In this challenging background, how should banks and bank supervisors respond? How do we strike an appropriate balance between the benefits of technological innovation and the strategic and operational risks it brings? How can we properly support the necessary transition to a less carbon-intensive future while avoiding potentially destabilizing temporary effects?
Are risk management and governance practices keeping pace? When it comes to new entrants or new risks in the banking industry, or banks’ exposure to NBFI, is the existing regulatory guardrails adequate?
Mohammed Abdul Imran Khan to your first question; The global Banking space is fast changing in the light of new developments in the world market post -COVID-19. The ''Brick and mortar'' banking is fasting becoming a thing of the past with technology, pandemic and digitalization revolutionalising the Banking space that was previously comfortably conservative. To survive in the current realities and be relevant into the future, banks need to keep pace with the global trends: Continue to mine the opportunities in the digital space to reduce manual processes to almost zero, Using Data analytics, identify the demography with the largest spend and develop products to ensure they keep the most of this class of clients' wallet-size while Leveraging on the advantage of size to ensure Non-Bank Financial Institutions do not take up the market share; by developing products that effectively compete with this spectrum of the competition. For example easy access to Loans with less stringent processes; less stringent account opening processes and ease of access in the event of complaints. These are models adopted by the tech-driven NBFI to win a large chunk of the market. also, Utilizing the social media space to drive patronage in this growing area of the market.
the future is for electronic banking so the electronic banking will face big challenges. so they must using technological innovation and the strategic and operational risks.
The old former Chairman of Barclays Bank in the United Kingdom, Anthony Faville Tuke, said in one of his Annual Addresses to shareholders that "....because at the end of the day banking is not about money, it is about humans".
Digitalisation, like so much else that is hitting at banking (regulation overloading, the tools of information technology, money laundering, and so much much else) runs the same risk of weeding out of the mindsets of decisionmakers the fact that both they and their banks would have no reason to exist if it were not for the fact that there are simple humans out there which needs to be served.
There is constant invention and creativity being resorted to to carry out such serving. And the methodology of digitalization in essence only serves to make certain functions (accounting, product creation, marketing, many aspects of conforming to regulation, simple management decisions, handling of crypto-currencies, etc) quicker, if not on every occasion or function easier.
Certainly there is now no going back to the old big ledger type of accounting and recording, but woe betide us all who live and labour in the noble banking profession if we persist with taking decisions that ignore so many of the weaker segments of our customer ranges: the old, the sick, the non-mobile, the non-IT and apps familiar, families, racial minorities, the unemployed.....technology was created - I would like to think - for the people, and the people created for technology!
So...yes...but also a very very big watch out!
Dr. John Consiglio
Department of Banking and Finance,
The University of Malta.
To the best of my knowledge, there are three fundamental issues that requires a diagnostic approach; First, the conventional banks should be ready to face stiff [ICT] challenges like software piracy, internet fraud, cyber-scam and high cost of E-banking technologies. Second, Continuous environmental hazards, climate-change, pollutions and global warming among others; Third, a continuous reduction in patronizing the products and services of the conventional banks respectively. Based on the aforementioned scenarios, it is logical that the following strategic measures should be put in place: (A) continuous innovation in ICT related products and services and blocking all loopholes for ICT-related crimes; (B) Embrace investment in Environmental, social and philanthropic activities/services for continuous and hitch-free survival in line with United Nations Sustainable Development Goals (SDGs); (C) Finally, banks should diversify their products and services channels by integrating non-interest based products and services in line with cost efficiency, cost effectiveness, cost-volume-profit (CVP) analysis and value-for-money principles.
@Dilinna @Sabri @J A Consolgia @Yusuf Jaafar
Thank you very much for your reply and valuable contribution
It is obvious that banks have been going under a lot of digitalization and internet based activities. This leads a stress on the bankers since these services are provided by almost all banks. However, the banks that invest in internet substructure with qualified personnel can satisfy customers more and collect more deposits and increase their balance sheets in a healthy manner. Those who do not invest in this infrastructure will lose customers for sure. The competition is on the human and software and hardware side, no matter where they are located. The # of branches still matters but not as much as it was in the past. You can run branches with a few people and satisfy your customers provided that you have a sound infrastructure.
The future of any bank now lies in the innovative abilities to keep up with the modern trend. Banking business is now more digitalise than in the past. Computer and internet fraud is expectedly in the increase. Banks should should strength their control measures in order to reduce risk. Banks must not lose sight of customer satisfaction in all of this. digitalisation will ease operations, increase speed and delight customers.
@Cenap Ilter @John Aliu
Thank you very much for your valuable input
Technological innovations and security have become even more important with digitalization. FinTechs and banks tend to act together instead of competing. As time progresses, we may see more "Bank-FinTech co-opetition".
Mohammed Abdul Imran Khan To give you some information about the changers taking place in Sri Lanka (South Asian Developing Market). After Covid-19, the direction of digitalization has taken an aggressive phase and for every State and Commercial bank there are growths recorded in digital adoption. However there are issues relating to technology and most of the applications are under developed and hence customers are complaining. Due to Covid-19 transactions are mostly done online and over automated machines. people are reluctant to visit a branch physically. Also for businesses most banks have implemented digital banking as mandatory requirement.
In terms of risk, overall Banking and NBFI sector Non Performing Loan/Asset (NPL) ratios has gone up and banks are desperate to find solutions. Reasons being the economic slowness, job loss, business losses, tourism collapse, export reduction, etc.
Regulatory processors are not effective and they are not very effective, on the other hand Government have granted debt moratorium for loans up to 1 year due to Covid-19 impact. however banks are at risk of loosing many loan advances in time to come.
These are some of the market trends, hope it will help you
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To the best of my knowledge, there are three fundamental issues that requires a diagnostic approach; First, the conventional banks should be ready to face stiff [ICT] challenges like software piracy, internet fraud, cyber-scam and high cost of E-banking technologies. Second, Continuous environmental hazards, climate-change, pollutions and global warming among others; Third, a continuous reduction in patronizing the products and services of the conventional banks respectively. Based on the aforementioned scenarios, it is logical that the following strategic measures should be put in place: (A) continuous innovation in ICT related products and services and blocking all loopholes for ICT-related crimes; (B) Embrace investment in Environmental, social and philanthropic activities/services for continuous and hitch-free survival in line with United Nations Sustainable Development Goals (SDGs); (C) Finally, banks should diversify their products and services channels by integrating non-interest based products and services in line with cost efficiency, cost effectiveness, cost-volume-profit (CVP) analysis and value-for-money principles.
Hi Dr Mohammed Abdul Imran Khan . I think the classical banks will be converted into digital banks with time.
@Esengül Salihoğlu, @Leel Gunawansha, @Bhadrappa Haralayya, @Benjamin Musumali,
@Aref Wazwaz
Thank you for your valuable contribution
Banks will have to compete to survive the digital finanial revolution in the financial ecosystem
In light of the scientific and technical development and what the banking sector has witnessed since the beginnings of the banking business, the development was based on two basic elements, namely safety and speed of completion of operations. Therefore, all the challenges facing the banking business will be overcome through research, research and development. The most important challenges will be security challenges (information security).
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