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ЭКОНОМИЧЕСКИЕ НАУКИ
THE IMPORTANCE OF EMBRACING DIGITALIZATION IN
UZBEKISTAN'S BANKING SECTOR 1 2 Azizov U.U. , Asrarova M.B. Email: [email protected]
1Azizov Ulugbek Uktamovich - PhD in Economics, Professor; 2Asrarova Madina Bahtiyarovna - Undergraduate, BANKING DEPARTMENT, TASHKENT INSTITUTE OF FINANCE, TASHKENT, REPUBLIC OF UZBEKISTAN
Abstract: digitalization of the economy and the transition of banking services to a new level, providing access to banking products and services nearly around the clock, contribute to the transformation of the banking system and the transformation of its classical structure. The role of digital banking in transforming banking services has a significant impact on society. This article examined the key problems facing banks in the digital age, the current state of affairs and the importance and feasibility of introducing digital innovation in banking. Keywords: digital technologies, digital banking, transformation, digital banking services, digitalization.
ВАЖНОСТЬ ВНЕДРЕНИЯ ЦИФРОВИЗАЦИИ В БАНКОВСКОМ
СЕКТОРЕ УЗБЕКИСТАНА 12 Азизов У.У. , Асрарова М.Б.
1Азизов Улугбек Уктамович - кандидат экономических наук, профессор; 2Асрарова Мадина Бахтияровна - магистрант, кафедра банковского дела, Ташкентский финансовый институт, г. Ташкент, Республика Узбекистан
Аннотация: цифровизация экономики и переход банковских услуг на новый уровень, обеспечивающий круглосуточный доступ к банковским продуктам и услугам, способствуют трансформации банковской системы и трансформации ее классической структуры. Роль цифрового банкинга в преобразовании банковских услуг оказывает существенное влияние на общество. В этой статье рассматриваются ключевые проблемы, стоящие перед банками в эпоху цифровых технологий, текущее состояние дел, а также важность и целесообразность внедрения цифровых инноваций в банковской сфере.
Ключевые слова: цифровые технологии, цифровой банкинг, трансформация, услуги цифрового банкинга, цифровизация.
UDC 336.719 DOI10.24411/2304-2338-2020-10601
Nations all over the world have been and will be entering to the digital era. The digital economy as the new productivity platform will not only boost economic growth but also will improve the lives of the citizens. The world is embraced by the idea of digital transformation, and Uzbekistan does not remain aloof from global trends. On January 24, 2020, the President of the Republic of Uzbekistan Shavkat Mirziyoyev in his Address to the new Parliament, declared 2020 as the "Year of Science, Education and the Digital Economy". He also mentioned: "In order to achieve progress, we must master digital knowledge and modern information technologies. It will allow us to traverse along the shortest route of progress" [1].
The technology has helped to remove many barriers so financial institutions and commercial banks can provide services and create more accessible products for their customers at lower cost. The recent developments in the technology have created totally new service concept and service environment, which has changed the nature of buying and selling of services.
At the moment, digital banking services are being developed at a rapid pace and it helps the banks shorten transaction time, reduce costs, and promote competitiveness. Digital banking is now considered as the future of the banking industry. In a developing country like Uzbekistan, the development of digital banking is not only an opportunity or a trend but also a significant challenge.
Digital banking operates on the basis of digitizing all activities, which allow customers to access all traditional services through the websites or mobile devices by having internet connection to be able to manage or execute their transactions. Research in digital banking uptake argues that it offers banks alternative delivery channels through which services can be delivered more conveniently and economically (Akinci, Aksoy & Atilgan, 2003) [2].
Uzbekistan's banks have to introduce different kinds of productive and innovative ideas with which they can give better services to their customer. By embracing digitalization, banks can provide enhanced customer services, customer convenience and saving of customer's valuable time. It is an important time for Uzbekistan's banks when they have to compete to every costumer by using all the digital and technological tools at their disposal to make their offering as customer-centric as possible.
The trend of customers using digital banking is growing rapidly. According to Internet World Stats report over 4.57 billion people (about 59%) of the global population are using the internet in 2019 [1].
There are a lot of reasons why customers choose digital banking and some of them are:
1. Customers do not have to go to the bank to make transactions and vice versa.
2. They have independence from space and time constraints through twenty-four-seven service availability on the Internet.
3. Customers have a chance to pay from anywhere in the world where they have Internet access.
4. Digital banking affords greater control over their money.
5. They can track their spending by using detailed records.
6. In the event of fraud customers' can address with their bank and make a claim.
7. It's simple to block a digital wallet that has been compromised whereas it is almost impossible to retrieve physical cash that has been stolen.
8. Customers may be eligible to accrue points, obtain discounts or even get freebies when they use their digital wallet.
Due to more advancement in internet technologies, digital banking nowadays play very crucial role in e-payment area and also provide online transaction platform to customers, support many e-commerce business such as online shopping, online auction and internet stock as well.
In today's world the customer can move to other banks without any cost if the current bank does not improve their services, as many competitors are offering the same or even better services. At the same time the satisfied customer does not move smoothly to other company. If customers are being offered numerous tools and feature that make their lives easier in other areas, they soon become frustrated with services that do not offer them similar levels of convenience and choice.
This shift towards digital banking means that banks' marketing and financial management models are changing and customer acquisition and retention, and financial performance are no longer determined solely in the branches. The number of credit organizations and bank divisions in Uzbekistan as of October 1, 2019 decreased compared to the same date a year ago from 8640 to 8061. The number of branches of commercial banks decreased by 49 (decrease from 896 to 847), mini-banks - by 174 (from 1134 to 960), operating cash desks located outside of banks - 373 (from 2281 to 1908) [4].
10153458
2020
Fig. 1. Number of user of remote banking services (as ofJanuary 1) [5]
We can see from the figure that the total number of users of remote banking services as of January 1, 2020 amounted to 10 153 458. It means that customers actively respond to market trends and switch to digital services that allow them to solve daily tasks faster and easier. This change has made the effect of digital banking on customer experience, satisfaction, and loyalty, and how they contribute to financial performance. The challenge for banks is how to meet these customer needs and make profit. With rapid technological change, banks face the challenge of improving their customer experience and profit, following the financial uncertainty and reduced customer confidence. Customers want high service quality, convenience and better experience via digital devices.
Banks are also pressured to grow, innovate, create better operating environments, utilize new capabilities, improve culture and operate flawlessly. The inability of customers to get what they want has driven the increased popularity of fintech companies, which have been focusing on customer experience and alternative business models to differentiate themselves.
The transition to digital technologies makes the task of improving the confidence environment in the financial sector particularly urgent. Digitalization of banking cannot be successful without establishing partnerships between fintech companies and financial organizations, coordinated actions to ensure cyber security and protect confidential information. Confidence in banks in the context of the formation of augmented reality and customization of services is turning into one of the main competitive advantages in the eyes of consumers. Speaking about the financial market as a whole, the problem of trust today is much broader than the trust of customers in banks. This is the trust of banks and other financial institutions to each other, and the confidence of banks in the regulator. This is a confidence in the competence and business reputation of the management and owners of financial institutions.
However, to date, there are several challenges to widespread digitalization in our banks. Firstly, security issues, as new technologies are more closely linked to our personality. Already introduced innovations allow, including banks, to analyze not only the provided personal data, but also the psychotypes, tastes and preferences of their customers. Secondly, problems of legislative regulation are one of the important barriers. It is impossible to draw a clear distinction between the use of publicly available information about bank customers and the invasion of their privacy. And the third obstacle is integration with outdated IT systems and infrastructure. There is a tendency for more rapid development of technologies than the conditions for their implementation. That is why, many developments have not yet been reflected in the banking or other public sphere.
Clearly, the majority of banking services can benefit from digitisation, which is convenient, cost efficient, empowers customers to bank 'anytime', adds value and offers the right customer experience. In the current market, customers and banks seek value, and digital banking innovation has become a good strategy to achieve this, as banks' strive to improve customer experience and financial performance. To summarize, it is necessary to emphasize once again that providing high-quality service and customer service is a priority for banks, and providing banking services in the amount needed by the client, in the right place and at the right time is impossible without the development of digital interaction channels.
References / Список литературы
1. Message from the President of the Republic of Uzbekistan Shavkat Mirziyoyev to the Oliy Majlis. Official website of the President of the Republic of Uzbekistan. [Electronic Resource]. URL: https://president.uz/en/lists/view/3324/ (date of access: 14.05.2020)
2. Akinci S., Aksoy S. & Atilgan E., 2003. Adoption of Internet Banking among Sophisticated Consumer Segments in an Advanced Developing Country. International Journal of Bank Marketing. 22 (3). 212-232.
3. Internet World Stats. [Electronic Resource]. URL: https://www.internetworldstats.com/stats.htm/ (date of access: 01.05.2020).
4. Banks close part of the branches, the Central Bank explained the reason. [Electronic Resource]. URL: https://www.gazeta.uz/ru/2019/12/10/banks/ (date of access: 05.05.2020).
5. Information from the official website of the Central bank of the Republic of Uzbekistan. [Electronic Resource]. URL: https://cbu.uz/ (date of access: 13.05.2020).
