Banking Goes Digital

Banks have used technology for several decades now, and it’s only the older folks that even remember the days before ATMs and bank cards, or older bank employees that remember when everything was done by cash or check and bank records were all kept on paper.

The coming of the computer, and especially personal computing, has changed the way we live forever, in a dramatic fashion, and this has certainly been the case with its effects upon the banking industry.

This revolution continues, and even though the biggest changes occurred many years ago, with the coming of computerized bank tellers and making payments and accessing your bank accounts with plastic cards, technology continues to change the banking industry, allowing us to do more and more all the time.

Banking Goes DigitalNot so many years ago, people mostly got paid by check, and they had to visit a bank branch to deposit it and get some cash. Cash was the way that most payments were made, although check writing was popular as well, in addition to credit cards, which weren’t digital back then but could be imaged with carbon paper for payment.

You needed to get your money in the bank first though before all of this could happen, as even your credit card payments had to be made by bank check through the mail. So on payday you’d stand in a long line along with everyone else who got paid, to make your deposit.

Nowadays, people mostly get paid electronically, and they just wake up in the morning on payday and their money is already in their account. Some people still get paid by check, which they can deposit at an ATM, and many banks also let you take a picture of the check with your phone and deposit it electronically, saving yourself a trip to the bank or ATM.

Cash is still used by many people as payments, checks not so much, but some do still write them, especially for paying rent. There are a number of other ways to pay for things now, including credit cards, debit cards, and electronic fund transfers. You don’t even have to take your card out of your wallet if you don’t want to, as you can get cards with electronic signaling that go right through it, or even leave your cards at home and use your phone to transmit the payment information.

So we sure have come a long way over the last few decades, and just when people think that we’ve already seen all the improvements that banking can offer us through technology, they find a new way to help us with it.

How the ATM Changed How We Bank

Automatic Teller Machines, or ATMs, also known as Automatic Banking Machines or ABMs in some areas, allowed clients to both make deposits and withdrawals at either the branch or at a remote location, more conveniently than having to go through a human teller in the branch.

Many people were reluctant to embrace the convenience of ATMs in the early days of them, and some people seem to have a natural tendency to be wary of machines, perhaps thinking that they are more prone to mistakes, or that there isn’t a human to speak to immediately should things go wrong.

Things do go wrong with ATMs from time to time, and they aren’t perfect. They do go down, due to a number of issues that can arise, a breakdown in the mechanics of the machine, a cash jam, a power failure, a network issue, cards being retained by the machine, and so on. Support is of course available for all of these issues but it generally isn’t immediate, and never is at remote ATMs.

However, these incidents are infrequent, and the inconvenience caused by them is seen as small compared to the utter convenience of using ATMs over bank tellers at a branch. ATMs allow one to make day to day transactions by just going to an ATM, which are usually open 24 hours a day and in many more locations than there are branches.

ATMs are also located throughout the world, and it used to be that the only place you could do banking was at your local branch, and branches within the same bank weren’t even connected at one time, and you’d have to have your branch wire money to another branch to access it, which took a fair bit of time.

You can now deposit or transfer at any of a bank’s ATMs, and withdraw money at most ATMs anywhere in the world, so this has provided even more significant benefits to travelers. Some people are concerned about security issues with ATMs, especially after hours, but there’s not even a need to use an ATM anymore if you don’t want to, and in a sense this is old school just like the tellers are.

Many merchants offer cash back on debit purchases, so in the case where one truly needs cash, one does not even have to visit an ATM for that.

Electronic Banking

The next huge innovation was electronic banking, which came our way by virtue of the internet. We could say that the movement toward electronic payments was also a big leap, although it wasn’t until this was teamed up with electronic banking, or online banking, that this really became a powerful tool.

With electronic banking, one does not even ever have to visit either a branch or an ATM, as this takes the entire day to day banking experience digital. This was the vision of those who predicted a cashless society, and while we aren’t there yet, one can go cashless completely provided that they have direct deposit, a bank card, and an internet connection.

If your bank allows you to use your mobile device to electronically submit checks, you may be able to go electronic all the way even if you get paid by paper checks, or if you receive checks from other sources.

This really is all about convenience to bank clients, more than it is about efficiency for the banks, reducing their costs for instance. While it is cheaper to serve someone with an ATM than in person, banks generally still maintain a physical presence with a lot of fixed costs, even though some newer ones don’t even have branches at all.

ATM transactions cost about a third as much as in person ones do, but the convenience of ATMs have brought us more transactions per client, so that tends to even out to a great degree. Banks also have additional costs involved in technology and security and the new age of electronic banking has not yielded the operational savings that many assume, but it sure has made things easier for their clients, and that’s what drives this.

In the competitive environment of the banking world, there are always several banks that fight for a client’s business, and given the focus on electronic banking these days, they strive to outdo one another in this arena, looking to improve the client experience and in particular the electronic client’s.

The fact that we have gone from having just a few branches of a bank around that we have to travel to, park at, and wait in line at, to having the branch right in your pocket, being able to access banking anytime and from anywhere, is sure a big improvement. People come to expect this these days though and banks who provide better online sites and apps are seen as more appealing by many.

Beyond ATMs and Everyday Online Banking

Technology has also changed the way banks do business and has allowed for a lot more efficiency on the back end. Transactions are now all stored electronically, making them far more easier to access and manage, and this all occurs instantaneously these days, which is a huge advantage over the old ledger system.

Money itself has become electronic now, and while hard currency played a much bigger role back when cash was king, it doesn’t even make an appearance in a lot of transactions these days. Even a lot of older folks who have resisted modernizing their banking experience are starting to come around, and the popularization of mobile devices among this demographic is really opening doors and their minds.

Some of the things that have always required a fair bit of human intervention, such as loan adjudication, is being given over to technology more and more, and in a lot of cases, banks have been holding on to the past a little too much as well. You can now apply and be approved for things like loans and mortgages completely electronically without the need of human agency at all.

Banks are looking to expand the reach of electronic banking to allow it to be more efficient, and the goal once again is to improve the client experience by making things happen faster and easier, and we’re already seeing more and more of this in the industry.

Some people think that technology in banking will end up putting people out of jobs as more and more machines replace them, but humans are still required, it’s more that the roles that we play in the process are changing. Even in the most efficient process we can imagine, there still will be a lot of people needed to manage it, and technology is actually a pretty labor intensive activity, in addition to all of the other management roles required to manage a banking operation.

In a sense, the big steps have already been taken, and while more improvements are on the horizon, the big challenge now will be to see a greater market penetration with electronic banking. Its popularity continues to grow though, not just with banking but with things like investment accounts as well. This is all about the client experience really, people allowing themselves to be benefited more significantly by embracing these modern enhancements more.

John Miller


John’s sensible advice on all matters related to personal finance will have you examining your own life and tweaking it to achieve your financial goals better.

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