Page 57 - Banking Finance February 2024

FEATURES

Making technology work for

smaller banks

I n today's rapidly evolving digital landscape, smaller Challenges

banks are increasingly recognising the importance of
Security, data privacy: Which technology adoption comes
technology adoption to enhance their operations and
the responsibility to ensure robust cybersecurity measures
stay competitive. Many of them are turning to third-
party providers to integrate innovative solutions into their and protect customer data. Small banks must adhere to
stringent regulations and invest in secure infrastructure,
existing systems. encryption techniques, and employee training to mitigate
However, alongside the opportunities that technology the risks associated with cyber threats.
offers, there are also challenges to navigate, particularly Compliance: Integrating technology requires small banks to
when it comes to meeting regulatory expectations and navigate a complex regulatory landscape. They must align
complying with existing frameworks. Here, we will explore their operations with relevant regulations, such as data
the opportunities and challenges involved in integrating protection laws, antimoney laundering requirements, Know
technology in such small banks while ensuring regulatory Your Customer guidelines, and consumer protection
compliance. measures. Failure to comply can lead to reputational
The opportunities are as follows: damage, legal penalties, and loss of customer trust.

Enhanced efficiency: Implementing technology solutions Vendor management: Collaborating with thirdparty
allows banks to streamline processes, automate routine technology providers introduces another layer of complexity.
tasks, and improve overall operational efficiency. This can Small banks must carefully evaluate and select vendors that
result in cost savings, faster response times, and better meet regulatory requirements and can demonstrate a
customer experiences. commitment to compliance. Effective vendor management
includes due diligence, contract negotiation, ongoing
Expanded product offerings: Technology integration monitoring, and ensuring contingency plans are in place.
enables banks to expand their product and service offerings,
catering to customers' evolving needs. It opens avenues for Legacy systems and integration challenges: Many small
digital banking, online payments, mobile apps, and banks operate on outdated legacy systems that may not
personalised financial management tools, which can attract easily integrate with new technologies. This can present
new customers and retain existing ones. challenges in achieving seamless integration, necessitating
investment in system upgrades or even complete
Data analytics and insights: Small banks can gain valuable infrastructure overhaul. Moreover, legacy systems may pose
insights from vast amounts of data by leveraging technology. compatibility issues with regulatory reporting requirements,
Advanced analytics tools help identify trends, patterns, and requiring careful consideration during the integration process.
customer preferences, empowering banks to make data
driven decisions and offer personalised financial advice. Technology adoption offers numerous opportunities for small
banks, empowering them to enhance efficiency, expand their
Competitive edge: Emracing technology enables small banks product offerings, and stay competitive in the evolving
to compete with larger institutions by providing innovative financial landscape. However, to fully leverage these
and convenient services. This level-playing field encourages opportunities, it is crucial for small banks to navigate the
customer loyalty, fosters growth, and helps small banks challenges associated with integrating technology while
carve out a unique market niche. meeting regulatory expectations. (Refer to Business Line)

BANKING FINANCE | FEBRUARY | 2024 | 51