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Mambu

5 min read
One of the most discussed subjects in the industry today is how digital has transformed banking and financial services. And of course this has been even further amplified by the Coronavirus pandemic.

Digital what?

The term ‘digital banking’ is generally used to describe online and mobile banking services that use automation and are web-based. Institutions can deliver financial products to consumers and provide transactions completely digitally - no in-person branch visits needed. Consumers of course can access their financial data through desktop, mobile, and ATM services.

With financial institutions having to close down physical operations during the pandemic, customers and providers alike that hadn’t made the switch to online and mobile - digital naysayers - had no option but to do so quickly.

Look in the crystal ball

With a robust digital strategy now a must-have, institutions are updating platforms and operating efficiencies to not only handle increased demand, but also remain competitive. Otherwise customers will find an alternative. Online banking is truly the new norm and is the most dominant way to open an account, do money transfers, manage balances and more.

And digital banking innovations are popping up everywhere:

  • Peer-to-peer payments allow people to send or request money from others while only using a phone application.
  • AI and machine learning have been used to offer loans to consumers with little to no credit history, based on an assessment of the consumer’s credit-eligibility using their smartphone data.
  • Applications have been developed to help track a consumer’s overall spending so they can compare and improve their budgeting.
  • There are even robotic advisors that give consumers financial advice based on a quiz to determine their financial status and overall goals.
With a robust digital strategy now a must-have, institutions are updating platforms and operating efficiencies to not only handle increased demand, but also remain competitive. Otherwise customers will find an alternative. Online banking is truly the new norm and is the most dominant way to open an account, do money transfers, manage balances and more.
Radhika Dholakia
Chief Risk and Compliance Officer, Mambu North America

Compliance concerns

While the ability to use the internet to create deposit accounts, as well as apply for credit via a smartphone, offers convenience to customers, it does come with compliance issues that financial institutions must tackle. Due diligence is needed to correctly review the digital software and technology that powers their offerings.

Financial institutions also have a challenge to root out money laundering from nefarious actors due to the increased compliance risk associated with digital onboarding. This begins with the BSA/AML (Bank Secrecy Act/Anti-Money Laundering), Office of Foreign Control (OFAC), and Know Your Customer (KYC) compliance coupled with the beneficial ownership collection requirements for business accounts.

Some things to think about

To meet regulatory requirements, financial institutions should consider the following to mitigate risk around online account onboarding and digital banking:

    list

In summary

The digital banking market was valued at about $3.95 billion in 2019 and is projected to reach almost $11 billion by 2027. With the trend towards digital over traditional face-to-face showing no signs of stopping, be sure to think through all compliance and regulatory implications and don’t get caught out, your reputation depends on it.

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Radhika Lipton
An esteemed authority on internal auditing, compliance, operations, and risk management for financial institutions, Radhika is a tenured banking executive, accomplished businesswoman and philanthropist. At Mambu she leads banking regulatory compliance discussions, policy and procedure development, internal audit best practices, and strategic planning.
Radhika Lipton