The days of sacrificing rates for safety are over. The digital banking model gives us both. The transformation in the fintech marketplace has made bank executives start from scratch in their career paths and mindset. Digital bank marketplace platforms are shaping the future of this sector with the implementation of disruptive technology.
The market has already witnessed many Fintech marketplace trends like AI-driven back office, biometrics authentication, and more. Indeed, the integration of technology in the financial marketplace has changed a lot the working of traditional models. The emerging Fintech enabled marketplaces have launched new and differentiated products. This has resulted in building scale more efficiently and quickly than ever before.
With digital banking as an emerging marketplace consumers get more efficient ways to complete banking transactions outside local financial marketplaces. No doubt we can say that the financial marketplace is undergoing some massive digital transformation, hence making marketplace banking the norm.
The information below can help you get up to speed on what digital banking is, and what other terminology you may have heard in conversations about digital banking. You will also be able to explore the benefits of digital banking and how it impacts the bank today and tomorrow. So let’s get started.
Digital Banking: A Selective Marketplace Model
Digital banking is the digitization of all traditional banking activities and programming activities that were initially only available to customers inside the bank branches. It’s a specialized fixed point business unit or hub housing a certain minimum digital infrastructure for delivering open banking marketplace finance services.
Not only digital banking products and services but also the servicing of existing financial products and services digitally in self-service mode at any time. In simple terms, digital banking as a marketplace depends on AI technology for its back-end operations.
These digital bank accounts include services like:
- Money deposits, withdrawals, and transfers,
- Checking/saving account management,
- Applying for financial products,
- Easy loan management,
- Bill payments,
- Account services.
Digital banking as a marketplace entirely focuses on electronic development. Furthermore, it does not lean on financial and customer support from an authorized physical location.
Online Banking Model + Mobile Banking Model = Digital Banking as a Marketplace
Essentially, the collaboration of mobile banking and online banking provides a combined umbrella for digital banking. Mobile banking provides users with an app for the same bank services (these applications are developed by the bank only).
On the other side, an online banking marketplace enables users to access banking services via banks’ official websites. Conclusively, we can say that the marketplace banking model provides us with a roadmap for digital banks.
How does the Open Banking Marketplace Function?
Marketplace banking functions exactly the same way traditional banking as a marketplace operates but for better quality and lower price. Retail banking is one of the last industries in that the internet hasn’t fundamentally changed.
Traditional banking marketplace platforms try to keep pace with evolving consumer needs. However, these methods are essentially still selling the same products and services on a legacy infrastructure that they have had for decades.
On the other hand, the Fintech marketplace mainly operates as fleshy front ends to the traditional banking architecture without actual wallet share or driving true revolutionary change.
In fact, digital banks can make onboarding easier for customers, as well as employees, through a fully-mobile process enabled by advanced technologies.
For instance, while opening a new account, an applicant needs to submit a large number of documents for verification. But with the help of modern technologies, it will be easier for customers to upload these documents using smart devices without the need to visit banks.
Surely, the rise of the fintech marketplace banking model has given a boost to a wide range of technological advancements within the core of many open banking marketplaces. Moreover, this extracted data will be automatically processed and updated in the bank’s system, saving time and hassle for everyone.
Why is Digital Banking as a Marketplace Gaining Popularity?
Introducing automation in financial marketplace processes can decrease costs and streamline the operational processes to deliver more value to customers. The advances in digital devices have gained huge popularity. Moreover, this has encouraged many financial marketplaces to provide their services at their user’s fingertips by opting for a digital bank marketplace platform.
No doubt, marketplace finance enjoys an increased demand for digital banking services. The cycle of innovation in financial marketplaces continues to remain in motion. Furthermore, the marketplace banking model is fast becoming an invaluable business model. Incumbent banks, challenger banks, and account aggregator products are all eyeing the transition to marketplace fintech (mainly driven by customers, market, and competition).
In times when customers are moving away from banks to non-banks, entities for their financial marketplace service needs, customers’ trust in banks has been diminishing. Particularly, in their capability to offer unbiased and high-quality advice. Hence, pressuring banking as a marketplace to find alternative means to re-establish customer trust and relationships.
Digital banking marketplace fintech comes as a great threat to the traditional banking model. These fintech enabled marketplaces tend to offer similar online services based on an archaic banking model.
To facilitate online use, most banking units provide online banking facilities. These services offer a host of high-quality, technological solutions that make your banking experience easy and fast. No doubt, the marketplace banking model has the power to reshape the financial marketplace using digital solutions.
History of Digital Banking
The transformation in fintech enabled marketplaces has made bank executives start from scratch in their career paths. Digital banks are shaping the future of this sector by applying disruptive technology and transforming the organizational culture entirely. From trading shells for goods to sending digital currencies around the globe, developments in technology are reflected in banking.
The rise of digital bank marketplace platforms has declined the presence of the traditional marketplace banking models gradually. The very first fintech inventions were the Wire transfer using the telegraph and morse code and the ATM back in the 1990s. Since then technology has evolved and shifted from analog to digital channels and revolutionized the way we perceive and interact with our finances.
The approach of advanced technology in digital banking was the introduction of the Electronic Recording Method of Accounting (ERMA) system. It was first utilized in 1959 by Bank of America to digitally evaluate the processes. After that, the internet invention in the financial marketplaces was another turning point for the rise of digital banking as a marketplace. It provided customers with access to their account data digitally.
The first internet banking system was launched in 1995 by Wells Fargo. Not only this, but the development of modern fintech enabled marketplaces also allowed users to make simpler P2P transactions.
In recent years technology has continued to update. Moreover, in the year 2015, the Bank of America announced fingerprint verification with the use of technology in its banking systems. This way the digital banking revolution continued, with early mobile banking, followed by contactless payment cards.
Right now our wallets are being digitized: with payment information being carried on phones and devices instead. In the end, one thing is certain wherever technology goes money and banking will be closed behind.
Digital Trends and Important Statistics on Digital Banking
So the talk about digital banking as the future of banking technology innovation is true or not? Here’s some information to back this up.
Evidently, the rise of the marketplace banking model involves a lot of modern banking tools and trends. A paper from TLT revealed that 84% of marketplace finance services plan to invest in open banking marketplace products and services. The population of digital banking users has increased by 4% since 2018.
Digital-only banks, popularly known as Neo banks are powered via digital platforms giving more convenient methods to appeal to the modern population. Nearly, 88% of online-only bank users reported their satisfaction with the bank’s services.
Also, according to a study, nearly 89% of respondents prefer to use mobile banking channels. Moreover, around 70% say that it has become the most effective solution to reach their accounts. Furthermore, around 65.3% of the U.S. population enjoys using marketplace banking services.
Not only this but the rise of banking as a service (BaaS) has also changed the games of digital accounting services. As more and more financial marketplaces continue to invest in opening their own application programming interfaces for fintech marketplace development. The report by Insider intelligence’s Rise of Banking-as-a-Service states the increasing integration of fintech marketplace units with traditional banks to develop a new digital marketplace platform.
Most innovative marketplace finances have already begun to take the advantage of this technology. In order to stay competitive in this marketplace, many other incumbent players have also started to realize the importance of adopting more digital services.
Why should Traditional Banks consider adopting Marketplace Banking as a Model?
In times of COVID-19, when in-person banking services were avoided, digital banking provided easy pathways that let users conduct their banking remotely. It wouldn’t be wrong if we say that the sun is setting on the side of traditional banking. This is because they are often branchless or maintain limited physical locations.
While traditional bank marketplace platforms allowed access to only branches. Digital banking marketplace finance also provided access to users in terms of attractive yields and low bank fees. Moreover, with the ability to access everyday banking while sitting in your comfort place has made it super convenient for users to make transactions.
These open bank marketplace platforms also tend to provide an intuitive mobile banking experience. In addition, it also offers online customer support that’s attentive and easy to reach. It enhances the set of products and services provided to consumers. Hence, improving the engagement with the banks.
Conclusively, digital banks provide users with more methods than traditional financial marketplaces to access the features and services they need to manage their finances in order.
Traditional Banking vs. Open Banking vs. Platform Banking Model
Firstly, traditional banking as a marketplace includes one of the oldest approaches that we have been following for decades. This one doesn’t require much explanation by now. In the case of traditional banking, the relationship between the customer and the bank office was one-to-one. Certainly, this bank marketplace platform offers “closed” fully supplied services to its consumers. Conclusively, we can say that digital banking is the new traditional banking as a marketplace.
This popular platformification trend of the marketplace fintech model replicates the collaborative experience with specialized third-party providers that digital banks offer to their consumers without compromising the supply of advanced marketplace fintech solutions. In simple terms, open banking offers a system where digital banks open their Application Programming Interfaces (API) and enables third parties to gain some financial data.
Unlike open banking, platform banking as a marketplace model is completely different in its approach, it’s much wider and more impactful. Platform banking means fintech businesses providing services to banks. On the other side in open banking, nonbanks simply access the data or trigger the payments via API. It goes on offering consumers much more than just traditional product services. Other names that this model is known for include Banking as a Service, Platform strategy, and App store banking. Here, there is no limited participation of third-party suppliers. In simple terms, it lets the end consumers choose from a wider variety of products from neo banks to marketplace Fintech as well as traditional model products.
|Category||Traditional Banking||Open Banking||Platform Banking|
|Meaning||It provides users its own closed full supply products and services.||It is a diversification of the traditional banking model.||A technology-enabled integration of Fintech and traditional banking units.|
|Access||Customers have to reach offline branches in order to solve issues.||Customers can simply connect through the online portal of the banking application.||It enables companies and Fintechs to offer banking products and services via API banking|
|Third Party Integration||Do not integrate with any third party.||Limited participation of third party.||No limited participation of third-party suppliers.|
In the end, the only thing common between open banking and platform banking as a marketplace is that both are types of digital banking marketplace fintech.
Top 3 Marketplace Banking Providers
Here are some top digital banking providers in the marketplace fintech industry.
Certainly, U.S. Bank leverages innovation and modern technologies to improve customer experiences and compete with other fintech marketplaces. Indeed, it’s one of the best providers that offers a healthy mix of high APYs, low fees, and reasonable minimum requirements. The reason U.S. bank partners with clients to build their digital bridge is simple: connect progress with possibility. Its application provides some extremely efficient features that make the customer experience super satisfactory with its superb customer service.
Venmo ranks second among the leading marketplace finance apps to quickly receive and send money to anyone globally. Unlike other open banking marketplaces, it works like social media. Evidently, it has revolutionized the way we pay each other. From day-to-day transactions to managing accounts, Venmo has your back all the time. In the end, it not only focuses on being quick but also provides a secure environment to over 83 million people.
Insider Intelligence’s Mobile Banking Competitive Edge Study has reported that Citi has repeatedly taken the top spot for digital money management. The popular digital payment network has been trusted by a wide range of financial institutions. It ensures its users deliver digital-first products to build pathways between customers and marketplace fintech.
Advantages of Braving the New Financial Marketplace
The open banking marketplace finance provides us with the luxury of banking anytime and anywhere. Throughout the year, website services are offered round the clock for internet banking, except for the time needed for website maintenance.
As marketplace banking provides full access to users to their digital bank accounts via mobile or desktop. It allows users to perform banking operations from the comfort of their homes. Hence, improving the customer experience and satisfaction by not limiting the services to fixed bank hours. Not only this but, open banking marketplace finance allows users to access their digital bank accounts with 24*7 availability.
Digital banking as marketplace finance helps to save a lot of time for consumers by removing all the time-consuming paperwork with ease. One of the major challenges in the traditional bank marketplace platform includes its boring paperwork. But digital bank accounts have made those processes paperless. Now users can simply log in to their digital bank accounts to verify records virtually.
Users no longer need to remember the due dates of their important bills in this era of marketplace fintech. With digital banks, users get the option to set up automatic payments for basic day-to-day expenses. For instance, users can easily automate their electricity bills with the help of an open banking marketplace. The alerts and reminder features will help users to automate their monthly payments and dues.
Strengthen the security
Promoting digital banking as a marketplace gives users the option to block any misplaced cards or block spammers simply with the click of a button. This helps marketplace fintech to effectively strengthen the security of digital bank users. In addition, to encourage a step towards cashless payments, digital bank accounts help to restrict the possibility of black money. This is because all digital transactions can be easily traced online.
Better rates and lower fees
Open banking marketplace finance gives options to users to go beyond the local brick-and-mortar financial marketplaces. Therefore, offering comparatively lower fee structures to fulfill your banking needs.
Challenges of Adopting a New Marketplace Banking Model
No doubt, marketplace banking brings users a highly convenient and accessible solution. But it also comes with some challenges too. Some of its main challenges include:
Poses Security Concerns
The solution of digital banks gives more authority to users. Yet trusting digital platforms always involve some chances of hacking or fraudulent activities. Digital banking is prone to vulnerabilities like phishing, identity theft, and keylogging. However, many digital banking platforms are utilizing multiple security protection methods like multi-factor authentication to encourage their users.
In case someone solely depends on an open banking marketplace, sometimes it becomes difficult to reach the accounts in times of digital outrage. At that time they don’t have the option to visit and communicate their issues directly.
Another challenge that comes in the way of getting started with digital bank accounts includes the barrier of a learning curve. As mobile banking or online banking platforms may involve a complex learning curve. People who do not understand the tech-savvy environment effectively might hesitate to trust the marketplace banking model with their money.
In the end, it’s always important to know which financial institution your digital bank account has partnered with. Users must do some background checks and seek reviews before trusting a certain digital banking solution.
How to Develop Fintech Enabled Marketplaces?
Before planning to develop a marketplace banking model, banks should consider the following areas in mind:
A. Define the platform business model
The very first step before developing fintech-enabled marketplaces required defines the marketplace strategy. Platform business model majorly includes B2B, B2C, or P2P/C2C. No matter whatever model the digital banks choose they must consider the bank’s offerings and how it will evolve the traditional banking system. In addition, defining the marketplace strategy should also opt based on the following:
- Types of marketplaces
- Target users, as well as,
- Product and services
After that, one should also look out at how the partners will operate the bank marketplace platform. Determining the fintech marketplace environment and position on specific niches like customer support and after-sale service to add the best business operations and processes will surely help.
B. Designing with the customer experience
Evidently, designing the customer focussed experience plays an important role in developing a reliable fintech marketplace. The simpler and more intuitive the design is, the improved customer satisfaction is. In simple terms, marketplace finance should be customer focused instead of business-focused.
Its marketplace fintech basically provides a suitable pace for bank marketplace platforms to bring products to the users. It represents the first interaction of the bank with the customer and hence, should aim to provide every necessary service to them at their appropriate places.
C. Decide on the eCommerce platform
With multiple options available, deciding on the perfect eCommerce platform with desired capabilities is important. It begins by analyzing the existing ability while focusing on the platform-related areas. Furthermore, this will help to find the best fit for its marketplace vision and banking structure.
Future of Fintech Enabled Marketplaces
Change is the only constant. Well, this is evident in the field of financial services as well. As the world evolves and becomes more digital, so does the increase in innovation in all sectors but especially in the finance sector as here is where all the money is. And with many opportunities currently and only one more to come it’s hard to see why fintech enabled marketplaces will not boom.
Today, most users are considering a transition into the world of the fintech marketplace. While digital banking revolutionizes the banking industry and gives millions of people access to financial services for the first time. The new banking models continue to emerge with fintech enabled marketplaces to potentially disrupt the status quo.
Fintech enabled marketplaces led the charge in the unbundling of the financial services value chain. The banks of the future will be simpler, smaller, and equipped with lots of technology and partners. No doubt fintech is the future of digital banking finance hence the consideration is the valid one.
Certainly, we now have multiple independent apps solving different financial problems. Although advantageous and convenient, it has also created a fragmented customer experience due to the sheer number of bank marketplace platforms. Hence, we can say that we are now at the dawn of the Digital banking 2.0 era.
In this article, we have talked about the new normal of traditional banking i.e. Digital banking. We also have covered its advantages, challenges, and some top marketplace banking providers as well.
CronJ has over a decade’s experience in serving the BFSI industry by delivering advanced solutions as well as enabling seamless team scalability. If you have an idea in mind bring it to life with CronJ’s dedicated Fintech Services.