'The future of digital banking in Asia', Sandeep Lal, Head of Digital Bank, DBS Bank
The 'Big Techs' have led the way in delivering customer-focused experiences, providing ease, value, variety, transparency, and personalised offers. This has led to their massive adoption by consumers. Banks who embrace these lessons and transform themselves into digital organisations – making customer experience part of their DNA, while maintaining a balanced approach to risk management – will come out on top.
It's an extraordinarily exciting time for the future of digital banking in Asia.
Digitalisation is being embraced by all segments of the population, bandwidth is cheaper and faster, devices are more sophisticated, and usage is skyrocketing. Just five years ago consumers were only starting to adopt mobile banking – today at DBS over 70 per cent of our digital interactions are via mobile. We can only imagine what the next five years will look like!
Across DBS, to continue staying at the forefront of the industry, we are re-imagining banking. We are using digital technology and innovation to extend our reach, enhance our efficiencies and create customer-focused solutions. A continuous barrage of new and improved technologies, such as artificial intelligence (AI), biometrics, image-based frontends and backends, big data, voice, blockchain and Internet of Things (IoT) promise even more exciting possibilities. Consumer experience will become even simpler, safer, more personalised, and have greater immediacy.
Asia – which has the world’s largest mobile internet user base, social media user base, gaming capabilities and marketplaces – will lead. With respect to finance, the region’s early recognition of a digital future, coupled with a positive regulatory stance towards innovation (with objectives ranging from financial inclusion to greater competition), has led to the entry of numerous fintech start-ups and also ‘Big Techs’ (e.g. Alibaba, Tencent) into financial services. Disruptions to financial models will increasingly originate from the region, as they have for payments. This is both an opportunity and a threat to banks and their digital banking strategies.
Watch out for the Big Techs (e.g. Alibaba – Ant Financial, Tencent – WeBank, Apple – Apple Pay, PayPal etc). Fintechs are likely to be allies!
The industry often looks at fintechs as the digital disruptors. We believe the Big Techs with large platforms are the ones we should be more concerned with. These platform companies are not only technology companies, they also have large customer bases (hundreds of millions of consumers), offer e-commerce, social media (with excellent daily transactional and marketing platforms), payments services, and are able to collect data very effectively. Their cost of customer acquisition is low, they have excellent data capabilities, and are very effective at cross-selling and providing personalised offers. They offer financial products through their financial offsprings, and they can pretty much do everything a bank can – raise money, lend money, and move money around. Most fintechs will end up collaborating with incumbent banks due to the high cost of customer acquisition, but the Big Techs could view banks simply as more competition.
Here’s the opportunity. The Big Techs have led the way in delivering customer-focused experiences, providing ease, value, variety, transparency, and personalised offers. This has led to their mass adoption by consumers. Banks who embrace these lessons and transform themselves into digital organisations – making customer experience part of their DNA, whilst maintaining a balanced approach to risk management – will come out on top.
So far, most of the digital disruption success stories we hear about are limited to small-value transactions (e.g. in payments). These disruptors have increased the pie by converting cash transactions to electronic, and transactions are small enough that customers can more readily overcome the fear of possible losses. For higher value transactions, such as large deposits or assets to be managed, consumers have been more reluctant to make the jump. This is because banks are still generally seen as a safer option. We are regulated and have a longer track record in risk management. Asian banks are also viewed to be more conservative. The challenge for banks is to ensure that they retain this trust – especially with millennials, who are digitally driven and may come to trust Big Tech names as much as the banks – even as they push ahead with their digital agenda and transform the delivery of their products to be on par with the Big Techs.
Customer centricity should be the new mantra, innovation has to be a priority, and the banks need to choose wisely amongst the constant barrage of new technologies by focusing on customer traction and satisfaction.
To re-imagine banking at DBS, we are re-wiring the organisation to have a start-up culture and mindset. We have established experiential learning platforms, introduced new ways of working, redesigned office spaces, and encouraged teams to look externally and embrace a spirit of innovation.
Here are a few tips on how banks can transform themselves to compete effectively in a digital age:
This is a rapidly evolving space, so making the right choices and taking the right approach is critical.
1. Cultural change is hard. Senior commitment is key and often the most difficult part. Your chief executive (CEO) and senior management will need to lead the way.
2. A vibrant digital future needs robust technology to achieve it. It is imperative that your technology arm is staffed appropriately with the right digital specialists.
3. It’s no trivial thing to embark on a digital transformation. You will need to commit significant resources.
4. Prioritise well. With a constant flow of new ideas and new methods proposed by consultants, technology companies, etc. you will need to choose carefully. Oftentimes, less is more.
5. Hire non-bankers, and implement goals and metrics that flow throughout the organisation. Hiring people with a digital background is critical to changing and challenging the status quo.
6. Don’t only build on your own digital properties. Like the ‘Big Techs’, plan on projecting your products on third-party sites or wherever customers may be transacting using APIs.
7. Artificial intelligence, biometrics, etc. are not just for fintechs. It’s the future, and it’s almost here so embrace these technologies.
8. Digital strategy should be led by digital practitioners, and supported by those who possess banking ‘domain expertise’. The default is usually the opposite and makes for slower progress.