The evolution of banking in the digital age and its intersection with technological innovation

The banking sector’s evolution has recently gained more density and profundity, since the transition to the digital age and the coming of the Fourth Industrial Revolution. We are living in the digital age—a digital intelligent world—a process that started with the Digital Revolution in the mid-20th century. Such a process is characterized by the rapid adoption of digital technologies since then, initial informal digital tool use, from the 1970s to 1990s, to a digital formal organization, between the mid-1990s and early 2000s, followed by the transition to the digital age, within the more advanced economies, around the early 2010s. If we focus on the financial sector as a whole, with the approach of the Fourth Industrial Revolution, its productivity has either stagnated or increased very slowly, according to the data. The banking industry, along with monitored financial institutions, has been one of the most important parts of the financial sector. Specifically, it plays a fundamental role within the current capitalist economy (Gomber et al., 2018; Arner et al., 2020; Bălănescu & Stefan, 2020).

The banking sector has been evolving thanks to a combination of factors. Historical actions such as the monetization of the economy, credit and payment system organization and coordination, risk management, and customer services have persisted through time. At the same time, conditions have constantly changed, thanks to the external pressure of clients, potential innovators, and different institutions, as well as the expansion of international finance and the internal demand of managers, labor unions, and workers. Monetary technology as well as banking organization supervision and regulation have evolved as well. The new technological capacity in the digital age is passing through two important degrading processes; one for the physical and manual dimension, and the other, a more demanding one, axiomatically for the human internal dimension. These elements that explain the banking sector’s evolution are going to be in the spotlight within the context of the Fourth Industrial Revolution (Zohar & Harari, 2018; Narula & Dunning, 2019).