By Hanniz Lam
If you’re following me on LinkedIn you would have seen me occassionally ranting about endless paperwork required by banks and government agencies. As a customer, I just want convenience without having to drive out, wait in line and fill 10000 forms requiring repeated information.
Yesterday afternoon, Bank Negara Malaysia announced that they have awarded digital banking licences to Boost-RHB, GXS Bank-Kuok Brothers, YTL-SEA, AEON-MoneyLion, and KAF Consortium amidst bated breath by the 29 companies and partnerships across different industries that applied for the digital banking licence.
Following the announcement, successful applicants will undergo a period of operational readiness that will be validated by BNM through an audit which may take between 12 to 24 months, before they can commence operations.
In the statement, BNM Governor Tan Sri Nor Shamsiah Mohd Yunus said, “Digital banks are expected to further advance financial inclusion.
By adopting digital technology more widely for everyday transactions, we can significantly increase opportunities for our society to participate in the economy — by overcoming geographical barriers, reducing transaction costs and promoting better financial management.”
“Digital banks can help individuals and businesses gain better access to more personalised solutions backed by data analytics. As businesses move online, digital banking also provides a safer and a more convenient way to transact,” she added.
What does Digital Banking Mean?
The automation of traditional financial services is known as digital banking.
Customers of a bank can use an electronic or online platform to access banking products and services.
Digital banking entails digitising all banking operations and replacing the bank’s physical presence with an always-on internet presence, reducing the need for customers to visit a branch.
Digital banking has the following benefits:
Digital banking enables consumers to perform banking functions from the comfort of their homes, be it an elderly person who is tired of waiting in line or a working-class professional who is caught up who has to take an off day just to vist the bank, or a regular person who does not want to visit the bank’s branch to run a single errand.
- Elaborating on the convenience offered, digital banking lets a user carry out banking work around the clock, with 24×7 availability of access to banking functions.
- One of the biggest drawbacks of traditional banking was the overly placed importance on paper. Banking has become paperless with the development of digital banking as a service. A user can log into their account at any point in time to monitor records.
- Digital banking allows a user to set up automatic payments for regular utility bills such as electricity, gas, phone, and credit cards. The customer no longer has to make a conscious effort of remembering the due dates. The customer can opt for alerts on upcoming payments and outstanding dues.
- Online shopping has become a even easier with payment channels becoming well-integrated with the online shopping portals. Internet banking has significantly contributed to online payments.
- Digital banking extending services to remote areas is seemingly a step toward holistic development. With smartphones at affordable prices and internet access in remote areas, the rural population can make the most out of digital banking services.
- Digital banking-enabled fund transfers reduces the risk of counterfeit currency. With the help of digital banking, a user can report and block misplaced credit cards at the click of a button. This benefit greatly strengthens the privacy and security available to a bank’s customer.
- By promoting a cashless society, digital banking restricts the circulation of black money as the Government can keep a track of fund movements. In the long run, digital banking is expected to lower the minting demands of a currency.
What’s the Difference between Digital Banking and Online banking?
More often than not, the terms of digital banking and online banking are used interchangeably. However, there exists a fine line between the meaning of the terms.
Online Banking deals with everyday essentials, such as checking balances, reviewing transactions, and transferring funds. This is the core operation of the bank, which is shifted to online presence with the help of online banking. Online banking is a means to an end.
However, digital banking is an end in itself. Digital banking is aimed at digitizing all the operations of the bank, core, or non-core.
Basically, starting from onboarding of clients to servicing of the accounts, to closure of accounts is digital banking’s primary objective.
Digital banking’s agenda is to make the physical presence of a bank’s branch redundant for its customers so that the customers can handle all banking operations from their place of convenience.
Therefore, online banking is a subset of the master set, digital banking.
Is digital banking safe?
We’ve been reading of money disappearing from bank accounts and resulting in accounts being frozen so what about digital banking?
Despite popular belief that digital banking creates security risks, you might be shocked to learn that it is actually safer than traditional branch banking.
While vulnerabilities and hacks such as phishing, pharming, identity theft, and keylogging are common in digital banking forums, banking institutions are investing heavily in their security measures.
When it comes to a service like digital banking, security is paramount. Banks would lose a key selling point if security was breached, and they can’t afford negative PR any more than they can’t afford to jeopardise customer data and resources.
Having said this, there are some steps to keeping your account secure:
- Follow prompts to change your passwords regularly and keep your passwords confidential.
- Avoid using public networks and devices to access digital banking – if you must use a public device, remember to clear cache and browsing data. It is good practice to not allow the browser to save your username and passwords for bank details.
- Banks never ask for confidential information so refrain from sharing it with anyone who asks for it even if you receive calls saying they are from the police or tax department accusing of crime.
- Anti-virus protected systems offer another layer of security to your systems.
- The URL address MUST begin with ‘https’, or a padlock must appear next to the website address. The padlock is a security certificate. The address bar turns green when the site is secured with an SSL certificated, which is an additional validation for the security of the website. Therefore, use the bank’s URL and refrain from clicking on other links. Banks generally use minimum SSL/128-bit encryption.
- There are some scammers who build websites that look like actual banking websites and they place Google ads so when you look for a bank’s phone number, their ad appears first.
- Lastly, disconnect from the internet when the system is left idle.