FACULTY NAME: FACULTY BUSINESS AND MANAGEMENT PROGRAMME NAME & CODE: DIPLOMA IN BANKING STUDIES (BA119) COURSE NAME & CODE : INTERNATIONAL BANKING (FIN365) PREPARED BY : GROUP : Incumbent banks have a good chance of being the real winners of the COVID-19 digital revolution because Incumbent banks are aware of the challenge,and have a bigger widow to respond.In a more digital environment, incumbent banks continue to find changes they need to make to their current processes to operate..Whether by developing this in-house or partnering with other companies that can bring in the right capabilities, they would have time to experiment with new CVPs.It is also important to note that the start of the licensing process for digital banking is likely to coincide with the release of the eKYC (electronic know your customer) guidelines . Using digital proof of identity through eKYC could radically change the role of branches in banks.While eKYC will provide the foundation for branchless digital banking models, it is also a key enabler for incumbent banks’ own digital transformation. The incumbent banks will be able to adopt eKYC immediately, unlike applicants for digital banking license who are delayed by the start of the application process. Second is becoming profitable as a digital bank is more challenging than ever.Globally, with entrants focusing on customer acquisition and creating a compelling CVP, digital banking models are still evolving as they seek to create a niche that they can monetize in the long term.With many digital banks focusing on the more affluent customer segments and adopting a lifestyle-based CVP, the continued relevance of the digital bank CVP will be significantly affected by fundamental changes in customer behaviour and spending patterns.For a digital bank focused on the less affluent B40 (the bottom 40% income group in Malaysia) and the Micro, Small and Medium Enterprise (MSME) segments, in line with the requirements of Bank Negara Malaysia, would devote their attention to those segments of society most affected by the pandemic.Taking into account the fact that the pandemic has threatened the profitability of many small and medium-sized businesses, this can result in lower incomes and greater risks for the banks that support them. We're looking at these in the next segment. Third is banking fundamentals,funding and risk management have become more important.banks in Australia with a natural funding base from deposits were able to dominate the lending market as wholesale funding sources disappeared.Even through a downturn, incumbent banks with a proven deposit base are more likely to continue their lending sector.With Bank Negara Malaysia’s requirement that digital banks focus on the under served and unbanked including the B40 and the MSME segments, this means that their core customers will have lower deposits than the average Malaysian customer.In addition, Development Financial Institutions (DFIs) focusing on similar segments of customers usually expand their deposit base by providing term deposits at competitive rates that increase their funding costs. In order to continue to expand their lending businesses, digital banks will need to draw deposits from consumers outside the under served target market. The pandemic, and any subsequent softer economic climate, will drive increased credit demand, but economic instability makes it far more difficult to assess risk. For example a company that seemed viable only a few months ago might face major risks today. Increases in non-performing loans would require rigorous processes to ensure that as much as possible is recovered.. Incumbent banks with established risk procedures are likely to have greater resilience to survive the crisis. Lastly is Malaysia digital banks can still be competitive if they create a differentiated CVP.COVID-19 has not changed the reality that a digital bank will succeed when it understands the behaviour of its customers and creates a compelling CVP that meets the needs of its customers.Customer access, or a technology platform alone is not sufficient. The delay in the application process provides the opportunity for players preparing to apply for the digital banking licence to reconsider their CVP and to test whether it really offers a unique service to the consumer that can not be duplicated by the incumbent banks. I agree that Incumbent banks have a good chance of being the real winners of the COVID-19 digital revolution because digital banks are more advanced and sophisticated they include using technology in every banking operation, method and stage in the delivery of banking products and services, with the intention of making customer experience more smooth, effective and efficient and thereby removing the need for a physical place.Digital banks rely heavily on technology and leading practices such as big data, machine learning, and a high degree of automation, cloud leverage, analytic and artificial intelligence (AI) to improve consumer experience beyond traditional credit and debt banking transactions.Second is Effective digital banks position customers at the forefront while planning business processes and ensuring that appropriate consumer data security plans are in place. They also concentrate on the value proposition of the customer when developing their business plan, strategy and target business model.Third digital bank offer different experience to the customer.Digital banks use data in a very different way than virtual banks when assessing risk.Through the use of data analytic and enhanced processing of data, digital banks can potentially understand customer needs better. Using data and analytic, digital banks,can generate small amounts of money, with very low risk, all while helping save people from money lenders that take very high margins. REFERENCES Annis shakirah, Mohd muslimin. “Digital Banks Are On the Rise In Malaysia.” https://www.comparehero.my/banking-finance/articles/digital-bank-malaysia, July 29, 2020, https://www.comparehero.my/banking-finance/articles/digital-bank-malaysia. Joe Devanesan |. Malaysia is gearing up for a digital banking revolution, © 2020 Tech Wire Asia, 11 June, 2020, https://techwireasia.com/2020/06/malaysia-is-gearing-up-for-a-digital-banking-revoluti on/. Lum Kar Hoe. COVID-19: Opportunities and Challenges for Digital Banks, Lum Kar Hoe, Senior Manager, Financial Services, PwC Malaysia, April 2020, https://www.pwc.com/my/en/perspective/digital/200408-pwc-blog-covid-19-opportuniti es-challenges-digital-banks.html.
