Spanish financial institutions facing the challenge of digitalization: The case of payment systems

Abstract

Technological development has brought about major changes in all aspects and spheres of society. Among the various environments where technological applications have brought improvements and transformed the usual way of operating, we highlight the financial sector. Indeed, technology has substantially modified the processes and mechanisms on which its operation is based, especially in the area of payments, due to the need for reliability, security and immediacy to improve the way in which money is transmitted between the different agents that interact in it. This digitization of payment systems has been made possible by various factors, including the emergence of new business models and the emergence of large technology companies, as well as the application of new technologies that streamline payment processes. This has forced the financial sector and, specifically, financial institutions, the main drivers of the financial system, to accelerate innovation in the payments sector in order to face these new challenges. This paper analyses payment systems, how they work, the services they provide and the challenges and opportunities that can be identified as a result of technological innovation in the financial sector. It also presents the strategies being followed by Spanish financial institutions in terms of the development of new services and capabilities to cope with these changes.