Global technology solution provider Oracle has suggested for developing digital banks in Asia to heed to deliver better banking.
The report “Beyond Digital - Data-Driven Strategies to Grow, Scale and Profit” uncovers important areas for digital banks to consider as they compete to gain market share.The report examines the evolving landscape for both digital and traditional banks in three key Asian markets: Hong Kong, Singapore and Malaysia.
The modern disruption of traditional banking is due to the growth of tech giants entering the financial services space, the emergence of alternative banks and new open banking regulations.
Also key is the issuance of virtual banking licenses, where in APAC, Singapore, Hong Kong and Malaysia are leading the charge. Oracle Financial Services Vice President Venky Srinivasan said the traditional banks are facing increasing competition in service innovation, which reinforces the need to redesign conventional banking models.
“Virtual banks may be nimble compared to the incumbents. Still, they face three immediate challenges: they need to demonstrate to regulators their ability to comply, they need to monetize data, and they need to turn compliance into a competitive advantage,” Venky added.
Digital banking propositions globally have done a great job of the on-boarding process. They now must prove themselves across the customer lifecycle with complex products such as SME banking, mortgages, investments and finance management – where satisfaction drops significantly.
The report details how banks can transform into data-driven organisations that meet regulatory and customer demands and considers their implications for banking best practices.Regarding the issue, PwC APAC Digital Banking Lead Harjeet Baura said the landscape has changed so rapidly that traditional banks are working at breakneck speeds to determine the best approach to remaining competitive amidst the advent of new entrants.
“ There is immense opportunity for both traditional and new digital banks by harnessing the right technology and use of data effectively to deepen their offerings and their share of the customer wallet,” he added.
PwC found that in Asia, sentiment toward virtual and non-traditional banks differs between various groups and within regions. Higher-income groups and people under 40-years-old typically express the strongest interest in digital banks, such as in Malaysia, where 81 percent of high-income residents favored a non-traditional financial solution.
That number was significantly higher than in Hong Kong, where only 63 percent of high-income residents desired a digital banking solution. However, despite the gap, the sentiment signals an opportunity for both traditional and virtual banks to serve current and future customers with the personalisation and products they desire.
The report spotlights several areas where banks can focus on delivering a better experience for customers across the financial lifecycle, including the underserved segment of SMEs, the use of data to turn compliance into a competitive advantage, and fighting financial crime.
With traditional banking, individual banks can open a digital account in the same day. But for SMEs, despite the demand for rapid funding, they face regulatory hurdles and delays unlike their individual counterparts.
According to the report, average ‘time to decision’ for SME on boarding within traditional banks ranges anywhere between five days to one month. ‘Time to Cash’ can take between 25-55 days.
Banks must focus on how to reduce turn-around times and deliver a seamless experience. By harnessing valuable data insights, using analytics and APIs, banks can quicken and automate processes to improve SME lending experiences.
Open Banking ecosystems present a significant opportunity to respond faster and more accurately to new demands across all stages of the financial lifecycle. It is critical for banks to tap these and give consumers fewer reasons to explore alternatives outside of the bank’s ecosystem.
Global policy think tank Pricewaterhouse Coopers or PwC research reveals a strong appetite for non-financial services like e-commerce or financial education from bank customers.
In various parts of Asia, health, travel and discount coupons top the list for non-financial services sought on e-commerce platforms. In Malaysia, 71 percent state these types of offers are the most desirable, followed by 60 percent in Singapore and 59 percent in Hong Kong.
Therefore, the ability to tie options for e-commerce, transport and lifestyle into one seamless digital banking experience is vital to attract and retain customers.
To ensure long-term profitability, banks should use data-driven tools to reshape their business models and achieve hyper-personalization. With data at their fingertips both digital and traditional banks need to leverage data insights using agile technology stacks to optimize capital allocation and mitigate risks.
This applies to virtual banks with a growth trajectory to ensure that risk and profitability are aligned strategically. Data-driven tools enable the mastery of data, which is needed across all levels and departments to get a real-time picture of the bank’s business.
Digital banks will need to consider how they can ensure compliance with less headcount and no physical presence. One of the critical design considerations of a digital bank is how it can design and automate processes to achieve compliance by design.
Jannatul Islam is with Daily Sun. He can be reached over email at [email protected]