With the boom of smartphones and the revolution of cloud computing. A major insitution is taking on a new form, faster, cheaper, more convenient, acessible anywhere and at anytime… this is none other than the banking industry.
Graph/image taken from Fintech News Philippines.
In the Philippines
Today we will take a deeper look on how digital banks are changing the game together with other fintech companies specifically here in the Philippines. I will be sharing with you observations based on my actual experiences.
What attracted me most in using digital banks and moving my savings there are the high interest rates. Traditional banks would offer an interest rate for savings of just .0625% in a year. Compared to digital banks which on average would give an APR of 5% (some banks offer more depending on their promotions. Biggets i’ve seen is at 12%)
It saves a lot of money as transfers are commonly free. It is upsetting at times when banks are charging me just to transfer small amounts or would even charge me from withdrawing from a different atm.
I can access my account anytime/anywhere and while traditional commercial banks already have most of their services online. I could feel that they are still restrictive. A digital bank functions just like a normal bank but is avaialble for me 24/7. I dont have to wait for business hours nor go to banks physically. This is more true now that a lot of payment transactions are done over the internet.
Due diligence is still needed
While digital banks are attractive in so many ways. There are still things needed to be considered.
Just like traditional banks a digital bank can be affected by a bank run where customers would withdraw their funds in droves. If the biggest banks in the world can be affected by bank runs so can digital banks.
Always do your research first and do not let high interest rates cloud your judgement and make you go blindly moving all your funds into one digital account. All banks make money from lending and other financial services like loans and credit cards. They are just keeping fractional reserves. If many of its customers default then that would spell trouble. Choose a bank which has a strong reputation and is licensed and is insured by central banks.
As for me
- I will continue to be in favor of digital banks. we are in the internet age and its only appropriate to take advantage of technological and digital advancements.
- However there are many other opportunities to earn bigger, quicker and while the proposition of making money while you sleep is attractive to say the least, key component of my personal plan is to diversify.
