How are Asia’s banks modernising to stay competitive?

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In order to stay competitive in today’s fintech era, banks are pushing ahead with modernising their operations and willingness to adopt new technologies.

David Irecki banks modernising

A scan of the Asia Pacific region’s FSI sector confirms a major surge in digital banking, with 43 of Asia Banker’s top 100 digital banks emerging from the region, according to David Irecki, the Director of Solutions Consulting, APJ at global software-as-a-service (SaaS) company Boomi.

In a recent interview with me, Irecki, who heads the presales teams in the region, gave a rundown on the current state of digitalisation.

Interestingly, the state of digitalisation varies across economies in Asia, with Singapore taking the lead.

Countries such as the Philippines have huge potential but are playing catch-up, while Malaysia is further enhancing its digital financial services infrastructure to meet the growing customer needs.

Modernising key areas

Overall, the digitalisation of banking in Asia Pacific is indeed accelerating. In 2021, the region’s digital banking market was worth $1.5 trillion and is expected to reach $2.5 trillion by 2025.

This growth is being driven by a number of factors, including the rise of mobile banking, the increasing adoption of online and contactless payments, as well as a growing demand for financial services from millennials and Gen Z.

Asia Pacific’s digital banking landscape is highly competitive. In recent years, a number of new digital banks have entered the market, including GrabBank, Singtel Dash, and AlipayHK. These new players are challenging traditional banks by offering a range of innovative products and services tailored to the needs of digital-savvy customers.

Some key areas where banks are modernising include:

  • Banks are investing in new digital technologies, such as artificial intelligence (AI), machine learning (ML), and blockchain. These technologies can help banks to improve customer service, reduce costs, and increase efficiency.
  • Banks are opening up their data to third-party providers. This allows customers to access their financial information from a variety of different sources, such as online banking, mobile apps, and personal finance management (PFM) tools.
  • Banks are investing in new technologies to help them comply with regulatory requirements. This includes technologies for fraud detection, anti-money laundering (AML), and know-your-customer (KYC).

Diversity in the region

“The diversity in the region highlights the fact that each market has different areas of focus,” says Irecki. “Digital banking in Singapore is rapidly growing due to the relaxation of the MAS (Monetary Authority of Singapore) policies on applications for digital bank licenses, combined with the strong foundation of the Smart Nation initiative.”

 As a result, Singapore has five digital banks. In the Philippines, given its large population levels, economic growth, and a higher percentage of unbanked or underbanked citizens as opposed to its neighbours, there are numerous opportunities for digital banking.

And in Malaysia, their focus is on creating a resilient ecosystem that promotes transparency and interoperability.

Brass tacks

Fintechs are providing a range of innovative financial services, such as peer-to-peer lending, mobile payments, and investment platforms. These services are often more convenient, affordable, and accessible than traditional banking services.

“Data is the key to understanding customers and organisations,” said Irecki. “Giving full visibility of an enterprise’s workflows and other aspects of its operations can enable business leaders to refine workflows and processes. Improved operational efficiency reduces errors, resulting in faster delivery times of products and services, at less cost.”

He said with the integration of legacy systems with modern ones, decision-makers have acquired a comprehensive view of their organisation and are able to pre-empt and eliminate bottlenecks when it comes to delivering products and services.

In tandem with automating processes, banks and FSIs can significantly improve delivery times and customer satisfaction levels.

Also, by tapping non-traditional data sources, such as social media and other online behaviour, banks can anticipate the needs of potential and existing customers through personalised services and products.

“A great example of the latter is how fintechs are developing banking products that require less documentation through alternative data points to develop credit histories,” continued Irecki. “Such invention enables these FSIs to penetrate population segments that are historically underbanked or unbanked.”

Benefits for customers

Speaking of the benefits to customers, Irecki said: “The advantages of automation to bank customers are numerous. Automation enables personalisation of financial products and services, which means that banks can tailor their offerings specifically to the needs of each customer.”

He said one example is open banking, a technology-driven solution for sharing data between different organisations to provide more efficient and secure access to financial information.

Open banking makes large amounts of data owned by various institutions available to third parties instead of just being stored within banks and other financial institutions.

Banks better understand customer behaviour

“Banks can then better understand customer behaviour and preferences, allowing them to offer tailored solutions, such as business loans or mortgages designed around individual needs, rather than one-size-fits-all products.”

“Moreover, by integrating various financial applications into mobile apps – something many contemporary banks are striving for – customers will enjoy an omnichannel banking experience without the hassle and with the knowledge that their data is better secured,” he said.

Ultimately, integration and automation open endless possibilities in terms of service delivery from both a consumer and business perspective. At the same time, it ensures better compliance with data governance and privacy regulations.

For example, chatbots can be used to answer customer questions and resolve issues, and robotic process automation (RPA) can be used to automate repetitive tasks, such as processing loan applications.

Furthermore, banks and financial services institutions (FSIs) can benefit from automation and integration of their systems in a number of ways, including reduced costs.

Automation helps banks reduce costs by eliminating the need for manual tasks. For example, RPA can be used to automate tasks such as data entry and reconciliation. Streamlining processes will reap returns in enhanced efficiency: for example, AI can be used to identify fraud and risk, and ML can be used to personalise products and services.

Boosting agility

Turning to Boomi’s role in the market, Irecki said modern iPaaS (integration-platform-as-a-service) platforms are revolutionising the way financial institutions access new services and modernise their existing infrastructure.

“By leveraging a cloud-native solution, these companies no longer have to invest in costly hardware or custom coding as it all comes with an off-the-shelf package at significantly less cost.”

In addition, maintenance of these systems is almost completely eliminated since most top-tier iPaaS providers offer automatic updating capabilities that use self-managing features.

IT teams also benefit from the crowdsourced integrations and predefined integration of iPaaS providers, making implementation faster while reducing the risk of broken functionality.

Use cases

Irecki says, “There are a number of use cases for automation and integration of systems in the banking and financial services industry.”

Boomi’s platform has been instrumental in helping Australian financial institutions transform their operations. Two success stories include superannuation fund HESTA and Teachers Mutual Bank (TMB), one of Australia’s largest mutual banks.

Adoption trends

Some of the most common technology adoptions include:

  • Automation, which can be used to automate the customer onboarding process and help to reduce the time and effort required to onboard new customers.
  • Automating the loan origination process can reduce the time and cost of processing loans.
  • Automation could also help identify and mitigate risks.
  • And perhaps not least, automating the compliance process will help banks to ensure that they are in compliance with regulations.

The adoption of automation and integration of systems is becoming increasingly important for banks and FSIs. As the industry continues to evolve, banks will need to continue to invest in these technologies in order to remain competitive.

Enablers in Malaysia

Examples of digital adoption by banks and FSIs in Malaysia demonstrate the importance of reliable and secure infrastructure by the country’s players.

A quick scan of the Telekom Malaysia (TM) Group, for instance, brings up the following collaborative necessities:

  • TM’s unifi network provides high-speed broadband connectivity to businesses of all sizes to help them deliver digital services to their customers. TM’s partnership with Maybank provides unifi to its branches so that customers can access a range of digital banking services, such as online banking and mobile banking.
  • Through its enterprise and business solutions arm TM One, TM continues to develop cloud-based solutions for the FSI sector. Banks and FSI companies need to securely store and manage their data through an array of data centres and cloud services. These solutions can help businesses to reduce their IT costs and improve their agility. For example, TM has partnered with CIMB Bank to develop a cloud-based core banking system. This system has helped CIMB Bank to reduce its IT costs by 30% and improve its time to market for new products and services by 50%.
  • TM’s partnership with RHB Bank has helped the bank reduce its risk of cyberattacks by 70%. This underlines the critical need for businesses to protect their data and systems as an integral part of their business planning and implementation.

Leaders moving forward

Forrester expects customers to limit their spending this year in the face of record-high inflation coupled with rising interest rates which are dampening loan growth.

To compensate, banks and financial institutions– such as expanding their portfolios of products and services or targeting unbanked and underbanked segments of the population.

Irecki believes banks are well supported in such efforts with an Integration-Platform-as-a-Service (iPaaS) – “such as the Boomi Platform can help organisations build interoperability across legacy systems and cloud applications quickly and easily.

“The resulting unified view of data allows banks deeper insights into profitability, better risk management practices, and the ability to provide superior customer service experiences at all stages in the journey,” he said. “At the same time, integrating with an iPaaS solution reduces technical debt by modernising legacy infrastructure components – ultimately leading to cost savings.”

Large-scale research conducted recently by Market Watch forecasts the worldwide iPaaS market will exceed US$ 53.88 billion in revenue towards the end of 2030 at a CAGR of 25.6%. This reflects a growing global demand for utility by many end-use industries. As the digitalisation of the banking sector continues to accelerate, traditional banks will need to more rapidly adapt to the changing landscape. Its leaders will need to invest in new technologies and products in order to compete with digital banks and fintechs.

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