International Journal of Economics and Business Administration

 
Table 1. Key differences between traditional and digital models of banking 
Distinguishing features 
Traditional model 
Digital model 
Customer service time frame 
Limited. Service is carried 
out only at a clearly defined 
time 
Unlimited. Possibility of 
round-the-clock access
The speed of customer 
service 
Depends on the 
qualification and 
experience of the Bank 
employee
Immediate 
Approach to service 
Flexible, however, is 
limited to a small variety of 
service channels 
Flexible and carried out 
through any convenient 
channel for the client 
Maintenance cost 
High, taking into account 
the Bank's costs for the 
personnel and maintenance 
of departments 
Low, often services are 
provided free of charge 
Scope of service 
Limited branching of the 
branch network and 
staffing 
Unlimited, can go beyond 
the geographical location of 
the banking institution 
Status of the operator in the 
service process 
Functions of the operator is 
performed by an employee 
of the Bank
Functions of the operator 
are performed by the 
Bank's client 
The procedure for learning 
new services and promotions
Requires time and cost 
Carried out quickly, via 
SMS and e-mail newsletter

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Consumable component of 
the operation of the service 
system 
The key models are articles 
on the staff and 
maintenance of 
departments 
The key articles are articles 
for the purchase and 
maintenance of servers and 
software package
Competition in the banking sector is toughening, and without the introduction of new 
technologies into the service mechanism, even the strongest banks with a conservative 
strategy will lose a significant part of customers. By 2020, more than 20% of 
businesses in the financial services industry will be at risk due to the impact of the 
FinTech segment. For retail banking, this assessment is in the range of 20-60% of 
profits in the next 10 years (Belous and Lyalkov, 2017). However, updating the 
software does not solve the problem. It is necessary to make the structural 
transformation with the use of FinTech. 
The digital transformation of banks requires an integrated approach based on the 
development and application of a digital strategy. The digital transformation covers 
all the aspects of financial and credit activity, including the Bank management 
mechanisms, so the digital transformation of the banking sector should be aligned with 
other development strategies in order to develop solutions that contribute to maximum 
efficiency. The digital strategy should be aimed at solving four main tasks: the 
implementation of digital technologies, the transformation of the process of forming 
the cost of services, the financial aspect of digitalization, as well as changing the 
organizational structure (Matt et al., 2015). 
To successfully implement the digital strategy, it is necessary to coordinate the above-
mentioned areas of the development, which largely depends on the Bank's operating 
model. There is no general operating model suitable for all the banks, therefore, 
depending on the maturity of the bank, its structure, services provided, there are 
different models in the implementation of the digital strategy: 
1. Confederate model: This type of operating model is mainly applicable to large 
banks that conduct the digital transformation gradually, in various areas of their 
activity. In such a situation, some units are involved into the implementation of the 
digital strategy, independently regulating the flow of digital technology costs and 
applying new requirements for staff skills, while other departments may not 
participate in the digital transformation. It is expected that hereinafter, all employees 
of the bank will appreciate benefits of the digital transformation and will also enter 
into the implementation of this process. An example of this operating model is the 
transition to electronic document management: the innovation is transferred from 
division to division and eventually introduced into the Bank's activities on a regular 
basis. 
2. Shared services model: If the company has already passed the stage of awareness 
of the importance of the digital transformation and made the first steps towards the 
implementation of the digital strategy, then with the relatively large size of the Bank, 

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S.S. Galazova, L.R. Magomaeva 
 
47  
it is possible to use the so-called model of shared services based on the transfer of 
similar functions to one centralized department. The department responsible for 
performing certain operations becomes the center of shared services. This model is 
analogous to outsourcing, in which some functions are provided by an external counter 
agent. The main purpose of this operating model is to improve the coordination of 
actions within the bank and rationalization of business processes due to the lack of 
standard recurring activities, and, therefore, the cost of certain banking operations. 
3. The model of strategic competence centers: The next stage in the development of 
the bank's operating model in the context of the digital transformation is the formation 
of competence centers – a structural organizational unit that controls information 
systems and business processes through the collection and analysis of data and 
generation of ways to use them as efficiently as possible. This element of the 
organizational structure will allow to coordinate the implementation of the digital 
strategy, to predict trends in the market and to position the bank in order to improve 
its competitiveness. 
4. Digital operating model: This model can be implemented in banks that are in the 
final stages of the digital transformation; as a rule, the model is suitable for so-called 
"net players", that is, single-industry organizations. A digital platform for activity is a 
distinctive feature of the digital operating model. Nowadays, this model is used either 
in companies that provide services of mobile payment systems, or in banks, based on 
the modern on-line banking system.
In general, the banking sector is aimed at this stage of the development of operating 
models, as eventually, an increasing number of customers realize that to obtain a 
variety of banking products and services is not necessary to go to a branch of the bank, 
and a person can use the achievements of digital technologies. The introduction of 
digital financial innovations in the banking sector of the economy makes it urgent to 
create a general space that unites the banking business and the digital environment. 
The mechanism reflecting the transformation of the Russian banking system under the 
influence of various factors is presented in Figure 1. 
Experts of the international consulting firm A.T. Kearney (2014) distinguish three 
main approaches to the process of the digital transformation of the banking sector. 
The first approach, followed by 26% of banks in the world, is based on the 
introduction of digital technologies as a separate project, which does not imply a full-
scale digital transformation. In this case, the digital transformation is implemented 
gradually, based on long-term planning and the implementation of pilot projects. 
The second approach is implemented through the creation of a subsidiary, which was 
originally built to meet the needs of the digital economy. This is the most popular 
method of the digital transformation and it is used by 42% of banks. The advantages 
of the approach are a clear focus on the needs of customers in the long term, the 

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creation of teams within the organization, including specialists in various fields 
(information technology, software, analytics, marketing), thereby achieving high 
flexibility of the organizational structure, as well as the opportunity to test new 
direction of activity without damage for existing ones. 
The third approach to the digital transformation of banks is based on the recognition 
of digital technologies as the main value of the organization. This method can be 
combined with other approaches, but it implies a more complete implementation of 
the digital strategy through the transformation of all the internal and external processes 
of the bank. 32% of banks began the realization of the digital transformation with the 
help of this approach.