Issue No. 106
DISPLAY TO 30 JUNE 2022
SCB’S REGIONAL PUSH Asian Banking & Finance
WITH ITS REORGANISATION TO SCBX, SCB PLANS TO EXPAND TO A CUSTOMER BASE OF 200 MILLION
BRI EMPLOYS AI ‘BRAIN’ TO MERGE ITS DIGITAL AND PHYSICAL PRESENCE BAKONG COULD PAVE THE WAY FOR DIGITAL CURRENCY IN CAMBODIA MAYBANK ISLAMIC HELPS HALAL SMES TAP INTO A $2.6T GLOBAL INDUSTRY
Arthid Nanthawithaya, Siam Commercial Bank CEO
CITIBANK CONSUMER ASSETS SNAPPED UP BY UOB, UBP, AND DBS
FROM THE EDITOR PUBLISHER & EDITOR-IN-CHIEF
Tim Charlton
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n this issue, we shine a light on the impact of the Russia-Ukraine conflict on the banking and finance sector in Asia-Pacific. Whilst banks in Asia face only limited impact from the sanctions imposed on Russia, effects on financial markets may snowball in the long run.
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Alternative payment methods are increasingly becoming the norm amongst consumers, a move spurred by the pandemic, as more people seek to avoid physical contact. Southeast Asian banks looking to dab in crypto may face operational, reputational, and legal risks. Maybank Islamic is helping Halal SMEs tap into a $2.6t global industry. We sat down with Arthid Nanthawithaya, CEO and Chairman of the Executive Committee of Siam Commercial Bank to discuss the bank’s rebranding to SCBX and plans to expand to a customer base of 200 million. Read the exclusive interview on page 20. We also chatted with Munir Nanji, the newly appointed Central Europe Cluster Head and Citi Country Officer for Citibank Czech Republic to discuss his strategies on tapping Central Europe’s growth to boost Citi’s profits. See the full interview on page 24. Read on and enjoy!
Tim Charlton
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MICA (P) 249/07/2011 No. 67
ASIAN BANKING & FINANCE | Q2 2022 1
CONTENTS
CEO INTERVIEW SCB IS TRANSFORMING INTO A FINTECH GROUP 16 WHY
FIRST 06 Relaxed policies boost China’s new lending
08 Thai banks bad loans will soar to highest since GFC
10 Pressure is still on for Indonesia’s ‘big four’ banks
12 SG bolsters digital banking security 13 Some respite for PH banks with credit costs sighted to decline
RETAIL BANKING 28 Negative impact on APAC banks bubbles up as Russia’s invasion carries on
BANKING TECHNOLOGY 18 BRI employs AI ‘brain’ to merge its digital and physical presence
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ANALYSIS BREAKING THE MOULD: TRANSFORMING WEALTH MANAGEMENT THROUGH ANALYTICS
CASE STUDY 32 DBS Digital Exchange as a key player in digital asset space
34 ‘HalMap’ helps Halal SMEs tap into
INTERVIEW 20 Talent & Tech at the heart of Munir Nanji’s mission
FINANCIAL INSIGHT 22 Bakong could pave the way for digital currency in Cambodia
SECTOR REPORT 24 Will Request To Pay displace card payments in the future?
26 Southeast Asian banks’ growing crypto exposure threatens earnings
Published quarterly by Charlton Media Group Pte Ltd 101 Cecil St. #17-09 Tong Eng Building 2 ASIAN BANKING AND FINANCE | MARCH 2019 Singapore 069533
36
COUNTRY REPORT PHILIPPINE CENTRAL BANK TAKES A SWING AT SUSTAINABILITY IN THE BANKING SECTOR
a $2.6t global industry
42 Citi consumer assets snapped up by United Overseas Bank, UnionBank, DBS
OPINION 44 Cryptocurrency in Hong Kong – why regulation and enforcement are needed
46 Where Bangladesh stands in its journey towards financial inclusion
48 Managing the financial risk of aiming for net zero carbon emissions
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News from asianbankingandfinance.net Daily news from Asia MOST READ
FINANCIAL SERVICES
BANKING TECHNOLOGY
DBS, OCBC, UOB: Who performed best in Q4 2021?
Why Indonesia’s Bank Raya seeks to service the gig economy Bank BRI Agro has shed its roots as an Amongst the three, UOB achieved agribusiness-focused finance platform the highest loan growth of 10.5% year-on-year (YoY), followed by DBS and rebranded as Bank Raya, looking at 9.9% YoY, and OCBC at 8.4% YoY. to take flight as a fully-fledged digitalNet interest margins across the three only bank able to service the 46 million banks were “mostly stable” quarter Indonesians who count themselves part of the local gig economy. on quarter.
RETAIL BANKING
BSP Deputy Governor Tangonan on PH’s digital finance ambitions The Philippines has less than two years to achieve its goal of getting 70% of Filipinos banked by 2023 and 50% of its financial transactions done digitally. But as of 2020, more than one in seven Filipinos still remain unbanked.
4 ASIAN BANKING AND & FINANCE FINANCE | Q2 | Q3 2022 2021
MARKETS
China’s new foreign-friendly financial market brimming with opportunities China opening up its trillion-dollar financial market to foreign firms is cause for much celebration, but that not everything is smooth sailing. More foreign firms may be taking a waitand-see approach following China’s ongoing regulator crackdown.
CARDS & PAYMENTS
What do SMEs expect from modern payment solutions? As everyone goes ga-ga over digital wallets, businesses are also ramping up means to cater to the increasing demand for digital payment options. But many small and medium enterprises are finding it a challenge to make the leap.
ISLAMIC BANKING
Why Islamic Banks will be the biggest winners post-COVID Southeast Asia’s Islamic banking sector is poised to enjoy longterm growth prospects thanks to a young, growing population demanding Shariah-based products, services, and government support, analysts said.
THOUGHT LEADERSHIP ARTICLE
Addressing operational challenges in financial institutions through effective managed services SmartStream Head of Business Development, Managed Services Mark Morris provided insights on the need to upgrade systems and create efficiencies to reduce costs and risks.
Mark Morris, Head of Business Development, Managed Services at SmartStream
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ith the hastening of digital adoption and automation, many financial firms had to think quickly about their strategies and how new work setups would affect various aspects of the trade lifecycle. Whilst innovations in the financial services industry have been consistent, those who would want to thrive amidst the harsh economic environment had to rapidly rise to the occasion and adapt new approaches and solutions. The key drivers for firms looking at SaaS solutions are a combination of lower cost of ownership, creating efficiencies by leveraging the expertise of vendors, and their experience in serving multiple institutions in this specialised space, by staying on the latest system version and benefiting from enhancements without being stymied by costly upgrade projects. They want to focus on initiatives that drive their revenue growth and not have to focus on commoditised functions and processes in the shared services space which can be delivered by SaaS vendors or utility service offerings. Also with cloud technology and services, financial institutions realise operational resilience, enhanced performance are future proof against accelerated business growth. Firms also reduce the risk & burden of maintaining trained resources to manage vendor platforms. Despite the impacts of the pandemic, it was still business as usual for SmartStream, having maintained uninterrupted service to customers. Mark Morris explained that managed services for Asian banks who are looking to reduce their total cost of ownership and where they can leverage
their expertise. “Clients likes the fact that SmartStream takes care of upgrades on their system for them, and that transformation are typically run by seasoned, experienced SMEs,” Morris said. He mentioned that managed services can benefit the industry in many ways. Firstly, they benefit from all the latest enhancements by staying on technologies’ latest versions. Firms are not bogged down by costly multi-year transformation projects and can conduct change at pace. “Leveraging the cloud technology, and all the services that come with that, it gives them some cost reduction. It gives them real operational resiliency. It allows them to be scalable. It’s very easy for us to provide additional enhanced processing capability in the cloud. It’s much quicker than doing it in an actual physical data centre,” Morris added. With the rise of digital transformation, there is also an increase in digital banking services in Asia. For Morris, this occurrence complements the managed services industries as firms get away from the old regime to the more automated digital processing one. As innovations in the banking and finance scene further progress, there is now a recurring premise of eradicating data centres as they are “old versions of technology and they’ve benefited massively from upgrading” in terms of processing. This is where SmartStream sees a lot of traction today. Morris noted that clients today are now demanding innovation. They conduct weekly meetings with cloud providers and infrastructure providers, as well as regular monthly client key performance indicator (KPI) meetings. This means listening to customers and finding out what their issues are. “I think it’s the constant drive for innovation and efficiency then it’s a good challenge that keeps you on your A-game,” he said. We have helped clients with Pan APAC SaaS solutions, by adopting a “Hub & Spoke” model where they can leverage their prime site in Singapore and service 6 other centres from there.
Choosing the right managed services provider Morris emphasised that there is no shortcut to choosing the right provider, as companies could introduce operational risk. Companies need to do a detailed request for information (RFI) and make a good shortlist of potential providers. They should also have real stringent scoring methodologies and act impartially. “Make sure it’s clear to the customer the costs of the implementations and the duration, how much elapsed time and resourcing the project is going to take. Some of these projects are very complex,” Morris said. Choosing SmartStream as a provider means customers will get experts who understand the company’s solutions, and who will immediately start looking at their day-to-day operations to understand how efficiencies can be driven. SmartStream has trusted service provision and produces KPI packs for clients. It also offers best-in-class security and all the right regulatory accreditations and external audits, all of which are key aspects of its managed services business. Moreover, for firms that are faced with a heavy amount of manual processes, SmartStream has introduced its SmartStream Air (Artificial Intelligence Reconciliations) solution to help them automate and incorporate machine learning capabilities into their processes. With SmartStream Air, loading information is straightforward and quick. The AI will cleverly read, analyse, learn and identify what needs to be compared, and then present a list of unmatched records or disputes for investigation. Burdensome tasks become easier. SmartStream’s capabilities have certainly made their mark, making firms realise there’s a better way to manage their data and streamline their processes. “They’re just getting to the stage where they need to invest in some technology, which we want to help them with fruitful leadership and leveraging our expertise, you know, to say we can help you,” Morris said.
ASIAN BANKS WHO ARE LOOKING TO UPGRADE THEIR TECHNOLOGY TURN TO MANAGED SERVICES PROVIDERS, TO REDUCE THEIR TOTAL COST OF OWNERSHIP, AND DERIVE IMMEDIATE BENEFITS ASIAN BANKING & FINANCE | Q2 2022 5
THOUGHT LEADERSHIP ARTICLE
The ISO 20022 Journey: Connected, MarketReady and Native Banks need to embrace a three-part journey to truly deploy ISO 20022 and reap the detailed data and digital modernisation rewards.
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SO 20022 finally got your attention. The payments industry across the globe has done a very effective job to educate and persuade financial institutions about the benefits of a more robust messaging standard. And we have also made a compelling case that it is a touchstone of digital transformation and the ability to compete. Still, we cannot declare “mission accomplished” yet. There is a lot more to do in terms of meeting deadlines and some banks are under a lot of pressure to adopt ISO and adapt to the changes it will create. Banks know this is not a one-time exercise. With that in mind, it is important to set some signposts on the ISO journey. Specifically, banks need to embrace a three-part journey to truly deploy the standard and reap the detailed data and digital modernisation rewards it will extend to them, corporates and consumers. That journey goes from ‘connected’, to ‘market-ready,’ to ‘ISO native’. ISO connected is the minimum, and whilst it will leave a lot of work to do later on, banks have to start here. Connectivity in the ISO context is a two-part program. There is a technical connectivity part and there is a messaging business data 14 ASIAN BANKING & FINANCE | Q2 2022
part. Understand that neither one of these is a banking, payments, or cash management project. This is about messaging, data, and compliance. The technical connectivity will require adaptations of core systems and payment gateways to accommodate ISO standards, and IT teams will also need to adjust architecture to change reconciliation, sanction screening, fraud, and liquidity. ISO connected is your ticket to the game, but you cannot play yet. Then there is part two of the ISO connected phase—messaging data. This is more complicated because it is where banks have to change the information they are sending and receiving. ISO’s messaging architecture has thousands of fields covering payments, securities, trade services, cards, and foreign exchange. This stage of connectivity gets you into the game. On to phase two: market-ready. In this stage, you get into the game, but you do not have ‘ring-side’ seats yet. The technology part is done, but there is more work to be done in the background. Some gaps that need to be addressed in this phase include introducing new network providers, new API options, new payment rails like instant payments and overlay
services like Request to Pay. You can send and receive ISO messages at this point, which is a huge step up in the digital migration that is so urgent for banks. But market-ready ISO does not mean you are automatically ready for instant payments. What you do get is a more automated operation and an opportunity to think about payments as transactions leading to new products and services. Phase Three: ISO native. Now you are in the game with the best seats in the house. All systems have the right architecture, the right data, and the right format. Accessible elements for ISO Native include real-time payments and real-time settlements, lower costs via straight-through processing, better tracking of transactions, transparency to meet current and new regulations, payments-system stability improvements, and better payment processing monitoring. The Bottomline: The testing window for SWIFT is now open, as well as those for MEPS+, RENTAS & BahtNet. It is vital that banks and FIs ensure that they meet the deadlines for November 2022 to receive and process ISO 20022 messaging. If not, they risk losing visibility of messages being sent from SWIFT and also risk reputational damage from having not processed critical payment information. But the reasons to take this three-part journey go beyond rules and regulations. There is the enhanced customer experience resulting from the data generated by the ISO format, which will also make it easier for parties receiving payments to achieve higher levels of automation and provide more services to their customers. There is also the competitive and innovative necessity of the ISO format. The universal rollout will lead to enhanced interoperability and standardisation between countries as the region migrates to a single messaging standard. It will be nearly impossible to compete in 2022 and beyond without ISO 20022. To find out more, visit: https://www. bottomline.com/apac/products/iso20022
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