Master Thesis Digital Banking & Financial Technology

Thanks 
 
Upon completion of my thesis within MBA postgraduate program at the University of 
Piraeus, I would like to thank Dr. Dimitris Cambis as my supervising professor for 
his valuable help. 
 
 

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6 
Table of contents 
Abstract ............................................................................................................ 4
 
Table of contents ............................................................................................. 6
 
Table of Images ............................................................................................... 8
 
Introduction .................................................................................................... 10
 
References .................................................................................................... 12
 
Chapter 1: Digital Banking ............................................................................. 13
 
1.1. Short history of banking ................................................................... 13
 
1.2. Digital Banking ................................................................................. 13
 
1.3. New Trends ..................................................................................... 14
 
1.4. Advantages of Digital Banking ......................................................... 15
 
1.5. Disadvantages ................................................................................. 17
 
1.6. The digitalisation of banks in the face of the pandemic ................... 18
 
References ............................................................................................. 24
 
Chapter 2: Digital transformation of the banking system in Europe ............... 26
 
2.1. Digital transformation (DT) ............................................................... 26
 
2.2. The cost-benefit regulation on the traditional banking operations .... 28
 
2.2.1. Capital Requirements and Cost Efficiency ............................. 29
 
2.2.2. Liquidity Requirement and Cost Efficiency ............................ 30
 
2.2.3. Interest Rate and Cost Efficiency .......................................... 30
 
2.2.4. Quality of Funding and Cost Efficiency .................................. 31
 
2.2.5. Security Market Regulation and Cost Efficiency .................... 31
 
2.2.6. Bank size and Cost Efficiency ............................................... 31
 
2.2.7. Macroeconomic Environment and Cost Efficiency ................. 32
 
References ............................................................................................. 34
 
Chapter 3: FinTech companies ...................................................................... 37
 
3.1. Financial technology ........................................................................ 37
 
3.2. The industry's development ............................................................. 39
 
3.3. The FinTech business ecosystem ................................................... 41
 
3.4. The importance of financial technology companies ......................... 44
 
3.4.1. Financial Inclusion ................................................................. 44
 
3.4.2. Cost-Effective Option ............................................................. 46
 

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3.4.3. Fintech is Safe and Secure .................................................... 47
 
References ............................................................................................. 49
 
Chapter 4: Reform of the European banking system ..................................... 51
 
4.1. The characteristics of the existing framework .................................. 51
 
4.2. Crisis management for EU banks .................................................... 59
 
4.3. Developments in Greece ................................................................. 63
 
4.4. Policies in Greece ............................................................................ 68
 
References .................................................................................................... 70
 
Chapter 5: Central Bank Digital Currencies ................................................... 73
 
5.1. Definition .......................................................................................... 73
 
5.2. Types of CBDCs .............................................................................. 77
 
5.3. Cryptocurrency Vs CBDC ................................................................ 78
 
5.4. Benefits ............................................................................................ 79
 
5.5. Disadvantages ................................................................................. 82
 
References .................................................................................................... 85
 
Conclusions ................................................................................................... 91
 

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Table of Images 
Image 1 Traditional business models in the payment services sector 
(https://www.europarl.europa.eu/thinktank/en/document/IPOL_IDA(2021)689460)
 .......................................................................................................................... 17 
Image 2 Examples of new business models in the payments arena 
(https://www.europarl.europa.eu/thinktank/en/document/IPOL_IDA(2021)68946
0) ...................................................................................................................... 17 
Image 
3 
 
Potential 
benefits 
of 
the 
BaaS 
model 
(https://www.europarl.europa.eu/thinktank/en/document/IPOL_IDA(2021)68946
0) ...................................................................................................................... 19 
Image 4 Fintech ecosystem (https://www.gatewayhouse.in/big-fintech-is-here/) ..... 39 
Image 5 Percentage of adults with a bank or mobile depository account worldwide 
(https://plaid.com/resources/fintech/financial-inclusion/) ................................... 43 
Image 
6 
 
Overview 
of 
main 
causes 
of 
the 
EU 
financial 
crisis 
https://www.eca.europa.eu/lists/ecadocuments/rw20_05/rw_financial_crisis_pre
vention_en.pdf ................................................................................................. 49 
Image 7 Internal MREL for an expanded scope of non-resolution entities ............... 50 
Image 8 European institutions for financial supervision and resolution in a Banking 
Union ................................................................................................................ 51 
Image 
9 
 
table 
of 
vulnerabilities 
https://www.bankingsupervision.europa.eu/ecb/pub/ra/html/ssm.ra2021~edbbea
1f8f.en.html ....................................................................................................... 55 
Image 
10 
Four 
phases 
of 
crisis 
management 
for 
EU 
banks 
https://www.eca.europa.eu/lists/ecadocuments/rw20_05/rw_financial_crisis_prev
ention_en.pdf ................................................................................................... 57 
Image 11 Evolution of the stock of gross nonperforming loans and the corresponding 
non-performing 
loans 
ratio 
for 
Greek 
banks 
https://economy-
finance.ec.europa.eu/system/files/2022-11/ip191_en.pdf ................................. 60 
Image 
12 
Bank 
credit 
and 
deposit 
trends 
https://economy-
finance.ec.europa.eu/system/files/2022-11/ip191_en.pdf ................................. 64 
Image 
13 
Bank 
credit 
and 
deposit 
trends 
https://economy-
finance.ec.europa.eu/system/files/2022-11/ip191_en.pdf ................................. 64 
Image 14 Possible Future: The introduction of CBDC could remove risk from users, 
and 
allow 
banks 
to 
focus 
on 
services. 

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https://blog.digitalasset.com/developers/what-is-a-central-bank-digital-currency-
and-why-should-people-prefer-cbdc-over-bank-accounts ................................. 71 
Image 
15 
The 
two 
main 
types 
of 
CBDCs 
https://corporatefinanceinstitute.com/resources/cryptocurrency/central-bank-
digital-currency-cbdc/ ....................................................................................... 74 
Image 
16 
Bank 
of 
International 
Settlements, 
The 
CBDC 
Pyramid. 
https://doi.org/10.1080/05775132.2021.2004738 ................................................... 81 

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Introduction 
Much progress has been achieved by financial institutions on their digital 
banking transformation journeys, although levels of maturity vary. Others are still in 
the nascent phases. As with most of the shift occurring in the financial services 
business, the largest financial institutions have demonstrated the best results and 
highest level of maturity. The smallest banks and credit unions have also 
experienced some progress, although the majority of midsized enterprises ($10 
billion to $100 billion) have lagged behind the market as a whole (Marous, 2022). 
There are various elements that can influence the amount of digital banking 
transformation maturity of financial organizations. They include the organization's 
size and complexity, the level of investment in digital technology, the level of 
regulatory compliance currently in place, and the level of client demand for digital 
banking capabilities. The good news is that there are a variety of choices for working 
with third-party providers who can execute digital banking transformation solutions 
more quickly than in-house solutions. In addition to updating their systems and 
operations, incumbent institutions can also form partnerships with fintech and big 
tech rivals (Marous, 2022). 
Many underlying themes influence the prioritization of investment and the 
advancement of digital banking transformation as we enter 2023. One of the most 
significant underlying trends is the ongoing expansion of digital banking usage and 
client expectations. As more consumers adopt smartphones and other mobile 
devices, banks are increasingly emphasizing the development of mobile-first 
strategies and mobile-optimized services. This includes mobile payments, mobile 
check deposits, and other services that make managing finances on the go easier for 
customers. The use of artificial intelligence (AI) and machine learning is a topic that is 
garnering a tremendous lot of attention, but is still exceedingly difficult for enterprises 
to adopt and deploy. In addition to utilizing AI and machine learning to boost 
cybersecurity and prevent fraud, banks and credit unions are employing 
sophisticated analytics to improve the accuracy and efficiency of operations and to 
create personalized client experiences. This includes offering customers with time-
sensitive, individualized product recommendations to improve their financial health 
(Marous, 2022). 
When digital banking transformation happens, financial institutions must consider 
modifying their current business model to meet the changing needs of the market 

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and to remain competitive as new competitors enter the market. It is certain that 
addressing the client experience will be at the core of future business model 
innovation. Financial institutions will prioritize enhancing the client experience by 
providing tailored services, enhancing the value proposition, streamlining distribution 
channels, and leveraging technology to make banking more convenient and efficient 
(Marous, 2022).
The purpose of this paper was to examine the phenomenon of digitalization of banks, 
the use of new technologies by financial institutions and related frameworks, and new 
trends in the digital banking industry. The methodology that was employed for this 
dissertation was an integrative literature review, constructing knowledge based on 
academic literature, recent reports and articles. 

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References 
Marous, J. (2022). Digital Banking Transformation Trends for 2023.