Banking has definitely seen its fair share of changes over the years. We’ve come a long way since the days of bank deliveries by horse and buggy and the risk of a stagecoach robbery. Now we have options that take us into a new frontier of banking. Let’s take a look at how banking has evolved over time by comparing and contrasting traditional vs. digital banking.

Traditional Banking

Before technology took over, the way we handled banking looked very different. If you wanted to make a deposit, a withdrawal, check your account balance, or do pretty much anything banking-related, you had to go into the physical bank. It was your responsibility to keep a record of your banking transactions in a paper ledger, also known as a checkbook. Before there were automatic teller machines (ATM) or debit cards, there were only paper checks and deposit slips.

Even with those now seemingly inconvenient tasks, there are still quite a few positive aspects of traditional banking that remain available only through a brick-and-mortar bank branch location. For example, with physical banking locations, customers have access to safe deposit boxes and can make both cash and coin deposits.

Traditional banking boasts personal connections and relationships. Clients have access to services such as cashiers checks, notaries—usually for free—personal bankers, estate planning representatives, and loan services. Business owners can leverage their professional and personal banking needs for an even higher level of service.

Of course, as with everything, there are a few drawbacks. Fees charged at a traditional bank can be higher than their digital counterparts. There is also a frustrating issue of smaller brands being taken over by larger brands, resulting in your trusted contacts being reassigned. The new bank likely also changes its benefits, account types, and services. Your once local brand disappears in a matter of months!

Traditional Online Banking

The rise of the Internet in the 1990’s really changed the game for banking. Faster internet speeds ushered in online consumer banking access. Early adopters of bank billpay services once shelled out $9.95/month for the privileges which are now widely adopted as the norm. These two services catapulted the self-service banking light years ahead. More recently, the rising popularity of bank-specific smartphone apps allows people to have access to their bank account and perform transactions from anywhere their mobile device has a signal. That means you can transfer funds atop a ski lift or check your account balance without having to leave your beach chair. Today, we literally hold our banks in the palms of our hands. Mobile banking apps are essentially extensions of your traditional bank that will allow you to transfer funds between accounts and other banks (though there are often lengthy wait times before funds are available, as well as transfer amount limits). You can also deposit mobile checks or pay bills.

The Digital Bank

Over the last several years, we’ve been propelled into a new wave of banking flexibility. While online banking with your traditional bank is similar to a digital bank, they are two entirely different entities. Digital banks have been created as an alternative to their traditional counterparts. In the early days, digital banks had limited offerings for checking and savings accounts. Now, digital banks have expanded to offer many other options such as car loans, business banking, and options for mortgage loans.

Digital banks will usually lower account minimums, assess lower fees (if any), and pay better interest rates for savings accounts. A digital bank account is a great option for putting aside money into a savings account to be paid towards taxes later. The idea is the money is “out of sight, out of mind” and you’re less likely to spend it.

However, there are some downfalls to digital banking. The most glaring issue is how do you deposit cash? ATMs (Automatic Teller Machines) give you the ability to deposit your cash even if you don’t have a traditional banking relationship. While ATMs can be found scattered all around from cruise ships to gas stations to grocery stores, you may need a specific ATM brand to make your cash deposit.

Since digital banks have no physical locations, this immediately eliminates any personal relationships and services with your banking professionals. Some digital brands focus on self-service options, relegating customers to communicating strictly through email. If you have an emergency situation, it can be inconvenient to wait for an email reply to come within 24 to 48 hours. Sometimes, you get no response at all and you’re left with no resolution and a lot of frustration.

If you’re considering relying solely on a digital bank brand, you absolutely have to be tech-savvy. You must be comfortable with providing copies of your identification documents online and comfortable navigating the app or website.

The Digital Age and Hybrid Banking

Now that we are able to perform basic banking transactions from our smartphones, we have access to a wide variety of options when it comes to how we handle our funds. Traditional banks and digital banks both provide similar services online, but ultimately each serves its own purpose and provides different functions. Hybrid banking, or having accounts at both a traditional banking brand as well as a digital bank, combines the best of both worlds and creates an experience that works for almost everyone.

Banking has most definitely come a long way and there’s plenty of room for improvement. For now, we have the option of going into a bank, handling all of our transactions online, or a combination of both. Whichever you choose for yourself, one thing is for sure: banking will continue to evolve.

At Organized Instincts, our seasoned team of daily money managers can help you streamline your financial tasks and routines. Schedule a free consultation today and give yourself the freedom to joyfully and abundantly live life.