Transformation of the Digital Banking World for The Future

Transformation of the Digital Banking World for The Future

Transformation of the Digital Banking World for The Future. The term 'digital bank' has become a hot topic of discussion this year. This story has even made the price of several mini-bank shares (principal capital below Rp 5 trillion) that want to go digital to soar, brought by Indonesian capital market investors.

If you look at the broad description, the impact of the industrial revolution 4.0 which identifies digital transformation - with disruptive technologies such as artificial intelligence, cloud computing, blockchain, to biometrics - is currently affecting banking businesses.

One of the most obvious impacts is the problem of using data to improve product quality. The term "data is the new oil", introduced by the British mathematician and data science businessman Clive Humby in 2006, still finds its echo today.

This means that data processed by certain computer programming mechanisms (big data analytics, for example) can be seen as new oil for today's digital/internet economy.

Within the banking framework, data transitions will be increasingly carried out in conjunction with changes in open banking by utilizing API (Application Programming Interface) technology. In simple terms, API technology is an interface (interface, visual appearance) in a software that can connect programs to each other.

In short, in the future, data can be used as bank assets to improve such as predictive analytics in efforts to improve financial services and products.

In addition to the problem of data usage, the impact of the industrial revolution 4.0 for banking includes the shift in customer expectations, new types of cooperation or collaboration with the digital economy ecosystem, to the shift in technology and business modes.

Along with the development of digital technology in the era of the industrial revolution 4.0, the Covid-19 pagebluk which began last year has contributed to the acceleration of the transfer of the digital form of banking.

The outbreak of the Corona virus, which was accompanied by limitations on the deployment of people or physical activities, forced residents to adjust and slowly carry out economic business transactions on an online (network/online) or digital basis.

Referring to Inventure (2020) data, which was taken in the book Make Blue Transfer of Digital Banking for Financial Services Authority (OJK), which was recently circulated, one of the visible impacts was the shift in banking business transactions during the outbreak.

Business transactions that were initially carried out at branch offices are now carried out digitally or online via mobile banking, internet banking, or call-centers carried out by artificial intelligence.

At the same time, there is a trend for banks to keep their office network closed. (Diagram below).

Furthermore, pagebluk encourages customers to reduce cash business transactions (cash).

Based on OJK records, before the outbreak, the trend of business transactions to cashless transactions or non-cash business transactions has increased. But the Covid-19 outbreak has accelerated that process with the argument to reduce the power of the virus' spread.

This can be seen from the increasing trend in the use of digital banking services during the Covid-19 outbreak. (Diagram below).

Witnessing the digitalization trend above, OJK finally issued Make Blue Change in Digital Banking at the end of October 2021.

The blueprint focuses on 5 specific components that want to provide digitalization regulations for banking, namely the basic issues of data implications, technology, risk management, cooperation, and institutional regulations in the banking industry.

We are currently seeing a shift from traditional banking--which is reflected in one of them by a vertically integrated, asset-heavy, rigid value chain-to a new-age bank, which is truly digitally integrated and on an open basis. platforms.

Referring to OJK, in this case, new age banks or digital banks are followed by a lean and agile organizational structure and have advanced digital capabilities.

Furthermore, a leaner and more agile organizational structure prioritizes collaboration and integration with other factions such as having a large, customer-focused marketplace community.

Furthermore, advanced digital capabilities prioritize the use of up-to-date and agile technology with high scalability, and data-based business modes with simple and automated processes based on open-platform.

Then, what are the prospects and opportunities for banking in the digitalization era ahead?