THE
AWARDS ISSUE UNIONBANK’S KYC BY SELFIE FEATURE FINTECHS VS BANKS: WHO’S WINNING IN FOREX? CASE STUDY: DBS’ DIGIBANK IN INDIA, INDONESIA CLOSING IN ON OPEN BANKING ISLAMIC BANKS SEEK SYNERGIES
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Welcome to the Asian Banking and Finance Awards issue. This edition is packed with exclusive interviews with top banking executives from Citi, Standard Chartered, BOCHK, Union Bank of the Philippines, and Bank Central Asia; comprehensive sector reports on Forex, Islamic Banking, and Business Banking; insightful op-ed pieces from EY, KPMG, Deloitte, Oliver Wyman, Bain, and Celent; and of course, the coverage of this year’s Wholesale Banking and Retail Banking Awards.
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In this issue, we also bring you stories on several trends taking over the banking industry today such as blockchain, bot-banking, virtual branches, and open banking. You will also find our Vendor View article discussing the most disruptive banking technologies to watch out for. We also present you with a Case Study on DBS’ digibank, and how they managed to successfully launch a revolutionary mobile-only bank in India and Indonesia, two of the most populous countries in the world. Start flipping the pages and enjoy our year-ender edition. Enjoy!
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ASIAN BANKING AND FINANCE | December 2017 1
CONTENTS
COUNTRY REPORT How systemic drawbacks drag Hong Kong banks in the heated digitalisation race
44
58
Cover story ABF Awards 2017 recognises record number of winners
FIRST 20 How blockchain is unchained in Singapore
21 The age of bot-banking 22 Closing in on open banking 24 Find out which banks are deploying virtual branches in Asia
26 Transfer funds in Singapore via PayNow
INTERVIEWS 32 Meet Citi’s new global subsidiaries group head for Asia Pacific Munir Nanji
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54 INTERVIEWS 34 Standard Chartered’s Deniz Güven
Country report A ‘whole new way of banking’ taking over India, Indonesia
INTERVIEWS 42 Union Bank of the Philippines’
on why delivering high-tech
president talks about their
services is not enough
three-point digital strategy
36 Alexis Calla talks about Standard Chartered’s Personalised Investment Ideas
38 Michael Wang of Bank of China (Hong Kong) shares how they collaborate with fintechs
40 Bank Central Asia’s senior EVP reveals the digital challenges
SECTOR REPORT 48 What fintech solutions do Asian banks offer to SMEs?
50 Why Islamic banks are seeking synergies
52 How real-time trading rocks the Asian forex boat
faced by Indonesian banks
For the latest banking news from Asia visit the website
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News from asianbankingandfinance.net Daily news from Asia most read
CARDS & PAYMENTS
Half of the world’s ATMs installed in Asia Pacific Following strong expansion of 6% in 2016, RBR Research said Asia Pacific now accounts for just over half of all terminals installed worldwide – a share which has grown rapidly over the last decade, and which is anticipated to rise further in the coming years, to reach 54% by the end of 2022. China added by far the most ATMs in 2016, but the rate of growth in the country has slowed as banks ramped up deployment of alternative self-service terminals.
RETAIL BANKING
Which amongst the Malaysian banks had the strongest profit growth in Q2? The percentage of banks delivering positive earnings surprise declined from 44% in 1Q17 to 11% in 2Q17 (only Affin surprised on the upside), whilst two disappointed (Maybank and BIMB), according to UOB Kay Hian. “Maybank and RHBBank registered strongest earnings growth on low-base effect. Lumpy O&G related bond impairments in 2Q16 for the likes of Maybank and RHBBank helped to fuel a relatively strong 19% yoy low-base effect.”
RETAIL BANKING
Singapore banks’ WM fees to post double-digit growth Between 2016 to 2Q17, Maybank Kim Eng said Singapore banks’ AUM grew decently by between 5-7%, thanks to their wealth franchise. Wealth management (WM) fees continued to drive revenue contribution, which grew by 24-43% YoY and 32-55% YoY across the banks in 2Q17 and 1H17 respectively. In 1H17, WM fees formed 26-44% of total net fee and commission income across the banks, thanks to positive market sentiment.
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Westpac Institutional Bank is a division of Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714 (“Westpac”). Information current as at 4 August 2017. The services and products described in this material are provided in accordance with appropriate local legislation and regulation and may not be available in all countries. New Zealand: In New Zealand Westpac Institutional Bank refers to the brand under which products and services are provided by either Westpac or Westpac New Zealand Limited (NZBN 942 903 432 4622) (“WNZL”). Any product or service made available by WNZL does not represent an offer from Westpac or any of its subsidiaries (other than WNZL). Neither Westpac nor its other subsidiaries guarantee or otherwise support the performance of WNZL in respect of any such product or service. WNZL is not an authorised deposit-taking institution for the purposes of Australian prudential standards. The current disclosure statements for the New Zealand branch of Westpac and WNZL can be obtained at the internet address www.westpac.co.nz. Both entities are registered banks in New Zealand under the Reserve Bank of New Zealand Act 1989. U.K.: Westpac Banking Corporation is registered in England as a branch (branch number BR000106), and is authorised and regulated by the Australian Prudential Regulatory Authority in Australia. WBC is authorised in the United Kingdom by the Prudential Regulation Authority. WBC is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority in the United Kingdom. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. Westpac Europe Limited is a company registered in England (number 05660023) and is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. China, Hong Kong, Singapore and India: Westpac Singapore Branch holds a wholesale banking licence and is subject to supervision by the Monetary Authority of Singapore. Westpac Hong Kong Branch holds a banking licence and is subject to supervision by the Hong Kong Monetary Authority. Westpac Hong Kong branch also holds a licence issued by the Hong Kong Securities and Futures Commission (SFC) for Type 1 and Type 4 regulated activity. Westpac Shanghai and Beijing Branches hold banking licences and are subject to supervision by the China Banking Regulatory Commission (CBRC). Westpac Mumbai Branch holds a banking licence from the Reserve Bank of India (RBI) and is subject to regulation and supervision by the RBI. U.S.: Westpac operates in the United States of America as a federally licenced branch, regulated by the Office of Comptroller of the Currency. Westpac is also registered with the US Commodity Futures Trading Commission (“CFTC”) as a Swap Dealer, but is neither registered as, or affiliated with, a Futures Commission Merchant registered with the US CFTC. Westpac Capital Markets, LLC (‘WCM’), a wholly-owned subsidiary of Westpac, is a broker-dealer registered under the U.S. Securities Exchange Act of 1934 (‘the Exchange Act’) and member of the Financial Industry Regulatory Authority (‘FINRA’).
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FIRST legitimate authentication. “The Monetary Authority of Singapore (MAS) has spoken about the importance for Singapore to ‘work smarter’ in how it fights financial crime in areas like banks’ approach to their KYC due diligence and through its use of technology. The launch of this KYC platform is an accumulation of all of these aims: collaboration, innovation, and crime prevention,” said Beaver Chua, head of financial crime compliance, HSBC Singapore.
banks and fintechs
Keith Lin
Keith Lin is a Hong Kong-based advisory partner for financial services organisations at EY focussing on capital markets, wealth and asset management. He spoke at the ABF Banking Forum 2017 in Hong Kong held in July. What are your insights about the financial services landscape in Hong Kong, especially in terms of banks and fintechs? I came to Hong Kong six months ago. I had a choice between New York and Hong Kong, but I came to Hong Kong because there is a lot of activity here in terms of innovations, and that’s where I am interested in. Fintech has shown great progress in this region, and banking is not the banking we know yesterday anymore. A lot of people do not do banking with banks and so the concept of banking is changing especially for the new generation. Banks should take advantage of their client base and huge network of distribution. Instead of trying to figure out what kind of digital innovation they want to do, they should be aiming at creating the ecosystem and becoming the leader of the network. Whoever will embrace the fintech companies and take them under their wings will be the winner. Do you think collaboration is the best strategy for banks and fintechs alike? Collaboration will be the norm and it will be a necessity. It won’t be optional for banks and fintechs because they will have to do it. Because of collaboration, you will also think about how to open up yourself. The banking environment will be more open and more inclusive, but it will also create a huge impact in terms of the corporate culture. The starting point is to recognise that it involves more than just a culture change – it’s an enterprise change. As a bank, you need to position yourself as a digital company. If you still think of yourself as a bank, you’re missing the point. 20 ASIAN BANKING AND FINANCE | December 2017
The MAS’ Project Ubin is now on its second phase
How blockchain is unchained in Singapore
I
singapore
n October 2017, OCBC, HSBC, Mitsubishi UFJ Financial Group, and Singapore’s Infocomm Media Development Authority broke new ground when the group became the first consortium in Southeast Asia to successfully complete a proof-of-concept for a Know Your Customer (KYC) blockchain. It runs on a Distributed Ledger Technology platform which enables structured information to be recorded, accessed and shared across a distributed network using advanced cryptography. The KYC blockchain allows banks to collect, validate and share customer information – with the customer’s consent – accurately, efficiently and securely. According to the consortium, the prototype’s performance was tested between February and May 2017 for its functionality, scalability and security. It remained stable even with a high volume of information flow, was resistant to tampering by third parties and maintained confidentiality by permitting access to the ledger’s information only with
Total investments globally to the blockchain and cryptocurrencies sector steadily increased by 14.2% between 2014 and 2016.
Blockchain in Singapore Singapore’s central bank itself has also been working on a proof-of-concept for inter-bank payments using blockchain when it partnered with DLT company R3 and a consortium of financial institutions for ‘Project Ubin.’ Sopnendu Mohanty, chief fintech officer, MAS, said the simplification of processes that comes from having a single, distributed record of information makes blockchain technology an attractive solution for the financial sector. Project Ubin succeeded in its first trial in March 2017 on domestic interbank payments but issues on singularity, compatibility, governance, and technological sophistication emerged. The second phase will focus on securities trading or payment for delivery, and the last phase will focus on cross-border payments. Whilst blockchain is not entirely new, it’s only finding its footing mainstream over the past few years. Total investments globally to the blockchain and cryptocurrencies sector, for instance, steadily increased by 14.2% between 2014 and 2016, with the trend looking set to be maintained in 2017 with over $412m already invested in the first half of this year, according to Fintech Global.
FIRST Today’s AI is not yet ready to replace humans. Instead, it will augment them, letting them move into more value-adding activities.
The ChatBot interface
The age of bot-banking
W
bots
hen RHB Bank launched ChatBot via RinggitPlus in October 2017, it pioneered a real-time messenger-style platform in Southeast Asia wherein clients can apply for their personal loan anytime and obtain the results for eligibility within a day. More banks like RHB are moving towards the use of artificial intelligence (AI), particularly natural language processing, with its attractive promises of cost reduction, risk mitigation, and increase in revenue. Also in the same month,
National Australia Bank launched its first ever chatbot designed to respond to up to 200 queries from its business banking clients. The bank expects to save up to $16m by 2020 by using these ‘virtual bankers.’ Dan Latimore, senior vice president, banking at Celent, said that whilst AI has applications in the front, middle, and back office, it is important to be clear about how, where, and why AI is to be used. Despite what seems to be a lot of progress amongst many banks in
terms of AI, Latimore noted that relatively few have begun production or even full-blown research. However, banks must already begin developing an AI strategy, if they wish not to be left behind. Most banks can begin with their knowledge of data analytics and couple it with machine learning. AI won’t replace humans Foundational technologies such as computing power, data, and algorithms have led to machine learning and language manipulation, two of the centrepiece technologies of true AI. In banking, Latimore said the most visible instance of AI today is the chatbot. Some banks have already put in place virtual agents which may be named and given an avatar and personality. “Today’s AI is not yet ready to replace humans. Instead, it will augment them, letting them move into more value-adding activities, freeing them from rote actions and making them more efficient,” Latimore concluded.
Artificial intelligence in banking
Source: Celent analysis. Arrows represent influence of source on target.
The Chartist: how low interest rates affect thai banks Low interest rates would be negative for Thai commercial banks, especially the big ones, as they lower NIMs. Maybank Kim Eng noted that because deposit rates are reaching or have already reached zero, lower interest rates are unlikely to force banks to cut their funding costs further. On the other hand, lending rates could succumb to pressure from policy makers, as commercial banks did in May and credit-card companies in July. “As Thai commercial banks’ NIMs are still higher than their ASEAN peers’, policy makers could use this for further moral suasion. Moreover, new regulations to cut credit lines to lower-income borrowers of unsecured loans could heat up competition in this segment, possibly creating another source of NIM pressure,” added Maybank Kim Eng.
Lending rates were cut in May, likely in response to government moral suasion
Sources: BOT, MKE-ISR
But as Thai NIMs remain higher than ASEAN peers’, we would not rule out more pressure from the government
Sources: Bloomberg, companies, MKE-ISR
ASIAN BANKING AND FINANCE | December 2017 21
FIRST Common AML risks in Hong Kong
Closing in on open banking
C
Three types of APIs
API
Simon Leung
Simon Leung is the head of AML at China CITIC Bank International. He was one of the panelists at the ABF Banking Forum in Hong Kong held in July 2017. What are the common AML risks that banks need to watch out for? I do have some principles or fundamental requirement for the business when thinking about products. One is KYC or know your customer. The KYC process can be face to face or digital. Just make sure the facial recognition technology is up to standards and acceptable to the regulator. What is your bank doing in terms of digital KYC? We are supporting the banking industry to build e-KYC, or what they call the KYC utilities, which is a centralised database for storing all the customer record. Every bank can go there to get proper KYC information that will help the bank enough to maintain the KYC standard and also reduce the cost of the bank. Fintechs have a bit of a headway in terms of introducing new products and services because they are not as regulated as the banks. How do you think can banks overcome this challenge? Fintech brings new opportunities and new risks tobanks so I keep myself abreast with new innovation and technology and advise the business unit on how to apply the new technology within regulation framework. When banks introduce a product, it is very important to communicate with the regulators. Explain how the technology came about, as well as the acceptable level that they will accept the technology. We are using this opportunity to persuade the regulator to change the regulation so they can consider how the banks can keep up with the fintechs and do efficient KYC and transaction monitoring. 22 ASIAN BANKING AND FINANCE | December 2017
iti opened up its platforms in November 2016 through its Global API Developer Portal, a self-service global portal enabling developers to write software in multiple contemporary programming languages and allowing them to get access to a rich set of APIs covering 80% of transactions performed by Citi customers. The bank has since forged strategic partnerships with tech giants such Grab, Lazada, Amazon, and Airbnb. “Citi’s Open Banking strategy focuses on forging strategic alliances with digital players and established brands that are an integral part of our customers’ lifestyles,” said James Griffiths, a spokesperson for Citi in Asia. Open banking—a platform-based business approach—could revolutionise how banks generate value. “Open banking offers leading banks the opportunity to expose data, algorithms and processes through application programming interfaces (APIs) and create new revenue streams,” said Berend de Jong, managing director at Accenture. “If banks are to restore profitability and successfully compete with their banking and non-banking peers, open banking is one option that could make all the difference to their digital transformation programmes,” he
Source: McKinsey Payments Practice
added. Whilst open banking stands to foster new areas of competition between banks and nonbanks, McKinsey analyst Laura Brodsky noted it is also likely to usher in an entirely new financial services ecosystem, in which banks’ roles may shift markedly. “It also raises issues around regulation and data privacy, which helps to explain why global markets have taken varying approaches to governance, contributing to disparate levels of progress. Regardless of Regardless of region, the momentum toward open banking models seems region, the clear, requiring banks and fintechs alike momentum toward open to position themselves for success in a new environment and to anticipate the banking likely customer impacts,” she added. models Brodsky warned that data sharing in seems clear, financial services tends to be risk- and requiring permission-based, with required audit banks and fintechs alike trails, and subject to regulation and risk management. If done well, however, to position she said it can deliver increased themselves security through enhanced knowfor success your-customer capabilities, identity in a new environment. validation, and fraud detection.
Digitalisation still a challenge for Hong Kong banks banking on the desktop computer. And of course, they are most comfortable to do the transaction in front of a real person. They prefer to keep in contact with their relationship managers in the branch. So still, digitalisation is a very challenging task. What is the key for banks to keep up with the fintechs? In Hong Kong, banks still have a lot of work to do to overhaul their online services so they can catch up to Raymond Chan is currently the deputy general banks in Singapore and China manager & head of e-channel business at China Fintech companies excel in delivering a seamless CITIC Bank International, and he was one of the customer experience. They are not using topnotch panelists at the ABF Banking Forum held in Hong technology or science, rather, they are focused on Kong in July 2017. customer experience. When I was working with Tell us about your experience with customers’ product managers at Tencent, what they are most concerned about is the customer experience. Hong digital savviness here in Hong Kong. Hong Kong customers are a bit conservative. Many Kong banks have a lot of work to do in order to of them still have reservations on the cybersecurity overhaul their online services so they will catch up to Singapore and China. on mobile devices and are still comfortable with Raymond Chan
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FIRST
Find out which banks are deploying virtual branches in Asia
J
virtual branches
.P. Morgan is making cash management more convenient with its Virtual Branch, which was launched in China this year. The Virtual Branch allows clients to upload, check, and store their supporting documents electronically, and it can be accessed by customers after they log on to their account at the J.P. Morgan ACCESS Online portal. “The portal’s sophisticated Dashboard offers track-and-trace capabilities, which allows clients to check and monitor the endto-end workflow progress of all their crossborder merchandise trade transactions, within a cohesive platform. Email alerts can also be activated to ensure our clients receive instant status updates of all their documentation processes, directly to their mailbox,” said Rani Gu, head of treasury services, China, at J.P. Morgan. The launch of the virtual bank in China follows J.P. Morgan’s successful implementation of the initiative in India, Indonesia, and Thailand. J.P. Morgan spent $9.5b in technology investments in 2016,
24 ASIAN BANKING AND FINANCE | December 2017
and the firm’s Treasury Services business is expected to increase its technology budget by 12% this year. The market will see more banks embracing virtual banking, as the European Financial Management Association predicts that as many as 80% of the world’s banks will be involved in virtual branch deployments in 2018. Another bank jumping on the virtual banking bandwagon is Citibank, which will also enable its customers in 16 countries to benefit from virtual banking after it signed an agreement with global technology company Ailleron to implement its LiveBank technology. LiveBank transfers 95% of the bank’s offer to remote channels, whilst maintaining the possibility of direct interaction between the client and the bank. The platform provides many services, including secure banking in video, audio, and chat channels, collaboration, file sharing, document signing, voice biometrics and eKYC.
The J.P. Morgan Virtual Branch interface
“The agreement on such a broad implementation in Citibank is the result of many years of work on improving LiveBank as well as the result of implementations in the Polish mBank and BZ WBK, German Commerzbank or international Standard Chartered Bank. Our cooperation with Citibank will give us plenty of experience and new ideas,” said Piotr Skrabski, Ailleron VP and general manager of LiveBank. “We are implementing the solution in 16 countries with different market regulations and IT requirements. We are currently expanding LiveBank with online customer identity verification, which will allow for opening a bank account, taking out a loan, or signing a contract remotely, without visiting a bank branch,” he added.
FIRST NUMBERS
Singapore Retail Satisfaction Study
These Maybank employees were able to purchase items in their charity flea market using their mobile
Transfer funds in Singapore via PayNow
R
singapore
Source: J.D. Power
26 ASIAN BANKING AND FINANCE | December 2017
unning a flea market is not the normal purview of a bank, but in Maybank’s case it was their way of introducing PayNow, Singapore’s latest payment method to its staff. Company staff members sold a range of handmade products to each other and collected payment digitally through their mobile phones rather than in cash or credit card. Maybank was one of seven banks in the consortium, which launched in July, and allows bank customers to register their mobile phone number to their bank account and pay someone else only knowing their phone number, rather than having to know their full bank account details. This is Singapore’s fourth bankbacked payment service and was unveiled by the Association of Banks in Singapore. The Seven participating banks – Citibank, DBS/PSOB, HSBC, Maybank, OCBC, Standard Chartered, and UOB – answered to the call of consumers hungry for a faster and more convenient method of funds transfer. The service runs through Fast And Secure Transfers, a service launched in March 2014 and is now being used by 19 banks in Singapore. However, unlike using FAST, PayNow does not require customers to key in the bank name and account number of the person they are sending the money to. With PayNow, they are
only required to supply the mobile number of the recipient of the money to transfer funds instantly. Maybank Singapore community financial services head Choong Wai Hong said the flea market was able to record 500 transactions, all of which are processed through PayNow. “As one of the banks offering PayNow, we want to show our strong support for this new fund transfer service and to promote its convenience to our staff via this charity flea market,” he noted. UOB has gone further and integrated PayNow into its MyKey keyboard app which can be used in messaging apps like WhatsApp and PayNow Carousell to send money instantly. To enables ensure safety, UOB MyKey requires customers the sender to input a one-time to use their password in confirming the transfer mobile of funds. There are some limits with numbers PayNow with a daily cumulative or NRIC numbers when transfer limit $1,000, but it is a facilitating fund major new addition to the Singapore banking landscape. transfers. PayNow vs other payment mechanisms Payment type
Receipt of Payments
PayNow
Uses mobile number and /or Singapore NRIC/FIN Almost immediate, 24x basis
FAST
Requires Bank Name and Account Number Almost immediate, 24x7 basis
Cheque
Up to 2 working days
Interbank GIRO
Up to 3 working days
Source: Association of Banks in Singapore
Co-published corporate profile
Work smarter, not harder: On user self-onboarding Why would a bank let their corporates indulge in setting up system privileges online – without keeping close tabs on the process?
I
t is one of major prerogatives of any given bank: deciding who, when and how can benefit from the online account access. More than that, it is a legal requirement for a financial institution to know their customers, including those who prefer to point and click. But there must be a better way to stay on top of the number of pointers and clickers – especially new ones – than relying on a small army of personnel. We know there is. We created one. It’s called self-onboarding: with it, banks can still have full control over the influx of new users simply because every instance of adding or modifying each user has to be approved by an authorized bank employee before taking effect. But corporates join in by themselves, entering all the necessary data, and the only thing left for a banker to do is to put a tick by verified names at the end of the day. The ‘approval’ part is just what concerns banks here. Period. Straightforward onboarding For corporates, self-onboarding means they have the power to set up numerous users at once whenever they want and wherever they are. As a result, it may take as little as one day for fresh hires to get their online privileges up and running.
As Agnieszka Piróg, Product Manager at Comarch, has it: Onboarding became so straightforward and fast for our clients: just enter personal data, choose rights and limits, sit back and relax as the welcome package gets on its way. It actually resembles registering at a fancy online store with a very good security level – and has nothing to do with cutting through the red tape. Once companies try self-onboarding, they no longer wish to go back to waiting in line for their slot in a banker’s schedule, says Krystian Suchodolski, Consulting Director at Comarch. Bank clerks, in turn, are happy to avoid potential human errors related to granting wrong rights to wrong users, which could put a dent in bank-customer business relations at best, and lead to a costly legal battle – at worst. Strangely enough, the more experience bank employees have under their belt, the more likely they are to make such error. From the employee’s perspective, when you onboard dozens of users each day, the routine of it makes it easier for your mind to wander, explains Bartosz Lerka, Comarch’s Business Consultant. Bottom line is: instead of putting endless resources to double- or triple-check what already takes some elbow grease, it is much more prudent to shift a large part of it to fresh and attentive
“For corporates, self-onboarding means they have the power to set up numerous users at once whenever they want and wherever they are.”
Bartosz Lerka
Bartosz Lerka is a former corporate banker with nearly 10 years of experience. During his banking career, he served international corporations, European SMEs, companies listed on the stock exchange, as well as enterprises with consolidated shareholder structure. In Comarch, he supports optimization of banking processes with IT solutions. Driven by freeing financial officers and bank employees from complex or repetitive tasks and excessive operational risks. Partial to efficient time and money allocation on both sides of the bank-client relation. minds of corporate admins. Especially if you consider that the onboarding wizard is available on the web, which really makes things smooth for everyone. The wizard can even be adjusted to the size of a given company and the number of its online banking users. That’s what we call smart, not hard. Comarch Financial Services is a provider of state-of-the-art IT solutions for banks, insurance companies, brokerage houses, asset management companies, as well as investment and pension funds. Tell us about your business needs - we will find the perfect solution. Send us an email at finance@comarch.com ASIAN BANKING AND FINANCE | December 2017 27
FINANCIAL INSIGHT: SINGAPORE ipos
Deal #1:HRnetGroup Limited had the largest IPO with the highest funds raised at $174m.
Deal #2: The NetLink Trust deal is largest since IHH Healthcare Bhd’s US$2b listing in 2012.
Why 2017 could be a blockbuster year Singapore’s IPOs for the first half of this year raised US$329m, and analysts expect the volume of IPO funds raised by the end of 2017 to surpass 2016 levels. Find out more about the nine IPO deals closed so far this year.
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ingapore’s status as one of the powerhouse financial and business hubs in Asia Pacific is helping the country’s IPO and equities industries close out the year in record fashion despite a comparatively laggard first half. Industry experts and observers share their insights and analysis on what transpired in Singapore’s IPO and equities industries in the first half of 2017, what can be expected in the rest of the year, as well as the kinds of challenges and opportunities for the two sectors along the way. Singapore, Southeast Asia’s richest country in terms of per capita income, remains one of Asia Pacific’s biggest and most vibrant economies and markets for IPOs and equities. With the country’s long-standing strong economic fundamentals and financial policies, experts remain bullish that Singapore will continue its strong start in the first half of 2017 for IPOs and equities. Singapore’s IPOs for the first half of 28 ASIAN BANKING AND FINANCE | December 2017
Romaine Jackson
Tham Tuck Seng
this year raised $450m (US$329m), according to the latest data and figures from PwC Singapore. The volume of IPO funds raised by the end of 2017 is also projected to surpass 2016 levels with a number of IPO deals expected to be closed in the coming months (before the end of the calendar year). There were nine IPO deals — for both domestic and overseas stock markets — closed in the first half of this year, including one business trust transaction. If including one registration and three lodgements made in the first six months of 2017, IPO fund-raising is expected to hit $3.03b during the period, according to data from Deloitte. This is the highest figure since 2013 for Singapore IPOs. “We are seeing a great start to the IPO activity this year,” said Dr Ernest Kan, deputy managing partner (markets) for Deloitte Singapore. “If we take into consideration the one registration and three
lodgements as of 30 June, we are seeing unprecedented level of funds raised since 2013. This performance reinforces positive investor sentiments for Singapore’s equity market.” Major deals The nine IPOs in the first six months of 2017 have a total approximate capitalisation of $2.14b, according to data from Deloitte. Eight company IPOs raised $310m with $1.7b market capitalisation, whilst the one Business Trust transaction on the SGX mainboard raised $154m in proceeds and $440m in market capitalisation. In comparison, despite 2016 having only seven IPOs in its first half, in terms of overall value, the first six months of last year had a bigger market capitalisation of $2.24b. “Asian IPOs including Singapore have done well so far and are expected to outperform 2016,” said Khong Choun Mun, chief executive officer of RHT Capital. “The strong
FINANCIAL INSIGHT: SIngapore ipos momentum achieved in the first half of 2017 is expected to continue for the rest of 2017.” Some of the major deals in the Singapore IPO and equities market are classified as a Catalist listing, a sponsor-supervised listing platform for fast growing local and international companies initiated by SGX. Of the nine IPOs, seven were Catalist listings which raised $125m funds with US$804m in market capitalisation, compared to the five registered last year with $55m funds raised and $250m in market capitalisation. For the two main SGX Mainboard listings, the largest IPO was HRnetGroup Limited with the highest funds raised at $174m and market capitalisation of $867m, followed by Dasin Retail Trust which raised $154m with a market capitalisation of $440m. Fibre network owner NetLink NBN Trust announced its initial public offering (IPO) price at $0.81 per unit. The offering price values the market capitalisation of the trust at about $3b. The $2.3b IPO is also the biggest in Singapore since 2011 when Hutchison Port Holdings Trust raised $7.6b, and the second largest IPO in Asia this year after the listing of Netmarble Games Corp in South Korea. The NetLink Trust deal will “change the discourse/sentiment on Singapore IPOs for 2017,” according to Romaine Jackson, head of Southeast Asia at Dealogic, with the transaction being the “sixth largest flotation in Singapore history and the largest since IHH Healthcare Bhd’s US$2b listing in July 2012. If the deal goes well, it will positively impact investor sentiment.” This sentiment is echoed by Tham Tuck Seng, capital markets leader at PwC Singapore. He says that although Singapore’s first half of 2017 IPO volume lagged behind 2016 figures of the same period in terms of fund raised, he expects the full year 2017 volume to surpass that of 2016 with the listing of NetLink Trust leading the way.” In terms of sectors, SGX’s traditional strengths in Real Estate Industrial Trusts (REITs) and business trusts, also comprised a significant portion of the country’s IPO proceeds
drives investor sentiments to be ‘ultra-conservative when compared to Hong Kong.’ “Deal flow is down year on year, with no jumbo deals (more than US$1b) so far this year. This will change with NetLink’s IPO (largest deal in 5 years). Listing rules may be deterring foreign listing in Singapore. There are also concerns that Singapore is losing its appeal as a regional fundraising hub,” the Dealogic official added.
for the first half of 2017 at 33%, after professional services at 41%. Singapore integral to APAC drive Asia Pacific, with its size and the stellar economic growth of its countries over the past few years, remains the biggest and most significant region in terms of growth and development in the IPO and equities markets in the first half of 2017. With the region headlining the strongest first half rally in nearly a decade, the global IPO market saw proceeds reach US$83.4b — a 90% rise from the same period last year — with the number of deals also rising significantly by 70% to 772 registered IPOs compared to the first half of 2016, according to data by Ernst & Young. Of this record figure, the Asia Pacific region accounted for 61% or 468 IPO deals and 44% or US$37b of all proceeds of the global IPO market — this is the highest first half of activity for the region since 2002. This is a remarkable development despite the continuous uncertainty. “Asia Pacific’s position as the leading center of IPO activity is unlikely to be challenged through the remainder of 2017 with Greater China leading the way,” said Max Loh, EY’s ASEAN and Singapore managing partner, adding that the region’s sustained growth and development momentum underpinned by stable fundamentals have continuously painted a positive economic and financial outlook over the years. He added that across ASEAN, investor confidence is strengthening due to the growth of the global and Southeast Asian economies. “The Singapore Exchange (SGX) is likely to lead the IPO pipeline for Southeast Asia in the second half of 2017, being wellpositioned as a platform for growth, alongside Indonesia, Thailand, and the Philippines.” However, it’s not always rainbows and butterflies for the Singapore IPO and equities landscapes, at least, for this year as some challenges in the horizon are looming. Jackson describes that there is some sort of drought in IPOs in Singapore given the “lack of liquidity in the market outside of REIT issuances” which
Marcus Chow
Outlook “Singapore has seen a flurry of equity markets activities with several Singapore related companies listing on the SGX and the Hong Kong Stock Exchange,” said Marcus Chow, corporate partner at Bird & Bird TMD. “The next 12 months look sanguine and we are optimistic that conditions for book building will hold.” PwC’s analysis suggests that rising sectors such as consumer and professional services will continue the uptrend with Singapore’s position as one of the main business and financial services centres in the region. Healthcare is also expected to maintain its position as a strong contributor to Singapore IPO and equities industries, whilst the island state is also expected to remain the choice listing destination for REITs and business trusts with notable interest from Chinese-based real estate players. “We are expecting a strong pipeline of blockbuster listings in the second half of 2017, and coupled with the strong post-IPO performance of the companies listed in the first half of 2017, Singapore’s market is buzzing with excitement,” said Dr Kan.
Ernest Kan
Khong Choun Mun
Max Loh
Mohamed Nasser Ismail
Top exchanges for cross-border IPOs
Source: Baker McKenzie
ASIAN BANKING AND FINANCE | December 2017 29
FINANCIAL INSIGHT: HOng KOng ipos
Deal #1: The biggest IPO deal in Hong Kong is the listing of financial services company Guotai Junan Securities for $2.2b on the Hong Kong Exchange in April.
Deal #2: The sale of PCCW’s $1.1b stake in telecommunications unit HKT Trust & HKT is the largest block trade done in the first quarter of the year.
IPO volume to reach record highs in HK Hong Kong will remain as the region’s leading international fundraising hub, as the special administrative region’s initial public offerings (IPOs) and equities landscape remain bullish with 72 new listings.
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ong Kong’s IPO market remained active in the first half of 2017, achieving increases in both number of listings and funds raised. A vibrant market in small to medium-sized IPOs contributed to more-thandouble listings and funds raised on the Growth Enterprise Market (GEM) board of the Hong Kong stock exchange. This is despite the economic and political uncertainties around the world. PwC Capital Markets service partner for Hong Kong Eddie Wong shared in a statement that they saw significant growth in the IPO market in the first half of 2017, comparing year on year, credited to improving market sentiment and economic conditions, which has also enhanced the quality of Hong Kong’s capital markets. He added that the segmentation of IPOs was more evenly distributed and that they are pleased to see companies from different industries and
30 ASIAN BANKING AND FINANCE | December 2017
Total funds raised reached HK$53.6b, increasing 23% year on year. The trend is the same for GEM board, with 35 IPO deals amounting to HK$2.6b in total fundraising.
geographies all proactively looking for listing opportunities in Hong Kong. Overall pricing and P/E ratios, Wong said, are improving, which indicates that investors are relatively optimistic about the future. PwC data suggested that in the first half of 2017, there were a total of 72 new listings in Hong Kong — an 80% increase on the same period last year. Total funds raised reached HK$53.6b, increasing 23% year on year. The trend is the same for GEM board, with 35 IPO deals amounting to HK$2.6b in total fundraising, a 133% increase in number of firms and 136% in terms of funds raised. There were also 37 new listings on the main board within the period, with total funds raised standing at HK$51b, which is a 48% increase in IPOs and a 20% increase in funds raised. Companies seeing IPOs are mainly from these sectors: industrial, retail, consumer goods, and services. “Hong Kong listed Equity volume is up year on year with $16.7b raised
via 229 deals in [the first half of 2017] compared to $13b via 179 deals in [the same period] in 2016,” said Trafford Blekinsopp, APAC head of equity capital markets at Dealogic. Major statistics Hong Kong’s close proximity — both in the cultural and geographical sense — to mainland China is proving to be a boon to the IPO and equities sectors. Some of the biggest deals in the first half of 2017 have ties, one way or another, to firms or financial institutions from the mainland. The biggest IPO deal for Hong Kong was the listing of financial services company Guotai Junan Securities for $2.2b on the Hong Kong Exchange (HKEX) in April. There was also the largest block trade done by Goldman Sachs with the sale of billionaire Richard Li’s PCCW Limited’s $1.1b stake in telecommunications unit HKT Trust & HKT Limited in the first quarter of this year.
FINANCIAL INSIGHT: Hong KOng ipos In the whole region, the largest IPO deal for the first half of 2017 was that of technology firm Netmarble games, South Korea’s largest mobile games maker, raising $2.3b in the Korea Exchange (KRX). Average deal size — excluding companies that raised funds of more than HK$10b — however, declined 17% in the first half of 2017 compared to the same period last year at HK$1b, according to data from PwC. Industries comprising the majority of new listings to the main board of HKEX for the first half of 2017 include industrial products (49%); retail, consumer goods, and services (30%); financial services (13%); information technology and telecommunications (5%); as well as energy and mining related (3%). For the GEM board of HKEX, majority of industries comprising new listings for the first half of the year include industrial products (37%); retail, consumer goods, and services (37%); financial services (14%); information technology and telecommunications (9%); as well as energy and mining related (3%). Boost factor The influence and boost by mainland China to Hong Kong’s IPO and equities growth was also highlighted by David Holland, Asia Pacific head of capital markets at Baker McKenzie. “The biggest influence on overall cross-border capital markets activity in Asia Pacific are Chinese companies listing on the Hong Kong exchange, which fell in the first half of 2017. Whilst the number of transactions increased from the low base in 2016, transactional activity hasn’t tracked the strong equity markets across the region,” he said. “Looking forward, we think we will see a modest increase in transactional activity overall across the region. Capital flows out of China continue to represent the biggest area of uncertainty in capital markets in Asia Pacific.” Experts agree that outlook for Hong Kong’s IPO and equities sector for the rest of the year is upbeat. PwC forecasts a vibrant IPO market for Hong Kong driven by small and medium-sized enterprises that could result in a record-breaking 150
IPOs over the course of the year. There is still also a chance for some mega-sized IPOs before year-end, making Hong Kong one of the three strongest markets globally, with total fundraising of HK$220b. This is echoed by findings and analysis of Baker & McKenzie saying that the Stock Exchange of Hong Kong surpasses London (both Mainboard and AIM), the New York Stock Exchange, and the NASDAQ as the preferred hub for cross-border listings globally. “The second half of 2017 could be more challenging. Market sentiment may be affected by economic and political risk factors around the world,” said PwC Hong Kong entrepreneur group leader Benson Wong in a statement, adding that geopolitical issues, slow global economic recovery, and Brexit can dampen business sentiment. He also expects a slowdown in IPO activity in mainland China after a spurt of listings in the first half of the year. Hong IPOs to hit record high Norton Rose Fulbright partner Winnie Chan said that they are positive on the Hong Kong IPO market in 2017. “Going forward with the Belt and Road Initiative, it is anticipated that more overseas companies are expected to see Hong Kong as their funding choice and seek listings here, she explained. Chan added that it is believed that the ability of Hong Kong to allow dual-class shares companies and attract technology firms are the key issues for Hong Kong’s IPO market in the future. In terms of deals for the rest of the year, an expected IPO for Zhongyuan Bank Company Limited will be the biggest for Hong Kong at $1.1b. Regionally, it will be China Tower’s $10b IPO valuation expected to be completed by the third or fourth quarter of this year, according to Dealogic’s Blekinsopp. According to PwC analysis, the number of IPOs in 2017 could reach a record high of 160 whilst the fund to be raised will depend on whether large-sized IPOs can succeed as scheduled. An expected market trend of companies and investors focusing more on GEM Board paints a positive view of an
emphasis of good performance in the second half of 2017. Hong Kong’s upper hand Experts and observers all over Asia Pacific are in consensus that there will be greater competition for stock markets and listings in the region. And being the region’s leader in financial and commercial activities, Hong Kong will be at the heart of it all. PwC analysis suggested that Hong Kong continues to be the most popular market for fund raising, attracting more overseas and mainland companies to get listed. This is echoed by experts around the region. Deloitte Singapore deputy managing partner for markets Ernest Kan said that they are witnessing a development — that of companies in Singapore going for Hong Kong listings. “There is the perception that Hong Kong listings ensure better valuations and liquidity. However, the valuation of a stock is a reflection of the company’s earnings and business performance,” he shared. But Hong Kong doesn’t seem to plan on resting on its laurels. PwC analysis suggested that there are reforms put forward by HKEX to clarify and strengthen the function of both mainboard and GEM board to respond to market demand and help attract more companies to get listed in Hong Kong. “The proposal clearly defines the functionality of the different boards … [as] it addresses the funding needs of different kinds of companies and helps them to source and match appropriate investors. It also clears the obstacles to the development of the city’s capital markets,” said PwC.
Benson Wong
David Holland
Eddie Wong
Winnie Chan
Trafford Blenkinsopp
Top exchanges for cross-border IPOs
Source: Baker McKenzie
ASIAN BANKING AND FINANCE | December 2017 31
We are already seeing significant investments by China into Southeast Asia, Korea into Vietnam, and the historic ties Japan has had with Asia becoming stronger. All across Asia, trade corridors are growing — 85% of trade never touches US borders.
Munir Nanji Global Subsidiaries Group Head, APAC Citi 32 ASIAN BANKING AND FINANCE | December 2017
INTERVIEW
Meet Citi’s new global subsidiaries group head for Asia Pacific Munir Nanji As US and European MNCs target Asia for growth, his priority is to be is in the middle of these flows.
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n June 2017, Munir Nanji was appointed as Citi’s global subsidiaries group (GSG) head for Asia Pacific. He will be based in Singapore and will report to Gerald Keefe, head of corporate banking Asia Pacific and Marc Merlino, global head of GSG. According to the bank, the GSG business supports the subsidiaries of Citi’s multinational clients around the world across institutional banking. Munir has 25 years of international banking experience, and he held leadership positions globally in corporate banking, product management, relationship, and risk management. He joined Citi as a management associate in Kenya in 1992, and has worked in Nigeria, Poland, Italy, Romania and the UK, prior to his current role in Hong Kong as the regional sales and marketing head for treasury and trade Solutions (TTS) for Asia Pacific. In an exclusive interview with Asian Banking and Finance, Munir reveals his plans and key philosophies: What makes you excited about your new position? The Global Subsidiaries Group (GSG) is one of Citi’s fastest growing businesses banking the subsidiaries of some of our largest multi-national clients (MNCs). Asia Pacific is core to further growth in the GSG with a presence across 16 markets in the region. This region is already large for Citi — it accounts for around a quarter of Citi’s global revenues at over US$13b annually and is the largest region for Citi globally. As we pivot to capture further growth in Asia, the GSG franchise has an important role to play in supporting our clients not only across Asia, but also globally in the close to 100 countries we operate in. There is also tremendous growth upside in the business. Asia today makes up a significant portion of MNCs’ sales underpinned by the fact two-thirds of the world’s population live in Asia. Asia’s contribution to GDP is already significant and rising with a relatively young and tech savvy population. With growth at between 5% and 6%, Asia is a key battleground for companies to grow to capture the rise of the Asian consumer and their increased spending power. On the corporate side similar trends prevail with the continued rise of Asian global champions making their mark not only in their domestic market and regionally, but also globally. In the recent Forbes annual world’s largest companies’ survey, Asia Pacific was the fastest growing region and over 250 companies from China and Hong Kong making the list. Citi banks 95% of the Fortune 500 in Asia. We are also excited by the growth in intra-Asia trade with increasing trade between Asian nations and the opportunities that brings across Asian trade corridors where we are already well positioned. We are already seeing significant investments by China into Southeast Asia, Korea into Vietnam, and the historic ties Japan has had with Asia
becoming stronger. All across Asia, trade corridors are growing — 85% of trade never touches US borders. We have also opened Asia desks across the world to support our Asian corporate champions. US and European MNCs continue to target Asia for growth and our priority is to make sure we are in the middle of these flows. We have a presence across Asia that dates back over a hundred years with a strong on-theground presence, and Citi is the best positioned global bank to connect Asia to Asia and the world to Asia and vice versa. What three goals are you focussed on? Our institutional business is focussed on increasing our wallet share penetration of our target clients by increasing the connectivity between our key businesses and tapping new growth. The GSG business has a key role to play in that. Another goal is to build on our strong momentum and capture further that Asia to Asia business where we see a surge in flows with the Asia champions doing much more across Asia. A priority is also building further our work with regional MNCs who have a treasury and finance presence in Asia where they manage their foreign exchange, risk management, liquidity, and capital. These MNCs are some of the largest global companies who have a very significant size of their business in Asia.
We want to ensure we are the first call and the trusted advisor with all our clients so we need to make sure we are offering the right content, data, and thought leadership.
What will you do differently in this position? We want to ensure we are the first call and the trusted advisor with all our clients so we need to make sure we are offering the right content, data, and thought leadership. With a global network, Citi is the best placed global bank with the full product set to bank these clients and the key priority is further monetising these competitive advantages. To achieve this, we need to increase both the quality and frequency of the dialogue to ensure we are offering clients the full access to our platform and opportunities we can offer them to support their growth. We will also continue to invest in key talent to make sure we have the best team on the field. What changes are you planning for and what key business philosophies guide you? I plan to listen and learn more about what our team thinks needs to be done differently or better to improve. Success is a team effort and you need to learn from what makes success and also from your failures and be humble — listen and learn from your clients. I am also a firm believer that once you are content, then you are finished. There is always more you can be doing and I will be challenging the team to be the best in all we do. ASIAN BANKING AND FINANCE | December 2017 33
What does digital banking with a human touch look and feel like? We think it means intuitive and easy-touse banking experiences for our clients; banking tools online and on mobile devices that simplify payments and transactions.
Deniz GĂźven Global Head Design and Client Experience Standard Chartered
34 ASIAN BANKING AND FINANCE | December 2017
INTERVIEW
Standard Chartered’s Deniz Güven on why delivering high-tech services is not enough Güven discusses going digital with a human touch and why he wants to introduce humanised solutions.
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eniz Güven was appointed as Standard Chartered’s global head, design and client experience in May 2017. Güven has 17 years of experience in the banking industry, and his most recent role was senior vice-president of digital channels at Garanti, the secondlargest private bank in Turkey. He was in charge of mobile and online banking channels, ATMs, call centres, user experience, and service design. Find out more about Güven in this exclusive interview with Asian Banking and Finance.
necessary to go into a branch to open an account or apply for a product. The third major focus is collaboration with third parties. This is really important for us. We have industry-leading partnerships with ApplePay, Samsung Pay, and AliPay. We plan to roll out new collaboration models that we know will create a lot of value for our customers. We’re talking about new service integrations, and bank-as-a-service model. So for example a new service integration would be something like in Korea, where we use a Samsung eye verification platform to log in and sign off on transactions. This makes us more convenient than other one-time password models. And we’re open to other, new kinds of integrations like this. As part of our BaaS model, we’ll have APIs to work with any startup or organisation. This is going to be a big change because what we want to create is more collaboration. And we do this through our Standard Chartered eXellerator programme, the Bank’s innovation lab located in Singapore.
What makes you excited about your new position? It’s exciting to join a truly global organisation. We’re in 33 diverse markets around the world, in the fastest-growing cities across Asia, Africa, and the Middle East. To have such significant reach internationally — from China to Zimbabwe — and to be excelling in such a wide range of markets is a remarkable thing. It’s challenging enough to lead in one market, so to lead in such a range of markets, with such diverse cultures, makes me very proud. I am a huge enthusiast about new client experience, and this is an interesting time in banking. To maintain our leading position, we need to continue to meet and exceed our clients’ expectations — and their expectations are high and constantly evolving. They want their bank to fit seamlessly into their lives, and Standard Chartered is committed to making sure we do. Our vision is to be a digital bank with a human touch — to start with our clients’ needs, problems, and pain points, and create services and products that address those. That means digital and mobile products and services, and also making sure there’s someone there to help them in their branch, or by phone or chat. Ideally, we’re introducing solutions that our clients didn’t even know they wanted or needed. That’s an exciting challenge. What three goals are you focussed on? I’ve identified three important areas of focus right now. First, creating best-in-class client experiences across all platforms that make our clients want to come back again and again. Infusing that obsession with client experience across every department in every market around the world is to be part of our DNA. That goes for every transaction and every touchpoint — whether in person or online. Digital will obviously be a main focus for now and well into the future. In the last two years, we’ve been discussing migrating from analogue to digital, but what we did was put analogue products and services onto digital platforms. This worked, but to deliver exceptional client experiences, we need to create solutions that are digital-specific, that are native to digital platforms. For example, our SelfBank solution in Korea is a fully digital account opening experience. Through video onboarding, it’s no longer
What are your key business philosophies? My main philosophy is “endeavor without a fear of failure”. One of the great things about the innovation space these days is ownership of failure, and acknowledgment that failure is a necessary part of the process. Digital is a space where we need to try and make mistakes, then try again and again and continuously improve based on what we’ve learned from our failures. That’s how innovation happens.
Our vision is to be a digital bank with a human touch — to start with our clients’ needs, problems, and pain points, and create services and products that address those.
How is digital changing the way retail banks support clients’ changing preferences? Digital should simplify clients’ lives and the way they bank. At Standard Chartered, a theme throughout our organisation is being human, and that extends to digital banking. What does digital banking with a human touch look and feel like? We think it means intuitive and easyto-use banking experiences for our clients; banking tools online and on mobile devices that simplify payments and transactions. It means a bank that’s able to understand and even anticipate our clients’ needs based on data. Our aim is not to deliver high-tech services to our clients. We want to introduce humanised, easy-to-use solutions that happen to leverage the latest and best in digital technology. Standard Chartered recently launched our PayNow service in Singapore. With PayNow, clients can transfer money to friends and family based on a mobile number. This is a good example of how we see banking: digital with a human touch. Customers carry around their friend’s telephone numbers, not their bank account details. There are over 50,000 clients who have signed up for this service in the first few weeks of service, so that certainly confirms how much customers are looking for convenience. ASIAN BANKING AND FINANCE | December 2017 35
After 25 years working with investors around the world, I am of the view that we must consider not just the financial goals and risk tolerance of our clients, but also their culture, their experience, and some aspects of their personality.
Alexis Calla Global Head, Investment Advisory and Strategy Standard Chartered 36 ASIAN BANKING AND FINANCE | December 2017
INTERVIEW
Alexis Calla talks about Standard Chartered’s Personalised Investment Ideas The new tool lets relationship managers provide clients with personalised investment advice instantly.
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lexis Calla is global head, investment advisory and strategy, having joined Standard Chartered Bank in November 2010. Based in Singapore, he is responsible for defining and delivering the bank’s wealth management advisory proposition. Calla recently spearheaded the development of the Personalised Investment Ideas tool, Standard Chartered Bank’s firstin-Asia digital investment advisory tool for its Priority Banking clients. Find out more about it in his exclusive interview with Asian Banking and Finance.
Now that Personalised Investment Ideas is progressively going live in our branches across Singapore, both our RMs and clients see its value in facilitating deeper investment conversations. Clients are telling us that it helps simplify the way we advise them and they appreciate the increased speed of delivery and the easy-to-understand portfolio performance views. What are the common problems clients face nowadays in terms of wealth management and investment strategy? Investors these days face three main challenges: market uncertainty, information overload and lack of time. Markets continue to be volatile with rising geopolitical uncertainty, slowed growth in China and fluctuating commodity prices. They also need to change the way they make their investment decisions, as the rules they are used to applying are based on experiences in very different economic and geopolitical environments and may no longer be relevant. Our Global Market Commentary follows an “open architecture” model designed to filter through the noise: our insights are derived from multiple sources and put through a rigorous process to remove decision bias and provided to clients across our footprint. Additionally, our Markets Views on-the-go capability provides short, digestible, mobile-friendly versions of our insights in 12 countries, helping our time-starved clients stay up to date with the markets.
Please tell us more about the Personalised Investment Ideas tool. What is it and what does it aim to achieve? Our Personalised Investment Ideas tool is part of Standard Chartered’s vision to be “digital with a human touch.” What we have essentially done is combine cutting-edge technology and design thinking with our market expertise to give our affluent, Priority Banking clients an enhanced investing experience. Relationship Managers (RMs) use the tool via our tablet-based Retail Workbench to provide clients with personalised investment advice instantly, enabling them to make informed investment decisions and respond quickly to changes in market conditions. It uses automated, algorithm-based methods to generate investment ideas for each client, based on a range of considerations such as their risk profile and the Bank’s market views. It provides the rationale behind each idea. At the end of an investment conversation, clients receive an automated email summarising our suggestions for buy/sell/hold. They can choose an idea and their RMs will help them access the relevant solutions. We are progressively rolling it out across our branches in Singapore, and will continue to develop the tool based on feedback from clients and our frontline and have a roadmap to build in more functionalities. What were the challenges you encountered in the process of developing this tool? It was a significant undertaking, given the timelines and system integration involved. Within just one year, we needed to digitise the wide range of content developed by our Global Investment Council, the team of experts that comes up with our house views, and harness the various streams of data we have on our clients and wealth management solutions. We had to develop proprietary advanced analytics and ranking algorithms to make it possible to instantly generate investment ideas for each client. Aggregating large data sets from multiple systems and sources was not easy but our partners in the technology team met the challenge very effectively. Successful adoption amongst our frontline teams involved a shift in mindsets and working styles and they had to get their clients comfortable with the new tool.
Now that Personalised Investment Ideas is progressively going live in our branches across Singapore, both our RMs and clients see its value in facilitating deeper investment conversations.
Having worked in the US and Europe, what are some of the best practices you’ve seen in the area of wealth management that you think will also work in Asia? After 25 years working with investors around the world, I am of the view that we must consider not just the financial goals and risk tolerance of our clients, but also their culture, their experience, and some aspects of their personality – all of these play a key role in the way they make decisions. As I mentioned earlier, a key challenge is that the rules investors are used to applying when making decisions – scientists called them heuristics – are based on experiences in a very different economic and geopolitical environment. When I was in the US, much of the personal finance literature at the time was about planning, about a few rules and key steps to follow for investing and most people were very comfortable with them, because it reflected the long term trend of the local financial market and economy. This “one size fits all” approach to investment guidance does not resonate with the local experiences in the markets in Asia. I have a long list of such differences in investment trends and habits across markets, collected over the years. International best practices are often useful but they should not be “copied and pasted,” they should be woven into a locally relevant framework. ASIAN BANKING AND FINANCE | December 2017 37
I believe that bank-fintech collaboration can help transform the bank’s innovation. We have been promoting collaborations with third parties.
Michael Wang Deputy General Manager of E-Finance Centre Bank of China (Hong Kong) 38 ASIAN BANKING AND FINANCE | December 2017
INTERVIEW
Michael Wang of Bank of China (Hong Kong) shares how they collaborate with fintechs He reveals that the bank has been working not only with large enterprises such as Tencent and Alibaba.
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ichael Wang is the deputy general manager of e-finance centre at Bank of China (Hong Kong). Prior to joining the Group, Wang also served as general manager of the financial planning department and Shangbu Sub-branch, Bank of China (Shenzhen Branch). He was previously the deputy general manager of interbank and corporate department, WeBank, Tencent. Wang graduated from Zhongnan University of Economics with a Bachelor’s Degree in International Finance. He completed the MBA in Finance Program (FMBA), jointly offered by The Chinese University of Hong Kong and the Tsinghua University.
customers tend to be more risk-aware. Thus, comparing to those SVF licensed companies, the involvement of banks can give customers more confidence in using mobile payment services. What do you consider as your biggest achievement? I believe that bank-fintech collaboration can help transform the bank’s innovation. We have been promoting collaborations with third parties. We work proactively with them to strengthen efforts on innovation of technologies, products, and channels for the development of digitalisation. Not only large enterprises such as Tencent and Alibaba, the collaborations also include some leading companies in the field of fintech in the niche market. Initiating cross-department project in a large scale is also one of the achievements. For example, to foster the digitalisation of channel (branches) management, it involves many departments to engage in, which include front, middle, and back offices. Hence, driving its progress takes extensive effort, especially when colleagues are under tremendous pressure daily. This takes determination and foresight. BOCHK places a high value on the importance of innovation. In recent years, we have pioneered numbers of innovative technologies’ application in banking, bringing new ideas to fruition. Recently, we have initiated agile development to existing “waterfall” project development approach. Although this approach has just started, effects have already appeared in accelerating the process of a project.
How is the Hong Kong banking sector affected by the big push for digitalisation in the financial services industry? Hong Kong has a well-developed infrastructure, advanced offline service platform, as well as well-established regulatory and supervision framework. The development path in Hong Kong’s banking industry is similar to that of a mature market which focused more on the advancement in system processes and services and improvement in channel management. And we attach high attention to consumer safety and protection of their rights and interests. For example, banks in Hong Kong are racing to apply new technology in biometrics and authentication such as fingerprint, finger vein, soft-token and voice recognition. Besides, banks are fostering intelligentisation of bank branches and services, such as iService, customer service, Chat robot, etc., to provide customers with self-servicing and automated servicing modes. Another example is that many banks have been exploring the application of blockchain and distributed ledger technology in use of mortgage loans and trade finance. Furthermore, SVF licensed payment companies in Hong Kong are also working proactively with banks to achieve a breakthrough in the mobile payment market. Please tell us about your most recent initiatives around digital and mobile banking. We are currently revamping our mobile banking app with more personalised features, and promoted “Smart Branch” to offer an enhanced range of e-services that deliver innovative and personalised banking experience to customers when they visit our branch. We aim to build an omnichannel for seamless multichannel experience. Fostering Mobile Payment Development is also one of our recent initiatives. 2017 can be called as the base year of Mobile Payments for Hong Kong. In 2017, we have collaborated with different third parties to promote local mobile payment usage in Hong Kong. BOCHK does have the edge on mobile payment development as we have a large customer base and cross-border advantage. When compared with mainland customers, Hong Kong
In recent years, we have pioneered numbers of innovative technologies’ application in banking, bringing new ideas to fruition.
What are your goals for the next 12 months? Firstly, we aim to take a market leading position in mobile banking and integrating digitalisation into an omnichannel experience. Smartphones have been adding technology into our daily lives. Hence, to foster better customer experience, it is necessary to tighten digital and physical channels to provide digital end-to-end banking services and offer more functional and user-friendly mobile banking service to our customers. Secondly, to develop substantial products in the mobile internet aspect. It’s rare to see anyone without a smartphone nowadays. In Hong Kong, it leads other Asian countries in mobile internet usage with 96% of smartphone users accessing internet via smartphone. Looking forward, we will work furiously on developing mobile internet products to meet the evolving financial needs of our customers. Thirdly, we will offer breakthrough fintech products for our business development in the Guangdong-Hong Kong-Macao Big Bay Area and Southeast Asia. We would like to leverage fintech product offerings to expand our customer base and serve the financial needs of the nonlocal customers as well. ASIAN BANKING AND FINANCE | December 2017 39
We recently opened up our APIs to a community of web developers to build all of the services a consumer might want in the digital world.
Hermawan Thendean Senior Executive Vice President Bank Central Asia
40 ASIAN BANKING AND FINANCE | December 2017
INTERVIEW
Bank Central Asia’s senior EVP reveals the digital challenges faced by Indonesian banks Hermawan Thendean also talks about how BCA opened its APIs to a community of web developers.
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ermawan Thendean has more than 30 years of experience in the IT industry. He started his career as a programmer analyst, and then went on to work as an IT project manager, group head of application department, group head of network and IT operation venter, completing a full cycle in IT organisational structures. Currently, he is a senior executive vice president in PT Bank Central Asia Tbk based in Jakarta, responsible for the bank’s IT strategic direction and transformation. How is the Indonesian banking sector affected by the big push for digitalisation in the financial services industry? First, around 50% of Indonesia’s population is between 1550 years old. Second, Indonesia is considered to be the third largest smartphone market in Asia Pacific, and that number is expected to grow from 56 million to 92 million in 2019 due to continued price drops in smartphone devices. Third, nearly 50% of Indonesia is expected to be connected to the Internet through smartphones when the government’s Palapa Ring project is completed. The project will provide fast broadband internet to Indonesians in both urban and rural areas. All these facts showed us that Indonesia is enjoying “online experience” where everything can be done conveniently through the Internet, anytime, anywhere. They can order food, hail a taxi, and buy things through their smartphone. So if the restaurant, grocery store, taxi company, and others do not innovate digitally, they will get left behind — including banks. At the same time, more fintech companies offer similar banking services at a much lower price. So the banking landscape in Indonesia is changing now. Most banks, especially big ones, will have to digitally transform to better serve their customers. Most banking services will go through digital transformation and we can already see several banks offer their digital banking products. Physical branches have also changed, with banks showing off their entire digital products and services. There will be less tellers or customer officers in physical branches. Talking to agents has been replaced by chatbots using AI (Artificial Intelligence) or Machine Learning. Just like what we have done lately by introducing VIRA (Virtual Assistant) to the market, where a machine answers our customers’ queries. Please tell us about your most recent digital initiatives. We recently opened up our APIs to a community of web developers to build all of the services a consumer might want in the digital world. For the first phase, we have opened up a good number of APIs — we are developing some more and it will be available soon. This is going to be our future open banking model, because we believe that the future of banking will depend on open APIs. Currently, fintech companies are offering better services and earning
better customer experience than traditional banks whilst banks still have better access to greater capital, customer base, and better knowledge on regulations and security. We believe that by collaborations between banks and fintech companies and by taking advantage of APIs, we can complement each other to significantly enhance our customers’ experience than if we do it separately. In the end, by leveraging open API, banks can grow its customer base as it will add various third parties to personalise and customise its products and services. What are the challenges you encountered in rolling out these initiatives? What are the results? We do not know exactly what APIs our customers need. Of course, we will not turn our entire core banking system into APIs, we need to understand what we wish to sell and expose. So, we have created and promoted several APIs that we think meet our customers’ need. We have held some events for our API users from many developers and fintechs. The event was organised to promote our APIs and have a better understanding of what developers or fintech customers are asking for. From that event, we have learned that developers who use our APIs don’t limit themselves to one — on average they are using three — and we know exactly what APIs they need.
In the end, by leveraging open API, banks can grow its customer base as it will add various third parties to personalise and customise its products and services.
What do you consider as your biggest achievement so far at Bank Central Asia? I decided to make my organisation more engaging and valuable. I have presented my idea to the directors’ committee and they have given me the go-ahead. So I started by analysing all the evaluations over the past few years to understand what people found valuable and where we are losing them. As a result, I was able to change our working environment to become more open and attractive. I changed the way we dress for work, from wearing formal attire into casual. I also added flexible working hours that really encouraged people to stay and work at their best time. I am very proud of the fact that this new environment made my people more engaged, motivated, and valuable to the company. How has the bank progressed under your leadership? Our electronic transaction has increased 15%-18% annually. Only 3% of our transactions happen in physical branches and the rest happen through digital. Compared to last year, transactions on mobile banking has increased significantly from 171 million transactions to 244.8 million where the value has increased from IDR157t (US$11.8b) to IDR215t (US$16.2b). The volume of transactions using internet has increased from 386 million to 476 million, with the corresponding value increasing from IDR1,586t (US$120b) to IDR1,762t (US$133b). ASIAN BANKING AND FINANCE | December 2017 41
The main threat to local banks, amidst the ongoing liberalisation of the banking industry, is the entry of fintechs and ‘all-digital’ foreign banks in the Philippines.
Edwin Bautista President & COO Union Bank of the Philippines 42 ASIAN BANKING AND FINANCE | December 2017
INTERVIEW
Union Bank of the Philippines’ president talks about their three-point digital strategy As part of its pursuit to become a digital bank, Union Bank pioneered ‘selfie banking’ in the country.
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dwin R. Bautista serves as president and chief operating officer of Union Bank of the Philippines, and he has more than 25 years of experience in the banking industry. He will assume the role of chief executive officer effective January 2018. Since joining UnionBank in 1997 as senior vice president, he has headed the Bank’s Transaction Banking, Commercial Banking, Operations and Consumer Finance centres. In 2006, he served as president of International Exchange Bank until its merger with UnionBank. Prior to UnionBank, Bautista worked for leading multinationals such as Citibank, American Express and Procter & Gamble. In this exclusive interview with Asian Banking and Finance, Bautista talks about UnionBank’s digital transformation and how he ensures that the Bank completes the journey without anyone being left behind. How is the Philippine banking sector affected by the big push for digitalisation in the financial services industry across the region? Digitisation has led to dramatic changes in financial services throughout the region. The rise of new technologies and competitors has prompted financial institutions, including Philippine banks, to rethink many of their strategies. From our perspective, the main threat to local banks, amidst the ongoing liberalisation of the banking industry, is the entry of fintechs and ‘all-digital’ foreign banks in the Philippines. Thus, here at UnionBank, we are pursuing a three-point strategy to digitise our operations and bring us onto a level playing field with these new players. The first plan is to digitise the whole Bank. The idea is we want to be fully digital as fast as possible in terms of operations and processes. The second plan is to launch UnionBank’s own ‘digital bank’ by using the new and improved EON brand. EON will drive to be the Philippines’ first in many userexperience areas. An example of this is it’s K.Y.C. by selfie feature – a first in Asia – which we have coined as ‘EON Selfie-Banking.’ By so doing, we believe this will help diminish the ‘wow factor’ that foreign all-digital banks can otherwise bring in. The third plan is to engage with fintechs as partners, instead of treating them as competitors. Especially when they get bigger and scale-up, they realise that they need a partner bank to assist them or else their costs can easily get out of hand. Here is where we can step in as their ‘backroom,’ given our ready infrastructure to handle this scale. Please tell us about your most recent initiatives around digital and mobile banking. We launched the new UnionBank Online mobile app last August, which allows our clients to bank from the comforts
of their home, office, or wherever they are. Signing up would no longer take days but only seconds. Our clients can use any of their UnionBank accounts to sign up, and there’s no need to visit a branch or ATM to activate their account. Also, our clients can now access and manage their deposit accounts, credit cards, loans, and investments through one online account. They can also transfer funds, pay bills, schedule transactions in advance, and purchase airtime load. They can even customise their online account. They can manage limits, one-time passwords, arrange accounts on their dashboard or hide accounts that they don’t want to see. They can even upload a profile picture. UnionBank Online is more than an improvement to the look and experience of our current banking facilities. It has a suite of features that are not seen in our competitors. Enhancements to UnionBank Online for the succeeding months will enable social payments and personal financial management tools. This is certainly an essential step in our move to become a digital bank. What are your key business philosophies? Everything starts and ends with the customer. Excellent customer service will always be the key to a company’s growth and stability. This is precisely the reason why here at UnionBank, we constantly seek ways to innovate and improve our products and services to ensure that we offer nothing but the best to our clients. Of course, we also make sure that we have the best players to execute our strategy. May I point out that we do take care of our people inasmuch as we take care of our customers. In fact, amidst the digital transformation that the bank is undertaking, we will do our best so that no one gets left behind. We are ‘future-proofing’ our people, meaning, we are preparing them in such a way that they can move seamlessly from a job that is disappearing into a new job that is emerging. What are your goals for the next 12 months? Now that we are in the second half of our FOCUS 2020 UnionBank “decade-long” roadmap, we have already gained significant Online is traction in achieving our strategy of shifting our business more than an model towards retail businesses and recurring income. improvement After all, a key “FOCUS 2020” objective is to become a to the look and great retail bank. experience of We have set ambitious targets in terms of market our current penetration. The ultimate gauge for us to say that we have banking reached this objective is we are able to bring or extend facilities. It financial services to the unbanked and underbanked has a suite Filipinos who have a “smart” mobile device. We believe that of features just “opening up branches” is not the solution to this goal, that are not which is why part of our digital transformation strategy is seen in our to provide the right products and channels needed by the competitors. unbanked and underbanked segments. ASIAN BANKING AND FINANCE | December 2017 43
Country report: HONG KONG
A spokesman from BOCHK said Hong Kong’s offline payment market has been highly developed
How systemic drawbacks drag Hong Kong banks in the heated digitalisation race Legacy systems, regulatory challenges, and exposure to the mainland are taking a toll on banks’ operations.
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he Bank of China (Hong Kong)-WeChat Pay collaboration enables customers to bind their BOCHK credit cards with WeChat Pay to conduct payments or make fund transfers to friends. BOCHK clients can also use WeChat to communicate with a chatbot that can provide quick answers to customers’ questions as well as a step-by-step guidance through customer service providers. China dominates Asia-Pacific investments
Source: Accenture
44 ASIAN BANKING AND FINANCE | December 2017
This collaboration was BOCHK’s response to a much anticipated need for Hong Kong banks to refresh the front-end of the banking experience. The BOCHK-WeChat Pay collaboration aims to promote local payment usage in Hong Kong, where the mobile payment market is still in its early stages, and which has lagged far behind China and nearby financial hubs in terms of digital innovations. However, as Hong Kong banks such as BOCHK innovate their services further, their back-ends remain stuck in a mire of systemic challenges and complex legacy systems. Despite the introduction of mobile apps and the rise in the number of online solutions, Hong Kong banks still fall behind in terms of straight-through processing in services such as credit card applications. Alicia Garcia Herrero, chief economist, Natixis, said that to
prepare for the digital era on a sustainable basis, Hong Kong banks could use a shortcut by starting from scratch with a parallel bank, but with the in-house or client knowledge intact. Banks can then move to developing omni-channel sales and service propositions, migrating services to digital channels, and leveraging new technologies to improve the customer experience. Fintech investments The city’s excessive exposure to mainland China has also made things a bit more complex, with the mainland receiving way more investments in fintech than Hong Kong. Garcia Herrero said that over the last year, Hong Kong received a measly 1.8% of the total fintech investment in China, ranking it second last in terms of access to capital amongst seven global fintech centres around the world. Whilst
Country report: HONG KONG fintech investment in the UK has reached around £524m (US$694m), investment in Hong Kong has been slow to catch up at just £46m (US$61m). Garcia Herrero lamented that as a result of slow investments and huge legacy systems in Hong Kong’s finance industry, the current fintech workforce of just 8,000 employees ranks last amongst the world’s top financial centres. Hong Kong also has a very low entrepreneurship culture, ranking 32nd in the 2017 Global Entrepreneurship Index, whereas the UK and Singapore ranked 8th and 24th, respectively. “System renewal is on every bank’s agenda, and legacy systems and processes put a real brake on a bank’s ability to adapt and change quickly. However, in our experience many benefits are possible that do not require immediate systems improvements. Changing staff behaviours to be more customer and digitally oriented, eliminating redundant legacy policies, and redesigning processes can all have significant impact whilst investment in digital building capabilities is underway. The prize of pulling these levers is a triple play of customer experience improvement, employee experience improvement and financial benefits,” said Richard Hatherall, partner, Bain & Company. The bigger picture The world of mobile payments has long seen Hong Kong as a laggard, particularly when compared to mainland China, which continues to experience an outpouring of fintech investments. Michael Wang, deputy general manager of e-finance centre, Bank of China (Hong Kong), said that Hong Kong’s disadvantage can be attributed to differences in business environments and people’s payment habits. Consumers in the mainland have been quick to respond to the rise in smartphones and consequently, the rise in online shopping payments during the last decade. “Hong Kong’s offline payment market has been highly developed, in which people can always buy what they want easily through the contactless smart card system. A
process of change in the payment habits of Hong Kong people is needed to foster the growth of mobile payments. With the efforts of different parties, together with the recent changes in customer payment habits, the mobile payment market of Hong Kong can be expected to grow further,” Wang added. Despite distinct differences, whatever happens to China’s banking and finance industry is immediately felt in nearby Hong Kong. Chua Han Teng, head of Asia country risk, BMI Research, said that the loan books of Hong Kong banks are highly exposed to mainland China, and they are therefore vulnerable to a slowdown in the Chinese economy. In order to reduce risks, Hong Kong banks are expected to slow lending towards less profitable state-owned enterprises versus private companies. “Hong Kong banks are also exposed to the overvalued domestic housing market, and a significant negative price shock would undermine asset quality. Hong Kong regulators are wary of financial instability, and they have been putting in place macro-prudential measures to slow property lending,” added Chua. Top risks for banks Garcia agreed that the top three risks for Hong Kong banks are excessive exposure to Chinese corporates, a large correction in Hong Kong’s real estate market, and pressures on the Hong Kong dollar. She further noted that whilst appreciation pressures have eased recently, the Hong Kong Monetary Authority cannot keep on accumulating reserves without revaluing the currency. According to her, this move could open Pandora’s box for the HKD. In the midst of all these risks, the Hong Kong economy at present does not seem to be in the doldrums, as the first half of this year saw the strongest showing of loan growth since 2011. Asheefa Sarangi, analyst, CLSA noted that financial concerns has been the biggest key sector driving demand, however the coming months are expected to slow down with the recent property measures forwarded by HKMA.
The bigger picture may look mixed, but Hong Kong has made several moves to ensure that progress happens, albeit slowly.
Alicia Garcia Herrero
Richard Hatherall
Chua Han Teng
Michael Wang
All hope is not lost Speedy developments in the UK and Singapore have prompted Hong Kong to implement a fintech sandbox to provide appropriate regulatory support by relaxing specific legal and regulatory requirements for fintechs. Garcia Herrero said that in order for this move to work, Hong Kong’s regulation regime must be simpler, clearer, and more transparent in order to attract new fintechs. “Hong Kong should increase its cooperation with the Chinese government on fintech matters to have a mutual regime and better access to each other’s market. Hong Kong should also increase its taxation policy incentives to catch up with UK and Singapore initiatives,” Garcia Herrero added. Amidst threats from nontraditional competitors, banks continue to find ways through the regulatory labyrinth in order to meet the demands and expectations of their evolving clientele. At the present, Hatherall said that banks are exploring how they can leverage new technologies like big data and advanced analytics to equip an increasingly digitally-enabled frontline. “In parallel they are looking to understand the intentions of the ‘big techs’ in terms of financial services. They have huge customer bases, are nimble and are increasingly building trust with customers. In China many ‘big techs’ also have financial services arms, the banks’ expectation is that some will look to Hong Kong as an attractive market,” Hatherall added.
Hong Kong GDP annual growth rate
Source: tradingeconomics.com, Census and Statistics Department, Hong Kong
ASIAN BANKING AND FINANCE | December 2017 45
Vendor View: disruptive technologies
Banks take a page from the cryptocurrency playbook
Here are today’s eight most disruptive banking technologies to watch out for Tech experts reveal the latest banking innovations that give us a glimpse at the future of finance.
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n an effort to help SMEs manage their finances, Singaporean bank DBS recently partnered with global cloud accounting platform Xero to allow small businesses to instantly connect their DBS business banking accounts to the platform. They simply need to set up their DBS bank account in Xero, then authorise the connection between the two. Once the bank feed is set up, the client’s DBS account transactions show up on the platform every business day ready for quick reconciliation. Alex Campbell, managing director for Asia at global cloud accounting platform Xero, noted this critical change in how banks function, saying that “banks have historically operated as closed systems, but there has been a significant increase in the number of banks opening up to collaborate with technology companies.” Banks are behaving more like 46 ASIAN BANKING AND FINANCE | December 2017
tech-savvy stores where customers can easily open accounts and make transfer payments efficiently through technology with the help of a concierge, according to David Haynes, head of KYC, AML, and financial crimes solutions APAC at LexisNexis Risk Solutions. However, banks are still struggling with regulatory requirements, and one way of efficiently meeting these is through a shared utility, or in other words a consortium of banks, which can increase efficiency through standardised KYC and scrutinise big data inputted from a range of institutions. “Asia Pacific authorities are backing this idea, even to the extent of utilising government technology infrastructure and databases. Indonesia recently opened its national ID card database up to financial institutions; India is considering a similar move with its ‘Aadhar’ data; and Singapore has
Banks have historically operated as closed systems, but there has been a significant increase in the number of banks opening up to collaborate with technology companies.
trialed a national KYC utility based on government-operated digital identity service MyInfo,” added Haynes. In this article, we will look at some of the most noteworthy technological innovations used by banks. Real-time payment methods According to a global survey from ACI Worldwide and Ovum around 90% of all Asian banks are putting their efforts toward providing customers a better and smoother end-user payment experience. Moreover, 66% of banks included in the study say that immediate payment schemes are their most important revenue drivers, whilst 61% share that real-time payments enhances their value proposition for customers. “Customer demand for modern real-time payment methods is driving banks’ investment priorities
Vendor View: disruptive technologies to focus on immediate payments and open API infrastructures that support responsive and adaptable payment solutions,” Rachel Hunt, director of marketing APAC of ACI Worldwide, said. “Those financial institutions that proactively shape strategies around real-time payments and open APIs will reap the benefits when it comes to both customer experience and revenue, whilst ensuring they are ready for the new payment ecosystem,” she added. Cognitive technologies and the mobile-first experience It has to be pointed out that mobile isn’t just another means of accessing a bank’s financial services; it’s an experience, or to put it simply — with the case of the predominantly young, tech-savvy Southeast Asian population—a way of life. Yaser Alzubaidi, Avaya Engagement Solutions sales lead for Asia Pacific, Middle East, and Africa, said that the integration of biometric technologies such as voice authentication, fingerprint, and facial recognition is a challenge that banks are already addressing for their mobile offerings. “Mobile financial services are becoming more context-aware and going beyond replacing the basics you can do on a web site. Whilst the mobile, financial services customer experience has been cumbersome and time-consuming with passwords, codes, and security questions, advances in context-aware computing will enable the mobile customer experience to be on par with other mobile experiences,” Alzubaidi said. Imad Abou-Haidar, APAC managing director of Finastra, added that though cognitive technology usage will be modest in 2017, “ecosystem players are continuing to work in increasingly collaborative ways to harness the enormous opportunities afforded by these.” Blockchain Banks are also taking a page from the cryptocurrency playbook, investing in blockchain deployments to address security and fraud concerns. Alzubaidi believes that this will revolutionise the payments industry, explaining that “this could
potentially remove the limiting factor of time zone differences, resulting in a payment system that allows participants to transact in different global markets round-the-clock.” Alex Campbell
Rachel Hunt
Yaser Alzubaidi
Imad Abou-Haidar
Irene Xu
Richard McLean
Michael Au
Anna Gong
AI and robo advisory services Advances in technology also allows them to improve upon machine learning systems which drives AI, robo advisors, and chatbots. Irene Xu, SAS Asia Pacific principal industry consultant for FSI, noted that some providers already have plans to implement chatbots “that can provide answers to specific questions, such as providing details of the last transaction, and even giving some basic financial advice.” Automated chatbots will also allow banks to address customer issues in a timelier manner, freeing support agents for tasks that require a more human touch. Internet of Things The conversation involving AI and machine learning inevitably brings the Internet of Things to the table, specifically how banks can use big data for greater insights into what specific products and services customers currently or might need. IoT-enabled technology also provides more telling data into consumer behaviour, on top of improving banking efficiency and productivity. “With automated teller machines (ATMs), for example, banks can easily analyse which areas have the highest foot traffic. A deeper analysis of this data from ATMs can enable banks to provide location-based offers and services to their customers in real time,” says Richard McLean, SAP regional CFO for Asia Pacific Japan. “Using data and location-driven insights, banks can differentiate themselves by anticipating customer needs and offer advice, products, and solutions to help customers make smart and financially-sound decisions instantaneously.” Cloud adoption The cloud is also one of the current buzzwords when it comes to banking technologies, as cloud computing enables institutions to continuously refine customer experiences whilst
reducing implementation risks. Moreover, Abou-Haidar further noted that “banks are looking more and more at opening platform solutions in the cloud to support this vision, and foster innovation within the industry.” All-in-one kiosks On top of mobile and online experiences, banks are also innovating the customer journey at their physical branches. According to Michael Au, Gemalto Asia banking and payment president, banks are rapidly equipping themselves with next-generation all-in-one kiosks or self-service machines that automates traditional banking services like biometric-based ID verification; securely opening a new account; personalising and printing a banking card; and requesting for a new PIN, amongst others. These machines allow customers to quickly conduct simple transactions without the need to queue up with a teller. “With the kiosks, banks assistants can concentrate on upselling premium, high-value products and services. The portable kiosks can be positioned either inside a physical branch, or in locations with high foot traffic, like a shopping mall,” he said. Regulation dictates innovation Whilst all these breakthroughs are very much welcome, regulatory measures are expected to be likewise modernised to both protect clients and encourage further banking innovations. Anna Gong, CEO of Perx, also predicts that future regulations will make banks and their customers release data to third parties to level the playing field for challengers such as fintech companies. “We see banks having a more tech-oriented approach by having more open architecture where third party solutions could connect and integrate more easily with their systems. That’s the only way to scale capabilities and serve the digitally savvy and more demanding next gen customers,” concluded Gong. And in such a situation, where innovation drives the industry, everybody — banks, individuals, and businesses — wins. ASIAN BANKING AND FINANCE | December 2017 47
SECTOR REPORT 1: Business Banking markets, global banks will be playing a larger advisory role on cross-border trade and foreign product regulations. “As SMEs venture into international trading, a growing number face new challenges and are exposed to new risks, such as forex volatility,” he said. “Because they’re small, they typically don’t have dedicated departments to focus on these issues. Global banks have a key role to play in this because they can connect SMEs to global opportunities and share their expertise to help these organisations get to where they want to be.”
DBS launched an online SME community called DBS BusinessClass x
What fintech solutions do Asian banks offer to SMEs? For banks to truly resolve the SMEs’ pain points, they will have to do more than just offer conventional banking products and services.
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he digitisation drive doesn’t just stop with banks, as Singapore’s UOB has learned with its partnership with Google to train customers how to use the internet and other tools to enhance exports. This programme can be accessed by anyone at goglobal. withgoogle.com and consists of online learning modules and a series of full day workshops for customers to learn the arts of online selling. There are also certification courses run for business in digital marketing, which presumably focus on how to use Google’s suite of products, but which also helps exporters. Users will also find customer success stories from local companies like fashion retailer Benjamin Barker and jewelry retailer RSIS. “The Google Go Global programme has empowered us with training and tools required to explore digital advertising in a lowrisk and collaborative environment. The training classes have enabled us to go beyond just an understanding of the tools Google offers – we are now equipped with in-house 48 ASIAN BANKING AND FINANCE | December 2017
Mervyn Koh
Rajeev Chalisgaonkar
Alexander Lau
capabilities to create, operate and optimise campaigns without having to outsource. By carefully matching ad placements to our business objectives, we were able to reach out to potential customers in Australia from the comfort of our office in Singapore. This was a great source of support for our Australian marketing team as customer traffic was driven to both our online and physical stores,” noted Benjamin Barker. Mervyn Koh, managing director and country head of business banking, Singapore at UOB said Google Go Global was expressly designed to help SMEs understand international trade and industry best practices, and show them how to incorporate their learnings to their own business models. To ensure customers received expert advisory lessons, UOB senior bankers and economists shared their insights at workshops and engaged SME executives. Rajeev Chalisgaonkar, global head, business banking at Standard Chartered, said with more Asian SMEs venturing into new overseas
SMEs’ pain points Alexander Lau, executive director and digital innovation head of institutional banking group at DBS Bank (Hong Kong), said SMEs share three common pain points in their ability to scale up their business across other markets. First, SMEs find it hard to identify reliable business partners in the new market. Second, they might not be able to fully understand the opportunities and threats of the new technology relevant to their industry. And third, they have difficulty obtaining market insights and the latest trends from knowledgeable industry experts. “For banks to truly resolve these customer pain points, they will have to do more than just offering conventional banking products and services,” said Lau, noting that the answer of DBS has been to launch an online SME community called DBS BusinessClass. The DBS BusinessClass Programme connects member SMEs to industry experts, investors and fellow entrepreneurs to guide their digital and international growth. They can seek advice through private online chat that advisors can immediately answer through a dedicated mobile app. DBS BusinessClass members also receive exclusive access to roundtables, seminars and talks, and receive a curated feed of news and articles to keep them abreast of key digital and business trends.
SECTOR REPORT 1: Business Banking In Australia, Westpac has been focused on connecting their SME clients to trade finance solutions that can optimise working capital and mitigate risks as they tap into new markets overseas. And since some firms find it confusing to navigate free trade agreements and source products from other jurisdictions, the bank’s advisors also step in to provide advice and bespoke solutions, said Adnan Ghani, global head of trade finance at Westpac Institutional Bank. Real-time response SMEs also can no longer afford to be one step behind their bigger counterparts, which has increased the demand for real-time banking information delivery and transaction processing. Amongst the new technologies, mobile platforms and blockchain stand out in this regard in how they quicken data access and transactions, respectively, whilst maintaining strict transaction security. Having real-time information to support decision-making is very important for Asian SMEs, therefore banks now need to provide online and mobile banking platforms that support real-time information on multi-account and multi-currency, said Thomas Low, director at OCBC NISP. “Business banking customers require similar experiences like the retail customer. They want digital experiences that are easy to use,” he said. “They are able to see an up-to-date cash positioning for all accounts thus allowing them to make right decisions to hold certain currency
balances to avoid unnecessary conversion from payables and receivables.” In Thailand, Krungsri has launched the first real-time international funds transfer service based on the blockchain technology. International funds transfer transactions, which took two to three days prior, could be completed in a matter of seconds, a boon for SMEs that deal with critical cross-border transactions. “This solution could support both buyers and sellers throughout the entire supply chain of business from upstream to downstream” said Thakorn Piyapan, head of Krungsri consumer and head of digital banking and innovation at Bank of Ayudhya PCL (Krungsri). Efficient and compliant Ease and efficiency of doing business processes are also becoming a core concern for SMEs, and banks are addressing it through a slew of fintech-powered upgrades. But beyond the saved hours and lower operational costs, SMEs that embrace digitisation also lessen their risk of compliance failure - an increasingly vital business boon given mounting regulations. Thailand’s Kasikornbank has partnered with IBM to develop OriginCert, a system that will certify letters of guarantee (LG) and speed up issuance for businesses, and the blockchain technology innovation is helping firms fight fraud risk. “From a business perspective, OriginCert has brought tremendous benefits
Westpac is focused on connecting their SME clients to right trade finance solutions
Thomas Low
Thakorn Piyapan
Somkid Jiranuntarat
Sayam Prasitsirigul
Raghavan Seetharaman
in terms of cost savings associated with digitising LG documents, which were all paper-based in the past. All costs involving bank’s branch to approve and issue paper-based LG, logistics to deliver the paper to customers, and store room amount to more than tens of millions per year,” said Somkid Jiranuntarat, vice chairman, business-technology group at Kasikornbank. “However, the true risks of paper-based document lie not only in operations and logistics, but the fraudulent activities associating with faking paper documents. Financial costs from fraud cases amount to much bigger loss than the operational costs alone, not including reputational risk for the bank.” Another emerging banking solution is reverse factoring, which Sayam Prasitsirigul, head of SME Banking Group at Bank of Ayudhya PCL (Krungsri), said is an effective way to reduce fraud and operating costs by eliminating manual processing steps. “This reverse factoring solution can be enhanced by using trade credit insurance to reduce risks of payment. We can also minimise operational risk through digitalisation by using electronic platforms to download receivables from buyers to SMEs so that they can select receivables to get financing from the bank.” In some countries like Qatar, the challenges of SMEs revolve less on optimisation and more on the sheer lack of access to capital, often due to lack of collateral security and no financial track record. “These factors are an impediment in the growth path of SMEs and prevent them from expanding their scale of operations,” said Raghavan Seetharaman, CEO of Doha Bank. But he said that Qatar Development Bank has launched the AlDhameen programme which assists SMEs grow in size and scale over a period of time. Commercial banks are encouraged to lend financial support to Qatari SMEs through the guarantee of 75% - 85% of the principal outstanding to new as well as existing entities. ASIAN BANKING AND FINANCE | December 2017 49
SECTOR REPORT 2: Islamic banking
Forging stronger relationships with conventional banks, governments, and fintechs is key
Why Islamic banks are seeking synergies Islamic banks are grappling with digitalisation which has taken conventional banks by storm.
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ention the phrase “financial technology disruption” and most banks will wince, scarred as they are over the encroachment of fintech startups on their markets and profits. But some Asian Islamic banks seem to be taking the trend in stride, following the guidance of their mother banks in Indonesia and experimenting with sandboxes in in Malaysia. There seems to be a realisation that Islamic banking cannot survive in a bubble amidst sweeping changes in technology and regulatory regime, and must start forging stronger relationships with conventional banks, technology firms, governments as well as key consumer groups like SMEs. This synergistic urge is on full display as Islamic banks grapple with digitalisation, which has taken conventional banks by storm. Andrae Krishnawan, director at OCBC NISP, said that most
50 ASIAN BANKING AND FINANCE | December 2017
Syed Abdull Aziz
Andrae Krishnawan
of the Islamic banking entities in Indonesia are closely related to their mother banks, so many have adopted a coping strategies of learning from the lessons of their mother banks and finding the synergy to create solutions together. “Since over the past years digitalisation has become a hot issue in conventional banks, and most of the banks are being so adaptive regarding the market demand in digitalisation, so is the Islamic banking industry which only follows what happens in their mother banks,” said Krishnawan. He said the government, in supporting Islamic banks, can do more in this regard through the creation of better incentives for subsidiaries to use their mother banks’ infrastructure. This will have an effect of reducing investment cost for Shariah banking, given the almost ubiquitous setup of having mother banks that support operations.
Last year, Malaysian central bank Bank Negara Malaysia launched fintech sandboxes which have been viewed as a critical catalyst for the development of fintech products and services in the country. It created a Financial Technology Regulatory Sandbox Framework document that lays out how fintech partners can deploy and test their innovations in a live environment, but still confined within structured parameters and timeframes. “Advances in fintech have led to the introduction of new business models and solutions that have contributed to improvements in customer value and experience as well as financial institutions’ efficiency and risk management,” said Bank Negara. “The bank seeks to provide a regulatory environment that is conducive for the deployment of fintech. This includes reviewing and adapting regulatory requirements or procedures that may
SECTOR REPORT 2: Islamic banking unintentionally inhibit innovation or render them non-viable.” Bank Negara has clarified though that whilst a sandbox serves as a protected pen for frontier-pushing fintech firms that are developing novel solutions, it is not meant to circumvent existing laws and regulations. When a product, service or solution that is not suitable to be tested in sandbox, Bank Negara takes on the approach that it calls ‘Informal Steer’ where it provides guidance and advice to fintech companies and financial institutions so they can modify their proposed business models or solutions to align with prevailing laws and regulations. Fintech sandboxes Syed Abdull Aziz Syed Kechik, CEO of OCBC Al-Amin Bank Berhad, said these sandboxes attract fintech companies that have an interest in pursuing a trial period in a relaxed regulatory environment. He also pointed out that Islamic banks received another breakthrough when the Securities Commission Malaysia published its Digital Investment Management framework in May. The framework sets out licensing and conduct requirements for the offering of automated discretionary portfolio management services, and has been seen by the industry as a key move towards fostering more Shariah-compliant robo advisory platforms. As Islamic banks begin to forge a cooperative path forward with disruptive fintech technology and startups, Syed Aziz said the ultimate winner will be the consumer. “From the Islamic finance consumer perspective, fintech disruptions are largely positive,” he said. “Latest technology embraced by fintech leveraging on Internet, mobile devices and social media integrations make financial transactions more automated, user-friendly and more convenient, thus providing a superior customer experience. With more options, consumers enjoy more competitive financial services cost.”
But even as regulations help Islamic banks cope with the global fintech revolution, additional supportive measures are needed to spur growth in a time of lower oil prices since some of the largest markets for Islamic finance are oil-exporting economies, according to banking executives. The International Energy Agency noted export revenues in OPEC countries fell to an estimated US$450b in 2016, down from US$1.2t in 2012, leading to ‘major budgetary strains.’ “The current economic situation in core Islamic finance markets and depreciation of local currencies has weighed on the industry’s performance in 2016 and 2017. The lack of product and market integration constrains growth, as does the absence of standardised Shariah interpretation and legal documentation,” said Syed Aziz. Three gamechangers Syed Aziz cited three possible gamechangers for Islamic banks seeking growth in the medium term: Integration, standardisation, and higher interest in responsible financing. Of these, standardisation holds great potential to support expansion. “Having standardised Shariah compliance and legal documentation, as well as more information for prospective issuers, could help the market move forward. Shariah is still interpreted in different ways across the various Islamic finance markets,” he said. “However, we believe that the gaps are getting narrower and the industry appears to be going in the right direction.” In Indonesia, Krishnawan said several incentives have been issued to boost the development of Islamic banking in Indonesia, including product codification. “It gives Shariah Banking equality in terms of product offering and gives customers more options to choose Shariah or conventional product usage.” But he said more measures are needed to boost the growth potential of Islamic banks in Indonesia, which he believes lies in key core sectors such as retail banking and SMEs, and
Three possible gamechangers for Islamic banks seeking growth in the medium term: Integration, standardisation, and higher interest in responsible financing.
the fast-expanding infrastructure industry. “Nowadays in Indonesia, infrastructure is becoming the sector that the government is focusing on. We believe that if Islamic banking are given the opportunities to join on those projects it will become our chance to boost up Islamic banking portfolio in Indonesia,” he said. “The other sectors that should be our basic fundamental in Indonesia are retail banking and SME banking. The demographic bonus which is going to be happening in 2020 until 2035 will be to our advantage,” he added. Pursuing an SME growth strategy, RHB Islamic Bank Berhad inked a strategic partnership with Credit Guarantee Corporation in August to become the first bank in Indonesia to provide Wholesale Guarantee Islamic (WG-i) Bumi, a scheme for Bumiputera SMEs. The bank said 72 existing Islamic Bumiputera SME customers under the SME portfolio will benefit from this scheme. “We understand the challenges faced by SMEs in expanding and growing their businesses,” said Dato’ Adissadikin Ali, managing director of RHB Islamic Bank Berhad. “As such today’s partnership with CGC is testament to RHB’s commitment in creating synergy in the financial services sector to provide our customers with better options and facilities that are sustainable.” Despite the encouraging demographics of Indonesia, Krishnawan argued that Islamic banking requires government to ramp up support in the form of incentives and assigning exclusive markets so they can better tap into the potential of these key sectors.
RHB is pursuing an SME growth strategy
ASIAN BANKING AND FINANCE | December 2017 51
SECTOR REPORT 3: Forex
The rise of new FX trading platforms will hurt conventional banks
How real-time trading rocks the Asian forex boat Bank Mandiri, Doha Bank, and UOB share their insights on how new platforms and technologies are changing the way they do forex.
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hen peer-to-peer international foreign currency and payments platform Midpoint collaborated with online accounting software company Xero, it was a boon for firms that needed to quickly pay their international suppliers in foreign currencies, but it was another blow to banks that until recent years were the preferred choice for settling international invoices. Midpoint launched an add-on application that provides a “Pay Now” button included in the email request which facilitates the customer using Midpoint to pay a supplier requesting payment. A firm simply has to create a Midpoint account, authorise Midpoint to access Xero data, click “Pay Now” to pay the invoice, and the system finds a market match that often results in better foreign 52 ASIAN BANKING AND FINANCE | December 2017
The innovation will hurt conventional banks if they don’t embrace their financial technologies since the expansion of FX mobile trading platform is rapidly growing.
exchange (FX) rates and a fraction of the fees compared to traditional bank methods. But aside from promising lower costs, these sleek new FX trading platforms are further enhancing their convenience and speed. The Midpoint-Xero collaboration, for example, enables an SME user to automatically notify suppliers that they have received payment and update accounts instantaneously after cross-border bills are settled. This promise of more seamless, mobile-accessible, low-cost FX transactions has helped the likes of Midpoint, TradeFintech and TransferWise grow in the past year and may be putting incumbent banks on the defensive, said Farida Thamrin, senior vice president of treasury group at Bank Mandiri. “The fintech innovation in the past year has been able to eliminate
those redundant processes and provide customers with realtime competitive price and faster settlement process,” she said, on what has driven the growth of new FX trading platforms, especially in the SME segment. TransferWise has taken on an aggressive expansion strategy, including hiring hundreds of new staff, setting up new offices in key markets, and launching a major advertising campaign. “White labelling and real-time trading platform have transformed the FX market in terms of seamless transaction execution capabilities, processing, database management and compliance,” said Raghavan Seetharaman, CEO of Doha Bank. White labelling has served to encourage new entrants by allowing them to acquire the use of technology and circumvent the cost of developing their own. But their success is hinged on finding a good partner and developing a strong sales channel to deliver their carefully selected list of FX products. “The innovation will hurt conventional banks if they
SECTOR REPORT 3: Forex don’t embrace their financial technologies since the expansion of FX mobile trading platform is rapidly growing,” said Thamrin. “Therefore, banks should raise the bar in terms of price competitiveness using both online and mobile trading platform reliabilities using advanced technologies.” Thamrin said the industry is also moving towards a battle of mobile apps, which are becoming more widely in use by customers that want to conduct their transactions anytime and anywhere. It is in these areas that incumbent banks must start to flex their relatively bigger financial muscles to thwart the advance of newer players. Realising the importance of the mobile app in currency exchange, South Korean Shinhan Bank announced it will start accepting currency exchange orders in Japan through Line Pay, the mobile payment platform of the namesake messaging app, the most popular with an estimated 50 million Japanese users by the end of the year, according to an eMarketer forecast. Shinhan Bank made sure to make the mobile app service easy to use: A customer only needs to enter the currency and amount, and choose where and when to pick up the currency, with convenient locations such as the Narita and Haneda airports available. The currency can even be delivered at the customer’s doorstep. Real-time FX info for SMEs Singaporean bank UOB has introduced UOB Business, a mobile app that enables SMEs to manage their currency exposure and risk more effectively. Its notable features include live updates on FX rates and global market insights, and is available in Singapore, Malaysia and Thailand. “The app was launched in response to the growing demand from SMEs seeking real-time FX information as their operations increasingly cross borders,” said Mervyn Koh, managing director and country head of
business banking, Singapore at UOB. “Through the app, users can set alerts for when the price of a currency reaches a specified level. When the alert is triggered, they can connect with UOB’s FX specialists, who will then provide advice on FX solutions or help execute trades.” Embattled blockchain Blockchain has also been making waves in FX trading because what see as revolutionary potential to improve efficiency and speed in transactions, but Thamrin said it is currently facing an uphill battle in regulation. “The growth of the blockchain with its independency, transparency and vulnerability is surely appealing as an alternative solution in the current forex market system,” said Thamrin. “However, we don’t see that the blockchain becoming integral to the future of FX trading process yet.” “This is due to the characteristic of the blockchain which is publicly available, but lack of control by certain regulator. If we put our perspective in the central government’s or central bank’s point of view, it will be almost impossible to trace the movement of fund, purpose of transaction, tax, and so on,” she said. In some developing countries, blockchain technology is not regulated yet, prompting critics to raise concerns on transaction privacy and security. But in developed countries, big financial institutions are starting to test the waters. Seetharaman said blockchain technology is currently used mostly by global multinational corporations providing FX liquidity and database management, as well as major banks like JP Morgan. Earlier this year, Goldman Sachs reportedly filed its first blockchainrelated patent pertaining to a distributed ledger that can process faster, almost real-time FX trades. This is in contrast with traditional FX trades that can take up to days to complete, tying up critical capital and raising trading costs. But apart from handling
the pressure of fintech rivals in real-time FX trading and keeping up with blockchain technology developments, Asian banks also need to worry about rising protectionism and regulatory compliance. Raghavan Seetharaman
Farida Thamrin
Growth drivers for FX Thamrin noted that the US foreign policies under the Trump administration tend to protect the domestic market and labour, increasing the likelihood of increased barriers on China’s export to US and exit from critical transpacific partnerships. These bode grim tidings for Asian economies and, in turn, profitable FX activity in the region. “The impact for the rest of the world will be in the form of limited global trade improvement,” she said. “Low export will bring low economic growth. In Asian countries, the impact will be more significant since they heavily rely on exports especially on commodity exports.” She cited Indonesia, which had to deal with lower commodity prices driving lower economic growth in the past five years. Indonesia’s economy experienced a bit of a recovery this year, partly because of better commodity prices. Booming growth in Asian emerging markets had been a driving force of FX trading, and weakness could further decelerate trading volumes that have fallen recently. Seetharaman, meanwhile, said US Dodd-Frank regulations could to be an effective damper on the Asian OTC market and “could potentially impact OTC swaps by providing stringent comprehensive framework for the regulation of the OTC swaps markets.”
The UOB Business app provides real-time FX info to SMEs
ASIAN BANKING AND FINANCE | December 2017 53
Case study: DBS digibank
DBS executives at the digibank launch in Bank Indonesia Museum on 29 August 2017
A ‘whole new way of banking’ taking over India, Indonesia DBS is changing the way people do their banking in two of the most populous countries in the world with its revolutionary digibank initiative.
O
n 8 November 2016, something happened in India that completely shook the country’s whole economy — the government announced a widespread demonetisation of the (then) two biggest banknotes in circulation (INR500 and INR1,000). The Government of India wants to curtail the country’s lingering shadow economy, stop money laundering, and crack down on the use of illicit and counterfeit cash that can be used to fund illegal activity and even terrorism. However, the sudden policy saw an economy disrupted as capital liquidity became affected and people started suffering from prolonged cash shortages as the physical banknotes tucked away in their wallet were suddenly rendered useless. But in the run up and the immediate aftermath of the policy’s implementation, something noteworthy happened in the digital space: more people started using digital modes of payments including mobile and internet banking. Around 22% more people started using cashless payments a 54 ASIAN BANKING AND FINANCE | December 2017
After just 12 months of digibank’s launch, over 1.5 million people have already signed up for the service — “all without stepping foot into a branch” — and bigger numbers are expected to pour in.
month before the demonetisation announcement as compared to the number of people using various modes of digital payments in 2015, according to data from the Reserve Bank of India. Mobile banking usage, for instance, grew rapidly from October 2015 until July 2017 — covering the period when the policy was announced — with a 244% increase on volume of transactions and 185% climb on value. Even usage rate of Immediate Payment Services posted stellar numbers, growing 255% in volume and 326% in value over the same period. This phenomenon was (and still is) something that DBS Bank, Singapore’s largest bank, is looking to take advantage of when it launched its digibank initiative in India in April 2016. Digibank, first mobile-only bank, offered something refreshing the increasingly tech savvy and highly connected Indian population with a whole range of technologies to revolutionise traditional banking. “[Digibank is] a revolutionary offering. It brings together an entire suite of ground-breaking technology — from biometric authentication
to artificial intelligence (AI) — to enable customers to enjoy a whole new way of banking,” said Shantanu Sengupta, MD & head, consumer banking group, DBS India. It’s easy to see why India was the first country DBS decided to launch its pioneering digibank initiative in. India is the second most populous nation in the world (with over 1.3 billion people), with almost 30% of those or around 380 million connected or have some access to the internet. “With its large, digitally savvy population and [an] enabling government infrastructure, the growth potential for digital banking is huge,” said Sengupta. “This is why we chose India as the first market to launch digibank last year.” A break from the mould DBS’ digibank initiative is, in a way, a break from the traditional mould of how banking used to be. Digibank, in a nutshell, offers a complete about face from tradition by offering a completely paperless, signatureless, and branchless banking experience. And this has been making headlines and producing stellar figures a year after its launch in India. Sengupta shared that after just 12 months of digibank’s launch, over 1.5 million people have already signed up for the service — “all without stepping foot into a branch” — and bigger numbers are expected to pour in. The relatively early success of DBS’ initiative, particularly for the Indian market, boils down to three things: convenience, technological leverage, and understanding of its potential market. In terms of convenience, digibank allowed people to open their accounts without requiring them to go to a physical branch and provide numerous documentation and paperwork just to be accredited. DBS allowed partner institutions, including over 500 cafés across India, to open people’s accounts using only their Aadhaar card, a biometrics-enabled ID issued to over 1 billion people in India. Added to this is the higher interest earnings (7% from the first
Case study: DBS digibank the traditional One-Time Passwords (OTP). Sengupta shared that DBS recognised that safety is one of the most pressing concerns of people when it comes to digital banking, hence the decision to go with dynamic inbuilt security as it offers better peace of mind. “Digibank has an embedded soft token security, avoiding the need to wait for SMS to arrive and providing even stronger security for transaction authorisation,” he added.
The digibank initiative in Indonesia is highly similar with the one in India in terms of technology and offerings, although there are some subtle differences.
over the same period. “We’ve witnessed a change in customer behaviour and people increasingly want a simple, fast, and effortless way to bank,” said DBS Indonesia President Director Paulus Sutisna. “As a bank that is committed to shape the future of banking, we’re excited to introduce digibank in Indonesia, giving customers the ability to bank anytime, anywhere.” The digibank initiative in Indonesia is highly similar with the one in India in terms of technology and offerings, although there are some subtle differences. Opening a digibank account is done through a mobile digibank agent whilst leveraging E-KTP, a biometrics-enabled ID programme in the country. Digibank customers can earn 3% interest from their first rupiah, and opening an account requires no minimum balance. Clients also enjoy DBS’ regional connectivity, making it easier and more convenient to withdraw money, for instance, in Singapore at no additional fees. “With digibank, we’ve built a bank that pulls together the power of biometrics, natural language, artificial intelligence, and inbuilt security in one offering,” said Piyush Gupta, DBS CEO, in a statement. “We believe this mobile-led offering represents the future of banking, and are excited to introduce this to Indonesia.”
Same service, new market Riding on digibank’s success in India over the past year, DBS is now venturing into new markets with the initiative launching in Indonesia — the world’s fourth most populous country — in August this year. DBS Indonesia President Director Paulus Just like India, Indonesia offers the Sutisna delivers his welcoming remarks same promising prospects for the growth and development of digital rupee) as well as the no minimum banking. Rudiantara, Indonesia’s balance requirement — an attractive Minister of Communication and offering for its potential market. Information Technology, shared in The initiative also leveraged a release that the country’s digital cutting-edge technology. Customer economy is expected to reach service is provided 24/7 through an US$130 billion, or 12% of GDP, in AI-driven virtual assistant. People can 2020. This is because, according to ask questions like their most recent a recent survey, over half (51.8%) of transactions or account balance and Indonesia’s population is connected get instant answers, eliminating the to and are active users of the internet, need to talk or interact with a call whilst 91% of people own a mobile centre agent and make the whole phone. E-banking is also gaining process more efficient and effective. ground, according to the country’s At the time of the initiative’s launch, financial authority services, with Do you have a Case Study? the Virtual Assistant can already users growing from 13.6 million Email us at answer 10,000 customer questions, in 2012 to 54 million in 2016 and abf@charltonmedia.com with new knowledge added as it transaction volume almost doubling matures in its role over time. Digibank also boasts of a built-in budget optimiser that helps customers do their budgeting, track expenses, and analyse their purchasing trends. The way the technology is designed is for it to understand customer behaviour and preferences, synthesise data, and provide recommendations, for example, restaurant discounts or airfare promos — something that bodes well to the increasingly mobile, millennial, travel enthusiastic, and connected young population in India. A cornerstone of DBS’ digibank initiative is the security it provides to its current and future clients through the platform, making it more enhanced through the use of DBS’ top executives with honourable guests after the official launch of digibank in Indonesia dynamic inbuilt security instead of
ASIAN BANKING AND FINANCE | December 2017 55
abf banking forum 2017: HOng Kong
Keith Lin, EY: “If you look at the virtual wallets provided in the market, you can store value, you can do investment, you can get interest on those things. And the question you ask is ‘why do I even need a bank anymore?’”
Priscilla Dell’Orto, Bain & Company: “If you have the best mobile banking app out there, but it is completely disconnected from the rest of the customer experience whether in the branches or online or elsewhere, that doesn’t really help.”
Find out why Hong Kong banks lag as digital disruptions continue to increase More than the digital products, banking executives need to focus on what their customers really want.
W
hen banks in Hong Kong started launching their digital strategies, many of the banking executives thought that their businesses would fly straightaway. However, analysts agree that beyond a well-packaged digital offering, banks should remain loyal to the customer experience and journey. Banks that have the newest and most exciting digital products, but are not aware of customer expectations, are doomed to fail. With the exponential rise in the number of fintechs and non-bank providers in Hong Kong’s free-for-all market, banks are being pushed to catch up to the competition amidst internal and external difficulties such as costs, the lack of manpower, and heavy regulation. Hong Kong’s close proximity to mainland China makes it even more exposed to the rise of fintechs who have made the mainland their hub. Bankers and industry 56 ASIAN BANKING AND FINANCE | December 2017
One in four people in Hong Kong no longer use banks as their primary financial services provider.
experts discussed this and more at the 2017 Banking Forum organised by Asian Banking and Finance in Hong Kong on 26 July. Keith Lin, partner, financial services advisory for Hong Kong, EY, said one in four people in Hong Kong no longer use banks as their primary financial services provider. This number is expected to rise in the coming years, as more and more financial services companies enter the city and innovate according to evolving customer preferences. “If you look at the virtual wallets provided in the market, you can store value, you can do investment, you can get interest on those things. And the question you ask is ‘why do I even need a bank anymore?’ You can even buy insurance, buy your mortgage online. Why do you need a bank? The concept of bank, of banking, has broken down,” Lin added. Whilst banks face growing
competition from non-traditional players, they are still met with challenges from fellow banks. Priscilla Dell’Orto, principal, Bain & Company, said that if banks want to keep their customers, they have to ensure that the experience they offer stands out from the rest. She said banks should focus on meeting customer expectations across the board in order to produce a seamless experience, regardless of whether the channel is traditional or digital. Dell’Orto noted that a higher level of customer loyalty prevents what Bain & Company calls hidden defections, or instances where customers choose to purchase financial products from banks other than their primary bank. She said that the concept of having just one bank is becoming less common nowadays, and those who have more than one bank tend to purchase higher value products from banks other than their
abf banking forum 2017: Hong Kong primary bank. What customers want from their primary bank is consistency, whether they are requesting services from the bricks and mortar spaces to the mobile banking app to the ATM and elsewhere. In Hong Kong, Dell’Orto said there is a massive room for improvement in terms of customer loyalty. There is a 28-point difference in the net promoter score (NPS) between the best performing bank, which is Citi, and the worst performing bank, which is Bank of China. The NPS measures customer loyalty within a bank by subtracting the number of bank defectors from the total number of bank promoters. “What’s important is omnichannel, which is delivering a seamless and consistently outstanding experience across physical or traditional and digital channels. If you have the best mobile banking app out there, but it is completely disconnected from the rest of the customer experience whether in the branches or online or elsewhere, that doesn’t really help. Actually, that angers customers a lot. Because they’re like, okay you can do this fantastic app, but when I go to the branch, no one can actually help me,” she added. Banks and fintechs Meanwhile, banks and fintechs continue to have a love-hate relationship in Hong Kong, especially with the presence of many fintechs in mainland China that are planning to foray into the city. Hao Hong, managing director, head of research, Bank of Communications, said banks and fintechs have a very complicated relationship in China. Banks remain to be pushed back by very traditional and conservative regulations, whilst fintechs find it hard to bypass the regulatory framework in order to innovate and break into the techsavvy Chinese markets. As the banking industries of Hong Kong and China become more closely intertwined, banking executives have a huge responsibility of ensuring that security remains intact. Security issues vary between the two — China battles internal fraud whilst Hong Kong is beset with rampant money laundering. Simon Leung, head of
anti-money laundering, Asia Pacific, China CITIC Bank International, said Hong Kong has to protect its reputation as a financial center whilst China has to come up with a reporting mechanism amidst weak law enforcement. The digital divide Despite the unanimous opinion that digitalisation is good for banks, banking executives in Hong Kong are still at odds on what digital really means. According to Celent senior analyst Eiichiro Yanagawa, banking executives come up with diverse and inconsistent definitions of the word “digital” when asked during surveys. Yanagawa said that whilst all of their answers somehow touch on digital, they do not fully capture the essence of the word. “You can see the customised experience and mobile startup as different characteristics of digital in the executive mind. However, the list of attributes has grown. Probably you could argue that digital banking has existed since 1950. Now we are in the midst of the topic where at least five different trends are radically changing our banking industry and beyond. They are mobile equity, social cloud and big data, and finally AI and robotics,” Yanagawa said. With the evolving definition of digital, disruptions continue alongside the rise of new products, enhanced infrastructure, and growing networks in the digital space. One particular development in Hong Kong is the direction towards realtime cross border payments. Esmond Kin Ying Lee, senior advisor, Financial Services Development Council, said the Hong Kong Monetary Authority (HKMA) is working on a faster payment system for small value payments, which will eventually be adopted by larger-value payments. “There is a growing number of markets developing new market infrastructure to support faster payments. We see this in Singapore [and] in Australia. China already has infrastructure and Hong Kong has an advantage. So, obviously, there’s opportunity for discussions about linking up those infrastructures.
The problem of most traditional banks is we are too focused on the product capability, or the in-house competence, how to serve the customer in the system, or the product functionality without knowing why the customer needs to make a cross-border payment.
The other aspect is there are a lot of new players, all sorts of nonbank providers who are trying to enter the space and improve the propositions,” said Stephan Levieux, head of deposits, payments, and cash management strategy, Hang Seng Bank. It is important for banks to remain focused on the customer experience as they strive to develop more efficient and more exciting digital products. Jimmy Chan, chief operating officer and head of operations management, ICBC Asia, said banks need to transform all these digital growth opportunities to be more customer-focused. Lin added that digital is just a part of the story — banks need to create a business strategy for their customers’ journey and work within the whole ecosystem. “All this demand at the back is linked up with some kind of customer demand. The problem of most traditional banks is we are too focused on the product capability, or the in-house competence, how to serve the customer in the system, or the product functionality without knowing why the customer needs to make a cross-border payment, without knowing why the customer has to make a payment to the payee,” said Chan. Banks in Hong Kong should not cower at the sight of non-bank players, rather they should leverage on their established networks, their experience in the industry, and the presence of existing distribution channels. From there, banking executives could find ways to work from within and transform their banks to a more customer-focussed and forward-looking company that moves with the times.
Tim Charlton, Esmond Lee, Stephan Levieux, and Jimmy Chan
ASIAN BANKING AND FINANCE | December 2017 57
COVER STORY
ABF Awards 2017 recognises record number of winners
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lmost 100 outstanding banks from 30 countries were recognised at the 2017 Retail Banking Awards and Wholesale Banking Awards held at the Shangri-La Singapore on 13 July. The event drew over 260 banking and insurance executives, beating last year’s record. Over 180 trophies were awarded to the winning banks. This year’s nominations were judged by representatives from the Big Four accounting firms: Mohit Mehrotra, regional head of financial services, strategy, and operation at Deloitte; Liew Nam Soon, ASEAN managing partner at Ernst and Young; Egidio Zarrella, ASPAC head of banking and capital markets, KPMG; and Andrew Taggart, partner, financial services leader, PwC Southeast Asia Consulting. “This night proves that there is still a lot of life in the banks. We have very good winners who are deserving of their awards tonight. We’d also like to thank all our judges for the ABF Awards,” said Tim Charlton, publisher of the Asian Banking and Finance magazine during the awarding ceremony. Below is a list of all the winning companies. Congratulations!
WINNERS OF THE WHOLESALE BANKING AWARDS 2017
BDO Unibank Philippines Domestic Trade Finance Bank of the Year Cathay United Bank Taiwan Domestic Cash Management Bank of the Year Taiwan Domestic Trade Finance Bank of the Year CB Bank Myanmar Domestic Trade Finance Bank of the Year CTBC Bank Taiwan Domestic Foreign Exchange Bank of the Year DBS Bank (China) China International Cash Management Bank of the Year China International Trade Finance Bank of the Year DBS Bank Singapore Domestic Trade Finance Bank of the Year Singapore Domestic Cash Management Bank of the Year Doha Bank Qatar Domestic Trade Finance Bank of the Year Qatar Domestic Project Finance Bank of the Year Emirates NBD PJSC UAE Domestic Cash Management Bank of the Year Hang Seng Bank Limited Hong Kong Domestic Trade Finance Bank of the Year HSBC Hong Kong International Cash Management Bank of the Year ICICI Bank Limited India Domestic Cash Management Bank of the Year KBZ Bank Myanmar Domestic Cash Management Bank of the Year Myanmar Domestic Foreign Exchange Bank of the Year KASIKORNBANK PCL Thailand Domestic Cash Management Bank of the Year
Abu Dhabi Commercial Bank UAE Domestic Trade Finance Bank of the Year
Lao Viet Joint Venture Bank Laos Domestic Technology & Operations Bank of the Year
ANZ Bank Thailand International Technology & Operations Bank of the Year
Maritime Bank Vietnam Domestic Foreign Exchange Bank of the Year
ANZ Banking Group Vietnam International Technology & Operations Bank of the Year
Maybank Malaysia Domestic Cash Management Bank of the Year
Bakhtar Bank Afghanistan Domestic Technology & Operations Bank of the Year
Maybank Investment Bank Berhad Malaysia Domestic Project Finance Bank of the Year
Bangkok Bank Thailand Domestic Trade Finance Bank of the Year
National Bank of Pakistan Pakistan Domestic Project Finance Bank of the Year
Bank for Investment and Development of Vietnam JSC Vietnam Domestic Technology & Operations Bank of the Year
National Development Bank PLC Sri Lanka Domestic Cash Management Bank of the Year Sri Lanka Domestic Project Finance Bank of the Year
Bank Mandiri Indonesia Domestic Cash Management Bank of the Year PT. Bank Mandiri (Persero) Tbk Indonesia Domestic Trade Finance Bank of the Year Bank OCBC NISP Indonesia Domestic Technology & Operations Bank of the Year Indonesia Domestic Foreign Exchange Bank of the Year
OJSC Optima Bank Kyrgyzstan Domestic Technology & Operations Bank of the Year RHB Banking Group Malaysia Domestic Foreign Exchange Bank of the Year Saigon-Hanoi Commercial Joint Stock Bank Vietnam Domestic Trade Finance Bank of the Year
Bank of Ayudhya PCL. (Krungsri) Thailand Domestic Technology & Operations Bank of the Year
TEB (Türk Ekonomi Bankası) Turkey Domestic Cash Management Bank of the Year
Bank of China (Hong Kong) Limited Hong Kong Domestic Cash Management Bank of the Year Hong Kong Domestic Foreign Exchange Bank of the Year
Vietnam Prosperity Bank Vietnam Domestic Cash Management Bank of the Year
Bank SinoPac Taiwan Domestic Technology & Operations Bank of the Year
58 ASIAN BANKING AND FINANCE | December 2017
Westpac Institutional Bank Australia Domestic Trade Finance Bank of the Year
COVER STORY Yes Bank Ltd India Domestic Trade Finance Bank of the Year
Digital Banking Initiative of the Year - Singapore Branch Innovation of the Year - Gold
WINNERS OF THE RETAIL BANKING AWARDS 2017
DBS Bank (Taiwan) Corporate Social Responsibility of the Year - Silver
Abu Dhabi Commercial Bank Domestic Retail Bank of the Year - UAE Digital Banking Initiative of the Year - UAE Azizi Bank Domestic Retail Bank of the Year - Afghanistan Corporate Social Responsibility of the Year - Bronze Baiduri Bank Domestic Retail Bank of the Year - Brunei PT Bank Central Asia Tbk Digital Banking Initiative of the Year - Indonesia PT Bank Ganesha Tbk Website of the Year - Indonesia Krungsri Auto-Bank of Ayudhya Advertising Campaign of the Year - Thailand Krungsri Auto-Ayudhya Capital Auto Lease PCL Automobile Lending Initiative of the Year - Thailand Bank of Ayudhya PCL. (Krungsri) Mortgage and Home Loan Product of the Year - Thailand Bank of Bhutan Limited Core Banking System Initiative of the Year - Bhutan Bank of China (Hong Kong) Limited Mobile Banking Initiative of the Year - Hong Kong Digital Banking Initiative of the Year - Hong Kong Online Securities Platform of the Year - Hong Kong Banque Pour Le Commerce Exterieur Lao Public Domestic Retail Bank of the Year - Laos BDO Unibank Online Banking Initiative of the Year - Philippines Mobile Banking Initiative of the Year - Philippines Social Media Initiative of the Year - Philippines BDO Foundation Corporate Social Responsibility of the Year - Gold Cambodian Public Bank Plc. Domestic Retail Bank of the Year - Cambodia Citi China Mobile Banking Initiative of the Year - China Citibank Korea Inc. Mobile Banking Initiative of the Year - Korea Citibank Singapore Limited Advertising Campaign of the Year - Singapore Social Media Initiative of the Year - Singapore International Retail Bank of the Year - Singapore Citi Australia Branch Innovation of the Year - Silver CommCredit (Powered by VPBank) New Consumer Lending Product of the Year - Vietnam Cooperative and Agricultural Credit Bank (CAC Bank) Mobile Banking Initiative of the Year - Yemen Online Banking Initiative of the Year - Yemen DBS Bank Domestic Retail Bank of the Year - Singapore Core Banking System Initiative of the Year - Hong Kong SME Bank of the Year - Hong Kong
HDFC Bank Limited Mobile Banking Initiative of the Year - India Social Media Initiative of the Year - India Hong Leong Finance ASEAN Finance Company of the Year HSBC Sri Lanka Advertising Campaign of the Year - Sri Lanka International Retail Bank of the Year - Sri Lanka HSBC Asia Pacific Asia Pacific International Retail Bank of the Year HSBC Bank (China) Company Limited International Retail Bank of the Year - China HSBC Vietnam International Retail Bank of the Year - Vietnam ICICI Bank Website of the Year - India IDFC Bank Limited Core Banking System Initiative of the Year - India Mortgage and Home Loan Product of the Year - India KBZ Bank Domestic Retail Bank of the Year - Myanmar Credit Card Initiative of the Year - Myanmar SME Bank of the Year - Myanmar KASIKORNBANK PCL Credit Card Initiative of the Year - Thailand Mobile Banking Initiative of the Year - Thailand Domestic Retail Bank of the Year - Thailand The Land Bank of the Philippines Employer Award of the Year - Gold Graduate Employment Programme of the Year - Philippines Lao Viet Joint Venture Bank Digital Banking Initiative of the Year - Laos Lien Viet Post Joint Stock Commercial Bank Digital Banking Initiative of the Year - Vietnam Online Banking Initiative of the Year - Vietnam Maybank Credit Card Initiative of the Year - Malaysia Mobile Banking Initiative of the Year - Malaysia Social Media Initiative of the Year - Malaysia Online Banking Initiative of the Year - Malaysia SME Bank of the Year - Malaysia Maybank Kim Eng Securities Pte. Ltd. Online Securities Platform of the Year - Singapore Milijuli Saving and Credit Cooperative Limited Rural Bank of the Year - Nepal National Development Bank PLC. Domestic Retail Bank of the Year - Sri Lanka Mobile Banking Initiative of the Year - Sri Lanka SME Bank of the Year - Sri Lanka OCBC Bank ASEAN SME Bank of the Year Bank OCBC NISP SME Bank of the Year - Indonesia International Retail Bank of the Year - Indonesia Credit Card Initiative of the Year - Indonesia
ASIAN BANKING AND FINANCE | December 2017 59
COVER STORY OJSC Optima Bank Debit Card Initiative of the Year - Kyrgyz Panin Bank Mobile Banking Initiative of the Year - Indonesia Ping An Bank Domestic Retail Bank of the Year - China Philippine National Bank Digital Banking Initiative of the Year - Philippines PNB Savings Bank New Consumer Lending Product of the Year - Philippines PrimeCredit Limited Finance Company of the Year - Hong Kong Public Bank Domestic Retail Bank of the Year - Malaysia
Wholesale Banking Awards trophies
Punjab National Bank Online Banking Initiative of the Year - India Digital Banking Initiative of the Year - India PVcomBank Core Banking System Initiative of the Year - Vietnam Mobile Banking Initiative of the Year - Vietnam RAKBANK Advertising Campaign of the Year - UAE New Consumer Lending Product of the Year - UAE RHB Bank Berhad Digital Banking Initiative of the Year - Malaysia Saigon-Hanoi Commercial Joint Stock Bank Automobile Lending Initiative of the Year - Vietnam Mortgage and Home Loan Product of the Year - Vietnam Credit Card Initiative of the Year - Vietnam
Retail Banking Awards trophies
Security Bank Corporation Advertising Campaign of the Year - Philippines Mortgage and Home Loan Product of the Year - Philippines Credit Card Initiative of the Year - Philippines Siam Commercial Bank SME Bank of the Year - Thailand Standard Chartered Bank Hong Kong Advertising Campaign of the Year - Hong Kong Credit Card Initiative of the Year - Hong Kong ​ tate Bank of India S Debit Card Initiative of the Year - India Taishin Bank Domestic Retail Bank of the Year - Taiwan Branch Innovation of the Year - Bronze Credit Card Initiative of the Year - Taiwan Mobile Banking Initiative of the Year - Taiwan Digital Banking Initiative of the Year - Taiwan
DBS Team
United Amara Bank Limited Social Media Initiative of the Year - Myanmar Union Bank of the Philippines Domestic Retail Bank of the Year - Philippines Debit Card Initiative of the Year - Philippines UOB Credit Card Initiative of the Year - Singapore Mobile Banking Initiative of the Year - Singapore Vietnam Prosperity Bank SME Bank of the Year - Vietnam YES BANK Limited Graduate Employment Programme of the Year - India Banking executives gathered at Shangri-La Singapore for the awards 60 ASIAN BANKING AND FINANCE | December 2017
Networking dinner
VPBank Team
PT Bank Mandiri (Persero) Tbk. Team
Networking and Registration
Union Bank of the Philippines Team
State Bank of India Team
UOB Team
Asian Banking & Finance Team ASIAN BANKING AND FINANCE | December 2017 61
Azaleen Mustapha from Baiduri Bank ADCB Team
Bank Sinopac Team
RAKBANK Team
Citibank Team
Representatives of National Development Bank
DBS Bank Team
HSBC Team
Representatives from Hong Leong Finance 62 ASIAN BANKING AND FINANCE | December 2017
Kajohnsak Manaviriyakul of Bangkok Bank
Laoviet Joint Venture Bank Team
KBZ Bank Team
Philippine National Bank Team
Ken Ng of Panin Bank with Wayne Benson of Fiserv
PT Bank Central Asia Tbk Team
RHB Bank Team
Peter Bautista of BDO Unibank
Representatives from Bank of Ayudhya
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Krishnakumar Duraiswamy & Mustaza Bin Kassim of Abu Dhabi Commercial Bank
Kajohnsak Manaviriyakul & Vorachai Wattanaparadorn of Bangkok Bank
Adrian Boon of RHB Banking Group
Bee Lian Toh of Westpac Institutional Bank
Mahadir Manap of Maybank
Nyo Myint of KBZ Bank
Napawan Chiraporncharoensuk & Pattra Khoprasirtkij of Bank of Ayudhya PCL. (Krungsri) 64 ASIAN BANKING AND FINANCE | December 2017
Dao Gia Hung & Phuong Le Thi Diem of VPBank
M. Sathyamurthy of Doha Bank
Peter Bautista of BDO Unibank
Victor Tan of Bank of China (Hong Kong) Limited
Nilanthi Desilva & Santhoshini Peries of National Development Bank PLC
DBS Bank Team
Ting Chen of Bank SinoPac
Silawat Santivisat of KASIKORNBANK PCL
Nguyen Cong Le & Thinh Dinh Nguyen of Bank for Investment and Development of Vietnam JSC
Winston Quek & Annie Hsieh of Cathay United Bank
Rori Achir of PT. Bank Mandiri (Persero) Tbk
Viengvilay Sengkhamyong, Nguyen Viet Phu & Nguyen Trieu Nam of Lao Viet Joint Venture Bank
Peter Koh of CB Bank
Thomas Low of Bank OCBC NISP ASIAN BANKING AND FINANCE | December 2017 65
Wayne Benson of Fiserv (ASPAC) Pte Ltd and Ken Ng of Panin Bank
Union Bank of the Philippines Team
Anurag Mathur of HSBC
Azaleen Mustapha Christopher Gene Lapuz of Baiduri Bank of PNB Savings Bank
Amit Saxena, Vasant Khandelwal, & Barinder Singh of State Bank of India
Aaron Chiew & Jasmine Tang of UOB
Christie Chu & Lee Hwee Boon of OCBC Bank 66 ASIAN BANKING AND FINANCE | December 2017
Choong Yang Ping & Welson Jamin of DBS Bank
Cristy Vicentina of Philippine National Bank
Edwin Reyes of BDO Unibank
Datin Amy Ooi & Jeffrey Ng of RHB Bank Berhad
Lao Viet Joint Venture Bank Team
Kittiya Srisanit of Krungsri Auto - Ayudhya Capital Auto Lease PCL
Hermawan Thendean of PT Bank Central Asia Tbk
Hung Dao Gia, Giang Dang Thi Chau, & Phuong Le Thi Diem of VPBank
Indika Ranaweera of National Development Bank PLC.
Lawrence Lee Ma. Paz of Maybank Kim Eng Victoria Gonzalez Securities Pte. Ltd. of Security Bank Corporation ASIAN BANKING AND FINANCE | December 2017 67
Mustaza Bin Kassim of Abu Dhabi Commercial Bank
Pairote Cheunkrut of Krungsri Auto Bank of Ayudhya
Nyo Mint of KBZ Bank
Nathapol Luepromchai, Vichapong Nopvaraphun, & Watchara Phumkem of Bank of Ayudhya PCL. (Krungsri)
Steven Chang & Jerry Chen of Taishin Bank
Supaneewan Chutrakul of KASIKORNBANK PCL
Peh Guat Hong of Hong Leong Finance 68 ASIAN BANKING AND FINANCE | December 2017
x
Susanna Liew of PrimeCredit
Representatives from DBS Bank
Thomas Low of OCBC NISP
Shum Cheuk Yiu & Olivia Sham of Standard Chartered Bank (Hong Kong) Limited
Phansana Khounnouvong & Bounlouane Ounlathavong of BCEL
Imranuddin Ahmad, Deepak Mohanlal Ahuja, & Shibani Mehra of RAKBANK
Kalyani Nair & Wai Hong Choong of Maybank
Surjawaty Tatang of PT Bank Ganesha Tbk
Nguyen Thuy Hanh & Nguyen Thanh Huyen of PVcomBank
Representatives from Citi
Minh-anh Pham & Viet Nguyen of CommCredit (Powered by VPBank) ASIAN BANKING AND FINANCE | December 2017 69
Credit Card Initiative of the Year - Singapore Mobile Banking Initiative of the Year - Singapore
UOB harnesses technology and big data to deliver topnotch digital solutions to its clients
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ustomer-centric, lifestyle-savvy, and digitally capable, UOB has found the right mix of features to ensure that their clients have access to the most rewarding products and programs possible. From being regional pioneers in convenience to contactless technology, UOB is a testament to the fact that banks can thrive amidst stiffening competition in the city and the region’s financial industries and ensure clients that banking can be smarter, simpler, and safer. Jacquelyn Tan, head of personal financial services at UOB, said that as customers’ needs and wants become increasingly complex and diverse, the challenge lies in banks’ adoption of the right technologies relevant to lifestyles and life stages. Customers are fast adapting to widespread digitisation as they become more dependent on their smartphones for their day-to-day activities. Tan said that it is important to keep a close watch on technology trends and embed new banking and payment features transparently into devices. Digital transformation Tan said digital is altering businesses and societies and banks have to be nimble and adapt to change. “There has also been a rise in services driven by data intelligence and the barriers to entry for these disruptive technologies continue to lower. The advantage we have is our large repository of transaction and channel data. We can harness the power of our data to improve our business processes and facilitate decision making to better serve our customers,” she added. As Singapore aims to become a cashless society, UOB came up with a couple of successful digital solutions that brought the bank wider geographical footprint and rising levels of customer engagement. One of these solutions is UOB Mighty, a mobile banking app where customers can bank, book restaurants, look for deals in Singapore, Malaysia, Thailand, and Indonesia, and make contactless payments. UOB is also the first to introduce PayNow through all social messaging apps through UOB MyKey, making it really convenient for clients to make funds transfers using just
70 ASIAN BANKING AND FINANCE | December 2017
Jacquelyn Tan, Head of Personal Financial Services, Singapore, UOB
prompting UOB to extend the service to the recipient’s mobile number. Malaysia and Thailand in January 2017 Aware of the growing number of SMEs where it received more than 26,000 and in Singapore and the region, UOB is also 19,000 sign-ups, respectively. helping small cash-based businesses adopt According to Tan, UOB YOLO remains QR code payments which their customers an unparalleled and unrivalled credit card can make in the UOB Mighty app. “We have solution in the market. Its unique “quick also been looking at how technology can read” card design enhance customer layouts the card experience and “The advantage we have is our numbers in a 4-bymake banking large repository of transaction 4 stack on the top safer. With Mighty and channel data. We can harness right hand corner Secure, UOB the power of our data to improve of the card, making was the first in it easier and more Singapore to offer our business processes and convenient to read second-factor facilitate decision making to when doing online authentication and better serve our customers.” transactions. The transaction signing card also uses on high-risk mobile new mobile technologies like contactless transactions without the need for a physical payments and instant issuance to give token. We are also the first and only bank customers easy access to investments. in Southeast Asia to launch the Near Beyond innovation, UOB YOLO also pushed Field Communication (NFC) contactless boundaries in the world of marketing and Automated Teller Machine (ATM),” added has gained an impressive foothold in a Tan. competitive market with its unique brand One other notable achievement of UOB and effective approach in engaging its as of late is the UOB YOLO Card, launched customers through social media. on the basis of extensive research and datagathering to understand the spending and CONTACT lifestyle habits of millennials. Tan said that the research, done with a survey and a poll Company name: United Overseas Bank of more than 600 UOB card members aged Address: 80 Raffles Place, UOB Plaza, 26 to 35, concluded that millennials’ love Singapore 048624 for leisure shapes their spending habits on Phone number: (65) 1800 222 2121 entertainment, travel, and shopping. UOB Fax number: (65) 6534 2334 YOLO has so far attracted 50,000 sign-ups Website: www.uobgroup.com in Singapore since its March 2016 launch,
We put innovation first. That’s why we’re ranked first in Asia. First we introduced Southeast Asia’s first quick-read credit card design. Then we innovated a seamless all-in-one bank app. Now UOB YOLO and UOB Mighty app have been awarded Credit Card Initiative and Mobile Banking Initiative of the Year by The Asian Banking and Finance Retail Banking Awards. This win only spurs us to keep delivering products that work harder for you. To discover our award-winning products, go to uob.com.sg
United Overseas Bank Limited Co. Reg. No 193500026Z
Domestic Retail Bank of the Year - Philippines Debit Card Initiative of the Year - Philippines
UnionBank leads the way to the digital age
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nionBank of the Philippines has always been quick to embrace innovation. Throughout its existence, it has been leveraging technology and innovation in making strides to empower its customers. With technology embedded in its way-of-doing-business, UnionBank is clearly a leader in Philippine digital banking. Most notably, the Bank was the first amongst its peers to start the first bank website; pioneer online banking in the country, and launch the country’s first electronic savings account. For the past 10 years, the Bank has centralised most of its operations, including majority of its accounting processes. When he assumed his position as UnionBank President and COO in 2016, Edwin R. Bautista said: “We are highly digitised in each of the products like credit cards, the only thing that is not automated is the physical handling of cash but even that we want to move to deposit taking machines.” One of the Bank’s immediate goals is to have a seamless operation in all points of its transaction, so that one can do everything on the phone. “We are not creating new branches… unless we are building branches in the phones,” said Bautista. Digital transformation Equally dedicated to the vision of reshaping the bank into a “technology company with banking utilities” is Chairman and CEO Justo A. Ortiz, who believes that this is the most revolutionary and gigantic step that the Bank has taken towards enabling its customers via digital transformation. Coupled with Bautista’s mission to “transform the bank for the digital economy”, UnionBank is well on its way to pursue its thrust of maintaining leadership in “Smart Banking” particularly in areas of innovation, customer delight and value-formoney through the creative application of expertise and dedication. Currently, the bank is embarking on its digital transformation following a threeyear timeline with 3 components: (1) Digitisation of the bank; (2) Launching of the digital bank; and (3) Partnering with fintechs. One centrepiece of this transformation is the “opening-up” of the bank’s application program interface (API) which will enable practically all Philippine businesses to more
72 ASIAN BANKING AND FINANCE | December 2017
Justo Ortiz, Chairman and CEO
Edwin Bautista, President and COO
easily participate in the ongoing fintech the First-in-Asia to use facial recognition revolution. Using UnionBank’s open API, to perform “KYC. (Know-Your-Customer) fintech companies can effectively connect amongst its users, instead of the usual with the Bank and use it as the operational passwords which are easily compromised. “backroom” as they grow their businesses. For this, the Bank has been granted the right In the spirit of Ubuntu, which means to use “Selfie Banking” and made EON known community building, the Bank wants to as the first Selfie Banking in Asia. complete its journey towards digital The series of awards received from Asian transformation Banking and Finance “In the spirit of Ubuntu, which without anyone being Retail Banking Awards means community building, the “left behind”. This in previous years Bank wants to complete its journey have affirmed the includes changing towards digital transformation UnionBankers’ Bank’s leadership in without anyone being “left mindsets and abilities the industry, as these in order to ensure behind”. This includes changing include Employer of that they will be the Year, Corporate UnionBankers’ mindsets and able to adapt to the Social Responsibility abilities in order to ensure that digital organisation Program (“Gold”), and they will be able to adapt.” that UnionBank Philippines Domestic will become. To date, there have been Cash Management Bank of the Year, at the several employee-engagement processes Wholesale Banking Awards. that include coding courses for both The latest accolade came in July of top executives and branch employees, 2017, when Asian Banking and Finance internal employee “hackathons” and digital recognised the UnionBank as the top marketing certification for top executives. “Domestic Retail Bank of the Year – There is also the Leaders Learning Circles Philippines” and for the best “Debit Card (LLC) wherein speakers from some of the Initiative of the Year – Philippines”. world’s most successful companies like Google, Amazon and Facebook are invited CONTACT to share their thoughts about the digital world. Company name: In early 2017, the Bank launched the Union Bank of the Philippines new digital banking platform EON, which is Address: Meralco Avenue cor. Onyx & an enhanced version of the country’s first Sapphire Roads, Ortigas Center, Pasig City, electronic savings account in 2001. Building Philippines 1605 on the inroads paved by the EON Cyber Phone number: +632 667-6388 (Trunkline) Account, UnionBank pulled out all stops Email: bgdgelido@unionbankph.com and strategically niched EON as a truly Website: www.unionbankph.com digital bank. Importantly, the new EON was
Check out how PrimeCredit is lending to younger spenders with remarkable fintech finesse difficulties they face. It also promises them what they sorely need: Convenient loan and credit card services that can be accessed with a tap of smartphone apps. “Nowadays, the online channel is becoming more and more important, therefore we created two mobile apps - PrimeCredit app and WeWa Card app - to match customer needs,” the spokesperson said.
PrimeCredit App interface
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hen young Hong Kongers apply for a loan or a credit card, interest rate is not the core concern, instead they are attracted to the approval certainty. – an insight that has been powering PrimeCredit’s latest product and financial technology pipeline, including the launch of two apps. PrimeCredit is putting all of its efforts to woo younger borrowers due to the gap in the market since other financial institutions are mostly running after the well-heeled, older set. The Hong Kong-based lender launched the PrimeCredit app that makes it easy and fast for younger borrowers to secure a cash loan and manage the loan disbursements through a smartphone. It also started offering the WeWa Card, a credit card that is designed to be hip and used closely with the WeWa Card app. Young Hong Kongers can instantly check their credit card transactions, pay for purchases and receive loyalty use prizes such as free coffee and ice cream through the WeWa Card app. For PrimeCredit, this hyper focus on younger spenders is not only a marketing strategy, but a survival imperative. In the past five years, PrimeCredit customers aged over 35 increased from 60% to almost 80%. “Ageing is the biggest challenge that PrimeCredit is facing,” according to PrimeCredit’s spokesperson. “Older customers actually are riskier with higher debt exposure, whilst they have less spending power. In the long run, it will not
74 ASIAN BANKING AND FINANCE | December 2017
Built for the younger customers Younger borrowers in Hong Kong can use the PrimeCredit app, for example, to complete and send their cash loan application online, including upload document requirements. The app helps reduce the application processing time and improves logistical convenience since customers do not have to step into a branch. After submitting the loan be able to sustain our overall profitability. application online, the customer can check So, we have to significantly rejuvenate our the loan status through the app without base.” having to contact an agent. The app was designed with the concept PrimeCredit app of straight-through application or STA, To connect with the younger audience which PrimeCredit has embraced since and generate sales leads, PrimeCredit 2015 and is marked by three key steps: introduced a brand campaign around a Upload information, instant approval new key proposition: “I get you, and I’ve and instant draw-a-loan. “Consumers are got your back,” which means PrimeCredit living in the moment, enjoying life,” said the understands and supports you as always. spokesperson. “In order to let consumers The brand campaign proved effective with solve their financial urgency anywhere and applications from new customers aged 18 anytime, the PrimeCredit App was launched to 30 rising 34%. to increase the “Pricing is not the flexibility on core concern of the loan application.” “For PrimeCredit, this hyper target audience, The not to mention focus on younger spenders is PrimeCredit that it was difficult not only a marketing strategy, app is the same to differentiate but a survival imperative. platform that ourselves when In the past five years, handles loan all brands were disbursements PrimeCredit customers aged fighting on interest and repayments rates. Certainty on over 35 increased from 60% after a loan loan approval and to almost 80%.” is approved. trustworthiness Customers were the biggest can check the concerns,” for younger borrowers, said a amount of available credit anytime. They PrimeCredit spokesperson. “Therefore, can also pre-set withdrawals or transfer we did not include any interest rates in revolving loan disbursements to any our advertising material intentionally. designated bank account, speeding up Instead, we focused on product and service transaction time. promises.” “We understand that speed is essential The firm says the branding campaign in this fast-changing environment, so captured the sentiments of younger we strive to be innovative for customer borrowers and acknowledged the
Finance Company of the Year - Hong Kong new brand, with its outstanding mobile app, is so successful that applications have increased by almost three times, whilst young customers increased by 202%.
WeWa Card App interface
convenience. We are the first in the market to adopt revolving loan on mobile,” noted the spokesperson. The PrimeCredit app also comes with a Balance Transfer 360° advisor that provides recommendations on the optimal repayment plan. The Balance Transfer 360° advisor computes the repayment plan based on customer preference (lower repayment amount or shorter repayment period), and outstanding credit card and loan balances. To protect customer information and prevent unauthorised transactions,the PrimeCredit app features Touch ID fingerprint authentication. WeWa Card app PrimeCredit also created a new brand geared towards the free-spirited younger generation called “WeWa”, which comes with its unique credit card and interactive mobile app. “Major banks had been mainly targeting the high-net-worth individuals with air-miles and high cash rebates as rewards, which unfortunately mass young consumers may not be able to enjoy”, said a PrimeCredit spokesperson. “The younger generation lives life in the moment and loves to share their fun experiences. So we created a new brand, called WeWa. It stands for instant fun, excitement, and rewarding interaction. ” WeWa is not just a credit card. It’s a totally new and unique customer experience. Unlike credit cards where customers need to wait for months in order to accummulate enough air miles or bonus points and redeem the rewards, WeWa promises instant gratification – Shake & Win Reward, supported by its interactive mobile app.
Right after the card is swiped, customers can instantly shake the mobile phone and draw the instant surprise reward. The prize is guaranteed, and available rewards such as a cup of coffee, a scoop of ice cream, or even the whole bill to be paid by PrimeCredit – totally free. The WeWa mobile app also drives user-friendly experience with features for added convenience. It allows for instant balance and transaction tracking updates after every card purchase, turning a large spending transaction into an interest-free 3-month installment in just one click and a Touch ID fingerprint authentication. When travelling overseas, as most young spenders like to do, they can set up the ATM cash withdrawal function and set withdrawal limits through the app. The mobile app has become the most important part of WeWa credit card, bringing the brand proposition into a real and solid credit card usage experience. The
The key is innovation With their spiffy new mobile apps, PrimeCredit is looking to add “innovative” to its list of brand superlatives. The 40-year-old financial institution has already earned the “trusted” mark amongst Hong Kongers, with Ipsos research in July 2017 naming it the top financial institution/bank for personal loan, with citations in having best customer service and being the most likely choice for customers to consider using. “In this changing world, the traditional operation of personal loan or credit card may not fulfill customer needs. The key for us is to be innovative,” said the spokesperson. “We also have aspirations to be a responsible financial institution, so we encourage people to manage their wealth effectively so as to enjoy the lifestyle they desire. We aim to assist customers on their cash flow needs, not encourage overspending.”
CONTACT Company name: PrimeCredit Limited Address: 23/F, Tai Yau Building, 181 Johnston Road, Wanchai, Hong Kong Phone number: +852 2530 3666 Fax number: +852 2290 0368 Website: www.primecredit.com
Warning: You have to repay your loans. Don’t pay any intermediaries. Complaint Hotline: 2111 2999 Money Lender’s Licence Number: 599/2017
WeWa Card card face
ASIAN BANKING AND FINANCE | December 2017 75
International Retail Bank of the Year - Singapore Advertising Campaign of the Year - Singapore Social Media Initiative of the Year - Singapore
Citi – Powered by digital to be the best
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he accelerating evolution of digitisation has pervaded every facet of our lives and revolutionised the way and pace at which companies conduct business and communicate with customers. Mobile technology plays an even bigger part in this change, which has empowered consumers to become increasingly connected. The mass adoption of mobile technology has given consumers an unprecedented level of convenience and truly transformed their behaviour and lifestyle. Serving the digital customers At Citi, we have been focused on Han Kwee Juan, CEO accelerating investments in our digital capabilities to provide a frictionless, seamless, intuitive and always-on with FinTech companies and consumer banking experience for all our customers. brands across the globe. Recognising that our customers are now By opening up Citi’s APIs, we embrace spending their time and managing virtually an agile approach to accelerate the most of their day-to-day needs via their introduction of innovative client solutions mobile phone, we have centred our digital and banking services and significantly transformation efforts around a mobileaugment the customer experience. In a first strategy to improve every aspect of span of a few months, we have introduced their mobile banking experience. seven partnerships leveraging API, starting Starting with the new with home-grown start-up “An important part of online grocer honestbee, Citi Mobile app, our customers are able to followed by AXA, Citi’s digital strategy bank on-the-go with the is to be relevant in key Moneysmart and more enhanced interface and digital ecosystems for recently, SingSaver.com.sg. functionalities that enables our customers.” quick and easy access to Digital partnerships information and payments, Consumers of today all in the palm of their hands. seek “micro-moments” of truth and make Next, we introduced Citi Pay, the bank’s decisions at different touch-points proprietary global digital wallet for Android along their purchase journey. Citi’s phones that offers a simple, convenient open banking strategy seeks to offer and safe way for our customers’ mobile customers a connected, ubiquitous and payments. Citi was the first global bank in intuitive digital experience by giving them Singapore to introduce a proprietary digital an unprecedented level of convenience wallet, and our customers were the first and access to the bank wherever they for the bank globally to experience this are digitally active. This is made possible seamless payment solution. through the strategic alliances that we have established with leading digital players Open banking architecture and popular consumer brands which are an An important part of Citi’s digital strategy integral part of their lifestyle. is to be relevant in key digital ecosystems By integrating our services into key for our customers and this demands applications, we are able to offer our transformation of the bank from the inside customers greater value from their banking out as well as the outside in. The launch of relationships via the platforms and channels Citi’s Global API (Application Programming that they regularly engage. Some of these Interface) Developer Portal in November include the ride-hailing service Grab, online last year marks the evolution of the retailer Lazada, and online hospitality bank’s technology to open architecture to service Airbnb among others. facilitate collaboration and partnerships Through these platforms and channels,
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we are able to offer customers choices in how they make payments with their Citi credit cards, such as using their credit card points to pay for rides or offset their retail purchases, solutions which would not have been made possible in the past with a traditional banking business model. As of today, 80% of Citi reward points are redeemed instantly by our customers at point-of-sale. Customer experience matters Understanding our customers and their needs has been a driving force for improving the customer experience at Citi. As global bank with a predominantly urban and globally mobile customer base, we have to exceed our customers’ evolving expectations as they embrace mobile technology with extraordinary speed. Remarkable, mobile and social form the core of our approach. Remarkable in all elements of the design, strong focus on ‘mobile’ solutions, and being socially integrated to be present at places where our customers are most digitally active. The new economy is about frictionless transactions, curated experiences, seamless service and higher value. Leveraging the best of digital is what we have done to become The Best Bank for our customers.
CONTACT Company name: Citibank Singapore Limited Address: 8 Marina View, #23-00, Asia Square Tower 1, Singapore 018960 Phone number: +65 6225 5225 Website: www.citibank.com.sg
Digital Banking Initiative of the Year - Indonesia
BCA wins Digital Banking Initiative of the Year at the Asian Banking and Finance Awards 2017
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CA wins Digital Banking Initiative of the Year for its API Project at the The Asian Banking and Finance (ABF) Retail Banking Awards 2017, held at the Shangri-La Singapore on 13 July 2017. The ABF Retail Banking Awards recognise banks across Asia that stand out with groundbreaking products and services despite the various challenges the banking sector is facing. The panel of judges was composed of highly-respected accounting firms Mohit Mehrotra, regional head of financial services, strategy & operation at Deloitte; Liew Nam Soon, ASEAN managing partner at Ernst and Young; Egidio Zarrella, ASPAC head of banking and capital markets, KPMG; and Andrew Taggart, partner, financial services leader, PwC Southeast Asia Consulting. The ABF Retail Banking Awards was organized by the Asian Banking and Finance Magazine, the leading publication for banking and finance executives in Asia, which focuses on commercial and retail banking and on securities market from a banking perspective. What is BCA’s API? BCA’s application program interface (API) was launched to support e-commerce merchants, smartphone-based payment apps, FinTech companies and startups. The contribution of the API to BCA that it was more focused on the transaction volume generated from such partnership. An API is a set of routines, protocols and tools used by developers to build software applications. APIs enable partners to easily connect to BCA’s banking services and enjoy various information and banking transactions in an easy and fast way. The introduction of API has led to significant reduction in implementation time and implementation cost to business customer merchant sites and apps in accessing BCA’s banking transactions. This has transformed the landscape of the type and size of companies bearing such capabilities. Businesses, big and small, are now able to connect themselves to the bank via APIs. Most of these small businesses are used to accept payments via separate transfer transactions from their customers.
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Asian Banking & Finance Publisher Tim Charlton and PT Bank Central Asia Tbk Senior Executive Vice President Strategic Information Technology Hermawan Thendean
to use them to accept payments for a These transfer transactions can be done business, is limited only to the businesses’ via another channel and verifying the imagination and creativity. completion of such transfers can be time The application for an API-based consuming for them. The use of APIs payment system is there for all types of has enabled these small businesses to e-commerce merchants, accept payments smartphone-based directly from their apps, FinTech websites and “The introduction of API has payment companies and startups. apps. Completion led to significant reduction Today, BCA’s APIs is and verification in implementation time and being used by various of the transfer companies from popular is real-time. implementation cost to This seamless business customer merchant ride-sharing providers to online shopping sites integration means sites and apps in accessing and online community easier and faster BCA’s banking transactions. forums. With the completion of This has transformed the massive growth in payments for the landscape of the type and smartphone use, BCA business owner and expects that over better customer size of companies bearing time, the emergence experience for the such capabilities.” of app-based payment end-user. platforms using BCA’s The output API will contribute the from an API is landscape of payment for businesses of pure data – i.e. without presentational any type and size. information. The use and formatting of such data is entirely done by the client’s site CONTACT or app. This gives clients the freedom to present the information as best they could Company name: – independent of the source. This shift PT Bank Central Asia Tbk fosters creativity and innovation to the Address: Menara BCA – Grand Indonesia, MH business owners. Thamrin Street No. 1, Jakarta 10310 As BCA’s APIs can be employed in a Phone number: +6221 2358 8000 number of computing platforms and whose Fax number: +6221 2358 8335 output can be consumed by a wide range of Website: www.bca.co.id clients – a browser, a smartphone or tablet app or a desktop program. The potential
Mobile Banking Initiative of the Year - Hong Kong Digital Banking Initiative of the Year - Hong Kong Online Securities Platform of the Year - Hong Kong
Bank of China (Hong Kong) devotes to explore opportunities in the era of Mobile Payments
Mr. Michael Wang Deputy General Manager of E-Finance Centre, BOCHK
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ank of China (Hong Kong) (“BOCHK”) has been promoting FinTech application actively to provide customers with more secure, comprehensive and convenient banking services. With the rise in use of smartphones, BOCHK has been devoted to bring customers a holistic and agile mobile banking experience, catering to customers’ demands of requiring access to banking services anytime and anywhere. Fostering mobile payment development BOCHK has taken a massive leap forward in promoting a cashless lifestyle amongst customers, turning phones into wallets. Bank of China (Hong Kong) and WeChat Pay Hong Kong collaborate to promote local mobile payment usage in Hong Kong, offering customers a faster and simpler one-stop mobile consumption experience. Customers can bind BOCHK credit cards with WeChat Pay to conduct payment or make a fund transfer to friends. Mr. Michael Wang, Deputy General Manager of E-Finance Centre, BOCHK said, “2017 is the base year of Mobile Payments for Hong Kong. Different kinds of mobile payment services have emerged during
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invited tertiary students to use the Artificial 2017. There is a broader range of services Intelligence Investment Model provided by provided. Banks are gradually collaborating ASTRI to design investment strategies and with Internet companies, building a trade in the Virtual Securities Investment collaborative advantage and enhancing Platform. This aims to boost their synergy to create greater value. Changes knowledge about are happening.” stock markets and In addition, “From banks’ perspective, the latest Fintech in the aspect of collaborating with internet applications, mobile payment, sharpen their skills customers can also companies can help enhance and provide a transfer money to customer experience and platform for them their friends and technological innovation. It to the investment family via mobile also expands banks’ customer experience phone number acquisition channel and accelerate needed. using the “Small banks’ transformation in digital Looking ahead, value transfer” BOCHK will service. Customers banking aspect.” continue to uphold can use Apple Pay the customerand Samsung Pay centric philosophy and give customers to make payments with phones in a quick, access to more comprehensive and convenient and secure way. BOCHK will convenient digital banking service. continue to cater for different lifestyle and financial needs of customers, ensuring that Experience the one-stop customers can conduct more sophisticated mobile banking service now! transactions on their mobile devices. In the future, BOCHK will keep fostering the growth of mobile payment in Hong Kong. Applying biometric authentication The “Fingerprint Authentication” service was launched this year. Customers can simply tap their mobile phones with fingers to access mobile banking promptly and enjoy digital banking services. This new service significantly reduces the login time which is highly welcomed by customers. BOCHK is also the first bank in Hong Kong to introduce the “Finger vein Authentication” service, with the application of Finger vein Authentication in branch counters and ATMs. Through biometrics, customers can use their finger instead of password or signature to complete transactions. This greatly shortens the transaction time and further enhances customer experience. Working with research institutions BOCHK works keenly with innovative research institutions to explore new Fintech application in banking. During the year, BOCHK has co-organised a Smart Investment Contest with the Hong Kong Applied Science and Technology Research Institute (ASTRI). In particular, we have
Search “BOCHK” on App Store or Google Play, or scan this QR code to download BOCHK Mobile App to enjoy the one-stop banking!
Come Follow BOCHK on WeChat! Search “BOCHK_Banking” or scan this QR code in WeChat!
CONTACT Company name: Bank of China (Hong Kong) Limited Address: E-Finance Centre, 3/F, Euro Trade Centre, 13-14 Connaught Rd Central, Central, Hong Kong Phone number: (852) 3982 6917 Fax number: (852) 2728 5498 Website: www.bochk.com
Website of the Year - Indonesia
Bank Ganesha: Showing remarkable evolution through growth and innovation
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ank Ganesha (“Ganesha”) is a private bank in Indonesia within the BUKU2 (core capital IDR 1-5 trillion) category. Established in 1990, Ganesha started a major transformation in mid-2015 and set out a new business aspiration, to be the ‘Everyday Bank in 2020’. As part of its strategy, the Bank then focuses on several key initiatives, whereby developing innovative channel and IT capabilities are the fundamental pivots to make its vision ‘To Be the Best Bank in Class, Delivering Reliable and Innovative Products Through Excellent Service’ a reality. Within the next two years, despite a challenging macroeconomic backdrop, Ganesha has undergone a remarkable revolution, experienced rapid growth, and delivered record financial performance by formulating a new strategy and focusing its efforts on key areas with greatest impact and long-term value creation.
rose 407% yoy, enabling Ganesha to ascend to BUKU2 classification and offer more products and services, including Mobile/ Internet Banking, Credit Card and Trade Finance.
Brand building and customer service Ganesha also launched multiple-front initiatives to improve branding and increase operational efficiencies. The bank revitalised branding on all products and services, providing modern and fresh look on both tangibles and intangibles; optimised its network by opting for selective expansion, relocating and/or refurbishing existing branches; introduced Service Culture and established higher standards on service quality; and launched a new 24-hour Customer Care Center. A key initiative is to revamp and relaunch the bank’s website which aims to inform clients about the latest promotions and developments. The goal for the website is for it to be visually appealing Building scale through strategic alliances: to key target segments, especially the Ganesha partnered with Mitra Adi Perkasa millennial generation, and to serve as one (“MAP”), one of the biggest retailers of the customer in Indonesia. acquisition tools, Ganesha in conjunction with introduced “Despite a challenging digital marketing. an innovative macroeconomic backdrop, To achieve this, the savings product Ganesha has undergone team incorporated named Ganesha a remarkable revolution, elements based - MAPCLUB experienced rapid growth, on the CRAVE Savings, where (Creativity, customers’ and delivered record financial Responsiveness, savings and performance by formulating Attractive, Valuable their shopping a new strategy.” info and Excellence) journey becomes philosophy: use of a more beneficial dashboard-style experience. The layout, shortcut buttons and icons, clean partnership is mutually beneficial for both concise look, installment calculator and Ganesha and MAP. Ganesha’s customers informative contents. and MAPCLUB members who open Ganesha The success of the bank’s initiative in – MAPCLUB Savings can enjoy interests, rejuvenating its website earned it the MAPCLUB loyalty points. ‘Website of the Year - Indonesia’ award in the Asian Banking & Finance Retail Banking Financial management, inorganic growth Awards 2017. Ganesha conducted and completed its Initial Public Offering in 2016 to strengthen Strong gains in key metrics long term funding structure for business Despite the difficult global and domestic expansion. Oversubscribed 13x, the macroeconomic backdrop, Ganesha not IPO saw robust demand from investors only survived 2015-2016, it thrived with amidst current market condition and tight gains made across all areas of profitability, competition for funds. Shareholders’ equity 82 ASIAN BANKING AND FINANCE | December 2017
Surjawaty Tatang President Director Bank Ganesha
lending, deposit taking, capitalisation, branding, organisational capacity and service quality. The bank’s growth performance is better than the national banking industry average in many key metrics. During the first semester of 2017, net profit increased 58% yoy driven by strong revenue generation, disciplined cost management and asset quality improvement. Assets also increased 37% yoy on the back of a 40% loan book growth. Funding base is diverse and is up 52%. Gross and net NPL ratios improved to 1.35% and 0.82% in 1H17 from 2.13% and 1.11%, respectively, a year prior.
CONTACT Company name: PT Bank Ganesha Tbk. Address: Wisma Hayam Wuruk 2nd fl.; Jl. Hayam Wuruk no. 8; Jakarta 10120; Indonesia Phone number: (62)21-2910-9900 (hunting) Fax number: (62)21-2910-9992 Website: www.bankganesha.co.id Email: marcomm@bankganesha.co.id
OPINION
Liew Nam Soon
Seeking growth amidst disruption
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sian banks are focussed on finding growth under the current market conditions, which present opportunities in terms of new areas of business growth, as well as challenges in the form of competition from non-banks and evolving regulatory requirements. Attractive growth opportunities exist in customer segments like small and medium-sized enterprises (SMEs), wealth management, and the unbanked in many emerging markets. There is plenty of innovation required, including leveraging data and technology to acquire and serve these customer segments to drive new revenue growth. However, the challenge is that much of this innovation and disruption comes from financial technology (fintech) startups. If traditional banks do not respond adequately, they risk being made irrelevant. The other big challenge is that it is often not a level playing field between banks and fintechs. Compliance has added another layer of cost and complexity to this, making it difficult for banks to compete. However, regulations are evolving to address this challenge. Ultimately, the winners will be those that can best acquire market share, with truly differentiating propositions whilst managing costs — of which there is no easy “one-size-fits-all” solution. Emerging trends in the banking sector One key trend is banks are looking for growth under market conditions where there is widespread disruption and competition. In the EY Global Banking Outlook 2017, only 11% of respondents expect their bank’s financial performance to improve significantly in the next 12 months. Over the next 12 months, banks are focussed on finding profitable growth through new business models, by leveraging data, technology, managing costs, and working with fintechs; meeting regulatory compliance and reporting standards; and enhancing cyber or data security. There are several positive conditions, including rising affluence and previously unbanked segments in the emerging markets, which provide new revenue growth areas. Initiatives like the One Belt One Road has also had a positive impact on Asian businesses and investments, affording new financing opportunities for banks. Additionally, there are rich opportunities in SME banking and wealth management. In SME banking, opportunities exist to apply alternative credit models and leverage digital offerings from fintechs to gain access to previously underserved corporate customers. There are also new underserved consumer segments yearning for banking services like payments, transfers, investments, and savings. Personalised wealth management services is no longer exclusive to the ultra-high net worth clientele. The mass affluent is being targeted through robo-advisors and client wealth portals. Quicker onboarding is enabled through digitalised processes with appropriate controls. Many banks in various countries are at different stages of being fully ready for a digital economy. Whilst there is strong awareness
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Liew Nam Soon Asean Managing Partner, Financial Services, EY
that disruption in the industry is real, many traditional banks are still bogged down by legacy systems and mindsets. There are a number of challenges for banks: • Difficult decisions to be made on whether to acquire new, develop from scratch, or outsource to vendors or fintechs. • Customer front-end platforms, which may be outdated or pale in comparison to those of non-banks in terms of customer experience. • Traditional technology vendors may not provide the right solution to help banks in revamping these systems and platforms — conversely, fintechs may provide part of the solution, resulting in a need to “stitch” certain fintechs and traditional techs together. • Fintech innovations that are disrupting traditional banking models, and forcing them to rethink their customer acquisition and retention strategies. It is interesting to observe that many regulators are beginning to level the playing field for financial institutions, applying common and customised regulatory frameworks for traditional banks and fintech players. This move is helpful to embrace innovation whilst allowing safeguards for customer data and privacy. On this, there are a number of key developments, such as: • Regulatory sandboxes that provide a safe environment for the testing and development of innovative solutions. • Banks are looking to collaborate with fintechs would still have to deal with issues regarding compliance, cybersecurity risks, and integration risks. • Fintechs may have the advantage of agility but banks have the advantage of experience, customer base, reach, and scalability It is clear that we are into a “new normal” for banks. Customers now have many choices from traditional banks and fintechs. Banks as a main financial services provider are evolving and the winners will be the banks that can evolve their business models with agility.
ASIAN BANKING AND FINANCE | December 2017 85
OPINION
HO & krishnamra The future of risk in financial services
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he regulatory and business environments have become more volatile and unpredictable. Financial institutions have also faced a tsunami of new regulatory requirements which have driven up compliance costs, whilst increased capital and liquidity requirements have reduced returns. At the same time, fintech startups are threatening to disrupt traditional financial services business models. As a result, risk management in financial services is at a crossroads. Financial institutions need to decide if they will continue with business as usual or rethink their approach to risk management. As they plan for the new era of risk management, institutions should consider the following six imperatives: 1. Increase focus on strategic risks and improve identification and management of these risks; 2. Rethink the three lines of defence by enhancing business unit responsibility for managing risks and clarifying second line of defence activities; 3. Leverage emergent technologies to increase efficiency and effectiveness of risk management; 4. Establish a formal conduct and culture programme to build customer trust and gain a clear strategic advantage; 5. Enhance risk management capabilities to build a nimble infrastructure able to address newer non-financial risks as well as the challenges of regulatory fragmentation; and 6. Manage capital and liquidity strategically by enhancing governance structures and decision-making processes. In this article, we focus on three imperatives that we have observed in Southeast Asia (SEA): Establish a formal conduct and culture programme Recent instances of inappropriate behaviour by employees at financial institutions have led to an increased focus by senior management as well as by regulatory authorities on the importance of instilling a risk-aware culture and encouraging ethical behaviour by employees. Efforts in this area will need to be enhanced to demonstrate a programmatic and sustainable approach to conduct risk. Organisations are placing increased emphasis on an individual’s ethics, compliance, and history during the hiring process, as well as refreshing recruitment, induction, training, and development frameworks. The Monetary Authority of Singapore is adding an ethics and skills component to existing financial adviser and market intermediary competencies. Enhance risk management capabilities Institutions will need to integrate their siloed responses to the many regulatory requirements that have been introduced in recent years. They will also need to leverage the power of RegTech solutions to increase their agility in responding quickly to new developments, whilst providing the analytics that support more effective risk 86 ASIAN BANKING AND FINANCE | December 2017
HO Kok Yong Financial Services Industry Leader Deloitte Southeast Asia
Somkrit KRISHNAMRA Financial Services Industry Risk Advisory Leader Deloitte Southeast Asia
management. An important Basel regulation which will apply to Domestically Systemically Important Banks (DSIBs) in SEA is the BCBS 239 principles on risk data aggregation and risk reporting. Banks will need to continue efforts on data management programmes such as those spurred by the regulation. These requirements often trigger additional enhancements in the fields of data governance, data quality, and risk reporting framework. They also push the banks to promote further collaboration amongst the key stakeholders: risk, IT, finance, and business units. Strategically manage capital and liquidity Recent regulatory requirements have significantly increased capital and liquidity requirements. In the current low revenue environment, institutions will need to consider carefully the impacts of their business strategy on capital and liquidity so they can improve their returns on equity by optimising the use of these scarce resources. Some banks in SEA face new liquidity requirements including the liquidity coverage ratio and the net stable funding ratio introduced in Basel III. In response, banks should develop a robust capability to measure capital and liquidity so the institution can understand the relative capital and liquidity needs of each business unit and how the business unit contributes to the institution’s overall capital and liquidity profile. Institutions will then need to build capital and liquidity measures into their strategic plans and management approaches and re-evaluate them periodically. Whilst we’ve only highlighted three, institutions will need to address these six imperatives in a coordinated programme in order to be effective. Each institution will need to decide whether to continue with business as usual, running the risk of being unprepared for new risks, and falling behind their peers and regulatory expectations or seize the opportunity to take risk management to an entirely new level that truly provides the capabilities to support the organisation’s strategic plan.
ASEAN SME Bank of the Year
OCBC Bank puts new spin to SME banking, cementing its lead in the ASEAN region to find out more about the business. The sales staff will utilise the customer’s existing data, such as identification documents, and proceed to open the account if the application process is successful. A regional strategy OCBC Bank’s consistent regional strategy also enabled it to be the only bank in Indonesia to offer multiple currencies in a single account. Together with differentiated features such as a flat fee for telegraphic transfers (TT), this feature enabled the bank to grow its average account balances significantly. With 610 branches in the region, Christie Chu, Head of Emerging Business, Global Commercial Banking, OCBC Bank OCBC Bank aims to further establish its presence by focusing its efforts on high-potential cities such as Penang strategy has always been, ‘be the first bank’ hen OCBC Bank launched the and Surabaya. In both cities, OCBC from day one,” she added. Working Capital Loan for young Bank leverages its sales staff to drive As digitalisation transforms the world businesses, banking executives productivity, acquisition, and growth. of finance, OCBC Bank has also made were in for a surprise. The platform received “We are often called upon by innovation a primary aim, especially for a huge amount of interest from hopeful government bodies and associations the tech-savvy startup segment. Chu entrepreneurs. As customer needs in to share our opinions on strategies or said that in the past year, OCBC Bank the region grow and evolve, OCBC Bank initiatives that are being piloted. This year, focused on leveraging big data to drive remains at the forefront of understanding as GovTech drives initiatives on building a banking decisions and strategies. Since expectations and delivering perfect national digital then, the bank solutions for the young and vibrant SME and identity, OCBC has been able to startup communities. “We keep a close eye on the is proud to be analyse customer For the longest time, SME banking has evolution of technology to part of the pilot behaviour and been a strategic space for OCBC Bank’s consistently develop our internal to utilise MyInfo predict outcomes key markets of Singapore, Indonesia, and analytics capabilities in areas such on our consumer more precisely, Malaysia. OCBC bank particularly focuses on-boarding enabling it to on two customer segments — startups as advanced machine learning platform. We refocus its targets and growing businesses — and ensures algorithms and visual analytics also partnered and increase that programmes and services applied techniques. “ with Singapore marketing efforts. in Singapore are adapted in Indonesia Press Holdings “We keep a and Malaysia. With a consistent regional to offer financing advice to businesses close eye on the evolution of technology to strategy for SMEs and startups, OCBC bank via the newly launched bilingual sgsme. consistently develop our internal analytics is confident that its core markets will grow sg portal and we are also the sole bank capabilities in areas such as advanced at a faster pace. partner for the annual SME Centre machine learning algorithms and visual conference which draws in over 1,000 analytics techniques. To harness the data Be the first and the best SMEs each year,” Chu added. insights we collect, we look to all channels Christie Chu, head of emerging business, including digital channels as the enabler Global Commercial Banking, OCBC Bank, in delivering products and services that said that their excellent reputation in SME CONTACT customers will value,” she said. banking is a fruit of the bank’s dedication For instance, OCBC Bank’s existing clients to their customers from the very beginning. Company name: OCBC Bank are no longer required to visit the physical “Be with the customers from day one. It’s Address: 65 Chulia Street, OCBC Centre, branch to open new business accounts. With like the first card concept. If you apply it to Singapore 049513 just an e-mail account and a mobile phone, the business account, the relationship will Phone number: +(65) 6538 1111 a client can communicate with the bank’s strengthen. When the customer grows, they Website: www.ocbc.com sales staff who will then make a short call might need more than one bank, but the
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ASIAN BANKING AND FINANCE | December 2017 87
OPINION
craig davis
The risk and compliance function of the future
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sian banks have seen an exponential growth in regulatory requirements in recent years, including a greater focus on consumer protection, market integrity and a demand for faster remediation of supervisory issues. This has added to the cost of operationalising compliance across the three lines of defence. For instance, firms are investing heavily on the business side to develop consistent methodologies, enhance data lineage, and implement risk identification. The industry’s approach to compliance though has been tactical and has amplified the need for end-to-end tools and platforms capable of automating and integrating front-to-back operations with compliance requirements that will ultimately drive accountability into the first line. As firms continue to make technological advancements that enhance customer experience and increase convenience, the next challenge for Asian banks is to look for practical and more effective ways to take advantage of “big data” — customer, risk, financial, operational, and more — that holds the potential to address many of these compliance concerns. However, managing this data efficiently, manipulating it effectively to serve a variety of purposes, ensuring sufficient quality to yield actionable results, and safeguarding it from cyberattacks remain elusive. Human biases and other limitations in managing big data’s multiple sources, volume, and complexity, whilst unavoidable, have only served to exacerbate these concerns. Although significant cost and effort has been expended, many firms still find themselves in non-compliance with regulatory obligations which has led to substantial fines and considerable reputational damage. From big data to smart data To address these challenges, Asian banks are exploring RegTech solutions to move away from the concept of big data towards one of “smart data.” Smart data uses machine learning and intelligent algorithms to make sense of big data’s overwhelming volume and complex patterns by structuring these patterns in a cost-effective way that is better able to identify current and emerging risks, predict compliance failures, and enhance business line coordination. Amidst significant business model disruption from increased competition and the rapid pivot toward growth objectives, it is critical that many of the manual processes firms have relied upon are automated to promote agility, scalability, and enhancements to customer and employee experiences. Increased competitive pressures from various market players, new entrants, and idiosyncratic customer demands for an improved delivery experience are also driving a need for agility in firms’ business processes and their ability to simultaneously achieve real-time compliance. To address this, many banks have either purchased or partnered with FinTech startups to support these key
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Craig Davis APAC Head of Financial Risk Management, KPMG Singapore
functions, assist in developing a lower-cost operating model, and provide technological innovations in financial product and service development. This trend is expected to continue for the foreseeable future as more banks consider their options. As profitability continues to improve and technologies become more scalable, the industry will likely continue attracting additional FinTech competitors, and smaller institutions will likely consider following the lead started by larger firms by leveraging technology hubs designed to foster innovation in product development and provide agile platforms to support growth. Risk management ‘as a service’ Another area that organisations are exploring is the use of the cloud and the benefits of ‘as a service’ solutions. This is of particular assistance to Asian banks as it allows them to access best in class solutions in a “turnkey” format which has the attraction of reducing costs through economies of scale, accessing specific intellectual property, and providing regulatory compliance. It removes a significant amount of the headaches involved in implementing a risk or regulatory driven project (think IFRS9), and moves it from a Capex expense to an Opex one through subscription services. It also opens up access to a range of cognitive approaches to enhance analytics or automate processes through the additional computational power that can be accessed. Whilst there are some regulatory hurdles that may need to be crossed, the general tone from the industry is that the benefits provided by these platforms far outweigh these challenges. Overall, Asian banks are having to change their mindsets around how to meet these challenges and leverage emerging technologies to remediate current tactical approaches and solutions, automating these processes to reduce costs and allow staff to focus on value adding activities, as well as differentiate themselves from their peers from a pricing or shareholder point of view.
Digital Banking Initiative of the Year - Malaysia
Check out how RHB leverages technology to boost Malaysia’s growing SME sector
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espite the challenges of going digital, Malaysia’s traditional businesses have kept up with the rise of new competition, and plenty of SMEs in the country are now leading in the digital front. As more businesses become tech-savvy and innovative, banks and financial institutions are also challenged to step up their digital game. Asian Banking & Finance interviewed Datin Amy Ooi Swee Lian, head, group business and transaction banking, RHB Bank, to talk more about the digital revolution and their win for Digital Banking Initiative of the Year at the Asian Banking and Finance Retail Banking Awards 2017. What are the impacts of digitalisation on business? With the rise of digital technology, businesses have become borderless and dynamic. Innovation and technology is now fuelling businesses across the globe and has helped turn SMEs into global powerhouses. Technology has enabled entrepreneurs today to harness the countless business opportunities available while maximizing efficiency and increasing sales. How does digitalisation help SME businesses become more efficient? Some of the important benefits of incorporating technology into businesses in Malaysia include: the ability of SMEs to use technology to raise their competitive advantage and sustainability, increased business differentiation and increase productivity while lowering operating costs, and faster and more efficient systems. What are some of the major digital trends among SMEs in Malaysia? As Malaysia continues its transition towards a digital economy, more traditional businesses are evolving while new businesses are sprouting. In the service sector, 90% of SMEs will likely be the most attractive sector to target for increasing the adoption of cloud-based computing services. Simple cloud computing solutions enables SMEs to save costs and reach out to a larger customer base. The cloud solution will help improve communications with different employees in the company,
help streamline workflow through better transactions. SMEs will then have access documentations and scheduling, as well as to the real-time financial position of their create inventory and customer database. businesses. In the past, business owners typically Other features include credit and debit had to be present at the business card terminals to enable card transactions, premises to keep an eye on the daily cash customised SME insurance packages collection. However, specifically for with cashless retailers to protect “RHB’s partnership with transactions, the their businesses, SAGE Software Asia Pte Ltd and business credit owner need not be will see the introduction of in the premises and cards to help SMEs SAGE One cloud accounting with expenses and will be able to attend to other business software. This cloud solution payment plans. matters. The remote Our latest offering, will be synced to the ePOS accessibility feature Merchant MPOS, is a terminal to enable automatic wireless device that allows business updates of transactions.” owners to manage accepts all types of their businesses card transactions from anywhere at anytime through internet- and is Chip & Pin enabled. Users can receive based tools. All this can be done through e-receipts via emails or phone notifications. the adoption of cloud-based systems and The MPOS is integrated into the merchant mobile devices. ePOS system to enable fast and convenient payment collection supported by bluetooth How does RHB support the growth of and Wi-Fi. With these added solutions in Malaysia’s retail and SME sector? place, SMEs are offered a fast, simple and In support of the retail sector’s growth, RHB seamless experience that connects them, has introduced its SME e-Retail Solution, through technology, to a more efficient and designed to improve business operations cost effective e-retail ecosystem. and point-of-sales experience for smallCONTACT medium enterprises (SMEs) and their customers. Company name: RHB Bank Berhad RHB’s partnership with SAGE Software Address: RHB Centre, Jalan Tun Razak, Asia Pte Ltd will see the introduction of 50400 Kuala Lumpur SAGE One cloud accounting software. This Phone number: 03-9206 8118 cloud solution will be synced to the ePOS Website: www.rhbgroup.com terminal to enable automatic updates of
Datin Amy Ooi Swee Lian, Head, Group Business and Transaction Banking, RHB Bank
ASIAN BANKING AND FINANCE | December 2017 89
OPINION
olsen & ford
How APAC financial markets can get the most from DLT
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ith all the noise surrounding distributed ledger technology (DLT), you’d expect participants in financial markets in Asia Pacific and elsewhere to be racing fullbore to get ready for it. But many are not. Presented almost daily with new claims about DLT’s disruptive and revolutionary potential, some executives have begun to wonder when they’ll actually begin to see some benefits from the technology. Financial market participants know DLT is coming. In Asia Pacific and around the world, about 80% of executives at financial institutions surveyed by Bain & Company believe the technology will be transformative, and a similar percentage expect their organisations to begin using it before 2020. Yet, at the same time, they’re hesitant to commit resources now. Amongst the market participants Bain surveyed, 38% said they’ve adopted a wait-and-see approach to DLT. What’s holding them back? First, uncertainty. It is hard to predict the exact timing or path of DLT. There are different types of DLT platforms (public or private, for example) and a wide spectrum of potential applications, from narrow cases such as proxy voting and Know Your Customer (KYC) vetting to broader uses such as posttrade clearing and settlement for equities. The way DLT evolves in a localised market like Australia, for example, is likely to be different from how it develops in a more connected market like Hong Kong. Much will depend on regulations that are still being formulated. Some regulators, such as the Monetary Authority of Singapore, actively support DLT innovation. Getting ready for DLT requires substantial investment, and it can involve working through tricky and expensive issues with legacy IT systems. Some firms, in an attempt to preserve near-term competitive positions, are trying to delay industry-wide adoption of DLT. Yet companies that are willing to be proactive and strategic about DLT, even in such a challenging climate, can gain an edge. DLT has the potential to broadly affect financial markets, but the most significant near-term impact is likely to be on settlement and clearing. Whilst a trader can now execute a transaction at lightning speed, it can take as long as three days for that transaction to settle. With DLT, execution, clearing, and settlement could occur simultaneously, minimising cost and credit risks. Bain estimates that across global financial markets, annual expense and capital cost savings from DLT could amount to 1-3 basis points of total global assets under management, or about $15 billion to $35 billion. DLT can eventually also play a role in improving reference data, including benchmark interest rates like Libor, replacing existing survey processes that are opaque and subject to abuse. A DLT-based benchmark-setting mechanism, possibly administered by trading venues and industry-wide utilities, could directly capture data from spot transactions. Beyond trading, DLT has the potential to change the way firms 90 ASIAN BANKING AND FINANCE | December 2017
thomas olsen Partner Bain & Company
frank ford Partner Bain & Company
80% of financial market participants say distributed ledger technology will be transformative
Source: Bain Blockchain Survey, 2016 (n=53)
interact with their clients in areas such as proxy voting, digital identity management and KYC. Broadridge, a global leader in proxy communication services, is developing a system to help make US proxy voting more efficient, secure, and transparent. As financial markets evolve with respect to DLT, companies will face game theory-type decisions. If they promote the early adoption of DLT across the ecosystem, they may benefit, but they may also end up disrupting their own economics and competitive positions. Yet if they’re slow to embrace DLT, they run the risk of being left behind. The most valuable DLT innovations can’t be developed in isolation; they require collaboration amongst participants, exchanges, and regulators. With so many participants involved across so many jurisdictions and asset classes, the adoption process will be messy and piecemeal — and this is the heart of the challenge. It may make more sense to share the costs as well as the benefits through industry utilities. One way or another, firms that want to reap the benefits of DLT will have to make significant changes to their processes, policies, and IT architecture. As part of their efforts to make their IT systems ready for digital, leading companies are taking some of the preparatory steps that will be necessary for DLT. Once a company has a perspective on how DLT is likely to evolve in the areas in which it does business, it can develop a systematic approach and a multi-year roadmap. Whether a company prospers or flounders in the DLT-dominated markets of the future will depend, in large measure, on strategic decisions it makes today. Once a firm defines a DLT-readiness posture and a high-level roadmap, its next step is to outline specific no-regrets initiatives. Many of the investments a firm makes, especially in IT, can bring benefits regardless of how fast the rest of the industry adopts DLT. Overall, the winners in DLT will be those that push the pace of change, rather than resist it.
Taiwan Domestic Technology & Operations Bank of the Year
Bank SinoPac redefines customer-centric innovation with temple banking
Bank SinoPac’s temple banking service
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hilst banks generally look to future spend huge amounts of time in unfavorable projections for driving necessary weather conditions. Before believers can digital transformations in their even pray, they have already spent a huge business models, some banks like Bank amount of energy in waiting and lining up SinoPac also look back to the past to see In its aim to reduce waiting lines and where digitalisation can fit in the traditional unload some work from the temple staff, day-to-day lives of their customers. With Bank SinoPac pioneered the Integration its aim to offer convenience and efficiency Temple Banking Service that provides wherever payments are involved, Bank cross-border integration digital banking SinoPac took to Taiwan’s temples and found services like ATM, mobile app, and opportunities to integrated cloud provide innovation in information. Clients can “To address some of these transactions. also rely on the Ann Tai gaps and go deeper into Chinese Lunar Sui automatic payment customers’ daily operations, service to work with QR New Year in Taiwan remains one of the codes for purchasing Bank SinoPac relies on its busiest seasons free blessing products highly-trained in-house of the country, as scanning. digital engineering capability, upon citizens and guests Ting Chen, chief a unit that not all banks have.” executive, retail banking flock to temples to light lamps and pray & products group at for good fortune. Bank SinoPac, said When Bank SinoPac saw that clients whilst banking in Taiwan continues to be face huge queues to pay temple staff in competitive, there are still plenty of gaps extremely cold weather, it discovered a that need to be filled so banks and clients huge opportunity to offer its services and can work together harmoniously. To address stay true to its “Banking is Simple” slogan. some of these gaps and go deeper into customers’ daily operations, Bank SinoPac Integrating technology and culture relies on its highly-trained in-house digital To be able to start the prayer practice in engineering capability, a unit that not all the temples, believers need to line up for banks have due to the popularity of thirdpayment and line up another time to fill out party suppliers. Having an in-house digital application forms. Due to the huge volume team allows Bank SinoPac to innovate at of people during the Lunar New Year, temple its own pace and allow bankers and the staff are overloaded with work and citizens developers to design entire processes
together. Chen added that Bank SinoPac places a huge importance on its talent, and aims to have a pool of people who understand finance and at the same time have a good grasp of technology and digitisation. People who understand the importance of going digital are sought after in the banking industry. “You do have to layout a very persuasive vision, because nobody is going to do the changes just like that. Sometimes you have to be doing a lot of internal marketing. People have that image in their mind, where would all these changes lead to? Setting goals is very important. We also need to extend collaboration and training to the employees outside our in-house digital engineering unit,” Chen said. Digital and traditional banking With 128 bank branches and 1,000 online channels, Bank SinoPac understands the digital direction of Taiwan’s banking landscape. However, Chen said branches are still needed in Taiwan. According to her, the digital channel can replace the time travelled to and from the bank, but it cannot replace the financial consultation expertise of the bank. Bank SinoPac introduced its Temple Featured ATM and Ann Tai Sui Temple Light app as solutions to the inconvenience and inefficiency that both temple staff and citizens experience as they practice their religious duties. Chen said these services show that digital banking does not have to be cold and indifferent and that it can have a place in a traditional cultural community. Today’s banking industry is steadfast in its aim of producing the bank of tomorrow, where digitisation is the name of the game and customers are at the forefront of innovation, but it also needs a much broader view to ensure that the bank of tomorrow does not neglect the importance of the past.
CONTACT Company name: Bank Sinopac Address: No. 36, Nanking East Road, Sec. 3, Taipei 104, Taiwan (R.O.C.) Phone number: 886-2-2506-3333 Website: https://bank.SinoPac.com
ASIAN BANKING AND FINANCE | December 2017 91
OPINION
EIICHIRO YANAGAWA Digital transformation: A new shape of core banking
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ustomer expectations for financial and banking services are rising at an ever faster rate. The approaches of banks are increasingly framed in black and white terms of good and bad. Banks found wanting or less than desirable are abandoned like sinking ships as customers take their transactions and businesses to more preferred institutions. Digital has made it simpler for customers to move their business to a different bank at the same time that it has made it possible for “undesirable” transaction business reviews to be disseminated nearly instantaneously — and as negative customer experiences can be shared in the blink of an eye, analog banks risk being left behind in the dust of the new digital era.
IT, customer relationship challenges Many existing core systems are designed, operated, and maintained as a platform (system platform) for building and providing product services. The repeated addition of product services, changes in new customer channels (such as telephone, the Internet, and mobile), and external connections have meant IT challenges for these system platforms. In other words, challenges exist in systems that stem from aging structural issues, challenges that include data model rigidity, lack of application flexibility, IT redundancy, as well as the duplication of labour. For banks today, establishing new customer relationships should be the top priority. To build an architecture to do so requires more of an outward focus on enhancing the experiences of customers than an inward focus seeking to improve processes to provide product services. Put in another way, this means that a platform that emphasises user interface is required, with consistency and simplicity across channels and products, and APIs allowing for ease of integration, both internally and externally, to entice greater collaboration and innovation. Both IT and customer relationship challenges must be simultaneously tackled and pursued in modernisation initiatives. Digital transformation means much more than the addition of a new digital channel. Rather, it signifies that a fundamental change involving moving from legacy architecture to a modern platform that can provide enhanced experiences for customers is paramount. Banks that fail to appreciate this and are not sufficiently careful can find that modernisation results recreate the same legacy problems they were designed to solve. Toward a new banking paradigm Celent believes that a turning point is coming — one in which the flow of product services will exceed the limits of vertical integration, and a shift to modular models (horizontal and vertical divisions of labour) will occur. The low-interest financial environment is transforming banks into companies that compete by marketing financial products, selling a vast array of products such as investment 92 ASIAN BANKING AND FINANCE | December 2017
EIICHIRO YANAGAWA Senior Analyst Celent
A holistic framework for digital in banking
Source: Celent
trusts, insurance, trusts, and real estate-related loans. Banking channels in their capacity as reliable aggregators are expected to offer advisory services related to financial services in general. A decoupling or split of the creation and sales of financial product services is already afoot. Meanwhile, the original core business areas of deposits, loans, and currency exchange, as well as the financial infrastructure that underpins them — the connection to the financial institution network, the mutual settlement and credit between financial institutions, reporting to supervisory authorities, and the core system that controls these — are rigidly structured, and, like a foundation of bedrock, not able to deftly handle this decoupling and separation. Advisory business operations as an aggregator of financial services and the creation and sale of financial products have already been partly unbundled and are in the midst of a shift to a more modular model (horizontal and vertical division of labour). In addition, human resources and organisations are also making the requisite changes to their possessed expertise. Nevertheless, the core business and fundamental operations are unable to change. Why? This is because business and IT architecture are resisting evolution and change. The Japanese banking industry experienced one-sided, unbalanced and shared, common core systems, but it has yet to experience unbundling. Modular Core Banking Based on these architecture discussions, Celent proposes the following modular core banking for the banking industry as it strives to undertake modernisation efforts. The architecture consists of three layers of modules: 1) management of customer experience; 2) management of product services, process management, and risk management; and 3) infrastructure management. Taking into consideration digitalisation and ways to facilitate a smooth transition to modernisation, Celent strongly recommends banks’ use of business case perspectives.
Afghanistan Domestic Technology & Operations Bank of the Year
Find out how Bakhtar Bank excels in serving the needs of the unbanked in Afghanistan
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here is an opportunity waiting to be tapped in the country’s banking and financial sector that could once again kickstart economic activities — and that is focusing on banking the unbanked, and serving the underserved (financially). Over 90% of Afghanistan’s economy remains unbanked, whilst 70% of businesses’ properties of all sizes are not registered, preventing these assets from being eligible as a collateral in loans and other financial services. This lack of inclusive and comprehensive financial inclusion on formal routes of banking means that majority of the population take the informal path, with many individuals, retailers, entrepreneurs, Bakhtar Bank’s headquarters in Afghanistan and business people operating small and medium-sized enterprises (SMEs) opting to expansion. transact financially with sarafs — or local Bakhtar Bank is currently focusing on money changers — which is risky, insecure, this segment of the population — retailers, and volatile. individual entrepreneurs, and SMEs — to This situation presents an opportunity for not only enroll them in formal financial growth and development in Afghanistan’s services but also incorporate them on banking and financial sector — particularly how to manage their in retail banking to finances properly. The fill the gap of formal “Bakhtar Bank is currently Bank’s professional financial inclusion focusing on this segment of the teams usually visit them on the unbanked population — retailers, individual at their work places to and underserved entrepreneurs, and SMEs — to talk to them about the segments of the not only enroll them in formal benefits and advantages population. Retail financial services but also of acquiring banking banking is arguably incorporate them on how to and financial services. also overlooked manage their finances properly.” Through these talks and in Afghanistan’s discussions, the agents economy given the can modify and custom inherent risk on fit products and services perfect for their providing financial instruments without business model to grow rapidly, whilst the client’s proper collateral and low managing their finances effectively. creditworthiness. Bridging a gap This is something of a gap that Bakhtar Bank is looking to bridge. By focusing on the unbanked and the financially underserved segment of Afghanistan’s population, the Bank wants to provide banking services to every nook and corner of the country to bring financial inclusion. Bakhtar Bank — Afghanistan’s third largest bank in terms of size, assets, and number of branches — plans to continue bringing familiarity to banking services, as well as saving surplus funds in banks for retailers, entrepreneurs, and SMEs planning for further business
Bakhtar Bank’s initiatives Every market in Afghanistan was thoroughly surveyed and the outcome recommended that there is little awareness from people about banking services. Since 2009, Bakhtar Bank is providing 100% financial support to its clients whilst acting as a financial consultant to SMEs —a sector that plays a vital role in Afghanistan’s economy. In order to facilitate social inclusion and access to finance, the following initiatives are being undertaken by Bakhtar Bank: The bank introduces faith sensitive
banking contracts and agreements. It also uses the latest state of the art Banking Digital Experience to provide an enterprise-class, open, modern, and scalable digital banking solution that allows the Bank to rapidly deliver digital capabilities without changing its existing core banking platforms: Oracle Banking Digital Experience offers a best-of-breed solution that includes digital marketing, customer and product acquisition, service, and social-engagement tools. Moreover, Bakhtar Bank recently acquired globally known banking software “Flex cube”, which will be implemented shortly to bring a handful of advantages and facilities to its customers. These technologies provide a spectrum of services helping corporate banks to improve the productivity of their knowledge workers, improving crosssell and up-sell, centralising product configuration and processing, providing end-to-end services across conventional and Islamic banking, and effectively managing operations and risk.
CONTACT Company name: Bakhtar Bank Address: Malalai zezhantoon Square Shar-eNaw, Kabul Phone number: 0776777000 -0792990099 Website: http://www.bakhtarbank.af/
ASIAN BANKING AND FINANCE | December 2017 93
OPINION
OLIVER WYMAN
Moving from “Fin” to “Tech”: Five key success factors in China fintech
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hinese fintech has caught the eyes of investors around the world with its explosive growth in the past half-decade. In our recent report Fintech in China: Hitting the Moving Target, we dissect this explosive growth, examine the imminent shift in the underlying value driver, and delineate the implications for market participants and investors. Since 2013, major segments of the fintech market — online peer-to-peer lending, online wealth management, digital insurance, and third-party payment — have doubled or even tripled every year. For example, the outstanding loan balance for online peer-to-peer lending platforms surged from RMB31 billion in January 2014 to RMB856 billion three years later (Exhibit 1). Such growth triggered massive injection of venture capital into China’s fintech. After achieving a staggering CAGR of 300% over the past three years, at $6.4 billion in 2016, China has overtaken the US as the global leader in fintech venture capital activities and represents 47% of total such investments, according to our research. Value driver shifting from “Fin” to “Tech” China has had a structurally imbalanced financial system with an underdeveloped infrastructure when compared to established markets. The structural shifts resulting from the Chinese government’s recent financial reform efforts, coupled with the skyrocketing internet and mobile penetration, has created an opportunity for fintech players to bridge the gaps in traditional financial services and serve the long tail of Chinese consumers by capitalising on their strong online presence and loose regulation. Nevertheless, the unregulated growth has led to several highprofile scandals. The Ezubao peer-to-peer lending platform made history as the biggest-ever financial fraud case in China after raising more than RMB1.5 billion in a Ponzi Scheme. Such incidents created growing concerns and prompted policymakers to incorporate fintech into the regulatory framework. As the window of regulatory arbitrage closes, future fintech leaders will differentiate themselves by pushing the frontiers of technological innovation and disrupting traditional financial services business models through three key technologies: big-data analytics, the Internet of things (IoT), and blockchain. Together, these technologies will create significant disruptions along value chains and bring about distinctive values for each of the four major areas of financial services: financing, investing, insurance, and transaction. Consider consumer finance as an example. The IoT created new, innovative sources of non-financial personal data that can be analysed using big-data analytics to aid the credit approval process, effectively expanding the “lendable” population. What does it mean for China’s fintech market participants? The potential for growth in China’s fintech remains massive, and players of all sorts will attempt to penetrate the market. Whilst there is no one-size-fits-all formula for success, we see five key factors that
94 ASIAN BANKING AND FINANCE | December 2017
Cliff Sheng Financial Service Partner Oliver Wyman Greater China
Exhibit 1: Indexed growth of China fintech segments*1
Source: WIND, Analysys, CIRC, Insurance Association of China
can increase its likelihood: 1. Data abundance and application: Access to or ownership of large amounts of proprietary data and the ability to derive insights from them allow future fintech leaders to differentiate in terms of both products and pricing. 2. Large customer base: A large customer base allows fintech companies to apply data-driven insights and directly monetise their customers. This in turn enables a fast accumulation of valuable data that can be further analysed to enhance product offerings. 3. Availability of proprietary and comprehensive products: Fintech players will need to develop adequate scale and obtain necessary licenses to enable a comprehensive and proprietary suite of product offerings. 4. Strong knowledge of financial services and risk management: Financial services and risk management expertise remain a prerequisite of success, allowing for efficient identification of useful data and construction of effective risk models. 5. “Fin plus tech” organisation and culture: A lean, flat organisational structure with product-driven teams will allow fintech leaders to shorten product development cycles and maximise returns by offering tailored products. Different types of players in the China fintech space will have to craft their own strategic agenda moving forward, considering their respective strengths and weaknesses. For example, incumbents would need to build data capabilities under a flexible organisational setup. This means leaner structure and culture with an operating model more suitable for fintech and innovation. Fintech players would need to apply for licences and find ways to monetise their user bases. As the fintech market dynamics becomes more complex, investors need to avoid overvaluing regulatory arbitrage, explore the broader player landscape, assess potential downside, and capture the value from technology and surrounding infrastructure.
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OPINION
ALICIA GARCIA HERRERO Chinese banks: An endless cat and mouse game benefitting large players
W
hen one door closes, another one opens up. As deleveraging moves up in the scale of objectives of the Chinese leadership, banks now face more restrictions from regulators. In any event, this is not the first time they find themselves in the regulatory whirlpool. From the usage of repo agreements to wealth management products (WMPs), and most recently negotiable certificate of deposits (NCDs), banks have been very creative in playing the cat and mouse game in front of evolving regulations. Flourishing financial innovation has helped China’s leverage process to continue unabated. However, with the tightened stance of open market operations by the People’s Bank of China (PBoC), liquidity seems to be increasingly scarce, pushing up the cost of funding. In fact, SHIBOR is already at record high since the difficult events in 2015, hovering very close to 3%. Regulatory pressure evolving much faster than before China’s central bank has introduced Macro Prudential Assessment (MPA) to contain financial risks in the economy, which serves as a quarterly report card for banks. Various indicators are included in the assessment framework from the beginning, such as loan growth and asset quality condition. Banks with poor score will be punished with a higher cost of funding. This is later further expanded to cover off-balance sheet WMPs, which has been a very common way among small and medium size banks to increase financial leverage and save the declining profitability due to lower net interest margin. Since the inclusion of WMPs into the MPA, the outstanding amount has already shrunk by 1.6 RMB trillion to 28.4 RMB trillion in May 2017. After the People’s Bank of China limited the use of WMPs, the latest move targeted at the issuance of NCDs, which are short-term, non-collateralised paper with an even higher funding cost than the SHIBOR. This has led to a fall in issuance, but has grown again since June 2017. The underlying reasons could probably be a lack of other options and the regulations are not as tight as they may appear on the surface. The most important point is that the PBoC’s pressure affects banks very differently: it penalises banks short of liquidity and benefits those long of liquidity. This simply means that China’s five largest commercial banks (all state-owned) are the winners (with an implicit government guarantee which allows them to benefit from flight to quality) whilst the others are the losers. Money market funds are the new intermediaries As liquidity is increasingly expensive, liquidity scarce banks have recently renewed their strategies to access funding in a different way, namely through money market funds (MMFs). Whilst banks are pressured to hold less interbank assets, money market funds (MMFs) are relatively more flexible. MMFs act as intermediaries to hold NCDs, and hence repackage products for retail and institutional investors. In fact, MMFs have seen a massive increase in July 2017, 96 ASIAN BANKING AND FINANCE | December 2017
Alicia Garcia Herrero Chief Economist for Asia Pacific Natixis
Money market funds (RMB bn)
Source: Natixis, Wind
rising 15% to 5.86 RMB trillion in a single month. As a relative measure, the size of MMFs has grown from 6.4% of the interbank market in January 2017 to 9.5% in July 2017. And 19% of the MMF is invested in NCDs as of Q2 2017. The quick pace of expansion may pose extra liquidity risks especially when three-quarter of the assets have a maturity less than 90 days. This kind of regulatory arbitrage will expand until the loophole is close as has happened with WMPs or NCDs in the past. It goes without saying that this only adds additional financial leverage to China’s already highly leveraged financial sector. Financial innovation The flurry of new funding instruments for Chinese banks is another sign of China’s financial innovation. Whilst positive in a vacuum, the reality is that the risks associated with such innovation do need to be assesses carefully. Chinese regulators are obviously aware, which explains their zeal to introduce new sources of financing in the PBoC’s MPA. However, that is only pushing banks new – and increasingly less safe – sources of funding. In addition, given the large share of state-owned ownership in Chinese banking sector with a much larger deposit base, the search for funding is only affecting one part of the banking sector. In other words, whilst small banks are struggling for liquidity, large banks stand to benefit from the regulatory crackdown. The latest 2017 Q2 results have confirmed our expectations that large banks can gain from regulatory arbitrage and risks are rising for smaller banks. In other words, the improvement in bank results is not only due to better economic conditions but also to regulatory arbitrage. Stateowned commercial banks (SOCBs) have seen improved net interest margin but generally not for smaller banks. This is mainly due to a continuous increase in funding in the shadow banking, which smaller banks heavily depend on. In other words, the improvement in bank results is not only due to better economic conditions but also to regulatory arbitrage.
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