Institutions need an intelligent strategy on ecosystems not predicated solely on control

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The first RadioFinance virtual roundtable saw the participation of 15 digital finance practitioners sharing insights on the future of the industry post COVID.

The first RadioFinance virtual roundtable saw the participation of 15 digital finance practitioners sharing insights on the future of the industry post COVID.

Industry experts discussed how the pandemic has altered the digital finance landscape and how the future of financial services could look like. They debated how technology and ecosystems ultimately reshape the customer journey and shift institutions’ priorities.

In this RadioFinance session, we will explore how both traditional and new players embrace this inevitable change and equip themselves with the right strategies and capabilities to win.

Key points in the discussion include:

  • COVID-19 has disrupted and accelerated the industry's digital transformation agenda
  • Significant disruption to consumer-facing and lending fintechs while B2B and technology infrastructure players see uptick
  • Institutions must reconfigure technology stacks to better leverage data and connect to customer-relevant ecosystems
  • Ecosystems are designed around customers, not products or institutions
  • Success requires capital, scale and understanding cost and unit economics
  • Operational security and resilience necessary to safeguard customer trust and engagement


Here is the full transcript of the session:

Foo Boon Ping (FBP): Good afternoon from Singapore. Welcome to our first RadioFinance virtual roundtable. We have assembled an expanded group of participants. We have over 20 digital finance and fintech practitioners across Asia to debate the future of the industry, as we make the transition to a new digital and post COVID-19 era. Many economies in the region are already opening including Singapore. How will business resume? How will consumers behave? What products and services will continue to be relevant, how will work change? What do business need to do to survive, we can be sure that we will not be business as usual. So it is timely for us to have this discussion. I am Foo Boon Ping, managing editor of The Asia Banker, and your host for the next 90 minutes. Our topic “Who is writing the next chapter of the digital finance revolution”, we’ll explore how different players – fintech, digital banks, marketplace and platform players, whether traditional or new, how they are fighting for a slice of the pie. And at the same time, embracing the change to be more digital and to equip themselves with the right strategy and capabilities. Now, let me introduce our panelists. 

First, we have Dennis Khoo. Dennis is chief architect and head of UOB’s digital bank called Tomorrow (TMRW), which has been launched in Thailand and soon across Asia. Dennis is responsible for the strategy growth and delivery of the digital banks business in UOB’s footprint. And he’s also involved in JVs (joint ventures) to build an ecosystem to support the growth of TMRW and the bank overall.

Next we have Donald Lacey or Don. Don is chief operating officer and managing director at Ping An Global Voyager – a $1 billion growth stage fintech and health tech venture fund formed by Ping An group, one of the largest banking and financial group in China and in Asia. Don has the mandate to accelerate Ping An’s group overall technology transformation and also to provide his portfolio companies scale access to China and to accelerate technology development in the country. 

Next, we have Ankur Mehrotra. Ankur is managing director and head of group financial Services of Grab, one of the leading ride-hailing company and e-commerce super apps. Before his current role, Ankur was also involved in creating JVs and partnership with banks and non-banks for Grab financial. 

Next we have Eduard Fabian. Eduard is the chief technology officer and vice president of Razer Fintech, a subsidiary of Razer Inc, one of the leading gaming industry player in the world, and Razer FinTech provides the digital payment network and e-wallet services in Southeast Asia. And Razer is also creating Razer youth bank which is the licensed application in Singapore and will be the first global bank that caters specifically to the youth and millennial. 

And finally, we have Siddharth Deshpande, or Sid. Sid is the Akamai’s director of security strategy for Asia Pacific, and Japan. He’s responsible for the company’s security product strategy, with a focus on helping customers build security and operational resilience into their digital program. Welcome, gentlemen. 

These are the topics that we’ll be covering today. What are the key trends that are driving digital financial services transformation? We will be raising questions about how they are impacting banks and FIs and how they are responding to them. And we know COVID will be one of the key topics we’ll be discussing. How has it impacted the assumption, strategy and plans that banks and Fis have to rethink, adjust and update now? Who will lead and how will the new financial ecosystem be built? How to monetise open banking and banking as service? Moving to cloud-based solution and using API’s? We want to debate your strategy behind ecosystem marketplaces and open banking, where do banks and FIs stand on them today. Are they driven by regulatory compliance or by the customers and real market needs? Or by competitive forces? What is driving the designing technology strategies to support digital banking requirements to meet customer expectation and effectively manage technology risk as banks and FIs become more digital? How and what are you doing to better meet customer expectation with all the technology available? How are you developing and scaling new products while improving security and operational resilience as your risk footprint increases as well with the digitalisation?

There are a few key trends that will have most significant impact on banks and FIs digital transformation, impact of COVID-19, the rise of digital banks, evolving open banking framework, building operational and cyber resilience. With social distancing and working from home becoming the norm and rising, e-commerce, digital and contactless transaction have also gone up. What opportunities will accelerate banks and FIs’ digitalisation and automation agenda? Will they be driven to consider the automation of B2B payments, integrating SMEs into supply chains, facilitating financial inclusion and micro payments for instance. Pre-COVID, regulators in many Asia Pacific economies have begun setting the rules and issuing licenses for digital banks. But the pandemic has affected some of these plans and initiative. More importantly, how has it impacted your digitalisation objective and digital banking services versus becoming digital only banks. 

Open banking is great for consumer, it promises more choice and lower transaction cost. In reality, only a limited number of jurisdictions have made it mandatory, for example, Australia and Hong Kong, and more recently, South Korea, in most other jurisdiction it is more persuasive. Regulators are encouraging the greater adoption, but is it right to assume that is heading towards universal adoption? The paceof digitalisation of the banking sector will vary across different countries in Asia. However, one thing is clear. Banks and FIs need to have an effective technology strategy to deliver and secure their digital services in line with their business objective. I’ve asked our panelists to elaborate how financial institutions are building operational and cyber resilience into their digital strategy/ 

Siddharth Deshpande(SD): I just thought I'd take a few minutes to discuss the front end of the digital transformation conversation right and why is Akamai talking about this? Akamai is responsible for content delivery, performance, acceleration, and improve the user experience, as well as for delivering security for the consumer facing digital platforms for banks worldwide. So we've had a lot of learnings over the years working with banks in the region. We all talk about it. But where does the customer experience actually happen? The customer experience happens on the user's mobile device, or it happens on the website. And a lot of the things that banks and financial institutions put on their web pages that generate revenue that might involve things like ability to track or things like JavaScript on numerous API calls. All of these things can potentially slow down the performance of the website. And when you're talking today about consumers who are comparing their digital banking are the new age banking platforms to consumer great platforms like Netflix in terms of user experience, it becomes very important to focus on that front end, not just in terms of improving the user experience, but also in terms of delivering security. And one of the things that we've seen is that users will just abandon their activity if the website takes longer than three seconds to load. Now, you could argue that this tolerance might be higher when it comes to maybe a financial services type of activity. But ultimately, users want great experience, or they're not going to continue their activity on your platforms. And you have to maintain this good user experience while being operationally resilient.

So that great customer experience needs to be maintained, while also being resilient to external events. You need to launch new services, continue innovating, compete with new players, you need to adapt to a situation where regulatory environment might change. So the platform that you're using to deliver your digital services as a bank, or as a financial institution, should be able to adapt to these changes. And one of the most important parts of operation resilience from our perspective is the ability to withstand targeted cyber-attacks. And what we seen this year is that attacks have continued when it comes to DDoS attacks But we have definitely seen that the capability of the attackers or the types of tools that they're using, are becoming increasingly specialised, and they're able to target those for specific organisations. So we're definitely seeing attackers becoming more persistent, as more activities happen online. And that applies to banks and financial services as well. And let's not forget that human behavior is also an important area to consider. So what we've seen is that since March this year, the number of phishing victims for a particular phishing toolkit called question quiz, where they basically attackers make this toolkit available to other attackers to be able to customise it to a certain organisation and it takes the form of a quiz which has a reward at the end. So it's pretty lucrative for the common user. And we've seen those types of attacks on users go up since March this year when the COVID situation escalated. We're also seeing an increase in credit card skimming attacks. This is some of you may know of these attacks by the term match cart. Malwarebytes, which is a security company, they've seen a 26% increase in web skimming attacks in March. And we've been able to integrate these new types of protections into the delivery of the digital services as well. For financial services, we're also seeing API-based attacks becoming super popular. Gartner has come out and said that API-based attacks are overshadowing attacks on the application user interface. There were times when we saw 75% of all attacks on financial services were using APIs. And when you talk about digital banking and open banking, APIs are fundamentally central to the whole mission of delivering digital banking services. So that's also something to watch out for.

And when you are thinking about it from an organisational standpoint, as an organisation that's delivering banking services, whether you're a traditional bank or you're a new player in the banking space, it's important to look at the performance and the governance and the security and resilience as one conversation. These are not individual capabilities that need to be put in place and Gartner has come out and said that this whole idea of combining the connectivity and combining security together to be able to deliver security controls closer to the attacker is actually the way of the future. 

FBP: Thank you for bringing that security and resilient perspective to our discussion. And I think throughout the discussion, we'll be getting back to that point. And we're going to start with the first topic on some of the key trends that are driving the transformation agenda. And we want to talk about the impact of COVID-19. Maybe I want to bring Don into the discussion in terms of how this impacted the competitive landscape from a funding and liquidity perspective. 

Donald Lacey(DL): I think that, on the one hand, consumer facing lending models have taken a hit clearly, a lot of high profile down rounds have taken place around the world. And I think there have been some significant credit issues at businesses that purported a very sophisticated AI credit underwriting approaches that have turned out not to be so sophisticated. The credit dimension of this crisis has also exposed some weaknesses, and some management teams that fintechs and I'm talking more about the consumer facing fintech models, the lending models that we see around the world. It is a very sobering experience to meet a neo bank CEO who doesn't know what a capital ratio is. And it's a sobering experience to meet a new bank CEO who doesn't get that NPL ratios are kind of inherently backwards looking as measures of credit quality go. And I've had a lot of those conversations recently so that the story is not uniformly positive. But on the other hand, I think that infrastructure oriented B2B fintech models are having a great 2020. The reality of the world of lockdowns and remote work has exposed the weaknesses of a lot of traditional financial institutions. And that had the effect of moving, deep digital transformation away from the science project category and the list of strategic priorities of big banks, big insurance companies, and it's moved it into the category of being a strategic imperative. So, in that respect, I think B2B, fintech infrastructure are having a great year, a lot of long term trends accelerated as a result of COVID.

FBP:  Thank you, Don. for that perspective on where some of the impacts are having on consumer facing business or the b2b infrastructure. I'm interested to hear from one of the fintech players as well. Eduard, would you like to present a counterpoint?

Eduard Fabian (EF): Sure. I will take a little bit of a different perspective. I think what we see is that business models are being tested as well during these difficult times. And especially in fintech, we have seen a lot of fintechs who were literally burning a lot of money to acquire customers, to build up new functionalities, and so on, which might not be even something that their user base is requiring. So what we can see now is that people are going back and sometimes back to the drawing table as well, and rethinking the business model, and also rethinking what is really worth doing and what is not worth doing. So in our case, we get down to this part of just burning to acquire clients and in a way we don't have to, but on the other hand, we see some of our partners that now are struggling from a funding point of view. So we came up with a solution to this as well. We have a fund and we're actively engage with a number of our partners, a number of other fintechs. And we are trying to help them to get through this difficult time. And we'll also see how companies turned to fintech more than maybe they would have turned before. I think the incumbents are very strong still, but on the other hand, now, I can see companies coming to us as well, and maybe before they wouldn't have done that. So B2B is very strong. And I think on the consumer side, we need to look at the business model to make sure that the model is sustainable.

FBP: This is interesting because you come out to say that your focus is on the money and you so can we take it that there'll be a shift in terms of your segment focus, so it will be moving towards B2B and more focused on ecosystem.

EF: We run three main products. So we have an online payment product. And we are processing payments for large e-commerce players in the region. And then we have an online-offline, offline-online network as well, which is actually very suitable product. And then we have the wallets. So the wallet specifically is focused on youth and millennials. However the online product and the offline-online product as well is focused more in the B2B space.

FBP: Okay, I'd like to go back to Don in terms of where you see retail versus the opportunity in B2B. How are traditional institutions responding to it? Are they actively pursuing fintech to be part of their solution?

DL:We were very collaboration oriented. You meet in fintech land from time to time there are guys out there who seem to have core driving motivation. I want to put JP Morgan out of business, right? I mean, there's sort of I want Citibank to be the next Blockbuster Video and I'm Netflix. I mean, there really are people who think that way. And I guess that's not a particularly productive way to think about disruption innovation and financial services. We think that there are a lot of profound reasons to believe that you're not going to see traditional financial institutions swept away in a fashion analogous to Blockbuster Video. We think the path forward involves a tremendous amount of transformation within those financial services business. We believe that digital ecosystems are going to be increasingly the primary means of new customer origination, and the maintenance of those customer relationships. So we don't see financial institutions just being cast away. What that means is that if you're a financial institution, it's not to say that financial institutions are not going to be forced to innovate quite radically and transform their business models. And I think that one of the things that is held backtraditional financial institutions from engaging with new infrastructure players. Take mortgage origination in the United States. It's not a pleasant experience to get a mortgage anywhere in the world. Not a pleasant experience in the US. But you know what, historically it was good enough calling up a mortgage broker, faxing things back and forth, very paper based, very labor-intensive process, but it kind of worked. And what's happened in the last two months is many of the world's mortgage originators have discovered that if they can't get their people into the office, you're in a state of lockdown. You know the way that processor used to work, it just doesn't work anymore. So a lot of the good reasons for refusing to engage with the next generation mortgage tech companies, you know, it's something that you can't ignore anymore because your old way of doing business during the coronavirus pandemic is just not viable. I think there is a proliferation of corporate backed venture investment vehicles that are backed by all manner of financial services companies all around the world. I think it's a good thing to have the primary beneficiaries and users of a new crop of infrastructure technologies, banding together to invest in those technologies. We believe in cloud-based platform solutions for different sleeves of financial services, functional stack being the future, and if financial services companies want to invest in that, that seems like a really good thing. We're very supportive of that. I guess the execution of many of those strategies feels flawed to us. I'll give you one example of how it's flawed. I think that very often, what you see is financial services businesses are starting out with funds that are quite small. So they are subscale, and they're generally oriented at an amazingly early stage investment philosophy. So rather than investing in more established businesses, we're going to give $500,000 to two guys in a garage who have an idea that we think it’s kind of cool. And, you know, I don't want to speak for the entirety of the financial services establishment, I can tell you this for Ping An. We fancy ourselves to be a very forward-thinking innovative and flexible company. We're a company of 1.3 - 1.4 million employees and agents. We're the second largest insurance company in the world by market cap, we're a bit of a monster to engage with, and it's very hard for two guys in a garage to productively engage with someone like Ping An. And I think that's true for most financial services organisation. So we have oriented our own investing strategy toward a later stage philosophy that requires more capital, but it feels like a much better bang for the buck and I wish that other financial services, businesses had a similar philosophy.

FBP:Now I’d like to bring Dennis into the discussion. And so talk to us about the pace of change and the entry of new players, competition and the impact on the competitive landscape. Was the industry prepared for COVID, unforeseen crisis, and how do you prepare your digital platform to ensure greater resilience?

Dennis Khoo (DK): Now, first, my experience on ground is more in Thailand. And we just launched in Indonesia earlier this year. Both of those countries don't have separate digital bank license. We are competing with traditional banks that have, over the past decade, invested a lot in growing their digital capability. So we see the battle is between digital banking, which is an omni channel strategy, and digital banks. And that's the battle because I don't think anyone is very clear whether the innovation and the experience of improvement will be much better in digital banks, or digital banking. And therefore, from UOB’s perspective, we invested in both. The digital banks that have the model to focus on experience using data, using innovation, around the customer experience, I think they're going to invent a whole new way of experience in banking that is going to take us on a different trajectory. I see the competition is intensifying the same methods of differentiation that we're using in Indonesia and in Thailand, where we are launching a bank with very high NPS scores. In fact, the NPS scores improvement based on a very well designed digital bank that's really centered on the customer. I think it's quite difficult for most incumbent banks to compete with because the incumbent banks are mostly still operating in a product manner. They focus on how they sell products. So this is going to be the battle for the next 10 years. There will be more digital banks. The digital banks get the model right. They are going to be in a battle with the digital banking players. 

EF: What do you think about banking 10 years from now? So you could be an incumbent or you could be a new bank, a neo bank as people call them, but 10 years from now, probably only a few of the incumbents will be able to meet customer needs, and also 10 years from now, a few of the neo banks will be able to operate in the right way, both meeting customer needs but also having viable business models. I agree that competition is not only between the incumbents and the neo banks. And it's really about winning the customer. It's about designing right user experience. It's also about the operating model. We’re looking at how we can leverage the latest in clouds and in data and have the lean operating model to sustain the business.

BP: I think Sid has a perspective on this as well, more in terms of how to prepare for unforeseen event and ensure resilience.

SD: What we're seeing is that operational resilience has become a board priority for sure. And that is not so much about business continuity, not so much about recovering from incidents but being prepared in advance for the reasonable but severe incidents or disruptions to the business. One of the ways that organisations try to build agility is to build their products on cloud infrastructure platform. So typically, what we see is companies start off with AWS, they start building infrastructure there, they think AWS is the best. And they realise that there are other cloud platforms that are good for other things. And eventually, they kind of settle on a multi cloud strategy, where they use different cloud providers for different things. And you also have different groups within the financial institutions or within the new banks, which are responsible for different products, right. So the way you deliver that to the customer, that can be equalised, by using a consistent delivery platform and delivering a consistent user experience. And if you're able to deliver the same level of user experience for an application, then that helps you to kind of equalise the differences across the infrastructure platform. So we're definitely seeing organisations moving to the cloud and delivering products and platforms to accelerate and make their infrastructure operationally resilient and to be able to cater to the changing competitive landscape and customer demands. 

FBP: And you talked about being agile to respond to changing consumer needs also. COVID in a way it's also change how customers are transacting or behaving. Ankur, I want to hear from you in terms of how has it changed in this field? 

Ankur Mehrotra (AM): Digitalisation has picked up. At Grab, we have onboarded 73% more merchants in the first quarter this year than the entire second half of 2019. We're also expanding consumer and merchant demand. We're creating more tools and solutions, which would help businesses get digital quickly. We launched an all in one merchant app, that gives consumers insights, create ads, take payments and we know that this trend is here to stay. These types of services would eventually benefit both our company and the consumers. And that is the wave that we are seeing right now. And we are positioning ourselves to ride that wave. It's creating the ecosystem, while generating insight to be able to do other ventures such as lending, insurance, wealth management.

FBP:That is interesting. To Don's point earlier in terms of using reference to a weakness in the consumer facing part of the lending business. Would you like to share your comments in terms of where do you see other architecture as equality issues come up?

AM: I think it's a fair point and where I am seeing this as I speak with colleagues and other founders running, lending fintechs across the globe, where if you're running just one vertical business, which is only providing consumer loans, the challenge you face is very different. What is the edge that you have, in terms of data or insight is essentially the same as what everybody else has. I think at Grab, we are positioned differently. And we are fortunate that we are an ecosystem. We are a super app. We touch the lives of users and our consumers. The insights that are generated allow us to make better informed lending decisions as well. 

FBP: Thank you, Ankur. I like to get some of our roundtable guests into the conversation and so, we see that we have the CTO of Maybank, Mohamed Suhail. Share with us what are your thoughts from Maybank in terms of the impact now and what opportunity that you're seeing, and how are you leveraging the opportunities to invest in solutions that may not come from traditional sources.

Mohamed Suhail (MS): We strongly believe that data is the currency of the future. Everything and anything from the point of origination, we believe that it's extremely important to get the data down to a central lake and figure out how you monetise that data in many retreats. We have a lot of legacy systems and the tough part is how do you connect dots to see what is going to be good for which customers. What is important is how you build a platform and what kind of microservices or APIs that you actually publish so that users and businesses or any SMEs are going to be able to consume the services. So it's definitely a journey. A lot of learning. A lot of quick failures, too. But along the way, we had some major breakthroughs. And I think that seems to be the new way of banking. 

I think it's important that everyone embrace that collectively. But there's also pros and cons, the entire infrastructure is so flat across the entire industry, how do you try and retain your customers as much as you can? 

FBP: So, right now with a digital proposition, how do you see thatlandingto your expansion or footprint?

MS: See, it depends on which country is it like in Malaysia, Maybank is known for our domestic presence but I think because of digitalisation, the footprint or the retail size will change, definitely, we need to have a presence because we are a local community bank, digital is way to go and we will continue to expand. 

FBP: And I'd also like to ask Don that question from a opportunity to opportunities from all the institutions that you work with in terms of the DNA being digital, does it land itself better to crossing borders and operating in multiple jurisdictions?

DL: Many of us find the idea of global finance to be a seductive idea. I think the reality is that retail finance is overwhelmingly national character. And despite the efforts of, say the European Union or ASEAN to harmonise regulation across nations, the nation state still exerts tremendous control over the financial services industry. Part of that is explicit in the sense of regulation. And part of it is implicit in the sense of language and culture. And I don't think technology changes that. I think technology helps to reduce operating expenses, it becomes easier for Maybank to expand into a new geography for sure, but there's still a lot of significant hurdles. I think that operates in many ways to entrench the position of national champions and to be candid, I think we're a long way from that really changing.

FBP: Dennis, how much of the digital strategy is part of your company’s DNA to achieve regional expansion? 

DK: Well, I think for UOB, it's quite clear cut in the sense that we're one of the three big local banks here, but elsewhere in the consumer business, we are a foreign bank. We have been very successful in Southeast Asia, in the sense that we are the number two foreign bank in Thailand and I'm one foreign bank in Malaysia. But the gap between the number one and number two for banks and the smallest local bank is still very large. And we do see the margins will continue to be under pressure. So if you don't build on volume, then you really unable to have sufficient scale to really continue to invest and advance the experience using digital capability. So that's why for us, we have invested in TMRW. We have built a platform that is very competitive. Both Bank of Scotland and JPMorgan closed down their digital bank, in one year or less. So it's something that I think all incumbents think seriously about. Nokia and Blackberry lost out because of five letters. You know, SMART, smart versus just four. So they lost the battle because of just one word. And for the banking industry is three letters differentiate between digital banking and digital bank by having looked at this area intensely for the past two and a half years, I think those three letters really represent a big deviation. That is small now but will become very big in five to 10 years.

EF: Boon Ping, if I may just offer a different perspective. So just because we don't see successful global retail banks today, or at least limited but there's a lot of change going on and some are retrenching It doesn't really mean it cannot be done. And if you look at other sectors, other industries, like for example, technology, the big technology companies, they're all global by nature. Yes, they're localisations, part of the technology. They're localisations in terms of the user experience, and so on. However, they're running global open platforms, and their user base is global, and their brand is global. So we in Razer believe that with our global brands with our 80 plus million users are already part of the Razer hardware software services ecosystem, we can build a global bank. And of course, again, market to market it needs to be localised, it needs to be integrated into local ecosystem and it needs to conform to local regulations. But we believe that the combination of the power of the brands and running the right technology strategy, cloud is a big component of that as well, API's and integrating local ecosystem players and having the right relationship with regulators, it can be done.

FBP: Thanks, Eduard. Wehave some questions from our audience. How would the skill set of the future banking and fintech, workforce look like? How would the challenge between old school banks and new modern banks look like and how can they be mitigated? 

DL: I will offer a view. And I think that we've had several of the panelists talk about the margin pressures that traditional financial institutions are facing. I don't see that changing at all. And on the one hand, that I think is a big push factor toward the adoption of a more efficient underlying technology stack. On the other hand, you know, it feels very clear to me that the financial institution of the future is going to have fewer people. I think it'll be fewer people in back office and middle office functions. I would suspect that will be a declining area of employment. And I would suspect that there will continue to be front office roles, but they will likely to be fewer in number and oriented at higher margin, very high touch relationship-oriented functions. I think the overall employment pie willshrink dramatically. I would suspect that there will be some technology roles, but a lot of the back-office roles will go. So I think being fluent in technology and being very relationship oriented, though, those are going to be two growth areas.

FBP: Okay, great. Ankur?

AM: I totally agree with Don and essentially all about automation and utilising more data and more insights to automate as much of the processes as possible in the financial services. But I think if there's one area, which I know in our team and in general Grab that we're focusing on quite a lot is data science. I think that's a space that would be a workforce of the future, or a bank or a financial institution in the future something that should keep an eye on would be in the data science we can leverage insights to improve your margins, improve your cost income ratios in general.

FBP: I want to follow up Ankur on a big part of your business is building ecosystem around core areas or integrating the different services that you have. So we work with banks, in terms of the lending part on the insurance or other business part, tell us in terms of how this ecosystem as you put them together in terms of the competitive advantage.

FBP: Thanks, Eduard. Wehave some questions from our audience. How would the skill set of the future banking and fintech, workforce look like? How would the challenge between old school banks and new modern banks look like and how can they be mitigated? 

DL: I will offer a view. And I think that we've had several of the panelists talk about the margin pressures that traditional financial institutions are facing. I don't see that changing at all. And on the one hand, that I think is a big push factor toward the adoption of a more efficient underlying technology stack. On the other hand, you know, it feels very clear to me that the financial institution of the future is going to have fewer people. I think it'll be fewer people in back office and middle office functions. I would suspect that will be a declining area of employment. And I would suspect that there will continue to be front office roles, but they will likely to be fewer in number and oriented at higher margin, very high touch relationship-oriented functions. I think the overall employment pie willshrink dramatically. I would suspect that there will be some technology roles, but a lot of the back-office roles will go. So I think being fluent in technology and being very relationship oriented, though, those are going to be two growth areas.

FBP: Okay, great. Ankur?

AM: I totally agree with Don and essentially all about automation and utilising more data and more insights to automate as much of the processes as possible in the financial services. But I think if there's one area, which I know in our team and in general Grab that we're focusing on quite a lot is data science. I think that's a space that would be a workforce of the future, or a bank or a financial institution in the future something that should keep an eye on would be in the data science we can leverage insights to improve your margins, improve your cost income ratios in general.

FBP: I want to follow up Ankur on a big part of your business is building ecosystem around core areas or integrating the different services that you have. So we work with banks, in terms of the lending part on the insurance or other business part, tell us in terms of how this ecosystem as you put them together in terms of the competitive advantage.

AM: I think about the ecosystem build, of course, it's been a journey for us of seven, eight years of building this really. It's really putting customer at the center, and then build around it. Put customers and customers’ needs at the center, not our products and think about what their needs are. And then are we positioned to serve those needs? If the answer is yes, then we work on it. If the answer is no, we still have lots of data, lots of insights that we can help other institutions, our bank partners, our financial institution partners, and we have quite a few, UOB, Maybank. We work with them to provide certain solutions for our own user base. And that's what allows us to create generate more powerful insights again, and that if there's one thing that is driving and really helping us and which we want to continue focusing on is deepening that ecosystem and deepening that relationship with our customers, deepening your knowledge building that trust. Because as we build other solutions and services, especially in financial services, especially in banking, it comes down to the trust with the customer.

FBP: I also want to hear perspective from Eduard and then from Sid. Eduard, from also in terms of how you're adjusting your strategy. And what do you need to do on the ecosystem side to be successful?

EF: Our strategy is correct. And as I shared before, we have also the B2B side and the B2C side. So on the B2B side, it's all about partnerships. I think there is room for everybody and the different companies have different audiences and what we say is that we focus on one segment. But as people grow out of that segment, potentially we can even refer them to incumbents. So from an infrastructure point of view, we are already partnering with banks like UOB and Citi. I think ecosystem plays is very important. So that's why our strategy is correct. And it really comes down to execution.

SD: I want to stress here is how do you generate trust from customers and new banking services. When you talk about ecosystems, there's so many different moving parts, there are different types of entities that are connecting to banking services and banking services offering different types of services. So when you see the young demographic or younger customers, as they go on to digital banking services, they're looking to compare the user experience to the experience that they have on online shopping and e-commerce. But their expectations for security are slightly different. So they expect the same user experience, but they expect more security to be in place. They expect those security controls to be transparent as much as possible. And as fintech use become more popular that basically exposes the risk surface as well. And that risk surface is not very obvious to the consumer. But they expect those risks to be adequately addressed as well. So as we talk about ecosystems and different entities connecting to each other, I think the conversation around customer trust becomes very important because it's very easy to lose that trust. 

FBP: Thank you, Sid for bringing that dimension in terms of customer trust, and still the balance between user experience and security. We have a question from SE bank in Vietnam, and this has to do with costs and investment. Can you measure the cost of the jump into the digital transformation? What are the key metrics as you invest in transformation and the different areas right from the technology stack that is suitable for the bank. How do you kind of move forward? Perhaps, Dennis, would you like to take that question?

DK: It's a question of can you afford not to do it? If you don't do it, then I think you're gonna be left behind eventually. Unfortunately, our industry is a slow thing. So that's what makes it more dangerous because it's a long term thing. And so people think they have the option not to invest. So I don't think there's a doubt that every bank will need to modernise their stack, so that you end up with microservices and that you can mix and match internal APIs so that it makes it flexible. The KPIs is really going to be measured by experience. Most banks don't have very high experience scores. And I use net promoter score as one way to measure experience. I think you will see that the very good digital banks of tomorrow will have very high NPS scores. And what those high NPS scores mean is that customers will stay there for a long time. Then you can afford to invest because one of the big things about retail banking is there's a big investment to revenue mismatch, you have to invest the whole bank, and then continue to upgrade because of technology all the time, and then your revenue streams come later. So it's something for long term players, you cannot make a quick business out of it. 

FBP: Okay, good. I wonder if you would like to make some comments, Mervyn. 

Mervyn John Koh (MJK):The future of banking, and as incumbent banks and neo banks, fintechs really depends on which segment of the customer you're going to serve. I guess for companies like Razer and Grab, you probably sort of hit more at this or newer segment of the younger generation of customers who probably do not have sort of any affinity with the sort of traditional banks. But that doesn't mean that incumbent banks are not doing anything. I think rather than competing with neo banks or fintechs, it's really collaborating with them, and really serving the community. I think that spurs the whole digital adoption agenda. But the other thing also is the mass adoption. I think, because of COVID, more customers are used to using the QR technology. So I think for organisations that come up with solutions, whether it's on the payment side or on the loan side using these technologies will probably get ahead of the game. 

FBP: Thank you, Mervyn. We have some comments from Michelle and Lito?

Michelle Oira (MO):We've also started our digital transformation journey. Given the pandemic, we see a greater need to accelerate the digital transformation initiatives. So we've seen also as Mervyn said, even here in the Philippine local setting, a faster rate of adoption in terms of our clients towards moving to online banking platforms for their transactions, especially during the lockdown, where mobility was restricted. We're also seeing that the pandemic is challenging the way to do things. So now everybody's recalibrating and seeing how we're going to change the way we do things given the new normal.

FBP: Okay, are there specific areas in terms of your recalibration.

FBP: Okay, are there specific areas in terms of your recalibration.

MO: We're boosting further the digital payments and fun transport platform. We're also accelerating digital touch points as far as the lending activities are concerned, because lending, especially in our space, would still be what was described earlier as your paper-based face to face client interface. So we're looking how we can facilitate things also for the client, given the pandemic situation.

FBP: Great. Thank you. 

FBP: Okay, are there specific areas in terms of your recalibration.

MO: We're boosting further the digital payments and fun transport platform. We're also accelerating digital touch points as far as the lending activities are concerned, because lending, especially in our space, would still be what was described earlier as your paper-based face to face client interface. So we're looking how we can facilitate things also for the client, given the pandemic situation.

FBP: Great. Thank you. 

Lito Villanueva (LV):I think what was evident in the case of RCBC is the fact that while you have a traditional bank that has been in existence for over 60 years, these digital strategies will be more on how you could blend that vision now with having to build in a separate digital centric banking operations or banking proposition that will be a subsidiary of the parent bank. So this is being able to capture all segments of the market in terms of having the traditional way of doing things but that additional way is now moving towards digital. So for example, during the lockdown we have seen four digit exponential growth when it comes to digital channels that have been in place even before the lockdown. So you could see that a lot of this digital transactions or digital channels have already been optimised or being used now by the public because they have no choice but to go digital because more than 50% of the branch network across all banks in the Philippines have been closed during the lockdown. Because at the end of the day, all organisations have been impacted and practically seen cost cutting measures are now being done across our organisation. But again, how do you now ensure that because of these losses of all of this potential revenues that were supposed to get during the lockdown would now be replaced by so much or massive cost savings by way of doing cost efficiencies in your processes. That is also one way of how you could now strategise your corporate plans or your strategic plans that have been crafted during the last quarter of last year for 2020 has really been thrown out of the window. So those things are no longer feasible or not even applicable under the new normal. So it's a matter of how quick you could adapt to the changing times, and how you could quickly deploy relevant and responsive products and services to the public.

FBP: Okay, so there's a need to review your plans and given the changing customer behavior moving from fiscal to more digital channels. 

A quick comment and maybe a question for Lito and for Michelle as well, based on the observations as we're talking about more traditional banking customers going towards digital engagements. Right now, if a customer were walking into a bank branch, you would have a more physical way of measuring the customer experience. But as they go online and digital, you have to look at their activity on your website. You can look at how much time it takes for the web page to load, how much time did they spend? What was the real user activity on the websites? So the question is, how are you thinking about this change in the measurement of the customer experience? And I would argue that on a digital platform, it's actually easier to track and trend and measure the customer experience if you have the right tools, than it was in the physical branch.

LV: I totally agree with you. That is one measure or metric that we need to have. Especially going into digital would really provide you with analytics. So at the end of the day, what is really relevant and significant would be more on how we can measure a delightful customer experience at the end of the day. I think it's more of how you could now transition your traditional customers to digital. And of course, in between that would be more on financial education and digital literacy. So because it really requires you to put some premium on educating your traditional customers on how he could actually shift to digital because once they tried digital, it's already habit forming.

FBP: Thank you. And Michelle, do you have any comment?

MO:It's really also changing the way we capture what is the customer experience so from the face to face where you get immediate response and feedback. Now you're looking at more of the statistics and other means by which you get the customer feedback, like to feedback from the customer response lines, social media, so it's really changing also. But of course the main objective is how to deliver pleasant customer experience.

FBP: Okay, now there was a discussion about ecosystem is the way to go in different ways of achieving that goal of building the ecosystem and how will the financial ecosystem in the future be built? And inevitably often ecosystem is discussed together with open banking. But is open banking the only way to achieving your ecosystem goals? I like to hear different views on this 

LV: To your question about open banking, I think that has been mandated in Europe, in EU markets, ED entries. I think in the Asia Pacific, specifically in Philippines, a number of banks or players are also embracing open banking or open API architecture. So it's really more on how you would be able to expand your reach in terms of having that collaboration among all fintech players in your ecosystem.Open banking will really ensure that the customers would be the ultimate winners in the whole equation.

FBP: Thank you, Lito. Eduard?

EF: So my key takeaway, it's all about the customer. It's all about the value you provide to the customer, the user experience you provide. And it's not about the banking product or whichever product you sell. It's how you engage with customers.And the more you cater to the customer's needs, and make it easy for the customer, the more they will come back to you. And it's an easy thing to say and probably a hard thing to do. And this is where technology comes in. So how do we enable that excellent customer experience and enable the customer value through technology? This is really the name of the game. 

MJK:My view is it depends. I mean looking at the UK experience in Monzo, they've done great on customer acquisition, but they still hold main banking relationships. I think there's up to a certain dollar value that they would say that I would use such platforms. But beyond that what we see is the larger relationships are still help with incumbent banks. Of course, that will change in the next five years as fintech players start to encroach into the banking space.

DK: It's really not about open APIs. It is really about how you can collaborate. I mean, the APIs are made of collaboration. So if there's a good model, how you can collaborate. Of course, both companies have to establish APIs that you can call. So the problem I think is the business model that can drive open banking. And the other thing is that in jurisdictions where you have a separation of licensing so retail banks can’t do wealth and wealth can’t do retail banking there. Yes, there's a reason to collaborate. But in a jurisdiction, we can do everything and experience is king. Then you want to control the experience. You want some third party to be in the experience. Because that’s all you have now. Bank is no longer a place, no longer a sign, no longer a building, no longer about people eventually.

FBP: Thank you, Dennis. Can an institution be king and control the entire customer experience or customer experience is beyond anyone?

DL: There is a profound difference between participating in an ecosystem and controlling an ecosystem. And one of those is a very high margin future and the other is probably a low margin future. I think everyone likes the idea of controlling an ecosystem. At Ping An we've invested money over a number of years in order to build a collection of online ecosystems. We've got 600 million people across our ecosystems, and they now contribute over a third of our customers into our traditional financial services business. So that's great. It didn't happen overnight. And it wouldn't have happened had we not had the capital to invest in building such a thing. It also would not have happened if we hadn't already been at quite significant scale in our traditional financial services business. I feel scale is important. And I think that if you don't have the scale to control your own ecosystem, the right path forward is interfacing intelligently with digital platforms. And that probably requires a rethinking of your traditional tech stack because your traditional tech stack is almost guaranteed not to be adequate to interface with those ecosystems in a manner that is pleasing to the customer. 

FBP: Great, thank you, Don. Ankur? 

AM: Whenever we're thinking about ecosystems, it's important to ensure that you are meaningful to the customer, and that what you're building makes sense. I think paying attention to your costs and the unit economics is something people often forget, when you're building for that scale, you need to build a platform that will scale, that needs to break even at a certain time, the unit economics is important to pay attention to as well. 

FBP: Thank you. And Sid, your thoughts?

SD: If you're able to deliver your services on a platform, that is able to adjust to scale requirements, able to adjust to evolving regulatory requirements. So the delivery platform can actually help you equalise a lot of the shortcomings or a lot of the challenges that you might face where you're building your tech stack. And we're seeing that being useful for a lot of banks that we work with across the world at Akamai in terms of the delivery and the security capability. 

FBP: Okay, thank you, Sid. I wonder whether any of our guests would have some comments Suhail or Setsiri? 

MS: I think it's centered around the same thought customer experience. Every product or service that anyone does, it's all about the customer. How do you interact, what kind of user experience we create, that will ensure that the customer will be continuously engaged with us.

FBP: Thank you. Setsiri?

Setsiri Settapakorn: We are going to look for building up the ecosystem. However, it doesn't mean that it's going to be the same ecosystem for each of the financial institutions. Each of us has to find what is suitable for each of the products and build that ecosystem incrementally. 

FBP: Okay, great. Thank you. We're happy to hear that the insights have been useful, and I will thank all our panelists for helping frame the discussion as well. But what consistent theme is the building of technology stack, we mean incumbent banks, becoming more digital being able to connect to the ecosystem, putting customers in the center, creating the customer experience that make for relevance, interaction, preference, and also, we hear a lot of net promoter scores affecting the engagement. At the same time, the need to ensure trust and the ecosystem play itself out. It needs scale. And Ankur made a very important point in terms of being mindful of the cost, the unit economics of ecosystem as well. So as banks develop your technology stack to plug into a bigger ecosystem, they need to also ensure operational resilience and security. I would like to thank all panelists and guests again and wish you have a good day. Thank you.



About RadioFinance:

The Asian Banker RadioFinance aims to enhance understanding of the finance industry globally by bringing together thought leaders, industry experts, practitioners and futurists to examine current, critical issues through a discussion facilitated by visual and web-based platforms. Through the use of interactive technology, participants do not have to take time out from their crowded schedules or leave the comfort of their own desks.

This session is supported by:
Keywords: Open Banking, Ecosystem, Data, Convergence, Customer Experience, Technology, Digital, Fintech, APIs, Transformation, Financial Institutions, Banking
Institutions: UOB, Ping An, Grab, Razer Fintech, Akamai, RCBC, Maybank, Bank Of Ayudhya, Sterling Bank Of Asia
Country: Singapore, Malaysia, The Philippines, China, Hong Kong
Region: Asia Pacific
Guest: Dennis Khoo, Donald Lacey, Ankur Mehrotra, Eduard Fabian, Siddharth Deshpande, Lito Villanueva, Mohd Suhail Amar Suresh, Setsiri Settapakorn, Mervyn John Koh, Michelle Oira, Foo Boon Ping

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