IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v12y2020i10p4040-d358291.html
   My bibliography  Save this article

Risks of Banking Services’ Digitalization: The Practice of Diversification and Sustainable Development Goals

Author

Listed:
  • Francisco Zabala Aguayo

    (Economic Analysis and Political Economy Department, Universidad de Sevilla, 41018 Seville, Spain)

  • Beata Ślusarczyk

    (Faculty of Economic and Management Sciences, North-West University, Vaal Triangle Campus, Vanderbijlpark 1900, South Africa
    The Management Faculty, Czestochowa University of Technology, 42-201 Czestochowa, Poland)

Abstract

The study aims to investigate threats that might occur in diversification management, operational risks of banking services in the process of digitalization, as well as the impact on customers and banks. The right choice of a risk management model for a bank plays an important role in the sustainable development of competitiveness and the transformation of banking activities in the future. This work assesses bank risks and determines information risks in relation to the total capital of Santander Bank of Spain. The authors adapted an operational risk management (ORM) model to minimize the risks of the bank’s digitalization and upcoming operational risks. The ratio of the total operational risk to the total bank’s capital was 0.65%, which is below the permissible minimum value and is acceptable. Based on this indicator, diversification of business risks can be applied. As a result of the study, the total value of operational risks was calculated and the acceptability of this indicator to the capital of Santander Bank was assessed, which allowed the authors to assess whether the value was critical. In addition, it was also revealed that the main external risk of Santander Bank in 2018 was fraud in the use of online payments. The results might help to more effectively evaluate insurance payments for identified operational risks and effectively make decisions and optimize reporting documents of banks.

Suggested Citation

  • Francisco Zabala Aguayo & Beata Ślusarczyk, 2020. "Risks of Banking Services’ Digitalization: The Practice of Diversification and Sustainable Development Goals," Sustainability, MDPI, vol. 12(10), pages 1-10, May.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:10:p:4040-:d:358291
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/12/10/4040/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/12/10/4040/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Moudud-Ul-Huq, Syed & Ashraf, Badar Nadeem & Gupta, Anupam Das & Zheng, Changjun, 2018. "Does bank diversification heterogeneously affect performance and risk-taking in ASEAN emerging economies?," Research in International Business and Finance, Elsevier, vol. 46(C), pages 342-362.
    2. Cortés, Kristle Romero & Strahan, Philip E., 2017. "Tracing out capital flows: How financially integrated banks respond to natural disasters," Journal of Financial Economics, Elsevier, vol. 125(1), pages 182-199.
    3. Irina Japparova & Ramona Rupeika-Apoga, 2017. "Banking Business Models of the Digital Future: The Case of Latvia," European Research Studies Journal, European Research Studies Journal, vol. 0(3A), pages 846-860.
    4. Pilar Gómez-Fernández-Aguado & Purificación Parrado-Martínez & Antonio Partal-Ureña, 2018. "Risk Profile Indicators and Spanish Banks’ Probability of Default from a Regulatory Approach," Sustainability, MDPI, vol. 10(4), pages 1-16, April.
    5. Maixé-Altés, J. Carles, 2019. "The Digitalization of Banking: A New Perspective from the European Savings Banks Industry before the Internet," Enterprise & Society, Cambridge University Press, vol. 20(1), pages 159-198, March.
    6. Shazida Jan Mohd Khan & Shamzaeffa Samsudin & Rabiul Islam, 2017. "Efficiency of banks in Southeast Asia: Indonesia, Malaysia, Philippines and Thailand," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 44(12), pages 2302-2312, December.
    7. García-Kuhnert, Yamileh & Marchica, Maria-Teresa & Mura, Roberto, 2015. "Shareholder diversification and bank risk-taking," Journal of Financial Intermediation, Elsevier, vol. 24(4), pages 602-635.
    8. Victor Aguirregabiria & Robert Clark & Hui Wang, 2016. "Diversification of geographic risk in retail bank networks: evidence from bank expansion after the Riegle-Neal Act," RAND Journal of Economics, RAND Corporation, vol. 47(3), pages 529-572, August.
    9. Jaffar Mohammed Ahmed, 2016. "A conceptual framework for the Basel accords-based regulation," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 24(1), pages 90-103, February.
    10. Bömer, Max & Maxin, Hannes, 2018. "Why Fintechs Cooperate with Banks - Evidence from Germany," Hannover Economic Papers (HEP) dp-637, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    11. Judit Oláh & Sándor Kovács & Zuzana Virglerova & Zoltán Lakner & Maria Kovacova & József Popp, 2019. "Analysis and Comparison of Economic and Financial Risk Sources in SMEs of the Visegrad Group and Serbia," Sustainability, MDPI, vol. 11(7), pages 1-19, March.
    12. Erik P. Gilje & Elena Loutskina & Philip E. Strahan, 2016. "Exporting Liquidity: Branch Banking and Financial Integration," Journal of Finance, American Finance Association, vol. 71(3), pages 1159-1184, June.
    13. Cai, Weixing & Xu, Fangming & Zeng, Cheng, 2016. "Geographical diversification and bank performance: Evidence from China," Economics Letters, Elsevier, vol. 147(C), pages 96-98.
    14. Sebastian Doerr & Philipp Schaz, 2018. "Bank loan supply during crises: the importance of geographic diversification," ECON - Working Papers 288, Department of Economics - University of Zurich, revised Mar 2019.
    15. Meyer Aaron & Francisco Rivadeneyra & Samantha Sohal, 2017. "Fintech: Is This Time Different? A Framework for Assessing Risks and Opportunities for Central Banks," Discussion Papers 17-10, Bank of Canada.
    16. Makmun Syadullah, 2018. "ASEAN Banking Efficiency Review Facing Financial Services Liberalization: The Indonesian Perspective," Asian Development Policy Review, Asian Economic and Social Society, vol. 6(2), pages 88-99.
    17. Jan Dvorsky & József Popp & Zuzana Virglerova & Sándor Kovács & Judit Oláh, 2018. "Assessing The Importance Of Market Risk And Its Sources In Smes Of The Visegrad Group And Serbia," Advances in Decision Sciences, Asia University, Taiwan, vol. 22(1), pages 230-255, December.
    18. Guerry, Nicolas & Wallmeier, Martin, 2017. "Valuation of diversified banks: New evidence," Journal of Banking & Finance, Elsevier, vol. 80(C), pages 203-214.
    19. Lee, Chien-Chiang & Hsieh, Meng-Fen & Yang, Shih-Jui, 2014. "The relationship between revenue diversification and bank performance: Do financial structures and financial reforms matter?," Japan and the World Economy, Elsevier, vol. 29(C), pages 18-35.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Florian Diener & Miroslav Špaček, 2021. "Digital Transformation in Banking: A Managerial Perspective on Barriers to Change," Sustainability, MDPI, vol. 13(4), pages 1-27, February.
    2. Qingjun Zhang & Yiding Ou & Rong Chen, 2023. "Digitalization and stability in banking sector: a systemic risk perspective," Risk Management, Palgrave Macmillan, vol. 25(2), pages 1-29, June.
    3. Valentina Vasile & Mirela Panait & Simona-Andreea Apostu, 2021. "Financial Inclusion Paradigm Shift in the Postpandemic Period. Digital-Divide and Gender Gap," IJERPH, MDPI, vol. 18(20), pages 1-28, October.
    4. Moch Panji Agung Saputra & Diah Chaerani & Sukono & Mazlynda Md. Yusuf, 2023. "Reserve Fund Optimization Model for Digital Banking Transaction Risk with Extreme Value-at-Risk Constraints," Mathematics, MDPI, vol. 11(16), pages 1-16, August.
    5. Pejman Peykani & Mostafa Sargolzaei & Mohammad Hashem Botshekan & Camelia Oprean-Stan & Amir Takaloo, 2023. "Optimization of Asset and Liability Management of Banks with Minimum Possible Changes," Mathematics, MDPI, vol. 11(12), pages 1-24, June.
    6. Nemanja Milanović & Miloš Milosavljević & Slađana Benković & Dušan Starčević & Željko Spasenić, 2020. "An Acceptance Approach for Novel Technologies in Car Insurance," Sustainability, MDPI, vol. 12(24), pages 1-15, December.
    7. Nikola Stefanovic & Lidija Barjaktarovic & Alexey Bataev, 2021. "Digitainability and Financial Performance: Evidence from the Serbian Banking Sector," Sustainability, MDPI, vol. 13(23), pages 1-15, December.
    8. Svetlana S. Galazova, 2023. "Digital banking ecosystems: Comparative analysis and competition regulation in Russia," Journal of New Economy, Ural State University of Economics, vol. 24(4), pages 82-106, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Haykel Zouaoui & Faten Zoghlami, 2023. "What do we know about the impact of income diversification on bank performance? A systematic literature review," Journal of Banking Regulation, Palgrave Macmillan, vol. 24(3), pages 286-309, September.
    2. Aguirregabiria, Victor & Clark, Robert & Wang, Hui, 2019. "The Geographic Flow of Bank Funding and Access to Credit: Branch Networks, Local Synergies, and Competition," CEPR Discussion Papers 13741, C.E.P.R. Discussion Papers.
    3. Adesina, Kolade Sunday, 2021. "How diversification affects bank performance: The role of human capital," Economic Modelling, Elsevier, vol. 94(C), pages 303-319.
    4. Robert Clark & Hui Wang & Victor Aguirregabiria, 2017. "The Geographic Flow Of Bank Funding And Access To Credit: Branch Networks And Local-market Competition," Working Paper 1402, Economics Department, Queen's University.
    5. Pham, Tho & Talavera, Oleksandr & Tsapin, Andriy, 2018. "Shock contagion, asset quality and lending behavior," BOFIT Discussion Papers 21/2018, Bank of Finland Institute for Emerging Economies (BOFIT).
    6. Shi, Yining, 2022. "Financial liberalization and house prices: Evidence from China," Journal of Banking & Finance, Elsevier, vol. 145(C).
    7. Smolyansky, Michael, 2019. "Policy externalities and banking integration," Journal of Financial Economics, Elsevier, vol. 132(3), pages 118-139.
    8. Choudhary, M. Ali & Jain, Anil, 2022. "Finance and inequality: The distributional impacts of bank credit rationing," Journal of Financial Intermediation, Elsevier, vol. 52(C).
    9. Berger, Allen N. & Molyneux, Phil & Wilson, John O.S., 2020. "Banks and the real economy: An assessment of the research," Journal of Corporate Finance, Elsevier, vol. 62(C).
    10. Kakuho Furukawa & Hibiki Ichiue & Noriyuki Shiraki, 2020. "How Does Climate Change Interact with the Financial System? A Survey," Bank of Japan Working Paper Series 20-E-8, Bank of Japan.
    11. Kilian Huber, 2021. "Are Bigger Banks Better? Firm-Level Evidence from Germany," Journal of Political Economy, University of Chicago Press, vol. 129(7), pages 2023-2066.
    12. Giovanni Dell’Ariccia & Dalida Kadyrzhanova & Camelia Minoiu & Lev Ratnovski, 2021. "Bank Lending in the Knowledge Economy," The Review of Financial Studies, Society for Financial Studies, vol. 34(10), pages 5036-5076.
    13. Abedifar, Pejman & Kashizadeh, Seyed Javad & Ongena, Steven, 2024. "Flood, farms and credit: The role of branch banking in the era of climate change," Journal of Corporate Finance, Elsevier, vol. 85(C).
    14. Firoozi, Fathali & Lien, Donald, 2022. "Models of optimal contract in lending: Evaluating the impact of diversified versus focused policies on riskiness of borrower base," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).
    15. Eduardo Minuci & Scott Schuh, 2022. "Are West Virginia Banks Unique?," Working Papers 22-03, Department of Economics, West Virginia University.
    16. Goetz, Martin R. & Gozzi, Juan Carlos, 2022. "Financial integration and the co-movement of economic activity: Evidence from U.S. states," Journal of International Economics, Elsevier, vol. 135(C).
    17. Ross Levine & Chen Lin & Wensi Xie, 2021. "Geographic Diversification and Banks’ Funding Costs," Management Science, INFORMS, vol. 67(5), pages 2657-2678, May.
    18. Federico, Stefano & Hassan, Fadi & Rappoport-Redondo, Veronica, 2019. "Trade shocks and credit reallocation," LSE Research Online Documents on Economics 103422, London School of Economics and Political Science, LSE Library.
    19. Izadi, Mohammad & Saadi, Vahid, 2023. "Banking Market Structure and Trade Shocks," Journal of Banking & Finance, Elsevier, vol. 153(C).
    20. Sergio Mayordomo & Omar Rachedi, 2019. "The China syndrome affects banks: the credit supply channel of foreign import competition (Updated February 2020)," Working Papers 1908, Banco de España, revised Feb 2020.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:12:y:2020:i:10:p:4040-:d:358291. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.