The Future of Finance Digitalization: What to Expect?

Inna Coker
Talent Mapping Specialist

Digitalization in financial services has already been taking place intensively for the last decades, focusing on new issues and needs to increase company performance. Success with this evolution is critical in a world where data volumes are growing at a dizzying rate. Financial data is no exception to this trend of information overproduction, notably because regulatory obligations require more information to be stored for extended periods.

 

Digital Transformation in Banking 

Digital transformation in banking speeds up electronic processing and increases the volume of digital data. However, data remains at the heart of the process, such as invoices in electronic solutions, structured data in predictive models, labels for classifying accounting entries, and product references in ERP systems.

Unfortunately, many European countries still have the old banking system, which consists of many steps like visiting offices, bureaucracy, long waiting for opening accounts and many more headaches that can be avoided with digital transformation.

Moreover, Covid-19 has changed the tradition of visiting places and going to offices. Most companies have started a hybrid work system or switched online wholly. The pandemic significantly impacted the digitalization of financial services, creating an immediate need for banks to communicate with their customers through digital channels, such as platforms and apps, while social distancing was the norm. The number of digital users has increased by 23% since the start of the pandemic. In 2021, 70%  of those who worked from home during the pandemic reported virtual meetings are less stressful, and 64% now prefer hybrid meetings, according to a report by Owl Labs.

 

European Digital Transformation in Banking

Innovation has been a constant feature of the financial sector in the last decades, leading to the development of new products, innovative technologies, and financial institutions (like exchange-traded funds and ETFs). However, technological advances in telecommunications and information technology have driven the recent wave of innovation. It has significantly increased the capacity to process information and connect with economic agents.

However, the European banking system still stands in one place. Bureaucracy, much paperwork and signing papers, long waits for bank cards, and numerous offline meetings are just a few challenges facing the European banking system. Sometimes, these issues are caused by people themselves.

For example, according to the German Central Bank –  almost 50% of their total purchases at the point of sale were still in cash from 2017 to 2022. That’s one of the highest rates worldwide. More recent data from the central bank show that 78% of payments at retail outlets (for example, when buying food) were still with cash. Finance digitalization penetration in Germany is weak in a European context. Household surveys also indicate that Germans are attached to their bank branches and cash.

Also, to give an example, to open an account in German bank Sparkasse, you should visit them offline, sign documents and wait about 2 weeks to receive your card and password.

At the same time, Nordic countries are pushing digital transformation for banking to become an opportunity to improve the system. According to the Digital Economy and Society Index (DESI), over 85% of the population in the Nordic countries use the Internet daily or almost daily, compared with slightly over 70% in the EU on average. In Bulgaria, Croatia, and Greece, nearly 30% of the population has never used the Internet, as opposed to less than 5% in the Nordic countries. Country-specific differences are further highlighted by comparing the number of mobile broadband subscriptions and Internet use via mobile devices.

As a result, Nordic countries are highly accustomed to using various online banking services. The declining use of cash in the Nordic region also demonstrates that consumers in these countries are eager to adopt new payment methods.

declining use of cash in the Nordic region

As you can see, for many banks, even traditional online banking represents modern technology, and going paperless will only come in the future. This hampers the digital transformation because moving forward will necessitate substantial financial investment. However, it is difficult to assess whether the digitalization of banks should proceed in small steps or giant leaps.

 

How Digitalization in Financial Services Can be Used?

The leading technologies in which financial services companies invest include artificial intelligence (AI), blockchain, data analytics, the internet of things, and robotic process automation (RPA). In addition, many financial institutions are turning to the cloud, a driver of efficiency and an enabler of change.

The benefits of cloud infrastructure for finance digitalization include additional cut-off costs, better and more integrated security, improved scalability, and flexibility – and it is seen as a more efficient and cost-effective approach to big data and analytics.

Automation is a crucial component of finance digitalization transformation for financial services companies. For example, banking and insurance are highly transaction-based industries that manage and generate vast amounts of data. Automatic processing of this data allows them to operate far more efficiently and use technologies, such as AI and data analytics, to retain and expand their customer base while managing their risks.

 

Examples of Digital Transformation in Banking

Finance digitalization has found its way into many banking systems worldwide. There is no need to visit banks, deal with paperwork, and wait for your bank card to be activated. Instead, you can do all these processes online with a few clicks. Sounds impressive, isn’t it? There are a few examples of digital transformation for a banking system that saves you time and boosts productivity.

  • Monobank 

Monobank is a digital-only bank in Ukraine with no single office. Monobank is a fully digitalized banking system where you can open your bank account through the unique app within a few minutes. Moreover, Monobank allows you to check and deposit funds in UAH, EUR, and USD. However, it will enable deposits and withdrawals of foreign currency to only be made in Universal Bank, Tascombank, and A-Bank branches.

It offers much digitalization of financial services: from free money transfers and paying utility bills with no commission to credits and cash-backs. Monobank uses neural networks for image recognition and gradient boosting that evaluate over 2000 parameters, from customers’ telephone numbers and IP addresses to the speed of filling out the application form for credit risk analysis.

  • Privat24

Privat24, or Privat Bank, is the biggest bank in Ukraine with multiple branches within the country. PrivatBank was one of the first to introduce modern digital transformation for banking and unique technological solutions in Ukraine, allowing customers to use most services remotely by employing Privat24.

Privat Bank also implemented digital services like compulsory automobile liability insurance policies, digital cards and digital skins in a mobile app, identity verification, and account opening in PrivatBank using digital documents in the Diia application.

  • Wise

Transfer money platform then later transformed its services to include banking products. Wise enables users to create a free personal account and enjoy the various benefits. In addition to standard features like global ATM and local currency support, Wise works with Apple Pay and Google Pay.

Users can currently transfer money in their local or over 50 different currencies. To be precise, Wise supports users to send and receive money from a list of 22 coins. And users can send money (no receiving) in another 27 currencies via local transfers.

  • Revolut 

Revolut is an excellent example of the digitalization of financial services, as it offers conventional and experimental features. It has just secured a broker-dealer license for the US market, enabling its customers to have a wide range of investment and trading options. The Revolut and Revolut Metal cards have also gained traction among new-generation banking customers. The fully-metal card gets customers 1% cashback on all transactions. In addition, you can open your bank account with Revolut online from any country within 30 minutes.

  • Monzo

Monzo is one of the most popular digital banks in Europe that enables customers to launch a fully-fledged UK bank account from their smartphones. Users can choose between a wide variety of charges, including free and premium ones. 

Multi-account management, credit cards, and stable savings are a reason why Monzo stays on top of the list. Customers also have access to loans, overdrafts, and security options. A personal account on Monzo also supports modern transactions, including shared tabs, utility bills, and versatile savings options. Monzo also offers a physical debit payment card.

 

Final Thoughts

Finance digitalization immediately impacts the competition and contestability of banking services. It requires an adaptation of the traditional business model of banks. It increases productivity and flexibility and gives more trust to the customers.

Unfortunately, even in the digitalization era, some banks still use an old-fashioned way of dealing with clients. If you want to keep abreast of the innovative technologies in the financial sector – cooperate with professionals from countries that know everything about digitalization in financial services. Ukraine is an excellent example of a country with a developed digital banking system. Monobank, PrivatBank, and Diia app are proven quick, convenient, and reliable tools. Qubit Labs knows where to find such IT experts to boost your projects.

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Inna Coker
Talent Mapping Specialist

I believe that the IT sector is one of the most promising fields in the world.
That’s why I have been researching for skilled IT professional and analyzing different IT markets and tech hubs worldwide for more than 3 years. I enjoy analyzing information and creating it into sapid articles.