Asian Banking & Finance (October - December 2016)

DISPLAY TO DECEMBER 31, 2016

the

awards issue ABF RETAIL BANKING FORUM: THE HOTTEST ISSUES IN SINGAPORE, BANGKOK ATM FRAUD: LEARNING ABOUT JACKPOTTING ATTACKS WHICH BANK HAS ITS HEAD IN THE CLOUD? DCM REVIEW: WHY PANDAS ARE EATING DIMSUM BONDS FOR BREAKFAST BIOMETRICS VS PINS: WHICH IS BETTER? FOREX FINTECH: BANKS CAN RUN, BUT NOT HIDE

C2 ASIAN BANK | JANUARY 2014

FROM THE EDITOR Publisher & EDITOR-IN-CHIEF production editor graphic artist

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We are proud to bring you the Asian Banking and Finance Awards issue, our biggest and most comprehensive year-ender yet. This 100-page issue features the most number of sector reports, exclusive interviews, and of course, the coverage of this year’s Wholesale Banking Awards, Retail Banking Awards and Charlton EastColes Awards.

Tim Charlton Roxanne Primo Uy Elizabeth Indoy

Rochelle Romero rochelle@charltonmediamail.com

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On its 11th year, the Retail Banking Awards recognised 65 winning banks from 24 countries, whilst on its fifth year, the Wholesale Banking Awards acknowledged 40 winning banks from 22 countries. It was truly the biggest Asian Banking and Finance Awards in history, with over 230 bankers attending the awarding ceremony held in Singapore in July.

You will also find exclusive interviews with bankers all over Asia as they share their insights on various issues: ICBC (Asia) CEO Jiang Yisheng on China’s Belt and Road Initiative; Bank of the Philippine Islands CEO Cezar Consing on Asian growth; Citi managing director Felimy Greene on digitalisation; Standard Chartered voice and virtual global head Stuart Beaumont on contact centres; and DBS CIO Neal Cross on the future of branch banking.

We also talked to a number of Asian bankers to bring you insightful sector reports on Forex, Islamic Banking, and Business Banking.

Enjoy the issue!

Tim Charlton

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Asian Banking & Finance is a proud media partner of the following events and expos:

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All editorial is copyright and may not be reproduced without consent. Contributions are invited but copies of all work should be kept as Asian Banking and Finance can accept no responsibility for loss. We will however take the gains. *If you’re reading the small print you may be missing the big picture    

MICA (P) 249/07/2011 No. 67

ASIAN BANKING AND FINANCE | DECEMBER 2016 1

CONTENTS

20

country report HK banks bear the brunt of China’s crisis

e

sp 40

COVER STORY More than 80 firms lauded at this year’s Awards programme

INTERVIEWS

FIRST 34 Asian banks have heads in the hybrid cloud

35 Burma’s road to liberalisation 36 Regtechs bring compliance relief 38 Voice biometrics vs PINs:

Which is more secure against data breaches?

40 Exploring the retail bank

of the future

financial insight The year the panda ate the dimsum

SECTOR REPORTS

44 ICBC (Asia) CEO reveals plans

58 Fintechs vs banks: Who wins

60 Islamic banks doubling

to capitalise on China’s Belt and Road Initiative

46 Why Bank of the Philippine

Islands’ CEO Cezar Consing is bullish on Asian growth

in forex? down on digital

62 Which banks are leading in digital business banking?

48 Felimy Greene on Citi’s digital

drive: Only 5% of all transactions happen in a branch

50 Standard Chartered reveals

why call volume to their contact centres declined 12%

52 DBS CIO Neal Cross reveals

Published Bi-monthly on the Second week of the Month by Charlton Media Group Pte Ltd, 101 Cecil St. #17-09 Tong Eng Building Singapore 069533

18

n

e cim

three key branch banking strategies for the future

OPINION 90 From loan-to-equity to loan-to-convertible bond swaps 92 Supporting trade finance in Asia

94 Banks fight to stay relevant 96 Regulation of domestic debit

card transactions in Thailand

For the latest banking news from Asia visit the website

www.asianbankingandfinance.net

News from asianbankingandfinance.net Daily news from Asia most read

RETAIL BANKING

RETAIL BANKING

Is a cascade of defaults on the horizon for Singapore banks?

AsiaPac banks to bear the brunt of IFRS 9 implementation pressures

Many traders feared that Swiber’s collapse could trigger a “cascade of defaults” on back of crosstransactions amongst oil and gas firms on top of threats from “unknown unknowns.”

However, UOB Kay Hian asserts that there has been no “cascading default” thus far. “It has been more than a month since Swiber filed for judicial management on 29 Jul 16 but another major default has not materialised,” the report noted.

Fitch Ratings says migration to International Financial Reporting Standard (IFRS) 9, or its local equivalent, is likely to create operational challenges across many of Asia Pacific’s banking systems.

These issues would have a negative initial effect on capital, and potentially raise the volatility of earnings and regulatory capital ratios.

IFRS 9 will be implemented in 2018 for most major APAC markets.

4 ASIAN BANKING AND FINANCE | DECEMBER 2016

BRANCH BANKING

Physical bank branches to die out soon in Singapore as banks step up digitisation: analysts It’s time to say goodbye to the brick and mortar bank branches as banks in the city-state find it cheaper and more efficient to utilise online estates with their digitization efforts.

According to Jefferies, mobile banking habits of millennials are well set, technology is becoming more affordable, and marginal cost to income ratios for digital channels are lower than traditional channels.

Co-published corporate profile

Fiserv outwits cyber thieves with advanced and relentless real-time protection

Data analytics helps ensure that partner FIs are protected from massive losses. holistic, data-driven approach to fraud protection,” says Andrew Davies, vice president, global market strategy, financial & risk management solutions at Fiserv.

Andrew Davies, vice president, global market strategy, financial & risk management solutions, Fiserv

F

inancial institutions are not only challenged to provide competitive financial products – they also have to make sure that these products are wellprotected in the confines of their company.

As such, Asian FIs have heightened vigilance in the wake of high-profile frauds such as the $81 million cyber theft from the Bangladesh central bank account at the New York Federal Reserve Bank.

Despite increased measures, the Asian financial industry remains no less vulnerable to sophisticated fraud schemes from all over the world. Security in the financial markets is always a tight arms’ race between FIs and fraudsters; it can be a matter of seconds before an FI loses a huge amount of money to a scheme that they never predicted.

“FIs and corporations of every size can take steps to help protect themselves, and more importantly, their customers who demand first class service and security.

Fiserv provides technology and advanced analytic models that are specifically designed to detect fraud, enabling a

Digital dilemmas With the rise of online and mobile banking among Asia’s customers, FIs have become more innovative in their product offerings and digital platforms. Cyber fraudsters see these digital developments and disruptions as opportunities to gain leverage and identify points of weakness in the technologies available. FIs must be able to circumvent these cyber criminals and protect customer identity and transaction security at any cost.

“As domestic and international payment networks evolve and payment channels progress to meet these growing demands, FIs face an increasing variety of fraud risk and techniques. This is becoming ever more prevalent for online payment channels, with reports of cyber fraud attacks making headlines on a regular basis,” Davies adds.

FIs can also their digital platforms to their advantage and use customer data to combat fraud, particularly when working in real-time. In order to prevent potential thefts, FIs can look at patterns of activity based on large sets of payment data and consider previous fraud incidents and red flags in monitoring.

“Fiserv’s technology allows FIs to collate and analyse customer data, including the frequency of transactions, beneficiary history, time of day, velocity and size of the payments typically made, as well as which channels a customer typically uses.

This enables them to create a complete picture of what typical behaviour looks like. Hence, if a transaction falls outside of what is deemed normal behaviour for a particular client, the fraud analytics team can be notified in real-time and carry out further investigations,” says Davies.

With greater accuracy, timeliness, and consistency in fraud prediction, customers of well-secured FIs receive a better experience and are therefore more likely to remain with that institution as they can trust them to keep their money safe. However, FIs must not be satisfied in maintaining their customer base.

Cyber fraud’s future As cyber fraud intersects with the world of high value global payments, fraudsters pose a material threat to the stability of financial institutions and networks.

Cyber thieves of the future will constantly evolve and seek thefts of increasingly greater value. The growing threat will likely be towards the global financial system as a whole, and not FIs singly, thus financial executives must decide on a more collaborative strategy to strengthen national and regional systems.

Davies adds that ignorance must not be Banking on data an excuse and that the lack of informed Financial institutions have the power action by financial institutions could to use huge amounts of their own customers’ data to come up with predictive have consequences on a massive scale.

He stressed consortium “Fiserv provides technology that FIs need models and advanced analytic to deploy to deliver advanced models that are specifically technology that is flexible, protection designed to detect fraud, and enabling a holistic approach empowering, and intelligent recognise to fraud protection.” to counter the useful sophisticated patterns threats. With Fiserv, FIs can utilise in preventing fraud. Fraud pattern data predictive models operating in real-time analysis may be leveraged to implement and with overlays of specific scorecards real-time scoring of payment transactions, where high risk payments are circumvented and typologies, they can effectively manage cyber crime. anywhere in the world.

ASIAN BANKING AND FINANCE | DECEMBER 2016 5

CO-PUBLISHED CORPORATE PROFILE

Diebold Nixdorf’s senior executives talk of their plans post-combination

Find out what Eckard Heidloff, Dr Ulrich Naeher, and Neil Emerson have to say about the future of the newly combined Diebold Nixdorf.

Eckard Heidloff, president, Diebold Nixdorf

I

nnovation and more competitively priced products will be the two immediate benefits from the business combination of Diebold and Wincor Nixdorf, according to Diebold Nixdorf president Eckard Heidloff.

“The combination gives us a significant amount of additional resources to invest in innovation and one of the first steps we have taken is to combine the strengths of the two companies to create a better portfolio. For instance, Diebold didn’t have its own cash recycling technology, but now, there are strong synergies between the technology and service aspects of the company’s offerings in the retail and banking sectors.”

The $1.8bn business combination of U.S. based ATM maker Diebold and German Wincor Nixdorf was finalised in August 2016. The newly combined Diebold Nixdorf is now the world’s biggest maker of ATMs with a market share of around 34% of the world’s ATMs, having combined annual revenues of approximately $5.2bn, including a

6 ASIAN BANKING AND FINANCE | DECEMBER 2016

promising position in the world’s retail on top of that. The new company will have market for its POS hardware and software. the strengths and resources to succeed,” In an exclusive interview with Asian Heidloff said.

Banking and Finance, Dr Ulrich “The newly combined Heidloff said another Naeher, Diebold important step was Diebold Nixdorf is now Nixdorf’s senior getting economies of vice president for the world’s biggest scale and therefore systems, noted maker of ATMs and getting the costs that one of the POS hardware and down for the new company’s software.” portfolio. “We now greatest strengths sell twice as much, is its knowledge and we can also standardise. We are in in branch transformation - how can banks a very strong position to drive growth in get more customers, do more businesses the industry, both from the resources and with less cost and more revenue? “There market position that we have,” he added. are a lot of processes banks do by themselves. It’s not a competition against Post-combination plans this one company which is as big as we Diebold Nixdorf will continue its are. It’s more of catering to the needs commitment to innovate in making its of the banks. How do they manage core products more efficient and integrate their channels? What does it mean for various channels. “There’s a whole set of middleware? What can we offer them efforts to grow technologies. This is going and what can we do together? Hardware to be a seamless omnichannel game with is still very important (ATM network, POS connecting different channels as a key network) but we can do much more,” point and having a portfolio of applications added Naeher.

CO-PUBLISHED CORPORATE PROFILE

ATMs per 1 million inhabitants yet, which is basically the plateau, so there is significant growth potential in Asia,” he added.

“If you can win in Asia, you can win anywhere. Asia has some of the toughest requirements, but has some of the fairest processes as well. A lot of cost pressures from the new entrants in the ATM market come in from Asia. That’s why for us, it’s important to learn from this region,” noted Heidloff.

Moving forward, Emerson believes one of the first things the new company must do is to consolidate. “In any integration, there will be areas in the business where we can leverage and find synergy. For our operations across Asia Pacific, we will be analysing what will work, where we can improve on, and what we can Dr Ulrich Naeher, senior vice president for systems, Diebold Nixdorf leverage to provide the best service for our customers,” he added.

Diebold Nixdorf has dual headquarters, “In most cases, one is bigger and the Diebold Nixdorf’s business will have a 40in USA and Germany. The combined 40-20 revenue distribution in the Americas, other is smaller and due to the fact that company will clearly be able to leverage the market is growing significantly, the Europe, Middle East and Africa, and Asia Diebold’s strength in the USA and Wincor’s cannibalisation is at a minimum so we Pacific/Japan, respectively. When asked strength in Europe. But Naeher noted don’t expect to lose any revenue from about what these markets can expect from that as a global this integration,” the new company, Naeher said the merger company, Diebold Heidloff noted. brings a more stable and future-oriented “We are in a very Nixdorf will define But despite the company that knows the industry trends strong position to things globally fact that the two worldwide. “We know the industry and drive growth in the but will act locally companies are the customers very well. We know what industry, both from the in each of the dominating in pains they have. So we can localise our resources and market markets it operates some countries, products and services for every customer’s Heidloff said there specific needs. We have the capabilities to position that we have.” in. “As Diebold Nixdorf, we is still a lot of give them the best technology available, function as a team. We believe that we are room for growth in the region. “We have connect them with the right people, and the partner of choice for our customers.” economies where we don’t have 1,000 make solutions to help them deliver better services to their customers,” he added.

Winning in Asia Neil Emerson, senior vice president and managing director for Asia Pacific, said that the two companies’ strategies in Asia are completely complementary.

“Interestingly enough, even though the high level metrics for Asia Pacific for both companies are very set, when you examine the individual companies, it’s actually quite different and very complementary,” he added.

Emerson noted that in Thailand, Diebold has more than 50% market share while Wincor Nixdorf is about 20% - So one is big and dominant, while the other is smaller yet fast growing. “Bringing the two together is complete market penetration. In markets where we are more dominant, we will be introducing solutions that can help our customers to grow with us while providing greater services,” Emerson explained.

Neil Emerson, senior vice president and managing director for Asia Pacific, Diebold Nixdorf

ASIAN BANKING AND FINANCE | DECEMBER 2016 7

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V

now operating with the total assets of ietnam Public Joint-stock VND100,000 billion, more than 3,400 Commercial Bank (PVcomBank) employees and the network of 113 was established under the Decision branches in 28 main provinces and big No. 279/GP-NHNN dated September 16, cities nationwide.

2013 by the State Bank of Vietnam based Positioning its brand as “The Bank on the merge of PetroVietnam Finance for your Lifetime”, the bank is making Corporation (PVFC) and WesternBank. every effort to offer wide range of This historical merging remarked a great financial products and services which are milestone and brought PVcomBank committed to be best advantages to tailored to satisfy the inherit a nationwide diversified and evernetwork, with a lot “Aiming to develop high changing demands of of experiences in quality products, recently both individual and financing, market and the bank has strategically corporate customers. customer insight, as focused on investing in PVcomBank’s target well as a qualified technology infrastructure.” in the near future is human resource in reaching the milestone banking industry. That of 1 million personal customers and being transformation in 2013 consulted by The among top 7 Joint Stock Commercial Boston Consulting Group (BCG), the world Banks in Vietnam in 2020. leading management consultancy, was Aiming to develop high quality implemented to ensure the bank up to products, recently the bank has international standard. strategically focused on investing in With the registered capital of VND9,000 technology infrastructure, going along billion, after 3 years, PVcomBank is 32 ASIAN BANKING AND FINANCE | DECEMBER 2016

with paying a lot of consideration on training staff to continuously improve customer service.

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FIRST throughout the region have also began looking at how cloud services can be integrated with their existing IT services strategy,” says James O’Neill, senior analyst at Celent.

beat ‘em, buy ‘em

If payments companies have one crucial mantra these days, it is “if you can’t beat them, buy them.” A recent PwC survey reveals that of all financial industry players, they are the most active in acquiring fintech startups and launching their own subsidiaries. You can’t blame them, though, as nine in 10 payments companies fear that they could lose more than a quarter of their operations to fintechs by 2020.

According to PwC’s 2016 Global FinTech Survey, 84% of payments companies have placed fintech at the heart of their strategy and 35% have launched their own fintech subsidiaries, whilst only 4% haven’t yet dealt with fintech.

A serious concern The increasing popularity of mobile apps outside of financial services among consumers is putting pressure on incumbents’ margins. PwC says almost three in four (74%) payments companies see this as a threat, again the highest percentage of all financial sector institutions. Customer churn is also a serious concern for 61% of the respondents, whilst 52% fear losing market share to new players.

“In China, mobile apps and payments are very popular with consumers. We can see some fintech companies looking at ways to add revenue directly through payment platforms, whilst there is also value to be gained from gathering consumer data on transactions. This data is being used to inform more targeted financial services and products, such as wealth management or loans. So striking a balance between immediate returns and longer-term loyalty will be an important challenge,” says Chun Yin Cheung, PwC China fintech partner.

34 ASIAN BANKING AND FINANCE | DECEMBER 2016

Who’s ready to embrace the cloud?

Asian banks have heads in the hybrid cloud

W

hen DBS signed an agreement with Amazon Web Services (AWS) to create a hybrid cloud environment, the bank wanted to acquire the same computing advantage that powers the world’s top corporations.

“Amazon, Facebook, Google, and Netflix are widely acknowledged as leaders in innovation. What sets them apart is their ability to constantly experiment, automatically scale, and rapidly bring new features to market. They are able to do this in part by leveraging the flexibility provided by cloud technology,” says David Gledhill, head of technology and operations at DBS. DBS plans to leverage on the cloud for its other business processes, with plans to allocate half of its computer workload to the cloud by 2018 in pursuit of higher cost savings, increased resilience and an improved ability to respond to customer demand. Aside from DBS, other Asian banks are starting to become more comfortable with moving to the public cloud despite the security challenges such a shift presents, according to regional analysts.

“DBS is undoubtedly leading the way in leveraging the capabilities of public cloud providers like AWS, however others in Singapore and

Leveraging on cloud platforms has become appealing because it enables faster deployment.

Pros and cons Leveraging on cloud platforms has become appealing because it enables faster deployment, has lower costs compared to large upfront investments, helps with reliability, and is typically easily scalable, reckons Vinayak HV, partner at McKinsey & Company.

But Vinayak warns that banks will need to manage the trade-offs associated with cloud services such as higher operational expenditure over time and vendor dependence, since shifting across cloud providers has not been fully tested. Banks will also have to build up their security standards to pass stringent regulatory banking requirements, which are typically higher compared to other industries.

“The challenge for banks that are considering a move to the cloud is that they need to ensure that they bring on board an adequate number of specialists required to manage what can be the complex details of managing cloud security,” concurs O’Neill.

Even if Asian banks hire thirdparty cloud service providers, O’Neill says they must still invest in sufficient security measures within the bank, including encryption of all customer data when in transit and when stored.

Banks should also mask personally identifiable data where possible and create mechanisms for controlling the access of client data to individuals within the bank.

Source: IDC Financial Insights Research

FIRST Banks can only open one branch and are restricted to only lending in foreign currencies to foreign companies.

Myanmar is far from an operating paradise

Burma’s road to liberalisation

W

hen OCBC Bank was appointed the lead bank alongside three other foreign banks to complete a landmark $40.2m syndicated loan facility for a Malaysian telecom firm operating in Myanmar, it showed just how far the country has come to open up its market to foreigners. The deal was one of the largest syndicated loans led by onshore foreign banks since Myanmar opened up its financial sector to foreign banks last year.

Liberalisation is well under way in Myanmar with OCBC and other banks racing to take advantage of market opportunities as foreign

companies expand their operations in the country, although banks still face a thicket of regulatory challenges that might take time to clear. There are currently four state-owned and 23 private banks, many with government shareholdings, but EY deems the products and services offering “limited and immature.”

Despite the loosening up of banking regulations in Myanmar, the country is far from an operating paradise, says Liew Nam Soon, ASEAN managing partner, financial services at EY. “Although new banks are being set up and foreign bank licences are being awarded for branch

Liew Nam Soon

openings, banks face considerable limitations both in terms of footprint as well as scope of operation,” he says. “For instance, banks can only open one branch and are restricted to only lending in foreign currencies to foreign companies. They are also not allowed to offer retail banking services. These restrictions are unhelpful in building up the financial system in Myanmar.”

Limitations preventing growth The central bank may now have greater autonomy but Liew reckons the country’s banking laws need to be updated to be more robust and aligned with international practices.

“In addition, existing regulations impose limitations on profitability, loan terms, and the use of collateral whilst tight interest rates guidelines place caps on lending rates and floors for deposit rates and capital requirements. These limitations will need to be relaxed to allow the sector more room to grow,” he adds.

2016 index of economic freedom

Sources: Terry Miller and Anthony B. Kim, 2016 Index of Economic Freedom (Washington, DC: The Heritage Foundation and Dow Jones & Company, Inc., 2016), http://www.heritage.org/index

The Chartist: The two culprits behind Thai banks’ slow loan growth Thai banks have been reporting sluggish overall loan growth this year, no thanks to the weakness in the large corporate segment. But interestingly, there is solid demand from this sector. It’s just that banks tightened credit standards for this client group, therefore causing loan approval rates to fall.

“Two reasons are behind this surprising phenomenon. First, slower economic growth is discouraging banks from taking risk. Second, banks find it difficult to compensate for the higher risk for this client group.

The latter reason is not frequently mentioned in the market,” says Maybank Kim Eng.

Despite strong demand, banks tighten supply...

...resulting in lower approval ratios

Source: BOT, MKE-ISR

Source: BOT, MKE-ISR

ASIAN BANKING AND FINANCE | DECEMBER 2016 35

FIRST

Regtechs bring compliance relief

Singapore’s skills gap in compliance

W

hilst banks are reducing costs in key operational areas through efficiency, these gains have been offset by the need to allocate more resources to meet expanded regulatory requirements and to settle fines for breaches. Regulatory compliance has become one of the costliest and most troublesome activities for banks, which is why a growing number of regulatory tech (regtech) firms have started to assist banks in this area, says Matthias Memminger, partner with Bain & Company’s financial services practice.

Memminger reckons governance, risk and compliance (GRC) costs account for 15% to 20% of the total “run the bank” cost base of most major banks, and that GRC demand drives roughly 40% of costs for “change the bank” projects under way. He also estimates that the cost to implement and run regulatory requirements will grow over the next five years.

In the face of ballooning costs, banks are working together with the regtech start-ups to implement smarter, hightech solutions in five areas of GRC: advanced regulatory requirements management, know-your-client services, consumer protection services,

Banks’ compliance costs are ballooning

market conduct services, and reporting and risk management.

Memminger reckons regtech firms are taking on a bigger role in banking because of their knack in automating and simplifying processes, which then reduce costs and pick up the pace of GRC. Automation is one of the ways that technology is revolutionising the banking industry and its workforce, says Bill Schlich, global banking & capital markets leader at EY. But as automation drives efficiency and reduces task-based roles in banks, it also means banking professionals will need to become more adaptable and innovative to continue to have a place in the industry.

Governance, risk and compliance costs account for 15% to 20% of the total “run the bank” cost base.

survey

APAC banks’ IT spending to hit US$19.1b in 2017 With demand for digital banking services increasing at an unprecedented rate, Gartner predicts that the IT spending by banks in Australia, New Zealand, Singapore and South Korea will hit US$19.1b in 2017, an increase of 4.7% from 2016. This includes spending on data centres, devices, software, IT services and telecom services.

Gartner adds that in USD terms, Singapore will have the highest growth rate in 2017 at 6.6%, followed by New Zealand at 6.5%.

“The banking and securities industry is working to reinvent the business models due to these new players and are trying to integrate the digital platforms firmly into business and operating models,” said Moutusi Sau, principal research analyst at Gartner.

36 ASIAN BANKING AND FINANCE | DECEMBER 2016

Mature Asia/Pacific

Worldwide banking and securities enterprise IT Spending

Singapore is facing a bad case of skills gap as demand for compliance professionals outweighs supply. Robert Half says the cost of compliance in Singapore is increasing as government regulations place added pressure on businesses, which is driving demand for skilled financial services professionals. A recent survey reveals that 76% of Singaporean finance leaders say the cost of compliance has increased compared to three years ago.

“The cost of compliance in Singapore is rising – which is a legacy of the global financial crisis resulting in a stricter regulatory environment. This rising cost requires companies to invest in educating and upskilling in-house staff or hiring compliance officers to navigate the changing landscape,” says Matthieu Imbert-Bouchard, managing director at Robert Half Singapore.

“The most sought-after compliance professionals are those who are able to understand and stay abreast of the latest regulations companies may face. They are able to streamline the compliance process and effectively cut costs for the business whilst maintaining regulatory standards,” he adds.

The search goes on Robert Half further reveals that out of the Singaporean CFOs who are planning to add permanent financial services staff, almost half (46%) state they will be sourcing compliance professionals to add to their teams. But the overall majority (95%) of Singaporean finance leaders say it is challenging to source qualified compliance professionals.

FIRST

Voice biometrics vs PINs: Which is more secure against data breaches?

B

ack in 2014, when a group of fraudsters tried to steal millions of dollars from a bank, it did not expect that it would be one of Brett Beranek’s customers that have just installed voice biometrics authentication – a technology that is now becoming a key component in banking security worldwide. “One of our banking customers had leveraged our voice biometrics solution to identify a series of prolific fraudsters and then worked jointly with local law enforcement to arrest and eventually prosecute individuals that were responsible for millions of dollars in fraud losses,” recounts Brett Beranek, director, voice biometrics at Nuance.

That was two years ago, and since then more banks have been using voice biometrics to deter cybercrimes such as online fraud and customer data theft. Citi and Standard Chartered, for example, have launched voice biometrics authentication systems this year. “Voice verification is automatically completed within 15

seconds, a reduction from the previous average of 45 seconds,” says Angel Ng, country business manager at Citibank Global Consumer Banking. Likewise, Standard Chartered Bank will be rolling out voice, as well as fingerprint, biometric technologies across Asia, Africa, and the Middle East in 15 markets for more than five million clients.

Why choose voice biometrics?

Beranek says voice biometrics provides a significant improvement in security over knowledge-based authentication methods such as PINs, passwords, and security questions. Voice biometric authentication has become advanced enough that even if perpetrators do get a hold of a voice recording of a banking client, it will not automatically grant them full access.

“In the case of a password or PIN, if the fraudster is successful in the phishing attack, then they have gained full access to the victim’s account and can perpetrate fraud. In the case of voice biometrics,

Trade transaction

Voice biometrics believed to be more secure

a successful phishing attack, where the fraudster socially engineers the user in speaking the voice passphrase, won’t necessarily lead to fraud. Recording detection algorithms are used to detect such attacks, and prevent the fraudster from getting through,” he says.

Seamless domestic and cross border transactions.

Westpac Institutional Bank provides a comprehensive suite of solutions to help our customers grow their domestic and international trade business. Our innovative and integrated approach across trade, commodities and foreign exchange is backed by the insights of our trade team and our comprehensive supply chain offering.

We have a market makers license allowing direct interbank AUD/CNY and NZD/CNY trading in China, positioning us to facilitate trade between Australasia and China.

Our streamlined approach positions us to ensure you can capitalise on opportunities whilst managing risk.

To find out more contact your Westpac representative or visit www.westpac.com.au/trade Westpac Institutional Bank is a division of Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714 (“Westpac”). Information current as at 15 July 2016. Westpac Institutional Bank is a division of Westpac Banking Corporation ABN 33 007 457 141 AFSL 2337 14 (“Westpac”). 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’). DW_WBC775A3_TRADE

38 ASIAN BANKING AND FINANCE | DECEMBER 2016

FIRST NUMBERS

Just make it easy

Traffic in Citi’s branches is down 50%

Exploring the retail bank of the future

A

re bank branches slowly becoming a thing of the past? If declining footfall in branches is anything to go by, the answer may be yes. “Traffic in our branches is down 50% in the last five years whilst in the same time, period digital transactions are up over 100%,” says Felimy Greene, Citi’s regional head of digital banking.

Citi in Asia draws some 20 million visits to its online properties every month and 95% of all transactions already happen outside a branch.

“We already have a relatively light footprint of smart branches in high impact urban locations and we are continuously optimising this through a mix of iconic city locations, transit hubs, retail malls, etc.,” he adds.

Standard Chartered even went as far as having a corporate alliance with Shinsegae Group, a top retail group in Korea, which allows the bank to deploy upscale, fully digitised branch outlets at Shinsegae shops so clients can have easy access to their services.

The human touch Bankers and finance experts have long claimed that despite the rise in digital banking, clients still demand the presence of brick-and-mortar branches for high value activities.

“To a large extent, banking revolves around trust and relationships. Whilst digital banking can help to speed up

40 ASIAN BANKING AND FINANCE | DECEMBER 2016

customers’ mundane and repetitive transactions, the human touch is still critical for engaging customers and developing trust,” says Choong Wai Hong, head of community financial services, Maybank Singapore.

Drastic changes ahead But with the nature of branch interactions changing at the speed of innovation, what will the retail bank of the future look like? “The branch of the future is possibly a fraction of what it currently is, both in terms of physical space as well as manpower size. The reduction is not just in response to the trend towards more digitisation, but also a function of increasing land and labour costs,” says Choong.

“I see more digital capabilities being integrated in the branch, for instance, video technology on the ATMs, video conferencing meeting/interview rooms where customers can talk to relationship managers or product or wealth specialists,” reckons Kariuki Ngari, global head, distribution network at Standard Chartered.

“Physical branches will still remain relevant but must adapt to serve a very different purpose and form. As most clients will prefer the convenience of digital channels, the branches will mainly support the delivery of more complex sales and advice and exception handling.”

Felimy Greene

Choong Wai Hong

Source: Bain & Company

Kariuki Ngari

FINANCIAL INSIGHT: debt capital markets

n e im

c

e p s

Panda bonds are eating away at dim sum bonds’ popularity

The year the panda ate the dimsum

From Singapore to Hong Kong, the dominance of dim sum bonds seems less assured as panda bonds start to amass momentum due to lower funding costs and increasing support from the Chinese government.

O

nly a couple of years ago, issuers and investors were feasting on dim sum bonds like there was no tomorrow, but there is a new star in the debt market world: panda bonds, which are yuan-denominated bonds sold by foreigners on the mainland. Analysts in Hong Kong and Singapore note that whilst the dim sum market has grown rapidly and even reached record proceeds in 2014, panda bonds are starting to amass momentum, and may soon overtake dim sum bonds in popularity.

In Hong Kong, issuers and investors are starting to turn away from dim sum bonds and are now flocking to panda bonds due to the latter’s lower funding costs and increasing support from the Chinese government. “In the long run it is likely that the panda bond will win out,” says Keith Pogson, senior partner, financial services, Asia Pacific at EY. “Depth and pricing will likely be key reasons as well as the 42 ASIAN BANKING AND FINANCE | DECEMBER 2016

Whilst the dim sum market has grown rapidly and even reached record proceeds in 2014, panda bonds are starting to amass momentum.

present uncertainty as to conversion rights for currency.”

With the move to internationalise the use of renminbi, panda bonds are receiving quite a push from Beijing.

Loose monetary conditions meant to spur on the economy have kept onshore funding costs lower, and made panda bonds increasingly more attractive to foreigners that want to raise funds in the mainland.

The debut of China’s panda bonds, an equity boom, and the yuan devaluation have helped slow down the demand and issuance for dim sum bonds, says Elaine Tan, senior analyst, deals intelligence at Thomson Reuters.

Dim sum bonds began gaining traction in 2010 after the loosening of restrictions and the issuance of international institutions, until reaching a peak record level in 2014 when total proceeds raised amounted to RMB337.7b (US$54.9b). But total dim sum bond proceeds so far this year amounted to RMB85.6b

(US$13.0b), down 38.8% from the same period last year. “Although dim sum bonds started to pick up again during the second quarter of this year, potential headwinds include currency concerns and increasing interest in China’s onshore bond market,” says Tan. In contrast, panda bonds issuance increased in 2016 year-to-date and reached RMB17.6 b (US$2.7b), a large jump from RMB5.0b (US$777.8m) issued in 2015.

Issuers and investors might be losing their appetite for dim sum bonds, but they have a growing taste for panda bonds, especially with incoming measures to increase the latter’s adoption. Pogson says Chinese authorities have been showing interest in necessary reforms to spur on the take-up of panda bonds, including the relaxation of filing requirements to support multiple formats of accounting, which has been one of the key problem areas of issuing panda bonds.

FINANCIAL INSIGHT: debt capital markets The increase in defaults have also dented interest in dim sum bonds but analysts believe there is still a healthy pool of investors keen to snack on dim sum bonds.

“PRC issuers are hungry for capital and the whispers of looming defaults certainly spook some investors, but there are a lot of investors out there still looking for yield and dim sum is one familiar way to participate,” says Thomas Kollar, partner at Mayer Brown JSM. “For the right issuers, dim sum will always be an option,” he adds. “It will be interesting to see the interplay between the fast-developing onshore panda market and the offshore dim sum market over the course of the next year.”

Whilst the rivalry between dim sum bonds and panda bonds dominates headlines, Hong Kong’s local currency remains a viable source for issuers seeking to meet regulatory capital requirements, says Tan. In fact, total issuance of HK$ bonds continued to grow at a record pace with proceeds amounting to HK$137.6b (US$17.7b), an 89.5% increase from the same period last year. The Financials and Government sectors accounted for majority of the issuance with 95% market share.

Overseas issuers, excluding China, tapped the HK$ bond market and accounted for 26.7% of the market share. Kollar says the recent uptick in activity is due to issuers seeking to take advantage of favourable yields either to raise new funds or re-finance existing debt.

Limited exposure in Singapore In Singapore, dim sum bonds are once again heating up, but it is a trend that not everyone is keen to ride just yet. Despite the higher yields that Dim sum bonds

Source: Thomson Reuters

dim sum bonds offer, more cautious investors have been limiting their exposure due to a fear of defaults and currency depreciation.

“There are conflicting views on whether issuers will return to the dim sum market. There was a tail-off last year and the beginning of this and the reasons for the reductions have not disappeared,” says Vicky MünzerJones, a partner in the Singapore office of Norton Rose Fulbright.

“However, some are starting to believe the rhetoric that China’s slowdown is a sensible correction, and, therefore, the prospects for the currency over the typical term of a dim sum bond are not so bad.”

She reckons offshore renminbi issues will be attractive for investors who are looking for higher returns compared with other currencies, especially in a market where negative interest rates are not just confined to Japan. It will also be a viable option for those that want to diversify their portfolios. “Investors may be willing to ignore why the higher yields are offered. In this environment, a dim sum bond may seem to be the better option,” says Münzer-Jones.

“Some investors sitting on capital which needs to grow are looking at increasingly risky structured investments to get a return which they would have been able to get from reasonably standard investments not that long ago,” she adds.

More interest in panda bonds But based on anecdotal evidence, in Singapore, Münzer-Jones observes that more clients asking about panda bonds than about dim sum bonds.

China’s panda bonds market opened last year to great enthusiasm, opening a new funding channel that

Keith Pogson

Elaine Tan

Vicky MünzerJones

Thomas Kollar

had been exclusively available to select agencies. Since then overseasincorporated Chinese companies had been lining up to issue panda bonds due to their lower funding costs compared to dim sum bonds.

Over the past months, there has been expectation that China’s panda bonds will exceed dim sum bonds for the first time. Warehouse developer and operator Global Logistic Properties (GLP) became one of the first foreign companies to issue panda bonds on the Shanghai Stock Exchange. GLP floated $224m which proved to be popular among institutional investors and ended up three times oversubscribed, with reported plans to issue a larger amount of up to $1.5b.

Key challenges But despite GLP’s successful issuance, some foreign issuers have had to deal with a muck of regulatory issues surrounding panda bonds, which has tempered interest. Key challenges for potential issuers include providing past three years of financial statements under Chinese accounting standards (CAS), according to Jack Chan, managing partner, financial services, Greater China at EY. Converting non-CAS accounts into CAS accounts as part of the filing can be a very arduous task, barring any granted exemptions for the issuer. panda bond issuers also must draft circular and disclosure documents in Chinese, requiring careful translation.

But for issuers that decide to push through, the payoffs could be worth it. He reckons panda bonds offer a way for financial and nonfinancial enterprises to diversify their investor base and gain a foothold in China. They also provide a vehicle for enterprises that want to fund an onshore subsidiary or to expand their operations in China. And for first movers, the issuance grants significant publicity and marketing advantages.

Norton Rose Fulbright Singapore’s Münzer-Jones reckons debt capital markets in Singapore and South East Asia will face a bumpy road, but there remains hope that there will be more deals in the region during the last part of the year.

ASIAN BANKING AND FINANCE | DECEMBER 2016 43

Under the present circumstances, ICBC (Asia) will fit in firmly with China’s national strategies such as the Belt and Road Initiative and the internationalisation of the renminbi. It will also actively capitalise on the increasing connectivity between the financial markets of mainland China and Hong Kong.

Jiang Yisheng CEO ICBC (Asia) 44 ASIAN BANKING AND FINANCE | DECEMBER 2016

INTERVIEW

ICBC (Asia) CEO reveals plans to capitalise on China’s Belt and Road Initiative Jiang Yisheng wants to fully tap Hong Kong’s potential as a “super connector.”

A

nalysts predict that Hong Kong banks’ asset quality will continue to deteriorate due to a number of factors such as rising delinquencies, weak growth in global demand, and higher borrowing costs owing to further monetary tightening in the US. Jiang Yisheng, CEO of ICBC (Asia), says that amidst the economic uncertainties, the bank has implemented some measures aimed at strengthening its capability to control both risks and asset quality.

“Presently, ICBC (Asia) maintains its non-performing loan ratio at a reasonable level and will endeavour to improve its credit risk management system unceasingly.

For instance, the bank has enhanced the due diligence for its lending, the procedure for reviewing and approving loan applications as well as post-loan management,” he adds.

Jiang was appointed as CEO in December 2015. After almost a year into the position, he reveals his views of Hong Kong’s current banking sector and his future plans for ICBC (Asia) in an exclusive interview with Asian Banking and Finance.

ABF: What are the biggest challenges facing Hong Kong banks today?

Nowadays, the global economy is extremely complicated and the financial markets fluctuate more wildly. Some companies have operational difficulties which are structural in nature.

In such circumstances, I think the banks in Hong Kong are facing a number of major challenges, namely: how to enhance the capability to control the asset quality and withstand risks; how to raise the standards of business management and how to strengthen the overall capability to serve customers.

ABF: You were appointed as CEO in December 2015.

Ten months into the position, what changes have you implemented and what are your future plans?

Since I assumed the office of the CEO of ICBC (Asia) in December 2015, I’ve been faced with a market where Hong Kong’s banking sector has shifted down a gear from rapid growth in the past. After having grown its business by leaps and bounds in the past several years, ICBC (Asia) has now entered a period for consolidating its businesses. It now has to meet new requirements to cope with a new situation which is marked by adjustments in organic growth and optimisation of organisational structure.

To prepare for that, we have decided to actively develop cross-regions businesses, speed up the transformation of the bank’s business model and the implementation of its strategy for comprehensive development. Such endeavours have already yielded good results. In the first half of 2016, ICBC (Asia) achieved double-digit percentage growth in both the scale of business and profit.

ABF: What are your key business philosophies?

I believe that a commercial bank should always adhere to the principle that “the financial sector serves the needs of real economy.” That is, a commercial bank should grow together with a nation and enterprises through cooperation, by adapting itself to the changes in economic environment, by capturing opportunities and by fitting in with the national strategies and policies.

Under the present circumstances, ICBC (Asia) will fit in firmly with China’s national strategies such as the Belt and Road Initiative and the internationalisation of the renminbi. It will also actively capitalise on the increasing connectivity between the financial markets of mainland China and Hong Kong and speed up the consolidation of the resources in Asia Pacific so as to build a framework for a cross-market, comprehensive, and integrated business.

This will enable the bank to provide a comprehensive range of financial services (such as financing, services for mergers and acquisitions, and settlement, etc.) for the countries and enterprises in Asia Pacific and those covered by the Belt and Road Initiative. This is one of the ways for ICBC (Asia) to contribute to the economy and prosperity of both mainland China and Hong Kong.

ABF: What three goals are you focussed on in the next 12 months?

Firstly, we aim to facilitate development by thoroughly enhancing the quality and efficiency of the operation of the core business. ICBC (Asia) will reinforce its foothold in Hong Kong, capitalise on the growth momentum of mainland China and extend its footprint to Asia Pacific.

It will also enhance its capability to coordinate the developments of the businesses within the ICBC Group and to operate cross-region businesses.

We aim to enhance the quality of development whilst maintaining steady growth in the scale of assets as we are shifting the focus from “building a large company” to “building a strong enterprise.”

Secondly, we will adjust the structure by forming a framework for sustainable business development which is driven by diverse operations. ICBC (Asia) will further adjust and optimise the operation structure. Specifically, the bank will speed up its transformation from a sizeable asset operation bank into a large asset management bank as well as its transformation from a conventional commercial bank into a comprehensive financial group.

Thirdly, we will step up risk control to reinforce the foundation for sustainable and steady development. ICBC (Asia) will further improve the overall risk management system. It will enhance its capability to prejudge and manage credit risks, market risks and operational risks so as to minimise these risks, and ensure that the risks to the overall operation are manageable.

ASIAN BANKING AND FINANCE | DECEMBER 2016 45

In the mediumto long-term, what we are going to see is that Asia will account for more of the global growth.

Around 10-20 years ago, it was already acknowledged that Asia was growing faster than the rest of the world but the base was still small.

Cezar Consing CEO Bank of the Philippine Islands

46 ASIAN BANKING AND FINANCE | DECEMBER 2016

INTERVIEW

Why Bank of the Philippine Islands’ CEO Cezar Consing is bullish on Asian growth The bank’s earnings hit a record high of USD267.5m in the first half of 2016.

M

ore than three years into his term as president and CEO of Bank of the Philippine Islands, Cezar Consing was able to lead the bank to achieve a 60% growth in size. The bank recorded its strongest first semester this year with PHP12.7b (USD267.5m) in earnings and almost 7.5m clients. As BPI celebrates its 165th year, Consing reveals goals to reach PHP1.65tr (USD34.7b) in assets.

In an exclusive interview with Asian Banking and Finance, Consing shared his philosophies, milestones, and goals. He also shared his take on issues around financial inclusion in the country as well as the opportunities that stem from regional integration and Asia’s strong growth.

ABF: What are your key business philosophies?

I started in banking in 1980. What you learn very quickly is in large public enterprises, you serve many masters.

You don’t survive unless you serve those masters well. In a nutshell, our business philosophy is all about serving our constituencies well. Firstly, we have to be very relevant to our clients. For us, that means they have to look to us for their most important financial transactions. If they can do that, then we know that we have a good relationship.

Second is our shareholders. We have to make sure that they are well-served, or else they will take their investments elsewhere. We have to make sure that over the economic cycles, we can produce the best risk-adjusted returns for them. The other constituency we have is our employees. We have to make sure that they want to work for us, that we present them with a future here, that they are well-compensated. They have to know that we value professionalism, loyalty, and mutual respect.

Our last constituency is the country. We have to be relevant in the Philippines and to Filipinos, which means we have to contribute to national growth.

ABF: What three goals are you focussed on?

In general, the goal is growth, stability, and relevance.

You’ve got to make sure that there is a reasonably good interplay among the three. For example, you can achieve growth but create an unstable institution. You could focus on stability but everything remains the same so there will be no growth. Or you can have both growth and stability and still be irrelevant.

As a bank, we’ve shown that we can balance these three.

In the last 3-4 years, we’ve grown this bank more than 60% in terms of the size and we’ve shown that we are able to do it in a stable way. So if you look at our financial metrics, we have among the better ones around the region.

In the last 10-12 years, we have tripled our client base.

Most of these new clients are middle class or lower middle class because we want to be more inclusive.

ABF: What key milestones were done towards these goals as you celebrate your 165th year as a bank?

I’d like to think 165 years and we are coming in on almost PHP1.65t (USD34.7b) in assets towards the end of 2016. Give or take PHP100m (USD2.1m) here and there, that’s a nice number to remember. And just in the first half of this year, we have registered our strongest ever semester profit-wise. We made PHP12.7b (USD267.5m) in the first half of 2016, and it’s the best semester that we’ve had in 165 years. We ended the first semester with almost 7.5m clients and customers. It’s a significant increase from 3 years ago.

We’ve been working on this milestone for some time now. We’ve made investments in people, processes, technology, so this number did not just happen. It started with my predecessors. We’re here because the people who’ve worked before us brought the bank to a certain level. We’ll bring it to the next level, and the people after us will bring it to the next level still. I call it a relay.

ABF: What are the new banking opportunities and challenges under the Philippines’ new administration?

The government announced that the country registered a 7% growth year-on-year in Q2 2016. When you have that kind of growth and it begins to translate to a higher per capita income, then the whole economy becomes a lot more financeable. The banks are seeing that but the question is how do they respond to it? The banks must do more with the sectors that are up and coming.

I very much like the economic program of this new administration. If the government succeeds in its 10-point plan, what they will do is to make life easier for everybody.

The plan is focused on uplifting the lower sectors of society and leveling the playing field.

As a banker, that’s exciting because it will help grow SMEs and it will help nourish micro entrepreneurs.

That’s the kind of environment in which we can be more inclusive. It can help us grow our business in segments that historically, this country has tended to ignore.

ABF: What is your outlook for the regional economy?

In the medium- to long-term, what we are going to see is that Asia will account for more of the global growth.

Around 10-20 years ago, it was already acknowledged that Asia was growing faster than the rest of the world but the base was still small. Then China and India entered the global labour market, then all of a sudden the base is not so small anymore. So now you have Asia as a bigger base growing at a faster rate than the rest of the world. So I’m very bullish on Asian growth.

In a year like this, the Philippines has led the growth. I suspect the Asian countries will all take turns. These cycles come and go but I think the overall trend favours Asia.

ASIAN BANKING AND FINANCE | DECEMBER 2016 47

Over 50% of our clients are actively using digital banking channels – up from 30% three years ago. We passed 8m users for the first time in March 2014 and we are targeting 10 million active digital customers within next two years.

Felimy Greene Managing Director Citi

INTERVIEW

Felimy Greene on Citi’s digital drive: Only 5% of all transactions happen in a branch Managing director Greene also reveals that the bank is getting one in five credit card signups online.

F

elimy Greene is the managing director and regional head of customer franchise responsible for digital banking, marketing, client experience and decision management for Citi’s Consumer Banking business in Asia Pacific and EMEA. Prior to his appointment in January 2015, Felimy was Asia Pacific head of digital banking responsible for driving Citi’s online and mobile banking to serve some 15 million consumer customers in 12 countries.

He sat down with Asian Banking and Finance to discuss why the bank is so focussed on digital in Asia and what the future holds.

ABF: Why is digitisation important in Asia for Citi?

Digitisation is extremely important for Citi, for a number of reasons. Firstly and most importantly, it is because our customers expect it. People have embraced mobile technology with extraordinary speed in the last few years, completely changing the ways in which they communicate and access information and a growing range of services.

It’s really been a massive shift – from something that was essentially confined to the home or office, to something that is with people all the time, everywhere they go. The mass adoption of smartphones and tablets with their intuitive, touch enabled experiences has really redefined the meaning of the term ‘convenient.’ As a global bank with a predominantly urban and mobile customer base, we have to meet these new expectations.

Digitisation is also a major priority with respect to how efficiently we run our business. The investments we are making to make life simpler for our customers are also transforming our systems and processes internally, making them faster and more efficient in every respect.

ABF: What is the impact of digital banking on branches?

Digital banking is transforming the way in which we serve our clients. Traffic in our branches is down 50% in the last five years – whilst in the same time period digital transactions are up over 100%. Digital banking is not completely replacing the branch experience, but rather supplementing it, whilst the nature of branch interactions is changing.

ABF: What is your digital banking strategy in Asia?

Asia has seen explosive growth in mobile adoption and now leads the world in this respect. Asia also has the highest rate of engagement on social media through mobile. We are working intensively in this space and have already launched our first Citi branded interactive experience within a social platform on WeChat in China.

Citi customers in China can now register with Citi on WeChat and receive alerts, offers and even access account balances and transaction history without leaving the WeChat environment. We are building on a good base

- Citi in Asia draws some 20 million visits to our online properties every month and 95% of all transactions already happen outside a branch. One out of every five new credit card accounts acquired comes from digital sources and over 50% of our clients are actively using digital banking channels – up from 30% three years ago.

We passed 8m users for the first time in March 2014 and we are targeting 10 million active digital customers within next two years. Citi was the first bank to offer 7 years of online statement history free of charge to all customers and today over half of our clients now receive monthly electronic statements.

ABF: What new digital features are you adding?

A major initiative for us this year has been the replacement of our Citi Mobile Banking App with completely new software with a brand new look and feel that is faster andsimpler to use. We have recently deployed this App in 10 Asian markets and the feedback has been overwhelmingly positive.

Customers love the “Snapshot” feature, which enables them to view account balances and recent transactions without having to enter a password, whilst the new Mobile Optimised Brokerage functionality is getting excellent results in Singapore and Hong Kong.

We’ve also made Touch ID available to iPhone users in a number of markets and the response to this has been really fantastic, with large numbers of customers activating and using it several times a week. We have also added significant new security features to our platform, and made a highly visible change to our Citiphone service by introducing voice identification using biometric technology, eliminating the need for customers to go through the traditional question and answer identification process when they call in for support.

The new Citi Mobile App is also the foundation for a wide range of new capabilities that we are currently either developing or planning. In the near term we will be extending Touch ID to all markets and will deliver our first wearable banking solution for this fast growing area.

ABF: Why is digitisation important in China?

China is currently undergoing the fastest and most comprehensive digital disruption of any banking market in the world. The scale and pace of consumer adoption is extraordinary: the online population in China is now close to 700m and over 90% of this group accesses the internet primarily via mobile phone.

Last year 358m Chinese people made payments on their mobile devices – an increase of almost two-thirds from the previous year. Almost all of these payments are being made via two key digital ecosystems in China with over 500m active users on WeChat and 400m registered Alipay users.

ASIAN BANKING AND FINANCE | DECEMBER 2016 49

We are experiencing the change and embracing it. Clients now prefer to choose the time, place and channel to interact with us. It’s our role to make it easy for them, so we are now offering multiple channels – from mobile to online to phone to chat and videobanking.

Stuart Beaumont Global Head, Voice and Virtual Retail Banking Standard Chartered

INTERVIEW

Standard Chartered reveals why call volume to their contact centres declined 12% Yet phone conversations are longer, complaints are lower, and sales are higher, says Stuart Beaumont.

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tuart Beaumont is the global head, voice and virtual, retail banking, for Standard Chartered Bank. Based in Singapore, he is responsible for transforming service delivery and improving service standards in the bank’s Client Contact Centres. He provides strategic direction to over 5,000 employees across 23 locations in Asia, Africa, and the Middle East.

Prior to joining Standard Chartered, Beaumont was the managing director of Serco Global Services, one of Australia’s most successful and largest BPO businesses.

Before this, he was the executive general manager at Salmat, a leading Australian BPO business.

In an exclusive interview with Asian Banking and Finance, Beaumont talks about their latest digital offerings as well as the evolving contact centre landscape.

ABF: What are your thoughts on the changing roles of contact centres from service resolution to deepening relationships and needs-based conversations?

We are experiencing the change and embracing it. Clients now prefer to choose the time, place and channel to interact with us. It’s our role to make it easy for them, so we are now offering multiple channels – from mobile to online to phone to chat and videobanking.

No longer is the contact centre simply a place for service resolution. Our consultants are engaging in needs-based conversations which are aligned to our clients’ needs. So it’s offering to set up a SMS payment alert when your client asks for a late fee waiver, or offering your client a savings product when they are saving up for a holiday.

Our experience in Standard Chartered shows that call volume to contact centres is down 12%, yet conversation lengths are longer, complaints are lower and sales are higher. This is because the contact centre is now a preferred channel for clients to have a conversation with their bank, be it a service request, or to find out about a financial product.

ABF: How can banks utilise/improve data analytics to increase efficiency in contact centres?

Analytics help us to understand and serve our clients better.

We use analytics to have better and more personalised conversations – we understand why the client is calling and can at times pre-empt their needs. We can then route them to the best person who can help them with their enquiry.

By better understanding past history and behaviour, we can tailor our products and services more seamlessly and also to proactively contact clients who might be interested in those products and services.

A very interesting new area we are exploring is speech analytics which analyzes speech patterns and key phrases, helping us understand real-time client needs and resolve issues more effectively.

ABF: Please tell us about your specific experiences with the recent rollout of video and chat banking.

Video and chat banking is changing the relationship between the bank and our clients. This is a personalised and staff-assisted way for clients to interact with the bank without having to visit a branch. This channel complements our mobile and online banking apps which allow clients to perform transactions like payments and fund transfers on their own. Client feedback so far has been strong and positive. They like the convenience and efficiency of being able to connect with a consultant immediately without having to visit a branch or queue.

Technology is very important in delivering convenient service to clients. The consumer now dictates how they wish to converse with an organisation. The organisation who adapts best will win client loyalty. As part of the bank’s strategy, Standard Chartered has committed to invest USD1.5b in technology over three years.

ABF: What do you consider as your biggest achievements so far?

I’m proud of the team for lifting the profile of the contact centre as a preeminent channel for client conversations and as a revenue generator for the bank. We’ve also been able to introduce many new innovations such as video and chat banking and voice biometrics, which have improved the quality of our service to our clients.

ABF: What are your key business philosophies?

To put the client first in all business decisions. Without clients we don’t have a business. This means we need to focus on making banking simpler for clients; reducing effort and streamlining processes.

Have a fail fast mindset. In today’s rapidly changing world we can’t afford to develop complex and long-winded solutions. We need to test and learn in a controlled manner to ensure our solutions meet the needs of our clients.

Execute! Telling your clients what you are going to do is never as powerful as doing it for your clients. It is never real in the bank until the client experiences a more positive engagement.

ABF: What three goals are you focussed on?

We aim to roll out our new digital channels to more markets and continue to introduce new innovative technologies which enhance the client experience. We will continue to improve service levels by developing our consultants so that they have the knowledge, skills and most importantly the motivation to deliver when it matters.

We will aim to deliver a seamless client experience.

So whether you are engaging with us at a branch, on the mobile banking app, or via video and chat banking, our clients will have a positive banking experience.

ASIAN BANKING AND FINANCE | DECEMBER 2016 51

Too many banks have been focussed on trying to integrate technology into their retail branches without truly trying to understand what customers want from a retail branch.

Branches should be a place where customers feel like they can spend time as opposed to a place that frustrates them.

Neal Cross Chief Innovation Officer DBS

INTERVIEW

DBS CIO Neal Cross reveals three key branch banking strategies for the future He also talks of plans of creating a digitised banking sphere for consumers.

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s the managing director and chief innovation officer at DBS Bank, Neal Cross is in charge of driving the bank’s innovation agenda regionally.

With over 20 years of experience in technology, innovation and financial services to back him up, Cross charts the innovation roadmap for DBS to enhance customer experience and better engage the bank’s customers in the digital landscape.

In an exclusive interview with Asian Banking and Finance, Cross talks about DBS’ digitisation efforts and how he envisages the retail bank branch of the future.

ABF: Why is digitisation/innovation important for DBS? The pursuit of digitisation and innovation at DBS is focussed clearly on one thing, to be able to improve the kind of experiences we provide for our customers that enable them to live more. However, the manifestation of that pursuit are two very distinct things. For us, digitisation is a recognition of where society is headed towards, with the increasing use of digital technologies. It’s clear that consumers are moving towards more digital experiences as they have access to various devices that allow them to seamlessly access various services. At the end of the day, it’s all about convenience and that’s why digitisation is important to us, because it is pivotal in transforming banking experiences to become effortless and simplified.

DBS’s Digibank is a prime example of this as we wanted to redesign the consumer experience of banking, where customers can do all their banking virtually.

Innovation though represents a different frontier where our big focus is on innovation management. To us, innovation is a mindset, it’s really not about technology.

And that mindset needs to be an inclusive one, which means everyone within the bank should be able to innovate.

At its heart, innovation management is about using a set of tools that enables people within DBS to have a common understanding of processes and goals – that is our focus on customer centricity. Having that understanding empowers our people to think outside the box and respond to external and internal circumstances and use creativity to introduce new ideas, processes and products to address current needs.

ABF: You’ve won multiple accolades for your digitisation efforts recently. What is your digital banking strategy?

It’s always very reassuring, and encouraging at the same time, to be awarded and recognised by such renowned personalities, who in themselves are highly symbolic to innovation – Steve Wozianak, Sir Richard Branson and the likes (We were also just recognised as the World’s Best Digital Bank).

To put it simply, our digital banking strategy has always focussed on the end-users, our customers. We started

to envisage what their future would look like and how digital technology plays a role in that. That’s why we are in the midst of creating a digitised banking sphere for our consumers using sophisticated systems architecture in our backend technology, which by the way is already driving 99% of its interactions with its consumers. Through the use of APIs we have been able to turn banking into an experience, rather a transaction for our customer.

Integration is key here.

ABF: How do you picture the retail bank branch of the future?

Too many banks have been focussed on trying to integrate technology into their retail branches without truly trying to understand what customers want from a retail branch.

Branches should be a place where customers feel like they can spend time as opposed to a place that frustrates them.

There will come a time when we see more people coming to the branch for advice as they conduct their transactions online or via mobile. That means redesigning the branch to suit that experience and then identifying how technology plays into that rather than force feeding technology into the branches as is often done now. That has several implications on the way banks operate in the future.

For one, the push towards digitisation and innovation means that banks will need to substantiate their own employee journeys, so their people are ready for the new kinds of customer experiences consumers desire. That means we will see a lot of retraining of staff as organisations seek to improve employee productivity and raise satisfaction levels (both from their customers and their own employees).

Secondly, we might see the redesign of branches that aim to maximise spaces for interactions as opposed to a usual scene in a branch where we see customers often waiting around. DBS has already introduced SMS queue systems so customers don’t waste their time. What we may see is the increasing growth of digital spaces where banks may primarily operate to engage with customers.

Thirdly, from an organisational standpoint, the shift towards digitisation is accelerating the movement towards design for no ops, where more and more processes are being automated and operations staff can evolve technical orientations to focus on business related responsibilities.

This means organisations will start to become leaner, more productive and over time, produce better outcomes.

The success of Digibank in India is a statement in itself that the future of consumer banking is breaking the barriers of physical and heading towards the virtual. Which effectively means that people wouldn’t have to travel to our banks; instead we bring banking right onto their palms.

Any further visible distance between a banking institution and the consumer will be eliminated.

ASIAN BANKING AND FINANCE | DECEMBER 2016 53

Country report: HONG KONG

China’s economic shift threatens Hong Kong’s stability

HK banks bear the brunt of China’s crisis

Analysts remain bearish amidst weak growth in China and plans of further monetary tightening in the US.

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ong Kong’s growing links with the mainland are exposing it to a possible financial contagion amongst China’s closest trade partners. Hong Kong remained stable over the past several years despite recent financial crises that have crippled other economic hubs within Europe and the Americas. Now, Hong Kong’s stability is threatened by China’s rocky economic shift, stretched property prices, and high private sector leverage.

Investors have taken a wait-andsee approach towards the volatile environment. Outside of China, the US Federal Reserve has yet to outline its monetary policy decisions, leaving the Hong Kong financial sector in grim uncertainty.

Meanwhile, banks’ increasing exposure to China are leading to greater loan delinquency pressures and higher borrowing costs. Recent economic reports show marked slowdowns in export of goods and tourism and retail sales activities,

54 ASIAN BANKING AND FINANCE | DECEMBER 2016

Banks’ increasing exposure to China are leading to greater loan delinquency pressures and higher borrowing costs.

which in turn reflect weak external demand, in particular, from mainland China.

“Nowadays, the global economy is extremely complicated and financial markets fluctuate more wildly.

Some companies have operational difficulties which are structural in nature. In such circumstances, I think the banks in Hong Kong are facing a number of major challenges, namely: how to enhance the capability to control asset quality and withstand risks; how to raise the standards of business management and how to strengthen the overall capability to serve customers,” says Jiang Yisheng, executive director and chief executive officer of ICBC (Asia).

The China connection Paul McSheaffrey, partner, head of banking, Hong Kong at KPMG China, says that banks in Hong Kong will be keeping a watchful eye on China’s growth. Alongside this major challenge are the implications of Brexit concerns and the upcoming

US elections in November. Analysts expect that the bleak outlook will persist in the next few years and will be exacerbated by deteriorating loan quality in mainland China and the expectation that the US will begin another rate-hike cycle.

The territory cannot easily pull away as mainland firms and banks snap up local assets and set up shop in the city. It is in fact a willing party, as it was the most significant transporter of exports and imports from China.

The slowdown in the mainland’s economy has thus impaired trade numbers in the city.

“The subsidiaries and branches of mainland banks continue to take market share in Hong Kong and the interconnectedness between their parent banks and their weaker intrinsic strength adds confidencerisk to the system. We believe high volatility in CNH interbank interest rates, due to the less developed nature of this market, raises the perceived risks,” said Ivan Lin, associate director, financial institutions, Fitch

Country report: HONG KONG Ratings.

Despite the challenges posed

by China’s slowdown, Hong Kong believes that it can keep the connection going, especially with regard to the fintech market. Banks in the city continue to forge partnerships with fintech companies, accelerators, and incubators in view of innovation demands and the overall goal for Hong Kong become a leader in the fintech space.

“With regard to the link to the mainland, Hong Kong’s Secretary for Financial Services and the Treasury recently signed an agreement with the Shanghai Municipal People’s Government to deepen our financial cooperation. One of the priority areas we are trying to work more closely together is in fintech. Regulators on both sides can openly exchange experience and views on regulatory issues, and the government will also facilitate local and foreign fintech companies based in Hong Kong to explore the mainland market, and vice versa,” says Kent Yau, head, research office, Financial Services and the Treasury Bureau.

Property pains After a peak in late 2015, Hong Kong’s property market prices have begun falling. Average residential prices are now at 11% below their peaks in September 2015. However, current rental yields remain at multi-year lows. Sherry Zhang, analyst at Moody’s Investors Service, says that these prices could come down further on the current sluggish labour market outlook and an increasing supply pipeline.

However, an accelerated fall in property prices could further discourage private sector demands

and erode the banks’ collateral buffer.

Zhang further notes that mortgages do not necessarily represent a central risk in the baseline scenario due to the macroprudential measures that the Hong Kong Monetary Authority has implemented in recent years. However, if property prices fall sharply, mortgages could be exposed to higher delinquencies and foreclosures, especially on loans where the borrowers have added to their overall leverage by remortgaging their properties or taking out second-lien mortgages.

“The first half of 2016 saw an increase in the non-performing loans of some of the city’s major banks. Problem loans will continue to rise with the combined effects of a slower Hong Kong economy and the possibility of higher interest rates, thereby adding pressure to loan delinquency,” says Yisheng.

Capital buffers Despite the largely gloomy outlook for Hong Kong’s economy, analysts have identified one bright spot which can keep the territory afloat for a whilst Hong Kong banks will continue to maintain good capital buffers over the next 12 to 18 months, in preparation for more stringent regulatory requirements and despite the looming rise in non-performing loans.

Fitch adds that Hong Kong banks’ general loan reserves and the phase-in of a 2.5% countercyclical capital buffer give banks a significant cushion against loan deterioration.

“The system’s common equity tier 1 ratio (CET1) improved to 14.6% at end-March 2016 from 13.7% at end2014. Likewise, its total capital ratio rose to 18.2% at end-March 2016, up

Hong Kong banks’ general loan reserves and the phasein of a 2.5% countercyclical capital buffer give banks a significant cushion against loan deterioration.

from 16.8% at end-2014. These ratios are well above the Basel III minimum requirement. In addition, the banks started to report Basel III leverage ratios in 2015, which are also well above the regulatory minimum of 3%,” Zhang says.

Liquidity risks will also be wellmanaged, as banks enjoy large liquid assets and funding structures. Zhang adds that the banks’ sound liquidity positions will continue to support their balance sheet strength and credit profiles, despite economic pressures.

She adds that on a global scale, Hong Kong banks have among the highest baseline credit assessments (BCAs) on a weighted average basis, which in turn support their high ratings.

Hong Kong banks are also awaiting the implementation of a resolution regime that would allow creditor bail-in. Zhang believes that the government’s intention to minimise the use of public funds to resolve failing financial institutions implies a lower likelihood of government support for the banks. Authorities are then enabled to take earlier resolution actions, which will likely better preserve the value of the banks’ assets when compared with disorderly liquidations.

High volatilities in Yuan rates

Source: Bloomberg

Hong Kong’s GDP performance (year-on-year % change)

Non-bank mainland China exposure

Source: Moody’s Investors Service

Source: Extracted from individual banks’ financial and public statements

ASIAN BANKING AND FINANCE | DECEMBER 2016 55

Vendor View: atm fraud

Could your bank be the next victim?

How can your bank outsmart malicious and aggressive ATM hackers?

High-profile ATM attacks in Thailand and Taiwan have shone a spotlight on an array of security cracks.

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hen Thailand’s Government Savings Bank suffered from a malware attack that enabled a cyber gang to steal millions of Baht from its ATMs in August, the bank was forced to deactivate more than 3,300 of its ATMs nationwide to prevent further unauthorised cash-outs.

Analysts note that this incident, along with a sophisticated ATM attack in Taiwan, suggest gaping vulnerabilities in these cash machines and the need for banks to bolster security protocols to deter attacks.

“Two recent ATM attacks – one in Bangkok and one in Taiwan – are the most outrageous,” says Naveen Bhat, managing director at Ixia Asia Pacific. “Both these attacks were similar, where the attackers, believed to be East European, introduced malware into the ATM via cards.

Several million dollars have been reported stolen, and the theft was 56 ASIAN BANKING AND FINANCE | DECEMBER 2016

detected as ATMs became slower and money was missing,” he adds.

Bhat says there are three ways to attack ATMs. First is by skimming and recording devices which are external to the ATM, second is by infecting the internals of an ATM via malware introduced through chips and cards, and third is by attacking the back end network that the ATM is connected to.

The first method of skimming devices is the easiest to pull off, provided that the attackers obtain physical access to the ATM. Still, a combination of the second and the third enabled the recent Bangkok incident, so there is concern that ATM attacks are becoming cleverer.

“Without physical access, attackers need to find a way to break into the network which is usually protected by VPN (Virtual Private Networks). Breaking into a private VPN is an intensive and complicated

As attackers get more sophisticated, breaking into the secure network will become more common.

procedure,” explains Bhat. “However, as attackers get more sophisticated, breaking into the secure network will become more common.”

Four problems If banks want to thwart future attacks, they will have to address four major security problems associated with ATMs, says Ryan Flores, senior manager, Future Threat Research TrendLabs at Trend Micro Asia Pacific. The first problem is that many ATMs run on older operating systems that could be vulnerable to security threats. Flores says that ATM manufacturers shipped most of their machines with Windows in the previous decade, but Microsoft was no longer releasing security patches for Windows XP as of 2014.

Security experts warned that at least 95% of banks ran the risk of being infected by OS-specific malware due to XP’s dominance in

Vendor View: atm fraud the ATM market. On the slightly brighter side, Microsoft worked with banks from 2007 on preparation for XP’s end of life,” says Flores.

A second related problem is the outdated infrastructure of ATMs in Asia. Flores says even if computers and mobile devices have shed legacy ports, many ATM designs have not kept up with the times, sporting optical disc drives and older USB connections, both of which can help facilitate rogue network access by cybercriminals.

A third concern for ATMs is their network vulnerability, stemming from poor standards in, if not a complete lack of, encryption security.

Once attackers bypass the initial safeguards, there is little else that will hamper their theft. “An ATM network is a closed-loop system; accordingly, encryption is often not implemented, leaving gaps for cybercriminals to steal data and, in lieu of an encrypted hard drive, boot the system using a Linux distribution to gain full access,” says Flores.

The fourth and final issue with ATMs is that many have been built for multiple vendors, which makes their security easier to crack.

“Cybercriminals don’t have to be an ATM expert or have inside knowledge to generate or code malware for ATMs,” he adds.

“Standardisation benefits hackers,” concurs Joerg Reuter, software engagement manager at Diebold Nixdorf. “To allow for easier interoperability and to reduce costs, the ATM industry has either created new, or is adopting existing standards to a large extent. These standards are publicly documented, making it

Major security problems in ATMs

Foo Siang-tse

Joerg Reuter

Naveen Bhat

Ryan Flores

easier to take advantage of them.”

As if the multitude of attack vulnerabilities inherent to ATMs were not enough, cybercriminals are becoming even more cunning.

Reuter cites as an example the recent malware or “jackpotting” attack in Taiwan, which he considers a harbinger of complex attacks that banks will face in the future.

Taiwan attack Attackers in the Taiwan incident hacked into the banking network with the use of an internet-facing server system without any direct relationship to the self-service network as their entry point. Once the network was infiltrated, the attackers moved laterally until they were able to take over a file distribution server of the bank’s ATMs, which in turn was used to establish remote control of the ATMs. The final step to actually steal the cash in the ATMs was for an accomplice to visit an ATM and give the green light via a mobile phone, triggering a remote initiation of an unauthorised dispensation.

“Sophisticated as it was, the Taiwan hacking attack could have been stopped at various stages,” says Reuter, “with a stricter network security regime, by requiring additional authentication for the file distribution system, by preventing remote control of the ATM on a network level, and finally by ‘hardening’ the ATM against unsolicited software dispensing cash.”

He reckons that there is reason to believe that in the future, more criminal groups will attempt similar attacks as the one in Taiwan, which puts a lot of pressure on banks to refresh and shore up their ATM defences. “With the ever-evolving attack landscape and the long lifespan of a typical ATM, it is not sufficient however to deploy security measures once and forget about the topic thereafter. Security is a process, and regular reviews and adjustments of the countermeasures are paramount,” says Reuter.

With so many physical and cyber touch points through which attackers can gain illegal access to ATMs, banks need to adopt a holistic and proactive

approach to security, according to experts. “Protecting ATMs requires a holistic security approach that addresses both the physical security and cyber security aspects of the network,” says Foo Siang-tse, managing director at Quann.

Holistic and proactive approach When it comes to physical security, a key measure is proactive monitoring. ATM CCTVs need to be well maintained and monitored in real-time, if possible. Every ATM alarm activation also has to be taken seriously, a vulnerability which was abused recently when attackers triggered the alarm repeatedly so that when a real attack did take place, the alarm would be ignored.

As for cyber security, Foo says it advisable that banks utilise the latest models of ATMs which boast of modular compartments that try to mitigate the vulnerabilities of multiple touch points. Each modular compartment is accessible by different parties only for the purpose of their job functions, so that a technician should not be able to access the cash and card compartments.

Banks should also become more aggressive in preventing attacks that could ruin their reputation and disrupt business operations, because it is always more difficult to play catch-up once a breach occurs.

Alexey Osipov, lead penetration testing expert at Kaspersky Lab, suggests forcing vendors to fix vulnerabilities in ATM software and hardware components, reviewing the XFS standard for security, implementing mutual authentication for “trusted dispenses,” and strengthening cryptography and integrity control over the data transmitted between the ATM hardware units and its computer.

“Keep in mind that proactive analyses of security issues is better, and often much cheaper, than forensics,” says Osipov, further recommending that banks conduct regular ATM security assessment and penetration testing to understand their vulnerabilities and improve security systems. “Security is not a once-a-year-audit but a permanent process,” he says.

ASIAN BANKING AND FINANCE | DECEMBER 2016 57

SECTOR REPORT 1: Forex

Fintechs give banks a run for their money

Fintechs vs banks: Who wins in forex?

Fintechs are carving out a bigger slice of the FX market and are reshaping the way banks do business.

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hen UOB selected the nine startups for its FinLab accelerator, one of them was Nickel, which has developed a proof-of-concept mobile technology using blockchain to help migrant workers send remittances to their families. Asian banks are viewing the innovations coming out of fintech firms with some optimism, hoping that they, too, can cash in on the breakthroughs that are disrupting the foreign exchange (FX) business, from remittances to trading.

“In the recent few years, fintechs are fighting for a bigger pie in the FX remittances business, giving incumbents like Western Union, MoneyGram and even banks that do telegraphic transfers, a run for their money,” says Peter Chia, FX strategist at UOB. He says some fintech firms like Nickel are leveraging on cryptocurrencies like bitcoin to significantly reduce the costs and waiting time in FX remittances.

Through the use of the Nickel service, users can skip long queues at 58 ASIAN BANKING AND FINANCE | DECEMBER 2016

Some fintech firms like Nickel are leveraging on cryptocurrencies like bitcoin to significantly reduce the costs and waiting time in FX remittances.

traditional remittances companies, and work is ongoing to build a mobile app service to also help Asian SMEs facilitate foreign exchange payments efficiently and at a low FX rate.

More efficiency “Mainly, fintech is related to bringing more ‘efficiency’ to the market,” says Masashi Nimura, deputy head of global markets group at Krungsri.

“For clients like consumers or SMEs, they can quickly buy or sell a foreign currency at a relatively cheaper cost with more convenience in online platform or mobile application.”

He reckons that fintech firms are able to tap into process automation and offer customers lower costs for FX conversion and overseas money remittance compared with traditional transactions made through commercial banks. They also deliver increased convenience, with some startups allowing retail customers and travellers to easily compare and transact foreign exchange rates from different local money changers

without the hassle of physically going to each one. “Fintech is poised to revolutionise the way FX transactions are conducted in Asian markets,” says Ray Choy, head, FIC research, global markets at RHB Bank.

He reckons fintechs are enabling businesses to transfer money within the region in faster and more convenient ways through the use of digital devices and cutting-edge technology platforms. This results in improved execution efficiency and smoother transactions.

Supply chain and trading companies, for example, can undertake transactions without the need to exchange physical cash either through automated netting processes or credit transfer, according to Choy. These companies can also provide lending and borrowing facilities based on the liquidity flow between businesses within the same technology platform.

Choy expects that as the industry matures, fintech even has the potential to create digital currencies

SECTOR REPORT 1: Forex to replace physical currencies altogether.

E-trading taking time The influx of fintech firms competing and working with banks has brought on a strong current of digitisation across the FX business, but the pace of adoption remains uneven in developing Asia, especially when it comes to e-trading. “For Asian frontier markets such as Japan, Singapore and Hong Kong, where the currencies are freely traded, we are seeing more and more digitisation kicking in. However, for Thailand, we still see that as some years away,” says Thiti Tantikulanan, capital markets business division head at Kasikornbank.

“Whilst the digitisation trend is strong, the need for the human touch in Thailand FX is still very high,” he adds. “Exporters and importers still want to talk to dealers to negotiate the rates and to update the news.”

Tantikulanan reckons many chief financial officers and finance managers still prefer to consult with dealers on other issues such as accounting and alternative hedging options.

“Fintech hasn’t reached the Thai local market yet,” he says, pointing out that the alternative to the overthe-counter (OTC) market, the FX USD future market, hasn’t yet drawn volume away from the OTC market.

“This is likely due to the fact that most end users in Baht FX market are businesses with hedging purposes, not the speculators, as the FX conversion is still somewhat regulated

by Bank of Thailand.”

The emergence of more cuttingedge technology has continued and

Digitisation brings more competitive pricing

will continue to re-shape FX trading desks in Asia, according to Choy, changing the roles of FX traders towards more of a supervisory capacity. “As computing power increases and software becomes more intelligent, trading activities can be potentially complemented by technology. Human FX traders will act in a governance role to ensure the system will be trading within defined parameters,” he says.

Already, he points out that digitisation is bringing wider access to markets and more competitive pricing. Not only are more players entering the field, new capabilities are also being introduced such as regional auto-matching – a similar concept to e-bidding– that are designed to provide better turnaround times and best prices among Asian regional players.

But for Nimura, despite the advantages that e-trading brings, existing regulations prevent Asian countries from fully embracing the trend. “Despite an increasing trend of e-trading platforms taking place in the western side of the world to promote more transparent and more competitive FX market, in Asia, the development of fully-fledged algorithmic trading can only succeed in sophisticated markets where the currencies are freely traded,” he says.

“For emerging Asian countries whose more stringent FX and capital controls are imposed to ensure liquidity and currency stability, the underlying business transactions remain mandatory for corporate clients to execute FX transactions. For these countries, regulation remains a major hurdle to the implementation of a freely electronic trading platform.

With current limited end-client flows through the e-trading platform, algorithmic trading is unlikely to be widely adopted in the Asian FX trading arena so soon,” Nimura adds.

Masashi Nimura

Ray Choy

Thiti Tantikulanan

Despite the advantages that e-trading brings, existing regulations prevent Asian countries from fully embracing the trend.

Increased regulations The stringent regulatory regimes that are prevalent in Asia are not about to ease up. Analysts believe this has put a damper on the growth of FX desks, but some argue that this will enable more sustainable long-term growth and even spur on the faster adoption of e-trading. “Currently, banks are bombarded with more stringent regulations which would have additional operation and compliance costs to comply with,” says Nimura.

“Although, on one hand, these regulations are aimed at levelling up market transparency and enhancing financial market stability, on the other, we foresee that the market would become more restrictive with less market liquidity.” He reckons the implementation of the Dodd Frank Act, for example, would lessen proprietary trading activities as well as restrict counterparties and the types of transactions to be traded.

There are also new transaction reporting and margin requirements that are raising transaction costs.

But he does note that during the transition period where international regulatory requirements are not enforceable across the globe, banks in Asian countries where these international requirements have not been adopted can take advantage of lower transaction costs.

But for RHB’s Choy, increased regulation has also brought on positive results such as increased self-governance and personal responsibility, and may well propel the FX market to fully embrace trading. “The increase in information sharing, improving visibility of the FX market via trade repository recording of OTC trades, and the streamlining of financial regulation will improve the stability, visibility and price discovery of FX in the future. Finally with the increased cost, increased visibility and reduced presence, there may be an increased incentive in the FX world for higher utilisation of electronic trading desks.”

ASIAN BANKING AND FINANCE | DECEMBER 2016 59

SECTOR REPORT 2: Islamic banking

Is digitisation a ‘disruption’ for the Islamic banking sector?

Islamic banks doubling down on digital

Islamic banks are attempting to extend their reach to underbanked populations in key Asian markets through the use of digital technology.

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hen the Shariah business unit of Bank OCBC NISP was coming up with a plan to increase market share in Indonesia and raise its competitiveness against traditional banks, it was convinced that doubling down on digitisation was the best move. The bank developed a robust electronic channel facility to deliver services such as ATM, mobile banking and internet banking, and other Islamic banking executives are similarly viewing digitisation as the key to propel market growth in Indonesia and the rest of high-growth Southeast Asia.

“As we know, Indonesia is the largest Muslim population in the world, scattered in many islands.

The e-channel was a starting point of digitalisation for banking and an opportunity to become more efficient and have the ability to serve customers across urban areas in Indonesia,” says Andrae Krishnawan W, director of network group at OCBC NISP. 60 ASIAN BANKING AND FINANCE | DECEMBER 2016

Digitisation presents a window for the Islamic banking sector to leverage on the advances to catch up with traditional banks and financial technology companies.

He says the Shariah business unit has been working hard to reach the same standard and service as conventional banking for electronic channels, especially now that customers demand easier ways to do banking transactions.

“In today’s fast-paced business world, digitisation has become a necessity,” says Sohail Niazi, chief Islamic banking officer at Maisarah Islamic banking services of Bank Dhofar.

“As for the Islamic banking sector, we see more financial transactions taking place via mobile apps, smart devices and internet banking. This pushes us to be more innovative and to walk the extra mile to fulfil the needs of our customers and meet their requirements.”

Niazi reckons that effectively using the latest technology and tapping into digitisation gives a large advantage not just for banks, but businesses of all kinds. “Successful businesses in all industries have made digitisation an

integral part of their business strategy to make life easier for customers and create value for shareholders.”

For Mohamad Safri Shahul Hamid, deputy chief executive officer at CIMB Islamic, digitisation presents a window for the Islamic banking sector to leverage on the advances to catch up with traditional banks and fintech companies, and pull ahead of their peers.

Digitisation “is both an opportunity and a disruption,” says Safri. “It is a disruption for Islamic banking sector, where most players are lagging behind conventional banks and fintech in offering and providing consumers with simple processes, instant accessibility through mobile applications and fast turn-around times.”

“This disruption is also a clear opportunity for Islamic banking players to leapfrog ahead with innovative Shariah-compliant products and solutions that efficiently communicate with consumers and

SECTOR REPORT 2: Islamic Banking to set up simple and cost-effective Shariah-compliant digital and mobile platform,” he adds.

Mixed year The emergence of digitisation as one of the defining strategies for Islamic banks comes in a year where issuance of Islamic bonds or sukuk has slowed.

For more optimistic analysts like Nitish Bhojnagarwala, AVP and analyst at Moody’s, the prospects of Islamic finance remain strong despite the issuance slowdown. Long-term growth will be driven by increasing demand growth in key markets and easing regulation across the globe.

“2016 has been a mixed year for Islamic finance so far,” says Bhojnagarwala. “Although growth trends in Islamic banking assets remain strong, growth in sukuk (Islamic bond) issuance has slowed whilst growth in Takaful insurance premiums has also pulled back from very rapid growth levels as the market matures,” he adds.

Even though Sukuk volumes remained flat for the first half of 2016 at around $40 billion due to lower short-term issuances by the Malaysian government and the souring economic conditions in emerging markets, Bhojnagarwala expects increased sukuk issuance into 2017 from sovereigns, banks and corporates in the Gulf on back of increased regional financing needs amid lower oil prices.

Growth in the Takaful insurance sector is also slowing as the market matures, but will remain at double digit levels into 2017, and Bhojnagarwala says low levels of insurance penetration suggests significant headroom for further expansion in the coming years, especially as more populations become affluent and embrace the concept of Takaful.

Bhojnagarwala reckons that there has been continuing retail demand for Shariah-compliant financial services in Muslim-majority countries. Core Islamic markets has experienced strong financing growth of around 13% in 2015 and 6% for the first six months of 2016.

Islamic banking assets have also posted solid growth due to the rise

of proactive government legislation.

Bhojnagarwala says that Islamic banks in some jurisdictions now have the opportunity to attract more rural, orthodox populations who were previously underbanked and include them in the financial system. “Oman is a notable success story as it has achieved a level of Islamic banking penetration that is higher than countries with a far longer history of the sector,” he adds.

He expects Islamic banking to continue to face challenges in core Islamic markets, particularly in the Gulf Cooperation Council countries due to lower oil prices, but other analysts expect other regions such as Southeast Asia to step up.

Extraordinary opportunities Despite the prevailing macroeconomic and political challenges that in emerging markets, there is significant unmet demand for Islamic banking in these markets, especially among the underbanked rural populations.

Digitisation is helping Islamic banks reach these populations and provide them with products that are more aligned with their ethical codes, according to analysts. The region is also seeing positive developments such as the formation of the ASEAN Economic Community (AEC), and Indonesian government’s increased determination to support Islamic banking and finance.

“Forward looking industry projections are generally positive,” says Ashar Nazim, partner, global Islamic banking center at EY in the World Islamic Banking Competitiveness Report 2016.

“There are a number of extraordinary opportunities in the making that will influence the regionalisation of the industry. Emerging markets will remain central to global growth over the next decade,” says Nazim. “In Southeast Asia, the coming together of AEC in 2015 is one of the key milestone towards a larger, integrated financial market.”

Bank Dhofar’s Niazi reckons Malaysia has already become a major hub for Islamic banking and finance, and Indonesia has a huge potential to become an Islamic market leader

Andrae Krishnawan W

Sohail Niazi

Mohamad Safri Shahul Hamid

Ashar Nazim

Nitish Bhojnagarwala

especially if the sector receives similar strong support from the government.

“If Indonesia puts together a proper roadmap and a comprehensive strategy like Malaysia did, it can make a huge impact on the Islamic finance Industry on a global scale. After all, it has a larger Muslim population than any other country in the world,” says Niazi.

In 2014, the Islamic finance industry grew to Rp 559 trillion, or 3% of total overall finance industry assets (Rp 16,380 trillion), and Indonesia is expecting its market share of Islamic banking to grow from 3% today to 11% by 2020, according to CIMB Islamic’s Safri.

Indonesia’s Islamic finance growth rate since 2010 at 139% surpassed the conventional sector growth at 42%, with the biggest contributors to Islamic finance industry are Islamic banking (50%) and sukuk (44%), compared with bonds (61%) and banking (35%) for the whole financial industry.

Total Islamic finance assets grew 10% to Rp617 trillion in 2015, and for Safri, Islamic finance should only grow more as it comes in to meet the need of Indonesia’s infrastructure sector for new financial models.

Indonesia is also seeking to boost its sukuk issuance, although there is still a need to allot more resources in developing human capital and institutional framework to develop a deep domestic sukuk market.

“In Indonesia, an ambitious, wideranging government master plan will drive growth, despite a shortfall of human capital,” says Bhojnagarwala, citing a recent positive announcement that 50% of all public financing will be Shariah-compliant in the next 10 years.

ASIAN BANKING AND FINANCE | DECEMBER 2016 61

SECTOR REPORT 3: Business banking

Manual transactions just don’t cut it anymore for businesses

Which banks are leading in digital business banking?

Asian banks are wowing business customers with tech-powered solutions that bring increased efficiencies and regional operating expertise.

W

hen UOB launched its new cloud-based service for small businesses, it was the bank’s latest “go-big-or-gohome” attempt to impress corporate customers with digital technology.

The first of its kind in Singapore, the cloud-based service integrates back office processes including payroll and accounting, saving business owners time and money. UOB could have rolled out standard banking services to get the job done, but these no longer excite business owners or keep them loyal. This is why banks are rolling out more technology solutions to help businesses thrive in an increasingly Internet-powered and regionally integrated Asia.

UOB’s cloud-based service, for example, provides businesses with a direct feed from their operating accounts with UOB. This allows owners to reconcile transactions 62 ASIAN BANKING AND FINANCE | DECEMBER 2016

There are also new security threats and risks that arise from this push to digitisation, hence only banks with certain size and economy of scale would be able to balance this with the appropriate investment.

like purchase orders and daily takings with their bank statement on demand. Other banks like OCBC NISP are also tapping into the flurry of innovations in financial technology to unlock more value for business customers, a strategy that is fast becoming a competitive necessity.

“Banks need to reinvent themselves in order to survive,” says Low Seh Kiat, director of retail banking group at OCBC NISP. “Banks are being pushed to move beyond their traditional role as enablers of financial transactions and providers of financial products and play a deeper role in the digital and commercial lives of their customers. Leading banks are investing and organising their products and services to be aligned to all these changes.”

He says the fast-changing pace of technology has altered customer behaviour and expectations. Now,

they clamour for simpler, more efficient and more rewarding solutions, which only banks that embrace the digitisation trend can hope to provide.

Bigger banks are leading the charge in the digitisation of business banking due to their large operations and sizeable coffers that allow them to make the appropriate technological and security investments. “There are also new security threats and risks that arise from this push to digitisation, hence only banks with a certain size and economy of scale would be able to balance this with the appropriate investment,” says Low. He adds that major banks with capable leadership and a culture of innovation are in a great position to forge strategic partnerships with promising fintech players, and quickly shift digital gears. “Banks with strong management teams and proven track records of forward-looking vision will ride this mega trend well and stay relevant,” says Low. Bank Mandiri, for one, is embracing the digitisation trend with plans to launch an array of business products that leverage on technology platforms.

The bank is focussing on improving its current lending business process

SECTOR REPORT 3: Business BANKING through the development of a single platform. Through the unified platform, all lending business processes in Bank Mandiri can be executed across various retail segments from business banking to consumer. It is also expected to enhance the service level agreement for other business processes.

Bank Mandiri is also developing an end-to-end solution retail product for supply chains to provide the working capital needs of business borrowers.

This will enable faster payments and minimise collection risks for the principal and distributors whilst increasing funding access.

Finally, Bank Mandiri is exploring technology to improve the process of opening bank accounts for business owners. Through the use of selfies, and voice and fingerprint biometrics, customers will be able to open an account without needing to visit a branch. Customers will be asked to use their smartphones to process and register their account applications, including sending requirements such as documents and photos.

“The strength of this product is it is paperless, easy to access, fast, and user friendly,” says Asriel Hay, head of transformation, business development department, small business group, Bank Mandiri.

ASEAN integration Asian banks are also racing to digitise their banking processes in order to better understand the needs of their business customers in the highgrowth and lucrative Southeast Asian region, which recently established the ASEAN Economic Community

Asian banks racing to digitise banking processes

(AEC) last year. Regional integration is emerging as a key consideration for banks that want to do business in ASEAN, and digitisation can play a crucial role in serving millions of customers across multiple south-east Asian countries.

“Banks need to have a strong regional network and in-depth knowledge of the local market to help Asian businesses expand into other markets” says Frederick Chin, head of group wholesale banking at UOB. “In addition, banks need to have strong relationships on the ground, to help their clients navigate through the local regulatory environment and establish connectivity to local business partners.”

UOB signed an agreement with BKPM to allow the former’s business banking clients to apply for their Indonesia Principal Licence, an initial requirement for companies that want to incorporate an entity in Indonesia, directly in Singapore without having to travel to Indonesia.

UOB also formed a foreign direct investment (FDI) advisory unit that provides a one-stop-shop service for companies that want to set up operations in Asia. Clients are linked with regional and local partners such as government agencies, business associations and professional service providers, and the digital process further speeds up the setup time.

“ASEAN being an economic region with diverse patterns of social and economic development, means that it would be some time before the region as a whole can be fully integrated,” says Chin.“The challenge is then for banks to help their clients understand

Low Seh Kiat

Frederick Chin

Asriel Hay

Masaaki Suzuki

how they can navigate the differing landscape in each market.”

With the AEC set to transform ASEAN into a single market and a highly competitive economic region, more businesses in the region will require an increasing number of complex services from crossborder trade to investment. “The AEC and the eventual integration of financial services implies greater competition from new players,” says Masaaki Suzuki, head of JPC/MNC banking at Krungsri. “Banks need to emphasise ‘customer centricity’ more than ever – growing with them and matching their evolving needs every step of their life stage.”

Customer centric In Thailand, for example, Suzuki notes that there is strong current of digital transformation led by the government. Under the policy direction of “Thailand 4.0 Model,” the country is adopting a national e-payment scheme and moving towards a cashless society.

The Bank of Thailand is also active in enabling digitisation in the banking industry through initiatives in e-signatures, e-know your customer, and digital content.

Suzuki expects that in the next five to 10 years, digital adoption should be the norm for all Thai people as 90% of the Thai population is expected to have internet access by 2026.

“Everyone will be using smartphones, whilst people in remote areas will benefit from easier access to financial services via mobile internet,” says Suzuki, even expecting biometric identification trends to replace mobile payments over the next decade. For business customers, the fast pace of digitisation and regional integration in Asia represents opportunities for the banking sector to evolve into new roles beyond that of the traditional financial service provider.

Suzuki says the banks that want to grow their customer bases in the region should focus on connecting and mobilising financial trade and investment flows. There will also be a need for banks to expand their role from providing existing financial services to business expansion advisory and networking services.

ASIAN BANKING AND FINANCE | DECEMBER 2016 63

retail banking forum: Singapore

FARAAZ ALI, ANZ: “Fintechs also find it easier to disrupt the payments space where there is little to no regulation.

In this area, the banks usually take on a more collaborative approach and look for a fintech partner to do business with.”

LIEW NAM SOON, EY: “It’s more than just a technical solution, it’s actually a lot of work to make a digital initiative successful. A lot of work needs to go into looking at the processes around it, the operating model, the entire organisation, the sponsorship from the very top.”

Singapore banks urged to look into methods of collaboration with fintechs

How do banks know which ones to work with, which ones to invest in, and what strategy to implement?

A

comparatively stable financial sector is not enough to make Singapore immune to shocks when it comes to the speed and volume of innovation from within and outside the industry. Bankers in the city-state might need to work even longer hours as they determine the best strategies for weathering droves of digital disruption.

“It’s more than just a technical solution, it’s actually a lot of work to make a digital initiative successful. A lot of work needs to go into looking at the processes around it, the operating model, the entire organisation, the sponsorship from the very top,” Liew Nam Soon, ASEAN managing partner, financial services at Ernst and Young (EY) Solutions LLP, said at the Singapore leg of the Asian Banking and Finance Retail Banking Forum held on the 11th of May this year at The Westin Singapore.

Innovation is a mere slice of the 64 ASIAN BANKING AND FINANCE | DECEMBER 2016

Fintechs also find it easier to disrupt the payments space where there is little to no regulation.

pie; banks are compelled to take a deeper look at data for any customer insights that could help develop a more specific and improved digital platform. Liew added that solutions must be meaningful enough for businesses with varied focuses, especially in the ASEAN region where financial markets have different levels of maturity from a client’s perspective as well as a regulatory regime perspective.

Strategic partnerships Singapore has positioned itself well in the region’s fintech space, and its lead is attributed to the existence of support infrastructure and the ease of doing business in the city. Singapore Life, one of the biggest and most recent entrants into the market, is showing that fintechs can dominate any frontier without the usual challenges that mainstays experience.

Banks have nonetheless jumped

in on the fintech bandwagon, and have themselves launched their own fintech accelerators and incubators.

Liew shared that a lot of the fintechs in the city and the region are very creative, but would need strict monitoring on the way they handle customer data and manage risk. The Monetary Authority of Singapore (MAS) has been very focussed on defining the regulations and putting out consolidation papers to determine how fintechs fit in the city’s operating environment.

Singapore fintechs have begun occupying several jurisdictions, two major ones of which are the online investment advisory space and the lending space. Faraaz Ali, head of consumer products, Asia at ANZ, added that fintechs also find it easier to disrupt the payments space where there is little to no regulation. In this area, the banks usually take on a more collaborative approach and look for

retail banking forum: Singapore Regional is now the name of the game, especially as the ASEAN financial sector is growing into a very robust, thriving, and more integrated marketplace.

From left to right: Asian Banking and Finance editor Tim Charlton, EY’s Liew Nam Soon, and ANZ’s Faraaz Ali

a fintech partner to do business with.

It is also not enough for banks to hire a chief strategic officer and let him do all the dirty work. According to Liew, bank employees must also feel empowered to work for innovation.

“There are so many fintechs. One of the challenges for banks is who to work with? How do they spot who will be successful over time? So, what’s the strategy to take? Do they collaborate?

Do they invest? This is something that requires a different set of skills from those of the traditional banker.

Another element to look at is the method of collaboration,” Liew added.

Digging into the data The varied tastes and contexts of customers are motivating Singapore banks to invest more into technology and data, but recent investments have not been enough to hit some of the sweet spots. Many customers do not fit nicely into previously identified moulds, and some have very different buying and selling behaviours.

“There’s a lot of transaction data that is available in banks’ systems.

To be able to monetise it, it is really important to extract the right customer insight from that data.

That’s the ongoing challenge for many banks. It’s gotten more sophisticated.

It’s important to look at the right insight; whether you will offer this kind of loan or investment. It’s easier said than done,” Liew shared.

Another major challenge for banks is to integrate different front-ends and extract from the back-end without the unnecessary residual information from legacy systems. This issue has driven a lot of businesses into creating

infrastructure service-oriented architecture that allows the extraction of meaningful data.

“Analytics are taking us into far more insights into customer behaviour: how to interact with the customer, whether to cross-sell or upsell, and understanding what is happening in the network,” said Dereck Raymond, vice president for software solutions at Diebold.

Enter refurbishments Ali emphasised that despite the high use of online banking among Singaporean customers, the branches will definitely not go away soon. He said that Singapore’s position as a financing hub has made it the perfect place for people to park their wealth.

This however, does not mean that banks will remain the way they are.

“In terms of the makeup of the branches, we have been experimenting with this for the last 3-4 years – to make the branches more attractive. Put in kiosks, displays, that allow customers to undertake communication.

Depending on the niche, banks should do away with cash and digitise a large number of transactions,” Liew said. As a way to maintain and popularise their brand, Singapore banks have already hit the road with a number of pop-up branches, a concept which follows the food-truck model. A pop-up branch goes directly to where the crowds are and provides basic services for customers on the go.

With regard to communicating well with customers, Raymond added that banks should also look into the relationship between specific banking

devices such as ATMs and the banks’ clients. He said that ATMs are now moving away from being a device that merely dispenses cash and provides balance inquiry into something that is far more friendly and understanding of who the customer is and from which segment he comes.

Business mediation might also see more developments as banks move towards becoming more friendly to individual investors within the SME sector. The high risk associated with SMEs have driven banks to put the sector at bay, but the innovation that they bring is making bankers think twice. Ali said that it will take a different mindset to approach this and that banks might turn to peerto-peer lending in order to cater not just to businesses, but to individual investors as well.

Neighbouring narratives Regional is now the name of the game, especially as the ASEAN financial sector is growing into a very robust, thriving, and more integrated marketplace. Banks who wish to expand their footprint cannot implement blanket business models or produce a single digital platform for all the countries in the region. The economies of these countries remain inextricably linked, but major trends in the sector vary from country to country.

For instance, Singapore is quite high on the use of online internet ATMs, and its city-state structure is vastly different from that of archipelagic Indonesia, where online internet remains low and mobile penetration is skyrocketing. Thailand, on the other hand, is moving away from a tight regulatory environment into a more innovation-friendly one, whilst neighbouring Cambodia and Vietnam find lending and repayment growing hand in hand.

One thing is clear, customers all over the world are inevitably moving towards digital banking. Banks therefore need to continuously rethink the way they do business, and for now they are all in a race to collaborate with social media platforms and implement contactless payments whilst keeping their branches attractive and up-to-date.

ASIAN BANKING AND FINANCE | DECEMBER 2016 65

retail banking forum: bangkok

THAKORN PIYAPAN, Krungsri: “The Bank of Thailand has to study the regulatory text to understand what’s going on in the technology today and work out the aspects of the regulations.“

SUPANEEWAN CHUTRAKUL, Kasikornbank: “We’ll see new companies in the payments systems, because that is easier and simpler to enter than the loaning side.”

RAJIV MADANE, Fiserv: “There is a lot of disruption happening in the market and there are a lot of banking industry concerns, but banks are not going to close business.”

How can banks in Thailand successfully dominate the digital innovation space?

Experts say Thai banks are not ready to introduce a separate brand for a standalone direct online bank.

S

martphone ubiquity has paved the way for the rapid rise in digital banking and online payments among Thai consumers, driving banks to come up with increasingly creative digital products and strategies lest they trail behind.

Fintechs have given banks an even bigger run for their money as they roll out highly competitive and attractive products such as contactless cards and FX trading platforms.

During the Asian Banking and Finance Retail Banking Forum held in Bangkok, Thailand on May 25 this year, Thakorn Piyapan, head of digital banking and innovation at Bank of Ayudhya (Krungsri), said that they have been counting the growth of fintechs and startups in Thailand for the last two years.

However, they have stopped count in recent months as new fintechs were being put up every day. These latest developments in the local and global 66 ASIAN BANKING AND FINANCE | DECEMBER 2016

We’ll see new companies in the payments systems, because that is easier and simpler to enter than the loaning side.

financial industries beg the question: Will banks remain up to speed?

The answer will most likely not disappoint in Thailand where consumers still pay regular visits to bricks-and-mortar banks, even as the banks’ digital departments have begun navigating their way into what originally were fintech-dominated spaces. Experts also think that Thai banks are not yet ready to introduce a separate brand for a standalone direct online bank because clients are not fully transitioning from physical branches to online platforms.

“There is a lot of disruption happening in the market and there are a lot of banking industry concerns, but banks are not going to close business. Banks are much smarter than most of the fintechs I worked with, so they will have the money and the power to stay alive,” said Rajiv Madane, director, product & strategy, core banking, risk &

compliance and payment networks, ASPAC at Fiserv.

Fintechs: friend or foe?

The entrance of fintech companies into the financial industry posed a threat to the the mainstays, but banks saw beyond the challenge and discovered opportunities to partner with the more technology-savvy fintechs. Their relationship has evolved from a competitive nature to a collaborative one, as both realised that their services are more closely intertwined than they first thought.

Supaneewan Chutrakul, first senior vice president – retail business division at Kasikornbank, shared that Kasikornbank does not see fintechs as competitors because each has an expertise that the other does not have.

“We’ll see new companies in the payments systems, because that is easier and simpler to enter than the loaning side. Fintechs are very keen

retail banking forum: Bangkok and they have the patience to learn, which is very good. The banks were slower in the earlier stage compared to the fintechs because they [fintechs] have focus and are doing things very fast. In terms of Kbank, we have upped our IT system and we are working very closely with the fintechs to gain a customer base faster than the others. We are looking forward to working with fintechs more often,” Chutrakul said.

The game is no longer played by outsmarting emerging competitors, but by striking a balance wherein both the bank and the fintech play to their strengths and mutually benefit from each other. Madane shares that his experience with advising Singapore fintechs revealed that their technical expertise may not be enough to keep them afloat. Unlike banks, fintechs do not have the infrastructure and the legacy to gain and keep a lot of traction, so the solution would be for them to reach out to those who have already made it big in the industry.

“What they [fintechs] don’t know is that once the connection to the bank fails, how will the transaction get processed? That is where collaboration between bank knowledge and fintech knowledge comes in,” said Madane.

Tailor-fitting digital solutions Despite reassurances that fintechs will not take over the banking universe, banks are far from heaving a sigh of relief. The massive digital disruption in financial services is sending banks

on a 24/7 frenzy to develop seamless strategies that work across all age brackets and consumer contexts.

Madane highlighted that banks should do away with one-size-fits-all solutions and come up with a digital strategy that provides an unparalleled and individualised customer experience. He calls it “banking at the speed of life,” a strategy that categorises banking products according to the different stages in the life cycle of a customer.

For instance, banks are now responsible for creating a customer identification platform that will eliminate countless hours of queueing, filling up new forms and submitting new documents for returning clients.

Meanwhile, young professionals, who make up the bulk of online bankers, expect that online payments will no longer need a separate tab on their computer browser or a separate app on their smartphone. Madane said that they will eventually look for a digital solution that will allow them to do their banking on Facebook or Instagram.

“There are a few banks, mostly in the US, who have integrated Instagram services and payments from the banks. I think it is still a young industry. Things are still picking up. This is the time for [Thai] banks to identify what customers want and how this could be done.

Check on your customer base. How are they adopting your current digital strategies? How are they using the

Asian Banking and Finance editor Tim Charlton facilitates the discussion among Thai bankers

The growing demand for online services pushed banks to close down 55 branches in the past year and an average of 200 branches per year over the last four years.

apps?” Piyapan added.

Proactive banking is another upcoming strategy that banks need to study and develop. According to Madane, the customer will no longer determine what he or she wants to do with his money – the bank must be ahead enough to layout the options for the customer. In Thailand, most of the cash influx come from the older segments of the clientele. Thai banks must be able to identify the perfect mix of branch banking and digital solutions that they will offer older clients who still make an effort to visit the branch and communicate with the branch staff.

Lobbying for dynamic policies The growing demand for online services pushed banks to close down 55 branches in the past year and an average of 200 branches per year over the last four years. Whilst cash will not be eliminated anytime soon, countries across Asia have already joined the massive drive of moving towards a cashless society which includes mobile and digital banking and a whole range of P2P services.

Piyapan elaborated that the changes must not take place only within banks, but within the entire Thai financial market.

According to him, the banking industry in Thailand is still replete with regulations that are keeping financial institutions from rolling out new products at top speed. This is where the fintechs enjoy an advantage – their structure and novelty have placed innovation at an arm’s length.

“The Bank of Thailand has to study the regulatory text to understand what’s going on in the technology today and work out the aspects of the regulations. Thailand’s banks have been left behind for the last 20 years,” said Piyapan. He cautioned, however, that the Bank of Thailand is also protecting the industry from a credit collapse whilst it is fine-tuning policies for P2P lending.

Chutrakul said that they are expecting changes to happen very quickly in the regulatory environment of Thailand’s financial services industry, one major development of which is the creation of a national payments platform.

ASIAN BANKING AND FINANCE | DECEMBER 2016 67

COVER STORY

More than 80 firms lauded at this year’s Awards programme

T

his year’s Asian Banking and Finance Awards marked a breakthrough as it honoured a record number of organisations.

On its 11th year, the Retail Banking Awards recognised 65 winning banks from 24 countries, whilst on its fifth year, the Wholesale Banking Awards acknowledged 40 winning banks from 22 countries. All the nominations were judged by Mohit Mehrotra, regional head of financial services, strategy & operation, Deloitte; Liew Nam Soon, ASEAN managing partner, Ernst and Young; Karen Loon, partner - assurance, financial services, PwC; and Egidio Zarrella, Asia Pacific head of banking and capital markets, KPMG. One of the judges, Nam Soon, spoke on behalf of the judging panel during the Awards night. “We live in very interesting times especially with the rise of disruptors, fintechs, and regulatory compliance. The job gets harder every year because of all the wonderful innovations the banks are undertaking to transform the industry. So congratulations to all the winners,” he said.

On its second year, the Charlton EastColes Corporate Performance Awards 2016 also gave recognition to the top firms in Southeast Asia. Charlton EastColes, a joint venture between the Sydney-based financial markets research specialist East Coles and Asian Banking and Finance publisher Charlton Media Group, surveyed over 200 fund managers and analysts across the region and asked them to rate the largest listed companies.

Last night’s event marked the biggest Asian Banking and Finance Awards in history. The Island Ballroom A at the Shangri-La Hotel Singapore was packed with more than 230 attendees from over 80 companies.

“We had such a wide range of interest for tonight’s awards, so thank you all very much. I’d also like to thank all our judges who patiently went through all the nominations,” said Tim Charlton, editor and publisher of Asian Banking and Finance.

Below is a list of all the winning companies. Again, congratulations!

WINNERS OF THE WHOLESALE BANKING AWARDS 2016

BankDhofar Oman Domestic Technology and Operations Bank of the Year BDO Unibank, Inc. Philippines Domestic Cash Management Bank of the Year Burgan Bank Kuwait Domestic Cash Management Bank of the Year Cathay United Bank Taiwan Domestic Cash Management Bank of the Year Domestic Trade Finance Bank of the Year CB Bank Myanmar Domestic Cash Management Bank of the Year Myanmar Domestic Trade Finance Bank of the Year CIMB Malaysia Domestic Cash Management Bank of the Year CIMB Niaga Indonesia Domestic Cash Management Bank of the Year CTBC Bank Taiwan Domestic Foreign Exchange Bank of the Year DBS Bank China International Cash Management Bank of the Year China International Trade Finance Bank of the Year Singapore Domestic Technology & Operations Bank of the Year Doha Bank Qatar Domestic Trade Finance Bank of the Year Emirates Islamic UAE Domestic Trade Finance Bank of the Year Hang Seng Bank Limited Hong Kong Domestic Trade Finance Bank of the Year Indusind Bank Ltd India Domestic Cash Management Bank of the Year Krungthai Bank Thailand Domestic Cash Management Bank of the Year Lao Viet Joint Venture Bank Laos Domestic Technology & Operations Bank of the Year Malayan Banking Berhad (Maybank) Malaysia Domestic Trade Finance Bank of the Year Maritime Bank Vietnam Domestic Foreign Exchange Bank of the Year Mashreq UAE Domestic Cash Management Bank of the Year Maybank Investment Bank Berhad Malaysia Domestic Project Finance Bank of the Year

​ bu Dhabi Commercial Bank A UAE Domestic Technology & Operations Bank of the Year

National Development Bank PLC Sri Lanka Domestic Project Finance Bank of the Year

ANZ Bank Singapore Singapore International Technology and Operations Bank of the Year

OCBC Malaysia Malaysia International Project Finance Bank of the Year

ANZ Banking Group Australia Domestic Technology and Operations Bank of the Year

OJSC Optima Bank Kyrgyzstan Domestic Technology and Operations Bank of the Year

Bangkok Bank Thailand Domestic Trade Finance Bank of the Year

PT Bank Mandiri (Persero) Tbk Indonesia Domestic Trade Finance Bank of the Year

Bank for Investment and Development of Vietnam JSC Vietnam Domestic Technology & Operations Bank of the Year

PT Bank OCBC NISP Tbk Indonesia Domestic Technology and Operations Bank of the Year Indonesia Domestic Foreign Exchange Bank of the Year

Bank of Ayudhya (Krungsri) Thailand Domestic Technology and Operations Bank of the Year Bank of China (Hong Kong) Hong Kong Domestic Foreign Exchange Bank of the Year Hong Kong Domestic Cash Management Bank of the Year

68 ASIAN BANKING AND FINANCE | DECEMBER 2016

RHB Banking Group Malaysia Domestic Foreign Exchange Bank of the Year Saigon-Hanoi Commercial Joint Stock Bank Vietnam Domestic Project Finance Bank of the Year

COVER STORY SB Capital Investment Corporation Philippines Domestic Project Finance Bank of the Year

Cambodian Public Bank Domestic Retail Bank of the Year - Cambodia

Standard Chartered Bank Bahrain Domestic Cash Management Bank of the Year

CIMB Bank Singapore Credit Card Initiative of the Year - Singapore

Taishin Bank Taiwan Domestic Technology & Operations Bank of the Year

CIMB Group Mobile Banking Initiative of the Year - Malaysia Digital Banking Initiative of the Year - Malaysia Core Banking System Initiative of the Year - Malaysia

Techcombank Vietnam Domestic Trade Finance Bank of the Year Vietnam Domestic Cash Management Bank of the Year Türk Ekonomi̇ Bankasi A.S. ( BNPP Joint Venture) Turkey Domestic Cash Management Bank of the Year United Amara Bank Limited Myanmar Domestic Technology and Operations Bank of the Year Westpac Banking Corporation Australia Domestic Cash Management Bank of the Year Australia Domestic Trade Finance Bank of the Year YES Bank India Domestic Trade Finance Bank of the Year

WINNERS OF THE RETAIL BANKING AWARDS 2016

CIMB Thai Mobile Banking Initiative of the Year - Thailand Citibank (Hong Kong) Limited Advertising Campaign of the Year - Hong Kong Citibank, N.A. Philippines Corporate Social Responsibility of the Year - Gold DBS Hong Kong Online Banking Initiative of the Year - Hong Kong SME Bank of the Year - Hong Kong DBS Singapore Domestic Retail Bank of the Year - Singapore Online Banking Initiative of the Year - Singapore DBS Taiwan Employer Award of the Year - Gold

Abu Dhabi Commercial Bank SME Bank of the Year - UAE Retail Innovation of the Year - UAE

DongA Money Transfer Company Finance Company of the Year - Vietnam

Alliance Bank Berhad Graduate Employment Programme of the Year - Malaysia

Eurasian Bank Domestic Retail Bank of the Year - Kazakhstan Employer Award of the Year - Silver

Asia Commercial Bank Domestic Retail Bank of the Year - Vietnam

HDFC Bank Online Banking Initiative of the Year - India Mobile Banking Initiative of the Year - India Digital Banking Initiative of the Year - India

Baiduri Bank Berhad Domestic Retail Bank of the Year - Brunei BDO Unibank, Inc. Automotive Lending Initiative of the Year - Philippines Mortgage and Home Loan Product of the Year - Philippines Online Banking Initiative of the Year - Philippines Corporate Social Responsibility of the Year - Silver

Hong Leong Finance ASEAN Finance Company of the Year Website of the Year - Singapore

Bank Eghtesad Novin Online Banking Initiative of the Year - Iran Digital Banking Initiative of the Year - Iran Social Media Initiative of the Year - Iran

HSBC Bank (Vietnam) Ltd. International Retail Bank of the Year - Vietnam

Bank for Investment and Development of Vietnam JSC Social Media Initiative of the Year - Vietnam Bank of Ayudhya Public Company Limited Advertising Campaign of the Year - Thailand Social Media Initiative of the Year - Thailand Mortgage and Home Loan Product of the Year - Thailand Bangkok Bank Mobile Banking Initiative of the Year - Thailand Bank of China (Hong Kong) Digital Banking Initiative of the Year - Hong Kong Social Media Initiative of the Year - Hong Kong Mobile Banking Initiative of the Year - Hong Kong BankDhofar Mobile Banking Initiative of the Year - Oman Digital Banking Initiative of the Year - Oman Banque Pour LE Commerce Extérieur Lao Public (BCEL) Domestic Retail Bank of the Year - Laos Online Banking Initiative of the Year - Laos Burgan Bank Domestic Retail Bank of the Year - Kuwait Mobile Banking Initiative of the Year - Kuwait Digital Banking Initiative of the Year - Kuwait

HSBC Asia Pacific International Retail Bank of the Year

HSBC Bank Australia Limited Digital Banking Initiative of the Year - Australia HSBC India Corporate Social Responsibility of the Year - Bronze HSBC Sri Lanka International Retail Bank of the Year - Sri Lanka ICICI Bank Website of the Year - India Branch Innovation of the Year - Silver Core Banking System Initiative of the Year - India Janata Bank Limited Domestic Retail Bank of the Year - Bangladesh Online Banking Initiative of the Year- Bangladesh Kasikornbank Public Company Limited Digital Banking Initiative of the Year - Thailand Domestic Retail Bank of the Year - Thailand Krungsri Auto Automotive Lending Initiative of the Year - Thailand Land Bank of the Philippines Domestic Retail Bank of the Year - Philippines Graduate Employment Programme of the Year - Philippines

ASIAN BANKING AND FINANCE | DECEMBER 2016 69

COVER STORY Lao Viet Joint Venture Bank Core Banking System Initiative of the Year - Laos

Unionbank of the Philippines Employer Award of the Year - Bronze

Malayan Banking Berhad - Malaysia Online Banking Initiative of the Year - Malaysia

United Amara Bank Limited Most Improved Retail Bank of the Year - Myanmar Advertising Campaign of the Year - Myanmar

Maybank Kim Eng Securities Pte Ltd Online Securities Platform of the Year - Malaysia National Development Bank Domestic Retail Bank of the Year - Sri Lanka SME Bank of the Year - Sri Lanka Social Media Initiative of the Year - Sri Lanka OCBC Bank ASEAN SME Bank of the Year OCBC Malaysia SME Bank of the Year - Malaysia OCBC NISP SME Bank of the Year - Indonesia Website of the Year - Indonesia Mobile Banking Initiative of the Year - Indonesia OJSC Optima Bank Domestic Retail Bank of the Year - Kyrgyzstan Panin Bank Online Banking Initiative of the Year - Indonesia

United Overseas Bank Limited Mobile Banking Initiative of the Year - Singapore Vietnam Bank for Agriculture and Rural Development Rural Bank of the Year - Vietnam Vietnam Prosperity Joint-Stock Commercial Bank - Vpbank Credit Card Initiative of the Year - Vietnam

WINNERS OF THE CHARLTON EASTCOLES CORPORATE PERFORMANCE AWARDS 2016 Bangkok Bank Public Company Limited Thailand Company of the Year 2016 - Top 15 Bank Mandiri (Persero) Tbk Indonesia Company of the Year 2016 - Top 15

Philippine National Bank New Consumer Lending Product of the Year - Philippines

BDO Unibank, Inc. Philippines Company of the Year 2016 - Top 15 Philippines Bank of the Year 2016

Philippine Savings Bank Mobile Banking Initiative of the Year - Philippines

DBS Bank Singapore Bank of the Year 2016

Ping An Bank Domestic Retail Bank of the Year - China

Indocement Tunggal Prakarsa Tbk Indonesia Company of the Year 2016 - Bronze Indonesia Construction Materials Company of the Year 2016

Prime Credit Finance Company of the Year - Hong Kong Public Bank Berhad Domestic Retail Bank of the Year - Malaysia PVcomBank Advertising Campaign of the Year - Vietnam Website of the Year - Vietnam Saigon-Hanoi Commercial Joint Stock Bank (SHB) SME Bank of the Year - Vietnam Security Bank Corporation Advertising Campaign of the Year - Philippines Siam Commercial Bank SME Bank of the Year - Thailand Standard Chartered Bank Branch Innovation of the Year - Gold Standard Chartered Bank (Thai) Pcl International Retail Bank of the Year - Thailand Credit Card Initiative of the Year - Thailand Standard Chartered Bank (Vietnam) Limited Digital Banking Initiative of the Year - Vietnam State Savings Bank of the Republic of Tajikistan “Amonatbank” SME Bank of the Year - Tajikistan Taishin Bank Credit Card Initiative of the Year - Taiwan Domestic Retail Bank of the Year - Taiwan Branch Innovation of the Year - Bronze Advertising Campaign of the Year - Taiwan Social Media Initiative of the Year - Taiwan Techcombank Mortgage and Home Loan Product of the Year - Vietnam

70 ASIAN BANKING AND FINANCE | DECEMBER 2016

KASIKORNBANK Public Company Limited Thailand Company of the Year 2016 - Top 15 Thailand Bank of the Year 2016 Siam Commercial Bank Public Company Limited Thailand Company of the Year 2016 - Top 15

Joy Supan from SB Capital Investment Corporation

ANZ Bank Singapore Team

Asian Banking and Finance Team

Linus Goh of OCBC

Westpac Banking Corporation Team

RHB Bank Berhad Representatives

Yang Lei and Yuwei Chan of Bank of China (Hong Kong)

Winston Quek from Cathay United Bank

ASIAN BANKING AND FINANCE | DECEMBER 2016 71

Adrian Boon of RHB Banking Group

BIDV Team

Bui Thanh Hoai and Nguyen Viet Phu of Lao Viet Joint Venture Bank

BDO Unibank representatives

Charoenlarp Thammanichanond of Bangkok Bank

Yang Lei of Bank of China (Hong Kong) 72 ASIAN BANKING AND FINANCE | DECEMBER 2016

Amara Klabprathum and Gridsn Nuengsigkapian of Krungthai Bank

Edwin Reyes of BDO Unibank

Dien Lam Do of SaigonHanoi Commercial Joint Stock Bank

Fazlur Rahman of Doha Bank

Gopal Iyer of Abu Dhabi Commercial Bank

Grandhis Harumansyah of PT Bank Mandiri (Persero) Tbk.

Ishani Palliyaguru and Kumudari Peiris of National Development Bank

Jean Su of DBS Bank

Jesse Han of Taishin Bank

Kijchai Vudhisethakrit of Bank of Ayudhya

Hoàng Vũ Mạnh of Maritime Bank

Joy Supan from SB Capital Investment Corporation

Munindra Verma and Pawan Kumar of YES BANK ASIAN BANKING AND FINANCE | DECEMBER 2016 73

Tan Ai Chin of OCBC Malaysia

Nick White of ANZ Bank Singapore

Swapnil Desai of Burgan Bank

Xiaohang Zhang of Bank of China (Hong Kong)

Than Sein of United Amara Bank Limited

Winston Quek of Cathay United Bank

Zin Wah Myint of CB Bank 74 ASIAN BANKING AND FINANCE | DECEMBER 2016

Tan Ai Chin, Jeffrey Tjoeng and Andreas Kurnawan of PT Bank OCBC NISP Tbk

Thomas Fitzgerald of Westpac Banking Corporation

Ngari Kariuki of Standard Chartered Bank Hong Kong

Matthias Dekan, Eugene Kwek and Aileen Choo of HSBC

Uyen Huynh Thi Ngoc of Asia Commercial Bank

Prassanee Ouiyamaphan of Bangkok Bank

Representatives from BIDV

Jesse Han, Jerry Chen and Sandy Wu of Taishin Bank

Auraratana Jutimitta of Standard Chartered Bank (Thai) Pcl

Sanjaya Perera and Kumudari Peiris of National Development Bank

The UOB Team ASIAN BANKING AND FINANCE | DECEMBER 2016 75

Alexa Virata of Security Bank Corporation

Dien Lam Do from Saigon-Hanoi Commercial Joint Stock Bank

Doan Duc Minh of PVcomBank

Antonio Pena and Edwin Reyes of BDO Unibank 76 ASIAN BANKING AND FINANCE | DECEMBER 2016

Alex Han of Ping An Bank

Aaron Chiew Kia Meng of United Overseas Bank Limited

Azaleen Mustapha of Baiduri Bank Berhad

Emily Wong of Alliance Bank Malaysia Berhad

Noppawan Jermhansa of KASIKORNBANK PCL

Gopal Iyer of ADCB

Bala Raghavendra Prasad of ICICI Bank

Bui Thanh Hoai and Nguyen Viet Phu from Lao Viet Joint Venture Bank

Swapnil Desai from Burgan Bank

Fung Kai Jin of Vpbank

Hang Le Vu Diem and Giang Tran Le Huong of BIDV

Parichat Samritchindakun of Bank of Ayudhya

Wandee Srimonthol of Krungsri Auto

Gillian Chan of Siam Commercial Bank

Ken Ng of Panin Bank

Matthias Dekan of HSBC

The OCBC Bank Team ASIAN BANKING AND FINANCE | DECEMBER 2016 77

Jovencio Hernandez, Modette Ines Cariño and Ma. Rowena Conda of Philippine National Bank

Michelle Lee of Bank of China (Hong Kong)

Rosario De Leon of UnionBank of the Philippines

Souphak Thinxayphone of BCEL

The DBS Bank Team

Regina Seow of Citibank, N.A. Philippines and Sanjeev Kapu of Citibank (Hong Kong) Limited

Srihari Sikhakollu of CIMB Bank Singapore 78 ASIAN BANKING AND FINANCE | DECEMBER 2016

Jeffrey Toh and See How Gee of Hong Leong Finance

Nathapol Luepromchai, Parichat Samritchindakun, and Kijchai Vudhisethakrit of Bank of Ayudhya

Tju Lie Sukanto from PT. Indocement Tunggal Prakarsa Tbk.

Charoenlarp Thammanichanond of Bangkok Bank

Gillian Chan of Siam Commercial Bank

Antonio Pena and Edwin Reyes of BDO Unibank, Inc.

Grandhis Harumansyah of PT Bank Mandiri (Persero) Tbk.

Noppawan Jermhansa of KASIKORNBANK PCL

Kum Thong Mok of DBS Bank

Tju Lie Sukanto of PT. Indocement Tunggal Prakarsa Tbk.

Noppawan Jermhansa of KASIKORNBANK PCL ASIAN BANKING AND FINANCE | DECEMBER 2016 79

ASEAN SME Bank of the Year SME Bank of the Year - Malaysia SME Bank of the Year - Indonesia

OCBC leverages digitisation to deliver maximum growth for ASEAN SMEs and startups

Eric Ong, head of emerging business, global commercial banking, OCBC

E

ntrepreneurs may never run of out ideas, but they most certainly are prone to run out of cash – something that many SMEs and startups fear will hinder them from staying alive in the market. Due to the risks that accompany ventures well within their first few months of operations, banks are typically a no-go as a funding source.

OCBC breaks the ice between banks and budding businesses through a wide range of solutions that increases SMEs’ access to a pool of wealth and expertise sans the usual load of documentary requirements and constant over-thecounter visits.

“We have the general capability to serve customers by providing local market know-how and access. It is also very important to support them at every stage of the business growth,” said Eric Ong, OCBC’s head of emerging business, global commercial banking.

Unparalleled advantage OCBC has over 80 years of experience serving the SME segment. This enables it to access a huge volume of information that it uses to strategise its financing products across the different 80 ASIAN BANKING AND FINANCE | DECEMBER 2016

evolving needs. For example, to address the challenge that SMEs and startups face to obtain funding in their early years, we introduced our Business First Loan in 2014 where businesses as young as six months old can get up to $100,000 in funding. We also partnered with the government in providing services to help improve loan accessibility for SMEs,” said Ong. OCBC provides new Singaporean businesses a good headstart at the minimum cost through the Business First Account – Lite, a product which enables customers to enjoy 30 free cheques a month, no minimum balance for the first six months, all for just $38 a year. The Business First Loan has captured more than 50% of the number of loans under the SME Micro Loan Programme for young companies.

Regional prowess stages of a client’s life cycle, from “The SME market is a growing and establishment to overseas expansion, important pillar of every country’s and even during an IPO. economy. OCBC is the leading SME The bank’s wide lead in the sector bank in the region, and we have been allows it to launch many first-toproviding support to many SMEs in market products such as biometrics Singapore, Malaysia, Indonesia, and based authentication and peer-to-peer Greater China,” said Ong. payments integrated into social media.

Due to its topnotch portfolio It is also the first bank of services, a knack in Singapore to launch for technology and a mobile app with “OCBC breaks the ice innovation, and a wellOneTouch technology, between banks and established reputation, allowing business budding businesses OCBC is the bank of owners to access their through a wide range choice for young ASEAN financial information of solutions that businesses and the bank hassle-free. increases SMEs’ access for life of older ones.

“We have also to a pool of wealth and “We are very honored launched an online expertise.” to receive not one but account application three SME Bank of through which SMEs the Year awards, as a can submit a simple application form definition of our long and rich heritage online to open a business account. of serving the SME segment and We are continually looking at ways to reinforces our position as an SME Bank innovate to redefine services relevant in Singapore and the region,” said Ong. to customers through innovation and making our services simple, fast, and CONTACT convenient for SMEs,” shared Ong. Loan leader “We continually look at ways our products can meet our customers’

Company name: OCBC Bank Address: 65 Chulia Street Singapore 049513 Website: www.ocbc.com

YOUR CONFIDENCE, OUR MOTIVATION.

THANK YOU FOR MAKING US

ASIA’S BEST SME BANK. Your confidence is the accolade that means the most to us.

We’re committed to helping your business grow both locally and beyond.

Asia’s Best Bank for SME 2016 ASEAN SME Bank of the Year 2016 SME Bank of the Year - Indonesia 2016 SME Bank of the Year - Malaysia 2016

Marquee Award for Best SME Bank in Southeast Asia 2016 Best SME Bank in Singapore 2016

ocbc.com/business-banking

Co.Reg.No.: 193200032W

DIGITAL BANKING INITIATIVE OF THE YEAR – HONG KONG MOBILE BANKING INITIATIVE OF THE YEAR – HONG KONG SOCIAL MEDIA INITIATIVE OF THE YEAR – HONG KONG

Customer-centricity and innovation are the core of Bank of China (Hong Kong)

B

Banking Corporation HKD accounts by ank of China (Hong Kong) simply entering the recipient’s phone / (“BOCHK”) actively promotes account number and the amount.

FinTech and takes the lead in BOCHK is also one of the first banks overturning traditional banking mode and in Hong Kong to introduce e-Cheques process through the adoption of innovative Services which offer a fast and convenient, technology. It changes the mode of interaction by creating new intercept points secured and environmental friendly way to issue and deposit cheques via mobile for the bank to approach its customers and phone as well as internet banking. blend into their living and social network, BOCHK provides “Mortgage bringing extra convenience and time-saving e-Assessment” function in its Mortgage solutions to the banking services.

Expert mobile application which advises Mr Tan Jiming, Deputy General customers about the “pre-assessed Manager of E-Finance Centre, BOCHK said approval loan amount” in just one minute.

“We are delighted to receive three awards BOC Express Cash mobile application in a row, which indicate that BOCHK’s also provides convenient instant approval innovative digital services are recognized service for personal loan. by the market.

Our mobile and internet banking, A brand new banking experience mobile application, “BOCHK Credit Card” The “BOCHK Credit Card” WeChat WeChat Official Account, Automated Official Account has Banking and branches already attracted over are integrated to provide 200,000 followers in seamless omnichannel “Going forward, BOCHK Hong Kong, Mainland services. BOCHK has the will continue to develop China and overseas. largest market share of its mobile banking, smart Being the leading young customers and branches, cross-border local bank in providing makes use of FinTech services and apply new banking services on in a variety of banking technologies to different WeChat, BOCHK has applications. banking businesses, in pioneered its Account We have also set up order to provide innovative Binding Enquiry a collaboration centre services to customers in Service. Customers with Hong Kong Applied their preferred ways.” can check their account Science and Technology balances through the Research Institute (ASTRI) social platform anytime, for innovation of financial anywhere and receive electronic alerts for technologies and fostering FinTech’s bank and credit card transactions. development in Hong Kong.”

To integrate with customers’ daily and social life, the “BOCHK Credit One-stop services Card” WeChat Official Account provides BOCHK has been devoted to provide a wealth of information on dining, comprehensive and innovative digital shopping and entertainment offers; services via mobile and internet banking and fun games and more, allowing to help customers manage their finances customers to share the joy with their easily. The brand new Small Value friends and enjoy from the “Likes” Transfer service introduced in August this received from group participation. The year has offered much convenience to “BOCHK Credit Card” WeChat Official customers in daily life. Users can transfer Account also provides interactive 24funds between BOCHK and Chiyu Please search for “BOCHK” on App Store or Google Play, or scan this QR code to download BOCHK Mobile App.

82 ASIAN BANKING AND FINANCE | DECEMBER 2016

Please follow “BOCHK Credit Card“ WeChat Official Account

(Chinese language only).

Mr Tan Jiming Deputy General Manager of E-Finance Centre, BOCHK C

hour Smart Customer Service with text analytic ability. Customers can simply input enquiries in the dialogue window and receive instant and interactive reply.

What’s more, the system will guide customers to get answers for their enquiries, providing a comprehensive and user-friendly service.

A 24/7 video banking service This year the bank has also introduced BOCHK iService, the only 24-hour video banking service in the local market, covering credit card, personal loan, mortgage, travel insurance, registration of payroll service, account opening for existing customers, Integrated Account Service upgrade, banknote reservation, document submission and enquiry services.

Going forward, BOCHK will continue to develop its mobile banking, smart branches, cross-border services and apply new technologies to different banking businesses, in order to provide innovative services to customers in their preferred ways.

CONTACT Company name: Bank of China (Hong Kong) Limited Address: 1 Garden Road, Hong Kong Phone number: (852) 2826 6888 Fax number: (852) 3406 2326 Website: www.bochk.com

M

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BOC Global Cash Management

Integrated Global Financial Management Solutions for Multinational Corporations

Your vision is our mission

Being awarded by the Asian Banking & Finance as the Hong Kong Domestic Cash Management Bank of the Year for three consecutive years, Bank of China (Hong Kong) is your best partner in providing the HIGHEST QUALITY and the WIDEST RANGE of cash management solutions to realize your vision.

Cash Management Customer Solution Hotline: (852) 3982 6719 / 3982 6054 | www.bochk.com

Mobile Banking Initiative of the Year

UOB takes a mighty leap forward While the customer experience is much harder to get right on the mobile because of the smaller user interface, it also means that once we get it right on mobile, it is easier to get it right on other platforms.

Q3: What have you learnt from the experience of creating UOB Mighty?

Aaron: What makes UOB Mighty different from the existing banking apps out there is that we created it at great speed to offer an app with a unique lifestyle offering in its Dine feature. The UOB Mighty is a showcase of our ability to harness innovation and the right technology to make banking simpler, more convenient and safer for our customers.

But we need to improve the product constantly. We will continue to ride on innovation and technology to enhance our customers’ experience and to serve them better. Since its launch, UOB Mighty has had four updates, and we plan to update the app progressively to suit our customers’ lifestyles.

Aaron Chiew Kia Meng

U

OB’s mobile banking app, UOB Mighty, won the Mobile Banking Initiative of the Year, Singapore award at the Asian Banking & Finance Retail Banking Awards 2016. Aaron Chiew, the bank’s Head of Mobile, Payments and Digital Sales shares more on UOB’s mighty experience.

Q1: Tell us about UOB Mighty and what it does for your customers?

Aaron: The UOB Mighty app combines mobile banking, payment and dining features in a single application. Through the app, our customers are able to perform daily banking transactions, and in four easy steps, pay bills and transfer funds on the go. Its dining features also enable our customers to receive recommendations on and make bookings at restaurants based on cuisine and location.

In addition, UOB is the first bank in Asia to offer customers the latest in mobile payment innovation by enabling contactless mobile payment capability with tokenised security through UOB Mighty.

This means that our customers today can use their NFC-enabled Android phones to 84 ASIAN BANKING AND FINANCE | DECEMBER 2016

Q4: What’s your vision for UOB’s ‘mobile’ journey? make contactless payments, directly from Aaron: We developed UOB Mighty with a UOB credit or debit card, at more than consumers’ changing lifestyles in mind. As 10,000 retail outlets more customers embrace islandwide. mobile contactless While the customer payments, we want experience is much harder Q2: Why is UOB so to make sure that the to get right on the mobile passionate about because of the smaller user acceptance at points of being “mobile sale, whether it is in a interface, it also means first”?​ supermarket, coffee shop that once we get it right on Aaron: These days, or at a petrol station, mobile, it is easier to get it almost everyone has grow as well. We have right on other platforms. a mobile phone or also lifted the $100-limit device and uses it for all mobile contactless frequently. On average, we check our payments made at our point-of-sale phones more than 140 times a day. So, terminals. mobile technology enables us to reach our We anticipate that by 2020, at least customers anytime, anywhere. The more one in five UOB card transactions will be a we engage with our customers, the more mobile contactless payment. likely are we to deepen our relationship CONTACT with them.

When we develop an app, we look Company name: at our customers’ changing needs and United Overseas Bank Limited preferences, and aim to offer them an Address: 80 Raffles Place, UOB Plaza, experience that will bring value to their Singapore 048624 lives. We want to make things more Phone number: (+65) 6533 9898 convenient, simpler and safer. We want Fax number: (+65) 6534 2334 to interact with customers not only in the Website: www.uobgroup.com areas of banking and payments, but also in lifestyle services.

AD: Baiduri Bank Berhad

Social Media Initiative of the Year - Vietnam

BIDV shares some important milestones in the technological innovation space

O

n April 26th 2016, Joint stock commercial Bank for Investment and Development of Vietnam (BIDV) reached the age of 59. On that 59year journey, BIDV has grown in line with the country’s development, overcoming some challenging periods. Throughout both difficult and favourable times, we have witnessed the effort, enthusiasm and intelligence of BIDV generations.

Proudly being one of the market leaders in the banking and finance sector in Vietnam, BIDV well understands that applying the new generation of technology plays an important role in business development. 2015 marked an important year for BIDV with many impressive successes in technology application.

BIDV headquarters in Hanoi, Vietnam

offices merged from MHB. Awareness of challenges, difficulties and risks in operations and serving customers while BIDV operates two IT systems in parallel, BIDV defined determination to complete 2015 – The year of technology success the merger and conversion of the MHB’s BIDV is the first commercial bank in Vietnam IT system into BIDV’s system within the to establish an in-house social media shortest possible time. BIDV self-developed command centre (April 8th, 2015) where IT applications to convert all data extracted their staff daily manage the social listening from the MHB’s Core Banking System (the tool to grab all mentions about BIDV on the Intellect Core Banking System provided by internet and social media so that they can Intellect Arena Co., work on every Gartner, the world’s leading Ltd), to carry out single issue and information technology research mapping and data make proper and advisory company, outlined two standardisation, feedback. The use key predictions around social media entering data into of social listening and collaboration: “By 2016, 50% of the BIDV’s Core technology has large organisations will have internal Banking system (the made a great Facebook-like social networks, and SIBS Core Banking change in how that 30% of these will be considered system provided by customers think as essential as email and telephones Silverlake). From about BIDV: are today.”

June 12nd, 2015 to friendlier, more October 15th, 2015, after only four months transparent and more professional. of work, BIDV had successfully converted BIDV officially completed its merger with all customers, products and services data the tinier Mekong Housing Bank (MHB) from MHB’s IT systems into BIDV’s system. on May 25th, 2015. This is considered the next step on the road to achieving its 2016 – Aiming higher ambition of becoming Vietnam’s leading Understanding the growing importance financial institution. BIDV has made an of social media in communication both outstandingly swift merger in only 55 days externally and internally, BIDV is looking – the shortest time ever in merging history for an appropriate social intranet solution. in the Vietnamese market. On May 22nd, This new platform is expected to totally 2015, MHB officially ended operations change the way BIDV communicates under its brand name. All branches of internally, between top leaders and staff MHB have operated under BIDV’s brand and among staff. since May 25th, 2015. After the merger, BBIDV is now using two demos from BIDV operated two IT systems, the BIDV’s IBM connections and Facebook at work.

IT system and the MHB’s IT system, running Obviously, both solutions have their at 44 branches and 187 transaction

86 ASIAN BANKING AND FINANCE | DECEMBER 2016

advantages and disadvantages, therefore, BIDV must clearly define their expectations when applying this new communication platform, in order to make a proper choice.

A virtual branch on Facebook – another social media technology application project which BIDV has been undertaking – is

expected to be launched at the end of this year. This microsite-based application on BIDV’s Facebook page will have several main functions: FAQ, live chat, and products and services registration. BIDV believes that this social store will help create a better customer experience as well as supporting business development.

In the run-up to the 60th anniversary of BIDV in 2017, BIDV is continuing its spirit of innovation in terms of technology making a greater contribution to products and service quality, customer’s engagement and of course, business development.

CONTACT Company name: Joint stock commercial Bank for Investment and Development of Vietnam (BIDV) Address: 35 Hang Voi street, Hoan Kiem district, Hanoi, Vietnam Phone number: + 84 4 222 05544 Fax number: + 84 4 222 05521 Website: bidv.com.vn

Advertising Campaign of the Year - Philippines

Security Bank’s Better Banking wins for the second time in a row

Security Bank’s headquarters in the Philippines

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or the second consecutive year, Security Bank bagged the “Advertising Campaign of the Year - Philippines” award in the Asian Banking and Finance (ABF) Retail Banking Awards 2016 held on July 20 at the Shangri-La Hotel, Singapore. The Bank’s multimedia advertising campaign, anchored on its BetterBanking brand promise, was lauded for effectively marketing its innovative products and services to its target market.

Since its rebrand in 2014, Security Bank’s main thrust has been BetterBanking™. Anchored on the tagline “You deserve better,” this entailed a shift in the bank’s retail branch business operations. From operations-centric, the bank became sales-oriented. Pro-customer products and services were reintroduced, such as Security Bank’s Unit Investment Trust Fund (UITF).

A simplified campaign To clients unfamiliar with investments, UITFs can be overwhelming and intimidating. Thus, Security Bank launched a simplified campaign communicating that customers who want to grow their money should not just save— they should invest.

The bank came out with a television spot

Hassle-free banking Part of Security Bank’s BetterBanking™ commitment to clients is a promise of freedom from banking hassles through All Access, its Deposit Account (CASA) product. Upon account opening, customers already experience freedom from having to bring several documents and filling out tedious forms.

With just one ID, they can open an account in less than 15 minutes.

Unlike other banks that take 5 working days, Security Bank issues checkbooks, MasterCard Debit Cards and passbooks right away. The MasterCard feature lets clients access their cash anywhere in the world. With the Debit Card, they can shop locally, abroad and even online.

They can also access their accounts online and through a mobile banking app that lets them log-in with just their thumbprint. Customers can pay bills, schedule payments and set up forced savings or transfers to higher yielding featuring brand endorser Megan Young, funds. And with the E-Give Cash feature, supplemented by print advertisements clients can send money to anyone with a and below-the-line efforts. This resulted mobile phone. No need for an ATM Card! in several clients inquiring about and even It’s the only cardless cash withdrawal in making investments. the country.

Now on its 11th year, the Retail Banking Get rebates when you spend Awards recognised 65 winning banks Another pro-customer product is the from 24 countries. This year’s ABF Awards Complete Cashback is the biggest in history, MasterCard. The most with more than 230 “Since its rebrand in 2014, comprehensive rebate Security Bank’s main thrust attendees from over card in the market, it 80 companies. Asian has been BetterBanking™. covers 5 categories Banking and Finance Anchored on the tagline with significant rebate is a well-renowned “You deserve better,” this amounts. Security entailed a shift in the bank’s industry magazine for Bank identified Asia’s banking and retail branch business expenses relevant finance sector that covers operations.” to the market then news and topics on launched a campaign commercial, retail, and on the Complete Cashback MasterCard. investment banking. It is published by the All communications focused on the Singapore-based Charlton Media Group.

5% rebate on grocery bills, 4% rebate on CONTACT gas, 3% rebate on utilities, 2% rebate on dining and 1% rebate on shopping. There Company name: is no minimum spend required to avail of Security Bank Corporation the Cashback and clients get a monthly Address: Security Bank Centre 6776 Ayala maximum rebate of P1,000. Customers Avenue, Makati City 0719 also need not call for redemption as Phone number: (02) 867-6788 / 88-791-88 Cashback is automatically deducted from Website: www.securitybank.com their bill monthly.

ASIAN BANKING AND FINANCE | DECEMBER 2016 88

from a local bank to a regional powerhouse

2007

Launching the new identity and announcing the expansion plan

1977

Inception

1997 Kuwait Projects Company (KIPCO) the largest shareholder

For more information call (+965) 1804080, or visit www.burgan.com

Burgan Bank Group: Kuwait - Turkey - Algeria - Iraq - Tunisia - Lebanon

Burgan Bank, driven by you.

Presence

Number of branches

Burgan Bank Group Subsidiaries

28

Burgan Bank Kuwait

Entering the Iraqi Market

2009

Entering the Lebanese Market

Entering the Tunisian Market

Entering the Algerian Market

2009

2010

2010

56

Burgan Bank Turkey

51

Gulf Bank Algeria

Entering the Turkish Market

2012

Regional Financial Powerhouse in 6 countries with more than 180 branches

2016

42

Bank of Baghdad

3

Tunis International Bank

a journey of achievements

Aligned with Burgan Bank’s vision for leadership in the banking industry both locally and regionally, and through a focused execution of its strategy of diversifying into faster growth markets, the Group enjoys a strong presence in 6 countries with a robust network of more than 180 branches in Kuwait, Turkey, Algeria, Iraq, Tunisia and Lebanon.

local bank

Burgan Bank

regional group

OPINION

ALICIA GARCIA HERRERO From loan-to-equity to loan-to-convertible bond swaps

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t has been two years since Chinese banks have seen their luck turn sour with raising NPLs and decreasing profits. Preoccupied by other issues – including the collapse of the stock market and a huge loss of reserves after a mini-devaluation – the Chinese government only turned to the banks’ situation early this year. Most of the actions taken have been piecemeal and uncoordinated.

However, there was one measure introduced last February that did stand out given its size and its “audacity”, namely the loan-to-equity swap in which RMB 2.75 billion in bank loans from Huarong Energy, a large shipping company, were converted into equity, making Bank of China its largest shareholder.

Whilst the deal may have looked great at first, in terms of hiding the NPL problem under the carpet, the market soon realised that it would be extremely costly in terms of capital needs if it were to be generalised beyond one single deal. Meanwhile, urgent cases of corporates unable to meet their repayments have been piling up. The best known case is probably SinoSteel.

After missing several payments (coupon and principal), the Chinese authorities have finally decided to tilt the strategy followed for Huarong Energy into a less capital-intensive one, namely a loan-to-convertible bond swap which has followed an initial capital injection by central SASAC. Loan-to-convertible bond swap: Better or worse?

The key is that banks having granted loans to ailing SinoSteel can get them off their balance sheets without immediately becoming the owners and without hugely increasing their capital needs. Loan-to-convertible bond swap is clearly a better instrument for banks but still worse than a loan, so banks only got their way halfway. Here are the reasons: As far as capital is concerned, there is nothing worse than a loan-to-equity swap. A convertible bond can still eat up capital but only further down the road.

If the banks’ claim on SinoSteel were to remain as loan, the ensuing capital needs very much depend on the level of non-performing loans and provisioning and the need to write off, and therefore it is hard to compare.

Looking into profitability, the loan-to-equity swap would still be the worst of all as a dividend payout would be very unlikely. However, the new scheme is still worse than a loan which you can write off at 90 ASIAN BANKING AND FINANCE | DECEMBER 2016

a certain point and the implicit return of the bond coupon will be lower than the loan.

Finally, for liquidity purposes, the loan-toconvertible bond is clearly the best option as there is a higher chance that the coupon will be paid (even if with a lower return) and the provisioning will be freed if the loan was classified as non-performing loan before the swap took place.

The new model of corporate debt restructuring introduced with SinoSteel’s case has a number of important implications. Firstly, the central government has given up on banks’ taking the lion share of the cost to clean up excess leverage and has preferred to share that among the three major stakeholders, namely the government, the corporate, and the banks.

Secondly, given the fairer burden sharing of the new initiative, we expect it to be implemented more generally, as opposed to the loan-to-equity swap which would have been too costly. This new scheme offers breathing space for banks but the clock keeps on ticking. In the medium term, unless rescued companies become profitable again, Chinese banks will need to raise capital.

Thirdly, the next corporate to come will probably be similar to SinoSteel, namely within the overcapacity sector and probably under SASAC so as to afford the initial capital injection.

ALICIA GARCIA HERRERO Chief Economist, Asia Pacific Natixis

China’s evolving bank restructuring

Domestic Retail Bank of the Year - China

A unique experience with “Ping An Gold Bank”

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ing An Bank offers diversified financial services for retail and corporate customers. In 2015, we innovatively created the business brand of “Gold Bank,” which provides a better financial experience to our customers.

account through which customers can obtain fixed returns.

In order to satisfy the various demands of retail customers, Gold Bank provides 24-hour services through on-line and mobile banking.

The Ping An Gold app has been launched in September. This app is designed in the traditional Chinese style which contains lots of interactive gaming, such as shake-it-to-wingold, count-steps-to-win-gold, gold smelting and so on. It is the first app that is tailor-made for precious metal customers in Chinese banks, and it demonstrates how Ping An Bank pays great attention to the users’ experience.

Product innovation On the 9th of September 2014, we took the lead in launching the brand, “Gold Bank,” which is based on physical gold, focussing on gold monetisation and providing a product and service valued and settled in gold, thus establishing a gold balance sheet and asset pool to satisfy our clients in all aspects. “Gold Bank” has drawn great attention since then. So far, our Extraordinary strategy “Gold Bank” has gained over 3.2 As one of the initial financial members million users and the number is still of SGE that has the largest spot climbing with at a rate of 10,000 per gold trading volume globally, Ping day.

For Gold Bank business, retail An Bank is qualified to undertake customers can use the “gold the business of proprietary trading, account,” which is similar to a agency trading, physical and paper commodity trading, leasing, currency account, to complete their consignment, pledge, liquidation, deals. The deals include gold purchase, fixed deposit, automatic investment warehousing, intermediator, interbank cooperation, enquiry, import-export plan, finance, exchange, transfer, and other businesses. We have been pledge and etc. conducting gold importing, agency As the most important innovation trading, proprietary trading and in Gold Bank, the gold share has the gold leasing in an efficient manner. following strengths: Various core businesses are developing • Flexibility of operation. Investors rapidly which improves our market can choose investment strategies share globally, and also builds our on their own. It could either be reputation. long-term investing for value In 2015, our gold trade ranked in maintenance and appreciation purpose, or short-term speculating SGE’s top 3. Our platinum and silver to make a profit from an increase in trading also ranked among the top gold prices. contenders in SGE’s list .

• Exchangeable for physical gold.

Ping An Bank offers a stable and Gold Bank provides excellent service to “Gold Bank has gained over an exchange service customers thanks 3.2 million users and the to our extraordinary for physical gold number is still climbing with strategy and floor and gold shares. at a rate of 10,000 per day.” trading ability.

The physical gold can be drawn from any branch.

Structured products • Automatic investment plan by In order to meet the demands of weight or amount. Customers institutions and individuals, Ping An Bank offers “Ping An Gold” structured can purchase gold shares on a product which is designed for clients daily/monthly basis and the fixed who wish to pursue higher revenue. investment can be rolled-over. The The Ping An Gold structured product gold shares from this channel can is managed by professional teams be used for fixed deposits via a gold

from the Asset Management Division and HQ Financial Markets SBU which control market and operating risks.

The financial product of Ping An Gold is a floating-rate financing product. Clients deposit money into the bank and secure a gold put option.

Their revenue is composed of interest from deposit and option premium.

On the strike date, the bank decides whether or not to exercise the option based on the terms of gold put option.

This structured product provides clients with higher yield and higher market risk as clients need to undertake the market risk of a falling gold price.

The financial products of Ping An Gold have earned great feedback from clients. Our clients are quite satisfied with the yield and structure of the product.

Designing more structured products which will bring customers a high yield, is one important development direction of Ping An Gold Bank.

CONTACT Company name: Pingan Bank CO.,LTD Address: 8F, Pingan Financial Building, No.1333 Lujiazui Ring Rd, Shanghai, China.

200120 Website: http://bank.pingan.com/

ASIAN BANKING AND FINANCE | DECEMBER 2016 91

OPINION

Vincent O’Brien

Supporting trade finance in Asia

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ince the financial crisis, a global trade finance gap – currently estimated at US$1.6 trillion by the Asian Development Bank (ADB) – has presented a considerable barrier to global trade flows. In particular, with US$700 billion of unmet demand in developing Asia, this needs to be addressed to help ensure the region’s huge potential can be realised. Certainly, Asia has the consumer base, the companies, and a hunger for growth. All it needs is the funding.

A risk-aligned balance The first step in tackling this issue is to stop he funding gap expanding further still. Finding a middle ground when it comes to regulation is a good place to start. Indeed, whilst considerable improvements and a shift towards more well-adjusted regulatory treatment of trade finance have been made in recent years, 77% of respondents to the ICC Banking Commission’s 2016 Global Survey still consider Basel III requirements a significant impediment to trade finance. Clearly, further work still needs to be done, and increased collaboration and dialogue will be key in helping to drive forward developments in this respect.

Year on year since the financial crisis, there has been a positive credit risk and default experience for trade finance products – and corresponding regulatory treatment should increasingly reflect this. According to the ICC’s 2015 Trade Register, the transaction default rate for short-term export letters of credit (L/ Cs) was at 0.01% between 2008 and 2014 – the equivalent of an Aaa or Aa Moody’s rating.

The Trade Register also shows that for transaction and exposure weighted default rates, aside from North America, Asia-Pacific (APAC) observes the lowest default rates, at just 0.29% (North America’s is 0.12%). Aligning regulatory proposals to the real risk-weightings of trade finance would go some way to ensuring those who operate in the industry – particularly in low risk regions such as APAC – can continue to do so.

Of course, regulation isn’t the sole cause of the trade finance gap. Ninety percent of Survey respondents cited the cost of compliance as a key barrier, with 40% reporting the termination of banking relationships due to the capacity required for compliance requirements, such as anti-money laundering (AML) and know-your-customer (KYC).

Certainly, in order to be effective, compliance must be strict.

Yet, there are opportunities to improve the efficiency of such processes and increase the understanding of particular nuances – such as the differences between client KYC and non-client due diligence expectations. The way banks understand and respond to compliance could perhaps make it less of a hindrance to their processes and capacity for trade finance.

Sourcing finance With respect to filling the funding gap itself, multilateral development banks (MDBs) have

92 ASIAN BANKING AND FINANCE | DECEMBER 2016

Vincent O’Brien Chair, ICC Banking Commission Market Intelligence

Extent to which trade finance programs of MDBs and ECAs narrow trade finance gaps, by region

considerably ramped up their efforts in this respect. In fact, 75% of Survey respondents perceived MDBs as helpful in addressing trade finance gaps. ADB’s Trade Finance Program (TFP), for instance, fills market gaps for trade finance by providing guarantees and loans more than 200 banks. Since 2004, the TFP has supported more than 12,000 transactions across the region, valued at over US$23.1 billion, with over 7,700 of these involving SMEs. The Survey data also shows that Export Credit Agencies (ECAs) provide support for export finance, and alternative sources of liquidity are flowing into the ECA space. Thirty-seven percent of the Trade and Export Finance (TXF)-conducted survey respondents had successfully conducted business with institutional investors relating to export finance – an increase from 30% the previous year. That said, the Survey shows areas where MDBs and ECAs could do more. Whilst the success of such measures in “Advanced Asia” (Hong Kong, Japan, Korea, and Singapore) is clear, the response is mixed in India and China – both of which are heavily dependent on trade.

Developing digitisation Digitisation could also help to close the gap. The Survey showed that APAC has taken the lead on the transition to digitisation, with 8.6 billion connected devices and a robust digital infrastructure. Digitisation reduces the costs and complexity of trade finance by allowing banks to automate their processes. In particular, the convergence of processes – such as generating purchase orders and invoices, and sanction checks – improves working capital management and reduces operational risks and costs.

Despite this, overall uptake is slow – with only 7% of Survey respondents claiming that it is widespread, and one-fifth reporting there is “none at all”. Expanding the uptake of digital trade finance solutions will help to enhance performance and the capacity of banks to provide trade finance. At US$1.6 trillion, the global trade finance gap can’t afford to get any bigger. Now is the time to ramp-up efforts to fill it.

OPINION

Jan Bellens & Li-May Chew

Banks fight to stay relevant

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by Jan Bellens Asia-Pacific Leader EY

by Li-May Chew Associate Director and CFA EY

onnection to customers is declining, and thus, relevance in financial services. EY 2016 Global Consumer Banking Survey gathers insight from more than 55,000 consumers from 32 countries to formulate a deep and quantitative understanding of customer preferences and behaviours.

In the survey, we introduce the Banking Relevance Index (BRI), which measures a range of current and future behaviours and attitudes to build a composite score based on how customers bank now and how they want to in the future. From a maximum index value of 100 (where consumers turn exclusively to banks), the average bank relevance score today stands at 75.1 globally.

The implication is clear: whilst there are material variations in terms of the importance of banks to people’s lives across markets, the relevance of a typical bank is weakening. For instance, whilst traditional banks remain highly relevant in Oceania with New Zealand scoring the highest regional BRI of 80.6, the emerging Asia-Pacific countries registered amongst the weakest globally.

The value was lowest in Indonesia (66.9) followed by China (69.5) and India (71.1).

APAC region, given the stronghold that local fintechs have in China, the presence of non-banks is felt most strongly there with only 70% identifying a traditional bank as their primary financial service provider against 85% globally and 95% in New Zealand.

Factors driving reduced relevance • A decline in trust. Trust appears limited to hygiene factors such as in keeping money safe, but lags behind nontraditional competitors in offering services. Banks appear to be lacking in transparency around their fees, in providing unbiased advice, and in recommending products in the best interest of customers, with 30% globally citing complete trust levels in their provider.

• Insufficient understanding of preferences and behaviours.

Banks have traditionally relied on readily available customer data to predict customer preferences, develop propositions, and tailor service models. Such approaches are overly simplistic and could be weak predictors of actual behaviours. Instead, comprehension of behaviours and attitudes based on financial and digital maturity could be more appropriate. For instance, 46% of those who are digitally mature but financially unsavvy in China indicate a disengagement with banks’ digital solutions.

• A mismatch in distribution channels with customer preferences. Digital is undoubtedly on the rise, not to substitute but complement human interaction. Whilst 82% of consumers go online to initiate product research, 59% would rather speak to an advisor first; and though 65% highly value a digital presence, an almost comparable 60% prefer banks to retain physical outlets.

In fact, 44% of customers globally do not trust a branchless bank, with that percentage being higher in some markets such as Malaysia and Singapore (at 54% and 52% respectively).

• New types of providers offering radically simplified products and superior customer experiences. Four in 10 consumers have used non-bank providers in the last 12 months and an additional two in 10 who haven’t yet, plan to in the near future. Within the

Recommendations • Make trust a top priority. Amongst other things, trust is measured by customers’ perceptions of the provision of transparent product pricing and features, proactively protecting customers’ data privacy, and preventing cyber threats.

• Personalise customer experiences and tailor propositions for various customer demographics. Non-banks like e-commerce retailers, social media firms, and fintechs are showing us what great customer experience looks like: outstanding service, intuitive processes, and personalised products. Banks possess a wealth of data for targeted segmentation – this goes beyond traditional classifications and into considerations like digital and financial savviness, and to generating targeted offerings.

• Rethink distribution engagement. Whilst some branch networks do need to be decommissioned to address cost challenges, those that remain should be reconfigured into core flagship branches surrounded by self-served, digitalised litebranches. With data showing the importance of omni-channel experience, banks need to think beyond siloed channels to create a network with seamless connectivity and consistency.

• Start innovating not only like fintechs, but with fintechs.

This includes radically simplifying product portfolios, features, and pricing; offering more appropriate and intuitive customisations; whilst also setting up formal fintech engagement programs to continuously identify potential opportunities to emulate, partner, or acquire the non-banks.

The fight for relevance can be won. The challenge goes beyond merely reaching customers to resonating with them – and in understanding and addressing their expectations.

94 ASIAN BANKING AND FINANCE | DECEMBER 2016

OPINION

David Duncan

Regulation of domestic debit card transactions in Thailand

B

ack in 2012, Thailand’s Electronic Transactions Commission issued regulations that mandated domestic processing of domestic debit card transactions with debit cards issued in Thailand. Policymakers highlighted the cost savings that would be yielded by domestic processing.

New regulations were issued in March 2016 and were published in the Government Gazette in April. The changes mainly provided greater specificity and rules around outsourcing and requests for temporary exemptions from parts of the regulations.

In July, amendments were made, and these were published in August. The regulations refer to a chip card standard for debit cards to be issued and imposed by the Bank of Thailand.

Financial institutions that issue debit cards will be required to issue cards meeting this standard, and the cards must be issued to use debit card networks in Thailand, unless an issuer utilises its own system for processing the transactions. The regulations also affect consumer protection, in that they require issuers to provide users with sufficient, clear, and correct information and details about the costs of each type of debit card. Where an issuer issues a card that is accepted on more than one network, at least one of the networks must be a domestic debit card network. In working with multiple networks, regulations require an issuer to observe its agreements and take account of the principle of equality.

New requirements for acquirers and providers The regulations also impose new obligations on acquirers to have equipment and systems to accept debit cards that meet the standard and that utilise local debit card networks. Importantly, acquirers are prohibited from restricting the rights of merchants to use any debit card network. They are also required to provide clear and accurate information on fees and services. Where multinetwork cards are processed, an acquirer must not charge any additional fees other than those for the network that is used.

The regulations also set out additional requirements for providers of switching, clearing, and settlement services. They are required to arrange their systems to support debit cards on all debit card networks or to connect their systems with those of other providers. In relation to cards that can be accepted on multiple networks, a service provider must not interfere with a merchant’s right to select a debit card network.

The new requirements are to be enforced from February 2017.

If an issuer or acquirer is unable to meet the new requirements, it can apply to the Bank of Thailand for additional time.

For cards issued prior to enforcement of the new requirements, they can continue to be used, but the issuer will eventually need to replace them by the end of 2019.

These regulations follow an earlier announcement in May that commercial banks in Thailand would, from May 16 onward, issue cards in conformity with the “Thai Bank Chip Card Standard,” which was

96 ASIAN BANKING AND FINANCE | DECEMBER 2016

by David Duncan Consultant in the Bangkok office of Tilleke & Gibbins

established by the Thai Bankers’ Association. Last year, China UnionPay issued press releases about entering into a Chip Card Standard License Agreement with the Thai Bankers’ Association, which contemplated the adoption of China UnionPay’s chip card standard as “the standard of Thailand’s banking industry.”

China UnionPay became a member of EMVCo in 2013, thus joining Visa, MasterCard, American Express, JCB, and Discover in the consortium that manages EMV standards (the technical standard for such chips). However, much has also been written about the compatibility problems between China UnionPay’s EMV version and those used by other card schemes.

The new regulations do not make specific reference to the China UnionPay standard, or any particular standard, for that matter. Moreover, the regulations make reference not only to discussions with the Thai Bankers’ Association, but also to the Association of International Banks in Thailand and the Council of State-Owned Financial Institutions.

China UnionPay is a major shareholder in Thailand Payment Network Co., Ltd. (TPN), established in 2014, which is one of the small number of companies that have been granted licences necessary for providing switching and clearing services for domestic debit card transactions in Thailand.

One can now see some debit cards issued by Bangkok Bank— the other major TPN shareholder—that bear TPN branding, together with China UnionPay branding. In essence, TPN will compete with National ITMX Co., Ltd., which is owned by ten major banks in Thailand and has been providing local debit card switching services for some years.

Thailand’s electronic payments landscape continues to excite.

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