# Digital transformation in banking
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-08-18
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: Why Digital Banking is the Future of Retail Banking
Meta Description: Discover how digital innovation is reshaping the retail banking industry and learn why customers are demanding more from their banking experience.
URL: https://financedigest.com/digital-transformation-in-bankinghtml

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_By **Manoj Mistry,** Managing Director of international banking network_ [_IBOS Association_](https://www.ibosassociation.com/)

Retail banking has always been focused on two key factors: the customer journey and the user experience. Traditionally, these were delivered through a network of bank branches and via personal relationships developed over time with managers and staff in a designated branch. This has now changed to such an extent that face-to-face retail banking is already becoming a thing of the past. Even where physical branches still exist in significant numbers, their demise seems all but inevitable.

Still in its infancy, this revolution in [digital transformation](https://www.financedigest.com/world-class-finance-digital-transformation-and-analytics-based-decision-making-among-key-imperatives-for-creating-finance-agility.html "World-Class Finance: Digital Transformation and Analytics-Based Decision Making Among Key Imperatives for Creating Finance Agility") has occurred in parallel with, and because of, technology. The advent of digital banking and the [transformation](https://www.financedigest.com/transforming-the-retail-banking-ecosystem-its-all-about-technological-innovation.html "TRANSFORMING THE RETAIL BANKING ECOSYSTEM: IT’S ALL ABOUT TECHNOLOGICAL INNOVATION") it has brought is arguably the most profound and significant game changer for the business of banking since Gutenberg and Caxton brought the printing press to market and illuminated manuscripts were consigned to history.

So why is [banking going digital](https://www.financedigest.com/britains-digital-banks-need-support-amid-banking-turmoil-trade-body.html "Britain’s digital banks need support amid banking turmoil – trade body")? The answer can be summarised in one word: demand. Compared to the traditional [retail bank](https://www.financedigest.com/uk-retail-banks-is-irrelevance-curtailing-opportunity.html "UK Retail Banks: Is Irrelevance Curtailing Opportunity?") offering, digital banking is always quicker and often cheaper, as well as being universally accessible to individual customers, 24/7, wherever they are based and without the need to queue. In practical terms, it has led to a significant reduction in the paper trail of documents which has been increasingly superseded by digital records which are viewable online. In turn, the modern user journey for new customers feels rather less like stepping into a [bricks and mortar](https://www.financedigest.com/35-days-after-the-brexit-vote-uk-bricks-mortar-are-far-from-crumbling.html "35 days after the Brexit vote, UK bricks & mortar are far from crumbling") bank, and rather more like logging onto Amazon.

As technology develops, an ever more sophisticated range of [digital banking services](https://www.financedigest.com/how-to-enhance-banking-services-with-digital-performance-intelligence.html "HOW TO ENHANCE BANKING SERVICES WITH DIGITAL PERFORMANCE INTELLIGENCE") is now available to bank customers. In turn, this is continuously reshaping [customer attitudes and expectations of what a bank](https://www.financedigest.com/christmas-debt-hangovers-how-banks-can-help-customers.html "CHRISTMAS DEBT HANGOVERS: HOW BANKS CAN HELP CUSTOMERS") can and should provide. As a result, they feel more empowered and more entitled; they are demanding an easy and seamless fully customised service; and they expect [banking to feel more like every other online](https://www.financedigest.com/dutch-online-bank-bunq-applies-for-u-s-banking-licence.html "Dutch online bank Bunq applies for U.S. banking licence") service that they use.

In their response, [banks need to continue innovating and delivering in order to meet](https://www.financedigest.com/banking-stability-worries-go-behind-closed-doors-at-imf-world-bank-meetings.html "Banking stability worries go behind closed doors at IMF-World Bank meetings") this growing set of customer demands and expectations. Meanwhile, the advent of [open banking has already led to banks releasing their data](https://www.financedigest.com/open-data-represents-the-biggest-challenge-to-banks-in-a-generation.html "Open data represents the biggest challenge to banks in a generation") in a secure, standardised form, so that it can be shared more easily between authorised organisations online.

Fuelled by continuous innovation, [digital technology is creating unique customer experiences in online banking](https://www.financedigest.com/how-will-the-introduction-of-digital-banking-impact-customer-perception-and-overall-loyalty.html "HOW WILL THE INTRODUCTION OF DIGITAL BANKING IMPACT CUSTOMER PERCEPTION AND OVERALL LOYALTY?"), as a wealth of new products and services are created to target customers’ specific needs. As their expectations continue to evolve, so does the digital [bank offering](https://www.financedigest.com/first-abu-dhabi-bank-reiterates-not-eyeing-offer-for-standard-chartered.html "First Abu Dhabi Bank reiterates not eyeing offer for Standard Chartered"). Digital innovation in the customer offering is increasingly driven by cutting-edge technology, such as [artificial intelligence](https://www.financedigest.com/artificial-intelligence-in-banking-magazine.html "Artificial Intelligence in Banking Magazine") (AI), blockchain, crowdfunding and cloud computing.

Fintech firms, which continue to grow in size and reach, are helping to drive faster change within the [banking sector](https://www.financedigest.com/big-ecb-hike-adds-fuel-to-the-banking-sector-fire.html "Big ECB hike adds fuel to the banking sector fire"). Most notably, [challenger banks](https://www.financedigest.com/big-banks-can-be-challengers-too.html "Big banks can be challengers too") have manifestly been quicker and nimbler in adapting their range of services to meet customer demand, delivering the right change at the right time.

For traditional banks, keeping up with [customer demand](https://www.financedigest.com/meeting-both-operational-and-customer-demands-how-insurance-can-adapt-in-a-disrupted-world.html "Meeting both operational and customer demands – how insurance can adapt in a disrupted world") is imperative. In order to do so, they need to emulate the challengers’ strategy: devoting sufficient time and resources into evaluating exactly what [customers now want and expect from their provider](https://www.financedigest.com/banks-can-provide-a-protective-shield-to-defend-customers-from-cyber-attack.html "Banks can provide a protective shield to defend customers from cyber attack"). In addition to expanding their own range of digital services, they are also looking to acquire digital [challenger banks](https://www.financedigest.com/5-things-to-consider-when-choosing-a-challenger-bank.html "5 Things to Consider When Choosing a Challenger Bank") to give them a stake in this growing sub-sector.

Traditional [banks are also emulating fintech challengers by enhancing the overall customer experience](https://www.financedigest.com/transforming-the-banking-experience-to-be-mobile-first-and-people-centric.html "Transforming the banking experience to be mobile-first and people-centric") in their digital offering.  The best-known challenger brands, such as Monzo, Revolut and Starling, understand their customers – primarily millennials who [expect instant online service](https://www.financedigest.com/what-to-expect-in-2022-financial-services-trends-according-to-salesforce.html "What to expect in 2022? Financial Services Trends, according to Salesforce"). They crave simplicity and ease, as with everything else that they experience via their smartphones. By making their services entirely digital, challenger [banks understand their preferences and adapt accordingly to tailor their offering of complementary products and services](https://www.financedigest.com/britain-seeks-to-boost-banking-services-from-fintechs.html "Britain seeks to boost banking services from fintechs").

Digital [banking not only means](https://www.financedigest.com/banking-turmoil-means-recession-fears-are-creeping-back.html "Banking turmoil means recession fears are creeping back") meeting current customer expectations, but anticipating new ones as technology advances. That means leveraging [data insights and offering a better-personalised experience along with a fully digital](https://www.financedigest.com/why-data-is-the-best-weapon-in-the-war-for-digital-talent.html "Why data is the best weapon in the war for digital talent") experience – offering customers what they want and then adding some more.

Traditional [banks are also fighting a digital battle](https://www.financedigest.com/swiss-national-bank-says-inflation-battle-not-yet-won.html "Swiss National Bank says inflation battle not yet won") on other fronts. As they compete less with other traditional banks, they are fighting more often with new, finance-related apps that make traditional [banking](https://www.financedigest.com/why-pay-by-bank-app-will-come-into-its-own-in-2022.html "Why Pay by Bank App will come into its own in 2022 ") apps appear dated and rigid. In response Banking as a Service (BaaS) has evolved – a model through which licensed banks [integrate their digital](https://www.financedigest.com/what-is-id-and-verification-and-why-is-it-such-an-integral-part-of-digital-life.html "What Is ID and Verification and Why is it Such an Integral Part of Digital Life?") banking services directly into the products of other non-bank businesses. This allows [non-bank businesses, such as airlines, to offer their customers digital banking services – mobile bank accounts](https://www.financedigest.com/are-banks-ready-for-the-new-accountability-regime-in-2016.html "ARE BANKS READY FOR THE NEW ACCOUNTABILITY REGIME IN 2016?"), debit cards, loans and payment services – without needing to acquire their own banking licence.

As banks reconfigure and revise their business model to accommodate and adjust to the needs of [digital transformation](https://www.financedigest.com/5-key-takeaways-from-the-finance-sectors-digital-transformation-revolution.html "5 Key Takeaways From the Finance Sector’s Digital Transformation Revolution"), the pace of change will continue apace. It is likely that by the end of this decade the world of retail banking will have [changed](https://www.financedigest.com/exclusive-world-bank-seeks-more-funds-to-address-climate-change-other-crises-document.html "Exclusive-World Bank seeks more funds to address climate change, other crises -document") much further still as traditional banks fully embrace the digital model. Their customers will demand it.


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