In the ever-evolving landscape of finance, startups face unique challenges that demand innovative solutions. Choosing the right financial partner can be a make-or-break decision for these companies, especially in an era of technological acceleration, which is why digital banks have risen as a compelling alternative to traditional institutions and their fintech counterparts. Established digital banks provide startups the best of both worlds, blending the reliability of traditional banking with cutting-edge technology. Here are four key ways that digital banks outclass traditional institutions in serving startup and SMB clients. 

Serving as a trusted resource

Many startups believe that convenience is the primary benefit of a digital bank. While digitising services and enhancing access to financial information is certainly an advantage, digital banks excel because they offer invaluable industry expertise and a human touch that few banking clients can expect at a traditional institution.

Digital banks are often created to serve a specific industry or niche so they have built-in knowledge of the industry that they are serving with valuable professional networks and resources at their disposal. For tech companies, that knowledge is amplified because digital banks inherently understand technology. After all, digital banks are tech companies themselves, so they have a deep understanding of startup culture, how the innovation economy works, and the unique challenges startups face, which traditional banks often lack.

When banking professionals understand the industry, current trends, projections and the business’ end goal, they become a true financial partner. Digital banks excel at fulfilling this role and evolving the banking experience from a transactional relationship to a long-term partnership as a collaborator invested in the success and growth of their clients.

Pursuing fintech partnerships

Digital banks are leaders in collaborating and partnering with financial technology companies to enhance products and services. According to research from Ernst & Young, fintech partnerships are critically important to driving growth and innovation and staying relevant in an increasingly digital marketplace, but only 32% of banks are currently pursuing fintech partnerships. Of those that do, 40% of partnerships fail to operationalise.

However, digital banks are driving the adoption of fintech partnerships in areas like fraud prevention, mobile banking access and risk management. They are leveraging the capabilities of fintechs to automate services like bookkeeping and enhancing banking-as-a-service (BaaS) and mobile banking functions. These partnerships increase the bank’s ability to support startup clients with a variety of powerful digital tools and products. 

Investing in tech versatility

Traditional banks typically operate on a one-size-fits-all model, with an inflexible suite of products and services meant to serve a wide variety of companies across all industries and sizes. Digital banks have disrupted this model by offering innovative technology, niche industry expertise, and personalised experiences. The digital banking model is made possible through leading edge technologies that provide clients with a seamless account opening process and access to all of their information, tools and resources in a single dashboard. BaaS is also central to technological versatility, as it allows banks to create an embedded experience with their own banking products, as well as with fintech partners. This means that all products, even those available through third-party partnerships, are easily accessible at the touch of a button.

Hyper-personalised solutions

Tech tools aren’t only for clients. Digital banks are also leveraging cutting edge technology and data collection to deliver hyper-personalised banking experiences. Transactional data, for example, can give banks deep insight into client behaviours, pain points and needs, and then offer services and products to meet those needs, creating a holistic and seamless experience. In addition, automation and machine learning capabilities are becoming a differentiator in the banking sector by helping banks understand client activity and track emerging trends and risks that might impact financial strategy.

These technologies are helping banks connect with prospective clients and form deeper relationships with existing clients. Clients also benefit by getting a personalised experience designed to meet their individualised needs. Hyper-personalisation is quickly becoming a cornerstone of the banking industry, and will be a competitive advantage for both banks and the startup clients they serve.

As the financial landscape continues to evolve, established digital banks stand as resilient pillars of support for startup clients seeking a reliable banking partner long term. These institutions not only meet but exceed the expectations of businesses by offering a seamless, secure and innovative banking experience with an unwavering commitment to the satisfaction of the clients they serve.