Possible Challenges of Digital Banks in 2023, Here’s What They Are

Digital banks are known for their efficiency in transactions so that banking transactions can be done online anytime and anywhere. However, the challenges for digital banks are also getting bigger. The challenges of digital banks are increasingly complex and challenging in the era of progress in information systems that continue to develop so there are more considerations in using them.

Based on the brief explanation above regarding the challenges of digital banks, AdIns has specifically prepared an in-depth explanation regarding this matter.

What is a Digital Bank?

Advances in information technology have had a major impact on all business sectors including banking services. The shift that occurs through banking innovation makes it easy for customers to access it online through digital platforms, websites or can be through mobile applications.

With regards to access and digital bank services, users can act independently without having to be assisted by functionaries such as bank tellers or customer service for their needs, one of which is opening an account.

One of the things that makes digital banks more efficient is that the physical offices are generally not needed that much anymore, but some still provide physical offices and only a limited number of them.

From the brief review above which describes digital banking, AdIns can argue that digital banks are banking services supported by information technology and operate with a transaction model through e-channels.

Read also: Functions of Non-Bank Financial Institutions That You Must Know

Challenges in the Industry

The challenges of digital banks are becoming increasingly complex to address. In this section, AdIns has prepared an overview of how these challenges may affect the existence of digital banks.

1. Imbalanced Distribution of Internet Providers

The presence of a digital bank is very dependent on the availability of internet access in an area because of the role of the connection that connects users so that the service process can run smoothly. Too many features can cause difficulties for users in areas with limited internet networks. Seeing these challenges, digital banks need to provide lightweight applications that can still be used by all users, including those in areas with limited internet access.

2. Digital Banks Require Full Population Data Access

Another challenge faced by digital banks is their need for access to population data. Data access is needed because it is directly related to the new customer verification process. Every time a new customer opens an account outside of normal office operating hours, a verification process must be carried out and requires direct access to the data center. Therefore, digital banks must be integrated with population data centers at all times.

Read also: Roles and Jobs of Credit Surveyors

3. Digital Banks Require OJK SLIK Data Access

Similar to population data, digital banks also require full data access to the OJK SLIK data center because more and more users are using financial services, and one of them is credit. The digital bank as a creditor is greatly assisted by the SLIK information service which is useful for verifying credit analysis so that the process is faster and more efficient.

4. Digital Banks Require Access to MSME Data Banks

Digital banks want the credit application process by debtors to run smoothly and faster. For this request to be carried out, of course, digital banks need to get access to MSME data banks and large companies that may one day apply for credit. During operation, digital banks can only provide credit to individuals or individuals through collaboration with third parties such as fintech.

5. Digital Banks Require Special Regulations

Special regulations for digital banks are needed so that they can carry out their business operations for healthier and stronger banking activities. An example is Islamic banks which have special regulations and are different from conventional banks. The most striking regulation of Islamic banks is not taking advantage of lending transactions to their customers.

To support their case, the Net Interest Margin (NIM) of digital banks has healthy prospects because when viewed from their portfolio, they focus on shares with a low ticket size value with a set figure (Rp 1,000,000 to Rp 2,000,000) and have a high level of Non-Performing Loans (NPL) ratio. In addition, the efficiency indicator used by digital banks is the Cost to Income Ratio (CIR) and not the Operating Income Operating Expenses (BOPO).

Seeing the challenges of digital banks, there is no doubt that they need support and additional access to make it easier to provide perfect service to each of their customers. In addition, internet connection problems must be resolved so that the reach is more even so that access to digital banking services can be more effective. Digital banks also need to pay attention to the data security of each of their business operations because it relates to their integrity as financial service providers.

In addition, digital banks certainly need to provide services in the form of credit that can boost economic activity for all classes of society. In applying for credit, an analysis process is needed to facilitate the mechanism. To address all challenges of digital banks, you can use the EKYC System – PROFIND from AdIns to make the profiles of potential customers’ tracking more efficient and accurate. Contact us to try the EKYC System – PROFIND from AdIns for your company’s business operations!