Keywords: digital bank, greenfield approach, brownfield approach, payment service provider, facilitator


Topicality. The article describes the current transition period of replacing traditional banking with remote banking at a time of deepening the digital transformation of the banking system and the characteristics of this period, as well as the ecosystem changes of this period. Joseph Schumpeter's concept of "Creative Destruction" on the application of innovations in economic processes and its application to the banking system were explained.
Aim and tasks. By defining the concept of digital banking, three main approaches to the formation of a digital banking platform were distinguished, including the characteristics of these approaches.
Research results. The analysis explains a number of features that characterize digital banking and shape its unique business model, including a horizontally integrated product and service chain based on a fully digital platform, minimization and zero physical contact, and an open platform based on the “Spider web” principle. The characteristics of the legal framework for the creation of digital banking from scratch in Singapore and Hong Kong, which have advanced financial market infrastructure, were analyzed. The main factors of the Australian approach were touched upon. The different approaches to the digital banking model (no new licensing procedure or special licensing requirements), protection of the rights of customers of financial services users, the legal form of digital banking and the legal address in the licensed country are described in the digital banking business model examples are shown. As a follow-up to the study, the Republic of Azerbaijan was selected as the country where the separate licensing process for digital banking was not applied.
Conclusion. The main steps to be taken to form a digital banking model in the Republic of Azerbaijan on the basis of the “greenfield” approach and the reforms implemented in the framework of the existing legislation have been announced.

Author Biography


Deputy Director of the Payment Systems Department of OJSC Bank Baku,
Head of the expert group on payment systems and digital banking Azerbaijan Banking Association.
Doctoral student, Institute of Scientific Research on Economic Reforms
of Ministry of Economy of the Republic of Azerbaiijan
AZ 1011, H.Zardabi prospect, 88a, Baku Azerbaijan


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How to Cite
RUSTAMOV, T. H. (2021). DIGITAL BANKING AND ITS ESSENCE. THE AZERBAIJANI MODEL. Economic Innovations, 23(3(80), 306-318.