This is an excerpt from The Future of Digital Banking in Europe 2023, a Money 20/20 special edition.

After a few stagnant years, the world is certainly in motion and macrotrends are forcing organisations to drive change in financial services, disruption in fintech, expand usage of mobile devices and adopt emerging technologies. Digital banking transformation is advantageous to those companies that can keep pace with the challenges presented such as increased competition, meeting evolving customer requirements and mitigating privacy and cybersecurity issues. Alongside this, regardless of a bank or fintech firm’s size, identifying and managing risk is crucial to future success.

In conversation with Visa, Mehret Habteab, head of product for Europe explores how “building digital trust amid global uncertainty is one of the biggest challenges our sector faces today. Transparency in data handling and privacy practices will be key to this, alongside strong cybersecurity measures to help protect customer data, collaboration with regulatory authorities and adherence to industry standards to ensure best practice.”

According to a recent EY report: “As the amount of digital information grows exponentially, devices become smarter and connectivity increases, the digital environment is likely to become even more complex. Trends towards more social networking, the growth of cloud computing and varying (and often lagging) national regulations will only add to this complexity.” All customers want is to manage their money with providers that they trust and those offering financial services must comply.

Tasha Chouhan, UK and IE banking director, Tink referenced their research and reveals that “more than four in ten (43%) financially vulnerable consumers express a wish to learn more about managing and optimising their finances. If banks can fulfil this wish and help their customers identify their biggest expenses, they can help them make ends meet at the end of each month – while possibly putting some away for even rainier days. Doing this will cement trust and boost consumer confidence at a time when people are in dire need of guidance.”

While technologies like cloud are known and today, well utilised, organisations must leverage emerging technologies such as artificial intelligence (AI), robotic process automation (RPA), internet of things (IoT), blockchain and others that help to improve digital banking business models. Furthermore, that also allow companies to offer advanced products in line with their competitors and at lower costs.

However, in order for these technologies to be used securely, risk functions within banks and fintech firms must also evolve to keep up with developments, ensure they are trained with relevant skills to manage new risks and interpret the impact global unrest and uncertainty will have on business.

The EY report continued: “Digital transformation creates new risks or magnifies existing risks that need to be properly managed to fully achieve the benefits of innovation and investment. In order to manage these risks effectively, risk functions need to empower executives with the right information to enable them to make risk-informed decisions and need to implement the right approach to manage these types of risks. With maintaining and building trust as the ultimate goal, how risks are identified and responded to can create new business value and unlock business potential.”

On this, Kilian Thalhammer, global head of merchant solutions - fintech and platform, Deutsche Bank AG, says that while trust is not limited to digital only, it is gaining more focus when considering digital risks and threats as fraud and cybercrime are becoming more prevalent than ever and topics such as security, safety and even sovereignty are becoming more and more top of mind.

Thalhammer adds that “data is the game changer. Safety and storage of sensitive data and transparency of not only how data is deployed but who is using it are essential – whether it is in the hands of the human or the machine – it ultimately comes down to the clarity of the data strategy.

“However, whilst much of ‘the what’ of building trust in the digital world is also digital in nature, trust itself goes beyond the digital realm. Machines provide facts, but humans provide experience and context and whilst we embrace the new era of technology, it is key to engage, educate and advise through ‘real life’ exchanges, in particular in times of heightened sensitivity still personally.”

Justin Basini, CEO, ClearScore has a similar view and says that as a credit broker, rather than a digital bank, his company understands that “users are open to sharing their banking data, but only if there is a meaningful value exchange. This is crucial to drive a willingness to share into a reality. Our research shows that people are more likely to share their financial data with third parties such as credit marketplaces than mortgage providers, loan providers, banks, and insurance companies. The question of trust is clearly a key driver of propensity to share data with a particular brand.”

This Finextra report, a Special Edition for Money 20/20 Europe, collates interviews with a range of leading players across the financial services and fintech industries operating across Europe and explores topics that will be covered at the event in Amsterdam. Key insights from Accenture, Clearscore, Deutsche Bank, ING, Nium, Plum, Ripple, Societe Generale, Tink, Visa and Zopa will discuss how digital banking across the continent will evolve.