Volume 9 (2024-25)

Each volume of Journal of Digital Banking consists of four 100-page issues published both in print and online. Articles scheduled for Volume 9 are available to view on the 'Forthcoming content' page. 

Volume 9 Number 1

• Editorial
  Simon Beckett, Publisher
• Practice Papers
  Big Data in the financial industry: Applications, potential and regulatory approaches
  Joachim Wuermeling, European School of Management and Technology Berlin and Nils Müller, Deutsche Bundesbank
  Abstract

  In the financial industry, the volume and complexity of data is growing exponentially. These vast amounts of data can potentially offer valuable insights that can contribute to process optimisation, risk management and decision making. Many companies in the industry, however, face the challenge of how best to leverage this data. Despite a general awareness of the significance of Big Data, there is often uncertainty surrounding the optimal use of this data for practical applications. This paper summarises the existing real-world applications, especially those with implications for financial stability, and highlights the specific benefits of Big Data in the financial sector. The paper comments on the role and implications of Big Data regulation from the perspective of a regulatory authority. It shows that artificial intelligence (AI)-driven Big Data processing has expanded from customer interfaces to banks’ back ends. Numerous use cases exist along the value chain within the financial sector, including at central banks. Big Data offers both opportunities and risks for the financial system as a whole. The paper thus also emphasises the importance of striking a balance with regard to regulating AI. Overall, the paper argues that the effective use of Big Data has the potential to enable the financial industry to cultivate better efficiency in business practices and ensure greater resilience in the financial system.
  Keywords: open banking; API strategy; platform banking; partnership ecosystems; data-driven insights; advanced analytics

• Secrets to successful bank and FinTech partnerships for credit and deposits
  Rebecca Bacon, VP Head of Financial Institutions, Upgrade
  Abstract

  This paper aims to provide a road map to a successful long-term partnership between traditional financial institutions (FIs) like banks and credit unions with a financial technology (FinTech) platform. This is a summary of lessons learned from developing and launching over 200 bank/credit union partnerships with a FinTech lending platform. Drawing on experience with financial institutions of all shapes and sizes, this paper details best practices to create a scalable way of providing custom solutions to the problems faced by the modern depository institution. This includes a particular focus on lending/ credit products, and how the effect of FI and FinTech lending programmes can add value while mitigating risk. The paper focuses on depositories domiciled in the USA and the American banking system’s regulatory environment, but many of its themes will be applicable to international organisations.
  Keywords: Big Data; financial industry; artificial intelligence; AI; machine learning; regulation

• The journey towards a responsible AI future: Hype, fear and hope
  Theodora Lau, Unconventional Ventures
  Abstract

  This paper discusses artificial intelligence’s (AI’s) growing prominence in, and impact on, various aspects of our daily lives, with a focus on the financial services industry. It highlights the evolution of use cases in banking against the backdrop of the hype cycle that we are in today and discusses how the technology can be used to streamline operations, increase productivity, drive new business opportunities and improve financial inclusion. It also urges readers to be mindful of the multifaceted impact of the technology and the responsibilities that organisations must bear to ensure reliability, transparency, safety, security, explainability, privacy and fairness. The author emphasises the importance of trust as a cornerstone and advocates for diversity in AI development and data representation to avoid reinforcing biases and inequities in our society. The paper is a call to action for a more thoughtful approach to innovation — urging stakeholders to recognise the shared responsibilities in shaping a human-centric, inclusive and trustworthy future.
  Keywords: artificial intelligence; future of work; responsible AI; ethics; FinTech; AI in banking

• Data science in economy and finance: A central bank perspective
  Douglas Araujo, Bank for International Settlements et al
  Abstract

  Data science is fundamentally different from traditional data analysis, as it typically applies to large, complex and/or unstructured information sets. The role of data scientists, hence, lies at the intersection of three areas. The first is IT: central banks are increasingly aware that a modern technological architecture is crucial to reliably and securely deal with data. The second relates to the use of mathematical and statistical techniques to deal with the raw data at hand. This paper analyses how many different approaches can help support central banks’ operations, especially in the monetary policy and micro- and macroprudential areas, as well tasks related to the functioning of the payment system, financial inclusion, consumer protection and anti-money laundering. It presents how, in addition, the use of the new techniques could transform the whole production chain of official statistics, making it potentially more efficient, resilient and user-friendly. The third key area is to ensure close cooperation between data specialists and subject-matter experts involved in data science projects. Analysing statistics calls for an awareness of the way they have been compiled as well as of the complex factors that drive them — which are essential elements for transforming data into knowledge and taking informed policy decisions.
  Keywords: IT; big data; policymaking; artificial intelligence; AI; official statistics

• Reskilling for the future: Enabling colleagues with a digital mindset who are ready for a future global digital era and platforms
  Helen Packard, Financial Conduct Authority and Louise Liu, SOAS University of London
  Abstract

  This paper explores the effect of digital skills at the individual, company and national levels to meet the digital era. UK and European Union based case studies are utilised to fully understand how jurisdictions are preparing stakeholders with confidence and digital tools capability and mindsets. The paper explores how large financial services employers and EdTech are striving to meet the challenges of the accelerating digital era. Finally, it aims to further encourage momentum to close the gap in digital skills by preparing stakeholders for success in the digital age. It concludes that the option of not evolving with technologies and data through new digital skills is no longer feasible for successful careers and industries.
  Keywords: digital skills; digital tools; challenges; skill gap; digital mindset; EdTech

• Enhancing the quality of banking technology platforms through a hybrid AI testing approach
  Iosif Itkin and Elena Treshcheva, Exactpro Systems
  Abstract

  In the dynamic landscape of the banking sector, marked by increased operational complexity and regulatory scrutiny, the pursuit of innovation demands a strategic orientation. While offering advantages in cost, quality and speed, this strategic approach to innovation should mandate a cautious consideration of the risks inherent in the integration of emerging technologies. With the continuous advancement of artificial intelligence (AI), particularly generative AI (GenAI), as a method for emerging banking technologies, its wider adoption in the financial industry demands careful consideration of associated risk implications. This paper advocates for a software testing approach that delves into the complexities of banking technology platforms by leveraging generative algorithms to attain extensive test coverage and simultaneously employs rule-based analytics to refine the generated datasets, optimising coverage for faster execution and efficient resource utilisation. Such an approach is in line with a risk-averse innovation strategy, as it balances out the smart creativity of novel GenAI methods with a rule-based discriminative potential of more established symbolic AI methods. This paper serves as a position paper, contributing to the discourse on the integration of innovative testing methodologies in the banking domain.
  Keywords: banking technology; software testing; artificial intelligence; AI

• Case Study
  Innovations and resilience in Thailand’s payment ecosystem: A comprehensive analysis — Connectivity initiatives, challenges and solutions
  Budsakorn Teerapunyachai, Payment and Bond Department and Yanin Bawornkitchaikul, Bank of Thailand
  Abstract

  This paper examines Thailand’s strategic initiatives to promote FinTech innovations, cross-border payments, individual and business payments. The primary objective is to showcase how Thailand is successfully capitalising on opportunities in the rapidly evolving payment ecosystem. Central to this adaptation is the modernisation of Thailand’s payment systems, which plays a crucial role in accommodating diverse payment preferences. A consensus on policy statements, guiding policies and collaborative approaches is deemed essential to increase competitiveness and consolidate Thailand’s position as a regional leader in payments. This leadership requires the dissemination of innovative and diverse initiatives focused on enhancing financial connectivity, thereby improving the quality of life and economic prosperity. The extensive use of Quick Response (QR) codes and PromptPay for cross-border transactions, which enable real-time international fund transfers, are important initiatives. Additionally, PromptBiz seamlessly facilitates the transfer of trade data and payment information, particularly benefiting businesses engaged in these processes. Concurrently, the integrity and security of the financial ecosystem are secured through meticulous risk management and mitigation efforts, ensuring a robust foundation for sustained growth and innovation.
  Keywords: payment connectivity; FinTech; cross-border payment; Standardised QR; PromptBiz; resilience