From Digitisation to Digitalisation and the future of banking.
The banking sector has undergone a significant transformation in recent decades, marked by the increasing adoption of digital technologies. I worked for Standard Charted Bank at the turn of the millennium as a senior product manager tasked with improving trade bank operations, while maintaining compliance with regulators. The outcome was an internet trade banking platform, an innovation that was initially viewed as disruptive. However, the automation of routine and repetitive tasks has since become commonplace, fundamentally reshaping industry practices.
The SARS-COVID-19 pandemic of 2020-2021 presented an unprecedented challenge, compelling a rapid shift from in-person to online transactions. This accelerated the adoption of digital banking services among previously hesitant customers. As evidenced by the widespread acceptance of ATMs, customers demonstrate a tendency to maintain reliance on technologies they perceive as reliable and efficient. Consequently, there is a growing expectation for fully integrated and automated business processes, as opposed to superficial front-end interfaces.
Contemporary consumers, particularly those in the millennial and subsequent generations, exhibit a high degree of technological proficiency and a preference for seamless online experiences, especially via mobile platforms. These users expect personalized services and minimal data re-entry, reflecting a desire for efficient and convenient banking interactions. The emerging paradigm prioritizes Speed, Security, and Service, available Anywhere and Anytime (SSSAA), facilitated by advancements in Artificial Intelligence (AI).
The initial phase of automation involved Robotic Process Automation (RPA), which streamlines routine business practices through software agents. RPA emulates back-office tasks, such as data extraction and form completion, thereby freeing human employees to focus on more complex and critical responsibilities, including real-time customer engagement. Financial institutions that have fully implemented business automation are better positioned to adapt to market fluctuations and evolving customer demands, enhancing their competitive advantage.
Digitalisation represents a logical progression from digitisation, leveraging AI, Machine Learning (ML), and Automated Machine Decision-Making Systems (AMDS) to transform business models, optimize workflows, and drive innovation across the organization. This approach emphasizes a holistic view of data management.
Beyond mere automation, digitalisation utilizes AI to enhance fraud detection, enabling proactive prevention rather than reactive detection. AMDS facilitates the creation and implementation of smart contracts, enabling rapid loan and mortgage approvals. Major technology companies are developing hybrid on-premise/cloud solutions to facilitate cost-effective digitalization for both established and challenger banks.
To transition from digitisation to digitalisation, financial institutions should engage with both existing technology providers and emerging developers, particularly those located in key financial centers such as London, New York and Hong Kong. This transformation may necessitate addressing cultural and organizational challenges, including potential job displacement. Boards of directors must proactively address these issues through reskilling initiatives to maintain competitiveness.
About the writer. Mr. Michael Mudd is a digital trade economist and data governance standards and policy expert. He specialises in analysis and advisory, providing opinion and insight into data policy, knowledge management, data security and digital transformation in Asia-Pacific, Africa and the Middle East.
He is an appointed IT standards expert to JTC-1 for Hong Kong at the ISO. He is a member of the policy committee of the Hong Kong Computer Society and a member of the Government of Hong Kong’s Expert Group on Cloud Computing. He is the Chairman of the Public Policy Working Group of the Middle East & North Africa Cloud Alliance and Senior Digital Trade Adviser to International Economics Consulting Ltd.
He also conducts executive coaching on technology change & risk, privacy and digital security coaching for non-technical staff to mitigate losses from online fraud, as well as CxO level guidance on the EU GDPR.
He may be contacted at managingpartnerapp@outlook.com