IUP Journal of Bank Management | Journals

The IUP Journal of Bank Management

Technological Evolution and Emergence of New Banking Models

Article Details

Pub. Date	: May, 2022
Product Name	: The IUP Journal of Bank Management
Product Type	: Article
Product Code	: IJBM010522
Author Name	: Sarita Bhatnagar
Availability	: YES
Subject/Domain	: Finance
Download Format	: PDF Format
No. of Pages	:09

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Abstract

The banking sector at present is witnessing significant changes, largely driven by technological developments. The banking ecosystem has undergone impactful alterations as a result of technological advancements in customer choice and access, as well as the increasing influence of fintech and other technology companies. Application Programming Interface (API) and open banking systems have led to the emergence of new banking business models. The paper traces the evolution of technology in banking, and the role of major technologies in bringing about changes in the banking ecosystem. It further explores the emerging banking business models. These models reflect the innovations in banking, resulting in increased customer access, choice, convenience, and personalization.The banking sector at present is witnessing significant changes, largely driven by technological developments. The banking ecosystem has undergone impactful alterations as a result of technological advancements in customer choice and access, as well as the increasing influence of fintech and other technology companies. Application Programming Interface (API) and open banking systems have led to the emergence of new banking business models. The paper traces the evolution of technology in banking, and the role of major technologies in bringing about changes in the banking ecosystem. It further explores the emerging banking business models. These models reflect the innovations in banking, resulting in increased customer access, choice, convenience, and personalization.

Introduction

Technology advancement has been a major factor in the revolution that the banking sector has been experiencing in recent years. Technology proliferation has led to the entry of a new set of competitors in banking and financial services from diverse industries. Customers are also more empowered and informed and have wider choices in accessing financial services. With the ubiquity of mobile phones and the rapid adoption of online services in retail and other businesses, customers are becoming more sophisticated in terms of consumption of services. In this context, there is a movement towards new value creation and value delivery processes in the banking sector.

Digital innovation has led to improvements in connectivity, data access, data usability and computing power. The major implications of these improvements are in the form of a reduction in transaction costs and the emergence of new business models and entrants. Increased information exchange and reduced transaction costs increase the possibility of disaggregation of the production of financial services. Consumers will be able to assemble their preferred products as there is an unbundling of products by specialized players (Feyen et al., 2021). With fintechs and bigtechs entering the financial services sector, incumbent banks are moving towards adopting new platform-based business models. The key dimensions of these models are big data analytics, automation, and partnering with Third-Party Providers (TPPs). Customers thus