Banks play a crucial role in supporting the financial and economic stability of emerging nations. Accounting for 5-10% of the total gross value added to the economy, banks contribute significantly to fueling entrepreneurship and providing financial security for every citizen.
The financial system of most emerging nations continue to be tested by mounting micro- and macro-economic challenges, prompting their respective central to manage risks prudently by fostering a vibrant and resilient financial sector through optimizing resource allocation and promoting stability among financial institutions.
Against this backdrop, it is necessary for the financial sector, in particular, the banking industry, to reflect upon several critical questions about their strategy and readiness moving forward:
Does the system contribute to economic prosperity?
Technology deployment and better business models are becoming pivotal to sustaining growth and tackling challenges in climate-dependent sectors such as agriculture
Does it offer innovative solutions that promote financial inclusiveness?
With a high percentage of the population residing in rural areas and an increase in the number of SMEs in emerging nations, banks are increasingly on the lookout for an integrated model that leverages new technology to enhance participation and promote banking as an ingrained habit.
Are there adequate security controls to ensure a secured and trustworthy banking environment?
Banks are a frequent target for cyberattacks and threats to information security. Necessitating maintenance of a safe and secure platform for participants is essential to sustain and inculcate higher consumer trust in the banking system.
What are the measures necessary to strengthen the resilience and sustainability of the banking sector?
As consumer banks are central to growth, the health of the financial system relies largely on the soundness of the LCBs, primarily the performance and strength of banks.
So how can banks realize these goals without having to radically reinvent or disrupt the existing sovereignty of the system? The answer lies in digital transformation. In conducting a detailed analysis of the financial sector in emerging nations, our core finding is the importance of IT modernization in transforming their banking system into a pragmatic, technology-driven business model focused on growth.
” The challenge ahead for the banking industry incumbents is no longer how to compete with existing competitors; instead, it is how to stay elevant amid changing customer expectations, digital disruptors, compliance requirements, and operational risks.”
Digitalization can fundamentally transform the competitive landscape in emerging nations’ banking system, improving economic prosperity, increasing financial inclusion, making banking safe and secure, and driving revenue opportunities. In transitioning toward digital channels and processes, banks can optimize their reach to unbanked populations and improve the speed of service delivery, which are essential prerequisites to building sustainable competitive advantage.
Embracing the four pillars of digital transformation across people, processes, and infrastructure is pivotal to charting a sustainable future for the banking ecosystem.