research methodology banking sector

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Published: 18 June 2021

Financial technology and the future of banking

Daniel Broby ORCID: orcid.org/0000-0001-5482-0766 1

Financial Innovation volume 7 , Article number: 47 ( 2021 ) Cite this article

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This paper presents an analytical framework that describes the business model of banks. It draws on the classical theory of banking and the literature on digital transformation. It provides an explanation for existing trends and, by extending the theory of the banking firm, it illustrates how financial intermediation will be impacted by innovative financial technology applications. It further reviews the options that established banks will have to consider in order to mitigate the threat to their profitability. Deposit taking and lending are considered in the context of the challenge made from shadow banking and the all-digital banks. The paper contributes to an understanding of the future of banking, providing a framework for scholarly empirical investigation. In the discussion, four possible strategies are proposed for market participants, (1) customer retention, (2) customer acquisition, (3) banking as a service and (4) social media payment platforms. It is concluded that, in an increasingly digital world, trust will remain at the core of banking. That said, liquidity transformation will still have an important role to play. The nature of banking and financial services, however, will change dramatically.

Introduction

The bank of the future will have several different manifestations. This paper extends theory to explain the impact of financial technology and the Internet on the nature of banking. It provides an analytical framework for academic investigation, highlighting the trends that are shaping scholarly research into these dynamics. To do this, it re-examines the nature of financial intermediation and transactions. It explains how digital banking will be structurally, as well as physically, different from the banks described in the literature to date. It does this by extending the contribution of Klein ( 1971 ), on the theory of the banking firm. It presents suggested strategies for incumbent, and challenger banks, and how banking as a service and social media payment will reshape the competitive landscape.

The banking industry has been evolving since Banca Monte dei Paschi di Siena opened its doors in 1472. Its leveraged business model has proved very scalable over time, but it is now facing new challenges. Firstly, its book to capital ratios, as documented by Berger et al ( 1995 ), have been consistently falling since 1840. This trend continues as competition has increased. In the past decade, the industry has experienced declines in profitability as measured by return on tangible equity. This is partly the result of falling leverage and fee income and partly due to the net interest margin (connected to traditional lending activity). These trends accelerated following the 2008 financial crisis. At the same time, technology has made banks more competitive. Advances in digital technology are changing the very nature of banking. Banks are now distributing services via mobile technology. A prolonged period of very low interest rates is also having an impact. To sustain their profitability, Brei et al. ( 2020 ) note that many banks have increased their emphasis on fee-generating services.

As Fama ( 1980 ) explains, a bank is an intermediary. The Internet is, however, changing the way financial service providers conduct their role. It is fundamentally changing the nature of the banking. This in turn is changing the nature of banking services, and the way those services are delivered. As a consequence, in order to compete in the changing digital landscape, banks have to adapt. The banks of the future, both incumbents and challengers, need to address liquidity transformation, data, trust, competition, and the digitalization of financial services. Against this backdrop, incumbent banks are focused on reinventing themselves. The challenger banks are, however, starting with a blank canvas. The research questions that these dynamics pose need to be investigated within the context of the theory of banking, hence the need to revise the existing analytical framework.

Banks perform payment and transfer functions for an economy. The Internet can now facilitate and even perform these functions. It is changing the way that transactions are recorded on ledgers and is facilitating both public and private digital currencies. In the past, banks operated in a world of information asymmetry between themselves and their borrowers (clients), but this is changing. This differential gave one bank an advantage over another due to its knowledge about its clients. The digital transformation that financial technology brings reduces this advantage, as this information can be digitally analyzed.

Even the nature of deposits is being transformed. Banks in the future will have to accept deposits and process transactions made in digital form, either Central Bank Digital Currencies (CBDC) or cryptocurrencies. This presents a number of issues: (1) it changes the way financial services will be delivered, (2) it requires a discussion on resilience, security and competition in payments, (3) it provides a building block for better cross border money transfers and (4) it raises the question of private and public issuance of money. Braggion et al ( 2018 ) consider whether these represent a threat to financial stability.

The academic study of banking began with Edgeworth ( 1888 ). He postulated that it is based on probability. In this respect, the nature of the business model depends on the probability that a bank will not be called upon to meet all its liabilities at the same time. This allows banks to lend more than they have in deposits. Because of the resultant mismatch between long term assets and short-term liabilities, a bank’s capital structure is very sensitive to liquidity trade-offs. This is explained by Diamond and Rajan ( 2000 ). They explain that this makes a bank a’relationship lender’. In effect, they suggest a bank is an intermediary that has borrowed from other investors.

Diamond and Rajan ( 2000 ) argue a lender can negotiate repayment obligations and that a bank benefits from its knowledge of the customer. As shall be shown, the new generation of digital challenger banks do not have the same tradeoffs or knowledge of the customer. They operate more like a broker providing a platform for banking services. This suggests that there will be more than one type of bank in the future and several different payment protocols. It also suggests that banks will have to data mine customer information to improve their understanding of a client’s financial needs.

The key focus of Diamond and Rajan ( 2000 ), however, was to position a traditional bank is an intermediary. Gurley and Shaw ( 1956 ) describe how the customer relationship means a bank can borrow funds by way of deposits (liabilities) and subsequently use them to lend or invest (assets). In facilitating this mediation, they provide a service whereby they store money and provide a mechanism to transmit money. With improvements in financial technology, however, money can be stored digitally, lenders and investors can source funds directly over the internet, and money transfer can be done digitally.

A review of financial technology and banking literature is provided by Thakor ( 2020 ). He highlights that financial service companies are now being provided by non-deposit taking contenders. This paper addresses one of the four research questions raised by his review, namely how theories of financial intermediation can be modified to accommodate banks, shadow banks, and non-intermediated solutions.

To be a bank, an entity must be authorized to accept retail deposits. A challenger bank is, therefore, still a bank in the traditional sense. It does not, however, have the costs of a branch network. A peer-to-peer lender, meanwhile, does not have a deposit base and therefore acts more like a broker. This leads to the issue that this paper addresses, namely how the banks of the future will conduct their intermediation.

In order to understand what the bank of the future will look like, it is necessary to understand the nature of the aforementioned intermediation, and the way it is changing. In this respect, there are two key types of intermediation. These are (1) quantitative asset transformation and, (2) brokerage. The latter is a common model adopted by challenger banks. Figure 1 depicts how these two types of financial intermediation match savers with borrowers. To avoid nuanced distinction between these two types of intermediation, it is common to classify banks by the services they perform. These can be grouped as either private, investment, or commercial banking. The service sub-groupings include payments, settlements, fund management, trading, treasury management, brokerage, and other agency services.

How banks act as intermediaries between lenders and borrowers. This function call also be conducted by intermediaries as brokers, for example by shadow banks. Disintermediation occurs over the internet where peer-to-peer lenders match savers to lenders

Financial technology has the ability to disintermediate the banking sector. The competitive pressures this results in will shape the banks of the future. The channels that will facilitate this are shown in Fig. 2 , namely the Internet and/or mobile devices. Challengers can participate in this by, (1) directly matching borrows with savers over the Internet and, (2) distributing white labels products. The later enables banking as a service and avoids the aforementioned liquidity mismatch.

The strategic options banks have to match lenders with borrowers. The traditional and challenger banks are in the same space, competing for business. The distributed banks use the traditional and challenger banks to white label banking services. These banks compete with payment platforms on social media. The Internet heralds an era of banking as a service

There are also physical changes that are being made in the delivery of services. Bricks and mortar branches are in decline. Mobile banking, or m-banking as Liu et al ( 2020 ) describe it, is an increasingly important distribution channel. Robotics are increasingly being used to automate customer interaction. As explained by Vishnu et al ( 2017 ), these improve efficiency and the quality of execution. They allow for increased oversight and can be built on legacy systems as well as from a blank canvas. Application programming interfaces (APIs) are bringing the same type of functionality to m-banking. They can be used to authorize third party use of banking data. How banks evolve over time is important because, according to the OECD, the activity in the financial sector represents between 20 and 30 percent of developed countries Gross Domestic Product.

In summary, financial technology has evolved to a level where online banks and banking as a service are challenging incumbents and the nature of banking mediation. Banking is rapidly transforming because of changes in such technology. At the same time, the solving of the double spending problem, whereby digital money can be cryptographically protected, has led to the possibility that paper money will become redundant at some point in the future. A theoretical framework is required to understand this evolving landscape. This is discussed next.

The theory of the banking firm: a revision

In financial theory, as eloquently explained by Fama ( 1980 ), banking provides an accounting system for transactions and a portfolio system for the storage of assets. That will not change for the banks of the future. Fama ( 1980 ) explains that their activities, in an unregulated state, fulfil the Modigliani–Miller ( 1959 ) theorem of the irrelevance of the financing decision. In practice, traditional banks compete for deposits through the interest rate they offer. This makes the transactional element dependent on the resulting debits and credits that they process, essentially making banks into bookkeeping entities fulfilling the intermediation function. Since this is done in response to competitive forces, the general equilibrium is a passive one. As such, the banking business model is vulnerable to disruption, particularly by innovation in financial technology.

A bank is an idiosyncratic corporate entity due to its ability to generate credit by leveraging its balance sheet. That balance sheet has assets on one side and liabilities on the other, like any corporate entity. The assets consist of cash, lending, financial and fixed assets. On the other side of the balance sheet are its liabilities, deposits, and debt. In this respect, a bank’s equity and its liabilities are its source of funds, and its assets are its use of funds. This is explained by Klein ( 1971 ), who notes that a bank’s equity W , borrowed funds and its deposits B is equal to its total funds F . This is the same for incumbents and challengers. This can be depicted algebraically if we let incumbents be represented by Φ and challengers represented by Γ:

Klein ( 1971 ) further explains that a bank’s equity is therefore made up of its share capital and unimpaired reserves. The latter are held by a bank to protect the bank’s deposit clients. This part is also mandated by regulation, so as to protect customers and indeed the entire banking system from systemic failure. These protective measures include other prudential requirements to hold cash reserves or other liquid assets. As shall be shown, banking services can be performed over the Internet without these protections. Banking as a service, as this phenomenon known, is expected to increase in the future. This will change the nature of the protection available to clients. It will change the way banks transform assets, explained next.

A bank’s deposits are said to be a function of the proportion of total funds obtained through the issuance of the ith deposit type and its total funds F , represented by α i . Where deposits, represented by Bs , are made in the form of Bs (i = 1 *s n) , they generate a rate of interest. It follows that Si Bs = B . As such,

Therefor it can be said that,

The importance of Eq. 3 is that the balance sheet can be leveraged by the issuance of loans. It should be noted, however, that not all loans are returned to the bank in whole or part. Non-performing loans reduce the asset side of a bank’s balance sheet and act as a constraint on capital, and therefore new lending. Clearly, this is not the case with banking as a service. In that model, loans are brokered. That said, with the traditional model, an advantage of financial technology is that it facilitates the data mining of clients’ accounts. Lending can therefore be more targeted to borrowers that are more likely to repay, thereby reducing non-performing loans. Pari passu, the incumbent bank of the future will therefore have a higher risk-adjusted return on capital. In practice, however, banking as a service will bring greater competition from challengers and possible further erosion of margins. Alternatively, some banks will proactively engage in partnerships and acquisitions to maintain their customer base and address the competition.

A bank must have reserves to meet the demand of customers demanding their deposits back. The amount of these reserves is a key function of banking regulation. The Basel Committee on Banking Supervision mandates a requirement to hold various tiers of capital, so that banks have sufficient reserves to protect depositors. The Committee also imposes a framework for mitigating excessive liquidity risk and maturity transformation, through a set Liquidity Coverage Ratio and Net Stable Funding Ratio.

Recent revisions of theory, because of financial technology advances, have altered our understanding of banking intermediation. This will impact the competitive landscape and therefor shape the nature of the bank of the future. In this respect, the threat to incumbent banks comes from peer-to-peer Internet lending platforms. These perform the brokerage function of financial intermediation without the use of the aforementioned banking balance sheet. Unlike regulated deposit takers, such lending platforms do not create assets and do not perform risk and asset transformation. That said, they are reliant on investors who do not always behave in a counter cyclical way.

Financial technology in banking is not new. It has been used to facilitate electronic markets since the 1980’s. Thakor ( 2020 ) refers to three waves of application of financial innovation in banking. The advent of institutional futures markets and the changing nature of financial contracts fundamentally changed the role of banks. In response to this, academics extended the concept of a bank into an entity that either fulfills the aforementioned functions of a broker or a qualitative asset transformer. In this respect, they connect the providers and users of capital without changing the nature of the transformation of the various claims to that capital. This transformation can be in the form risk transfer or the application of leverage. The nature of trading of financial assets, however, is changing. Price discovery can now be done over the Internet and that is moving liquidity from central marketplaces (like the stock exchange) to decentralized ones.

Alongside these trends, in considering what the bank of the future will look like, it is necessary to understand the unregulated lending market that competes with traditional banks. In this part of the lending market, there has been a rise in shadow banks. The literature on these entities is covered by Adrian and Ashcraft ( 2016 ). Shadow banks have taken substantial market share from the traditional banks. They fulfil the brokerage function of banks, but regulators have only partial oversight of their risk transformation or leverage. The rise of shadow banks has been facilitated by financial technology and the originate to distribute model documented by Bord and Santos ( 2012 ). They use alternative trading systems that function as electronic communication networks. These facilitate dark pools of liquidity whereby buyers and sellers of bonds and securities trade off-exchange. Since the credit crisis of 2008, total broker dealer assets have diverged from banking assets. This illustrates the changed lending environment.

In the disintermediated market, banking as a service providers must rely on their equity and what access to funding they can attract from their online network. Without this they are unable to drive lending growth. To explain this, let I represent the online network. Extending Klein ( 1971 ), further let Ψ represent banking as a service and their total funds by F . This state is depicted as,

Theoretically, it can be shown that,

Shadow banks, and those disintermediators who bypass the banking system, have an advantage in a world where technology is ubiquitous. This becomes more apparent when costs are considered. Buchak et al. ( 2018 ) point out that shadow banks finance their originations almost entirely through securitization and what they term the originate to distribute business model. Diversifying risk in this way is good for individual banks, as banking risks can be transferred away from traditional banking balance sheets to institutional balance sheets. That said, the rise of securitization has introduced systemic risk into the banking sector.

Thus, we can see that the nature of banking capital is changing and at the same time technology is replacing labor. Let A denote the number of transactions per account at a period in time, and C denote the total cost per account per time period of providing the services of the payment mechanism. Klein ( 1971 ) points out that, if capital and labor are assumed to be part of the traditional banking model, it can be observed that,

It can therefore be observed that the total service charge per account at a period in time, represented by S, has a linear and proportional relationship to bank account activity. This is another variable that financial technology can impact. According to Klein ( 1971 ) this can be summed up in the following way,

where d is the basic bank decision variable, the service charge per transaction. Once again, in an automated and digital environment, financial technology greatly reduces d for the challenger banks. Swankie and Broby ( 2019 ) examine the impact of Artificial Intelligence on the evaluation of banking risk and conclude that it improves such variables.

Meanwhile, the traditional banking model can be expressed as a product of the number of accounts, M , and the average size of an account, N . This suggests a banks implicit yield is it rate of interest on deposits adjusted by its operating loss in each time period. This yield is generated by payment and loan services. Let R 1 depict this. These can be expressed as a fraction of total demand deposits. This is depicted by Klein ( 1971 ), if one assumes activity per account is constant, as,

As a result, whether a bank is structured with traditional labor overheads or built digitally, is extremely relevant to its profitability. The capital and labor of tradition banks, depicted as Φ i , is greater than online networks, depicted as I i . As such, the later have an advantage. This can be shown as,

What Klein (1972) failed to highlight is that the banking inherently involves leverage. Diamond and Dybving (1983) show that leverage makes bank susceptible to run on their liquidity. The literature divides these between adverse shock events, as explained by Bernanke et al ( 1996 ) or moral hazard events as explained by Demirgu¨¸c-Kunt and Detragiache ( 2002 ). This leverage builds on the balance sheet mismatch of short-term assets with long term liabilities. As such, capital and liquidity are intrinsically linked to viability and solvency.

The way capital and liquidity are managed is through credit and default management. This is done at a bank level and a supervisory level. The Basel Committee on Banking Supervision applies capital and leverage ratios, and central banks manage interest rates and other counter-cyclical measures. The various iterations of the prudential regulation of banks have moved the microeconomic theory of banking from the modeling of risk to the modeling of imperfect information. As mentioned, shadow and disintermediated services do not fall under this form or prudential regulation.

The relationship between leverage and insolvency risk crucially depends on the degree of banks total funds F and their liability structure L . In this respect, the liability structure of traditional banks is also greater than online networks which do not have the same level of available funds, depicted as,

Diamond and Dybvig ( 1983 ) observe that this liability structure is intimately tied to a traditional bank’s assets. In this respect, a bank’s ability to finance its lending at low cost and its ability to achieve repayment are key to its avoidance of insolvency. Online networks and/or brokers do not have to finance their lending, simply source it. Similarly, as brokers they do not face capital loss in the event of a default. This disintermediates the bank through the use of a peer-to-peer environment. These lenders and borrowers are introduced in digital way over the internet. Regulators have taken notice and the digital broker advantage might not last forever. As a result, the future may well see greater cooperation between these competing parties. This also because banks have valuable operational experience compared to new entrants.

It should also be observed that bank lending is either secured or unsecured. Interest on an unsecured loan is typically higher than the interest on a secured loan. In this respect, incumbent banks have an advantage as their closeness to the customer allows them to better understand the security of the assets. Berger et al ( 2005 ) further differentiate lending into transaction lending, relationship lending and credit scoring.

The evolution of the business model in a digital world

As has been demonstrated, the bank of the future in its various manifestations will be a consequence of the evolution of the current banking business model. There has been considerable scholarly investigation into the uniqueness of this business model, but less so on its changing nature. Song and Thakor ( 2010 ) are helpful in this respect and suggest that there are three aspects to this evolution, namely competition, complementary and co-evolution. Although liquidity transformation is evolving, it remains central to a bank’s role.

All the dynamics mentioned are relevant to the economy. There is considerable evidence, as outlined by Levine ( 2001 ), that market liberalization has a causal impact on economic growth. The impact of technology on productivity should prove positive and enhance the functioning of the domestic financial system. Indeed, market liberalization has already reshaped banking by increasing competition. New fee based ancillary financial services have become widespread, as has the proprietorial use of balance sheets. Risk has been securitized and even packaged into trade-able products.

Challenger banks are developing in a complementary way with the incumbents. The latter have an advantage over new entrants because they have information on their customers. The liquidity insurance model, proposed by Diamond and Dybvig ( 1983 ), explains how such banks have informational advantages over exchange markets. That said, financial technology changes these dynamics. It if facilitating the processing of financial data by third parties, explained in greater detail in the section on Open Banking.

At the same time, financial technology is facilitating banking as a service. This is where financial services are delivered by a broker over the Internet without resort to the balance sheet. This includes roboadvisory asset management, peer to peer lending, and crowd funding. Its growth will be facilitated by Open Banking as it becomes more geographically adopted. Figure 3 illustrates how these business models are disintermediating the traditional banking role and matching burrowers and savers.

The traditional view of banks ecosystem between savers and borrowers, atop the Internet which is matching savers and borrowers directly in a peer-to-peer way. The Klein ( 1971 ) theory of the banking firm does not incorporate the mirrored dynamics, and as such needs to be extended to reflect the digital innovation that impacts both borrowers and severs in a peer-to-peer environment

Meanwhile, the banking sector is co-evolving alongside a shadow banking phenomenon. Lenders and borrowers are interacting, but outside of the banking sector. This is a concern for central banks and banking regulators, as the lending is taking place in an unregulated environment. Shadow banking has grown because of financial technology, market liberalization and excess liquidity in the asset management ecosystem. Pozsar and Singh ( 2011 ) detail the non-bank/bank intersection of shadow banking. They point out that shadow banking results in reverse maturity transformation. Incumbent banks have blurred the distinction between their use of traditional (M2) liabilities and market-based shadow banking (non-M2) liabilities. This impacts the inter-generational transfers that enable a bank to achieve interest rate smoothing.

Securitization has transformed the risk in the banking sector, transferring it to asset management institutions. These include structured investment vehicles, securities lenders, asset backed commercial paper investors, credit focused hedge and money market funds. This in turn has led to greater systemic risk, the result of the nature of the non-traded liabilities of securitized pooling arrangements. This increased risk manifested itself in the 2008 credit crisis.

Commercial pressures are also shaping the banking industry. The drive for cost efficiency has made incumbent banks address their personally costs. Bank branches have been closed as technology has evolved. Branches make it easier to withdraw or transfer deposits and challenger banks are not as easily able to attract new deposits. The banking sector is therefore looking for new point of customer contact, such as supermarkets, post offices and social media platforms. These structural issues are occurring at the same time as the retail high street is also evolving. Banks have had an aggressive roll out of automated telling machines and a reduction in branches and headcount. Online digital transactions have now become the norm in most developed countries.

The financing of banks is also evolving. Traditional banks have tended to fund illiquid assets with short term and unstable liquid liabilities. This is one of the key contributors to the rise to the credit crisis of 2008. The provision of liquidity as a last resort is central to the asset transformation process. In this respect, the banking sector experienced a shock in 2008 in what is termed the credit crisis. The aforementioned liquidity mismatch resulted in the system not being able to absorb all the risks associated with subprime lending. Central banks had to resort to quantitative easing as a result of the failure of overnight funding mechanisms. The image of the entire banking sector was tarnished, and the banks of the future will have to address this.

The future must learn from the mistakes of the past. The structural weakness of the banking business model cannot be solved. That said, the latest Basel rules introduce further risk mitigation, improved leverage ratios and increased levels of capital reserve. Another lesson of the credit crisis was that there should be greater emphasis on risk culture, governance, and oversight. The independence and performance of the board, the experience and the skill set of senior management are now a greater focus of regulators. Internal controls and data analysis are increasingly more robust and efficient, with a greater focus on a banks stable funding ratio.

Meanwhile, the very nature of money is changing. A digital wallet for crypto-currencies fulfills much the same storage and transmission functions of a bank; and crypto-currencies are increasing being used for payment. Meanwhile, in Sweden, stores have the right to refuse cash and the majority of transactions are card based. This move to credit and debit cards, and the solving of the double spending problem, whereby digital money can be crypto-graphically protected, has led to the possibility that paper money could be replaced at some point in the future. Whether this might be by replacement by a CBDC, or decentralized digital offering, is of secondary importance to the requirement of banks to adapt. Whether accommodating crytpo-currencies or CBDC’s, Kou et al. ( 2021 ) recommend that banks keep focused on alternative payment and money transferring technologies.

Central banks also have to adapt. To limit disintermediation, they have to ensure that the economic design of their sponsored digital currencies focus on access for banks, interest payment relative to bank policy rate, banking holding limits and convertibility with bank deposits. All these developments have implications for banks, particularly in respect of funding, the secure storage of deposits and how digital currency interacts with traditional fiat money.

Open banking

Against the backdrop of all these trends and changes, a new dynamic is shaping the future of the banking sector. This is termed Open Banking, already briefly mentioned. This new way of handling banking data protocols introduces a secure way to give financial service companies consensual access to a bank’s customer financial information. Figure 4 illustrates how this works. Although a fairly simple concept, the implications are important for the banking industry. Essentially, a bank customer gives a regulated API permission to securely access his/her banking website. That is then used by a banking as a service entity to make direct payments and/or download financial data in order to provide a solution. It heralds an era of customer centric banking.

How Open Banking operates. The customer generates data by using his bank account. A third party provider is authorized to access that data through an API request. The bank confirms digitally that the customer has authorized the exchange of data and then fulfills the request

Open Banking was a response to the documented inertia around individual’s willingness to change bank accounts. Following the Retail Banking Review in the UK, this was addressed by lawmakers through the European Union’s Payment Services Directive II. The legislation was designed to make it easier to change banks by allowing customers to delegate authority to transfer their financial data to other parties. As a result of this, a whole host of data centric applications were conceived. Open banking adds further momentum to reshaping the future of banking.

Open Banking has a number of quite revolutionary implications. It was started so customers could change banks easily, but it resulted in some secondary considerations which are going to change the future of banking itself. It gives a clear view of bank financing. It allows aggregation of finances in one place. It also allows can give access to attractive offerings by allowing price comparisons. Open Banking API’s build a secure online financial marketplace based on data. They also allow access to a larger market in a faster way but the third-party providers for the new entrants. Open Banking allows developers to build single solutions on an API addressing very specific problems, like for example, a cash flow based credit rating.

Romānova et al. ( 2018 ) undertook a questionnaire on the Payment Services Directive II. The results suggest that Open Banking will promote competitiveness, innovation, and new product development. The initiative is associated with low costs and customer satisfaction, but that some concerns about security, privacy and risk are present. These can be mitigated, to some extent, by secure protocols and layered permission access.

Discussion: strategic options

Faced with these disruptive trends, there are four strategic options for market participants to con- sider. There are (1) a defensive customer retention strategy for incumbents, (2) an aggressive customer acquisition strategy for challenger banks (3) a banking as a service strategy for new entrants, and (4) a payments strategy for social media platforms.

Each of these strategies has to be conducted in a competitive marketplace for money demand by potential customers. Figure 5 illustrates where the first three strategies lie on the tradeoff between money demand and interest rates. The payment strategy can’t be modeled based on the supply of money. In the figure, the market settles at a rate L 2 . The incumbent banks have the capacity to meet the largest supply of these loans. The challenger banks have a constrained function but due to a lower cost base can gain excess rent through higher rates of interest. The peer-to-peer bank as a service brokers must settle for the market rate and a constrained supply offering.

The money demand M by lenders on the y axis. Interest rates on the y axis are labeled as r I and r II . The challenger banks are represented by the line labeled Γ. They have a price and technology advantage and so can lend at higher interest rates. The brokers are represented by the line labeled Ω. They are price takers, accepting the interest rate determined by the market. The same is true for the incumbents, represented by the line labeled Φ but they have a greater market share due to their customer relationships. Note that payments strategy for social media platforms is not shown on this figure as it is not affected by interest rates

Figure 5 illustrates that having a niche strategy is not counterproductive. Liu et al ( 2020 ) found that banks performing niche activities exhibit higher profitability and have lower risk. The syndication market now means that a bank making a loan does not have to be the entity that services it. This means banks in the future can better shape their risk profile and manage their lending books accordingly.

An interesting question for central banks is what the future Deposit Supply function will look like. If all three forms: open banking, traditional banking and challenger banks develop together, will the bank of the future have the same Deposit Supply function? The Klein ( 1971 ) general formulation assumes that deposits are increasing functions of implicit and explicit yields. As such, the very nature of central bank directed monetary policy may have to be revisited, as alluded to in the earlier discussion on digital money.

The client retention strategy (incumbents)

The competitive pressures suggest that incumbent banks need to focus on customer retention. Reichheld and Kenny ( 1990 ) found that the best way to do this was to focus on the retention of branch deposit customers. Obviously, another way is to provide a unique digital experience that matches the challengers.

Incumbent banks have a competitive advantage based on the information they have about their customers. Allen ( 1990 ) argues that where risk aversion is observable, information markets are viable. In other words, both bank and customer benefit from this. The strategic issue for them, therefore, becomes the retention of these customers when faced with greater competition.

Open Banking changes the dynamics of the banking information advantage. Borgogno and Colangelo ( 2020 ) suggest that the access to account (XS2A) rule that it introduced will increase competition and reduce information asymmetry. XS2A requires banks to grant access to bank account data to authorized third payment service providers.

The incumbent banks have a high-cost base and legacy IT systems. This makes it harder for them to migrate to a digital world. There are, however, also benefits from financial technology for the incumbents. These include reduced cost and greater efficiency. Financial technology can also now support platforms that allow incumbent banks to sell NPL’s. These platforms do not require the ownership of assets, they act as consolidators. The use of technology to monitor the transactions make the processing cost efficient. The unique selling point of such platforms is their centralized point of contact which results in a reduction in information asymmetry.

Incumbent banks must adapt a number of areas they got to adapt in terms of their liquidity transformation. They have to adapt the way they handle data. They must get customers to trust them in a digital world and the way that they trust them in a bricks and mortar world. It is no coincidence. When you go into a bank branch that is a great big solid building great big facade and so forth that is done deliberately so that you trust that bank with your deposit.

The risk of having rising non-performing loans needs to be managed, so customer retention should be selective. One of the puzzles in banking is why customers are regularly denied credit, rather than simply being charged a higher price for it. This credit rationing is often alleviated by collateral, but finance theory suggests value is based on the discounted sum of future cash flows. As such, it is conceivable that the bank of the future will use financial technology to provide innovative credit allocation solutions. That said, the dual risks of moral hazard and information asymmetries from the adoption of such solutions must be addressed.

Customer retention is especially important as bank competition is intensifying, as is the digitalization of financial services. Customer retention requires innovation, and that innovation has been moving at a very fast rate. Until now, banks have traditionally been hesitant about technology. More recently, mergers and acquisitions have increased quite substantially, initiated by a need to address actual or perceived weaknesses in financial technology.

The client acquisition strategy (challengers)

As intermediaries, the challenger banks are the same as incumbent banks, but designed from the outset to be digital. This gives them a cost and efficiency advantage. Anagnostopoulos ( 2018 ) suggests that the difference between challenger and traditional banks is that the former address its customers problems more directly. The challenge for such banks is customer acquisition.

Open Banking is a major advantage to challenger banks as it facilitates the changing of accounts. There is widespread dissatisfaction with many incumbent banks. Open Banking makes it easier to change accounts and also easier to get a transaction history on the client.

Customer acquisition can be improved by building trust in a brand. Historically, a bank was physically built in a very robust manner, hence the heavy architecture and grand banking halls. This was done deliberately to engender a sense of confidence in the deposit taking institution. Pure internet banks are not able to do this. As such, they must employ different strategies to convey stability. To do this, some communicate their sustainability credentials, whilst others use generational values-based advertising. Customer acquisition in a banking context is traditionally done by offering more attractive rates of interest. This is illustrated in Fig. 5 by the intersect of traditional banks with the market rate of interest, depicted where the line Γ crosses L 2 . As a result of the relationship with banking yield, teaser rates and introductory rates are common. A customer acquisition strategy has risks, as consumers with good credit can game different challenger banks by frequently changing accounts.

Most customer acquisition, however, is done based on superior service offering. The functionality of challenger banking accounts is often superior to incumbents, largely because the latter are built on legacy databases that have inter-operability issues. Having an open platform of services is a popular customer acquisition technique. The unrestricted provision of third-party products is viewed more favorably than a restricted range of products.

The banking as a service strategy (new entrants)

Banking from a customer’s perspective is the provision of a service. Customers don’t care about the maturity transformation of banking balance sheets. Banking as a service can be performed without recourse to these balance sheets. Banking products are brokered, mostly by new entrants, to individuals as services that can be subscribed to or paid on a fee basis.

There are a number banking as a service solutions including pre-paid and credit cards, lending and leasing. The banking as a service brokers are effectively those that are aggregating services from others using open banking to enable banking as a service.

The rise of banking as a service needs to be understood as these compete directly with traditional banks. As explained, some of these do this through peer-to-peer lending over the internet, others by matching borrows and sellers, conducting mediation as a loan broker. Such entities do not transform assets and do not have banking licenses. They do not have a branch network and often don not have access to deposits. This means that they have no insurance protection and can be subject to interest rate controls.

The new genre of financial technology, banking as a service provider, conduct financial services transformation without access to central bank liquidity. In a distributed digital asset world, the assets are stored on a distributed ledger rather than a traditional banking ledger. Financial technology has automated credit evaluation, savings, investments, insurance, trading, banking payments and risk management. These banking as a service offering are only as secure as the technology on which they are built.

The social media payment strategy (disintermediators and disruptors)

An intermediation bank is a conceptual idea, one created solely on a social networking site. Social media has developed a market for online goods and services. Williams ( 2018 ) estimates that there are 2.46 billion social media users. These all make and receive payments of some kind. They demand security and functionality. Importantly, they have often more clients than most banks. As such, a strategy to monetize the payments infrastructure makes sense.

All social media platforms are rich repositories of data. Such platforms are used to buy and sell things and that requires payments. Some platforms are considering evolving their own digital payment, cutting out the banks as middlemen. These include Facebook’s Diem (formerly Libra), a digital currency, and similar developments at some of the biggest technology companies. The risk with social media payment platform is that there is systemic counter-party protection. Regulators need to address this. One way to do this would be to extend payment service insurance to such platforms.

Social media as a platform moves the payment relationship from a transaction to a customer experience. The ability to use consumer desires in combination with financial data has the potential to deliver a number of new revenue opportunities. These will compete directly with the banks of the future. This will have implications for (1) the money supply, (2) the market share of traditional banks and, (3) the services that payment providers offer.

Further research

Several recommendations for research derive from both the impact of disintermediation and the four proposed strategies that will shape banking in the future. The recommendations and suggestions are based on the mentioned papers and the conclusions drawn from them.

As discussed, the nature of intermediation is changing, and this has implications for the pricing of risk. The role of interest rates in banking will have to be further reviewed. In a decentralized world based on crypto currencies the central banks do not have the same control over the money supply, This suggest the quantity theory of money and the liquidity preference theory need to be revisited. As explained, the Internet reduces much of the friction costs of intermediation. Researchers should ask how this will impact maturity transformation. It is also fair to ask whether at some point in the future there will just be one big bank. This question has already been addressed in the literature but the Internet facilities the possibility. Diamond ( 1984 ) and Ramakrishnan and Thakor ( 1984 ) suggested the answer was due to diversification and its impact on reducing monitoring costs.

Attention should be given by academics to the changing nature of banking risk. How should regulators, for example, address the moral hazard posed by challenger banks with weak balance sheets? What about deposit insurance? Should it be priced to include unregulated entities? Also, what criteria do borrowers use to choose non-banking intermediaries? The changing risk environment also poses two interesting practical questions. What will an online bank run look like, and how can it be averted? How can you establish trust in digital services?

There are also research questions related to the nature of competition. What, for example, will be the nature of cross border competition in a decentralized world? Is the credit rationing that generates competition a static or dynamic phenomena online? What is the value of combining consumer utility with banking services?

Financial intermediaries, like banks, thrive in a world of deficits and surpluses supported by information asymmetries and disconnectedness. The connectivity of the internet changes this dynamic. In this respect, the view of Schumpeter ( 1911 ) on the role of financial intermediaries needs revisiting. Lenders and borrows can be connected peer to peer via the internet.

All the dynamics mentioned change the nature of moral hazard. This needs further investigation. There has been much scholarly research on the intrinsic riskiness of the mismatch between banking assets and liabilities. This mismatch not only results in potential insolvency for a single bank but potentially for the whole system. There has, for example, been much debate on the whether a bank can be too big to fail. As a result of the riskiness of the banking model, the banks of the future will be just a liable to fail as the banks of the past.

This paper presented a revision of the theory of banking in a digital world. In this respect, it built on the work of Klein ( 1971 ). It provided an overview of the changing nature of banking intermediation, a result of the Internet and new digital business models. It presented the traditional academic view of banking and how it is evolving. It showed how this is adapted to explain digital driven disintermediation.

It was shown that the banking industry is facing several documented challenges. Risk is being taken of balance sheet, securitized, and brokered. Financial technology is digitalizing service delivery. At the same time, the very nature of intermediation is being changed due to digital currency. It is argued that the bank of the future not only has to face these competitive issues, but that technology will enhance the delivery of banking services and reduce the cost of their delivery.

The paper further presented the importance of the Open Banking revolution and how that facilitates banking as a service. Open Banking is increasing client churn and driving banking as a service. That in turn is changing the way products are delivered.

Four strategies were proposed to navigate the evolving competitive landscape. These are for incumbents to address customer retention; for challengers to peruse a low-cost digital experience; for niche players to provide banking as a service; and for social media platforms to develop payment platforms. In all these scenarios, the banks of the future will have to have digital strategies for both payments and service delivery.

It was shown that both incumbents and challengers are dependent on capital availability and borrowers credit concerns. Nothing has changed in that respect. The risks remain credit and default risk. What is clear, however, is the bank has become intrinsically linked with technology. The Internet is changing the nature of mediation. It is allowing peer to peer matching of borrowers and savers. It is facilitating new payment protocols and digital currencies. Banks need to evolve and adapt to accommodate these. Most of these questions are empirical in nature. The aim of this paper, however, was to demonstrate that an understanding of the banking model is a prerequisite to understanding how to address these and how to develop hypotheses connected with them.

In conclusion, financial technology is changing the future of banking and the way banks intermediate. It is facilitating digital money and the online transmission of financial assets. It is making banks more customer enteric and more competitive. Scholarly investigation into banking has to adapt. That said, whatever the future, trust will remain at the core of banking. Similarly, deposits and lending will continue to attract regulatory oversight.

Availability of data and materials

Diagrams are my own and the code to reproduce them is available in the supplied Latex files.

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Kawa Wali ORCID: orcid.org/0000-0003-2724-6900 1 ,
Kees van Paridon 2 &
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Future Business Journal volume 9 , Article number: 95 ( 2023 ) Cite this article

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This study examines the understanding of banking governance among the sample participants and its effectiveness in achieving significant objectives. The research methodology employed in this study adopts a descriptive and analytical approach, aiming to comprehensively examine the multifaceted phenomenon of corporate governance within the context of private banks. The purpose of this study was to assess the comprehension of banking governance and its effectiveness in achieving important objectives. This investigation was undertaken to gain insights into the current state of banking governance, its implementation, and the challenges it faces. By conducting this research, we aimed to provide a clearer understanding of the issues surrounding banking governance and offer recommendations for improvement and finding solutions. The findings of our study indicate that the sample participants have a clear comprehension of governance as an efficient system. However, we identified significant obstacles in the implementation of governance and its objectives, primarily stemming from legal challenges and the overall environment. We also noted that success for private banks is contingent on meeting governance requirements, but the banking sector faces challenges both internally and externally, which render control systems less effective. Furthermore, we found that the Basel standards for banking supervision, through the implementation of supervision and control procedures, seek to enhance solvency and risk management, along with prudential measures. These findings are crucial as they provide a roadmap for strengthening governance practices in the banking sector, which is vital for its stability and effective operation. By addressing the issues identified in this study, stakeholders can work toward achieving a more robust and effective banking governance framework.Please confirm if the author names are presented accurately and in the correct sequence (given name, middle name/initial, family name). Author 2 Given name: [Kees] Particle [van] Last name [Paridon]. Author 3 Given name: [Bnar Kareem] Last name [Darwish]. Also, kindly confirm the details in the metadata are correct.correct

Introduction

In recent decades, both industrialized and developing economies have shown an increased interest in corporate governance. This interest has been prompted by big crises in finance and failures which resulted in far-reaching consequences for the worldwide financial system. Corporate governance is the institutional authority and administration of a firm, encompassing the distribution of privileges and duties between different players such as a board of executives, directors, investors, and other stakeholders. This involves the processes and laws that regulate making decisions within the firm. Employees, vendors, and clients are only a few of the parties involved in corporate governance. Lenders, banks, and lawmakers are all involved. According to Freeland Basel [ 1 ], the Organization for Economic Cooperation and Development (OECD) defines corporate governance as the system of interactions between a company's management, board of directors, shareholders, and other stakeholders. In light of this concept, bank governance may be regarded as a complete system of financial and non-financial monitoring that is put in place to manage, monitor, and guarantee a bank's ethical behavior and activities. The main goal of this system is to protect the interests of investors and beneficiaries by preventing corruption in the administrative process.

One area of particular interest is the governance of financial institutions, with researchers exploring comprehensive systems of financial and non-financial oversight to ensure ethical conduct and operations within banks. Notably, Hussain et al. [ 2 ] highlight the impact of knowledge sharing and innovation on sustainable performance in Islamic banks, underscoring the importance of these factors in the context of corporate governance. Moreover, Rehman et al. [ 3 ] shed light on the imperative role of managerial traits in navigating the impact of the financial crisis and the advent of industry on the tourism industry, emphasizing the significance of technology adoption and reshaping human management systems.

Furthermore, the evolving landscape of corporate governance is intricately linked with advancements in education and technology. Meng et al. [ 4 ] offer insights into the role of human–computer interaction and digital literacy in fostering educational learning and psychological resilience among pre-school children, thereby emphasizing the interplay between technological proficiency and mental well-being. These studies collectively underline the multifaceted nature of corporate governance and its intertwined relationship with diverse domains, ranging from finance to education and hospitality.

While the existing literature has made significant strides in understanding the intricacies of corporate governance, there remains a distinct gap in comprehensively elucidating the specific mechanisms through which corporate governance frameworks contribute to mitigating corruption and safeguarding the interests of stakeholders. This study seeks to address this gap by examining the intricate interplay between corporate governance mechanisms and ethical practices within the banking sector, thereby providing a nuanced understanding of the measures essential for fostering transparency and accountability.

Research problem and research questions

The major issue of the study revolves around the ineffective contribution of banks, both governmental and private, to financial and accounting development. This ineffectiveness is attributed to legislative deficiencies, an absence of openness, possible threats to shareholder trust, financial and administrative misconduct, and the effects of technical improvements are all blamed for this inefficiency. Consequently, there is a pressing need to develop work systems and mechanisms within the banking sector. Particularly in private banks without a strategic component to their business, the distance between the board of directors and shareholders is a serious problem.

The following questions are the focus of the research:

To what extent are the principles, regulations, and governance culture applied in banking activities?

Do private banks provide a conducive environment for the implementation of governance mechanisms?

Do beneficiary parties have to adopt governance practices?

The research problem pertains to the ineffective role of banks in financial and accounting development, influenced by legislative weaknesses, lack of transparency, potential risks, corruption, and technological changes. The research questions focus on ideal banking conditions, the application of governance in banking activities, the presence of suitable governance mechanisms in private banks, and the need for beneficiary parties to adopt governance practices.

Research objectives

The following goals are what the research aims to accomplish:

Investigate the present state of banking activity, particularly inside private banks, and respond appropriately. Additionally, propose effective crisis management strategies that not only ensure financial stability but also foster customer trust and maintain market confidence, thereby fortifying the resilience of the banking sector.

Evaluate the relevance of corporate governance in the private sector and financial institutions.

Develop comprehensive guidelines and mechanisms to strengthen risk management protocols, improve transparency, and establish a culture of ethical conduct, thereby safeguarding the interests and rights of all stakeholders, including shareholders, employees, and customers.

Research methodology

The research methodology employed in this study adopts a descriptive and analytical approach, aiming to comprehensively examine the multifaceted phenomenon of corporate governance within the context of private banks. The primary objective is to develop a holistic framework that encapsulates the various characteristics and dimensions of corporate governance, enabling a nuanced understanding of its implications and outcomes.

To effectively conduct the study, a rigorous selection process was undertaken to identify a diverse set of private banks, ensuring representation from various regions and scales of operation. The chosen banks were integral to the field investigation, providing crucial insights into the practical implementation and adherence to governance practices within their respective institutions.

A meticulously designed questionnaire served as the primary instrument for data collection, encompassing two main areas of inquiry closely aligned with the overarching research objectives. The questionnaire was strategically crafted to elicit comprehensive responses from experts, officials from private banks, and other relevant stakeholders, facilitating a thorough exploration of the intricacies of corporate governance within the banking sector.

The first section of the questionnaire was dedicated to eliciting insights into the fundamental concept of governance, focusing on its definition, objectives, and perceived significance within the banking industry. This section comprised eight carefully formulated questions that aimed to gauge the respondents' understanding and interpretation of the core tenets and principles underpinning effective corporate governance practices.

The second section of the questionnaire delved deeper into the practical aspects of governance, exploring the specific principles, regulations, and methodologies employed by private banks to ensure the effective implementation of governance frameworks. It consisted of two divisions, each tailored to assess distinct facets of governance practices, encompassing a total of nine targeted questions aimed at capturing nuanced perspectives and experiences related to governance adherence and application.

To ensure comprehensive and accurate data analysis, a standardized five-point Likert scale was employed to evaluate the responses provided by the participants. This scale facilitated a systematic assessment of the participants' opinions and perspectives, enabling the researchers to derive meaningful insights into the prevailing attitudes and perceptions surrounding corporate governance within the sampled private banks.

The sample selection process was deliberately structured to ensure a diverse representation of private banks, considering various operational scales and regional contexts. A combination of deliberate and random sampling techniques was employed to enhance the inclusivity and representativeness of the study, thereby reinforcing the validity and reliability of the research findings.

Hypotheses for research

By adopting a comprehensive governance framework, banking institutions can witness a significant improvement in their operational efficiency and overall performance. This, in turn, is expected to contribute significantly to the upward valuation of the market. This association indicates that strong governance practices not only streamline internal processes but also act as a catalyst to enhance investor confidence and market perception, ultimately promoting an environment conducive to sustainable growth and profitability in the banking sector. Therefore, the first research hypothesis can be formulated:

There is a clear correlation among implementing governance as a comprehensive framework and improving banking performance efficiency, thereby leading to a rise in valuation of market.

Incorporating a well-defined governance framework within banks is expected to foster a culture of increased responsibility and accountability among stakeholders. By establishing transparent guidelines and protocols, such a framework can effectively reduce instances of administrative and financial misconduct, thus enhancing a culture of integrity and ethical behavior within the organization. Moreover, the systematic integration of governance practices ensures that shareholders' interests are protected, underscoring the pivotal role of governance in nurturing an enabling environment that prioritizes the long-term sustainability and growth of the organization while supporting the rights and interests of all relevant stakeholders. Hence, the second research hypothesis can be formulated as follows:

Incorporating a governance framework within banks enhances responsibility, diminishes instances of managerial and financial misconduct, and guarantees shareholder interests are protected.

The paper is structured as follows: after the introduction, it provides an overview of the theoretical framework (Section. “ Research methodology ”), followed by a presentation of the literature review (Section “ Framework for the concept of banking governance ”). Section “ Results ” discusses the empirical findings, while Section “ Discussion ” offers a discussion of the results. Finally, the paper concludes and recommended solutions with implications, limitations, and avenues for future research in Section “ Conclusions ”.

Framework for the concept of banking governance

Over the last two decades, the corporate establishment in general and banks in particular have encountered huge problems.

The adoption of the concept of governance and supporting its application in banks, while noting the effective application of banking governance, were inevitable due to the banking industry's prosperity, intense competition, the emergence of the financial banking services market's liberalization, and the spread of financial corruption. Understanding the motivations for adopting banking governance, which we touched on in the first demand, as well as the fundamental components of banking governance, which we covered in the second demand, is crucial. It is also important to understand the dimensions of banking governance, which we covered in the third demand [ 5 ].

The first demand is the justification for the use of banking governance. In light of the changes and developments in the financial sector, the banking environment has undergone major modifications. According to the International Monetary Fund 6 , the growth of the banking industry and the expansion of the geographic and functional scope of its operations has led to a boom as a result.

The rise of non-banking financial organizations as formidable rivals has increased competition among banks, forcing them to modify their strategy via a variety of established channels in order to stay ahead in the changing banking environment. These changes have led to the adoption of banking governance practices. Several factors have contributed to this necessity, including the following:

Financial liberalization:

Financial liberalization is a key characteristic of the modern financial system and a significant aspect of economic progress. The professionalization of liberal methods and the tendency for most nations to move toward global economic integration have grown to be closely related during the course of the twentieth century. According to Al-Saydiya and Muhammad [ 7 ], financial liberalization is a collection of policies aiming at diminishing the financial sector's onerous regulations, reducing the state's monopoly over it, and promoting competition.

Technological advancements and digital transformation:

Technological advancements and the widespread adoption of digital solutions have revolutionized the banking industry and intensified competition among banks. Non-banking financial institutions, leveraging innovative technologies, have emerged as strong competitors. In response, banks have recognized the need to adapt their operations and embrace digital transformation to remain competitive.

This shift toward technology-driven banking practices has been driven by several factors. Firstly, customers' expectations have evolved, with a growing demand for convenient and seamless digital banking experiences. Banks have had to invest in digital channels, such as mobile banking apps and online platforms, to meet these expectations.

Furthermore, new financial services and products have been made possible by technology, including robo-advisory services, peer-to-peer lending platforms, and online payment systems. Non-banking financial institutions, often unburdened by traditional banking regulations, have capitalized on these opportunities, forcing banks to innovate and expand their offerings.

Additionally, technology has streamlined internal banking processes, increasing efficiency and reducing costs. Automation, artificial intelligence, and data analytics have empowered banks to enhance risk management, fraud detection, and customer relationship management.

In light of these advancements, banks have recognized the importance of robust banking governance practices to effectively manage technological risks, ensure data security, and maintain regulatory compliance. Embracing technological advancements while adhering to governance standards has become essential for banks to navigate the competitive landscape and deliver value to their customers.

In the context of banking, governance refers to how the Board of Directors and senior management handle the affairs of the Bank, including:

(The Development of the bank's direction as well as priorities), included delivering financial returns for the shareholder.

Establishing the bank's degree of risk tolerance.

Control the bank's day-to-day activities.

Taking into account the interests of everyone who has a stake in the Bank, including shareholders, workers, and customers.

Aligning the bank's operations and actions so that it may carry out its duties in a safe, sound way and with a dedication to adhering to all applicable laws and regulations.

Review of literature

The financial sector, both public and private, is confronted with issues such as inadequate laws, rules, and transparency. Private banks struggle to contribute to economic growth, particularly those lacking strategic departments, excellent practices, and international standards. The International Monetary Fund (2015), emphasizes the significance of corporate governance in developing human capital and mitigating risks. To enhance corporate governance, banks must promote awareness among all stakeholders, strengthen the role of administration in risk reduction, crisis prevention, and beneficiary rights protection. Banks may improve their performance, control, and client focus by applying corporate governance, thereby contributing to financial prosperity.

According to Moghadam (2015), the Basel Committee on Banking Supervision was established to develop mechanisms and standards for the adoption of governance in financial and banking institutions in order to play a significant and effective role in controlling the activities of banks and preventing crises. This was done in response to the financial collapses that occurred in some major economies. Through the function of the bank, the principles of governance are properly applied in the financial system. The financial system has undergone various changes, but while there are some indications of their implementation, they have not been as effective as they could have been.

Wali [ 8 ] explored the influence of Dutch firms' performance on discretionary accrual models, highlighting the complexities of financial management and reporting practices. The study emphasized the importance of regulatory oversight and compliance measures to foster transparency and accountability within the banking sector, underscoring the significance of maintaining ethical standards in financial operations [ 8 ].

According to Matouk and Tarih [ 9 ], this study examines the idea of governance as defined by the Organization for Economic Cooperation and Development. Furthermore, governance has been defined from a banking perspective and in accordance with the Basel Committee, the importance of governance, particularly its application to the banking system, is emphasized with special reference to examples of financial crises such as the one in Southern Eastern Asia in 1997 or the international crisis. The paper uses these instances to emphasize that the banking system's poor practices, particularly its inadequate application of governance, were a key cause of the aforementioned crises, and to demonstrate how they drove certain governments to issue legislation linked to the right application of governance.

Agoba (2017) investigates the influence of financial systems and political institutions on the efficiency of central bank independence in lowering inflation. The study finds that the relationship between central bank independence and inflation is complex and contingent on various factors, drawing from different economic and political theories.

In a rapidly globalizing world, central banks have evolved their primary goal to safeguard their native currency and maintain low and steady inflation rates [ 10 ], Mohamed (2019) emphasizes the significance of central bank independence in achieving monetary stability and effective monetary policy. Independent central banks can operate without political interference, emphasizing the importance of this autonomy. In a similar vein, Wali et al. [ 11 ] delved into the causes and effects of earnings management on stock prices, emphasizing the intricate relationship between financial manipulation and market performance. Their findings underscored the significance of implementing robust governance frameworks to mitigate the adverse impact of such practices on the banking sector's stability [ 11 ]. Furthermore, Mahmood et al. [ 11 ] shed light on the effects of corporate social responsibility practices and environmental factors, emphasizing the moderating role of social media marketing in enhancing the sustainable performance of businesses.AUTHOR: Bedikanli 2018 has been changed to Bedikanli 2018 so that this citation matches the Reference List. Please confirm that this is correct.correct AUTHOR: Wali et al. 2019 has been changed to Wali et al. 2019 so that this citation matches the Reference List. Please confirm that this is correct.correct

Additionally, drawing from contemporary literature, Zhang et al. [ 12 ] illuminate the importance of knowledge management in fostering sustainable innovation within small and medium enterprises, highlighting the mediation analysis utilizing a structural equation modeling (SEM) approach. Muhamad Ali et al. [ 13 ] investigated the impact of changes in accounting standards on earnings management, providing applied research spanning from 2003 to 2014. Their study shed light on the dynamic relationship between accounting regulations and financial manipulation, underscoring the importance of robust regulatory frameworks to control unethical practices within the banking sector [ 13 ].

Moreover, Wali's [ 14 ] research on the detection of earnings management through a decrease in corporate income tax highlighted the critical need for transparency and accountability in financial reporting. The study emphasized the importance of stringent monitoring mechanisms to curb deceptive practices that could potentially destabilize the sector [ 14 ]. Furthermore, Li et al. (2022) investigate the impact of tax avoidance culture and employees' behavior on sustainable business performance, emphasizing the moderating role of corporate social responsibility. The study emphasizes the critical relationship between ethical business practices, corporate social responsibility, and long-term sustainable performance.AUTHOR: Muhamad Ali et al. 2020 has been changed to Muhamad Ali et al. 2020 so that this citation matches the Reference List. Please confirm that this is correct.correctAUTHOR: Wali, 2021 has been changed to Wali 2021 so that this citation matches the Reference List. Please confirm that this is correct.correct

Finally, with the advent of technological advances, Wali [ 15 ] explored the security and confidentiality of information in the banking sector, especially in the context of cloud accounting versus traditional accounting methods. This research emphasizes the need for comprehensive data protection and risk management strategies, emphasizing the importance of a governance framework that adapts to the evolving technological landscape [ 15 ].

The present study aims to contribute to the existing literature by examining the specific mechanisms through which robust governance frameworks within the banking sector contribute to mitigating risks, enhancing performance, and safeguarding stakeholder interests. By analyzing the interplay between governance practices, financial stability, and market valuation, this study seeks to bridge the existing gap in understanding the nuanced relationship between corporate governance and banking performance. The following sections will provide a comprehensive analysis of the empirical findings and discuss the implications for policy and practice within the financial sector.

Sample data analysis and research methods

This research will concentrate on private banks particularly, Kurdistan International Bank, Bank of Cihan, Bank of Erbil, and Bank of Harem. The objective was to collect opinions and views from professionals and employees of these private banks. The data were gathered and analyzed using a well-designed questionnaire, and frequency distribution tables, percentages, arithmetic means, and standard deviation were produced using statistical software (SPSS). These statistical methods assisted in gathering data and producing visual displays like graphs. The survey had two sections:

The participants' demographic information was collected in the first section.

The principles, guidelines, and controls necessary to execute efficient governance, was devoted to examining in the second section.

The analysis of the collected data involved a thorough examination of the frequency distribution for each answer category, allowing for a comprehensive understanding of the prevailing trends and patterns within the dataset. Additionally, the use of the standard deviation as a statistical metric further facilitated a robust analysis of the data, providing valuable insights into the variations and consistency of responses across the sample.Reference (The International Monetary Fund (2015), Moghadam (2015), Agoba (2017), Mohamed (2019)) was mentioned in the manuscript; however, this was not included in the reference list. As a rule, all mentioned references should be present in the reference list. Please provide the reference details to be inserted in the reference list.okay

Testing of hypotheses

The results of the hypothesis testing reveal strong support for both hypotheses. The participants showed complete agreement with both hypotheses, indicating a high level of consensus among them. The participants' thorough comprehension of these elements is further evidenced by the fact that the average scores for all the questions pertaining to the idea, goals, foundations, laws, and processes of governance continuously clung at about 4. According to Hypothesis 1, there is a clear correlation between implementing comprehensive governance and improving banking performance, which results in a rise in market value and the eradication of market issues. The overall average score of 4.050 reinforces the participants' agreement with this hypothesis. This finding suggests that the participants recognize the importance of comprehensive governance in improving banking performance and addressing market challenges.

According to Hypothesis 2, the integration of the governance system within banks enhances responsibility, reduces cases of administrative and financial misconduct, and ensures the protection of shareholders' rights. The participants' strong agreement with this hypothesis is evident through their consistently high scores. This indicates that the participants acknowledge the role of governance in promoting responsible behavior, mitigating misconduct, and safeguarding shareholders' rights.

In this section, we provide a description and analysis of the research variables. We also present the results obtained from the study with discussion.

The descriptive statistics for the demographic questions are shown in Table 1 . The bulk of participants (51.7%) are between the ages of 20 and 30, followed by those between the ages of 31 and 40 (26.7%), 41 and 50 (16.7%), and those above 50 (5%). Females constitute a larger proportion (65%) compared to males (35%). Regarding education, most participants hold a master's degree (58.3%), while 23.3% have a diploma, and 18.3% possess a bachelor's degree. None of the participants have a PhD. In terms of work experience, the majority (33.3%) have less than four years, and a significant number (26.7%) have a background in finance and banking.

To offer a comprehensive understanding of the study's participants, Table 1 showcases the descriptive statistics pertaining to the demographic questions. These statistics serve as a valuable lens through which we can discern the diverse characteristics and backgrounds of the individuals involved, thereby enriching the contextual understanding of the research outcomes. Through this analytical lens, we aim to provide a nuanced perspective that not only encapsulates the numerical data but also paints a vivid portrait of the participants, highlighting the diverse tapestry of their experiences and perspectives.

Table 2 provides illustrative data on the goals, significance, and notion of governance. As shown in Figs. 1 and 2 , Q1 has the highest mean score (4.133) out of all the questions, followed by Q7 (4.117), Q5 (4.100), Q4 (4.050), Q6 (4.050), Q8 (4.050), Q2 (4.017), and Q3 (3.967). The total average is 4.062, suggesting that respondents overwhelmingly concur with all of the inquiries on the idea of governance, its goals, and its significance. It is proven that governance exists and is important as a result of this acceptance of the first hypothesis.

The mean of each question on governance

The second section of the study, which was divided into two subsections with a total of nine questions, concentrated on the concepts, principles, and tools for applying governance. For the purpose of gathering data, the researchers used a five-point Likert scale. To analyze the responses, frequency distribution was used, aligning with the study's objectives. The sample was intentionally selected but also had random elements, and standard deviation was utilized in the analysis.

Table 3 contains descriptive data on the foundations, norms, and procedures involved in governance implementation. Interesting insights about the responses obtained are revealed by the analysis. Among the questions in this section, Q17 stands out with the highest mean score of 4.150, indicating that participants hold strong opinions regarding this particular aspect. It is closely followed by Q13 with a mean of 4.133, Q12 and Q16 with means of 4.117, Q11 with a mean of 4.050, Q9 with a mean of 4.033, Q10 with a mean of 4.017, and Q15 with a mean of 3.967. The question with the lowest mean score in this section is Q14 with a mean of 3.950. These findings are visually represented in Fig. 2

The results suggest that the surveyed experts and officials attribute significant importance to Q17, indicating that they consider it a crucial element in the successful implementation of governance. Q13, Q12, and Q16 also received high mean scores, suggesting that they are highly valued aspects in the context of governance. On the other hand, Q14 received a relatively lower mean score, indicating that it may be perceived as less significant compared to other questions in this section.

The results of the study provide clear evidence that the respondents have a comprehensive understanding of governance and its various components. Their shared understanding of the importance of governance lends credence to the idea that they are well equipped to put governance measures in place and help their organizations establish strong governance practices. Descriptive statistics, such as means, help provide an understanding of participants' opinions and positions regarding the foundations, guidelines, and procedures for governance performance. The findings contribute to a comprehensive analysis of corporate governance practices in private banks. By examining the statistics, researchers can gain valuable insights into the strengths and potential areas for improvement in private banks' governance frameworks.

The significance of the results lies in the fact that they show that the participants have the skills and awareness required to implement governance practices within their organizations. The findings underline how important it is for them to understand effective governance and promote excellent results within their own organizations.

A study by Abbas [ 16 ] discusses crisis management and transnational healthcare challenges, highlighting the crucial role of effective governance in handling crises. This study underscores the importance of the respondents' skills and awareness in implementing governance practices within their organizations, as it prepares them to manage crises and challenges effectively.

Moreover, Shah et al. [ 17 ] in Utilities Policy emphasizes the importance of environmental policy in the context of renewable electricity generation. The findings of this study resonate with the significance of comprehensive governance practices, as effective governance often involves implementing policies that prioritize sustainable practices.

Additionally, Wang et al. [ 18 ] focus on the impact of economic corridors and tourism on the local community's quality of life under the context of the One Belt One Road initiative. This study's insights can be related to the discussion on the significance of the respondents' ability to understand governance and its implementation within their organizations. Furthermore, the study by Micah et al. [ 19 ] in The Lancet Global Health, this study's emphasis on the importance of investments in healthcare and pandemic preparedness aligns with the discussion's key point regarding the importance of understanding effective governance in promoting excellent results within organizations.

The recent studies provide additional context and support for the idea that a comprehensive understanding of governance is essential for effective management, especially in the areas of environmental policy, crisis management, community development, and healthcare preparedness. Participants' ability to understand governance concepts and practices is likely to enhance their effectiveness in these areas, ultimately benefiting their organizations and the broader community. Furthermore, the research emphasizes the importance of aligning governance with evolving accounting standards, detecting and preventing earnings management, and adapting to technological advances, all while maintaining strict regulatory compliance and ethical standards. These insights provide valuable recommendations to policy makers and industry stakeholders to strengthen governance mechanisms and enhance the long-term sustainability and stability of the sector.

Conclusions

This study looked at how well the sample participants understood governance and how well it worked to accomplish important goals. Analyzing data from a chosen sample of responses was part of the research technique. The research sample shows that participants have a good concept of governance as a system that works well and has accomplished important goals. Legal challenges and the overall environment continue to impede the implementation of governance and its objectives. The efficiency of control mechanisms in the banking system is hampered by both internal and external factors, despite the fact that adherence to governance criteria is essential for private banks to succeed. Moreover, the study underscores the critical role of regulatory frameworks, such as the Basel requirements for banking supervision, in bolstering the resilience and stability of the banking system. While acknowledging the existing limitations, the research emphasizes the progressive nature of the Basel requirements, extending beyond conventional prudential safeguards to encompass comprehensive monitoring and control systems. By enhancing solvency and risk management practices, the Basel requirements aim to fortify the foundations of governance within the banking sector, fostering greater transparency, accountability, and long-term sustainability.

Overall, this study underscores the intricate interplay between governance, legal frameworks, environmental dynamics, and regulatory structures, highlighting the need for continuous adaptation and innovation to address the persistent challenges and foster a more robust and resilient governance framework conducive to achieving sustainable objectives across diverse sectors, especially within the intricate landscape of the banking industry.

Recommendations

Several recommendations were made, including increasing public awareness and understanding of the governance culture, strengthening the legal system through enforceable directives and regulations, and investing in workforce development. These recommendations are considered appropriate solutions for private banks:

Private banks should prioritize the development and implementation of comprehensive governance guidelines that encompass clear objectives, ethical standards, and transparent practices. This involves creating a robust framework that outlines the responsibilities and roles of various stakeholders, emphasizing the importance of integrity and accountability at all levels of the organization.

Private banks should actively engage with all stakeholders, including shareholders, customers, employees, and regulatory authorities, to foster transparency and build trust. Regular communication, feedback mechanisms, and stakeholder consultations can significantly enhance the alignment of organizational objectives with stakeholder expectations, thereby fostering a culture of openness and collaboration.

Private banks should invest in advanced risk management tools and technologies, coupled with comprehensive internal and external audits, to proactively identify and mitigate potential risks and compliance breaches.

Private banks should leverage technological advancements to enhance transparency and accountability within their operations. This involves the implementation of advanced digital systems for data management, reporting, and monitoring, enabling real-time tracking of financial transactions and governance practices. Embracing fintech solutions that prioritize security and transparency can significantly enhance the overall governance framework within the bank.

Potential limitations

Sample Size and Selection Bias The study's findings might be influenced by the relatively limited sample size and potential selection bias, which could affect the generalizability of the results. The inclusion of a more diverse and larger sample, encompassing a broader spectrum of banking institutions, could provide a more comprehensive understanding of the nuanced dynamics of corporate governance within the banking sector.

Data Quality and Validity Potential limitations related to data quality and validity might have influenced the accuracy and reliability of the study's results. The reliance on self-reported data and potential inaccuracies in the reporting process could have introduced biases, thereby impacting the robustness of the empirical analysis.

External Factors and Economic Conditions: The study's findings might be subject to external factors and economic conditions that were not fully accounted for during the analysis. Macroeconomic fluctuations, regulatory changes, and global financial trends could have influenced the observed relationship between corporate governance practices and banking performance, thereby necessitating a more nuanced understanding of the contextual factors at play.

Implications and future research

The implications of the study's findings hold substantial significance for both academia and the banking industry. Academically, the research highlights the pivotal role of robust governance frameworks in fostering sustainable banking practices, mitigating risks, and enhancing overall performance. It underscores the critical need for continued research and development in the field of corporate governance, particularly within the context of the dynamic and evolving banking landscape.

For the banking industry, the study underscores the imperative need for the adoption and implementation of comprehensive governance frameworks to ensure transparency, accountability, and long-term sustainability. The findings emphasize the potential benefits of integrating governance practices in enhancing operational efficiency, minimizing risks, and fostering a culture of integrity and ethical conduct within banking institutions.

Future research endeavors could build upon this study by delving deeper into the specific mechanisms through which governance practices influence various facets of banking operations. This could involve exploring the role of technology and digital transformation in reshaping governance frameworks, examining the impact of cultural and ethical dimensions on governance implementation, and assessing the long-term implications of governance practices on stakeholder relationships and market valuation. Additionally, comparative studies across different global regions and banking systems could provide valuable insights into the cultural and contextual variations influencing the efficacy of governance practices within the banking sector.Reference [20 to 30](after sorting) was provided in the reference list; however, this was not mentioned or cited in the manuscript. As a rule, if a citation is present in the text, then it should be present in the list. Please provide the location of where to insert the reference citation in the main body text. Kindly ensure that all references are cited in ascending numerical order.okay

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Wali, K., van Paridon, K. & Darwish, B. . Strengthening banking sector governance: challenges and solutions. Futur Bus J 9 , 95 (2023). https://doi.org/10.1186/s43093-023-00279-0

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The importance of agile methods has increased in recent years, not only to manage IT projects but also to establish flexible and adaptive organisational structures, which are essential to deal with disruptive changes and build successful digital business strategies. This paper takes an industry-specific perspective by analysing the dissemination, objectives and relative popularity of agile frameworks in the German banking sector. The data provides insights into expectations and experiences associated with agile methods and indicates possible implementation hurdles and success factors. Our research provides the first comprehensive analysis of agile methods in the German banking sector. The comparison with a selected number of fintechs has revealed some differences between banks and fintechs. We found that almost all banks and fintechs apply agile methods in IT projects. However, fintechs have relatively more experience with agile methods than banks and use them more intensively. Scrum is the most relevant framework used in practice. Scaled agile frameworks are so far negligible in the German banking sector. Acceleration of projects is apparently the most important objective of deploying agile methods. In addition, agile methods can contribute to cost savings and lead to improved quality and innovation performance, though for banks it is evidently more challenging to reach their respective targets than for fintechs. Overall our findings suggest that German banks are still in a maturing process of becoming more agile and that there is room for an accelerated adoption of agile methods in general and scaled agile frameworks in particular.

Structured software development versus agile software development: a comparative analysis

A teamwork effectiveness model for agile software development

Agile Project Management

Avoid common mistakes on your manuscript.

1 Introduction

Globalisation and digitisation have triggered disruptive changes in many industries, often related to innovative technologies such as Artificial Intelligence, Machine Learning, Blockchain Technologies, Internet of Things (IoT) as well as advances in High Performance Computing. Shorter product life cycles, fragmentation of value chains and new organisational models such as value creation networks, platform solutions and cluster organisations have emerged. For many companies across a range of industries, it is essential to digitally transform supply chains and distribution channels on the basis of Big Data and advanced analytics in order to successfully deal with accelerated change. Digitisation forces companies to establish flexible operating models so that they can quickly adapt their business strategy in a volatile economic environment (e.g. Gupta 2018 ; Kotter 2014 ; Ravichandran 2018 ; Weill and Woerner 2018 ).

These trends also affect the strategic role and organisational set-up of IT as a corporate function that goes far beyond the traditional responsibilities of building, running and maintaining IT systems. Information technologies enable organisations to sustain and generate competitive advantages by fostering cost efficiency and quality of products and services or even by disrupting the marketplace with innovations. Therefore, IT is evolving from a supporting function into a cross-functional organisational capability that becomes pivotal for product and process innovations in many industries and thus an integral part of a digital business strategy (Alt et al. 2020 ; Bharadwaj et al. 2013 ; Châlons and Dufft 2017 ; Denning 2017 ; Haffke et al. 2017 ; Ross et al. 2017 ; Westerman et al. 2014 ).

Business needs often depend on achieving a faster time-to-market, which in turn requires customer-centric and iterative development processes. In that sense, agility can be regarded as a dynamic capability of organisations to rapidly adapt to new market developments, speed up processes and actively shape their own competitive position by enhancing innovation performance and flexibly allocating corporate resources (e.g. Birkinshaw 2018 ; Mikalef and Pateli 2017 ; Overby et al. 2006 ; Shams et al. 2021 ).

The increased pressure to digitise businesses brings a need for new organisational frameworks and effective tools to manage IT projects that often play a critical role in all parts of the value chain. Agile methods were originally developed to improve the management of small to medium-sized software development projects (e.g. Schwaber and Beedle 2002 ; Sommerville 2015 ; Sutherland and Schwaber 1995 ) as IT projects carried out using the waterfall method very often took longer, were more costly and less innovative than expected. In the meantime, the scope of agile methods has been extended so that they are increasingly applied to large-scale IT-related projects (e.g. Conboy et al. 2019 ; Larman and Vodde 2016 ; Rigby et al. 2016 , 2018 ; Sommerville 2015 ) as well as to organisational transformation projects on a business- or even company-wide level (e.g. Abrar et al. 2019 ; Denning 2018 ; Doz and Kosonen 2010 ; Kettunen and Laanti 2008 ; Tallon et al. 2019 ; Teece et al. 2016 ).

Notwithstanding the different features of the respective method, agility rests upon the principle of dividing the overall project into small increments that are refined in an iterative process (sprints) to ensure continuous improvement and changing requirements during the project. Agile teams work in a self-organised manner, ensuring the best possible outcome through frequent testing, including regular feedback from users or customers. Such an agile setting is supposed to minimise up-front investments and accelerate project execution while at the same time reducing costs and improving quality (e.g. Sommerville 2015 ; Schwaber 2004 ; Sutherland 2015 ). Despite the increasing popularity of agile methods, traditional approaches to software engineering such as waterfall models and their variations still play a role (Kassab et al. 2018 ; Palmquist et al. 2013 ; Poth et al. 2019 ; Thensing et al. 2021 ).

Advocates of agile methods are convinced that even a large number of interacting agile teams operating in parallel across the firm will lead to more innovation, higher productivity and a faster go-to-market (e.g. Jorgensen 2019 ; Larman and Vodde 2016 ; Rigby et al. 2018 ). On the other hand, there is evidence that the scalability of agile methods remains a challenge in many organisations (Denning 2016 , 2018 ; Dikert et al. 2016 ; Dingsøyr and Moe 2014 ; Dingsøyr et al. 2019 ). Therefore, it seems crucial to choose the right design option in order to successfully implement agility in the organisation (e.g. Jöhnk et al. 2017 ; Qumer and Henderson-Sellers 2008 ).

It is striking that so far there is still limited empirical evidence on the actual performance of agile methods in practice. The few empirical studies on agile software development pursue a cross-industry approach and hence do not address sector-specific issues that may well affect the application of agile methods, e.g. due to different regulatory environments. This could particularly apply to the international banking sector in general, and the German banking sector specifically, as the German financial supervisory authority BaFin (Bundesanstalt für Finanzdienstleistungsaufsicht) issued minimum requirements for IT systems in banks (“Bankaufsichtliche Anforderungen an die IT” (BAIT)) in 2017 (amended in August 2021). Monitoring the fulfilment of these requirements is part of the supervisory and evaluation process performed by the respective authorities. The requirements cover a wide range of topics, e.g. strategy, governance and operations of IT systems, IT security, data protection and risk management.

To the best of our knowledge, there is so far no scientific empirical analysis of the usage of agile methods in the German banking sector. There are a few reasons why we chose the German banking industry as the field of our research. Firstly, the business models in this industry are especially subject to digitisation of core processes, as financial products are virtual by nature. Hence, managing heavy investments in IT and reducing running costs are vital tasks for banks when it comes to defending their competitive position and sustaining it in the future. A redesign of the value chain including large outsourcing projects, cloud solutions and cooperations with technology partners (including fintechs) requires efficient and effective management of IT projects.

Secondly, new incumbents such as fintechs are entering the market as competitors, suppliers or cooperation partners of banks, and these newcomers are not held back by the high costs of operating inflexible and sometimes incompatible legacy IT systems. Furthermore, fintechs are usually subject to a different regulatory framework as many of them do not need a (full) banking licence for their services or if they do, they often cooperate with or own a very small banking operation. Therefore, the question arises as to whether these different conditions affect the approach of banks and fintechs towards the use of agile methods.

1.1 Research questions

The following paper analyses, for the German banking sector, whether and to what extent agile methods are being applied in IT projects, which tools are being used and what kind of expectations regarding cost savings, quality improvement, accelerated project execution or enhanced innovation performance have been linked to the application of agile methods and to what extent these expectations have been met. Furthermore, the paper investigates what kind of impediments in implementing agile practices can be observed and whether significant differences exist in this regard between established banks and young financial technology companies (fintechs).

1.2 Related work

Agile methods have increasingly received attention both in academic research and in management practice. However, the existing empirical research is mainly based on experiences of specific companies documented in a limited number of case studies. They primarily focus on the potential benefits and challenges compared to waterfall methods and critical factors for successfully introducing and adopting agile methods (e.g. Aldamash et al. 2017 ; Chow and Cao 2008 ; Denning 2016 ; Dybå and Dingsøyr 2008 ; Misra et al. 2009 ; Serrador and Pinto 2015 ). Other research studies deal with the challenges of applying agile methods in large-scale transformation projects or even introducing an agile mindset on an enterprise level (e.g. Abrar et al 2019 ; Conboy et al. 2019 ; Dikert et al. 2016 ; Dingsøyr and Moe 2014 ; Gerster et al. 2020 ; Kalenda 2018 ; Mahanti 2006 ).

Furthermore, the existing literature predominantly takes a software engineering perspective, e.g. by mainly asking operational IT experts when analysing and testing the specific features of single agile methods (such as Scrum or XP), comparing them to waterfall methods and drawing lessons learned for introducing and adopting agile frameworks including the choice of design options and engineering practices (Inayat et al. 2015 ; Jöhnk et al. 2017 ; Kassab et al. 2018 ). Other fields of research relate to behavioural aspects of agile teams such as the impact of individual backgrounds, beliefs and values on the effectiveness of agile teams (e.g. Kakar 2017 ; Senapathi and Srinivasan 2013 ). Apart from these scientific studies, the “Annual State of Agile Report” conducts a survey among practitioners to provide insights into the application of agile methods, e.g. the dissemination of agile methods, recent trends and engineering practices employed (digital.ai 2021 ).

There are some research papers dealing with specific aspects of applying agile methods in the banking sector, such as the impact of agile methods on IT governance (Sulejman et al. 2018 ). Other contributions present case studies on the digital transformation of a particular bank (e.g. Birkinshaw 2018 ; Christou et al. 2010 ; Roses et al. 2016 ; Scott et al. 2021 ). As the existing research does not pursue a sector-specific perspective, our study of the German banking sector complements the existing empirical research on agile methods in IT projects. We start by briefly introducing the most important methods in software development, from traditional waterfall models to agile methods and hybrid frameworks, to prepare for the methodological approach and the data analysis of this paper.

2 Software development life cycle (SDLC)—models and methodologies

The Software Development Life Cycle is a framework defining tasks to be performed at each step within the software development process (e.g. Sommerville 2015 ). Traditionally, large software development projects were managed with the waterfall method by breaking the project scope into different work streams that in turn were structured as sequences of actions. Each phase depends on the deliverables of the previous one, based on a detailed specification of tasks, time schedules, budgets and performance indicators (e.g. Bell and Thayer 1976 ; Benington 1983 ; Royce 1970 ; Sommerville 2015 ). The waterfall method is characterised by a hierarchical approach with the resulting project management processes largely flowing in one direction, i.e. from the overall project targets at the top in a cascade of activities down to the most incremental project steps, with each step being defined by a starting point, an end point and a precise output.

The advantages of the waterfall approach stem from a logical, well-structured project plan with clearly assigned responsibilities, defined deliverables, milestones and resources (Balaji and Murugaiyan 2012 ; Sage and Palmer 1990 ; Sommerville 2015 ). On the other hand, the waterfall approach is characterised by a low level of flexibility, as the linear progression of stages impedes early detection of mistakes, bottlenecks or changing requirements of users, since first product releases are generated late in the development process (e.g. McConnell 2004 ; Sommerville 2015 ).

In order to overcome some of these weaknesses, modified waterfalls have been developed to allow for overlapping phases (Degrace and Stahl 1990 ) or to introduce iterative components such as feedback loops (Boehm 1988 ; McConnell 1996 ). Other advancements of the waterfall model lead to the V-model (Boehm 1979 , 1981 ), which amends the sequential activities in a software development process with corresponding testing activities. A strong focus of the V-model is on quality assurance and improvement.

2.1 Iterative and incremental models

The basic idea behind this group of methods is to develop a system through repeated cycles (iterative way of working) and in smaller portions (incremental development), allowing software engineers to learn from experiences and feedback gained from earlier versions of the system. At each iteration, design modifications may take place and new functional capabilities may be added (Basili und Turner 1975 ; Cockburn 2008 ; Larman and Basili 2003 ). An important example within this group of software development methods is the spiral model (Boehm 1988 , 2000 ) that considers the overall project as a spiral series of development cycles consisting of target setting, evaluation of alternatives, risk analysis, development, testing and reviewing. The concept of Rapid Application Development (RAD) builds on the spiral model and emphasises the importance of prototyping for the overall project success (e.g. Beynon-Davies and Holmes 1998 ; Kerr and Hunter 1993 ; Martin 1991 ; McConnell 1996 ).

2.2 Agile methods in general

Compared to traditional software engineering, agile software development mainly targets complex systems with dynamic, non-deterministic and non-linear characteristics. Often, at the outset of such projects, neither precise user expectations nor detailed information about technological challenges or elaborated business cases are available. Therefore, agile methods avoid detailed up-front specifications and pursue adaptive, iterative and evolutionary development processes (e.g. Martin 2013 ; Schwaber and Sutherland 2020 ).

Notwithstanding the specific design of the manifold agile methods that have been developed in the meantime, the basic principles of agile software development have been summarised in a memorandum signed by experienced software developers (Manifesto for Agile Software Development 2001 ). Important principles include a customer-centric approach to software development based on close interaction between business representatives and developers. A first prototype of the software should be delivered early in the process, followed by frequent deliveries of improved prototypes based on regular testing and user feedback. Each iteration covers planning, analysis, design, coding, testing, and user acceptance. This minimises overall risk and allows the product design to be adapted to changes very quickly. Multiple iterations might be required to release a new product version or features. Hence, especially in complex software development projects, optimal solutions emerge from self-organising, possibly cross-functional teams that regularly reflect progress, identify obstacles and risks and adapt accordingly in a process of continuous learning from each other. Furthermore, co-working is supported by co-location to foster face-to-face communication and facilitate instant feedback. Overall, agile methods are considered to speed up the project, support quality assurance and also reduce development costs (e.g. Flewelling 2018 ; Sommerville 2015 ; Sutherland 2015 ; Dybå and Dingsøyr 2008 ; Forsberg and Mooz 1999 ).

Although there is a common set of principles characterising agile methods, in recent years many different agile methods have been developed, accentuating different aspects of agility. To prepare the empirical analysis of agile methods in the German Banking sector, we briefly describe the agile method Scrum, which is so far the most popular agile approach in practice (digital.ai 2021 ). We also provide a short summary of other important agile frameworks.

The Scrum methodology was originally developed for product development processes in the manufacturing industries (Takeuchi and Nonaka 1986 ). The transfer to software development processes goes back to the 1990s (e.g. Sommerville 2015 ; Hossain et al. 2009 ; Schwaber 1997 ). Since then several methodological refinements and amendments have further advanced the Scrum approach (e.g. Schwaber and Sutherland 2020 ; Beedle et al. 2010 ; Schwaber 2004 ; Schwaber and Beedle 2002 ). The fundamental action unit of Scrum is a small team of up to ten members consisting of a product owner, a scrum master and developers. The team is self-managing, often cross-functional and focuses together on the product delivery. The scrum set-up fosters mutual accountability, participation and self-organisation (e.g. Schwaber and Sutherland 2020 ).

The product owner is responsible for defining the product in customer-centric terms and for negotiating priorities, scope, funding, and schedule with stakeholders. Therefore, a key role of the product owner is to create, order and clearly communicate product backlog items to the developers and ensure that product requirements are transparent, visible and understood by the development team (Sverrisdottir et al. 2014 ). Developers are core members of the scrum team who are responsible for building the product increments in the respective iteration towards the final product. Depending on the type of product, development teams usually include members with different fields of IT-related expertise such as system architects, designers, data specialists, programmers or testing specialists. Representatives of non-IT functions such as HR, Finance, Marketing or Legal may also belong to the team (Dikert et al. 2016 ; Dybå and Dingsøyr 2008 ). The development team works in a self-organising manner on the product backlog by planning the next sprint, creating the sprint backlog or adapting activities when needed. Direct interaction with customers or stakeholders is recommended to allow for regular feedback and to improve the understanding of customer needs (Schwaber 2004 ; Schwaber and Beedle 2002 ).

The scrum process is facilitated by a scrum master, who is responsible for implementing the scrum process in accordance with the basic principles documented in the scrum guide (Schwaber and Sutherland 2020 ). In that role, the scrum master supports the product owner, the developers and even the entire organisation in which the scrum process is being executed. In particular, the scrum master coaches team members in the basic working principles of scrum (e.g. self-management, customer-orientation, cross-functionality) and helps to overcome internal or external impediments to deliver valuable product increments or other deliverables. The scrum master facilitates key sessions and encourages the team to continuously improve. However, in contrast to a project manager, the scrum master has no people management responsibility.

A sprint is the basic iteration unit of development in Scrum which is characterised by a pre-agreed length of about one to four weeks (Fig. 1 ). Each sprint starts with a sprint planning that establishes a sprint goal and the required product backlog items are translated into a sprint backlog covering the activities needed to achieve the sprint goal. A daily meeting of the development team (the “daily scrum”) is important to monitor progress, identify possible impediments to achieving the sprint goal and adjust the sprint backlog accordingly. At the end of each sprint the scrum team presents the deliverables of the sprint, i.e. the product increment, to stakeholders in order to inspect progress towards the sprint goal (sprint review). In addition, lessons learned are identified to improve the forthcoming sprints (sprint retrospective) and potentially refine the product backlog. However, it should be noted that, despite the common framework and tools, scrum projects are usually tailored to the specific situation of the company as multiple design options are available (Diebold et al. 2015 ; Jöhnk et al. 2017 ).

Overview of the scrum process

Other agile software development frameworks are Extreme Programming (XP) (Ambler 2002 ; Beck and Andres 2004 ; Beck and Fowler 2000 ; Lindstrom et al. 2004 ), the Unified Software Development Process (Jacobson et al. 2000 ), which was originally developed by Rational/IBM (Gornik 2001 ; Kroll and Kruchten 2003 ; Kruchten 1998 ), and Kanban (Brechner 2015 ; Ohno 1988 ). Besides these, there are development frameworks that stress specific aspects of the agile software development process such as Test-Driven Development (TDD) (Beck 2002 ), Behaviour-Driven Development (BDD) (Kortum et al. 2019 ; North 2006 ) or Adaptive Software Development (Highsmith 2000 ; Highsmith and Cockburn 2001 ).

2.4 Agile at scale

While originally agile methods were used in smaller projects with co-located teams, over the past decade the scalability of these frameworks became an important topic both for practitioners and for researchers. The term “large-scale agile development” is used to describe multi-team development efforts that make use of agile principles and involve a large number of actors and interfaces with existing systems (Dingsøyr and Moe 2014 ). This includes extending the application of agile methods to other corporate processes such as innovation or product development (Kettunen 2007 ).

Hence, frameworks emerged dealing with the scalability of agile methods, such as LeSS (Large-Scale Scrum) (Larman and Vodde 2016 ) or the Scaled Agile Framework (SAFe) (Leffingwell 2018 , 2011 ).

SAFe is an extensive agile framework intending to make the whole organisation more agile by addressing different fields, levels and competencies of an enterprise. The framework of SAFe distinguishes between different components constituting an “agile enterprise”, including “Lean Agile Leadership”, “Agile Product Delivery”, “Team and Technical Delivery” or “Organisational Agility”, that need to be addressed in parallel and tailored to the specific business requirements. As SAFe has a much wider scope than improving IT projects or product development processes, SAFe involves the use of different agile methods, such as Scrum or XP, in combination with lean management tools such as Kaizen or Six Sigma (Knaster and Leffingwell 2020 ).

In contrast to SAFe, the framework LeSS is an expanded version of Scrum in an environment where multiple teams are working together on one product. Hence LeSS is mainly applied in product development projects. Based on the fundamental principles of Scrum, LeSS explicitly addresses interfaces between different work streams and ensures efficient communication and cooperation across teams (Larman and Vodde 2016 ). Other large-scale agile frameworks include DAD, Nexus and Scrum at Scale (Almeida and Espinheira 2021 ).

3 Agile methods in the German banking sector—database and research methodology

Due to the lack of empirical evidence of agile methods in the German banking sector, we have conducted a structured survey to find out whether and to what extent German banks use agile methods in IT projects, which tools they prefer and to investigate their expectations, experiences and perceived success factors. Furthermore, we analyse whether or not significant differences on these questions can be observed between established banks and young fintechs that do not have to solve legacy IT issues and can predominantly pursue a greenfield approach. In order to answer these questions, a total of 51 financial institutions headquartered in Germany took part in a structured survey conducted between November 1st 2020 and January 31st 2021. We concentrated on the banking sector and “banking-related” fintechs that act either as competitors of traditional banks or as suppliers or cooperation partners. Therefore, we included fintechs providing services in the fields of financing, investments and transactions (e.g. payments) as well as other banking-related services (e.g. risk management). Fintechs in the insurance sector (InsurTechs) or in other fields such as property technology (PropTechs) or regulatory technology (RegTechs) were excluded from the survey, as they operate in a different regulatory environment.

Table 1 shows that 17 German banks and 34 fintechs participated in the survey. Out of the 51 participants in the survey, all banks have at least some experience with agile methods in IT projects, whereas two out of the 34 fintechs have so far not applied any agile methods, i.e. they apply either waterfall methods or work without a specific development framework as they are still too small. For the purpose of this study we have defined banks with total assets of at least EUR 100 bn as large banks and all other banks as small-to-medium-sized (SME) banks. Banks that serve both corporate and retail clients and offer savings and loans products are defined as universal banks; all others have been categorised as special banks. In terms of market coverage, the banks participating in the survey represent the “three pillars” of the German Banking System (i.e. private banks, state banks (incl. savings banks) and cooperative banks) and cover approx. 90% of the total assets of the German banking sector based on the German banking statistics (Deutsche Bundesbank 2021 ). Hence the results of the data analysis for the banking sector are statistically robust. For the German fintech sector it is more challenging to select a meaningful sample as there is so far no database of registered fintechs provided by a body such as a financial supervisory authority, a financial data provider or a research institute, which would ensure a high level of data quality in terms of completeness, correctness and validity. The available lists of German fintechs are mainly compiled by startup organisations or consulting firms that differ widely in terms of definitions, categories, numbers and data quality.

For the purpose of our study we defined fintechs as “young” technology-based financial services firms that have existed for 10 years at most. The fintechs covered in this study were therefore founded on or after November 1st 2010 and are still active in the market as of January 1st 2021. Companies older than 10 years are usually not considered startups any more (Deutscher Startup Monitor 2021 ). Furthermore, we focused on fintechs that offer “banking” or “banking-related” services, in order to ensure that the selected fintechs operate in a market and regulatory environment similar to the banks participating in this survey. Based on these criteria, we identified and approached 103 “banking-related” fintechs, of which 34 fintechs participated in our survey, which corresponds to a response rate of 33%. Although this is still a limited number, the sample is sufficiently large to fulfil the prerequisites of applying the non-parametric test methods used in this paper while carefully considering the limitations of the analysis when interpreting the results.

In addition, Table 1 displays a classification of the participating fintechs along two dimensions. In terms of their business model, fintechs have been divided into two groups, one of which serves end customers (Business-to-Consumer, B2C) and the other serves business customers (Business-to-Business, B2B). As for their stage of development, all companies founded on November 1st 2015 or after have been defined as “early stage” while all fintechs with a maturity of more than 5 years have been classified as “later stage” fintechs.

We designed a questionnaire with 12 questions in order to analyse fields of application, expectations and experiences with agile methods in general and to find out whether or not statistically significant differences between banks and fintechs can be observed (Table 2 ). Before we finalised the design of the questionnaire, we discussed draft versions with ten randomly selected survey participants (five banks and five fintechs) to make sure that the questions asked and the corresponding choices presented were clearly formulated and are considered suitable and relevant for the topic.

It should be noted that during these preliminary discussions it turned out that larger banks, in particular, were not willing to collect the data on a more granular (e.g. divisional or functional) level. This means that our findings are restricted to a corporate level and hence do not allow for a more differentiated perspective on the respective organisations.

We have addressed the questionnaire both to the Head of Corporate Development and the Head of Corporate IT in larger banks, who then decided who should internally take the lead in collecting the required information. This was also to ensure that both business-related and technological aspects are considered when completing the questionnaire. In small-to-medium-sized banks the Chief Operating Officer (COO) most often completed the questionnaire. At fintechs the CEO or the CTO of the company filled in the questionnaire.

We had a preliminary talk about the questionnaire with at least one representative of each participating firm to clarify open issues and to make sure that the questions had been properly understood. After receiving the completed form, in some cases we had another meeting, particularly when the participating company had added qualitative remarks on selected questions that provided additional insights into the company-specific background for the given answers.

A limiting factor of our analysis is the fact that, in large banks with a broad portfolio of business divisions, the usage of agile methods and the agile mindset can be very different across the firm. Therefore, the feedback we received from diversified banks may be characterised as a corporate view taking into account different agile development stages of the various divisions.

The survey consists of three parts. The first part, comprising questions 1–4, intends to establish a picture of the status quo of how agile methods are applied in the German banking and fintech sector. These questions therefore relate to the share of IT projects where agile methods are applied and the preferred agile methods. They also cover the objectives of using agile methods in IT projects as well as the type of projects in terms of size.

The second part of the survey (questions 5–8) deals in particular with the experiences of banks and fintechs with agile methods to date, based on their expectations on cost savings, acceleration of projects, quality improvement and enhanced innovation performance. The final part (questions 9–12) intends to shed some light on possible implementation hurdles, success factors of using agile methods and the future relevance of agile methods inside and outside the IT function. The Chi-Square test for categorical variables and the Mann–Whitney U test as a non-parametric test method for ordinary scaled variables are used to find out whether or not a statistically significant difference between banks and fintechs could be observed. For each of the following Mann–Whitney U tests, the null hypothesis assumes that there is no difference between fintechs and banks based on mean ranks of the respective variable. For each of the following Chi-Square tests, the null hypothesis assumes that no difference between banks and fintechs on the tested categorical variables can be observed.

4 Data analysis and results for the German banking sector

In the following we summarise the main findings from our survey on agile methods in the German banking sector. The analysis provides insights into objectives, preferred tools, expectations and experiences of banks and fintechs. In addition, lessons learned by the participants indicate implementation hurdles and success factors of agile methods in banking.

4.1 Objectives and current usage of agile methods

To get an indication of how broadly agile methods are being applied in IT projects, the participants were asked about the percentage of IT projects in which agile methods are applied, regardless of the project size in terms of volume (Table 3 ).

While 84% of the fintechs apply agile methods in at least 75% of their IT projects, only 47% of the participating banks do so. At the same time, 35% of the banks apply agile methods in less than 50% of their IT projects compared to 0% of the fintechs. Overall, the fintechs apply agile methods more frequently than the banks. This difference is statistically significant on a confidence level of 5%, i.e. the null hypothesis stating that there is no difference between fintechs and banks is rejected. The analysis may also support the hypothesis that startups are more inclined to use innovative organisational methods, as they do not have to cope with legacy technologies and structures that sometimes pose barriers to change.

As illustrated in the first chapter, a number of different agile methods are available in the market that share similar principles. Therefore, we preselected some well-established frameworks and tools (Scrum, SAFe and LeSS) and captured other methods (e.g. XP and Kanban) in a category called “others”. Through the inclusion of SAFe and LeSS we wanted to get some evidence on whether or not scaled agile frameworks already play a role in practice. Table 4 shows that Scrum is by far the most applied agile tool, both in banks (94%) and fintechs (100%). Other tools such as XP or Kanban are used to a much lower degree (banks 35%, fintechs 38%). A different picture emerges regarding the application of advanced methods such as LeSS, which seems to be almost irrelevant to date in the German banking sector, or SAFe, which plays a role in German banks (35%) and a small role (3%) in the fintech segment. Only in the latter case is the null hypothesis, that there is no difference between banks and fintechs, rejected on a 5% confidence level. This is quite plausible, given that the potential benefit of using scaled agile methods is greater in larger organisations such as established banks than in typically much smaller fintechs.

The panelists were asked about the objectives they intend to achieve by applying agile, i.e. more flexible, adaptive and self-organising, methods in IT projects compared to more traditional, precisely structured and centrally steered waterfall methods. The participating institutions could choose between “cost savings”, “accelerated project execution”, “improved quality of project outcome” and “better innovation performance”. Multiple answers were possible. Table 5 summarises the answers and the results of the Chi-Square independence tests with the respective null hypotheses that no difference between fintechs and banks can be observed.

The data shows that the “acceleration” of projects is an important priority both for banks and fintechs, whereas cost savings and quality improvements are also on the agenda of panelists, but to a lower degree. Interestingly, cost savings seem to be slightly more important for fintechs than for banks. A similar observation can be made concerning the relative importance of “quality improvement”, which may relate to the innovative and somewhat immature character of the solutions offered by fintechs. However, based on a Chi-square test, for these objectives no significant statistical differences on a significance level of 5% could be observed between fintechs and banks, i.e. the null hypotheses are not rejected. But the data also suggest on a significance level of 5% that banks place greater importance on achieving better innovation performance than fintechs. This is not surprising, as the fintechs included here are startups and are usually founded to introduce innovative products and services, whereas banks hope to become more innovative when project management and the whole corporate culture becomes more agile.

Table 6 illustrates in which type of projects, in terms of project size, agile methods are applied. We distinguish large-scale projects, medium-sized and small projects, whereby we had to accept that even companies of similar size segment these project categories in different ways. Therefore, we did not precisely prescribe how to allocate projects to the three categories, e.g. in terms of project volume, rather we let the participants decide how to classify their project portfolio to consider company-specific circumstances. Consequently, it should be noted that the volume of projects associated with each category varies. Nevertheless, the figures give an indication of the field of application of agile methods based on the company-specific judgement of project size.

The data suggest that the application of agile methods is mainly focused on medium-sized and small IT projects and to a lesser extent on large-scale projects. However, there is a remarkable—though still not statistically significant—difference between fintechs and banks, as only about 71% of the banks versus some 47% of fintechs use agile methods in large-scale IT projects. Qualitative comments provided by some participants indicate that the comparatively low figure for fintechs may stem from the fact that younger fintechs, in particular, have less exposure to large-scale projects simply because of their limited size. Some banks stated that they are somewhat cautious about introducing agile methods in large projects as they are still in the process of gaining deeper experience with such methods in smaller projects.

4.2 Expectations and experiences with agile methods

Table 7 provides insights into the fulfilment of expectations regarding the main objectives of applying agile methods, i.e. reduction of project costs, reduced project time, improved quality and enhanced innovation performance, each of them analysed for banks and fintechs, applying the Mann–Whitney U test as rank sum test for ordinal scaled data. First of all, the data show that across all objectives only a small group of panelists (between 2 and 4%) consider their expectations from applying agile methods to not have been fulfilled at all. Conversely, the vast majority of participants see their expectations across all dimensions as at least partially fulfilled. Looking at the different objectives, it is striking that expectations regarding cost savings were only partially-fulfilled in most cases (fintechs 63%, banks 82%). Only a minority of participants were fully satisfied with their cost reductions, while only 6% of the banks and 0% of the fintechs report having missed their cost saving objective entirely. The difference between fintechs and banks is statistically significant on a 5% confidence level, indicating that it is more difficult for banks to achieve their cost savings targets by applying agile methods.

In terms of project acceleration, the analysis reveals that 51% of participants overall see their expectations as fully or at least partially (47%) met. However, the results differ substantially between banks (35% of fully met expectations) and fintechs (59%) although this difference is not significant on a confidence level of 5%, which could be related to the limited sample. On the other hand, a partial fulfilment of expectations was confirmed by 59% of the banks and 41% of the fintechs. This is an interesting aspect given that the acceleration of projects is mentioned as the most important objective by most banks and fintechs.

The experiences regarding the expected innovation performance show a similar overall pattern, with a high level of fully (43%) or partially (53%) met expectations. The figures differ again between fintechs considering their expectations completely or partially fulfilled (each 47%) and banks (35% fulfilled versus 65% partially met). Yet again the difference between banks and fintechs is not statistically significant on a 5% confidence level using the Mann-Whiney U test.

When it comes to expected quality improvements, around 98% of the participants see their expectations fully (53%) or partially (45%) met. While 66% of the fintechs were fully satisfied with their achieved quality improvements, only 29% of the banks achieved such a high satisfaction level. Nevertheless, 71% of banks (31% of fintechs) indicated a partial fulfilment of their expectations. This wide gap between the experiences of fintechs and banks is statistically significant on a 5% confidence level.

In summary, across all dimensions, most banks and fintechs see their expectations as either fully or at least partly fulfilled. While the expectations of banks in every dimension were predominantly only partially fulfilled, most fintechs report that their expectations were fully met with regard to acceleration of project execution and quality improvement. The data suggest on a confidence level of 5% that banks have more difficulty achieving their cost savings and quality assurance targets than fintechs. Based on the comments we received from interviews with company representatives, possible explanations for these differences include that some expected benefits among banks were unrealistically high and that banks have so far not gained enough experience with agile methods to exploit their full benefits.

We also asked the panelists about their views on the future relevance of agile methods for projects inside and outside the IT function. Table 8 confirms that there is a unanimous opinion that the relevance of agile methods in IT project management will further increase (94% of banks, 97% of fintechs). The response is similar, though not quite as pronounced, regarding projects outside IT, which may relate to strategic projects, for example, or projects in other centralised functions such as HR, Accounting or Finance. 82% of banks and 94% of fintechs expect that agile methods will also become more relevant outside IT projects.

4.3 Implementation hurdles and success factors for agile methods

Finally, we want to get an indication about implementation hurdles and success factors for agile methods in the German banking sector based on the experience the participants have gained so far in practice. In order to facilitate the completion of the questionnaires, we wanted to avoid a too detailed segmentation of technical parameters. Therefore, we preselected five potential hurdles and five success factors. Although they represent a relatively rough grouping of parameters, they are in line with findings in other studies and with the feedback we received from some panelists before finalising the questionnaire. Table 9 shows that the compliance of project teams with the agile rules, i.e. accepting and consistently applying roles such as scrum masters, product owners and developers, is among the most important challenges in agile IT projects for both banks (76%) and fintechs (72%). Remarks from interview partners highlighted that proper training and coaching are viewed as essential before starting to apply agile methods. Comments from the participants also suggest that interdisciplinary project teams need to go through a learning curve in order to continuously put agile rules into practice.

Furthermore, the majority of banks (76%) and fintechs (69%) consider organisational interfaces as a possible hurdle that may exist between the respective agile project team and other projects (which may or may not also apply agile methods) or other organisational units (e.g. business divisions, centralised functions) affected by the project outcome. Possible frictions could arise, for instance, if product owners have multiple, perhaps conflicting, roles in a company or when there is a general resistance to major changes in the organisation.

Another aspect that could negatively affect the implementation of agile methods is insufficient management support, e.g. if senior managers are not already familiar enough with agile methods. Although only 27% of the institutions mentioned this as a possible hurdle, it is noticeable that the ratio is substantially higher among banks (41%) than fintechs (19%). This may be due to the fact that fintechs usually operate with much flatter hierarchies and that founders are often part of the management team. Hence, the acceptance of new (organisational) technologies seems to be higher among fintechs than established banks. However, this difference is not statistically significant on a 5% confidence level.

At the same time, the buy-in of the project team itself seems to be a challenge to promoting agility as well. For example, not all members of the project team may be convinced about the benefits of agile methods, perhaps because of limited experience with agile methods so far or because the defined role of the individual team member is perceived as a downgrade compared to former line management positions.

Some respondents from banks mentioned that the implementation of agile principles goes hand in hand with a flattening of the organisational hierarchy and hence a loss of management responsibility for some employees. It should be noted that only 34% of the fintechs, but 59% of the banks, consider this aspect a possible implementation barrier, although this difference is not statistically significant on a 5% confidence level. The buy-in of users/customers seems to be of minor relevance (24% overall). However, even this comparably low figure is remarkable, as the engagement of users/customers is crucial for a successful project. Overall, it is noteworthy that no statistically significant differences between banks and fintechs can be observed with regard to implementation hurdles, i.e. the null hypotheses have been all accepted (Table 9 ).

Finally, we raised the question about key success factors for applying agile methods in IT projects. It turns out that the know-how of the project team members regarding agile methods is viewed as an important prerequisite for a successful application. Some 76% of the banks and about 66% of the fintechs share this view (Table 10 ). Remarks from interview partners highlighted that proper training and coaching are viewed as essential before starting to apply agile methods. Another success factor mentioned by 82% of the banks and 72% of the fintechs relates to support from the responsible management to overcome scepticism towards agile methods in the wider organisation. This fits with the findings related to the previous question, where insufficient management buy-in was considered a possible barrier to successfully implementing agile methods.

In addition, a clear project set-up, i.e. a consistent establishment of the agile framework selected, and the buy-in of the concerning business units were each mentioned as success factors by about 53% of the participants. A little surprising is the feedback on the significance of project budget constraints. Neither the majority of banks nor of fintechs report a sufficient budget as a key success factor. The difference between the responding banks (35%) and fintechs (3%) is statistically significant in that case, whereas no significant difference between banks and fintechs could be observed for any other factors. Qualitative comments from participants point to the fact that the pre-agreed budgets have been sufficient and in many cases have even not been fully utilised, partly because budgeting was based on past experience with waterfall methods, not taking into account the benefits of agile methods in terms of cost savings. Another reason mentioned refers to the fact that, in the banking sector, investments in digitisation enjoy a high priority, so budget negotiations are less contested than in other fields of investment.

5 Discussion

Our results show that agile methods are widely used in IT projects both in the German banking sector and in banking-related fintechs. However, fintechs have relatively more experience with using agile methods and apply them more intensively than banks. Given that only 47% of the banks, but 84% of fintechs, apply agile methods in at least 75% of their IT projects (Table 3 ), a significant part of the German banking sector seems to still be in a learning process of implementing agile methods or to prefer using more familiar, non-agile methods in many projects. The question as to whether this difference in adoption levels of agile methods between startups and established companies is specific to the financial sector or also applies to other industries has so far not been covered by other empirical studies.

As an agile mindset is considered to be strategically important to sustain and enhance competitive positions in a rapidly changing environment with more frequent disruptions, the somewhat sluggish implementation of agile methods by at least some German banks could be one reason for them losing market share to fintechs in a number of segments.

Both fintechs and banks state that agile methods are mainly adopted in medium-sized and small IT projects (Table 6 ), which is consistent with other empirical evidence and the intended field of application of basic, i.e. non-scaled, agile methods (e.g. Dingsøyr et al. 2019 ; Martin 2013 ; Schwaber 2004 ; Sommerville 2015 ). However, there is a clear tendency to scale agile approaches beyond single projects and apply them in multiple-project-settings or extend their implementation to whole business units, centralised functions or even to enterprise level (e.g. Abrar et al. 2019 ; Dikert et al. 2016 ; Conboy et al. 2019 ; Dingsøyr and Moe 2014 ). A significant portion of German banks (71%) and fintechs (47%) have also applied agile methods in large-scale IT projects, evidently often without using scaled agile frameworks such as SAFe or LeSS, which are so far negligible in German fintechs, while a minority of German banks have at least adopted scaled agile frameworks to a certain degree (Table 4 ). Responding fintechs pointed out that the limited size and complexity of their organisations and projects make scaled agile frameworks unnecessary.

Our survey does not allow an exploration of the reasons behind the limited adoption of scaled agile methods in German banks to date. This may, for example, be related to structural or cultural barriers in the respective organisation, possibly indicating that there is a lot of unexploited potential for agile applications, especially in larger banking groups. Comparable studies addressing these questions in international banking markets are not yet available.

However, the wide gap between the application of basic agile methods compared to large-scale frameworks is consistent with findings in other studies and supports the hypothesis that the increased level of complexity in a multiple project framework involving many stakeholders could be a barrier to a broader introduction of scaled agile methods (e.g. Dikert et al. 2016 ; Dingsøyr et al. 2019 ; Turetken et al. 2016 ).

Furthermore, Scrum is by far the most popular agile framework in both groups, while XP and Kanban are used as complementary tools in some cases (Table 4 ). These findings are consistent with the practitioner-oriented cross-industry study of Digital.ai ( 2021 ). Recent scientific studies analysing the usage of different agile methods are not available, either from a cross-industry or from a sector-specific perspective. Hence there is so far no evidence that the affiliation of a company with a particular sector affects the choice of the preferred agile method. Nevertheless, there is a broad consensus among fintechs and banks that agile methods will become more important within and beyond IT in the future (Table 8 ).

Agile methods are supposed to accelerate projects in rapidly changing competitive environments and reduce project costs (e.g. Flewelling 2018 ; Forsberg and Mooz 1999 ; Sommerville 2015 ; Sutherland 2015 ; Schwaber 2004 ). Other targets are improved quality (e.g. Chakravarty et al. 2021 ; Dybå and Dingsøyr 2008 ; Karhapää et al. 2021 ; MnKandla et al. 2006 ), and better innovation performance (e.g. Highsmith and Cockburn 2001 ; Kettunen 2007 ; Ravichandran 2018 ; Teece et al. 2016 ; Wilson et al. 2011 ).

Our analysis suggests that agile methods can indeed help to accelerate projects in banking, which is of the highest priority for both banks and fintechs when adopting agile methods. However, there seems to be room for improvement, as only 35% of the banks (59% of the fintechs) see their expectations fully met in that regard.

The achievement of cost savings by adopting agile methods seems to be a lower priority than other targets for both fintechs and banks, although high IT costs, especially in the financial services sector, are frequently mentioned as a source of poor profitability in the age of digital transformation. In addition, cost saving targets seem to be more difficult to reach, especially for banks, of which only 12% find their expectations fully met (38% of fintechs), possibly because they are subject to much stricter regulatory requirements and/or higher organisational complexity.

Other non-banking-related research studies also conclude that agile methods are contributing positively to project efficiency in terms of meeting schedules and budgets. In addition, prior findings include that agile methods can help to increase productivity in IT projects by reducing rework and defect rates (e.g. Alahyari et al. 2017 ; Dikert et al. 2016 ; Dybå and Dingsøyr 2008 ; Korpivaara et al. 2021 ; Olszewska et al. 2016 ; Reifer 2002 ; Serrator et al. 2015 ).

Furthermore, our findings suggest that agile methods can also contribute to quality improvements of products and services. However, banks reported significantly less satisfactory experiences than fintechs in that regard. The existing studies do not show a uniform picture of the link between quality of end products and the usage of agile processes. There are some studies that are in line with our banking-related findings (e.g. Ahmed et al. 2010 ; Dikert et al. 2016 ; Dybå and Dingsøyr 2008 ), suggesting that agility can lead to a higher quality of products, both directly through close cooperation and regular exchange with users and indirectly by supporting knowledge creation and motivation of team members. Yet there are also case studies indicating that agile methods may not always contribute to an increase in quality of project outcome (Li et al. 2010 ; Reifer 2002 ).

It is also noteworthy that a much higher portion of banks (77%) than fintechs (44%) intend to improve their innovation performance by adopting agile methods. Although our findings suggest that agile methods may contribute to improving innovation activities overall, most banks and fintechs state that their expectations in that regard have not been fully met. Empirical studies focused on IT projects do not cover the role of agile methods for innovation processes, although innovation is supposed to be part of the software value map (e.g. Alahyari et al. 2017 ; Khurum et al. 2013 ). Yet there is a growing body of research on the role of strategic agility (e.g. Ciric et al. 2018 ; Clauss et al. 2021 ; Denning 2017 ; Doz and Kosonen 2010 ; Gupta 2018 ; Wilson and Doz 2011 ) claiming that an agile mindset is essential to promote innovation in companies in general and business models in particular. The limited empirical research on this question supports this hypothesis (Clauss et al. 2021 ).

The data also shed some light on important hurdles when implementing agile methods in practice (Table 9 ). It is apparent that compliance with the rules of the respective agile framework plays a key role, which implies that a proper project set-up, including the selection and customisation of the respective agile framework, is an important success factor. This observation is consistent with other studies highlighting that typical implementation challenges include, inter alia, “general resistance to change”, the “misunderstanding of agile concepts”, “hierarchical management”, “inappropriate attention to design issues” and “incomplete user stories” (e.g. Chow et al. 2008 ; Dikert et al. 2016 ; Inayat et al. 2015 ).

The data also reveal that the majority (59%) of the banks and even a significant portion of fintechs (34%) have experienced that a lack of buy-in among the project team can be a relevant barrier to implementation. The comparably lower figure for fintechs may be related to the fact that fintechs usually work in organisational structures with flat hierarchies and low complexity due to their limited size. Besides, many fintechs as well as startups in other industries employ much younger staff on average than established banks, staff who might therefore prefer to work in more entrepreneurial and agile cultures. Nevertheless, both the majority of banks (76%) and fintechs (66%) consider the know-how of the team as an important success factor (Table 10 ). Therefore, suitable training of teams in agile methods is essential to ensure not only that the necessary technical agile skills are acquired, but also to convince team members of the benefits of working in an agile set-up so that organisations can learn how to become agile on a project or even organisational level. These results are also in line with previous studies (e.g. Aldamash et al. 2017 ; Dickert et al. 2016 ; Misra et al. 2009 ). The establishment of suitable incentives to reward the performance of agile teams may also foster an agile mindset.

The management of organisational interfaces between the agile teams and other organisational units is also mentioned as a potential barrier to implementation by about 76% of the banks (69% of the fintechs). This means that agile project teams cannot simply be implanted into the overall organisation, rather corporate culture has to be open-minded towards agile management approaches and strong management support is pivotal. Furthermore, successful implementation of agile projects can be hampered by frictions between self-organised agile project teams and departments that still have hierarchical structures and are affected by the project outcome. Besides, the lack of proper involvement of non-development corporate functions could also hinder implementation of agile projects. Similar findings have been reported in other research articles confirming that organisational resistance and scepticism towards agile principles and new working practices can be important barriers to implementation. (e.g. Conboy 2019 ; Denning 2016 ; Dikert et al. 2016 ; Kalenda et el. 2018 ).

The interviews with participating banks suggest that most of them are in the midst of a longer-term digital transformation process taking time, investments and cultural change to eventually become a more agile organisation. Fintechs are obviously not affected by a long-term corporate history that could become a barrier to more dynamic organisational models.

It may be noted that, based on our survey, insufficient buy-in among the management seems to be a notable factor in the German banking sector, given that some 41% of the banks (19% of the fintechs) consider this aspect as a barrier to implementation. However, this factor seems to be more important in established organisations than in younger fintechs, whose managers are often also founders of the respective companies, which could facilitate the alignment between owners, management and project teams. At the same time, some 82% of the banks (72% of the fintechs) consider sufficient management support as a critical success factor. This finding suggests that a significant portion of managers remains unconvinced or not fully convinced about the benefits of agile organisational frameworks. Similar results have been found in past studies outside the banking sector (e.g. Aldamash et al. 2017 ; Dikert et al. 2016 ; Kalenda et al. 2018 ; Senapathi and Srinivasan 2013 ).

Similarly, a non-negligible portion of German banks (some 18%) and of fintechs (28%) view a lack of buy-in among users/customers (internal or external) as a barrier to implementation, while at the same time some 65% of the banks (47% of the fintechs) consider strong user support as a critical success factor. The importance of this factor has also been emphasised in prior studies (e.g. Conboy et al. 2019 ; Misra et al. 2009 ). This evidence may also be a hint that intensive communication and training for all parties involved, including management and users/customers, is vital before starting an agile project.

6 Limitations of our findings

Our analysis focuses on the application of agile methods in IT projects. Hence, the trend towards a broader adoption of agile frameworks in other parts of organisations and even on an enterprise level is beyond the scope of our study. While the data are statistically robust for the German banking sector, as the participating banks cover more than 90% of the total assets in the German banking sector, the results for fintechs and, by extension, the difference between fintechs and established banks are statistically less reliable due to the limited number of participating fintechs.

Hence, the statistical robustness and power of the findings would benefit from a larger sample, which presupposes a higher willingness of fintechs to share their experience with researchers. Furthermore, it has to be taken into account that our analysis takes a corporate perspective, as our results are based on feedback from responsible management representatives (corporate development and/or corporate IT function, COO). However, especially in larger firms, the findings could vary across different business units and functions depending on their level of agile maturity. Moreover, our study does not allow for a deeper understanding of the reasons behind some of our findings, e.g. regarding the low adoption rate of scaled agile frameworks in German banks to date. The same applies to the fact that banks often fall short of their expectations regarding performance targets such as cost savings, quality improvements and improved innovation performance.

7 Conclusion

Our research provides the first comprehensive analysis of agile methods in the German banking sector. The comparison with a selected number of fintechs has revealed many communalities but also some differences between banks and fintechs.

We found out that all banks and almost all fintechs in the German banking sector apply agile methods in IT projects. However, fintechs seem to have relatively more experience with agile methods than banks and use them more intensively. Scrum is by far the most relevant framework used in practice. Scaled agile frameworks are so far negligible in the German banking sector. Another observation is that the application of agile methods is mainly focused on medium-sized and small IT projects and to a lesser extent on large-scale IT projects. Our findings suggest that the application of agile methods is usually beneficial for banks and fintechs, given that both see their expectations across all dimensions at least partly fulfilled. Acceleration of projects is apparently the most important objective of deploying agile methods. While fintechs achieve their acceleration targets in most cases, there seems to be room for improvement for banks. In addition, agile methods can contribute to both cost savings and quality improvements, though for banks it is evidently more challenging to reach their respective targets. Improving innovation performance is an important priority for banks and fintechs when applying agile methods. Yet in this regard too, most banks do not see their expectations fully met.

An agile mindset, as well as sufficient support from management, project teams and customers/users, are critical to enable a successful adoption of agile methods. This requires proper training and the adaptation of the respective agile methods to company-specific needs. Moreover, a longer-term change management process may be needed to make the whole organisation more agile. To that end, suitable review and incentive systems may play a role in unfolding the full benefits of agile teams. Effective management of organisational interfaces between agile project teams and other parts of the organisation is important to avoid implementation hurdles. Overall, our findings suggest that German banks are still in a process of becoming more agile, both in IT projects and—although the strategic dimension of agility is beyond the scope of our study—most likely also on an enterprise level. Therefore, the accelerated adoption of agile methods in general, and possibly of scaled agile frameworks in particular, could help German banks to improve their competitiveness.

8 Further research

Our study also suggests further fields of research. Firstly, it would be interesting to see whether or not significant differences can be observed between our observations for the German banking sector and those of other major financial markets inside and outside the EU. Besides, we think that a closer examination of intra-company experiences could provide interesting insights, for example by comparing projects of different business divisions and/or between front- and back-office departments in banks. Moreover, the possible impact of a company’s phase of development (e.g. startups versus established firms) on the adoption of agile methods could be the subject of a broader cross-industry research project. Furthermore, there seems to be room to improve the alignment between the different participants and stakeholders of agile teams. Hence a deeper understanding of the performance drivers of agile teams—such as the composition and backgrounds of team members, cultural aspects or incentive systems—could provide valuable insights as well. Whether or not agile methods could benefit from the integration of lean management tools (e.g. Kaizen, Six Sigma) could also be an interesting research question. First attempts in this direction can already be observed, as the latest release of the SAFe framework demonstrates.

Although our banking-sector focused findings are in many regards (e.g. implementation hurdles, success factors) consistent with other cross-industry studies, certain aspects of our research (e.g. targets, expectations and experiences) have so far not been covered in larger samples, either from a cross-industry or from a sector-specific perspective. Therefore, it would be interesting to find out whether or not sector-specific patterns in the application of agile concepts can be observed.

The data suggest that banks have more difficulty achieving their cost savings and quality assurance targets than fintechs. In addition, the so far low adoption rate of scaled agile frameworks in German banks is noticeable. The study does not enable a deeper understanding of the underlying drivers of these observations, which could also be a field of future research projects.

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Brühl, V. Agile methods in the German banking sector: some evidence on expectations, experiences and success factors. J Bus Econ 92 , 1337–1372 (2022). https://doi.org/10.1007/s11573-022-01102-y

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Conducting Effective Research: A Banking Questionnaire Guide

Are you tired of scrolling through countless articles on banking research, only to find vague and unreliable information? Look no further! In this guide, we have distilled the essence of conducting effective research into a concise and user-friendly questionnaire. Whether you are a student working on a finance project or a banking professional seeking valuable insights, our guide will equip you with the right tools to delve deep into the world of banking and unlock the knowledge you seek.

So, grab your pen and get ready to embark on a research journey that will propel your understanding of banking to new heights!

Overview of the importance of research in the banking industry

The banking industry relies on research to gain valuable insights and make informed decisions. Research helps banks understand customer needs, preferences, and behaviors, allowing them to tailor their products and services accordingly. By conducting well-designed questionnaires, banks can gather data on topics such as customer satisfaction, financial literacy , and emerging trends.

For example, a questionnaire may unveil opportunities to improve digital banking experiences or identify areas where customers require additional educational resources. Effective research through questionnaires enables banks to adapt and stay competitive in a rapidly evolving industry by addressing customer demands and enhancing overall customer experience.

Choosing the Right Questions

Understanding the goals of the research.

Understanding the goals of the research is vital for a banking questionnaire. It allows researchers to clearly define the purpose and focus of the study.

For example, if the goal is to gather feedback on customer satisfaction, the questionnaire will be designed to address specific aspects such as the quality of customer service, ease of online banking, or overall banking experience. Similarly, if the goal is to identify improvements in banking products, the questionnaire will target features like interest rates , account fees, or loan options. By having a clear understanding of the research goals, the questionnaire can be tailored to collect relevant and actionable insights that can drive positive changes in the banking industry.

Identifying the target audience for the questionnaire

Identifying the target audience for the banking questionnaire is vital to ensure the research collects relevant and valuable data. Here are some practical steps to follow:

Define the research objectives : Clearly outline the purpose of the questionnaire to determine which group of individuals or organizations can provide the required insights.
Consider customer segmentation : Analyze your banking customer base and segment them based on demographics, behavior, or preferences. This helps in targeting specific groups for more accurate responses.
Prioritize key stakeholders : Identify the stakeholders who have a direct impact on the research goals, such as existing customers, potential customers, or employees. Their input can provide valuable perspectives.
Consider industry experts : Reach out to experts in the banking field who can offer specialized knowledge and insights based on their experience.

By carefully identifying the target audience, the banking questionnaire can gather relevant information that leads to actionable insights for decision-making.

Creating open-ended and closed-ended questions

Creating open-ended and closed-ended questions is crucial for a banking questionnaire. Open-ended questions allow participants to provide detailed and personalized responses, providing valuable qualitative insights. For example, asking "What factors influenced your decision to choose a banking provider?" gives respondents the freedom to express their thoughts.

On the other hand, closed-ended questions offer structured response options and facilitate quantitative analysis. These questions allow for easy comparison and statistical analysis, providing measurable data. For instance, asking "On a scale of 1-5, how satisfied are you with the customer service provided by your bank?" enables the collection of numerical data that can be analyzed for trends.

By incorporating both open-ended and closed-ended questions, a banking questionnaire can gather both subjective opinions and objective data, ensuring a comprehensive understanding of customer preferences and experiences.

Avoiding biased or leading questions

When creating a banking questionnaire, it is crucial to avoid biased or leading questions. Biased questions can influence respondents to provide answers that align with a specific agenda, compromising the integrity of the data collected. To prevent bias, formulate questions that are neutral and unbiased, focusing on objective facts rather than personal opinions.

For example, instead of asking, "Do you agree that Bank A provides superior customer service?", ask, "How would you rate the customer service of Bank A on a scale of 1 to 10?" By maintaining neutrality in your questions, you can gather unbiased and reliable data for effective research.

Designing the Questionnaire

Creating a clear and logical structure.

Creating a clear and logical structure is vital when designing a banking questionnaire. It helps respondents understand the flow of the questionnaire and ensures that their answers align with the intended objectives. To achieve this, start with introductory questions to establish context and gradually move towards more specific topics. Group related questions together and use headings to guide respondents through different sections.

For example, if exploring customer satisfaction, organize questions about service quality under a distinct heading. This way, respondents can follow the logical progression of the questionnaire, leading to more accurate and meaningful responses.

Using appropriate question types for different purposes

Using appropriate question types is vital in a banking questionnaire for gathering specific and actionable insights. Closed-ended questions with options provide quantitative data and make data analysis efficient.

For example, asking respondents to rate their satisfaction on a scale of 1-10 allows for easy comparison and trend identification. On the other hand, open-ended questions encourage respondents to provide detailed feedback and uncover deeper insights. For instance, asking customers to describe their ideal banking experience can provide valuable suggestions for improvement. Balancing both question types ensures a comprehensive understanding of customer needs and preferences.

Ensuring questions are concise and easy to understand

Keep questions concise and clear to avoid confusion or misunderstandings.
Use simple language and avoid jargon or technical terms that may be unfamiliar to respondents.
Focus on one idea per question to maintain clarity and prevent cognitive overload.
Use straightforward sentence structures and avoid using complex or convoluted wording.
Break down complex concepts into simpler components to enhance understanding.
Consider including examples or scenarios to illustrate the question and provide context.
Pilot test the questionnaire with a small group to identify any potential comprehension issues.
Revise and reword questions as needed based on feedback from the pilot test.
Seek feedback from colleagues or experts in the field to ensure the questions are easily understandable by a wide range of respondents.

Banking Questionnaire Best Practices

Keeping the questionnaire focused and relevant.

Keeping the questionnaire focused and relevant is vital for obtaining accurate and useful data in the banking industry. Avoiding unnecessary or unrelated questions ensures that respondents stay engaged and provide meaningful responses.

For example, if the research focuses on customer satisfaction, include specific questions related to banking services, customer support, and overall experience. Irrelevant questions about unrelated products or industries can dilute the results. By maintaining focus, the questionnaire remains concise and efficient, maximizing response rates and enabling researchers to gather insights specifically tailored to the banking sector.

Testing the questionnaire for clarity and comprehensiveness

Testing the banking questionnaire is crucial to ensure clarity and comprehensiveness. Start by reviewing the questions to ensure they are concise and easy to understand. Consider conducting a pilot test with a small sample to identify any confusing or ambiguous questions. Analyze the feedback received to make necessary adjustments.

Additionally, assess the flow and logical structure of the questionnaire, ensuring it is organized in a logical sequence. This testing process helps improve response rates and the quality of data collected, ultimately leading to more accurate insights for decision-making.

Ensuring the questionnaire is unbiased and neutral

When designing a banking questionnaire, it is crucial to ensure that it is unbiased and neutral. This means avoiding any wording or formatting that may lead respondents towards a particular response or opinion. An unbiased questionnaire allows for objective data collection, providing accurate insights into the target audience's attitudes and behaviors. For instance, instead of framing a question with positive or negative connotations, keep it neutral and straightforward.

Additionally, pilot testing the questionnaire with a diverse group of individuals can help identify any potential biases. By maintaining neutrality, the questionnaire will generate reliable and useful data for effective research and decision-making in the banking industry.

Allowing for anonymous and confidential responses

Allowing for anonymous and confidential responses in a banking questionnaire is vital to ensure honest and unbiased feedback. By providing respondents with the option to remain anonymous, they are more likely to feel comfortable sharing sensitive information without fear of repercussions. This promotes authenticity and increases the reliability of the data collected.

For example, when asking customers about their satisfaction with banking services, offering anonymity encourages them to provide honest feedback, even if it includes negative experiences. Maintaining confidentiality is equally crucial, assuring respondents that their personal information will not be disclosed. This builds trust and encourages participation, resulting in more accurate insights for decision-making.

Administering the Questionnaire

Choosing the appropriate method of administration.

Choosing the appropriate method of administration for a banking questionnaire is important to ensure reliable and accurate data collection. Online surveys offer convenience, reach, and cost-effectiveness, making them a popular choice. They allow for quick distribution and can be easily accessed by a wide range of respondents. However, in-person or telephone interviews provide the opportunity for more in-depth responses and can clarify any uncertainties.

The method selected should align with theresearch objectives and target audience.

For example, if the questionnaire aims to gather insights from busy banking professionals, an online survey may be more appropriate. Consider factors such as accessibility, respondent preferences, and the nature of the data required when determining the administration method.

Determining the sample size and target population

Determining the sample size is crucial for the effectiveness of a banking questionnaire. It helps ensure representative results that can be generalized to the target population. Consider factors like the research objectives, desired level of precision, and available resources. For instance, a larger sample size provides more reliable data but may require more time and resources.

Additionally, defining the target population is essential to accurately reflect the group the research aims to understand. For a questionnaire on customer satisfaction with online banking services, the target population would be active online banking users rather than all banking customers. Tailoring the sample size and target population enhances the validity and applicability of the research findings.

Ensuring data accuracy and reliability

Ensuring data accuracy and reliability is vital in the banking questionnaire process. To achieve this, it is important to use well-structured and clear questions that leave no room for ambiguity.

Additionally, implementing validation checks and data verification techniques can help identify and rectify any inconsistencies or errors.

For example, including skip patterns can prevent participants from answering irrelevant questions, reducing the risk of unreliable data. It is also advisable to conduct a pilot study to test the questionnaire's effectiveness before distributing it widely. By implementing these strategies, banks can gather accurate and reliable data to make informed decisions and improvements in their banking services.

Analyzing and Interpreting the Results

Organizing and tabulating the data.

When organizing and tabulating data from banking questionnaires, it is important to structure the information in a clear and logical manner. This allows for easier analysis and interpretation of the results. One approach is to create categories or themes based on the questionnaire's objectives and group related responses together. For numerical data, creating charts or graphs can provide a visual representation of patterns and trends.

Additionally, using statistical measures like averages or percentages can help summarize the data. By organizing and tabulating data effectively, researchers can gain valuable insights and make informed decisions for the banking industry.

Identifying trends and patterns in the responses

Identifying trends and patterns in the responses is an integral part of analyzing a banking questionnaire. By carefully examining the data, you can uncover valuable insights that can inform business strategies and decision-making. Look for recurring themes or commonalities in the responses that can provide meaningful information about customer preferences, satisfaction levels, or emerging trends.

For example, if multiple respondents mention a desire for faster mobile banking services, it could indicate a need for improvement in that area. By identifying these patterns, banks can take proactive steps to address customer needs and stay competitive in the industry.

Drawing meaningful conclusions from the findings

Drawing meaningful conclusions from the findings of a banking questionnaire is crucial for informed decision-making. By analyzing the data collected, patterns and trends can be identified.

For example, if a majority of respondents indicate dissatisfaction with the mobile banking app's user interface, it suggests a need for improvements. These insights enable banks to prioritize areas for improvement and allocate resources effectively.

This article provides a concise guide on conducting effective research using a questionnaire in the banking industry. It emphasizes the importance of careful planning, creating clear and concise questions, and considering the target audience. The guide highlights the significance of selecting the right sample size and using unbiased sampling methods to ensure accurate results.

It also suggests techniques for improving the response rate and includes tips for analyzing and interpreting data gathered from the questionnaire. By following this practical guide, researchers can obtain valuable insights to inform decision-making in the banking sector.

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Invited Review Operational research and artificial intelligence methods in banking
1. Introduction. The assessment of various financial aspects of banks occupies an essential place in the academic literature because of the crucial intermediation role of the banking industry in financial markets (Ioannidis et al., 2010; Tzeremes, 2015; Zopounidis et al., 2015).Along with an increasing need to use more sophisticated methods in banking research, several studies in this area ...
Financial technology and the future of banking
The research questions that these dynamics pose need to be investigated within the context of the theory of banking, hence the need to revise the existing analytical framework. Banks perform payment and transfer functions for an economy. The Internet can now facilitate and even perform these functions. ... The banking sector is therefore ...
Research and Methodology
fragmented structure of its banking sector. Methodology Many of our research questions have been answered by the findings of several lev-els of analysis. The methodologies used are determined by the empirical character of the research: statistical method as the general method (limited to the descriptive
Research evolution in banking performance: a bibliometric analysis
Banking performance has been regarded as a crucial factor of economic growth. Banks collect deposits from surplus and provide loans to the investors that contribute to the total economic growth. Recent development in the banking industry is channelling the funds and participating in economic activities directly. Hence, academic researchers are gradually showing their concern on banking ...
(PDF) Introduction, Research Methodology and
The study recommends that the banking sector, especially public sector banks, should lead efforts to expand inclusion as private sector initiatives to do so are likely to be curtailed by their objective of maximizing shareholder profit rather than optimizing stakeholder ... Research Methodology and Review of Literature 1.1 Introduction 1.2 ...
Big Data Applications the Banking Sector: A Bibliometric Analysis
This review covered the themes that include investment, profit, competition, credit risk analysis, banking crime, and fintech. This report also signifies the importance, use of big data, and its function in the banking and financial sector. This study has also discussed the future research scope in the banking industry's big data analytics.
Data Mining Methodologies in the Banking Domain: A Systematic
The main research objective of this paper is to study how data mining methodologies are applied in the banking domain. We apply systematic literature review (SLR) method as it ensures trustworthy, rigorous, and auditable methodology, as well as supports synthesis of existing evidence, identification of research gaps, and provides framework to appropriately position new research activities [].
Past, Present and Future of FinTech Research: A Bibliometric Analysis
The rest of the paper is structured as follows; section 2 presents the research methodology, section 3 discusses the influential aspects of FinTech literature, section 4 provides an overview of the research streams and section 5 presents future research directions. ... Disruptive innovation in the financial sector. Journal of Banking and ...
Strengthening banking sector governance: challenges and solutions
This study examines the understanding of banking governance among the sample participants and its effectiveness in achieving significant objectives. The research methodology employed in this study adopts a descriptive and analytical approach, aiming to comprehensively examine the multifaceted phenomenon of corporate governance within the context of private banks.
Utilization of artificial intelligence in the banking sector: a
This study provides a holistic and systematic review of the literature on the utilization of artificial intelligence (AI) in the banking sector since 2005. In this study, the authors examined 44 articles through a systematic literature review approach and conducted a thematic and content analysis on them. This review identifies research themes demonstrating the utilization of AI in banking ...
PDF Structured Review of Research Methodologies Applied in Internet Banking
further develop methodologies for conducting research in the field of internet banking. Keywords: Internet banking, sampling methods, survey instrument, data analysis techniques Introduction Money is the lifeline of business as well as society. Therefore the banking sector has an important role to play in today's rapidly growing economy.
CSR in Banking Sector: A Literature Review
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Agile methods in the German banking sector: some evidence on ...
The importance of agile methods has increased in recent years, not only to manage IT projects but also to establish flexible and adaptive organisational structures, which are essential to deal with disruptive changes and build successful digital business strategies. This paper takes an industry-specific perspective by analysing the dissemination, objectives and relative popularity of agile ...
Work-Related Stress in the Banking Sector: A Review of Incidence
Materials and methods. To find recent date scientific literature on the subject of work-related stress in the banking sector, we conducted a review following the MOOSE Group's guidelines (MOOSE is the acronym for Meta-analyses Of Observational Studies in Epidemiology) (Stroup et al., 2000).The platform chosen for the literature search was MEDLINE®.
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the bank which would be important for the future growth of the company. Theoretical framework of the research examines the term "customer satisfaction" and analyzes different models that can measure it. The thesis employs SEVQUAL dimensions, Profit-chain model and ISO standards that are a basis for an empirical research.
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India's financial inclusion has significantly improved during the last several years. In recent years, there has been a rise in the number of Indians who have bank accounts, with this figure believed to be close to 80% at present. Fintech businesses in India are progressively becoming more noticeable as the Government of India (GoI) continues to strive for expanding financial services to the ...
Conducting Effective Research: A Banking Questionnaire Guide
Testing the banking questionnaire is crucial to ensure clarity and comprehensiveness. Start by reviewing the questions to ensure they are concise and easy to understand. Consider conducting a pilot test with a small sample to identify any confusing or ambiguous questions. Analyze the feedback received to make necessary adjustments.
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bank. Research methodology The research methodology is the systematic, theoretical analysis of the methods applied to a field of study. ... Banking sector has always been regarded as an important and necessary financial sector in the economy of India. Without a sound and effective banking system in India it cannot have a healthy economy .The ...
A Study of Banking Sector in India and Overview of Performance of
Finance and banking is the life blood of trade, commerce and industry. Now-days, banking sector acts as the backbone of modern business. Development of any country mainly depends upon the banking ...
(PDF) Analysis of cyber-crime effects on the banking sector using the
reportedly banking costed the banking sector a gross sum of more than R250 000 000. Furthermore, there had been an exponential increase in similar cases from January to August 2018, with an ...
Banking Research Methodology
Banking Research Methodology. 1204 Words5 Pages. A quantitative research methodology was used so as to achieve the objectives of this study. This is because, this method can be used to produce numerical measurement and evaluation of the adoption of mobile banking. Being part of the quantitative research methodology, survey questionnaires were ...
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computerization was felt in the Indian banking sector. in late 1980s. R eserve Bank of India set up a. Committee headed by Dr. C. Rangarajan on. Conversion of d ata into a digital format with the ...
Full article: The role of Sharia banking in strengthening the assets of
Methodology. This research used a normative juridical approach, which is a strategy that focuses on secondary data research that includes primary legal resources, secondary legal materials, and tertiary legal materials. ... P. K., Sakti, A., & Syarifuddin, F. (2020). Role of Islamic banks in Indonesian banking industry: An empirical exploration ...
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Basel has identified four. principles of supervisory review: Principle 1: Banks should have a process for assessing their overall capital adequacy in. relation to their risk profile and strategy ...

Financial technology and the future of banking

Introduction

The theory of the banking firm: a revision

The evolution of the business model in a digital world

Open banking

Discussion: strategic options

The client retention strategy (incumbents)

The client acquisition strategy (challengers)

The banking as a service strategy (new entrants)

The social media payment strategy (disintermediators and disruptors)

Further research

Availability of data and materials

Acknowledgements

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Introduction, Research Methodology and

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Strengthening banking sector governance: challenges and solutions

Introduction

Research problem and research questions

Research objectives

Research methodology

Hypotheses for research

Framework for the concept of banking governance

Review of literature

Sample data analysis and research methods

Testing of hypotheses

Conclusions

Recommendations

Potential limitations

Implications and future research

Availability of data and materials

Acknowledgements

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Agile methods in the German banking sector: some evidence on expectations, experiences and success factors

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Structured software development versus agile software development: a comparative analysis

A teamwork effectiveness model for agile software development

Agile Project Management

1 Introduction

1.1 Research questions

1.2 Related work

2 Software development life cycle (SDLC)—models and methodologies

2.1 Iterative and incremental models

2.2 Agile methods in general

2.4 Agile at scale

3 Agile methods in the German banking sector—database and research methodology

4 Data analysis and results for the German banking sector

4.1 Objectives and current usage of agile methods

4.2 Expectations and experiences with agile methods

4.3 Implementation hurdles and success factors for agile methods

5 Discussion

6 Limitations of our findings

7 Conclusion

8 Further research

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Conducting Effective Research: A Banking Questionnaire Guide