Digitalisation and the Banking Industry Flashcards
What issues and opportunites does digital banking give rise to?
Cyber Security: Financial institutions are one of the primary targets for cyber-attacks and can have severe economic and reputational consequences on the organisation.
Analytics: Through analytics tools and algorithms, banks will be able to anticipate the best time to provide advice to the customer.
Barriers to Benefitting from Data Analytics
- Data ownership questions
- Challenges to cloud computing, e.g. security
- Employees with the right skills and competencies
- Lack of harmonisation among supervisors
- Legacy of banks’ IT systems’ infrastructure – older bank infrastructure may be incompatible with digitalisation
What did the 2015 European Banking Federation (EBF) Report on Banks turning digital say?
The EBF blueprint focuses on the challenges and opportunities in retail banking. It also explains why banks should be considered as strategic players in the digital single market (DSM).
- ‘The emergence of new technologies such as cloud-based systems, high-speed wireless network, biometrics or instant payment systems is leading to more efficient banking services, generating many new opportunities for banks and better products and services for their customers’
- ‘Digital banking is, in fact, all about improving the customer experience’
What is a distributed ledger?
A distributed ledger is an asset database that can be shared across a network of multiple sites, geographies or institutions. Participants within a network can have their own identical copy of the ledger. Changes to the ledger are reflected in all copies in minutes, or in some cases, seconds.
Distributed ledgers are inherently harder to attack (or make unauthorised changes to) than a single database, because there are multiple shared copies of the same database, so a cyber-attack would have to attack all the copies simultaneously to be successful.
What is blockchain and what can it be used for?
A blockchain is a type of distributed ledger, comprised of unchangable, digitally recorded data in packages called blocks. It can:
- Help increase efficiency in capital markets by showing the chain of transactions (reconciliation through cryptography) in a way that is transparent to a regulator
- Reduce fraud and increase efficiency in trade finance
- It could also speed up trading systems
The project to test blockchainlike technology is being led by financial technology firm R3 which has signed nine banks up to the initiative.
