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COVID-19 fast-tracked digitalisation exposes banks vulnerability

European Union (EU)-owned bank, European Investment Bank’s (EIB) latest annual survey on banks in Africa confirms that COVID-19 fast-tracked the rate of digital transformation within the broader banking sector as banks were forced to use digital channels to reach customers.

EIB Chief Economist Debora Revoltella, said, “Ninety percent of banks agree that the pandemic has accelerated their internal digitalisation transformation and 70% say that they increased the range of digital services available to customers.

However, there are constraints to increasing digitalisation, with three-quarters of banks ranking cybersecurity risks as the biggest issue.”

Meanwhile, Botswana’s reserve bank has indicated that operational risk within the banking sector is expected to increase due to increased digitisation.

The Bank of Botswana’s (BoB) most recent Banking Supervision 2021 report revealed that operational risk grew from P7-billion in 2020 to P7.3-billion, while the regulatory capital charge for operational risk increased by 4.7% from P1-billion to P1.1-billion in the same period.

With the uptake of digitalisation, the Banking Supervision report stated that the instituted risk management measures were considered to be unsatisfactory.

“For the ensuing 12 months, operational risk is expected to trend upwards, mainly influenced by expanding digitalisation of operations by banks, which increased susceptibility to cyber-crime risks. The identified lapses in internal controls at some banks are likely to exacerbate operational risks.”

Revoltella also noted that the rapid growth of the Fintech sector has been another catalyst for increased digitalisation.

“The entire Fintech ecosystem in Africa has grown to more than 1 000 active companies in April 2022, up from 450 in 2020. Of these, 80% are home-grown and 20% come from outside Africa,” she said.

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