Digital banking will replace physical banks in 20 years

Over the past decade, digital banking has witnessed exponential growth, revolutionising the way customers interact with their financial institutions 

by HAJAR UMIRA MD ZAKI/ pic BERNAMA

THE traditional brick-and-mortar bank has long been a symbol of stability and trust in the financial world. However, with the rapid advancement of technology and the ever-growing popularity of digital banking solutions are challenging this age-old paradigm. 

As more and more customers embrace the convenience and efficiency of digital banking, the traditional physical bank branch is facing an uncertain future. In this article, we will explore the reasons behind this shift and examine the potential consequences of a banking world that is increasingly detached from its physical roots. 

Over the past decade, digital banking has witnessed exponential growth, revolutionising the way customers interact with their financial institutions. Online banking platforms, mobile applications, and virtual wallets have enabled users to conduct financial transactions, manage accounts, and seek customer support with just a few clicks. The convenience, accessibility, and speed offered by digital banking have made it an attractive alternative to traditional banking methods. 

Security concerns have historically been a major deterrent for customers considering digital banking. However, banks have made significant strides in bolstering their cybersecurity measures, employing advanced encryption technologies, biometric authentication, and artificial intelligence-driven fraud detection systems. These robust security measures have helped build trust among consumers and mitigate the risks associated with digital transactions. 

The Asia-Pacific Region of Global One Belt One Road Association, Thailand advisor Professor Datuk Dr Chin Yew Sin, JP, also stated this uptrend of the digitalisation would be developed more in the near future. 

Dr Chin even predicted in 15 to 20 years time, it will be hard to find a physical bank as more banks will pivot to digital. 

“In order for the bank to survive, you must be able to be very fast, at a very low cost and it must be very convenient to your customers. You have to think that you must be able to reach all of your customers,” he said — outlining the current happenings. 

He was speaking as the panel list for the topic Digital Banking — Transforming the Banking Landscape at the 5th Malaysian Banking Summit. 

Dr Chin predicts in 15 to 20 years time, it will be hard to find a physical bank (pic: WCES)

Fast Speed 

Dr Chin further divulged that going digital is everything about speed. By digitising the banking sector, it is very much convenient when loan applications can be made digitally and it can be done very fast — not to mention, the speed of approval for said application can be increased as well. 

Business-wise, he said 80% of the female entrepreneurs had their first experience in applying for loans through digital channels such as MyBank — an e-payment solution which enables users to make and receive payments through an immediate bank transfer via their own online banking portal — or other e-banks. 

“The whole idea of the digital bank is to serve those unserved or underserved segments. So, one segment for lady entrepreneurs or those people in the rural areas or digital banks can access the uncapped market. 

“So, they are more or less in the grey areas. They never come, they want to borrow money from the bank, they are not welcome because they don’t know. 

“Data or not anything to prove that the income is high, is it so I think digital banks can help those people in these grey areas who are supposed to get the necessary finance,” he said. 

Customer Behaviour 

From the digital banking systems, they are able to get more details of their customers and obtain all the physical data; for example, through e-commerce shopping behaviour, said Dr Chin. 

“As for the digital bank, they will also assess the records of the customers — not to the traditional bank ways of accessing where your computer accounts or where your current account bank statement. 

“So, for this digital bank they can get all this data from big data. They can use big data analytics to assess the bankability of the customer or whether this customer is bankable or not,” he said. 

From the digital banking system, a customer’s spending habit could also be assessed from the data which could help them in order to request for the necessary financing aid from the banking institution. 

24/7 Services for The People

As normal physical banks usually operated on a business hour basis, it was indeed a hassle for the individuals who required an immediate transaction or urgent matters. With its operating 24 hours, it worked very fast and was convenient for the customers. 

“Physical bank will be applied to being a Monday to Friday,” he said. Meanwhile, Affin Bank Bhd president and Group CEO Datuk Wan Razly Abdullah Wan Ali who are in the same forum agreed that digital banking coming on stream has pushed the conventional banks to become more digital.

“Maybe in the past, we were slow to embrace digital, but now with the onset of the digital banks coming on stream, we have to evolve faster. 

“So, all in all, this is all good for the customer. So, the customer gets instant service 24/7 service three, four hours a day, seven days a week, and better service from the banks. I think that’s what the customer is to gain. 

“And the banks have to elevate our game to become more friendly, more customer-centric towards our customers,” he said. 

Affin Bank previously increased its capital expenditure (capex) for the digitalisation from RM300 million to RM400 million this year, with the introduction of their first mobile app. 

Status Quo Changed 

The phenomenon is global as earlier this year, a new report from major accounting firm Price Waterhouse Cooper (PwC) suggests that, by as soon as 2025-2030, a market economy could readily exist without banks of the traditional kind. 

The report, The Future Shape of Banking, says that as barriers to entry for non-banks to provide formerly “core” banking services continue to decline, the business models of today’s banks will be challenged. 

However, banks retain some substantial advantages to help them prevent this from happening: banks’ brands and reputations remain powerful, shored up by familiarity, experience and regulation. 

The report also said that in the end, “trust and brand matter in financial transactions and some of the resistance to alternative banking providers results from a lack of trust in their security.” 

Gabriel Ukpeh, head of financial services at PwC Nigeria was quoted in the report saying while the status quo of banking is no more, the need of banking and service to the people remains. 

“Banks still have advantages and alternative providers suffer from a lack of trust; but to be part of the future, banks need to invest heavily, rediscover and reassert their core role in society, and secure the ongoing support of policymakers,” he said. 


  • This article first appeared in The Malaysian Reserve weekly print edition