CAERC: Azerbaijan's banking sector is at crossroads of digitalization, security challenges

Today, Azerbaijan's banking sector is experiencing a period where digitalization intersects with security challenges, Vusal Gasimli, the Executive Director of the Center for Analysis of Economic Reforms and Communication (CAERC), stated at the 9th International Banking Forum (IBF-2025) held in Baku, Report informs.

Gasimli noted that data‑driven management, digital ecosystems, the transition from open banking to open finance, real‑time payments, and the application of artificial intelligence (AI) have already become new standards in banking:

"It is clear that consumer behavior is changing, technology is accelerating, and risks are becoming more complex. The main task of the banking sector is to balance innovation with security and ensure the transition to sustainable and reliable systems. The new banking model is no longer built solely on providing services, but also on data‑driven management, forecasting risks with AI, detecting incidents in real time, and applying progressive regulatory standards. At the same time, ESG frameworks, Basel III requirements, and AI‑based approaches to liquidity and risk management have become essential components of sustainable development."

The director emphasized that the forum's agenda shows fintech‑bank cooperation, AI‑driven automated risk monitoring, advanced cybersecurity solutions, digital investment platforms, and blockchain‑based operations as the foundation of future financial architecture.

"I believe that integrating modern technologies and analytical approaches is vital for building a reliable, secure, and sustainable banking sector. In particular, the use of artificial intelligence and big data opens new opportunities in risk management. Through these technologies, banks can assess credit, liquidity, market, and operational risks more proactively and accurately, while gaining the ability to respond swiftly and flexibly with real‑time analytical decision mechanisms," Gasimli said.

He added that an ecosystem approach plays a critical role in the sustainable development of the banking sector:

"This approach ensures that financial institutions create an integrated and interconnected ecosystem with customers, fintech companies, regulators, and other stakeholders. Such an ecosystem enhances resilience through information sharing, innovation promotion, and risk distribution."

Gasimli also stressed that progressive and flexible regulatory approaches are key to ensuring the reliability and security of the banking sector: "Regulators must keep pace with technological developments, introduce new legal frameworks and standards, and support the use of innovative tools such as AI and big data in risk management processes.

This approach not only strengthens regulatory oversight but also creates a favorable environment for banks to operate innovatively and sustainably. In fact, building a reliable, secure, and sustainable banking sector is possible only through the combined application of technological capabilities, analytical decision mechanisms, ecosystem cooperation, and progressive regulatory approaches. This not only ensures effective risk management but also makes a significant contribution to financial stability, economic development, and public trust."

Concluding his remarks, Gasimli said: "Ultimately, forming a new development model for the banking system based on digital transformation, artificial intelligence technologies, open financial ecosystems, and sustainability principles is one of the structural economic requirements of the modern era. Integrating these directions is fundamentally important for enhancing the competitiveness of financial institutions, managing risks more effectively, and ensuring long‑term financial resilience."