Skip to main content

2022 | Buch

Digitalization and the Future of Financial Services

Innovation and Impact of Digital Finance


Über dieses Buch

This book develops insights of digitalization and the future of financial services to originate an innovative approach to financial field, in order to underpin research and practice in the wide area of digital finance. The aim of this book is to extend our understandings on how digitalization and the future of financial services can be helpful in different business circumstances in many cross-functional financial areas, such as financial markets, financial risk management, financial technologies, investment finance, etc. Thus, the book aims at addressing the relevance of digital finance for different players, highlighting differences in tools and processes as well as identifying innovative practices in financial digitalization. This can result in some novel theoretical and practical insights that can foster financial players, in order to proactively explore and exploit opportunities in financial digitalization and offset financial risks and increase efficiency.


Digital Finance and Financial Services
In this chapter, we try to explain the importance of financial inclusion by focusing on the different aspects of financial inclusion. According to latest data released, there is still a large number of people around the world who are unbanked. In addition, data also shows that there are significant differences between developing and developed countries in terms of different indicators of financial inclusion such as adults with account and use of credit and debit cards as well as receiving and making payments. These differences are also significant across genders and educational attainment levels. The empirical results of the chapter indicate that volatility of performances of companies providing digital financial services has been increase during the COVID-19. The chapter concludes that there is a long way to go increase the degree of financial inclusion in the world. It requires an increased contribution and coordination of all participants in world economy.
Mustafa Özer
Innovation and Fintech
This chapter is dedicated to the research of financial innovations as well as the emergence and development of financial technology (Fintech). The history of innovation in the field of finance is as long as civilization itself. The processes of creating innovations were related to the development of the overall economic activity and social circumstances. In the last half-century, the scope and dynamism of financial innovations have significantly expanded and accelerated. New financial instruments have emerged, a number of trading strategies have been developed based on use of that instruments, technical and technological progress have led to a change in approach, processes, and even the paradigm of doing financial business and the functioning of the financial services industry. Financial technology understood as a combination of finance and technology is playing an increasing role in the functioning of modern financial institutions. Fintech has brought us accelerated digitalization in the financial service industry. This chapter points out its development, importance, and areas of application in light of the challenges facing the modern world of finance today. In order to more efficiently analyze certain aspects of the development of innovation and fintech, an analogy with the development of the industrial revolution (from 1.0. to 4.0.) was used. The world of modern finance has entered a completely new phase of development that is appropriate for the time in which we live—the era of the Industrial Revolution 4.0. These processes are unstoppable, so we can expect more changes and innovations in the future, perhaps with even greater dynamism and intensity.
Dejan Erić
Central Bank and Fintech: Regulatory Challenges and Framework
The introduction of new technology and the evolution of business models have resulted in a significant transformation in the Fintech sector in recent years. Improved financial inclusion and lower transaction costs, on the other hand, have created several opportunities for both users and service providers. However, information security, data breaches, the possibility of cyberattacks, and the threat to financial stability continue to be a source of worry. Among the topics covered in this chapter are Fintech innovations and adaptations as well as growth, regulatory problems, policies, and recommendations. In addition, it discusses the relevance of the digital transformation that has occurred in the Fintech sector, as well as cross-country experiences in this area, among other things. An additional point of discussion is that frameworks for considering and evaluating the key challenges and regulatory consequences of this industry are required to be developed. The assessment of the many difficulties that regulatory bodies are confronted with can lead to the development of a range of innovative regulatory responses through initiatives such as regulatory sandboxes, innovation hubs, RegTech, regulatory reforms, and international cooperation.
Jayaraj Rajaiah, Agamoni Majumder, Kavita Ingale, Srinivas Subbarao Pasumarti
The Dematerialization of Money in the Age of COVID-19 Pandemic: A New Future for Digital Finance?
This chapter analyzes the dematerialization of money in the age of COVID-19 pandemic. Although this process has become more visible following the pandemic, the dematerialization of money is not a new phenomenon. Over time, money was turned into fiat money, scriptural money, electronic money, and recently to digital money, namely in the context of cryptocurrency market. However, contrary to what would be expected, it was found that the growing trend toward the use of cryptocurrencies has been reversed with the emergence of the pandemic. The comparison between the pre-pandemic and the pandemic period shows the mean growth rates of daily trading volumes for six of the major cryptocurrencies (Bitcoin, Dogecoin, Ethereum, BitcoinCash, Ripple, and Litecoin) are considerably lower during the pandemic. This situation is particularly evident in the case of Ethereum, which from a mean growth rate of trading volumes of 0.54% in the pre-pandemic period, recorded during the pandemic a decrease of −0,575%. Significant drops were also observed in Bitcoin, Dogecoin, and Litcoin. Even so, digital payments seem to be the future, namely through the launch of the so-called Central Bank Digital Currency. We can take the digital euro as a good example of this future reality.
António Portugal Duarte
International Financial Markets in the Digital Era
Financial markets have changed their face substantially with the digital era. Floor trading has to a large extent been replaced by electronic trading platforms. This led to a substantial increase in trading speed bringing the trade execution time down from minutes to milliseconds. At the same time, we observe an increase in liquidity and transparency, whereas the impact on price quality and financial stability is more ambiguous. Particularly high-frequency trading is suspected to have a negative effect in this respect. Recently we observed eroding profits from high-frequency trading and a declining market share.
Turning to the foreign exchange market it has also undergone substantial changes due to digitalization. While it was dominated by bilateral telephone trades and voice brokers, it has to a large extent moved to the electronic trading platforms by Reuters and EBS. While this first applied to the interbank market, the customer market has more recently been affected and most of the enormous increase in trading volume during the last decades took place there. Particularly the introduction of electronic communication networks had a huge impact. Nevertheless, their share is currently declining due to increased demand by customers for a centralized marketplace.
Michael Frömmel
Response of BTC Market to Social Media Sentiment: Application of Cross-Quantilogram with Bootstrap
The cryptocurrency market is regarded as the world’s first entirely decentralized digital payment system, with no third-party influence. Hence, the advent of Bitcoin symbolizes a revolutionary occurrence in financial markets. This study looks into the relationship between Twitter-based economic uncertainty and changes in Bitcoin returns, which are considered as the dominant cryptocurrency. Using high-frequency historical daily data from March 2017 to March 2022, we used a recently introduced method called cross-quantilogram analysis to investigate Bitcoin’s behavior under various levels of uncertainty. The study created lower, middle, and upper quantiles to investigate the lag impact in time intervals such as daily, weekly, monthly, and quarterly. Twitter-based economic uncertainty appears to be a significant volatility influence, while Bitcoin returns appear to be the net volatility recipient during the daily and weekly time lags. The outcomes of this research study show a substantial causal relationship between Twitter-based economic uncertainty revealed by users of social media and how it effects the returns of Bitcoin. This effect is most noticeable for all cryptocurrencies and especially for Bitcoin at the tails of return distributions. Findings of this study shed some new insight into the significance of Bitcoin to consider as an alternative asset class in the aftermath of global financial instability and provide practical guidance for investors in developing portfolios.
Kazi Sohag, Mirzat Ullah
The Impact of Digitalization on the Introduction of Innovations into BFSI Activities
This chapter examines the manifestations of digitalization and technological solutions in the financial sector. Here is an overview of the use of special terms denoting groups of applied technological innovations in the financial sector. There is a lot of evidence that digital transformation is a strategic priority for BSFI. The paper shows the impact of the requirements of consumers of financial services, which form the demand for innovation. The features of the following business models are considered here: Open Banking, Bank-as-a-Service, and Marketplace Banking. A separate section of the analysis of the regulatory practice of the use of digital technologies in BSFI is given. Emphasis is placed on the fusion of RegTech, SupTech, as the most effective form of interaction to ensure financial stability in BSFI.
Elena M. Grigorieva
AI, Blockchain, and IOT
Artificial intelligence and blockchain technologies are widely used in the Internet of Things (IoT). IoT to collect and present data, blockchain to provide the infrastructure to define operational rules, and AI optimization processes and rules are all possible connections between these technologies. These technologies converge, enabling new autonomous business models and the innovative impacts of this triad on increasing the competitiveness of companies. This chapter delves into the basic understanding of each of the triads and how they complement each other’s drawbacks in possibly revolutionizing the entire financial domain.
Ankit Som, Parthajit Kayal
Role of Digital Financial Inclusion in Promoting Economic Growth and Freedom
Digitalization is considered a pivotal step toward attaining financial freedom, financial inclusion, financial development, and economic growth of a country as a whole. The impact of digital finance on financial inclusion and freedom is significant when it comes to the allocation of financial services to society, including the poor via transformational technologies. This chapter delves into the basic understanding of various aspects of digitalization and its impact on economic and financial freedom. Specifically, we first discuss the connection between financial inclusion and financial freedom and then explore how digitalization in the modern industrial era improves the financial freedom of people by making borrowing easier with alternative financing. Further, we show how digital financial services via Information and Communication Technology (ICT) dissemination and penetration lead to financial freedom and financial development. Finally, we explore the idea of financial freedom in the context of banking performance and its efficiency.
Malvika Saraf, Parthajit Kayal
Nexus of Digitalization, Social, and Governance Factors
Accounting has become increasingly multifaceted in recent years, and accounting information must shift from the past to the future due to rapid changes in technology. The impact of digital technology on all aspects of business is reshaping the way of doing business across industries. The majority of global economic output will be digital and digital innovations will be critical in achieving the Sustainable Development Goals (SDGs). Digital transformation of society is required to evolve and adapt to the shift. Application of Extensible Business Reporting Language (XBRL) is considered one of the significant steps toward digitalization of accounting and reporting. Digital corporate reporting needs substantial modifications to the corporate information architecture. XBRL-based digital corporate reporting will save capital expenditures, enhance analyst forecast accuracy, and boost analyst following. The XBRL taxonomy for International Sustainability Standards Board (ISSB) standards will be developed, making digital Environmental, Social and Governance (ESG) disclosure reporting easier for issuers, and data aggregation and analytics easier for investors. Digital corporate sustainability reporting has a broader implication for the reporting organizations, regulators, and users of the information.
Charumathi Balakrishnan, Habeebu Rahman
Risk of Digitalization and Financial Freedom
This chapter is devoted to the problem of digitalization, financial freedom, and cryptocurrencies analyses and analyses of risks enclosed. It was aimed to show the baseline of risks alongside with the reasons for them. It was also identified the main types of risk and some particular parameters of their control. The role of digitalization was shown in the scope of scientific progress and possible risks of digitalization. The analyses of difficulties met with digitalization were fulfilled regarding different aspects of economy and social environment.
Guirinskiy Andrey
Digitalization and the Future of Financial Services
herausgegeben von
Darko B. Vukovic
Moinak Maiti
Elena M. Grigorieva
Electronic ISBN
Print ISBN

Premium Partner