Study on factor responsible for operational risk in digital banking in public and private banks in Haryana

Abstract

Banking sector has gone through the rapid digitization, transforming financial services and delivering efficiency and convenience to the customer. While such aggregation has lowered operational costs, it has also stepped up their operational risk, particularly in the case of public and private banks. This paper studies the factors affecting operational risk associated with digital banking in the Indian State of Haryana, for both private and public sector banks. A mixed method research is used in the form of quantitative surveys, as well as qualitative interviews with banking professionals and customers. Operational risks found to be key include cyber threat, technological failure, regulatory compliance, human error, and fraud. Also, the study shows the difference in the adoption and means of managing digital banking operations between public and private sector banks. The technology integration level is high in Private Banks, but the system is overloaded and the data is prone to be breached. On the other hand, public banks face old technology, untrained workforce, and slower ability to thwart emerging threats. The findings further highlight that optimal risk management approaches and a well trained workforce, bolstered by stringent cybersecurity, play an instrumental role in fighting the operational risks. The study also strongly stresses the need for greater collaboration between public and private banks to share best practices and build a world class digital banking ecosystem. Results from this study can help policymakers as well as banking institutions to design effective risk mitigation strategies to promote the safe use of digital banking in Haryana.