Banks must stop living in the past

• Fast-pace change in the banking industry demanded institutions to rethink strategy, adopt leaner, agile and collaborative models
• Fundamental redesign of processes with customers at the core to digital transformation involving a whole new process of thinking towards frictionless customer journey
• The new revolution - Artificial intelligence, Internet of Things, and blockchain are reshaping the financial services industry

The disruption from new financial technology players compels the banks to focus on innovation culture, not just top down but across all level of employees, agility in processes and to think and act like them. Mobile will dominate the future landscape and banks are struggling to ensure that they are able to offer all their services across this channel. “Next generations prefer automated relationships through their phones and social media apps,” pointed Ron Suber, president emeritus and senior advisor at Prosper Marketplace, during the inaugural The Future of Finance Summit 2017 in Singapore.

“Banks need to ensure that innovation results in efficiency and that can translate into lower costs to customers,” said Suhail Suresh, group chief technology officer (CTO), Maybank. “How do banks ensure that any type of service they provide can be offered on any hand held device?” he questioned while talking about the current challenges.

Institutions need to rethink strategy, adopt leaner, agile and collaborative models

The fast pace of change in the industry demands that all institutions are agile and evolve constantly. The product life cycle and technology innovation happen in ever reducing time span, speed is paramount and innovation is an iterative journey.

“Banks recognise that they have to rollout initiatives first then deal with the risks as they come,” commented Ng Ling Soon, CTO, BCSIS Information Systems.

There is dramatic shift in thinking as the banks realise the need to be alert to identify opportunities to target inefficiencies in the market towards better customer service experience. The leading institutions increasingly focus on connectivity of data and the ability to integrate with partners through application programming interface (API) frameworks to launch new services. Institutions should seek opportunities to build greater collaboration in the industry, to partner with nonbanking organisations to further their service potential and identify niche areas for expansion.

Non-banking and peer-to-peer players improve financial inclusion, new credit risk assessments models with increased focus on big data and channelising excess wealth to these untapped segments of markets. Banks need to stop living in the past and awaken to the emerging ‘shared economy’ models. There is paradigm shift towards ‘network effect’ created by consumers which is being tapped effectively by the new emerging players.

Market place and alternative lenders fill gaps where banks are not able to offer services and are risk worthy. Banks need to actively identify untapped segments to bring greater financial inclusion. Most banks are still focused on “finance as arbitrage” opportunity rather than focusing on whether they are able to fund all their customers. Alternative lenders on the other hand focus on reaching out to bigger and untapped wider markets.

“Future of finance will be decided by customers, not banks. The future will be inclusive, affordable, easy to understand and regulate. ‘Opportunity is king’ and the future will belong to people who can create opportunities and not by people who have capital,” opined Soul Htite, chief executive officer (CEO) of Dianrong.com.

Fundamental redesign of processes with customers at the core

Organisations need to develop a culture which fosters innovation by thinking beyond the conventional business models and evaluating collaborations and partnerships with digital leaders in the financial services industry. Digital transformation involves a whole new process of thinking towards frictionless customer journey.

“Next generation banking is not about newer systems. It requires a fundamental redesign of processes with customers at the core. New bankers need aptitude in technology, banking and design,” pointed Kanags Surendran, managing director and head, digital banking at CIMB.

Digitisation is about customer experience, no longer targeted at just cost savings, efficiencies or reputational gains. Customers are seeking ‘journey based experience’ rather than a channel based experience and this is becoming increasingly important in being able to retain customers.

“Focus in banking will shift from infrastructure to application, and the power will shift to consumers and user experience,” commented Ron Hose, founder and CEO of Coins.ph. “It is no longer a one dimensional customer segregation based on maturity but a new dimension of how customers interact with digital services,” said Michael Lor, former CEO of Canadia Bank.

The new revolution - AI, IoT and blockchain are reshaping the industry

Artificial intelligence (AI) and robotics, including advances in data intelligence and machine learning and on their effective utilisation are redefining the future of financial services industry. Banks have significant amount of data but are still struggling to manage and use it effectively.

“Data is particularly useful in journey mapping, customer movement behaviours and using transaction data to identify information asymmetry in the market,” pointed Tobias Puehse, vice president, digital payments and labs - innovation management at MasterCard.

Modern AI platform are built on the foundation of the data and process automation technology trends that preceded it. The discussions highlighted that institutions are increasing implementation of a combination of human and machine learning technologies to augment the customer experience and speed up the processes.

With the advent of Internet of Things (IoT) and billions of interconnected devices, the importance of data ownership and capability to develop intelligence insights from the vast pool of data becomes of paramount importance.

Alvin Wong, head of regional products at Samsung Pay, believes there is a need to create an environment where a bank can target a user from his home through IoT, make appliances intelligent, and enable them to interact with user seamlessly through AI.

Furthermore, emerging technologies like blockchain are moving beyond ”hype” and multiple initiatives across institutions are on the way towards bridging value propositions, in a process of constant learning and evolution of technology. Coexistence, integration and interoperability are the key requirements for initial deployment of blockchain, pointed R Vivekanand, vice president & co-head at TCS Financial Solutions.

Cryptocurrencies are gaining popularity towards mainstream as they find growing instances of application. Singapore government recently experimented towards developing a tokenised form of the Singapore dollar on a distributed ledger.

“When you look into future there is going to be time when cryptocurrency will not touch fiat,” commented Mike Kayamori, CEO of Quoine Corporation.