Technology is revolutionizing everything, banking included. We don’t yet have robot maids, but robot vacuum cleaners and voice activated controls are commonplace. Cash hasn’t been eliminated, but it is on the decline as we pay with the click of a button or wave of a card. What do you need to know about digital currencies and digital banking?
An Overview of Digital Banking
Digital banking is the digital alternative to traditional banking. It is simply when you use an app on a device or website on your computer to access traditional banking functions. One form is checking your account balance via an app instead of querying it at an ATM. Another form is scanning a paper check and depositing it via an app instead of making a deposit with the bank teller.
A common form of digital banking is online bill payments. It is when you pay your bills via your bank’s website or an app instead of writing a check and mailing it in. Digital banking allows you to transfer money between bank accounts immediately, eliminating the need to write a check to pay off your credit card with the same institution. You can use digital banking to automate regular bill payments or automatically send money to your retirement account.
What Are the Pros and Cons of Digital Banking?
The greatest benefit of digital banking is that it gives you instant access to your money. You can access information and funds 24×7. You aren’t restricted to office hours or impacted by bank holidays. You can send money to someone digitally without them having to wait for the check to arrive; they receive it immediately. Your bill payments may not clear the recipient’s bank immediately, but it should clear the next business day.
Digital banking can save you money. You may reduce your banking fees because you can receive paychecks via direct deposit and pay bills digitally. Then you don’t have to pay for printed checks or postage to mail them.
This technology has allowed online only banks to open up. They have lower overhead costs, allowing them to offer higher interest rates and lower loan costs. These online only institutions may rely on conventional currencies or provide access to digital currencies.
Digital banking does bring risks. If someone steals your unsecured phone, they may be able to access all of your financial information and drain a bank account. Hackers could do the same by hacking your computer or the website that you’re accessing.
Digital banks may not provide all of the services you need. They may offer loans and savings accounts, but they may not have ATMs or a way for you to deposit cash. Getting a hold of a human when you’re dealing with complex problems may be a challenge in and of itself.
An Introduction to Digital Currencies
The most famous digital currency is Bitcoin, since it was the first on the market and remains the biggest in terms of valuation. Cryptocurrencies are attractive for a number of reasons. First and foremost is their greater security than conventional digital banking. Others find digital currencies attractive because they are independent of any nation’s government. They are, in theory, safe from government seizures, immune to hyperinflation due to a government’s bad policies, and universally accessible.
Cryptocurrencies are not complete hack proof. If someone gets a hold of your credentials, they could in theory drain your cryptocurrency account. Lose the device that holds your secret key, and you could lose access to your cryptocurrency. Conversely, the high level of encryption built into all cryptocurrencies prevents it from being counterfeited. The value of cryptocurrencies should remain stable, though they rise and fall based on demand. The way cryptocurrencies hide your identity is valuable in its own right; it protects your privacy.
We mentioned the universal availability of cryptocurrencies. You could be visiting almost any country in the world and access your cryptocurrency account; you could pay a variety of bills online using cryptocurrencies like Bitcoin. The challenge is converting it to local currencies on demand, much less being able to pull that money out at the nearest ATM.
There is a risk that major financial institutions will shut out cryptocurrencies in favor of their own digital currencies. And there are governments cracking down on cryptocurrencies.
The future of digital banking is certain, though it will continue to evolve. The future of digital currencies is less clear. While independent cryptocurrencies took the lead, private cryptocurrencies may take over. However, the expansion of digital technologies and the erosion of cash are certain to continue.