The pandemic accelerated the previous trend towards digitization of processes for the private production of goods and services and the provision of public services, as well as the digital transformation. Companies and other organizations have initiated digital transformation processes, that is, cross-cutting organizational changes to implement a deeper use of digital technologies. In addition to digitizing information, processes and functions that make up an organization’s operations, the organization itself and its strategy were transformed by this movement.
Digitization, and in many cases the most decisive and intensive digital transformation of all time, took place in the wake of the pandemic crisis. In just a few months, the pandemic has brought years of change in the way many private and public companies and organizations operate in all sectors and regions, serving as a catalyst for change.
In many cases, digital transformation was not a strategic priority before the pandemic, but it has been since. An irreversible change in organizational strategies overcame previous hesitations, with the results corroborating the option.
Digitization and digital transformation will also require proper regulation and transparency in data use. British mathematician Clive Humby coined in 2016 the phrase “data is the new oil”. In fact, as technology scholar James Bridle put it in a book in 2018, it can also be said that “data is the new nuclear energy.” In other words, they are a valuable and powerful commodity, but they also have an enormous capacity to cause harm.
We’ve recently had some examples of the vulnerability of digitized systems to data manipulation, such as the 2016 US elections, the UK brexit process, and several other electoral processes.
Furthermore, cybersecurity risks must be addressed. This year we have already witnessed attacks – either politically motivated or aimed at rescue – on companies, at key points in supply chains and on critical infrastructure – and also on public bodies, such as the recent cyber attack on the Ministry of Health. against data misuse has become more necessary than ever, something achievable only with proper regulation and supervision.
digitization of finances
The financial sector is a special case of rapid technological change, a trend reinforced by the pandemic. Traditional banks have had to adapt to a competitive environment in which online financial intermediaries operate without physical branches. Payments and credit are increasingly made using digital platforms. The increased demand for digital services triggered by the pandemic has accelerated this transformation.
The confluence we are witnessing is driving innovation in fintechs and raising important questions. As well addressed by Arnoud Boot, Peter Hoffmann, Luc Laeven and Lev Ratnovski in an IMF (International Monetary Fund) blog post on December 17, 2020 (“What’s Really New in Fintech”), the recent financial transformation digital has changed the collection and use of information, communication and the needs related to prudential regulation.
About information: Collecting and analyzing customer data can now benefit from using their digital footprint to improve solvency analysis. The authors draw attention to artificial intelligence and machine learning as factors that improve the quality of assessment when compared to conventional techniques based simply on income, working time, assets and debts.
Furthermore, they can promote financial inclusion, allowing, for example, more credit for informal workers and families and businesses in rural areas. Geographic competition between service providers tends to be reinforced by the possibility of serving more distant customers.
Communication has also changed with regard to customer relationships and the distribution of financial products. It is no coincidence that large platforms have begun to incorporate financial services into their ecosystems, allowing the emergence of new specialized providers that compete with banks in payments, asset management and provision of financial information. In Brazil, the success of the expansion of Pix, created by the Central Bank, in commerce, in such a short time, suggests how vast the potential reach of digitization and digital transformation in finance is.
Prudential regulation will also be required to adapt as the operational risks of new credit technologies and business models have to be assessed. Cybersecurity risks and regulatory arbitrage need to be addressed. And regulators must maintain their ability not to be left behind by market ingenuity.
Other critical areas include competition policy, to address the monopolistic trends of large digital platforms, and the natural tendency to converge in their direction, as well as data policies to ensure consumer privacy, as well as data collection, processing and exchange. efficient and secure data. As Boot, Hoffmann, Laeven and Ratnovski said so well on the IMF blog:
“Overall, while much of the technological progress in finance is evolutionary, its pace is accelerating rapidly. Fintech’s potential to reach more than a billion people outside of banks worldwide and the changes in the structure of the financial system that this can bring can be revolutionary.”
Accelerated digital transformation, including finance, is among the legacies of the pandemic crisis.
*Text based on lecture for Infoparliament Hungary.
I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.