What is Digital Banking?

Digital banking solutions can be tailored to different market segments, including retail and business banking.

What are the trends shaping digital banking?

Digital banking is not new (dating back to Temenos’ inception in 1993), but it’s evolving faster than ever:

• One of the most transformative forces in digital banking today is AI:
  • Generative AI helps FIs discover and embrace opportunities, including new customer segments, as well as design products that align with customer needs. It also powers tools like chatbots and virtual assistants, boosting engagement and service delivery.
  • Agentic AI helps FIs simplify complex processes through automation, particularly compliance and security, helping to enhance operational efficiency while staying on top of threats.
• Real-time capabilities are becoming a standard feature, with customers expecting instant transactions as part of their everyday banking experience.
• Digital banking is also helping FIs meet their ESG goals. Cloud-based infrastructure and digital services reduce reliance on physical branches and paper-based processes, while also optimizing the use of computing resources to lower carbon footprints and improve overall efficiency (see the Temenos Performance Benchmark 2025). Digital banking platforms can also improve access to financial services and products to underserved populations.
• Competition remains one of the strongest catalysts for transformation in banking. The rise of neobanks, digital-only banks and other fintech players is fundamentally changing the competitive landscape, challenging incumbents with their more agile, customer-centric models.

What are the challenges related to digital banking adoption?

While digital banking brings efficiencies for FIs and convenience and more enjoyable experiences for customers, the shift to digital is not always easy. In fact, McKinsey found that only 30% of banks said their digital transformation strategy was implemented successfully, with most falling short of their objectives (a similar finding, however, in other industries too)[1]. While digital banking transformation success will of course depend on individual companies’ circumstances and implementation approaches, there are some common challenges:

• The technical debt resulting from decades of patchwork-style technology investment is a major hurdle. Disparate legacy infrastructure often lacks the flexibility to support modern, cloud-based solutions, and integrating new technologies can be expensive and time-consuming.
• Regulatory compliance adds further pressure, with standards around data privacy and AI constantly changing – including regional nuances – and new regulations such as the Digital Operational Resilience Act in the EU coming into force[2].
• Another important factor is cybersecurity, with the threat landscape changing constantly and extremely hard to predict. Data breaches and financial fraud are real risks across digital channels but can be managed effectively with the right tools, mindset, and vigilance.

Is digital banking secure?

Digital banking can be highly secure – even more so than traditional banking. Here’s why:

• Absence of physical documents reduces the risk of data loss and privacy breaches.
• Automation reduces human error and delays.
• Modern platforms replace outdated, brittle legacy systems that may be vulnerable to cyberattacks and other risks (such as regulatory).

However, digital banking does introduce new risks such as cyberattacks, data breaches, and system glitches or even complete failure. All of this very much depends on the robust security of the technology, and how it’s implemented, used, and maintained.

To protect digital banking services, FIs and their customers, technology vendors often include measures such as:

• End-to-end encryption
• Multi-factor authentication
• AI-powered and real-time fraud prevention and detection
• Secure APIs for third-party integrations
• Regular audits and compliance checks
• Compliance support with relevant regulatory requirements

Why Temenos for digital banking?

Temenos Digital Banking empowers FIs to deliver secure, scalable, and personalized banking experiences across retail, business, and specialized segments. In the retail banking space, Temenos Digital simplifies everyday banking, giving customers greater flexibility and control, as well as a more personalized, compelling experience. From onboarding and account opening to servicing and transactions, the cloud-native, end-to-end platform drives meaningful interactions with AI-powered insights and omnichannel access.

For business banking, Temenos helps FIs attract, onboard, and serve small business customers – starting with a smooth onboarding process through differentiated product journeys and self-service capabilities. With financial solutions designed specifically for small and medium-sized enterprises, such as digital lending, automated cash management, asset finance and payment services, FIs using Temenos Digital for Business can discover new revenue streams and offer value-added services like financial advisory tools.

Explore the full scope of Temenos Digital Banking, including Journey Manager for seamless onboarding, as well as origination and servicing.

References

[1] https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/tech-forward/why-most-digital-banking-transformations-fail-and-how-to-flip-the-odds

[2] https://www.eiopa.europa.eu/digital-operational-resilience-act-dora_en