An Interview with Arthur Wong, General Manager & Head of IT, China Construction Bank

"As the most important players in the financial industry, I believe banks should take back the driver’s seat and take a more proactive role in financial innovations. Banks should actively review their legacy applications; adopt open standards; form partnership with tech firms or even other banks to provide new and innovative service to broader audiences..."

FST Media: What are your business and digital priorities for the next 6 months?

Wong: Here are top 3 business/digital priorities for the coming 6 months:

  • One business strategy of CCBA is to sustain our growth by maintaining our market leader position in the cross border business (i.e. between Hong Kong and China). The Bank has been constantly launching new products for this market segment and is heavily relying on technologies to enhance the customer experience for customers in these two locations.
  • With the investment and development efforts across the Bank in the past 18 months, we are going to roll out several new solutions on mobile platforms in the next 3 months, including P2P solutions, stock trading, new mobile banking app etc. and hopefully these new applications can enhance our customer experience and provide more tools to further bloom our cross border business.
  • The other priority is on cyber security. The HKMA has issued a Cyber Resilience Assessment Framework (C-RAF) early this year and most of the banks in Hong Kong have to comply with it by the middle of 2018. This will involve a lot of security assessments and reviews, system enhancements and implementations, new control procedures as well as hiring of external consultants and training of internal talents to get the tasks accomplished.

 

FST Media: What role can traditional banks play in driving finance innovation?

Wong: In the past decade, most of the finance innovations are driven by technology companies or fintech startups rather than traditional banks, despite their much higher IT budgets and no. of customers served. Most traditional banks are feeling the threats from these fintechs now and are trying to catch up.  As the most important players in the financial industry, I believe banks should take back the driver’s seat and take a more proactive role in financial innovations. Banks should actively review their legacy applications; adopt open standards; form partnership with tech firms or even other banks to provide new and innovative service to broader audiences.

 

FST Media: How can analytics and insights be used to develop customer-centric services?

Wong: It is more challenging for banks to develop successful customer services based on big data analytics than other industries such as supermarkets or travel industries.  Trust, relationship and pricing are the 3 most important factors when a customer decides which bank to deal with and the importance of analytics is relatively minor in attracting new customers.

That said, data analytics are still very useful in giving new insights in mass market consumer behaviors. It would definitely help improve the effectiveness of credit card promotions, for instance, by targeting our service to a more specific group of customers.

Another growing application of data analytics is risk profiling, especially for unsecured lending products, which used to have higher return with higher risk. By applying sophisticated data analysis models to calculate the pricing and share the risks to other participants, some fintechs are able to offer different varieties of unsecured loans to the mass market with lower-than-average risk levels.

 

FST Media: What are the main Cybersecurity risks in the banking industry at the moment?

Wong: The main cyber security risk is anomaly-based intrusions, such as privileged access attempts and exploiting system vulnerabilities or missteps during system setup to gain access to critical data or end-points. Attackers had successfully exploited the system loopholes between the SWIFT and RTGS connection and were able to steal $81 million from the Bangladesh central bank last year.

The other risk is malware (including spyware, ransomware and viruses). Hackers often plant the malware into the organization with phishing or other social engineering techniques in order to gain control of critical end-points and then perform economic espionage. The ATM ‘jackpot’ incident happened in Taiwan last year was one typical example which criminals used malware to hack into 41 machines of the First Commercial Bank.

Other cyber risks such as DDoS attacks or application specific attacks are also quite common in the banking industry but they are not causing as significant damages as the two risks mentioned above.

 

FST Media: What technology or innovation is proving to be the biggest game changer for the finance industry?

Wong: In the past decade (actually last 5 years merely) , smartphones and financial applications running on them, have been proven to be the single most disruptive factor for the finance industry.

Coming next, I would predict robotics technologies, including artificial intelligence, softbot, natural language processing etc., would become the next big game changer for the finance industry. Imagine 80% of the calls in call centre will be handled by machines and your relationship manager advising you to buy Google and to sell Apple stocks is actually a softbot. There will be a lot of uncertainties before we can reach there but I believe it is the way to go.

 

FST Media: How is China Construction Bank (Asia) responding to the challenges of digital disruption?

Wong: CCB (Asia) is celebrating our 105th anniversary in Hong Kong this year.  Being one of the long established banks in the region, our core is dependent on different legacy systems and we are definitely feeling the pressure of the digital disruption.

In the short term, CCB (Asia) is trying to focus our resources to selective technologies and partner with industrial leaders such as Tecent in order to bring better and modernized solutions to our customers.

For the longer term, we will leverage the resources and technology developments from our parent company CCB. CCB is one of the largest banks in the world and serving hundreds of millions customers in China and we believe further platform integration with our HQ will enable us to respond better to the digital disruption.

 

FST Media: What would you like to see develop from IT innovation over the next 5 years?

Wong: Other than the robotics technologies mentioned in (5) above, the IT innovation that I am looking forward to in the finance industry is identity management. We need a much more secure and convenient mechanism to authenticate a user’s identity (which could be customer, business partner or even email sender) other than the weak user-id/password or cumbersome 2FA like SMS or OTP.

Outside the finance industry, I would like to see breakthroughs in virtual reality as well as 3D printing technologies so that the applications of these two exciting technologies will become more widespread.

 

FST Media: How do you encourage a culture of innovation in your team?

Wong: One of the key responsibilities of banks is safe keeping other people’s money and thus by definition, most banks are prudent and conservative. It is therefore challenging to encourage an innovation culture within banks as stability always has a much higher priority than innovation. To make the matter worse, regulations and strict compliance requirements will make technology innovations more costly, if not impossible.

I would tend to start innovation with smaller projects with focus on solving a specific business problem first. In addition, it is also important to form a team with appropriate talent for this type of ‘innovation project’, such as younger generations looking for a new way to get things done. We also have to give them a leeway for mistakes so that the team members won’t be penalized if anything goes wrong during the innovation.

 

FST Media: What is the next big thing for China Construction Bank (Asia) and how will you measure its success?

Wong: The next big thing for CCB (Asia) is definitely the integration with Head Office’s New Generation banking platform but due to the scale of the project, with added complexity in dealing with the difference of regulatory and customer requirements between Hong Kong and China, it will take some time before full integration will happen.

Upon successful integration, we would expect to a quantum jump in productivity, lower system costs as well as reduced time to market for new products and services.

 

FST Media: What career line would you be in if you did not work in financial services?

Wong: I am the co-founder of a highly popular web site HKGolden.com in Hong Kong. I started the web site as a hobby in year 2000 and sold all the stakes in 2008 because I could not manage such a popular web site on a part time basis while I was having a full time career in a bank.

Along that line, I could be a web master, software developer or entrepreneur of a small tech firm if I were not working in the financial industry.

 

 

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