The COVID-19 pandemic has forced industries all around the world to innovate in order to continue their operations. The banking industry is no exception. Since the lockdown, banks have had to move their services online. That, in itself, is a technological trial — one that comes with a whole slew of consequences. In this article, we’ll be discussing the opportunities and challenges that come with the digitalization of banking.
Digital transformation puts banking professionals in a position wherein they can improve their current system. Often, legacy systems are a mix of different tools that aren’t built to share data. But by migrating these into the digital sphere, it’ll be easier to keep track of them. Banks can even compile all their data into a centralized system. This will speed up internal processes. Additionally, data storage will be much easier to navigate and maintain.
Digital transformation also provides opportunities to make a bank more accessible. Effective migration to online banking makes a bank’s services more appealing. This is especially the case during the pandemic. Michael Ogden, the executive editor for Credit Union Times, writes that over 50% of consumers began using banking applications since the pandemic arrived. And a majority intends to keep using it post-pandemic. Given this then, an effective transition to the digital sphere is a good way to retain clients.
Unfortunately, these opportunities come with hurdles. The actual transition to digitalization is tricky to maneuver. Pedro Soto-Acosta, a researcher from the University of Murcia, writes that there is a difference between digital change and digital transformation. The implementation of technology to improve a business’ processes and eliminate inefficiencies can be considered a digital change, but it isn’t transformational. Digital transformation requires that technological changes contribute to significant changes in a company’s business model. This is what businesses hope to accomplish to truly digitalize their brand. However, this is easier said than done, as it requires meticulous research and systematic overhauls.
Moreover, there are tons of security issues that come with digital migration. Data protection must be ensured, and that requires robust cybersecurity measures. Company data, employee files, and sensitive client information — all these need to be heavily guarded. There’s also the rampant issue of identity fraud, which can occur not just directly with banks, but also with merchants offering online payment options. Dr. Erika Rasure, a professor at Maryville University’s online business programs, points out that online shopping fraud is responsible for some $16.8 billion in losses. And though credit card companies are typically very attuned to detecting and fighting off online fraudsters, Rasure writes in an Entrepreneur report that banks don’t tend to be as fast, which is why debit card fraud can often result in empty bank accounts for victims. So, apart from investing in cybersecurity measures, banks also need to inform their client base of data protection measures that must be followed. After all, cybersecurity in the business sector is a two-way street between the institution and its clients.
Those are the opportunities and challenges that come with the digital transformation of banking. Secure digital finance tools, particularly payment platforms, are vital in any business, but especially in the banking industry. If you want to know your options, check out Our Services. We can assist you through every step of the way — from market research to business development.
Written for PayX International by Alicia Edwards