Banks vs E-services: Should traditional banking services fear digitization?

Find out what Citi, Maybank, DBS, and other major banks in Asia have to say.

With the rapid development of electronic systems and technology, the adoption of smart commerce services has become increasingly popular. Will they be a huge threat to traditional banking services? Our Asian bank representatives shed light.

ABF: According to a research, banks are threatened by the mass adoption of smart commerce services due to the risk of customer intermediation and the decline in bank relevance to the consumer. What do you think can banks do to counter this threat?

Maybank Singapore: Cynthia Liaw, Head, Virtual Banking & Payments

Banks will remain relevant as the service provider of secured payment solutions. Most intermediaries still require the customers to fund their “purse” or “wallet” from an account, card or cash, before they can be used for payments. Banks that allow retail customers to use their bank account as the source of funds to pay online via internet banking, and provide a convenience and cost effective collection service to business owners via online payments, will always be ahead of the competition.

Bank of East Asia: Vincent Hui, General Manager and Head of Personal Banking Division

We do not see smart commerce as a threat; rather, it is an opportunity for banks and merchants to provide a new level of convenience and simplicity for consumers. We are actively looking into innovative smart commerce solutions, including an NFC mobile payment wallet that will allow customers to make direct payments using their mobile phone, and new technology that will enable customers to make cash withdrawals without using an ATM card.

Smartphone technology has opened up many new avenues for mobile banking, and we have been keen to take advantage of this through the BEA App, our mobile application for iPhone and Android. Customers can already perform day-to-day banking transactions, search for nearby branches/ATMs/promotions, check market information and make trades, and apply for a wide range of banking services.

Digital payments and other smart commerce solutions will be yet another way for us to bring added value. Banks will always be relevant in Hong Kong – they provide services that go far beyond POS payments, from investment and loans to insurance and retirement schemes. However, by providing services that make customers’ day-to-day tasks more convenient, we can become their preferred banking partner for life. 

Bank of the Philippine Island: Besse J. Bassa, VP and Transaction Banking Head

In developing countries like the Philippines, we see smart commerce evolving in the form of digital wallets, digital payments specifically in the mass market segment . The challenge is how to make these technologies accessible and useful for smaller businesses. It is for this reason that BPI embarked on a partnership with a telco provider,Globe Telecom in 2009 to establish the first mobile phone based microfinance-focused savings bank. This partnership promotes financial inclusion for the country's "unbanked".

It is pioneering the delivery of formal financial services through its network of partner outlets which serves as the link to communities and remote locations in the countryside. BPI is at the forefront of using technology to further widen its reach, improve customer experience and provide flexibility in transactions.

CIMB Bank: Renzo Viegas, CEO, Consumer Banking

We don’t see this as a major threat. Since we are well ahead in our digital banking roadmap, we feel we are well positioned to be at the centre of our customers’online needsand we are clear of our online and digital strategy to servethe needs of our customers who are shifting online and using digital for all their day-to-day needs.
We have and will continue to roll out various e-wallet and e-payment products and services. We've also established partnership tie up with e-commerce merchants to provide our customers with customisedvalue and targeted benefits.

In addition,we have a significant advantage of being able to understand our customers so much better with the wealth of information we have on our customers, enabling us to provide intelligent real-time offers through data analytics.

Citi: Jonathan Larsen, Head of Global Retail Banking and Head of Consumer Banking Asia Pacific

Technology and digitization are transforming the very way in which we as banks serve our clients. Consumer preferences are changing and a generational shift in behavior is driving to new digital channels. Technology enables us to improve our efficiency and, importantly, it is likely to create new opportunities as non-financial firms emerge as potential partners and, of course, as potential competitors.

Technology and digitization are defining global trends of our lifetimes. Across the world, nearly 5 billion people are using mobile phones. That’s two and a half times more than the number of bank accounts, with the differences especially pronounced in emerging markets. This has important implications for our consumer franchise, as we not only see a generational shift in how consumers want to access financial services, but we’re also the development of highly digital consumer banking in markets which are already predisposed to using mobile technology rather than bricks-and-mortar branches.

We have been investing heavily in technology to support the expansion of our consumer-banking business. New Citibank branches around the world are taking on the "smart-banking" model, with interactive touch panels, video-conferencing capabilities and full-service banking from devices such as iPhones and iPads. These were launched first in Japan in 2009 and since have been rolled out across the world.

These branches are also generating increased traffic -one of our largest branches in Asia is in Mongkok in Hong Kong, the most densely populated area in the world. We are adding several thousand new clients a month at this Smart branch.

Speed, simplicity and ubiquity are guiding our use of technology across the world. Banking works well through devices like Apple Inc.'s iPad for example, it is a good fit for us. We have had good success with the i-Phone too. As a bank there is a priority on using innovation and technology to serve our clients and we are getting better and better at utilizing operating systems on mobile devices. We're taking a hard look at what ATMs do, too and we launched the next generation ATM in South Asia last year which we call Citibank Express which basically does all that you can do in a branch.

DBS: David Gledhill, Head of Technology and Operations

Many banks already realise that the competition will increasingly be coming from non-traditional players such as Google, Ali Baba, and Paypal. At DBS, we understand that in the future, our customers will continue to need banking, but they may not necessarily need a bank – in the traditional way of understanding what a bank is. Hence, we have taken a step forward in our innovation journey to be at the forefront of shaping the future of banking. DBS recently announced that we will be investing SGD 200m over the next three years to establish a digital banking initiative.

Ernst & Young: Liew Nam Soon, Asean Financial Services Leader

More and more non-banks are encroaching into the financial services industry in search of new revenue growth, and this poses an emerging challenge to banks. These non-banks use digital solutions to capture parts of the banking value chain e.g., payments, and the risk is that this disintermediation relegates banks to back office utilities. Banks should come up with their own digital propositions and go beyond that to be more intimately involved with their customers buying decisions. This can be done by applying intelligence to the large amounts of data banks have of their customers.