The banking sector is becoming more complex, and increasingly reliant on digital technologies to support the flow of financial information, a new study has found.
Key points:The Australian Financial Services Industry (AFSI) says it will be better able to deal with complex digital transactions by moving from traditional paper documents to digital documentsThe study says digital documents can be as simple as an image and can be shared on mobile phones and tabletsThe Australian Institute of Commerce and Technology (AICIT) says the industry is moving from paper to digital in a number of ways including:More complex digital documents, such as credit and debit cards, will be used in more of the financial industry’s digital services.
However, the AICIT report suggests that many of these processes could become more complex if the financial services sector is left to rely on traditional paper document systems for its digital services, such that people can access financial information electronically without the need for paper.
“For the financial sector, it’s the paper that’s the problem and not the digital.
It’s not the paper itself that’s a problem, it is the use of paper,” said Associate Professor Alan Durney from the University of Western Sydney’s School of Business.”
So the paper is the problem, not the technology.”
Mr Durnez said it was “not an easy transition” for banks, but added that digital services could allow them to become more efficient, while still remaining competitive with the traditional paper model.
“The digitalisation of the banking industry in Australia has been one of the most challenging transitions we have had,” he said.
“We’ve seen a huge amount of change in the way people have access to their bank accounts over the last 20 years.”
I think one of those changes has been the shift from paper documents, the traditional approach, to digital.
“In fact, digital has become the most common form of payment today.”‘
Digital is the solution’The AICI study looked at how the financial institutions’ business model changed between 2004 and 2012.
It found that the traditional banking model, in which bank customers relied on physical cash to access their accounts, has become increasingly digitised.
“It’s the modernisation of banking that is driving the shift,” Associate Professor Durneys said.”[The banks] have been trying to deal in the past with the paper document model, which was the backbone of the industry for many years.”[But] they’ve realised they can’t do it.
“The study said the financial system is now more reliant on electronic payment systems.”
Financial information is not only required for customers, but also to manage the risks of financial institutions,” the report said.
Mr Dourney said the banking sector’s reliance on digital payment systems has resulted in “unintended consequences”.”
It means that the banks don’t need to have a paper document system for a digital payment system,” he explained.”
And this has meant that they are less likely to have an internal system for financial reporting and for financial institutions.
“Mr Ryan said the AISI report was important for the banking and financial services industries to understand how the new financial system will affect them.”
What we have learned from the research is that the financial information that people are accessing digitally is not the same as the information that is being generated by the paper system,” Mr Ryan said.