Digital Transformation

Digital Financial Services in the Banking System: Progress and Solution of the Future Challenges


     Today, we have the opportunity to do most of the work at home, having only a phone in hand. One can also open a mobile application or go to the official website of any organization and get the necessary information, place an order, make a payment and even file a complaint. There are programs and devices that allow us to carry out operations in a matter of seconds, but before it took months, or waiting in line for the whole day.
     All these are the results of the development of information and communication technologies (ICT), digitalization of information, consolidation of disparate data from paper media into electronic databases. The rapid penetration of ICT into our life has sharply increased the globalization of world economic relations, competition in the market for suppliers of goods and services, including financial ones.
     The banking system is also experiencing the widespread introduction of information and communication technologies in line with modern requirements, and thus the automation of many banking services is carried out. Now one can get almost all banking services instantly using a mobile phone or special devices, unlike, say, what it was a few years ago.
     The Strategy for Reforming the Banking System of the Republic of Uzbekistan for 2020-2025, signed by the President on May 12, 2020, identified such priority tasks as creating the necessary conditions for the wide introduction of modern information and communication technologies, automating business processes of commercial banks and expanding remote banking services.
     In the course of corporate transformation of commercial banks for introduction of modern information and communication technologies, it is planned to implement the following measures:
     ● expanding the volume and coverage of the remote banking services, including contactless payments;
     ● widespread use of the scoring system, remote identification and credit conveyor;
     ● strengthening the information security of banking information and systems;
     ● widespread introduction of new concepts and technologies in the banking sector (FINTECH, digital banking).
     These steps are aimed at developing the digital economy in the country, digitalizing banking services to ensure the rapid growth of the economy of Uzbekistan, accelerating the country’s integration into the world economy and the free market along with economically developed countries.
     Digitalization of banking services is the establishment of a relationship between a bank and a client based on digital information and communication technologies. As the bank clients use financial services, they begin to understand the importance of having convenience, quality and speed of service, time saving and reduced operating costs, and electronic document flow. Accounting and management systems are being integrated, a Customer Relationship Management system CRM is being created.
     It used to be difficult to contact the bank and use the services, especially in remote areas. Digital financial services enabled to effectively reach the population and business entities in remote and sparsely populated areas where opening bank branches is unprofitable.
     The digital transformation is streamlining business models of banks, developing the banking and payments segment – from remote banking services to changes in financial transactions.
Increased competition between banks
     The transition to electronic banking services and creation of convenience for the population undoubtedly influenced the intensification of competition. In turn, as competition grows, so does the need to take advantage of new opportunities in information and communication technologies.
     Thus, the digitalization of the economy has intensified competition in the financial services market between banks and non-banking entities. Customers have the opportunity to choose where and when to use financial services. The result of studying the client’s needs is the opening of bank offices working 24/7. In line with these needs, the electronic banking technologies offered in the financial market are developing rapidly. Examples are electronic payment systems, e-money, remote banking services including online banking products, bank terminals, and automated banking centers.
     The use of digital financial technologies optimizes the possibility of active cooperation between the government, payment service providers and customers. Constant analysis of the needs and requirements of customers leads to the introduction of new ways of providing services by banks, the creation of new attractive products.
     It should be noted that the pandemic has also impacted the rapid development of digital financial services. Before the lock-down began, the population was less interested in remote banking, preferring to come to the bank and solve the problem “on the spot.” A small number of bank customers used mobile applications and remote banking software. Residents who could not leave their homes due to the quarantine were in dire need of remote banking services. We began to search, study, and, if necessary, use the necessary service through electronic channels. This prompted banks to pay more attention to electronic applications, improve remote services and mobile applications.
Director of the Department of Payment Systems of the Central Bank of the Republic of Uzbekistan
You can read the whole article in the printed version of the magazine.


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