"Banks in Asia Pacific have a more positive approach towards technology"

The race to improve customer wallet share and experience has already steered banks towards significant technology investments. With players from other industries, such as telecommunication firms, increasing their roles and respective foothold in traditionally banking domains such as payments and remittances, the banking industry no longer works in an insulated environment. Banks are now being forced to look at new business model, technology innovations and also learn from customer-centric practices adopted by players in other industries.

According to Simon Paris, head of strategic industries at SAP, “Software companies are arriving to banking with experience from other industries, and bringing product functionalities like real-time offer management, relationship-based pricing, differential pricing per channel and product configurations that have been proven in other industry segments."

Currently, banks place emphasis on improving customer centricity levels, number of accounts, wallet share and inclusive banking. They are also focusing on multichannel integration where a transaction started in one channel can be concluded at any other channel, with real-time information flowing across multiple channels. This has meant a great thrust for mobility, internet banking and integration across channels. However, banks often lack the required infrastructure for these growth objectives. Moreover, to achieve these objectives, initiating a technology discussion alone is not enough; operational and organisational model changes must also take place.

“In this scenario, markets that have less dependency on legacy systems will move faster. We would not be surprised to see banks in Asia Pacific and Latin America move faster than those in the US because they do not have a legacy architecture, mindset, and multi outsourcing contracts that act as handcuffs. Banks in these markets have a more positive approach towards technology and desire for growth,” Paris said.

The fact remains that over the years, banks have developed their technology capabilities to meet changing customer requirements in a reactive manner, leading to cobbled systems and silos of information that they now scramble to integrate. There is an increasing realisation of the need for enterprise-wide solutions, though most banks prefer to begin transformation at their front office solution level, and then proceed to their back office systems; or vice versa. The key bottleneck to technology is however the hefty investments required and banks' already high technology costs.

“If one were to look at banks' technology cost per employee, they are way too high. The reason for such high costs are mainly due to the complexities of their systems, with multiple systems added over years, with homemade applications and different technology stack, requiring multiple trainings. The front, middle and back office are all ripe for simplification, standardisation and industrialisation. Banks' ambition of banks should be to reduce such complexities and costs,” Paris suggested.

In this scenario, SAP sees itself playing the role of enabler and co-innovator alongside banks. The vendor recently got together with 17 banks and developed a new solution dubbed SAP Financial Services Network, which facilitates processing, formatting and distribution of transaction banking data among banks, corporations and treasury service providers.

“Our key proposition is a platform-based approach which has the power of integration, customer centricity, real-time capability and is massively scalable,” Paris said. “We build solutions for Tier 1 bank and then pre-configure and simplify it to be used by Tier 2, 3 and 4 banks,” Paris explained.

Notably, SAP is one of few software companies that provide enterprise-wide solutions to banks. At one end, it provides solutions for standard back office and middle office functions; at the other, it offers a platform from which banks can innovate for front office functions where they need to be competitive and distinctive.

The growing trend of technology investments by Asian banks is driving leading enterprise software companies towards the region. Today, financial services ranks among the top five industries contributing to SAP's total revenue, with the company hoping to increase its market share in Asia in times to come.

*Simon Paris is currently global head of strategic industries at SAP. He is responsible for the firm's end-to-end footprint and ambition across financial services industries. Prior to this role, Paris served as global head of financial services industries and was managing director for SAP EMEA Emerging Markets.