Traditional banking is characterized by having a large infrastructure (physical offices) and giving “face-to-face” attention to its customers. Its strategy has been to provide a very close, humane treatment and give personalized attention to its customers. This type of banking focuses on providing support to its clients through financial services, specifically accounts, payrolls, credit / debit cards, personal or mortgage loans, etc.
With traditional banking, the client often has the need to travel to the physical offices, in order to carry out procedures, transactions, obtain cash, etc. In that place you are given a personalized service, unlike online banking where transactions can be made remotely (from a smartphone, tablet or personal computer). While face-to-face / traditional banking is slowly “migrating” or using some functions of online banking, at the present time there are still some disadvantages with respect to fintech companies, which we will know below:
Operating expenses tend to be high in traditional banking, since in addition to having administrative offices, they also have offices to serve their clients in person (due to the idea that the more in-person offices there will have a better reputation) . Among its main operating expenses are: paying rents from the premises where they operate, payment of public services, security, expenses in stationery and in the issuance of the plastics with which they make debit and credit cards, in addition to payments of payroll of face-to-face employees.
Move to offices at certain times
In the case of needing to make a transfer or other type of management, in many cases “physical presence” must be made in the bank’s office and within the business hours established by the bank, which is a great disadvantage, since the «Banking hours» generally coincide with the working hours of several companies or businesses, so in many cases a «work permit» is required to go to the bank. Another factor to take into account is the distance to travel to reach said office (either from work or from home) which can also generate an additional problem for the end user.
Another disadvantage is the slowness with which some of its processes are carried out (usually caused by its internal hierarchy / organization or the actions of its own officials). Another demonstration of the slowness is the time that transactions between different banks usually take (especially on holidays or weekends).
In general, traditional banking commissions are higher due to their high operating expenses, which makes many of their products or services more expensive compared to other products or services of fintech companies.
Low stimulus to savings
Due to the low interest rate that traditional banks usually pay to their savings clients, there is a low saving stimulus. This is because traditional banking promotes more bank loans (which are made with commercial bank money) and they are the ones that generate more interest and collection fees, which allows them to create more fiat money and have more profits.
Lack of permanent ATM network
Sometimes, the ATM network is not the most suitable due to the following reasons: there are few units available in the city, low availability of cash, have daily withdrawal limits or simply present momentary failures in the operation of the ATM, All these factors can generate problems or discomfort to users.
Limitations in online or virtual banking
Although traditional banking is using some functions of online banking, the latter is still very limited, for example in some cases this service is “conditioned” to the use of some of its products (credit or debit cards), There is also the problem of “limits” on the amounts to be transferred in addition to the difficulties or restrictions in transferring money to other countries.
What do you think about this topic? Do you know another disadvantage of traditional banking?
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