Technologies of the day, such as digital banks and their role in the financial future, have created significant growth in the world of economics. This revolution has improved the relationship between customers and banks, and consequently, with financial markets and their performance quality. With this remarkable development, the banking industry is reducing its costs more each day than before. Resource management has also benefited from these changes. The future of banks, with this growing trend, has new horizons ahead.
What Is Digital Banking?
The broad concept of digital banking refers to the modern process of this industry, striving to minimize and even eliminate the need for physical visits to bank branches. Transferring all banking operations to the virtual world and under digital processes has had profound effects on the financial turnover of these financial centers. With these characteristics, digital banks and their role in the financial future will cast a very prominent shadow over financial markets; because they are the ones who introduce large capitals into the banking system of countries and influence their power.
Features of Digital Banking
Digital banking systems, along with the extensive transformations they bring, also acquire different characteristics, some of which are:
- High speed
- System agility and dynamism
- No need for physical presence
- Significant time-saving
- Conducting banking processes and operations using small devices like mobile phones and similar devices
- The possibility of performing all necessary banking and financial activities online, such as: fund transfers, check issuance, personal account funding, installment payments, bill payments, and…
The Relationship Between Banks and Financial Markets
The relationship between banks and financial markets is defined as one of the most powerful systemic connections, linking the banking system of countries with the capitalist system. Markets are the main financial sources for banks, and any change in these sources can also affect banking institutions as important economic centers of the government.
Banks are symbols and representatives of the monetary system, and financial markets are symbols of the capitalist system; therefore, without examining banking systems and being aware of their role, one cannot understand the performance of financial markets and analyze them.
The banking system of each country plays the most prominent role in the development and progress of that society’s economy and has responsibilities such as providing financial resources for companies and investors, boosting commercial exchanges, and facilitating the implementation of monetary policies. On the other hand, markets also strive to allocate these financial resources correctly, create fair incomes, provide a way for converting and dividing large ownerships into small and equitable ownerships, and influence the alignment of savers and investors.
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With these prominent roles, it is very important to study digital banks and their role in the financial future; because these two institutions have common functions, such as:
- Acting as intermediaries between public savings and the realization of investment projects
- Appearing as two competitors that boost the economic condition.
Digital Banks and Their Role in the Financial Future
Understanding the relationship between the banking system and markets better enables us to comprehend the technological changes and digital transformations in their performance in financial markets. Digital banks and their role in the financial future are one of the most important economic topics today; because, as mentioned, banks play a complementary role for various financial markets; therefore, their digitization, which leads to even faster agility and higher speed of this powerful financial institution, also increases the market pace and enhances the intensity of financial transactions.
We will try to introduce more about the impacts that the digital banking system has on the performance of financial systems and economies:
Changing the Way Financial Resources Are Provided
Traditional banking employed different methods to provide the necessary capital, but the introduction of technology changes the way capital is collected and financial institutions make payments. Digital methods provide suitable financial services for small businesses, startups, and similar cases, significantly reducing costs such as insurance premiums for risks prevalent in the traditional method and operational and execution-related costs of that method.
Impact on Structures
The introduction of digital technologies first shows its effect on the formation or change of structures. With this form of banking, the gap between smaller assets and businesses and large and powerful businesses is reduced, and under such conditions, companies and institutions with medium power will have better conditions and more opportunities to access financial resources and capital collection systems, thus forcing existing structures to change.
Facilitating Conditions for Investors
Studying digital banks and their role in the financial future provides us with clear perspectives on the operational methods of banking systems. As much as medium and small companies faced serious difficulties in accessing capital resources in the traditional banking system and were deprived of financial resources due to the lack of sufficient supervision, modern technologies provide them with the opportunity to be in the sight of investors and be recognized more and better.
New models reveal smart algorithms that easily introduce new business models and, with the analysis of extensive data and the use of artificial intelligence and other advanced and related technologies, offer strong solutions to solve investors’ problems.
Examining the extensive roles that digital banks have in shaping the economic conditions of the future world, there is still much room for further studies and identification of the roles and broader impacts of these institutions, which should be considered by researchers and economic experts.
Conclusion
With the entry of new technologies and the expansion of modern technologies that have entered different dimensions of societies, traditional banking systems have not been spared. For years, the system of digital banks and their role in the financial future has gained significant importance and has left a remarkable impact on market behavior patterns and economic situations, among which facilitating the provision of financial resources for markets and financial companies is considered one of the most important.
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By David Taha