International Journal of Economics and Business Administration

The Transformation of Traditional Banking Activity in Digital 

 
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financial innovations can partly be included into the concept of "digital economy", 
while the functioning of FinTech without digital technologies is almost impossible. 
Financial technologies are a transformed service that is provided through IT 
technologies, solutions and data not used before, that allows it to be delivered at a 
higher level of utility. The inevitability of the ever-increasing use of digital financial 
innovations in banking leads to a dual effect: 
– on the one hand, the activation of new technologies leads to the modernization of 
banking services, increasing the availability of banking services and the speed of their 
provision, which increases the demand for them and leads to an increase in the 
profitability of institutions by balancing the margin provided in turn by reducing 
transaction costs; 
– on the other hand, the active transfer of transactions to the digital field, as well as 
the threat of reducing their cybersecurity, increase the risks associated with banking 
activity; however, the refusal to develop financial technologies in the work of the 
organization will lead to even more negative consequences. 
The financial capacity of banks allows them to make significant investments into 
innovation. However, if until recently, the main task of IT-departments of banks was 
the implementation of business goals with the use of digital technologies set by top 
management, in the era of digital transformation there are tasks of a complete 
rethinking of the business idea.
Thus, we can see that first, there is a transformation 
of IT-architecture of banks, allowing to use such innovative IT-technologies as: 
- cloud technologies and big data (Bigdata). Cloud technologies provide access to data 
without installing special applications on the device, which allows banks to offer their 
products anywhere in the world through the centralization of services on the network. 
Big data, in turn, provides customers with personal targeted proposals based on the 
analysis of heterogeneous and fast-flowing digital information, the sources of which 
are the Internet, corporate archives of documents, sensor readings, instruments, etc.; 
- API (Application Programming Interface, i.e., appendix programming interface, 
application programming interface) integrated into customer interaction systems. An 
API is a set of prepared classes, procedures, functions, structures, and constants that 
are provided by an appendix, service, or operating system for the use in external 
software products (Pshenichnikov, 2018); 
- social media and mobile communication with special appendix. Integration of 
banking business with social networks allows to provide information about customer 
preferences. Examples of successful implementation of such relations in retail is 
Amazon, in the banking sector is Deutsche Bank.
Digital transformation is achieved 
through a full-fledged study of customer experience and analysis of both existing 
needs and the identification of new ones. It is the consumers of banking services that 
are the driving force of innovative development of banks, as they form requirements 
for modern banking products and services through the expression of their needs. 

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S.S. Galazova, L.R. Magomaeva 
 
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Clients evaluate their experience of interaction with banks depending on how easy and 
comfortable it was for them to receive some service, so the banking sector should 
constantly study the experience of work with clients, identify shortcomings in their 
work, since new customers with require the use of even more modern technologies. 
Before the efficiency of banking was assessed by increasing the target sales of 
products and services, but in the era of the digital economy, banks must reckon with 
modern digital challenges: now banks are becoming more focused on customers with 
their urgent needs. 
Billions of potential customers can be served using a mobile phone with Internet 
access, which forces banks to constantly improve the applied digital technologies in 
order to maintain competitive advantages. Barclays Bank was one of the first banks 
introduced an online banking system: customers now visit the Bank's branches on 
average twice a month, while mobile banking services are used up to 18 times a month 
(Shukla, 2016). 
According to Pshenichnikov (2018), the introduction of the above technological 
components into the banking sector made it possible to form a new model of banking 
services, which is a whole ecosystem of value exchange. Its main differences from the 
traditional model of banking business are presented in the Table 1.