1.      Introduction

The financial sector is already being changed by new technologies in banking and the conventional banking environment is set to change dramatically in the next five years. Security features enable protect against bank fraud, including such advanced cryptography and biometrics, and remote apps will make it simpler than ever before to do your transactions without visiting the branch and when you do, the interaction is expected to be even more customer-friendly.  In the banking sector, the mobile and digital transition has only just started and progress is already exponential (Mbama and Ezepue, 2018). Banks have invested heavily in digital banking technology, where customers utilize banking services via smartphone, web or digital channels. In basic activities such as making purchases, artificial intelligence solutions, including the chatbots also assist clients.  86 percent of banks suggested in a Forbes survey on banking customer engagement from late 2016 that these kinds of services reflect their top technology investments.

It was also expected in previous years that the trends in technology is going to hit the market with new financial services in 2020 that is now actually seen practically happening. It is also anticipated that the growth of financial companies will focus on their ability to shape the shared economy and customer intelligence and come to terms with breakthroughs in technologies like blockchain, artificial intelligence (AI), robotics and more. The advent of the Internet is entirely compatible with the upswing in digital banking, fueled by the emergence in the 1960s of ATMs and debit cards. Today, banks have been able to bring multiple forms of interaction to their customers due to the internet and greater usage of smartphones devices. Both for banks and their customers, digital banking provides convenience. Although consumers can also save time and effort by easy on-the-go banking transactions, banks save costs on physical infrastructure by shifting a portion of their transactions online and recruiting costs. Although in-branch banking remains relatively important, it is not possible to ignore the advantages of digital banking, which is possibly why Santander a leading bank, recently decided to cut its branch network by nearly a quarter (Larsson and Viitaoja, 2017).

The aim or purpose of this report therefore is to analyze digital banking and banking as a platform. The report is structured by providing brief background and overview of the digital banking and then the second section of the report focuses on the discussion of advantages of digital banking and fintech and its development. Moreover, the issue like money laundering and its prevention, enforcement of complex and extensive regulation on banking and affect of AI on digital banking is also discussed in the second part of this report. Side by side, the linkage of risk with being more digital is also thrown light in the discussion part of this report. Then, the brief conclusion is also provided by brief summary of the whole report in the third section. Finally, some of the recommendations are given in fourth and last part of the report for tackling the issues faced by banking organizations.

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2.      Discussion

2.1. Digital banking

Digital banking is defined as the digitalization (or movement to online) of all conventional banking practices and services that have traditionally only been open to customers when they are physically within a branch of a bank. This involves operations like bill pay, loan management, account services, applying for financial products, money deposits, checking, withdrawals, account management and money transfers. Market preferences have moved rapidly to websites and mobile devices, however most financial institutions are getting accustomed their banking experiences to smaller mobile device screens and online platforms. Unfortunately, since consumers are increasingly willing to migrate banks to digital features such as bill pay, mobile payments and loan applications, banks can no more decide to keep investing in digital transformation (Mbama and Ezepue, 2018).

Digital banking is part of the wider context of the shift to online banking under which online delivery of banking services takes place. The transition from traditional to digital banking has indeed been gradual and remains ongoing and is characterized by varying degrees of digitization of banking services. Digital banking includes elevated levels of automated processes and web-based services that may include APIs that allow banking products to be delivered and transactions to be provided by cross-institutional service composition. It offers the ability for consumers to use desktop, mobile and ATM applications to access financial data. The reasoning that digital banking is far more than a smartphone or online platform is because middleware solutions are included. Middleware is a software which bridges other applications with operating systems or databases. In order to really be considered a full digital bank, financial sector divisions such as risk management, product creation and marketing will have to go along with the middle and back end. To ensure protection and comply with government regulations, the financial institutions must be at the forefront of contemporary technologies.

A digital bank reflects a virtual mechanism involving and even beyond online banking. Digital banking must include the front end that customers see, the back end which bankers see into their servers and admin control panels, and the middleware that links these domains as an end-to-end network. Ultimately, on all service delivery channels, a digital bank can promote all core functions of banking. In other words, the head office, branch office, online service, bank cards, ATM and point of sale machines should have all the same functions(Mbama and Ezepue, 2018). Digital banking, at its heart basically includes using technology to deliver the banking products.   A few believe that digital banking is fundamentally an online or mobile banking platform, but real digital banking has to go much further than that. Going digital means implementing the latest technology at all levels of organization and on all networks for service delivery. At the branch, at the head office, on an online service delivery network, at the ATMs and at the point of sale of computers, a digital bank will behave the same way.

2.2. Fintech and its development

The year 2020 and beyond will see transformative shifts in how technology affects companies. Innovation in products and services led by technology will be in full bloom as companies will exploit FinTech (Financial Technologies) to develop new revenue streams. This is evident from the fact that the demand for FinTech is rising consistently. The term FinTech comes from the combination of two words: financial services and digital technology. In short, FinTech is simply empowering start-ups for using digital technologies to develop creative products and services including such mobile payments, online banking, alternative finance, big data, and holistic financial management. Fintech defines any business that offers software or other technology for financial services and encompasses everything from mobile payment applications to cryptocurrencies.

FinTech was founded as a technology that has been used in financial institutions and banks’ back-end systems. Ever since, however, its meaning has drastically changed. It now covers many consumer-based applications (Vives, 2017).

The definition of FinTech goes back decades, even though the term was only introduced to the Merriam-Webster dictionary in 2018.  At one time, for instance, ATMs have been at the very leading edge of fintech innovation as were signature-verifying systems first used in the 1860s by banks.  Fintech has transitioned from being connected to scrappy startups in recent times to be a major facet of developed and legacy financial institutions. By 2019, with this technology, you can exchange stocks, control money, and pay for your insurance and food. Numerous applications have been influenced by FinTech for banking and have revolutionized the way customers access their finances. The introduction of cutting-edge innovations paired with the demand for stable and more user-friendly business experience from customers and this has led banks and financial institutions to embrace FinTech finance technology readily. Therefore, the technologies of blockchain and cryptocurrency are the hallmark instances of FinTech that are in action currently.

2.3. Money laundering and its prevention

Money laundering is the illicit method that appears to have originated from a illegitimate source to make large sums of money produced by a criminal activity, such as drug trafficking or terrorist financing.  The money from illegal activity is considered filthy, and to make it look clean, the method “launders” it. Money laundering is a severe financial crime used by white collar and street-level offenders alike. In order to prevent, track and deter this operation, most financial firms have anti-money laundering (AML) practices in place. The banks must also have a requirement for reporting the transactions that are of large cash and other such activities that are suspicious and reflect money laundering signs in order to prevent this financial crime (Purovesi, 2016).

From either the simplest or to the very complicated processes, there are several avenues to launder money. Using a legal, cash-based company owned by a criminal enterprise is among the most popular techniques. For instance, if the company owned a restaurant, the regular cash receipts might be inflated to funnel illicit cash via the restaurant and then into the bank account of the restaurant. The funds can be extracted as needed after that. Such types of companies are commonly referred to as “fronts.” In recent decades, policymakers around the world have made tremendous efforts to fight money laundering, with laws requiring financial institutions to put in effect systems to identify and monitor fraudulent behavior. Individuals who receive CAMS (Certified Anti Money Laundering Specialist) certification can work as managers of brokerage enforcement, officers of the Bank Secrecy Act, managers of the financial intelligence unit, surveillance analysts and investigative analysts of financial crimes (Purovesi, 2016).