Digital Banks and Traditional Banks – Their Differing Qualities

Digital Banks and Traditional Banks – Their Differing Qualities

The most striking difference between digital banks and traditional banks lies in the provision of services. Digital banks do not require to have a physical office position to provide their services, while traditional banks are required to have a physical office position to operate and provide their services.

In this article, we have prepared the definition of digital banks and traditional banks as well as their differences and examples.

What is a Digital Bank?

Advances in information technology in the banking world are a response to digital transformation which continues to grow rapidly. The flow of information technology development is unstoppable, making people involved in various business sectors need to follow up on changes that occur.

Through developing information technology, stakeholders are committed to innovating in their business sector to create a digital bank as a banking service that is safe, fast, and easy to access at any time without visiting the bank’s office.

The presence of digital banks is an innovation that focuses on efficiency and cost savings. In addition, digital banks can perform better risk management procedures and accurate data analysis. The combination of information technology adopted by digital bank stakeholders greatly assists them in understanding customer behavior and using this insight to offer products that suit user needs.

If we try to summarize the whole thing, digital banks can be interpreted as a banking business sector that provides digital ways of transacting through electronic channels and has its legal entity.

Read also: Knowing the Definition of KYC and the Benefits of Its Implementation

What is a Traditional Bank

Before everyone was familiar with digital banks that existed today and became part of society, traditional banks had existed and operated for a long time. Traditional banks operate under the rule of law and a financial supervisory body. Traditional bank activities involve offering a variety of their products which are generally financial services in the form of savings, investment, insurance, and credit.

In addition, traditional banks can be recognized easily through the physical presence of their branch offices which can be accessed by customers directly. Customers are served by functionaries according to their needs right away. Another activity is receiving funds from customers in the form of savings, current accounts, or time deposits which are then managed again for credit.

In addition to physical offices, traditional banks also have banking services in the form of Internet banking, mobile banking, and ATMs which are useful for facilitating customers in making many important transactions for their needs.

Read also: Functions of Non-Bank Financial Institutions That You Must Know


The explanation above explains the meaning and position of digital banks and traditional banks as well as significant differences in the method of transfer. Concerning some of the points that we explained above, here are some of the differences that you need to know between digital banks and traditional banks.

1. Account Opening Procedure

The first difference that you will notice is the account opening procedure. Digital banking can be done online and independently through a digital bank application, a special link, or the bank’s website. They are different from traditional banks which require their customers to come to the office in person when they want to carry out the account opening procedure.In addition, manual account opening cannot be done independently and must be assisted by a bank functionary who is on duty in the customer service department.

2. Office Location

The position of the office is the second difference that you can feel the impact. Digital banks generally do not need physical offices to operate, but that does not prevent digital banks from having physical offices. Digital banks can also have a limited number of physical offices. This is different from traditional banks which must have a physical office because every business operation is very dependent on a physical office.

3. Administrative Costs

You can also feel other differences in the form of administrative costs. Digital banks have lower administration fees compared to traditional banks, where some of them do not even charge administration fees.

4. Interest

Interest rates on savings at digital banks are usually higher than those at traditional banks. This is due to operational costs that are not so high that they can offer higher profits. However, as a wise customer, you should do a comparison between the two banks first before deciding to make a deposit.

5. Transaction Process

Digital banks offer convenience in the transaction process so that all activities related to this process can be carried out independently. On the other hand, traditional banks need help from bank tellers to process transactions.

Read also: Why Credit Survey is Important for Businesses

Examples of Digital Banks in Indonesia

Lots of digital banks have sprung up and are competing to attract new customers and use their services. Ease of transaction is one of the considerations for many people to choose to use a digital bank. In the following, we have prepared digital banks operating in Indonesia.

1. Jenius

In 2016 the Bank Tabungan Pensiunan Nasional (BTPN) released Jenius which operates as a digital bank. Following our explanation above, opening an account can be done independently, which makes it much easier to do. The process is quite easy and a physical ATM card can be sent to the registered address. Apart from that, the administration fee is also low and the debit card can also function as a credit card.

2. Jago

Bank Jago may not be that heard of by Indonesians outside Jabodetabek, but it is one of the pioneers of digital banking in Indonesia. Previously, the name of this bank was Bank Artos Indonesia, which later changed its name to Bank Jago in 2020 until now. Bank Jago offers debit cards that are available in physical and virtual forms. In addition, they also do not apply administrative fees.

3. Neobank

Neobank is one of the digital banks in Indonesia with several advantages in the form of high savings interest and interestingly that customers do not need an initial deposit to open an account at Neobank. This digital bank does not have a physical office position so all of its activities take place online.


Another digital bank in Indonesia is the one launched by Bank UOB and is one of the best choices for digital banking services throughout the country. TMRW offers services with no monthly administration fees and no fees for the minimum balance. Those are the two advantages of this digital bank.

5. Digibank

Digibank is a digital bank that is now available in several countries and one of them is Indonesia. Their services can be accessed via a mobile application and are easy to use. In addition, transaction security is very high and guaranteed.

Many conveniences and security offered by digital banks have become a trend and are popular among the public. In addition, the advantages and benefits in the form of low administrative costs and high-interest rates make digital banks the right choice to use. Even though traditional banks are also competing to offer their products, the many differences between digital banks and traditional banks mean that they must continue to compete with one another. In addition, banking affairs in both digital banks and traditional banks will always be related to data and verification. One of the state-of-the-art applications from AdIns which can carry out the process of verifying prospective bank customers automatically is the e-KYC system PROFIND which can help you carry out the credit analysis process more easily. Contact us now to try this service for your bank!

Digital banks and traditional banks, Digital Banks and Traditional Banks – Their Differing Qualities, Advance Innovations

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Published date :

22 May 2023