If my bank doesn't support the letter A in names, they can't spell my first or last name correctly. Why shouldn't the bank—in the year of the linux desktop 2023—be forced to fix this? We live in an age where any character is easily representable in multiple encodings.
Wrongly spelling people's names (regardless of the reason) increases the risk of error and fraud. It also makes it difficult or impossible to request that information about you be removed or turned over if you wish to request it (how are you supposed to request information about yourself if their records have your name spelled wrong, and there's no way to correct it?). Just because the fix here is a technological one doesn't mean that it isn't a problem.
Representation is one thing, but for the user, presentation matters; the user in the article wouldn't have been happy if the bank had stored the diacritics but still communicated without them. I'll bet that 99% of systems that happily handle a Russian or Korean name will store a Mongolian name correctly but utterly fail at printing it.
Wrongly spelling people's names (regardless of the reason) increases the risk of error and fraud. It also makes it difficult or impossible to request that information about you be removed or turned over if you wish to request it (how are you supposed to request information about yourself if their records have your name spelled wrong, and there's no way to correct it?). Just because the fix here is a technological one doesn't mean that it isn't a problem.