On the Mauritian landscape, much of the legislative novelties brought about since the outbreak of the COVID-19 pandemic has focused on the reinforcement of our international financial centre to enable the application of emerging technologies (predominantly Fintech) such as peer to peer lending and crowdfunding.

Fintech has been described as the driver of digital adoption and financial inclusion as it has effectively been the catalyst for digital banking and therefore made space in today’s virtual world for both the vulnerable populations and those who are traditionally less digitally savvy (i.e. 65+ years).

What then is digital banking – the reasons for and the apprehensions?

Digital banking is effectively online banking delivered over the internet and available on smart phones. The prominent actors in this domain are Monzo, Revolut & Starling Bank in the UK and N26 in Germany.

It marks a formidable shift of financial expertise and power from traditional banking to the hands of customers who now have access to these services either by the internet or from their mobiles.

On the one hand, digital banking brings to the fore the fundamental issues of data and privacy and how artificial intelligence is effectively protecting these. On the other hand, it challenges traditional banking and raises the question whether traditional banks will accommodate these into their banking culture, whether on a business-to-customer or a business-to-business setting. According to a report by Business Insider (Digalaki 2021), banks have been cautious in implementing artificial intelligence solutions as 54% of banks with less than USD 100 billion in assets have not implemented artificial intelligence strategies for reasons which range from having to deal with disparate data, implementing IT structures which their traditional ‘aging’ infrastructure cannot readily accommodate to the corporate culture change which digital banking requires ie innovation.

The advantages

Efficiency and financial wellness are undeniably the main arguments for encouraging digital banking:
Financial Wellness or Personal Management: consumers are offered

(i) a convenient dashboard of services to assist them i.e. view, manage finances generally and,

(ii) financial education and well-being because fintechs have increased their focus on helping organisations customize experiences through transactional behavior and therefore positively influence customers’ experience with money. Leading names on this front are Darktrace, RedSift & The ID Co. in the UK, Intezer in Israel, McAfee in the USA, MindBridge in Canada.

Efficiency: the use by fintech tools of robotic process automation and optical character recognition promote efficiency which lies at the heart of consumers’ expectations when dealing with loans or other types of funding. These help process loans faster, analyse credit history, track data and maintain compliance criteria. Ultimately, these projects a system which improves accuracy provided by the human input for these processes.

The drawbacks

While the undisputed aim of banks remains the enhancement of their services and their transformation through the implementation of artificial intelligence-based systems, their main challenge resides in

(i) the quality of customer data being held

(ii) where it is located and,

(iii) how it is formatted.

There is thus a need to centralise and standardize data processing and reuse software and algorithms, which in effect calls for a company-wide digital transformation in a system characterized by aging infrastructure. This transformation potentially exposes banks to risks if undertaken without proper planning and without the implementation of adequate safeguards.

The good news and the way ahead

Unprecedented times call for a culture change. Thus, partnerships between fintechs and banks offer the possibility to banks to fill their platforms and offer to clients a more integrated and comprehensive banking and investment portfolio without the need to develop the algorithm themselves but instead use existing setups to redesign their business processes.

Mastercard and Union Bank are the most glaring examples of successful partnerships with fintechs. Thus, Mastercard launched a “digital-first” card program which both acts as a “digital wallet” and enables cardholders to perform all account-based activities digitally. As to Union Bank it has leveraged 5G technology in order to partner with IoT which “allows for better prediction and anticipation of a customer’s preferences and behaviours” (Globe, 2020).

Twitter LinkedIn Email Save as PDF
More Publications
19 Feb 2024

Disciplinary Committees and the requirement of fairness and impartiality

Every company should ensure that it has established in its internal policies and procedures, a fair ...

17 Jan 2024

Derivative Action: A shareholder’s remedy to protect the interests of the Company

Generally, when there is a wrongdoing committed against a company, it is the company itself which ac...

15 Sep 2023

The Financial Services Commission issues the Financial Services (Global Shared Services) Rules 2022

On the 20th December 2022, the FSC issued the Financial Services (Global Shared Services) Rules 2022...

15 Sep 2023

Employer's perspective: What to expect in a settlement agreement?

What is a ‘Settlement Agreement’? One of the innovations of the Workers’ Rights Act (‘Act...

13 Mar 2023

New rules to boost the regulatory framework of Mauritius International Financial Centre

The Financial Services Commission introduces new rules in support of the new business activity of sh...

20 Dec 2022

Non-Fungible Tokens: Guidance notes issued in Mauritius

The Financial Services Commission (FSC) continues to propel its Fintech sector with a view to streng...

18 Nov 2022

Appleby Mauritius Newsletter, Nov 2022

There have been interesting developments in our legal landscape since our last issue with the Govern...

17 Nov 2022

Mauritius Case-Law Summary November 2022

This is a summary of recent cases likely to influence the practice of global business in Mauritius.

17 Nov 2022

The Statutory Requirement for a Debenture Holders’ Representative in Mauritius

A debenture is essentially a debt instrument which is traditionally not supported by any collateral ...