Customer centricity drives APAC’s digital transformation

Banking And Financial Messaging


Ed Singleton

Sep 22, 2022

Bottomline recently attended the Digital Transformation in Banking Summit in Singapore, joining  payment leaders from across the region to discuss the key implications and benefits of the rapid modernisation the industry is experiencing. Four key themes were consistent across the event:

1.     Customer centricity is critical

2.     Balancing customer experience and security is a top priority

3.     Talent shortage impacts modernisation plans

4.     Regulations are getting tougher to manage

Customer centricity is critical

There has been a proliferation of new digital banks within the last five years, and it has become apparent that their focus falls differently from incumbent banks. Challenger banks often highlight customer engagement as their primary performance indicator, with the Net Promotor Score (NPS) being the main gauge. For example, in the UK, research by Accenture indicates that digital-only banks gained an average NPS score of 62 vs traditional banks’ score of 19, putting customers’ needs at the forefront of their digital transformation journey.

The pandemic accelerated customer demands for improved digital banking offerings and experiences. Banks already providing such services, or those that could adapt and respond quickly to customer needs, excelled. This speedy response was even more vital when you factor in the number of consumers in Asia using digital banking, which has increased from 65 per cent to 88 per cent in the last four years, according to McKinsey’s 2021 Personal Finance Survey. Furthermore, there’s an expectation that digital payments in Southeast Asia will triple to USD 1.5 trillion by 2030 (HSBC).

While challenger banks typically have innovative digital banking technology from launch, traditional banks often carry the burden of legacy systems, needing to rip and replace or scale for innovation to keep up with the customers’ changing needs. However, some traditional players have risen to the occasion. An excellent example of a bank that has proven its capability to adapt quickly is OCBC, which created a self-serve online 60-minute ‘instant mortgage’ approval service during Singapore’s Covid-19 lockdown when face-to-face meetings were not allowed. It is now up to other banks to follow suit and be more reactive and responsive in closing the innovation gap - to delay is to risk losing their competitive edge.

The challenge incumbents face, is that it can be difficult to achieve good NPS scores because of the high operating costs that are likely to be incurred. Whilst traditional banks are innovating faster than ever, associated costs with legacy systems and upskilling the workforce can hinder efforts. This hurdle is one of the reasons the industry is moving away from legacy infrastructures to cloud-based platforms, enabling them to keep up with customer demands whilst minimising costs and improving their efficiency and productivity.

Balancing customer experience and security is a key priority

Throughout the Summit, there were several discussions on customer experience and security, and how to balance the two. Historically, it has been the case that they are mutually exclusive, and increasing one will be at the cost of the other. In today’s world, it is apparent that this is no longer an acceptable response for customers who demand a good experience from banks and FIs, as well as being able to have the confidence that their transactions and data are secure.

Asia Pacific’s rapid digitization alongside the pandemic, has made it a prime target for fraudsters. For example, over 400 OCBC customers in Singapore lost at least $8.5 million in 2021 to a phishing scam and Thailand also saw one of the country’s largest-ever banking scams, where 130 million Baht ($5.3 million) was stolen.

The banking community is responding to these cases while considering the impact on user experience. Technology plays a crucial role in striking this balance, with many banks turning to AI and SaaS-based solutions to promote innovation whilst ensuring security from such threats.

Talent shortage impacts modernisation plans

Globally, banks are experiencing a talent shortage, reportedly most prominent in Asia. In the region’s biggest hubs, workers look to the many fintechs and big tech firms for higher salaries and better career prospects.  Strict Covid-19 policies and associated travel restrictions exacerbated these issues in cities like Hong Kong. Rapid digital advancements have also caused a shortage in skilled areas such as software engineers, data science and architecture and banks competed against other industries for tech talent.

The Summit’s panel discussed straightforward solutions to these shortages, including hiring for attributes of the role rather than specific skills, investing in training to meet skill requirements, and hiring graduates with guaranteed salary increases for the next three years. However, the truth is that it is rarely the best option to hire additional staff to do this all in-house. The better choice is to look at a hybrid integration model and outsource complex projects to trusted third-party providers.

Besides, it is often too expensive for institutions to maintain heavy infrastructures on-site. These disadvantages impact the ability to scale on-demand and future-proof systems. Instead, the solution is to partner with the right supplier to leverage their expertise and bandwidth – whether that is via SaaS, Service Bureau, or a trusted Fintech partner. These options reduce your development by utilising the right partner who’s already audited and compliant. Your objective should be to look for the most effortless possible integration through standard connectors that will offer quick time to test and speed-to-market combined with a genuine capacity for custom integration. This way, your provider does the heavy lifting on your behalf, providing seamless integration across all your systems within a centralised hosted platform.

Inevitably, many new players in the market claim they understand the challenges you face and can take away the pain – the harsh reality is that this is not always true. Robustness and efficiency, Disaster Recovery and high availability are mandatory first factors in choosing a partner, including sufficiently robust Service Level Agreements. But more than just the technical knowledge and the promise to meet expectations, you need a partner who truly knows and understands your business, has a proven track record in delivering successful projects and has solid relationships with regulators and auditors. In other words, the expertise to transcend beyond a mere supplier to a valued and trusted partner in your day-to-day operations.

Regulations are getting tougher to manage

The consensus is that regulations are getting tougher to manage in banking and the broader finance industry. Central banks and industry regulators are updating frameworks and increasing security measures to protect their clients from the rising threat of fraud. In a diverse region, with differing regulatory requirements and needs evolving at different speeds, it can be costly for banks and financial institutions to remain compliant. The Summit also discussed the disparity between regulators’ attitudes towards cloud-based technologies. The banking industry has been one of the slowest to adopt cloud infrastructure. However, it is now migrating at pace, and regulators are reviewing their positions and frameworks in response.

As a result, many banks and financial institutions are turning to RegTech to navigate the regulatory landscape and streamline in-house processes. Our recent Future of Competitive Advantage in Banking & Payments Survey asked “How important do you think RegTech will be in the next 12 months?” 76% of APAC respondents answered that it’s likely to be more important. Banks and FIs are embracing such technologies and are realising the benefits beyond basic compliance for business continuity and viewing them as a source of best practice to win competitive advantage.


The 2nd Annual Future of Competitive Advantage in Banking & Payments Survey

How does your Bank or Financial Institution stack up against your competition? Could you benefit from comparing your strategic priorities, product roadmaps and plans for future innovation with your peers? Are you interested in determining which technology trends the industry prioritises to ensure you are aligned?

If so, it is worth spending 3 minutes to fill out this ‘live’ benchmarking report, covering key topics such as cloud, real-time, ISO, cross-border, fraud, treasury and Open Banking. With views from over 500 industry experts across the banking ecosystem, the question is, ‘Can you afford not to?’


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Ed Singleton

Ed Singleton is Head of Account Management APAC at Bottomline
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