The financial digitalization concept refers to the complexity of the subject, on the one hand, digitalization, a technical concept, on the other hand, financial, a very important business sector in Spain.
In Physics there are many analog and digital processes, in mechanics, electronics…they indicate continuous (analog) or discontinuous (digital) processes, which are produced or stopped at certain values, a switch to turn on the light is a digital element, in one position there is no light, off, in another there is, on.
But in this context, it’s just another marketing term, which indicates, technology, it doesn’t matter if it has analogical or digital components, because what matters is the use that, as users of a product, we are going to give it, it doesn’t matter if it is logical (software, a new program, an app…) or physical (hardware, a PC, a tablet…).
Two of the great technological, digital events that are currently changing the world are the Internet and mobile phones. This change has not only affected the financial system, but also the rest of the industries, shops and services.
The most executed transaction in any bank is the consultation of current account movements. In the past, there were two ways to find out information, going to a bank branch with which we had the account or waiting for the mail, receiving a record of the movement.
Since the appearance of the Internet, when anyone connects to their bank, the first thing that appears is the consultation of movements, but from any mobile phone the same thing will happen. This has meant that visits to bank branches have been reduced as much as possible, and in many cases, they are no longer stepped on except to sign a document. Cash is usually withdrawn from ATMs.
The role of technology giants
There are two concepts that are affected, first the proximity banking, which besides the big banks, before was represented by the savings banks, now it is not necessary, we have the bank in our laptop, PC, tablet or mobile. Secondly, Spain is the country in Europe with the most bank branches per person and today there is no need for so many.
This has meant a huge investment by banks in «digital» processes to bring the bank to its customers and plans to close offices that are not so necessary, but not all is good news, according to the Bank of Spain, in September 2019 there were 25,037 branches, assuming an average of 5 employees, would mean that there would be about 125,000 people possibly affected by these closures, although not affect all, the number is huge and will mean a drama.
However, the banking sector is one of the most supervised and in order to lower costs and protect users, banks have to comply with various regulations, MIFID, PSD2 and GDPR among others. In the case of the 2nd PSD2 payment regulation, banks have
the obligation, with the authorization of the users, to share data of these on payments, which has promoted the appearance of small financial entities Fintech, Neo-banks, Openbanks… or that the big American technological corporations Google, Apple, Amazon and Facebook (GAFA) or the Chinese Baidu, Alibaba and Tencent (BAT) are interested in part of the business that until now gave the banks.
This is undoubtedly are good news for any user, but it puts additional pressure on banks. Banks are absorbing some of the technology offered by Fintech either by buying it or by entering into agreements with it, usually small companies that are small in size compared to banks.
But the technological giants like GAFA or BAT are something else, they are very powerful companies that can make very large investments and that do not reside in the country. At the moment, it seems that they are only introducing themselves into the world of means of payment, in the future there will be no cards, it will be the mobile phone, but if we have any doubt or mishap with the banking services that Alibaba is already offering in China, who are we going to complain to? Who is going to supervise these mega-companies?
This same week, it has appeared the news that El Corte Inglés and Telefónica have asked the Bank of Spain for authorization to offer banking services. Competition is increasing.
To conclude, a third party affected is society, banks are companies that contribute greatly to the treasury, which will be affected if the banking business disappears as we know it today.
Manuel García Ramírez
MGR Consultants IT y Security Manager