ever have.

• Simplicity

Today’s customers seek easy accessibility, and top-notch financial customer service and traditional banks make the banking experience easier for the audience of all sectors of the society. A Certain part of the society won’t agree with me on this point, but when we see from the perspective of a larger audience considering individuals from all sectors, then you will find this point relevant. The Physical presence of branches gives a chance to even the poorest and illiterate sector of the society to personally visit it and understand things that they wish to learn about. The Presence of ATM at every corner of your locality makes it easier for people in need of cash. It has also made depositing cheque simpler through ATM centers.

Imagine an old man leveraging the benefits of financial services, what according to you will be more convenient for him, the traditional banking method or the latest financial platforms? I think this question can clear all your doubts about why we consider traditional banks easier when compared to other digital platforms.

• Security

Whether it is online banking or other digital platforms or even traditional banks, one of the major concern for every financial organization and even the customers are security. The financial platforms introduced today are mainly online so naturally, security becomes a major concern whereas for traditional banks any loophole in data storage or even while using cards, etc. can prove fatal.

Digital, as well as traditional financial institutions, are constantly working towards the development of security methods. We have listed this feature in traditional banks as they are considered comparatively safer. 

Traditional banks use assisted transactions, which naturally minimizes some security risk because you hardly perform online transactions. There is also an advantage of physical security as the banks utilize vaults to protect cash and they also often have security guards to help with the physical protection of customers.

Banking in-store might expose you to an armed robber. Some thieves also use phone applications and electronic swapping devices to access card information of a customer through wallets, but most of these risks are generally less compelling than those of online banking.

Now you might come across some stats that showcase that the number crimes committed in traditional banks are more when compared to digital banks, which are absolutely true but we should not forget that for how long these traditional banks have been existed. Every institution slowly and steadily evolves with the latest crimes and similar has happened in the case of traditional banks.

• Best for both worlds

Traditional banks offer the advantage of physical as well as online or mobile usability. As we all know to counter the increasing influence of online banking, traditional banks have started offering online solutions. This gives them an opportunity to serve both online as well as the offline audience. With the increasing use of smartphone these offerings from traditional banks are largely adopted.

Many traditional banks offer their customers the flexibility of being able to walk into a branch to perform their functions like deposit cash or to transfer money through websites or smartphones. As an example, Chase Bank offers QuickPay that is a free online service to send or receive money by email, which competes with fintech applications like Square Cash. With online banks, there is only one option of fulfilling a task that is online.

Also, most of the people still trust traditional banks over online banks and this makes even tougher for online banks to convince their users to make it a primary bank in use.

• Cash deposits

Currency is money approved by the government that is used for circulation and various transactions, and there is very less chance that it will be discontinued by governments all over the world. 

Cash deposits comprise of cash placed into banking institutions for safekeeping. These deposits are made to bank accounts such as current accounts, savings accounts, checking accounts, and money market accounts. The account holder can withdraw deposited cash, according to the terms and conditions governing the account agreement.

Despite all the progress made by fintech, the industry still has to contend with a traditional form of currency, which is cash. For clients who deal with cash regularly, a traditional bank is an attractive and convenient option.

Online banks have awkward processes to depositing cash. You can deposit cash through various methods such as using a deposit-accepting ATM or putting cash into a traditional bank account and transferring that money to your online account. You can also convert the cash into a money order, which you will have to deposit electronically using your online bank’s mobile application.

Final Take

Traditional banks are not perfect, and one of the major concerns for them can be their ignorance. They need to start working towards updating their offerings and leveraging the offerings that give them an upper hand while competing with fintech institutions. Fintech has come up with many latest offerings but traditional banks are still relevant and will stay. So, for all the people preparing for the good-bye kisses for them will have to wait, atleast for now.