Digital Transformation of Business Models in The Banking Sector A Multiple Case Study

Submitted by
Stepantseva Anna
Submitted at
Institute of Innovation
Management
Supervisor
Digital Transformation
Univ.-Prof. Dr. Robert. J.
Breitenecker
of Business Models in
Co-Supervisor
Mag. Andreas Krawinkler
the banking sector: a

October 2020
multiple case study
Master Thesis
to obtain the academic degree of
Master of Science Global Business
in the Master’s Program
Joint Master Program Global Business - Russland/Italien
JOHANNES KEPLER
UNIVERSITY LINZ
Altenberger Str. 69
4040 Linz, Austria
www.jku.at
DVR 0093696
STATUTORY DECLARATION
I hereby declare that the thesis submitted is my own unaided work, that I have not used other
than the sources indicated, and that all direct and indirect sources are acknowledged as
references.
This printed thesis is identical with the electronic version submitted.
Nizhny Novgorod, 15th of October 2020
Signature
October 15, 2020 Stepantseva Anna 2/100

Abstract
Digitalization has impact on all segments of society, particularly on the economy and business.
Digital transformation opens new unforeseen possibilities and new business activities for
companies that lead to the new forms of firm relationships with its customers and employees,
transformation of its business processes and the creation of new business model. Digital
technology as the main driver of changes is at the epicenter of digital transformation. As
digitalization is important topic for many businesses today, this master thesis explores the
impact of digitalization on companies’ business model and how different digital technology
shapes digital transformation process of companies in banking industry of Austria and Russia.
To reach the general goal and answer all risen research questions, qualitative research
approach was applied with multiple case study of ten banks in studied countries. The results
illustrates key digital technology that banks use in digital transformation process, the change of
business processes and business model the social impact of digitalization and what value is
created/captured/proposed for their customers. In addition, the research provides the
comparative analysis of Austrian and Russian banking industry, identifying differences and
similarities. The main implication of this thesis is the conceptual framework that includes the
development of digital transformation model of banking sector. This model and research findings
can be used in future researches while the model can be applied as a consultancy framework for
companies that are going to enter digital transformation process.

Table of Content
I. List of Figures ....................................................................................................................... 6
II. List of Tables ........................................................................................................................ 6
III. List of Abbreviations ............................................................................................................. 6
1. Introduction ........................................................................................................................... 7
1.1. Research gap and research questions .......................................................................... 9
1.2. Research approach and structure of the thesis.............................................................. 9
2. Theoretical Background and Literature Review ................................................................... 11
2.1. Digitalization as a phenomenon ................................................................................... 11
2.1.1. Digitalization and Digital Transfomation ............................................................ 12
2.1.2. Digital Transformation of Business Model ......................................................... 15
2.1.3. Business opportunities and risks ...................................................................... 19
2.2. The mean of Digital Technology .................................................................................. 21
2.2.1. Definition of Digital Technology ........................................................................ 21
2.2.2. Digital Technology trends ................................................................................. 22
2.2.3. Digital Technology in practice ........................................................................... 25
2.2.4. Digital technology and customer value in the banking sector ............................ 29
2.3. The social aspect of Digital Transformation ................................................................. 31
2.3.1. The impact of digitalization on the labor market ................................................ 31
2.3.2. Focus on response actions ............................................................................... 34
2.3.3. Ethics Guidelines for Trustworthy AI ................................................................. 36
2.4. Synopsis and theoretical framework ............................................................................ 38
3. Methodology ....................................................................................................................... 40
3.1. Research design ......................................................................................................... 40
3.2. Research structure ...................................................................................................... 43
3.2.1. Research sample.............................................................................................. 43
3.2.2. Data collection and processing ......................................................................... 44
4. Research findings and results ............................................................................................. 46
4.1. The banking sector of Russia and Austria ................................................................... 46
4.2. Case descriptions and case results ............................................................................. 49
4.2.1. Sberbank case study ........................................................................................ 49
4.2.2. Tinkoff bank case study .................................................................................... 49
4.2.3. Alfa Bank case study ........................................................................................ 50
4.2.4. Raiffeisenbank case study ................................................................................ 50
4.2.5. AK Bars Bank case study ................................................................................. 51

4.2.6. Erste Group Bank case study ........................................................................... 51
4.2.7. Raiffeisen Bank International case study .......................................................... 52
4.2.8. UniCredit Bank Austria case study ................................................................... 52
4.2.9. BAWAG P.S.K case study ................................................................................ 52
4.2.10. Oesterreichische Kontrollbank AG case study .................................................. 53
4.3. Discussion on assembled data .................................................................................... 54
4.4. Application of Theoretical Framework .......................................................................... 60
5. Conclusion .......................................................................................................................... 62
5.1. Implications and discussion ......................................................................................... 62
5.2. Limitations and further research .................................................................................. 64
IV. Reference List .................................................................................................................... 65
V. Appendix .............................................................................................................................. 0

I. List of Figures
Figure 1. Conceptual setting (Rachinger et al., 2018) ................................................................17
Figure 2. Digital Transformation of business model and its components (Schallmo & Williams,
2018) .........................................................................................................................................18
Figure 3. Key contributing digital technologies (PwC, 2016).......................................................23
Figure 4. Global technology market spending from 2014 to 2019 (in billion U.S. dollars) (Alsop,
2020) .........................................................................................................................................26
Figure 5. Digital transformation market revenue worldwide from 2017 to 2023 (in trillion U.S.
dollars) (Holst, 2020)..................................................................................................................26
Figure 6. Factors that improve customer experience and create additional customer value .......30
Figure 7. Demand for skills in all sectors, Western Europe, 2016-2030, % (Digital McKinsey,
2018) .........................................................................................................................................32
Figure 8. Digital Transformation of individual industries (Digital McKinsey, 2018) ......................33
Figure 9. Firms providing training to develop employees’ ICT skills in 2017 (Digital McKinsey,
2018) .........................................................................................................................................35
Figure 10. Digital Transformation model (own illustration) ..........................................................39
Figure 11. Framework for multiple case study analysis based on Yin (2009) approach..............41
Figure 12. Ranking of banks by digital technologies involved into banks’ business processes ...55
Figure 13. Digital Technology involved into digital transformation of banking sector, by country
comparison ................................................................................................................................56
Figure 14. Technology integration degree in banks focused on the technology .........................57
Figure 15. Banks’ new business model, developed in digital transformation process .................58
Figure 16. Digital Transformation model of banking sector.........................................................60
II. List of Tables

Table 1. Definitions of digitalization and digital transformation ...................................................13
Table 2. Insight data on digital transformation and customer experience ...................................27
Table 3. Research sample .........................................................................................................43
Table 4. Overall table on digital transformation of banking industry in Austria and Russia .........55
Table 5. Summary of country comparison ..................................................................................59
III. List of Abbreviations

AI…………………………………………………………………………………...…Artificial Intelligence
AR……………………………………………………………………………………...Augmented Reality
FinTech……………………………………………………………………………..Financial Technology
IoT…………………………………………………………………………………….....Internet of Things
ML………………………………………………………………………………….……Machine Learning
RPA…………………………………………………………………………Robotic Process Automation
VR……………………………………………………………………………………………Virtual Reality

1. Introduction
The term of digital transformation is remaining vital topic for many business discussions to the
date. Modern technology as a part of digitalization process has direct impact on different parts of
humans’ being, the society and the economy at large (Schallmo & Williams, 2018). Digitalization
has introduced new market players that by taking advantages from an agile market entry
strategy and novel business models, attack the market giants of the twentieth century (Vogel &
Hultin, 2018). Therefore, it has led to the new characteristics of organization in the today’s digital
world: companies need to be agile, flexible and react to these breaking forces if they want to
save, strengthen and maintain their position in the future on the market.
Emergence of digital technology has radically changed the way how companies conduct their
business and contributed to the development of new markets (Rachinger et al, 2018; Schallmo &
Williams, 2018). Today traditional business strategy is becoming inefficient to meet the issues
which arise with emergence of new generation of technological organizations that are flooding
markets around the world (‘Disrupting Market Strategy’, 2018). Previously technology was
perceived by companies’ managers as an option to choose after a firm defined its business
strategy. However, the situation has been changed up to the date: today technology is
potentially able to radically change and improve customer experiences, increase employees
capabilities of organizations whilst significantly reducing costs. It has now become essential for
companies not only to understand what modern market technology trends should be followed,
but also what technology has the potential for reshaping current marketplace in the future.
Digitalization opens for businesses unprecedented opportunities for customer value creation and
improving customer experience. Recent studies showed that nowadays customers have become
value-oriented (Johnson, 2017; Larsson & Viitaoja, 2017; Cajetan I. Mbama & Ezepue, 2018;
Cajetan Ikechukwu Mbama et al., 2018). With the help of modern technologies companies can
offer and commercialize new products and services, optimize its systems and processes,
automate monotonous work processes and develop new digital business models (Vogel &
Hultin, 2018). Moreover, digitalization of company’s business processes contributes to the
additional customer value creation and higher customer experience (Capgemini, 2018).
The digital technology trends identify customer behavior directions and specify direction of
business development and grow. The integration of new technology into the business in general
can lead to operational effectiveness improvement and increase of company competitiveness on
the market (Bouwman et al., 2018; Rachinger et al, 2018). Going through digitalization path
companies can discover new perspectives and networking possibilities for cooperation between
different actors on the market, face with potential associated risks and follow modern digital
trends on the market.
In view of the potential benefits provided by digitalization, new digital solutions play the role of
crucial factors of business digitalization across different industries in different divisions such as
production, marketing, customer service, logistics, and human resource management (Khin &
Ho, 2018) Thus, without encouraging innovative digital solutions by companies’ management, IT
systems and support that play crucial role in digital ecosystem, companies are not ready for the
digital transformation.

Nowadays, banking sector experiences great changes worldwide, the key factor of which is the
development of financial technologies (Deloitte & CII, 2016; FINTECH Circle Institute, 2019;
PwC, 2019). Global investment into FinTechs has increased exponentially and it is expected that
this boost will continue to develop with slower rate in 2020 (FINTECH Circle Institute, 2019).
According to Statista (Rudden, 2020), global investments in fintech enterprises had a drastic
growth of 220% showing from 50.8 billion U.S. dollars in 2017 to 111.8 billion U.S. dollars in
2018. In 2019, global investments continued rising and amounted 135.7 billion U.S. dollars.
In Russia, the volume of investments in financial technologies in 2017 doubled compared with
2016. The total amount of transactions in this segment in 2017 was $ 30.8 million. And in the
first half of 2018, the total amount of investments in fintech was already $ 7.1 million (PWC, РВК,
2018).
Bank service models are significantly changing under the influence of digital technologies
(machine learning, artificial intelligence, P2P lending, robotization), and also as a result of the
development of an integrated network economy (McKinsey, 2018). Russian large and
technologically advanced banks create their own ecosystems, which open up new, non-
traditional sources of income. It contributes to developing partnerships with other companies,
providing banking services under someone else's brand, and creating fundamentally new
business lines based on new technologies, such as blockchain. According to McKinsey research
(2018) the target vision of Russian banking sector in 2030 is that industry will be shared by 3
major players: large banks (providing wide range of services through their ecosystems), non-
banking players, particularly, telecommunication and IT-companies (providing traditional bank
services and competing with banks) and niche players (taking the market share not captured by
banks’ ecosystems). Moreover, the expert states digitalization of banking processes will allow to
reduce Russian banks 'expenses by 10-15%.
According to Deloitte report (2016), Austrian financial services industry is a traditional and
conservative sector, but is developing. Austrian banks are becoming more and more focused on
building relationships with their clients, mainly via online and mobile channels and exploiting the
power of big data. Many banks understand the need of changing their business models to keep
up with modern developing technology and to meet customer needs. Such banks started to
assemble teams and build structures to develop and introduce necessary changes. They started
to make co-operations and partnerships with FinTechs companies. As an example, one of the
largest Austrian banks in 2016 invested EUR 100 million for the such activities.
The technology implementation in the banking sector has important consequences for banks’
marketing activity and especially for the development of digital banking as it directly impacts
customer interaction (Cajetan I. Mbama & Ezepue, 2018). Digital banking assumes integration of
Internet, mobile gadgets and computer technology into the marketing processes and it has
become a major way to deliver multi-channel services to customers, which is challenging
traditional banking models. These trends determine the direction of development of the industry,
and it is important for banks to take them into account in their strategies.

1.1. Research gap and research questions
Up to the date there is an increasing importance of digitalization, digital innovation, digital

technology and digital solutions has become a topical research agenda (Bouwman et al., 2018;
Elia et al., 2020; Khin & Ho, 2018). Despite the growing interest in digitalization, literature in
scientific community on digital transformation of companies’ business models is in an infancy
stage. The great contribution to the exploring the topic of digital transformation is made by
industry experts and consultancies such as McKinsey, Accenture, Gartner, Deloitte, PwC etc.
Several studies describe the influence of digital technology on firm business models (Rachinger
et al., 2018). But no complex study was found to have illustrated how key digital technology
changes firm’s business processes and business model with the help of transformational model.
Therefore, this research provide the multiple case study analysis of digital transformation of
business models in banking sector with the help of complex transformational model. The
comparative analysis of digital technology usage is presented. Moreover, the research answer
the question how companies deal with the situation on the labour market shaped by
digitalization.
Hence, the following research questions take place:

How does Digital Transformation influence Business Models in the banking sector in
Russia and Austria?
In order to answer the major research question, the following perspectives are evaluated:
1) What impact digitalization has on the business model?
2) What are digital trends and key technology?
3) What is value created for customers?
4) What is the social impact of digitalization?
The research findings and developments can be applicable to the future studies in the
digitalization field, marketing surveys or banking industry analysis.
1.2. Research approach and structure of the thesis
The general aim of this research is to identify the impact of digitalization on companies’ business
model and to explore how different digital technologies shapes digital transformation process of
companies in banking industry.
In order to find the answer, within the board aim the following main objectives can be singled
out:
 To identify the main aspects of digital transformation;
 To discover key trends on digital technology;
 To identify main company’s processes to be transformed (for each case);
 To build a transformation model of business processes.
In order to achieve these goals, the literature on digital transformation was reviewed and the
qualitative approach with multiple case study method based was applied. Empirical part of this
thesis involves the comparative analysis of banking industry of Austria and Russia. In the focus
of the research there are 10 cases of innovative banks (5 in Russia and 5 in Austria) and the key

technologies they involve into their transformation processes. By comparing the multiple cases,
the general picture of digitalization in banking industry was investigated, key financial technology
appeared in different banks was identified and the similarities and differences were filtered out.
The case study method includes the analysis of secondary data. For the purpose of this thesis,
secondary data was explored and includes companies’ annual and interim reports,
presentations, articles, reviews, news on reliable information sources and other reports.
As the framework of this thesis, the digital transformation model of banking industry was
elaborated by the interplay of literature review, treated concepts and empirical results. The
model outlines the transformation process with digital technology as the main driver of change,
inputs and outputs of changes, situational factors and social impact of digitalization.
The structure of the thesis incudes two main parts: literature review and empirical research with
findings. Theoretical part is based on the four sections and explains theoretical concepts of
digitalization, digital transformation, digital technology and the social impact of digitalization.
Chapter 2.1 describes digitalization as an existing phenomenon, digital transformation of
business model, opportunities and risks that businesses meet on digital transformation way. The
next chapter discusses digital technology trends, its practical complicity and meaning in digital
transformation, customer value created through digitalization and overview of banking sector in
Austria and Russia. As the result of the theoretical part, the digital transformation model
framework is developed.
Empirical research covers chapters 3 – 4 and includes the multiple case study analysis of 10
banks in Austria and Russia. Chapter 3 is dedicated to the description of practical analysis
structure, approach and method used, research sample and data collection and processing.
Chapter 4 includes the research findings and main results illustrated through tables, graphs and
diagrams. Then, based on the empirical outcomes digital transformation model is completed to
the final framework result.
The research findings and developments of this thesis can be applicable to the future studies in
the digitalization and digital transformation field, financial technology surveys or banking industry
analysis. In addition, digital transformation model can be used as the consultancy for banks
going to introduce digital technologies into their business.

2. Theoretical Background and Literature Review
This part of the thesis discusses the current literature review based on three logical blocks. The
first section describes digitalization as an existing phenomenon: provides the explanation of
basic definitions and considers the changes that business meets dealing with digital
transformation. The next section discusses the meaning of digital technology in digitalization
process and digital technology trends. And, the last section discusses the social part of digital
transformation. At the end of this part the synopsis of theoretical part with the elaborated
framework is provided.
2.1. Digitalization as a phenomenon
To the date digital technology plays crucial role not only in daily life, but also in business
relations, staying the main driver for any change and transformation. The topic of digital
technology development and digitalization remains modern to the date as among researchers in
academic literature (Bouwman et al., 2018; Ilcus, 2018; Rachinger et al., 2018; Schallmo &
Williams, 2018), and among industry experts, which conduct ongoing research in this field, such
as McKinsey, Gartner, PwC, Deloitte, Erst&Young (EY), Cisco. Their works and studies provide
relevant and recent information and data for the topic. Before exploring the topic of digital
transformation of business processes and business models it is important to distinguish the
understanding of “digitization” and “digitalization” concepts and to determine the meaning of the
term “digital”. One of the commonly known and cited definition of the term “digital” is given by
McKinsey (Ilcus, 2018; Schallmo & Williams, 2018). It sets that “digital” describe more how
companies manage their operations and business than any separate operation. The concept
covers the following dimensions:
 Value creation at the new borders of the business world
 Processes optimization that have direct impact on the customer experience
 Creation of fundamental capabilities that maintain the whole business initiative
There is difference between the terms “digitization” and “digitalization” and they are not
interchangeable, as some researchers discuss it (Ilcus, 2018; Legner et al., 2017; Rachinger et
al., 2018; Schallmo & Williams, 2018). The most common definition of “digitization” assumes the
transformation process of physical or analog artifact into digital form, and eventually the
conversion into binary digits; and this basic idea of the term has been implied since the invention
and the emergence of first computer machines (Legner et al., 2017). Analog data can have any
value from a wide range of parameters — for example, volume. On the contrary, digital data
possesses only one of two binary states: 0 or 1. This peculiarity of digital bits’ values reduces to
minimum sources of error and contribute to production of more precise signals (Jensen et al.,
2016). As an explanatory transformation-oriented examples from analog to digital data can be
the following cases: usage of film negative for taking photographs is transformed into making
digital photography with digital camera; and posting a usual letter which is turned into sending a
digital mail as a message with the help of gadgets and Internet. Another example of process-
oriented meaning can be a musical instrument, which has different process of sound creation in
comparison to its ancestors, such as modern synthesizers or guitars. In business sphere, it is
important for companies to go through digital transformation way by focusing on core business
processes.
Besides, industry experts define “digitization” in different way. As an example, Cisco has
determined digitization as “the connection of people, process[s], data and things to provide
intelligence and actionable insights enabling business outcomes” (Surber, 2016), which
underlines the importance of process elements, particularly data and newly gotten knowledge.
Garnter, as another industry expert, perceives digitization as “the goal is to create and deliver
new value to customers, not just improve what is already being done or offered” (Schallmo &
Williams, 2018).
2.1.1. Digitalization and Digital Transfomation

The terms of “digitization” and “digitalization” are commonly used concerning the topic of
technology but they are not interchangeable. Digitization is used to describe the conversion
process from analog data into digital and it is the framework for digitalization. Meanwhile,
digitalization (and later digital transformation) reflects any changes in a firm and firm’s business
model because of amalgamated integration and growing use of digital technology to enhance
the scope of the business and company’s performance (Ilcus, 2018; Legner et al., 2017).
Another explanatory definition of digitalization was proposed by digital business consultancy, I-
SCOOP (2016): “Digitalization means the use of digital technologies and of data (digitized and
natively digital) in order to create revenue, improve business, replace/transform business
processes (not simply digitizing them) and create an environment for digital business, whereby
digital information is at the core”. This concept has been introduced to characterize the diverse
sociotechnical phenomenon and processes of technology adoption and usage in the social and
business contexts (Legner et al., 2017; Urbach & Röglinger, 2019). Digitalization can have a
significant impact on any kind of organization (Rachinger et al., 2018).
Digitalization and digital transformation are often used as synonyms but there is the difference in
meaning. Digital transformation, as the next step after digitalization, was described by Bloching
et al. (2015) as the continuous interconnection process of all business segments and business
adaptation to the market conditions of the digital economy. In addition, Unruh and Kiron (2017)
stated that digital transformation reveals the process, which arise to reconstruct institutions,
economies, and society systematically through digital technology diffusion.
Although the point of digital transformation remains the hot topic of many discussions up to the
date, the concepts of digital products and services took good understanding already in the 1990s
and 2000s (Schallmo & Williams, 2018). For example, considering marketing in the retail (Vogel
& Hultin, 2018)campaigns as significant and effective digital channels, even consumers still
made purchases primarily through physical stores and with cash. In time from 2000 to 2015, the
boost of smart gadgets and social media platforms has drastically changed the ways of
communication between customers and businesses worldwide, as well as consumers’
expectations in relation to multi-channel availability and response time to requests. Companies
understood that there is the possibility of communication with their customers on digital level and
on an individual basis. Moreover, businesses started to open the incredible opportunity to collect
valuable information about their consumers in real time through getting more interconnected
digital technology. A constantly increasing trend for digital payment option as, for example,
PayPal also gave the contribution to the formation and rapid development of the online market.
In present time, companies focus on mobile gadgets use and on creating customer value by
processing and managing the personalized customer data that digital technology generates on a
massive scale. This advantage help businesses to touch customers, to tailor their products and
services, to improve communication with customers, and fit consumers’ specific needs in a
better way.

In times, when digital technology started to penetrate our life, the first person who introduced
“digitalization” term in the common use was Robert Machal (Brennan and Kreiss 2014). In his
article published in the North American Review he discussed the “digitalization of society”
concerning the limitations and prospects for computer-aided research.
Reference Definition
“Digitization (i.e., the process of converting
analogue data into digital data sets) is the
framework for digitalization, which is defined
as the exploitation of digital opportunities.
Digitalization by means of combining different
Rachinger et al., 2018
technologies (e.g., cloud technologies,
sensors, big data, 3D printing) opens
unforeseen possibilities and offers the
potential to create radically new products,
services and BM”.
“We define digitalization as fundamental
changes made to business operations and
Schallmo & Williams, 2018 business models based on newly acquired
knowledge gained via value-added digitization
initiatives”.
“Digital transformation describes the
fundamental transformation of the entire
PwC, 2013 business world through the establishment of
new technologies based on the internet with a
fundamental impact on society as a whole”.
“We understand digital transformation as a
consistent networking of all sectors of the
economy and adjustment of the players to the
new realities of the digital economy.
Bouee´ & Schaible, 2015
Decisions in networked systems include data
exchange and analysis, calculation and
evaluation of options, as well as initiation of
actions and introduction of consequences”.
Table 1. Definitions of digitalization and digital transformation
Following the description of “digitalization” and “digital transformation” concepts given in the
beginning of the chapter, Table 1 illustrates some other definitions of these terms. All this
information was taken into account for the purpose of this research paper. However, it is
important to remark that this list of definitions is not exhaustive, and there are other
interpretations of these concepts that were not integrated into this survey.
Digitalization of organizations across all the industries is driven by new digital technologies
including Big Data analytics, robots, Artificial Intelligence, IoT, Blockchain, AR and VR, cloud
computing etc. According to Khin & Ho (2018) nowadays companies should be involved into
digitalization process and succeed in comprising digital transformation because digital
technology can introduce important improvements in business such as increasing customer
experience and involvement, optimizing business operations and even digitalization contributes
to the creation of completely new business models. Otherwise, a firm can face tough competition
and become weak to survive on the modern market. Digitalization has been changing and
shaping the modern market and one of the main its characteristics is the extraordinary speed of
change, volatility (permanent and massive change) and increasing level of connectedness and
convergence of the worlds: physical, social and digital (Urbach & Röglinger, 2019; Zaki, 2019).
Thus, in the modern market it is vital for modern companies to be agile and open to
technological change, to critically analyse current business strategy and to become ready to
undergo this change on time (Zaki, 2019). In business practice, there are several examples of
famous companies, which failed to innovate and to make timely technological change: Kodak,
Blockbuster, Nokia, General Motors, Polaroid, Xerox etc. In contrast, General Electric, Netflix,
Walmart, Apple, Amazon, Nike, Microsoft and Tesla are not the only ones from all the modern
businesses that were able to succeed in going through digital transformation and present
completely new business models to their industries.
Moving business towards digitalization requires companies experience socio-technical

transformation that have a direct impact on firm’s structure, business model, strategy, IT
architecture etc. (Legner et al., 2017). To benefit and take the potential while go digital,
companies need above all an appropriate technological infrastructure (Urbach & Röglinger,
2019). The success of digitalization is highly dependent on the management strategy the
company follows, its management should possesses digital leadership and vision, open mindset
(Jacobi & Brenner, 2018; Legner et al., 2017). Other main factors of digitalization processes
include open-minded people and corporate culture in the organization, its processes and
structure, data-driven agility, digital security and compliance.
Organizations that seek to succeed in the digital age should reevaluate their business models,
uncover and develop the potential of digital technologies, and transform their processes (Urbach
& Röglinger, 2019). In the scope of digitalized enterprise, Legner et al. (2017) and Urbach &
Röglinger (2019) characterized for companies three key fields of action developing firms into
digital enterprises:
 Digital Disruption. In this case, organizations make strategic decisions on a relevant

usage of disruptive technologies for the optimization of existing business model. As
various forces (such as changes in industry structures, in economy, market trends etc.)
at large influence companies, organizations face the serious pressure to respond (Skog
et al., 2018). This situation forces firms to take a focus on exploring and analyzing
emerging and developing technologies. That is the main goal of digital disruption. In this
context, it is important to make systematic analysis of technology potentials and threats
and find recommendations for taking the proper action. In addition, companies should
develop their competences for the introduction into their processes and effective usage
of digital technologies.
 Digital Business. In this case, digitalization forces companies to design and realize new
digital business models enabled by digital technology. In the digital age, organizations
move from stand-alone value propositions to holistic ecosystem-enabled valuable
suggestions. It often happens as the outcome of the fusion of the digital and physical
worlds. Data-driven services, digital platforms, smart products, product-service hybrids
are illustrative examples for new opportunities that is opening for businesses in the digital
age. During the establishment and development of new working business models
enterprises are required to figure out the impact of digitalization on the different levels:
individual, organizational, competitive, and increasingly societal.
 Digital Transformation. When the company experiences fundamental changes in its

business model, the need for transformation of the whole existing organization
architecture arises. The technology-caused change in business is in the focus of the
digital transformation action field. Considering architecture from the business model to
business processes companies need to undergo goal-oriented organizational,
technological, and processual transformation for reaching the success in the digital age.
Digital transformation assumes that firms should understand how to realize business
models, how digitalization itself affects the business and how enterprises itself should be
managed. Companies need to align their entire existing infrastructure, business
processes and organizational structures, data and application systems with the new
market conditions, new business models, requirements of new customer needs in a
coherent manner.
Concerning the structure and main goal of this paper, it is important to note that this research
work is focused on digitalization and digital transformation action field. The orientation is to
explore how mature companies experience fundamental changes in their business models and
then in business processes because of digital technology diffusion.
2.1.2. Digital Transformation of Business Model

Organizations commercialize their new ideas and technology potentials through their business
models. Technology by itself has no individual objective value (Chesbrough, 2010).
Technologies acquire the economic value when they are commercialized someway via a
company’s business model. The identical technology commercialized by firms in different ways
will lead to various results. In this case, it is important to understand the nature of change that is
going to be implemented through digital technology, the purpose of the change and analyze the
structure of firm’s business model and suitability of digital technology for the firm’s business
model. For successful transformation, it is necessary to analyze the interconnection these
aspects.
First of all, it is important to understand what the concept of “business model” means. There are
various definitions of this term, but there is the main idea among them. According to (Teece,
2018) “a business model describes an architecture for how a firm creates and delivers value to
customers and the mechanisms employed to capture a share of that value”. The business model
is perceived as a manifestation of strategy, it serves as a tool for the analysis and
communication of strategic choices (Lambert & Davidson, 2013). A business model identifies the
basic, underlying logic of an enterprise business and describes what value a company provide to
its customers and partners (Schallmo & Williams, 2018), what is the main purpose of its existing.
Business model concept represents elements and interconnections in business activities for the
purposes of planning, communication and making improvement because they connect firm
strategy with its business processes (Rachinger et al., 2018). Through business model, an
organization is able to describe the nature of its business in the sense of “what it does,” “what it
offers” and “how the offer is made” (Ritter and Lettl, 2018) and “what is the main value created”.
The value provided for customers allows a company to stay differentiating from its competitors,

the straightening consumer relationships, and the creation of competitive advantage (Schallmo &
Williams, 2018). The following dimensions and elements can characterize a business model:
- The benefit aspect involves provided values, products, services;

- The customer aspect includes the clients segments, customer channels, and clients
relationships;
- The value-added aspect contains the resources, processes and skills involved;
- The financial aspect covers firms’ revenues and expenses;
- The partner aspect involves partners, partner communication channels, and partner
relationships.
The general objective for companies is to combine and join these business model elements in
appropriate way that they mutually straighten each other. Therefore, when it is difficult for
competitors to copy and imitate business model, it is possible for a company to succeed and
achieve growth.
Over time, organizations can stay successful if they constantly adapt to their changing
environment. Rachinger et. All (2018) and Teece (2018) described the concept of the dynamic
capabilities to explain the phenomenon how companies adapt their physical, organizational, and
human resource bases when they meet technological or market changes in the volatile
environments. The ongoing transformation of economies and industries, the growing power and
development of digital technologies generally, play the role of market and technological drivers
that has direct impact on a firm’s business model. Schweizer (2005) outlined that a dynamic
capabilities can be regarded as the capacity to grasp new opportunities and to modify the firm’s
existing business model. These activities can be reached through reconfiguring the firm’s value
chain constellation and securing competences, knowledge assets, complementary assets, and
technologies for the purpose of gaining sustainable competitive advantage for the firm.
Therefore, enterprises are able to stay competitive if they are ready to introduce changes into
their business models (Rachinger et al., 2018; Teece, 2018). To become more successful on the
market with the designed business model, organizations should explore different alternatives,
possess a good understanding and insights about their client requirements, a clear
understanding of the firm’s value chain (Teece, 2018).This allow to understand that a company
provides to its customers what they need as possible and on time, as cost-effectively. Thus, the
ability to adapt business model to the environment is perceived as a dynamic capability.
According to Rachinger et. al (2018) and Teece (2018), “dynamic capability” is the learning-
driven approach of three main actions: sensing, seizing and reconfiguring. These actions helps
companies to adapt to the environment and meet changing market requirements in accordance
with their business strategy. At first, sensing of technology and business model assumes as the
firm’s capacity to transfer technological capabilities to its new business model ideas as well as
recognition of alternative business models of strong competitors and across the industry.
Secondly, the action of seizing, on the whole business model level, play the role of firm’s focus
on innovation activities via the process of (re)combining elements including new technology,
business model insights and market conditions. In third, reconfiguring is understood as the
process of selecting and sourcing of the relevant core resources and competencies that are in
need and the process of involving partners who could provide complementary resources and
competences for the business. In short, sensing capabilities are required to find out possibilities
and threats potential to the firm’s business model; seizing capabilities are needed to address
and apply these new opportunities and possibilities in the existing business model; and lastly,

reconfiguration capabilities are required to elaborate and adapt organizational activities,
processes and structures, find necessary resources that make it possible to introduce new
business model (Rachinger et al., 2018).
Based on these perspectives of digitalization and new fundamental changes in business model
(authors use the term “business model innovation) taken together and applied the concept of
dynamic capabilities, Rachinger et. al (2018) designed the conceptual setting, which are
presented on the Figure 1.
Figure 1. Conceptual setting (Rachinger et al., 2018)
Researchers designed business logic triangle. It shows the distinguishing business activities into
3 levels from the top to the bottom: the highest layer is called “planning level”, where the strategy
of the company takes place, the middle layer is determined as “architectural level” which
assumes business model of the company and the bottom layer is “implementation level” with
business processes of the company. The author implies that all these levels are influence by
changes caused by the digitalization. In the same time, the reason of value creation and value
capture in the organization via proposing new value for existing and potential company’s
customers is represented by business model (Rachinger et al., 2018; Teece, 2018). Thus,
implementation and planning are linked by business model in the figure.
As discussed above, companies are the subject to the changes in their environment. Over time
organizations which have dominated the market face the challenge from the new competitors
that redefine the established market conditions and industries (Rachinger et al., 2018). Thus,
existing business models often become outdated and non-efficient that leads to the replacement
by new ones. The recent major developments that was held in the 2010s, for instance, the social
media emergence, the mobile revolution or the growing power of analytics, particularly was
resulted in the digital transformation of business models. “Anything-as-a-service” models
appeared that time and promoted platforms with ecosystems and business networks.
Meanwhile, consumers can get pervasive access to the necessarily information through the
Internet and possess diverse channels to choose from (Linz et al., 2017; Berman and Bell,
2011). In time when competition occurs basing on the outstanding business models, enterprises
are in need to adapt to the environment and innovate their business models in order to stay
successful in today’s digital world (Rachinger et al., 2018).

Digital transformation of business models was in focus of exploration for many researchers (da
Costa et al., 2019; Schallmo & Williams, 2018; Urbach & Röglinger, 2019). Schallmo & Williams
(2018) investigated digital transformation of business models in details and illustrated its
structure and major components, which are presented on the Figure 2. According to these
researchers, digital transformation of business model could be referred to different objects of
modification, such as entire business model, its individual elements (e.g. business processes),
value chains, value-added networks and its actors. The company decides to what extent it
intends to implement digital transformation (transformation degree): whether slight, incremental
degree of change or fundamental, radical changes. The firm’s transformation can be new
primarily for customers, its own business, competitors, industry and partners, as reference units.
Also a firm should define what procedures it is aimed to evoke by the change, i.e. how
transformation is going to be occurred. In the scope of the digital transformation, technology or
enabler(s) are applied to initiate new services or applications. These enablers demand skills that
make it possible to collect, exchange and analyze data; these processes the enablers must be
able to apply for calculating and estimating options. Then these options are utilized to initiate
new business processes in the firm’s business model. The following four objective dimensions
can initiate digital transformation: quality, time, space and finance. Digital transformation of
business model assumes “sequence of tasks and decisions that are related to one another in a
logical and temporal context”.
Figure 2. Digital Transformation of business model and its components (Schallmo & Williams,
2018)

2.1.3. Business opportunities and risks
Digitalization provides many attractive and beneficial strategic opportunities for both
technological (as IT companies) and non-technological companies (as manufacturing,
healthcare, bank, retail etc.) (Abaidi & Vernette, 2018; Berman, 2012; Ilcus, 2018; Jacobi &
Brenner, 2018; Khin & Ho, 2018). Digital technologies can be involved in and support each
function part of the business including production, marketing and customer service, logistics,
human resource management, finance etc. First of all, innovations could enable new forms of
collaboration between organizations or the modification of existing firm’s relationships with its
employees and mainly customers (Rachinger et al., 2018). Proper introduction of digital
technologies into firm’s processes can optimize resource utilization and reduce or eliminate
diverse operational costs (e.g. raw materials, staff payments, deliveries, intermediary in
production and service etc.), improve work efficiency and productivity (Urbach & Röglinger,
2019). Secondly, technological changes contribute to firm’s greater flexibility, reactive capacity
and product or service individualization (Loonam et al., 2018; Rachinger et al., 2018).
Digitalization has the potential for businesses to create completely new products/services or
even business models (Berman, 2012). These novate decisions could improve value
propositions, form new customer relationships and shape new ways of collaboration between
companies and their clients, enhance consumers’ loyalty and satisfaction (Vogel & Hultin, 2018).
In addition, the main characteristics of digital technologies include ubiquitous connectivity and
mobility, which provide quick access to a wide range of customer data and allow to collect, store
and process this data online regardless of geographical location (Ilcus, 2018; Loonam et al.,
2018; Zaki, 2019). Data analysis and management can be used as a source of competitive
advantage. This opportunity makes it possible to touch customer closer, generate value and
provide more personalized offerings.
According to Berman (2012): “To succeed in digital transformation leading companies focus on
two complementary activities: reshaping customer value propositions and transforming their
operations using digital technologies for greater customer interaction and collaboration”.
There is growing role of timeliness, quality, convenience and variety in value proposition; digital
technology reshapes customer relationship and customer experience, leads to increased
customer loyalty and satisfaction (Johnson, 2017; Vogelsang, 2010). Digitalization contributes to
the additional customer value and higher customer experience (Capgemini, 2018).
In the global scale, digitalization has a large socioeconomic impact. According to the survey of
(PwC, 2012) digitalization effects the growth of economy and contributes to overall GDP growth,
innovation and job creation. The influence of digitalization on the societal well-being of countries
is underlying in improved quality of life and quick affordable access to basic services.
Despite all possible benefits of digitalization, companies face with associated risks. Since
information technology penetrates many business processes, organizations become more and
more relying and dependent on the work and availability of their IT systems in the today’s digital
world (Urbach & Ahlemann, 2019; Vogel & Hultin, 2018). Nowadays all the gadgets and IT
systems have easy access to the Internet that become a reason for vulnerability of IT security
where cyber terrorism is a great problem (Jansen & Jeschke, 2018; Urbach & Ahlemann, 2019).
In recent years there is growing concern for the significance of syber security and corresponding
security guidelines, especially in terms of IT virus infections or other Internet-based attacks from
outsiders that lead to direct data loss, systems destruction, or initiating business transactions
outside the firm’s interests (Abolhassan, 2017). By the way, IT risks are greatly underestimated

by many firms and in the case of an emergency they are not completely managed. Conceivably
as a result of vulnerabilities in the IT or automation systems, the issue of cyber-terrorism is
becoming critically important in the recent years (Deloitte, 2018a; Jansen & Jeschke, 2018;
Urbach & Ahlemann, 2019).

2.2. The mean of Digital Technology
We live in the world of rapid changes. Technology is not exception, it is progressing and
developing headily from day to day. Digital Technologies had been deeply changing the ways
people live, work, buy and do their business. They have even changed society at large and
continue influencing virtually all economic industries and business functions. As digital
technology provides new ways for connecting, collaborating, conducting business and creating
bridges between people, it touches the heart of all business functions and the ways companies
are organized and managed.
2.2.1. Definition of Digital Technology
As discussed in previous chapter, digital technology is the key driver of digitalization (Urbach &
Röglinger, 2019). Digital technologies provide beneficial perspectives for businesses involving
reducing costs, optimization of recourse utilization, improvements in work efficiency and
productivity, improvements in customer satisfaction and loyalty, capturing of new markets,
optimizing firm’s supply chains (Hacklin et al., 2018). These digital technologies have been
determined by Urbinati et al. (2018) as Artificial Intelligence (AI), Big Data, Cloud Computing,
Internet of Things (IoT), Virtual and Augmented Reality (VR/AR), and cyber-physical systems.
From other side, digital technologies identified by Fitzgerald et al. (2014) such as social media,
analytics, mobile or embedded devices.
To understand the nature of digitalization, it is important to understand the difference between
digital technology and fromearlier technologies. Yoo et al. (2010) suggest three main and unique
characteristics of digital technology:
 the reprogrammability;
 the homogenization of data;
 the self-referential nature of digital technology.
Besides, digital technologies have facilitated the formation of new business ventures forms and
digital start-ups, because modern technology constitutes a fundamental element of their
operations and business models. Thus, the entrepreneurial activity nowadays is enabled by
digital technology (von Briel et al., 2018) which reveals in the sphere of business and
entrepreneurship in the forms of three definite but related elements (Nambisan, 2017). These
elements involve digital artefacts, digital tools or infrastructure and digital platforms.
A digital artefact implies a digital component, media content or an application that composes a
part of a new product or service, and provides the value or a specific functionality to the end-
customer (Ekbia, 2009; Kallinikos et al., 2013). Examples can be different apps that run on smart
watch (e.g. iWatch), Amazon Dash Button, Google Pay, Face ID. Digital artefacts can act as
either detached software or hardware component on a physical gadget or, as an element of a
broader ecosystem that runs on a digital platform. A digital artefact makes physical products or
services support innovation. As an example, companies take in use social networking sites to
build and develop social capital and find new business opportunities (Elia et al., 2020).
Digital platform represents common, shared sets of services and architectures that serve to host
complementary offerings (products and services), involving digital artefacts (Parker et al., 2016;
Tiwana et al., 2010). In other words, digital artefacts are software-based platforms built by the
extensible codebase of a software-based system that ensures the core functionality shared by
the interfaces and modules with which it interact. For example, Google Chrome browser allows
working with Google search engine; Apple's iOS platform enables different apps to run on its
smartphone. Services of a digital platform maintain real-time matching between highly
personalized offerings and multivariate demands (Parker et al., 2016), and execute activities that

require digital engagement but also may refer to both physical and digital assets. Digital
platforms have facilitated relevant industry transformation and set up new bases for ecosystem
innovation and industry leadership (Elia et al., 2020).
Finally, in contrary to digital platforms, digital infrastructure is the set of digital technology
systems and tools (e.g., data analytics, cloud computing, online communities, 3D printing, social
media, digital makerspaces) which provide cooperation, communication, and computing power
to support business and innovation. The implementation of digital infrastructure into the
entrepreneurial use is a sociotechnical process described by Tilson et al. (2010) as process of
digitalization. Microsoft Azure or Google Cloud Platform are examples of digital infrastructure in
the sphere of cloud computing. Another example of digital infrastructure is Stanford FabLearn
and MIT Fab Central Labs used for digital prototyping and mockups. Crowdsourcing portals such
as Upwork, Amazon Mechanical Turk or Innocentive, online communities such as Quiky or
Eclipse and crowdfunding systems such as Indiegogo or Kickstarter are further cases of digital
infrastructures that help entrepreneurs to involve with potential suppliers, partners, investors and
customers, and acquire different resources globally (Kim and Hann, 2013).
2.2.2. Digital Technology trends

Over the past ten years, the world has changed radically (Denner et al., 2018). The digitalization
of products and services is a globally and rapidly developing megatrend which reshapes value
networks across all economic sectors. As digitalization assumes the adoption of digital
technologies in order to bring improvements or fundamental changes into business processes,
business models, firm’s products and services, the impact of digitalization is increased by the
rapid emergence of digital technologies, which are evolving in step with time (Gartner 2016).
Digitalization of companies across all industries is driven by new digital technologies such as
artificial intelligence (AI) big data analytics, IoT and cloud computing (Nwaiwu, 2018).
Organizations should track changes and technology trends during time for successful
transformation via digital technologies to make significant business improvements. Otherwise,
they will lose the game, because their market competitors will do faster (Nwaiwu, 2018). For
digitalization of product, service, or business process, companies need to implement new digital
solutions. For example, for marketing activities namely for identifying trends among target
consumers, organizations can integrate market intelligence software which engages artificial
intelligence (AI) technology and in general it helps firms to personalize and modify their product
offerings accordingly (Nwaiwu, 2018).
There are a lot of industry experts doing research each year on digitalization and its influence on
business sector, such as McKensey, PWC, Erst&Young (EY), Deloitte, Gartner etc. They track
tendencies, major movements in digitalization and its influence on service and production
sectors, make forecast for future potential changes. Quite often the term “digitalization” often is
associated with Industry 4.0 (Wilkesmann & Wilkesmann, 2018). Wilkesmann & Wilkesmann
(2018) described Industry 4.0 as “a comprehensive digitalization and linkage of production
processes, starting from the customer’s order, through the creation of production processes, to
downstream product services”. Thus, in course of digitalization concept it is important to apply to
common technology trends in Industry 4.0. In their research of 2016, PWC identified the
following core digital technologies for the production: Mobile devices, IoT platforms, Location
detection technologies, Advanced human-machine interfaces, Authentication & fraud detection,
3D printing, Smart sensors, Big data analytics and advanced algorithms, Multilevel customer
interaction and customer profiling, Augmented reality/wearables and Cloud computing.

Figure 3. Key contributing digital technologies (PwC, 2016)
Another industry expert Deloitte (2018) makes research in digital tech trends tracking major
changes and exploring their profound potential for society and business. For 2019 the expert
shares the following results in their report:
1. Analytics. Big data provides insights about markets, customers, firm’s operations and
virtually about every aspect of how an organization is doing business. But just
possession of information is not enough. “Companies need the ability to predict and
prescribe. The amount of data which is available for the analysis is growing
tremendously. Algorithms, analytics engines and supporting infrastructure can help
companies to obtain valuable information beyond well-formed data and predict what
may happen in the future.
2. Cloud. Cloud can be considered not only as a tool for lifting and shifting workloads or
for expanding data center or for infrastructure strategy, as many companies use it. In
coming years it will possibly remain as a “competitive differentiator”, its potential value
will be emphasized as pattern and platform to achieve long-term growth and develop
new innovations. Even now cloud can serve for the access to AI, digital reality,
blockchain, quantum computing and for other more.
3. Digital reality. Progress in computer vision, conversational interfaces and auditory

technologies made the interaction with the digital world into reality feasible. Virtual
reality (VR), augmented reality (AR), mixed reality (MR), the Internet of Things (IoT)
and spatial technologies show how humans interact with technologies and data.
4. Blockchain. A few years ago this word was associated only with cryptocurrencies.
Now this disruptive technology transforms as businesses as paths of humans’
interaction and engagement, it successfully captures both mindshare and

investments. Large companies are implementing enterprise grade blockchain
solutions to facilitate traversing multiple disparate databases. It is expected that
massive transformation and possibilities across industries, functions, and
geographies is feasible with cross-organizational business process reengineering.
5. Cognitive technologies. Robotic process automation (RPA), neural networks, bots,

machine learning (ML), natural language processing (NLP), and the broader domain
of artificial intelligence (AI) can help to interpret and make sense of constantly
growing data, processing complexity and the volume that traditional analysis tools
techniques and human minds cannot comprehend. There is a potential for machines
to make decisions and actuate main business capabilities.
Meantime, three newer tech trends including cognitive technologies, digital reality, and
blockchain are growing rapidly in their value and importance (Deloitte, 2018b). Staying still
emerging these three trends, are potential to become as well-accepted and powerful as
analytics, cloud, and digital experience are now.
Additionally, research findings of Gartner, Inc. supported the results described above (Gartner,
2018). This industry expert pointed out the top strategic digital trends that companies need to
investigate in 2019:
1. Automation. Robots, autonomous vehicles and drones by using AI they can automate
functions previously made by humans and deliver advanced behaviors.
2. Augmented Analytics. Potential of this technology will be rapidly adopted, as a key

trait of modern analytics, data preparation and management, data process mining,
data science platforms and business process management.
3. AI-Driven Development. To the date the model becoming rapidly available in which
for creation most AI-enhanced solutions the professional developer can work
independently with the help of developed models delivered as a service.
4. Digital Twins. “A digital twin refers to the digital representation of a real-world entity or
system”. Over the time companies implement them to improve their ability for the right
data collection and visualization, for applying the right analytics and rules, and
responding effectively to the business objectives.
5. Empowered Edge and IoT. The edge relates to endpoint devices which people use or
which are integrated in the surrounding world. Edge computing outlines a computing
topology where information processing, content collection and delivery, are located
closer to these endpoints.
6. Digital reality. Virtual reality (VR), augmented reality (AR) and mixed reality (MR) are
transforming people’s perception of the digital world and their way of interaction with
digital world. This combined change in interaction and perception models leads to the
future immersive customer experience.
7. Blockchain. Blockchain is going to reshape industries by engaging trust, ensuring

transparency and decreasing excessive interaction across business ecosystems. It
potentially lowers transaction times, cuts the costs and increases cash flow.

Under a strategic technology trend Gartner determines the trend “with substantial disruptive
potential that is beginning to break out of an emerging state into broader impact and use”. Also it
assumes rapidly growing phenomenon on the market which has a high degree of volatility
reaching tipping points over the next five years.
Gartner also admits the influence of digitalization now and in the coming future (Forni 2016). For
instance, Gartner affirms that “20 percent of individual daily engagement will involve at least one
of the digital giants by 2021”. At 2018, some of the top digital giants were presented by Google,
Apple, Amazon, Facebook, Microsoft, Snap, Alibaba, and Tencent (IMD, 2018).
2.2.3. Digital Technology in practice

Digital technology possesses the ubiquitous connectivity and mobility features, which provide
instant interaction and quick access to a broad range of data and processing power for
businesses and society (Zaki, 2019). These technology characteristics can be found in modern
products and services and allow reaching wider audience, regardless of their geographical
location. Over time, digital technology increasingly composes an inner part of the business
opportunity regarding the process and the outcome (Nambisan, 2017). Digitalization and digital
transformation has induced new market players that attack the giants of the 20th century,
competing with agile market entry strategies and new business (Vogel & Hultin, 2018).
Technology is increasingly changing traditional industry models and structures and reinterpreting
the company’s view of its customers (Nwaiwu, 2018). Thus, if organizations want to consolidate
and maintain own position on the market or in the global economy generally, they need to be
agile and react to the disruptive market forces (Vogel & Hultin, 2018).
According to the worldwide survey conducted in 2014-2016 and published on online portal for
statistics, Statista, by Alsop (2020) the global market of technology usage is grooving over last
five years (Figure 4). The statistical data illustrates the total technology spending worldwide
during 2014 and 2019. The global technology market involves software, system integration
services and tech consulting, telecom services, hardware maintenance and tech outsourcing,
computer equipment, and communications equipment. The graph shows the increasing trend in
total tech spending from 2015 to 2019. As survey was conducted in 2014-2016, it was
forecasted that in 2018 and 2019 the global tech spending would reach the amount of 3,212
billion U.S. dollars and 3,360 billion U.S. dollars respectively. Thus, it means that global
technology consumption is growing over time.
In modern digital age, companies need to undergo digital transformation. Figure 5 illustrates the
global digital transformation market revenue from 2017 to 2023 (Holst, 2020). According to this
survey, conducted in 2017 to 2019 and published on Statista, there is the rising trend in the
world digital transformation market. The rapid growth was forecasted for the spending on the
digital technology and services that enable digital transformation around the world in 2022 and
2023 that is expected to reach 1.97 trillion U.S. dollars and 2.3 trillion U.S. dollars respectively.
Hence, statistics shows the growing power of digital transformation as the market is expected to
increase in the future. It proves once again the necessary for companies to go through digital
transformation if they want to consolidate and maintain own position on the market.

Figure 4. Global technology market spending from 2014 to 2019 (in billion U.S. dollars) (Alsop,
2020)
Figure 5. Digital transformation market revenue worldwide from 2017 to 2023 (in trillion U.S.
dollars) (Holst, 2020)

In 2019 Forbes, the global media publisher, published an article with statistics on digital
transformation and customer experience up to 2019, based on the data of major industry experts
and consultancies (Morgan, 2019). The major insights from this publication was collected for this
research in Table 2 below. This information proves the need of digital technology integration in
business processes and digital transformation path for companies worldwide.
Industry expert Insight information

IDC 85% of decision-makers in companies state
they have two years as a time frame to make
significant activities for digital transformation
or their firms will lose to their competitors and
result in financial suffer.
Seagate By the end of 2019 2/3 of global CEOs were
expected to start focusing on digital strategies
for improving customer experience.
Smart insights 34% of enterprises have already experienced
digital transformation.
Gartner 56% of CEOs stated that digital improvements
allowed them to have revenue growth.
Vxchnge By 2020, it is expected 20.4 billion devices to
be connected to the Internet of Things.
Gartner 25% of customer service operations is
expected to use virtual customer assistants
such as chatbots by 2020, up from 2%
observed in 2017.
Gartner By 2020, more than 40% of all projects in data
analytics is expected to be related to
customer experience.
IDC In 2019, spending on AI is expected to be
total 35.8 billion U.S. dollars, that will be a
44% jump from 2018.
Accenture 75% of customers are more likely to purchase
products and services from a firm that is
aware of their name, buying history and
makes recommendations of products based
on their preferences.
Table 2. Insight data on digital transformation and customer experience
According to the general opinion of professionals and industry experts, companies need to go
through digital transformation and make it as continuous part of their whole business strategy
(Schallmo & Williams, 2018). Lots of organizations are forming and developing own new digital
divisions and simultaneously hiring specialists in digital transformation and technology in their
several different departments for the purpose of leading their digital transformation strategy. In
the modern world, all organizations will experience technological change. More recent
companies do not possess old working practices and systems that will need to undergo
technological changes at some time, thus they are more agile to technological change (Zaki,
2019).
Successful novel firms led by digital technology are appearing everywhere, whereas mature
organizations have to make significant changes or face the defeat losing their position on the
market (Abolhassan, 2016). The reason is (as it was discussed) that they have not introduced
changes at all or not changed promptly enough, or because these companies have not
succeeded to adapt own business models to the competitive market conditions they meet from
digital giant and major digital service providers, for example, as Amazon, Google, Facebook,
Apple, Alibaba, Microsoft, Snap and eBay, Airbnb, Uber, Booking.com or Spotify (Abolhassan,
2016; IMD, 2018). By the way, the music industry is one of illustrative examples of how rapidly
the change can occur: ten years ago, Apple radically changed the industry launching iTunes. But
up to the date, new streaming services (e.g. Spotify, the new Apple Music and Deezer) are
turning the successful iTunes model inefficient. Thus, Apple has moved from a pioneer in its
industry to an imitator.
The exponential accessibility of data enables enterprises to explore the provided insights and
develop the appropriate decisions in real time. Thus, artificial intelligence (AI) is an extremely
powerful tool that now are having impact on all parts of the society (Zaki, 2019). McKinsey
Global Institute (2018) has published new report, which forecasted that by 2030 AI could add
13tn U.S. dollars to the global economic output and that by the end of the next decade around
70% of organizations will have introduced some form of AI. Artificial Intelligence and more
particularly machine learning, and even more particularly deep learning day after day are
becoming part of our lives, applied by the likes of Google for identifying millions of images.
Machine learning and deep learning are used by self-driving cars in learning how to identify
obstacles and react respectively. As an example, in Cadillac’s Super Cruise on the CT6 model,
partially automated cars, these technologies allows lane following with adaptive cruise control,
as well as controlling the driver’s eye movements in the same time to determine his vigilance
(Daily et al., 2017).
Nowadays, famous voice-user interfaces such as Google Assistant, Amazon's Alexa, Apple's
Siri, Microsoft's Cortana, Yandex’s Alice are illustrative examples of AI technological
development that create digital disruption on business-to-consumer markets (Deloitte, 2018b;
Zaki, 2019). These virtual assistant are based on the voice recognition software and intelligent
interfaces that makes the collaboration between human and computers possible. Besides, these
voice assistants are able to help to find requested information, but recently, Amazon patented its
novel Alexa feature that could understand based on the speech and emotions, when a user is ill
and offers him medicine. All this enhance customer experience and create additional value for
the company’s clients.
KONE is a worldwide provider of elevators, escalators, automatic doors is using different kinds
of technologies in its processes: analytics, digital experiences, cloud, digital reality, cognitive,
and other technology for the purpose of reinventing the way how its products are serviced.
According to the firm’s CIO, employees have moved ahead in digital transformation with the
emergence of KONE 24/7 Connected Services (Deloitte, 2018b). The development included
insertion of sensors throughout KONE elevators to transfer products’ performance data to IoT
platform based on machine learning, which monitors, explores, and illustrates performance data
of KONE products in real time. This service is available for KONE's escalator and elevator
clients and is fundamentally transforming how product maintenance services are provided,
because potential errors and defects can be predicted in advance and firm’s equipment can be
observed in real time. For example, due to constant monitoring of products performance and
timely preventative measures for 100 KONE client elevators over a period of 12 month, the
company reported fewer maintenance issues in 60%. In 2018 KONE expanded i offering to
escalators. Moreover, there is the possibility to connect KONE 24/7 Connected Services for
earlier generations of KONE equipment, as well as other clients’ equipment regardless to the
manufacturer. This is one more example of how artificial intelligence, IoT, and analytics are
bringing substantial benefits to a broad portfolio of companies’ assets.
2.2.4. Digital technology and customer value in the banking sector

The role of new technology is important in modern banking system. The digital technologies are
changing many banks business processes: management, production, delivery. According to
Capgemini report (2018) going through digital transformation banks are experiencing the impact
on a variety of business fronts:
 New business models. The integration of digital technologies into banks business
processes has driven the introduction of bank new business models: the transformation
of traditional banking into digital banking;
 Operational efficiency. New technology is decreasing entry barriers and stimulating
market competition. These forces make large banks improve efficiency through business-
model transformation and business process automation that influence positively cost-to-
income ratio (CIR). Banks save labor forces on simple operations and direct it on working
under strategic tasks;
 Higher quality and faster service. Integration of modern financial technology allows
improving the bank services accessibility, convenience and speed of operations (real-
time updates, mobile connectivity, 24/7 online service), reducing operation errors and
deviations in working process that positively impact customer experience;
 Personalization. Modern technologies helps Russian banks to rethink how customer data
can be used and based on this information develop personalized products and services
for their clients. Banks offer targeted content thanks to better understanding clients’
lifestyle, interests, life-stage needs and social affiliation preferences;
 Transparency of operations and cybersecurity. Financial technology helps to prevent
consequent risks. Financial technologies including blockchain help to make transparent
operations. AI and ML allow to solve the cybersecurity problem;
 Largest investments. Russian banks are increasingly investing in Financial Technology
innovations. Implementation of digital technologies into bank business processes
requires time and large investments on research and development on the start stage.
Digitalization contributes to additional customer value and higher customer experience

(Capgemini, 2018). Factors that improve customer experience and create additional customer
value for banks’ products and services through digitalization are (presented in Figure 6):
 Higher personalization: More personalized and targeted service and products;
 Increased speed of service: Providing service quickly and digitally. Minimization of delays
and customer turn-off;
 Improved convenience: 24/7 access to service anytime and anywhere;

 Intuitive interaction: Digital user-interface principles contributes to smooth customer
journey;
 Better functionality: Creation of innovative solutions for the clients pain points;
 Proactive insights: Foreseeing and better understanding customers’ needs in advance
and then offering relevant bank services and products in time thanks to predictive
analytics.
Figure 6. Factors that improve customer experience and create additional customer value

2.3. The social aspect of Digital Transformation
Digital transformation has influence on the society at several levels. Considering the production
part of the economy, digital transformation empowers the automation of firm’s business
operations, facilitating operational efficiency (e.g. reducing transaction costs) and influencing
enterprise productivity (Katz, 2017). Besides, digital transformation opens new opportunities for
businesses worldwide, thus having impact on entrepreneurship and employment. In terms of the
public services delivery, digital transformation improves the provision of health and education,
social protection systems such as social insurance and social assistance and the way in which
citizens cooperate with their governments anomie (Katz, 2017; Misuraca et al., 2018). At last,
digital transformation has an effect on individual behavior and human relationships, encouraging
social inclusion, communication and collaboration. Nevertheless, digital transformation could
potentially has a negative impact on the society, resulting in workforce disruption, as well as
problems in human resources management, losses and disappearance of organizations,
cybercrime and social anomie (Katz, 2017; Misuraca et al., 2018).
2.3.1. The impact of digitalization on the labor market

Labor markets and legislations still take deep roots in the ‘old economy’, where measures imply
standard employment relationships, standard working hours and having a physical workplace,
while disregarding modern forms of working that emerged as a result of introduction of digital
technology(Vogel & Hultin, 2018). For example, the ‘unreadiness’ of politics for the digital
transformation of the work world can be illustrated by the ongoing government’s regulatory
resistance against Uber (digital provider of taxi service) because the company applies
technology for opening up and enhancing access to taxi services as for providers and for
customers. Furthermore, regulation does not particularly consider technology provoked stress or
psychological symptoms.
Regarding the impact of digital transformation on the labor market, in the economic literature, it
was assumed that new technology encourages economic growth, which has a positive effect on
employment (Bührer & Hagist, 2017). At the first stages, it was true, as the replacement of some
human physical functions still required a person control behind a desk. To the time of digital era,
this relationship between information technology and the workforce market can go in opposite
direction. In the coming feature of the digital technological change the arising problem includes
that not only muscle work but also brain functions is being replaced by robots (Bührer & Hagist,
2017).
The main consequence is replacing some human labor with mechanical labor leading to some
job automation and the potential risk of losing jobs for some part of workforce (Harteis, 2018).
The outcomes of new technology implementation involve increasing automation of simple, low-
skilled tasks leading to potential liquidation of current work places and practices and new rising
importance of labor highly cognitive skills (Bührer & Hagist, 2017; Harteis, 2018). All of these are
leading to labor market polarization or inequality that in its turn will result in a growing demand
for specialists in highly cognitive-based jobs as well as manual low-income jobs, supplanting
middle-income jobs with routine cognitive and manual skills (Harteis, 2018; Misuraca et al.,
2018). Thus, conventional tasks with a lower degree of cognitive complexity are more probable
to be automated by technology than cognitively more complex jobs that involve a higher level of
uncertainty. According to Digital McKinsey (2018), 49–51% of work activities in CEE is potential

to be automated with digital technology available now, the equivalent of about 21 million jobs.
Possible negative effects can also be addressed to human resource management because new
forms of production and services enabled by digitalization require new highly cognitive skills.
Highly cognitive skills put in demand because of digitalization involve sophisticated ICT skills
and more generic skills based on social intelligence and creativity (Harteis, 2018). It can be
challenging as for new employees as for senior workers to maintain a high skill level as it
requires continuous update of skills. To save own labor value, people must possesses the digital
skills of using modern innovations and the ability to provide decisions in self-organizing training
environments (Brynjolfsson and McAfee 2014). Creative and critical thinking, entrepreneurship,
problem-solving, negotiation, and learning constitute highly cognitive skills (World Economic
Forum 2016), which are common and relate to different industries, providing constant learning
opportunities and demanding adaption to novel transformative work environments (Harteis,
2018). Digital technologies also demand collaboration and a batch of human soft skills, such as
empathy, emotional intelligence, altruism, and reciprocity. The main features of social
collaboration are quite difficult to automate. It includes an individual ability to read and then react
to others’ emotions, intentions, and needs that is mainly based on hidden social orders and tacit
knowledge. Therefore, computers cannot replace tasks that demand an underlying batch of rules
unidentified by programmers. Computers and devices are unable to produce anything outside a
framework of program, and human collaboration can rely on developing new ideas, creative
mindset, and building understanding. Thus, labor market increasingly values workers with high
cognitive and social skills. According to the research (Digital McKinsey, 2018) in Western
Europe demand for human technological skills is possible to grow by approximately 50% and
need for social and emotional skills could rise by 20% (Figure 7 below).
Figure 7. Demand for skills in all sectors, Western Europe, 2016-2030, % (Digital McKinsey,
2018)
Worldwide development and common availability of robotics and learning algorithms has the
potential to reduce the value of human manual labor and make some types of jobs excessive,
creating relative demand for more skilled workers (Harteis, 2018; Katz, 2017). Skills required in
complex job tasks are accompanied by those demanded for interaction with other people in
increasingly diverse work contexts, e.g. people management and coordination. The rating of
creativity turned from a level of 10 in 2015 to level of 3 in 2020, because creativity act as a driver
in how employees benefit from novel technology, products, and ways of doing work. Strategic
decision-making process became a little bit less important due to the machines development,
which in turns can take strategic decisions based on deep-learning algorithms and very large
amount of data (World Economic Forum 2016).
There is the direct relation between the level of digitalization in business sectors, level of
automation potential and the need for workforce reskilling (Digital McKinsey, 2018). Figure 8
illustrates that large industries with the greatest potential demand for workforce reskilling in CEE
include manufacturing, trade, and agriculture. These industries also show a mismatch, with low
level of current digitization and high automation potential in the future. Smaller industries with a
large potential demand for reskilling in CEE: transportation, mining, utilities, and
accommodation. These sectors show a similar mismatch, with low level of current digitization
and high automation potential in the future. Additionally, these industries will have to
substantially update their skill basis, but they take considerably smaller share in the overall CEE
job market than the first group.
Figure 8. Digital Transformation of individual industries (Digital McKinsey, 2018)
The most digitized industries with less automation potential include financial and insurance,
telecommunications. These sectors were the first ones to go through digital transformation, and
up to the date, they have become leaders in digital technology adoption in business in CEE.
These industries have already begun to attract the digital talent they need. Digital McKinsey
(2018) estimates their potential for automation in the future to be just 36–38%. At last, industries
with low level of digitization and low potential for automation including healthcare, education,
entertainment, and arts are not meeting a radical change in the terms of automation. Thus,
sectors with low level of digitization and high potential for the automation are more possible to
experience the biggest demand for workforce reskilling. Such sectors also may experience the
biggest labor mismatch in the future.
Moreover, digital technology will change the way of how people search and navigate job
opportunities (Digital McKinsey, 2018). In modern world, it can be already observed how
advances in new technologies make the workforce market more “democratic,” i.e. more
accessible for everybody. New emerged platforms allow to find employees where it was not
possible before. For example, inappropriate quantity of supply and demand has been eliminated
by contribution of distant or on-demand work. The McKinsey Global Institute evaluates that by
the end of year 2025 up to 540 million people are potential to benefit from talent platforms and
marketplaces for independent work. Up to 230 million people could find new jobs faster,
reducing the quantity of unemployment time, whereas 200 million people who are inactive or
have part-time job could find additional tasks with the help of freelance platforms. Additionally,
up to 60 million people are possible to find job that more suitable for their skills and preferences,
in time when an additional 50 million people could move from informal to formal way of
employment.
2.3.2. Focus on response actions

In the past, there was the competition between working people in the labor market. Today,
because of digitalization, the situation has changed and people are forced to compete against
robots and machines; and professional career has become more malleable for all workers,
regardless to qualification (Harteis, 2018). In this context, working people are required to take a
responsibility for developing their qualifications and skills and get the role of modern technology
that enables learning anytime and anywhere, in different learning environments. The mindset
theory states that people can be more or less inclined or fixed to some traits or open for changes
(Harteis, 2018). This assumption is supported by recent research on the development of
expertise, which highlights the significance of active expanding own skills and competencies by
workers for the purpose of dynamical adaption to changing professional environments.
As it was discussed above, the progressive introduction and adoption of digital technologies
would lead to a growing shift in the demand for human skills in most industries (Digital
McKinsey, 2018). Higher cognitive skills, technological skills, social and emotional skills will grow
in importance and be in high demand. The labor market will have to adapt to fulfill this demand.
In this case, response actions include reskilling efforts with the promotion continuous and
constant learning and provision of formal employee trainings by companies.
According to Digital McKinsey (2018) report among countries in CEE, 27% of companies in
Slovenia, 23% of companies in Check Republic and in Croatia, 17% in Hungary and Slovakia,
and that are the most rates (Figure 9). Almost twice as many companies, comparatively, in
Digital Frontrunner countries and in Digital Challengers support employees with training for
developing their ICT skills among other countries in CEE. For the survey Digital McKinsey
defines countries which demonstrate strong possibility for the growth in “digital economy” as
“Digital Challengers” (Bulgaria, Croatia, the Czech Republic, Hungary, Latvia, Lithuania, Poland,
Romania, Slovakia, and Slovenia). While relatively small countries, demonstrating very high

digitization level are defined as “Digital Frontrunners” (Belgium, Denmark, Estonia, Finland,
Ireland, Luxembourg, the Netherlands, Norway, and Sweden).
Figure 9. Firms providing training to develop employees’ ICT skills in 2017 (Digital McKinsey,
2018)
In reply to changes on the labor market because of digitalization, the government of Singapore
has created an initiative called SkillsFuture (Digital McKinsey, 2018). This program helps to
promote mastering and recognizing skills and encourage a culture of continuous learning. Using
the platform all citizens over age of 25 years get from the government an opening credit of about
300 Euros for spending on courses supplied by recommended partners. Programs also are
aimed to touch citizens aged 40 years and above.
A network of “Union Learning Representatives” is encouraged by Unionlearn in firms across the

United Kingdom (Digital McKinsey, 2018). Participants of this network are trained to determine
the skills required at their workplaces and to provide access for their colleagues to relevant
trainings and resources. For the assessment of employees’ skills in digitalization, Unionlearn
also offers an online “Skillcheck” that is useful in determining potential gaps. Moreover, there is
the possibility for employees to visit one of the 150 union-related learning centers and visit skills-
training sessions if they need.
In 2015, a new National Skills Strategy 2025 Ireland’s Future was developed by the Department
of Education and Skills in Ireland. This strategy was developed as a meaningful reform in the
training and education industry for providing a more dynamic, high quality, and responsive
system that helps all users to get the knowledge and skills required to take full part in society
and economy.

2.3.3. Ethics Guidelines for Trustworthy AI
In June 2018, as a part of the AI strategy (which was announced in 2018) the European
Commission established High-Level Expert Group on Artificial Intelligence (AI HLEG). AI HLEG
then developed the Ethics Guidelines for Trustworthy Artificial Intelligence (AI). These
Guidelines outline a framework for achieving and promoting Trustworthy AI and provide the
Trustworthy AI assessment list. This assessment was integrated into the current research on
digital transformation to evaluate the social aspect of digitalization.
Artificial Intelligence has the potential to substantially change the society (AI HLEG, 2019). AI is
promising tool to improve human prosperous, thereby increasing welfare of individual and
society and facilitating the progress and innovation. Especially, systems based on AI have the
potential to contribute to achieving the UN’s Sustainable Development Goals. They primarily
include encouraging gender balance and monitoring the climate change, rational utilization of
natural resources, improving human health, mobility and companies’ business processes.
To meet the global goals, AI systems must be human-centric, basing on a dedication to their
usage in the service and support of humanity and the social good, for the purpose of human
well-being and freedom improvement. Except that AI provide wide opportunities, it also
possesses certain risks that should be managed appropriately and rateably as people now have
an opportunity to shape AI systems development. We want to ensure that we can trust the socio-
technical environments in which they are embedded. By introducing Trustworthy AI into the
products and services, producers of AI systems want to rely on technology and to obtain a
competitive advantage. That leads to the benefits maximization of AI systems and to
minimization and prevention of their risks.
Within the scope of rapid technological change, it is crucial that trust constitutes the base for
economies, societies, communities, and future sustainable development. Then, AI HLEG (2019)
determines Trustworthy AI as human foundational ambition, as people and communities will only
be confident in the application and development of technology when there is a clear and
complete framework for reaching its trustworthiness.
Trustworthiness is described by AI HLEG (2019) as a precondition for people and societies to

develop, expand and apply AI systems. If AI systems (and people behind them or their
producers) are not worthy of trust, undesirable outcomes may arise and their development can
be difficult. The prevention of AI systems realization leads to the loss of their potentially vast
social and economic advantages. Thus, it highlights the importance of ensuring and scaling
Trustworthy AI.
Trust in the development, expansion and application of AI systems deals with not only inner
features of technology, but also the quality assurance of the socio-technical systems providing
AI utilization. The similar questions of trust (or loss of trust) arise in food safety, aviation, or
nuclear power. Hence, the ambition to Trustworthy AI should consider not only the
trustworthiness of the AI system generally, but involve a systemic and holistic approach,
covering the trustworthiness of all parties and processes included into the system’s socio-
technical context via its whole life cycle.

Trustworthy AI involves three key components, which should be applied all over the AI system's
whole life cycle:
 it should be lawful, conforming to all applicable laws and regulations;
 it should be ethical, enabling commitment to human ethical values and principles; and
 it should be robust, both in a technical and social prospect, because even with good
intent, AI systems may lead to unintentional harm.
Each of three listed components is essential but not sufficient individually in achievement of
Trustworthy AI. In ideal case, all three elements overlap in their operation and work in harmony.
In reality, however, conflicts and tensions between them may exist (e.g. sometimes the content
of existing law can go against ethical norms). Thus, the common responsibility is to ensure that
all three key elements contribute to secure Trustworthy AI.
A trustworthy approach is driver for providing “responsible competitiveness” by enabling the

base for all players they can trust that their development, expansion and application of AI
systems are lawful, ethical and robust.
AI HLEG (2019) developed the list of requirements for Trustworthy AI, which is non-exhaustive.
It covers individual, societal, and systemic aspects:
1) Human agency and oversight (involving fundamental rights, human agency and human
oversight);
2) Technical robustness and safety (involving resilience to attack and security, fall back
plan and general safety, accuracy, reliability and reproducibility);
3) Privacy and data governance (involving respect for privacy, quality and integrity of
data, and access to data);
4) Transparency (traceability, explainability and communication);
5) Diversity, non-discrimination and fairness (involving the avoidance of unfair bias,
accessibility and universal design, and stakeholder participation);
6) Societal and environmental wellbeing (involving sustainability and environmental
friendliness, social impact, society and democracy);
7) Accountability (involving auditability, minimization and reporting of negative impact,
trade-offs and redress).
In times, when all requirements are of equal significance, context and potential conflicts between
them should be considered while applying them across various industries and domains.
Introduction of these requirements should take place through an AI system’s whole life cycle and
relies on the specific application.

2.4. Synopsis and theoretical framework
The theoretical part of the master’s thesis discusses the main topics: digitalization as a
phenomenon, the value of digital technology and the social aspect of digital transformation. The
first chapter is devoted to the concept of the digitalization and digital transformation and its
interface with business. Digitalization is the process in which companies by the use of digital
technology and data improve their business operations, create revenue, replace and/or
transform business processes and develop an environment for digital business. In the same time
digital transformation, as the next step after digitalization, is the continuous interconnection
process of all business segments and deals with reconstruction of institutions, economies, and
society systematically through digital technology diffusion. While discussing the digital
transformation of business model it was pointed out that this process coming from the strategy
and is implemented through business processes leads to customer value creation, value capture
and value proposition. Digital transformation of business model is a complex process that can be
considered from different aspects: objective of transformation, procedure, transformation degree,
reference unit or object of transformation. Digitalization provides for companies as unforeseen
opportunities and certain business risks. Mainly, digitalization leads companies to the forms of
communication with the customer, greater flexibility, reactive capacity, product or service
individualization, and the creation of new products and services. In the same time, the major risk
for companies in digital transformation is cybersecurity.
The next chapter discusses digital technology as the main driver for changes in terms of
digitalization. Digital technology is innovative technology enhancing and enabling information
processing capacities, introduction of which brings fundamental, transformative changes to
business. Organizations should track changes and technology trends during time for successful
transformation via digital technologies to make significant business improvements. Digital
technology trends at the moment of the thesis involves Artificial Intelligence (AI), Machine
Learning (ML), Robotic Process Automation (RPA), Augmented Analytics, Blockchain,
Augmented and Virtual Reatity (AR/VR), Internet of Things (IoT).
The role of new technology is important in modern banking system. Digital transformation leads
to the creation of new business model, operational efficiency, higher quality and faster service,
personalization, transparency of operations and cybersecurity, largest investments. Digitalization
contributes to additional customer value and higher customer experience through higher
personalization, increased speed of service, improved convenience, intuitive interaction, better
functionality, and proactive insights.
In modern digital age, companies need to undergo digital transformation. It was discussed that
global digital transformation market is growing and developing rapidly. The banking sector, as
the subject of this research, now experiences great changes worldwide, and the key factor of
which is the development of financial technologies. Undergoing digital transformation, banks
transform their processes and business model. Large and technologically advanced banks
create their own ecosystems through which they provide non-financial services. Russian banking
sector is strongly developing in the usage of digital technology and has the possibility to become
one of the most advanced in the world. The situation in Austrian banking sector is characterized
by consumers’ payment behavior, which bounds digital transformation process in the industry.
The vast majority of Austrians do not use digital services and pay by cash.

The last chapter of theoretical part is about social impact of digital transformation. Digitalization
leads to the changes on the labor market. On the one hand, because of the jobs automation the
workplaces could be reduced. In the same time, digitalization requires highly cognitive skills that
create new demand on the labor market. Nevertheless, to stay competitive on the labor market,
employees need to develop their qualifications and skills. Thus, companies arrange trainings for
their employees.
Moreover, introducing digital technology into the business, companies need to be sure that the
technology is ethical, lawful and robust. This is essential condition, if companies are going to rely
on new technology and develop, expand and apply digital systems.
Based on literature and empirical findings a framework was developed that describes digital
transformation of business processes in the banking sector. Digital transformation of bank
business processes leads to the transformation of its business model and creation of ecosystem,
through which a bank provide financial and non-financial service 24/7.
At the final point of theoretical part, digital transformation model, as the general framework, is
developed (presented on the Figure 10).
Digital
Novate Customer
Object Technology
Object Value
involved
Situational factors Social

Impact
Figure 10. Digital Transformation model (own illustration)
The model summarizes the findings of the theoretical part and describes the digital
transformation of business model. In particular, in the center there is digital technology involved
into the process of digitalization that are considered based on the digital technology trends. In
this model digital transformation is reviewed from the object of the transformation. Therefore, the
input and output of the model are object and novate object respectively. There are certain
circumstances or conditions that make companies to introduce digital technology; they are
situational factors, on the bottom of the model. Implementation of digital technology leads to
additional customer value creation, capture or proposition. Besides, digital transformation has
social impact.
In the empirical part of the thesis, this model will be applied for the banking industry.

3. Methodology
After exploring the literature review on digitalization and digital transformation concepts, the
research part mainly focuses on exploring how digital technologies transform business
processes and business models in banking industry in Austria and Russia. This section is
allocated to the empirical research part of the thesis. The further chapters develop the empirical
research process based on the multiple case study method including the results generated
through the analysis of secondary data. Methodology describes ways and method on how the
objectives are going to be addressed and on how the core research question are going to be
answered. Then, the comparative analysis of the findings is presented. Moreover, practical
implications are provided and the final framework is developed to illustrate the professional
significance of the generated insights. At last, limitations and recommendations for future
research are listed.
3.1. Research design
“Research approaches are plans and the procedures for research that span the steps from
broad assumptions to detailed methods of data collection, analysis and interpretation”
(Cresswell, 2014). According to the author, there are three main approaches to research:
quantitative, qualitative and mixed methods. For this thesis, qualitative research approach was
applied. Qualitative research is used to explore human behavior and society in natural
environment and to understand the meaning that people ascribe to a human or social issue or
problem (Cresswell, 2014; Punch, 2013). Qualitative data helps to describe the meanings of
people occurred in the life processes, events, structures and to link these meanings with to the
social world (Miles et al., 2014). The process of qualitative research includes arisen questions
and procedures, the participant’s setting frames usually data collection, data analysis is
inductively formed from specifics to common topics, and then interpretation of data meanings is
developed by the researcher (Cresswell, 2014). Thus, considering research main goal, research
intention and research problem qualitative research is more suitable to collect data on digital
transformation of business models and to answer all risen research questions.
For the purpose of this research, the analysis of particular companies was applied. The case
study is qualitative research because it usually highlights the significance of present state while
determining social realities (Yin, 2009; Stake, 1995). This method is commonly used in social
sciences surveys to generate qualitative data for a specific situation under research
consideration (Thomas, 2011). The case study has three main research purposes: description,
exploration, or explanation of a phenomenon under consideration (Yin, 2009). This method is
useful dealing with no clear understanding of relationship between the phenomenon under
research consideration and its broader causal link.
According to Punch (2013), case study method allows to investigate specific case (or small
amount of cases), modern phenomenon in details, in its natural settings and identifying its real-
life context and complexity. In most instances, case study method is open-ended and involved
into research with the problems when it is difficult to find single solution (Eisenhardt & Graebner,
2007). According to Yin (2009), case study method usually aims to response the research
questions “what”, “why”, and “how” a specific phenomenon occurs and exists. In frames of this
research, the phenomenon under consideration is digital transformation as the processes arisen

when companies introduce modern technologies into their businesses. This thesis includes all
research questions of “what” type, one of them is what impact digitalization has on the company
business model and business processes. Thus, case study method is most suitable for this
research.
In order to meet all research questions, investigate the phenomenon of digitalization in different
bank cases, obtain overall picture of digital transformation in banking sector in general and in
different countries for comparative analysis, multiple case study method was chosen to shape
the empirical part of this research. According to Baxter and Jack (2008), multiple case study is
applicable to investigate and estimate similarities and differences between the cases.
Replicating the outcomes from the case study based on the research theoretical background is
the main objective of this method (Yin, 2009).
According to Yin (2009), multiple case study design includes investigation of particular cases
inside several contexts. Cases can include several embedded units of analysis. Considering this
multiple case study framework, for this research the contexts include Austria and Russia, the
cases are 10 banks (5 in Austria and 5 in Russia) and the embedded units of analysis are key
digital technology on the market which were discussed in theoretical part of the thesis. The
multiple case study design for the research is presented on the Figure 11 below.
Austria Russia
Bank 1 Bank 2 Bank 3 Bank 4 Bank 5 Bank 6
Digital Digital Digital Digital Digital Digital

Tech 1 Tech 1 Tech 1 Tech 1 Tech 1 Tech 1


Figure 11. Framework for multiple case study analysis based on Yin (2009) approach
The methodology of multiple case study has some advantages and disadvantages. This method
allows to generate and make the analysis of data from two perspectives: within each setting
particularly and across both settings (Yin, 2009). Moreover, as Baxter and Jack (2008) state, the
evidences that are gathered for this type of research design are more robust and reliable.
Another main advantage of multiple case method is that the obtained research findings are more
convincing as they are confirmed by some empirical evidences. Additionally, multiple case study
includes the comparative analysis of different cases with generation of similarities and
discrepancies that are supported by scientific literature (Vannoni, 2015). Therefore, this method
is useful for the problem investigation considered from various perspectives and tracing
theoretical evolution across the phenomenon under research consideration (Eisenhardt &
Graebner, 2007).

However, multiple case study method has some disadvantages and difficulties. According to
Gustafsson (2017), the most difficult part of working with this method is the illustration of the
results and findings of the multiple case study analysis. The findings should be carefully
structured with a thoughtful developed research design and presented for the reader in
understandable and accessible manner. Therefore, the analysis of annual reports and other
sources on digital transformation of banking industry is structured with the developed table and
then results are presented with the help of bars, graphs and key findings of the research are
generalized with the help of developed digital transformation model as the framework.
Eisenhardt and Graebner (2007) determine reliable case study analysis as a research that
supports the reader with the relevant information (or the rich evidence base), including figures,
graphs, and tables. Gustafsson (2017) states that case study analysis should be focused on the
core research question and deals with main research objectives while excessive information
should be avoided. In addition, significant part of the analysis is the proper comparison of the
collected and assembled data with the theoretical basis in order to verify the data validation.
According to Yin (2009), it is reachable when the scientific audience or object was determined in
a proper way.
In the center of multiple case study there is digital technology that companies involve in their
digital transformation process and implications of their introduction. Thus, multiple case study of
this research contains the investigation of 10 firms’ cases (5 in Austria and 5 in Russia). Banking
industry was chosen as the sector for the analysis, since it has one of the highest level of
digitalization (Digital McKinsey, 2018). Then, after particular case analysis the data was brought
together to make comparison between companies and to illustrate the general picture on digital
transformation of business models.
Qualitative Data Analysis (2013), by Miles et al. was applied in this study as a framework for
qualitative data analysis. This framework is used to track stable and lawful relations among
social phenomena, founded on the regularities and consequences that connect these
phenomena. Qualitative Data Analysis consists of three core components (Miles et al., 2014):
 Data reduction or condensation. This component relates to the process of selecting,
focusing, abstracting, simplifying, and/or transforming the data, which is applied to the full
body of field notes, documents, interview transcripts, and other empirical material.
 Data design. This component refers to the process of organizing, squeezing, and
assembling gathered information, results of which provide conclusion drawing and further
action.
 Drawing and verifying conclusions. This component includes developing propositions
drawn and verified, and is conceptually particular from the other steps, but also may
happen simultaneously with them.

3.2. Research structure
The following section describes how the empirical research of this study is structured to answer
the research questions. The research is based on the qualitative approach and applies multiple
case study method. The data collection was organized with the secondary data, which includes
companies’ annual and interim reports, presentations, articles, news on reliable information
sources and other reports.
3.2.1. Research sample

This study is aimed at exploring the impact of digitalization on companies’ business model and
to explore how different digital technologies shapes digital transformation process of companies.
Banking industry was taken in the center of the investigation for this thesis, as one of the most
digitized (Digital McKinsey, 2018). As this study is developed in frames of partnership of Austrian
and Russian universities, these countries were chosen for the analysis. Moreover, Russian
banking sector, as well as the global one, is undergoing radical changes (McKinsey, 2018). The
Russian banking system has a chance to become one of the most advanced in the world.
According to Deloitte report (2016), Austrian financial services industry is a traditional and
conservative sector, but is developing. Therefore, the comparing analysis of generalized data on
banking industries of these countries acquired through multiple case study is developed.
Moreover, Deloitte Digital (2018) has published the report on Digital banking, included the
investigation of 238 banks from 38 countries and around 8,000 customers (as a participants)
who shared their banking preferences. According to this survey, the country comparison shows
that top 5 countries in digital banking are Russia, Switzerland, Turkey, Poland and Spain. Austria
took the 12th place in ranking. In Austria domestic banks cover the majority of current
consumers’ needs in a good way with their digital offerings.
This master thesis studies 10 cases of most digitized banks in each country (5 in Austria and 5
in Russia). The SKOLKOVO Foundation and VR_Bank (2019) provided the rating of banks’
digitalization in Russia. According to this rank, Tinkoff Bank, Sberbank, Alfa Bank,
Raiffeisenbank and AK Bars bank were chosen for this study as the most innovative in Russia.
Corporate Financial Institute (CFI) provided the rating of top 10 Austrian banks. According to this
rank, Erste Group Bank, UniCredit Bank Austria, BAWAG P.S.K, Raiffeisen Bank International
and Oesterreichische Kontrollbank AG were chosen for the analysis in this study. Also according
to the data provided by Statista (Cherowbrier, 2020), Erste Group Bank, UniCredit Bank Austria,
BAWAG P.S.K and Raiffeisen Zentralbank are leading banks in Austria in 2019.
Austrian banks Russian banks

Erste Group Bank Tinkoff Bank
UniCredit Bank Austria Sberbank
BAWAG P.S.K Alfa Bank
Raiffeisen Bank International Raiffeisenbank
Oesterreichische Kontrollbank AG AK Bars bank
Table 3. Research sample

3.2.2. Data collection and processing
Qualitative data for this study is presented by annual and interim bank reports, presentations,
articles, news on reliable information sources and other reports, which were published on the
official banks’ websites or other reliable sources.
At the step of data consideration, information about digital technology the bank uses in its
digitalization process and how digital transformation of business model occurs is selected from
reports for this study for each particular case. In the Part I (literature review) of this study, the
core digital technologies were explored and reviewed. Relying on the ranking of digital
technology trends (Deloitte, 2018b; Gartner, 2018; PwC, 2016), reports of banks were analyzed
on the subject of what modern technologies banks introduce into their processes and how the
digital transformation process is developed in each bank. Usually, contemporary reports of
developing countries include the separate section dedicated to this topic. Also considering the
social impact of digitalization, the technology involved and the bank processes were analyzed on
the subject are they lawful, ethical and robust in compliance with Trustworthy AI Guidelines by AI
HLEG (2019). Also, social impact includes the firm’s activities to support workforce in the current
situation on the labor market.
Then, on data design stage the collected data is organized, assembled and presented into the
form of structured table. Based on data design stage the collected data is organized, assembled
and presented into the form of structured table. It includes key technology involved based on the
digital technology trends described in paragraph 3.2 and bank data, the object of transformation
(e.g. process, function, service, product, business model) as a component of digital
transformation (Schallmo & Williams, 2018), new object created with the help of digital
technology (e.g. tool, platform, process), the integration time, the main implications, the valued
created/captured/delivered for bank’s customers (according to the description given in paragraph
2.4.1) and the social impact of transformation as of Trustworthy Artificial Intelligence.
Considering that due to the lack of officially provided and accessible deeper information on
banks’ digitalization process, it is difficult to evaluate social impact of digitalization with
Trustworthy AI Guidelines in full range. As it was stated in many banks’ reports that in modern
conditions they constantly track and develop the digital technology used and try to find the better
way of technology integration and application in business. Thus, it is supposed that if banks
introduce digital technology into their processes and constantly track them, banks find these
technology ethical, lawful and robust. In this case, if a bank has a technology integrated into its
processes, it was considered that this technology meets Trustworthy AI Guidelines. Also if there
were no sufficient information to fill the table blocks it is indicated not applicable or “n/a”. The
results in the form of tables for each bank are located in the Appendix.
The collection of data on digital technology will be explained on the following example of
Biometrics in Sberbank. Annual reports of Sberbank 2018 and 2019 has the particular section
called “Performance Overview” and subsections “Best customer experience and ecosystem” and
“Technological Leadership” where the most part of the information about digital technology was
found. As for Biometrics, in these sections the information about project “Ladoshki” and
integration of this technology into self-service terminals and call center was selected. Biometrics
is integrated into the bank processes that helps company to provide and deliver its service to
customers and to identify the personality of customers for the safer transactions. For example, in
the project “Ladoshki” this technology allows children to pay for food in school and palm prints

are used for identification. Thus, in “Objet” column there are business processes connected with
customer service and customer identification. “New object created” is biometric system,
according to reports, because before the digital transformation the bank did not use biometric
data. As it was mention in the reports that this technology is already integrated in 250 schools,
and self-terminals, there is status “Integrated” in the column of “Integration time”. If a company is
still testing technology or doing a pilot projects on digital technology, there is corresponding
status. The main implications on Biometrics are filled in accordance with the information
provided in the mentioned sections of Sberbank annual reports. In the section of “Value for
customers” there are: better functionality as there innovative solution for delivering service to
customers is created; intuitive interaction as it contributes to smooth customer journey;
increased speed of service as with biometric data identification of the client takes less time.
“Social impact” is filled using the logic described in previous paragraph.
On the next step, based on the structured and assembled data presented in tables for each bank
separately the general comparative table for banks is developed. This table helps to illustrate
what digital technologies are presented in each bank and what is the focus of digitalization for
each bank. Basing on this table, the comparative analysis of banks in Austria and Russia is
created. Also the key results on the analysis of 10 banks in terms of key technology, new
business model created and the degree of digitalization are illustrated with the help of bars and
graphs.
On last stage of drawing and verifying conclusions, as a final framework, the overall complex
transformation model is developed based on key findings to illustrate how key technology is
changing business processes that lead to digital transformation of banks’ business models.
Lastly, the implications for digital transformation of business model are summarized, answers on
research questions are completed, the limitations and recommendations for future research are
listed.

4. Research findings and results
The following chapter starts with a description the banking sectors in Russia and Austria. Next
the investigation characterizes cases of ten particular bank and the technology they involve into
their digital transformation. The companies taken for the thesis analysis are Tinkoff Bank,
Sberbank, Alfa Bank, Raiffeisenbank and AK Bars bank in Russia and Erste Group Bank,
Raiffeisen Bank International, UniCredit Bank Austria, BAWAG P.S.K and Oesterreichische
Kontrollbank AG in Austria.
4.1. The banking sector of Russia and Austria
Nowadays, banking sector experiences great changes worldwide, the key factor of which is the
development of financial technologies (Deloitte & CII, 2016; FINTECH Circle Institute, 2019;
PwC, 2019). Global investment into FinTechs has increased exponentially and it is expected that
this boost will continue to develop with slower rate in 2020 (FINTECH Circle Institute, 2019).
According to Statista (Rudden, 2020), global investments in fintech enterprises had a drastic
growth of 220% showing from 50.8 billion U.S. dollars in 2017 to 111.8 billion U.S. dollars in
2018. In 2019, global investments continued rising and amounted 135.7 billion U.S. dollars.
In Russia, the volume of investments in financial technologies in 2017 doubled compared with
2016. The total amount of transactions in this segment in 2017 was $ 30.8 million. And in the
first half of 2018, the total amount of investments in fintech was already $ 7.1 million (PWC, РВК,
2018).
FinTech, or financial technology, is at the epicentre of digital transformation of financial sector

(PwC, 2019). FinTech is described by PwC (2019) as a combination of financial services and
modern technology that is transforming the way companies in financial industry operate,
transact, and collaborate with their clients and other stakeholders. All types of organizations,
from startups to tech enterprises or mature companies, apply FinTech.
Bank service models are significantly changing under the influence of digital technologies
(machine learning, artificial intelligence, P2P lending, robotization), and also as a result of the
development of an integrated network economy (McKinsey, 2018). Russian large and
technologically advanced banks create their own ecosystems, which open up new, non-
traditional sources of income. It contributes to developing partnerships with other companies,
providing banking services under someone else's brand, and creating fundamentally new
business lines based on new technologies, such as blockchain.
Russia possesses favorable conditions for realizing digital transformation of the banking industry
(McKinsey, 2018). Every year the proportion of customers, who choose remote service
channels, increases. According to McKinsey research, in 2016, 65% of customers of Russian
banks wanted to buy banking products via remote channels (mobile and Internet banking).
Emergence of fintech companies, non-traditional banks and non-banking players in banking
sector causes great changes in the competition structure of the industry, which lead to decrease
of the profitability of traditional banking services. The two new most potential sources of revenue
are new digital-based banking products and non-banking products created through the
partnership with third-party companies.

The Russian banking system has the possibility to become one of the most advanced in the
world (McKinsey, 2018). McKinsey published in their report target vision of the Russian banking
sector up to 2030. The expert described industry with 3 different aspects: business, clients and
industry in general.
Business:
 Digitalization of banking processes allowed reducing bank costs by 10-15%;
 Usage of Big Data allows to estimate and understand customers as accurately as
possible and to reduce significantly credit risk;
 Significant part of bank revenues comes from sales of non-baking products;
Clients:
 In developed banking ecosystems clients acquire not only bank service, but also
telecommunication and retail services;
 Thanks to integration of digital technologies, including blockchain, banking operations are
made almost momentarily;
 Clients get only personalized service;
Industry in general:
 Banking sector is the driver for integrating digital solutions and supplier of qualified labor
to other business industries;
 Non-banking players (telecommunication and IT-companies) offer more and more
traditional banking services and compete with banks;
 Large banks offer wide range of services for the clients through their own ecosystems;
 Market segments not taken banks’ ecosystems are served by niche players.
The Bank of Russia sees the future of banking sector in developing the following perspective
digital technologies: Big Data and Data analytics, mobile technologies, Artificial Intelligence,
Machine Learning, Robotization, Biometrics, Blockchain and Cloud Technology (Filippov, 2018).
According to KPMG research (2019) about digital technologies in Russian companies, 84% of
financial companies use Big Data, 60% - Chat bots, 56% - Robotization and OCR, 40% - AI,
32% - Blockchain, 16% - VR/AR, 12% - IoT. Moreover, integration of digital technologies in
banking sector has made it possible to form new model of banking service in Russia (McKinsey,
2018). Large and technologically advanced banks create their own ecosystems that open up
new, non-traditional sources of income.
The external ratings of banks in Austria continued to enhance in 2018 (Oesterreichische

Nationalbank, 2019). As of 2018, the Austrian banking sector has been evaluated and placed
among the 13 most stable banking systems in the world, according to S&P. Austrian banking
sector is seen alongside with the strong banking systems of Germany, Belgium, France, and the
Netherlands. According to Oesterreichische Nationalbank (2019), financial stability in Austria
was straightened due to the several factors: restructuring of companies in banking sector,
transformation of banks’ business models and managerial measures integrated in the last few
years. However, Austrian banking sector needs to take further steps in order to enhance banks’
cost efficiency and resistance for increasing their capacity to meet the outcomes of a potential
economic downturn.

Generally, Austria takes place close to or above the EU28 average in ranking in many areas of
financial digitalization (Ritzberger-Grünwald & Stix, 2018). According to the findings of OeNB
research, in the beginning of this century 7% of Austrians used online banking, in comparison to
58% in 2018. Online banking will grow in the future even among its current nonusers because of
the omnipresent diffusion of digital technologies. This trend will further have impact on banks,
which will be forced to adapt their branch network, to change the way they collaborate with
customers (e.g. regarding finance consulting, providing their services) and their investments in
novel technologies.
Increasing competition from the side of online banks, the varying speed of moving and
adaptation to banks’ new business models and low interest rates are shaping the banking sector
in Austria (Oesterreichische Nationalbank, 2020). Over the last few years, cooperative banks
raised their market share by 2%, when building societies and joint stock banks lost their shares
within total assets. Online banks in Austria also enhanced their market position.
Overall, up to 2018, there are considerable changes in the way Austrians bank do their business
and consumers’ payment behavior (Ritzberger-Grünwald & Stix, 2018). The share of Austrians
using digital services is becoming substantial. However, surveys of the payment behavior of
Austrian customers show that the vast majority of customer payments are still settled in cash.
The same trend is occurred in many other European countries despite the availability of many
cashless options.
In the same time, as a considerable amount of Austrians have already came into the market of
digital financial services provided by banks, a sizeable share of Austrian consumers do not yet
use novel technologies. This trend is likely to be continued in the coming years. For example,
45% of the Austrian population favors to pay for a EUR 50 buy in cash, and 42% of the
customers does not use online banking.
Contactless card payments, one of the options that has become available only for a few years,
are used by 50% of the Austrian population in 2018. Other digital payment solutions (e.g.
provided via smartphone apps) are on a much earlier step of diffusion but it can be expected to
grow in the coming years. These factors significantly slow down the process of digital
transformation of banking sector in Austria.

4.2. Case descriptions and case results
In order to fill the general table on digital transformation of banks, analyze the data and answer
research questions fully, the following 10 sections are dedicated to bank cases and have the
certain structure. Each case has the general information about the bank, new business model
that company has developed or created in digitalization process, social impact including the
company’s efforts in terms of employees support and the main digital technology that bank has
in the focus at the moment. Digital technologies for the analysis were chosen in accordance with
digital technology trends, reviewed in chapter 2.2.2 of theoretical part. Thus, there are 10 core
technologies in the research focus: Artificial Intelligence (AI) and Machine Learning (ML),
Robotic Process Automation (RPA), Bots and chat bots (based on AI or ML), Computer Vision
(based on AI and ML), Augmented Analytics and Machine Learning (ML), Virtual reality (VR) and
Augmented reality (AR), Biometrics, Internet of Things (IoT), Blockchain, Cloud.
The more descriptive information on digital technologies that banks use are collected,
assembled and presented on the general table in Appendix.
4.2.1. Sberbank case study

Sberbank is Russian financial conglomerate, the largest transnational and universal bank in
Russia and Eastern Europe. The Banker put it on the first place in its ranking list of Central and
Eastern Europe banks (Sberbank, 2018; The Banker, 2018). In the Banker’s “Top 1000 World
Banks” global ranking, Sberbank takes 31st place for 2018, and the bank has increased its
position by five ranks during last years. In 2018 Sberbank got Global Finance award in the
category Best Investment Bank Award. In 2019 Sberbank corporate and investment business
won in two Global Finance award nominations of World’s Best Investment Bank 2019: Best Debt
Bank and Best Bank for New Financial Technology in Central and Eastern Europe.
New business model: the bank has open ecosystem, based on the Sberbank Business Online,
through which it provide bank financial and non-financial services of reliable partners for its
clients. The bank also has internal ecosystem for its employees.
Social impact: the bank provide development of soft-skills to its employees. Up to 2019, 187
thousand bank employees trained in digital skills and 93 thousand employees increased their
soft skills.
Digital technology in the bank focus: Artificial Intelligence (AI) and Machine Learning (ML),
(based on AI and ML), Augmented Analytics and Machine Learning (ML), Virtual reality (VR) and
Augmented reality (AR), Biometrics, Internet of Things (IoT), Blockchain, Cloud.
The assembled data on digital transformation of Sberbank presented in the table in Appendix A.
4.2.2. Tinkoff bank case study

Tinkoff Bank is the part of TCS Group Holding PLC and the largest independent fully online bank
in the world and the second largest player in the Russian credit card market in 2018 with 10
million clients as of 2019 (Tinkoff Bank, 2018, 2019). According to Global Finance ranking 2019,

Tinkoff Bank is №1 Consumer Digital Bank in CEE and the best in mobile banking in CEE
(Tinkoff Bank, 2019).
New business model: Tinkoff Bank financial ecosystem provides online retail financial and
lifestyle services for individuals and businesses through a high-tech branchless platform via
bank’s web interface and its mobile app.
Social impact: In 2019 the bank conducted 2,854 educational events, were 13,007 people were
trained, including 1,043 managers and 12,034 specialists. Also the bank organized 125
electronic courses on soft and hard skills.
(based on AI and ML), Biometrics, Blockchain, Cloud.
The assembled data on digital transformation of Tinkoff Bank is presented in the table in
Appendix B.
4.2.3. Alfa Bank case study

Alfa Bank is the part of the Alfa Group, and one of the largest private banks in Russia (The
Economist, 2011). The Bank operates in seven countries, delivering financial services for 14.2
million retail customers and over 381,600 corporate clients (Alfa Bank, 2019). In 2019, Alfa Bank
took the first place in Best Trade Finance Providers 2019 in Russia, according to Global
Finance.
New business model: Alfa-Bank is not focused on the creation of ecosystem. The bank’s target
model is phygital (physical + digital), which combines digital innovations with an effective set of
physical features: a minimum of bureaucracy, easy solution of routine issues via gadgets, and at
the same time the possibility of live communication with bank’s employee in a branch.
Social impact: the bank organizes special trainings for its employees to develop skills for digital
business.
Robotic Process Automation (RPA), Bots and chat bots (based on AI or ML), Virtual reality (VR)
and Augmented reality (AR), Biometrics, Blockchain, Cloud.
The assembled data on digital transformation of Alfa Bank is presented in the table in Appendix
C.
4.2.4. Raiffeisenbank case study

Raiffeisenbank in Russia is Russian commercial Bank, a subsidiary of the Austrian banking
group Raiffeisen Bank International. According to Forbes, Raiffeisenbank is included in the TOP
3 most reliable banks and included in the list of 11 systemically important banks in Russia
(Raiffeisenbank, 2018, 2019).

New business model: the bank is focused on the development of digital banking that includes
customer service through remote sales channels and offers of banking services via the Internet
and mobile devices, including through the development of digital customer engagement and the
distribution of full-fledged remote service in regions where there are no bank branches.
Robotic Process Automation (RPA), Bots and chat bots (based on AI or ML), Augmented
Analytics and Machine Learning (ML), Biometrics, Blockchain, Cloud.
The assembled data on digital transformation of Raiffeisenbank is presented in the table in

Appendix D.
4.2.5. AK Bars Bank case study

AK Bars Bank is Russian joint-stock commercial Bank. The bank provides more than 100 types
of banking services for corporate and private clients (AK Bars Bank, 2019).
New business model: the bank applies and develops the ecosystem (Life-style and Life-stage),
which includes various remote channels with virtual payment services and the ability to choose
the necessary services and marketplaces.
Robotic Process Automation (RPA), Bots and chat bots (based on AI or ML), Biometrics,
Blockchain, Cloud.
The assembled data on digital transformation of AK Bars Bank is presented in the table in
Appendix E.
4.2.6. Erste Group Bank case study

Erste Group Bank is one of the largest financial services providers in CEE with 16.1 million
clients and 2,300 branches in 7 European countries (Erste Group Bank, 2019).
New business model: the bank digital strategy is based on its own digital ecosystem. Through
APIs in the secure IT environment of a financial platform, the bank provides customers access to
personalized products and services from Erste Group and third-party suppliers.
Social impact: the bank applies the highest standards in its IT infrastructure and provides
ongoing education and trainings to its employees.
Robotic Process Automation (RPA), Bots and chat bots (based on AI or ML), Virtual reality (VR)
and Augmented reality (AR), Biometrics, Blockchain.
The assembled data on digital transformation of Estre Group Bank is presented in the table in
Appendix F.

4.2.7. Raiffeisen Bank International case study
Raiffeisen Bank International is one of major banks in Austria and CEE. In Austria, it is a leading
commercial and investment bank, serving the country's top 1,000 corporate clients. In CEE, the
bank subsidiaries serve the bigger part of the region. The bank 16.8 million customers are
serviced with the help of 2,000 business outlets in Corporate, Retail and Investment Banking
(Raiffeisen Bank International, 2019).
New business model: redesigned model to the digital banking
Social impact: the bank applies the highest standards in its IT infrastructure and provides
ongoing education and trainings to its employees.
Robotic Process Automation (RPA), Bots and chat bots (based on AI or ML), Advanced
Analytics, Virtual reality (VR) and Augmented reality (AR), Biometrics, Blockchain, Cloud.
The assembled data on digital transformation of Raiffeisen Bank International is presented in the
table in Appendix G.
4.2.8. UniCredit Bank Austria case study

UniCredit is large network of Pan European Commercial Bank in CEE, with a fully plugged in
Corporate & Investment Banking business, serving 16 million clients (UniCredit Bank Austria,
2019). In 2019, the bank issued more than 430 billion commercial loans, 10% of those relates to
Austrian branch.
New business model: the bank focuses on further development of its business model
concentrated on customer service and cost reduction, with increased emphasis on digitization
and investments in the IT structure.
Social impact: the company provides digital learning for its employees through UniCredit
Academy.
Robotic Process Automation (RPA), Bots and chat bots (based on AI or ML, Biometrics,
Blockchain.
The assembled data on digital transformation of UniCredit Bank Austria is presented in the table
in Appendix H.
4.2.9. BAWAG P.S.K case study

BAWAG P.S.K is one of the largest banks in Austria, with the main banking subsidiaries easy
bank and start (BAWAG, 2019), serving more than 2.5 million clients and 88 branches in
Ausitria.
New business model: the bank focuses on further development of its business model, which
allows more meaningful adoption of modern technology across the group.

Social impact: the company provides IT trainings and trainings for soft skills, keeping the staff up
to date for new challenges.
Robotic Process Automation (RPA), Advanced analytics.
The assembled data on digital transformation of BAWAG P.S.K. is presented in the table in
Appendix I.
4.2.10. Oesterreichische Kontrollbank AG case study

OeKB AG plays a central role in the Austrian economy, both for the export industry and in capital
markets, for which OeKB AG also performs statutory functions (Oesterreichische Kontrollbank
AG, 2019).
New business model: the bank focuses on further development of its business model with the
focus on digitalization.
Social impact: the bank provides training for its employees to improve their digital skills.
Robotic Process Automation (RPA), Blockchain.
The assembled data on digital transformation of Oesterreichische Kontrollbank AG is presented

in the table in Appendix J.

4.3. Discussion on assembled data
This chapter presents the discussion on the assembled structured data about banks’ digital
transformation process in tables illustrated before. The information about major digital
technology trends in Austrian and Russian banking sector was summarized in the Table 13
below. As it was already mentioned, digital technologies for the analysis were taken in
accordance with digital technology trends, reviewed in chapter 2.2.2 of theoretical part, and
include 10 of them. If the information that reports bank has integrated or is going to integrate
certain technology into its business was found in official sources and mentioned in the table
above, there is “X” mark in the table block in correspondence with appropriate bank and key
digital technology. If the bank is testing or making a pilot project on certain digital technology (it
is not integrated, but the bank is interested in it), there is “O” mark in the block. If the information
about certain digital technology in banks was not found in officially published sources, there is no
mark in the block. It might mean both that the bank does not share this information (it has
commercial secret) as such technology is out of the bank’s focus of digital transformation.
Key Sberba Tinkoff Alfa Raiffeis AK Erste Raiffeis UniCre BAWA Oesterr
Technology nk Bank Bank en- Bars Group en dit G eichisc
bank Bank Bank Bank Bank P.S.K. he
Internat Austria Kontrol
ional lbank
AG
Artificial
Intelligence (AI)
X X X O O O O X X X
and Machine
Learning (ML)
Robotic Process
Automation X X X X O O X O O O
(RPA)
Bots and chat
bots (based on X X X X X X O X
AI or ML)
Computer
Vision (based O X
on AI and ML)
Augmented
Analytics and
Machine
X O X X
Learning (ML),
Advanced
Analytics
Virtual reality
(VR),
O O O O
Augmented
reality (AR)
Biometrics X X X O X X O X

Internet of
O
Things (IoT)
Blockchain X O X X X X X O X
Cloud X X X X X O
New business develop develop develop develop
model ment of ment of ment of ment of
BM with BM with BM with BM with
ecosyst ecosyst digital ecosyst ecosyst
phygital2 emphasi emphasi emphasi emphasi
em1 em banking em em
s on s on s on s on
digitaliz digitaliz digitaliz digitaliz
ation ation ation ation
Dealing with
social impact –
X X X X X X X
developing
employees
Table 4. Overall table on digital transformation of banking industry in Austria and Russia
In order to visualize the data of Table 3 and reach the goal of the master thesis, the discussion
will go from one research question to another to answer them fully. Meanwhile, the country
comparison is presented. It is important to note that during the data collection process, it was
found out that Russian banks are more open to share information about their digital
transformation. The secondary data (annual reports, reviews, news, articles and other reports)
gathered from Russian banks includes more valuable information for the research on digital
technology they use and strategy they follow in digitalization way. The most digitized and most
open to the public bank is Russian Sberbank. Its annual report includes many slots of
information about digital technology integration and development.
Ranking of Banks by Digital Technology

10
9
8
7
6
5
4
3
2
1
0
Figure 12. Ranking of banks by digital technologies involved into banks’ business processes
1 ecosystem is the business model through which banks provide traditional (financial) and non-traditional (non-
financial) services.
2 phygital is the combination of physical and digital business models.

Figure 12 illustrates the ranking of banks explored by amount of digital technologies involved
into banks’ business processes. As for the analysis 10 trend digital technology was under
consideration, it is the maximum amount of technology on the graph. According to this figure, the
leader in digital transformation among analyzed banks is Sberbank (with 10 of 10) from Russia.
The following is Raiffeisen Bank International (with 8 of 10) from Austria. The third place is taken
by 3 banks from Russia: Tinkoff Bank, Alfa Bank and Raiffeisenbank (with 7 of 10). Taking into
consideration the information presented on the Figure 12, it can be concluded that Russian
banks are more focused on digital transformation and more developed in digital technology
usage and implementation.
Coming back to research questions, one of them includes given below:
What are digital trends and key technology?
As it was already mentioned, the digital technology trends were reviewed in chapter 2.2.2 of
theoretical part. Following this the empirical results presented in the Table 4 show that digital
technology trends in the focus of analyzed banks include: Artificial Intelligence (AI) and Machine
Learning (ML), Robotic Process Automation (RPA), Bots and chat bots (based on AI or ML),
Computer Vision (based on AI and ML), Augmented Analytics and Machine Learning (ML),
Virtual reality (VR) and Augmented reality (AR), Biometrics, Internet of Things (IoT), Blockchain,
Cloud.
Digital Technology in the Focus

Robotic Process Automation 10
Artificial Intelligence and Machine Learning 10
Blockchain 9
Biometrics 8
Bots and Chat Bots 8
Cloud 6
Virtual and Augmented Reality 4
Augmented and Advanced Analytics 4
Computer Vision 2
Internet of Things 1
0 2 4 6 8 10 12
Russia Austria
Figure 13. Digital Technology involved into digital transformation of banking sector, by country
comparison
Meanwhile, Figure 13 illustrates digital technology in the context of banks’ involved them into
their business and in the context of countries. According to this graph, Artificial Intelligence and
Machine Learning, Robotic Process Automation are in high demand and interest as all the
studied banks are focused on integration of these technologies. The next popular technologies

are Blockchain (9 banks of 10 has integrated it), Biometrics (with 8 of 10 banks), Bots and Chat
Bots (with 8 of 10 banks). The least popular technologies in the banking sector are Computer
Vision and Internet of Things. Thus, key technology for Austrian and Russian banks includes
RPA, AI and ML, Blockchain, Biometrics, Bots and Chat Bots.
Considering country comparison, Figure 13 shows that Russian banks are interested in 10 of 10
digital technology trends while Austrian banks are focused only on 8 of 10. All Russian banks
are interested in the implementation of Robotic Process Automation, Artificial Intelligence and
Machine Learning, Blockchain, Biometrics, Bots and Chat Bots. All Austrian banks are interested
on Robotic Process Automation, Artificial Intelligence and Machine Learning while Computer
Vision and Internet of Things are out of their focus.
The next Figure 14 illustrates technology integration degree in banks focused on the technology
individually. According to the graph, 60% of studied companies has integrated Artificial
Intelligence and Machine Learning and 40% is testing the technology or has pilot project on it.
As for Robotic Process Automation, 50% of banks has integrated the technology and 50% is
going to do it. As for next key technologies, Blockchain is implemented by 70% and is testing by
20%, while from 10% the data was not got. Biometrics has 60%, 20% and 20% respectively,
Bots and Chat Bots has 70%, 10% and 20% respectively. In the same time, the technologies
which are at the moment only tested by banks include Augmented and Virtual Reality and
Internet of Things. About Computer Vision and Internet of Things the data was not obtained
mostly in essence.
Technology Integration Degree, in %

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Integrated In testing or a pilot project No data
Figure 14. Technology integration degree in banks focused on the technology
The next addressed research question is given below:
What impact digitalization has on the business model?

As it was discussed in the chapters 2.2.4 and 2.2.5 of the theoretical part, that digitalization
leads to the transformation of a company business model and the creation of new business
model. Digital transformation of banking sector could lead to the development of banks’
ecosystem as a new business model.
The results presented on the Figure 15 show that 40% of analyzed banks going through digital
transformation has created ecosystem as a new business model, 40% are interested in the
development of business model with focus on digitalization. The least 10% has created phygital
business model (the combination of physical and digital) and 10% is focused on digital banking
business model. Considering country comparison, the preferred new business model for
Austrian banks is the development of business model with focus on digitalization, as 80% of
them has it. The preferred new business model for Russian banks is ecosystem, as 60% of them
is focused on it.
Banks' New Business Model

10%
10%
40%
40%
Ecosystem Development with focus on digitalization Phygital Digital Banking
Figure 15. Banks’ new business model, developed in digital transformation process
The following research question is given below:
What is the social impact of digitalization?
As it was described in chapter 2.3 of the theoretical part digital transformation leads to the
changes in labor market, precisely to automation of business functions and the shifting manual
work by mechanical and Information Technolgy. This changes creates the demand for
technological skills and new highly cognitive skills. Thus, to remain competitive on the labor
market, companies need to support and develop their workforce. The case study showed that
70% of banks concerned and interested in developing and training their employees’ digital skills
that allow to maintain their competitiveness and value on the labor market dealing with social
impact of digitalization. Considering country comparison, 80% of Austrian banks develop their
employees, while the same percentage of Russian banks is 60%.

In addition, considering the social impact of digitalization, the technologies integrated into the
bank business processes are they lawful, ethical and robust in compliance with Trustworthy AI
Guidelines by AI HLEG (2019), while technologies in testing and pilot projects most likely do not
meet these Guidelines.
And the last research question is given below:
What is value created for customers?
As it was discussed in chapter 2.2.4 of the theoretical part and proved by empirical part, digital
transformation substitutes the creation of addition value for customers, which involves higher
personalization, increased speed of service, improved convenience, intuitive interaction, better
functionality, proactive insights.
Summarizing the insights on country comparison of Austria and Russia, the Table 5 is provided
below.
Characteristics Austrian banks Russian banks
The most digitalized

Raiffeisen Bank International Sberbank
bank
Sharing information More closed More open
Digital technology in Focused on 10 of 10

Focused on 8 of 10 technology
focus technology
RPA, AI and ML, Blockchain,
RPA, AI and ML, Blockchain,
Key technology involved Biometrics, Bots and Chat
Biometrics, Bots and Chat Bots
Bots, Cloud
Preferred new business Development of BM with
Ecosystem
model emphasis on digitalization
Dealing with social 80% of banks develop their 60% of banks develop their
impact employees employees
Table 5. Summary of country comparison
Thus, digital transformation in Austrian and Russian banks has differences and similarities. Most
part of banks in countries focus on the same digital technology in digitalization process, including
RPA, AI and ML, Blockchain, Biometrics, Bots and Chat Bots. Austrian and Russian banks are
interested in digital development of own employees, while 80% banks in Austria and 60% in
Russia. However, Russian banks are more open to provide the information about their digital
transformation process. In addition, Austrian and Russian banks have different vector in creation
of new business model: in Austria it is development of BM with emphasis on digitalization;while
in Russia – ecosystem.

4.4. Application of Theoretical Framework
This chapter is dedicated to the application of theoretical framework developed on the base of
the framework described in the chapter 2.4 of theoretical part and empirical results from the
chapter 4.2. Application of theoretical framework includes Digital Transformation model of
banking sector, presented on the Figure 16. This framework was filled out with the help of
insights of empirical research.
AI and ML Technological Higher

Bank business RPA platforms, personalization
processes Bots and Chat bots systems Increased
Transactions Biometrics Automated speed of
Blockchain processes service
Improved
convenience
Intuitive
interaction
Better
functionality
Repetitive, routine tasks Proactive
Simple time-consuming tasks insights
Lots of paperwork and document
The technology should be
processing
- lawful
Congestion of business functions
- ethical
Market changes
- robust
Customer urgent needs
To save employees’
market value, banks
arrange trainings on
digital cognitive skills
Figure 16. Digital Transformation model of banking sector
In the center of the model, there are key digital technologies including Artificial Intelligence and
Machine Learning (AI and ML), Robotic Process Automation (RPA), Bots and Chat Bots,
Biometrics and Blockchain that were identified in previous chapter. As they are the driver for
changes in digital transformation they were placed in the center of the model. On the left box as
input, there is the object of changes that is represented by bank business processes and
transactions as they undergo changes. On the right box as output, there is technological
platforms and systems, automated processes that have been created with the help of digital
technologies inside or instead of business processes. Then, on bottom under digital technology
box, there are situational factors, which favour and foster digital transformation. These factors
were collected from secondary data used in the research, include repetitive, routine tasks,
simple time-consuming tasks, lots of paperwork, and document processing, congestion of
business functions, market changes, customer urgent needs. On the right ellipse there is
customer value added, created or captured in digitalization process. This information was taken
to the model from the main findings of empirical results and involves higher personalization,
increased speed of service, improved convenience, intuitive interaction, better functionality,
proactive insights. On the bottom circle there is social impact of digitalization, that includes 2

parts: to rely and trust digital technology, they should be lawful, ethical and robust; and to save
employees’ market value in digital era, banks arrange trainings on digital cognitive skills.
This model is the summary of the findings gathered in theoretical and empirical parts. Generally,
this model leads to the transformation and creation of new business model: ecosystem or
development of business model with focus on digitalization.
This model can be applied as a consultancy framework and be useful for banks which are going
to implement digital technology into their business. Moreover, this model can be used in further
researches in the field of digital transformation of banking industry and other industries as well.

5. Conclusion
5.1. Implications and discussion
On the whole, this master thesis has explored the topic of digital transformation in the banking
industry using qualitative approach with multiple case study method. Literature review and
empirical analysis of 10 bank cases from Austria and Russia allowed to answer all risen
research questions. The master thesis has offered tremendous and curious insights about digital
transformation of banking industry and provides comparative analysis of Austrian and Russian
banks. The main findings in summary are the following:
 Artificial Intelligence and Machine Learning (AI and ML), Robotic Process Automation
(RPA), Bots and Chat Bots, Biometrics and Blockchain are the key technology involved
into digital transformation process of banking industry;
 Banks transform their business processes that include repetitive, routine, simple and
time-consuming tasks and that have lots of paperwork and document processing;
 As the outcome of business processes digitalization banks develop technological
platforms and systems, automation of processes;
 Digital transformation encourages customer value created, added or captured that
includes: higher personalization, increased speed of service, improved convenience,
intuitive interaction, better functionality, proactive insights;
 To rely and trust digital technology, they should be lawful, ethical and robust;
 Digital transformation has created the demand on new highly cognitive and technological
skills. Therefore, to save employees’ market value, banks develop their workforce and
arrange trainings on digital skills;
 Digital transformation leads to operational efficiency, transparency of operations,
personalization, creation of new business model and require largest investments;
 Russian Sberbank is the most digitalized banks among studied companies, and Austrian
Raiffeisen Bank International is the next one in ranking;
 Russian banks are more open in sharing information about their digital transformation
way and technology they use;
 Digital transformation of Russian banks leads to the creation of new business model,
ecosystem, through which they provide financial as well as non-financial services;
 The preferred new business model for Austrian banks is development of business model
with emphasis on digitalization;
 Dealing with social impact 80% of Austrian banks develop their employees while in
Russia this percentage counts 60%.
As the general outcome of this thesis, the final thesis framework was elaborated based on
literature review and empirical results. It includes digital transformation model of banking
industry. This model illustrates the process of digital transformation, which has business
processes as inputs, technological platforms as outputs, digital technology as the main driver for
changes, situational factors that favor digital transformation, social impact and customer value
as the consequences.

The findings and results of this thesis have theoretical and practical implications. First of all, they
contribute to the digitalization and digital transformation literature, as there is no such complex
research of banking sector in this field. Secondly, this master thesis includes the comparative
analysis of Austrian and Russian banks that could be applied to the statistics or future research
of banking sector in these counties. Thirdly, the model elaborated in the thesis can be applied as
a consultancy framework and be useful for banks which are going to implement digital
technology into their business and enter digital transformation process. Moreover, the model and
the findings can be used in further researches and studies in the field of digital transformation of
banking industry and other industries as well.

5.2. Limitations and further research
This chapter describes the limitations elaborated for this master thesis, which open the
opportunities for future researches in this field. First of all, the empirical research included the
sample of only 10 banks and only in 2 countries (Austria and Russia). For more complex and
representative research, it is better to include in the sample more companies and more countries
successful and leading in digital transformation of banking industry.
Secondly, this master thesis includes the analysis of the most digitalized Russian banks and the
best large Austrian banks. For the aligned empirical research and more illustrative results, it is
better to take the most digitized banks for the analysis in accordance with the opinion of one
expert or consider the opinion of several experts.
Thirdly, within this research it was found out that during the empirical research process there
were the lack of information provided by banks officially. Because of strong competition and
commercial secret companies may not share deeper information about technology they use,
introduce and develop in real time. Thus, the perception and review of a bank digital
transformation process could be distorted. In future similar study it is better to cake for the
analysis banks more open for sharing information.
Moreover, this research was limited by the application of one method – multiple case study, and
usage of only secondary data. Further researches can involve into research primary data
collected through interviews, questionnaire, and focus groups. With the help of this method the
more precise and valuable information can be acquired for the research.

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V. Appendix
Appendix A: Case study of Sberbank
Key Object of New object Integratio Main implications Value for customers Social
technolog digital created or n time impact
y involved transforma transformed
tion
Artificial Bank 8 AI-based Integrated 1. In general: AI is implemented into all levels of bank platform. Integration of AI initiatives Increased speed of Lawful
Intelligence business platforms in all (2018- saved bank RUB 42 billion in 2019. service Ethical
(AI) and processes levels of bank 2019) Better functionality Robust
Machine characterize ecosystem: 2. New product: Loan in 7-minutes covers 15% of short-term corporate lending transactions of Proactive insights
Learning d by manual Speech medium-sized and large businesses that are approved in 7 minutes and then corporate clients (better understanding
(ML) work, Analytics, receive a full package of credit documents. of customer needs)
repetitive Natural Loan in 3-minutes to micro and small businesses produced 21 thousand loans in 2019. Higher quality of
tasks, work Language service
with large Processing Since 2018, the bank launched new non-financial service “Market Pulse”, based on AI and Big
slot of (NLP), Data technologies. “Market Pulse” collects data from trading platforms in real time and by using
accumulate automated complex machine algorithms generates a set of recommendations on trades which are most
d data, decision suitable for the user in corporate clients segment.
decision- support,
making (Intelligent 3. Service delivery: In terms of customer service, AI allows to make pre-analysis of the
process Management customer’s dialogue with the call center managers that make it possible to automatically
involved; System) IMS categorize the request and reduce the resolution time by 30%.
and its etc.
entire Market Pulse More than 30 Data Science models are engaged into sales campaigns in offices, via
business platform telemarketing and SMS. AI technologies generate a response for the insurance product sales
model manager within 6 minutes, taking into account the personal request history of the client.

Real Time
Decision In the corporate clients segment, integrated RTDM based on specially developed analytical
Manager models and client history allows individual entrepreneurs take credit cards and loans online,
(RTDM) without visiting the bank.
The AI-based assistants help to classify the topics of a customer query and support a bank
operator with a ready-made reply to accelerate the bank service, for instance, in searching for
the nearest office hours or ATM.
4. HR development: IMS helps to develop employees’ business skills via gamification. The
Executive IMS are based on the built-in AI-models that make personal recommendations for
the bank manager and contribute to effective management decisions in the context of
recruitment, adaptation, development of bank employees’ competencies, discipline, forecasting
risk events, fraud and customers’ complaints. It helps regional manager to manage effectively
18 branches instead of 12 as earlier. Consequently, in 2019 it allowed to optimize the size of
service network managers by 12%. Participation in the game has voluntary manner, and in
2019 60% of branch employees were engaged in the game.
Moreover, the IMS has an AI-model that forecasts employees’ errors, which in real time selects
an individual set of questions for bank employees, and the employees’ errors are not repeated
in 90% of cases.
5. Market research: In 2019, AI-models were involved into an analysis the data of 85 million
customers on their behavior and investigations of their purchases in retail networks. This
analysis became the base for developed tools to forecast sales of non-financial and ecosystem
products via physical channels. The potential and location of new 55 bank branches were
calculated and determined with the help of AI-models that are used to manage its physical
network. The analysis takes into account 300 geodata characteristics for all cities, data on

customers’ transactions at branches, POS-terminals, self-service terminals and its operating
income.
The created Data Platform (which includes 80 terabyte of data from internal and external
sources) and master system for managing Unified Client Profile (which processes 3 million
transactions of corporate clients daily) are the base for AI-models helping to predict customer
behavior and generate personalized offerings.
Fraud AI-Fraud Integrated The system includes solutions that reduce unwarranted blocking of card-to-card transfers Better functionality Lawful
monitoring monitoring between customers. The system tracks behavior and transactional activity of payee, detects and safety Ethical
processes system fraudulent transfers that was improved up to 2020 and decreased false positives by 8%. Robust
Robotic Bank Automated Integrated, 1. In general: The usage of autonomous software robots on a virtual machine that perform Increased speed of Lawful
Process business business some routine work of employees allowed to automate 103 bank processes (at the end of 2018 there service Ethical
Automation processes processes with projects were 53 such processes) and receive 2.8 million robot-hours, that equivalent of 930 full time Better functionality Robust
(RPA) characterize the help of are in a employee jobs. Higher quality of
d by manual autonomous pilot stage service
and routine software robots (2018- 2. Service delivery: RPA allows to process digitally 100% of credit card applications without
work, lots of 2019) underwriters, to approve 90% of loan applications from retail clients.
paperwork
and In 2019 into pilot operations, an assistant robot (based on the Robotic Desktop Automation
document technology) was implemented. This robot helps bank employees to perform routine tasks on a
processing personal computer. As a result, 12 test processes have been automated and employee
productivity improved by 27 % in these processes.
In 2019, the bank conducted 4 pilot projects with introduction of the "reading robot" tool (based
on the Auto Named Entity Recognition technology). This robot helps to extract the necessary
data from scan versions of semi-structured and unstructured documents that foster
documentation processing.

In the segment of corporate clients, the implementation of a robotized algorithm allowed to
remove the unnecessary internal document flow that reduced the time for issuing a loan from
15 to 2 minutes.
In the segment of corporate clients, software robots help to open more than 1/3 of new
customers settlement accounts. These robots allowed to reduce the time to service clients and
register accounts more than in a half: from 1-1.5 hours to 35 minutes. More than 2,000
contracts for 4 different types of banking products are registered by the robots every day,
which saves customers lots of time on paperwork.
In terms of document processing, program robots automatically execute agreements for 11

bank products (cash management services, service package, a card for businesses, SBBOL,
self-service cash collection, merchant acquiring, QR payments, SmartPos, Evotor+, salary
project, Foreign Trade in rubles) and corporate client should only sign 1 online document for
banking services.
Sberbank provides acquiring for retail point within 1 business day, and it is the best indicator
on the market. Automation and robotization of the processes make it possible to connect
companies to acquiring equipment in 1 day. All Sberbank customers can make an agreement
for acquiring services only through the Sberbank Business Online system.
In 2018, the bank began to offer automated submission of lease and loan applications for small
businesses in Sberbank Business Online. This service brought new customers to Sberbank,
and allowed to reduce labor inputs. During the period of the service offer (less than 1 year)
customers made 136,000 applications and 18,000 loans worth RUB 37 billion were issued.
Bots and Business Automated Integrated Bank clients can get non-personalized consultations through chats-bots on the bank website, Increased speed of Lawful
chat bots processes process of (2019) mobile app and the web version of Sberbank Business Online, and also in the WhatsApp service Ethical
(based on that involve communication messenger. This service is available 24/7. The chat bots on Sberbank Business Online and the Better functionality Robust
AI) Bank’s website handles 500 customer queries per day. Improved convenience

customer with bank
service customers The chat bot helps to resolve automatically client issues in 40% of the cases. The bot is driven
by an AI technology for recognizing the subject of a client's query in order to launch the
appropriate service scenario.
Sberbank Business online chat bot Olga helps corporate clients to choose a suitable system of
taxation, evaluate the effectiveness of a business idea, and find out whether it is possible to
become self-employed.
The bank also have chat bots in Telegram (for queries on all legal topics and payment) and in
the project SberKot in VK, created as the personalized communication channel with young
generation to master financial literacy.
In corporate clients segment up to 2018 near 11 % service queries were processed with the
help of chat and voice bots based on AI technology. The chat bot Anna the Virtual Operator,
and the smart assistant of the Contact Center are all integrated with the NLP platform and the
Bank’s other systems, so that all these assistants can use the same data in service scenarios.
Voice bots are used in calling bank clients to make a reminder, for example, if customers need
to prolong the mortgage insurance policy. In 2018 robot Alexandra made 15,000 reminders.
Computer Business The platform In a In 2019, at the Office-2020 site, Sberbank tested a photo and video analytics platform based Increase the Lawful
Vision processes based on process of on the computer vision (SberEye) technology, which used special-purpose video equipment. effectiveness of Ethical - ?
(based on connected computer Vision test and The platform allows to compute the number of bank unique clients, accompanying customers interaction with the Robust
AI and ML) with “SberEye” integration in branches, those served on a first come – first served basis, or those who left without bank client
customer (2019) service. Deviations from the norm value measured by five indicators are transmitted to the IMS
service for increasing the efficiency of interaction with the bank client.
Augmented Business SberSovetnik Integrated ML and Big Data tools help to develop also non-banking products for bank client business Higher personalization Lawful
Analytics processes (Sberbank (2019) growth. As an example of such product is SberSovetnik (Sberbank Adviser) that provides Proactive insights Ethical
and connected Adviser) Analytics of key business metrics, segment assessment, business performance comparison of Robust

Machine with the client with similar companies. The use of neural networks helps to determine what B2B and
Learning customer B2C companies are doing, and recommends them business connections based on the
(ML) service Analytics of a client business and similar businesses.
Business Proprietary Integrated New threat reaction time was decreased from 48 hours to 15 minutes; 100s of potential leak Better functionality Lawful
processes cybersecurity (2019) messages and 62 million new cyber threat alerts were processed, 1000s of phishing domains and safety Ethical
connected threat analytics were revealed. 1.9 million of suspicious transactions were prevented by the AI-based fraud Robust
with platforms monitoring system that averted more than RUB 39.7 billion of potential damage to bank
cybersecurit (Sberbank TIP customers funds.
y and Advanced
Analytics
Functional
Subsystem)
Virtual Business Tactical VR In pilot The development of core features of a tactical VR simulator was completed to train cash Better functionality Lawful
reality (VR), processes simulator and project collectors remotely. The special GERT suits and VR glasses tried on the sensations of a Proactive insights Ethical
Augmented connected AR assistant (2019) person with particular health features. These technologies allow to better understand how Intuitive interaction Robust
reality (AR) with convenient or inconvenient to use the bank services for elder people and people with special
customer needs.
service Sberbank has accepted an AR assistant for the visually impaired clients for testing in
operations.
Business VR presentation In pilot In a collaboration with DomClick the bank launched the test operation of a VR property Lawful
processes app project presentation app with beta connection of external partners, involving large developers and Ethical
connected (2018- design bureaus. Robust
with 2019)
customer
service
Biometrics Business Biometric Integrated The project "Ladoshki" is based on the usage of a biometric system that allows children to pay Better functionality Lawful
processes system for food on sensor with the help of the palms in schools. The project was introduced in 250 in Intuitive interaction Ethical
connected 2018. Increased speed of Robust
with service

customer One of the examples is implementation of biometrics into self-service terminals. Customers
service and with visual impairments can use terminals with the help of contactless service technology
customer (NFC). After the client registers own biometric template, and then can make all non-cash
identificatio transactions in own account without using the bankcard.
n
For the service speed and security, in addition to self-service terminals Sberbank has started in
2018 to use biometric data when the clients call the bank contact center and when the
customer logs in bank mobile applications, which increased speed of service.
Internet of n/a n/a In a pilot The bank has IoT labs. More information is not disclosure. n/a Lawful
Things stage Ethical
(IoT) (2018- Robust
2019)
Blockchain Payment Hyperledger In a In 2018, Sberbank made the first in Russia payment transaction based on the blockchain Increased speed of Lawful
transactions Fabric, process of technology with the participation of Megafon and Alfa-Bank companies. The use of blockchain service Ethical
blckchain test and technology helped to reduce the transaction time to a few minutes while the standard Better functionality Robust
platforms and integration transaction time could be 30 hours. Safety of operations
systems (2019)
In 2019, the bank launched the first decentralized industrial depository blockchain system in
Russia for keeping records of electronic deeds of pledge on the Masterchain platform.
In 2019, the bank developed a new version of the blockchain platform for Sberbank Factoring
and delivered it to the client, and connection of new participants initiated.
The Singapore-based multinational exchange company Trafigura PTE Ltd and Sberbank
conducted a pilot transaction using blockchain at the Eastern Economic Forum 2019 to
discount receivables for West-Siberian oil supplies. The transaction was made on the basis of
a solution created by the Blockchain Lab using the Hyperledger Fabric framework, with the
deal date, supply volume, amount and term, product characteristics and financial conditions all
recorded in blockchain.

Cloud The entire n/a Integrated 80% of ecosystem infrastructure is provided in the cloud Availability and Lawful
business accessibility of bank Ethical
model ecosystem products Robust
and service online and
24/7.

Appendix B: Case study of Tinkoff Bank
Key Object of New object created Integration Main implications Value for customers Social impact
technolog transformatio or transformed time
y involved n
Artificial Bank business 8 AI-based platforms Integrated In 2017 the company introduced Smart IDReader technology based on AI into Increased speed of Lawful
Intelligence processes in all levels of bank (2018-2019) the mobile application. This system allows the customer to extract data from service Ethical
(AI) and characterized ecosystem: Speech the card (card number, expiration date, card holder etc.) with the help of phone Better functionality Robust
Machine by manual Analytics, Natural camera and Tinkoff Bank app during several seconds. This functionality has Proactive insights
Learning work, repetitive Language become relevant for Tinkoff Bank with the need for customers to enter full Higher quality of service
(ML) tasks, work Processing (NLP), information about the card during various payment transactions. Higher personalization
with large slot automated decision
of accumulated support, (Intelligent AI is introduced into the bank mobile app and this technology develops the tips
data, decision- Management and recommendations that are provided for the client based on customer’s
making process System) IMS etc. transaction activity, shopping experience and entertainment choices.
involved; and Market Pulse
its entire platform AI and ML involved into bank centralized IT system and all bank processes. AI
business model Real Time Decision and ML is the base for the supercomputer, the Kolmogorov cluster.
Manager (RTDM)
All requests in the bank are processed by AI. In 30% of cases, even the
operator's help is not required.
Robotic n/a n/a Integrated The technology is implemented into bank processes. n/a n/a
Process (2018-2019) Not disclosed deeper information.
Automation
(RPA)
Bots and Business Automated process Integrated The bank call bot makes automatic calls to clients and communicates using Higher personalization Lawful
chat bots processes that of communication (2018-2019) pre-recorded phrases. Test group did not notice talking with a bot. Improved convenience Ethical
involve with bank customers 23 million of calls and chat enquires solved by bots or cloud service agents. Intuitive interaction Robust

(based on customer In 2019, 30% of all customer requests across the products processed by chat Better functionality
AI) service bots. Proactive insights
In all its client communications Tinkoff Bank uses chat-bots. In 2018 in 30% of
all dialogues no operator is engaged, and in 35% of dialogues only one
question was answered by an operator. Bots use personalized responses
which are based on the client data the bank has. In other cases, bots forward
the call to bank operators. In 2018 via chat-bots 8 million customer issues were
resolved.
The voice assistant Oleg in Tinkoff bank mobile app helps bank clients in
everyday lifestyle banking and finance tasks, performing 90% of user tasks
automatically with the help of a dialogue system technology. The rest 10% of
calls is forwarded to Tinkoff’s remote call center. The voice assistant helps to
optimize business processes, improve bank capabilities, reduce the time
needed to perform client tasks and provide more personalized solutions for
customers.
The introduction of Oleg, the world's first financial services voice assistant,
makes navigation through the Tinkoff platforms seamless and convenient.
Computer n/a n/a Integrated The technology is implemented into bank ATMs. n/a n/a
Vision (2019) Not disclosed deeper information.
(based on
AI and ML)
Biometrics Business Real-time voice Integrated This system is used to verify the identity of a caller in customer support center Improved convenience Lawful
processes that authentication (2019) by making voice prints in times of the traditional Q&A verification process when Increased speed of Ethical
involve system (voice each new client calls. And in cases of next client calls this voice samples plays service Robust
customer biometrics system) the role of a benchmark for the person recognition. In 2018 Tinkoff integrated Intuitive interaction
service and in voice authentication system of call center NICE Real-Time Voice

client Authentication System, which allowed to reduce customer verification from 40 Safety and protection of
identification to 7 seconds. In 2019, this technology correctly detected up to 95 % of speech personal data
and used terabytes of data and 10,000s of hours of human speech for training.
It helped to improve customer experience by saving bank clients’ time and to
cut traffic costs and enhance security.
Client face recognition is integrated into bank terminals and is going to be

implemented into the mobile app. Client verification system helps to boost the
processing time of loan applications and reduce credit risks and fraud cases.
Blockchain n/a n/a In a pilot Blockchain technology can be applied primarily to person identification or n/a n/a
project cashoff project in which blockchain helps to accrual of cashback from the
(2018-2019) purchase of each commodity unit.
Not disclosed deeper information.
Cloud Entire business Cloud platform as Integrated The cloud platform is the base for the Tinkoff ecosystem, through which it n/a Lawful
model the base of the bank (2019) provides its financial and non-financial service for the clients. Ethical
business model Robust

Appendix C: Case study of Alfa Bank
Key Object of New object Integration Main implications Value for Social impact
technolog transformation created or time customers
y involved transformed
Artificial Operating and Smart IDReader Integrated With Smart IDReader technology bank employees help to apply for receiving Better functionality Lawful
Intelligence supporting business based on AI (2019) various banking products without visiting the branch. The use of recognition Proactive insights Ethical
(AI) and processes technology helps to accelerate customer service at times and allow to abandon the Robust
Machine Analysis of manual data entry on mobile devices. Also Smart IDReader allows to recognize
Learning customer calls documents in the video stream in real time.
(ML) with bank
operator by AI Analysis of customer calls allows to quickly determine the topics of requests and
customer satisfaction (via client reactions), as well as improve the service
processes. Because of recommendations of the Alfa-Bank contact center system,
sales to retail customers increased by 9.3% and by 12.4% in the small and
medium-sized business segment. In addition, this technology allowed to receive an
inflow of 30 million rubles due to sales growth, optimization of service processes
and reduction of customer outflow. By the end of 2020, it is expected to receive an
additional profit from artificial intelligence of 200 million rubles.
In 2019, the bank introduced the AI-based platform into HR – Help Desk that helps
bank employees to get consultations in several seconds and optimizes the work of
bank operators.
Robotic Routine business Automation of Integrated In 2018, Alfa-Bank implemented RPA technology in its 30 routine business Better functionality Lawful
Process processes involving routine business and in the processes, on which the bank plans to save up to RUB 85 million annually. The Higher service Ethical
Automation processing payments processes process of financial effect is achieved by increasing productivity and reducing the errors quality Robust
(RPA) of legal entities and integration number.
individuals (2018-2019)

(transferring money The integration of technology into bank’s processes allowed to automate lending
inside and outside process and made contribution to the increase of clients by 70% in the medium-
the bank) and sized business segment.
processing
unidentified
payments (with no
purpose specified),
parsing internal
incoming mail,
changing customer
data on his
application, editing
credit agreements of
individuals on their
applications, and also
the posting of
contract financing
and responses to
typical requests
Bots and Bank internal Automated Integrated Robot makes a call to customers about the debt and specifies whether they are Improved Lawful
chat bots business processes, process of and in the ready to repay it. If it receives a positive response, it automatically transmits this convenience Ethical
(based on customer service communication process of information to the system, and if it receives a refusal, the bank employees begin to Intuitive interaction Robust
AI) processes with bank integration communicate with the client. Such voice technologies simplify the work of the call
customers (2018-2020) center.
Intellectual chat-bot integrated into internal bank processes, which contains more
than 1000 answers to various requests from client bank managers. As stated in the
press service of the credit organization, this service has no analogues in the
Russian market. If necessary, the bot can ask clarifying questions, give several

variable answers and provide links to download templates of necessary
documents. In addition to the 24/7 operating mode, it significantly reduced labor
costs for a fairly routine functionality, also allowed to increase the speed of
consulting responses by more than 50 times, thereby improving the quality of
service and customers of the Alfa Bank.
The chat bot integrated into the bank mobile app and is used to response on
clients simple queries.
Virtual Business processes Consultations In a pilot The main goal is to provide convenient access from anywhere, as a visit to the Intuitive interaction Lawful
reality (VR), connected with with 3D-avatars project bank office for corporate clients may not always be suitable, while chat with a bank Proactive insights Ethical
Augmented customer service of Alfa Bank's (2018) operator will not give the effect of presence and trust atmosphere and integration Robust
reality (AR) employees on in the context. This technology will allow to work in an interactive format with real
financial or numbers, to visualize them in the form of graphs and perform many other
investment operations.
issues with the
usage of special
devices for Alfa
Private VIP
corporate clients
Biometrics Business processes Client Integrated This technology saves clients time on bureaucracy and allow to make payments in Better functionality Lawful
connected with identification via and in the safer way. After the client shares his biometric data, the system can identify the Proactive insights Ethical
customer service biometric data process of customer, what bank services he uses, what possible problem he came with, and Robust
(client identification) integration what he can be interested in. The accuracy of facial recognition is 98%.
(2019)
In the summer of 2020, the bank plan to introduce voice biometrics, so that make it
possible to recognize customers by voice. This will increase the security of
transactions with accounts, as well as allow customers to receive more bank
services remotely, without visiting a branch.

Blockchain Payment Blockchain- Integrated In 2017, Alfa Bank, in partnership with MegaFon and Sberbank, made the first Intuitive interaction Lawful
transactions, trading based platforms: and in the payment using the blockchain technology in Russia. The exchange of electronic Better functionality Ethical
operations, factoring GTLM, process of transactions was carried out via a decentralized computer network consisting of Proactive insights Robust
operations Ethereum, integration nodes interacting via IBM Blockchain's Hyperledger Fabric technology protocol.
Hyperledger (2018-2019) Network participants could send and receive electronic documents online, track the
Fabric, R3 status of the transaction, and also had access to view blocks of blockchain
Corda transactions containing the entire history of payment transactions.
In 2017 Alfa Bank and S7 Airlines launched an innovative blockchain platform for
automating trading operations. The technology has made it possible to speed up
and simplify payments between the airline and its largest agent in the sale of airline
tickets.
In the fall of 2017 Alfa Bank together with Sberbank Factoring and M.Video
created an open consortium that focused on the commercial use of blockchain-
based technologies in the financial sector. The consortium participants launched
an open blockchain platform for factoring operations, which makes it possible to
connect an unlimited number of banks and factoring companies while preserving
the confidentiality of transaction information. The platform has allowed to
significantly reduce operating costs, increase the speed and enhance the security
of factoring payments.
Up to 2018 Alfa bank integrated blockchain technology into the business and use it
for “smart contracts” in factoring operations, in letter of credit operations and for
serving airline business sector with blockchain-based platform.
Together with X5 Retail Group, the bank launched the first Russian business
application based on blockchain technology, GTLM (Global Treasury & Liquidity
Module, previously presented as Distributed Treasury and Cash Management

DTCM), which allows to manage payments, a pool of liquidity within the holding,
and it is planned to be implemented for managing credit and deposit solutions.
The Marco Polo network, based on the R3 Corda software platform, allows Alfa-
Bank to offer its clients a wide range of solutions for international trade Finance
and a seamless connection to the global trade ecosystem.
Cloud The bank entire n/a Integrated The bank infrastructure is based on cloud technology. In 2017, the bank actively n/a n/a
business model (2019) developed cloud technology in its processes, as it provides flexible scalable
infrastructure, effective data center utilization strategy, ability to create new
products
Not disclosed deeper information.

Appendix D: Case study of Raiffeisenbank
Key Object of New object created or Integration Main implications Value for Social
technolog digital transformed time customers impact
y involved transforma
tion
Artificial n/a n/a In the process The technology is in testing. n/a n/a
Intelligence of testing Not disclosed deeper information.
(AI) and (2018)
Machine
Learning
(ML)
Robotic Bank n/a Integrated and The technology is integrated into bank 35 business processes for their optimization n/a n/a
Process business in the process and resolution of local problems.
Automation processes of testing Not disclosed deeper information.
(RPA) (2018-2019)
Bots and Business Automated process of Integrated Collaboration with customers is realized through chats in all messengers. To Increased speed of Lawful
chat bots processes communication with (2019) optimize the process of responding on simple queries (that do not contain service Ethical
(based on ) that involve bank customers via personalized queries, the chat bots were integrated. In 2019, the bank received Better functionality Robust
customer chat bots and voice more than 35% of requests via chat, and this share is expected to reach 50% by the Improved
service assistants end of 2021. convenience
Voice assistant based on neural network will increase the efficiency of non-voice
communication channels by 40% by the end of 2021.
Augmented Business Voice analytics In the process The system will automatically translate all conversation recordings into text and Better functionality ?
Analytics processes of integration analyze it. The decryption accuracy is approximately 90%. It is expected that the
and that involve (2019) implemented technology will help identify problem areas in products and processes
Machine through analysis of particularly long calls, identify the causes of dissatisfaction and

Learning customer improve the quality of communication in General, as well as increase the number of
(ML) service product recommendations to customers.
Biometrics n/a Voice and face In the process The technology is in testing. n/a n/a
recognition technology of testing Not disclosed deeper information.
(2019)
Blockchain Payment Blockchain platform for Integrated and The decisions provided by blockchain allow to optimize the bank operations. n/a n/a
transactions customer settlements is in the Not disclosed deeper information.
between with suppliers and process of
customers contractors testing (2018-
and A decentralized 2019)
suppliers depository system
Accounts on based on the
electronic Masterchain platform
mortgages (an innovative
Guarantees technological solution
issue that allows to account
for electronic
mortgages)
The platform R-Chain
adaptive to Ethereum
Quorum and
Hyperledger Fabric
Cloud Entire Cloud infrastructure Integrated The infrastructure allows to quickly scale tested solutions to all banks in the group. n/a Lawful
business (2019) Not disclosed deeper information. Ethical
model Robust

Appendix E: Case study of AK Bars Bank
Key Object of New object Integratio Main implications Value for customers Social impact
technolog digital created or n time
tion
Augmented Business AIMEE Platform In a pilot The bank has a lab on this technology development. Not disclosed deeper information. n/a Lawful
Intelligence processes based on ML project Ethical
and that involve Augmented (2019) Robust
Machine customer Intelligence
Learning service Aimee
(ML)
Robotic n/a n/a In a The bank has a lab on this technology development. Not disclosed deeper information. n/a Lawful
Process process of Ethical
Automation testing Robust
(RPA) (2019)
Bots and Business Automated Integrated Automatic responses of chat bot allow to reduce the processing time of clients queries by Increased speed of Lawful
chat bots processes process of (2019) 36%. service Ethical
(based on that involve communication Robust
AI) customer with bank
service customers via
chat bot Aimee
Biometrics Payments, Face2Pay video Integrated Customers can remotely apply for a loan, open a virtual card, or order a card. This Better functionality Lawful
transfers, validation and in a technology allows to reduce the time for providing services, for example, the procedure Proactive insights Ethical
clients system for pilot of remote account opening using biometrics takes no more than 5 minutes. Intuitive interaction Robust
registration making version Increased speed of
in the bank, payments (2019) service
providing

financial through face
services recognition
and Behavioral
products biometrics in
the mobile app
Blockchain Accounting Blockchain Integrated In 2020, based on this technology, the bank launched a decentralized depository system n/a Lawful
processes platform (2020) (DDS) for accounting electronic mortgages. Ethical
(accounting Robust
electronic
mortgages)
Cloud Bank Cloud box office Integrated Cloud box office performs all the standard functions of a box office, but keeps all records Better functionality Lawful
product for SME (2019) of products in the "cloud". This box office allows the bank customers to optimize their Proactive insights Ethical
inventory balances, develop their own loyalty system, and remotely track all sales in real Robust
time.

Appendix F: Case study of Erste Group Bank
tion
Artificial n/a n/a In a Not disclosed deeper information. n/a n/a
Intelligence process of
(AI) and testing
Machine and
Learning developm
(ML) ent (2019)
Robotic n/a n/a In a Not disclosed deeper information. n/a n/a
Process process of
Automation testing
(RPA) and
developm
ent (2019)
Bots and Business Automated Integrated Bank clients can apply contact center by email or via chats, through voice recognition Increased speed of Lawful
chat bots processes process of (2019) systems and chat-bots. service Ethical
(based on that involve communication Better functionality Robust
AI) customer with bank Improved convenience
service customers via
chat bots and
voice
recognition
systems.

Virtual n/a n/a In a Not disclosed deeper information. Better functionality Lawful
reality (VR), process of Proactive insights Ethical
Augmented testing Intuitive interaction Robust
reality (AR) and
developm
ent (2019)
Biometrics Business Voice Intergated Voice customer authentication is introduced in bank call centers. Not disclosed deeper Better functionality Lawful
processes recognition (2019) information. Biometric authentication is also introduced into mobile app. Proactive insights Ethical
connected technology Intuitive interaction Robust
with Increased speed of
customer service
service
(client
authenticati
on)
Blockchain Capital Linux Integrated This technology supports investors and issuers with improved efficiency, more operation Increased speed of Lawful
markets Foundation’s (2019) transparency and a lower operational risk. The platform allows to make service Ethical
issuance Hyperledger Schuldscheindarlehen and similar products on capital markets more accessible and their Better functionality Robust
Fabric based handling more efficient, both for institutional investors and for corporate issuers. Open Proactive insights
platform, called architecture of blockchain platform allows the further integration of additional platforms Safety of operations
we.trade and banks.

Appendix G: Case study of Raiffeisen Bank International
Key Object of New object Integration time Main implications Value for Social impact
technolog digital created or customers
tion
Artificial n/a n/a In a process of Not disclosed deeper information. n/a n/a
Intelligence testing and
(AI) and development
Machine (2019)
Learning
(ML)
Robotic n/a n/a Integrated and in a Not disclosed deeper information. n/a n/a
Process process of testing
Automation and development
(RPA) (2019)
Bots and Business Chat bots and In a process of Not disclosed deeper information. n/a n/a
chat bots processes virtual assistants testing and
(based on that involve development
AI) customer (2019)
service
Advanced Analysis of n/a Integrated (2019) Advanced analysis and evaluation of data allow to better understand, optimize and Higher Lawful
Analytics business also manage business processes, develop new business opportunities. personalization Ethical
processes Proactive insights Robust
Virtual n/a n/a In a process of Not disclosed deeper information. n/a n/a
reality (VR), testing and
Augmented development
reality (AR) (2019)

Biometrics Business Face recognition In a process of The technology is introduced in facial recognition in mobile banking (The subsidiary in n/a n/a
processes technology testing and Slovakia). Not disclosed deeper information.
connected development
with (2019)
customer
service
(client
authenticati
on)
Blockchain Transaction Mortgage Integrated and is The Russian subsidiary initiated the first mortgage certificate transaction on the state Increased speed Lawful
s in trade certificate in the process of masterchain platform. of service Ethical
finance, transaction on the testing (2018- the first feasibility studies for the necessary identificationprocesses were successfully Better functionality Robust
capital state masterchain 2019) concluded. To further develop blockchain solutions, RBI entered into a cooperation Safety of
markets platform agreement operations
business with the Institute for Cryptoeconomics at the Vienna University of Economics and
and in Business. It has been a member of the international
clearing, blockchain consortium R3 since the end of 2017.
settlement
and
payment
services
Cloud n/a n/a In a process of Not disclosed deeper information. n/a n/a
testing and
development
(2019)

Appendix H: Case study of UniCredit Bank Austria
Key Object of New object Integration Main implications Value for customers Social impact
technolog digital created or time
tion
Artificial Payment Photo credit Integrated The software identifies all the necessary data on an invoice and automatically Increased speed of Lawful
Intelligence transactions transfers (2019) completes the transfer form. The time on typing of the payment-relevant data is service Ethical
(AI) and significantly reduced. This technology also allows to upload and process electronically Better functionality Robust
Machine transmitted invoices. Proactive insights (better
Learning understanding of
(ML) customer needs)
Higher quality of service
Robotic n/a n/a In a process Not disclosed deeper information. n/a n/a
Process of testing
Automation (2019)
(RPA)
Bots and Business Digital voice Integrated This technology supports non-personalized services such as branch opening hours, Increased speed of Lawful
chat bots processes assistant Alexa (2019) exchange rate information or general market, economic and financial information for service Ethical
(based on that involve bank clients. Better functionality Robust
AI) customer Improved convenience
service
Biometrics Business Personal Integrated Not disclosed deeper information. n/a n/a
processes Identification - (2019)
that involve FaceID or
customer fingerprints in
service bank mobile
app

Blockchain International We.trade In a pilot Transactions through the platform become ordinary, processed faster and more Increased speed of Lawful
trade platform based project transparently. All parties involved - i.e. sellers, buyers, their banks participate on service Ethical
transactions on Hyperledger (2019) we.trade. All agreed Details or documents can be viewed by all at any time. Payments Better functionality Robust
Fabric are executed automatically as soon as deliveries are made. If seller or buyer want Safety of operations
additional hedging or financing, these can be transferred to we.trade can be applied Proactive insights
for.

Appendix I: Case study of Bawag
tion
Artificial Operational Digital Adoption Integrated With the help of the WalkMe digital AI and Ml based platform, the bank provides its e- Increased speed of Lawful
Intelligence business platform - (2019) banking service to its customers, that is secure and convenient in any time and any service Ethical
(AI) and processes corporate-class location. Better functionality Robust
Machine guidance, Not disclosed deeper information. Proactive insights
Learning insights,
(ML) engagement,
and automation
platform for
providing e-
banking service
Robotic Operational n/a In a Not disclosed deeper information. n/a n/a
Process business process of
Automation processes testing
(RPA) (2019)
Advanced Business Models based Integrated Not disclosed deeper information. n/a n/a
Analytics processes on data-driven (2019)
that involve approaches for
customer making
service offerings to
customers

Appendix J: Case study of Oesterreichische Kontrollbank AG
tion
Artificial Business Text recognition Integrated In partnership with Start-up Giromatch the bank develops automated text recognition for Better functionality Lawful
Intelligence processes technology and in a documents. This technology allows to make the process more economical, clear and Proactive insights Ethical
(AI) and that involve process of automated. Robust
Machine customer testing
Learning service and
(ML) developm
ent (2019)
Robotic n/a n/a In a Not disclosed deeper information. n/a n/a
Process process of
Automation testing
(RPA) (2019)
Blockchain Data Blockchain Integrated This technology helps to verify the authenticity of data, thus ensuring the greatest Increased speed of Lawful
notarization based platform and in a possible degree of data security. Blockchain technology has great potential for service Ethical
for reports for norization process of improvements in the efficiency and quality management of banking processes. Better functionality Robust
from bond testing(20 Safety of operations
auction 19)

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the banking sector: a

multiple case study

Nizhny Novgorod, 15th of October 2020

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II. List of Tables

III. List of Abbreviations

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Up to the date there is an increasing importance of digitalization, digital innovation, digital

Hence, the following research questions take place:

1.2. Research approach and structure of the thesis

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2.1. Digitalization as a phenomenon

2.1.1. Digitalization and Digital Transfomation

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Table 1. Definitions of digitalization and digital transformation

Moving business towards digitalization requires companies experience socio-technical

 Digital Disruption. In this case, organizations make strategic decisions on a relevant

 Digital Transformation. When the company experiences fundamental changes in its

2.1.2. Digital Transformation of Business Model

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- The benefit aspect involves provided values, products, services;

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Figure 1. Conceptual setting (Rachinger et al., 2018)

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2.2.2. Digital Technology trends

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3. Digital reality. Progress in computer vision, conversational interfaces and auditory

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5. Cognitive technologies. Robotic process automation (RPA), neural networks, bots,

2. Augmented Analytics. Potential of this technology will be rapidly adopted, as a key

7. Blockchain. Blockchain is going to reshape industries by engaging trust, ensuring

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2.2.3. Digital Technology in practice

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Industry expert Insight information

Table 2. Insight data on digital transformation and customer experience

2.2.4. Digital technology and customer value in the banking sector

Digitalization contributes to additional customer value and higher customer experience

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2.3.1. The impact of digitalization on the labor market

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Figure 8. Digital Transformation of individual industries (Digital McKinsey, 2018)

2.3.2. Focus on response actions

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A network of “Union Learning Representatives” is encouraged by Unionlearn in firms across the