The digital ecosystem risk in digital banking: A case study

Abstract

Rapid technological development encourages disruptive innovation that transforms the concept of the value chain into a digital ecosystem. Companies can leverage the resources of other companies as part of their value chain, without having to own them. It can generate greater risk due to external factors that cannot be controlled directly. Digital Bank Z is a digital bank with a large business ecosystem transforming from Book Bank I. They need to address these potential risks through good risk management while digital banking expansion in Indonesia is increasing rapidly. This case study aims to obtain an evaluation of how the digital transformation and risk management held by Digital Bank Z as well as to produce the conceptual framework for digital ecosystem risks. This qualitative research conducted semi-structured interviews as triangulation with informants from Digital Bank Z and Financial Services Authority or Otoritas Jasa Keuangan (OJK). Digital transformation produces competitive advantages for Digital Bank Z through higher interest rates, but the regulator cited, “digital bank is not a disruptor or competitor”. Recently, risk management is more focusing on operational risk due to no specific regulation of digital banks yet. As recommendations, the conceptual framework provides three stages to identify the risk of collaboration and the digital ecosystem.