In the recent past, there has been a big trend within finance: digitalization. Many bulky, long and slow processes have been moved towards a far quicker environment with digital applications ranging from loaning facilities to the actual biggest trend within finance: digital banking. Apps like Monzo and Revolut have almost become an industry standard and, with new “digital” credit services like Paypal credit, they are set to take over “traditional” banking. Let’s analyse the matter in more detail.
Free Digital Banks: Are They Actually “Free”?
If you’re a Monzo or Revolut client, then you should know that they are completely free of charge and they offer quite good perks, especially when withdrawing money abroad. They also provide you with a free saving pot (which many banks charge for) and, if you sign up for their “premium” account you will be able to invest a percentage of your monthly income in the actual company, effectively becoming an investor. This sounds great, right, but the reality is actually quite different: these banks are normally outsourcing their accounts to other bigger funds and the fact that they are “free of charge” is paid by providing these big funds with detailed data on how you shop, what you shop and how you spend your money.
The “Good” Side
What said above isn’t meant to picture digital banks as evil organizations, but explains why they are completely free of charge. Apart from this, digital banking has definitely sped up features which aren’t very fast within the modern financial sector. Let’s take Paypal credit as an example: Paypal uses static machine learning to cross-check with different credit providers if a person is eligible for a loan (big or small) and gives a response within seconds. Being the fastest form of credit confirmation, many were sceptical about Paypal’s precision and risk management but, by deploying a deep learning tool within their actual architecture, Elon Musk-funded brand was able to confirm again the fact that, for what concerns speed and precision, digital banking is the future.
Data-Breaching Episodes
Coming back to the data subject, Monzo has recently been involved in a series of data breaches which have increased the concerns many have in regards to the digital banking sector. “Is my data safe when I sign up for these services?” “Who is guaranteeing me that my money will remain there?”. The answer to these very questions is relatively simple: a digital architecture is in as much danger as a normal bank account. The difference stands within the cybersecurity tools which are being set into place. Monzo, being in the “startup” realm still, doesn’t have the same level of cybersecurity which brands like Santander have, for example, and a simple hacking attack could end up (as it did) tragically. With this being said, these data breaching episodes are pure scaremongering. In the UK, a company who relies on digital banking to fulfil their commercial property auctions have stated how these data breaching episodes haven’t impacted the success and the productivity of the business itself, confirming what said above.
To Conclude
Digital banking and online banks are definitely here to stay and aren’t a financial bubble or (as some say) a “fintech trend”. The future is definitely bright for the companies who will heavily invest in these sectors and we can safely say that they will move into the billion dollar-worthy sectors in the next couple of years.
