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Digital Banking and What It Means for Cryptocurrency

Basics of Cryptocurrency
Last updated June 12, 2020

The main idea with digital banking was to provide customers with a way to access and manage their bank accounts and finances through the internet. And it is indeed great to not have to go to the nearest ATM to check your balance every time you plan your spendings.

Thankfully, most established banking institutions have implemented internet banking to some degree. But when you still have to go to an office to sign some papers for an operation to run, you realize that the company’s digital banking ecosystem still has a long way to go.

But again, for better or worse, we still have an option.

With the digital disruption in banking, you would think it is easier to use your money as you wish. 

As we are a channel dedicated to cryptocurrencies we can tell you that is not the case. The bank is still in full control of your money.

As we all know, traditional banks are not big fans of cryptocurrencies. So using your bank account to finance cryptocurrency transactions may result in it being frozen. But why?

Well, that can happen under the assumption that cryptocurrency is used for criminal transactions or some sort of violation of the Anti Money Laundry policy. At this point, banking on Bitcoin looks like a near-impossible thing to do.

So with no further addition, let’s dig in and see what is digital banking, where it is going, and what are the best digital banking solutions that can work even for customers that deal with cryptos. 

What is digital banking

What is digital banking

Digital banking is a service that allows customers to use banking capabilities that are usually only available inside of a bank branch. This includes activities like:

  • Money Deposits;
  • Withdrawals;
  • Transfers and payments;
  • Checking balances;
  • Opening and managing account;
  • Applying for financial products;
  • Etc.

The earliest forms of banking were placed in antiquity in Asia and Mesopotamia, as well as in the Greek and Roman world.

You could say that bank statements were literally set in stone. 

As paper began to be widely used, the banking ledgers started to move on scrolls and books.

Until the ’50s when ERMA and mainframes were introduced, people would still have to go to the bank to fill out a card with their names. That card represented the account record and customer record.

SIDENOTE. ERMA – Electronic Recording Machine Accounting was a pioneering computer technology that automated bank bookkeeping and check processing.

But technology started to change the banking system. So in the ’50s banks introduced unique bank account numbers so ERMA could sort customers in the computer system. Why numbers? That’s because the early computers weren’t that performant at all, so ERMA couldn’t sort customers by their names.

Although computers got smarter and smarter, you would still have to go to the bank every time you wanted to get money out or to buy something with a large quantity of money.

However, the ATMs and the widespread use of the internet allowed people to bank 24/7, reducing the reliance on the bank as a building. But as the world kept digitizing (and keeps digitizing), banks saw an opportunity in introducing internet banking.

“Wow, how progressive of them” you would say. That’s not true at all. Internet banking was introduced as an overlay to the traditional banking system. It was essentially the bank statements put online. They were slow, had confusing interfaces, and still, you had to go to the bank for most operations to sign papers. 

And with the emergence of mobile internet, mobile banking turned into the same bank statements on a smaller screen.

The world is digitizing. We want immediate responses. We want a better connection to transfers and commerce in a comprehensive way.

Mobile isn’t an extension for banks, but a technology that says “Banking can be done wherever you are, whenever you are!”. And the fact that nowadays you don’t really need the bank but its core utility was best understood by Revolut.

Nowadays, people don’t keep their money in a bank’s vault. The brand matters less. But the utility is crucial. If the bank’s servers are hacked or are shut down for a week, it won’t matter the brand. Customers will look for more reliable service.

Digital banking is not just an overlay of traditional banking.

Digital banking trends

Digital banking trends

Fundamentals of digital banking are changing. Using ebanking just as an overlay for traditional banking will soon be proved as a precarious strategy. Although most traditional banks implemented a mobile banking app many are far beyond mobile users expect. 

And for every person that has ever been given in school the argument that he won’t always have a calculator in his pocket, there is a growing number of 3.5 billion smartphone users around the world that carry a whole computer in their pockets, at all times.

So app-based banking behavior is a trend that is only going to grow. And it won’t be just about having an app but how many things can you do with the app.

Improved user experience

In many cases, the internet banking app has the same interface as the website platform. Although the mobile-first approach starts to make its presence felt in most industries, internet banking apps tend to be heavily loaded with lots of menus and small characters.

Although, online first banks seem to have seen this trend coming so they designed light applications that are easy to comprehend.

Use of data and biometrics

Making the customer feel secure while using a banking app is the most important matter. The intention behind tokens and various verification codes is good. However, all those security processes are easy to become quite annoying, especially when you check your bank account daily – or even more often. 

One of the approaches to decrease the friction of people interacting with their accounts used by some of the mobile banking apps consists of signing in with the help of data and biometrics.

 As smartphones keep coming out with fingerprint readers, it’s now easier than ever for app creators to implement identity validation systems based on the fingerprint.

Agility 

Perhaps here are the most complaints linked to the traditional banking system. If I put my money into a bank account I want to be able to use it now and not wait hours or days

The more you start using banking services, the more you discover what banking needs you to have. It goes from transfers to opening up (or closing down) accounts to money exchange, even buying stocks or taking a loan.

And there are also operations linked to security, like freezing and unfreezing a credit card or setting various limits to your account.

Utility and security

As said previously, the utility of a bank becomes more relevant. In a way, you could say the brand of a bank will be built on top of how well and securely can its customer use it to achieve their goals.

True digital banks must be able to give their clients immediate access to their holdings and provide associated financial services like exchanges and options to invest in stocks and cryptocurrencies. Banks must stop behaving like the big brother and prevent users from acting as they will.

Moreover, the worst feeling you can have is the fear you can lose your economies or not be able to use your money because of hackings and server errors.

5 best online banking apps

5 best online banking apps

Nowadays, there are quite a few online banking apps in the market. But at the end of the day, competition brings progress, and progress brings even better products and services. 

So, we’ve identified some of the best online banking apps. However, the order does not reflect which one is better.

Also, if you have encountered an even better app, feel free to let us know in the comment section.

1. Monzo

Monzo Bank Limited is a company registered in England and Wales that provides Monzo, a digital bank based on an app. It offers its customers a platform to check where and how they spend money, making managing money quick, simple, and easy.

It offers joint accounts, flexible savings accounts, overdrafts, salary sorters, Bills Pots, and can be used anywhere in the world that accepts Mastercard without fees.

When it comes to fees, you can take out up to £200 from ATMs, without fee, on a rolling 30-day basis. However, the fees for overdrafts are 50 Pounds a day.

As for cryptocurrency users, Monzo started to work with 3DSecure in 2018 and can be used to transfer money to exchanges like Coinbase. However, for large amounts, it can trigger AML.

It is available in the UK and US

2. Plutus

BLOCK CODE LTD is the UK-based company behind Plutus. Plutus is a crypto-friendly finance app used by thousands in the UK and across Europe. It provides its customers with a UK Sort Code and Account Number or European IBAN within minutes, together with a Visa card with either fiat or converted crypto.

The Plutus Card lets you shop at over 60 million merchants worldwide and earn 3% crypto back and up to 30% cashback at selected retailers. The app is user-friendly and can be used for general endeavors like bills and transactions anywhere in the world.

Plutus emphasizes its crypto friendliness, offering options to buy, sell, and convert Bitcoin, Ethereum, and Pluton (its own loyalty token) from within the app. 

However, Plutus is still to obtain a banking license but its services are provided under the FCA guidelines.

3. Chime

Chime is an online-only bank from the USA that serves US customers only. The company provides free Visa cards that can be used without fee at ATMs in the Money Plus or Visa Plus networks. Also, Chime doesn’t tax adding money to your account.

They have direct integration with Paxful so their customers can trade Bitcoin instantly within the app.

4. Fidor Bank

Fidor Bank is an internet-based direct bank licensed in Germany. With the Fidor account, the bank is aimed at private and business customers. The app offers various loan offers and card products, investment options in foreign currencies, or online savings bonds – all in one account.

Fidor Bank is focused on Germany but can be used in Europe and the US as well.

When it comes to cryptocurrencies, Fidor works with the Kraken exchange and Bitcoin.de exchange, allowing customers to withdraw and deposit funds within minutes.

5. Revolut

Revolut is a digital banking company with a global presence for more than 10 million customers. 

Revolut is linked to a visa card and can be used in the UK, Europe, USA, Canada, Australia, and Singapore. 

The app offers domestic and international payments through both SWIFT and SEPA, offers a balance up to 29 different currencies, bank transfers (even through SMS), split bills and advanced control over your credit card (including freezing and shutting down some of its capabilities without making a single phone call to the bank).

You can access cryptocurrency and commission-free stock trading, as well as investing in commodities and putting money in vaults.

Revolut offers a standard version that already has extensive capabilities, but also a Premium and a Metal to feet the needs of more 

Banking on Bitcoin – app-based banking and cryptocurrency

Banking on Bitcoin

App-based banking offered by progressive fintech companies allows for people to take power over their finances and improve the utility of the banking services. With close to no paper-work, and no need to visit an office branch, they truly bring the banking system into the digital era.

Although they still have to prove themselves to the general public, they give their clients control over accounts and allow operations that traditional banks wouldn’t allow without consulting.

More importantly, online-first banks bring through their apps ways for tech-savvies to make transfers and access financial products that are not always available at banks.

And with the growing interest in cryptocurrencies, these financial instruments started to give access and integrate more and more with cryptocurrencies and exchanges, going beyond just banking on Bitcoin.

Key Takeaways

  • Using traditional banking accounts to finance cryptocurrency-related transactions can result in you getting your account frozen, motivated with various Anti Money Laundry policies.
  • Digital banking is a service that allows customers to use banking capabilities that are historically only available physically inside of a bank branch.
  • As the world is today digital banking trends are storming towards improved user experience, the use of data and biometrics, agility, utility, and security.
  • Some of the best online banking solutions are Revolut, Fidor Bank, Chime, Plutus, and Monzo.
  • The evolution and advancements of app-based banking brought by progressive fintech companies will bring to the crypto world capabilities that go beyond banking on Bitcoin
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