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The rise of digital banking has brought numerous benefits, including increased convenience and accessibility. However, it has also introduced significant security and compliance challenges that financial institutions must address to protect their customers and remain in line with regulations. Digital banking platforms handle vast amounts of sensitive personal and financial data, making cybersecurity a top priority. Banks must secure their platforms from cyberattacks, data breaches, and fraud.

Regulatory compliance is another key challenge for digital banking. With global regulations such as GDPR (General Data Protection Regulation) and PSD2 (Payment Services Directive 2), financial institutions must ensure they safeguard customer data and operate transparently. Additionally, banks must meet anti-money laundering (AML) and know-your-customer (KYC) requirements to prevent financial crimes.

To tackle these challenges, digital banks are investing in advanced security technologies like encryption, multi-factor authentication, and biometrics to protect customer data. They are also collaborating with third-party cybersecurity firms to bolster their defenses. On the compliance side, digital banks are utilizing regulatory technology (regtech) to streamline processes and stay aligned with evolving laws and standards.