[Written by Opposition Leader Cole Simons]
Like many countries around the world, Bermuda lives in a digital economy, with many digitally supported financing, shopping and other personal services.
The education and international banking sectors are also advancing to meet the growing demand for online access to numerous new learning opportunities, as well as the development of digital financial transactions.
The One Bermuda Alliance supports this necessary evolution. It is essential for Bermuda to remain competitive and at the forefront of being a world-class financial services institution.
Traditional banks always exist in the banking industry, but the same applies to the banking sector, using the analogy of how plant species evolve and adapt to their surroundings to survive. New types of banks will continue to evolve and adapt to the growing demands of the population. In 2022, they represent digital banks.
In light of the above, we believe that Bermuda has room for a newly licensed Jewel Bank and its digital products.
What is a digital bank?
Simply put, digital banks offer the same types of banking services as traditional banks, except that they operate completely online without a single physical infrastructure such as a bank branch.
What is the difference between traditional banks and digital banks?
The difference lies in its shape.
Traditional banks have the physical form of having a head office and branches, while digital banks can only operate at the head office and usually do not require the presence of branches.
Like traditional banks, digital banks make money through fees, fees and investment advice charged on products purchased on online platforms. Digital banks also make money by accruing interest on customer deposits in their digital accounts.
Protection of the public interest:
When it comes to protecting the public interest in terms of behavior and prudence, like traditional banks, digital banks should and will be regulated by the BMA. This is a good thing. It also complies with Bermuda’s Digital Asset Business Act 2019.
Which is best, a digital bank or a traditional bank?
The answer depends on the consumer, but here are the pros and cons of virtual banking to consider:
The operating costs of a physical store are much higher than the operating costs of a virtual business. In many cases, online-only banks have lower account fees than traditional banks. For example, most digital banks do not charge a monthly account maintenance fee, but some traditional banks do. Online banks such as Ally, Axos, Discover and other online banks are also said to require no minimum deposit to open an account.
- 2. Higher interest savings:
The savings you receive often lead to a higher interest in your savings, as it is cheaper to run a digital bank. This means that with digital banks, your money can work harder for you.
Traditional banks also have this option, but virtual banks are set up for paperless interactions.
In-store banks, unlike the digital options available, charge almost all fees.
- 5. Minimum balance option:
Sticking to minimum balances can be a good practice for ensuring financial security, and these requirements are not unique to virtual banks. You can find it in most physical banks as well.
With an online bank account, you can trade on any day of the week, anytime, anywhere, as long as you have access to your computer or digital device. You don’t have to go to a bank branch.
- 7. Many standard banking services:
In addition to standard check and savings accounts, many online-only banks offer other traditional banking services and products such as money market accounts and certificates of deposit. [CDs]Mortgages, car loans, personal loans, investment options.
- 1. No physical location:
Sometimes it’s good to have a face-to-face conversation with a human. Almost all banking can be done on a device in the palm of your hand, but some of us find it safer to do business with people. With virtual banks, people interact only by phone. This is a challenge for many older people who may not be familiar with computers.
Virtual banks do not have many unique ATMs. Therefore, if you use an ATM of another bank, you will be charged an additional fee.
Some virtual banks require a minimum balance in your checking account to unlock low-value or free accounts.
Some virtual banks charge a fee to transfer money.
The introduction of digital banks could trigger existing local traditional banks in Bermuda to close some local branches. As mentioned earlier, digital banks have a smaller physical footprint without branches because services are provided digitally, which is why Bermuda’s current traditional banks are moving to more digital services and branch offices. There is a real concern that it could trigger a closure. As a result, the work of Bermuda employees cannibalize.
The conclusion is:
Digital banking offers many benefits such as low rates, high interest rates and 24-hour convenience, but online-only accounts are usually not suitable for face-to-face transactions with traditional banks such as cash deposits and customer service. enough. Therefore, before jumping into digital banking, be sure to consider the most important things about where to put your money.
As a banker, if you want to support digital banks, you need to do your own proper research. Be aware of what a successful and well-established bank is doing. Also, make sure that your local banking regulator is doing or saying that these banks will need to file a filing.
The risks and rewards of both traditional and digital banks need to be assessed.
Moreover, the scalability factor that most digital banks enjoy should not be underestimated. This factor seems to be able to attract thousands of international clients and could challenge Bermuda’s reputation as an offshore financial center.
Therefore, as a banking expert and as Treasury Minister Shadow, Bermuda has the right level of resources and capital for this new generation of banks to ensure the right degree of due diligence and operational standards. I think I need to confirm. I’m sticking to. These banks also need to comply with the laws and protocols of KnowYourClient and AntiMoneyLaundering in Bermuda and ensure that our best reputation as a good offshore financial center is well maintained and uncompromising.
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