The rise of innovative technologies in finance naturally sparked an interest in digital banking. No wonder it has become a…

Subscribe

The rise of innovative technologies in finance naturally sparked an interest in digital banking. No wonder it has become a catch-all thing – while the competition in disruption is quite intense, many traditional banking institutions are currently attaching themselves to the idea of a digital bank in order to look more modern. Many new electronic money licence holders are going after potential customers who prefer the quick and convenient approach through digital applications also referring to their services as digital banks. But are they really digital banks? 

The term digital bank is commonly used to describe many new payment apps or banking extensions. The definition is often used very broadly to describe the technological innovations within the banking sector or any banking solution that has a digital asset such as a mobile banking app. Andrej Zujev, the founder of banking software provider Forbis Group, claims that many currently available digital services should not be categorized this way. “Digital banking is not just about modern solution implementation. The term should be ascribed to new technology built to fully digitize banking services, in other words making banking services as automated as possible. I would even say that none of the digital payment solutions that call themselves a digital bank are not really digital banks.”

As stated by Zujev, the appropriate framework of digital banking has to rely on automated systems to a large extent. “The need for human resources should be very limited. Nearly everything can and should be done automatically.” On the other hand, Zujev agrees that some vital functions should be overseen by people. “For example, people should check on all issues related to escalated legal concerns, advanced anti-money laundering or geographically specific regulatory concerns. This provides better quality assurance and security of large assets. Marketing and communications can be considered as well, but the rest should be automated.”

Forbis Group have been working on developing a true digital bank where nearly all functions are automated: “We have developed a product, which is closest to a proper digital bank now. Contomobile uses our digital bank solution and needs only 4 employees to run the operations. This white label solution is currently in high demand for financial institutions who want to go digital but do not want to reinvent the wheel.”

According to Zujev, who has worked on digital financial solutions for nearly 30 years, even modern banking solutions, while steadily becoming rivals for traditional players, should not be seen as fully digital banking companies. “Even big market players like Revolut or N26 employ thousands of employees, raking up expenses that wouldn’t be necessary for a completely digital bank. Real digital banking should be investing more in technology rather than physical assets,” argues Zujev.

Zujev holds that modern technologies are still underused in the fintech sector. “Currently, the most technologically advanced frameworks are not being used to their full potential in digital banking.” One of the potential reasons for that is the still-ongoing use of more common IT solutions which are less developed than disruptive technologies. “Developers are using traditional algorithms instead of applying AI (Artificial Intelligence) or Big Data. These components are the future of automation and should be involved as much as possible.”

However, the expert agrees that the full digitalization of banking may take a while. “We are taking our first steps and many initiatives have large potential”, claims Zujev. “It is very difficult to predict how digital banks will look like in 5 or 10 years from now.” Although the future of this industry is ever evolving, some steps may ensure a more sustainable development. “A new structure and organisation of banking are necessary. There are many ideas and time will show which solutions can be the most suitable for banks and their clients.”

Subscribe

Related Stories

Issue 34 of Interface magazine is live!

Our cover story this month investigates how Fleur Twohig, Executive Vice President, leading Personalisation & Experimentation across Consumer Data & Engagement Platforms, and her team are executing Wells Fargo’s strategy to promote personalised customer engagement across all consumer banking channels

Issue 34 of CPOstrategy is LIVE!

CPOstrategy’s cover star this month is procurement transformation expert, and CEO and Co-Founder of Tropic, David Campbell…

Welcome to the first ever edition of SupplyChain Strategy!

Our aim is to bring you the latest actionable insights into every issue relating to supply chain management from the world’s leading exponents. Each issue will lift the lid on the supply chain transformations taking place, right now, at enterprises across every sector and territory.

How to accelerate supply chain digital transformation

The right time to digitalise the supply chain and reap the multiple benefits is now.

Issue 33 of Interface magazine is live!

Our cover story this month reveals how Sarita Singh, Regional Head & Managing Director for Stripe in Southeast Asia, and her team are driving financial inclusion across the region and supporting SMEs with end-to-end services putting users first

Supply chain data: Mind the gap 

The list of drivers to better understand global supply chains grows every day.

Top 5 essential procurement/supply chain management books 

We list five vital books in procurement and supply chain strategy that are reshaping the way we work.

Building resilience into the weakest supply chain link

Disruption and uncertainty mean a myriad challenges face organisations ad the weakest link in the supply chain can appear quickly and unexpectedly.

Supply chain decarbonisation, the data-driven way

It’s an open secret: enterprises that want to effectively reduce their CO2 emissions need to first and foremost address their supply chain.

We believe in a personal approach

By working closely with our customers at every step of the way we ensure that we capture the dedication, enthusiasm and passion which has driven change within their organisations and inspire others with motivational real-life stories.