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Virtual Banking; Global Trends & how Azerbaijan’s Banking Legislation Limits Growth

Updated: Apr 6

Virtual Banking:

With the work of technology and the internet being common and popular globally, the overall need for businesses to sell their products and services through electronic channels is constantly growing in all kinds of the business world. In this business world, banks are the most common business globally that are focusing more on electronic service delivery. Due to this reason, most of the traditional branch networking importance has decreased in plenty of the banks. While this is a commonly spread situation in every bank of the developed countries, the developing countries encounter a slower pace of online banking growth.

The combination of technological advancement and aggressive informational technology being encouraged more and more has made traditional banking’s transformation into Internet banking possible. With this growth and development in technology, a new form of service offering concept and environment has been formed, making technology crucial in the financial industry.

When it comes to the changes in the banking industry due to technology, one of the most prominent changes is the movement of 2 consumers from traditional banking to e-banking. This includes the transfer of internet, mobile phones, and telephones in private banks. The benefits of Internet banking involve not only the customers but also the banks in numerous ways. For instance:

Customers can now perform numerous banking transactions from any location and at any time. This limits the customer’s need to revisit the bank branches.

For the banks, the same reason proves to be highly advantageous as they can deliver the banking service to their customers by accessing increased flexibility and efficiency overall. In short, it eases the task of the bankers, making it possible for them to please the customers without being restricted it a specific location/branch of the bank.

Another benefit for banks is the ability to differentiate their service from the competitors, making them add more value to their diversified customer segments.

Let’s talk about the rates of internet banking usage globally. Developed countries like the United States and Europe are fonder of this type of banking – making it a common practice among every individual. However, when it comes to developing countries like Azerbaijan, the common population’s adoption rate of Internet banking has yet to grow in their entire country; since many people still don’t fondly recognize it.  What has helped the idea of online banking expand over this time is the increase in high-speed broadband availability and the internet user’s maturity growth. Not only that, but e-banks have also grown exponentially because of the discovery of e-bank advantages and the ability to offer these advantages to clients as an alternative to branch banking.

Due to this increase in technology and internet usage as a solution to virtual banking for clients globally, the banking industry has dramatically changed. Thanks to the use of innovative resources of the Internet being introduced as the Internet banking information system, customers can utilize many banking services from their location.

According to research regarding Internet banking in Azerbaijan, online banking is only influenced by prior Internet knowledge and online banking information. Not only that, but the perceived ease of use and the perceived usefulness of Internet broadband and Internet banking also promoted the use of Internet banking in Azerbaijan.

Additionally, age, gender, and education were also shown to significantly impact online banking usage. Hence, the practitioners who plan to foster new forms of online banking and its activities among the common population in this competitive environment should focus on the factors affecting Internet banking usage intention.

Not only that, but the virtual banking operators and promoters in Azerbaijan also need to understand the perception of their customers about Internet banking services. This would help them persuade the customers to use the channels to proceed with banking transactions. To make it possible, various research studies have also been conducted on adopting online banking while examining the factors that influence the bank customer’s intention to use Internet banking. Most of these research and studies have shown the interactions among the influencing factors and the ultimate impact of customer’s decision to adopt Internet banking in Azerbaijan. The perceived ease of use and the perceived usefulness of Internet banking in Azerbaijan promotes service adoption more fondly.

All in all, where the virtual banking trend and solutions globally are increasing and becoming more commonly updated for banking customers with time, developing countries are still working on promoting online banking among every individual. This might take some time, but the online banking trend will surely expand in Azerbaijan, making it common among every citizen and banking customer over time.

Global Trends of Digital Banking:

When it comes to the usage of online banking in the present, 24% of US citizens already rely on this banking concept. Not only that, but all of the developed countries ahead opted for the concept of global banking to become extremely common everywhere in the world. This has reduced the need to carry cash for most of the people in such developed countries. Additionally, 60% of the retail banks of these countries also heavily invest in IT development and digital infrastructure upgrades in these banking departments.

Some global trends that are affecting digital banking include:

  • Blockchain Data Management:

The beginning of blockchain focused on tracking the cryptocurrency exchange. Yet, blockchain has found its place in various industries and cloud platforms. When it comes to making its place in digital banking, blockchain is used to track data and manage information. As a result, this helps in making digital banking safer for global clients. Due to this reason, the presence and upgrading of the blockchain in the banking industry are rapidly increasing and becoming a trend. 

  • Availability of Mobile-Only Banking:

Since mobile usage is more convenient and easy for customers and users, most of them prefer using mobile devices as their go-to option for banking. With online banking in most banks, most people prefer trusting those bank businesses more often than others. Hence, when it comes to traditional banks, even they are focused on increasing their presence in the mobile banking sphere because of their clients ’ needs and requirements. Not just that, but the banking businesses that haven’t yet adopted the concept of mobile-only banking for their customers are also keen to provide a mobile-only banking system to their customers for their overall development.

  • Security through AI:

The accessible and versatile nature of digital banking has made cyber intrusions and social engineering hacks become rare in the industry. The banking industry trend has seen the rise of implementing AI algorithms that have made user notification of any and every access attempt to the account to cover this change.

Not just that, but the AI algorithms trend in the banking industry has made it easier to learn which user pattern is associated with any making user. This allows the banks to register those patterns as positive interactions and make the user aware of suspicious events. The following rend of AI presence in the banking system is set to use artificial intelligence in digital banking as a cyber-barrier, offering extreme safety to the user data, more than that of other automated systems. 

  • Chatbot Services:

When it comes to AI, it’s not just the security trend that has been introduced and promoted through this intelligence in the banking system. Instead, the continued presence of artificial intelligence in the digital banking industry has made chatbots more frequently appear in the client’s service. Thanks to these new machine-learning algorithms, new and recurring clients are better assisted following any kind of DAQ regarding your business – at any time of the day.

This chatbot trend by AI that serves around the clock has facilitated the recognition of advanced issues solutions. This means that even if the AI cannot handle an issue, it forwards the issue to the bank’s representative. This helps the banking system please the customer by attending to them with delicacy when the AI isn’t of much help while giving the client extreme attention. This has not just made chatbots a common part of the FAQ customer service section. Still, the use of chatbots in mobile banking apps and digital cloud banking browser services is also set to increase rapidly and become more advanced. With this advance, it’s obvious that all kinds of generations will be able to transition into the digital-first banking ecosystem, making it common, widely spread, and more convenient than traditional banking.

  • Transactions without a Card:

While the use and carrying of cash among the common population aren’t practiced frequently anymore as they used to be in history, the use of credit cards is still common today. Due to this more widespread usage of credit cards among bank clients, the engineering flaws and the common hacking threats can still allow others to avail of illegitimate account access through credit cards.

Yet, the use of digital-first banking has made more advancements and improvements in no-card transactions. These improvements include the recognition of POP and POS purchases through QR codes and other no-card means. Thanks to this no-card system being more advanced with time, banks can now focus on improving the mobile banking services of the customers while leaving the physical card requirements and improvement aside. This again makes the online banking trend and spread more beneficial for banking customers globally – even in countries that are already fond of this trend and are still promoting it among the common population.

Azerbaijan Banking Legislation Limiting Growth:

As mentioned earlier, Azerbaijan banking and its shift towards the online sector aren’t growing as rapidly as it is in developed countries; some reason for the strain can be Azerbaijan banking legislation. The major reason for this limit in Azerbaijan's banking growth is the lack of ability of the Azerbaijan banking market to become healthy and competitive. Since the time of Azerbaijan’s independence and its bank market formation, banking growth has been extremely slow due to the unhealthy and weak banking system. As a result, the banking management has not been able to meet modern corporate standards as efficiently and rapidly as other countries – preventing Azerbaijan’s banking system’s growth in virtual and physical form. Just the fact that I can not set up a bank account to use its services without physically going there is enough for me to make a case & do not get me started on E-Imza…

If we look into the present condition of Azerbaijan’s banking system, its legislation, and the overall adoption of online banking in the country, most large and developed countries have made a positive change in adopting online banking. Hence, while the pace of online banking being spread in Azerbaijan among typical banking clients is quite slow, it is still being spread, just as the speed of internet usage awareness is becoming common.


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