Banking digital transformation has been a hot topic for over a decade. The transformation was slow before 2008 but was then picked up since Global Financial Crisis in 2008 due to the lower creditability of banking system and tightened regulatory requirement on AML and Compliance. Thanks to the prevalence of advanced mobile technologies, new generation have no intention to step foot inside a bank and mainly utilise online tools to complete their banking transaction. The same applies to the young business owners. To cope with the new banking environment, technology is playing a key role in the revolutionary digital era so that the banks can maintain its market position from the challenge of Fintech Start-ups and Technology Companies.
What are the technologies applying in banks?
First answer from majority would be online banking as the technologies applied to the banking digital transformation. Yes, it is; but not entirely. Online banking or mobile banking that prevails in digital transformation is the end result of technology application. In fact, it combined Paymentech, Wealthtech, Credittech and Regtech.
Payment Tech – evolves from manual payment input to automatic payment. In the past, we had to fill in a payment form in branch in order to transfer money from one bank to another. With the payment tech, customers just input the destination account information and can see the credit balance in another account immediately. Corporate Bank or Retail Bank incorporated payment tech into the core banking system so that manual input is no longer required. In Hong Kong, Chats, Telegraph Transfer, e-Cheque or latest FPS are well known channels for the payment which is connected to the banks’ core banking system.
Wealth Tech – evolves from manual investment order to client made order. Trading equity need to call your brokers or going to branch to make your order. Nowadays, most customers can simply login to their bank accounts and input the order, then system will execute your order and check your credit balance automatically. This kind of system enhancement is called wealth tech applied in banking system. The technologies well cover not only equity, but also fixed income investment, fund investment and FX investment. Investors are no longer required to remember the phone numbers of different brokers. All investment can be executed by online banking.
Credittech – the key function of credittech is for bank to easily manage the credit risk on their borrowing banking products. ranging from credit card to business financing application. Some of the Nordic Banks allow corporates to apply small business loan from online banking and pre-approve a credit limit to the applicant in 10 minutes. Credit not only helps the bank to reduce the credit risk but also helps customers to shorten the processing time which significantly fulfils the short-term needs from financing.
Regtech – acts as a supplementary technology to the application of the aforementioned technologies. Regtech makes sure the bank complies with regulatory requirements on the application of the other three technologies such as KYC, Documents keeping, AML, etc. All the banking operations intend to be automatic on online banking system. To comply with the regulatory requirements, regtech ensures those automated processes are complied with the same requirements as were handled manually. Otherwise, those automation cannot be completed with a back-end bottleneck.
Banking Digital Transformation is not a one-off revolution. Instead, the transformation is an ongoing process to align with user expectation like most of the other industries like electronic industry. From online banking to mobile banking, the banking industry is trying to catch up with the economic revolution from product-driven to user-experience-driven. Along with the technology advancement, we believe banking will evolve into a new digital face from dinosaur.