What is a Digital Bank and types of Digital Bank?

Updated: May 28


There are a lot of ways we define a digital bank.


A lot of customers like interacting with a person face to face when they do banking. Digital banking is a little different from what we have experienced in the past. It simply means that you can manage all of your banking transactions either on your mobile phone, your computer or on your iPad, today. Digital banking is more important than ever in managing your finances, it is highly secure as these banks provide you a security guarantee and it is easy to use and open 24/7. Once you have mastered online banking, you are going to be surprised at how simple it is and how empowered that you will feel being able to manage your money remotely.


There are primarily three types of digital banks.

  • Direct bank

  • Neobank

  • Challenger Bank


Direct Bank

A direct bank is typically provided or launched by an incumbent bank or an incumbent financial institution who are offering out a new digital only offering to the marketplace. Direct banks provide a great opportunity for deposit growth and expand customer reach. It acts as a new revenue stream for the Banks, based on modern technology, and modern business practices it provides several advantages.


Benefits of Direct Banks

  • Offers speed to market and accelerates new customer onboarding

  • Lowers customer acquisition costs and reduces overheads

  • Helps provides excellent customer experience and fast track deposits

  • Expand customer base and increase marketshare


Neobank

Neobanks are typically FinTech (Financial Technology Companies), they do not have a bank charter and they leverage or rent other Banks’ charters and provide unique customer experience in a niche market.

Some examples of the offerings of a NeoBank are as follows:

  • Opening a checking or savings account

  • Loans other money lending services

  • Transfers to individuals or companies

  • Investing and insurance

Here’s a Neobank Tracker: The World’s Biggest Database of Digital-Only Banks



Challenger Bank

Challenger banks are digital-only banks, usually mobile, they have their own charter. They challenge the current status of existing banks in the market, they provide a unique customer experience, and provide new products and services beyond traditional banks and banking.


Benefits of Challenger Banks

  • Excellent customer service

  • Competitive pricing

  • Transparent fee structures

  • User-friendly mobile interfaces

  • Spending stats

Here is a list of 10 Best Challenger Banks in the world