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Traditional Banks in the Age of Online Banking

Živile Šarkauskaite

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Živile Šarkauskaite

May 31, 2023

Traditional banks have long been the sound and stable backbone of the financial system. However, fast technological development and changing customer needs have forced a new look at traditional banking.

In this blog, we will look at what traditional banking is and what is the growing popularity of online banking, which seems to be about to eclipse everything else.

Traditional bank

What are the traditional banks?

Traditional banking has been around for centuries. It is usually characterised by physical branches, regional headquarters, own-branded ATMs, many employees, and personal customer service provided by dedicated account managers. While traditional banks offer online services, the main focus is mainly on physical presence.

Many customers choose traditional banking because of the direct customer service. A global consumer banking survey has revealed the reason for this choice. The survey results showed that live contact builds trust and credibility.

Clients prefer to visit a physical location and deal with a real person when seeking financial advice or buying new products. In addition, being present in such local branches gives more confidence, especially when opening a bank account.

However, you can’t separate a traditional bank from an online bank completely. Most traditional banks recognise the importance of digital solutions.

Therefore, to adapt to changing client needs and preferences, they have started offering online banking services and developing online platforms and mobile applications.

What is online banking?

Online banks have become a crucial aspect of modern banking. In particular, it allows customers to perform various banking functions on websites or mobile apps. Many traditional banks now offer online banking services. However, some new banks are online only and do not have local branches.

Internet banking entirely focuses on the digital banking user interface. Unlike traditional banks, internet banks do not have a physical office and operate only through their online platforms. The lack of features such as physical branches and ATM services can reduce accessibility. It is particularly relevant outside working hours and when travelling.

In one survey, more than half of consumers said that a strong digital presence is a necessary aspect of their choice of bank. Online and mobile banking is particularly important for younger generations.

Therefore, traditional banks have embraced internet banking and developed online portals. Through these portals, customers can access features like balance inquiries, money transfers, account openings, and even mortgage applications.

Unlike physical branches, these online services are available 24/7. Additionally, customer service has shifted towards online channels such as email, chat, and video calls, reducing reliance on phone calls and in-person visits.

Mobile banking

Mobile banking is another part of online banking that is growing in popularity. The emergence of mobile banks has further transformed this sector. More and more people are using banking apps.

With their help, you can check a bank account online, and make convenient digital payments or quickly transfer money to other accounts.

Are online banks safe?

As the use of online banks has increased, so has cybercrime. Criminals often exploit the vulnerability of online systems. Clients who access their bank account information through unsecured networks can have their login credentials compromised.

Email fraud is a problem too. Clients may carelessly click on malicious links that appear to be from their bank.

However, banks are also taking steps to protect their websites and applications. Nevertheless, they also need to educate their customers about safe usage practices.

Online banking vs. traditional banking

There are a few differences between online and traditional banking, which determine people’s choices. Here’s a breakdown:

  • Accessibility

The main advantage of online banks is that you can access your account anytime, anywhere, as long as you have an internet connection. Traditional banks, on the other hand, require a personal visit during office hours.

This convenience appeals to those who have mastered the new technologies. Therefore, online banks are not accessible and convenient for everyone. Some people prefer to visit the nearest local branch of their bank more.

  • Safety and security

Online banks raise concerns about security and fraud. However, it has advanced security measures and is constantly being improved. Some of these security measures include multi-factor authentication and data encryption.

  • Fees

Online-only banks generally offer lower fees and higher interest rates than traditional banks. However, often traditional bank clients prefer to pay higher fees for additional services and benefits such as deposit protection and free cheques.

  • Customer service

Usually, the traditional bank is excellent at providing personal service. For this reason, they are preferred by those who prefer face-to-face communication.

Online banks rely on completely digital customer service. They use communication channels such as email, chatbots or telephone support services, which may have limited opening hours. However, complex issues can be hard to resolve without direct human contact.

  • Efficiency and convenience

Online banking simplifies processes by eliminating paperwork and providing instant access to account information. Transactions are faster, and notifications are received quickly. On the other hand, traditional banking involves physical paperwork and potentially longer processing times.

  • Better interest Rates

An online savings account of a digital bank often provides higher returns than at a traditional bank. Also, some digital banks offer accounts with particularly competitive interest rates.


What is the role of traditional banks?

Traditional banks provide financial services. These services include accepting deposits, providing loans, facilitating transactions, offering investment and savings products, and providing financial advice to individuals, businesses and organisations.

Traditional banking works as an intermediary between depositors and borrowers. It helps to manage risk and contributes to the overall stability and functioning of the economy.

What are the 2 disadvantages of traditional banks?

Two main disadvantages of traditional banks include limited accessibility and higher fees.

First of all, they have limited accessibility. Traditional banking requires customers physically visit branches to open a new traditional bank account or carry out various financial transactions. It can be inconvenient for individuals who prefer flexibility.

Another disadvantage is higher fees. Traditional banks generally have higher operating costs. As a result, they may pass these costs on to customers as higher fees.

These may include fees for savings account management, wire transfers, or other services. It is a disadvantage for customers seeking more cost-effective options or to reduce the costs associated with financial transactions.

What is the difference between traditional and conventional banking?

Traditional banking and conventional banking are often used synonymously to refer to the same financial institutions. Both terms generally describe the traditional banking model, where customers interact with physical bank branches to carry out banking transactions.

Is online and mobile banking the same?

Online banking and mobile banking are digital solutions offered by financial institutions. They are closely related but not identical.

Online banking refers to accessing banking services through online platforms on a computer or laptop. Mobile banking, on the other hand, involves using a mobile device such as a smartphone or a tablet to perform banking activities using dedicated banking apps or mobile-optimized websites.

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