Financial Services Must Address Digitalization and Automation

Rapid technical breakthroughs have astounded the world during the last several decades. It has influenced and left an everlasting mark on anything and anything that humans can quantify.

Financial Services Must Address Digitalization and Automation

Rapid technical breakthroughs have astounded the world during the last several decades. It has influenced and left an everlasting mark on anything and anything that humans can quantify. Authorities are welcoming entrants (fintech and digital banks) as a much-needed injection of competition and innovation into the banking industry as digital banking becomes more widespread throughout the world. To promote digital banking, several authorities have opted to create specific licensing regimes. A digital bank is a deposit-taking financial institution that uses a digital-first or digital-only business model to supply its goods and services. Customers are attracted to digital banks because they do not require paper documentation, a physical presence (such as branches, ATMs, or agent point of sale), or manual processing. They also seek to provide an excellent user interface and experience. Digitalization and automation in financial services are major factors that must be addressed.

Financial Services Firms need to embrace Digitalization and automation to succeed. Customers trust banks as a one-stop shop for their requirements because security and client protection are vital to them. However, in this digital banking era, the challenge is how far digital banking can be applied while maintaining the security of consumer transactions and the safety of customers. The governments’ principal reason for establishing digital banks is to encourage greater innovation and competition in the banking sector by decreasing entrance barriers and reducing overly burdensome regulatory regulations. This initiative aimed to enhance customer experience and protect customers from risks associated with conventional mode of banking.
However, there are some additional risks and challenges that are associated with digital banks. These risks may lead to financial and non-financial losses to the customers. There are the issues of cyber security and technology risks (digital risks) related to the protection of customers’ data, associated with financial services via digital banks.
Digital banks and digital banking services have evolved and played an important role in the future creation of a digital ecosystem. This can be seen in the significant development of digital banking in various countries around the world, as well as the opportunities that exist. However, such a scenario presents several challenges, particularly in the risk management field.

To provide secure digital banking services to the general public, there must be innovative and secure business processes, prudent and sustainable digital banking business practices, adequate risk management policies and procedures, proper governance and IT capability requirements, and guidelines on consumer data protection and the risk of data leakage. This will result in digital banks making a genuine contribution to the development of the digital financial ecosystem.

Originally published at Business Recorder