Commentary

For years, banks treated online banking as an afterthought. A website and a mobile app were necessities, but creating a digital channel that fully serviced customers wasn’t a priority. When COVID-19 struck, customers of all demographics completely switched to online banking -- and most won’t go back. Digital banking is no longer an additional channel. From now on, digital is the default.

 Latest Trends in LIBOR Transitions in Japan

Agent Banking is getting more popular in the rural areas of Bangladesh. More number of agents and outlets are seen these days as their numbers have grown by 15.69% and 12.59% respectively in September 2020 compared to September 2019 even amid COVID-19, according to data from the country’s central bank, Bank Bangladesh (BB)

BY AASHISH SHARMA, risk lifecycle and decision management lead for FICO in Asia Pacific.

Much has been written about the likely death of incumbent banks in the face of coming competition from neobanks (or digital banks) soon to be launched in Singapore, that will be more nimble and agile, have more streamlined processes and lower cost overheads, be free of any legacy (in the form of infrastructure, and mindsets) and give customers exactly what they want.

Banking-as-a-Service, or more commonly known as BaaS, is an end-to-end process that enables third parties to directly connect with banks  systems so they can build products on top of the banks’ regulated infrastructure. The reason BaaS is a big deal today is that it makes it far easier for anyone — from start-ups to multinational enterprises — to create seamless, scalable payment experiences across and within borders.

It is fair to say that financial institutions have, with technology, largely succeeded with stopgap measures in the initial drive to adapt to the new normal of the “After COVID-19” (AC) world. Celent released the results  of its global survey at a digital event on April . Of course, financial services depend to a large extent on country-specific regulations, business practices, and consumer behavior. Likewise, the impact of the COVID pandemic and its effect on financial technology will vary by region and depending on how the pandemic plays out in different places.

There is a popular analogy comparing artificial intelligence (AI) to electricity. Just like the role of electricity during the second industrial revolution, AI has the same potential to greatly transform how industries function and benefit humankind. However, this analogy in my opinion is over-simplified. The power of AI is much harder to standardize and harness, and it requires a far more collaborative effort to bridge existing gaps between academic research and solving real-world problems.

The World Bank estimated that over 1.7 billion individuals remain unbanked today. The trend is reflected in Southeast Asia, where more than 70% of its adult population is either underbanked or unbanked, despite being one of the world’s largest and fastest growing regions, according to a study by Google, Temasek, Bain & Company on Asia's digital financial services.

The COVID-19 pandemic forced Singapore banks to change tack in order to meet social distancing and work from home requirements. However, it didn’t stop financial crime. Since the pandemic, there has been a significant increase in COVID-related fraud, with criminals engaging in telephone fraud, phishing scams, and even developing fake websites for personal protective equipment (PPE) – only recently a Singapore man was arrested for suspected involvement in money-laundering offences linked to a Covid-19-related scam.

In the transitional period from the unprecedented emergency to the new normal, the Japanese and APAC financial institutions have stepped up their countermeasures.

In the last decade, Asia’s banking sector has not only led the world in global banking profit pools, assets and market capitalism but also in building new business models centred on digital innovations. Whilst the future of Asia banking is bright, most traditional banks, especially the mid and small-tier banks, are poorly equipped to seize the opportunities to keep pace and transform for the digital age. On the other hand, the ongoing health crisis is making customers go online for their banking needs while they #stayhomestaysafe, stretching the capabilities of digital services beyond its limits. While digital banking would have been a convenient option in the past, it has now become a vital lifeline. As customers’ demand for digital access and control to their finances intensifies, it has brought into question the industry readiness towards digital banking.

The internet economy for ASEAN is expected to grow to US$300 billion in 2025 with e-Commerce becoming its biggest sector as published in the Google and Temasek’s 2019 e-Conomy report. Consumers have adopted digital for day-to-day lifestyle and financial needs and we see that in Singapore, over 88% of Singaporeans are online and 57% have either made a purchase or paid a bill through online platforms*, according to We Are Social’s Digital 2020 Singapore report. This trend is set to accelerate especially with 5G technology implementation and consumers having greater access to a variety of digital products and services.

Corporate banking is at a critical juncture of accelerated change

The COVID crisis has resulted in an unprecedented disruption to the economic activity, and will lead to major changes in operations of most industries, including banks. Given below are some views on how banks will need to adjust to the new reality once situation stabilises and economic activity starts resuming normal operations. While this note has been made keeping India in mind, most conclusions will be valid for other emerging economies as well.

Open banking is emerging as a key trend and the next ‘wave’ of digital transformation in global financial markets. At its core, it is focused on data sharing, which is enabled through application programming interfaces (APIs) which make it possible for two different systems to ‘share’ information with each other. Simply put, this means that consumers will have greater control over their financial data and who to share it with. An example of this in practice would be a mobile banking application that enables users to see all of their financial information and spending habits (across different bank accounts) on one interface.