The Big Problem With Digital Banks – and How To Overcome It.

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by Timothy Partasevitch, Chief Growth Officer at Smart IT

The digital banking revolution is in full swing. Customers are increasingly looking for ways to access their bank accounts and make payments across multiple channels, including mobile devices. 

They also want to be able to do so securely and conveniently, which means that security has become a top priority for banks around the world.

Assuming that, there are also some major problems standing in the way of the widespread adoption of digital banking solutions. Let’s take a look at each one individually:

Reinventing banking model

The traditional banking business model is rapidly evolving in heated competition. Huge technological changes are happening outside the banking industry, and this means that banks need to adapt to stay relevant. Why is that important?

Many other players can offer similar services as well as something unique from what banks offer. This group includes peer-to-peer lenders, fintech companies, and tech giants like Apple Pay/Google Wallet/ Samsung Pay, etc.

The biggest challenge that banks face is putting customer behavior at the heart of their business model.

Thus, big data goes along with that goal. In a fast-changing game, data collection helps banks instantly abstract useful insights about clients and align them with more profitable and relevant strategies, for example, creating personalized discount offers.

However, you’re not the only one in the market. 

Outdated Mobile Experiences

You might have noticed, customers are increasingly expecting a seamless experience across all channels including mobile. 

They want to be able to interact with banks 24/7 having a ‘smart digital assistant’ in their hands. The thoughtful customer experience may look like that: self-service banking apps anticipate needs and provide customized financial advice based on the person’s situation or request. 

That’s why keep in mind two characteristics of a well-crafted digital bank: the user experience of a digital bank should be both personal and easy to use.

But don’t forget to make it also secure.

Security Breaches

The biggest problem with digital banks? Security breaches.

In 2023, an average bank is estimated to have about 5 security breaches per year. That’s a lot of data being stolen!

One of the factors lies in using open APIs. Even if open API plays a critical role in data sharing with fintech and other providers, there is no guarantee that data will not be exposed to external parties.

To ensure sensitive data are under control, financial institutions should reinforce protection measures. They can approach it in several ways:

  • integrate security management across business and product lines
  • implement risk management frameworks to control interdependencies between different systems
  • adhere to industry standards (for instance, ISO 27001)

However, banks can maintain a durable cybersecurity shell only with a competent board of talent equipped with the latest technologies. 

To cope with these sorts of problems, we compiled a list of extra measures you can carry for a better digital banking experience.

You can do more

To overcome forthcoming challenges (and they will be bound to happen), there are a few solutions that can be explored. 

Innovation labs

The first is innovation labs, which are small teams of developers who work on new products and services for banks. They can help the company innovate and experiment with new technologies, products, and services. 

Innovation labs are not just about coming up with new ideas, they are also about testing them.

This can be done through experiments and prototypes that focus on specific aspects of a product or service.

Innovation labs have been around for decades but have become more common in recent years as technology has advanced at such a rapid pace.

With the rise of digital-only banks such as Revolut, Monzo, and Starling Bank, traditional banks need to do everything they can to stay ahead of their competition while also keeping their customers happy with what they already offer them today.


Blockchain technology is a decentralized system. It works as a distributed database where all the transactions are stored in blocks and linked to each other through cryptography.

Blockchain is the future of digital banking because it allows users to make payments without using an intermediary (such as PayPal or Stripe).

A good example of how blockchain is used in digital banking is when you want to make an international money transfer from your bank account at Bank A to another bank account at Bank B (or even another country). 

With traditional methods of transferring funds, both banks will have their own internal systems that record all transactions made between them – and they may even be different systems!

This makes it difficult for either party involved in the transaction (you or the recipient) because there are multiple places where information could get lost or corrupted during transmission.

Voice assistant

Voice assistant technology has been around since the early days of Siri and Alexa, but it’s only recently that they’ve become widespread enough to be worth talking about in this article.

You tell the voice assistant in a banking app something like “I need help with checking my balance,” and then they do whatever job you’ve assigned them.

They can also use natural language processing techniques. So users don’t have to learn any complicated commands before starting their tasks.

Customers simply say what they want to be done (e.g., “I want cash from this ATM”), and the system will figure out what needs doing based on context alone.

If you aim to enhance your digital bank usability, the voice assistant can lead to improvement. 

Chatbots and AI

Chatbots are a great way to improve customer experience. They can answer FAQs, provide product information, make payments, and check balances.

Using chatbots to send money is also becoming more popular among digital banks because it’s easy for customers who want to send payments between friends or family members who don’t bank together.

Chatbots are also useful for banks that need to handle customer support. Customers can ask questions about their accounts, report a problem or request help from the bank.

Chatbots can also be used to provide account statements and notifications of transactions.

It’s important to note that chatbots are not a replacement for human customer service. They can’t provide the same level of support as an employee, but they’re a good way to reduce costs and improve efficiency.

Continuous innovation is the only way to stay ahead of the game in a rapidly-changing industry.

It’s not enough to just offer one great service; you need to keep innovating and improving on it as well as offering new services, too. So good luck!


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