write an essay on innovative banking

• Innovative Banking

Innovation means something new or something which had not been done before. The same goes for banking section as well. There are many sections in banks which are going through or have gone through innovation in recent past. They are no longer restricted to age-old (traditional) methods. Thus, to increase the business avenues and capture the new market banks are resorting to innovation. This term innovative banking is being in use a lot nowadays.

There are many types of banking facilities that the banks have started in recent years. These are the following types of innovative banking used by the banks these days:

Mobile Banking

Mobile banking has been a revolution in the past few years. It has completely changed the way banking systems are working. Thus, it is a system that allows customers to perform many types of financial related services through a smartphone.

These include services like ATM locations, bill payment alert, inter or intrabank payments, bill payments, and many more. So, services are available at the fingertips of every person.

Internet Banking

Internet coverage in the last few years has increased drastically. This service is online banking, web banking, or virtual banking.

Thus, this banking service allows its users to execute and perform any financial transaction or service with the help of the Internet. The banking facilities are provided traditionally at a local bank outlet.

This includes bill payments, a deposit of money, borrowing of money, and other services are all available at one place. This service happens with the use of the Internet facility. In India, ICICI Bank was the first bank to avail it’s customers the facility of Internet banking.

 Learn more about History of Banking in India And World here

Retail and Wholesale Banking

Like other businesses, the banking sector to has evolved into retail and wholesale banking and it is also one of the parts of innovative banking.

Here, retail banking refers to the banking in which the transactions which are done daily by the banks are executed with consumers.

Thus, this is done instead of transactions with other banks or other corporates. The services under this are:

• Personal loans
• Savings accounts
• Checking accounts
• Credit card

Wholesale banking is completely the opposite of retail banking. It refers to the business being conducted with the business and industrial entities.

Thus, in wholesale banking, trading houses, domestic companies, and multinational companies are included. So, there are many services which are included in the wholesale banking and these services are:

• Value-added services
• Fund based services
• Non-fund related services
• Internet banking
• Multinational and offshore banking

Multinational banking is the banks that are present in more than one country. The main services are available in more than one country in these services. Thus, these banks are also called international banks.

The first bank to offer its services outside India was Indian bank in 1946. Currently, Bank of Baroda has the maximum number of the overseas franchise in India.

While under offshore banking, the banking activities are performed in the currencies that are different than the currency of the country in which the bank account is opened.   The banking services in these banks remain the same though. 

Narrow and Universal Banking

Narrow banking includes keeping together the higher part of deposits in risk-free assets like government securities. In India, this is basically in performance to reduce the size of the NPAs.

While commercial, investment, insurance, and many other financial activities combine to form universal banking. Thus, in this practice every product is available.

Practice Questions on Innovative Banking

Q. Out of the following, which was the first bank to start internet banking?

A. Axis bank                 B. Bank of Baroda               C. HDFC                  D. ICICI bank

Answer : D. ICICI bank

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Financial Reforms and Banking Innovation

• Major Effects of International Banking
• Introduction to Financial Reforms
• Services of Banks
• Trends in Banking
• Committees related to Banking Sector Reforms

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• Open access
• Published: 18 June 2021

Financial technology and the future of banking

• Daniel Broby   ORCID: orcid.org/0000-0001-5482-0766 1  

Financial Innovation volume  7 , Article number:  47 ( 2021 ) Cite this article

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This paper presents an analytical framework that describes the business model of banks. It draws on the classical theory of banking and the literature on digital transformation. It provides an explanation for existing trends and, by extending the theory of the banking firm, it illustrates how financial intermediation will be impacted by innovative financial technology applications. It further reviews the options that established banks will have to consider in order to mitigate the threat to their profitability. Deposit taking and lending are considered in the context of the challenge made from shadow banking and the all-digital banks. The paper contributes to an understanding of the future of banking, providing a framework for scholarly empirical investigation. In the discussion, four possible strategies are proposed for market participants, (1) customer retention, (2) customer acquisition, (3) banking as a service and (4) social media payment platforms. It is concluded that, in an increasingly digital world, trust will remain at the core of banking. That said, liquidity transformation will still have an important role to play. The nature of banking and financial services, however, will change dramatically.

Introduction

The bank of the future will have several different manifestations. This paper extends theory to explain the impact of financial technology and the Internet on the nature of banking. It provides an analytical framework for academic investigation, highlighting the trends that are shaping scholarly research into these dynamics. To do this, it re-examines the nature of financial intermediation and transactions. It explains how digital banking will be structurally, as well as physically, different from the banks described in the literature to date. It does this by extending the contribution of Klein ( 1971 ), on the theory of the banking firm. It presents suggested strategies for incumbent, and challenger banks, and how banking as a service and social media payment will reshape the competitive landscape.

The banking industry has been evolving since Banca Monte dei Paschi di Siena opened its doors in 1472. Its leveraged business model has proved very scalable over time, but it is now facing new challenges. Firstly, its book to capital ratios, as documented by Berger et al ( 1995 ), have been consistently falling since 1840. This trend continues as competition has increased. In the past decade, the industry has experienced declines in profitability as measured by return on tangible equity. This is partly the result of falling leverage and fee income and partly due to the net interest margin (connected to traditional lending activity). These trends accelerated following the 2008 financial crisis. At the same time, technology has made banks more competitive. Advances in digital technology are changing the very nature of banking. Banks are now distributing services via mobile technology. A prolonged period of very low interest rates is also having an impact. To sustain their profitability, Brei et al. ( 2020 ) note that many banks have increased their emphasis on fee-generating services.

As Fama ( 1980 ) explains, a bank is an intermediary. The Internet is, however, changing the way financial service providers conduct their role. It is fundamentally changing the nature of the banking. This in turn is changing the nature of banking services, and the way those services are delivered. As a consequence, in order to compete in the changing digital landscape, banks have to adapt. The banks of the future, both incumbents and challengers, need to address liquidity transformation, data, trust, competition, and the digitalization of financial services. Against this backdrop, incumbent banks are focused on reinventing themselves. The challenger banks are, however, starting with a blank canvas. The research questions that these dynamics pose need to be investigated within the context of the theory of banking, hence the need to revise the existing analytical framework.

Banks perform payment and transfer functions for an economy. The Internet can now facilitate and even perform these functions. It is changing the way that transactions are recorded on ledgers and is facilitating both public and private digital currencies. In the past, banks operated in a world of information asymmetry between themselves and their borrowers (clients), but this is changing. This differential gave one bank an advantage over another due to its knowledge about its clients. The digital transformation that financial technology brings reduces this advantage, as this information can be digitally analyzed.

Even the nature of deposits is being transformed. Banks in the future will have to accept deposits and process transactions made in digital form, either Central Bank Digital Currencies (CBDC) or cryptocurrencies. This presents a number of issues: (1) it changes the way financial services will be delivered, (2) it requires a discussion on resilience, security and competition in payments, (3) it provides a building block for better cross border money transfers and (4) it raises the question of private and public issuance of money. Braggion et al ( 2018 ) consider whether these represent a threat to financial stability.

The academic study of banking began with Edgeworth ( 1888 ). He postulated that it is based on probability. In this respect, the nature of the business model depends on the probability that a bank will not be called upon to meet all its liabilities at the same time. This allows banks to lend more than they have in deposits. Because of the resultant mismatch between long term assets and short-term liabilities, a bank’s capital structure is very sensitive to liquidity trade-offs. This is explained by Diamond and Rajan ( 2000 ). They explain that this makes a bank a’relationship lender’. In effect, they suggest a bank is an intermediary that has borrowed from other investors.

Diamond and Rajan ( 2000 ) argue a lender can negotiate repayment obligations and that a bank benefits from its knowledge of the customer. As shall be shown, the new generation of digital challenger banks do not have the same tradeoffs or knowledge of the customer. They operate more like a broker providing a platform for banking services. This suggests that there will be more than one type of bank in the future and several different payment protocols. It also suggests that banks will have to data mine customer information to improve their understanding of a client’s financial needs.

The key focus of Diamond and Rajan ( 2000 ), however, was to position a traditional bank is an intermediary. Gurley and Shaw ( 1956 ) describe how the customer relationship means a bank can borrow funds by way of deposits (liabilities) and subsequently use them to lend or invest (assets). In facilitating this mediation, they provide a service whereby they store money and provide a mechanism to transmit money. With improvements in financial technology, however, money can be stored digitally, lenders and investors can source funds directly over the internet, and money transfer can be done digitally.

A review of financial technology and banking literature is provided by Thakor ( 2020 ). He highlights that financial service companies are now being provided by non-deposit taking contenders. This paper addresses one of the four research questions raised by his review, namely how theories of financial intermediation can be modified to accommodate banks, shadow banks, and non-intermediated solutions.

To be a bank, an entity must be authorized to accept retail deposits. A challenger bank is, therefore, still a bank in the traditional sense. It does not, however, have the costs of a branch network. A peer-to-peer lender, meanwhile, does not have a deposit base and therefore acts more like a broker. This leads to the issue that this paper addresses, namely how the banks of the future will conduct their intermediation.

In order to understand what the bank of the future will look like, it is necessary to understand the nature of the aforementioned intermediation, and the way it is changing. In this respect, there are two key types of intermediation. These are (1) quantitative asset transformation and, (2) brokerage. The latter is a common model adopted by challenger banks. Figure  1 depicts how these two types of financial intermediation match savers with borrowers. To avoid nuanced distinction between these two types of intermediation, it is common to classify banks by the services they perform. These can be grouped as either private, investment, or commercial banking. The service sub-groupings include payments, settlements, fund management, trading, treasury management, brokerage, and other agency services.

How banks act as intermediaries between lenders and borrowers. This function call also be conducted by intermediaries as brokers, for example by shadow banks. Disintermediation occurs over the internet where peer-to-peer lenders match savers to lenders

Financial technology has the ability to disintermediate the banking sector. The competitive pressures this results in will shape the banks of the future. The channels that will facilitate this are shown in Fig.  2 , namely the Internet and/or mobile devices. Challengers can participate in this by, (1) directly matching borrows with savers over the Internet and, (2) distributing white labels products. The later enables banking as a service and avoids the aforementioned liquidity mismatch.

The strategic options banks have to match lenders with borrowers. The traditional and challenger banks are in the same space, competing for business. The distributed banks use the traditional and challenger banks to white label banking services. These banks compete with payment platforms on social media. The Internet heralds an era of banking as a service

There are also physical changes that are being made in the delivery of services. Bricks and mortar branches are in decline. Mobile banking, or m-banking as Liu et al ( 2020 ) describe it, is an increasingly important distribution channel. Robotics are increasingly being used to automate customer interaction. As explained by Vishnu et al ( 2017 ), these improve efficiency and the quality of execution. They allow for increased oversight and can be built on legacy systems as well as from a blank canvas. Application programming interfaces (APIs) are bringing the same type of functionality to m-banking. They can be used to authorize third party use of banking data. How banks evolve over time is important because, according to the OECD, the activity in the financial sector represents between 20 and 30 percent of developed countries Gross Domestic Product.

In summary, financial technology has evolved to a level where online banks and banking as a service are challenging incumbents and the nature of banking mediation. Banking is rapidly transforming because of changes in such technology. At the same time, the solving of the double spending problem, whereby digital money can be cryptographically protected, has led to the possibility that paper money will become redundant at some point in the future. A theoretical framework is required to understand this evolving landscape. This is discussed next.

The theory of the banking firm: a revision

In financial theory, as eloquently explained by Fama ( 1980 ), banking provides an accounting system for transactions and a portfolio system for the storage of assets. That will not change for the banks of the future. Fama ( 1980 ) explains that their activities, in an unregulated state, fulfil the Modigliani–Miller ( 1959 ) theorem of the irrelevance of the financing decision. In practice, traditional banks compete for deposits through the interest rate they offer. This makes the transactional element dependent on the resulting debits and credits that they process, essentially making banks into bookkeeping entities fulfilling the intermediation function. Since this is done in response to competitive forces, the general equilibrium is a passive one. As such, the banking business model is vulnerable to disruption, particularly by innovation in financial technology.

A bank is an idiosyncratic corporate entity due to its ability to generate credit by leveraging its balance sheet. That balance sheet has assets on one side and liabilities on the other, like any corporate entity. The assets consist of cash, lending, financial and fixed assets. On the other side of the balance sheet are its liabilities, deposits, and debt. In this respect, a bank’s equity and its liabilities are its source of funds, and its assets are its use of funds. This is explained by Klein ( 1971 ), who notes that a bank’s equity W , borrowed funds and its deposits B is equal to its total funds F . This is the same for incumbents and challengers. This can be depicted algebraically if we let incumbents be represented by Φ and challengers represented by Γ:

Klein ( 1971 ) further explains that a bank’s equity is therefore made up of its share capital and unimpaired reserves. The latter are held by a bank to protect the bank’s deposit clients. This part is also mandated by regulation, so as to protect customers and indeed the entire banking system from systemic failure. These protective measures include other prudential requirements to hold cash reserves or other liquid assets. As shall be shown, banking services can be performed over the Internet without these protections. Banking as a service, as this phenomenon known, is expected to increase in the future. This will change the nature of the protection available to clients. It will change the way banks transform assets, explained next.

A bank’s deposits are said to be a function of the proportion of total funds obtained through the issuance of the ith deposit type and its total funds F , represented by α i . Where deposits, represented by Bs , are made in the form of Bs (i  =  1 *s n) , they generate a rate of interest. It follows that Si Bs  =  B . As such,

Therefor it can be said that,

The importance of Eq. 3 is that the balance sheet can be leveraged by the issuance of loans. It should be noted, however, that not all loans are returned to the bank in whole or part. Non-performing loans reduce the asset side of a bank’s balance sheet and act as a constraint on capital, and therefore new lending. Clearly, this is not the case with banking as a service. In that model, loans are brokered. That said, with the traditional model, an advantage of financial technology is that it facilitates the data mining of clients’ accounts. Lending can therefore be more targeted to borrowers that are more likely to repay, thereby reducing non-performing loans. Pari passu, the incumbent bank of the future will therefore have a higher risk-adjusted return on capital. In practice, however, banking as a service will bring greater competition from challengers and possible further erosion of margins. Alternatively, some banks will proactively engage in partnerships and acquisitions to maintain their customer base and address the competition.

A bank must have reserves to meet the demand of customers demanding their deposits back. The amount of these reserves is a key function of banking regulation. The Basel Committee on Banking Supervision mandates a requirement to hold various tiers of capital, so that banks have sufficient reserves to protect depositors. The Committee also imposes a framework for mitigating excessive liquidity risk and maturity transformation, through a set Liquidity Coverage Ratio and Net Stable Funding Ratio.

Recent revisions of theory, because of financial technology advances, have altered our understanding of banking intermediation. This will impact the competitive landscape and therefor shape the nature of the bank of the future. In this respect, the threat to incumbent banks comes from peer-to-peer Internet lending platforms. These perform the brokerage function of financial intermediation without the use of the aforementioned banking balance sheet. Unlike regulated deposit takers, such lending platforms do not create assets and do not perform risk and asset transformation. That said, they are reliant on investors who do not always behave in a counter cyclical way.

Financial technology in banking is not new. It has been used to facilitate electronic markets since the 1980’s. Thakor ( 2020 ) refers to three waves of application of financial innovation in banking. The advent of institutional futures markets and the changing nature of financial contracts fundamentally changed the role of banks. In response to this, academics extended the concept of a bank into an entity that either fulfills the aforementioned functions of a broker or a qualitative asset transformer. In this respect, they connect the providers and users of capital without changing the nature of the transformation of the various claims to that capital. This transformation can be in the form risk transfer or the application of leverage. The nature of trading of financial assets, however, is changing. Price discovery can now be done over the Internet and that is moving liquidity from central marketplaces (like the stock exchange) to decentralized ones.

Alongside these trends, in considering what the bank of the future will look like, it is necessary to understand the unregulated lending market that competes with traditional banks. In this part of the lending market, there has been a rise in shadow banks. The literature on these entities is covered by Adrian and Ashcraft ( 2016 ). Shadow banks have taken substantial market share from the traditional banks. They fulfil the brokerage function of banks, but regulators have only partial oversight of their risk transformation or leverage. The rise of shadow banks has been facilitated by financial technology and the originate to distribute model documented by Bord and Santos ( 2012 ). They use alternative trading systems that function as electronic communication networks. These facilitate dark pools of liquidity whereby buyers and sellers of bonds and securities trade off-exchange. Since the credit crisis of 2008, total broker dealer assets have diverged from banking assets. This illustrates the changed lending environment.

In the disintermediated market, banking as a service providers must rely on their equity and what access to funding they can attract from their online network. Without this they are unable to drive lending growth. To explain this, let I represent the online network. Extending Klein ( 1971 ), further let Ψ represent banking as a service and their total funds by F . This state is depicted as,

Theoretically, it can be shown that,

Shadow banks, and those disintermediators who bypass the banking system, have an advantage in a world where technology is ubiquitous. This becomes more apparent when costs are considered. Buchak et al. ( 2018 ) point out that shadow banks finance their originations almost entirely through securitization and what they term the originate to distribute business model. Diversifying risk in this way is good for individual banks, as banking risks can be transferred away from traditional banking balance sheets to institutional balance sheets. That said, the rise of securitization has introduced systemic risk into the banking sector.

Thus, we can see that the nature of banking capital is changing and at the same time technology is replacing labor. Let A denote the number of transactions per account at a period in time, and C denote the total cost per account per time period of providing the services of the payment mechanism. Klein ( 1971 ) points out that, if capital and labor are assumed to be part of the traditional banking model, it can be observed that,

It can therefore be observed that the total service charge per account at a period in time, represented by S, has a linear and proportional relationship to bank account activity. This is another variable that financial technology can impact. According to Klein ( 1971 ) this can be summed up in the following way,

where d is the basic bank decision variable, the service charge per transaction. Once again, in an automated and digital environment, financial technology greatly reduces d for the challenger banks. Swankie and Broby ( 2019 ) examine the impact of Artificial Intelligence on the evaluation of banking risk and conclude that it improves such variables.

Meanwhile, the traditional banking model can be expressed as a product of the number of accounts, M , and the average size of an account, N . This suggests a banks implicit yield is it rate of interest on deposits adjusted by its operating loss in each time period. This yield is generated by payment and loan services. Let R 1 depict this. These can be expressed as a fraction of total demand deposits. This is depicted by Klein ( 1971 ), if one assumes activity per account is constant, as,

As a result, whether a bank is structured with traditional labor overheads or built digitally, is extremely relevant to its profitability. The capital and labor of tradition banks, depicted as Φ i , is greater than online networks, depicted as I i . As such, the later have an advantage. This can be shown as,

What Klein (1972) failed to highlight is that the banking inherently involves leverage. Diamond and Dybving (1983) show that leverage makes bank susceptible to run on their liquidity. The literature divides these between adverse shock events, as explained by Bernanke et al ( 1996 ) or moral hazard events as explained by Demirgu¨¸c-Kunt and Detragiache ( 2002 ). This leverage builds on the balance sheet mismatch of short-term assets with long term liabilities. As such, capital and liquidity are intrinsically linked to viability and solvency.

The way capital and liquidity are managed is through credit and default management. This is done at a bank level and a supervisory level. The Basel Committee on Banking Supervision applies capital and leverage ratios, and central banks manage interest rates and other counter-cyclical measures. The various iterations of the prudential regulation of banks have moved the microeconomic theory of banking from the modeling of risk to the modeling of imperfect information. As mentioned, shadow and disintermediated services do not fall under this form or prudential regulation.

The relationship between leverage and insolvency risk crucially depends on the degree of banks total funds F and their liability structure L . In this respect, the liability structure of traditional banks is also greater than online networks which do not have the same level of available funds, depicted as,

Diamond and Dybvig ( 1983 ) observe that this liability structure is intimately tied to a traditional bank’s assets. In this respect, a bank’s ability to finance its lending at low cost and its ability to achieve repayment are key to its avoidance of insolvency. Online networks and/or brokers do not have to finance their lending, simply source it. Similarly, as brokers they do not face capital loss in the event of a default. This disintermediates the bank through the use of a peer-to-peer environment. These lenders and borrowers are introduced in digital way over the internet. Regulators have taken notice and the digital broker advantage might not last forever. As a result, the future may well see greater cooperation between these competing parties. This also because banks have valuable operational experience compared to new entrants.

It should also be observed that bank lending is either secured or unsecured. Interest on an unsecured loan is typically higher than the interest on a secured loan. In this respect, incumbent banks have an advantage as their closeness to the customer allows them to better understand the security of the assets. Berger et al ( 2005 ) further differentiate lending into transaction lending, relationship lending and credit scoring.

The evolution of the business model in a digital world

As has been demonstrated, the bank of the future in its various manifestations will be a consequence of the evolution of the current banking business model. There has been considerable scholarly investigation into the uniqueness of this business model, but less so on its changing nature. Song and Thakor ( 2010 ) are helpful in this respect and suggest that there are three aspects to this evolution, namely competition, complementary and co-evolution. Although liquidity transformation is evolving, it remains central to a bank’s role.

All the dynamics mentioned are relevant to the economy. There is considerable evidence, as outlined by Levine ( 2001 ), that market liberalization has a causal impact on economic growth. The impact of technology on productivity should prove positive and enhance the functioning of the domestic financial system. Indeed, market liberalization has already reshaped banking by increasing competition. New fee based ancillary financial services have become widespread, as has the proprietorial use of balance sheets. Risk has been securitized and even packaged into trade-able products.

Challenger banks are developing in a complementary way with the incumbents. The latter have an advantage over new entrants because they have information on their customers. The liquidity insurance model, proposed by Diamond and Dybvig ( 1983 ), explains how such banks have informational advantages over exchange markets. That said, financial technology changes these dynamics. It if facilitating the processing of financial data by third parties, explained in greater detail in the section on Open Banking.

At the same time, financial technology is facilitating banking as a service. This is where financial services are delivered by a broker over the Internet without resort to the balance sheet. This includes roboadvisory asset management, peer to peer lending, and crowd funding. Its growth will be facilitated by Open Banking as it becomes more geographically adopted. Figure  3 illustrates how these business models are disintermediating the traditional banking role and matching burrowers and savers.

The traditional view of banks ecosystem between savers and borrowers, atop the Internet which is matching savers and borrowers directly in a peer-to-peer way. The Klein ( 1971 ) theory of the banking firm does not incorporate the mirrored dynamics, and as such needs to be extended to reflect the digital innovation that impacts both borrowers and severs in a peer-to-peer environment

Meanwhile, the banking sector is co-evolving alongside a shadow banking phenomenon. Lenders and borrowers are interacting, but outside of the banking sector. This is a concern for central banks and banking regulators, as the lending is taking place in an unregulated environment. Shadow banking has grown because of financial technology, market liberalization and excess liquidity in the asset management ecosystem. Pozsar and Singh ( 2011 ) detail the non-bank/bank intersection of shadow banking. They point out that shadow banking results in reverse maturity transformation. Incumbent banks have blurred the distinction between their use of traditional (M2) liabilities and market-based shadow banking (non-M2) liabilities. This impacts the inter-generational transfers that enable a bank to achieve interest rate smoothing.

Securitization has transformed the risk in the banking sector, transferring it to asset management institutions. These include structured investment vehicles, securities lenders, asset backed commercial paper investors, credit focused hedge and money market funds. This in turn has led to greater systemic risk, the result of the nature of the non-traded liabilities of securitized pooling arrangements. This increased risk manifested itself in the 2008 credit crisis.

Commercial pressures are also shaping the banking industry. The drive for cost efficiency has made incumbent banks address their personally costs. Bank branches have been closed as technology has evolved. Branches make it easier to withdraw or transfer deposits and challenger banks are not as easily able to attract new deposits. The banking sector is therefore looking for new point of customer contact, such as supermarkets, post offices and social media platforms. These structural issues are occurring at the same time as the retail high street is also evolving. Banks have had an aggressive roll out of automated telling machines and a reduction in branches and headcount. Online digital transactions have now become the norm in most developed countries.

The financing of banks is also evolving. Traditional banks have tended to fund illiquid assets with short term and unstable liquid liabilities. This is one of the key contributors to the rise to the credit crisis of 2008. The provision of liquidity as a last resort is central to the asset transformation process. In this respect, the banking sector experienced a shock in 2008 in what is termed the credit crisis. The aforementioned liquidity mismatch resulted in the system not being able to absorb all the risks associated with subprime lending. Central banks had to resort to quantitative easing as a result of the failure of overnight funding mechanisms. The image of the entire banking sector was tarnished, and the banks of the future will have to address this.

The future must learn from the mistakes of the past. The structural weakness of the banking business model cannot be solved. That said, the latest Basel rules introduce further risk mitigation, improved leverage ratios and increased levels of capital reserve. Another lesson of the credit crisis was that there should be greater emphasis on risk culture, governance, and oversight. The independence and performance of the board, the experience and the skill set of senior management are now a greater focus of regulators. Internal controls and data analysis are increasingly more robust and efficient, with a greater focus on a banks stable funding ratio.

Meanwhile, the very nature of money is changing. A digital wallet for crypto-currencies fulfills much the same storage and transmission functions of a bank; and crypto-currencies are increasing being used for payment. Meanwhile, in Sweden, stores have the right to refuse cash and the majority of transactions are card based. This move to credit and debit cards, and the solving of the double spending problem, whereby digital money can be crypto-graphically protected, has led to the possibility that paper money could be replaced at some point in the future. Whether this might be by replacement by a CBDC, or decentralized digital offering, is of secondary importance to the requirement of banks to adapt. Whether accommodating crytpo-currencies or CBDC’s, Kou et al. ( 2021 ) recommend that banks keep focused on alternative payment and money transferring technologies.

Central banks also have to adapt. To limit disintermediation, they have to ensure that the economic design of their sponsored digital currencies focus on access for banks, interest payment relative to bank policy rate, banking holding limits and convertibility with bank deposits. All these developments have implications for banks, particularly in respect of funding, the secure storage of deposits and how digital currency interacts with traditional fiat money.

Open banking

Against the backdrop of all these trends and changes, a new dynamic is shaping the future of the banking sector. This is termed Open Banking, already briefly mentioned. This new way of handling banking data protocols introduces a secure way to give financial service companies consensual access to a bank’s customer financial information. Figure  4 illustrates how this works. Although a fairly simple concept, the implications are important for the banking industry. Essentially, a bank customer gives a regulated API permission to securely access his/her banking website. That is then used by a banking as a service entity to make direct payments and/or download financial data in order to provide a solution. It heralds an era of customer centric banking.

How Open Banking operates. The customer generates data by using his bank account. A third party provider is authorized to access that data through an API request. The bank confirms digitally that the customer has authorized the exchange of data and then fulfills the request

Open Banking was a response to the documented inertia around individual’s willingness to change bank accounts. Following the Retail Banking Review in the UK, this was addressed by lawmakers through the European Union’s Payment Services Directive II. The legislation was designed to make it easier to change banks by allowing customers to delegate authority to transfer their financial data to other parties. As a result of this, a whole host of data centric applications were conceived. Open banking adds further momentum to reshaping the future of banking.

Open Banking has a number of quite revolutionary implications. It was started so customers could change banks easily, but it resulted in some secondary considerations which are going to change the future of banking itself. It gives a clear view of bank financing. It allows aggregation of finances in one place. It also allows can give access to attractive offerings by allowing price comparisons. Open Banking API’s build a secure online financial marketplace based on data. They also allow access to a larger market in a faster way but the third-party providers for the new entrants. Open Banking allows developers to build single solutions on an API addressing very specific problems, like for example, a cash flow based credit rating.

Romānova et al. ( 2018 ) undertook a questionnaire on the Payment Services Directive II. The results suggest that Open Banking will promote competitiveness, innovation, and new product development. The initiative is associated with low costs and customer satisfaction, but that some concerns about security, privacy and risk are present. These can be mitigated, to some extent, by secure protocols and layered permission access.

Discussion: strategic options

Faced with these disruptive trends, there are four strategic options for market participants to con- sider. There are (1) a defensive customer retention strategy for incumbents, (2) an aggressive customer acquisition strategy for challenger banks (3) a banking as a service strategy for new entrants, and (4) a payments strategy for social media platforms.

Each of these strategies has to be conducted in a competitive marketplace for money demand by potential customers. Figure  5 illustrates where the first three strategies lie on the tradeoff between money demand and interest rates. The payment strategy can’t be modeled based on the supply of money. In the figure, the market settles at a rate L 2 . The incumbent banks have the capacity to meet the largest supply of these loans. The challenger banks have a constrained function but due to a lower cost base can gain excess rent through higher rates of interest. The peer-to-peer bank as a service brokers must settle for the market rate and a constrained supply offering.

The money demand M by lenders on the y axis. Interest rates on the y axis are labeled as r I and r II . The challenger banks are represented by the line labeled Γ. They have a price and technology advantage and so can lend at higher interest rates. The brokers are represented by the line labeled Ω. They are price takers, accepting the interest rate determined by the market. The same is true for the incumbents, represented by the line labeled Φ but they have a greater market share due to their customer relationships. Note that payments strategy for social media platforms is not shown on this figure as it is not affected by interest rates

Figure  5 illustrates that having a niche strategy is not counterproductive. Liu et al ( 2020 ) found that banks performing niche activities exhibit higher profitability and have lower risk. The syndication market now means that a bank making a loan does not have to be the entity that services it. This means banks in the future can better shape their risk profile and manage their lending books accordingly.

An interesting question for central banks is what the future Deposit Supply function will look like. If all three forms: open banking, traditional banking and challenger banks develop together, will the bank of the future have the same Deposit Supply function? The Klein ( 1971 ) general formulation assumes that deposits are increasing functions of implicit and explicit yields. As such, the very nature of central bank directed monetary policy may have to be revisited, as alluded to in the earlier discussion on digital money.

The client retention strategy (incumbents)

The competitive pressures suggest that incumbent banks need to focus on customer retention. Reichheld and Kenny ( 1990 ) found that the best way to do this was to focus on the retention of branch deposit customers. Obviously, another way is to provide a unique digital experience that matches the challengers.

Incumbent banks have a competitive advantage based on the information they have about their customers. Allen ( 1990 ) argues that where risk aversion is observable, information markets are viable. In other words, both bank and customer benefit from this. The strategic issue for them, therefore, becomes the retention of these customers when faced with greater competition.

Open Banking changes the dynamics of the banking information advantage. Borgogno and Colangelo ( 2020 ) suggest that the access to account (XS2A) rule that it introduced will increase competition and reduce information asymmetry. XS2A requires banks to grant access to bank account data to authorized third payment service providers.

The incumbent banks have a high-cost base and legacy IT systems. This makes it harder for them to migrate to a digital world. There are, however, also benefits from financial technology for the incumbents. These include reduced cost and greater efficiency. Financial technology can also now support platforms that allow incumbent banks to sell NPL’s. These platforms do not require the ownership of assets, they act as consolidators. The use of technology to monitor the transactions make the processing cost efficient. The unique selling point of such platforms is their centralized point of contact which results in a reduction in information asymmetry.

Incumbent banks must adapt a number of areas they got to adapt in terms of their liquidity transformation. They have to adapt the way they handle data. They must get customers to trust them in a digital world and the way that they trust them in a bricks and mortar world. It is no coincidence. When you go into a bank branch that is a great big solid building great big facade and so forth that is done deliberately so that you trust that bank with your deposit.

The risk of having rising non-performing loans needs to be managed, so customer retention should be selective. One of the puzzles in banking is why customers are regularly denied credit, rather than simply being charged a higher price for it. This credit rationing is often alleviated by collateral, but finance theory suggests value is based on the discounted sum of future cash flows. As such, it is conceivable that the bank of the future will use financial technology to provide innovative credit allocation solutions. That said, the dual risks of moral hazard and information asymmetries from the adoption of such solutions must be addressed.

Customer retention is especially important as bank competition is intensifying, as is the digitalization of financial services. Customer retention requires innovation, and that innovation has been moving at a very fast rate. Until now, banks have traditionally been hesitant about technology. More recently, mergers and acquisitions have increased quite substantially, initiated by a need to address actual or perceived weaknesses in financial technology.

The client acquisition strategy (challengers)

As intermediaries, the challenger banks are the same as incumbent banks, but designed from the outset to be digital. This gives them a cost and efficiency advantage. Anagnostopoulos ( 2018 ) suggests that the difference between challenger and traditional banks is that the former address its customers problems more directly. The challenge for such banks is customer acquisition.

Open Banking is a major advantage to challenger banks as it facilitates the changing of accounts. There is widespread dissatisfaction with many incumbent banks. Open Banking makes it easier to change accounts and also easier to get a transaction history on the client.

Customer acquisition can be improved by building trust in a brand. Historically, a bank was physically built in a very robust manner, hence the heavy architecture and grand banking halls. This was done deliberately to engender a sense of confidence in the deposit taking institution. Pure internet banks are not able to do this. As such, they must employ different strategies to convey stability. To do this, some communicate their sustainability credentials, whilst others use generational values-based advertising. Customer acquisition in a banking context is traditionally done by offering more attractive rates of interest. This is illustrated in Fig.  5 by the intersect of traditional banks with the market rate of interest, depicted where the line Γ crosses L 2 . As a result of the relationship with banking yield, teaser rates and introductory rates are common. A customer acquisition strategy has risks, as consumers with good credit can game different challenger banks by frequently changing accounts.

Most customer acquisition, however, is done based on superior service offering. The functionality of challenger banking accounts is often superior to incumbents, largely because the latter are built on legacy databases that have inter-operability issues. Having an open platform of services is a popular customer acquisition technique. The unrestricted provision of third-party products is viewed more favorably than a restricted range of products.

The banking as a service strategy (new entrants)

Banking from a customer’s perspective is the provision of a service. Customers don’t care about the maturity transformation of banking balance sheets. Banking as a service can be performed without recourse to these balance sheets. Banking products are brokered, mostly by new entrants, to individuals as services that can be subscribed to or paid on a fee basis.

There are a number banking as a service solutions including pre-paid and credit cards, lending and leasing. The banking as a service brokers are effectively those that are aggregating services from others using open banking to enable banking as a service.

The rise of banking as a service needs to be understood as these compete directly with traditional banks. As explained, some of these do this through peer-to-peer lending over the internet, others by matching borrows and sellers, conducting mediation as a loan broker. Such entities do not transform assets and do not have banking licenses. They do not have a branch network and often don not have access to deposits. This means that they have no insurance protection and can be subject to interest rate controls.

The new genre of financial technology, banking as a service provider, conduct financial services transformation without access to central bank liquidity. In a distributed digital asset world, the assets are stored on a distributed ledger rather than a traditional banking ledger. Financial technology has automated credit evaluation, savings, investments, insurance, trading, banking payments and risk management. These banking as a service offering are only as secure as the technology on which they are built.

The social media payment strategy (disintermediators and disruptors)

An intermediation bank is a conceptual idea, one created solely on a social networking site. Social media has developed a market for online goods and services. Williams ( 2018 ) estimates that there are 2.46 billion social media users. These all make and receive payments of some kind. They demand security and functionality. Importantly, they have often more clients than most banks. As such, a strategy to monetize the payments infrastructure makes sense.

All social media platforms are rich repositories of data. Such platforms are used to buy and sell things and that requires payments. Some platforms are considering evolving their own digital payment, cutting out the banks as middlemen. These include Facebook’s Diem (formerly Libra), a digital currency, and similar developments at some of the biggest technology companies. The risk with social media payment platform is that there is systemic counter-party protection. Regulators need to address this. One way to do this would be to extend payment service insurance to such platforms.

Social media as a platform moves the payment relationship from a transaction to a customer experience. The ability to use consumer desires in combination with financial data has the potential to deliver a number of new revenue opportunities. These will compete directly with the banks of the future. This will have implications for (1) the money supply, (2) the market share of traditional banks and, (3) the services that payment providers offer.

Further research

Several recommendations for research derive from both the impact of disintermediation and the four proposed strategies that will shape banking in the future. The recommendations and suggestions are based on the mentioned papers and the conclusions drawn from them.

As discussed, the nature of intermediation is changing, and this has implications for the pricing of risk. The role of interest rates in banking will have to be further reviewed. In a decentralized world based on crypto currencies the central banks do not have the same control over the money supply, This suggest the quantity theory of money and the liquidity preference theory need to be revisited. As explained, the Internet reduces much of the friction costs of intermediation. Researchers should ask how this will impact maturity transformation. It is also fair to ask whether at some point in the future there will just be one big bank. This question has already been addressed in the literature but the Internet facilities the possibility. Diamond ( 1984 ) and Ramakrishnan and Thakor ( 1984 ) suggested the answer was due to diversification and its impact on reducing monitoring costs.

Attention should be given by academics to the changing nature of banking risk. How should regulators, for example, address the moral hazard posed by challenger banks with weak balance sheets? What about deposit insurance? Should it be priced to include unregulated entities? Also, what criteria do borrowers use to choose non-banking intermediaries? The changing risk environment also poses two interesting practical questions. What will an online bank run look like, and how can it be averted? How can you establish trust in digital services?

There are also research questions related to the nature of competition. What, for example, will be the nature of cross border competition in a decentralized world? Is the credit rationing that generates competition a static or dynamic phenomena online? What is the value of combining consumer utility with banking services?

Financial intermediaries, like banks, thrive in a world of deficits and surpluses supported by information asymmetries and disconnectedness. The connectivity of the internet changes this dynamic. In this respect, the view of Schumpeter ( 1911 ) on the role of financial intermediaries needs revisiting. Lenders and borrows can be connected peer to peer via the internet.

All the dynamics mentioned change the nature of moral hazard. This needs further investigation. There has been much scholarly research on the intrinsic riskiness of the mismatch between banking assets and liabilities. This mismatch not only results in potential insolvency for a single bank but potentially for the whole system. There has, for example, been much debate on the whether a bank can be too big to fail. As a result of the riskiness of the banking model, the banks of the future will be just a liable to fail as the banks of the past.

This paper presented a revision of the theory of banking in a digital world. In this respect, it built on the work of Klein ( 1971 ). It provided an overview of the changing nature of banking intermediation, a result of the Internet and new digital business models. It presented the traditional academic view of banking and how it is evolving. It showed how this is adapted to explain digital driven disintermediation.

It was shown that the banking industry is facing several documented challenges. Risk is being taken of balance sheet, securitized, and brokered. Financial technology is digitalizing service delivery. At the same time, the very nature of intermediation is being changed due to digital currency. It is argued that the bank of the future not only has to face these competitive issues, but that technology will enhance the delivery of banking services and reduce the cost of their delivery.

The paper further presented the importance of the Open Banking revolution and how that facilitates banking as a service. Open Banking is increasing client churn and driving banking as a service. That in turn is changing the way products are delivered.

Four strategies were proposed to navigate the evolving competitive landscape. These are for incumbents to address customer retention; for challengers to peruse a low-cost digital experience; for niche players to provide banking as a service; and for social media platforms to develop payment platforms. In all these scenarios, the banks of the future will have to have digital strategies for both payments and service delivery.

It was shown that both incumbents and challengers are dependent on capital availability and borrowers credit concerns. Nothing has changed in that respect. The risks remain credit and default risk. What is clear, however, is the bank has become intrinsically linked with technology. The Internet is changing the nature of mediation. It is allowing peer to peer matching of borrowers and savers. It is facilitating new payment protocols and digital currencies. Banks need to evolve and adapt to accommodate these. Most of these questions are empirical in nature. The aim of this paper, however, was to demonstrate that an understanding of the banking model is a prerequisite to understanding how to address these and how to develop hypotheses connected with them.

In conclusion, financial technology is changing the future of banking and the way banks intermediate. It is facilitating digital money and the online transmission of financial assets. It is making banks more customer enteric and more competitive. Scholarly investigation into banking has to adapt. That said, whatever the future, trust will remain at the core of banking. Similarly, deposits and lending will continue to attract regulatory oversight.

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7 game-changing innovations that will re-boot banking.

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Apps. Contactless. Bots. Blockchain. Biometrics, AI, The Cloud... . The financial services industry has committed itself to digital innovation over the last 10 years. It’s just the start. 

Banking might seem like a traditional industry. But it has always innovated. From bank notes to cheque books to credit and debit  cards, the banking sector’s big ideas have reverberated across the world.

The current pace of change, however, is at another level. Today, technological innovation is re-defining how banks operate and the services they offer to customers. 

In fact, it’s even re-framing what a bank is.

Let’s dive into seven of the biggest trends we can look forward to.  

#1. Digital innovation starts a new age of self-service

James Brown sang: ‘I don't want nobody to give me nothing. Open up the door. I'll get it myself.’

The Godfather of Soul was expressing – in his inimitable way – the human desire for autonomy. It’s a universal feeling. Any time that consumers are given the opportunity to take back a little control, they take it.

People also want instant gratification. Today, the desire for immediately delivered services is just as strong as the demand for self-service. It brings to mind another song lyric, this time from Queen. “I want it all! I want it now!”

Banking is a good example of an industry that has met these needs. Across its history, customers have always gravitated to self-service innovation – a process that started with ATMs and is now evident in the rise of mobile banking and chat bots.

The speed with which the mobile app has displaced the physical branch has been remarkable. According to 2021 research by Ipsos-Forbes , 76 per cent of Americans say they used their bank’s app in the last year for banking tasks such as depositing a check or viewing account balances.

But today’s apps do much more than providing an alternative to these ‘everyday’ banking services. Thanks in part to competition from fintechs, the banks have enhanced their apps with a constant stream of useful new features. Examples include:

•    Financial planning

Many banking apps now let customers group their payments by type. This way, they can see at a glance where their money is going. They can set caps on, say, coffee or personal grooming and receive alerts when they are near their limits.

•    Turn a card off and on

If a card is lost or stolen, it’s easy to disable it from the mobile app. Consumers can easily lock the card with a few taps on their phone. They can also report fraud directly from the app, or order a new one and use it to pay online or at stores right away. These features are proving incredibly popular. More than one billion people now use mobile wallets.

•    Spare change investing

Here’s an easy way for consumers to save: round up the money spent in a store and invest the ‘spare change’. For example, buy a coffee for $2.75, and let the app round it up to $3 and then invest the 25c. Many banking apps now offer this feature to their account holders.   

#2. Contactless payment: set to change the way we pay 

Contactless payment took a while to take off. However, by the end of the 2010s take-up was growing fast. Then, in 2020, the pandemic accelerated this usage. Now it’s ubiquitous on cards, mobile phones and wearables.  

Rising upper limits on contactless payments have helped. In the UK for example, the ceiling started at £15 in 2014, then rose to £30, before moving to £45 in April 2020. In October 2021, the limit was increased to £100 . 

Data shows what a difference this made. In July 2021, Visa confirmed it processed 1bn contactless transactions across Europe in 12 months. Its research also found that two-thirds of global consumers plan to increase their use of contactless payments in the future.

So there's no going back now. Customers are sticking with contactless. Indeed, Mastercard recently confirmed it will phase out its magnetic stripe cards from 2024 .

Contactless payment was made possible by the introduction of Near Field Communication tech . NFC is an upgrade of RFID technology – a chip that enables short-range communication between compatible devices. These devices can be anything from a card to a tag to a smartphone. 

But how does it actually enable in contactless payments? Let’s go deeper.

How does mobile payment work?

When phone makers started to put NFC and QR tech in their handsets, they made it possible for phones to become payment devices. Using NFC, Google and Apple gave banks and card networks the ability to de-materialize payment cards and place them in wallets such as Google Pay and Apple Pay. 

This is convenient for customers, since they can load multiple cards into one wallet . It’s also very safe. Why? Because the user has to unlock the app (with a PIN or biometric method) before tapping on the reader. Meanwhile the industry has created advanced security frameworks to protect the stored payment credentials.

In 2021, the industry unveiled an important new innovation to its Card Verification Method on Consumer Devices (CD-CVM). It launched the EMV biometric payment card .

Introducing a contactless card with a fingerprint sensor

The new EMV biometric payment cards embed a fingerprint sensor on the card body to provide an extra element of authentication. This is a breakthrough innovation – especially for those consumers who love the convenience of contactless but worry about the lack of PIN entry.

Biometric payment cards also make it possible to increase spending caps. Some issuers will maintain PIN code entry for exceptionally high transactions, but otherwise contactless without a PIN code entry will become the new normal. 

It suits retailers too. No upgrade is required on the POS, as the biometrics check is directly performed on the card and nowhere else. Data is not kept on the bank's servers or sent over the air in store.

Various commercial deployments of these new biometric payment cards are underway. The biggest, by French bank BNP Paribas, is now rolling out in partnership with Thales .

Contactless payment extends to wearables

The other big contactless payment trend is extending the tech to new device types. Manufacturers are waking up to the idea that if you can put an NFC chip in a card, phone, watch or item of jewellery. As consumers become more used to paying with a tap, they are starting to embrace this idea.

Fintech start-ups are experimenting. In Japan, for example, EVERING recently launched a waterproof ceramic NFC ring . The battery-less product requires no charging, and marries fashion with technology. Thales provided the embedded chip and card personalisation services for the device. 

Wearable payment devices look good and they are also very secure. EVERING users, for example, can disable the ring via a mobile app linked to their credit card.  

#3. Banks are investigating new forms of biometric authentication

As we have seen from the contactless section above, strong authentication really matters. Passwords and PINs offer some protection, but they can be breakable – and people often forget them.

Biometrics offer a stronger protection: what you are, in addition to than what you know or what you possess.

Fingerprint ID may have started this evolution, but biometric innovation is now extending to more unique attributes. 

Many banks and card firms are exploring facial recognition as a way of authenticating a customer’s identity. Mastercard has already launched its ‘Identity Check Mobile’ feature, which is better known as ‘selfie pay’ . Here, the cardholder can verify his or her identity using the facial recognition technology in the phone. It eliminates the need to remember passwords to confirm online payments.

This kind of authentication is not only safe, it’s also quick. It can reduce the previously time-consuming ‘analogue’ process of creating a new account to just ten minutes.

Another form of biometrics attracting lots of attention is voice. Speaking your identity is not only secure and convenient, it is also better fitted to situations such as driving – keeping hands on the wheels and eyes on the road. 

A handful of banks have made it possible to make payments by voice. Royal Bank of Canada (RBC) lets customers ask Apple’s Siri assistant to pay their bills. Siri confirms the name from their payee list and the RBC app automatically debits the account and sends the payment, which is protected by Touch ID or face recognition.

It’s also worth considering the palm print. Palm-based identification relies on vein patterns, which are hidden beneath the skin. That makes them invisible and therefore a little safer than a fingerprint scan. In 2020, Amazon announced a payment system based on palm ID to be used at two of its stores in Seattle. The Amazon One scanner lets people pay by hovering their hand in mid-air .   

#4. Banking as a service…can any company be a bank?

Warren Buffett is possibly the world's most famous investor. He knows what he is doing. In June, his Berkshire Hathaway fund invested $500 million into Brazil's Nubank .

It did so because Nubank is now the world’s largest challenger bank. It has 34 million customers across Brazil, Colombia, and Mexico, and a valuation of $30 billion.

Nubank is one of dozens of digital-first banks that are now challenging the incumbents. They have mimicked disruptors in other industries (music, media etc.) by re-thinking the conventional user experience and targeting a demographic that are comfortable with new digital behaviours.

Most of these companies have replaced a branch network with an app. They use algorithms to pull in all sorts of contextual information that’s useful for their customers. Thus, they send push notifications whenever a customer makes a payment and provide rich data about a customer’s spending and habits in easy-to-understand graphics. 

They can do this because the underlying technological structure of banking is changing. In many regions, regulars have requested that banks open up access to bank accounts via bank APIs. This has radically changed the competitive environment. 

It's even led to the idea of Banking as a Service .

This describes a model in which banks can integrate their services into the products of non-bank businesses. It means any company can offer services such as bank accounts, debit cards, loans and payment services, without needing a banking licence of its own.

They just get permission from customers and use APIs and webhooks. 

In the UK, neobank Starling has rolled out a 'white label banking' service . It means that a fintech with a good idea can have its own bank account and payments capability without a banking licence.  

#5. Machine learning. Efficiency that adds $1 trillion of value to banks every year?

AI and banking were made for each other. Artificially intelligent machines might struggle to stack boxes , but give them millions of documents to scan and they will humiliate any human competition.

This ability to analyse huge data sets to discern meaningful patterns is transforming banking. AI and machine learning can detect fraud, offer a more personalised customer service, improve the effectiveness of marketing, combat churn and much more.

The impact will be huge. Indeed, McKinsey estimates that AI technologies could potentially deliver banks up to $1 trillion of additional value each year.  

There are so many examples already out there. But here are two that stand out. In the US, JPMorgan Chase launched ‘contract intelligence’, which it also calls COIN. The tech specialises in reviewing the bank's commercial credit agreements . 

It says a manual review of the 12,000 agreements it issues every year takes 360,000 hours (or 173 years). COIN does it in seconds. 

The second example is HSBC's Anti-Money Laundering (AML) system. HSBC teamed with Quantexa to develop a customer surveillance system that identifies suspicious patterns and potential criminal networks in both bank and external data. It screens 5.8 million trade transactions a year against more than 50 different scenarios that indicate signs of money laundering.   

#6. Investing in the planet. Banking goes green

Not all innovation involves technology. Sometimes enterprises have to re-think their processes to align with customer concerns. Such is the case with green banking.

Green banking is a new trend that sees banks shift their strategies and activities to focus on sustainable technologies and environmentally friendly lending. 

Investment is one area of focus. It is already having an impact. The American Green Bank Consortium says green banks drove $1.69 billion total investment in clean energy and energy-efficient projects in 2020 alone.

But on a more ‘micro’ scale, many banks are now re-thinking their products, services and processes to make them more sustainable. 

Take single-use plastics. Banks use a lot of plastic material, so it makes sense to investigate how to recycle it. Suppliers such as Thales are on the case . The Thales Gemalto Recycled PVC card cuts down first-use PVC by 85%. 

Recycling is also on the agenda. In September 2019, Thales partnered with a payment card issuer to announce the introduction of the first-ever bank card made with 70% reclaimed plastic collected from beaches, islands and coastal communities. Each new card is made from approximately one plastic bottle.

And finally, Thales has even launched a card that doesn’t use plastic at all. The Thales Gemalto Bio-Sourced Cards is made from Poly Lactic Acid (PLA), which is produced from non-edible corn and is entirely biodegradable.  

#7. Blockchain: the next big revolution in digital banking?

In a sense, it’s possible to see most banking services as the process of moving assets from one account to another. Viewed this way, banking is all about databases – and finding the safest and quickest way of transferring information between them.  

For a growing number of specialists, blockchain offers a much better way of managing asset transfers than the current system. Blockchains are distributed ledgers, so they are not owned by a single entity. They cannot be manipulated and are accessible to all.

Proponents say this makes transactions cheaper and faster. And since asset provenance and credit history are recorded as immutable components, transactions become less risky.

One area where the blockchain is making impact earliest is cross border payments. According to the blockchain firm Ripple the current method of international payments, SWIFT, relies on ‘disco-era technology’ , which debuted in 1973.

Unsurprisingly, Ripple thinks its crypto-based alternative solves the 'problem' of international payments. So, what is the problem?

Well, even in an era of near-instant domestic payments, a cross-border transfer can take up to 10 days and cost up to 10 percent of the value of the payment. 

The reason for this is 'correspondent banking' in which banks hold accounts in overseas banks. They debit or credit these accounts when payments are made. But not all banks do correspondent banking, so they have to use partners. The complexity is compounded by the variety of bank processes, local rules and the fact that most processing is done manually. 

Blockchain-based systems replace this with transfers using cryptocurrency. A bank converts money into crypto and sends it to the target country, which converts it into local currency and makes the payment. These trades are instantaneous.

Now, the central banks of many nations are looking carefully at the potential of blockchain. And some very well established corporates are now harnessing blockchain too. They include Visa's B2B Connect network, JPMorgan Chase's Liink and IBM Blockchain World Wire .

It seems certain that technological innovation will transform banking as it has other industries. A world of change is coming. What your banking service looks like – and who provides it – will never be the same.  

Related articles:

  Biometrics in payment : the case of the biometric bank card (white paper)

7 benefits of biometric payment systems

A history of payment cards (infographic)

4 innovative ways to pay

Abel, the Destitute Norwegian Who Gave His Name to the ‘Nobel’ in Mathematics

Is the self-driving car the new big brother, openmind books, scientific anniversaries, gender diversity: a competitive advantage for companies, featured author, latest book, innovation for the 21st century banking industry.

This book, Innovation: Perspectives for the 21st Century , is the third in a series of annual publications by the BBVA Group. The motivation behind these publications is to publish expert knowledge on the key issues shaping the future course of the 21st century and relay this knowledge to society. To this end, we seek out leading researchers and creative minds from around the world and ask them to address rigorously and objectively the latest developments in knowledge and the ongoing debates on research and artistic creation in their own fields, using a language and approach that non-specialised readers can understand.

The first book in the series, Frontiers of Knowledge, was published in connection with the institution of the Frontiers of Knowledge Awards granted by the BBVA Foundation. It focused on recent breakthroughs and key challenges in each of the eight award categories: biomedicine; ecology and conservation biology; climate change; information and communication technologies; economics, finance and business management; development cooperation; and the contemporary arts.

The second book offered a comprehensive overview of the complex phenomenon of globalisation, which today deeply affects every aspect of people’s lives.

In order to give the collection a sense of continuity, we have chosen innovation as the central theme of this third book. It was chosen for two main reasons: the first was the decisive importance of innovation as the most powerful tool for stimulating economic growth and improving human standards of living in the long term. This has been the case throughout history, but in these modern times, when science and technology are advancing at a mind-boggling speed, the possibilities for innovation are truly infinite. Moreover, the great challenges facing the human race today—inequality and poverty, education and health care, climate change and the environment—have made innovation more necessary than ever. Our economy and our society require massive doses of innovation in order to make a widespread improvement in the standards of living of nearly 7 billion people (the number continues to increase) compatible with the preservation of the natural environment for future generations.

The second reason for choosing this theme is that it is consistent with BBVA’s corporate culture. Our group’s commitment to the creation and dissemination of knowledge ties in directly with the vision that guides every aspect of our activity: “BBVA, working towards a better future for people”. People are paramount in our work, and the work we do for people is supported by two other pillars of our culture and strategy: principles and innovation.

BBVA’s principles can be summed up in the belief that ethics are not only desirable but also profitable. Acting in accordance with strong values of honesty, integrity and transparency is essential for establishing a close and lasting relationship of trust with all our stakeholders: our shareholders, suppliers, regulators and, above all, our employees and our customers.

This ethical commitment extends to all the societies in which we operate and to society as a whole because we believe that economic development and social stability are the keys to ensuring BBVA’s continuous, profitable growth . For this reason, BBVA is actively involved in a variety of social projects, with a particular focus on promoting education and knowledge. This is the context that has inspired the publication of these books as well as a host of other initiatives, such as the Frontiers of Knowledge Awards and the different activities organised by the BBVA Foundation, in addition to ambitious educational programmes launched by the bank in every country in which we have a presence.

However, although these actions are undeniably important, at BBVA we believe we make our greatest contribution to improving people’s lives through diligently performing our daily activity. The banking industry, and the financial industry in general, carry out tasks essential to people’s everyday lives and to economic development and social stability. BBVA strives to offer its customers a wider and better range of solutions each day, and to make these solutions available to more and more people. Innovation is a vital tool; with it, our daily efforts can achieve the best results, and BBVA can become, as we want it to be, the best universal bank worldwide—in other words, the bank that offers the best and most varied solutions for people and for companies.

I will return to this later, but first I would like to say that the undertaking of publishing these books over the past three years has been an extremely gratifying experience. Each year we have been privileged to work with some of the world’s leading experts on truly fascinating subjects. The opportunity to interact with them and their ideas has enriched us all.

This year, again, I am very proud of the calibre of the authors who kindly agreed to participate in our project. The book boasts texts written by a select group of the world’s best and most prestigious experts in their respective fields. Some are repeating the experience—like Professor Rosenberg, who contributed a magnificent article on globalisation to last year’s publication—which constituted a great honour and show of support for our project. Others have collaborated with BBVA on different innovation projects, or represent institutions with which we have signed agreements or established partnerships in this field. And all have made valuable contributions that give us a glimpse of the “state-of-the-art” in innovation.1

I wish to express my gratitude and that of the entire BBVA Group to all the authors for participating in this book entitled Innovation: Perspectives for the 21st Century. On reading it, I trust that all of you will find a rich, varied and thought-provoking discussion of innovation–a complex phenomenon of paramount importance for the society and economy of the 21st century.

An open, pluralistic view of innovation

Innovation is extremely hard to define. Schumpeter, the great economist who positioned innovation at the centre of the economic debate, made a distinction between invention, defined as the manifestation of a new idea or a previously unknown fact, and innovation, the ability to successfully apply that idea in practice (Schumpeter, 1934). Thus, innovation can be very loosely defined as “a change in the thought process for doing something, or the useful application of new inventions or discoveries” (McKeown, 2008).

Working on the premise of these general ideas, innovation has been analysed in countless contexts and from very different perspectives—always associated with “positive change”—in such disparate fields as technology, economics, business, sociology, the arts or the multiple branches of engineering.

Schumpeter supplied us with a definition of economic innovation which lists the different forms that innovation can take:

• the introduction of a new good or service;
• the introduction of a new method of production;
• the opening of a new market;
• the conquest of a new supply source of raw materials or semi-manufactured goods;
• the implementation of a new organisation in any industry.

The importance of innovation in the field of economics has even given rise to a discipline known as Neo-Schumpeterian Economics, which views all economic development as the result of innovation (see, for example, Freeman, 1982).

Every innovation is the result of a process in which the idea for a possible practical application of an invention is first posited and subsequently developed until it is ready to be introduced into the market. This is why economic and business texts dealing with innovation are just as concerned with the “sources of innovation” and the processes that encourage the generation of potentially useful ideas as they are with the best mechanisms, structures or incentives for transforming those ideas into goods and services that can effectively create value on the market.

The connection between science, technology and innovation, the relationship between academic research and companies, public policy and the role of the market, government and corporate structures, business management in the area of innovation—all of these subjects have been the focus of special attention in the literature on innovation. This diversity of themes and their complexity explain both the importance and the difficulty of developing a Theory of Innovation (see Nelson and Winter, 1977).

A wide range of scholarly approaches to the concept of innovation is documented in Fagerberg (2004), which I recommend to interested readers as a helpful reference for becoming familiar with the prolific and varied bibliography on innovation.

Given the diversity of approaches, aspects and ramifications of innovation and its practical applications, in this book we have chosen to offer a very wide spectrum of articles addressing the most relevant aspects of innovation, all written by authors at the very top of their respective fields.

The first segment of essays, which provide crucial insights for understanding innovation, focuses on its deepest roots. Sandy Pentland traces the roots of creativity—and, by extension, innovation—back to their source in biology, and shows how communication and interaction among the members of each species, including (of course) humans, are essential for development. Sander van der Leeuw points out that the cognitive abilities of the human brain do not seem to have changed in the last 50,000 years; however, thanks to cultural elements (in other words, the experience of learning to exploit those abilities to the fullest), combined with advances in information and communications, the human species still has plenty of room for improvement in terms of managing its natural environment, and that improvement is made possible by innovation.

The second segment of essays focuses on the institutional aspects of innovation. Nathan Rosenberg discusses the complex relationship between science and technology. The traditional view is that science “leads” and technology “follows”, but Professor Rosenberg points out that technology is much more capable of “explaining” scientific progress than we have been led to believe. Hiroyuki Itami underscores the role that organisations (corporate, government, or non-profit) play in knowledge accumulation mechanisms, which are vital for innovation, while Alfonso Gambardella focuses on how market mechanisms can encourage innovation—mechanisms that are primarily fuelled by the utilisation of that accumulated knowledge.

Francisco Louça , on the other hand, demonstrates the importance of the intricate network of cultural values, social interactions and institutions of each society for understanding innovation processes, and discusses how the match or mismatch between socio-institutional systems and the degree of techno-economic development in each period determine the long or Kondratiev waves of economic growth and recession. Based on this reasoning, the current crisis can be chalked up to the inability of economic structures, institutions, regulations and social values to keep pace with the technological revolution we are experiencing.

David Mowery’s essay offers an analysis of the US National Innovation System over more than a century and concludes that its results have largely depended on the decisions made by private companies. For this reason, public innovation policies should remain consistent over time and seek the approval and support of the private sector.

Using data compiled by European economists, Edward Lorenz and Bengt-Åke Lundvall empirically prove that the structural traits of economies, like education systems and labour market structures, have a significant impact on creativity, and therefore on innovation.

The third section of essays examines innovation from a “micro” perspective, exploring how innovations are generated and what plans and mechanisms should be introduced in organisations to generate and disseminate ideas and, above all, to turn those ideas into innovative goods and services on the market.

Alice Lam analyses the organisational aspects of the innovation process and points out the need to cultivate the learning and knowledge-building capacity of human resources, but also to design flexible organisations that can adapt to new technologies and processes.

In a revision of the conventional “producer-centred” approach to innovation analysis, Eric von Hippel reveals how users have become an important source of innovation thanks to advances in computer science and improved connectivity. Consequently, it is essential for companies to maintain a constant dialogue with users and devise mechanisms for working with them and making the most of their abilities.

Frank Moss describes the key cultural aspects of the MIT Media Lab’s “research style”, one of which is the creation of an environment of creative freedom that encourages people to ask bold questions, where failure is perfectly acceptable and where learning is an integral part of the creative process (learning by doing).

The essay written by Curtis Carlson illustrates the “best practices” for innovation developed at the Stanford Research Institute, designed to improve the odds of success for the innovative efforts of organisations.

Harry West focuses on “radical innovation” and outlines the principal elements of Continuum’s process for designing and developing this type of innovation, which is the hardest to standardise but has a much greater impact.

Pascal Soboll offers a complementary perspective—that of the consulting firm Ideo—on how to create an innovative culture in organisations, in such a way that innovation is a priority for all departments rather than the exclusive concern of a small group of “experts”.

This third section concludes with Joaquim Vilá , who highlights the pivotal role that senior executives must play in implementing the changes required for an organisation to achieve a robust innovative culture, and enumerates the fundamental cultural factors that these executives must embrace and preach by example.

The fourth and final segment is dedicated to the application and impact—present and/or future—of innovation in a number of relevant areas, sectors or activities.

Manuel Mira Godinho shows us how innovation is largely responsible for the reduction of extreme poverty in the world over the past several decades, and how it can continue to eradicate this problem in the future. For this to happen, developing nations must acquire policies and tools that will allow them to obtain know-how, compete for R&D funding, and join the global institutional framework, including the necessary policies for handling environmental problems.

As one might expect of a book published by a financial institution, this volume pays special attention to innovation in the service industry, and more specifically in the world of finance. Ian Miles points out that conventional academic publications on innovation have tended to focus on manufacturing industries; yet services represent a very large (and constantly growing) chunk of the economy, and innovation in this sector presents distinctive traits and demands. Developing cross-disciplinary teams is a necessity in the service industry, because innovations in this field usually involve the combination of multiple goods and services, requiring knowledge of technologies, institutions, regulations and social habits as well as of specific types of customers and customer interfaces.

Robert Litan reviews the history of financial innovation in recent decades and concludes that in many cases it has had a positive effect, similar to that achieved by innovation in any other industry, generating goods and services that are better, cheaper and delivered to the buyers more quickly. It is only when financial innovation focuses on the search for mechanisms to increase leveraging to dangerous levels that it has a negative impact, as the recent crisis clearly proves. Therefore, the competent authorities must introduce policies that will prevent the proliferation of “destructive” financial innovations without stifling true, positive financial innovation.

Xavier Vives picks up where Litan leaves off, discussing the role that financial innovation has played in the crisis and reminding us that every major technological change (the railway or the automobile in their day and the internet in ours) has been accompanied by a speculative bubble. Nevertheless, innovation—particularly financial innovation—is essential for economic development. Consequently, we must concentrate our efforts on designing appropriate regulations for the development of financial innovations that will bring private incentives into line with general welfare interests.

Edward Rubin views innovation as a fundamental tool for solving the problem of climate change. If we hope to achieve the international goal of stabilising the levels of greenhouse gases in the atmosphere, we will have to apply technologies that are still being developed or have not even been invented on a massive scale. Public policy should focus on providing the proper incentives.

Takanori Shibata addresses innovation in the medical field, discussing the development of robots that can be used as pets and have proven to be therapeutic. Hugh Herr and Ernesto Martínez-Villalpando explain the tremendous potential of technological innovations for improving the quality of life of the 650 million people around the world who live with some kind of physical or mental disability.

Carlo Ratti and Nashid Nabian show how innovation can generate “intelligent” cities that will provide access to useful information in real time and a platform for collaboration among their inhabitants, radically improving their quality as living and working spaces.

Finally, Tod Machover explores the applications of innovation in music through musical “tools” that allow anyone to make music. This technology has great therapeutic potential; however, on a more general level, it also offers a new model of interaction between people and music that is much more direct and creative.

Innovation in the financial industry

The financial industry is already caught up in an intense, inevitable process of transformation, and the driving forces behind it—technological progress and the social changes it is bringing about—are equally intense and inevitable.

We are currently witnessing the most disruptive technological revolution since the advent of the Industrial Revolution two centuries ago. The difference is that only a small portion of the world took part in the technological progress of the 18th and 19th centuries, while today’s revolution is spreading like wildfire across the entire planet. The reason for this is simple: ours is not a revolution of the tangible (production or transport of goods) but of the intangible. It is a revolution of information. The cost of collecting, storing, processing and sending information is falling rapidly. And just as important—or perhaps even more so—is the fact that these new possibilities are within reach of almost everyone on the planet, thanks to the advent of personal computers, the internet and, increasingly, mobile phones.

This phenomenon is changing people’s habits and behaviour in every area of their lives: the workplace, recreational activities, communication and even interpersonal relationships. Although all companies must deal with these changes in their customers’ lifestyles and in the production and distribution processes, nowhere are their effects more drastic than in the service industry, where the information component carries much more weight (see Miles, 2000).

Banks are at the epicentre of this change. Technological evolution and social changes have a deeper and more direct effect on the financial industry than on most other sectors, for its basic raw materials are information and money. And money, in turn, can dematerialise and transform into accounting entries—in other words, into data that can be stored, processed and transmitted in real time and at costs so low that they are on the verge of disappearing altogether.

It is true that banking has not experienced—up until now—a transformation on a par with that undergone by other information-based sectors, such as the music industry. This is largely owing to the fact that banking has historically been a highly-regulated industry, subject to close scrutiny and control by public authorities. It is also partly due to the exceptionally benign economic and monetary climate of the past several decades, which fuelled the intense growth of financial activity and permitted a relatively high level of inefficiency in the industry, including the survival of a staggering number of financial institutions around the world—or, to put it another way, a severe excess plant capacity.

However, not only is the transformation of the industry inevitable, but it is also picking up speed with each passing day. The primary reason is that the technological revolution is introducing daily new and different ways of doing things, and increasing the potential for cutting costs, while the number of users who resort to non-traditional banking methods continues to grow.

The second reason is that the current crisis is imposing changes in various directions. Banks are perceived as the “culprits” of the recession, and with good reason, for a large number of institutions made some very serious mistakes and chose to ignore the basic principles of banking: prudence, transparency and even integrity (for a more detailed discussion of this issue, see the essays by Edward Litan and Xavier Vives). As a result of these mistakes, many banks have experienced serious difficulties which caused some to go under and others to go through a complete restructuring, generally funded by government bailouts. The colossal amount of taxpayer resources poured into to saving banks has severely tarnished the reputation of financial institutions and the entire industry in the eyes of ordinary citizens. Trust is what gives banks their competitive edge, but over the past several years they have lost much of their customers’ trust, and the trust of society in general.

In addition, the crisis has triggered a process of sweeping changes in banking regulations: borrowing limits, higher capital and reserve requirements, the need for major investments to improve risk and compliance systems, etc. All of this boils down to less revenue and more expenditure—in other words, a reduction in the current and future profitability of financial institutions.

In short, banks must respond to the new demands of their customers and of society, and they must face this challenge with a damaged reputation, lower profits and slow growth in the traditional banking business. This situation calls for a radical transformation: banks must dramatically revise the way they interact with their customers and take a qualitative (not quantitative) leap forward in efficiency.

To a degree, these advances in efficiency will be achieved by a drastic consolidation of the banking sector, which has already begun. But the industry’s true transformation will be effected with the widespread and, above all, intelligent use of technology as part of a sustained process of innovation.

In recent decades, banks have been among the most important users of information and communication technologies, which they have adopted with two primary goals in mind: to cut costs and streamline processes to increase profit margins, and to develop channels of communication other than the conventional branch office.

Yet the original technological platforms used by banks were first introduced several decades ago (in the 1960s and 1970s) and, in most cases, subsequent improvements in functions were developed based on different, more modern technologies, architectures and programs that were later added and/or hooked up to the old system ad hoc.

If it were possible to visualise the complete systems network of an average bank, it would probably resemble nothing so much as a plate of spaghetti: a tangled web of connections linking very different systems that have undergone a long string of changes and partial updates over time.

This situation generates high maintenance costs (for example, it is estimated that banks in the United States devote 80% of their total investment in systems to maintenance and only 20% to new developments). And, most importantly, it quickly becomes untenable given the pace at which new technologies appear and customers’ habits and demands change.

Meanwhile, the internet revolution continues to spread (internet users now account for nearly 30% of the world’s population). And the uses, capabilities and functions of the internet are proliferating day by day. The internet has become the leading source of information, an indispensable pastime (today Europeans spend more time online than they do watching television), and even a forum for personal relations: over 500 million people around the world now use social networks like Facebook which did not even exist until a few years ago.

With each passing day, the internet is gaining importance as a commercial and advertising space and as a place where people on opposite sides of the globe can work together as a team. The web is also the driving force behind the fragmentation of production chains which facilitates the outsourcing of services. In this field, services offered via cloud computing represent a major breakthrough in terms of universal access to data storage and processing at very low cost, and will undoubtedly have far-reaching implications.

Internet usage has also received a tremendous boost from advances in mobile phone technology. Thanks to these new devices, nearly 4.5 billion people (almost three-quarters of the human race) are “online” and have almost ubiquitous access to some level of information services, which has a tremendous effect—yet to be quantified—on productivity.

Mobile phones come equipped with increasingly more powerful and varied functions, functions that will gradually be incorporated into other devices that people can use anywhere, anytime (what has been dubbed the “Internet of Things”).

All this opens up countless windows of opportunity, not only to cut costs but also, and most importantly, to increase revenue.

In the most technologically advanced countries, the challenge is to offer customers a wider array of information-based products and services—and not just of the financial variety—with a cost so nominal it is close to zero, and to do it in the way that is most efficient, rapid and convenient for users.

Technology also offers unprecedented possibilities for tailoring services to meet the users’ needs and demands. To this end, the bank must provide customers with tools that will allow them to participate in the actual process of designing the service they wish to receive.

In developing nations, we find an array of truly historic opportunities: firstly, because the majority of global growth will be concentrated in these countries in the coming decades; and secondly, because only 900 million people in the world are currently bank customers, and there are over 2 billion people—most of whom live in the world’s least developed countries—who do not have access to financial services. This situation exists because, in the conventional model of production and distribution, providing financial services that involve small amounts to a scattered population is not a profitable activity.

However, technology facilitates the introduction of much more efficient models for producing and distributing financial services—for example, through the use of mobile phones. In addition to opening up a huge new market for banks, such a measure would have a tremendously positive effect on the economic development of these countries and facilitate the inclusion of the most disadvantaged collectives.

The technology needed to do all this already exists and is improving every day. A new scenario of competition in the financial industry is taking shape, a stage on which new competitors will soon emerge: companies, many of them internet-based, with high brand awareness and none of the legacies encumbering banks (obsolete systems, costly physical distribution networks, etc.), and with the potential ability to introduce highly efficient models for offering financial services.

The banks that want to compete in this new league will have to undergo a profound transformation, but they do have a few competitive advantages for initiating this change, the most important being the vast amount of information they already possess about their customers. This knowledge must become the foundation for building a new business model, one that is firmly entrenched in technology.

The fundamental tool of this new model will be a much more modern and flexible technological platform capable of absorbing all that information about customers and exploring all possible points of contact with them. In this new model, the existing network of branch offices must be given a complete overhaul: physical distribution networks are only logical if they can offer the users added value and are perfectly integrated in a physical-virtual platform. This platform should allow customers/users to interact with the bank at any time, through any channel, with no interruptions or time lapses, in order to quickly obtain financial or non-financial solutions at minimal cost that are perfectly suited to their specific needs, and which customers can even help to design if they so wish.

Parallel to this technological revolution, banks must also undergo a sweeping organisational and cultural transformation—a transformation that will allow them to restore their reputation by offering transparency in dealings with customers, speed and flexibility in responding to their demands, and the creation of an innovative culture that allows them to find solutions to the new challenges which technology and social changes will continue to pose.

Only those banks which are capable of undertaking this transformation will be able to participate in the financial industry of the 21st century: an industry that will be much more competitive than in the past, but which will also present tremendous opportunities given the possibility of meeting people’s needs much more efficiently and providing universal access to financial services in the world’s least developed regions.

BBVA: An innovative project

At BBVA, long before the current crisis, we have always tried to stay one step ahead of the pack, and we have already started to build this new business model. Our project is upheld by three pillars: principles, people and innovation.

Principles are the cornerstone of our project. At BBVA, our efforts have always been guided by the premise that ethics are not only desirable but also profitable.

Sustaining a corporate culture of prudence, transparency and integrity at any cost is a difficult, time-consuming task, and in some cases it even means sacrificing short-term profits. But in the medium and long term, it is the only way to ensure a project’s sustainability.

Thanks to this culture of principles, BBVA has managed to avoid the pitfalls that many of our competitors have stumbled into in the recent past, and consequently our relative position in the global banking industry has been strengthened.

The number-one priority of our project is people, just as our vision states: “BBVA, working towards a better future for people.” We strive to build stable, long-term relationships with our customers, relationships of trust based on strict ethical conduct and an effort to provide them with the best solutions to meet their needs efficiently, conveniently, and at the best price.

And here is where the third pillar of our project comes in: innovation. Creating a truly groundbreaking, “customer-centric”, rapid, simple and efficient model of interaction, in which the customer receives the best his bank has to offer, requires constant efforts to innovate in both the organisational and cultural arena and in the technological field. I would like to mention just a few of the initiatives we are working on at present.

If we want to offer customised solutions, the first order of business is to know our customers well. At BBVA, like all banks, we have compiled a huge amount of information about our customers. But turning that data into knowledge that can be used to design products that will meet each customer’s unique needs and determine fair prices in accordance with his/her situation means that we must equip ourselves with cutting-edge technology. At BBVA we are leading the way in the application of data-mining and creating intelligent algorithms that will allow us to anticipate the future demands of our customers at any given time.

At BBVA, we have initiated a profound transformation of our distribution network. We are already the world’s most efficient bank, but we continue to work on new branch office configurations that are even more efficient, streamlined and able to provide better service. Another project underway is the design and construction of the best remote channels, equipped with the best and most varied functions, so that customers can interact with BBVA in whatever way is most convenient for them and help us perfect the exact kind of service they prefer. The phone and the computer were followed by the mobile phone, and these will soon be joined by the iPad, television and any other devices to which customers have access.

At BBVA, we are moving towards a distribution model that goes beyond the contemporary concept of multi-channel communication, where the physical office is the heart of the system and the other channels are just useful accessories. We are developing a seamless physical/virtual space where customers can come and go between the branch office and the virtual world as they please and in perfect continuity.

This space will give rise to a new definition of a bank: a company that will offer other non-financial, information-based services which incorporate the users’ own contributions and tap the potential of social networks. And all this will be achieved by taking advantage of the growing ubiquity and functionality of mobile phones and the ability of cloud computing to offer cheap universal access to all kinds of information-related services.

In pursuing this goal, BBVA has an important competitive advantage: a cutting-edge technological platform, a platform that goes far beyond the conventional model of banking systems and is capable of integrating all channels and all sources of information. Thanks to this platform, a customer who accesses the bank by any channel will always find the same BBVA, with the same capacities, and will be able to jump from one channel to another as he/she pleases without a hitch. This platform, which we have been building since 2007, is currently 80% complete and will be fully operational in less than two years.

BBVA has a vision for the industry’s future and has been working for years to make it a reality. But it also has a strategy that combines this vision of the future with the current reality and the prospects of each market and each type of customer.

At BBVA we want to leverage the potential of our model in high-growth markets. For this reason, in addition to our strength in Latin America, we are building a solid franchise in the United States (the world’s largest market), we have a strong presence in China and other Asian countries, and we are in the process of acquiring significant interests in Turkey. In this way, BBVA combines its strength in developed markets with a growing presence in emerging economies, where most of the global economic growth will be concentrated in the coming decades and where a high percentage of the population still does not have access to financial services—which means that the potential for growth in the financial sector is staggering.

Our highly efficient model, firmly rooted in technology, gives us a significant competitive edge over other banks when it comes to meeting the needs of customers in developed nations (highly sophisticated and with intensive technology usage). But it is also essential for developing simple, inexpensive models to provide large sectors of the population with access to banking (as we are already doing in Latin America with mobile phones, agents and bank cards) and to operate in huge markets where we do not have a strong physical presence.

In summary, we have already made tangible progress in our transformation process. However, we have also made other “intangible” advances—or, if not strictly intangible, at least difficult to quantify—derived from what we have learned after all these years of constant work, and these are no less important for the future of our institution.

Firstly, over the course of these years we have refined and perfected our model of innovation. The journey began back in 2004 with the creation of a Corporate Innovation Department, and our initial approach was, in relative terms, more focused on technological possibilities than on the demands of the market and/or the customers.

This centralised department laid the groundwork for evolving towards an innovation “spread” among the different areas of the group. At the same time, the people who are in direct contact with customers have become our principal source of ideas, and technology is now viewed as a tool—an indispensable one—for materialising those ideas.

Meanwhile, at BBVA we have evolved towards a more open model of innovation in which we cooperate with a variety of institutions; in fact, representatives of many of them (MIT, SRI, Continuum, Ideo, etc.) contributed essays to this book. This model also factors in the increasingly important element of customer input, opening up a new space for innovation promoted by the users themselves—which, as Von Hippel points out, is quickly becoming a major source of innovations (Von Hippel, 2005).

However, the most important thing may be that this process of “learning by doing”, the practice of innovation, has brought about a profound cultural change in the people who work for our organisation. Today BBVA has more and better leaders, leaders who are spearheading the transformation of BBVA. And the entire BBVA organisation has embraced a new culture that is open, has a positive attitude towards change, and accepts and encourages flexibility, initiative, accountability, learning and knowledge as values that will give us a decisive competitive edge. This culture also responds to the growing demands and high standards of society with solid ethical principles, transparency and good governance as the keys to earning and maintaining the trust of our customers.

In short, at BBVA we have gone from a traditional corporate culture, with elements inherited from a time when banking was a semi-official, micromanaged industry, to a culture that will allow us to achieve our ambition, which is nothing less than to lead the transformation of the financial industry in the 21st century.

The end goal of this transformation is a new financial system, capable of stimulating growth and sustainable development and of offering more useful, high-quality solutions to meet the needs of more people around the world.

The force that fuels this transformation can only be the thirst for knowledge. This is the driving force behind the project of the BBVA Group, and the publication of this book was inspired by our desire to express and share that motivation.

Bibliography

Fagerberg, J. (2004), “Innovation: a Guide to the Literature”, in J. Fagerberg, D. C. Mowery and R. R. Nelson, The Oxford Handbook of Innovation, London: Oxford University Press, pp. 1-26.

Freeman, C. (1982), The Economics of Industrial Innovation, London: Frances Pinter.

McKeown, M. (2008), The Truth About Innovation. London: Prentice Hall.

Miles, I. (2000), “Services Innovation: Coming of Age in the Knowledge-Based Economy”, International Journal of Innovation Management 14(4), pp. 371-389.

Nelson, R., and S. Winter (1977), “In Search of a Useful Theory of Innovation”, Research Policy 6(1), pp. 36-76.

Schumpeter, J. (1934), The Theory of Economic Development. Boston, MA: Harvard University Press.

Von Hippel, E. (2005), Democratizing Innovation, Cambridge, MA: The MIT Press

1 Here I would like to offer a special tribute to the memory of Professor Chris Freeman of the University of Sussex, one of the pre-eminent contemporary experts on economic cycles and the economics of innovation. His untimely passing this summer precluded the possibility of recruiting him for this project, in which a number of his colleagues, collaborators and disciples have participated.

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FinTech’s rapid growth and its effect on the banking sector

• Original Article
• Open access
• Published: 28 November 2022
• Volume 6 , pages 159–176, ( 2022 )

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• Charalampos Basdekis 1 , 2 , 3   na1 ,
• Apostolos Christopoulos 2 , 4   na1 ,
• Ioannis Katsampoxakis   ORCID: orcid.org/0000-0001-8019-6231 5 &
• Aikaterini Vlachou 2   na1  

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FinTech is a New Financial Technology, which provides financial services through innovative information and communication technologies. It is widely accepted that 4th industrial revolution, has affected tremendously the living and working conditions of the societies. The convergence between advanced technologies, entrepreneurship becomes more complex and remarkably computerized. Within such significant changes it is rather expected that banking, has been one of the most challenged sectors. New players like FinTech and Big Tech companies try to capitalize the circumstances, by promoting new consumer patterns to gain market shares. The purpose of this study is to investigate the rapid expansion of FinTech and to evaluate its impact on the Greek banking system. This topic becomes very important nowadays as the number of FinTech companies, which compete with traditional banks on financial products and services, are increasing constantly as digital technology develops. In our study we apply a questionnaire method mainly with closed questions to collect data from the main players. To do this, we use two questionnaires each one for a different sample. The first sample consists of the consumers for financial products and services in the Greek banking sector and the second sample consists of the employees in the Greek banking sector. According to the results, customers of all ages seem to trust the traditional banks more than FinTech companies whereas the level of mobile transactions separately for each consumer, depends on age and education. From the answers of the consumers, it is clear that security is on the top of their worries for using financial services by FinTech companies. On the other hand, the second questionnaire with bank employees shows clearly that educational level is a critical factor for their readiness and response to new technologies.

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Research Problem : Advances in financial technology has brought a new era in the banking sector, introducing challenges, opportunities and risks. The integration of FinTech in the financial system has created global digital technology platforms through which new innovative financial products and services are provided to end customers.

At the same time, traditional banks seem unable to assimilate at the same level these new technologies to deliver products and services to their own customers. In the light of these developments, the question arises as to whether non-banking entities, such as FinTech companies, are capable to lead the competition in such a way and at such a level that banking products and services will no longer be a privilege of the traditional banking sector.

Objective: The evaluation of FinTech growth and the examination of the prospects for the Greek commercial banks, taking into consideration the presence of FinTech companies.

Research Questions :

What types of products and services are provided by FinTech companies and which of them are most attractive to users?

Which are the most important factors influencing the choice of FinTech services?

At what level traditional banks operating in Greece are interested to invest in FinTech?

How FinTech affects employment in the Greek banking sector?

1 Introduction

In recent years, technology has developed rapidly, affecting the way and means in which financial products and services are provided and the way in which consumers are served. Looking in the past, we find Bill Gates, the founder of Microsoft to declare in 1990 that "banking is necessary, banks are not." Thirty years later, this statement seems to be more suitable than ever, especially in Europe [ 19 ]. One can surely say that banks in the future will have many different forms. Brei et al. [ 13 ] point out that in order to maintain their profitability in such an environment, many banks have placed great emphasis on fee-generating services.

It is noteworthy that in the age of advanced technological developments, even the nature of deposits is changing. This prompts Braggion et al. [ 12 ] to investigate whether FinTech expansion could pose a threat for financial stability. Already today banks accept deposits and make transactions in a digital form. However, at the same time, this raises a number of issues, such as resilience, security and competition in payments, the way financial services are provided, the way and security of cross-border money transfers, but also raises the question of private and public money issuance.

According to Arner et al. [ 3 ], the global financial crisis in 2008 proved to be the most critical moment for the strengthening of FinTech financial technology and RegTech regulatory technology, as it stimulated all processes much faster. Indeed, as banks are unable to adopt right away new technologies due to regulatory restrictions [ 25 ] they have to rely at least for some time on obsolete infrastructure technologies. Therefore, advances in technologies are expected to benefit the FinTech companies more. However, according to Philippon [ 45 ], this advantage for FinTech companies does not show reduction in the intermediation costs of the banking sector. At a European level, during the crisis of 2008, the primary concern of ECB was to introduce effective measures, in order to achieve the key objective of financial stability in Eurozone [ 32 ] and thereafter to move towards the introduction and development of a strict and effective regulation framework for the operation of FinTech companies.

The growth of FinTech companies has strengthened more, after the global financial crisis of 2007. Estimates by Finances Online indicate that there are currently more than 12,000 FinTech companies operating worldwide [ 33 ]. The main target of FinTech companies is to offer in a friendly way financial products and services to their customers, in a more efficient, transparent and more automated way [ 21 ]. In another recent study, Broby [ 14 ] concluded that, in an increasingly digital world, trust will remain at the core of banking, which means that transformation of assets will continue to play an important role. However, the nature of banking and financial services is expected to change dramatically. The technological achievements and the importance on R&D expenditures is of paramount importance for every business in or out of the financial sector [ 10 , 30 , 31 ].

Mitra and Karathanasopoulos [ 41 ] examined the impact of financial technology on the relative value of the business in the banking sector. They found that financial technologies affect operational risk and thus companies must take into account the benefits but also the risks from implementing new technological innovations.

Before the introduction of FinTech, entrepreneurs and individuals had to visit a bank branch to apply for small business credit lines, finance leases, mortgages, business loans, credit cards and various other banking services. However, after the introduction of FinTech companies people no longer need to visit a bank to apply for a mortgage loan or a consumer loan. The applications for these products are now offered online through FinTech companies [ 29 ] which are incorporated in various business models.

There is a wide variety of business models that have been established under the banner of Fintech such as, crowdfunding, payments, wealth management, lending, capital markets and insurance services. Every business model is unique but depends on the digital platform in order to reduce operating costs [ 26 ].

The findings of Karsh and Abuhara [ 29 ] show that FinTech companies will grow faster in an environment, where digital technology is available and the penetration of smartphones is high. The empirical results of this study show that the profitability of traditional banks is higher when they collaborate with FinTech companies and when the banks adopt their own financial technology in their business model.

Internationally, the most influential banking system by FinTech is in China. Arner et al. [ 6 ], report that although the structure of the Chinese banking system is inefficient, the penetration of technology is high and thus why we see in China a rapid increase of technology companies like Alibaba, Baidu and Tencent which have a significant impact on financial services [ 36 ]. Although, for at least one decade, those involved with FinTech have attracted the worldwide attention, this issue has not studied widely by academics.

The existing literature shows that although FinTech companies perform like banks, till today they are not regulated like banks.

The main goal of our study is to enlighten aspects of the rapid growth of the financial industry in combination with high technology. At the same time, we aim to clarify the role of FinTech in the financial sector in general, emphasizing though in the banking sector. The results of our study show that generation Z will be the basis for new era emerging in the banking system and their needs and expectations will act a key role. At the same time another important output is the interrelation between FinTech and prudent investments decisions.

The present work is structured as follows: The second section presents the historical development of FinTech and TechFin, the third section deals with the regulation framework of RegTech in Europe and the fourth section refers to the technology used and efficiency of FinTech. In the fifth section, we analyze the technological trends in the banking sector, and in the sixth one the impact of Covid-19 pandemic on FinTech. The methodological framework, the results and the empirical analysis are presented form the seventh to ninth sections while in the last section there are analyzed the conclusions and the discussion regarding the existing literature and the empirical research, giving answers to the research questions that we have identified, suggesting future research perspectives.

2 The historical development of FinTech and TechFin

The term “FinTech” refers to companies that combine the provision of financial services with modern and innovative technologies, although the traditional banking sector has the potential for technological improvement and banks are working in this direction. However, in addition to the banking sector, there are FinTech companies that also offer insurance and financial instruments, either directly or as third parties. FinTech therefore includes companies that provide advance technology to financial service providers. However, it should be noted that there is a huge variation in the legislative and regulatory obligations that apply between banking institutions and FinTech companies [ 21 ].

According to the Financial Stability Board (FSB) [ 23 ], “FinTech is a new financial industry that applies new technology to improve financial activities, including processes, products or even business models”.

The development of FinTech can be divided into three main time periods [ 5 ]: The first is defined from 1866 to 1967 and focuses on the development of the infrastructure of economic globalization. The second refers to the period from 1967 to the outbreak of the international financial crisis and is characterized by the transition to digital technology. A hallmark of this period is the emergence of ATMs (Automated Teller Machine), the foundation of NASDAQ as the world's first digital stock exchange and the World Bank Interbank Financial Telecommunications Company (SWIFT), which is a network of encrypted messages that transmit secure information and instructions. [ 5 ].

FinTech’s most recent achievements during this period are the development of e-banking and e-commerce which resulted in a huge impact of the banking system on everyday human life. [ 5 ].

Currently we face the third era of FinTech, which corresponds to the response of distrust towards the performance of the traditional banking system. This period is characterized by the introduction of cryptocurrencies and the widespread use of smart phones, which allow the execution of several financial services. In fact, in the last decade, Google's digital wallet and Apple Pay have been introduced, which allow their holders to make electronic payments. Arner et al. [ 4 ], consider that in contrast with the more developed economies, in the emerging economies of Asia and Africa, FinTech has begun to develop in recent years. Dorfleitner et al. [ 21 ], point out that FinTech companies can be divided into four main categories, depending on the sector they operate: financing sector, asset management sector, payment transactions and other FinTech (see Fig.  1 ).

Source: Dorfleitner et al. [ 21 ]

Categorization of Fintech firms

In addition to FinTech which act as financial intermediaries there are also data intermediaries TechFin companies which aim to take advantage of their relationship with customers in non-financial services to collect big data in order to provide them with purely financial products and services. TechFin companies create large-scale databases which allows them to offer financial services and become major non-banking players in the sector [ 57 ]. At the same time, FinTech companies may fill the gap or malfunction of the traditional banking system due to regulatory changes and the lack of technological and digital focus on the customer, providing solutions either directly or through the provision of know-how to existing banking providers.

3 The regulatory regime of FinTech firms in Europe

The global financial crisis in 2007 significantly affected financial services and had a catalytic effect on FinTech growth. Although several years have passed it was only recently that legislation and the implementation of some international regulations became mandatory for these companies. Regulatory provisions primarily appeared with the introduction of Regulatory Technology (Reg Tech) which expanded rapidly as a result of the growth of FinTech companies. In turn, the growth of FinTech companies, has attracted the interest of the banking industry, regulators and consumers. The aim of RegTech companies is to provide secure, cost-effective and reliable regulatory solutions through the latest digital technology [ 20 ].

After the crisis, there was an economic gap, mainly due to the loss of confidence in traditional banking institutions. New Regulations through Basel III resulted in increased costs for these institutions due to the new regulatory obligations they had to comply with and their obligation to perform stress tests on a frequent basis.

All these developments have led in the growth of FinTech industry, which competes credit institutions by providing cheap and innovative services. In the field of payment services, the original PSD (Payments Services Directive—PSD) (Directive 2007/64/EU) was strengthened the competition in the European Market and the Simple European Payment Area (SEPA). The PSD2 Directive that followed not only helped to broaden the definition of payment services, but also extended the categories of providers [ 42 ]. Both directives define and extend the information, requirements, rights and obligations of users, as well as payment services that facilitate money transfers [ 56 ]. However, the year 2018 can be said with certainty to be the year that changed the game for traditional banks and this is mainly due to the revised payment directive PSD2.

The main objectives of the PSD2 Directive [ 19 ] are to:

Contribute to the completion of an efficient European payment market.

Contribute to improving fair competition between banking and non-banking providers regarding payment services.

Promote competition in the new economic environment, where new innovative products and services are available.

Offer secure payments.

Reduce customer costs.

According to Navaretti et al. [ 42 ], almost all central banks in the EU have created innovation hubs that provide regulatory sandbox. In Greece, the FinTech Hub, which first appeared in March 2019, aims to enhance the interaction between banks and to facilitate the interaction of FinTech companies with the supervisory mechanism, which aims to enter the industry. Through this hub, it becomes clear that economic innovation is encouraged and implemented and therefore, in some way, a balance between risks and opportunities is ensured. This security has provided some form of support to businesses and individuals who are developing or considering introducing innovative products and services.

Due to the trend of convergence between banks and FinTech, the regulations focus mainly on the services provided and not on the provider and the main goal is to ensure that services and products are offered in full transparency [ 42 ].

To date, it seems that the financial services sector is undergoing a period of radical transformation. As a result, market forces and regulations are leading to the rapid growth of Open Banking. The legal basis is provided by the implementation of the PSD2 Directive creating a single Pan-European payment market. Third party access to customer data held by banks is also regulated and consequently banks cease to have exclusivity in their customer data [ 17 ].

4 Technology and efficiency of FinTech

Numerous analysts argue that although FinTech’s original goal was to eradicate traditional banks from the market by acquiring a dominant position, there are several cases where we can see partnerships between these companies and established traditional banking institutions. In this way, the FinTech companies were able to cope with the difficulties they had in increasing the number of their customers by achieving larger economies of scale.

According to Vives [ 54 ], the use of new technologies has significant implications for the financial sector, such as reducing transaction costs and the availability of new and higher quality products.

One could briefly claim that:

Big Data and the appropriate statistical models can control prospective borrowers more effectively, which is very important for tackling the problem of asymmetric information.

Allows targeted pricing policies as sophisticated interest rate models are used.

Less developed countries have access to financial services but also companies that until now did not have easy access to the banking system.

Through new technologies, the business plan can be implemented and served more efficiently.

5 Technological trends in banking sector

The growth of FinTech through newly established FinTech companies, contributed to the development of RegTech, due to the increased exposure to risk and the need for regulatory compliance. RegTech is considered as an evolving subcategory of FinTech. However, we could also see RegTech as a separate phenomenon, evolving through years (see Fig.  2 ).

Source: Arner et al. [ 2 ]

Stages of RegTech Development.

In general, the periods Reg1 (1967–2008) and Reg2 (2008–2018) are associated with the digitization of the regulatory authority, while the period Reg3 (2018-present) is related to the formation of an appropriate regulatory framework of the digital age.

More specifically, according to Arner et al. [ 2 ], Reg3 is the regulatory term directly linked to the future of RegTech. Concepts such as data dominance and algorithm monitoring now need to be modified as RegTech is used to control how regulations work and who should be subject to those regulations. It's the era marked by the transition from 'Know Your Customer' (KYC) to 'Know Your Data' (KYD). The main obstacle for RegTech is not the technological constraints, but probably the ability of regulators to process and analyze big data.

Therefore, regulators are required to develop systems that allow them to properly monitor and analyze all data. It is certain that the development of regulations has become necessary in order to meet the growing need for cybersecurity.

The technologies with the greatest impact on the FinTech growth are:

Blockchain technology Blockchain allows computer systems located in different places to propose, validate transactions and update the files of a common network at the same time and enhance efficiency [ 44 , 55 ]..

Blockchain information is not stored in a specific location, making malicious attacks more difficult, while the required time for transactions is limited. However, there are also new risks associated with money laundering, inadequate customer protection and tax evasion [ 20 ].

A main benefit of Blockchain technology is Smart Contacts which are based on a purely digital and complex computerized protocol and includes complex calculations, multi-party agreements, various forms of encryption and contributes to the make transactions safer. They also improve the ability of conducting contracts and offer easier confirmation that all obligations have been met, while at the same time, the monitoring time is being eliminated and therefore the contractual monitoring costs are reduced [ 24 ]. However, there is also a belief that Smart Contracts may create new legal requirements [ 9 ].

According to Saripalli [ 48 ], Blockchain can facilitate the decentralization of the last mile delivery channel, by enabling peer-to-peer and cashless transactions even among the unbanked population.

Application Programming Interface The Application Programming Interface (APIs), is the way of communication for two computer applications in a network, using the same communication code [ 56 ]. Through different channels offered by FinTech companies, banks can offer products and services of great flexibility and short time required, thus facilitating innovation [ 17 ].

According to Vishnu et al. [ 53 ], APIs have the same type of functionality in m-banking. They can be used to authorize the use of banking data by third parties. How banks are evolving over the years is important because, according to the OECD, the activities of the financial sector accounts for between 20 and 30% of the GDP of developed countries.

The open banking model is promoted by the Directive PSD2 and is based on APIs. It is an important data source, as it allows access to system’s data. This adds value to the bank, as through access to multiple data sources it receives valuable, difficult and complicated information. APIs are not a new reality in the banking system, as they are already used in the internal communication between the various infrastructure systems (or nodes). APIs are at the heart of the FinTech revolution, as they influence the way products and services are delivered and used. On the other hand, PSD2 allows access to customer information and communication from authorized third parties. According to Omarini [ 43 ], they have been created in order to ensure this compatibility.

Artificial Intelligence Artificial Intelligence (AI) is a bigger concept to create intelligent machines that can simulate human thinking capability and behavior, whereas, machine learning is an application or subset of AI that allows machines to learn from data without being programmed explicitly. Its popularity has increased, mainly due to the large volume of digital data, the growing need for data storage and the great progress that has been made in the algorithms that are applied [ 22 ].

According to Schlinder et al. [ 49 ], the applications of artificial intelligence are diverse and apply, inter alia, to regulatory reporting and data quality, monetary policy and risk analysis, as well as fraud monitoring and detection.

At the central bank level, AI has been integrated into functions that contribute to the identification of microeconomic and macroeconomic indicators [ 49 ], supervision, information management and forecasting and detection of malicious activities [ 22 ].

The benefits of AI application are manifold. In the financial sector, the use of AI and ML techniques increases efficiency, reduces transaction costs, improves service quality, provides smart investment solutions, increases and boosts customer satisfaction. In addition, AI and ML applications allow the institutions that use them to analyze all customer data to which they have access, learning about their preferences and thus developing specific products and services tailored to customer needs, while improving user experience [ 22 ].

Hsu [ 27 ] has developed a stock selection model in the S&P 500 and the FTSE 100, applying machine learning methods to enhance the performance of the benchmark for individual investors. The results of this study suggest that machine learning techniques are well applied in stock markets.

Villar and Khan [ 52 ], using artificial intelligence procedures, demonstrated how Deutsche Bank successfully automated Adverse Media Screening (AMS), speeding up compliance, increasing coverage for negative media, and drastically reducing false positives.

Virtual and Augmented Reality Augmented Reality (AR) and Virtual Reality (VR) are relatively new applications which are based on the principle of interaction. Their cost is still high, as they incorporate desktop, software, headphones, visual content and advertising costs [ 28 ]. According to Goldman Sachs, it is estimated that in 2025 the value of the VR market will amount to 25 billion dollars [ 34 ]. The technological revolution and the evolving customer base, led financial institutions to introduce AR and VR technology in financial services [ 28 ].

Robo Advisors Robo Advisors (RA) platforms provide automated portfolio management services that require minimal or even no human intervention, at a significantly lower cost than traditional consultants [ 47 ]. Automated service consultants or robotic consultants consist a new challenge in the financial services industry, providing investment, banking and insurance products. A well-known RA is the automated investment advisor in the financial sector [ 8 ]. A well-designed RA can be competent, honest and can recommend suitable products to their customers [ 7 ]. However, the motivation of those who plan or develop RA may not be objective as the applied algorithms may not be in favor of the customers’ benefit, but in favor of the providers [ 8 ]. According to Liu et al. [ 37 ], robotics is increasingly being used to automate customer interaction. In addition, robotics improve efficiency and the quality of execution Vishnu et al. [ 53 ].

Cloud Computing Cloud Computing (CC) is the on-demand availability of computer system resources, especially data storage, data sharing and remotely work through internet access. CC offers flexibility in the provision of services and the saving of resources. However, CC like APIs, if not segregated securely and not adequately monitored may cause serious problems [ 54 ].

6 Covid-19 pandemic and banking sector challenges

The Covid-19 pandemic has forced countries around the world to accept a new reality as almost everything in people's daily lives has changed dramatically. This new reality has forced financial institutions to move fast to protect both their employees and their customers, changing their operations and serving customers in new ways.

The coronavirus footprint was visible to both consumers and banks with small businesses in their clientele. The steps taken during the pandemic period will shape many banking activities in the future. What is certain, however, is that the need to "Stay Home" is rapidly accelerating the adoption of digital technologies. This increasing use of digital technology means at the same time reduced dependence on traditional banking branches, thus accelerating the transformation of the banking landscape. It is estimated that in China and Italy, just four weeks after the onset of the coronavirus, the increase in consumer digital choices increased by between 10 and 20%. This gained experience by consumers may change their trading behavior in the long run [ 1 ].

Currently, the implementation of a dynamic and flexible banking model seems inevitable. During the pandemic, the operation of bank branches was temporarily differentiated by incorporating remote work. If this continues on a more permanent basis, it will obviously affect the number of branches currently in operation as well as the number of bank employees. Such a scenario is expected to accelerate the conversion process of traditional banks to virtual banking, where the customer communicates with a specialized consultant via video call in order to conduct banking transactions, thus developing a model that relies heavily on remote consultants [ 1 ]. In the near future, it is very likely that customers will visit the bank branches relatively infrequently, as almost all of the services will be offered through e-banking, mobile banking or virtual banking. Therefore, the challenges are expected to be intense with long-term effects worldwide.

Especially in the case of Greece, the imposition of capital controls in 2015 contributed to the first rapid transformation of banking transactions where the paper currency was replaced by plastic money. The Covid-19 pandemic has pushed this transformation further. As the crisis progresses, we have more and clearer evidence of the impact on the behavior and expectations of customers and businesses but what is certain is that there can be no return to the methods applied before 2019 [ 1 ]. Banks need to develop new strategies taking into account certain internal and external factors. The new trends will definitely include great receptivity to digital channels. After the crisis, employees may be more willing to embrace new working models remotely. On the other hand, banks will have to face a prolonged period of low interest rates and reduced profits with tighter balance sheets and higher operating costs due to the new security measures and for their survival they must move immediately with the right decisions.

Thus, we see that although the global financial crisis of 2008 highlighted the seriousness of systemic risks to banks, in the case of the Covid-19 pandemic the risk was entirely due to factors unrelated to the banking system offering banks the opportunity to highlight their role as a systemic stabilizer. Banks need to learn from the two crises that emerged in 2008 and 2019 respectively and proceed directly to their own digital transformation, while at the same time creating a much higher degree of operational and financial resilience [ 16 ]. During the recent global crisis, banks were considered to be the biggest problem. Today, however, they are considered to be at the heart of problem solving [ 11 ].

7 Sample and hypotheses

Sample In the context of this study, we conducted questionnaires to collect information from the participants selected in our samples and the hypotheses were tested by non-parametric tests. For the purposes of our study, we use two separate groups and samples, constructing two independent questionnaires, oriented to the needs of our study.

The first sample includes consumers/users of banking products and services, regardless of the banking institution that are customers, who answered a questionnaire structured and tailored to their personal transactional needs, habits and desires. The survey was conducted in Greece during the period 28/12/2019–19/02/2020 where 300 questionnaires were distributed to users of which 241 questionnaires received feedback. 10 questionnaires were removed due to omissions in the answers and we finally obtained 231 valid questionnaires, with an effective rate of 77%. The sample consists of 117 women (50.65%) and 114 men (49.35%). The respondents are mainly under the age of 50 (n = 206, 89.15%) and only 42 (18.18%) of the respondents have not graduated from a higher education institution.

The second pool of our study includes the employees of Greek banks. This survey took place in Greece during the period 10/01/2020 to 12/02/2020. In order to investigate the banks employees’ convictions and opinions related to FinTech, we distributed 148 questionnaires to employees from which we received feedback on 120 questionnaires of which 16 questionnaires were deleted due to omissions. Thus, our final sample consists of 104 valid questionnaires, with an effective rate of 70.3%. The second sample of bank employees consists of 64 women (61.54%) and 40 men (38.46%). Participants under the age of 40 constitute the largest percentage (n = 97, 93.20%) while the 87 employees (83.65%) hold at least an undergraduate university degree.

The sampling for distribution and completion of both users’ and bank employees’ questionnaires followed the rules of sampling. In the case of bank employees, the questionnaires were distributed to employees of both bank branches and headquarters services during the time period mentioned above. Regarding the users, the questionnaires were distributed to citizens outside specified metro central stations during the period 28/12/2019 to 19/02/2020. Both questionnaires are listed in the appendix section at the end of the paper, while the empirical results with the corresponding tables are analyzed at the empirical part of the paper.

A common feature of both our questionnaires is that they include three critical questions to test our hypotheses, regarding the demographic characteristics, gender, age and educational level of the respondents.

Hypotheses The users’ questionnaire was constructed by categorizing the questions into four subgroups, which emerged from the research questions and led to the hypotheses testing of the study. A total of twenty questions are included:

The intention to use FinTech services

The perception of the usefulness offered by FinTech services

The trust and the perception of the risk that is integrated in the FinTech services

The preference between FinTech services and services provided by traditional banking branches

On the other hand, bank employees were asked to answer a questionnaire consisting of thirteen questions structured in four subgroups, according to the research needs and the hypotheses testing:

The knowledge they have in new technologies

The degree of adoption of new technologies

The perceived usefulness of new technologies

The perception they have regarding the digital transformation and employment

More specifically, the following hypotheses are considered:

Do users take advantage of the opportunities provided by FinTech companies?

Do they receive sufficient satisfaction from the use of FinTech services?

Do they trust FinTech companies and/or banks for securely making transactions?

Do bank employees have thorough knowledge on new technologies and to what extent they adopt them in their professional environment?

According to bank employees how useful new technologies are for their work and for customers’ satisfaction and whether there may be a negative impact on future employment?

8 Empirical approach

For each variable we examine descriptive statistics average, median, standard deviation and variance and then Kolmogorov Smirnov and Shapiro Wilk tests for normality is applied.

However, as the samples do not follow normal distribution, we apply the non-parametric tests:

Kruskal–Wallis test.

Chi-squared (X^2) test for independence.

rs rank-order Correlation Coefficient (Spearman test).

In our research we are interested to examine which variables from both questionnaires are affected and differentiated by demographic factors, i.e. gender, age and educational level. As the data from both samples do not follow the normal distribution, non-parametric tests at 5% significance level will be tested. When P-value is less than 5%, the examined variable is not independent by each tested demographic factor. Thus, in the next step non -parametric tests follow a single factor (non-parametric dispersion analysis), using Kruskal–Wallis non parametric tests.

We apply the non-parametric Kruskal–Wallis test by ranks, or one-way ANOVA on ranks for testing whether samples originate from the same distribution [ 18 , 35 , 50 ]. This is a way for comparing two or more independent samples of equal or different sizes and tests whether the difference is statistically significant related to their median. It extends the Mann–Whitney U test, which is used for comparing only two groups. The parametric equivalent of the Kruskal–Wallis test is the one-way analysis of variance (ANOVA).

A significant Kruskal–Wallis test indicates that at least one sample stochastically dominates over the other sample. Since it is a non-parametric method, the Kruskal–Wallis test does not assume a normal distribution of the residuals, unlike the analogous one-way analysis of variance. Kruskal–Wallis test is widely used to test small-sized non-parametric models, as it provides exact probabilities for sample sizes even less than about 30 participants. It is indicative that the mechanism behind Kruskal–Wallis test has the possibility to adequately estimate smaller samples, relying on asymptotic approximation for larger sample sizes. Spurrier [ 51 ] published exact probability tables for samples as large as 45 participants, while Meyer and Seaman [ 39 , 40 ] produced exact probability distributions for samples as large as 105 participants. In order to use the Kruskal—Wallis criterion (K-Intependent Samples), we test for the following hypotheses:

The null hypothesis is accepted when P (value) is greater than 0.05, while when P (value) receives price less than 0.05 the null hypothesis is rejected in comparison to the alternative one (H1).

Validity and Reliability Tests Before we applied the proposed conceptual model, we have tested the internal reliability and validity of the scales by calculating the Cronbach alpha coefficient. Cronbach's alpha tests the internal consistency among a set of items. It is a scale reliability measure and its value ranges from 0 to 1. When Cronbach alpha value equals to 0 it implies that scale is perfectly unreliable whereas a value 1 suggests that it is perfectly reliable. When Cronbach alpha value is greater than 0.5 the scale is considered reliable and therefore it is acceptable, whereas if it is over 0.7 the scale is considered very reliable. The Cronbach alpha value depends on the number of the items, the inter-item covariance and the average variance.

The reliability of the Cronbach alpha value for the first questionnaire addressed to users is 0.708 whereas, the reliability of the Cronbach alpha value for the second questionnaire addressed to the employees is 0.796.

9 Empirical results

The following tables (1 and 2) summarize the cases where we compare the variables and we find different medians (p < 0.05) which implies differences in statistical significance.

For the first, users’ questionnaire, we found the following results, in Table 1 :

On the other hand, from the answers of employees in the second questionnaire we find the results presented in Table 2 :

Chi-square Χ 2 testing At this stage the Chi-square (Χ^2) test for independence was performed in order to determine whether the questionnaire’s variables are independent, not correlated to the demographic data of the sample. According to the null hypothesis (H0), the variables are independent between each other (p > 0.05) and the alternative hypothesis (H1), the variables are not independent between each other (p < 0.05) but at least some dependence is present. In the following tables (3–7) we present the cases where null hypothesis is rejected (p < 0.05) implying statistical significance for these relationships, meaning that cases on the other hand with evidence of statistical significance imply that variables are not independent.

Empirical analysis of users’ questionnaire

For the users’ questionnaire we can see the following results in Table 3 :

Chi-square Χ 2 test for independence according to gender

Based on Table 3 which shows some kind of dependency on gender, we observe that the highest value (v = 25.218) is given to the knowledge of digital currencies, such as Bitcoin or Litecoin. The lowest value (v = 9.988) corresponds to the possibility of recommending FinTech services to friends and the users’ families. Therefore, we can suggest that data with dependency on both genders are mainly evident, indicating the intention for using FinTech services. In addition, there is a statistical significant dependence relationship between trust and gender, as well as a comparison between FinTech companies and traditional banking branches, regardless gender.

Chi-square Χ 2 test for independence according to age

In the above Table 4 , we can observe some kind of dependency on the users’ age in relation to their view whether FinTech services provide better services relatively to traditional banks as it receives the highest value (v = 26.402). On the contrary, the lowest price (v = 8.896) corresponds to the question that according to users, funding can be consider as an interesting FinTech area of action. Therefore, the questions which show the highest dependence between age and users’ responses include all the variables which examine the trust and the implied risk for FinTech services as well as the questions that compare FinTech with the traditional banks branches. Another dependence emerging relationship is that between users’ age and their intention for using FinTech services.

Chi-square Χ 2 test for independence according to educational level

Based on the above Table 5 regarding the questions that have some kind of dependence on users’ education level, the highest value (v = 61.441) corresponds to the importance of interaction between the banks and the use of mobile phones. On the other hand, the question related to the availability of services as a selection factor for non-banking providers corresponds to the lowest value (v = 12.939). So far, the main questions with the highest dependence with the users’ educational level are those which examine the intention to use Fintech services.

Empirical analysis of employees’ questionnaire

At this section the analysis focus on the main results derived from the elaboration and test of employees’ questionnaire.

In the above Table 6 , we present only the questions that have some dependence on the gender. The most important results are linked with the existence of dependence between the employees’ gender and the assessment of innovation (ν = 8.821) and the facilitation of daily work with the use of new technologies, such as digitization (ν = 8.894).

Table 7 shows the employees’ responses being affected by their educational level. These responses are related to the degree of effective customer service through the use of technological innovation (ν = 25.301), the readiness to meet the requirements of new technology (ν = 19.548) and the automation of work as a threat to their employment conditions.

In addition, the Chi-square Χ 2 test for independence according to the age of the employees does not show any kind of dependence between the respondents’ answers and their age.

Summing up the above analysis, we find that in the first questionnaire addressed to the users, the demographics related to the age and education level are somewhat dependent with several questions from almost every subgroups of the questionnaire, whereas, compared to the gender it seems to be dependent on specific responses related mainly to the knowledge of FinTech services and trust on FinTech services. Concerning the employees, we can come to the conclusion that demographic characteristics of the sample in relation to the gender and education are dependent on specific responses such as the services innovation, work facility, readiness for using FinTech, effectiveness in serving customers and the impact of new technologies for their employment future. On the contrary, dependence is not present in the relationship between the age of the employees and the responses in the questionnaire.

rs rank-order Spearman Correlation Coefficient

Spearman's correlation coefficient or Spearman's r{s}, is a nonparametric measure of ranking correlation as it tests for the existence of statistical dependence between the rankings of two variables. Alternatively, it can assess how well the relationship between two variables is described using a monotonic function. When there are no repeated data values means that a perfect Spearman correlation of + 1 or − 1 occurs as each of the variables is a perfect monotone function of the other. Intuitively, the Spearman correlation between two variables will be high when observations have a similar (or identical for a correlation of 1) ranking between the two variables, and low when observations have a dissimilar (or fully opposed for a correlation of − 1) ranking between the two variables.

According to the null hypothesis (H0) tests show that variables are not related between each other, meaning that it does not seem to have any kind of dependence (p > 0.05). On the other hand, the alternative hypothesis (H1) tests whether variables are correlated to each other, meaning there is a dependence relationship (p < 0.05) between the examined variables. The following Tables 8 , 9 show that questionnaire responses reject the null hypothesis (H0) accepting the alternative hypothesis (H1) so there is a dependence relationship.

The above Table 8 illustrates the dependence relationship that exists between the demographic data of the sample and the responses from the users’ questionnaire. Thus, the knowledge of adding digital banks/FinTech companies to the financial sector, the knowledge of digital currencies and the question that examines the equivalence of trust between traditional banks and FinTech companies being under the supervision of the European Supervisory Authorities are positively related to users’ gender. Regarding the respondents’ educational level, the questions related to the degree of price, quality and availability of services importance are positively dependent with users’ educational level. On the other hand, we observe a negative correlation between educational level and the questions related with the knowledge of digital currencies, the choice for specific services such as TransferWise, Currency, Peer Transfer, Currencies Direct, the quality and availability of services as non-selecting a non-banking provider.

In terms of age, there is a positive correlation between the responses the users’ age with and the existence of greater trust of users in traditional banks in terms of transactions and personal data management, increased risk undertaken through the use of FinTech services, the speed as a very important factor of selecting a non-banking provider and the increased transactions insurance as an interesting FinTech area of operating. Last but not least, there is a negative dependence relationship between users’ age and the cooperation with a bank through smart phones.

Table 9 shows the dependence between the demographic characteristics of the employees and the corresponding questionnaire.

Regarding the respondents’ gender, there is a positive dependence between the assessment of innovation of traditional banks and the facilitation of the daily work through the use of new technologies and employees’ gender.

As far as the respondents’ age is concerned, there is a negative dependence between their age and the choice of specific services such as Zopa, Lending Club, Funding Circle and Rate Setter.

In terms of employees’ education, the readiness to meet the requirements of new technology is positively dependent to educational level. Finally, the subgroup which is related to digital transformation and employment is not dependent with any of the sample demographics.

Main Implications of Empirical Results Taking into account the empirical surveys conducted at the level of users and bank employees, the main findings that emerged are the following:

The vast majority of users seem to prefer only financial institutions to conduct their banking transactions. According to the literature, FinTech has great potential and is active in various fields. However, the present study shows that users only know payment services as FinTech's area of activity as almost no other activity was reported in the questionnaire responses. Payment services are the activity of most interest to FinTech companies, while the second most important activity is the trading of shares and investments. It is worth noting that most customers who have used payment services have opted for PayPal. This conclusion is also in line with the answers of the bank employees. This is a clear sign that FinTech services in Greece are still at an early stage of development.

Although there are several factors that affect the decision to use FinTech services, the security factor seems to be of paramount importance for the users. In the case of trust, the majority of the respondents indicate that they trust traditional banks more than other non-financial institutions. According to the literature, the main advantages of banks are the regulatory compliance and the confidence between the bank and its customers, which is built over the years.

Regarding the adoption of new technologies by banks, it seems that, admittedly, Greek banks have given the necessary weight to the digital transformation and have made significant investments. The increased pressure on traditional banking institutions to modernize their core business activities is mainly due to the parallel penetration of new technology-oriented companies. From the results of the present study, the digital transformation seems to be a one-way street and will continue to light the way for the technological revolution. Also, the findings of the study show that banks have invested significantly in education, offering employees the opportunity to acquire the necessary skills to meet modern needs and be able to further develop their skills. It seems that Greek banks have largely focused their investment strategy on staff training. Another conclusion is that only a small percentage of bank employees feel fully prepared to face the new technological reality, although based on their educational level, this percentage is expected to be higher soon.

Regarding their future employment, employees seem to be worried and their prevailing position is that for a job that needs mainly automated movements, there is high risk of dismissal. The majority of respondents believe that artificial intelligence and robotics are likely to replace a wide range of professional skills and pose a risk to their personal work and further professional development. The literature shows that artificial intelligence has a very important role as it intervenes and disrupts the activities in tasks traditionally performed by humans. However, its impact on the work is not clear and opinions vary substantially. Professions that require a high degree of creative intelligence, are less likely to be replaced by smart machines in the next decade.

Non-parametric tests show that in matters of trust, security and protection of personal data, the majority of the sample shows a preference for traditional banking institutions and seems to be age-dependence. The importance of interaction with the use of smartphones seems to depend on users’ age and educational level. On the other hand, for bank employees it holds that their educational level clearly plays an important role in the degree of readiness and response to new technologies.

10 Conclusions

FinTech has come to stay is sure to force reform in many areas, mainly intervening technologically and creating competition. In this way there is a view that argues that business activities that have traditionally been vital to the banking sector are threatened. What is certain is that companies that have decoded developments in time and invested significant capital in technology and human resources will be ready for the digital transformation, which will give them a comparative advantage over other companies.

The best way for banks to stay competitive in the new era, is to implement Open Banking, which is both an opportunity and a threat to banking institutions. The threat comes mainly from the limited ability to control the interaction between banks and their customers. However, the most important element that should not be lost in the new economic landscape is the trust of all stakeholders (banks, FinTech, TechFin, regulators and users). A new open platform between banks and FinTech is sure to be an advanced environment for increasing bank innovation. For example, through the Open Banking environment, customers will be able to view all their accounts and transactions independently of the bank provider on a 24-h basis.

It is obvious that in the coming years we will be able to know who the real winner will be, between the FinTech companies and the banking institutions. According to the existing literature, the one that will prevail will be any more investments to succeed in turning it into a customer-centric organization, even if it is a new coalition or collaboration that will consist of both players [ 43 ].

It is accepted that the 4th Industrial Revolution has transformed modern enterprises by causing radical changes in the banking sector. Global banking giants have begun to be challenged by new players, while at the same time FinTech and BigTech are claiming market share, creating major changes in consumer patterns and habits.

The main results of the current study imply that users only know payment services as FinTech's area of activity and prefer to use for their transactions PayPal. It is worth noting that payment services consist the most invested activity for FinTech firms.

Security, trust and protection of privatization seems to be by far the most significant factors affecting users in conducting transactions, using new financial technologies and that is mostly argued by trusting traditional banks more than other non-financial institutions. For their transactions, most of customers use smart phones, whose use depends on users’ age and educational level.

Moreover, banks have invested significantly in education, offering employees the opportunity to acquire the necessary skills to meet modern needs and be able to further develop their skills. However, only a small percentage of bank employees feel fully prepared to face the new technological reality. One equally important conclusion for employees’ part is that they consider themselves in risk of being dismissed due to the automation of many jobs. In addition to the above, for bank employees it holds that their educational level clearly plays an important role in the degree of readiness and response to new technologies.

In conclusion, the present study shows that we must be focused on the new generation that will be the basis for the banking system in the future and those in charge to target the needs and expectations of the "Millennials" while at the same time appropriate investments in technology and knowledge must be planned. Recent literature shows that FinTech companies may look and act like banks, but they are not yet set up as banks. It is also worth mentioning that in cases of pandemics, such as Covid-19, the importance of FinTech is highlighted while financial technology in all areas of activity becomes more important than ever. The coronavirus crisis has helped the banking sector take steps of digital transformation in the short term, something that would otherwise take longer to take place. What is certain is that these new developments will "force" customers to adapt to these unprecedented conditions, while creating new business habits, regardless of age and educational level. Questions such as what is the real relationship between banks and FinTech companies, who is most affected and by whom, are interesting topics for future investigation as well as to repeat the current study after the end of the Covid-19 crisis to compare the results, even expanding the study to incorporate the financial systems of more Member States in the E.U.

The above conclusions must be taken into account by the competent regulatory authorities in order to shield the economy with the necessary institutional framework for the operation of the FinTech companies, as well as the Basel Committee for the reconsideration of Basel regulations.

Data availability

The data that support the findings of this study are available from the corresponding author upon reasonable request.

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Charalampos Basdekis, Apostolos Christopoulos, Ioannis Katsampoxakis, Aikaterini Vlachou—alphabetical order.

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Department of Economics, National & Kapodistrian University of Athens, Athens, Greece

Charalampos Basdekis

Hellenic Open University, Patra, Greece

Charalampos Basdekis, Apostolos Christopoulos & Aikaterini Vlachou

University of West Attica, Egaleo, Greece

Department of Business Administration, University of the Aegean, Chios, Greece

Apostolos Christopoulos

Department of Statistics and Actuarial, Financial Mathematics, University of the Aegean, Samos, Greece

Ioannis Katsampoxakis

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Basdekis, C., Christopoulos, A., Katsampoxakis, I. et al. FinTech’s rapid growth and its effect on the banking sector. J BANK FINANC TECHNOL 6 , 159–176 (2022). https://doi.org/10.1007/s42786-022-00045-w

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Technology and Innovation in Banking/Finance

Introduction.

The rise of Technology and innovation in the banking and finance sector has been a source of both promise and concern. On the one hand, technological advances have enabled banks and financial institutions to provide customers with a faster, safer, and more efficient service. On the other hand, Technology and innovation have also posed several risks to the financial sector’s stability as regulators struggle to keep up with the pace of technological change. This paper will discuss the potential benefits and risks of Technology and innovation in banking and finance and will argue that, while Technology can bring many benefits, it should be managed carefully and with proper oversight to ensure that it does not pose any undue risks to the financial sector.

Technology and innovation have been transforming the banking and finance industry for many years. From the introduction of automated teller machines (ATMs) to the development of online banking, the banking and finance industry has quickly embraced technological advances. With the introduction of new technologies such as artificial intelligence (AI), blockchain, and distributed ledger technology (DLT), the banking and finance industry is undergoing a significant transformation.

Technology has enabled the banking and finance industry to become more efficient and secure. Automation has made it easier to process transactions and manage customer accounts. AI has enabled banks to analyze customer data and make decisions more quickly. Blockchain and DLT have opened up new opportunities for financial transactions, such as decentralized finance (DeFi) and digital currencies. Innovation has also been key to the banking and finance industry. Banks have long been pioneering new products and services to meet the changing needs of their customers. Banks have recently embraced innovations such as contactless payments, mobile banking apps, and digital wallets (Meister, 2022). These innovations have made banking more convenient and accessible for customers.

Technology and innovation have also allowed banks to expand their reach. Banks can now offer services to customers worldwide, regardless of where they are located. This has enabled banks to reach new markets and increase their customer base. Technology and innovation have revolutionized the banking and finance industry. Banks have become more efficient and secure while offering new products and services to customers (Al Kemyani et al., 2022). As Technology continues to evolve, the banking and finance industry will continue to be transformed.

The Benefits of Technology and Innovation in Banking/Finance

One of the main benefits of Technology and innovation in banking and finance is that it has made financial services more accessible to a broader range of customers. Through online banking and mobile apps, customers can now access their accounts and conduct transactions easily, regardless of their geographical location (Jarvis & Han, 2021). This has enabled banks and financial institutions to reach more customers and provide faster and more convenient service.

In addition, technological advances have also enabled banks and financial institutions to reduce costs and increase profits. By introducing automation and other technologies, banks and financial institutions can reduce the need for manual labor and thus reduce their operational costs. This has enabled them to improve their bottom line and increase their profits. Technological advances have enabled banks and financial institutions to improve their security measures and thus protect their customers’ data and the financial system (Jarvis & Han, 2021). Through encryption and other security measures, banks and financial institutions can ensure that their customer’s data is secure and protected from potential cyber threats.

The banking and finance industry has always been at the forefront of technological advances. Technology and innovation have become increasingly crucial for banks and financial institutions in recent years. In today’s competitive market, Technology and innovation are essential for banks and financial institutions to stay competitive and provide better customer services (Jarvis & Han, 2021). The ability to quickly and accurately process customer data, analyze customer behavior and preferences and provide quick and efficient services are all significant benefits of Technology and innovation in banking and finance.

One of the most significant benefits of Technology and innovation in banking and finance is the ability to create a better customer experience. Technology and innovation enable banks and financial institutions to provide customers with more personalized services, such as the ability to access accounts and view statements online easily, as well as the ability to make payments and transfer funds quickly and securely (Jarvis & Han, 2021). In addition, Technology and innovation allow banks and financial institutions to offer more advanced services, such as online banking, mobile banking, and financial planning tools.

Another benefit of Technology and innovation in banking and finance is reducing costs. Banks and financial institutions can use Technology to improve their efficiency, reduce costs associated with manual processes, and streamline processes (Jarvis & Han, 2021). Additionally, Technology and innovation enable banks and financial institutions to access and analyze large amounts of data quickly and accurately, which can help them make better decisions, reduce risks, and improve customer satisfaction.

Finally, Technology and innovation allow banks and financial institutions to keep up with changing industry trends and regulations. By incorporating new technologies and innovations, banks and financial institutions can stay ahead of the competition and ensure that their services remain compliant with the latest regulations and laws. As the financial industry continues to evolve and become more complex, Technology and innovation will become increasingly crucial for banks and financial institutions to stay competitive. Technology and innovation have become essential to the banking and finance industry. They have enabled banks and financial institutions to provide better customer services, reduce costs, and keep up with changing industry trends (Jarvis & Han, 2021). Technology and innovation have revolutionized the banking and finance industry and will continue to do so in the future.

The Risks of Technology and Innovation in Banking/Finance

In the modern world, Technology and innovation play a significant role in banking and finance. Technology and innovation can drive efficiency, reduce costs and enable new services. However, with the ever-evolving landscape of Technology, there are also risks associated with banking and finance that need to be addressed. Technology and innovation bring certain risks that must be managed to ensure the security and reliability of banking and finance services (Utami & De Guzman, 2020). These risks include cyber security threats, data privacy concerns, and new regulations and standards.

Cyber Security Threats

With the increased use of Technology and innovation in banking and finance, the risk of cyber-attacks is significantly increased. Cyber-attacks can take many forms, including malware, phishing, social engineering, and distributed denial of service (DDoS) attacks. These attacks can cause irreparable damage to an organization, including the loss of customer data and the disruption of services. Therefore, organizations need a robust cybersecurity strategy to detect, prevent, and respond to cybersecurity threats.

Data Privacy Concerns

The use of Technology and innovation in banking and finance also brings with it concerns about data privacy. As organizations collect, store, and use customer data, they must ensure that it is secure and protected from unauthorized access. This requires organizations to have robust data privacy policies, procedures, and measures to protect customer data from external threats.

New Regulations and Standards

Finally, the use of Technology and innovation in banking and finance also brings with it the need to adhere to new regulations and standards. These regulations and standards are designed to ensure that organizations comply with relevant laws and regulations and protect customer data (Utami & De Guzman, 2020). Therefore, organizations must be aware of the new regulations and standards and adhere to them.

Mitigating Risks

Organizations can mitigate the risks associated with Technology and innovation by implementing a robust risk management strategy. This strategy should include measures to detect, prevent, and respond to cyber security threats and measures to protect customer data. Additionally, organizations should ensure they are aware of and compliant with the new regulations and standards.

Technology and innovation can bring many benefits to banking and finance, but they also bring certain risks. Therefore, organizations need to be aware of these risks and implement a robust risk management strategy to mitigate them. By doing so, organizations can ensure that their services are secure and reliable. While Technology and innovation in banking and finance can bring many benefits, they can also pose several risks. For example, the rapid pace of technological change means that regulatory bodies often cannot keep up with the changes, leaving banks and financial institutions vulnerable to new and emerging risks (Utami & De Guzman, 2020). In addition, the increased use of automated systems has led to the rise of “algorithmic trading,” which can create new levels of market volatility and potentially destabilize the financial system.

Generally, the increased use of Technology in banking and finance has created new opportunities for fraud and cybercrime. By exploiting vulnerabilities in the systems, criminals can gain access to sensitive customer data and financial information, which could potentially be used to defraud customers and institutions. Technology and innovation in banking and finance can bring many benefits, including increased accessibility, cost savings, and improved security. However, it is also essential to recognize the potential risks that Technology and innovation can pose (Utami & De Guzman, 2020). In order to ensure that the benefits of Technology and innovation are realized without compromising the financial system’s stability, banks and financial institutions must be appropriately regulated and that technological advances are managed carefully.

My Position on the Issue of Technology and Innovation in Banking/Finance

Technology and innovation in banking and finance have become increasingly important in recent years due to the emergence of new digital technologies that have revolutionized the way banks and financial institutions do business. These advances in Technology and innovation have allowed banks and other financial institutions to provide more efficient and cost-effective services to their customers (Dutta, 2020). Additionally, the use of Technology and innovation in banking and finance has opened up new opportunities for consumers and businesses.

Technology and innovation in banking and finance have made it easier for individuals to access and manage their finances. Through online banking, mobile banking apps, and other digital financial tools, customers can quickly check their account balances, transfer funds, and make payments, all from the convenience of their homes. This has made it easier for people to keep track of their finances and stay on top of their budgeting (Dutta, 2020). Furthermore, the use of Technology and innovation in banking and finance has enabled banks and other financial institutions to offer services such as online loans and credit cards that are more tailored to customers’ needs.

Technology and innovation in banking and finance have also made it easier for businesses to manage their finances. Through cloud computing and other digital tools, businesses can now easily access their financial information and manage their accounts from anywhere in the world. Additionally, the use of Technology and innovation in banking and finance has allowed businesses to automate their financial processes, reducing the need for manual labor and saving them time and money (Dutta, 2020). Technology and innovation in banking and finance have also allowed financial institutions to protect their customer’s data better and provide more secure services. By utilizing advanced technologies such as encryption, two-factor authentication, and fraud detection algorithms, banks, and other financial institutions can ensure that their customer’s data is kept safe and secure (Dutta, 2020). This gives customers the peace of mind that their financial information is not accessible to anyone but them.

Overall, the use of Technology and innovation in banking and finance has revolutionized how banks and financial institutions operate. Through the use of these advanced technologies, banks and other financial institutions can now provide more efficient and cost-effective services to their customers. Additionally, the use of Technology and innovation in banking and finance has enabled businesses to automate their financial processes, reducing the need for manual labor and saving them time and money. Finally, the use of Technology and innovation in banking and finance has allowed financial institutions to protect their customer’s data better and provide more secure services. For these reasons, the use of Technology and innovation in banking and finance is a positive development that should be encouraged and supported.

Technology has revolutionized the banking industry, creating more efficient and secure ways of handling financial transactions. Technology has also opened up new opportunities for banks to offer their customers more sophisticated services, such as online banking and mobile banking. In addition, Technology has allowed banks to become more competitive in terms of customer service and cost efficiency. Innovation has allowed banks to explore new business models and develop products and services that meet changing customer needs. The potential of Technology and innovation in banking and finance is enormous, and the possibilities for the future are exciting. Banks must continue to invest in Technology and innovation to ensure they remain competitive and provide the best possible customer experience. With suitable investments and strategies, banks can continue to lead the way in banking and finance.

Finally, Technology has enabled banks to become more competitive and has opened up new opportunities for banks to offer their customers more sophisticated services. Innovation has allowed banks to explore new business models and develop products and services that meet changing customer needs. To ensure continued success, banks must continue to invest in Technology and innovation to remain competitive and provide the best possible customer experience.

Meister, F. L. (2022).  An investigation of conversational artificial intelligence platforms (clip) in the banking/finance industry-practical and innovative future recommendations in the form of artificial intelligence  (Doctoral dissertation).

Al Kemyani, M. K., Al Raisi, J., Al Kindi, A. R. T., Al Mughairi, I. Y., & Tiwari, C. K. (2022). Blockchain applications in accounting and finance: qualitative Evidence from the banking sector.  Journal of Research in Business and Management ,  10 (4), 28-39.

Jarvis, R., & Han, H. (2021). FinTech Innovation: Review and Future Research Directions.  International Journal of Banking, Finance and Insurance Technologies ,  1 (1), 79–102.

Utami, P., & De Guzman, M. J. J. (2020). Innovation of technology-based strategies based on environmental examination organizations in Islamic banking and finance.  Asian Journal of Multidisciplinary Studies ,  3 (1), 117-126.

Dutta, P. R. (2020). Shadow Banking in India & the Lender of Last Resort.  Journal of Emerging Technologies and Innovative Research ,  7 (8).

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Analysis of Technology and Innovation in Banking/finance Sector

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Research Topics & Ideas: Finance

120+ Finance Research Topic Ideas To Fast-Track Your Project

If you’re just starting out exploring potential research topics for your finance-related dissertation, thesis or research project, you’ve come to the right place. In this post, we’ll help kickstart your research topic ideation process by providing a hearty list of finance-centric research topics and ideas.

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We know it’s exciting to run through a list of research topics, but please keep in mind that this list is just a starting point . To develop a suitable education-related research topic, you’ll need to identify a clear and convincing research gap , and a viable plan of action to fill that gap.

If this sounds foreign to you, check out our free research topic webinar that explores how to find and refine a high-quality research topic, from scratch. Alternatively, if you’d like hands-on help, consider our 1-on-1 coaching service .

Overview: Finance Research Topics

• Corporate finance topics
• Investment banking topics
• Private equity & VC
• Asset management
• Hedge funds
• Financial planning & advisory
• Quantitative finance
• Treasury management
• Financial technology (FinTech)
• Commercial banking
• International finance

Corporate Finance

These research topic ideas explore a breadth of issues ranging from the examination of capital structure to the exploration of financial strategies in mergers and acquisitions.

• Evaluating the impact of capital structure on firm performance across different industries
• Assessing the effectiveness of financial management practices in emerging markets
• A comparative analysis of the cost of capital and financial structure in multinational corporations across different regulatory environments
• Examining how integrating sustainability and CSR initiatives affect a corporation’s financial performance and brand reputation
• Analysing how rigorous financial analysis informs strategic decisions and contributes to corporate growth
• Examining the relationship between corporate governance structures and financial performance
• A comparative analysis of financing strategies among mergers and acquisitions
• Evaluating the importance of financial transparency and its impact on investor relations and trust
• Investigating the role of financial flexibility in strategic investment decisions during economic downturns
• Investigating how different dividend policies affect shareholder value and the firm’s financial performance

Investment Banking

The list below presents a series of research topics exploring the multifaceted dimensions of investment banking, with a particular focus on its evolution following the 2008 financial crisis.

• Analysing the evolution and impact of regulatory frameworks in investment banking post-2008 financial crisis
• Investigating the challenges and opportunities associated with cross-border M&As facilitated by investment banks.
• Evaluating the role of investment banks in facilitating mergers and acquisitions in emerging markets
• Analysing the transformation brought about by digital technologies in the delivery of investment banking services and its effects on efficiency and client satisfaction.
• Evaluating the role of investment banks in promoting sustainable finance and the integration of Environmental, Social, and Governance (ESG) criteria in investment decisions.
• Assessing the impact of technology on the efficiency and effectiveness of investment banking services
• Examining the effectiveness of investment banks in pricing and marketing IPOs, and the subsequent performance of these IPOs in the stock market.
• A comparative analysis of different risk management strategies employed by investment banks
• Examining the relationship between investment banking fees and corporate performance
• A comparative analysis of competitive strategies employed by leading investment banks and their impact on market share and profitability

Private Equity & Venture Capital (VC)

These research topic ideas are centred on venture capital and private equity investments, with a focus on their impact on technological startups, emerging technologies, and broader economic ecosystems.

• Investigating the determinants of successful venture capital investments in tech startups
• Analysing the trends and outcomes of venture capital funding in emerging technologies such as artificial intelligence, blockchain, or clean energy
• Assessing the performance and return on investment of different exit strategies employed by venture capital firms
• Assessing the impact of private equity investments on the financial performance of SMEs
• Analysing the role of venture capital in fostering innovation and entrepreneurship
• Evaluating the exit strategies of private equity firms: A comparative analysis
• Exploring the ethical considerations in private equity and venture capital financing
• Investigating how private equity ownership influences operational efficiency and overall business performance
• Evaluating the effectiveness of corporate governance structures in companies backed by private equity investments
• Examining how the regulatory environment in different regions affects the operations, investments and performance of private equity and venture capital firms

Asset Management

This list includes a range of research topic ideas focused on asset management, probing into the effectiveness of various strategies, the integration of technology, and the alignment with ethical principles among other key dimensions.

• Analysing the effectiveness of different asset allocation strategies in diverse economic environments
• Analysing the methodologies and effectiveness of performance attribution in asset management firms
• Assessing the impact of environmental, social, and governance (ESG) criteria on fund performance
• Examining the role of robo-advisors in modern asset management
• Evaluating how advancements in technology are reshaping portfolio management strategies within asset management firms
• Evaluating the performance persistence of mutual funds and hedge funds
• Investigating the long-term performance of portfolios managed with ethical or socially responsible investing principles
• Investigating the behavioural biases in individual and institutional investment decisions
• Examining the asset allocation strategies employed by pension funds and their impact on long-term fund performance
• Assessing the operational efficiency of asset management firms and its correlation with fund performance

Hedge Funds

Here we explore research topics related to hedge fund operations and strategies, including their implications on corporate governance, financial market stability, and regulatory compliance among other critical facets.

• Assessing the impact of hedge fund activism on corporate governance and financial performance
• Analysing the effectiveness and implications of market-neutral strategies employed by hedge funds
• Investigating how different fee structures impact the performance and investor attraction to hedge funds
• Evaluating the contribution of hedge funds to financial market liquidity and the implications for market stability
• Analysing the risk-return profile of hedge fund strategies during financial crises
• Evaluating the influence of regulatory changes on hedge fund operations and performance
• Examining the level of transparency and disclosure practices in the hedge fund industry and its impact on investor trust and regulatory compliance
• Assessing the contribution of hedge funds to systemic risk in financial markets, and the effectiveness of regulatory measures in mitigating such risks
• Examining the role of hedge funds in financial market stability
• Investigating the determinants of hedge fund success: A comparative analysis

Financial Planning and Advisory

This list explores various research topic ideas related to financial planning, focusing on the effects of financial literacy, the adoption of digital tools, taxation policies, and the role of financial advisors.

• Evaluating the impact of financial literacy on individual financial planning effectiveness
• Analysing how different taxation policies influence financial planning strategies among individuals and businesses
• Evaluating the effectiveness and user adoption of digital tools in modern financial planning practices
• Investigating the adequacy of long-term financial planning strategies in ensuring retirement security
• Assessing the role of financial education in shaping financial planning behaviour among different demographic groups
• Examining the impact of psychological biases on financial planning and decision-making, and strategies to mitigate these biases
• Assessing the behavioural factors influencing financial planning decisions
• Examining the role of financial advisors in managing retirement savings
• A comparative analysis of traditional versus robo-advisory in financial planning
• Investigating the ethics of financial advisory practices

The following list delves into research topics within the insurance sector, touching on the technological transformations, regulatory shifts, and evolving consumer behaviours among other pivotal aspects.

• Analysing the impact of technology adoption on insurance pricing and risk management
• Analysing the influence of Insurtech innovations on the competitive dynamics and consumer choices in insurance markets
• Investigating the factors affecting consumer behaviour in insurance product selection and the role of digital channels in influencing decisions
• Assessing the effect of regulatory changes on insurance product offerings
• Examining the determinants of insurance penetration in emerging markets
• Evaluating the operational efficiency of claims management processes in insurance companies and its impact on customer satisfaction
• Examining the evolution and effectiveness of risk assessment models used in insurance underwriting and their impact on pricing and coverage
• Evaluating the role of insurance in financial stability and economic development
• Investigating the impact of climate change on insurance models and products
• Exploring the challenges and opportunities in underwriting cyber insurance in the face of evolving cyber threats and regulations

Quantitative Finance

These topic ideas span the development of asset pricing models, evaluation of machine learning algorithms, and the exploration of ethical implications among other pivotal areas.

• Developing and testing new quantitative models for asset pricing
• Analysing the effectiveness and limitations of machine learning algorithms in predicting financial market movements
• Assessing the effectiveness of various risk management techniques in quantitative finance
• Evaluating the advancements in portfolio optimisation techniques and their impact on risk-adjusted returns
• Evaluating the impact of high-frequency trading on market efficiency and stability
• Investigating the influence of algorithmic trading strategies on market efficiency and liquidity
• Examining the risk parity approach in asset allocation and its effectiveness in different market conditions
• Examining the application of machine learning and artificial intelligence in quantitative financial analysis
• Investigating the ethical implications of quantitative financial innovations
• Assessing the profitability and market impact of statistical arbitrage strategies considering different market microstructures

Treasury Management

The following topic ideas explore treasury management, focusing on modernisation through technological advancements, the impact on firm liquidity, and the intertwined relationship with corporate governance among other crucial areas.

• Analysing the impact of treasury management practices on firm liquidity and profitability
• Analysing the role of automation in enhancing operational efficiency and strategic decision-making in treasury management
• Evaluating the effectiveness of various cash management strategies in multinational corporations
• Investigating the potential of blockchain technology in streamlining treasury operations and enhancing transparency
• Examining the role of treasury management in mitigating financial risks
• Evaluating the accuracy and effectiveness of various cash flow forecasting techniques employed in treasury management
• Assessing the impact of technological advancements on treasury management operations
• Examining the effectiveness of different foreign exchange risk management strategies employed by treasury managers in multinational corporations
• Assessing the impact of regulatory compliance requirements on the operational and strategic aspects of treasury management
• Investigating the relationship between treasury management and corporate governance

Financial Technology (FinTech)

The following research topic ideas explore the transformative potential of blockchain, the rise of open banking, and the burgeoning landscape of peer-to-peer lending among other focal areas.

• Evaluating the impact of blockchain technology on financial services
• Investigating the implications of open banking on consumer data privacy and financial services competition
• Assessing the role of FinTech in financial inclusion in emerging markets
• Analysing the role of peer-to-peer lending platforms in promoting financial inclusion and their impact on traditional banking systems
• Examining the cybersecurity challenges faced by FinTech firms and the regulatory measures to ensure data protection and financial stability
• Examining the regulatory challenges and opportunities in the FinTech ecosystem
• Assessing the impact of artificial intelligence on the delivery of financial services, customer experience, and operational efficiency within FinTech firms
• Analysing the adoption and impact of cryptocurrencies on traditional financial systems
• Investigating the determinants of success for FinTech startups

Commercial Banking

These topic ideas span commercial banking, encompassing digital transformation, support for small and medium-sized enterprises (SMEs), and the evolving regulatory and competitive landscape among other key themes.

• Assessing the impact of digital transformation on commercial banking services and competitiveness
• Analysing the impact of digital transformation on customer experience and operational efficiency in commercial banking
• Evaluating the role of commercial banks in supporting small and medium-sized enterprises (SMEs)
• Investigating the effectiveness of credit risk management practices and their impact on bank profitability and financial stability
• Examining the relationship between commercial banking practices and financial stability
• Evaluating the implications of open banking frameworks on the competitive landscape and service innovation in commercial banking
• Assessing how regulatory changes affect lending practices and risk appetite of commercial banks
• Examining how commercial banks are adapting their strategies in response to competition from FinTech firms and changing consumer preferences
• Analysing the impact of regulatory compliance on commercial banking operations
• Investigating the determinants of customer satisfaction and loyalty in commercial banking

International Finance

The folowing research topic ideas are centred around international finance and global economic dynamics, delving into aspects like exchange rate fluctuations, international financial regulations, and the role of international financial institutions among other pivotal areas.

• Analysing the determinants of exchange rate fluctuations and their impact on international trade
• Analysing the influence of global trade agreements on international financial flows and foreign direct investments
• Evaluating the effectiveness of international portfolio diversification strategies in mitigating risks and enhancing returns
• Evaluating the role of international financial institutions in global financial stability
• Investigating the role and implications of offshore financial centres on international financial stability and regulatory harmonisation
• Examining the impact of global financial crises on emerging market economies
• Examining the challenges and regulatory frameworks associated with cross-border banking operations
• Assessing the effectiveness of international financial regulations
• Investigating the challenges and opportunities of cross-border mergers and acquisitions

Choosing A Research Topic

These finance-related research topic ideas are starting points to guide your thinking. They are intentionally very broad and open-ended. By engaging with the currently literature in your field of interest, you’ll be able to narrow down your focus to a specific research gap .

When choosing a topic , you’ll need to take into account its originality, relevance, feasibility, and the resources you have at your disposal. Make sure to align your interest and expertise in the subject with your university program’s specific requirements. Always consult your academic advisor to ensure that your chosen topic not only meets the academic criteria but also provides a valuable contribution to the field. 

If you need a helping hand, feel free to check out our private coaching service here.

thank you for suggest those topic, I want to ask you about the subjects related to the fintech, can i measure it and how?

Please guide me on selecting research titles

I am doing financial engineering. , can you please help me choose a dissertation topic?

I’m studying Banking and finance (MBA) please guide me on to choose a good research topic.

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107 Innovation Essay Topic Ideas & Examples

Inside This Article

Innovation is a key driver of progress and growth in any field, whether it be in science, technology, business, or the arts. As such, it is a topic that is frequently explored in essays and research papers. If you are struggling to come up with a unique and interesting topic for your innovation essay, look no further. Here are 107 innovation essay topic ideas and examples to inspire your next writing project.

The impact of artificial intelligence on innovation in the workplace

How blockchain technology is revolutionizing the financial industry

The role of innovation in addressing climate change

The future of transportation: innovations in electric vehicles

The ethical implications of gene editing technologies

How virtual reality is transforming the way we experience entertainment

The rise of telemedicine: innovations in healthcare delivery

The role of innovation in addressing food insecurity

The impact of 3D printing on manufacturing processes

How the sharing economy is driving innovation in the service industry

The potential of renewable energy technologies to revolutionize the energy sector

Innovations in cybersecurity: protecting data in the digital age

The role of innovation in creating sustainable cities

The impact of social media on innovation and creativity

How biotechnology is revolutionizing healthcare

The future of work: innovations in remote collaboration

The role of innovation in addressing global poverty

The impact of autonomous vehicles on transportation systems

Innovations in education technology: transforming the classroom experience

The ethical implications of artificial intelligence and machine learning

The role of innovation in disaster response and recovery

The impact of big data on innovation in business

Innovations in renewable energy storage

The future of space exploration: innovations in propulsion technology

The role of innovation in addressing mental health challenges

How the Internet of Things is transforming everyday life

The ethics of gene editing and designer babies

The impact of virtual reality on mental health treatment

Innovations in sustainable agriculture

The role of innovation in addressing income inequality

The potential of quantum computing to revolutionize technology

Innovations in personalized medicine

The impact of biometrics and facial recognition technology on privacy

The future of sustainable fashion: innovations in eco-friendly materials

The role of innovation in promoting social justice

How drones are revolutionizing industries from agriculture to delivery services

The ethics of autonomous weapons systems

Innovations in clean water technology

The impact of 5G technology on communication networks

The role of innovation in addressing mental health stigma

The potential of regenerative medicine to revolutionize healthcare

Innovations in prosthetics and assistive technologies

The impact of virtual reality on empathy and social change

The future of smart cities: innovations in urban planning

The role of innovation in addressing gender equality

How bioengineering is revolutionizing the production of food and consumer goods

The ethics of artificial intelligence and decision-making

Innovations in disaster-resistant infrastructure

The impact of social media on political innovation

The role of innovation in promoting diversity and inclusion in the workplace

The potential of nanotechnology to revolutionize materials science

Innovations in sustainable transportation

The impact of biotechnology on personalized nutrition

The future of wearable technology: innovations in health monitoring

The role of innovation in addressing plastic pollution

How blockchain technology is transforming supply chain management

The ethics of autonomous vehicles and driverless cars

Innovations in sustainable architecture and design

The impact of artificial intelligence on creative industries

The role of innovation in promoting mental health awareness

The potential of gene editing technologies to cure genetic diseases

Innovations in renewable energy generation

The future of smart homes: innovations in home automation

The role of innovation in promoting environmental sustainability

How bioengineering is revolutionizing the production of consumer goods

The ethics of artificial intelligence and privacy

Innovations in disaster-resistant building materials

The impact of social media on political activism

These 107 innovation essay topic ideas and examples cover a wide range of disciplines and industries, providing you with plenty of inspiration for your next writing project. Whether you are interested in exploring the ethical implications of emerging technologies, the role of innovation in addressing social challenges, or the potential of cutting-edge scientific advancements, there is sure to be a topic on this list that piques your interest. Happy writing!

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Phil Donahue, talk show host pioneer and husband of Marlo Thomas, dies at 88

Phil Donahue,  an innovative TV host who rose to fame in the late 1960s after he was the first person to interact with a studio audience on a talk show and brought new ideas into American living rooms, died Sunday , his family said.

The cause of death was not immediately disclosed. His family said he'd been suffering from a "long illness."

"Groundbreaking TV talk show journalist Phil Donahue died Sunday night at home surrounded by his wife of 44 years Marlo Thomas, his sister, his children, grandchildren and his beloved golden retriever Charlie," his family said in a statement.

"Donahue was 88 years old and passed away peacefully following a long illness."

Thomas posted to Instagram on Monday to tell her followers she'd be stepping away from her page a while to take care of herself.

She wrote that she didn't want to leave without expressing gratitude for the support she has received and the "wonderful and generous way that you've let Phil and me share our life adventure with you over the years."

"As a man who spent his career loving his audiences, Phil got such a kick out of our cozy little community here, and I know he would be very touched by the heartwarming thoughts and memories you've been sharing," Thomas wrote.

The post was an image of her and Donahue on a motorized scooter, which she described as one of her favorite photos of them together from a vacation.

Thomas told her followers that she wished them well in her absence and hoped they held those they cherished close "as I was blessed to do with my beloved Phillip."

At his peak, his nationally syndicated "The Phil Donahue Show" — later renamed "Donahue" — was a ratings hit and a precursor to similar shows with hosts Montel Williams and Jerry Springer .

Oprah Winfrey described Donahue as a trailblazer who invented smart talk in the afternoon and brought startling new ideas into the living rooms and laundry rooms of American women.

“His show debuted nationally, and the whole country came to know his personal brand of issue-driven straight talk,” Winfrey said in 2002 .

“If there had been no Phil Donahue show, there would be no 'Oprah Winfrey' show. He was the first to acknowledge that women are interested in more than mascara tips and cake recipes — that we’re intelligent, we’re concerned about the world around us, and we want the best possible lives for ourselves.”

But Donahue ushering in a new wave of television happened by accident.

He first tried the audience participation format while he was taping his show in Dayton, Ohio, in 1967. The audience arrived for a variety show, which, unbeknownst to them, had been canceled, according to The New York Times .

Donahue suggested letting them watch his interview with Madalyn Murray O’Hair, then a celebrity for being an atheist. Soon, he allowed members of the audience to ask questions. Decades later, his brand of television became an industry standard that continues today.

“Phil Donahue essentially started this company and began an entire industry in daytime syndication,” Bob Turner, then president of Multimedia Entertainment, said in a statement to the Times in 1996 when Donahue announced his retirement.

Donahue was a contributor to NBC's "TODAY" show from 1979 until 1988. He returned to television in 2002 as a prime-time host on MSNBC, but his show was canceled after less than a year. ( MSNBC and NBC News share the same parent company, NBCUniversal.)

Away from interviewing entertainers and touching on polarizing topics such as war and abortion, Donahue was a self-described feminist.

He became an advocate for women’s rights after he noticed how women decades ago were treated in the workplace.

“I was always proud of that,” Donahue said during a taping of NBC’s " Megyn Kelly Today " in 2017.

In the 1960s, “a boss could tell his secretary to walk around the room so he could look at her; poke her in the chest and get away with it. There was nothing she could do about it,” Donahue said during the episode.

He also noted how many women at the time didn’t host daytime talk shows, unlike now.

“It reminds me of how far we’ve come, how far women have come,” he said.

Donahue was inducted into the Television Academy Hall of Fame in 1993 .

During that ceremony, Thomas recalled how her husband put the toughest issues faced by Americans in stark and understandable language.

"He forced us to take a hard look at the real and imagined goals of the Persian Gulf War, the pros and cons of condom distribution in schools and legalized drug abuse," she said.

"He laid out the savings and loan crisis in terms so plain that anybody who had ever taken freshman math could get a grip on the ripoff."

He won nine Daytime Emmy Awards, dominating the outstanding syndicated talk show host category from the mid-1970s to the mid-’80s.

President Joe Biden honored him this year with a Presidential Medal of Freedom , the nation's highest civilian honor.

The White House called him a "television pioneer," whose daytime chat show became "one of the most influential" programs of its time.

In lieu of flowers, loved ones asked for donations to be made to St. Jude Children’s Research Hospital or the Phil Donahue/Notre Dame Scholarship Fund.

Donahue's wife and his father-in-law, Danny Thomas , have long been associated with St. Jude Children’s Research Hospital.

Donahue married Thomas in 1980 , making them one of the most enduring couples in show business.

She's best known for her work on the groundbreaking sitcom " That Girl ," which ran for five seasons on ABC from 1966 to 1971.

It was one of the first network shows to focus on a single woman seeking a career. More shows with that nature would follow in the 1970s and ’80s, such as "The Mary Tyler Moore Show" and "Kate and Allie."

Deon J. Hampton is a national reporter for NBC News.

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Essay Writing on Role of technology in Banking Sector – RBI Grade B 2023

Write an argrumentative essay on “Role of technology in the banking sector and its impact on customers” for RBI Grade B 2023

The banking sector has undergone a significant transformation in recent years, thanks to the role of technology. Technology has revolutionized the banking industry by making it more efficient, secure, and accessible. This essay argues that the role of technology in the banking sector has had a positive impact on customers.

One of the most significant impacts of technology in the banking sector is the convenience it offers to customers. Customers can now access their bank accounts and conduct transactions from the comfort of their homes or offices, thanks to online and mobile banking. This has eliminated the need for customers to visit their bank branches, which can be time-consuming and inconvenient. Customers can now transfer funds, pay bills, and access account information with ease.

Technology has also made banking transactions more secure. With the implementation of measures such as two-factor authentication and biometric identification, customers can be sure that their transactions are safe and secure. This has reduced the incidence of fraud and made it more difficult for cybercriminals to steal customer information.

The role of technology in the banking sector has also increased the speed and efficiency of transactions. Automated teller machines (ATMs) and online banking have reduced the time it takes for customers to access their funds and conduct transactions. Customers can now withdraw cash, deposit cheques, and transfer funds quickly and easily.

Another significant impact of technology on customers is the access it has provided to banking services. Technology has made it possible for banks to offer their services to customers who previously did not have access to banking services. This has had a positive impact on financial inclusion, especially in developing countries.

In conclusion, the role of technology in the banking sector has had a positive impact on customers. It has made banking more convenient, secure, and accessible. Technology has also increased the speed and efficiency of transactions and contributed to financial inclusion. However, it is important for banks to ensure that they maintain the privacy and security of their customers’ information to ensure that technology continues to have a positive impact on customers.

Essay on Innovation

Students are often asked to write an essay on Innovation in their schools and colleges. And if you’re also looking for the same, we have created 100-word, 250-word, and 500-word essays on the topic.

Let’s take a look…

100 Words Essay on Innovation

What is innovation.

Innovation means coming up with new ideas and turning them into something real that people can use. It’s like when someone invents a new toy or finds a new way to make things faster or better. It’s important because it makes our lives easier and more fun.

Types of Innovation

Why innovation matters.

Innovation is key for progress. It helps solve problems, like finding cleaner energy sources. It also creates jobs and makes countries stronger. Without new ideas, we wouldn’t have many things we use every day.

250 Words Essay on Innovation

Innovation means coming up with new ideas and turning them into something real that people can use. It’s like when someone has a lightbulb moment and thinks of a better way to do things. This can be a new gadget, a different way to do a task, or even a fresh game to play.

How to Be Innovative

To be innovative, you need to let your imagination run wild and not be afraid to fail. It’s like trying to build the tallest tower with blocks. Sometimes it might fall, but you learn and try again. Asking lots of questions and being curious about everything around you can also help you come up with innovative ideas.

Innovation in School

In school, you can practice innovation by working on projects that let you think of new solutions to problems. It could be making a poster in a new way or finding a faster method to solve a math problem. Teachers love it when students think of creative answers!

Innovation is all about dreaming up new things and making them happen. It makes life exciting and full of surprises, helping us to learn and grow every day.

500 Words Essay on Innovation

Innovation is like planting seeds in a garden. Just as you need to plant different kinds of seeds to grow a variety of flowers and plants, innovation means coming up with lots of different ideas to make new things or to make things better. It’s not just about inventing something completely new; it can also be about improving something that already exists to make it more useful or fun.

Why is Innovation Important?

Imagine if we never had anyone who tried to create new things or improve old ones. We would still be living without many of the things we enjoy today, like smartphones, video games, and even the internet! Innovation is important because it helps solve problems and makes life easier and more enjoyable. It’s the reason we have medicines that cure illnesses, cars that take us places, and computers that help us learn.

Where Do New Ideas Come From?

How do people make innovations happen.

Making an innovation happen is like baking a cake. You need the right ingredients, a good recipe, and the patience to see it through. The ingredients are the tools and materials you need. The recipe is your plan or design. And just like baking, sometimes you have to try many times before you get it right. People who innovate are not afraid to make mistakes because they know that’s how they learn and get better.

Working Together to Innovate

Innovation is not just a one-person job. Often, it takes a team of people with different skills and knowledge to bring a new idea to life. For example, making a video game might need artists, programmers, and writers. Everyone has to work together and share their ideas to make the game fun and exciting.

Challenges of Innovation

The future of innovation.

In conclusion, innovation is all about dreaming up new ideas and working hard to make them real. It’s what moves us forward and makes the world a more interesting and better place. Remember, every big change starts with a simple idea, and that idea could come from anyone—even you!

Apart from these, you can look at all the essays by clicking here .

Happy studying!

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Essay Samples on Innovation

What does creativity mean to you.

Creativity, an intricate tapestry of imagination and innovation, holds a unique significance for each individual. It is a concept that transcends the boundaries of convention, sparking curiosity and igniting the flames of inspiration. In this essay, we embark on a journey to unearth the meaning...

Henry Ford: The Man and His Automotive Legacy

Henry Ford: The Man Behind the Cars Henry Ford was an American industrialist, the owner of plants for the production of cars around the world, an inventor, and an author of 161 US patents. He was born in Springwells Township, Wayne County, Michigan. Henry made...

• Ford Motor Company

Why Artificial Intelligence Can't Replace Human

Machines play an important part in today’s society but they have decreased the odds of humans getting work done helplessly. Will artificial intelligence occupy the world? Musk claimed that “artificial superintelligence is more dangerous than nuclear attacks”. We depend on machines in all areas of...

• Artificial Intelligence

Appearance of a Book in the Future: Traditional Books vs E-books

Books are an integral part of people’s lives. They provide the foundation of learning from an early age and continue to grow with people throughout their adult lives. The purpose of a book is to convey information. Whether that information is intellectually driven or for...

• Reading Books

Alexander Bell And His Innovation

Alexander Graham Bell is most well-known for his scientific breakthrough in changing how the world communicates. The invention that changed the course of history is the telephone, which allowed people to speak directly to each other through a device interconnected in a system of wires....

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Technological Innovations And Medical Practice 

INTRODUCTION With technology, the past decade has been a revelation. We’ve got tech developers breaking new grounds, doing what we’d have once thought impossible. For engineers, researchers and developers, it seems the question to ask now is; how can it be done instead of if...

The Concept of Overcoming Technological Entrenchment in Society

The entrenchment of technology throughout society is a common and complex issue that is hindering and stunting the development and innovation of newer and arguably better technologies. Through retrospective viewing the paths of technological entrenchment are complex but evident, however, the foresight required at the...

• Impact of Technology
• Negative Impact of Technology

Solar Camping Light and Charging Devices

One of the best feelings in the world is lying down under the stars with the cold breeze of the night and the calming smell of leaves. This is why camping is an experience one should never miss.It is even better if you don’t have...

• Solar Energy

Process of Advancing the Area of Interventional Cardiology

Thanks to technology and bright-minded people, the field of cardiology has come a long way over the years. For instance, many medications and drug therapies were discovered and created like Fibrinolytic therapy. Fibrinolytic therapy is a therapy that uses fibrinolytic drugs like tissue plasminogen activator...

• Cardiovascular System

AI Applications in Cardiology, Radiology, CT and MR Images: A Review

AI is becoming irrefutable in many fields, but in the field of medical it has become very important. It has many applications in Health and Bio-medical which is currently being deployed and also significant research is still going on. It mainly focuses on diagnoses of...

Technical Innovations Of Precision Medicine And How They Can Benefit Healthcare

Precision medicine, based on a global perception survey has been ranked as one of the most emerging technologies with great potential benefits [1], an emerging approach in terms of disease treatment and prevention that takes into account individual variability in genes, environment and lifestyle of...

• Health Care

Artificial Intelligence Application In Poultry Industry

Artificial intelligence (AI) is defined as computer systems replicating human intelligence, such as visual perception, speech recognition, decision-making and translation between languages. At a simplistic level, predictive modelling such as that used in feed formulation might be a form of artificial intelligence, but the use...

History Of Evolution Of The Modern Computers

There are some aspects you just can’t live without. These include food, water, air and many more. One the most commonly used and important is the computer which most people don’t acknowledge. They are everywhere mobile phones, fridges, washing machines, cars and practically all around...

• Alan Turing

History of Innovations in Ancient Roman and Greek Empires

Ancient leaders built powerful empires through innovation. The Greek Empire gave way to the beginnings of representative government, constructed new weaponry, and formed independent city-states. Cyrus the Great and Darius the Great of the Achaemenid Empire gained the respect and loyalty of conquered populations as...

• Ancient Rome

BMW: The World's Best Automobile Giant of the Next Century

The engineering inclusions in automotive industry widen faster with time. So, we can see a number f changes in it over the years. That is why people never giving up their crazy desires in the best car with novel options. Do you also such a...

The Importance of Open Source Software for Chinese Tech Firms

As companies plow more and more investment into AI research, China has finally woken up to the realisation of open source and how it can shape the development of a field that’s becoming more and more attractive. Over the last few years, open source has...

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Technological Innovations in the Field of Accounting in Australia

Research Background Accounting is the skill of recording, ordering and categorizing the financial dealings and procedures. Advancement of technology has significantly enhanced accounting systems and altered money making cycle. Accounting is the escalator that takes the business ahead. The main job of an accountant is...

• Accounting Software

Review of the Recent Five Futuristic Products in Transportation

Transportation is the most important thing when we go on a backpacking tour or any other journey. Here are the most innovative transportation providing futuristic products. Most Famous Futuristic Transportations Hyperloop This was introduced by prolific creator and bourgeois Elon Musk in 2012, once he...

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Features of Nestree, a Brand New Messenger App

This innovation is definitely the game changer for the users that would take a chance to leap at it even at this early stage. It has emerged as thw perfect messenger on the blockchain with a perfect DApp which users will find appealing to use....

Cinematography And Storytelling Innovations In Sopranos And House Of Cards

Throughout the Golden Ages of television, there has been one constant - innovation. Quality television usually challenges societal norms, tackles stigmatized topics, or paints the world in a picture that brings a nuanced meaning to artistic expression. As viewers, we often look past these subtleties...

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Progression of Innovation in Space Suits Since the Apollo 11

When engineers took on the task of putting man in space and on the moon, they knew that there would be an uncountable number of challenges ahead of them. They were breaking new ground but were also creating and discovering everything as they went along....

Research Spending Impact On Medical Tech Profits.

Introduction The medical devices’ industry (MedTech) plays a crucial role in life of people and provides them with services which improve customer safety and health constantly. The industry is strongly regulated by the government, especially by the Food and Drugs Administration (FDA), which checks the...

• Biomedical Engineering

The Evolution of Technology in Accounting

The improvement of something in the world is fleetingly described by the word evolution. Evolution is in many segments which are indispensable to our life style. Some of them are accounting, politics education, sports, communication and transportation. All the evolution is carried out for upcoming...

The History of Fintech Development

Abstract FinTech or financial technology refers to innovation of technology in the financial services. FinTech has evolved from developments of electronic technology in financial products to online based financial products and services. FinTech now, offers a variety of products in the financial industry which range...

Financial Technology: Convenience of Financial Stability of Today

Abstract The FinTech has gain more popularity throughout the years and have been putting itself out there to be as convenient as it can be. This paper will provide the reason why everyone should switch to the use of fintech. This paper also contains the...

FinTech - The Next Evolution in Finance

Abstract Fintech, an abbreviation for financial technology, is one of the driving disruptive innovations in the area of finance. In general, it seeks to reshape how the financial services industry structures, provisions, and captures customers demands. Computers have assumed an expanding job in the field...

The Way Robots Will Improve Medicine

As Robotic technologies are revolutionizing many industries in the world, we often come across a question: 'How are robots going to improve medicine?'. Well, telemedicine is undoubtedly the simplest answer to this question. After the first transmission of an ECG, in 1906, advancements in technology...

 Technological Determinism and Social Determinism

Technological determinism is a theory developed by Marshall McLuhan. The theory of technological determinism says that technology advances in predictable ways, and those advances shape human events. In other words, technology has vast effects on humans and history. In contrast, social determinists disagree that technology...

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The Main Features and Innovations of the Apple Smart Watches

Here it is. It's the new Apple Watch Series 5. It's-- you know what, it's great. I've used a lot of different smartwatches in my life, and this one is the best. If you have an iPhone and you can afford the $399 starting price,...

How Alexander Bell Invented the Telephone

Do you remember when there was no electricity, probably not. Most people can’t go without their phone for 24 hours. How about learning that the first telephone was starting to get invented in 1875, and wasn’t finished until 1877-1878. Alexander Bell was the very first...

• Cell Phones

The Big Importance of Telephone Communiation in Our World

How would you communicate with your friends,family or people around the world without a phone?Would you send letters,or even emails with no idea of understanding their true feelings?The only other option would be going and visiting them every time you wanted to talk.Phones are one...

Medical Tourism in South Africa - The Best Novel Innovations

Since medicine is an important aspect of one's life, people think a lot in the best practices. That is why certain countries, regions and hospitals or certain institutions have become more popular as advanced healthcare stations. The word medical tourism has derived from this belief....

• Medical Tourism

Innovations in 19th Century France

Introduction Throughout history, there has been notable periods of expeditious growth and radical change, but the 19th century is among the most revolutionary. It was an era comprised of both the first and second industrial revolution, and characterized by international cross-disciplinary evolution. Cities were making...

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• Claude Monet

Foundation And Development of 3D Printing

Introduction With the development of society and the needs of people, for many businesses, innovation has become an indispensable key to success. As a group, we are asked to create an innovative product by using the 3D printer for our assignment. The purpose of this...

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The Economic Affects of Net Neutrality on Internet Service Providers 

Introduction On May 18, 2017, the Federal Communications Commission (FCC) voted to repeal net neutrality laws that had been put in place by the Obama Administration (Fiegerman, 2017). The earlier regulations had ensured that no service provider could restrict individual components of the internet. Groups...

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Depiction of Creativity and Innovation in Business Organizations

It is useful to depict creativity in organizations as intricate, social, political and specialized frameworks. To recognize inventive outlets and execution a lot of systems, the administration in business must have what it takes to acknowledge information at the person, group and business levels all...

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Variety of Computer Hacking: The Ethical and Hat Hacking

Computer has become the necessity in our daily lives where we are performing all most all the works by sitting in the house and controlling things with the internet. There is no surprise in even saying that our lives are dependent on the internet and...

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The Benefits and Drawbacks of Computer Hacking

The endless mission of human personality has imagined to every vital innovation of the world. Hacking goes back its beginning to a similar human inclination to know and subsequently investigate things. Computer Hacking is a routine with regards to peeping into the extraordinary specialized points...

Sub-Diffraction Mode Characteristics In Nanolaser.

Abstract Nanolasers are the key component in photonic integration and in this work we investigate the mode characteristics of an optically pumped Metal-Insulator-Semiconductor (MIS) plasmonic nanolaser structure at the sub-diffraction limit. The nanolaser structure consists of Ag/oxide/InGaAsP materials and operates at the telecom wavelength of...

Computerized Financial Services In Agriculture In India

A rancher is an accomplished individual in augmenting the GDP. Horticulture is the most vital one of the foundation of in India. Agriculturist in profoundly blending the Financial and Economically situated individual so natural to support recuperating, paid to cost of use, deals arranged expense,...

Fingerprinting: An Analysis of Forensic Methods

Abstract Fingerprinting has been a mainstay of North American forensics since the early 20th century. Fingerprints form on hands so early that the movement and pressure inside of the womb varies the patterns. This variance in each environment causes the fingerprint pattern to not only...

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A Report On Electric Locomotive Protection Types And Methods

Pantographs are the successor innovation to trolley posts, which were generally utilized on early streetcar frameworks. Pantographs with overhead wires are presently the prevailing type of current accumulation for present day electric trains in light of the fact that, albeit more costly and delicate than...

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Application Of Nanomaterials With Replacement Of Cement In Cement Mortar

In this chapter the analysis work of assorted authors on the utilization of nanomaterials with replacement of cement in cement mortar has been mentioned briefly. Sizable amount of analysis work is done to grasp the behavior of nanomaterials and their result on the properties of...

Case Study Assignment On Ford And On Its Role In Disruption

The article by Ernest Goulding describes Ford’s storied history with innovation and its reaction to disruption - within and outside the USA – in the transportation industry from 1903 to 2016. It also highlights the aggressive moves made by the past CEO and leadership team...

Innovation For The Sustainable Development

Social Innovations One of the main pillars of Sustainable Development is Social Innovation. Unfortunately, we perceive this is often disregarded and pushed aside in favour of literature focusing on Technological Innovation. Taking its importance in mind, this paper will attempt to further our understanding on...

• Modern Technology

A Renaissance In Electric Vehicle Fabricating

A battery electric auto is a module electric car that is pushed by at least one electric engines, utilizing vitality commonly put away in rechargeable batteries. Since 2008, a renaissance in electric vehicle fabricating happened because of advances in batteries, worries about expanding oil costs,...

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Analysis Of The “Not Invented Here” And “Open Innovation” Syndrome

In the article there were two topics being discussed, which were the “Not invented Here” and “open innovation” syndrome. The “Not invented Here” syndrome is a style that if its own company did not invent the product or item that it will not want anything...

Blockchain Technology As Innovation & A New Paradigm In Business

The advent of the blockchain technology brought innovation and a new paradigm to the way we transact business, offering security, transparency, scalability and decentralization of the digital technology, and has fashioned a remarkable cutting-edge infrastructure housing a new brand of network. However, with its efficiency,...

Comparison Of Confucius And Lao Tzu

Abstract - today, there are several Lightweight(LW) energy efficient Hashing techniques available. They are photon, quark, spongent, present, etc. These all are fixed length block sized and key sized LW hashing techniques. In order to improve the diffusion property of cryptographic techniques along with permutation...

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Flying Robots (MAV): Design & Application

The design and development of flying robots has been currently hindered by the lack of applicability of conventional aerodynamics equations/principles to the small size vehicles flying at extremely low Reynolds number. Also, conventional optimization techniques and algorithms have shown very limited success in these applications....

Graphene: A Rising Star Seemingly Within Easy Reach Of Materials Science

Abstract At time when the limitation of silicon capabilities be there being touched the discovery of graphene as well as its exclusive nano-scale properties stands of extreme importance. As it is paving the way towards possible substitutes to next generation for faster and smaller electronics...

Legal Regulations, Compliance, And Investigation

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• Essay On Bank

Essay on Bank

500+ words essay on bank.

Banks are an integral part of the modern economy. They play a major role in the economic growth and development of a country. The idea of banking evolved with the idea of money. In India, public sector banks (PSBs) have been working to provide banking services in urban and rural areas since 1970. These public sector banks account for nearly 70% of banking activity in India. With the help of this essay on banks, students will get to know the functions performed by banks and their importance for individuals and the country. To help students in improving their essay-writing skills, we have also compiled a list of CBSE Essays on different topics. By practising these essays, they can boost their writing skills and also score good marks on the English exam.

Meaning of Bank

Banks are mainly linked to depositing and lending money. In Indian society, moneylenders used to give money to people in ancient times. They charged a high rate of interest to people as there were no banks or banking systems available at that time. But, with the change in time, the banking system was introduced in India. Now, we have public sector banks and private banks.

A bank is a financial institution that deals with deposits, withdrawals and other related banking services. Bank receives money from those who want to save in the form of deposits, and it lends money to those who need it. A bank is a financial institution that works as an intermediary to accept deposits and channels those deposits into various lending activities. It does so through loans or capital markets. A bank establishes the connection between the customers who have capital surpluses and those with capital deficits. In India, all banks operate under the guidelines of the Reserve Bank of India, which is known as the banker’s bank.

Functions of Bank

Banking is the lifeline of the modern economy. It has played a very important role in the economic development of all the nations of the world. We can not think of modern commerce without banking. Banking is a business which seeks profits like any other business. The banking business mainly constitutes borrowing and lending as their basic functions. Now, banks are providing many other services to people, such as net banking, online shopping, mobile banking, granting loans and advances, short-term credit, pension payments, acting as a dealer in foreign currency etc. A common person can safely deposit their money in the banks.

How Important are Banks for Development?

Banks are the most important financial pillars. They play a vital role in the economic development of a country. The financing requirements of industries, trades, agriculture and other business are met with the help of banks. Therefore, if the banking system of a country becomes strong, then the development of the country will also be at a faster rate. In today’s economy, banks are not only dealing with money, but they are also contributing to the development of the nation. They play a crucial role in the disbursement of credit and the mobilisation of deposits to various sectors of the economy. Banks also represent the economic health of the country. The strength of a nation’s economy depends on the strength of the financial system, which depends on the banking system.

In India, banks play a crucial role in the social and economic growth of the country after independence. The banking sector in India accounts for more than half the assets of the financial sector. The Indian banks have shown much growth after the implementation of financial sector reforms.

Banks are the backbone of any country’s economy. They are responsible for running the economy and controlling the price of the markets. They perform various important functions. However, there are default NPAs, cases of corruption and security threat-related issues, but these can be resolved by implementing strict laws and rules by the government.

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Essay on Banking

Banking is a very powerful instrument of social change. Banks are playing a crucial role in bridging the gap between the rich and the poor. In fact, banking is the backbone of the modern economy. It is difficult to visualize how trade, commerce or business can be conducted without an efficient banking system.

They only wanted to fill their own pockets and never missed an opportunity to exploit the poor and the needy. There was nobody to check these malpractices. People condemned the money lenders, but they could not do much. They felt helpless once they were caught in the vicious net of the money-lender.

With a view to bringing commercial banks into the mainstream of economic development with definite social obligations and objectives, the Government acquired the control and ownership of 14 major banks in the country in July 1969.

Six more banks were nationalised in April 1980 Some of the objectives of the public sector banks were: (a) to mobilise savings of people to the largest possible extent and utilise these for productive purposes, (b) legitimate credit needs of the private sector, (c) to acutely foster opportunities for helping neglected and backward areas of the country, (d) curb, use of bank credit for speculative and unproductive purposes.

The philosophy behind nationalisation of banks was that they should function as an instrument for promoting economic and social development in more purposive manner. As against 8262 branches at the end of June 1969, the number of branches at the end of 1992 was more than 60,000.

The thrust of expansion policy has improved the availability of banking facilities in rural areas. They have started extending loans at concessional rates of interest to small farmers, entrepreneurs, artisans, labourers and members of ST and SC. Lead Bank scheme was also introduced in 1969.

Unfortunately, the expectations of the policy makers and the people have not been fulfilled. Since the nationalisation of banks, there has been a slow deterioration in their services.

The banking staff has become ineffi cient, callous and indifferent to the public. Political interference has also adversely affected the working of the banks. Writing off of the loans for political gain, has put the banking services off the rails.

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Services in Banks: Strategies and Plans Essay

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• As a source of information (ensure proper referencing)
• As a template for you assignment

Introduction

Literature review, body of the paper: services in banks, bank strategies used to attract and satisfy clients’ needs, new plans for the future.

Services play an extremely essential role in political, economic and social aspects. It is not possible to imagine people’s life without personal, government, business, financial and other services. On a state economics level, service sector is one of the most reliable parts of country GDP. Mutually beneficial service practice strengthens not only interpersonal, but international relationships, as well. Every day, customers want to satisfy their needs from a service provider.

Naturally, the role of bank services in the context of state economics and business can not be underestimated. Bank operations influence macro-economic indices and welfare of society. Worldly recognized first-rate banks of the world, located in Switzerland, the UK, the USA, Japan, France, etc. attract their clients with many-years experience, good reputation, reliability and safety of bank services and operation. Such banks use effective strategies to achieve the customer satisfaction. The aim of the present essay is to reveal the multifaceted nature of bank services through understanding bank strategies and examining the experience of specific banks.

The role of services in people’s life is great. All services are performed for a customer, called to provide his life with comfort, satisfying his needs. Services support and facilitate customer personal life. The essence of a service is to help and do work for someone. Mutually beneficial service providing has become the basis for business, trade, interpersonal and international relationships. There are many people employed in services. According to some researchers, in 2005, there were about 80 % of people in the USA involved in the service sector. The indices of another countries are also notably high: the UK – 77%, Canada – 76%, Germany – 68, 5%, etc. (Fitzsimmons, & Fitzsimmons, 2008). As one may see, services are appreciated and demanded by people.

In the history of human civilization, economic evolution has proved favourable environment created by services. A service offers commodity, and performs delivery function (on customer demand). It has an intangible nature, and customized attribute. Any service should be directed to benefits of both a client (buyer) and a provider (seller). Information technology and innovations are the main sources of service sector growth (Fitzsimmons, & Fitzsimmons, 2008).

Banking and bank services have been in the scope of interest of many researchers. For example, Mullineux and Murinde (2003) dedicated their book to the problem of international banking. Mishra (2010) examined a bank in the context of microeconomics and macroeconomics, and the essence of the financial system, where a bank plays an exceptionally essential role.

Analyzing the works of these and other relevant researchers, one may see that a bank is a complex and unique financial institution that performs numerous functions, and provides a wide range of services to its clients. Being a financial intermediary, a bank can be central (issues governmental money and regulates the money supply), commercial (accepts deposits and channels them into landing activities with the help of capital markets), and savings one (receives customer savings accounts, and pays interest to depositors). In addition, most of people have become clients of retail bank, as it provides its services to general public. A modern bank has so many functions that it is difficult to enumerate them all. In general, a bank “accepts deposits from the public, makes fund available to those who need them, and helps in remittance of money from one place to another” (Mishra, 2010, p. 181.). In other words, a bank deals with money and credit in a different way. This is the main essence of commercial banking.

Bank strategies were in the scope of the researchers, as well. For example, Botten and McManus (1999) described the British Internet-oriented strategy that gave bank clients to make financial operations in a cyberspace. Bank card system gave rise to application of other strategies.

Smart bank card applications technology contributes to electronic financial solutions. The network of Automated Teller Machines (ATM) allowed banks to dispense its services to customers through a Personal Identification number (PIN) and a magnetic card. ATM gave customers an opportunity to be engaged in “receiving and dispensing cash, funds transfer between accounts, balance enquiries, etc.” (Wonglimpiyarat, 2005, p. 6). At the same time, Visa, MasterCard and bank’s ATM networks serve to promote its brand, and spread its services among the world population.

Future of the bank services attracted researchers’ attention. In the 90s, it was evident, that globalization, commercialization and Internet expansion reflected on bank performance. Blery and Michalakapoulos (2006) believe that customer-oriented strategies will be applied in the future. Banks will tend to make services more effective, accessible, time-saving, quality and satisfying. New innovative technologies and additional Internet opportunities will contribute to this process.

Numerous functions of a bank predetermined the presence of range of services to its consumers. According to Mishra, it is possible to differentiate the following principal services. First, it accepts deposits: many people prefer saving their money in banks. This function helps people to earn interests and avoid theft. The presence of different types of accounts allow banks to attract clients’ savings: fixed (money is deposited for a fixed period of time; the rate of interest is high), current (serves businessmen and traders to make payments every day, making them pay incidental charges for a service), saving (encourages and mobilizes small savings with a low rate of interest; the number and amount of withdrawals is limited), recurring (encourages regular savings with interest of maturity of depositions; a rate of interest is relatively high), home safe (promotes saving habits under a special scheme), etc. deposit accounts (Mishra, 2010).

Second, a client may take advantage of loans, becoming debtor of a lending bank. However, loans are granted by a bank, depending on the creditworthiness of the borrowers (depends on clients yearly income). Among various types of loans, there are the following ones: money at call (a short period loan, provided for banks and other financial institutions), cash credit (given to a borrower against his current assets, and allows to withdraw money from time to time), overdraft (a borrower is allowed to withdraw more money than his deposits), discounting of bills of exchange (a popular and self-liquidating loan that gives an opportunity to pay the bill with the help of bank commission), and term loans (medium- and long-term loan that allow the amount to be either paid or credited to the borrower’s account; it must be repaid) (Mishra, 2010).

Credit creation is the following bank service: “a bank has the ability to create credit many times more than its deposits, and this ability to multiple credit creation depends on its cash-reserve ratio” (Mishra, 2010, p. 183). Credit creation is favoured by many people, because it allows to obtain good or service before payment. Promoting cheque system is the other bank service that became popular in the age of business transactions: “through a cheque, the depositor directs the banker to make payment to the payee” (Mishra, 2010, p. 183).

Also, a bank provides a customer with the following agency services: remittance of funds, payment and collection of credit instruments (bills of exchange, cheques, etc.), execution of standing orders (for example, a bank may pay rent on behalf of its clients), sale and purchasing of securities (bonds, stocks, shares, etc.), collection of dividends on shares, income tax consultancy, acting as executor and trustee (preserves its customers’ wills after their death), acting as a correspondent and representative (a bank may get traveller’s tickets, passports, and receive letters on clients’ behalf).

Besides, a bank provides its customers with general utility services: locker facility (valuables and important documents are kept for safe custody in a bank), traveller’s cheques (a customer may travell without the fear of loss and theft of money), letter of credit (used in foreign trade to certify customer’s creditworthiness), collection of statistics (a bank keep important information about country money, industry, commerce, trade, banking; publishes bulletins and journals with research articles), underwriting securities, gift cheques (of various denominations), acting as referee (for seeking information about its customers’ business reputation, financial position, and respectability), and foreign exchange business (by discounting foreign bills of exchange, a bank finances foreign trade) (Mishra, 2010).Nevertheless, people’s daily life suggest the idea that payment services are the most demanded services of a bank that meet customer needs every day.

One of the world financially strength banks in the world that satisfy its clients with practically all possible services, accessible for both general and elite public, is National Bank of Abu Dhabi (NBAD), founded in 1968 (Oxford Business Group, 2007). It has served as a central bank that actively participates in formation of the currency abroad. In 2005, its net profit equaled “$702, 42 m, return on quality of 43, 9% and total assets of $22, 76 bn” (Oxford Business Group, 2007, p. 97). Nationals who live outside the UAE have certain preferences in bank services. In general, the bank offers quick, reliable and secure services, giving an opportunity to take advantage from personal, corporate, and free Internet banking. Provision with personal bar-code, bank archive data, credit cards, currency exchange, time deposits, account opening, online trading are only one of possible services, available there (National Bank of Abu Dhabi, 2011). The researchers believe that

“NBAD is the chief provider of corporate services to business, the government, key public sector institutions, and major corporate groups. Corporate services include cash flow management, foreign exchange, and capital market products and assess management” (Oxford Business Group, 2007, p. 97).

Providing the mentioned services, NBAD keeps up the evolving international market, as well, because the considerable number of its clients is foreigners. This bank is able to meet the needs of growing market owing to its successful and effective development strategies. Also, NBAD has developed the advantageous system of international partnership. For example, Italia and Japan take part in corporate cross-border transactions. The bank has 23 overseas units and banking divisions located in Paris, Cairo, Oman, etc. that constituted the branch network that allow to provide with bank services customers from different corners of the world (Oxford Business Group, 2007).

In general, banking is an important service industry for all countries. In a bank, all customer-provider relationships and interactions are concentrated around services. For this reason, services are the most essential integrative elements of banking. Bank services are appreciated by general public, because they help people to achieve what they want: to buy a good or service, to transact money, to get borrower’s credit, etc. Providing a client with a service, a bank is interested in success, as well: a service produces benefit for a bank (difference between amount of deposits and credit percentage) and additional money supply that plays important role for state economy. When a client comes to a bank to get a certain service (for example, he wants to be accommodated with a loan), it should meet consumer expectations.

According to some researchers, it is reliability, responsiveness, assurance, empathy and tangibles (Fitzsimmons, & Fitzsimmons, 2008). Hence, a bank should have credibility; bear responsibility for services provided. Besides, a client should be assured that a bank is able to provide the needed service on favourable terms. A provider should understand the reason of the demanded service, and demonstrate empathy to the client (in case of a loan, it can be family’s financial necessity owing to back pay, unexpected constrained loss of money, a desire to buy a house or a car). Loan is tangible if a consumer get desirable amount of money before he can repay the debt.

There are many bank strategies called to attract new customers and satisfy their needs. One of them was applied in 1996 by the royal Bank of Scotland. It became the first bank in the UK that offered its clients bank services on the Internet. Since that time, direct banking by PC became possible. It was estimated that about 60 % of the UK population used to pay their bills and check the accounts using a home computer (Botten & McManus, 1999, p. 205). The Internet-oriented strategies of the UK banks allowed internet users to print statement, pill bills, transfer account data into home-banking software package, and take advantage from on-line services and PC banking services (including mobile commerce) (Botten & McManus, 1999).

Bank card innovations of the 1970s gave rise to new competitive strategies in the UK and USA banking sectors. However, the bank card on-line system was quickly extended across the world, because it made bank services (especially, payment ones) accessible and efficient; it notably contributed to electronic commerce that allow to make electronic transactions on the Internet, and buy a product. As one can see on the figure 1 (see appendices), on-line shopping has notable advantages (for example, timesaving capability), in comparison with traditional shopping, that meet modern consumer needs. However, there are some disadvantages, as well (for example, it requires delivery fee) (Fitzsimmons, & Fitzsimmons, 2008).

Nowadays, credit plastic cards, issued by banks, are used every day: they allow to purchase goods and services on credit. Besides, electronic cash currency system proved to be extremely convenient (Wonglimpiyarat, 2005). Credit card and electronic service strategies facilitate the social life: owing to these strategies, people easily make certain banking operations, get cash money from a card, and buy certain goods and services through mobile e-commerce.

Globalization, decreasing customer loyalty, economic volatility, resource outsourcing and other factors made banks to elaborate survival strategies for financial services. The essence of these strategies lies in the following processes: workforce performance improvement, cost reduction, revenue enhancement, return increase, cost-effective activities, integration of up-to-date technologies, etc.

Capitalization of banks plays an extremely important role in bank strategies. Retail banking strategies that practiced in Europe were adopted on the CEE ground. As the internet decreased the customers’ loyalty, banks needed special customer-oriented strategies called to increase bank clients’ loyalty. The loyalty programs that provided special benefits to customers were introduced. Traditionally, cooperative banks possessed “a strong loyalty tool, membership of the bank”.(Groeneveld & Wagemakers, 2004, p. 6).

Besides, Customer Relationship Membership (CRM) systems provide banks with good knowledge of their clients that allow banks to meet their needs. For this reason, many banks used to chose a niche-strategy, and focus on a specific customer need (real estate segment, for example). Retail banking is an extremely competitive industry, for this reason, CRM have certain priorities. Figure 2 (see appendices) shows that three top priorities are customer loyalty, profit growth and client satisfaction (PricewaterhouseCoopers, 2003).

Retail networks are used to sell all kinds of possible products: multidistribution provides with alternative options. For example, multi-channeling strategy, described as “selling products and servicing of clients with different channels, such as branches, ATMs, telephone and internet”, attracts clients with free choice, diversity of channels for different clients, and cost savings. (Groeneveld & Wagemakers, 2004, p. 7). The European largest internet bank, Rabobank, is a virtual distribution channel that offers transaction services on internet-mode technology that allows all users of mobile phones to make bank transaction operations.

Some banks offer other essential strategies that improve customer experience, leverage up-sell and cross-sell opportunities, and promote customer satisfaction. Some of retail bank strategies sound in the following manner: “facilitate integrated and consistent interactions across all channels”, “offer an inviting “Customer Front Door”, “integrate self-service with agent assistance”, etc. (Genesys, 2008, p. 3). On the whole, the strategies mentioned in this part of the essay, are beneficial for both banks and customers; moreover, all of them are called to attract and satisfy customer’s needs in a different way.

CRM systems have proved its effectiveness in aggressive bank competition, and will be used in the future. The strategic importance of CRM is obvious: it helps banks “to build long-lasting relationships with their customers and increase their profits through the right management system and the application of customer-focused strategies” (Blery & Michalakapoulos, 2006, p. 116). The Greek bank and other banks that use CRM system will be able to focus on most profitable customers with the help of efficient segmentation that corresponds to clients’ individual behaviour.

The commercial approach based not only the product but a client, as well, will help to satisfy and retain bank customers. Obviously, more banks will implement voice and phone banking services (loans, stock exchange transactions, etc.) and customer segmentation system (that responds to clients’ needs, interests, habits, etc.), and more clients will take advantage from synchronized networks, offered by banks (branch ATM, Interactive Voice Response, telephone center) (Blery & Michalakapoulos, 2006).

Even modern successful banks are concerned with plans for the future that will bring them more customers, more innovations, and better profit. The research of Oxford business group showed that development strategy of NBAD for the future is directed to expansion and positive innovative changes: installation of new ATM, opening of new branches, provision with first mobile phone banking service in the Middle East and North Africa region (Oxford Business Group, 2007).

Revolutionizing e-commerce is one of the reasons why banking system should be improved and transformed. Internet banking of the future will “reduce transaction costs, enhance customer service, increase the customer base and improve cross-selling opportunities” (Nath et al., 2001, p. 21). The phenomenon of Internet banking can not be underestimated, as it is future of modern society: the number of Internet and PC users grows every day. Online loans, brokerage services, bill payment will be popular clients’ banking activities in cheap cyberspace of electronic banks. Additional and expanded online bank services will be available to clients in private and business life. In addition, “banks are adding real-time loan applications, the ability to make Individual Retirement Account investments, and the opportunity to trade stocks through their web sites” (Nath et al., 2001, p. 26). Thus, the concept of “one-stop shopping” will be wide spread in the future.

Taking into consideration all the information mentioned above, one can make the following conclusion. Bank services serve for the benefit of people, engaged in financial relationship, commerce, business, and other activities. Owing to a great variety of bank services, a customer may deposit, save, transact, exchange, loan money, get a credit card, purchase goods and service via Internet, etc. There are many effective, development and competitive bank strategies used to attract and satisfy clients: customer-oriented strategies, electronic service strategies (Internet-oriented, e-commerce), retail banking strategies (multi-channeling), etc. However, successful future for banks consists in improved, expanded and quality e-banking services that serve for the customer’s benefit in the commerce, business and private life, customer segmentation, increasing and improving clients’ opportunities.

Blery, E., & Michalakapoulos, M. (2006). Customer relationship management: a case study of a Greek bank. Journal of Financial Services Marketing, 11 (2), (pp. 116-124). Web.

Botten, N., & McManus, C. (1999). Competitive Strategies for Service Organizations. Basingstoke, UK: Purdue University Press.

Fitzsimmons, F., & Fitzsimmons, M. (2008). Service Management: Operations, Strategy, and Information Technology (6 th ed.). New York, NY: McGraw-Hill.

Genesys. (2008). Industry strategy guide: customer service strategies for the retail banking industry. Web.

Groeneveld, J., & Wagemakers, J. (2004). Retail bank strategies in Europe. Economic Research Department. Web.

Lele, U. (2000). The World Bank Forest Strategy: Sticking the Right Balance. Washington, DC: World Bank Publications.

Mishra, S. (2010). Engineering Economics and Costing. Philadelphia, PA: PHI Learning.

Mullineux, A., & Murinde, V. (2003). Handbook of International Banking. Cheltenham, UK: Edward Elgar Publishing.

Nath, R., Schrick, P., & Parzinger, M. (2001). Bankers’ perspective on Internet banking . E-Service Journal, 1 (1), (pp. 21-36). Web.

National Bank of Abu Dhabi. Official Website. Web.

Oxford Business Group. (2007). The Report: Abu Dhabi 2007. Dubai, UAE: Oxford Business Group.

PricewaterhouseCoopers. (2003). Tackling the key issues in banking and capital markets. Web.

Wonglimpiyarat, J. (2005). Strategies of Competition in the Bank Card Business: Innovation Management in a Complex Economic Environment. Brighton, BN: Sussex Academic Press.

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Essay on Bank | Bank Essay for Students and Children in English

February 13, 2024 by Prasanna

Essay on Bank:  Banks are financial institutions that provide a loan or save customer’s money. The term ‘Bank’ is derived from the word ‘Banc’ or ‘Banque,’ which means a bench upon which the ancient day financiers would display their coins or transact their business in the market space.

Banks are an elemental part of society. Banks are located in different parts of the country and deal directly with the general public. They provide multiple services on customer-based requirements and provide lockers, ATM Services, money transfer, loans for houses and businesses, and several other monetary services.

Thus, Bank (s)provides primary monetary services that boost the economic development of the country.

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Long and Short Essay on Bank for Students and Kids in English

We have mentioned two essays- a 500 words Long Essay and a 200 words Short Essay. The extended essay on Bank consists of 400-500 words. The Long essay provides a framework that helps students with their competitive exams and assignments. The short essay on Bank is written for 200 words and is suitable for children and kids with their classwork.

Long Essay On Bank 500 Words in English

Given below is an extended essay on Bank for aspirants of competitive exam and students belonging to classes 6,7,8,9, and 10. The Bank essay helps the students with their class assignments, comprehension tasks, and even for competitive examinations.

A bank is a licensed monetary institution to make loans and receive or deposit money. It provides financial services such as safe deposit boxes, wealth management, and currency exchange.

The inception of a Bank/Banking system in India goes back to the Vedic civilization. Loans were given to those in need and were then known to be the name ‘rnalekhya or rnapatra.’ As time evolved, Big merchants and business people started bidding interests on loans to farmers and small traders and the unpayable assets were confiscated.

The first Bank established in India was the Bank of Hindustan at Calcutta in the year 1770. This was followed the start of other banks such as Bank of Calcutta, Bank of Madras, and Bank of Bombay in the early 19th century.

Classifications of a Bank

• Commercial Bank:  Theses may be government-owned or a private bank. There are 20 major commercial banks
• Industrial or Investment Banks:  These banks provide long-term loans or other features to any industrial concerns.
• Exchange Banks:   These banks deal with the foreign exchange of currencies. A few Indian commercial banks also handle foreign currency exchange deals.
• Co-operative Banks:  These are set-up regarding small-scale industries and farmer’s concern. Co-operative banks are subcategorized as Central Co-operative Banks and State Co-operative Banks.
• Land Mortage Banks:  These banks provide loan-term debentures to agriculturalists and farmers.
• Central banks:  This Bank occupies the central position in the country and is the financial market’s statutory body.
• Saving Banks : these banks promote savings scheme among the middle-class families. However, the savings accounts are monitored by the commercial banks in India.
• Indigenous banks:  These lend money and finance the country’s internal trade.
• Regional Rural   Banks:  Theses banks are set-up by the central government for the economic development of rural regions. The commercial banks sponsor these banks.

Functions of a Bank

The essential function of a bank is to receive deposits. Theses deposits are received as fixed deposits- which have a limited time frame, current deposits- require no interests and are framed mainly for business people and savings bank deposits to encourage savings with a 5 percent interest rate.

Another primary function of a bank is to lend money through cash credits or loans, overdrafts, or discounting bills. The banks usually charge a higher interest rate while giving money.

The banks also perform various agency functions that provide services such as remitting funds, sell and purchase shares and bonds, collect and paycheck bills, subscriptions, rents, etc.

Importance of a Bank

A bank helps people cultivate the habit of saving and provides safe custody. It collects bills, drafts, cheques, and grants credit facilities and loans to people. It facilitates making payments and secures the overdrafts and loans.

A bank also provides safe custody of valuables such as deeds, ornaments, documents, jewels, etc. It also sells and purchases stocks, shares, etc. A bank is essential as it provides Credit information and a Letter of Credit and acts as representatives and makes correspondence.

Top 10 Indian Banks

• Bank of Baroda
• Punjab National Bank
• Canara Bank
• Bank of India

Thus, a bank forms an integral part of society and is a critical factor that boosts economic development in the country.

Short Essay on Bank 200 Words in English

The 200 words short essay mentioned below is suitable for kids and children up to 6th standard. The essay is written to guide the children with their school works-assignments and comprehension exercises.

A bank is a financial institution that provides funds based on credits to firms or individuals and accepts money deposits from the general public. A bank offers various functions such as transfer of funds, issuance of drafts, locker facility, portfolio management, etc. The first established Indian Bank is the Bank of Hindustan, located at Calcutta in 1770.

There are different types of functioning banks, such as Retail banks, national banks, investment banks, savings banks, co-operative banks, commercial banks, land mortgage banks, exchange banks, industrial banks, and consumer banks.

A bank provides multiple functions such as eases trade and commerce, promote agricultural sectors, ensure safe deposits, aids industrial developments, provides employment, and encourages saving habits.

A bank plays a vital role in the economic development of a country as it removes the deficiency of capital and encourages investment and savings. It resembles all the savings of society and makes it available for investment.

There are a total of 34 functioning banks in India; out of 12 banks are public sector banks, and the remaining 22 banks are private sector banks. The Top ten banks include

In short, Indian banks play an essential role in boosting the economic development of a country. It mobilizes the financial resources and flow of money in a society.

10 Lines on Bank Essay

•  Banks are government certified financial institutions that lend or receive money deposits.
• The Bank of Hindustan was the first Bank to be established in 1770 at Calcutta, while the State Bank of India, established in 1906, is the oldest functioning Bank.
• Banks provide long and short term loans to individuals and corporate firms.
• The Reserve Bank of India is a central monetary that controls and regulates the entire banking system- circulation of currency and credit.
• India comprises 34 functioning banks, out of which 12 are public sector banks, and the remaining 22 are private sector banks.
• There are multiple divisions in banks. However, the two primary classifications of a bank are Investment Banks and Commercial/Retail Banks.
• The primary purpose of a bank is to provide consumers with ease of financial issues.
• A bank plays a significant role in the economic development of a country. It aids in the removal of the deficiency of capital and encourages investment and savings.
• A bank also performs other services such as remitting funds, sell and purchase shares and bonds, collect and paycheck bills, subscriptions, rents, etc.
• The Bank acts as the lifeline of any economy and is significant for the development of a country.

FAQ’ On Bank Essay

Question 1. State the significant functions of a bank?

Answer: A bank’s primary function includes cash credits, overdrafts, discounting bills, granting loans, and accepting deposits. While their secondary duties include providing consumer finance, safe deposit for valuables, issues letter of credit, educational loans, etc.

Question 2. Which is the first Indian Bank?

Answer: The first Bank to be established in India was the Bank of Hindustan in 1770 at Calcutta.

Question 3. State the various types of banks?

Answer: A bank is classified as national banks, investment banks, retail banks, savings banks, industrial banks, co-operative banks, commercial banks, exchange banks, consumer banks, and land mortgage banks.

Question 4. Name the top ten Indian banks?

Answer: HDFC Bank, Axis Bank, IDFC Bank, SBI, Bank of Baroda, Punjab National Bank, ICICI Bank, Canara Bank, IDBI Bank, and Bank of India.

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