Traditional Banking and Mobile Banking: Differences, Pros, and Cons

In the past, if you wanted to deposit your money in an account, get a loan from a bank, or apply for any other financial service you would have to go into the bank or speak with an agent on the phone. Today, this process can be done exclusively through online channels. This is called online banking, and it has been slowly taking over since its introduction in the late 1990s.

Online banking is safe, and secure and provides many advantages over its traditional counterpart. This article outlines key benefits of e-banking and outline the traditional and online banking comparison. It will also reveal how online banking has been outperforming traditional banks for years, giving its customers a better banking experience.

What is Online Banking?


Before we start the traditional vs online bank comparison, we need to understand what online banking entails. Online banking is a type of banking done completely through an Internet portal. An online portal is a system developed by the bank to offer customers access to their accounts, transactions, and other banking services. Online portals can be accessed through any computer or mobile device, which makes them convenient for users.

How Do Online Banks Work?

Online banking services are provided by most banks in the U.S. and some of the largest banks worldwide. Most online portals have websites with built-in banking software to process transactions and accounts. Generally, customers can access all of their bank accounts through one portal, which can also be used to pay bills, transfer funds and manage investments.

Online portals also offer a variety of additional features such as budgeting tools, price comparison services and mobile applications for financial management on-the-go.

Benefits of Online Banking Over Traditional Banking

Online banking is the wave of the future as it offers digital transformation in banking with many advantages over traditional banking, including but not limited to the following:

1. Higher Interest Rates

Online banks offer a faster and better user experience, which means you may get higher interest rates on your money. For example, most online banks offer customers up to 1% more interest on their transactions if they do their banking through an online portal. On the other hand, most traditional banks offer between 0.1 and 0.5% interest on checking and savings accounts.

2. Convenience

Online banking is more convenient than traditional banking. Traditional banking mainly involves going into the bank and sometimes having to call an agent. With online banking, you can access your accounts and make transactions anytime, anywhere, which means that you can do it at home or work. Online portals can be accessed from any device, including smartphones and laptops. They provide services like mobile banking so customers can do their banking wherever they are at any time of day.

3. Security

Contrary to the popular misconception, online banking is more secure than traditional banking. Online banks have security measures in place to keep customers’ assets safe, preventing unauthorized access. They use the latest technology to ensure that customers’ data is always protected . For example, online banks use Advanced Encryption Standard (AES) technology for data encryption and many other tools for customer protection.

Each customer is assigned an account number, password, and personal identification number that cannot be duplicated or shared with any bank or third party. Furthermore, online portals are monitored by trained IT staff who can spot any suspicious activity as soon as it happens.

Meanwhile, most traditional banks have no or limited actions or measures in place to protect their customers’ information and assets. Some do not even monitor their customers’ accounts.

4. Lower and Fewer Fees

Online banks provide lower fees for many services. This is because online banking does not require physical branches and employees which traditional banks do. Online portals can be easily accessed anywhere at any time and do not require live human intervention to complete transactions.

Online banking enables you to avoid most fees. For example, there are no minimum balance charges if you maintain your account with most online banks. Besides, many online banks charge lower annual fees and maintenance fees than traditional banks.

Drawbacks of Online Banking

Even though online banking has numerous advantages, it is yet to address the following drawbacks:

1. Deposits Can Be a Hassle

Depositing money to your account can be challenging. Online banks do not accept cash deposits, and the only two other options are transferring money from another account, which requires an account number or using prepaid cards to deposit money.

2. Technological Challenges

One of the challenges that online banking faces are that it is a fairly new concept to people. It has been slow in catching on with people, a trend that will probably continue for some time. The number of online banking customers is steadily increasing, but it is still much less than traditional banking customers in most countries.

Another challenge facing online banking is how fast it has grown since its inception, which means there are bound to be some technological glitches from time to time.

3. Unreliable Customer Service

Another drawback of online banking is that you might have to deal with customer support agents who do not seem knowledgeable about the service and keep transferring you to different departments. In the past, customers had no choice but to talk with staff at the bank regarding their transactions.

In addition to being physically available, traditional banks also have ATMs where customers can authorize cash withdrawals and transfers from their accounts.

Online Bank vs Traditional Bank Comparison

Element Online Banking Traditional Banking
Interest Rates Higher interest rates on savings Lower interest rates on savings
Convenience You can access from anywhere, anytime You must visit the bank or call an agent
Security More security measures in place to keep customers’ assets safe Limited actions or measures in place to protect their customers’ information and assets
Fees Fewer or lower fees as services do not require physical branches and employees More and higher fees as all services require human intervention
Deposits Deposits can be a hassle Deposits are straight forward
Technological Challenges It is a new concept, and online banking technologies keep changing The banking system is conservative and non-technical
Customer service Unreliable customer service Excellent customer service

The Bottom Line

As technology keeps evolving, not only has online banking become a common practice but from-the-phone banking or mobile banking is also becoming more popular. Although online banking has some drawbacks, it is still the preferred method for many customers. Online banking users enjoy lower fees and greater security, as well as high convenience than traditional banks.



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