Overview of the modern payment solutions vs classic banks

The banking industry has rapidly evolved over the past decade. Banks have become global institutions, operating in multiple countries worldwide — and, perhaps more importantly, online.

Modern customers have begun to place more importance on the online banking capabilities of their financial institutions. It’s forcing European banks to launch new products and adjust their digital strategies to keep up. Fewer customers are visiting local branches; in fact, reports claim that online banking is the chief cause of local bank branches’ disappearance across Europe. For example, Belgium saw an average 3.5% reduction in the number of branches each year since 2010. In the UK, the number of free ATMs has decreased by 17% since 2017, and bank branches have declined since the mid-1990s, according to The Sunday Times statistics.

Also, the changes in customer behaviour generated due to the crisis caused by COVID-19 are putting pressure on the banking sector to establish a new roadmap with more enhanced digital operations.

The Fintech Race

People born in the early 2000s are now on the verge of adulthood, and they cannot imagine life without the Internet. The more these people will enter adulthood, and the more active banks will rebuild their business. Those who fail to meet the expectations of young people, in the long term, will be out of business. Banks do understand this and are already actively joining in the fintech race. Under current conditions, financial institutions have several development paths. The easiest way is for those who create a bank from scratch — today. They can get a serious advantage over competitors by merely building software from the beginning for the new time — online payments and other services and related services — and without spending money on offices. In the West, such financial market players have already emerged: American Moven, British Revolut, and Monzo, continental ING Direct, EVO Banco. These organizations are united precisely by communicating with clients — work with them is built entirely online, through mobile applications.

In Europe, going digital is relatively tricky for traditional banks due to their conservative nature of operations. However, in Russia, where the banking infrastructure is relatively new such transitions appear to be more comfortable. A good example is the Russian Tinkoff Bank.

Tinkoff Bank is a real neobank in the Russian Federation — it initially developed as a bank without a single branch, building exclusively remote services. Now it is turning into a multifunctional platform for the sale of both financial and non-financial services.

Overview of the modern payments platform vs classic bank

Digital Bank

If you don’t know anything about digital banking, the concept can be a little confusing at first. It’s worth starting by saying they have nothing to do with credit card apps or even digital wallet apps, like PayPal.

Digital banks offer you a checking account, investment options, the possibility to pay bills, and make transfers. The difference is that everything is done via their application or on the website.

Suppose you are looking for ease of account opening, fair price, and fast deadline. In that case, modern platforms appear as a more exciting alternative. Thinking about it, we list some advantages:

1. Opening an account is more simple and more accessible

You have probably tried to open an account with a traditional bank and know all the bureaucracies included in this process. In addition to the typical delay, most pending issues need to be resolved in person and during business hours.

In contrast, with modern banking, these bureaucracies no longer exist. You can open your account from wherever you are, using your cell phone and spending less time completing the opening. All document validation is done virtually, and the approval time is usually faster than in traditional banks.

According to research done by builtformars.com, opening an account with a traditional bank like HSBC took 18x longer than modern platforms like Monzo. Also, Revolut requires 5x less clicks to open an account than it did with First Direct.

The modern platforms were significantly quicker (in days) and required less effort (in clicks) to get an active account.

How they achieved this:

  • Allowed you to open an account directly through the app.
  • Changed the perspective of when your account is ‘open.’
  • Remove the worst part of the traditional experience.
  • Minimized data collection.
  • Created a memorable experience when your card arrives.

So the answer is yes, it is easier to open an account with the challenger banks. Maybe not significantly easier than every traditional bank — Barclays and Lloyds are also excellent — but they were indeed more comfortable than the average traditional bank.

2. Opening an account via the app

Most banks, including classic ones, have an app. However, not all of the banks let you open an account through their apps. Opening an account on modern platforms like Monzo and Revolut is seamless and straightforward. In contrast, you need to visit a physical office to open an account with traditional banks like HSBC.

3. Digital ID verification

Understandably, you need to prove your identity when opening an account. Traditionally, this would mean walking into a branch with your passport or sending scanned copies of your ID in the post.

But what was a laborious exercise — and might’ve taken a whole day — can now be done in seconds, from the comfort of your own home.

The user scans a suitable ID document and then takes a photo or video selfie. That’s it. No trip to the bank is required with modern platforms.

4. Asking for a limited address history

The modern platforms also asked fewer questions. For example, your address history.

Banks all ask for your address history so they can run a Credit Search. But there’s some discrepancy in how much address history the banks require: Monzo, Revolut, and Starling only asked for the current address. In contrast, every other bank required at least one previous address — usually asking for three years of address history.

In short, the more address history you provide, theoretically, the higher the chance that the bank will accurately find your credit report.

5. Fees and Rates

It is common for modern banking to offer cheaper or even free services to its customers. This is due to the cost of operation, which is lower than in traditional institutions.

In other words, using modern platforms, you can have more control over finances without the high fees of big banks.

It is common to find in Digital Banks:

  • Digital Current Account without tariff;
  • Credit Card without an annual fee;
  • Free transfers or lower rates;
  • Easy online service.

It is worth remembering that, by law, traditional banks must offer a package of essential services, free of charge. You are entitled to make four withdrawals, two monthly statements, and two transfers between the same institution account in this package.

However, this limited number of operations may not meet demands and may compromise customers’ financial pace.

When sending money abroad, modern platforms have gained popularity for offering zero FX fees or fees with withdrawing cash at an ATM abroad.

For someone who spends a lot of time working overseas or regularly sends money abroad, this can save hundreds or thousands of dollars in FX fees each year.

All traditional banks charge fees for you to send money abroad. There are even more basic versions without a fee. Still, these accounts’ actions are minimal and not suitable for most people. In this sense, digital banks are different.

Most of them do not have fees for checking accounts, managing their money, making transfers, and paying bills. In general, only withdrawals and certain transfers (depending on the bank) are charged. For example, it costs nearly £30 to send £100 with Santander and Metro while free to send on Revolut.

6. Applications

Whether the bank is digital or traditional, it is sure that it will have a mobile application to access your account. The big difference between apps is that modern banking apps are much more complete.

As there are no other great ways to check information about your account, everything is there and very simple to understand. This is true even for credit and debit card transactions.

This is great for finding out exactly when your card was used, the amount, what store, etc. This way, you have greater control and can be notified if someone has misused it.

The apps of most traditional banks can be quite annoying and unnecessarily difficult to navigate. They work almost like a website in the form of an app instead of optimized for mobile use. This slows everything down, including the ability to view your credit card transactions or transactions in your account.

Interestingly, both the speed of the challenger banks and the consistency between both flows. For the incumbent banks, making a payment was a considerably longer journey.

What the challenger’s bank have done differently on their application

  • It took nearly 4x longer to authorize an Open Banking payment with Lloyds than it did with Starling.
  • Monzo, Revolut, and Starling loaded twice as fast as any of the traditional banks. Monzo loaded 5x more quickly than Santander.
  • Payment notifications were at least 2x faster with the modern platforms, and in some cases, 100x quicker.
  • It was more than 3x faster to send a payment with Monzo than it was with Nationwide.

7. Communication with the bank

This is a critical issue to consider. On the one hand, it can seem great to solve everything online with digital banks. Only more severe problems can take a long time to resolve. You can feel vulnerable with answers only over the Internet.

Whether you like it or not, it is comforting to go to your agency to speak to a manager when a severe problem arises. Even more involving your account, cash, or cards. Of course, this can generate bureaucracy and lead to a lengthy process. So it is good to consider what would make you more relaxed in the event of a problem.

We think traditional banks have more advantage in this sense than modern platforms. Face to face communications can help you resolve an issue faster. However, you have to consider the number of hours you will spend in the bank before the issue is resolved.

On the other hand, you can resolve every issue from your home’s comfort with modern platforms.

In conclusion

Today, more than ever, quality service is an essential point, not a differential. Therefore, banks must take advantage of Fintech to attract and retain customers.

The financial services industry is still growing, with more non-bank players entering the market. As a result, banks have begun to rethink their strategies to ensure they stay relevant to modern consumers. Traditional banks, with their personal care, remain essential to consumers. But with the increased offering of online banking services, it’s prudent for banks to focus not just on keeping up digitally — by developing its internal digital services but partnering or acquiring Fintech — but maintaining the personal service that traditional banks have historically offered.

If we had to place a qualifier between the two banking modalities, I would precisely choose modern platforms for their low commissions, practicality, and modernity.

Would you like to take advantage of modern banking?

xpate is a fintech startup that enhances global payments using a design-centric approach to serve growing business needs. We make the payment process easier, faster, and accessible by introducing the first true drag and drop payment experience in the world.


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