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TRANSFORMATION PROCESSES IMPLEMENTED IN THE BANKING SYSTEM
AND POSSIBILITIES OF IMPLEMENTING IT IN OUR COUNTRY
Suyunov Dilmurod Kholmuradovich,
Higher School of Business and Entrepreneurship, Head of the Department of "Business
Management and Entrepreneurship (MBA), Doctor of Economics, Professor,
Ergashev Khusan
Chief specialist of “Supporting entrepreneurship and coordination of project office activities”
department of the Chamber of Commerce and Industry of the Republic of Uzbekistan and
Masters of the Higher School of Business and Entrepreneurship
Ergashev Mirzabek
Chief specialist of “Coordination of work with state programs and activities of regional
structures” department of the Chamber of Commerce and Industry of the Republic of Uzbekistan
and Masters of the Higher School of Business and Entrepreneurship
Abstract:
The article discusses the goal of the New Uzbekistan Development Strategy for
2022-2026, which sets the goal of "making the digital economy the main "driver" sector
and increasing its volume by at least 2.5 times", and the task of completing the
transformation processes in state-owned commercial banks and bringing the share of
private banks in bank assets to 60 percent by the end of 2026. The main driver of the
development of the banking system, increasing mutual trust and transparency between the
bank and the client, and the consequences of modernization without the rapid
implementation of the latest achievements of scientific and technological progress in
banking activities, as well as in-depth studies of world practice and influencing factors are
analyzed.
Keywords:
Homelink system, Pronto system, Payments Industry Intelligence portal, IT
integration, CashPro platform, artificial intelligence, treasury, receivables.
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Currently, it is impossible to modernize banking activities without the rapid
implementation of the latest achievements of scientific and technical progress. World
practice shows that scientific and technical progress and the rapid growth of new
information technologies (IT) have a significant impact on the overall assessment of the
attractiveness of a bank. This creates the need to study advanced foreign experience in this
regard.
Address of the President of the Republic of Uzbekistan to the Oliy Majlis
“Unfortunately, the banking system is 10-15 years behind the requirements for the
development of digital technologies, the introduction of new banking products and
software. Starting in 2020, a large-scale transformation program will be implemented in
each bank. Increasing the capital, resource base and profitability of banks will be the focus
of our attention” [1] – he emphasized.
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Technologies related to digital transformation, such as big data, cloud computing, artificial
intelligence, and the Internet of Things, are characterized by their innovation-driven nature
and focus on consumer needs.
Table 1
The main issues in the development of transformation processes in the banking system
No.
The main problems faced by most of our commercial banks are the
development of the banking system transformation process and digitization
1.
Digital offices have been created, but they are poorly integrated into the
bank's internal processes, which hinders the rapid launch of new products and
services.
2.
A significant part of the IT infrastructure is outdated and most of them work
according to old methodologies. They do not fully understand how to work
with new adaptive methodologies. Similarly, in the process of digital
transformation, the business direction, in addition to the IT direction, must
also be able to use project management systems to create products based on
new methodologies and set the right requirements for software developers.
3.
Low business involvement in data analysis and data management, or lack of
such skills at all, hinders the effective use of data.
4.
The complete absence of a flexible HR policy or HR strategy is a factor that
hinders the attraction and retention of modern IT and product management
specialists. This gap in the corporate culture of traditional banks prevents the
rapid introduction of new products and services.
5.
Risk management and other support functions usually work in the interests
of their own functions, not the business at all, but rather seek solutions to
problems together with the business, but often limit the business in new
initiatives, that is, they impose restrictions without any analysis or research.
6.
Bank customers are increasingly paying attention to digital products and
channels, and most of them are ready to switch to a fully digital service: but
another problem with digital banks is that it is possible to order cards online,
but the delivery system by couriers has not yet developed to that level.
7.
The following key functions and features are missing from most banks'
digital channels and products (although many other banks and even FinTechs
have them):
- Debit cards: online application and courier delivery
- no credit cards or payment cards
- financial analysis (PFM)
- Fast P2P payments with other banks via VISA Direct .
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8.
The CRM system does not fully function as a tool for storing all customer
data and cross-selling it
the Homelink system was created
, which allowed bank customers to check their deposits,
make payments and transfer money from their bank accounts by connecting to a computer
via telephone . In the same year, a similar system,
Pronto
, was launched in the USA.
However, people were skeptical about
the Homelink
and
Pronto systems, but with the
widespread use of the Internet, these systems began to be widely used. In 2001 , Bank
of America
became the first leading bank in the field of electronic banking, providing
online services in the amount of 1 billion US dollars. This bank opened its 3 digital
(neobank) branches in 2017 [2].
According
to
the
Payments
Industry
Intelligence
portal,
in 2018 there were 60
digital neobanks in the world , and by
2021 this figure
had reached
319 , with 90% of the money they use
being electronic money [3].
Citi Group
calculations, digitalization will create excess workforce in banks, and reducing
these jobs will lead to a reduction in banks' operating costs by up to half.
In addition, according to research conducted by
Accenture
, banks that have advanced in
digitalization have seen their return on equity
increase by 0.9 percent,
while banks that
have lagged in this area have seen their return on equity
drop by 1.1 percent
. Accenture
analysts predict that this gap will widen in the future [5-11].
Table 2
The main issues in the development of transformation processes in the banking system
of foreign countries
No.
Country
name
Problems
1.
India
One of the main challenges in India is the low speed of the
internet and the need to improve the infrastructure for digital
transformation. There are also problems related to training
and the shortage of qualified personnel.
2.
China
China faces the challenge of protectionism and government
regulation, which can hinder private sector development and
innovation in digital transformation.
3.
South
Korea
Despite the high speed of the Internet and the developed
infrastructure in South Korea, the regulation and protection of
personal information is a problem.
4.
USA
One of the problems in the United States is the lack of
uniform data protection standards and the lack of a uniform
digital transformation strategy at the national level.
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5.
Russia
One of the main problems in Russia is the lack of qualified
personnel and limited access to information, which complicates
digital transformation and innovation in the IT sector.
The directions of transformation and reform of the banking system, the experience of
transforming the banking and financial sector of foreign countries, in particular the
experience of
Japan ,
were studied. With the rapid development of digital technologies in
the past few years, many companies and governments around the world have taken steps
towards
"digital transformation"
. In Japan, digital transformation is also developing
rapidly, first in the non-governmental financial sector, and today it is developing rapidly
and widely in the banking and financial sector.
In addition, the global spread of COVID-19 has accelerated the digital transformation
process due to the increased demand for remote services among customers in the country.
4 important
developments supporting the digitization of society that have led to
significant positive changes in the business environment :
1.
Wide use of digital devices, in particular, smartphones, which allow collecting
data on economic activity;
2.
Widespread use of cloud technology, which reduces the costs of collecting and
storing large amounts of data;
3.
Use of information technology (IT) and other advanced technologies that
increase the capacity and efficiency of analyzing large amounts of data;
4.
Providing timely and scalable highly customized services based on data analysis
through digital channels.
The "Global Digital Competitiveness Ranking 2021" published by the Swiss business
school Institute for Management Development (IMD) shows that Japan's lack of human
resources and capital in the digital sector, relatively low scientific potential, and
insufficient flexibility in business change have affected its digital competitiveness
indicators
compared
to
other
developed
countries,
with
Japan
falling one place in this indicator compared to 2020, taking 28th place overall.
Currently,
Bank of America's commercial banks are using the CashPro platform
to
implement digital transformation . This platform is powered by artificial intelligence and
provides an integrated set of working capital management tools that cover treasury,
payments, receivables and reporting.
This system's capabilities provide direct access to the client's
ERP and accounting
systems, enabling deeper integration and automation for services such as cash flow
forecasting and real-time reporting.
Also, how does
Bank of America's Intelligent Debtors
program, created at this bank,
work:
- It uses artificial intelligence to match payments coming into your bank account with
payments that match the corresponding invoice, using remittance information from
multiple sources.
- Automatically records automated email messages sent to your dedicated mailbox by
payers regarding your receivables, and all online customers can access payment portals to
receive remittance details.
The more you use the
Intelligent Debitors payment system, the more it constantly
learns to achieve better and faster results.
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page 640
If the transfer cannot be read automatically, a specialized team will manually review and
record the information for you.
Banks in Germany have been transformed by a variety of factors, including technological
advances, changing customer preferences and regulatory requirements.
One of the key trends in the transformation of German banks is the shift to
digital
banking . Many banks have invested in online and mobile banking platforms
to meet
the demand for digital services . This has led to the closure of physical branches and the
adoption of digital-first strategies.
Another key aspect of the transformation of German banks is the focus on customer
experience. Banks are increasingly prioritizing customer-centric approaches such as
personalized services, improved user interfaces, and streamlined processes. This has led to
the development of innovative products and services to meet the changing needs of
customers.
In addition, regulatory changes such as the implementation of the European Union's
Payment Services Directive (PSD) and the introduction of open banking have also
influenced the transformation of German banks. These regulations have encouraged banks
to open up their data and collaborate with third-party providers to offer new services and
increase competition in the market.
Overall, the transformation of banks in Germany is driven by a combination of
technological, customer-centric, and regulatory factors, with a focus on digitalization,
customer experience, and compliance. This ongoing evolution is expected to continue to
shape the banking landscape in Germany in the coming years.
Traditional management processes in the banking system of our country.
the Resolution of the President of the Republic of Uzbekistan No. PP-3620
dated March
23, 2018 “On additional measures to increase the accessibility of banking services” . In this
regard, commercial banks are required to:
- study of advanced international banking experience and introduction of new types of
banking services and products;
- expanding the network of bank branches and mini-banks, taking into account the
coverage of bank branches and mini-banks and the needs for banking services;
- It is recommended to expand the rights of branches to make independent decisions on
loan allocation without additional agreement with the parent banks.
By upgrading modern corporate governance mechanisms, banks will be able to become
more flexible and innovative. With the help of these transformations, banks will not only
be able to increase financial efficiency, but also meet the demands and expectations of
customers.
It is also important to ensure a high level of digital security and expand digital banking
services. These changes serve to comply with global regulatory requirements and increase
the transparency of financial markets.
In 2022, within the framework of the strategy of reforming the banking system, work
aimed at transforming banks with a state share was continued.
In particular, the corporate management system was introduced in the main banks, the bank
councils were formed at the expense of professional local and international experts, the
transformation strategies defining the place and position of each bank in the market were
developed, and in these processes, special emphasis was placed on the digitization of
banking services, transparent and simple delivery to customers.
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In order to provide high-quality banking services to residents and business entities through
any bank branch, 6 banks started to operate on the basis of the technology of a single bank
code. have launched a
Soft Collection service
that collects overdue credit debts at the
initial stage .
The "Marketplace"
electronic trading platform was launched, which
abandoned the centralized supply system for the supply of products and equipment and the
provision of services, and introduced an environment of free choice and competition in
their purchase .
Also, more than 90 percent of the total payments made by business entities
(1,005 trillion
soums)
were made through the instant payment system without visiting the bank.
"QR-
online" system
, which allows for contactless payments without the direct use of a bank
card
and
payment
terminal,
is growing.
To study the transformation processes implemented in the banking system of developed
countries and to introduce them in the banks of our country.
2020 has presented all countries with unprecedented challenges on two fronts: on the one
hand, their healthcare infrastructure and the fight against the pandemic, and on the other,
their economies have struggled to survive the shocks to demand and supply.
In particular, the consequences of the pandemic for Japan can be observed in factors
affecting digitalization. In particular, in 2020-2021, it was observed that the overall rating
dropped by one place, the level of knowledge by one place, the level of technology by four
places, and the level of readiness for the future by one place.
Meanwhile,
FinTech
players in Europe and the US have created
“challenger banks
.”
They have gained a certain number of customers with their user-friendly interfaces and low
fees. Others, such as
Facebook’s Diem (formerly Libra),
are planning to issue private
digital currencies and build a payment infrastructure. However, only a few of these
companies have stable revenues, and some have ceased operations within a few years of
their launch.
Policy measures implemented in developing countries have supported the rapid
development of digital transformation through various instruments, including an adequate
legal framework.
Such support, when widely accepted by society, will lead to increased prosperity in the
country. The number of customers owning a bank credit card, a convenient means of
payment, is high in developed countries, but low in developing countries in 2011.
Subsequently, banks in some of these developing countries have developed financial digital
transformation and started providing innovative payment services, and with government
measures and support, the level of bank account ownership has increased.
Below, we review the current state of digital transformation in Japanese banks, the state of
data collection and the creation of innovative services using it, and the developments of
non-bank institutions. As they compete with banks by expanding their innovative financial
services, we examine the services provided to three different groups of customers:
1.
The first group
is individuals;
2.
The second group
is small and medium enterprises;
3.
The third group is
large enterprises.
individuals
A number of
FinTech entities and non-bank institutions
are expanding their
financial services for individuals, thanks to regulatory reforms that have established money
transfer services
(shikin idō gyō)
and electronic payment services
(denshi daikō gyō) .
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These entities initially started out as payment services, but later developed a wide range of
financial services and have already acquired many customers. Typical examples of them
are the payment systems
Pay, LINE Pay
, and
Payment .
These payment systems are being used by retailers, in particular, to improve the efficiency
of their customers' payment processes and thereby improve their traditional businesses,
while others are seeking to provide a wide range of new services using a variety of
customer data collected through various financial and non-financial services.
Table 3
Definitions of the process of transformation of banks
No.
F.I.S.
The tariff given to the transformation process
1.
A. Abduvokhidov [5]
"Digital transformation activities have a positive
impact on the financial position of credit institutions,
and significant investments are compensated by
achieving a combination of goals.
2.
Bharadwaj [6]
Digital transformation fundamentally changes
operations and adds value to the product offering to
customers. It is also an intellectual and cultural
change that means “developing and improving
business
models,
operations,
processes
and
capabilities to take advantage of changes in digital
technology and its strategic impact on society”.
3.
Feher & Varga [7]
Key digital transformation practices such as
leadership, digital trends, digital transformation
skills, digital strategies, digital adoption and a
customer-centric approach affect a bank's digital
maturity level.
4.
Listeners[11]
The integration of technologies and infrastructures
is one of the leading principles of digital banking, a
principle that is absent in electronic banking, which
uses several old and new technologies.
5.
Suyunov D
.
[13]
Banking transformation is the most fundamental
new process that will help banks use digital
transformation operations in all types of services
provided and ensure the efficiency of service delivery
and its effectiveness. In this, service delivery will
fundamentally change and the services offered to
customers will bring added value. This will
necessitate the use of artificial intelligence, big data,
etc.
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To conclude, as a result of reviewing the modern management system of banks of
developed foreign countries,
it is appropriate to implement the following in the banks
of our country.
1.
To ensure the development of the business and investment environment, the
processes of governance bodies related to making the right decisions and
the introduction
of digital technologies into the activities of society
;
2.
A model model of "Digital Corporate Governance"
and a system for assessing
its effectiveness, and to establish a monitoring system, in order to model the development
of the right decisions, use the capabilities of artificial intelligence, ensure the participation
of board members remotely using electronic platforms, and increase the level of
transparency of bank activities .
By implementing these processes,
the following results can be achieved.
1.
The ability to process and store information flows will expand, the participation
of management bodies in important economic and financial decisions of society will be
ensured, and the speed of making decisions related to the fate of employees will increase;
2.
High competitiveness of societies is ensured due to automation and simplification
of business processes, transition to digital management methods and modeling of actions of
specialists to realize strategic goals.
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