Managing new risk in digital banking

Summary

Digital banks face unique challenges as they scale without physical presence while managing technological risks, cybersecurity, data privacy, and compliance requirements. New risks such as cloud outsourcing and operational resilience emerge in this evolving business model. A recent survey of 1,500 Malaysians revealed only 36% trust digital banks to secure their data, highlighting the importance of building customer trust. Digital banks must prioritize key security and privacy measures in their strategies to foster adoption and ensure long-term success.

Takeaways

• 😀 Digital banks must consider technological requirements and operational risks while scaling without physical presence.
• 😀 New risks, such as cybersecurity, data privacy, cloud outsourcing, and operational resiliency, are emerging in the digital banking business model.
• 😀 Cybersecurity and data privacy are the key focus areas for digital banks due to the increased use of digital channels and assets.
• 😀 Compliance requirements and addressing technology risks are essential for digital banks to operate securely.
• 😀 A recent survey revealed that only 36% of Malaysians trust digital banks to keep their data secure.
• 😀 Data protection remains a significant concern for consumers regarding digital banking services.
• 😀 Digital banks need to prioritize security and privacy considerations in order to build trust with customers.
• 😀 Strategies for earning customer trust include implementing robust security and privacy measures in digital banking solutions.
• 😀 The adoption of digital banking will increase if banks effectively address customers' data security concerns.
• 😀 As digital banking grows, maintaining operational resilience and managing emerging risks will be critical to success.

Q & A

What are the technological challenges digital banks face in scaling their operations?

Digital banks need to address issues related to scaling operations digitally with minimal physical presence, all while managing technology and operational risks and ensuring compliance with regulatory requirements.

What types of risks are emerging as a result of the digital banking model?

The new or emerging risks include cybersecurity, data privacy, cloud outsourcing risks, and operational resiliency. These need to be prioritized by digital banks.

Why is data protection a major concern for digital banks?

Data protection is crucial because a significant portion of customers are concerned about the security of their personal information. In fact, only 36% of Malaysians trust digital banks to secure their data, highlighting the need for strong data privacy measures.

What does the recent survey indicate about Malaysian consumers' trust in digital banks?

The recent survey of over 1,500 Malaysians revealed that only 36% trust digital banks to keep their data secure, indicating a major concern for customers regarding data privacy and security.

What can digital banks do to earn customer trust?

Digital banks can earn customer trust by implementing key security and privacy measures in their digital banking solutions. Addressing these concerns effectively will encourage further adoption of digital banking services.

What is the role of compliance requirements in digital banking?

Compliance requirements are critical for digital banks, ensuring that they meet regulatory standards while mitigating risks related to technology, operations, and customer data security.

How do digital channels impact the risks digital banks face?

The increased use of digital channels and assets introduces new risks, especially in cybersecurity, data privacy, and operational resiliency, as there is more reliance on online infrastructure for banking services.

What are the main types of operational risks that digital banks must manage?

Operational risks include ensuring the resilience of digital systems, managing third-party cloud outsourcing risks, and maintaining smooth digital transactions and services even under stress or system failure scenarios.

How can digital banks scale effectively with minimal physical infrastructure?

Digital banks can scale effectively by focusing on robust, scalable technology platforms, optimizing customer service through automation, and ensuring they can handle increased traffic without physical branches.

Why is cybersecurity an essential focus for digital banks?

Cybersecurity is vital for protecting customer data and preventing breaches. As digital banks handle more sensitive information online, robust cybersecurity measures are necessary to maintain trust and compliance.