By Ramanujam Komanduri
Fintech start-ups are shaking up industry practices. How can established banks continue to remain relevant?
Rapidly advancing technology is transforming the financial sector with more innovative and convenient banking approaches that deliver financial services to customers anywhere, at any time. As the race to digitize banking and exeed customer expectations intensifies, data could be the difference for organizations to pull ahead.
Challenging the Status Quo
Asia Pacific proves to be a particularly fertile ground with financial technology gaining more traction in the region.
Post demonetization in India we have seen a wave of digital payments taking over the industry. E-wallets such as Paytm, Freecharge and MobiKwik saw spike in demand which continues till date though the scale has come down.
Consumers now are tapping into alternative use of cash such as internet banking, e-wallets and credit cards.
We are also witnessing more innovation in banks as they work to make payments frictionless.
Most of the mobile banking apps/e-wallets enable cutomers to manage their money, bills and even top up mobile phone cards from a sigle platform instead of queuing at banks or ATM for cash.
All of these new services have one thing in common: they are built around harnessing the power of data. Slowly but surely, the financial sector is sitting up to realize the immense potential data has for their businesses.
Singapore’s DBS Bank set up Digibank, a mobile-only bank that operates branchless, paperless and signatureless in Indonesia and India. Designed for simplicity and efficiency, Digibank offers 24-hour customer service via an artificial-intelligence-driven virtual assistant.
At the recent Google Cloud Next Conference in San Francisco, Darryl West, CIO of HSBC Bank, stated that, apart from HSBC’s USD$2.4 trillion assets, the core asset of the company is its database. West saw enormous growth in the size of HSBC’s data assets as customers adopted digital transaction channels vigorously. By smartly collecting data on customer interactions, HSBC is working and partnering with closely fintech firms to draw insights into running a more efficient business and creating more engaging customer experiences.
Intelligence Brings Opportunities
When it comes to harnessing the power of data, many of our customers turn to cloud computing. Case in point: IDC’s latest Cloud in Banking in Asia Pacific report predicts that the next two years will be a tipping point for cloud uptake among the region’s banks, as customer demand for anytime, anywhere services forces financial institutions to effectively utilize data insights to offer customized products and services in real time.
For example, Uber automatically suggests your next destination when you open the app, or a bank would offer an interest-free loan to cover a large bill, at the time of the bill receipt by the customer. Based on previous borrowing patterns, a backend algorithm can then calculate an appropriate interest rate and evaluate the user’s credit risk before transferring the loan amount instantly.
Data is also driving the automation of work procedures and training of machine learning algorithms, as artificial intelligence and advanced analytics have the potential to transform how banks will function in the future.
Already, the likes of DBS bank, have made multi-channel experiences possible by offering both online and mobile device banking services on a single platform. This reinforcement is also made via the integration of social networks, with the objective of understanding consumer needs and wants.
However, the integration and cross pollination of data can prove problematic if banks build their practices, such as credit risk analytics, operations analytics and compliance analytics independently, meaning they do not communicate with each other. More often than not, these silos examine similar data sets to extricate revenue opportunities and risks. With the setup of data systems and technologies which enable cross-banking analytics and address institution-wide challenges, new and more efficient customer services can emerge.
However, it’s not a smooth ride for the sector when it comes to data adoption. With only some institutions prioritizing the need for data and analytics, banks and financial institutions need to take the following steps to reap significant benefits:
Get End-to-End Visibility: Know where your data is and how it moves across private or public cloud and different geographies
Simplified Data Management: Uniform processes and interface for all your company’s data reduces operational risk and confusion
Always-on Security: Detect performance anomalies before they lead to service disruption or outages and ensure compliance with regulatory mandates and internal IT governance rules
Data-centric banking that understands patterns, predicts outcomes and improves processes, for digitally dependent customers and organizations is the future. Financial instituitions today have to prioritize digital transformation and create data-centric systems that will provide solutions for banking services that make lives easier and businesses better.