Trainee Manual - Digital Technology in Banking May 2024 PDF

Digital Technology in Banking Course Manual New Version 1.0 Copyright © 2023 Digital Technology in Banking Table of Contents Module One – Introduction to Digital Banking........... ………………………………3 Module Two – Digital Banking Concept..................... ……………………...

Digital Technology in Banking Course Manual New Version 1.0 Copyright © 2023 Digital Technology in Banking Table of Contents Module One – Introduction to Digital Banking........... ………………………………3 Module Two – Digital Banking Concept..................... ………………………………7 Module Three – Digital Payment Systems.................. ……………………………..14 Module Four - Digital Banking & Financial Inclusion …………………………….20. Module Five - Future Trends in Digital Banking........................................................29 Module Six – Benefits & Challenges of Digital Technology in Banking ……… 33 2|P a ge Digital Technology in Banking 1.0. Introduction To Digital Banking 1.1 Definition of Digital Banking Digital banking, often referred to as online banking or internet banking, is a banking model and service delivery approach that leverages digital channels and technology to provide customers with access to various financial services and transactions. In digital banking, customers can manage their banking activities, conduct financial transactions, and access banking services through digital platforms, typically over the internet or via mobile applications. The underlisted are the key features and aspects of digital banking: Online Account Access: Customers can check their account balances, view transaction history, and monitor their financial accounts online. Fund Transfers: Digital banking allows customers to transfer money between accounts, pay bills electronically, and send funds to other individuals or businesses. Mobile Banking: Mobile applications provide access to banking services on smartphones and tablets, offering the convenience of managing finances while on the go. Remote Check Deposit: Some digital banking platforms allow customers to deposit checks by taking photos of them with their mobile devices. Loan Applications: Customers can apply for loans, mortgages, and credit cards online, often with streamlined approval processes. Investment Management: Digital banking services may include tools for managing investments, trading stocks, and monitoring investment portfolios. Customer Support: Many digital banks offer customer support through online chat, email, or phone to assist with inquiries and issues. Security Measures: Robust security measures, including encryption, multi-factor authentication, and fraud detection, are implemented to protect customer data and transactions. 24/7 Access: Digital banking services are typically available 24/7, providing customers with continuous access to their accounts and financial tools. Digital banking has become increasingly popular due to its convenience, accessibility, and efficiency. It allows customers to manage their finances from the comfort of their homes or on- the-go, reducing the need for physical branch visits. Traditional brick-and-mortar banks have also adopted digital banking services to meet changing customer preferences and remain competitive in the modern financial landscape. 1.1.2. DIGITAL TRANSFORMATION IN BANKING Digital banking has brought about several major transformations in the traditional banking systems, revolutionizing how financial services are delivered, accessed, and experienced. These transformations are reshaping the banking industry, making it more customer-centric, efficient, and accessible. As digital banking continues to evolve, it is expected to drive further innovations and improvements in the financial services landscape. 3|P a ge Digital Technology in Banking 1.2. KEY DRIVERS IN DIGITAL TRANSFORMATION The banking sector is experiencing a profound digital transformation driven by several key factors that are reshaping the industry. These drivers are changing the banking landscape, making digital transformation a strategic imperative for banks to remain relevant, competitive, and responsive to evolving customer needs and regulatory requirements. The following are the key drivers of Digital Transformation in the Banking Sector: Changing Customer Expectations: Customers increasingly expect convenient, personalized, and seamless banking experiences. Digital transformation helps banks meet these expectations through user-friendly online and mobile banking platforms. Competition from Fintechs: The rise of fintech startups has introduced agile and innovative competitors. To remain competitive, traditional banks must embrace digital technologies and adopt fintech-inspired approaches to service delivery. Regulatory Requirements: Regulatory changes, such as open banking initiatives and data protection regulations like GDPR, compel banks to adopt digital solutions for compliance and to securely share customer data with authorized third parties. Data-Driven Insights: Banks are harnessing the power of data analytics and artificial intelligence to gain actionable insights into customer behavior, risk assessment, and fraud detection, which drives more informed decision-making. Security and Fraud Prevention: With cyber threats becoming more sophisticated, banks are investing in advanced cybersecurity measures to protect customer data and transactions, including multi-factor authentication and real-time fraud detection. Competitive pressure: Many countries are implementing open banking regulations that require banks to open up their APIs to third-party providers. This promotes competition, innovation, and the development of new financial services. Mobile Banking and Contactless Payments: The ubiquity of smartphones has led to a surge in mobile banking and contactless payments, with banks offering mobile apps and digital wallets to cater to customer preferences. Partnerships and Ecosystems: Collaboration with fintechs and other technology partners allows banks to access complementary technologies and expand their service offerings. Real-Time Transactions: Banks are striving to offer real-time payment processing, account updates, and transaction tracking to meet customer demand for instant gratification. Innovation Culture: Embracing a culture of innovation is essential for banks to adapt to rapid technological changes and remain competitive in the digital era. 4|P a ge Digital Technology in Banking 1.3. IMPACT OF DIGITAL TRANSFORMATION ON CUSTOMERS EXPECTATION Digital transformation in banking has had a significant impact on customer expectations. As banks increasingly adopt digital technologies and offer innovative services, customers' preferences and expectations have evolved. This has elevated customer expectations in banking, emphasizing the need for convenience, personalization, security, and efficiency. Here are the keyways in which digital transformation has impacted customer expectations in the banking sector: Convenience and Accessibility: Customers now expect 24/7 access to their accounts and banking services through online and mobile platforms. They value the convenience of conducting transactions and managing their finances from anywhere, reducing the need for physical branch visits. Personalization: Customers anticipate personalized banking experiences tailored to their individual needs and preferences. They expect banks to use data analytics and artificial intelligence to offer product recommendations and financial advice based on their financial behaviors and goals. Real-Time Transactions: The expectation for real-time transaction processing has grown. Customers want to see up-to-the-minute updates on their account balances, receive immediate payment confirmations, and have access to real-time information on their financial transactions. Digital Onboarding: Opening new accounts and applying for banking products should be a seamless, digital experience. Customers expect efficient and straightforward digital onboarding processes, reducing paperwork and wait times. Enhanced Security: While expecting convenience, customers also demand robust security measures to protect their data and transactions. They value features like multi- factor authentication and real-time fraud detection. Support and Communication: Customers want responsive customer support through various channels, including online chat, email, and phone. They expect timely and informative communication from their bank, especially regarding account updates and security alerts. Speed and Efficiency: The speed of service has become a critical factor. Customers anticipate quick responses to inquiries, rapid fund transfers, and efficient problem resolution. Innovation: With the introduction of new fintech services and features, customers increasingly expect innovative banking solutions that offer unique value and keep pace with evolving technologies. Financial Inclusion: Digital transformation has the potential to improve financial inclusion. Customers expect banks to play a role in providing accessible banking services to underserved populations. Sustainability: Customers value green banking options and sustainability initiatives. They expect banks to offer environmentally responsible financial products and services. 5|P a ge Digital Technology in Banking 1.4. ROLES OF REGULATORY BODIES IN DIGITAL BANKING TRANSFORMATION Regulatory bodies play crucial roles in overseeing and shaping the digital banking transformation. Their responsibilities extend to ensuring that the transformation aligns with regulatory standards, safeguards consumer interests, promotes fair competition, and maintains the stability and integrity of the financial system. Here are the key roles of regulatory bodies in digital banking transformation: Establishing Regulatory Frameworks: Regulatory bodies create and update the legal and regulatory frameworks that govern digital banking activities. They define the rules, standards, and guidelines that banks and fintech companies must adhere to in their digital operations. Security and Data Protection: Regulatory bodies set and enforce security and data protection requirements to safeguard customer data and prevent cybersecurity breaches. This includes regulations related to encryption, authentication, and incident reporting. Consumer Protection: Regulatory bodies focus on protecting consumers by ensuring fair and transparent practices in digital banking. They may set rules regarding disclosure of terms and conditions, handling of customer complaints, and dispute resolution mechanisms. Compliance Oversight: Regulatory bodies monitor banks and fintech companies to ensure compliance with financial regulations. They conduct audits, inspections, and examinations to assess adherence to regulatory requirements. Licensing and Authorization: Regulatory bodies grant licenses and authorizations to financial institutions, including digital banks and fintech firms, allowing them to operate legally. These licenses often come with specific conditions and obligations. Cross-Border Coordination: In an increasingly globalized financial landscape, regulatory bodies collaborate with their international counterparts to establish consistent regulatory standards and address cross-border issues. Innovation Facilitation: Regulatory bodies may create sandboxes or innovation hubs to encourage experimentation and innovation in financial services while maintaining regulatory oversight. These initiatives allow fintech companies to test new products and services within a controlled environment. Education and Awareness: Regulatory bodies often engage in public outreach and education initiatives to inform consumers and businesses about their rights, responsibilities, and risks in digital banking. Enforcement: Regulatory bodies have the authority to enforce penalties and sanctions against financial institutions that violate regulatory requirements, ensuring accountability. 6|P a ge Digital Technology in Banking 2.0. DIGITAL BANKING CONCEPTS 2.1. WHAT IS ONLINE BANKING Online Banking is a system that enables customers of a bank or other financial institution conduct a range of financial transactions through the website or mobile app. 2.1.1. FEATURES OF ONLINE BANKING Account Management View Account Balance: This is a feature that enables customers to check the balances of various types of accounts, including savings, current, and fixed deposits. Transaction History: Users can easily access and categorize past transactions based on variables such as date, transaction type, or amount. Account Statements: Options are provided to download or view account statements over selected periods. Fund Transfers Domestic Transfers: Users can facilitate money transfers to accounts within the same bank or other domestic banks. Bill Payments & Recharges Utility Bills: Enables direct payments for utility services like electricity, water, and gas. Credit Card Bills: Offers the capability to pay credit card bills without requiring a visit to a physical branch. Mobile and DTH Recharge: Direct recharge options for mobile phones. Loans & Investments Loan Application: Banks & fintechs offers the option to apply for various types of loans, such as personal loans directly from the online banking platform. Investment Portals: Investment options for various funds, fixed deposits are available from the platform. Security Features Multi-Factor Authentication: Most platforms have security measures such as multi-factor authentication methods, like OTPs, biometrics, or security questions. 7|P a ge Digital Technology in Banking 2.1.2. FUNCTIONS Customer Service: Online banking platforms offer 24/7 customer service through various means such as chatbots, live chats, or helpline numbers. Customization: Customizable dashboards allow users to prioritize features according to their requirements. Scheduled Payments: Automation of recurring payments, such as monthly utility bills, is accessible. Budgeting and Analytics: Advanced platforms may include tools and insights into spending behavior and budgeting. 2.2. MOBILE BANKING Mobile banking is the use of a mobile device, such as a smartphone or tablet, to access and manage one’s banking accounts and conduct various financial transactions. 2.2.1. FEATURES OF MOBILE BANKING Account Access & Management Quick Balance Check: View your account balances at a glance, often without even logging in. Transaction History: Browse through your past transactions, complete with search and filter options. Digital Wallet Integration: Many apps integrate digital wallets to streamline payments and fund transfers. Fund Transfers & Payments QR Code Payments: Scan QR codes for instant payments. Contactless Payments: Utilize NFC (Near Field Communication) for tap-and-go payments at point-of-sale terminals. Instant Transfers: Perform real-time fund transfers to other accounts. Utility Services Bill Payments: Pay utility bills directly through the app. Mobile Recharge: Top-up your mobile credit directly from your bank account. Ticket Booking: Some apps offer flight, train, or event ticket booking services. Investment & Loan Services Portfolio Management: Manage your investments and check your portfolio health. Loan Application & Tracking: Apply for loans and track the application status. 8|P a ge Digital Technology in Banking Security Biometric Login: Utilize fingerprint or facial recognition for secure logins. In-App Notifications: Receive real-time alerts for account activities. 2.2.2. FUNCTIONS Usability Functions User Interface: Mobile banking apps are designed for smaller screens and touch-based interaction. Device Synchronization: Settings and transactions can be synchronized across devices. Offline Functions: Some basic features may be accessible even without an internet connection. Security Functions Data Encryption: Advanced encryption algorithms to secure data transfer. Authentication Protocols: Multi-layered authentication processes for secure transactions. Fraud Detection Algorithms: Real-time fraud detection based on user behavior and transaction patterns. Integration Functions API Connectivity: Many apps integrate third-party services via APIs for added functionalities like investment advice or credit scoring. Banking Backend: Seamless integration with the bank's existing infrastructure for real- time data. 2.3. AUTOMATED TELLER MACHINE (ATM) An ATM is an electronic banking terminal that allows customers to complete basic transactions without requiring the assistance of a branch representative 2.3.1. FEATURES Cash Withdrawal: Withdraw cash from your account, the most basic function of an ATM. Account Inquiry: Check the current balance of your account. Deposit Functionality: Some ATMs allow cash deposits. Mini Statement: Print or view a mini statement showing recent transactions. Bill Payments: Pay bills such as utility payments, credit card bills, etc. 9|P a ge Digital Technology in Banking Foreign Currency Exchange: Some ATMs offer the ability to withdraw foreign currency. Card Management: Change PIN or activate new cards at certain ATMs. 2.3.2. FUNCTIONS User Authentication: Verifies the user's identity through a PIN and sometimes even biometric methods. Secure Communication: Encrypts the data transmitted between the ATM and the bank's servers. Cash Handling: Mechanisms for dispensing and counting cash accurately. Receipt Printing: Generates transaction receipts for user records. 2.4. USSD Banking USSD banking, also known as mobile banking via USSD (Unstructured Supplementary Service Data), enables users to perform banking transactions and access financial services using their mobile phones through a USSD menu system. USSD banking offers a convenient and accessible way for customers to manage their bank accounts, conduct transactions, and access banking services, even without internet connectivity. Here's how USSD banking works and some common features: Accessing USSD Banking: Users can access USSD banking by dialing a designated USSD code provided by their bank on their mobile phones. This code typically starts with a '*' and ends with a '#', followed by a specific numerical sequence. Menu-Based Navigation: Upon dialing the USSD code, users are presented with a menu of options on their mobile phone screens. These options typically include account balance inquiry, funds transfer, bill payments, mobile recharge, statement requests, and other banking services. Transaction Authentication: Users navigate the USSD menu using their mobile phone keypad and select the desired banking service or transaction type. Transactions are typically authenticated using a PIN or other security credentials provided by the user. Transaction Types: USSD banking supports a wide range of banking transactions, including: Balance Inquiry: Users can check their account balances in real-time. Funds Transfer: Users can transfer funds between their own accounts or to other accounts within the same bank or to third-party accounts in other banks. Bill Payments: Users can pay utility bills, credit card bills, insurance premiums, and other bills directly from their bank accounts. Mobile Recharge: Users can recharge their prepaid mobile phones or those of their family and friends directly from their bank accounts. 10 | P a g e Digital Technology in Banking Mini-Statements: Users can request mini-statements to view recent transactions and account activity. Service Requests: Users can request services such as cheque book requests, account statement requests, and account management services. Security Measures: USSD banking transactions are secured using encryption and authentication mechanisms to ensure the confidentiality and integrity of user data. Users are required to authenticate themselves using their PIN or other security credentials before initiating transactions. Accessibility and Convenience: USSD banking offers accessibility and convenience to users, particularly in regions with limited internet connectivity or smartphone penetration. Users can access banking services anytime, anywhere, using their basic mobile phones. 2.5. CHATBOTS & VIRTUAL ASSISTANTS Chatbots are software applications designed to carry out conversations with users via text or voice interfaces. Virtual assistants use machine learning to adapt to user behaviors and preferences over time, providing more personalized services. 2.5.1. FEATURES Customer Support and Engagement 24/7 Availability: Both chatbots and virtual assistants are available round-the-clock to provide customer service. Multilingual Support: Offer the ability to converse in multiple languages. FAQs and Troubleshooting: Capable of guiding users through common issues or questions. Financial Transactions Balance Checks: Quick queries to check account balances. Fund Transfers: Assist in transferring money between accounts or to other individuals. 11 | P a g e Digital Technology in Banking Bill Payments: Process and confirm payment of utility bills or other expenses. Personalized Financial Advice Investment Recommendations: Some advanced versions can offer personalized investment advice. Spending Insights: Analysis and advice on spending habits to better manage finances. Loan Queries: Provide information on loan types, eligibility criteria, and even the loan application process. 2.6. OMNICHANNEL BANKING Omnichannel banking is the integrated approach to delivering financial services across various channels in a seamless manner that provides a unified and integrated customer experience. 2.6.1. FEATURES Seamless Experience Consistent Interface: Users see a uniform interface, whether they are using a mobile app, website, or in-branch kiosk. Real-time Updates: Changes or transactions made on one channel are immediately reflected across all others. Customer-Centric Personalization: Customer preferences and behaviors are tracked to offer personalized services and offers. Context-Aware: Service offerings could vary depending on the user's location, time, and even previous interactions. Comprehensive service offerings Account Management: Easy access to account information and management features across all channels. Fund Transfers and Payments: Capability to initiate and track transactions from anywhere. Customer Support: Availability of customer support through chat, voice, across platforms. 2.6.2. FUNCTIONS Data Integration Unified Data Repository: All customer data is stored in a centralized database accessible by all channels. Data Synchronization: Ensures that up-to-date information is available across all channels for both customers and bank staff. 12 | P a g e Digital Technology in Banking Technology and API Architecture API-First Approach: Enables easy integration of different platforms and third-party services. Responsive Design: The platforms automatically adjust to different screen sizes and orientations. Security and Compliance Multi-Factor Authentication: Security measures like OTPs, biometrics, or security questions are consistent across platforms. Regulatory Adherence: Ensures that the platform as a whole complies with regulations like GDPR for data protection and other financial regulations. Analytics and Customer Insights Behavior Tracking: Monitors how customers interact with various platforms to offer insights for further improvement. Real-Time Analytics: Provides real-time data to assist in decision-making for both customers and the bank. 13 | P a g e Digital Technology in Banking 3.0. DIGITAL PAYMENT SYSTEMS 3.1. WHAT ARE DIGITAL CURRENCIES Digital currency is any currency, or money-like asset that can be managed, stored or exchanged on digital computer systems, especially over the internet. Types of digital currencies include cryptocurrency, virtual currency and central bank digital currency. The most popular digital currencies are Bitcoin & Ethereum. 3.1.1. CRYPTOCURRENCY A cryptocurrency is a digital asset designed to work as a medium of exchange that uses cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Bitcoin Bitcoin was designed as a digital alternative to traditional fiat currencies and aims to enable peer- to-peer transactions without the need for intermediaries like banks. 3.1.2. HOW DOES IT WORK? At its core, Bitcoin is a decentralized ledger that records all transactions across a network of computers. It uses cryptographic techniques to secure transactions and control the creation of new units. Miners validate and record transactions in blocks, which are then added to a public chain, known as the blockchain. Primary Use-Cases Digital Currency: Primarily used for online transactions and as an investment asset. Remittances: Allows for international transfers without high fees. Financial Sovereignty: Provides financial inclusion without the need for traditional banking systems. Ethereum Ethereum's primary focus is to enable smart contracts and distributed applications (dApps) to be built and run without downtime, fraud, or interference from a third party. How does it work? Ethereum also uses blockchain technology but adds a layer of functionality called "smart contracts." These are self-executing contracts with the terms of the agreement directly written into code Primary Use-Cases Smart Contracts: Enables automated, self-executing contracts with the terms directly written into lines of code. Decentralized Applications (dApps): Supports apps that run on a blockchain, removing the need for centralized servers. 14 | P a g e Digital Technology in Banking Tokenization: Allows for the creation of new cryptocurrencies and assets via Ethereum's ERC-20 and ERC-721 standards. 3.2. DIFFERENCES BETWEEN BITCOIN & ETHEREUM BITCOIN ETHEREUM Bitcoin is primarily used as Its primary usecase is the digital currency. creation of smart contract Suitable for remittance Ideal for the creation of transactions decentralized applications Provides financial sovereignty Allows for the creation of new as it doesn’t need traditional tokens and assets banking infrastructure 3.2.1. ATTRIBUTES OF CRYPTOCURRENCY Decentralized (No Central Authority) Most cryptocurrencies are decentralized on distributed networks of computers that are spread around the world, also known as nodes. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. The transaction is propagated across the peer-to-peer network and is replicated by every node, reaching a large percentage of the nodes within a few seconds. Everyone on the network has a copy of the ledger so we no longer need to trust a single entity/organization/third-party because there is no need to trust when you can just verify against this ledger because you have a copy of it. The decentralized ledger is known as the blockchain. Irreversible and Immutable (Cannot be Undone) Immutability regarding blockchain and cryptocurrency should follow 3 principles: It should be impossible for anyone but the owner of a private key to move funds. It should be highly improbable or difficult to rewrite history. All transactions are recorded on the blockchain. The irreversible and immutable features of cryptocurrency mean that it is impossible for anyone but the owner of the respective private key to move their digital assets and that transactions cannot be changed once it is recorded on the blockchain. 15 | P a g e Digital Technology in Banking Anonymous Since there is no need for a central authority, users do not need to identify themselves when transacting with cryptocurrency. When a transaction request is submitted, the decentralized network will check the transaction and verify it and record it on the blockchain accordingly. Cryptocurrencies, like Bitcoin, use a private key and public key system to authenticate these transactions. This means users can create anonymous digital identities and digital wallets to transact on the decentralized system and still be able to securely authenticate their transactions. Limited Supply and Scarcity Fiat currencies have an unlimited supply, as the central banks can issue and/or print as many fiat currencies as they want. Central banks often manipulate the value of the countries’ currencies as part of their economic policies. The inflationary nature of fiat currencies would mean a decrease in the value of the currency over time. On the other hand, most cryptocurrencies have a limited and pre-determined supply of the cryptocurrency that is coded into its underlying algorithm when it is created. With cryptocurrency, however, no individual or consortium is able to affect the supply of currency or exert significant influence over it without the approval of the majority. Leading cryptocurrencies feature maximum token supply caps or infinite supply with pre-defined production parameters. Many top cryptocurrencies such as Bitcoin, Litecoin and Dash have a maximum supply, making them deflationary by nature. Any increase in the demand or adoption of cryptocurrency will cause a corresponding increase in the price. 3.3. REGULATION OF CRYPTOCURRENCY IN NIGERIA Through CBN’s circular dated January 12, 2017, all banking entities were directed not to use, hold, trade and/or transact in cryptocurrencies. The justification by the CBN being they are issued by unregulated and unlicensed entities, their use in Nigeria goes against the key mandates of the CBN, as enshrined in the CBN Act (2007), as the issuer of legal tender in Nigeria. In effect, the use of cryptocurrencies in Nigeria are a direct contravention of existing law. 16 | P a g e Digital Technology in Banking 3.4. CRYPTOCURRENCY APPLICATION IN THE BANKING & FINANCE INDUSTRY Eliminated the need for middlemen: Cryptocurrencies are primarily based on a decentralized system in the sense that blockchains allow you to make transactions securely and independently without involving intermediaries. The use of blockchain technology has made crypto-cash more fluid besides enabling users to make quick and convenient transactions from wherever they are Cryptocurrencies have lowered the cost of transactions: Cryptocurrency transactions are generally cheaper than traditional international money transfers. Asset tokenization Asset tokenization refers to the process of taking an asset that is not easily divisible or transferable—like a piece of real estate, artwork, or any other high-value item—and transforming its ownership into a digital token that can be easily traded or transferred. Asset transfers can be executed more quickly and transparently and also be made liquid very quickly. Compliance friendly: Anti-Money Laundering (AML) and Know Your Customer (KYC): Immutable blockchain records can aid in compliance efforts. Smart Contracts: These can automate complex compliance requirements, ensuring transactions are legal and transparent. Decentralized Finance (DeFi) Allows individuals/institutions to send, purchase, and exchange financial assets without relying on banks, brokerages, or exchanges. Decentralized finance enables: Lending and Borrowing: DeFi platforms can replace traditional lending institutions, offering peer-to-peer lending options without intermediaries. Exchanges: Decentralized exchanges allow for the peer-to-peer exchange of assets without the need for a centralized third party. 3.5. CENTRAL BANK DIGITAL CURRENCY (CBDC) Central bank digital currency (CBDC) is an electronic form of cash that can be used as a medium of exchange in the same way you exchange traditional “money. The central bank mints the currency and provides every “e-naira” or “e-dollar” with a unique serial number to identify it. Usually, central banks will also peg the digital currency to their existing national currency. THE NIGERIAN ENAIRA The eNaira is a CBN minted digital currency that provides a unique form of money denominated in Naira. It is both a medium of exchange and a store of value, able to be used for payments in retail transactions. 17 | P a g e Digital Technology in Banking BENEFITS OF THE ENAIRA The eNaira provides a secure, cheaper and faster option for Nigerians in the diaspora to send money back to Nigeria. The eNaira enables effective monitoring of all transactions carried out on the blockchain thereby limiting illegitimate transactions. With the eNaira the government through the CBN is able to carry out equitable distribution of resources to households and communities and social welfare program. Revenue collection for federal and state government is made more efficiently as cash handling costs is reduced. The eNaira has a strong security system as it cannot be forged or counterfeited because of its unique identity. Helps promote financial inclusion by making financial services available to people in rural communities who can access a mobile device. HOW TO ACCESS THE ENAIRA 1. Download the eNaira Wallet App from the Google Play Store or Apple App Store. 2. Choose your Bank: Select Access Bank from the list of Banks provided. 3. Validate your details: Enter your identification details such as NIN, BVN, Date of Birth and Emails. These details should be as it appears in your Bank details. 4. Fund your wallet from your Access more app and start receiving, sending and managing your eNaira. 3.6. WHAT IS A DIGITAL WALLET A digital wallet is a software-based system that securely stores users' payment information and passwords for multiple payment methods and websites. E,g Google Pay, Opay wallet, Kuda wallet, Barter by flutterwave. HOW IT WORKS: Storing Information A digital wallet securely stores your credit, debit, or prepaid card information, either on your device or in the cloud. This information is encrypted for additional security. Making Payments To make a payment, you select the card you want to use, and the wallet interacts with the point- of-sale terminal through technologies like Near-Field Communication (NFC) or a quick-response (QR) code. For online transactions, the wallet auto-fills the payment details, speeding up the checkout process. 18 | P a g e Digital Technology in Banking Authentication To ensure the security of transactions, digital wallets often require some form of authentication, such as a fingerprint, PIN, or facial recognition, before completing a payment. IMPORTANCE OF DIGITAL WALLETS Digital wallets enable quick and hassle-free transactions. They offer a more secure way to store and use your financial information. Can be used to store loyalty cards, membership cards, tickets, and even identity documents. Offer budgeting tools, expense tracking, and transaction history to aid financial management. Simplifies the process of handling transactions across different currencies. 19 | P a g e Digital Technology in Banking 4.0. DIGITAL BANKING AND FINANCIAL INCLUSION 4.1. Understanding Financial Inclusion 4.1.1. Definition and Importance of Financial Inclusion Financial inclusion refers to the availability and accessibility of financial services to all segments of society, especially those traditionally excluded from the formal financial system. It aims to provide individuals and businesses with the tools and opportunities to manage their finances, save, invest, and access credit and insurance services. Financial inclusion is not limited to traditional banking services but encompasses a wide range of financial products and services, including digital payments, mobile banking, and microfinance. The importance of financial inclusion cannot be overstated, as it has several key benefits: Poverty Reduction: Financial inclusion can help alleviate poverty by providing marginalized individuals and communities with the means to save, invest, and accumulate assets. It enables them to smooth consumption, plan for the future, and cope with unexpected financial shocks. Economic Growth: Expanding access to financial services can stimulate economic growth by fostering entrepreneurship, enabling small and medium-sized enterprises (SMEs) to access capital, and facilitating investment in productive assets. Reducing Inequality: Financial inclusion can reduce income and wealth inequality by providing underserved populations with the tools to participate in the formal economy and benefit from economic opportunities. Financial Stability: A more inclusive financial system can contribute to overall financial stability by reducing the reliance on informal and potentially risky financial channels. Digital Transformation: In the digital age, financial inclusion is closely linked to digital inclusion. Access to digital financial services can empower individuals to participate in the modern economy and take advantage of online commerce and e-government services. 4.1.2. The Global Perspective on Financial Inclusion Financial inclusion is a global challenge with varying levels of progress and commitment across different countries and regions. Here's a brief overview of the global perspective: Regional Disparities: The level of financial inclusion varies significantly from region to region. Developed economies generally have high levels of financial inclusion, while many developing countries struggle to provide widespread access to financial services. Government Initiatives: Many governments and central banks have recognized the importance of financial inclusion and have launched initiatives to promote it. These initiatives often involve regulatory reforms, financial literacy programs, and the development of digital payment infrastructure. Digital Transformation: The rise of digital financial services, particularly mobile banking and digital payments, has played a significant role in advancing financial inclusion globally. Mobile money platforms in Africa, for example, have revolutionized access to financial services for millions of people. 20 | P a g e Digital Technology in Banking International Organizations: Organizations like the World Bank, the International Monetary Fund (IMF), and the United Nations are actively involved in promoting financial inclusion as part of their development agendas. They provide resources, research, and technical assistance to support countries in their efforts. Private Sector Engagement: Banks, fintech companies, and other financial institutions are increasingly recognizing the business opportunities in serving unbanked and underbanked populations. They are developing innovative financial products and partnerships to expand access. 4.1.3. Barriers and Challenges to Financial Inclusion Despite its importance, financial inclusion faces several barriers and challenges: Lack of Access: Many individuals, especially in rural and remote areas, lack physical access to banks or financial service providers. This is often due to the high cost of establishing branches in such areas. Low Income and Financial Literacy: People with low incomes often have limited financial literacy and may be hesitant to use formal financial services. Lack of understanding about how banking works can hinder their participation. Identification and Documentation: Some individuals, particularly in developing countries, lack the necessary identification and documentation to open bank accounts. This can be a significant barrier to accessing financial services. Regulatory Hurdles: Overly restrictive regulations can impede the growth of financial inclusion. Regulatory requirements, such as minimum account balances or know-your- customer (KYC) rules, can be burdensome for low-income individuals. Digital Divide: While digital financial services can expand access, the digital divide remains a challenge. Many people lack smartphones or internet access, making it difficult for them to use digital banking services. Security Concerns: Inadequate cybersecurity measures and concerns about data privacy can deter individuals from using digital financial services, particularly in regions where cybercrime is prevalent. Cultural and Social Factors: Cultural norms and social factors can influence people's attitudes toward financial services. Some communities may have a preference for cash- based transactions or distrust formal financial institutions. Efforts to overcome these barriers and challenges often require a multi-faceted approachinvolving government policies, regulatory reforms, financial education, and technological innovations to create a more inclusive financial ecosystem. 21 | P a g e Digital Technology in Banking 4.2. Digital Banking for Financial Inclusion 4.2.1. Role of Digital Banking in Expanding Financial Access Digital banking plays a pivotal role in expanding financial access by leveraging technology to bring financial services to underserved and remote populations. Here's an overview of its significance: Geographical Reach: Digital banking eliminates the need for physical bank branches, making financial services accessible to people in remote or rural areas where traditional banks are often absent. This increased geographical reach is crucial for expanding financial inclusion. Lower Costs: Digital banking significantly reduces operational costs compared to traditional brick-and-mortar banks. This cost efficiency allows financial institutions to offer services at lower fees and minimum balance requirements, making them more accessible to low-income individuals. Convenience: Digital banking offers 24/7 access to financial services through mobile apps, websites, and ATMs. This convenience enables individuals to manage their finances, make payments, and access credit and savings products at their convenience. Financial Inclusion for the Unbanked: Many people, especially in developing countries, lack access to traditional banking services. Digital banking, including mobile banking, can provide them with a gateway to basic financial services like savings accounts and payments. Digital Payments: Digital banking facilitates cashless transactions through methods such as mobile wallets and digital payment platforms. This reduces the reliance on physical cash, making transactions more secure and transparent. Data-Driven Financial Services: Digital banking generates valuable data on user behavior and financial transactions. This data can be leveraged to assess creditworthiness and offer tailored financial products, including microloans and insurance, to previously underserved populations. Financial Literacy: Many digital banking platforms offer educational resources and financial literacy tools to empower users with the knowledge to make informed financial decisions. 4.2.2. Case Studies: Successful Digital Banking for Financial Inclusion Initiatives M-Pesa (Kenya): M-Pesa is a widely recognized mobile banking success story. Launched in Kenya in 2007, it allows users to send and receive money, pay bills, and access other financial services via mobile phones. M-Pesa has expanded financial access to millions of Kenyans, especially those in rural areas. Jan Dhan Yojana (India): The Indian government's Pradhan Mantri Jan Dhan Yojana (PMJDY) initiative aimed to provide financial access to every household in India. It leveraged digital banking and Aadhaar-based biometric authentication to open millions of bank accounts and promote financial inclusion. TymeBank (South Africa): TymeBank is a digital bank in South Africa that offers 22 | P a g e Digital Technology in Banking affordable banking services through a network of retail partners and a mobile app. It has rapidly gained customers, including those who were previously excluded from the formal banking sector. bKash (Bangladesh): bKash is a mobile financial service provider in Bangladesh that has facilitated financial transactions for millions of people. It allows users to send money, make payments, and access other financial services using their mobile phones, making it a vital tool for financial inclusion. These case studies illustrate the transformative impact of digital banking and digital financial services in expanding financial access and improving financial inclusion, especially in emerging economies. They highlight the scalability and adaptability of digital solutions to address the diverse needs of underserved populations. 23 | P a g e Digital Technology in Banking 4.3. Strategies for Researching Underserved Populations 4.3.1. Branchless Banking and Agent Banking Models Branchless banking and agent banking are innovative models that aim to extend financial services to underserved populations, particularly in areas where traditional bank branches are scarce or inaccessible. Here's an overview of these models: 4.3.1.1. Branchless Banking Branchless banking, also known as banking without branches, involves providing bankingservices to customers without the need for a physical bank branch. Instead, it relies on digital andelectronic channels, often in partnership with retail agents. Key elements of branchless banking include: Digital Channels: Branchless banking relies heavily on digital technology, including mobile banking apps, internet banking, and SMS-based services, to allow customers to access their accounts, make payments, and conduct other banking transactions remotely. Retail Agents: Banks or financial institutions partner with local retail businesses or individuals to act as agents who provide basic banking services on their behalf. Agents can facilitate cash deposits, withdrawals, account openings, and other transactions. 4.3.1.2. Agent Banking Agent banking is a subset of branchless banking that focuses on the role of agents in providing banking services. Here are some key aspects of agent banking: Agent Network: Agent banking involves the establishment of a network of authorized agents, often in rural or remote areas, who can perform banking transactions on behalf of a financial institution. These agents are typically local businesses or entrepreneurs. Services Offered: Agents can offer a range of banking services, including cash deposits, withdrawals, account balance inquiries, funds transfers, and even loan applications. Customers can visit these agents to perform these transactions instead of going to a traditional bank branch. Cost-Efficiency: Agent banking is cost-effective for financial institutions because it reduces the need for building and maintaining physical branches. This cost savings can be passed on to customers in the form of lower fees and charges. Customer Convenience: Agent banking enhances customer convenience by bringing banking services closer to where people live and work, reducing the need for long travel to access banking facilities. 24 | P a g e Digital Technology in Banking Both branchless banking and agent banking models have been successful in increasing financial inclusion, particularly in regions with limited banking infrastructure. These models leverage technology and local partnerships to provide essential financial services to a wider population. 4.3.2. Leveraging Government Initiatives for Financial Inclusion Government initiatives play a vital role in advancing financial inclusion by creating an enabling environment and implementing policies that promote access to financial services. Here's an overview of how governments can leverage initiatives for financial inclusion: Policy Framework: Governments can establish a clear policy framework that supports financial inclusion. This includes regulatory reforms, such as simplifying know-your- customer (KYC) requirements, reducing barriers to entry for financial institutions, and promoting competition in the financial sector. National Financial Inclusion Strategies: Many countries develop and implement national financial inclusion strategies that outline specific goals, action plans, and targets for expanding financial access. These strategies often involve collaborations between government agencies, central banks, and other stakeholders. Digital Infrastructure: Governments can invest in digital infrastructure, such as widespread internet access and mobile networks, to enable the delivery of digital financial services to remote and underserved areas. Financial Literacy Programs: As mentioned earlier, governments can sponsor financial literacy and customer education programs to ensure that citizens are equipped with the knowledge and skills to make informed financial decisions. Financial Inclusion Mandates: Some governments mandate that financial institutions, including banks, offer basic, low-cost accounts to underserved populations. These accounts often have simplified documentation requirements and low fees. Public-Private Partnerships: Collaboration between the public and private sectors can be instrumental in expanding financial access. Governments can encourage partnerships with financial institutions, fintech companies, and NGOs to reach marginalized communities effectively. Social Safety Nets: Governments can use digital payment systems to distribute social benefits, pensions, and subsidies, ensuring that these funds reach beneficiaries efficiently and securely. Consumer Protection: Implementing consumer protection measures, such as fair lending practices and dispute resolution mechanisms, can build trust in the financial system and encourage more people to use formal financial services. 25 | P a g e Digital Technology in Banking Data Collection and Analysis: Governments can collect data on financial inclusion indicators to track progress and identify areas that require targeted interventions. Financial Inclusion Awareness Campaigns: Governments can run awareness campaigns to inform citizens about the benefits of financial inclusion and the availability of financial services. Leveraging government initiatives is essential because they can provide the regulatory, infrastructural, and financial support necessary to drive financial inclusion efforts forward. Collaboration between governments, financial institutions, and civil society can lead to more effective and sustainable outcomes in promoting financial access and well-being. 4.4. Ethical and Regulatory Considerations 4.4.1. Ethical Banking Practices in Promoting Financial Inclusion Ethical banking practices play a crucial role in promoting financial inclusion by ensuring that financial services are provided in a fair, transparent, and responsible manner. Here are some key aspects of ethical banking practices in the context of financial inclusion: Fair Access: Ethical banks prioritize providing access to financial services for all individuals, regardless of their income, background, or location. They aim to bridge the gap between the banked and unbanked populations. Affordable Services: Ethical banks offer affordable financial products and services, including low-cost savings accounts, microloans, and insurance, to cater to the needs of low-income and underserved communities. Transparency: Transparency is a cornerstone of ethical banking. Customers should have access to clear and comprehensive information about the terms, fees, and conditions associated with financial products. Responsible Lending: Ethical banks ensure responsible lending practices by conducting thorough assessments of borrowers' creditworthiness and providing loans that borrowers can reasonably repay. Financial Education: Ethical banks often invest in financial literacy programs to empower customers with the knowledge and skills needed to make informed financial decisions. Community Engagement: These banks actively engage with local communities to understand their unique financial needs and design products and services accordingly. Social and Environmental Responsibility: Ethical banking extends beyond financial inclusion. It encompasses a commitment to social and environmental responsibility, which includes responsible investment practices and support for sustainable development goals. Avoidance of Predatory Practices: Ethical banks steer clear of predatory practices, such as excessive fees, usurious interest rates, and deceptive marketing tactics, which can harm vulnerable customers. 26 | P a g e Digital Technology in Banking Inclusivity and Diversity: Ethical banks prioritize inclusivity and diversity within their organizations, aiming to reflect the communities they serve and ensure equal opportunities for all. By adhering to these ethical principles, banks can contribute to the broader goal of financial inclusion, ensuring that their services are not only accessible but also fair and beneficial to all segments of society. 4.4.2. Regulatory Frameworks and Compliance Effective regulatory frameworks are essential for ensuring the stability, integrity, and fairness of financial markets and institutions. When it comes to financial inclusion, regulatory frameworks and compliance play a crucial role in creating an environment that supports the expansion of accessible and responsible financial services. Here are key considerations: Know Your Customer (KYC) Regulations: KYC requirements are critical for verifying the identity of customers, preventing money laundering, and enhancing security in financial transactions. However, regulators should balance the need for stringent KYC measures with the goal of not excluding potential customers due to excessive documentation requirements. Consumer Protection Laws: Regulatory authorities should establish and enforce consumer protection laws to safeguard the interests of customers. These laws may include provisions related to fair lending, disclosure of terms and conditions, and dispute resolution mechanisms. Digital Identity Systems: Developing secure and reliable digital identity systems is crucial for digital banking and financial inclusion. Regulators should oversee the implementation of such systems to enable individuals to access financial services conveniently while ensuring data privacy and security. Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) Regulations: These regulations are essential for maintaining the integrity of the financial system. However, they should be designed to minimize compliance burdens on low-value, low-risk customers. Market Entry Regulations: Regulatory authorities can promote competition and innovation by streamlining the process for new financial institutions, including fintech startups, to enter the market. Reducing regulatory barriers can lead to a more diverse and accessible financial services landscape. Financial Inclusion Targets: Some countries set specific financial inclusion targets as part of their regulatory framework. This may include targets related to the number of individuals with access to bank accounts or credit services. Supervision and Monitoring: Regulatory bodies should actively monitor financial institutions to ensure compliance with regulations and ethical practices. Regular audits and examinations are essential to maintaining the integrity of the financial system. Collaboration: Regulators can facilitate collaboration between government agencies, financial institutions, and other stakeholders to develop and implement financial inclusion initiatives effectively. 27 | P a g e Digital Technology in Banking Regulatory frameworks should strike a balance between ensuring financial stability and security while also promoting financial inclusion. They should be adaptive to evolving technologies and market dynamics to foster innovation and expand access to financial services for underserved populations. 28 | P a g e Digital Technology in Banking 5.0. FUTURE TRENDS IN DIGITAL BANKING 5.1. Artificial Intelligence in Digital Banking 5.1.1. Definition and Importance of Artificial Intelligence in Digital Banking Artificial Intelligence (AI) in digital banking refers to the use of advanced computational technologies and algorithms to simulate human intelligence and perform tasks that typically require human intelligence, such as data analysis, decision-making, and problem-solving, within the context of the banking and financial industry. AI is leveraged in various ways in digital banking to improve customer experiences, streamline operations, and enhance security. The importance of Artificial Intelligence (AI) in digital banking cannot be overemphasized. AI has become a transformative force in the financial industry, offering numerous benefits and addressing critical challenges. Here are some key reasons why AI is so important in digital banking: Customer Service and Engagement: AI chatbots and virtual assistants are used to provide 24/7 customer support, answer inquiries, and assist customers in managing their accounts. Personalization: AI algorithms analyze customer data to offer personalized product recommendations, marketing offers, and content to enhance the customer experience. Fraud Detection and Prevention: AI models can identify unusual transaction patterns and detect potentially fraudulent activities in real-time, helping to enhance the security of digital banking platforms. Credit Scoring: AI can assess creditworthiness more accurately by considering a wider range of data points, including non-traditional sources, to determine lending risk. Risk Management: AI is employed to monitor and analyze market trends and predict potential risks in investment portfolios, enabling banks to make informed decisions. Automation: Robotic Process Automation (RPA) and AI-driven workflows are used to automate routine tasks such as data entry, document processing, and compliance checks, improving operational efficiency. Data Analytics: AI algorithms analyze vast amounts of customer data to derive insights into customer behavior, helping banks make data-driven decisions for product development and marketing strategies. Natural Language Processing (NLP): NLP enables banks to extract valuable information from unstructured data sources like customer reviews, news articles, and social media to gauge public sentiment and market trends. Chatbots and Virtual Assistants: AI-powered chatbots and virtual assistants engage with customers, offering information, assistance, and transactional support through text or voice interactions. Predictive Analytics: AI models can predict future financial trends, customer needs, and potential opportunities or threats, allowing banks to proactively respond to changing market conditions. 29 | P a g e Digital Technology in Banking 5.2. Open Banking Open banking is a financial practice and system that allows third-party financial service providers (FSPs) to access and utilize consumer financial data and services from traditional banks and other financial institutions through application programming interfaces (APIs). Definition of Open Banking It is a framework that enables authorized third-party financial service providers to access and use customer financial data and services, typically offered by traditional banks, through standardized and secure APIs. It fosters competition, innovation, and the development of new financial products and services while giving consumers greater control over their financial information. Here are the key elements of open Banking: Customer control in open banking refers to the ability of bank customers to have full control over their financial data and how it is shared with third-party financial service providers (FSPs). This control is a fundamental principle of open banking and is designed to enhance the privacy, security, and autonomy of consumers in their financial interactions. This entails Consent-Based Data Sharing, transaction monitoring, and revocation of access. Data sharing in open banking refers to the process of allowing authorized third-party financial service providers (FSPs) to access and use a bank customer's financial data, with the customer's consent. This data can include various financial information such as account balances, transaction history, payment details, and more. Data sharing is a core element of open banking and is facilitated through secure and standardized application programming interfaces (APIs). An Application Programming Interface (API) in open banking is a set of standardized protocols and rules that enable communication and data exchange between different software applications and systems. In the context of open banking, APIs play a pivotal role in facilitating secure and standardized data sharing between traditional banks and third-party financial service providers (FSPs) while ensuring data privacy, security, and compliance with regulations. 30 | P a g e Digital Technology in Banking 5.2.1. Key Components of Open Banking Open banking comprises several key components that work together to create a framework for secure and standardized data sharing between traditional banks and third-party financial service providers (FSPs). These components are essential for the success of open banking initiatives. Here are the key components of open banking: APIs (Application Programming Interfaces) Consent Management Authentication and Authorization Data Sharing Security Measures Third - Party Provider (TPPs) Application Programming Interfaces (APIs): Are sets of rules and protocols that allow different software applications to communicate with each other. They define how software components should interact, making it possible for developers to access the functionality and data of one application from another. APIs serve as intermediaries, allowing for seamless integration and interoperability between software systems. Roles of Application Programming Interfaces (APIs) Interoperability: APIs enable different software components, systems, or services to work together seamlessly, regardless of their underlying technologies or programming languages. Data Access: APIs provide a structured way for applications to request and exchange data, allowing them to retrieve, update, or manipulate information stored in databases, web services, or other sources. Functionality Extension: APIs allow developers to extend the functionality of their applications by integrating with external services or libraries. For example, a weather application might use a third-party API to provide real-time weather data. Integration: APIs are used to integrate third-party services and tools into existing applications, such as embedding a map from Google Maps into a travel website. Security: APIs can enforce security measures like authentication and authorization to control access to sensitive data or functionality. Modularity: APIs promote modular software design by breaking down complex applications into smaller, manageable components that can be developed, tested, and maintained independently. Consent Management: Consent management systems allow customers to grant, modify,or revoke their consent for data sharing with third-party FSPs. Consent is a foundational principle of open banking, ensuring that data sharing is based on the customer's explicit permission. Authentication and Authorization: Robust authentication mechanisms verify the identity of both the customer and the third-party FSP. Authorization controls specify what data andservices the FSP can access once authentication is successful. 31 | P a g e Digital Technology in Banking Data Sharing: This component encompasses the sharing of customer financial data, including account balances, transaction history, and other relevant information. Data sharing is based on customer consent and is often facilitated through APIs. Security Measures: Security measures include encryption, data protection, and other safeguards to ensure the confidentiality and integrity of customer data during transmissionand storage. Strong security is essential to protect against data breaches. Roles and Types of Third-Party Providers (TPPs) in Open Banking: Payment Initiation Service Providers (PISPs): PISPs enable customers to initiate payments directly from their bank accounts through third-party applications or services, facilitating online purchases and transfers. Account Information Service Providers (AISPs): AISPs access and aggregate a customer's account information from various banks, providing consolidated financial insights, budgeting tools, and financial management services. Fintech Companies: Many fintech companies and startups act as TPPs, offering services such as peer-to-peer lending, investment management, financial planning, and more, often powered by open banking data. Payment Service Providers (PSPs): PSPs are entities that offer various payment solutions and may utilize open banking to provide additional payment options and services. Aggregators: Aggregators compile data from multiple banks and financial institutions to offer customers a comprehensive view of their financial accounts and transactions. Credit Scoring and Risk Assessment Providers: Some TPPs specialize in using open banking data to assess creditworthiness and provide credit scoring services. Payment Requestors: These are entities that request payments from customers through open banking channels. REGULATORY COMPLIANCE 1. PSD2 and Other Regulations: Open Banking initiatives are often driven by regulatory mandates, such as the Revised Payment Services Directive (PSD2) in Europe. These regulations establish the framework for secure data sharing, ensuring that customer data is protected, and consent is obtained. 2. Data Security and Privacy: Regulatory oversight ensures that banks and third-party providers implement robust security measures to protect customer data. Encryption, authentication, and authorization mechanisms are essential components of Open Banking security. 32 | P a g e  Digital Technology in Banking 6.0. BENEFITS AND CHALLENGES OF DIGITAL TECHNOLOGY IN BANKING 6.1. Benefits of Digital Technology in Banking: 1. Enhanced Customer Experience: Personalization: AI analyzes customer data for tailored recommendations and offers. Chatbots and Virtual Assistants: Provide 24/7 support and assistance. Voice Banking: Enables interaction and transactions via natural language commands. 2. Fraud Detection and Prevention: Real-time Monitoring: Detects suspicious patterns and anomalies. Behavior Analysis: Identifies unusual activities to prevent fraud. 3. Efficient Operations: Automation: Reduces manual tasks and operational costs. Robotic Process Automation (RPA): Streamlines back-office operations. 4. Data Analytics and Insights: Predictive Analytics: Forecasts customer behavior and market trends. Risk Management: Assesses credit risk and identifies potential risks. 5. Compliance and Regulatory Compliance: Automated Compliance Checks: Ensures adherence to regulations. Compliance with KYC and AML requirements. 6. Cost Reduction: Operational and Customer Service Cost Savings. Quick Decision-Making and Error Reduction. 7. Competitive Advantage: Innovation and Customer Retention. Scalable and Secure Solutions. 8. Data Security: Cybersecurity measures to safeguard customer data. Identifies and mitigates potential vulnerabilities. 6.2. Challenges of Digital Technology in Banking: 1. Data Privacy and Security: Data Protection and Mitigating Algorithmic Bias. NDPA (Nigeria Data Protection Act 2023) Compliance and Cybersecurity Risks. 2. Regulatory Compliance: Complex Regulatory Landscape and Compliance with Standards. Consent Management and Ethical Considerations. 3. Customer Trust: Transparency and Building Customer Trust. Managing Consent Preferences and Data Accuracy. 4. Data Quality and Availability: Ensuring Accuracy and Availability of Data. Legacy Systems Integration and Talent Gap. 5. Operational Integration: Changes to Operations, Technology Infrastructure, and Culture. Fraud Prevention and Risk Assessment. 6. Costs: 33 | P a g e  Digital Technology in Banking Investment in Technology, Infrastructure, and Talent. Sustainable Revenue Models and Monetization. 7. Vendor Selection and Change Management: Choosing the Right Partners and Managing Relationships. Employee Training and Adaptation to Change. 8. Customer Experience and Competitive Landscape: User-friendly Interfaces and Design. Adapting to Increased Competition and Developing Innovative Solutions. 34 | P a g e