Digitisation challenges and innovation in Asian banking

The recent ASEAN Cisco Connect and Internet of Things (IoT) Forum in Singapore was kicked off by Saleh Munshi, Cisco’s president for Southeast Asia (ASEAN). He said that although studies carried out by the multinational tech giant show that four out of 10 incumbents in many industries are going to get disrupted, only one in four are dealing with digitisation in a proactive manner. The studies also suggest that 45% of companies don’t have digital disruption as an issue on their board level agenda.

Expanding upon Munshi’s comments, Cisco vice president Ross Fowler said that research by Cisco and Swiss business school IMD showed that financial services is one of the five industries that will face the greatest impact from digitisation. Although 41% of financial services executives told researchers that they understand digitisation increases their risk of going out of business, less than a quarter believe they’re doing the job seriously enough to counter disruption. What they need to do, he suggested, is to leverage hyper-awareness among their customers and competitors, develop processes for informed decision-making and ensure fast execution.

According to Fowler, although many banks lack a strategy some have managed to put digitisation in place. Australia’s Westpac Bank, for example, has used video technology to connect video experts to customers in many of its 1,100 branches, and has seen products per customer increase more than 100%. Malaysia’s Bank Simpanan Nasional (BSN) launched virtual teller machines in 31 branches late last year, resulting in substantial improvements in customer experience and incredible efficiency increases.

Transforming the workforce

In a panel discussion on digital transformation Rob Findlay, senior vice president of The Development Bank of Singapore – aka DBS Bank – confirmed that his bank is using digitisation to transform its workforce.

“Our culture comes from a different place from a start-up,” he said. DBS is transforming a deeply ingrained mindset and a risk-averse culture. “We want to create a culture where there is an embrace of risk, and teach our people innovation. Our job is to be cheerleaders for innovation.”

Key initiatives at DBS include running start-up programmes and hackathons with bank staff and training teams in human-centered design. Additionally, the bank is asking staff to transform customer journeys and “they’re doing the same thing to employee journeys, making employees have a great time at work.”

Driving innovation

Focusing on innovation in Southeast Asia, Olivier Berthier, chief executive officer (CEO) of Singapore-based digital banking software specialist Moneythor, said there have historically been few innovative solution providers born and bred in ASEAN.

“There is not a culture of research and development (R&D) and software development in this space,” he said and there have been fewer propensities for start-ups. “The concept of being an entrepreneur is relatively new in the region. That explains why ASEAN is a little late.” However, he is now finally seeing government support to promote a broader entrepreneurial culture and incubators are promoting innovation.

A challenge for banks according to Amran Hassan, head of innovation for Malayan Banking Berhad (Maybank), is that “we have to compete with a different experience from other industries. We have to be fast.” While services such as account opening took weeks in the past, now it has to be speedily completed.

Making changes quickly, though, is a challenge. “If I have something today, I have to budget it for 2017 as this year’s budgets are all gone.” Hassan therefore focuses on “the need to build, to move faster, try out things and execute.”

He has found that the success of innovation teams depends on their purpose. “Teams that banks build with ‘white lab coats’ come up with new stuff. They have been very successful, like Citibank. Innovation teams that support the rise of culture rate a ‘C’.”

For David Moskowitz, founder of Singapore-based Bitcoin broker Coin Republic, the key for fintechs is problem-solution. “We don’t know what your problems are – I need to learn about those things,” he said. “Then, develop great solutions to your problem.”

Customer experience: the next generation

David Malik, senior director at Cisco, echoed Fowler in agreeing that most banks lack a clear digitisation strategy. Moreover, he said the financial services industry has been slow in digitising, even though the trend is accelerating from a customer and consumer experience perspective. The question for banks, then, is how to transform and move faster.

In Asia Pacific, the US and Europe video is a pervasive part of digitisation, “Banks are saying ‘can I do a video call with you?’ The remote advisor that Bank of America is using is profitable, and loan origination decreased by weeks. Business managers are investing in technology because of how it generates revenue.”

Malik is also seeing massive demand in analytics. “The days of streaming analytics are here, on mobile or other devices, is here to stay.” To retain customers as well, banks are pulling in 60-70,000 data points and using analytics. The key is figuring out how to analyse the data. “Getting data is easy. Correlating it is difficult.”

On the technology front, Malik identified the fact that “every bank has 50,000-60,000 applications, and a third are dinosaurs” as a key issue. To re-factor these applications, banks needed to develop a view of dependencies. “Applications are dependent on other applications. Dependency mapping – the investments in that space.” He also expects that although banks are spending millions on security – and large banks typically engage 300-400 vendors with a niche vendor for every problem – consolidation will happen over time.

Malik added that almost every bank in the region either has or is working on a strategy for 2020 – those able to make digitisation an effective part of that strategy are the ones that have the best chance of success.

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