The Infosys Labs research blog tracks trends in technology with a focus on applied research in Information and Communication Technology (ICT)

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Rise of Digital banks!

Our computers have become windows through which we can gaze upon a world that is virtually without horizons or boundaries. 
                                                                                                                                                ~ Joseph B. Wirthlin

Ever complained about standing in queues and having to sign countless banking forms? Ever wondered why you need to walk into a branch of your bank to perform mundane tasks which can be easily done with a tap on your smartphone? If you have, then you are not alone. Welcome to the new world of banking where several startups and even some traditional banking giants are experimenting with all online and fully functional digital banks. These digital banks are industriously working towards addressing many of the consumer pain points in the business as usual banking world.

Digital-only banks are on the rise. And by digital-only banks, I am referring to truly digital banks who do not have any brick and mortar presence. They have an edge over traditional banks in terms of efficiency, speed, ROI and scale. Being fully automated, they are more efficient than their traditional counterparts where still a lot of processing is manual. Digital banks deliver services faster than a brick and mortar business while being efficient at the same time. 

Setting up a digital bank is again more pocket friendly when compared to a regular bank. Also, a digital bank can be scaled up to meet rising consumer demands much more easily. Another major advantage is in terms of readily available data. Digital banks can undertake AI/ML initiatives with much more ease to deliver faster insights and implement changes with reduced time to market. Data cleansing and curation process becomes seamless.

Digital banks are very much powered by technology and are at the forefront of experimenting with all the cutting-edge advances available. AI powered virtual assistants, digital only cash, peer-to-peer lending and payments and blockchain based banking transactions have all been tried out in digital banking arena. Touch ID serves as an efficient security tool which provides a safe way to login to banking accounts.

Digital banks come in all flavors. Some banks offer zero maintenance fees. Few others offer rewards based on your social media likes. Revoult, a digital-only bank, offers global payments and cryptocurrency exchange. Yet another section of banks cater to a very niche segment of consumers. For example, USAA is a member only bank serving US military members and their kin.

Banking is at the cusp of a digital revolution similar to what the retail industry witnessed few years ago. Amazon disrupted brick and mortal retail stores with an all-online market. Likewise, digital banks are all set to disrupt traditional banks. Agreed there are rigid regulations and compliance in place which digital banks will have to adhere to; yet they are flourishing at a super fast pace. Banking as a platform or banking as a service may become the norm in banking sooner than later.


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