The adoption of digital technology in the banking industry is shifting the economic fundamentals of the market, giving rise to a widening gap between business aspirations and operational reality in the sector. Incumbent banks’ legacy systems and infrastructure are often incompatible with the rapidly evolving digital landscape. Banks’ supply chains have become more complex through a process of digitalisation, which challenges the capability and integrity of banks’ controls and oversight. The rise of non-bank market participants broadens the provision of banking services beyond the reach of industry regulators.
These market dynamics contribute to a changing mechanism through which risks emerge, intensify and spread. The net outcome is heightened vulnerability to conduct risks and financial crime, greater inter-dependency between financial and non-financial risks and a potential threat to financial stability at an organisational and systemic level.
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