Banking essay PDF

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Banking sector includes banks and other financial institutions which provide lending and investments. The banking system of each state reflects state’s financial and economic conditions, responding to ups and downs in the national and global economy. Stable development of the banking sector ensures the stability of the entire state. Meanwhile, crises that hit the banking system can change the prospects for the growth of national economies. Banks are a link between industry and commerce, agriculture and the population. That is why it is very important to develop banking sector. I this essay, I would like to consider the future of banking system in Kyrgyzstan from my perspective. Nowadays, innovations in information technology are having significant influence on almost every sphere of our lives. Banking sector is not an exception. Even today, banks try to go along with innovations in IT area in order to make bank services more simple and time saving. One of the evidences of strong interconnection of banking sector and IT field in Kyrgyzstan is Elsom.

In the diagram above, we can see that at the moment of launching Elsom, there were only 14500 users, however, by the end of 2017 there were already more than 300000 users. Therefore, the number of users grew 20 times over the past 3-4 years. If Elsom continues its work and insert some new innovative things, there is a very high possibility that Elsom will cover the entire population of Kyrgyzstan and even foreign countries. In addition, I believe that there will be more competitors of Elsom at the market. Additional trigger for changing banking sector is customers. In 20 years, the majority of population will be the people who grew up with smartphones and other technologies, so they will be very close to IT sphere. Unlike today we still have some kind of scepticism on innovative technological things. Moreover, the financial literacy of population will grow over time and it will be normal for banks not to release plastic (credit/debit) cards anymore. However, there is no huge demand for plastic cards in Kyrgyzstan right now. If in Europe everyone has already in average 2 plastic cards, in Kyrgyzstan only 30% of population use such cards. In the future, plastic cards will be replaced by a smartphone and payment chips in clothes, watches and other things. Even today, according to Timur Vorona’s article, Starbucks

already accounts for more than 10% of revenues for mobile financial services, Amazon launched its own service for receiving payments using mobile devices, Facebook allowed the users of the instant messenger to send each other money directly. Today in Kyrgyzstan, the main functions of retail branches of banks are operations with cash: deposits and withdrawals. In the future they will go online, and bank branches will not be needed. There will be no need to wait for consultation, if there are banks’ mobile apps and call centres. There are already such banks in Europe. MBank in Poland invented a new architecture of the digital social bank. MBank’s customers can make payments through Facebook, use video services and so on. The bank closed almost all branches, and the costs of maintaining the old infrastructure were aimed at advertising a new one. As a result, 75% of the old customers of the bank themselves switched to a new platform. According to Chris Skinner’s book “Digital Bank”, technologies will make banks more human. From Skinner’s perspective technologies will soon recognize customers and anticipate their action with help of social media. This is what awaits us in the future: you post on Facebook: “I am thinking about buying this Jaguar”, and the bank sends you a private message: “Are you out of your mind? You already have $23000 overdraft ”. Therefore, different types of financial technologies and apps will lead to non cash payment system. Is it good or not? Let us compare two countries - Sweden and India. According to the statistics of the Central of Sweden, only a fifth of all payments in the country are made by cash, and in monetary terms such transactions account for a few percent of the total turnover. All other operations are carried out electronically: mainly through plastic cards and (in recent years) using mobile applications. India is the antipode of Sweden when it comes to money. 90% of the turnover falls on cash, also less than half of the citizens have bank accounts. But worst of all, India has a huge shadow economy. The full-flowing river of unaccounted-for money flows into the pockets of enterprising citizens and officials, provoking and feeding

corruption, disfiguring the budget. And of course, while cash continues to play the first fiddle in cash transactions, this problem can not be handled because there are no effective ways to control the turnover of cash. Therefore, it is better for Kyrgyzstan to have more transactions through bank accounts, however, it is important to bear in mind that any country has to have certain amount of money in its economy in cash. All things considered, it is obvious that banks will change significantly over time. Due to an increase in IT field, banks will look like IT company too in order to stay updated with customers demands.

References: 1. Банкинг будущего: трансформация формы или сути? (n.d.). Retrieved from https://www.terrasoft.ru/financial-services/insights/future-banking 2. Как будут выглядеть банки будущего. (2016, February 10). Retrieved from https://apparat.cc/world/banks-of-the-future/ 3. У традиционных банков нет будущего. (n.d.). Retrieved from https://www.google.com/amp/s/www.akchabar.kg/news/amp/u-tradicionnyh-bankovnet-budushego/...