Sharfaa Khalifa - P2589253 -1

The COVID-19 pandemic has expedited the transition to digital banking, with online registrations and mobile banking usage reaching unprecedented levels. This shift has brought benefits for both banks and consumers, including reduced costs for banks and greater convenience for customers. Traditional banks have had to invest in improving their digital systems and collaborate with fintech companies to meet the demands of digital services. Digital banking has also increased financial inclusion and allowed underbanked populations to access financial services. Various types of banks, including traditional banks and neobanks, have adapted to the digital transformation. Central banks have also developed central bank digital currencies (CBDCs) as a digital alternative to cash. However, the digital banking revolution has introduced new risks, particularly in cybersecurity, and banks have had to enhance their consumer protection and safety measures. In the long run, traditional banks will have to Welcome to the Banker's Corner. I'm your host Shofa and today we are going to discover and explore the expedited transition of digital banking due to COVID-19 and the role of the banking industry in achieving environmental sustainability. To the listeners who are tech savvy and want to explore the digitalization in finance or to those convenience seekers who prefer the accessibility and convenience of digital banking or for those who just want to learn more about the digital banking landscape then this podcast is just for you. The outbreak of COVID-19 did not only impact people's daily lives but it also transformed businesses overnight. One of the most consequential shifts we have witnessed is within the field of banking. What was once a gradual and consistent progression towards the digital transition abruptly turned into rapid advancement. But how did this occur and what impact could this have on the future of banking? Let's go back to 2020. The pandemic resulted in lockdowns and social distancing measures being enforced globally and a sudden transition to remote work. Conventional banking which has a strong dependence on face-to-face interactions was substantially affected. ATM kiosks became difficult to obtain and physical branches had ATM kiosks became difficult to obtain and physical branches had to close temporarily. As such individuals were hesitant to handle physical cash. Despite there already being an upturn in digital transformation the pandemic acted as a catalyst pressurizing banks and consumers to adopt the digital solutions. There was an uproar in online banking registrations and the use of mobile banking reached unprecedented levels. But this was not only about practicality but it was a prerequisite where consumers had no choice but to use the digital platform to transmit funds, handle their services and finances and pay bills. There was a shift in consumer behavior where digital services became convenient and efficient to use rather than consumers physically carrying out these tasks. Banks were able to implement data-driven strategies with more online users. Banks collected critical consumer data which was used to personalize and improve the experience of digital users. Banks were in a better position to meet the demands of their consumers. One of the huge benefits is that the shift towards digital banking has brought about several benefits for both banks and consumers. For banks the change has allowed them to reduce overhead costs associated with maintaining physical branch networks whilst also providing a more scalable and efficient way to serve their customers. However for consumers digital banking has offered greater convenience, accessibility and flexibility with the ability to manage their finances from the comfort of their own homes and thus customers have been able to avoid the risks and inconvenience of in-person banking during the pandemic. There was also enhanced productivity where the digital platform and services ensured a streamlined banking operation which would reduce the overall time to process transactions, customer service inquiries as well as approvals for loans and other services. Michael Kosowski, a business development manager, stated in the Financial Times that the demand for digital solutions hugely increased and forced banks to innovate and transform more rapidly than ever before. With a substantial rise in the utilization of technology like digital payment wallets, AI-powered technology and RDC, remote deposit capture. Despite this benefit traditional banks had to prioritize significant amount of funds to improve their digital systems and improve their online banking services. Moreover, integrating the new software and technology with existing software became more complex, time-consuming and costly. Traditional banks became crucial allies with FinTech companies that have a digital-first approach to leverage FinTech solutions and integrate advanced technologies to meet the demands of digital services. However, because of the collaboration it has significantly increased the competition within the financial services market and potentially caused market saturation making it harder for new competitors or entrants to enter the financial services sector. However, there was an increased level of financial inclusion. Digital banking created an opportunity for underbanked and unbanked populations which gave them access to new and improved financial services without the need to visit physical branches. Now let's discuss specific examples. How did various types of banks react to this transformation? Well, with traditional banks those with a significant reliance on face-to-face interactions had adopted the digital solutions rapidly by allocating substantial resources to elevate and enhance their online platforms and mobile banking. The Bank of America annual report stated a 30% increase in mobile banking users during the outbreak of COVID-19. In addition, the Bank of America's annual report stated a 30% increase in mobile banking users during the outbreak of COVID-19. They enhanced their digital platforms by providing virtual financial consultations and contactless card payments. Conversely, neobanks or digital-only banks operate primarily through digital channels and thus were already well positioned. Companies like Monzo and Chime saw accelerated growth as consumers turned to neobanks for complete digital solutions. Neobanks did not have to transform their business into a digital platform but rather just scaled up. For instance, Chime's consumer base nearly doubled during the COVID-19 outbreak. The acceleration also had an impact on central banks. Central banks had to adapt quickly and respond. The trend towards digital banking has accelerated. This was carried out through the development of CBDCs, Central Bank Digital Currencies, which are a digital alternative option for cash, addressing the deterioration of the use of physical cash. However, as digital payments were increasing, the demand for physical cash declined, which impacted central banks' strategies for printing and distributing currency. The increased usage of interoperable digital payments, where central banks create frameworks to enable smooth transactions internationally, central banks now had to update their regulatory and supervision policies to encompass the digital banking activities, including fintech companies and traditional banking providers. The digital banking acceleration can also boost economic resilience during crises. Digital financial services are being used despite the lockdown and social distancing measures. However, despite these beneficial impacts, let's not forget about another main aspect of the digital platform which can introduce new risks like security. With a higher volume of users on the digital platform, cybersecurity became a primary focus. There's a huge regulatory scrutiny and regulatory oversight within the digital banking sector. Banks needed to ensure they mitigate this risk by integrating rigid frameworks and policies to prevent cyber threats and data privacy. Banks ensured they included updated regulations and multiple verification methods. Banks needed to face these challenges in stride and ensure they enhanced consumer protection and safety measures. Compliance costs were a huge issue for banks, especially smaller banks, where they have to invest in a lot of funds and time to meet the new regulatory requirements. But this asks the question, will there be any long-term implications? I think traditional banks will have to remodel and prioritize the digital banking platform to adopt the current trends and demands of consumers. Banks will have to ensure they continue to innovate to create an enhanced experience for the consumers and strive within the financial market to beat the competition as well. Digital channels have also become a primary role to interact between the banks and the consumers. However, what are also the lasting impacts of the digital banking revolution and is it here to stay? The COVID-19 outbreak has changed the digital banking landscape and I believe it is here to stay. Despite the challenges the banking industry has faced, there are more beneficial impacts. Digital services have become an efficient and effective way for banking and thus consumers are now demanding a streamlined and personalized service. Banks will have to continue to invest and slowly integrate and improve technologies like AI, blockchain and more advanced digital banking features and services. The future of banking is digital and the pandemic accelerated the process in that direction. Banks will be well situated and will fully embrace the digital banking landscape in the future and will be more resilient if they come across other crises. Aside from the pandemic outbreak, banks have a role in achieving environmental sustainability. But what is the role of the banking industry in achieving environmental sustainability? Climate change and environmental degradation have become an urgent matter that needs to be addressed in the world and thus the banking industry has made intentions to create a positive change in creating a significant change. But how can banks contribute to environmental sustainability? One of the methods is through green finance. What is green finance you might ask? Well, green finance is a financial method that invests capital towards projects that can promote and boost environmental sustainability. Essentially it's like giving your money a green makeover where you're investing your money in business projects that commit to promoting renewable energy products, reducing carbon emissions and preserving natural resources. Banks provide sustainable financing products like green bonds, sustainability linked loans and also green loans. These options can help banks contribute to mitigating their exposure to environmental footprint and climate change. Green bonds can also attract investors that support these sustainable practices. HSBC annual report states that they first introduced green bonds of 500 million dollars to invest in environmental projects. HSBC have future goals and plans in place to invest in a greener future. Banks can also collaborate with third parties, the government, NGOs to boost the level of sustainability. This collaboration can lead to efficient and effective research policies, frameworks and also making timely decisions. Yes, banks do look at making money, however they also want to foster a constructive influence on the planet. Another way they achieve this is using ESG, the environmental and social governance framework. Banks can implement environmental practice and performance, social responsibility and government practices within their investment and lending activities to enhance overall sustainability. Banks can assess these factors and carry out screening and assessments and frameworks to identify potential risks which can help them make informed investment decisions and as well as environmental decisions. Not only do banks have a role in shaping a sustainable future externally but they have a role internally as well. Banks can inform their clients on the environmental and sustainability practices to increase corporate engagement which the client can also contribute to. Banks can incentivize their consumers to invest in eco-friendly investments and loans to boost and adopt more sustainable practices. Employee education is also another factor that banks can consider to internally improve their sustainable future and environmental sustainability. To educate and inform the workers regarding the bank's goals and objectives towards environmental sustainability and how the company can reach these goals together. When the banks and the employees themselves work together, they will be able to carry out all their objectives and their goals. This can be done through training programs and campaigns where the employees can learn how to integrate the environmental practices within their work. This is measured through reporting and transparency. Banks have policies in place to ensure disclosure of their environmental practices and impacts while also ensuring accountability and transparency. There are challenges and limitations that banks face which affect them in achieving environmental sustainability. Banks are pressured to meet their short-term profitability objectives and returns which can affect the long-term investment objectives that are required for environmental sustainability. If banks are focusing more on short-term projections, it can lead to less focus and commitment to environmental sustainability. Regulatory ambiguity can result in environmental policies having different jurisdictions which could be challenging for banks to integrate these sustainable practices. Robust data and reporting systems are need to carry out an effective integration of environmental sustainability. However, this may be challenging for banks as they could find it hard to obtain relevant environmental data which could adversely impact their decision-making process. Although collecting data may be challenging, banks could use different methods to measure their environmental impact. For instance, using data to assess the energy consumption and environmental consumption on their supply chain or by using metrics to consistently and constantly measure the environmental impact. Metrics like GRI, Global Reporting Initiative, or TCFD, the Task Force on Climate-Related Financial Disclosures. Metrics and frameworks like these can help banks in performing and achieving the role of environmental sustainability. With these metrics, banks can improve their overall decision-making through risk assessments and scenario planning. Banks can use different scenarios on their internal operations and activities and will be able to assess the outcome and see how it will impact their environmental and sustainable performance. Banks would also be able to see and make informed decisions which can create a positive and beneficial impact on their operations and portfolios. Banks carrying out these metrics and assessments and frameworks can allow them to carry out internal audits as they have obtained the right information and data to carry it out. Banks will be able to know how their projects are doing and if it is effective in reaching environmental sustainability and if there needs to be room for improvement. If they have updated their regulations or identify any gaps in their policies to ensure the bank's environmental strategies are robust. Internal benchmarking can also be used and if it is carried out, the data will allow banks to compare their other branches or departments and see which areas are performing the best and which areas need more priority and more attention. Banks can use this to identify opportunities in sustainable initiatives where the internal audits can uncover opportunities for new sustainable initiatives like energy saving products, waste reduction programs and green product development. This would also give an opportunity for innovation and investment where they can identify areas where environmental performance can be improved and again using the audits can guide the investments in new technologies and innovations that enhance sustainability. This could also be used for accountability where they can have assignments for responsibility where internal audits can help assign clear responsibilities for the environmental performance ensuring that the individuals and the employees and departments are accountable for their actions and results and they know how they are achieving their goals and objectives in achieving the financial and environmental sustainability. It is clear that the banking industry plays a significant role in achieving environmental sustainability by ensuring they align their financial activities with environmental goals and objectives which positively contribute to the planet and the economy. The banking industry can help contribute towards an environmental and sustainable world for the future. Thank you listeners for joining me today for the invaluable insight on the banking landscape. I'm your host Sharifa at The Banker's Corner signing off.