Revolution in the Banking Sector

Since ancient times, mankind has faced financial duties such as managing taxes or trading

money. From storing coins and expensive jewels in the basements of temples to being able to

reserve money in banks and controlling it with the help of electronic devices, it is evident that

efforts have been made to apply the most convenient systems. As money holds a salient role in

the lives of any individual, managing it requires the most efficient system to be implemented.

Conventional wisdom has it that the implementation of digitalization in banking systems is not

necessary and that traditional banking systems fulfill all the financial requirements. With the

increasing innovation in the technology field, however, it would be absurd to ignore the

significant benefits these digital systems provide. Therefore, although some argue that traditional

banking systems are still more efficient than digital ones, adopting digitalization in the banking

sector could improve the system in a matter of time and efficiency.

The first argument advanced by opponents is that the delivery time of transactions in the

digital banking system is more time-consuming than in traditional ones. Usually, there are fewer

ATMs for online banks which makes it inconvenient and time taking to get these processes done

(Revathi, 2019). Although it is true that traditional banking systems have adopted more access to

automated machines, it is more time-consuming to complete your transactions in fixed places

since they restrict the places where the transactions could be done (Chen et al.,2017). With the

help of innovation, digital banking systems do not demand an ATM, for example; all the money

imports and exports could be done online with the help of online terminals whenever and

wherever it is needed (Chen et al.,2017). Therefore, the adoption of digital wallets encouraged

the creation of more efficient systems (Arner et al.,2020).

when inconvenient and exceptional situations occur than digital ones. Money is a major factor in

human life and no matter what the situation is, traditional banks will still continue to provide

their services. However, during the Covid-19 period, for example, banks limited their services

and people had to keep their social distance which resulted in an increased amount of time spent

in banks to fulfill their required work. This caused some people to change their preferred bank

systems to online ones because they did not require any direct human interaction or leaving the

house (Arner et al.,2020). Due to the increasing demand for online banking systems, banks

evolved in terms of learning to digitalize and communicate with customers efficiently and reduce

the time spent on operations to a minimum (Mapping banking's digital future,2020). Therefore,

with the encouragement of crisis, digitalized banks provide more appropriate services than

traditional banking systems.

The final argument of those who support traditional banks is that they attract and have

more loyal customers compared to those digital banks. It is important for banks to create loyalty

between their services and customers to gain more profit and prevent them from choosing

another bank (Hendriyani & Raharja,2018). According to Mittal and Agrawal (2015), customer

satisfaction leads to customer loyalty. In traditional banking systems, customer satisfaction

depends on employees' attitudes and the services they encounter. Because there is face-to-face

interaction with the customers, usually they can get the answers they need immediately which

leads to higher satisfaction and loyalty, respectively (Mittal and Agrawal, 2015). However,

having access to this facility does not always show positive reactions from customers. In some

cases, due to not having employees who are skilled at answering and solving issues provided by

the customers, banks lose their clients because of the unfavorable treatment they encounter from
the staff (Mittal and Agrawal, 2015). Also, when customers face long waiting lines, they get

negative impressions from the banks which also decreases customer satisfaction (Mittal and

Agrawal, 2015). Digital banking systems, on the other hand, provide their services online in a

more practical way. This kind of banking system does not require any physical interaction or

waste of time spent on lines because all the processes are done with the help of electronic

devices that can be controlled from home. Digital banks can create abiding and profound

relationships with their customers with the help of E-CRM (“electronic customer relationship

management” (Hendriyani & Raharja,2018)). E-CRM uses digital communication technologies

(e.g., “operational databases, websites, customer service, e-mail, and social media marketing”

(Kumar, 2015)) which help the company to get in contact with its current and potential

customers to figure out its customer retention costs (Hendriyani & Raharja,2018). Customer

engagement is a vital factor that influences customer loyalty; therefore, the contribution of E-

CRM could create affinity between customers and digital banks which will lead to reliable

customers.

In conclusion, it is obvious that although traditional banking systems possess certain

advantages such as providing ATMs all around the country with easy access, digital banking

systems’ potential benefits overcome them. People like to reduce excess time spent on duties

such as managing financial responsibilities and choosing a bank that has adopted the most

convenient system is certainly a goal of many. With the increasing demand for feasible services,

banks should reconsider the structure of their banking systems and slowly switch to online ones;

they make the transactional processes much faster and effortless by providing online applications

and services which can be managed from everywhere and do not limit access to their services in

cases of inconveniences. Moreover, one of the central aim of banks is to make customers happy
and engaged; being able to employ the facilities provided by online systems with no limitation in

the matter of time and place, gradually increases the number of loyal customers. Nowadays,

some banks do benefit from digital access to banking systems such as Judo Bank; however, the

number of digital banks throughout the world is comparatively small to traditional banks. By

encouraging banks that work traditionally, by presenting the potential benefits of online banking,

the number of online banks could increase; thus, making customers more willing to choose the

most efficient service offered in the banking sector.

Mittal, D., & Agrawal, S. R. (2015). The effects of traditional practices on modern banking

system . International Journal of Bank Marketing, 476-500.

Mapping banking's digital future. (2020). The Banker, 1-4.

Chen, Z., Li, Y., Wu, Y., & Luo, J. (2017). The transition from traditional banking to mobile

internet finance: an organizational innovation perspective - a comparative study of

Citibank and ICBC. Financial Innovation, 1-16.

Arner, D. W., Barberis, J. N., Walker, J., Buckley, R. P., Dahdal, A. M., & Zetzsche, D. A.

(2020). Digital Finance & The COVID-19 Crisis. University of Hong Kong Faculty of

Law Research Paper No. 2020/017, 1-24.

Hendriyani , C., & Raharja , S. J. (2018). Analysis building customer engagement through e-

CRM in the era of digital banking in Indonesia . International Journal of Economic

Policy in Emerging Economies, 479-486.

Revathi, P. (2019). DIGITAL BANKING CHALLENGES AND OPPORTUNITIES IN INDIA.

EPRA International Journal of Economic and Business Review, 20-23.