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Digital banking has advanced considerably, but like in any other industry, many myths and misconceptions are floating around. These often cloud understanding and limit the adoption of new technologies and ways to level up digital banking. Let's explore some of the biggest myths in banking and learn how transaction data enrichment plays a crucial role in moving in the right direction.
While millennials have embraced digital banking, the idea that only tech-savvy younger generations use these platforms is wildly inaccurate. In reality, a much broader demographic is engaging with digital banking tools. A report by PYMNTS found that Millennials have been steadily increasing their use of online and mobile banking, with 60% primarily using mobile banking apps due to the convenience of managing finances on the go.
For digital banking to reach its full potential, accurate transaction data enriched by providers like Tapix is needed to fuel the features it offers. This not only appeals to tech-savvy users but also helps older generations by providing easily digestible financial insights, reducing the need for manual tracking and interpretation, thus making digital banking usable across generations.
This myth assumes that legacy banks can maintain their market position without adopting digital innovations, solely based on their brand name and long-term services they have been providing. However, with the rise of challenger banks and fintech disruptors like Monzo and the rapid growth of Revolut, traditional banks must simply innovate to keep up, since digital banks are adapting to market shifts and everchanging clients´ needs much more quickly. McKinsey reports that banks that fail to embrace digital transformation risk losing up to 25-30% of their revenues to more agile competitors.
One of the key differentiators for traditional banks that can keep them in the race is becoming much more personal with their customers. With the transaction information being often confusing, like a simple payment history for your Starbucks visit, innovation is what transforms unstructured raw data into an accurate and informative insights. It allows banks to offer a more focused experience and thus keep up with what clients´ need daily.
Security concerns often discourage users from fully adopting digital banking. However, this myth overlooks the significant advancements in encryption, biometric authentication, and fraud detection technologies. Many modern digital banks, according to Bankingly, use TLS 1.3 protocol, end-to-end encryption, PCI compliance, real-time backups, 24/7 monitoring, and proactive management.
Another key advancement lies in machine learning and AI-driven fraud detection systems. By analyzing transaction data in real-time, these systems can identify unusual spending patterns, flagging potentially fraudulent transactions before they escalate. This fraud detection not only stops fraud in its tracks but also provides customers with instant alerts and insights, allowing them to take immediate action if something looks suspicious.
It’s a common misconception that digital banking removes human interaction entirely. While digital channels are increasingly preferred for everyday transactions and AI is on the rise with many smart applications within the banking industry, more complex financial decisions still require personalised advice. In fact, more than half of customers still want to speak to a human when dealing with high-stakes financial decisions, according to Hiver.
Despite human touch still being a major factor, banks can now offer a hybrid model, combining the convenience of digital banking with personalised data that can supplement human interaction in many areas. For instance, they can help identify customers who might benefit from speaking with a financial advisor based on their spending patterns, such as those who frequently make large purchases or are nearing retirement age. This approach ensures customers get the best of both worlds: automation for routine tasks and human interaction when needed.
Not all digital banking platforms are created equal. While most banks offer basic mobile and online services, the depth of features can vary significantly. Some banks focus on innovative tools like AI-driven financial planning, while others offer a more bare-bones experience. For example, modern digital banks like Monzo and Revolut provide instant notifications, budgeting tools, and other, more future-proof features for young generations, while many big traditional banks still focus on the basic but stable financial platform.
The banks that stand out are those creating a more engaging experience, and for that you need to get personal and dig deeper. So naturally, the biggest difference is lack of fundamentals and raw data that can barely differentiate between the coffee shop and a grocery store. With enhanced payment data, users can view detailed transaction summaries, including merchant logos, geolocations, and categorised spending insights. This transforms a bland bank statement into a powerful financial tool, helping customers better understand and manage their finances and create a stronger bond with their primary bank which becomes their financial helper and advisor through life.
Some users hesitate to switch to digital banking, believing it’s too complicated. Yet, studies have shown that most people find it intuitive and convenient once they try it. In a survey by Capgemini, 75% of users found digital banking platforms easier to navigate than traditional banking. The truth is digital banking done wrong is not accessible and friendly for everyday use, which can be seen as complicated.
Simplifying digital banking for the everyday user is an important step on the way to acquiring their trust. By converting cryptic transaction codes into recognisable merchant information, enhancing raw data helps banks to give users easily understandable information. Real-time categorisation of purchases (e.g., groceries, utilities, entertainment) allows for better budgeting and reduces confusion over vague transaction details. The result is a more straightforward, user-friendly banking experience that appeals to a wider audience.
Another common misconception is that digital-only banks lack the range of products offered by traditional banks because of their novelty and lack of experience on the market. However, many digital banks provide everything from savings accounts and loans to investment products, while disrupting the world of banking by experimenting with revolutionary features. According to a study by EY, 64% of digital bank customers use their platform for multiple financial services.
Digital banks can go beyond standard offerings by recommending personalised products and developing the new ones with much higher focus on the actual clients´ needs. For example, based on spending data, a digital bank can suggest investment opportunities, savings plans, or insurance products tailored to an individual’s financial habits. This hyper-personalisation is a major differentiator between digital and traditional banks, as enriched data allows banks to anticipate and meet customer needs proactively.
Many people believe that digital-only banks lack the stability and comprehensive services needed to serve as a primary banking institution, which for a long time was reserved for more traditional banks. However, this might not be the case. Digital banks are designed to provide the essential services required by customers, often with lower fees and better interest rates than traditional banks. The reason is simple. Digital banks need to find different “points of entry” compared to traditional banks, which gives them an opportunity to attract new clients not only with basic services, but also more unique features.
According to a survey by J.D. Power, digital banks scored higher in overall customer satisfaction compared to traditional banks, with a satisfaction score of over 700 out of 1,000 compared to traditional banks. Many consumers using digital banks also reported improved financial management due to advanced features, proving that digital-only banks can indeed be primary financial institutions.
There's a common belief that the mortgage process is too complex to be fully digitized, with many moving parts that need to be taken care of “manually”. While the mortgage process involves significant documentation and regulatory compliance, advancements in technology have made it increasingly streamlined. According to a report by Fannie Mae, digital mortgage applications have grown by over 50% in recent years, demonstrating a shift towards embracing technology in this sector as well.
The integration of AI and machine learning into mortgage processing has simplified risk assessment and document verification significantly. The time to close a mortgage has decreased by 10 days on average due to these technological advancements, enabling banks to serve customers more efficiently and improve their overall experience. Enhanced transaction data also plays a vital role in providing a clearer picture of a borrower's financial health, making the process less complicated for both lenders and borrowers.
Many banks believe that raw transaction data provides all the information needed for effective digital banking. That of course is wrong by design. Raw data typically shows vague or cryptic descriptions based on basic MCC codes, such as unfamiliar merchants or unclear transaction details, which can confuse users and make it difficult to manage personal finances. A survey by Accenture in 2023 revealed that 42% of digital banking users reported difficulty understanding their transaction history due to unclear descriptions. This lack of clarity can lead to frustration and mistrust in digital banking platforms where user experience is front and center. Relying on raw data alone simply won’t cut it.
As you can see, enhanced transaction data is vital in debunking not just this, but many other myths since modern digital banking is focused on personalised, clear, and insightful financial information that enhances the user experience. By transforming raw, cryptic transaction details into valuable personalised insights, enriched data is the one thing that helps banks stay competitive.
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Michal Maliarov
Senior insider
