Digital Technologies in Transformation of Classical Retail Bank into Digital Bank

Abstract — This paper consideres, proposes and describes possibilities and methods for using digital electronic technologies for transformation of classical banks into modern digital banks. Digital electronic technologies are widely used, including banking, bank operations and services as one of important sectors. Application of different types of digital technologies, including computers, computer networks, digital communication, Internet and information and communication technologies, with appropriate software, enables increasing speed, security and efficiency of all banking operations and services. It gives many benefits and advantages to the banks and to users of banking services. Way to use modern digital technologies to effectively transform classical financial data bank into digital data bank on the example of typical commercial/retail bank is proposed and described. It is also proposed organizational model of the digital bank. Advantages of using digital technologies and digital banks compared with classical banks are given. Keywords — Digital electronic technologies, Information technologies, Bank transformation, Classical bank, Digital bank.


Modernization of banks, banking sector, financial institutions and financial sector necessarily involves introduction and application of modern digital electronic technologies based on using different kinds of computer systems, computer system networks, digital communication, Internet, mobile phones and similarly. It also needs appropriate data bases and software applications (APP) for different needed bank services. All it increases speed, security and efficiency of all banking and financial operations and services. It also brings many benefits and advantages to the banks and to users/clients of bank services. All this processes lead to transformation of banks from classical financial retail data banks into modern digital data banks [1-5]. Possibility and way to apply modern digital electronic technologies for efective transformation of classical financial data bank into digital data bank are considered, proposed and described in the paper. The process of transformation was ilustrated via proposed transformation phases on example of a commercial bank. Organizational model of the digital bank and organization of the bank information system were also proposed and given.


The classical bank with its the biggest part is a retail bank. Such banks are waiting for the clients to come into tha bank premises with their requests and needs for the services. Such way of work creates many problems and disadvantages to clients and to banks. Clients need to go to the bank premises and to wait for the service wasting their time. Banks need to provide enough premises and space for the clients and enough personal for the services. It is also well known that it is very hard to adapt the classical bank to use growing power of digital and mobile electronic technologies and devices. In the time of appearance of the computers, data base servers and communication links banks were one of the leaders in the introduction of the new technologies. But, the latest expansion of digital and mobile technologies and devices banks were received quite unprepared. The main reason is in the classical retail bank organization that is impossible to be adjusted, without significant changes, to new technology, in the way it takes full advantage of it. The basis of the classical bank is the Central Unit. The unit includes the strategic and operational management of the bank, information technologies (IT) center, marketing, call center, back office, accounting, legal service, head of retail and corporate and other support services. Fig. 1 shows principle of typical classical bank organization. The Central Unit dictates the working procedures, designs and puts the products on the market, manages the operation of the bank network. The bank network consists of belonging branches, agencies and counters. Recently, the bank network was expanded with automated teller machine (ATM) and point of sale (POS) devices. That in some way represents a limited usage of modern digital technologies. The basic problem of this approach is the fact that the modern person/client, through the use of modern digital and mobile technologies, mobile smart phones and mobile computers, more and more information and services receives remotely using such devices. So, the need of client to come in the bank for a service becomes unnecessary and very rare. But, the basic concept of classical bank is to attract clients to visit their branches and offices. Banks try to use modern digital and IT technologies, but in a wrong way. Banks send emails and text messages, publish information on their web pages in order to attract clients to visit their offices. But, that is a real problem. Modern client would like to be able to get banking services on their mobile devices and to be able to realize the services from home, from working place, when is on a journey, etc. But, the concept of the classical bank is still to do everything to attract client to visit bank office and to present and sell to lient products there. It should to be changed and to enable clients to use and obtain banking services from anywhere and at any time.

Fig. 1. Model of classical bank organization In order to somehow satisfy the wishes of clients, banks have begun to develop and deliver electronic and mobile banking as a products. Exactly these products, when are popularized and expanded, show the correctness of the proposal that way of working and organization of the banks should to be changed. With this new aproach, more and more bank services client can use via mobile devices. It shows that the network of branches, agencies and counters becomes unnecessary in the form it is now. Simple cost and benefit analysis would show that branches cost more and more, with less and less of profit. Client habits are increasingly moving in other direction. The only thing that still keeps branches is the legal regulation of the Banking Agencies. It still requires need for client to be physically present in certain banking services (physical identification, signature on paper, etc.) [1-3]. Classical organization also implies a classical way of client treatment. It becomes too official and refuses modern client from the bank. Good examples of such bank behavior are the exchange rates in branch offices and on the web pages. The exchange rate tables do not understand even the majority of employees in the bank and clients also do not understand it. In addition to the listed arguments caused by the usage of digital and mobile technology and changes in the habits and wishes of clients, there is another important fact for proposing and why the process of transformation from the classical into a digital bank is natural and unavoidable. Almost all of banking products and services have become of virtual type. So, with the withdrawal of the cash from the usage, the last real product will be lost from the use in the banks. Also, it is known that every virtual product and service can be described algorithmically, software processed and automated (the API function is a modern name for it). If it is accepted as true, then arises the logical question and problem for the banks. What about the fact that at this moment banks have a large number of branches, most often in their possession and what to do with them? The solution is to conduct the bank transformation from a classical (retail) to a modern (digital) bank. The possible way of the transformation is proposed here.