Digitalization of the banking sector in Hungary

Abstract

During the pandemic period, considerable attention was paid to the online digital financial services. Tangible services provide tangible benefits to both the national economy and citizens. Easily accessible and popular options contribute to reducing the use of cash, expanding e-commerce and administration, and raising financial awareness, as well as creating a sustainable financial system. The widespread use of digital services ensures connection to the global world, more effective use of opportunities, and thus success either as an individual, as a company, or as a government actor. The emergence of FinTech applications has also been helped by the fact that while the operation of financial institutions is strictly regulated and controlled by the authorities, the operation of technology companies in this field is tied to far fewer mandatory regulations. It is important to note that there are still many issues to be resolved, one of which is the issue of equal regulation of FinTech companies and traditional banks. The purpose of the study is to evaluate the current state of digital banking in Hungary in the field of residential services and highlight the paths for further development. The main statements of the paper are the following: Overall, the level of digitization of the Hungarian banking system can be considered medium. In connection with the COVID-19 epidemic, the digitization of customer relations and products has come to the fore in the sector. Among the loan products, the overdraft facility for individuals and the degree of digitization of personal loans are the highest. At the corporate level, online loan applications are even less resolved, largely due to the evaluation and assessment of complex collateral requirements and the low prevalence of digital solutions for contracting and signing. This article proposes more sophisticated regulations, since the regulatory issues in digital financial innovation pose challenges for regulators. The main task should be to create the conditions for the competitiveness and safe operation of the financial intermediation system in the digital age, so the digital interfaces and communication platforms should be standardized. Regarding to the current EU regulation, the security elements of the digital payment system should be strengthened.