From traditional banking to the digital era

Circa 1988, when I was 13 or 14 years old, my father opened my first bank account at the then Oman International Bank (OIB). The bank has since merged with HSBC to form HSBC-Oman. My first account was ‘Mandoos,’ a children’s account, and OIB was the pioneer in introducing minors’ accounts in the Sultanate of Oman. Shortly after, the National Bank of Oman launched a similar minors’ account called ‘Al Amaal Club.’ These accounts aimed to inculcate the habit of saving among children and teenagers. Those days, all banking transactions were manual. Computers were rare in branches, cash-counting machines were a luxury, and ATMs were virtually non-existent in the late 1970s and early 1980s. Bank employees often worked late into the night to manually reconcile transactions. For customers, withdrawing money was inconvenient; one had to visit their home branch for any transaction. Inter-branch banking was an unheard-of concept. Clearing cheques was another cumbersome process. At the time, clearing cheques involved two categories: ‘inward clearing cheques’ and ‘outward clearing cheques.’ As a young bank representative, I was tasked with taking ‘outward clearing cheques’ to the Central Bank of Oman (CBO) every working day at 8 am. Representatives from all banks gathered at the CBO clearinghouse to exchange cheques. We had to manually tally and balance transactions before leaving, which was a tedious and time-consuming process. Fast forward to today, and the banking landscape has transformed dramatically. The introduction of Electronic Clearing Cheques (ECC) has replaced the manual cheque-clearing process. Customers now enjoy same-day cheque clearance unless there’s an issue. This evolution epitomises the efficiency brought about by digital technology. In the past, customers had to queue for long hours just to transfer money. Today, thanks to online banking and mobile applications, funds can be transferred instantly with just a few taps. Travellers’ cheques, once essential for international travel, are now obsolete. Debit and credit cards, along with digital wallets, have made carrying cash or cheques redundant. Traditional banking relied heavily on face-to-face interactions. Customers needed to visit physical branches for tasks such as depositing money, opening accounts, or applying for loans. Passbooks were used to record transactions, and bank employees played a crucial role in maintaining ledgers and reconciling accounts. Almost every transaction was documented on paper. Branch hours were restricted, and customers often had to travel to their branch of origin. Processes like cheque clearance, fund transfers, and account opening took days or weeks. Digital banking, by contrast, has revolutionised the industry. Tasks such as fund transfers, bill payments, and cheque clearances are automated. Banking services are available 24/7 through mobile apps and online platforms. Customers can open accounts, apply for loans, and even invest in seconds. For example, opening a US Dollar account used to be a complex process requiring multiple forms and a visit to the bank. Today, it’s as simple as a few clicks on a banking app. Several banking theories have influenced this transformation. The Theory of Financial Intermediation underscores the role of banks as intermediaries between savers and borrowers. Digital platforms have expanded this intermediation, enabling banks to serve a global customer base. Modern Portfolio Theory (MPT), introduced by Harry Markowitz, has guided banks in offering tailored investment advice to customers. Today, robo-advisers and AI-driven tools make personalised investment strategies accessible to even small-scale investors. The Technology Acceptance Model (TAM) examines how users come to accept and use technology. Banks have leveraged this model to design user-friendly apps and platforms that enhance customer engagement. Modern banks are no longer just custodians of money. They have evolved into financial advisers and business partners. For instance, last week, I approached a local bank for investment advice. Within minutes, I was guided through various options and made an informed decision. This reflects the proactive role banks now play in wealth management. Digital banking applications have become the largest ‘branch’ of any bank. Customers can manage their finances anytime, anywhere. This shift has also brought about innovations such as contactless payments through cards and mobile wallets, AI for fraud detection and customer support, and blockchain technology for secure and transparent transactions. The journey from traditional to digital banking required visionary leadership, technological advancements, and the adaptability of both banks and customers. Yet, this evolution is far from over. Emerging trends like open banking, biometric authentication, and decentralised finance (DeFi) are set to redefine the industry further. The transformation of banking over the decades reflects not just technological progress but also a shift in customer expectations and banking philosophies. While traditional banking laid the foundation, digital banking has propelled the industry into a new era. The journey continues, promising even more innovative solutions in the future.