In recent years significant changes have occurred in the banking sector. Traditional banking operations are becoming outdated, replaced by new, innovative, digital-based practices. Digitalization affects all spheres of banking activities: management, customer and partner relationships, security, financial accounting, strategic planning, etc. The author explains the need for such changes, describes main digital technologies and tendencies observed in the banking sector; shows the extent of digitalization in the banking sector. The article analyzes the opportunities and threats presented by new financial technologies for both credit institutions and their clients. The author shows how digitalization has affected the structure of the banking sector, the composition of participants, the needs and preferences of bank customers. The article formulates the main challenges and threats to the banking sector from digital innovations. The modern fraudulent practices are analyzed, and the degree of their influence on the banking activities is determined. The increasing role of the regulator in the financial market is substantiated.